UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

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

                   For the fiscal year ended December 31, 1999

                                       or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 (NO FEE REQUIRED)

                 For the transition period from _____ to _______

                         COMMISSION FILE NUMBER 0-25713
                         ------------------------------

                             AremisSoft Corporation
              ----------------------------------------------------
             (Exact name of Registrant as specified in its charter)

           Delaware                                      68-0413929
 ---------------------------------          -----------------------------------
(State or other jurisdiction                (I.R.S. Employer Identification No.)
of incorporation or organization)

                                Goldsworth House
                                   Denton Way
                             Woking, Surrey GU21 3LG
                                 United Kingdom
                    ----------------------------------------
                    (Address of principal executive offices)

     Registrant's telephone number, including area code: 011-44-1483-885-000
    -------------------------------------------------------------------------

        Securities registered pursuant to Section 12(b) of the Act: None
           Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, par value $0.001 per share
    -------------------------------------------------------------------------
                              (Title of Each Class)

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

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

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  based upon the closing  sale price of the Common Stock on March 14,
2000, as reported on the Nasdaq National Market, was approximately $268,212,792.
Shares of Common  Stock held by  officers  and  directors  and their  affiliated
entities  and related  persons  have been  excluded in that such  persons may be
deemed  to  be  affiliates.  This  determination  of  affiliate  status  is  not
necessarily conclusive for other purposes.

As of March 14,  2000,  the  Registrant  had  15,201,595  shares of Common Stock
outstanding.

Documents Incorporated by Reference: None


<PAGE>i

                                TABLE OF CONTENTS


<TABLE>
<S>            <C>                                                                                                    <C>
                                                                                                                       Page of
                                                                                                                       Report
                                     PART I

ITEM 1.           BUSINESS.........................................................................................         1

ITEM 2.           PROPERTIES.......................................................................................        22

ITEM 3.           LEGAL PROCEEDINGS................................................................................        22

ITEM 4.           SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..............................................        22

                                     PART II

ITEM 5.           MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
                  STOCKHOLDER MATTERS..............................................................................        23

ITEM 6.           SELECTED FINANCIAL DATA..........................................................................        25

ITEM 7.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS........................................................................        27

ITEM 7A.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.......................................        36

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................................................        36

ITEM 9.           CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE..............................................................        66

                                    PART III

ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...............................................        67

ITEM 11.          EXECUTIVE COMPENSATION...........................................................................        70

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT.......................................................................................        74

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................        74

                                     PART IV

ITEM 14.          EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
                  FORM 8-K.........................................................................................        76

SIGNATURES        .................................................................................................        80

</TABLE>


<PAGE>1


         The  discussion  in this report on Form 10-K  contains  forward-looking
statements  that involve risks and  uncertainties.  The statements  contained in
this report that are not purely historical are forward-looking statements within
the  meaning of Section  27A of the  Securities  Act of 1933,  as  amended,  and
Section  21E of the  Securities  Exchange  Act of 1934,  as  amended,  including
statements on our expectations,  beliefs, intentions or strategies regarding the
future.  In  some  cases,  you  can  identify   forward-looking   statements  by
terminology  such as  "may,"  "will,"  "should,"  "could,"  "expects,"  "plans,"
"anticipates," "believes," "estimates," "predicts," "potential" or "continue" or
the negative of these terms or comparable terminology. These statements are only
predictions  and  involve  known  and  unknown  risks,  uncertainties  and other
factors, including the risks outlined in the section entitled "Risk Factors" and
the risks  discussed in our other  Securities and Exchange  Commission  filings,
that may  cause  our or our  industries  actual  results,  levels  of  activity,
performance or achievements to be materially  different from any future results,
levels of activity,  performance or  achievements  expressed or implied by these
forward-looking statements.

         You should not rely on these forward-looking statements,  which reflect
only our opinion as of the date of this  report.  We do not intend to update any
of these forward-looking  statements.  You should also carefully review the risk
factors set forth in other  reports or  documents we file from time to time with
the Securities and Exchange  Commission,  particularly the quarterly  reports on
Form 10-Q and any current reports on Form 8-K.

         As used in this  report,  the terms "we," "us," "our" and  "AremisSoft"
mean AremisSoft Corporation and its subsidiaries, unless otherwise indicated.

ITEM 1.       BUSINESS

Overview

         We develop,  market,  implement  and support  enterprise-wide  software
applications  primarily  for  mid-sized   organizations  in  the  manufacturing,
healthcare,  hospitality and construction industries. Our fully-integrated suite
of  Internet-enabled  products  allows  our  customers  to  manage  and  execute
mission-critical  functions  within their  organization,  including  accounting,
purchasing,  manufacturing,  customer  service,  and  sales and  marketing.  The
modular  design  of  our  products  enables  us  to  provide  customers  with  a
cost-effective  scalable solution which can be easily  implemented.  We focus on
mid-sized  organizations  with  annual  revenues  of less than $200  million  to
capitalize on a market we believe is receptive to our  cost-effective  solutions
and shorter  implementation  periods.  To date,  we have  licensed  our software
applications to more than 6,000 customers in over twenty countries.

         Our software  applications use our internally  developed  three-tiered,
object oriented software  architecture,  which we call the Aremis  architecture.
This  architecture   enables  us  to  develop  software  solutions  rapidly  and
cost-effectively  by taking advantage of the common requirements of customers in
our target markets.  In addition,  we believe that, with 212 developers based in
our  facilities  in  India,  we have  established  a  cost-effective  model  for
implementing, supporting and enhancing our software applications.

         In December 1999, we acquired  e-nnovations.com,  an Internet  software
solutions provider located in Bangalore, India. We believe this acquisition is a
key strategic  milestone in our development because it enables us to address the
rapidly expanding market opportunities  brought about by the Internet.  For over
two years,  we have  partnered  with  e-nnovations.com  and have utilized  their
technological  capabilities in several large projects.  This acquisition enables
us  to  continue  to  leverage  the  diverse   technological   capabilities   of
e-nnovations.com  to address our customers' current and future e-business needs.
We believe the  e-nnovations.com  acquisition  will also assist us to develop an
application service provider,  or ASP, delivery method to best suit the evolving
requirements of our expanding customer base.

<PAGE>2


Industry Background

         Enterprise-wide  software  applications are designed to help a business
manage and execute its mission-critical operations. They provide an organization
with a  strategic  resource  that  can  be  used  to  generate  and  disseminate
mission-critical  information,  as well  as  enable  it to  respond  rapidly  to
changing market environments and customer needs.

         Businesses are increasingly demanding flexible solutions that assist in
the  management  and  execution of  mission-critical  functions in a continually
changing business  environment.  In the past,  host-centric systems operating on
mainframes or mid-range  computers  achieved broad market  acceptance.  Although
these  systems  served  the  near-term  needs  of  customers,  they  lacked  the
flexibility  necessary  to  operate  in the  modern  marketplace  due  to  their
inability to  accommodate  variations in business  requirements  and  technology
infrastructure.  As a result,  companies like Baan,  Oracle,  PeopleSoft and SAP
developed  more  flexible  enterprise-wide  solutions  targeted at Fortune  1000
companies.  Although these solutions have undergone  significant evolution since
their introduction, they remain very expensive and require significant resources
because   they   involve   lengthy   implementation   cycles   and   substantial
customization.  Small to mid-sized  organizations generally cannot afford and do
not have the information technology resources to purchase, implement and support
these large-scale enterprise-wide systems.

         According to Forrester  Research,  an independent market research firm,
global  packaged  applications  license  revenues are estimated to grow from $14
billion in 1998 to over $41 billion by 2003. The  international  portion of this
market is estimated to grow from $6 billion to over $20 billion, representing an
annual  compounded  growth  rate  of  approximately  27%.  This  growth  can  be
attributed,  in  part,  to a shift  among  organizations  away  from  developing
enterprise-wide  software applications in-house to purchasing these applications
from outside  sources.  This shift has been fueled by the growing  complexity of
new technology,  the increasing  failure rate of in-house  software  development
projects,  and  the  difficulty  in  hiring,  training  and  retaining  software
professionals.  By outsourcing their software needs, businesses can reduce their
risk of in-house development failures and ensure quicker time to market with new
and increased functionality.

         As a result,  there is a  substantial  global  market  opportunity  for
enterprise-wide software applications which cater to mid-sized organizations and
offer:

o         ease of integration,

o         faster implementation,

o         reduced risks associated with business and technological changes,

o         lower costs, and

o         industry-specific and customized functionality.

The AremisSoft Solution

         We focus on mid-sized organizations with limited information technology
resources and a need for cost-effective,  modularized  software systems that can
be scaled as the company grows. Our solutions provide the following benefits:

                  Industry-Specific   Applications.   We  offer  enterprise-wide
         software applications for mid-sized organizations specifically tailored
         to four vertical markets:  manufacturing,  healthcare,  hospitality and
         construction. Through our industry focus and history of working closely
         with customers,  we believe we have developed a high level of expertise

<PAGE>3


         in  industry-specific,  complex business  processes which enables us to
         develop software applications to address our customers' specific needs.

                  Comprehensive   Product  Suite.  Our  comprehensive  suite  of
         products provides our customers with significant flexibility and a wide
         range of functions.  We utilize a modular  approach in configuring  our
         solutions,  drawing upon a broad array of modules  that handle  various
         business  functions  such  as  accounting,  purchasing,  manufacturing,
         customer service,  and sales and marketing.  As a result, our customers
         are able to incorporate  their business  processes into a single system
         and add new modules as their business needs increase.

                  Rapid Implementation and Integration  Advantages.  The modular
         design and object  oriented  nature of our products,  combined with our
         vertical   market   focus  and   expertise,   permits   rapid   product
         implementation.  Our software  applications are designed to address the
         specific  needs of our  customers  so they  need  only  purchase  those
         applications with the functions they require.  This limits the need for
         extensive customizing after installation and eliminates  implementation
         and training  time for  unnecessary  features.  Our  software  products
         operate on numerous hardware  platforms,  are compatible with all major
         databases   and  can  be   integrated   with  a  variety  of   Internet
         technologies.

                  Global  Service and Support.  We provide  high quality  global
         service and  support,  which we believe is a critical  component of our
         solution.  We offer  dedicated  product  service  and support by highly
         trained  personnel  locally and through our  software  development  and
         support  facilities  in India.  We believe our  investment in worldwide
         customer  support services and user groups improves  communication  and
         feedback,  enhancing  customer  satisfaction and cultivating  long-term
         relationships with our customers.

                  Ease of  Migration.  Although we  encourage  our  customers to
         migrate  to our newer  products,  we also  support  their use of legacy
         products.  By  providing  support for legacy  products,  we protect our
         customers'  investment in their  existing  systems and reduce the costs
         and business  interruptions  associated with mandatory system upgrades.
         We believe this is critical to customer  satisfaction  and improves our
         success in transitioning customers to our rejuvenated and new products.

The AremisSoft Strategy

         Our business objective is to attain a leadership position as a provider
of enterprise-wide  software  applications in our target markets. As part of our
business strategy, we intend to continue to:

                  Focus on Marketing to Mid-sized Organizations. We believe that
         the  market  for  providing  cost-effective,  enterprise-wide  software
         applications to mid-sized  organizations is large and  underserved.  We
         believe our software  products are well suited for this market  because
         they  are  generally  less  expensive  and have  significantly  shorter
         implementation  periods than  products  marketed to larger  businesses,
         which typically require  implementation  periods in excess of one year.
         We intend to continue  to focus on the  mid-sized  market  which is not
         easily  penetrated by large software  vendors who face  difficulties in
         tailoring   their   applications   to  address  the  needs  of  smaller
         organizations.

                  Further  Penetrate  Targeted  Markets.  We  believe  there are
         significant  opportunities  to  increase  our  presence  and expand our
         customer base within the  manufacturing,  healthcare,  hospitality  and
         construction  industries.  We intend to leverage the  expertise we have
         developed  in each of  these  industries  to  further  penetrate  these
         markets and to take advantage of the common  functionality across these
         industries by utilizing our Aremis architecture.

                  Increase   Efficiencies  by  Using  Our  Software  Development
         Facilities in India.  We believe our software  development  and support
         facilities in India provide us with a significant competitive advantage

<PAGE>4


         in  product  development,   implementation,  product  rejuvenation  and
         administrative functions. Our team in India is responsible for research
         and   development   and   shares   responsibilities   for   design  and
         specification  with our technical  personnel in the United Kingdom.  We
         also  utilize  the  satellite  link  that we  established  between  our
         operations in India and each of our other offices to increase operating
         efficiency and enhance  communications  throughout our  operations.  We
         intend to increase the use of our  operations  in India to reduce costs
         in other areas of our business including administrative functions.

                  Provide  Internet-Enabled  Software  Solutions.   Through  our
         recent acquisition of e-nnovations.com, we have enhanced our ability to
         provide  fully  integrated   Internet-enabled  software  solutions.  We
         anticipate  releasing  future  versions  of  our  software  which  have
         enhanced   Internet   capabilities,   including  the  delivery  of  our
         applications directly to our customers over the Internet.

                  Expand on our  Technological  Expertise.  We believe  that our
         three-tiered object oriented  architecture enables us to respond to and
         rapidly  incorporate new technologies.  We intend to continue to invest
         in the development of new technologies and products to address evolving
         customer requirements.  In addition, our technology strategy is focused
         on transitioning  customers from legacy products to products  utilizing
         our Aremis architecture.

                  Expand Sales, Marketing, Support and Service. We believe there
         are  significant  opportunities  to expand our market  position  in our
         existing markets by further developing our sales, marketing and support
         infrastructure.  We sell and support our software  products directly in
         Argentina,  Bulgaria,  Germany,  India,  Ireland,  Mexico,  the  United
         Kingdom and the United States and indirectly in 14 additional countries
         through  value  added   resellers.   We  plan  to  continue  to  invest
         significantly in expanding our sales,  marketing,  support and services
         in these and other geographic regions.

Acquisition Strategy

         We believe we have developed a successful and proven acquisition model,
from pre-acquisition due diligence to post-acquisition  integration.  We believe
our model  enables us to integrate  acquired  products and  customers  and, over
time,  rejuvenate  those  products  and  transition  those  customers to our new
applications.  A significant aspect of our growth strategy is, and will continue
to be, the  acquisition of  complementary  businesses to achieve market presence
and  increase our customer  base.  From January 1993 to March 1996,  we acquired
eleven businesses, and in December 1999, we acquired e-nnovations.com.

         Our  acquisition  strategy  focuses  on the  corporate,  financial  and
operational   characteristics  of  a  potential  business  to  be  acquired.  We
extensively  consider a potential  acquisition's  customer  base,  products  and
applications,  application  environment  and  operating  platform  to assess the
potential for rejuvenation utilizing our Aremis architecture.

         After  we  have  acquired  a  business,   it  is  integrated  into  our
operations.  The  first  step  in the  integration  process  is to  establish  a
satellite link between it and our software development and support facilities in
India. A team within our India facilities immediately assumes responsibility for
product  development,  finance and  administration.  As a result, we are able to
reduce staff in the  development  and  administrative  functions of the acquired
business.

         The next step in the  process  is to begin  rejuvenating  the  acquired
products and transitioning  them to our Aremis  architecture.  At this point, we
offer customers of the acquired business three choices,  to transition to one of
our  products,  to upgrade to a  rejuvenated  legacy  product or to  continue to
utilize  the  existing  legacy  product.  We are  sensitive  to  the  customer's
investment  in legacy  systems  and do not  require  them to  transition  to the
rejuvenated  products,  rather, we continue to support the acquired  businesses'
legacy  products until all customers are  transitioned to one of our rejuvenated

<PAGE>5


or new  products.  Because  the  transition  process is gradual  and, to a large
extent,  controlled by the customer,  disruption to the customer's operations is
minimized.

The Aremis Architecture

         We believe  that our  Aremis  architecture  enables us to produce  high
quality,  scalable  enterprise-wide  software  applications  with  substantially
reduced development, implementation and maintenance costs. The foundation of our
Aremis architecture is a three-tiered, object-oriented model.

         The three  tiers of our Aremis  architecture  consist of  presentation,
logic and database.  The presentation tier is the interface between the user and
the system which, in the Aremis architecture,  is a graphical user interface, or
GUI. The logic tier comprises the applications within each product that interact
with  the   database   tier.   The   database   tier   stores   mission-critical
enterprise-wide  data. A primary advantage of this three-tier  structure is that
it allows software programmers to make changes and enhancements to any one tier,
without needing to modify others.

         We believe that our Aremis  architecture's  object orientation provides
us  with a  significant  competitive  advantage.  We  have  devoted  significant
resources  to  developing   an  extensive   proprietary   software   library  of
well-defined,  reusable  business objects which link business rules and policies
to our applications.  This object  orientation  enables our developers to easily
create  additional  modules or to rapidly  adapt  existing  software to changing
business  conditions  or  requirements.   It  also  facilitates  the  re-use  of
functional  applications  which are similar across our products and our markets.
We  believe  that  approximately  70% of the  objects  used  within  the  Aremis
architecture  are common across the markets we target.  This means that the same
objects  can  be  used  in  applications   across  various   industries  without
substantial modification.

         The  object  orientation  of our  Aremis  architecture  also  helps  to
minimize training costs since our software  developers,  who are already trained
in the  development  methods and language,  can be assigned to various  vertical
markets with little or no additional  training.  In a similar manner, we can add
modules to a customer's Aremis system with minimal additional cost and training.

         Our Aremis  architecture  encompasses most industry  standard  database
technologies including:

o         Oracle                             o         SQL Server
o         Informix                           o         Sybase

This provides our  customers  with the  flexibility  to utilize our high quality
data warehouse and data mining  applications.  Our Aremis  architecture  is also
based  on  open,  client/server  computing  technology.  This  open  environment
provides  compatibility  with other software  applications,  even among multiple
revision  levels of the same or  different  products.  Components  of the Aremis
architecture have been implemented on numerous hardware  platforms and operating
systems, including:

o        Windows NT                        o   Novell
o        Windows 95                        o   Multitasking DOS environments
o        UNIX

<PAGE>6


Our Products

         We  provide  customized   enterprise-wide   software  applications  for
mid-sized organizations in four principal vertical markets. For each of the last
three years,  revenues in each of these  markets,  as a percentage  of our total
revenues, were as follows:

<TABLE>
<S>                                                    <C>          <C>          <C>

                                                         1997         1998          1999
                                                         ----         ----          ----
Manufacturing...............................              22%          32%           35%
Healthcare..................................              45%          30%           27%
Hospitality.................................              24%          26%           26%
Construction................................               8%           8%            7%
Other.......................................               1%           4%            5%
                                                         ----         ----          ----
                       Total................             100%         100%          100%
                                                         ====         ====          ====
</TABLE>



         As a result of the acquisitions we completed from January 1993 to March
1996, our customer base is in various stages of transition to products utilizing
our Aremis architecture.  Each of our legacy products was originally acquired as
part  of an  acquisition  and  subsequently  rejuvenated.  In  the  rejuvenation
process, a legacy product is enhanced by incorporating the then current features
of the Aremis architecture  appropriate for that product.  New customers in each
of our target  markets are sold  rejuvenated  products  and updated  versions of
products,  while existing customers of the acquired businesses are encouraged to
transition to the rejuvenated  product line at their own pace. As a result,  the
products we sell and support consist of:

o         legacy products of acquired businesses that have not been rejuvenated,

o         legacy  products  of  acquired  businesses  that have been
          rejuvenated  and  incorporate  features  of our Aremis architecture,
          and

o         new products that incorporate all or a substantial portion of the
          features of our Aremis architecture.

         We currently  sell and support  products in each of the following
vertical  markets:  manufacturing,  healthcare, hospitality and construction.

     Manufacturing Products


[graphic omitted]


<PAGE>7


         Aremis Enterprise is a fully-integrated  enterprise-wide management and
control system which provides full enterprise resource planning capabilities and
broad  functionality and is compatible with larger enterprise  resource planning
systems.  Aremis  Enterprise  consists  of nine  main  application  modules  and
incorporates features of our Aremis architecture.

         MTMS, which operates on UNIX or Windows  platforms,  is compatible with
larger enterprise  resource  planning  systems.  MTMS was acquired in connection
with our acquisition of BEC Group Limited and was subsequently rejuvenated.  The
rejuvenated  version of MTMS contains the same application  modules and programs
as  Aremis  Enterprise  but does not  incorporate  all  features  of our  Aremis
architecture.

         License fees for the Aremis  Enterprise and MTMS products  range from
approximately  $50,000 to $500,000  depending upon the size of a customer and
number of application modules utilized.

         The  following  table  describes the main  application  modules and the
primary  customer  benefits  of  Aremis  Enterprise  and  the  rejuvenated  MTMS
products:

   Application Modules                             Primary Customer Benefits
---------------------------------             ----------------------------------

Manufacturing  Data Management                 o   Enables the creation of,
                                                   and access to, parts details
                                                   bills   of material, process
                                                   routes and any other
                                                   resources  fundamental to the
                                                   control of the manufacturing
                                                   process
Production Planning                            o   Assists in the  control of
                                                   daily targets with inventory
                                                   and  labor entries
Production Control                             o   Facilitates ordering and
                                                   controlling work in progress
Inventory and Stores                           o   Defines and controls
                                                   inventory requirements,
                                                   records unplanned  inventory
                                                   movements,  tracks  inventory
                                                   in all  stages of the
                                                   manufacturing process and
                                                   generates product forecasts
Purchasing                                     o   Integrates  purchase orders,
                                                   material requirements
                                                   planning, quality control and
                                                   purchase invoice validation
Sales                                          o   Provides several methods of
                                                   entering purchase orders
System Software                                o   Provides  the framework  upon
                                                   which the MTMS customer
                                                   implementation  is built  and
                                                   maintained;  includes modules
                                                   to    parameterize     system
                                                   functions,  set  defaults and
                                                   provide  options for creating
                                                   and maintaining  basic system
                                                   data
Quality Control                                o   Enables management of quality
                                                   control of raw  materials and
                                                   finished products
Environment                                    o   Contains  the control
                                                   mechanism to support a range
                                                   of database  facilities

     Healthcare Products

[graphic omitted]


<PAGE>8


         Global  Clinical  System for Windows,  commonly  referred to as GCS for
Windows,  is a navigation  system for  managing  the medical and  administrative
tasks  that are  routinely  encountered  by  physicians,  physician  groups  and
community  hospitals.  It utilizes  many  features  of our Aremis  architecture,
incorporating  object-oriented  and touch screen  technologies.  GCS for Windows
consists of nine main application modules.

         AMSyS is a DOS-based clinical system we acquired in connection with our
acquisition  of  Advanced   Medical   Systems   Limited  that  we   subsequently
rejuvenated.  The rejuvenated  version of AMSyS incorporates  primarily the same
application  modules as GCS for Windows but in a non-Windows format and operates
alone or in a PC/local area network environment.

         Genisyst is a product we acquired in connection with our acquisition of
Genisyst Limited. The rejuvenated version of Genisyst incorporates functionality
similar to GCS for Windows and provides a nondisruptive transition for customers
to GCS for Windows.

         License fees for our GCS products range from approximately  $20,000 for
single users to $150,000 for multiple user systems, depending upon the number of
application  modules utilized.  License fees for our other rejuvenated  products
vary depending on the product but are generally lower than GCS license fees.

         The following  table describes the main  application  modules and their
primary customer benefit of GCS for Windows:

    Application Modules                          Primary Customer Benefits
----------------------------             ---------------------------------------
Administration Manager                   o   Contains all basic patient record
                                             information  including  name,  age,
                                             gender and address
Consultation                                 Manager o  Delivers  an  electronic
                                             patient  record to the  clinician's
                                             desktop,  providing  the user  with
                                             the significant  medical history of
                                             the patient,  consultation history,
                                             test results and tests due
Prescription Manager                     o   Provides  access to the user's 40
                                             most commonly prescribed  drugs, as
                                             well as information on generic
                                             types, preferred drugs, packaging
                                             and costs
Appointment Manager                      o   Creates  an  appointment
                                             calendar  for  multiple  physicians
                                             across various specialties,  tracks
                                             patient visits,  prints details and
                                             produces  statistical  reports  for
                                             physicians
Reporting                                o   Generates  reports  specific to a
                                             practice or health authority, based
                                             on a number  of  factors  including
                                             age, gender and patient profile
Training                                 o   Provides  state-of-the-art training
                                             techniques from the user's screen
                                             Communications o Enables a facility
                                             to link its system to the NHS
                                             intranet,  the local hospital and
                                             the health authority
Word Processing                          o   Allows users to  incorporate  data
                                             from other modules into letters and
                                             referrals
Dispensing                               o   Facilitates the issuance of drugs
                                              and prescriptions


<PAGE>9

     Hospitality Products

    [graphic omitted]


         Aremis 4.0 Property  Management System,  commonly referred to as Aremis
4.0 PMS, is a comprehensive  client/server hotel property management system that
can be dynamically  configured to match a customer's  business model. Aremis 4.0
PMS  consists  of eight  main  application  modules  that  offer a wide range of
functions  for  both  the  front  and  back  office  operations  in a hotel  and
incorporates features of our Aremis architecture.  Aremis 4.0 PMS is scalable to
accommodate hotels with more than 500 rooms.

         IGS Hotel is a product we acquired in connection  with our  acquisition
of IGS Leisure Technology Limited. IGS Hotel operates in a DOS format and offers
a wide range of  functions  for both the front and back office  operations  in a
hotel.  The  rejuvenated  version  of IGS  Hotel  contains  primarily  the  same
application  modules as Aremis 4.0 PMS but does not  incorporate all features of
our Aremis architecture.

          License fees for IGS Hotel and Aremis 4.0 PMS range from approximately
$11,000  to $1.0  million,  depending  on the size of a  customer  and number of
application modules utilized.

          The following  table  describes the main  application  modules and the
primary customer  benefits of Aremis 4.0 PMS and the rejuvenated  version of IGS
Hotel:

    Application Modules                           Primary Customer Benefits
---------------------------                   ----------------------------------

Front Office                                  o    Assists hotels in managing
                                                   its front office operations
                                                   from reservations through
                                                   check out
Central Reservations                          o    Provides hotel chains with a
                                                   central reservations facility
                                                   for each hotel within the
                                                   chain
Data Warehousing                              o    Provides a central
                                                   information database for
                                                   hotel chains and an executive
                                                   information system for
                                                   management
History & Marketing                           o    Provides  hotels with key
                                                   profile information on guests
                                                   and prospects
Conferencing & Banqueting                     o    Assists hotels in  organizing
                                                   events  and facilitates  the
                                                   reservation process,
                                                   consolidating billing
                                                   statements and maintaining
                                                   detailed information on
                                                   guests and events
Point of Sale (Restaurant &  Bar)             o    Provides automatic and direct
                                                   settlement of restaurant and
                                                   bar charges onto the
                                                   appropriate  account;
                                                   advanced  inventory module
                                                   also controls all aspects of
                                                   the catering process
<PAGE>10

    Application Modules                           Primary Customer Benefits
---------------------------                   ----------------------------------

Interfaces                                    o    Offers   interfaces  to  a
                                                   number  of  high  quality
                                                   third-party  hardware   and
                                                   software  systems including
                                                   room access control systems,
                                                   telephone systems, television
                                                   systems, mini-bar systems and
                                                   in-room fax facilities
AccountMaster                                 o    Provides  hotels with a
                                                   comprehensive range of
                                                   management accounting and
                                                   reporting software designed
                                                   specifically for the
                                                   hospitality industry


     Construction Products

[graphic omitted]




         ViXEN  Windows  is  a  fully-integrated  Windows-based  management  and
control system designed  specifically for contracting companies across a variety
of industries.  It consists of 13 main application modules and incorporates many
features of our Aremis architecture.

         ViXEN Plus & ODBC operates on a UNIX platform. The product was acquired
in connection with our  acquisition of Briter  Computer  Systems Limited and was
subsequently rejuvenated. ViXEN Plus & ODBC operates in a multi-user environment
and  contains  the  same  application  modules  as  ViXEN  Windows  but does not
incorporate all features of our Aremis architecture.

         License fees for a ViXEN contracting  system range from  approximately
$80,000  to  $500,000  depending  on  the  size  of a  customer  and  number  of
application modules utilized.

         The  following  table  describes the main  application  modules and the
primary customer benefits of ViXEN Windows and ViXEN Plus:

     Application Modules                           Primary Customer Benefits
---------------------------                   ----------------------------------

Services and  Maintenance                  o   Controls various tasks related to
                                               servicing     and     maintaining
                                               equipment     and     facilities,
                                               allowing   users  to  record  and
                                               manage numerous  customer address
                                               and plant equipment parameters
Job Costing                                o   Records and  analyzes  costs of
                                               each job;  serves as the hub of
                                               the   ViXEN contracting system
Purchase Orders                            o   Produces printed orders,
                                               calculates  prices and  discounts
                                               automatically   and  records  the
                                               value of  outstanding  orders  as
                                               part of work in progress
Estimating                                 o   Calculates  a quote  based  on
                                               changes in labor rates, overhead,
                                               task      factors,       wastage,
                                               allowances,     increased    cost
                                               percentages  and  desired  profit
                                               margin and  performs  sensitivity
                                               analysis

<PAGE>11


    Application Modules                           Primary Customer Benefits
----------------------------------            ----------------------------------

Inventory Control                          o   Maintains  control  of
                                               inventory  changes  by  providing
                                               detailed information on inventory
                                               levels,    goods   ordered   from
                                               suppliers    and   incoming   and
                                               outgoing transactions
Price                                          File Database o Provides  instant
                                               access  to   current   prices  on
                                               frequently  used  products  for a
                                               variety  of  purposes,  including
                                               estimating,  material
                                               requisitions,   purchase  orders,
                                               inventory control and small works
                                               invoicing
Client Reconciliation                      o   Assists  in the recording,
                                               reconciling  and accounting for
                                               interim applications,  client
                                               certificates, deferred
                                               value-added  taxes and  discounts
                                               and retentions on contracts
Subcontractor Reconciliation               o   Provides  the  same
                                               functionality  for subcontractors
                                               as  Client Reconciliation
                                               provides for contractors
Sales Ledger                               o   Automatically  posts  invoices
                                               through the Job Costing  module
                                               and performs sales analyses
Purchase Ledger                            o   Logs invoices,  validate
                                               input   data,   specify   payment
                                               options, makes automatic payments
                                               and produces invoices and checks
Nominal Ledger                             o   Provides extensive  reporting
                                               modules in a variety of formats
                                               based on a user-defined structure
Payroll                                    o   Processes  the  wage  and  salary
                                               payments  of  various  types  of
                                               employees
System Management                          o   Embraces a range of  necessary
                                               features, integrating other ViXEN
                                               modules in a UNIX environment

Customers

         We primarily focus on mid-sized organizations within the manufacturing,
healthcare,  hospitality and construction  industries worldwide. As of March 14,
2000, we had licensed  software  products to over 6,000 customers in over twenty
countries.  No one customer accounted for more than 10% of our total revenues in
1999.  The  following  is a  representative  list of  companies  in our targeted
markets:

<TABLE>
  <S>                               <C>                       <C>                            <C>

       Manufacturing                    Healthcare                     Hospitality                   Construction
   ---------------------------     -----------------------     --------------------------   ----------------------------

         ABB Kent Joy                BHB Hospital Trust              Bass (Toby Inns)              CWS Engineering
                                                                                                      Services

        Alcan Aluminum              Birmingham Multifund                 Cliveden             East Midlands Electricity

      British Aerospace              Blackburn National               Forte Limited              London Electricity
                                        Health Trust

      Fernz Corporation               Dudley Multifund               Friendly Hotels            Midlands Electricity

     Nabisco Biscuit Co.              Durham Multifund                Jarvis Hotels                NG Bailey & Co.

       Rotork Controls               Kingston & Richmond            Jurys Hotel Group            Norweb Contracting

     Spartan Electronics             Lambeth & Lewisham           Millennium & Copthorne                ROMEC
                                                                          Hotels

    Telefon AB LM Ericsson          Potteries Healthcare            Regal Hotel Group             Southern Electric

        Tomkins Group               South Wales GP Group              Thistle Hotels          Southwestern Electricity

   Watts Industries Europe          Southampton Multifund         Whitbread (Travel Inn)        Yorkshire Electricity

</TABLE>


<PAGE>12

Sales and Marketing

         We market our products primarily through a direct sales force organized
around our target markets which enables us to address the  specialized  needs of
our customers in each of these markets.  In the  manufacturing  and  hospitality
industries,  we also rely, to a limited extent, on value added resellers to sell
our products.

         We have  adopted a tailored  sales and  marketing  strategy  to develop
demand for our  products  by creating  visibility  for us and  awareness  of our
products.  This strategy includes  advertisements in leading trade publications,
participation  in trade shows and  sponsorship of user groups.  In addition,  we
have  developed  corporate  sales and  marketing  materials  as well as  general
financial and technical materials that we distribute to each of our subsidiaries
for  inclusion  in their sales  materials  as well as make  available on our web
site, thereby promoting a consistent portrayal of our image and products.

         The sales  cycles for our  products  vary  across  each  target  market
typically  ranging  from one to 12  months.  The  average  sales  cycle  for our
manufacturing  products  is three  to nine  months,  healthcare  is one to three
months,  hospitality  is  three to six  months,  and  construction  is six to 12
months.  The  sales  cycle  depends  on  many  factors,  including  the  size of
customer's  organization,  the number of individuals  involved in the purchasing
decision,  whether a potential customer has retained a consultant to assist in a
purchasing  decision,  the status of a customer's  implementation  of a hardware
system and the degree of implementation, consulting and training required.

Product Development

         Since our inception,  we have made substantial  investments in research
and development.  We are continually designing and developing new generations of
software  applications to provide  improved  performance and enhanced  functions
utilizing the most recent proven technology.

         We maintain research and development centers in both the United Kingdom
and India.  Our operation in the United  Kingdom  concentrates  primarily on new
product  design and  prototyping  using our Aremis  architecture.  Our  software
engineering  research  division also evaluates and develops new technologies and
methodologies  for the future  benefit  of our broad  range of  products.  These
include hand held, imaging, Internet/intranet, voice activation, touchscreen and
multimedia  technologies.  Coding,  integration and testing are performed at our
software  development  and support  facilities  in India,  where  employees  are
divided  into  teams for each  target  market.  Our teams in India also focus on
incorporating enhancements and error corrections to existing products.

         Use of  the  software  development  and  support  facilities  in  India
provides us with access to highly skilled software engineers.  In contrast,  the
available pool of appropriately skilled software professionals in Europe and the
United  States is limited.  In  addition,  the cost of  recruiting  and training
software developers in C++ and Java is substantially greater in Europe and North
America.  We believe  our  facilities  in India  provide  us with a  significant
advantage over our  competitors  in Western  Europe and the United States,  even
with the additional  communications  and  management  overhead  associated  with
remote development.

Customer Service and Support

         We provide  service and support to our  customers to promote  rapid and
efficient implementation. Our service and support offerings include:

         Installations  and Training.  Installations are planned and overseen by
specialized  project  managers in  accordance  with  customer  requirements  and
pre-installation   consultation   is  provided  when   necessary.   We  offer  a
fully-integrated  training  program to support  customer  implementation  of our
products to help ensure successful installations.

<PAGE>13


         Customer  Support.  In  addition to local  support  provided on a daily
basis,  we  provide  a high  level of  customer  support  through  our  software
development and support facilities in India. Support and product information are
also  provided  through our web page.  In  addition,  through user groups in the
United  Kingdom and North  America,  we seek feedback to enhance the support and
development of our products as well as our brand.

         Business  Review  Services.  We  provide a business  review  service to
ensure that our customer  organizations  recognize and respond to market trends.
These reviews  assess the factors  influencing  the  performance of a customer's
business with respect to the  management of required  information  services.  As
part  of  the   service,   we   produce  a   comprehensive   report   containing
recommendations for improvement and the related costs and benefits.

Proprietary Rights and Licensing

         Our success is  dependent  upon our  proprietary  technology  and other
intellectual property. We have submitted an application for federal registration
of the  AremisSoft  tradename,  trademark and logo with the United States Patent
and Trademark Office. We have not registered any copyrights nor have we received
or applied for any patents for our products,  technology  or other  intellectual
property.  We rely primarily on the protection provided by applicable copyright,
trademark  and trade  secret laws,  as well as  confidentiality  procedures  and
licensing arrangements,  to establish and protect our rights to our software. We
also enter into confidentiality agreements with some employees, distributors and
customers  and limit  access to and  distribution  of the  source  codes for our
products and other proprietary technology.

         We enter into license  arrangements  that provide for the  nonexclusive
license of our software. These license agreements generally allow the use of our
software  solely by the  customer  for  internal  purposes  without the right to
sublicense or transfer the software to third parties.  These licenses  generally
are perpetual,  but subject to termination for breach or on notice,  and contain
confidentiality  and nondisclosure  provisions,  a limited warranty covering the
software,  and  indemnification  for the customer from any  infringement  action
related to the software.

Competition

         The enterprise-wide  software applications market, including the market
for client/server-based  systems, is intensely competitive and rapidly changing.
The competition  that we encounter varies across and within each vertical market
depending  upon,  among other things,  the customer's  size and specific  system
requirements.  There are many  factors that affect  competition  in the software
applications market,  including a vendor's  responsiveness to customer needs and
the  quality  of  customer   support  as  well  as  a  product's   architecture,
functionality,  speed  of  implementation,  ease  of  integration,  performance,
features, reliability,  breadth of distribution and price. Although some factors
are applicable to each vertical market, others are unique to specific markets or
take on greater relative importance.

         In the manufacturing  industry,  the principal factors include the ease
of implementation of a product and its functions, customer service, training and
price. Our main competitors in the manufacturing industry include:

o         Epicor                           o         QAD
o         Fourth Shift                     o         Symix
o         Glovia

<PAGE>14

         In the healthcare industry in the United Kingdom, the principal factors
affecting  competition  are the  ability  to produce  applications  to market in
relatively  short periods of time,  compliance with the  requirements of primary
care groups, compliance with the National Health Service specifications,  access
to reliable software support,  system  implementation and maintenance costs. Our
main competitors in the healthcare industry include:

o        EMIS                            o         Microtest Europe
o        Exeter Systems                  o         PCTI Solutions
o        GPASS                           o         Seetec
o        In Practice                     o         Torex
o        Medical Care Systems

         In  the  hospitality  industry,   the  principal  factors  include  the
functionality  of the  product,  the ease of  implementation,  the return on the
customer's   investment,   customer  service,   training  and  price.  Our  main
competitors  in the  hospitality  industry in the United  Kingdom and Europe are
Innsite and MICROS Systems.

         In the construction industry, the principal factors include the ability
to collect  marketing  data,  produce  accurate  invoicing,  profit  control and
purchasing  information,   as  well  as  price.  Our  main  competitors  in  the
construction industry are:


o         Database                        o         FCG Computer Systems
o         Estimation                      o         Misys

Healthcare Regulations

         The  healthcare  industry  in the United  Kingdom is  regulated  by the
National Health Service,  commonly referred to as the NHS, a government  agency.
Health authorities  ensure that the healthcare  services provided meet the needs
of residents in their designated areas.

         Our healthcare products sold in the United Kingdom are regulated by the
NHS through an accreditation  process. The requirements for accreditation ensure
that  computer  systems  provide  consistent  core  functions and conform to NHS
standards.

         A new Information  Management and Technology Strategy is expected to be
published by the NHS. The strategy will set the information technology standards
for the future including  specifications for primary care groups. The purpose of
the  strategy  is to  ensure  that  all  primary  care  groups  have in place an
auditable  clinical system with the ability to provide  management  information.
Primary care groups are groups of physicians  who combine  practices to manage a
budget for staff,  provide hospital  referrals,  drug costs,  community  nursing
services  and  management  costs.  The  NHS  recently   recommended  that  major
investments in  information  technology  systems to support  primary care groups
should not be made before the strategy is published.  As a result, we anticipate
that  we will  continue  to  experience  delays  in  customer  purchases  of our
healthcare products pending such publication.

         The  strategy  is  expected  to be the basis for  drafting  an  updated
requirements  for  accreditation.  In the  future,  the NHS is  expected to only
reimburse  primary care groups for purchases of information  technology  systems
that meet its accreditation criteria.

         Employees

         As of December  31,  1999,  we had 535  full-time  employees.  Of these
employees,  241 are based in our offices in the United Kingdom, 115 are based in
our  software  development  and  support  facility  in New  Delhi,  India and 97
employees  are based in our  software  and  development  facility in  Bangalore,
India. The remaining 82 employees are in various  facilities in other locations.

<PAGE>15


None of our employees is represented by any collective bargaining agreements and
we have never experienced a work stoppage. We consider our relationship with our
employees to be good and we have not experienced any interruptions of operations
due to labor disagreements.

     All of our  employees in India are  full-time  employees.  We do not employ
contractors or fixed term temporary  personnel in India.  In order to retain key
personnel,  we  operate a number of  incentive  programs,  including  subsidized
housing,  car  allowances,  and overseas  allowances  and bonuses for  employees
working on special projects.  Currently,  we utilize a three-shift system at our
facilities in India, thereby allowing us to ensure key projects are delivered on
time and to  specification  and  facilitating  customer  access to our  software
staff.


Risk Factors

     In addition to other information in this report, the following risk factors
should be considered in evaluating our business and us.

  We have a history of losses and we could suffer losses in the future.

     Until the second half of 1997, we incurred  substantial  losses. Our losses
were $1.6 million for 1997 and $15.3  million for 1996. As of December 31, 1999,
we had an  accumulated  deficit  of $18.9  million.  Although  we have  operated
profitability since the third quarter of 1997, we cannot assure you that we will
sustain profitability on a quarterly or annual basis in the future. We expect to
continue to incur increasing cost of revenues,  research and development,  sales
and marketing and general and administrative  expenses. If we are to continue to
sustain  profitability  given our planned  expenditure  levels,  we will need to
generate and sustain increased revenues.


   Our  quarterly  operating  results may  fluctuate  causing  volatility,  or
decline in the market price of our common stock.

     Our revenues,  gross margins and other  operating  results have  fluctuated
significantly  in the past and may vary  significantly  from quarter to quarter.
These  fluctuations may be due to a number of factors,  many of which are beyond
our control.  These factors include (i) the relatively long sales cycles for our
products,  (ii) the size and  timing of our  licensing  transactions,  (iii) the
timing of release,  proper  operation and market  acceptance of our  rejuvenated
products,  product  enhancements  or new  products,  (iv)  changes in the budget
cycles of our customers, (v) seasonality of our customers' technology purchases,
and (vi) foreign currency exchange rates.

     The timing of our revenue  recognition  can be  affected  by many  factors,
including  the timing of a  contract's  execution  and  delivery,  a  customer's
acceptance and our  post-delivery  obligations  with respect to the installation
and  implementation  of our  products.  As a result,  the time between  contract
execution and the satisfaction of the criteria necessary for revenue recognition
can be lengthy and unpredictable and, consequently,  may affect our revenues. As
a result,  it is possible that in some future quarters our results of operations
may fall below the  expectations of some securities  analysts and investors.  In
that  event,  the  trading  price of our stock  may  likely  be  materially  and
adversely affected.

  We may acquire other companies'  products,  technologies or businesses that
could be difficult  to  integrate,  disrupt our business and dilute  stockholder
value.

         As part of our strategy,  we expect to continue to pursue  acquisitions
of  other  businesses,   products  and  technologies.   In  connection  with  an
acquisition,  we may pay cash, issue stock or incur debt. Our stockholders  will
be diluted if we finance  acquisitions by incurring  convertible debt or issuing
equity securities.  In addition, we may be required to incur expenses related to
goodwill and other intangible asset amortization.

<PAGE>16


         Acquisitions  of companies and businesses  also involve  numerous other
risks,  including  (i)  difficulties  in the  assimilation  of  the  operations,
technologies,  (ii)  products  and  personnel of the  acquired  business,  (iii)
diversion of our management's attention from other business concerns, (iv) risks
of entering  markets in which we have no or limited direct  experience,  and (v)
the potential loss of key employees of the acquired business.

         From 1993 through 1996, we acquired  eleven  companies  with  aggregate
annual  revenues in the last fiscal year prior to acquisition  of  approximately
$24.2 million and we recently  acquired  e-nnovations.com  which had revenues of
approximately  $3.1  million in 1999.  Our  acquisition  strategy  is focused on
acquisitions  that are  potentially  larger  in scope  and size  than any of our
previous  acquisitions  and we  cannot  assure  you  that we  will  successfully
integrate an acquisition of this size into our operations. Although we currently
have no  agreement,  understanding  or  arrangement  with  respect to any future
acquisitions,  we continually  evaluate  acquisition  opportunities.  Any future
acquisition may also disrupt our ongoing  business,  divert the attention of our
management  and employees  from day to day operations and increase our operating
expenses.

     Failure  to manage our growth  may  seriously  harm our  ability to deliver
products in a timely manner,  fulfill existing customer  commitments and attract
and retain new customers.

         We have grown  rapidly  in the last five  years,  with  total  revenues
increasing  from $21.4 million in 1995 to $73.4 million in 1999.  Our growth has
placed  a  significant  strain  on  our  management,  operations  and  financial
resources. Our recent expansion has resulted in substantial growth in the number
of our employees, the scope of our operating and financial reporting systems and
the geographic area of our operations. This growth has placed, and will continue
to place,  a significant  strain on our  managerial,  operational  and financial
resources.  Accordingly, our future operating results will depend on our ability
to  continue to  implement  and improve our  operational  and  customer  support
systems and to expand,  train and manage our employee base. We cannot assure you
that we will be able to manage our expansion successfully,  and our inability to
do so may  seriously  harm our ability to deliver  products in a timely  manner,
fulfill existing customer commitments and attract and retain new customers.

     We must  successfully  develop  new  products  and  keep  pace  with  rapid
technological change to remain competitive.

         The market for our  products is  characterized  by rapid  technological
changes,   evolving  industry   standards  in  computer  hardware  and  software
technology,   changes  in  customer   requirements   and  frequent  new  product
introductions and enhancements.  Our future success will depend upon our ability
to continue to enhance our current product line and to develop and introduce new
products that keep pace with technological  developments,  satisfy  increasingly
sophisticated  customer  requirements and achieve market  acceptance.  We cannot
assure you that we will be successful in developing and  marketing,  on a timely
and cost-effective  basis, fully functional product enhancements or new products
that  respond to  technological  advances by others.  We can also not assure you
that our new or enhanced products will achieve market acceptance.  Our customers
utilize a wide variety of hardware, software, database and networking platforms.
As a result,  we must continue to support and maintain our products on a variety
of these  platforms.  In particular,  we must continue to anticipate and respond
adequately to advances in other software and desktop computer  operating systems
like Microsoft Windows.

     We may not succeed in penetrating  the e-business and  application  service
provider markets.

         We may not have the resources,  skills and product  offerings that will
be required to  successfully  penetrate the e-business and  application  service
provider markets.  To succeed in these markets,  we must continue to (i) develop
expertise in marketing  and selling  Internet-based  applications  and services,
(ii) develop and  cultivate  new sales  channels to market our  applications  to
prospective  customers,  and (iii) hire,  train and  integrate new technical and
sales personnel.

<PAGE>17


         The e-business and  application  service  provider  markets that we may
attempt to  penetrate  may not become  substantial  commercial  markets  for our
applications or may not evolve in a manner that will enable our  applications to
achieve broad market acceptance.

     Undetected  errors may increase our costs and impair the market  acceptance
of our products and technology.

         Our products and technology have occasionally contained, and may in the
future contain, undetected errors when first introduced or when new versions are
released.  Our customers  integrate our products and technology into systems and
products  that they  develop  themselves  or acquire  from other  vendors.  As a
result,  when problems occur in equipment or a system into which our products or
technology have been incorporated,  it may be difficult to identify their cause.
Regardless  of the source of these  errors,  we must divert the attention of our
engineering  personnel from our research and development  efforts to address the
errors. We cannot assure you that we will not incur warranty or repair costs, be
subject to liability  claims for damages related to product errors or experience
delays as a result of these errors In the future. Any insurance policies that we
have may not provide sufficient protection should a claim be asserted. Moreover,
the  occurrence of errors,  whether  caused by our products or technology or the
products  of  another  vendor,  may  result in  significant  customer  relations
problems and injury to our  reputation  and may impair the market  acceptance of
our products and technology.

     We may be subject to product  liability claims from product defects,  which
may harm our operating results.

         If our products  malfunction or suffer from design defects, we may also
be  subject  to  product  liability  claims.  Our  license  agreements  with our
customers  typically  contain  provisions  designed  to limit  our  exposure  to
liabilities  arising from product  liability claims. We also maintain errors and
omissions  liability  insurance  in the amount of $6.0  million for damages as a
result of  product  defects or errors.  However,  we cannot  assure you that the
provisions in our license agreements  limiting our liability will be enforceable
under international, federal, state or local laws and judicial decisions or that
our insurance  coverage will be  sufficient to cover all losses  resulting  from
product defects or errors.  To the extent our insurance is insufficient to cover
any losses we may incur, our operating results will suffer.

     Competition in the markets for our products and  technology is intense.  We
may not be able to compete  effectively  in these markets and we may lose market
share to our competitors.

         The markets for our enterprise-wide software applications are intensely
competitive and we expect  competition to intensify in the future. We may not be
able to compete effectively in these markets and we may lose market share to our
competitors.  Our  principal  competitors  for products sold to customers in the
manufacturing  industry  include  Epicor,  Fourth Shift,  QAD and Symix. We also
believe that large enterprise  software vendors,  like Baan, Oracle,  PeopleSoft
and SAP, are increasing  their marketing  efforts to mid-sized  organizations in
the  manufacturing   industry.   In  the  healthcare  industry,   our  principal
competitors  include  EMIS,  GPASS,  In Practice and TOREX.  In the  hospitality
industry,  our  principal  competitors  are Innsite and MICROS  Systems.  In the
construction  industry,  our competitors  include  Database,  Estimation and FCG
Computer Systems.  In addition,  we face indirect  competition from suppliers of
customized enterprise-wide software applications with highly customized software
and from the internal information  technology departments of large organizations
who develop their own systems.

     Many of our competitors  have greater  resources than we do. This may limit
our ability to compete effectively and may discourage  customers from purchasing
our products.

         Many of our  competitors  have greater  financial,  personnel and other
resources than we do, which may limit our ability to compete effectively.  These
competitors may be able to respond more quickly to new or emerging  technologies
or changes in customer requirements. These competitors may also (i) benefit from
greater  economies of scale,  (ii) benefit from longer  operating  histories and
name recognition,  (iii) offer more aggressive pricing,  and (iv) devote greater

<PAGE>18


resources  to the  promotion  of their  products.  Any of these  advantages  may
discourage  customers from purchasing our products.  If we are unable to compete
successfully  against our  existing or potential  competitors,  our revenues and
margins will decline.

     We face a risk from increased  competition as a result of  acquisitions  of
competitors by large software companies.

         We  believe  the  fragmented  nature  of the  enterprise-wide  software
applications  market will result in future  acquisitions of competitors by large
software  companies  or  strategic  alliances,  which  will lead to  significant
consolidation  in  our  industry.  As a  result,  we may  face  an  increase  in
competition  from larger  companies and new entrants to the industry which could
harm our business and cause our stock price to decline.

     Our ability to acquire complementary  businesses and products may be harmed
by the increasing consolidation in our markets.

         Increasing  consolidation in our markets may require us to compete with
other  software  companies  for  strategic  acquisition  opportunities.  We have
acquired  complementary  businesses  and  products  in the past and we expect to
continue to pursue similar  opportunities  in the future.  As competition in our
markets has increased,  a number of our  competitors  have been acquired or have
entered into strategic alliances. A continuation of this trend may require us to
compete with other software companies for attractive  acquisition  opportunities
and may lead to fewer  opportunities and increased  acquisition costs which will
harm our acquisition strategy.

     Our lengthy sales and  implementation  cycles may cause fluctuations in our
operating results, which could cause our stock price to decline.

         Sales of our products  require an extensive  marketing  effort  because
decisions to purchase  these  products  generally  involve the evaluation of the
product by a significant number of a potential  customer's  personnel in various
functional and geographic  areas.  Our products are generally used for division-
or enterprise-wide purposes and involve significant capital outlays by customers
and relatively  complex  installations.  Potential  customers  generally  commit
significant   resources   to   evaluate   available   enterprise-wide   software
applications  and require us to provide a significant  level of education  about
the use and  benefits of our  products.  As a result,  our sales cycle  averages
between  one and 12  months  from  initial  contact  to  execution  of a license
agreement.  Our ability to forecast  the timing and amount of specific  sales is
limited,  and the  delay  or  failure  to  complete  one or more  large  license
transactions could cause our operating results to fall below the expectations of
securities analysts and investors and cause our stock price to decline.

     We are  dependence  on our key  personnel,  particularly  Dr.  Lycourgos K.
Kyprianou,  our founder and chief executive officer. Any loss of the services of
our key personnel would harm our business.

         Our future success depends to a large extent on the continued  services
of our  senior  management  and key  personnel.  In  particular,  we are  highly
dependent on the services of Dr.  Lycourgos K. Kyprianou,  our founder and chief
executive officer. If we were to lose the services of Dr. Kyprianou or other key
personnel,  our ability to manage  operations  and  generate  revenues  would be
harmed.

     Our  failure  to retain  and  attract  qualified  personnel  could harm our
business.

         Our products require sophisticated research and development,  sales and
marketing, and technical customer support. Our success depends on our ability to
attract,   train  and  retain  qualified  personnel  in  each  of  these  areas.
Competition  for  personnel  in all of these  areas is intense and we may not be
able  to  hire  sufficient  personnel  to  achieve  our  goals  or  support  the
anticipated growth in our business. The market for the highly-trained  personnel
we require is very  competitive,  due to the limited number of people  available

<PAGE>19


with the  necessary  technical  skills and  understanding  of our  products  and
technology.  If we fail to attract and retain qualified personnel,  our business
will suffer.

     Our limited  ability to protect our  intellectual  property and proprietary
rights may harm our competitiveness.

         Our  success is  substantially  dependent  upon the  protection  of our
internally  developed  technology,   including  our  Aremis  architecture.   Our
profitability  could  suffer if third  parties  infringe  upon our  intellectual
property rights or  misappropriate  our technology and other assets.  To protect
our rights to our intellectual  property,  we rely on the protection provided by
applicable   copyright,   trademark  and  trade  secret  laws,   confidentiality
procedures and licensing  arrangements  to establish and protect our proprietary
rights. We have a trademark  application  pending, but do not currently hold any
patents or registered  copyrights.  Despite our efforts,  it may be possible for
unauthorized  third parties to copy portions of our products or reverse engineer
or  obtain  and  use  information  that  we  regard  as  proprietary.   Policing
unauthorized  use of our  software  is  difficult  and,  while we are  unable to
determine the extent to which piracy of our products exists, software piracy can
be expected to be a problem. In addition, the laws of some countries,  including
India and the United Kingdom,  do not protect our proprietary rights to the same
extent as do the laws of the United  States.  Any  failure by us to protect  our
intellectual   property   could   result  in   competitors   offering   products
incorporating  the same or similar  technology which could reduce demand for our
products.  Further,  litigation to enforce our intellectual  property rights, to
protect  our  trade  secrets  or to  determine  the  validity  and  scope of the
proprietary  rights of others could result in substantial costs and diversion of
resources.

     Our products may infringe on the  intellectual  property  rights of others,
which could increase our costs and negatively affect our profitability.

         We expect that enterprise-wide  software applications will increasingly
be subject to claims of infringement relating to software codes as the number of
products and competitors in our industry segment grows and the  functionality of
products  overlaps.  We do not  currently  have  liability  insurance to protect
against the risk of third party intellectual  property  infringement claims. Any
claim,  with or without  merit and  whether  or not  insured  against,  could be
time-consuming, result in costly litigation and require us to enter into royalty
and licensing agreements.  These royalty or licensing  agreements,  if required,
might not be  available  on terms  that are  acceptable  to us. An  infringement
claim,  even if not meritorious,  could result in the expenditure of significant
resources and could negatively affect our profitability.

     We occasionally enter into fixed price service contracts, which may lead to
lower margins and harm our operating results.

         We  offer  a  combination  of  enterprise-wide  software  applications,
implementation  and support  services to our  customers.  We have,  from time to
time,  entered into  fixed-price  service  contracts  that require us to provide
support  services for a fixed price  regardless of our actual costs  incurred in
fulfilling our support service obligations. Revenues attributable to fixed-price
service  contracts  were  approximately  11% of our  total  revenues  for  1997,
approximately  11% of our total revenues for 1998 and  approximately  14% of our
total revenues for 1999. Our inability to successfully complete these contracts,
as  budgeted,  could lead to lower  operating  margins and reduced  revenues and
profits.

     Our  results  of   operations   may  be  adversely   impacted  by  currency
fluctuations.

         We currently have operations in Argentina,  Bulgaria,  Germany,  India,
Ireland,  Mexico,  the  United  Kingdom  and the United  States and  independent
distributors in 14 additional  countries.  A significant portion of our revenues
is received in currencies other than the United States dollar,  primarily in the
British pound.  We also  anticipate  receiving  substantial  future  payments in
Bulgarian Leva relating to our work with the Bulgarian National Health Insurance
Fund and other  customers  in Bulgaria.  Because our  financial  statements  are
reported in United States  dollars,  fluctuations of the British pound and other

<PAGE>20


currencies  against the United States  dollar have caused,  and will continue to
cause, us to recognize foreign currency  transaction gains or losses,  which may
be material to our  operations and impact our reported  financial  condition and
results of operations.

     We face risks associated with doing business in international markets.

         Our  principal  executive  offices are  located in the United  Kingdom.
Revenues  from  our  operations  outside  of the  United  States  accounted  for
approximately  97% of our total  revenues in 1999.  We expect that a significant
portion of  revenues  for the  foreseeable  future  will be derived  outside the
United  States.  We are  subject to risks  inherent  in  international  business
activities,  including (i)  difficulties in collecting  accounts  receivable and
longer   collection   periods,   (ii)   changing  and   conflicting   regulatory
requirements,  (iii)  potentially  adverse tax  consequences,  (iv)  tariffs and
general export  restrictions,  (v) difficulties in staffing and managing foreign
operations,   (vi)   political   instability,   (vii)  reduced   protection  for
intellectual  property  rights in some  countries,  and (viii)  fluctuations  in
currency exchange rates.

     The tax benefits that we currently  receive in India may be lost if we fail
to satisfy specified conditions.

         We  maintain  development  and  support  facilities  in New  Delhi  and
Bangalore,  India.  As of  March  14,  2000,  we  had  approximately  40% of our
workforce in India.  As a means of encouraging  foreign  investment,  the Indian
government provides tax incentives and exemptions from regulatory  restrictions.
Among  the  benefits  that  directly  affect  us  are  tax  holidays  (temporary
exemptions from taxation on operating income) and liberalized  import and export
duties.  The current tax holiday to which we are entitled expires in March 2001.
To be  eligible  for these tax  benefits,  we must  continue  to meet  specified
conditions  including  continuing to operate in a qualified software  technology
park and exporting sales of at least 75% of our inventory turnover.  Our failure
to meet these  conditions  could  result in  cancellation  of the  benefits or a
requirement  to pay  damages  in an amount  as later  determined  by the  Indian
government  and customs  duty on plant,  machinery,  equipment,  raw  materials,
components and consumables. In addition, goods, raw materials and components for
production  imported by our offices in India are generally  exempt from the levy
of a customs duty.  These tax benefits could be  discontinued or modified in the
future which could significantly harm our operations in India.

     Our operating results may be harmed by changing conditions in India.

         Although wage costs in India are significantly lower than in the United
States,  the United Kingdom and similar markets for comparably  skilled software
engineering  and other technical  personnel,  wages in India are increasing at a
faster rate than in the United States and the United Kingdom. In the past, India
has experienced significant inflation and shortages of foreign exchange, and has
been  subject to civil  unrest  and acts of  terrorism.  Although  the effect of
inflation on our financial  statements for the periods  discussed in this report
has been  insignificant,  increases  in  inflation  in the  future or changes in
interest  rates,  taxation or other  social,  political,  economic or diplomatic
developments could harm our operating results.

     Our  products  for  the  healthcare  industry  are  subject  to  government
regulations and specifications that can be difficult to satisfy.  Our efforts to
satisfy  these  regulations  and  specifications  may  cause  the  prices of our
products to increase substantially, which may adversely affect sales.

Our products  designed  for the  healthcare  industry in the United  Kingdom are
regulated  by the  National  Health  Service,  a  governmental  agency  commonly
referred to as the NHS,  through a product  accreditation  procedure.  While our
healthcare  products currently meet NHS specifications for information  systems,
these  requirements  are  expected  to be  updated  pursuant  to  the  NHS'  new
Information Management and Technology Strategy. The new mandatory specifications
are expected to require that all  information  technology  systems in the United
Kingdom's  healthcare  marketplace  conform  with one  another.  Although we are
currently  modifying our healthcare  industry  products in  anticipation  of the
proposed  specifications,  we may not meet all of these specifications or, if we

<PAGE>21

meet  them,  our  related  costs  may be  substantial  and  make the cost of our
healthcare  products  prohibitive  for  our  customers.  In  addition,  we  have
experienced  and expect to continue to experience a decrease in purchases of our
existing  healthcare products as organizations in the healthcare industry in the
United Kingdom  postpone  purchases  pending  release of final  regulations  and
specifications.  These regulations and specifications, as well as future changes
to NHS  specifications  for  information  systems,  could harm our revenues from
healthcare related products.

     It may be difficult to enforce a U.S. judgment against us, our officers and
directors  and some of the  experts  named in this  report,  or to  assert  U.S.
securities   laws  claims  in  the  United  Kingdom  and  to  serve  process  on
substantially all of our officers and directors and these experts.

     A majority of our directors,  all of our executive officers and some of the
experts  named  in  this  report  are  nonresidents  of  the  United  States.  A
substantial portion of our assets and all or a substantial portion of the assets
of these  officers and experts are located  outside of the United  States.  As a
result,  it may be  difficult  to effect  service of  process  within the United
States with respect to matters  arising under the United States  securities laws
or to  enforce,  in  United  States  courts,  judgments  predicated  upon  civil
liability under U.S. securities laws. It also may be difficult to enforce in the
United Kingdom,  in original  actions or in actions for enforcement of judgments
of U.S. courts, civil liabilities predicated upon U.S. securities laws.

     Dr.  Kyprianou  owns  a  large  percentage  of our  voting  stock  and  has
significant influence over matters requiring  shareholder approval,  which could
delay or prevent a change of control.

     As of March 14, 2000, Dr.  Kyprianou will  beneficially  own  approximately
47.5% of the outstanding  common stock. In connection with the private placement
with Info-quest,  an information  technology  company listed on the Athens Stock
Exchange,  Dr. Kyprianou and Info-quest  entered into a voting  agreement.  As a
result of the voting agreement,  Dr. Kyprianou's  beneficial  ownership includes
shares held by Info-quest.  The voting agreement  requires Dr. Kyprianou to vote
his shares to elect  board  representatives  of  Info-quest  and  Info-quest  is
similarly required to vote its shares for the board representatives nominated by
our board of directors.  In addition,  the  agreement  provides that each of Dr.
Kyprianou  and  Info-quest  vote their  shares by mutual  agreement on all other
matters. As a result,  these stockholders may, as a practical matter, be able to
substantially  influence all matters requiring  stockholder approval which could
delay or prevent a change of control.

     Our common stock price has been volatile in the past and may be volatile in
the future.

     The market price of our common stock is highly  volatile and may be subject
to significant  fluctuations in response to actual or anticipated  variations in
quarterly  operating  results  and other  factors.  From the time of our initial
public  offering  through March 14, 2000,  the closing price of our common stock
reported on the Nasdaq  National market has ranged from $3 ? to $46 ? per share.
In addition,  the stock market in general, and the market for technology related
stocks in particular,  has  experienced  extreme  volatility that often has been
unrelated to the  operating  performance  of particular  companies.  These broad
market and industry  fluctuations  may adversely affect the trading price of our
common stock, regardless of our actual operating performance.

     Provisions  of  our  corporate  documents  and  Delaware  law  could  deter
takeovers which may prevent you from receiving a premium for your shares.

     Provisions of our  certificate  of  incorporation,  bylaws and Delaware law
could delay,  defer or prevent a change in our  control.  Our board of directors
has the authority to issue up to 15,000,000 shares of preferred stock and to fix
the rights, preferences,  privileges and restrictions of those shares, including
voting  rights,  without any  further  vote or action by the  stockholders.  The
rights of our common  stockholders  could be adversely affected by the rights of
preferred  stockholders  in the  future.  In  addition,  we are  subject  to the
anti-takeover provisions of Section 203 of the Delaware General Corporation Law,
which prohibits us from engaging in a "business combination" with an "interested

<PAGE>22


stockholder"  for a period of three years after the date of the  transaction  in
which  the  person  became  an  interested  stockholder,   unless  the  business
combination  is approved in a prescribed  manner under Delaware law. The ability
of our board of directors to issue shares of  preferred  stock  without  further
stockholder approval,  as well as the anti-takeover  provisions of Delaware law,
could have the effect of delaying,  deferring or preventing a change in control,
even if doing so would be beneficial to our stockholders.

ITEM 2.       PROPERTIES

         We lease  various  facilities  which house our  administration,  sales,
marketing,  support and research and development functions.  The following table
sets forth  information  concerning our principal  facilities as of December 31,
1999:

<TABLE>
<S>                                     <C>                                 <C>                <C>
                                                                                Lease             Approximate
                Location                             Function                 Expiration        Square Footage
 ----------------------------------     -----------------------------------  --------------     ----------------

  Blackburn, United Kingdom .......       Manufacturing Division                2010               12,000
  Bangalore, India  ...............       Internet, Workflow,                   2002               11,700
                                          Research and Development
  New Delhi, India.................       Research and Development,             2001                7,620
                                          Customer Support
  Woking, United Kingdom...........       Principal Executive Offices           2012                7,430
  Hitchin, United Kingdom..........       Healthcare Division                   2000                7,125
  Alton, United Kingdom............       Construction Division                 2005                4,500
  Westmont, New Jersey.............       Manufacturing Division                2000                4,200
  Nicosia, Cyprus..................       Administration                        2004                4,000

</TABLE>


         We also have  relatively  small  leaseholdings  elsewhere in Argentina,
Bulgaria,  Germany,  India,  Ireland,  Mexico, the United Kingdom and the United
States which expire on various dates from 2000 through 2013. We believe that our
current facilities will be sufficient to meet our needs for the next 12 months.

ITEM 3.       LEGAL PROCEEDINGS

         As of  the  date  of  this  report,  we are  not  party  to  any  legal
proceedings.

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

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the fiscal year ended December 31, 1999.


<PAGE>23


                                     PART II

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

         Our common stock began trading  publicly on the Nasdaq  National Market
on April 22, 1999 and is traded under the symbol AREM. The following table shows
the high and low per share  closing  prices of our common  stock for the periods
indicated.

<TABLE>
    <S>                                                            <C>           <C>
      1999                                                         High            Low
      ----                                                         ----            ---
      Second quarter, beginning April 22, 1999.................$   5-3/32       $ 3-7/8
      Third quarter............................................$  14-1/4        $ 5
      Fourth quarter...........................................$  32-1/2        $11-7/8

      2000
      ----
      First quarter, through March 14, 2000....................$  46-1/8        $27-1/4
</TABLE>

         On March 14, 2000,  the closing price of the common stock on the Nasdaq
National Market was $37-3/8 per share, and there were  approximately 105 holders
of record of the common stock.

         We have never declared or paid any cash dividends on our capital stock.
We  currently  intend to retain any future  earnings  for funding  growth and we
therefore do not expect to pay any dividends in the foreseeable future.

Recent Sales of Unregistered Securities

  For the year  ended  December  31,  1999,  we have sold and  issued the
following securities:

         1) In March 1999,  we changed  our  corporate  domicile  from Nevada to
Delaware  pursuant to a merger  agreement.  In connection  with the merger,  the
board of directors declared a 1.711772-for-one  reverse stock split prior to the
effectiveness of the merger. Pursuant to the merger agreement,  each outstanding
share of common  stock and option and  warrant to purchase  common  stock of our
predecessor  automatically became one share of our common stock and an option or
warrant to  purchase  our  common  stock,  and the  corporate  existence  of our
predecessor  ceased. We relied on the exemption from  registration  contained in
Rule 145(a)(2) of the Securities Act.

         2) In April 1999, we issued a warrant to purchase 330,000 shares of our
common stock with an exercise price of $7.50 per share to Roth Capital Partners,
Inc.,  formerly known as Cruttenden Roth  Incorporated,  the underwriter for our
initial public offering.

         3)  We  granted   non-qualified  stock  options  to  our  officers  and
directors,  outside of the 1998 Stock Option Plan,  in the  aggregate  amount of
800,000 shares.

         4) We granted an aggregate  of 1,488,800  shares of our common stock to
our employees, officers and directors under our 1998 Stock Option Plan.

         5) In October 1999, we issued  1,600,000  shares of our common stock to
Info-quest, a Greek corporation, for an aggregate purchase price of $17,600,000.

<PAGE>24


The sales and  issuances  of the shares of common stock and options and warrants
to purchase  common stock since March 1999 were made by us in reliance  upon the
exemptions from registration  provided under Section 4(2) of the Securities Act.
The offers and sales were made to accredited investors as defined in Rule 501(a)
under the Securities Act, no general  solicitation  was made by us or any person
acting in our behalf; the securities sold were subject to transfer restrictions,
and the certificates  for those shares  contained an appropriate  legend stating
that  they had not  been  registered  under  the  Securities  Act and may not be
offered or sold absent registration or pursuant to an exemption therefrom.

<PAGE>25


ITEM 6.           SELECTED FINANCIAL DATA

         We have derived the selected consolidated  statement of operations data
for the  years  ended  December  31,  1997,  1998  and  1999,  and the  selected
consolidated  balance sheet data as of December 31, 1998, from our  consolidated
financial  statements  included in this  report.  We have  derived the  selected
consolidated  statement of operations data for the years ended December 31, 1995
and 1996,  and the selected  consolidated  balance sheet data as of December 31,
1995,  1996 and  1997,  from  consolidated  financial  statements  which are not
included in this report.  Please read the selected  consolidated  financial data
presented below in conjunction  with the consolidated  financial  statements and
notes thereto and other financial information included elsewhere in this report.
The  consolidated  statement of operations  data for the year ended December 31,
1999 includes the  operations of  e-nnovations.com  from December 17, 1999,  the
date we acquired that business.  The unaudited pro forma consolidated  statement
of operations  data  reflects the combined  results of operations of our company
and e-nnovations.com as if we had acquired that business on January 1, 1999. The
unaudited pro forma data is not  necessarily  indicative of what actually  would
have  occurred if the  acquisition  had  occurred on January 1, 1999,  nor is it
indicative of future operating results.

<TABLE>
<S>                                           <C>            <C>            <C>             <C>            <C>       <C>

                                                                           Year Ended December 31,
                                                                                                                       Pro Forma
                                                                                                                          1999
                                                      1995        1996          1997          1998         1999       (Unaudited)
                                                   --------     ---------     ---------      ---------   ----------   -----------
                                                                    (in thousands, except per share data)
Consolidated Statement of
   Operations Data:
Revenues:
  Software licenses ......................        $  6,641     $  12,052     $  17,024      $  26,416  $    37,224  $    39,458
  Maintenance and services................           9,426        15,839        18,990         21,680       30,435       30,658
  Hardware and other......................           5,355         6,541         6,360          4,525        5,727        6,187
                                                  --------     ---------     ---------      ---------   ----------   -----------
       Total revenues.....................          21,422        34,432        42,374         52,621       73,386       76,302
Cost of revenues:.........................
  Software licenses.......................             875         1,555         2,079          2,654        4,468        5,118
  Maintenance and services................           2,735         5,393         5,377          5,319        8,620        8,779
  Hardware and other......................           4,829         5,760         5,147          2,817        3,625        4,021
  Amortization of purchased software and
   Capitalized software development costs.           1,986         2,327            70            265          298          298
  Write-off of purchased software costs...             388            --            --             --           --           --
                                                   --------     ---------     ---------      ---------   ----------   -----------
       Total cost of revenues.............          10,813        15,035        12,673         11,055       17,011       18,216
                                                   --------     ---------     ---------      ---------   ----------   -----------
Gross profit..............................          10,609        19,397        29,701         41,566       56,375       58,086
Operating expenses:.......................
  Sales and marketing.....................          10,811        15,182        17,834         21,594       25,518       25,727
  Research and development................           6,428         6,409         6,233          6,207                     6,902
                                                                                                             5,916
  General and administrative..............           3,442         5,605         5,227          4,868                     7,239
                                                                                                             7,108
  Write-off of offering costs.............              --            --            --          1,592           --           --
  Amortization of intangible assets.......           3,176         5,144            97             74           --        4,603
  Profit on disposition of subsidiary.....              --            --            --             --          (42)         (42)
  Write-off of intangible assets..........              --           505            --             --           --           --
                                                   --------     ---------     ---------      ---------   ----------   -----------
       Total operating expenses...........          23,857        32,845        29,391         34,335       38,500       44,429
                                                   --------     ---------     ---------      ---------   ----------   -----------
Profit (loss) from operations.............         (13,248)      (13,448)          310          7,231       17,875       13,657
Other income (expense.....................
Interest expense, net.....................          (1,284)       (1,906)       (1,895)        (2,030)        (661)        (661)
                                                   --------     ---------     ---------      ---------   ----------   -----------
Income (loss) before income taxes.........         (14,532)      (15,354)       (1,585)         5,201       17,214       12,996


<PAGE>26

                                                                           Year Ended December 31,
                                                                                                                       Pro Forma
                                                                                                                          1999
                                                      1995        1996          1997          1998         1999       (Unaudited)
                                                   --------     ---------     ---------      ---------   ----------   -----------

Income tax expense (benefit)..............              37           (50)           35          2,026         5,097        5,097

Income (loss) after taxes before
  Extraordinary item).....................        $(14,569)     $(15,304)     $ (1,620)      $   3,175       12,117        7,899
Extraordinary item--gain on debt
  Forgiveness.............................              --            --            --              --        1,163        1,163
                                                  ---------     ---------     ---------      ---------   ----------   ----------
Net income (loss).........................        $(14,569)     $(15,304)     $ (1,620)      $   3,175   $   13,280   $    9,062
                                                  =========     =========     =========      =========   ==========   ==========
Basic earnings (loss) per share before
  Extraordinary item......................        $  (1.94)     $  (2.04)     $  (0.21)      $    0.35   $     0.95   $     0.62
                                                  =========     =========     =========      =========   ==========   ==========
Diluted earnings (loss) per share before
  Extraordinary item......................        $  (1.94)     $  (2.04)     $  (0.21)      $    0.35   $     0.90   $     0.59
                                                  =========     =========     =========      =========   ==========   ==========
Basic earnings (loss) per share after
  Extraordinary item......................        $  (1.94)     $  (2.04)     $  (0.21)      $    0.35   $     1.04   $     0.71
                                                  =========     =========     =========      =========   ==========   ==========
Diluted earnings (loss) per share after
  Extraordinary item......................        $  (1.94)     $  (2.04)     $  (0.21)      $    0.35   $     0.99   $     0.68
                                                  =========     =========     =========      =========   ==========   ==========
Weighted average number of shares used
  In computing:...........................
       Basic earnings (loss) per share....           7,504         7,504         7,518           9,120       12,762       12,762
       Diluted earnings (loss) per share..           7,504         7,504         7,518           9,135       13,434       13,463

</TABLE>

<TABLE>
<S>                                                            <C>          <C>           <C>           <C>          <C>

                                                                                     As of December 31,
                                                               -------------------------------------------------------------------
                                                                   1995          1996          1997          1998          1999
                                                               ------------ ------------- ------------- -------------- -----------
                                                                                       (in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents..........................            $    255      $    867      $    239      $     149      $  13,386
Working capital (deficit)..........................              (8,244)      (15,438)      (12,971)       (10,516)        17,840
        Total assets...............................              22,729        18,449        17,242         27,952         60,944
Long-term debt.....................................              12,453        13,388        10,096          1,781             --
        Total stockholders' equity (deficit).......             (12,365)      (25,103)      (19,534)        (7,109)        36,246
</TABLE>




<PAGE>27


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

         The following  discussion  and analysis  should be read in  conjunction
with  information  contained in "Selected  Consolidated  Financial Data" and our
Consolidated  Financial Statements and Notes thereto appearing elsewhere in this
report.

Overview

         We develop,  market,  implement  and support  enterprise-wide  software
applications  primarily  for  mid-sized   organizations  in  the  manufacturing,
healthcare,  hospitality and construction industries.  We were founded in Cyprus
in 1978 and initially focused on developing customized  enterprise-wide software
applications for international organizations located in the Middle East and Near
East. In 1986, we  established  our New Delhi,  India software  development  and
support  facility to access the  skilled  Indian  labor  force and capture  cost
efficiencies. We established operations in the United Kingdom in 1992. From 1993
to 1996, we completed  eleven  acquisitions  and  established  operations in the
United States, Mexico,  Argentina and Ireland. By the end of 1996, all operating
entities were  consolidated.  In 1997, we reorganized as a United States holding
company, changing our domicile from the Netherlands to Nevada. We reincorporated
in  Delaware  in 1999 in  connection  with our initial  public  offering.  As of
December 31, 1999, we had 535 full time employees and conducted business in over
twenty countries.

         During 1999,  we continued to expand our revenues in Europe,  primarily
through large contracts in emerging markets in the  manufacturing and healthcare
industries. We also experienced a decline in our revenues in the United Kingdom,
primarily in our healthcare  division,  as customers delayed purchase  decisions
earlier in the year while they waited for government  adoption of  accreditation
procedures for healthcare products under recently adopted specifications.

         During the second  quarter of 1999,  we  completed  the initial  public
offering of our shares of common stock  generating net proceeds of approximately
$12.9 million.  We used the proceeds to reduce our debt and for other  corporate
purposes.  In exchange for the early  retirement of our  indebtedness to a bank,
which occurred in the fourth  quarter,  we received a discount of  approximately
$1.2 million, net of taxes,  resulting in a one-time  extraordinary gain for the
forgiveness  of debt. By the end of 1999, we repaid all of our  indebtedness  to
banks and other lenders,  which we expect will result in lower interest  expense
in the year 2000.

         During the fourth  quarter of 1999,  we were  awarded  two  significant
contracts in Bulgaria.  One  contract was with a private  Bulgarian  information
technology  company,  Insyst  Electronics,  for our  manufacturing  products and
significant  Internet related  services.  The contract is structured in multiple
phases and we anticipate  recognizing  revenues from the contract over a fifteen
month implementation  period from the day of signing. The estimated value of all
phases under the contract is $9.2 million.

         The second contract was with the Bulgarian  National  Health  Insurance
Fund,  commonly  referred to as the NHIF,  in  connection  with  automating  the
Bulgarian  nationwide  healthcare system. The contract is structured in multiple
phases and we  anticipate  recognizing  revenues  from the contract over a three
year  period  from the day of  signing,  with the later  phases  subject  to the
availability  of  approximately  $20 million in third party lease financing made
available to Bulgaria's general  practitioners for the purchase of equipment and
software to be installed in their  offices.  The  estimated  value of all phases
under the contract is approximately $37.5 million,  with later phases contingent
upon acceptance by the NHIF of the earlier phases and other conditions  relating
to our performance. Under the contract, we will install a comprehensive suite of
our  Internet-enabled  healthcare  products  to provide  financial,  patient and
clinical information  management and a communications network to link hospitals,
pharmacies,  laboratories and general  practitioners  with the NHIF headquarters
and  some  regional  centers.   Initially,  we  will  provide  our  products  to
approximately 5,000 of Bulgaria's 12,000 general practitioners, 500 of its 1,000

<PAGE>28


pharmacies and 30 of its 250 hospitals. The NHIF has agreed to cooperate with us
in processing  third party lease  financing and has offered the possibility of a
financial guarantee for the lease obligations of their general practitioners.

         In October  1999,  we divested  ourselves of our Cyprus  operations  in
exchange  for  approximately  $2.6  million in cash to be  received  in 2000 and
approximately 9.5%, or 4,000,000 shares, of GlobalSoft.com, a recently organized
Cyprus  company  formed for the purpose of  consolidating  several  Cyprus based
software companies. Dr. Lycourgos K. Kyprianou, our chairman and chief executive
officer, is the chairman of the board of GlobalSoft.com.

         In December 1999, we completed our acquisition of e-nnovations.com,  an
Internet  software  solutions  provider  located in Bangalore,  India, for $14.5
million.   In  connection  with  the  acquisition,   we  anticipate   allocating
approximately $13.8 million to intangible assets, including goodwill, which will
be amortized over a period of three years, or $4.6 million per year.

     Revenues

         We derive our revenues from software licenses,  maintenance and service
contracts and hardware  sales.  Software  license  revenues  represent  both new
licenses  and  upgrades  derived  from the  licensing  and  service of  industry
upgrades to existing  customers.  Maintenance and service contract  revenues are
primarily  derived from the ongoing support of installed  software and training,
consulting and implementation services. Hardware sales revenues are derived from
the sale of third-party  hardware to customers requiring turnkey solutions.  The
sales  cycles  for  our  products  can  vary   significantly   among  customers.
Historically, our sales cycles have ranged from one to 12 months.

         For the year ended  December 31,  1999,  we derived 35% of our revenues
from  customers  in  the  manufacturing  industry,  27%  from  customers  in the
healthcare industry,  26% from customers in the hospitality industry and 7% from
customers in the construction industry. The remaining 5% of our revenues for the
year ended  December 31, 1999,  were derived from sales to  approximately  1,000
relatively small customers in various industries.

         For the year ended  December 31, 1999,  our revenues  were derived from
customers located in the following areas:

                         Area                        Percentage of Revenue
       --------------------------------------------  ---------------------

       United Kingdom .............................          35%
       Other portions of Europe....................          44%
       United States...............................           3%
       Asia .......................................           5%
       Rest of world .. ...........................          13%
                                                      --------------------
           Total...................................         100%
                                                      ====================

         We recognize  software license revenue upon execution of a contract and
delivery of software, provided that the license fees are fixed and determinable,
no significant  obligations  remain,  collection of the resulting  receivable is
deemed  probable  and no  substantial  customization  or  modification  to  core
software is required.  We recognize  software  license and service revenues on a
percentage of completion  basis when,  among other  things,  customer  contracts

<PAGE>29

require substantial  customization or modification to our core software in order
to  meet  the  customer's  specifications.  Maintenance  contract  revenues  are
recognized ratably over the life of the contract,  service contract revenues are
recognized  in  accordance  with the terms of the contract  and add-on  hardware
sales revenues are recognized  when the hardware is shipped to the customer.  We
believe that our accounting  policies are consistent with the guidance  provided
by the American Institute of Certified Public Accountants' Statement of Position
(SOP) 97-2, as modified by SOP 98-9, Software Revenue Recognition.

     Cost of Revenues

         The cost of software license revenues  consists  primarily of personnel
costs as well as the costs of third-party software,  media and freight. The cost
of  maintenance  and service  contract  revenues  consists  primarily of salary,
travel and other  personnel  costs.  In addition,  cost of service  revenues may
include the cost of outsourcing services when relatively large service contracts
require resources in excess of our resources.  In general,  our costs are higher
when services are  outsourced.  Costs incurred as a result of  outsourcing  were
approximately  $320,000 for the year ended December 31, 1997,  $18.0 million for
1998 and  $12.0  million  for  1999.  The  cost of  hardware  revenues  consists
primarily of the cost of hardware purchased from third parties.

     Gross Profit

         We generally experience significant  differences in profit margins from
software licenses,  maintenance and services,  and hardware.  For example, gross
profit  margins for our software  licenses were 88% for 1997,  90% for 1998, and
88% for 1999. For  maintenance  and services,  our gross profit margins were 72%
for 1997, 76% for 1998 and 72% for 1999. For hardware,  our gross profit margins
were 19% for  1997,  38% for 1998 and 37% for 1999.  Our  overall  gross  profit
margin is affected by our relative mix of revenue sources.

     Operating Expenses

         Sales and  marketing  expenses  consist  primarily  of sales  personnel
costs, advertising and other public relations expenses. Research and development
expenses  consist  primarily of  personnel  costs,  facility  overhead and other
expenses  associated  with the  development  of new and  enhanced  products  and
technologies.  General and administrative expenses include salaries and benefits
for administrative,  executive,  finance,  legal, human resources,  data center,
distribution  and internal systems  personnel and associated  overhead costs, as
well as bad debt,  accounting  and legal  expenses.  General and  administrative
expenses also include depreciation,  which represents the write down of the cost
of property and equipment  over their  expected  useful lives.  Amortization  of
intangible  assets consists of the amortization of customer lists and management
contracts of acquired  businesses.  Amortization of goodwill  resulting from the
December 1999 acquisition of e-nnovations.com was not material in 1999.

         We  continue  to make  substantial  investments  and  operational  cost
improvements   in  our  sales  and  marketing,   research  and  development  and
administrative  infrastructure.  From 1997 through  1999, we increased our sales
and marketing staff from 85 employees to 270 employees.  During the same period,
we reduced our total research and development and administrative  staff from 331
employees to 276  employees.  The major  impetus  behind this  transition is the
continuous  shift of the  research  and  development  and,  to a lesser  degree,
administrative  functions from the United  Kingdom to India,  where the relative
cost of operations is lower.  During this period,  our research and  development
and administrative  personnel in India increased from 115 to 212, while research
and  development  and  administrative  personnel in the United Kingdom and other
countries decreased from 216 to 64.

     Research and Development

         We have several software  products which are under  development or were
recently released.  We expect a number of customers  currently using rejuvenated
or legacy products to transition to our new products,  which would likely reduce
the number of installed customers of the rejuvenated or legacy products.

<PAGE>30

         We capitalize the qualifying costs of developing our software products.
Capitalization  of such costs requires that  technological  feasibility has been
established.  We define the  establishment of  technological  feasibility as the
completion of all planning,  designing,  coding and testing  activities that are
necessary  to  establish  products  that meet design  specifications,  including
functions,   features  and  technical  performance   requirements.   Under  this
definition,  establishing  technological feasibility is considered complete only
after  the  majority  of  customer  testing  and  customer   feedback  has  been
incorporated into the product functions. Development costs incurred prior to the
establishment  of  technological  feasibility  are  expensed as  incurred.  When
software is fully documented and available for unrestricted sale, capitalization
of development  costs ceases,  and  amortization  commences and is computed on a
product-by-product  basis,  based  on  either  a  straight-line  basis  over the
economic life of the product or the ratio of current gross revenues to the total
of current and anticipated future gross revenues, whichever is greater.

     Purchased Software

         We capitalize as purchased  software the costs associated with software
products either  purchased from other companies for resale or developed by other
companies  under  contract with us. The cost of the software is amortized on the
same basis as capitalized software development costs. The amortization period is
re-evaluated  quarterly  with  respect to external  factors  including,  but not
limited  to,  technological  feasibility,  anticipated  future  gross  revenues,
estimated economic life and changes in software and hardware technologies.

     Currency Translation and Transactions

         A significant  portion of our business is conducted in currencies other
than United States  dollars (the currency  into which our  historical  financial
statements have been prepared). Historically, we have recorded a majority of our
operating expenses in British pounds, and a substantial  portion of our research
and development costs in Indian rupees.  In addition,  during the fourth quarter
of 1999 we were  awarded a  significant  contract  with the  Bulgarian  National
Health  Insurance  Fund  valued at $37.5  million  which  calls for  payment  in
Bulgarian Leva.  However,  we anticipate  converting  payments made in Bulgarian
Leva into U.S.  dollars  promptly  upon  receipt of payments.  Our  consolidated
balance sheets are translated into U.S.  dollars at the exchange rate prevailing
at the balance sheet dates,  and the statements of operations and cash flows are
translated  into United  States  dollars at the average  exchange  rates for the
relevant periods.  Gains and losses resulting from translation are included as a
component of accumulated  other  comprehensive  income (loss).  Increases in the
exchange rate from British pounds to U.S. dollars used from one year to the next
negatively  impact  stockholders'  equity and  decreases  in the  exchange  rate
positively impact stockholders'  equity. For example,  because the exchange rate
used to  translate  our balance  sheet for the year ended  December 31, 1999 was
2.9%  higher  than the rate  used for the year  ended  December  31,  1998,  the
translation  adjustment  resulted  in a  decrease  in  stockholders'  equity  of
$148,000 for 1999.

         Net gains and losses resulting from currency exchange  transactions are
included in our statement of  operations.  We did not incur material net foreign
exchange  transaction  losses in 1997,  1998 or 1999.  Because  of the number of
currencies  involved,  the  constant  currency  exposures  and  the  substantial
volatility of exchange  rates,  we cannot assure you that we will not experience
currency  losses in the future.  We cannot  predict the effect of exchange  rate
fluctuations on our future operating results. We have not previously  undertaken
hedging transactions to cover our currency exposure,  but may implement programs
to mitigate  foreign  currency risk  exposure in the future as management  deems
appropriate.



<PAGE>31

Results of Operations

         The  following  table  sets  forth,  for  the  periods  indicated,  the
percentage of revenues  represented by each item in our consolidated  statements
of operations.

<TABLE>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

                                                                         Year Ended December 31,
                                                        --------------------------------------------------------
                                                           1995         1996         1997      1998        1999
                                                          ------       ------       ------    ------      ------
Revenues:
    Software licenses                                       31%          35%          40%       50%         51%
    Maintenance and services                                44           46           45        41          41
    Hardware and other                                      25           19           15         9           8
                                                          ------       ------       ------    ------      ------
         Total revenues                                    100          100          100       100         100
                                                          ------       ------       ------    ------      ------
Cost of revenues:
    Software licenses                                        4            5            5         5           6
    Maintenance and services                                13           16           13        10          12
    Hardware and other                                      22           16           12         5           5
    Amortization of purchased software and
      capitalized software development costs                 9            7           --         1          --
    Write-off of purchased software costs                    2            --          --         --         --
                                                          ------       ------       ------    ------      ------
         Total cost of revenues                             50           44           30        21          23
                                                          ------       ------       ------    ------      ------
    Gross profit                                            50           56           70        79          77
                                                          ------       ------       ------    ------      ------
Operating expenses:
    Sales and marketing                                     51           44           42        41          35
    Research and development                                30           19           15        12           8
    General and administrative                              16           16           12         9          10
    Write-off of offering costs                             --           --           --         3          --
    Amortization of intangible assets                       15           15           --        --          --
    Write-off of intangible assets                          --            1           --        --          --
                                                          ------       ------       ------    ------      ------
         Total operating expenses                          112           95           69        65          53
                                                          ------       ------       ------    ------      ------
Profit (loss) from operations                              (62)         (39)           1        14          24
Other income (expense):
Interest expense, net                                       (6)          (6)          (5)       (4)         (1)
                                                          ------       ------       ------    ------      ------
Income (loss) before income taxes                          (68)         (45)          (4)       10          23
Income tax (expense)                                        --           --           --        (4)         (7)
                                                          ------       ------       ------    ------      ------
Extraordinary gain--gain on debt forgiveness                --           --           --        --           2
                                                          ------       ------       ------    ------      ------
Net income (loss)                                          (68)%        (45)%         (4)%       6%         18%
                                                          ======       ======       ======    ======      ======
</TABLE>


Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

     Revenues

         Total  revenues  increased to $73.4 million for 1999 from $52.6 million
for 1998. This increase was due primarily to higher software license revenues as
a result of an increase in the sale of licenses,  and associated maintenance and
service contract revenues, generated by all four divisions.

         Software  license  revenues  increased  to $37.2  million for 1999 from
$26.4  million for 1998.  This  increase was due  primarily to the growth in the
number of  installed  customers,  increased  sales of  licenses  for our  recent
generation of products and price  increases.  As a percentage of total revenues,
software  license  revenues were 51% for 1999 and 50% for 1998,  reflecting  our
strategy to  increase  our  software  license  revenues,  which  provide  higher
margins, as a percentage of total revenues.

         Maintenance and service  contract  revenues  increased to $30.4 million
for 1999 from $21.7  million for 1998, as a result of the increase in the number
of  installed  customers  and the  growth in  software  license  revenues.  As a
percentage of total revenues, maintenance and service contract revenues remained
the same at 41% for both 1999 and 1998.

<PAGE>32


         Hardware  and other  revenues  increased  to $5.7 million for 1999 from
$4.5 million for 1998.  As a percentage  of total  revenues,  hardware and other
revenues  decreased to 8% for 1999 from 9% for 1998,  reflecting our strategy to
reduce the sale and installation of third-party hardware which has lower margins
than software licenses.

     Cost of Revenues

         Total cost of revenues  increased to $17.0  million for 1999 from $11.1
million for 1998.  As a  percentage  of total  revenues,  total cost of revenues
increased to 23% for 1999 from 21% for 1998.

         The cost of software  license  revenues  increased  to $4.5 million for
1999 from $2.7 million for 1998. As a percentage of total revenues,  the cost of
software license  revenues  increased to 6% in 1999 compared to 5% for 1998. The
increase  from  1998 to 1999 was  primarily  the  result of  increased  software
license revenues in 1999.

         The cost of maintenance and service revenues  increased to $8.6 million
for 1999 from $5.3 million for 1998. As a percentage of total revenues, the cost
of maintenance and service revenues increased to 12% for 1999 from 10% for 1998.
This  increase  was  primarily  due to the use of outside  personnel  in certain
regions until our operations in these regions are firmly established.

         The cost of hardware and other  revenues  increased to $3.6 million for
1999 from $2.8 million for 1998. As a percentage of total revenues,  the cost of
hardware and other revenues was 5% for 1999 and 5% for 1998.

     Sales and Marketing

         Our sales and  marketing  expenses  increased to $25.5 million for 1999
from  $21.6  million  for  1998,  primarily  due to the  expansion  of sales and
marketing  activities  principally in Europe. As a percentage of total revenues,
sales and  marketing  expenses  decreased  to 35% for  1999,  from 41% for 1998,
primarily due to increased efficiencies in our sales and marketing operations.

     Research and Development

         Research and  development  expenses  decreased to $5.9 million for 1999
from $6.2 million for 1998.  As a  percentage  of total  revenues,  research and
development  expenses  decreased to 8% for 1999 from 12% for 1998. This decrease
was  primarily due to cost savings  resulting  from the shifting of research and
development functions from the United Kingdom to India and a significant portion
of the planned expenditures  relating to our new generation of software products
having been incurred in prior accounting periods.

     General and Administrative

         General and administrative  expenses increased to $7.1 million for 1999
from $4.9  million for 1998.  As a  percentage  of total  revenues,  general and
administrative expenses increased to 10% for 1999, from 9% for 1998.

     Net Interest Expense

         Net interest expense  reflects  interest on our credit  facilities,  as
reduced by interest income on cash balances.  Net interest expense  decreased to
$0.7 million for 1999 from $2.0 million for 1998,  primarily due to repayment of
all long and short-term debts.

<PAGE>33

     Income Taxes

         There  was a  provision  for  income  taxes  recorded  for 1999 of $5.1
million.  We recorded a provision for income taxes of $2.0 million for 1998. The
increase in income  taxes  resulted  from the increase in our  profitability  in
1999.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

     Revenues

         Total  revenues  increased to $52.6 million for 1998 from $42.4 million
for 1997. This increase was due primarily to higher software license revenues as
a result of an increase in the sale of licenses and associated  maintenance  and
service  contract  revenues,  principally  generated  by the  manufacturing  and
hospitality  divisions,  which were  partially  offset by a slight  decrease  in
revenues  from the  healthcare  division.  The  decrease in  healthcare  related
revenues was likely attributable to delayed purchasing decisions by existing and
potential  customers  pending  release of new  regulations in the United Kingdom
healthcare industry.

         Software  license  revenues  increased  to $26.4  million for 1998 from
$17.0  million for 1997.  This  increase is  primarily  due to the growth in the
number of  installed  customers,  increased  sales of  licenses  for our  recent
generation of products and price  increases.  As a percentage of total revenues,
software  license  revenues  increased  to 50%  for  1998  from  40%  for  1997,
reflecting our strategy to increase our higher margin software  license revenues
as a percentage of total revenues.

         Maintenance and service  contract  revenues  increased to $21.7 million
for 1998 from $19 million for 1997, as a result of the increase in the number of
installed customers and the growth in software license revenues. As a percentage
of total revenues, maintenance and service contract revenues declined to 41% for
1998 from 45% for 1997,  primarily as a result of our increased  sales of higher
margin software licenses.

         Hardware  and other  revenues  decreased  to $4.5 million for 1998 from
$6.4 million for 1997.  As a percentage  of total  revenues,  hardware and other
revenues decreased to 9% for 1998 from 15% for 1997,  reflecting our strategy to
reduce the sale and installation of lower margin third-party hardware.

     Cost of Revenues

         Total cost of revenues  decreased to $11.1  million for 1998 from $12.7
million for 1997.  As a  percentage  of total  revenues,  total cost of revenues
decreased to 21% for 1998 from 30% for 1997.  This  decrease was  primarily  the
result of an increase in sales of higher margin products.

         The cost of software  license  revenues  increased  to $2.7 million for
1998 from $2.1 million for 1997. As a percentage of total revenues,  the cost of
software license revenues was 5% for both 1998 and 1997. The increase in cost of
revenues  from  1997 to 1998 was  primarily  the  result of  increased  software
license  revenues  in 1998.  Although  the  cost of  software  license  revenues
increased  from 1997 to 1998,  the  significant  increase  in  software  license
revenues  for 1998  resulted  in a 2.2%  increase  in gross  profit on  software
license revenues for 1998.

         The cost of maintenance and service revenues  decreased to $5.3 million
for 1998 from $5.4 million for 1997. As a percentage of total revenues, the cost
of maintenance and service revenues decreased to 10% for 1998 from 13% for 1997.
This  decrease was primarily  due to increased  efficiencies  in the delivery of
maintenance  and other  services.  The decrease in the cost of  maintenance  and
service  revenues  from 1997 to 1998 resulted in a 3.5% increase in gross profit
on maintenance and service revenues for 1998.

<PAGE>34


         The cost of hardware and other  revenues  decreased to $2.8 million for
1998 from $5.1 million for 1997. As a percentage of total revenues,  the cost of
hardware and other  revenues  decreased  to 5% for 1998 from 12% for 1997.  This
decrease was primarily  attributable to a decrease in hardware sales  generally,
which was  partially  offset by the sale of hardware  with higher  margins.  The
decrease in cost of hardware and other  revenues from 1997 to 1998 resulted in a
19% increase in gross profit on hardware and other revenues for 1998.

     Sales and Marketing

         Our sales and  marketing  expenses  increased to $21.6 million for 1998
from  $17.8  million  for  1997,  primarily  due to the  expansion  of sales and
marketing  activities  principally  in  the  United  States  and  Europe.  As  a
percentage of total revenues,  sales and marketing expenses decreased to 41% for
1998,  from 42% for 1997,  primarily due to increased  efficiencies in our sales
and marketing operations.

     Research and Development

         Research and  development  expenses were $6.2 million for both 1998 and
1997.  As a percentage  of total  revenues,  research and  development  expenses
decreased  to 12% for 1998 from 15% of  revenues  for  1997.  The  decrease  was
primarily  due to cost  savings  resulting  from the  shifting of  research  and
development functions from the United Kingdom to India and a significant portion
of the planned expenditures  relating to our new generation of software products
having been incurred in prior accounting periods.

     General and Administrative

         General and administrative  expenses decreased to $4.9 million for 1998
from $5.2  million for 1997.  As a  percentage  of total  revenues,  general and
administrative  expenses  decreased  to 9% for  1998  from  12% for  1997.  This
decrease  reflects  the effect of our cost  cutting and cost  control  measures,
including  the closure of our office at Dukes Court,  Central  Woking,  England,
during the fourth  quarter of 1997.  The decrease was partially  offset by a one
time charge in 1998  reflecting  severance  payments to four  individuals in the
aggregate amount of approximately $500,000.

     Write-off of Offering Costs

          In July 1998, we filed a registration statement in connection with our
initial public  offering.  Securities and Exchange  Commission  Staff Accounting
Bulletin,  Topic 5:A (Expenses of Offering),  deems that a  postponement  of the
offering  process for greater than 90 days be treated as an aborted offering and
that all related costs be expensed. Accordingly, we wrote-off approximately $1.6
million in costs associated with our initial public offering in 1998.

     Net Interest Expense

         Net interest expense  reflects  interest on our credit  facilities,  as
reduced by interest income on cash balances.  Net interest expense  increased to
$2.0  million  for 1998 from $1.9  million for 1997,  primarily  due to a slight
increase in amounts outstanding under our credit facilities.

     Income Taxes

         There  was a  provision  for  income  taxes  recorded  for 1998 of $2.0
million.  We recorded a  provision  for income  taxes of $35,000  for 1997.  The
increase in income  taxes  resulted  from the increase in our  profitability  in
1998.

<PAGE>35

Liquidity and Capital Resources

         We  have  funded  our  operations  since  inception  primarily  through
borrowings under bank credit  facilities,  private placements of equity and debt
securities,  equity  contributions by our principal  stockholder and our initial
public offering.  In April 1999, we sold 3,300,000 shares of our common stock in
our initial  public  offering,  generating net proceeds of  approximately  $12.9
million.  In June 1999, we sold 230,000 shares of our common stock and generated
approximately  $1.1 million in connection  with the exercise of a portion of the
over-allotment  option  granted  to  the  underwriters  of  our  initial  public
offering.  In October  1999,  we sold  1,600,000  shares of our common  stock to
Info-quest  in a private  placement,  generating  net proceeds of  approximately
$16.2 million.  As of December 31, 1999, we had  approximately  $13.4 million of
cash and cash  equivalents  and no short-term  borrowings and a working  capital
surplus of approximately $17.8 million.

         We may,  from  time to time,  consider  acquisitions  of  complementary
businesses, products or technologies, which may require additional financing. In
addition,  continued  growth in our  business  may,  from time to time,  require
additional  capital.  We  cannot  assure  you that  additional  capital  will be
available  to us at such time or times as such  capital may be  required  or, if
available,  that it will be on commercially acceptable terms or would not result
in additional dilution to our stockholders.

         We had an operating  cash flow surplus of $13.1 million for 1999.  This
was primarily  due to an increase in our revenue and the related net income.  We
had  operating  cash flow deficits of $6.7 million and $4.0 million for 1998 and
1997, respectively.  Operating cash flow is affected by seasonality, among other
factors, and is often disproportionately higher in our third and fourth quarters
than in the first two quarters of the year.

         Accounts  receivable  increased  to $18.1  million  for 1999 from $16.2
million for 1998. The increase in accounts  receivable in 1999 was primarily the
result  of a  greater  number  of  significant  contracts  in 1999.  These  more
significant  contracts have, by their terms, a longer period for payment,  which
is customary in the industry.  As of December 31, 1999, the average days revenue
outstanding was 90 compared to 112 for 1998.  Accounts  receivable  increased to
$16.2  million as of December  31,  1998,  from $9.5  million as of December 31,
1997.

         We had an  allowance  for  doubtful  accounts of $507,000  for 1999 and
$639,000 for 1998.  We had $765,000 and $452,000 of write-offs in 1999 and 1998,
respectively.  Due to our growth,  we do not believe that historical  write-offs
are necessarily  indicative of future write-offs.  We review the adequacy of the
allowance for doubtful accounts based primarily on a review of aged receivables,
with special  attention  paid to amounts over 90 days old. At December 31, 1999,
the allowance for doubtful accounts was $765,000,  which management  believes is
adequate to cover our receivable balance at December 31, 1999.

         Accrued payroll taxes decreased to approximately $574,000 for 1999 from
$586,000 for 1998.

         We  utilized  cash for  investing  activities  of $17.6  million,  $2.6
million and $1.0  million for 1999,  1998 and 1997,  respectively.  During these
periods,  we  experienced  significant  growth  and  invested  in  property  and
equipment.  During the fourth quarter of 1999, we acquired  e-nnovations.com for
approximately $14.5 million.

         Cash provided by financing  activities was $18.1 million,  $9.1 million
and $4.5 million for 1999, 1998 and 1997, respectively. Financing activities for
1999 primarily  consisted of the initial public offering and a private placement
in October 1999.  The net proceeds from the issuance of shares during the period
were $30.2  million.  We used $13.9  million of the proceeds for payment of long
and short term borrowings.  Financing activities for 1998 primarily consisted of
a private  placement in February 1998 of  approximately  1,294,500 shares of our
common stock, the net proceeds of which were $9.3 million.  We used $2.9 million
of those proceeds for the repayment of long term  borrowings in 1998.  Financing
activities  for 1997  primarily  consisted  of a  private  placement  of  equity
securities in the aggregate amount of $6.4 million,  of which approximately $2.0
million was used to repay bank indebtedness.

<PAGE>36


           As of December 31, 1999, we had no outstanding  indebtedness  under
our bank credit facilities.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Foreign Currency Exchange Rates

         A significant portion of our business is transacted in currencies other
than the United States dollar. Our functional  currency is the British Pound and
the functional  currency of our non-United Kingdom  subsidiaries are their local
currencies.  As a result,  we are subject to exposure from  movements in foreign
currency exchange rates,  specifically the U.S.  dollar/British  pound, the U.S.
dollar/Bulgarian Leva and the British pound/Bulgarian Leva exchange rates. We do
not use derivative financial  instruments for speculative trading purposes,  nor
do we hedge our  foreign  currency  exposure  to  manage  our  foreign  currency
fluctuation risk.

     Interest Rate Sensitivity

         In the past,  our  exposure  related to adverse  movements  in interest
rates  was  primarily  derived  from  the  variable  rate  on  our  bank  credit
facilities.  As of the year ended  December 31,  1999,  we had repaid all of our
indebtedness  to banks and  other  lenders.  Therefore,  we  believe  we are not
currently exposed to any market risks related to interest rate sensitivity.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                   Index to Consolidated Financial Statements

                             AremisSoft Corporation

<TABLE>
<S>                                                                               <C>

Independent Auditors' Report.......................................................37.
Consolidated Balance Sheets........................................................38.
Consolidated Statements of Operations..............................................39.
Consolidated Statements of Changes in Stockholders' Equity (Deficit)...............40.
Consolidated Statements of Cash Flows..............................................41.
Notes to Consolidated Financial Statements.........................................42.
e-nnovations.com
Independent Auditors' Report.......................................................56.
Consolidated Balance Sheets........................................................57.
Consolidated Statements of Operations..............................................58.
Consolidated Statements of Changes in Stockholders' Equity.........................59.
Consolidated Statements of Cash Flows..............................................60.
Notes to Consolidated Financial Statements.........................................61.
Unaudited Pro Forma Condensed Combined Financial Information.......................64.
Notes to the Unaudited Pro Forma Condensed Combined Financial Information..........66.

</TABLE>



<PAGE>37

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
AremisSoft Corporation

         We  have  audited  the  accompanying  consolidated  balance  sheets  of
AremisSoft  Corporation  as of  December  31,  1999 and  1998,  and the  related
consolidated statements of operations, changes in stockholders' equity (deficit)
and cash flows for each of the three  years in the  period  ended  December  31,
1999.  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 audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
AremisSoft  Corporation  at  December  31, 1999 and 1998,  and the  consolidated
results of its operations and its consolidated  cash flows for each of the three
years in the period ended  December  31, 1999,  in  conformity  with  accounting
principles generally accepted in the United States.

/s/ PANNELL KERR FORSTER

London, England
March 2, 2000


<PAGE>38

                             AremisSoft Corporation

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<S>                                                                                                    <C>            <C>

                                                                                                              December 31,
                                                                                                           1998          1999
                                                                                                        ---------     -------
                                                                                                             (in thousands)
                                                             ASSETS
Current assets:
Cash and cash equivalents............................................................................   $     149     $  13,386
Accounts receivable, less allowances for doubtful accounts of $639 and $507 at
   December 31, 1998 and 1999, respectively..........................................................      16,166        18,115
Accounts receivable-- disposition proceeds...........................................................          --         2,592
Other receivables....................................................................................         903           705
Inventory............................................................................................         787         1,603
Deposits paid on service and maintenance contracts...................................................       3,531         3,712
Prepaid expenses and other assets....................................................................       1,135         2,423
                                                                                                        ---------     ---------
          Total current assets:......................................................................      22,671        42,536
                                                                                                        ---------     ---------
                Loan receivable -- related party.....................................................       1,886            --
Investments..........................................................................................          --         1,803
Property and equipment, net................................................                                 1,774         1,847
Purchased and developed software, net of accumulated amortization of $6,075 and
   $5,893 at December 31, 1998 and 1999, respectively................................................       1,284           948
Intangible assets, net of accumulated amortization of $13,036 and $11,534 at
  December 31, 1998 and 1999, respectively...........................................................         337        13,810
                                                                                                        ---------     ---------
          Total assets...............................................................................   $  27,952     $  60,944
                                                                                                        =========     =========

                                         LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.....................................................................................   $   3,669     $   6,910
Accrued payroll taxes................................................................................         586           574
Accrued value added taxes............................................................................       1,649         1,055
Accrued income taxes.................................................................................       2,059         6,572
Current portion of capital lease obligations.........................................................          55            24
Other accrued expenses...............................................................................       2,946         2,371
Bank loans and short-term demand facility............................................................      15,530            --
Deferred revenue.....................................................................................       6,693         7,190
                                                                                                        ----------    ----------
          Total current liabilities..................................................................      33,187        24,696
                                                                                                        ----------    ----------
Loan and accrued interest payable-related party......................................................       1,781            --
Capital lease obligations, less current portion......................................................          93             2
                                                                                                        ----------    ----------
          Total liabilities..........................................................................      35,061        24,698
                                                                                                        ----------    ----------
Stockholders' equity (deficit):
Series-A convertible preferred stock, par value $0.001 authorized 2,100 shares; no
   shares issued and outstanding at December 31, 1998 and 1999, respectively                                   --            --
Series-B convertible preferred stock, par value $0.001 authorized 3,500 shares; no
   shares issued and outstanding at December 31, 1998 and 1999, respectively                                   --            --
Common stock, par value $0.001: authorized 85,000 shares; 10,000 and 15,193
   shares issued and outstanding at December 31, 1998 and 1999, respectively                                   10            15
Additional paid-in capital...........................................................................      27,107        57,325
Accumulated deficit..................................................................................     (32,201)      (18,921)
Accumulated other comprehensive income (loss)........................................................      (2,025)       (2,173)
                                                                                                        ----------    ----------
          Total stockholders' equity (deficit).......................................................      (7,109)       36,246
                                                                                                        ----------    ----------
          Total liabilities and stockholders' equity.................................................   $  27,952     $  60,944
                                                                                                        ==========    ==========

</TABLE>

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


<PAGE>39


                             AremisSoft Corporation

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<S>                                                                                <C>            <C>           <C>

                                                                                         Year Ended December 31,
                                                                                         1997          1998         1999
                                                                                     -----------   -----------   -----------
                                                                                     (in thousands, except per share data)
Revenues:
  Software licenses...........................................................       $   17,024     $  26,416     $   37,224
  Maintenance and services....................................................           18,990        21,680         30,435
  Hardware and other..........................................................            6,360         4,525          5,727
                                                                                     -----------   -----------   -----------
       Total revenues.........................................................           42,374        52,621         73,386
Cost of revenues:
  Software licenses...........................................................            2,079         2,654          4,468
  Maintenance and services....................................................            5,377         5,319          8,620
  Hardware and other..........................................................            5,147         2,817          3,625
  Amortization of purchased software and capitalized software
    development costs.........................................................               70           265            298
                                                                                     -----------   -----------   -----------
       Total cost of revenues.................................................           12,673        11,055         17,011
                                                                                     -----------   -----------   -----------
Gross profit..................................................................           29,701        41,566         56,375
Operating expenses:
  Sales and marketing.........................................................           17,834        21,594         25,518
  Research and development....................................................            6,233         6,207          5,916
  General and administrative..................................................            5,227         4,868          7,108
  Write-off of offering costs.................................................               --         1,592             --
  Amortization of intangible assets...........................................               97            74             --
  Profit on disposition of subsidiary.........................................               --            --            (42)
                                                                                     -----------   -----------   -----------
       Total operating expenses...............................................           29,391        34,335         38,500
                                                                                     -----------   -----------   -----------
Profit from operations........................................................              310         7,231         17,875
Other income (expense):
  Interest expense, net.......................................................            1,895         2,030            661
                                                                                     -----------   -----------   -----------
Income (loss) before income taxes.............................................           (1,585)        5,201         17,214
Income tax expense............................................................               35         2,026          5,097
                                                                                     -----------   -----------   -----------
Income (loss) after taxes before extraordinary item...........................           (1,620)        3,175         12,117
Extraordinary item-- gain on debt forgiveness.................................               --            --          1,163
                                                                                     -----------   -----------   -----------
Net income (loss).............................................................       $   (1,620)   $    3,175    $    13,280
                                                                                     ===========   ==========    ===========
Basic earnings (loss) per share before extraordinary item.....................       $    (0.21)   $     0.35    $      0.95
                                                                                     ===========   ==========    ===========
Diluted earnings (loss) per share before extraordinary item...................       $    (0.21)   $     0.35    $      0.90
                                                                                     ===========   ==========    ===========
Basic earnings (loss) per share after extraordinary item......................       $    (0.21)   $     0.35    $      1.04
                                                                                     ===========   ==========    ===========
Diluted earnings (loss) per share after extraordinary item....................       $    (0.21)   $     0.35    $      0.99
                                                                                     ===========   ==========    ===========
Basic weighted average shares outstanding.....................................            7,518         9,120         12,762
Diluted weighted average shares outstanding...................................            7,518         9,135         13,463


</TABLE>

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


<PAGE>40

                             AremisSoft Corporation

      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>

       <S>                       <C>      <C>     <C>      <C>     <C>       <C>           <C>            <C>          <C>

                                                                                            Accumulated     Total
                                 Preferred Stock     Common Stock   Additional                 Other     Stockholders'
                                 ----------------  ---------------   Paid-in   Accumulated Comprehensive    Equity     Comprehensive
                                 Shares   Amount   Shares   Amount   Capital    Deficit     Income (loss) (Deficit)    Income (loss)
                                 ------  --------  ------- -------- ---------- ----------- -------------- -----------  -------------
                                                                         (in thousands)
        Balance at December
          31, 1996..............    --    $    --   7,504   $    8   $ 11,364  $ (33,756)      $ (2,719)   $ (25,103)    $ (18,042)
        Issuance of common
          stock in connection
          With the
          acquisition of the
          net assets of Juno....    --         --      65       --         --         --             --           --            --
        Issuance of Series A
          preferred stock,
          net of costs of $609.. 1,137          1      --       --      6,403         --             --        6,404            --
        Net loss................    --         --      --       --         --     (1,620)            --       (1,620)       (1,620)
        Currency translation
          adjustment............    --         --      --       --         --         --            785          785           785
                                 ------  --------  ------- -------- ---------- ----------- -------------- -----------  -------------
       Balance at December
          31, 1997.............. 1,137          1   7,569        8     17,767    (35,376)        (1,934)      (19,534)        (835)
        Issuance of common
          stock, net of costs
          of $1,046.............    --         --   1,294        1      9,340         --             --         9,341           --
        Conversion of
          preferred stock
          into common stock.....(1,137)        (1)  1,137        1         --         --             --            --           --
        Net income..............    --         --      --       --         --      3,175             --         3,175        3,175
        Currency translation
            adjustment..........    --         --      --       --         --         --            (91)          (91)         (91)
                                 ------  --------  ------- -------- ---------- ----------- -------------- -----------  -------------
        Balance at December
          31, 1998..............    --         --  10,000       10     27,107    (32,201)        (2,025)       (7,109)       3,084
        Issuance of common
          stock in connection
          With public and
          private issuance,
          net of costs of
          $3,878.................   --         --   5,130        5     29,681         --             --        29,686           --
        Issuance of common
          stock in connection
          with the conversion
          of a promissory note...   --         --      63       --        537         --             --           537           --
        Net income...............   --         --      --       --         --     13,280             --        13,280       13,280
        Currency translation
          adjustment.............   --         --      --       --         --         --           (148)         (148)        (148)
                                 ------  --------  ------- -------- ---------- ----------- -------------- -----------  -------------
        Balance at December
           31, 1999..............   --   $     --  15,193   $   15   $ 57,325   $(18,921)   $    (2,173)  $    36,246   $   13,132
                                 ======  ========  ======= ======== ========== =========== ============== ===========  =============

</TABLE>

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


<PAGE>41

                             AremisSoft Corporation

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<S>                                                                                      <C>          <C>          <C>

                                                                                                Year Ended December 31,
                                                                                             1997         1998         1999
                                                                                          ----------   ----------   ----------
                                                                                                     (in thousands)
Cash flows from operating activities:
Net income (loss)............................................................               $(1,620)     $ 3,175     $ 13,280
Adjustments to reconcile net income (loss) to net cash
  provided by (used in) operating activities:
  Depreciation...............................................................                   977          695        1,093
  Amortization of capitalized software and intangible assets.................                   167          339          298
  Gain on disposition of subsidiary..........................................                    --           --          (42)
  Extraordinary item.........................................................                    --           --       (1,163)
Changes in assets and liabilities, net of acquisitions and dispositions:
  Accounts receivable........................................................                 2,933       (6,602)      (6,477)
  Other receivables..........................................................                  (461)        (226)        (129)
  Inventory..................................................................                   163          295         (723)
  Deposits paid on service and maintenance contracts.........................                    --       (3,531)        (283)
  Prepaid expenses and other assets..........................................                (2,595)       1,059       (1,210)
  Accounts payable...........................................................                   788         (622)       3,867
  Deferred revenue...........................................................                (5,726)         937          692
  Accrued taxes payable......................................................                 1,242         (647)       4,298
  Other accrued expenses.....................................................                   103       (1,611)        (447)
                                                                                            ----------   ----------   ----------
    Net cash provided by (used in) operating activities......................                (4,029)      (6,739)      13,054
                                                                                            ----------   ----------   ----------
Cash flows from investing activities:
Purchases of property and equipment..........................................                  (684)        (373)      (1,355)
Capitalized software development costs.......................................                  (515)        (325)          --
Loan to related party (net)..................................................                    --       (1,886)      (1,781)
Payment for acquisition, net of cash acquired................................                    --           --      (14,537)
Proceeds from disposal of property and equipment.............................                   228            4           82
                                                                                            ----------   ----------   ----------
    Net cash used in investing activities....................................                  (971)      (2,580)     (17,591)
                                                                                            ----------   ----------   ----------
Cash flows from financing activities:
Net proceeds from issuance of stock..........................................                 6,404        9,341       30,223
Principal payments of long-term borrowings...................................                (2,040)      (2,850)      (9,204)
Long-term borrowing..........................................................                    33          511           --
Loan from related party......................................................                    --        1,781        1,886
Principal payments of capital lease obligations..............................                   (55)         (30)         (61)
Short-term demand facility...................................................                   186          372       (4,705)
                                                                                            ----------   ----------   ----------
    Net cash provided by financing activities................................                 4,528        9,125       18,139
                                                                                            ----------   ----------   ----------
Net increase (decrease) in cash and cash equivalents.........................                  (472)        (194)      13,602
Effect of foreign currency exchange rates on cash and cash equivalents.......                  (156)         104         (365)
Cash and cash equivalents, at beginning of year..............................                   867          239          149
                                                                                            ----------   ----------   ----------
Cash and cash equivalents, at end of year....................................               $   239      $   149     $ 13,386
                                                                                            ==========   ==========   ==========
Supplemental disclosure:
    Interest paid............................................................               $ 1,900      $ 2,188     $  1,390
    Assets acquired under capital leases.....................................               $   138      $    34     $     --
    Investment acquired in connection with disposition of subsidiary.........               $    --      $    --     $  1,803
    Conversation of promissory note and accrued interest into 62,759 shares of
        common stock.........................................................               $    --      $    --     $    537

</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

<PAGE>42

                                              AremisSoft Corporation

                                    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   Business and Significant Acounting Policies

Nature of Operations

         AremisSoft Corporation ("AremisSoft") develops, markets, implements and
supports   enterprise-wide   applications   software   targeted   to   mid-sized
organizations  in the  manufacturing,  healthcare,  hospitality and construction
industries.

Organization and Basis of Presentation

         In  October  1997,   AremisSoft,   under  its  previous  name  of  Juno
Acquisitions,  Inc.,  a Nevada  corporation  ("Juno"),  entered  into a Plan and
Agreement of  Reorganization  (the "Plan") with LK Global  Information  Systems,
B.V. ("LK Global"), a company  incorporated in The Netherlands.  Under the terms
of the Plan, Juno acquired all of the issued and outstanding  common stock of LK
Global  in  exchange  for  7,503,920  shares  of its  common  stock  (the  "1997
Acquisition").   Prior  to  the  1997  Acquisition,   Juno  had  no  significant
operations.

         LK  Global  was  accounted  for as the  acquirer  and as the  surviving
accounting  entity  because  the  former   stockholder  of  LK  Global  received
approximately 99% of the voting rights in the combined  corporation.  The shares
issued  by Juno  have  been  accounted  for as if  those  shares  comprised  the
historical share capital of LK Global. The outstanding capital stock of Juno, at
the date of the 1997 Acquisition,  has been accounted for as shares issued by LK
Global to acquire the net assets of Juno.

         Because LK Global is the accounting survivor,  the financial statements
presented  for  all  periods  are  those  of  LK  Global  and  its  subsidiaries
(collectively,  the "Company")  with a change in name to AremisSoft  Corporation
shortly  after  the  1997   reorganization.   All  inter-company   accounts  and
transactions are eliminated in consolidation.

         During 1999, AremisSoft reincorporated in Delaware. As a result of this
reincorporation,  shareholders of the Nevada corporation have effectively become
shareholders of the newly formed Delaware corporation.

Revenue Recognition

         The Company  derives  its revenue  primarily  from  software  licenses,
maintenance and service contracts and hardware sales.  Software license revenues
are mainly derived from the licensing and service of industry-specific  software
applications,  primarily the sale of upgrades to existing customers. Maintenance
and service  contract  revenues are  primarily  derived from ongoing  support of
installed  software,  and  training,  consulting  and  implementation  services.
Hardware  sales  revenues are  primarily  derived  from the sale of  third-party
hardware to customers requiring turnkey solutions.

         Software license revenues consist of sales of software  licenses which,
for periods  subsequent to December 31, 1997, are recognized in accordance  with
the American  Institute of Certified Public  Accountants'  Statement of Position
("SOP") 97-2,  "Software Revenue  Recognition." Under SOP 97-2, software license
revenues are  recognized  upon execution of a contract and delivery of software,
provided  that  the  license  fee is  fixed  and  determinable,  no  significant
production,  modification  or  customization  of the  software is  required  and
collection  is  considered  probable by  management.  When  contracts do require
significant  production,  modification or customization of software, the Company
recognizes  revenue  under the  percentage of  completion  method.  During 1999,
software  license  revenues  were  recognized  in  accordance  with SOP 97-2, as
modified by SOP 98-9,  "Modification of SOP 97-2,  Software Revenue  Recognition

<PAGE>43

with respect to Certain  Transactions." The Company believes it is in compliance
with SOP 97-2, as modified by SOP 98-9.

         The  Company  also  enters  into  arrangements  with  customers  to use
multiple copies of software products under site license agreements. If all other
criteria for recognition of revenue are met, revenue is recognized upon delivery
of the product.

         Product sales to  distributors  are not  recognized  until the products
have been shipped to the end-user.  Maintenance contract revenues are recognized
ratably over the life of the contract.  Service contract revenues are recognized
in accordance  with the terms of the contract and add-on hardware sales revenues
are  recognized  when the hardware is shipped to the customer.  The Company does
not enter into sales  contracts,  either for direct sales or with  distributors,
which include provisions for rights of return. In addition, the Company does not
enter into price protection  agreements or inventory  balancing  agreements with
distributors.

         Fees  earned  during  1999  from  contracts  accounted  for  under  the
percentage of completion method amounted to approximately  $10.2 million,  while
billed  and  unpaid   receivables   due  under  these   contracts   amounted  to
approximately  $2.0 million at December 31, 1999.  Fees earned  during 1998 from
contracts  accounted for under the percentage of completion  method  amounted to
approximately $9.2 million,  while billed and unpaid receivables due under these
contracts  amounted to  approximately  $5.0 million at December 31, 1998.  These
contracts involved  substantial  modification and customization of the Company's
core software, Aremis 4.0 architecture,  in industries where the Company did not
have a fully developed "off the shelf"  software  product to offer the customer.
These contracts typically provide for defined milestone  objectives with payment
when the  milestone is achieved and the  customer has accepted  delivery.  There
were no amounts included in accounts  receivable relating to unbilled amounts or
retainage.  Prior to  1998,  the  Company  did not  receive  any  revenues  from
agreements which required contract accounting.

Foreign Currency

         The  functional   currency  of  the  Company  and  its  United  Kingdom
subsidiaries  is the  British  pound.  The  functional  currencies  of the other
subsidiaries are their local currencies.

         For  reporting  purposes,  the  financial  statements  are presented in
United States dollars and in accordance  with Statement of Financial  Accounting
Standard No. 52, "Foreign Currency Translation". The consolidated balance sheets
are translated  into United States  dollars at the exchange rates  prevailing at
the balance sheet dates and the  statements of operations  and cash flows at the
average exchange rates for the relevant periods. Gains and losses resulting from
translation  are  included as a component  of  accumulated  other  comprehensive
income (loss).

         Net gains and losses resulting from foreign  exchange  transactions are
included in the consolidated statements of operations.

International Operations

         The Company currently has operations in the United Kingdom,  the United
States,  Argentina,  Mexico, India, Ireland, Bulgaria and Cyprus and independent
distributors in 14 additional countries.  A significant portion of the Company's
revenues are received in  currencies  other than the United  States  dollar (the
currency  into which the Company's  historical  financial  statements  have been
translated),  primarily  British pounds. As a result, a portion of the Company's
sales are  subject to  certain  risks,  including  adverse  developments  in the
foreign  political and economic  environment,  trade barriers,  managing foreign
operations and potentially  adverse tax consequences.  There can be no assurance
that  any of  these  factors  will not have a  material  adverse  effect  on the
Company's financial condition or results of operations in the future.

<PAGE>44


Cash Equivalents

         Cash   equivalents   consist   of  highly   liquid   investments   with
insignificant  interest  rate risk and a maturity  date of three  months or less
when purchased. They are carried at cost which approximates fair value.

Inventory

         Inventory  is   comprised  of  finished   goods  held  for  resale  and
maintenance  parts.  Finished  goods  held for resale are stated at the lower of
cost or net realizable value. Cost is determined on a first-in  first-out basis,
and includes all direct costs incurred and  attributable  production  overheads.
Net realizable  value is based on estimated  selling price net of completion and
disposal costs.  Maintenance parts are valued at cost and are depreciated over a
three-year period.

Purchased and Developed Software

         The Company capitalizes the qualifying costs of developing its software
products.  Capitalization of such costs requires that technological  feasibility
has been  established.  The Company defines the  establishment  of technological
feasibility  as the  completion of all planning,  designing,  coding and testing
activities   that  are   necessary  to  establish   products  that  meet  design
specifications,   including  functions,   features  and  technical   performance
requirements. In most instances the Company may arrange for customer testing and
considers the customers'  feedback in determining if feasibility is established.
Development   costs  incurred  prior  to  the   establishment  of  technological
feasibility are expensed as incurred.  When the software is fully documented and
available for unrestricted sale, capitalization of development costs ceases, and
amortization  commences and is computed on a product-by-product  basis, based on
either a straight-line  basis over the economic life of the product or the ratio
of current gross revenues to the total of current and  anticipated  future gross
revenues, whichever is greater.

         The Company capitalizes as purchased software the costs associated with
software  products either purchased from other companies for resale or developed
by other companies under contract with the Company.  The cost of the software is
amortized  on the same basis as  capitalized  software  development  costs.  The
amortization  period is re-evaluated  quarterly with respect to certain external
factors including,  but not limited to, technological  feasibility,  anticipated
future  gross  revenues,  estimated  economic  life and changes in software  and
hardware technologies.

         The   establishment  of  technological   feasibility  and  the  ongoing
assessment of recoverability of capitalized  software  development costs require
considerable  judgment by management with respect to certain  external  factors,
including,  but not limited to,  technological  feasibility,  anticipated future
gross  revenues,  estimated  economic  life and changes in software and hardware
technologies.  Realization  of  capitalized  software  costs is  subject  to the
Company's  ability to market its  software  products in the future and  generate
cash flows sufficient to support future operations.

Intangible Assets

         Goodwill and other intangible  assets  consisting of customer lists and
management  employment  agreements  related  to  acquired  businesses  are being
amortized  over  periods of three to five  years.  Amortization  of  intangibles
amounted to $97,000,  $74,000 and $0 for the years ended December 31, 1997, 1998
and 1999 respectively.



<PAGE>45

Property and Equipment

         Property and equipment is recorded at cost.  Depreciation is calculated
using the straight-line  method over the estimated useful lives of the assets as
follows:

Leasehold improvements................shorter of the lease term or economic life
Fixtures and equipment................three to five years
Motor vehicles........................four years

Impairment of Long-lived Assets

         In the event that facts and  circumstances  indicate  that the carrying
value of an asset may be impaired,  an  evaluation  of  recoverability  would be
performed.  If an evaluation is required, the estimated fair market value of the
asset  would  be  compared  to the  asset's  carrying  value to  determine  if a
write-down to the lower of carrying value or market value is required.

Offering Costs

         In July  1998,  the  Company  filed an S-1  Registration  Statement  in
connection  with an initial public  offering  ("IPO") of its common stock.  As a
result  of  a  delay  in  the  registration   process,  the  Company  wrote  off
approximately $1.6 million in offering costs in 1998. Offering costs incurred in
1999 were  capitalized  and have  been  offset  against  the  proceeds  from the
offering.

Accounting for Stock Based Compensation

         Employee  stock options are accounted for under  Accounting  Principles
Board Opinion No. 25 "Accounting  for Stock Issued to Employees" (APB 25), which
requires  recognition  of expense  when the  option  price is less than the fair
value of the stock at the date of grant.

         The Company generally awards options for a fixed number of shares at an
option  price  equal to the fair  value at the date of grant.  The  Company  has
adopted the  disclosure-only  provisions  of Statement  of Financial  Accounting
Standard (SFAS) No. 123 "Accounting for Stock-Based Compensation" (SFAS 123).

Income Taxes

         Income  taxes  are  accounted  for  in  accordance  with  Statement  of
Financial  Accounting  Standards  No. 109,  "Accounting  for Income Taxes" (SFAS
109). Under the asset and liability method of SFAS 109,  deferred tax assets and
liabilities are recognized for the future tax  consequences  attributable to net
operating loss  carryforwards  and differences  between the financial  statement
carrying  amounts of existing assets and  liabilities,  and their respective tax
bases.  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.  Deferred tax assets are
recorded at their estimated realizable value.

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.

<PAGE>46


         Certain  estimates used by management are  particularly  susceptible to
significant  changes,  such as the  recoverability  and amortization  periods of
purchased and developed software and intangible assets. Management believes that
the estimates used are adequate based on the information currently available.

Net Income (Loss) Per Common Share

         SFAS No. 128 "Earnings per share"  requires the  presentation  of basic
and diluted earnings per share. Basic net income (loss) per share is computed by
dividing net income  (loss) by the weighted  average  number of shares of common
stock  outstanding for the period.  The diluted net income (loss) per share data
is  computed  using the  weighted  average  number  of  shares  of common  stock
outstanding plus the dilutive effects of common stock equivalents.

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

<TABLE>
<S>                                                                   <C>             <C>       <C>

                                                                            Year Ended December 31,
                                                                          1997         1998      1999
                                                                       ---------   ----------  ---------
Numerator used for basic and diluted earnings (loss) per share:
  Income (loss) before extraordinary item.........................     $  (1,620)  $    3,175  $  12,117
  Extraordinary item..............................................            --           --      1,163
                                                                       ---------   ----------  ---------
  Net income (loss)...............................................     $  (1,620   $    3,175  $  13,280
                                                                       =========   ==========  =========
Denominator for basic earnings (loss) per share:
  Weighted average shares outstanding.............................         7,518        9,120     12,762
                                                                       =========   ==========  =========
Denominator for diluted earnings (loss) per share:
  Denominator for basic earnings (loss) per share.................         7,518        9,120     12,762
  Effect of dilutive securities:
     Warrants and options.........................................            --           15        701
                                                                       ---------   ----------  ---------
  Weighted average shares outstanding.............................         7,518        9,135     13,463
                                                                       =========   ==========  =========
Basic earnings (loss) per share:
Before extraordinary item.........................................     $   (0.21)   $   0.35    $   0.95
Extraordinary item................................................            --          --        0.09
                                                                       ---------   ----------  ---------
After extraordinary item..........................................     $   (0.21)   $    0.35   $   1.04
                                                                       =========   ==========  =========
Diluted earnings (loss) per share:
Before extraordinary item.........................................     $   (0.21)   $    0.35   $   0.90
Extraordinary item................................................            --           --       0.09
                                                                       ---------   ----------  ---------
After extraordinary item..........................................     $   (0.21)   $    0.35   $   0.99
                                                                       ==========  ==========  =========
</TABLE>


Fair Value of Financial Instruments

         In the opinion of  management  the carrying  amounts for the  Company's
financial  instruments  which  include  cash  and  cash  equivalents,   accounts
receivable, accounts payable, accrued expenses approximate fair values.

         Estimates are not necessarily  indicative of the amounts which could be
realized  or would be paid in a current  market  exchange.  The  effect of using
different market assumptions and/or estimation  methodologies may be material to
the estimated fair value amount.


<PAGE>47

2. Inventory

         Inventory consists of the following (in thousands):

                                                                 December 31,
                                                              -----------------
                                                                1998      1999
                                                              -------   -------
Finished goods held for resale.............................    $ 287     $1,321
Maintenance parts..........................................      500        282
                                                              --------   ------
                                                               $ 787     $1,603
                                                              ========   ======
3. Property and Equipment

         Property and equipment consists of the following (in thousands):

                                                                 December 31,
                                                              -----------------
                                                                1998      1999
                                                              -------   -------
               Fixtures and equipment.....................    $5,652    $ 5,833
               Motor vehicles.............................       360         81
               Leasehold improvements.....................       288        280
                                                              -------   -------
                                                               6,300      6,194
               Less accumulated depreciation..............    (4,526)    (4,347)
                                                              -------   -------
                                                              $1,774    $ 1,847
                                                              =======   =======

         At December 31, 1998 and 1999,  the Company held property and equipment
with a net book  value of  $98,000  and  $27,000,  respectively,  under  capital
leases.

         Depreciation  expense was $977,000,  $695,000 and $1,093,000  for the
years ended December 31, 1997, 1998 and 1999, respectively.

4. Bank Loans Payable

         Bank loans payable at December 31, 1998, all of which is collateralized
and fully guaranteed, consists of the following (in thousands):
<TABLE>
<S>                                                                                                       <C>

Description

Loan payable to bank, interest payable quarterly at 3% over bank base rate, principal due in
     monthly installments of $10..................................................................     $    187
Loan payable to bank, interest payable quarterly at 3% over Sterling LIBOR plus 1/16% associated
     costs, principal due in quarterly installments of $146.......................................        1,019
Loan payable to bank, interest payable quarterly at 3% over Sterling LIBOR plus 1/16%   associated
     costs, principal due in quarterly installments of $85........................................          768
Loan payable to bank, interest payable quarterly at 3% over Sterling LIBOR inclusive of associated
     costs, principal due in quarterly installments of $119.......................................          714
Loan payable to bank,  interest  payable  monthly at 4% over Sterling LIBOR plus
     variable associated funding costs,  averaging 1/32% in 1998,  principal due
     in equal annual installments of $1,872......................................................         7,487
Loan payable to bank, interest payable at 12% per annum...........................................           35
Short term demand facility-- bears interest at the lending banks base rate plus the applicable
     margin.......................................................................................        5,320
                                                                                                        -------
                      Total.......................................................................     $ 15,530
                                                                                                        ========
</TABLE>


<PAGE>48


During 1999 all of the above loans were repaid  primarily  from the  proceeds of
the Company's initial public offering.  Management  negotiated a settlement with
the  lender  whereby   approximately   $1,163,000  (net  of  tax)  of  principal
indebtedness  was forgiven.  This amount has been reflected as an  extraordinary
item in the  accompanying  consolidated  statement  of  operations.  The lending
bank's base rate ranged between 6.25% and 7.5% and Sterling LIBOR ranged between
6.6% and 7.9% during the year ended December 31, 1999.

5. Acquisitions and Dispositions

Acquisition

         In December 1999, the Company  acquired all the issued and  outstanding
common stock of  e-nnovations.com in exchange for approximately $14.5 million in
cash.  The  acquisition  has been  accounted  for using the  purchase  method of
accounting.  The operations of e-nnovations.com are included in the accompanying
consolidated financial statements from the date of acquisition. e-nnovations.com
is an Internet software  solutions  provider.  The excess of purchase price over
net  assets  acquired  amounted  to  approximately  $13.8  million  and has been
temporarily  allocated  to goodwill.  Management  is  currently  evaluating  the
allocation of goodwill to certain identifiable  intangible assets.  Amortization
of goodwill and identifiable  intangible assets are expected to be provided on a
straight  line  basis  over three  years.  Amortization  expense in 1999 was not
material.

         The aggregate estimated fair value of the assets and liabilities of the
acquired  business  and  the  aggregate  consideration  paid is as  follows  (in
thousands):

Net current assets (including cash of $2)..................     $   603
Property and equipment.....................................         126
Intangible assets..........................................      13,810
                                                                -------
                                                                $14,539
                                                                =======
Consideration paid:
Cash consideration.........................................    $ 14,539

Disposition

         In October  1999,  the  Company  disposed of its Cyprus  operations  in
exchange  for  approximately  $2.6  million in cash to be  received  in 2000 and
approximately 4 million shares of common stock (representing a 9.5% interest) in
GlobalSoft.com. GlobalSoft.com is a software development company with operations
in  Cyprus  and  Eastern  Europe.  GlobalSoft.com  was  formed  in  1999  by the
acquisition  of AremisSoft  (Cyprus) Ltd as well as six other  unrelated  Cyprus
entities. The Company's CEO is also the chairman of the board of GlobalSoft.com.

         A summary of the exchange transactions is as follows (in thousands):

Net assets disposed off............................................. $ 4,353
Estimated fair value of shares of GlobalSoft.com(1)................. $ 1,803
Cash to be received.................................................   2,592
                                                                     -------
                                                                       4,395
Gain on disposal.................................................... $    42
                                                                     =======
------------
(1) The  value  of the  GlobalSoft.com  shares  at the date of  acquisition  was
    estimated  at $0.45 per share  based upon  similar  sales of  GlobalSoft.com
    common stock to third parties.  At December 31, 1999,  the Company  accounts
    for this investment under the cost method.


<PAGE>49



     The  Cyprus   operations   included  in  the  accompanying  1998  and  1999
consolidated  statements of operations are as follows (in thousands,  except per
share amounts):

                                                              Year Ended
                                                               December
                                                                  31,
                                                            ---------------
                                                             1998      1999
                                                            ------   -------
Revenues..............................................      $ 810     $ 669
Net income............................................        285       286
Basic earnings per share..............................       0.03      0.02
Diluted earnings per share............................       0.03      0.02

         The following  unaudited  pro forma results of operations  for the year
ended  December 31, 1999 assume that the  acquisition  of  e-nnovations.com  and
disposition of Cyprus had occurred on January 1, 1999 (in thousands,  except per
share amounts):

Revenues.........................................................  $75,633
Net income.......................................................    8,776
Basic earnings per share after extraordinary item................     0.69
Diluted earnings per share after extraordinary item..............     0.65

         The unaudited pro forma results are not necessarily  indicative of what
actually would have occurred if the  acquisition and disposition had occurred on
January 1, 1999, nor is it indicative of future operating results.

6. Capital Lease Obligations

         The Company has  entered  into  various  non-cancelable  capital  lease
agreements  for items of property and equipment.  Annual  payments for the years
ending December 31, 2000 and 2001 are as follows (in thousands):

2000.............................................................     $  27
2001.............................................................         3
                                                                      -----
                                                                         30
Less amount representing interest................................         4
                                                                      -----
                                                                         26
Less current portion.............................................        24
                                                                      -----
                                                                      $   2
                                                                      =====
7. Commitments

Operating Leases

         The Company  leases office space,  equipment and motor  vehicles  under
non-cancelable  operating  leases which expire on various dates through 2012. As
of December 31, 1999 required  future minimum  rentals to be paid are as follows
(in thousands):

2000...........................................................    $ 1,201
2001...........................................................        797
2002...........................................................        626
2003...........................................................        421
2004...........................................................        378
Thereafter.....................................................      2,831
                                                                   -------
                                                                   $ 6,254
                                                                   =======

<PAGE>50

     Rent expense for the years ended December 31, 1997,  1998 and 1999 amounted
to approximately $1.9 million, $2.0 million and $1.4 million, respectively.

Registration rights

     In connection  with the private  placement to third party  investors of the
Company's common stock and convertible notes in 1998, the investors were granted
registration rights.  Pursuant to their registration rights, the holders thereof
may require the Company to register under the Securities Act all or a portion of
their shares at the Company's expense.  In addition,  if the Company proposes to
register  any of its  securities  either for its own  account or the  account of
others these investors are entitled to include their shares in the  registration
at the Company's expense.

Employment Agreements

     The Company has entered into employment agreements with its Chief Executive
Officer  (CEO)  and its  President  which  expire on June 1,  2001.  Each of the
employment  agreements may be terminated by the Company or the employee  without
cause (as defined in the  employment  agreements)  upon 30 days  notice,  or for
cause without notice. Under the terms of the CEO's employment  agreement,  he is
entitled to minimum  annual  compensation  of  $350,000 in 2000 and  $400,000 in
2001. Under the terms of the President's employment agreement, he is entitled to
minimum  annual  compensation  of $300,000 in 2000 and  $350,000 in 2001.  Under
their  employment  agreements,  each is entitled to receive a severance  benefit
equal to one times annual  compensation  if  terminated  without  cause and 2.99
times his annual  compensation if terminated without cause within 180 days after
a "change in control" (as defined).  The CEO and the President are also entitled
to bonuses  (estimated at $600,000 in 1999) based on a bonus plan adopted by the
compensation committee at its December 1999 meeting.

         During the third and fourth  quarters of 1998, the Company's  president
made loans to the Company in the  aggregate  principal  amount of  approximately
$1.7 million.  The loans were reflected in a promissory  note dated December 31,
1998,  bearing interest at the rate of LIBOR plus 2% per annum and was repaid in
1999.

         In May 1998,  the  Company  loaned $2.6  million to its CEO,  which was
evidenced by a promissory  note in order to provide  temporary  liquidity to the
CEO.  The loan  accrued  interest at the rate of LIBOR plus 2% per annum and was
repaid in November 1999.

Employee Benefit Plans

         The Company  has  various  defined  contribution  retirement  plans for
qualified employees.  Contributions made under the plans were $328,000, $311,000
and $115,000 in 1997, 1998 and 1999, respectively.

<PAGE>51

8. Income Tax

         The  Company's  principal  subsidiaries  are not resident in the United
States for tax purposes.  Income (loss) from operations  before income taxes and
extraordinary items included the following:

<TABLE>
<S>                                                                <C>        <C>       <C>

                                                                             Year Ended
                                                                             December 31,
                                                                  --------------------------------
                                                                     1997        1998         1999
                                                                  --------    ----------    --------
US income (loss)..............................................    $  (103)    $  (1,917)    $  (816)
Foreign income (loss).........................................      (1,482)       7,118      18,030
                                                                  --------    ----------    --------
                                                                  $ (1,585)   $   5,201     $17,214
                                                                  =========   ==========    ========
The provision for income taxes was estimated as follows:
Income taxes estimated to be payable (refundable) currently
  US Federal..................................................    $    23     $     963      $ (519)
  US state and local..........................................         11            (1)          6
  Foreign.....................................................          1         1,064       5,610
                                                                  --------    ----------    --------
                                                                  $    35     $   2,026      $5,097
                                                                  =========   ==========    ========

         A  reconciliation  of the provision for income taxes  compared with the
amounts at the US federal statutory rate is as follows:

                                                                              Year Ended
                                                                             December 31,
                                                                  --------------------------------
                                                                     1997        1998         1999
                                                                  --------    ----------    --------
Tax at statutory rate.........................................    $  (539)     $  1,769      $5,853
Differences in tax rates......................................         48            (9)       (627)
Non-deductible expenses.......................................        733           499         841
Valuation allowance on operating loss.........................       (207)          147        (496)
Prior years over accrued and other............................         --          (380)       (474)
                                                                  --------    ----------    --------
Income tax expense............................................    $    35      $  2,026      $5,097
                                                                  ========    ==========    ========

</TABLE>


         The  Company's  deferred  tax assets as of  December  31, 1998 and 1999
primarily consisted of the following (in thousands):

<TABLE>
<S>                                                                           <C>          <C>

                                                                                   December 31,
                                                                               -------------------
                                                                                 1998        1999
                                                                               --------    --------
Loss carry forwards.......................................................     $ 3,083     $ 2,523
Equipment.................................................................         675         806
Other.....................................................................         290         223
                                                                               --------    --------
                                                                                 4,048       3,552
Valuation allowance.......................................................      (4,048)     (3,552)
                                                                               --------    --------
  Total deferred tax assets...............................................     $    --     $    --
                                                                               ========    ========
</TABLE>


<PAGE>52


     Estimated net operating loss  carryforwards  at December 31, 1999 and their
expiration dates are shown below:

                                               Expiration       Net operating
Country of jurisdiction                          dates             loss
-----------------------                      -------------      -----------
United Kingdom............................   No expiration       $  8,410
United States.............................     2005-2018         $     76

         The Company has  recorded a  valuation  allowance  to offset the entire
deferred  tax asset  where it is more likely than not that the asset will not be
realized.

         The Indian government,  as a means of encouraging  foreign  investment,
provides  significant tax incentives and exemptions to regulatory  restrictions.
Certain of these  benefits  that  directly  affect the  Company  include,  among
others,  tax holidays  (temporary  exemptions from taxation on operating income)
and liberalized  import and export duties.  The current tax holiday to which the
Company is subject  expires in 2001.  To be  eligible  for  certain of these tax
benefits, the Company must continue to meet certain conditions such as continued
operation in a qualifying  software technology park and export sales of at least
75% of inventory turnover. A failure to meet such conditions could result in the
cancellation  of the benefits or a requirement to pay damages in an amount to be
determined  by the  Indian  government  and  customs  duty on plant,  machinery,
equipment,  raw materials,  components and consumables.  With respect to duties,
subject  to  certain  conditions,   goods,  raw  materials  and  components  for
production  imported by the Company's  offices in India are exempt from the levy
of a customs  duty.  No  assurances  can be given that such tax benefits will be
continued in the future or at their current levels.

9. Stockholders' Equity

Stock Split

         In 1999, the Board of Directors approved a 1.711772-for-1 reverse stock
split of issued and outstanding common shares. All shares, per share and warrant
information  in the  accompanying  financial  statements  has been  restated  to
reflect the effect of the split.

Common and Preferred Stock

         During 1999, the Company  completed an initial  public  offering of its
common stock and sold additional shares in a private placement whereby 5,130,000
shares of common stock were issued in exchange for  approximately  $30.2 million
in cash, net of issuance costs. The private  placement  occurred in October 1999
and  resulted in $17.6  million in proceeds  through the issuance of 1.6 million
shares to a related entity.  This related entity also acquired an additional 1.2
million  shares of the Company's  common stock from an entity  controlled by the
Company's  CEO. At December 31, 1999,  this related entity owned over 20% of the
Company's outstanding stock.

         The Company is authorized to issue  85,000,000  shares of common stock,
par value $0.001 per share, and 15,000,000  shares of preferred stock, par value
$0.001 per share, two series of which have been designated as follows: 2,100,000
shares of Series A convertible  preferred stock and 3,500,000 shares of Series B
convertible preferred stock.

         The Company's  Series A and Series B convertible  preferred  stock rank
pari passu except with respect to the right to receive dividends.  In respect of
dividends,  Series A holders are entitled to a  non-cumulative  cash dividend of
$0.40 per share per annum and Series B holders are entitled to a  non-cumulative
cash  dividend of $0.50 per share per annum,  each  commencing  on  September 1,
1998. In a  liquidation,  the preferred  stock ranks in preference to the common
stock  as to  repayment  of  par  value,  and  ratably  with  the  common  stock
thereafter.

<PAGE>53


         The  preferred  stock  is  convertible  at the  rate  of one  share  of
preferred  stock for one share of common stock at the option of the holder.  The
preferred stock is not redeemable. There are provisions to protect the preferred
holders from dilution in events such as subdivision or combination of the common
stock,  the payment of stock dividends or  distributions  of other securities or
other reclassifications,  exchanges or substitutions.  The preferred stock votes
with the common stock on an as-converted basis.

         On October 10,  1997,  in  connection  with the Plan and  Agreement  of
Reorganization  referred  to in  note  1,  the  Company  offered  its  Series  A
convertible  preferred stock in a private placement.  As a result of the private
placement  1,137,000  shares of the Series A  convertible  preferred  stock were
issued and the Company received  proceeds of approximately  $6.4 million (net of
costs of  $609,000),  including  shares  issued to  various  parties  in lieu of
commissions  and finders' fees related to the private  placement.  In June 1998,
all of the outstanding Series A preferred stock was converted into common stock.
Upon  conversion,  all holders of the Company's  Series A convertible  preferred
stock waived their right to receive  dividends as described  above.  At December
31, 1998 and 1999 there were no preferred shares outstanding.

Warrants

         In connection  with the issuance of its Series A convertible  preferred
stock,  the Company issued warrants to purchase an aggregate of 51,117 shares of
common stock. The warrants were issued in payment of finders' fees in connection
with the offering.  Such warrants have an exercise price of $8.56 per share, are
assignable  and expire on April 10,  2000.  At the time of  issuance  management
determined  that the value of the  warrants  was not  material to the  financial
statements.

         During  1999 the  Company  issued  warrants  to  purchase up to 330,000
shares  of  common  stock  at an  exercise  price  of  $7.50  per  share  to the
underwriters of the April 1999 IPO. The warrants are exercisable beginning April
27, 2000 and expire on April 22, 2003.

Convertible Promissory Note

         In December 1998, the Company  executed a convertible  promissory  note
(the "Note") in the principal  amount of $500,000,  which bears  interest at the
rate of 8% per annum. The Note was issued, and the proceeds received, in January
1999. The Note converts into shares of the Company's common stock, at the option
of the holder at $8.56 per share.  These  securities were sold to one accredited
investor  and a fee of 10% of the  principal  amount  of the  Note was paid as a
finder's fee. Management has evaluated the Note's beneficial  conversion feature
and  determined  that its  value  was not be  material  to the  basic  financial
statements.  In December 1999, the promissory note and accrued  interest thereon
was converted into 62,759 shares.

Stock Option Plan

         In October  1997,  the Company  adopted the "1998 Stock  Option  Plan",
which  provides  for awards in the form of options,  including  incentive  stock
options ("ISOs") and non-statutory stock options ("NSOs"). Employees, directors,
consultants  and advisors of the Company will be eligible for the grant of NSOs,
while only employees will be eligible for the grant of ISOs. Options will have a
term of up to ten years from the date of grant. In addition, the Company granted
options outside the 1998 Stock Option Plan. As of December 31, 1999,  there were
2,288,000 options to purchase common stock outstanding.


<PAGE>54



         A summary of the  Company's  stock option  activity  during  1999,  and
related information follows:

<TABLE>
<S>                                                             <C>                 <C>

                                                                               1999
                                                                ---------------------------------------
                                                                   Number of              Weighted
                                                                    options           Average exercise
                                                                 (in thousands)            Price
                                                                ----------------      -----------------
Outstanding at the beginning of year..............                     --                       --
Granted...........................................                  2,288                $    7.86
Outstanding at the end of year....................                  2,288                $    7.86
Exercisable at end of year........................                    802                $    9.08

</TABLE>


     The exercise  price of options  outstanding  as of December 31, 1999 ranged
from $5 to $14. The weighted average remaining contractual life of those options
is 4.5 years.

     Options granted under the stock option plan are accounted for under APB 25,
and since  options  have been  granted at prices  equal to the fair value of the
Company's common stock on the date of grant, no compensation has been recognized
for the option grants.  Had compensation cost for the plan been determined based
upon estimated fair value of the options at the grant dates consistent with FASB
123, pro forma net income after extraordinary item would have been approximately
$8.1 million or $0.64 per share-basic and $0.60 per share-diluted.  The weighted
average fair value of options  granted  during 1999 is estimated to be $3.63 per
option assuming the following: no dividend yield, risk free interest rate of 6%,
an  expected  term of the option of 3 years,  and an expected  weighted  average
volatility of 43%.

10. Segment Reporting Information

     The Company  develops  markets,  implements  and  supports  enterprise-wide
applications  software  targeted  at  mid-sized   organizations  mainly  in  the
manufacturing,  healthcare, hospitality, and construction industries. Management
considers  each  industry  to  be  a  reportable  segment,  with  each  industry
representing a strategic  business that offers  products and services to various
customers.  These  industries  are  managed  separately  because  each  requires
different product and marketing strategies.

     Within  each  industry,  the  Company  has  adopted  a  tailored  sales and
marketing  strategy.  This  strategy  includes  advertisements  in leading trade
publications,  participation  in trade shows and sponsorship of user groups.  In
addition,  the Company has developed  corporate sales and marketing materials as
well as general  financial and technical  materials that are distributed to each
of the Company's  subsidiaries for inclusion in their sales  materials,  thereby
promoting a  consistent  portrayal  of the  Company's  image and  products.  The
Company markets its products  primarily  through a direct sales force in each of
the industries.  In the  manufacturing and hospitality  industries,  the Company
also  relies,  to a  limited  extent,  on  distributors  to sell  the  Company's
products.

     The  accounting  policies  adopted by each  industry  are the same as those
described  in  the  summary  of  significant  accounting  policies.   Management
evaluates performance based on profit (loss) from operations before interest and
income taxes.

<PAGE>55


     Summarized  financial  information   concerning  the  Company's  reportable
segments is shown in the following table:

             SEGMENTAL ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<S>                                                <C>            <C>          <C>        <C>           <C>         <C>

                                                  Manufacturing  Healthcare  Hospitality  Construction   Other       Total
                                                  -------------  ----------  -----------  ------------  -------   ---------
                                                                               (in thousands)

Revenues from external customers............          $9,587       $18,909     $10,190      $3,318      $  370    $ 42,374
Depreciation and amortization...............             258           318         167          59         342       1,144
Profit (loss) from operations...............             182           325         322         231        (750)        310
Total segment assets........................           4,105         4,250       4,129         749       4,009      17,242

             SEGMENTAL ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 1998

                                                  Manufacturing  Healthcare  Hospitality  Construction   Other       Total
                                                  -------------  ----------  -----------  ------------  -------   ---------
                                                                               (in thousands)

Revenues from external customers............         $ 16,635      $15,990     $13,799      $4,421      $1,776    $ 52,621
Depreciation and amortization...............              189          216         207          43         379       1,034
Profit (loss) from operations...............            3,993        1,461       1,914         429        (566)      7,231
Total segment assets........................           12,514        6,682       6,337       1,301       1,118      27,952

             SEGMENTAL ANALYSIS FOR THE YEAR ENDED DECEMBER 31, 1999

                                                  Manufacturing  Healthcare  Hospitality  Construction   Other       Total
                                                  -------------  ----------  -----------  ------------  -------   ---------
                                                                               (in thousands)

Revenues from external customers............         $ 25,485      $19,988     $19,180      $5,305     $  3,428   $  73,386
Depreciation and amortization...............              321          352         328          74          316       1,391
Profit (loss) from operations...............            8,913        3,454       4,943         928         (363)     17,875
Total segment assets........................           17,950       13,434      13,706       3,375       12,479      60,944

</TABLE>


         The following table  represents  revenue by country based on country of
customer  domicile and long-lived assets by country based on the location of the
assets:

<TABLE>
<S>                                                    <C>       <C>         <C>          <C>         <C>          <C>

                                                                   Revenue                      Long-lived  Assets
                                                       ---------------------------------  --------------------------------
                                                         Year Ended December 31,                     December 31,
                                                       ---------------------------------  --------------------------------
                                                          1997        1998        1999        1997       1998       1999
                                                       ---------   ---------   ----------  ---------  ---------  ---------

United Kingdom...................                      $  39,057   $  31,100   $  25,779   $  1,649    $ 2,008   $  1,645
Rest of Europe...................                          1,002      13,069      32,073      1,109        577        400
United States....................                          1,840       1,517       2,272        107        111        105
Asia.............................                            475       1,800       3,719        752        687     16,243
Rest of world....................                             --       5,135       9,543         20         12         15
                                                       ---------   ---------   ----------  ---------  ---------  ---------
                                                       $  42,374   $  52,621      $73,386  $  3,637    $ 3,395   $ 18,408
                                                       =========   =========   ==========  =========  =========  =========
</TABLE>


11. Subsequent Event

Proposed Public Offering

         The Company plans to file a registration  statement with the Securities
and  Exchange  Commission  for the sale of  2,800,000  shares  of  common  stock
(excluding the underwriters' over-allotment option).



<PAGE>56



                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
e-nnovations.com Pvt Ltd

         We  have  audited  the  accompanying  consolidated  balance  sheets  of
e-nnovations.com  Pvt Ltd as of  December  31,  1998 and 1999,  and the  related
consolidated statements of operations,  changes in stockholders' equity and cash
flows for each of the three years in the period ended  December  31, 1997,  1998
and 1999.  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 audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.

         In our opinion,  the  financial  statements  referred to above  present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
e-nnovations.com  Pvt Ltd at December  31, 1998 and 1999,  and the  consolidated
results of its operations and its consolidated  cash flows for each of the three
years in the period ended  December  31, 1999,  in  conformity  with  accounting
principles generally accepted in the United States.

/s/ Pannell Kerr Forster

Nicosia, Cyprus
March 14, 2000



<PAGE>57



                            E-NNOVATIONS.COM PVT LTD

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<S>                                                                                                   <C>            <C>

                                                                                                            December 31,
                                                                                                        -----------------------
                                                                                                          1998         1999
                                                                                                        ----------   ----------
                                     ASSETS
Current assets:
  Cash and cash equivalents.......................................................................      $  24,600    $   2,137
  Accounts receivable, less allowances for doubtful accounts......................................        250,182      400,098
  Other receivables...............................................................................         33,813           --
  Inventory.......................................................................................         92,871      115,050
  Prepaid expenses and other assets...............................................................         72,893      113,484
                                                                                                        ---------    ---------
          Total current assets....................................................................        474,359      630,769
                                                                                                        ---------    ---------
Property and equipment, net.......................................................................         34,914      126,125
                                                                                                        ---------    ---------
          Total assets............................................................................       $509,273     $756,894
                                                                                                        =========    =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable................................................................................      $  48,155    $   9,354
  Deferred revenue................................................................................         24,976           --
  Bank loans and short-term demand facility.......................................................         28,374           --
                                                                                                        ---------    ---------
          Total current liabilities...............................................................        101,505        9,354
                                                                                                        ---------    ---------
Long-term debt....................................................................................         64,492           --
                                                                                                        ---------    ---------
          Total liabilities.......................................................................        165,997        9,354
                                                                                                        =========    =========
Stockholders' equity:
  Share capital...................................................................................            244          244
  Additional paid up capital......................................................................         58,617       58,617
  Accumulated reserves............................................................................        284,415      688,679
                                                                                                        ---------    ---------
          Total stockholders' equity..............................................................        343,276      747,540
                                                                                                        ---------    ---------
          Total liabilities and stockholders' equity..............................................      $ 509,273    $ 756,894
                                                                                                        =========    =========

</TABLE>

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



<PAGE>58



                            E-NNOVATIONS.COM PVT LTD

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<S>                                                                                  <C>           <C>              <C>

                                                                                                       Year Ended
                                                                                                      December 31,
                                                                                      ------------------------------------------
                                                                                          1997           1998            1999
                                                                                      ------------   ------------  -------------
Revenues:
  Software licenses...............................................................      $ 323,793      $ 720,276    $  2,342,527
  Maintenance and services........................................................         94,299        152,496         233,802
  Hardware and other..............................................................         37,257         68,496         482,714
                                                                                        ---------      ---------    ------------
          Total revenues..........................................................        455,349        941,268       3,059,043
Cost of revenues:
  Software licenses...............................................................         93,000        162,329         728,804
  Maintenance and services........................................................         57,672         84,458         167,132
  Hardware and other..............................................................         18,593         32,381         416,413
                                                                                        ---------      ---------    ------------
          Total cost of revenues..................................................        169,265        279,168       1,312,349
                                                                                        ---------      ---------    ------------
Gross profit:
  Software licenses...............................................................        230,793        557,947       1,613,723
  Maintenance and services........................................................         36,627         68,038          66,670
  Hardware and other..............................................................         18,664         36,115          66,301
                                                                                        ---------      ---------    ------------
          Total gross profit......................................................        286,084        662,100       1,746,694
Operating expenses:
  Sales and marketing.............................................................         83,330         62,942         218,961
  Research and development........................................................        124,742        224,167         985,949
  General and administrative......................................................         49,906         63,811         137,520
                                                                                        ---------      ---------    ------------
          Total operating expenses................................................        257,978        350,920       1,342,430
                                                                                        ---------      ---------    ------------
Profit from operations............................................................         28,106        311,180         404,264
Other income (expenses):
  Interest income.................................................................             --             --              --
  Interest expenses...............................................................         (5,376)        (9,111)             --
                                                                                        ---------      ---------    ------------
Income before income taxes........................................................         22,730        302,069         404,264
Income tax expense................................................................             --             --              --
                                                                                        ---------      ---------    ------------
Net income........................................................................      $  22,730      $ 302,069    $    404,264
                                                                                        =========      =========    ============
</TABLE>

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



<PAGE>59



                            E-NNOVATIONS.COM PVT LTD
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<S>                                                      <C>          <C>         <C>               <C>           <C>

                                                              Share Capital                                           Total
                                                           ------------------        Additional     Accumulated   Stockholders'
                                                           Shares      Amount     Paid up Capital    Reserves        Equity
                                                           ------      ------     ---------------   ----------    -------------

Balance at December 31, 1996....................             105        $244      $       58,617    $ (40,384)    $     18,477
  Net income....................................              --          --                  --       22,730           22,730
                                                           ------      ------     ---------------   ----------    -------------
Balance at December 31, 1997....................             105         244              58,617      (17,654)          41,207
  Net income....................................              --          --                  --      302,069          302,069
                                                           ------      ------     ---------------   ----------    -------------
Balance at December 31, 1998....................             105         244              58,617      284,415          343,276
  Net income....................................              --          --                  --      404,264          404,264
                                                           ------      ------     ---------------   ----------    -------------
Balance at December 31, 1999....................             105        $244      $       58,617    $ 688,679     $    747,540
                                                           ======      ======     ===============   ==========    =============

</TABLE>

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



<PAGE>60

                            E-NNOVATIONS.COM PVT LTD

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<S>                                                                                     <C>           <C>            <C>

                                                                                               Year Ended December 31,
                                                                                          ------------------------------------
                                                                                             1997         1998          1999
                                                                                          ----------  -----------   ----------
Cash flows from operating activities:
Net income.......................................................................          $ 22,730    $ 302,069     $ 404,264
Adjustments to reconcile net income to cash provided by (used in)
  operating activities
  Depreciation...................................................................            14,203       16,415        62,318
  Changes in assets and liabilities:
     Increase in current assets..................................................           (81,999)    (344,417)     (178,873)
     Increase in current liabilities.............................................            36,383       44,925       (92,151)
                                                                                           ----------  -----------   ----------
       Net cash provided by (used in) operating activities.......................            (8,683)      18,992       195,558
Cash flows from investing activities:
Purchases of property and equipment..............................................           (26,496)     (23,970)     (153,529)
                                                                                           ----------  -----------   ----------
       Net cash used in investing activities.....................................           (26,496)     (23,970)     (153,529)
Cash flows from financing activities:
Proceeds (repayment) of loan.....................................................            33,256       31,236       (64,492)
                                                                                           ----------  -----------   ----------
       Net cash provided by (used in) financing activities.......................            33,256       31,236       (64,492)
                                                                                           ----------  -----------   ----------
Net increase (decrease) in cash and cash equivalents.............................            (1,923)      26,258       (22,463)
Effect of foreign currency exchange rates on cash and cash equivalents...........                --           --            --
  Cash and cash equivalents, at beginning of the year............................               265       (1,658)       24,600
                                                                                           ----------  -----------   ----------
  Cash and cash equivalents, at end of the year..................................          $ (1,658)   $  24,600     $   2,137
                                                                                           ==========  ===========   ==========
</TABLE>


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

<PAGE>61


                            E-NNOVATIONS.COM PVT LTD

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business and Significant Accounting Policies

Nature of Operations

         e-nnovations.com Pvt Ltd is an Internet software solutions provider and
it  develops,  markets,  implements  and supports  enterprise-wide  applications
software targeted to mid-sized organizations.

Organization and Basis of Presentation

         The financial  statements  have been prepared under the historical cost
convention,  in accordance with the generally accepted accounting  principles in
the United States.

         All expenses are accounted for on accrual basis.

Revenue Recognition

         The Company  derives  its revenue  primarily  from  software  licenses,
maintenance and service contracts and hardware sales.  Software license revenues
are mainly derived from the licensing and service of industry-specific  software
applications,  primarily the sale of upgrades to existing customers. Maintenance
and service  contract  revenues are  primarily  derived from ongoing  support of
installed  software,  and  training,  consulting  and  implementation  services.
Hardware  sales  revenues are  primarily  derived  from the sale of  third-party
hardware to customers requiring turnkey solutions.

         Software license revenues consist of sales of software  licenses which,
are  recognized in accordance  with the American  Institute of Certified  Public
Accountants' Statement of Position ("SOP") 97-2, "Software Revenue Recognition."
Under SOP 97-2,  software  license  revenues are recognized  upon execution of a
contract and delivery of  software,  provided  that the license fee is fixed and
determinable,  no significant  production,  modification or customization of the
software is required and collection is considered  probable by management.  When
contracts do require  significant  production,  modification or customization of
software,  the Company  recognizes  revenue  under the  percentage of completion
method.  In 1999,  software  license revenues were recognized in accordance with
SOP 97-2, as modified by SOP 98-9,  "Modification of SOP 97-2,  Software Revenue
Recognition  with respect to Certain  Transactions."  The Company believes it is
currently in compliance with SOP 97-2, as modified by SOP 98-9.

Foreign Currency

         The  functional  currency of the Company  and its  subsidiaries  is the
Indian Rupee. For reporting purposes,  the financial statements are presented in
United States dollars and in accordance  with Statement of Financial  Accounting
Standard No. 52, "Foreign Currency Translation".

         Net gains and losses resulting from foreign  exchange  transactions are
included in the consolidated statements of operations.

Cash Equivalents

         Cash   equivalents   consist   of  highly   liquid   investments   with
insignificant  interest  rate risk and a maturity  date of three  months or less
when purchased. They are carried at cost, which approximates fair value.

<PAGE>62

Inventory

         Inventory  is   comprised  of  finished   goods  held  for  resale  and
maintenance  parts.  Finished  goods  held for resale are stated at the lower of
cost or net realizable value. Cost is determined on a first-in  first-out basis,
and includes all direct costs incurred and  attributable  production  overheads.
Net realizable  value is based on estimated  selling price net of completion and
disposal costs.  Maintenance parts are valued at cost and are depreciated over a
three-year period.

Property and Equipment

         Property and equipment is recorded at cost.  Depreciation is calculated
using the straight-line  method over the estimated useful lives of the assets as
follows:

Leasehold improvements............  shorter of the lease term or economic life
Fixtures and equipment............  three to five years
Motor vehicles....................  four years

Impairment of Long-lived Assets

         In the event that facts and  circumstances  indicate  that the carrying
value of an asset may be impaired,  an  evaluation  of  recoverability  would be
performed.  If an evaluation is required, the estimated fair market value of the
asset  would  be  compared  to the  asset's  carrying  value to  determine  if a
write-down to the lower of carrying value or market value is required.

Income Taxes

         The Indian  government,  as a means of  encouraging  exports,  provides
significant  tax  incentives  and  exemptions.  Certain of these  benefits  that
directly  affect the Company  include,  among  others,  tax holidays  (temporary
exemptions from taxation on operating income) and liberalized  import and export
duties.

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 these estimates.

2. Inventory

         Inventory consists of the following (in thousands):

                                                  December  31,
                                                -------------------
                                                 1998         1999
                                                ------      -------
Finished goods held for resale.............     $   79      $    81
Maintenance parts..........................         14           34
                                                ------      -------
                                                $   93      $   115
                                                ======      =======



<PAGE>63


3. Property and Equipment

         Property and equipment consists of the following (in thousands):

                                                    December  31,
                                                -------------------
                                                 1998         1999
                                                ------      -------
Fixtures and equipment....................      $  158      $   303
Motor vehicles............................          --            8
                                                ------      -------
                                                   158          311
Less accumulated depreciation.............         123          185
                                               -------      -------
                                               $    35      $   126
                                               =======      =======

         Depreciation  expense was $14, $16 and $62 for the years ended December
31, 1997, 1998 and 1999, respectively.

4. Segment Reporting Information

         The following table  represents  revenue by country based on country of
customer  domicile and long-lived assets by country based on the location of the
assets:

<TABLE>
<S>                                  <C>           <C>         <C>             <C>        <C>          <C>

                                                    Revenue                               Long-lived Assets
                                      ---------------------------------------  ----------------------------------
                                             Year Ended December 31,                         December 31,
                                      ---------------------------------------  ----------------------------------
                                         1997         1998          1999          1997        1998        1999
                                      ----------   ----------   -------------  ----------  ----------  ----------
Europe.........................        $ 268,491    $ 470,634   $     764,761   $  2,105    $  5,237    $  25,225
Asia...........................          119,503      329,444       1,835,426     25,254      29,677      100,900
Rest of world..................           67,355      141,190         458,856         --          --           --
                                       ---------    ---------   -------------   --------    --------    ---------
                                       $ 455,349    $ 941,268   $   3,059,043   $ 27,359    $ 34,914    $ 126,125
                                       =========    =========   =============   ========    ========    =========

</TABLE>


<PAGE>64



          UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

         The unaudited pro forma condensed  combined  financial  information for
AremisSoft  Corporation  (the  "Company")  set forth below  gives  effect to the
acquisition of  e-nnovations.com  Pvt Ltd  ("e-nnovations.com").  The historical
financial information set forth below has been derived from, and is qualified by
reference to, the financial  statements of the Company and  e-nnovations.com and
should be read in  conjunction  with those  financial  statements  and the notes
thereto included  elsewhere herein.  The unaudited pro forma condensed  combined
financial  information  presents  the  combined  results  of  operations  of the
companies for the year ended  December 31, 1999,  giving effect to the Company's
acquisition of  e-nnovations.com  as if such acquisition had been consummated as
of January 1, 1999 under the  purchase  method of  accounting.  The  information
should be read in  conjunction  with  "Management's  Discussion  and Analysis of
Financial  Condition  and  Results  of  Operations."  The  unaudited  pro  forma
condensed combined financial  information does not purport to represent what the
consolidated  results of operations or financial  condition of the Company would
actually have been if the  e-nnovations.com  acquisition had in fact occurred on
January 1, 1999 nor does it purport to be indicative of the consolidated results
of operations or financial  condition of the Company that may be achieved in the
future.



<PAGE>65


<TABLE>
<S>                                                     <C>             <C>              <C>          <C>            <C>

                          UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

                                                                           Year Ended December  31, 1999
                                                         ------------------------------------------------------------------------
                                                                                                         Pro Forma     Pro Forma
                                                          AremisSoft   e-nnovations.com    Combined     Adjustments     Combined
                                                         ------------  -----------------  ----------    ------------   ----------
                                                                         (In thousands, except per share data)
Revenues:
Software licenses....................................    $    37,224    $   2,343         $  39,567     $   (109)      $  39,458
Maintenance and services.............................         30,435          234            30,669          (11)         30,658
Hardware and other...................................          5,727          483             6,210          (23)          6,187
                                                         ------------  -----------------  ----------    ------------   ----------
          Total revenues.............................         73,386        3,059            76,445         (143)         76,302
                                                         ------------  -----------------  ----------    ------------   ----------
Cost of revenues:
Software licenses....................................          4,468          729             5,197          (79)          5,118
Maintenance and services.............................          8,620          167             8,787           (8)          8,779
Hardware and other...................................          3,625          416             4,041          (20)          4,021
Amortization of purchased software and
  capitalized software development cost..............             98           --               298           --             298
                                                        ------------  -----------------  ----------    ------------   ----------
          Total cost of revenues.....................         17,011        1,312            18,323         (107)         18,216
                                                        ------------  -----------------  ----------    ------------   ----------
Gross profit.........................................         56,375        1,747            58,122          (36)         58,086
                                                        ------------  -----------------  ----------    ------------   ----------
Operating expenses:
Sales and marketing..................................         25,518          219            25,737          (10)         25,727
Research and development.............................          5,916          986             6,902           --           6,902
General and administrative...........................          7,108          137             7,245           (6)          7,239
Profit on disposition of subsidiary..................            (42)          --               (42)          --             (42)
Amortization of intangible assets....................             --           --                --        4,603           4,603
                                                         ------------  -----------------  ----------    ------------   ----------
          Total operating expenses...................         38,500        1,342            39,842        4,587          44,429
                                                         ------------  -----------------  ----------    ------------   ----------
Profit from operations...............................         17,875          404            18,279       (4,622)         13,657
Other income (expense):
  Interest expense, net..............................            661           --               661           --             661
                                                         ------------  -----------------  ----------    ------------   ----------
Income before income taxes...........................         17,214          404            17,618       (4,622)         12,996
Income tax expense...................................          5,097           --             5,097           --           5,097
                                                         ------------  -----------------  ----------    ------------   ----------
Income after taxes before extraordinary item.........         12,117          404            12,521       (4,622)          7,899
  Extraordinary item-gain on debt forgiveness........          1,163           --             1,163           --           1,163
                                                         ------------  -----------------  ----------    ------------   ----------
Net income...........................................    $    13,280    $     404          $ 13,684     $ (4,622)      $   9,062
                                                         ============  =================  ==========    ============   ==========
Basic earnings per share before extraordinary item...
                                                         $      0.95                                                   $    0.62
                                                         ============                                                  ==========
Diluted earnings per share before extraordinary item.
                                                         $      0.90                                                   $    0.59
                                                         ===========                                                   ==========
Basic earnings per share after extraordinary item....
                                                         $      1.04                                                   $    0.71
                                                         ===========                                                   ==========
Diluted earnings per share after extraordinary item..
                                                         $      0.99                                                   $    0.68
                                                         ===========                                                   ==========
Basic weighted average shares outstanding............         12,762                                                      12,762
Diluted weighted average shares outstanding..........         13,405                                                      13,405


</TABLE>

 The  accompanying  notes  are an  integral  part of this  unaudited  pro  forma
condensed combined financial information.



<PAGE>66



                        NOTES TO THE UNAUDITED PRO FORMA
                    CONDENSED COMBINED FINANCIAL INFORMATION

       In December  1999,  the Company  acquired all the issued and  outstanding
common stock of  e-nnovations.com in exchange for approximately $14.5 million in
cash.  The  acquisition  has been  accounted  for using the  purchase  method of
accounting.  The operations of  e-nnovations.com  are included in the historical
consolidated  financial  statements of the Company from the date of acquisition.
The excess of purchase price over net assets acquired  amounted to approximately
$13.8  million and has been  temporarily  allocated to goodwill.  Management  is
currently   evaluating  the  allocation  of  goodwill  to  certain  identifiable
intangible assets.  Amortization of goodwill and identifiable  intangible assets
is being  provided on a straight line basis over three years.  An adjustment has
been made to the unaudited pro forma condensed combined financial information to
record $4,603,000 of amortization expense in 1999.

         The accompanying historical financial statements of the Company include
the  operations  of  e-nnovations.com  from  December  17,  1999,  the  date  of
acquisition.    The   accompanying    historical   financial    information   of
e-nnovations.com  reflect the operations of  e-nnovations.com  for the full 1999
year.  Accordingly,  a pro forma  adjustment has been made to exclude 14 days of
operations of e-nnovations.com included in both entities historical figures.


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

Not applicable.


<PAGE>67

                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

          The following table lists our current  executive  officers,  directors
and other key employees:

<TABLE>
<S>                                          <C>       <C>

       Name                                   Age                               Position(s)
----------------------------                 -----     ----------------------------------------------------------
Dr. Lycourgos K. Kyprianou                     45      Chairman of the Board and Chief Executive Officer

Roys Poyiadjis                                 34      President and Vice Chairman of the Board

Michael A. Tymvios                             37      Chief  Financial Officer

Noel R. Voice                                  58      Chief Operating Officer, Secretary and Director

M.C. Mathews                                   35      General Manager of Group Software Development and Director

Barry J. Crowe                                 55      General Manager of Manufacturing Systems

Dennis Badman                                  53      General Manager of Healthcare Systems

Michael J. Gadbury                             52      General Manager of Hospitality Systems

Brian Rogers                                   59      General Manager of Construction Systems

Dann V. Angeloff                               64      Director

George H. Ellis                                51      Director

H. Tate Holt                                   48      Director

Theodoros Fessas                               48      Director

George Papadopoulos                            53      Director

John Malamas                                   52      Director

</TABLE>


     Dr.  Lycourgos  K.  Kyprianou  has served as our  chairman of the board and
chief  executive  officer  since  October 1997 and has served as chairman of the
board and managing director of our subsidiaries and predecessors since 1978. Dr.
Kyprianou is the sole founder of our worldwide business,  including our software
development and support facility in India. Dr. Kyprianou  received a bachelor of
science  degree with first class honors in computer  science from the University
of London and a  doctorate  in  philosophy  (computer  science)  from  Cambridge
University.

     Roys  Poyiadjis  has served as our president and vice chairman of the board
since  June 1998 and our chief  financial  officer  from  October  1998  through
September  1999. From 1997 to 1998, Mr.  Poyiadjis  served as a partner of Alpha
Capital Limited,  an investment banking firm primarily focused on investments in
technology  companies.  From 1995 to 1996,  he served  as a  director  of Lehman
Brothers International Ltd. and from 1993 to 1995 he served as an associate with
Morgan Stanley & Co. International Limited. Mr. Poyiadjis received a bachelor of
science  (honors) degree in  communications  engineering  from the University of
Kent and a masters degree in business  administration  from the London  Business
School.

<PAGE>68


     Michael A.  Tymvios  has served as our chief  financial  officer and senior
vice president of finance since  September  1999. From 1991 to 1999, Mr. Tymvios
was a partner at Morison  International,  a certified  public  accounting  firm.
Prior to joining  Morison  International,  he was a senior  manager at  Deloitte
Haskins & Sells. He is a chartered  certified  accountant and a fellow member of
the Chartered  Association of Certified  Accountants of the United Kingdom.  Mr.
Tymvios  received a bachelor of science  (honors)  degree in economics  from the
University of Athens.

     Noel R.  Voice has  served as a  director  since June 1998 and as our chief
operating officer and secretary since October 1997. From 1992 to 1997, he served
as the senior vice president of administration of our United Kingdom operations.
From 1987 to 1992, he was founder and managing director of Noble Marketing Ltd.,
a sales  and  marketing  consulting  firm.  From 1987 to 1989,  he was  managing
director of Cara Consulting Ltd., a United Kingdom hotel systems company.

     M.C.  Mathews  has served as a director  since April 1999 and has served as
our general  manager of group  software  development  since October 1997.  Since
1995,  he has served as the  managing  director  of software  engineering  of LK
Global Software  Engineering  (India) Private Limited,  one of our subsidiaries.
From 1992 to 1995, he served as our group project  manager.  Prior to joining us
in 1990, Mr. Mathews was employed as a programmer with Alphabetics  Ltd., an IBM
distributor in India. Mr. Mathews received a bachelor of science (honors) degree
from Kerala and a masters of science degree in physics from Delhi Universities.

     Barry J. Crowe has served as our general manager of  manufacturing  systems
since October 1997.  Since 1995,  Mr. Crowe served as project  manager,  account
manager  and  managing   director  of  one  of  our   subsidiaries,   LK  Global
Manufacturing  Systems  (UK)  Limited.  From  1992 to  1995,  he was a  managing
director of BEC Group Limited, a manufacturing  computer systems company that we
acquired.  From 1988 to 1991, he served as a consultant for the BM Group, plc, a
construction company. Mr. Crowe is a chartered structural engineer.

     Dennis Badman has served as our general manager of healthcare systems since
May 1999 and a senior manager of healthcare systems since August 1998. From 1994
to 1998,  Mr. Badman served as general  manager of LK Global Field  Engineering,
one of our subsidiaries. From 1989 to 1994, he served as the regional manager of
Misys Computer Maintenance.

     Michael  Gadbury has served as our general  manager of hospitality  systems
since  October 1997.  From 1996 to 1998, he served as director of  international
business  development of LK Global Hospitality Systems (UK) Limited,  one of our
subsidiaries,  From 1993 to 1996, he served as our managing director.  From 1984
to 1993, he was a managing director of IGS Leisure  Technology  Limited, a hotel
computer systems company we acquired.

     Brian  Rogers has served as our  general  manager of  construction  systems
since October 1997. Since 1995, he has served as managing  director of LK Global
Construction Systems (UK) Limited,  one of our subsidiaries.  From 1978 to 1995,
Mr. Rogers served as managing  director for Briter Computer Systems  Limited,  a
manufacturing   computer   systems  company  that  was  acquired  by  LK  Global
Construction Systems (UK) Limited, one of our subsidiaries.

     Dann V. Angeloff has served as a director since April 1999. Mr. Angeloff is
the  founder and  president  of The  Angeloff  Company,  a  corporate  financial
advisory firm, a position he has held since 1976. He also currently  serves as a
director of Public  Storage,  Inc., a New York Stock  Exchange  listed  company,
Nicholas/Applegate  Growth Equity Fund,  top jobs.net,  plc, a company quoted on
the Nasdaq  National  Market and various  private  companies.  Mr. Angeloff is a
former  trustee of the  University  of Southern  California  and is a university
counselor.  He received a bachelor of science degree in business  administration
and a masters degree in finance from the University of Southern California.

<PAGE>69


     George H.  Ellis has served as a  director  since  April  1999.  Mr.  Ellis
currently serves as executive vice president and chief operating  officer of the
Communities  Foundation  of Texas  and is a founder  and  managing  director  of
Chaparral  Ventures,  Ltd.  Since 1996, he has provided  consulting  services to
various technology  related  companies,  and serves on the board of directors of
Neon Systems, Inc., and several private companies. From 1986 to 1996, he was the
chief financial  officer of Sterling  Software,  Inc., a New York Stock Exchange
listed  company.  Mr. Ellis is a certified  public  accountant and attorney.  He
received a bachelor of science degree in accounting  from Texas Tech  University
and a juris doctor degree from the Southern Methodist University School of Law.

     H. Tate Holt has served as a director  since  April 1999.  Since 1990,  Mr.
Holt has been  president of Holt & Associates,  a growth  management  consulting
firm.  From 1987 to 1990, he served as a senior vice president of Automatic Data
Processing  (ADP).  Prior to 1987,  Mr. Holt held  positions  in various  senior
sales,  marketing  and  general  management  positions  at  IBM,  Triad  Systems
Corporation  and ADP.  Mr. Holt is also a director of DBS  Industries,  Inc. and
Onsite  Energy  Corporation.  Mr.  Holt  received a bachelor of arts degree from
Indiana University.

     Theodoros  Fessas has served as a director since November 1999. Since 1981,
Mr. Fessas has been a majority  shareholder and president of several  companies,
including Info-quest,  that comprise the QUEST Group, a diversified  information
technology and communications enterprise, headquartered in Athens, Greece. Prior
to that,  Mr.  Fessas  worked in the  construction  industry  as an  independent
engineer while also serving as a scientific  associate  with the  thermodynamics
faculty of Metsovio  University.  Mr.  Fessas  received a  bachelors  of science
degree in mechanical  engineering from National  Technical  University of Athens
and a master of science degree in  thermodynamics  from  Birmingham  University,
England.

     George  Papadopoulos  has served as a director  since  November  1999.  Mr.
Papadopoulos  was  appointed as the managing  director of Info-quest in February
2000. From 1977 to January 2000, he was the general manager of Info-quest.  From
1995 to 1996, he served as the general manager of Decision System Integration, a
subsidiary of  Info-quest,  and from 1985 to 1995, he was a founder and managing
director of ABC  Systems and  Software.  Mr.  Papadopoulos  received a degree in
agricultural  engineering from the University of Thessaloniki and a bachelors of
arts degree in economics from the University of Athens.

     John Malamas has served as a director since November 1999.  Since 1987, Mr.
Malamas has served as the  corporate  administrator  and finance  manager of the
QUEST Group.  Mr.  Malamas  worked as a financial  manager in various  Greek and
multinational  companies from 1973 to 1987 when he joined the QUEST Group.  From
1990 to 1992,  he  served as the  general  manager  of  Com-Quest.  Mr.  Malamas
received a  bachelors  degree in  business  administration  from  University  of
Pireus.

Board of Directors

     Our board of directors consists of ten members, all of whom are elected for
one-year  terms at each  annual  meeting of  stockholders.  Holders of shares of
common stock have no right to  cumulative  voting in the election of  directors.
Consequently, at each annual meeting, a majority of the stockholders are able to
elect all of the directors.

Committees of the Board of Directors

  Audit Committee

     The  audit  committee  of the  board  of  directors  makes  recommendations
regarding the retention of independent auditors, reviews the scope of the annual
audit  undertaken  by our  independent  auditors and the progress and results of
their work,  and reviews  our  financial  statements,  internal  accounting  and
auditing  procedures and corporate  program to ensure compliance with applicable
laws. The members of the audit committee are Messrs. Angeloff, Ellis and Holt.

<PAGE>70


  Compensation Committee

     The compensation  committee of the board of directors  reviews and approves
executive compensation policies and practices,  reviews salaries and bonuses for
our officers,  administers  our 1998 Stock Option Plan and other benefit  plans,
and  considers  other  matters as may, from time to time, be referred to them by
the board of directors.  The current members of the compensation  committees are
Dr. Kyprianou and Messrs. Poyiadjis, Angeloff, Ellis and Holt.

Compensation of the Board of Directors

     Our  directors  who are not also our  employees  or employees of one of our
subsidiaries  receive  $20,000  per year  plus  $1,000  for each  board  meeting
attended  and $1,000  for each  committee  meeting  attended.  Directors  do not
receive any other cash  compensation  for services as a director.  All directors
are reimbursed for their expenses incurred in attending  meetings.  Each outside
director  also  receives,  for each year of  service as a  director,  options to
purchase  20,000 shares of common stock.  All options are granted at an exercise
price  equal to the fair market  value of the common  stock on the date of grant
and vest at the rate of 33 1/3% per year commencing on the grant date.

ITEM 11.  EXECUTIVE COMPENSATION

     The following table  summarizes all  compensation  earned by or paid to our
chairman of the board and chief  executive  officer for 1997,  1998 and 1999 and
our two other highest paid executive officers whose total salary and bonuses for
1999 exceeded $100,000.  No other executive  officer's total annual compensation
for  services  rendered  in all  capacities  for  1997,  1998 and 1999  exceeded
$100,000.



<TABLE>
<S>                                       <C>         <C>          <C>          <C>               <C>

                           Summary Compensation Table
                                                                                                      Long-Term
                                                                                                     Compensation
                                                                                                        Awards
                                                                                                      Securities
                                                                                                    -------------
                                                Annual  Compenation (1)            All Other         Underlying
                                            -------------------------------       ------------      --------------
Name and Principal Position                  Year      Salary        Bonus        Compensation         Options
----------------------------------------    ------    ---------    ---------      -------------     --------------

Dr. Lycourgos K. Kyprianou(2)...........     1999      $250,000     $300,000            --             700,000
  Chairman of the Board and                  1998      $250,000     $200,000            --                --
  Chief Executive Officer                    1997      $250,000     $200,000            --                --

Roys Poyiadjis .........................     1999      $200,000     $300,000            --             700,000
  President and Vice Chairman of                                                        --                --
  The Board

Noel R. Voice...........................     1999      $100,000     $ 50,000            --              60,000
   Chief Operating Officer, General
   Manager of Healthcare Systems
   and Secretary

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

</TABLE>

(1)  As translated into United States dollars based upon the average  conversion
     rate in effect during each fiscal year.
(2)  Does not include payment of business  related  expenses of $250,000 in each
     of 1997 and 1998.


<PAGE>71

                              Option Grants in 1999
                              ---------------------

         The  following  table  provides  information  relating to stock options
granted during the year ended December 31, 1999.

<TABLE>
<S>                            <C>          <C>                <C>              <C>            <C>              <C>
                                                      Individual Grants
                               ---------------------------------------------------------------
                                                                                               Potential Realizable
                                                                                                 Value at Assumed
                                Number of     Percent of Total                                 Annual Rates of Stock
                                Securities        Options                                     Price Appreciation For
                                Underlying       Granted to                                        Option Terms
                                 Options         Employees       Exercise Price   Expiration  -------------------------
         Name                  Granted (#)     In Fiscal Year      Per Share        Date            5%          10%
------------------------      ------------    ----------------   --------------  -----------  ------------  -----------


Dr. Lycourgos Kyprianou          400,000           17.48%           $  5.00        04/22/04      $552,563    $1,221,020
                                 300,000           13.11            $10.875        09/01/04       901,369     1,991,789
Roys Poyiadjis                   200,000            8.74            $  5.00        04/22/04       276,282    $  610,510
                                 500,000           21.85            $10.875        09/01/04     1,502,281     3,319,648
Noel R. Voice                     30,000            1.31            $  5.00        04/22/04        41,442    $   91,577
                                  30,000            1.31            $10.875        09/01/04        90,137       199,179

</TABLE>

         The exercise price of each option was equal to the fair market value of
our common stock on the date of the grant.  Percentages  shown under "Percent of
Total  Options  Granted to  Employees  in the Last Fiscal  Year" are based on an
aggregate of 2,288,800  options  granted to our  employees  under the 1998 Stock
Option Plan and outside of this plan during the year ended December 31, 1999.

         Potential  realizable  value is based on the assumption that our common
stock appreciates at the annual rate shown,  compounded annually,  from the date
of  grant  until  the  expiration  of the  five-year  term.  These  numbers  are
calculated based on Securities and Exchange  Commission  requirements and do not
reflect  our  projection  or estimate of future  stock price  growth.  Potential
realizable values are computed by:

o    Multiplying  the number of shares of common stock subject to a given option
     by the exercise price,

o    Assuming  that the  aggregate  stock value  derived  from that  calculation
     compounds  at the  annual 5% or 10% rate  shown in the table for the entire
     five-year term of the option, and

o    Subtracting from that result the aggregate option exercise price.

                          Fiscal Year End Option Values

         The following table sets forth for each of the executive officers named
in the  Summary  Compensation  Table the  number  and value of  exercisable  and
unexercisable options for the year ended December 31, 1999.

<TABLE>
<S>                                 <C>                  <C>              <C>                    <C>

                                          Number of Securities                       Value of Unexercised
                                      Underlying Unsecured Options             In-The-Money Options
                                          At December 31. 1999                      at December 31, 1999
                                   ------------------------------------     ------------------------------------
       Name                           Exercisable       Unexercisable           Exercisable        Unexercisable
----------------------------       ---------------    -----------------     ------------------   ---------------
Dr. Lycourgos Kyprianou               133,333            266,667             $  3,666,657.50       $ 7,333,342.50
                                      150,000            150,000                3,243,750.00         3,243,750.00

Roys Poyiadjis                         66,666            133,334                   1,833,315            3,666,685
                                      250,000            250,000                   5,406,250            5,406,250

Noel R. Voice                          10,000             20,000                     275,000              550,000
                                       15,000             15,000                     324,375              324,375

</TABLE>

<PAGE>72

     Amounts shown under the column "Value of Unexercised  In-The-Money  Options
at December 31, 1999," represent the difference between the fair market value of
the shares of common stock  underlying the options at December 31, 1999,  $32.50
per share (the  closing  price on the last  trading of 1999,  as reported by the
Nasdaq National Market) less the corresponding exercise price of such options.

1998 Stock Option Plan

     In October 1997, our board of directors adopted the 1998 Stock Option Plan,
which  provides  for awards in the form of options,  including  incentive  stock
options and nonqualified stock options. Our directors,  officers,  employees and
consultants are eligible for the grant of nonqualified stock options, while only
our employees are eligible for the grant of incentive stock options. Options can
have a term of up to ten years from the date of grant.

     The 1998 Stock Option Plan is administered by our  compensation  committee.
The consideration for each award under the 1998 Stock Option Plan is established
by the  compensation  committee,  but in no event can the option exercise prices
for  incentive  stock  options be less than 100% of the fair market value of the
common stock on the date of grant.  Awards for employees have such terms and are
exercisable  in  such  manner  and  at a  time  as  the  compensation  committee
determines, subject to the terms of the plan.

     Our board of  directors  may amend the 1998  Stock  Option  Plan as desired
without further action by our stockholders except as required by applicable law.
The 1998 Stock Option Plan will  continue in effect,  unless  terminated  by our
board of directors, for a term of ten years expiring in October 2007.

     As of December 31, 1999,  options to  purchase  1,487,950 shares of  common
stock were outstanding  under the 1998 Stock Option Plan at a weighted  exercise
price of $6.2382 per share.  In addition,  we granted  options  outside the 1998
Stock  Option Plan to  purchase  800,000  shares of common  stock at an exercise
price of $10.875 per share.  In February  2000, we granted  options  outside the
1998 Stock Option Plan to purchase an additional  750,000 shares of common stock
at an exercise price of $35.00 per share.

Employment Agreements

     We have entered  into  employment  agreements  with Dr.  Kyprianou  and Mr.
Poyiadjis.  The employment agreements for Dr. Kyprianou and Mr. Poyiadjis expire
on June 1, 2001.  Each of the  employment  agreements may be terminated by us or
the employee  without cause (as defined in the  employment  agreements)  upon 30
days notice,  or for cause without  notice.  Under the terms of Dr.  Kyprianou's
employment  agreement,  Dr. Kyprianou is entitled to minimum annual compensation
of $350,000  in 2000 and  $400,000  in 2001.  Under the terms of Mr.  Poyiadjis'
employment  agreement,  Mr. Poyiadjis is entitled to minimum annual compensation
of $300,000 in 2000 and $350,000 in 2001. Under their employment agreements, Dr.
Kyprianou and Mr.  Poyiadjis  are each  entitled to receive a severance  benefit
equal to one times his annual  compensation if terminated without cause and 2.99
times his annual  compensation if terminated without cause within 180 days after
a  change  in  control.   Each  of  these  agreements  also  contain  provisions
prohibiting  each of Dr.  Kyprianou and Mr.  Poyiadjis  from  competing  with us
during  the  term of  their  employment.  The  employment  agreements  with  Dr.
Kyprianou and Mr.  Poyiadjis  also provide that we will  indemnify  them for any
losses,  costs,  damages or  expenses  incurred as a direct  consequence  of the
discharge of their duties or by reason of their status as our agents.

     Dr.  Kyprianou  and Mr.  Poyiadjis  are also entitled to bonuses based on a
bonus plan adopted by the  compensation  committee at its December 1999 meeting.
Under this plan, Dr.  Kyprianou and Mr. Poyiadjis are each entitled to receive a
bonus based on our ability to meet earnings per share targets, as established by
the board of directors or compensation  committee.  The bonus can be up to three
times their 2000 annual salaries,  but cannot exceed $1.4 million  individually.
In 1999,  the  compensation  committee  awarded  each of Dr.  Kyprianou  and Mr.
Poyiadjis a $300,000 bonus.

<PAGE>73


Compensation Committee Interlocks and Insider Participation

     The  compensation  committee  of the board of  directors  consists  of five
directors  including  Dr.  Kyprianou,  our  chief  executive  officer,  and  Mr.
Poyiadjis,  our  president.  A  majority  of the  members  of  the  compensation
committee are non-employee directors and none of our executive officers serve on
the board of directors or compensation committee of any other entities.

     In May 1998, we loaned  approximately  $2.6 million to Dr.  Kyprianou.  The
loan  accrued  interest at the rate of LIBOR plus 2% per annum and was repaid in
November 1999.

     During the third and fourth  quarters of 1998, Mr.  Poyiadjis made loans to
us in the  aggregate  amount of  approximately  $1.7  million.  The  loans  were
reflected in a promissory  note that accrued  interest at the rate of LIBOR plus
2%. We repaid the loan in May 1999.

Limitation of Liability and Indemnification Matters

     We have adopted  provisions in our certificate of incorporation  that limit
the  liability  of our  directors  for  monetary  damages  for  breach  of their
fiduciary  duty as  directors,  except for  liability  that cannot be eliminated
under  Delaware law.  Delaware law provides that directors of a company will not
be personally  liable for monetary damages for breach of their fiduciary duty as
directors, except for liability:

o    for any breach of their duty of loyalty to the company or its stockholders,

o    for  acts or  omissions  not in good  faith or  which  involve  intentional
     misconduct or a knowing violation of law,

o    that arises under Section 174 of the Delaware  General  Corporation Law for
     unlawful payment of dividends or unlawful stock repurchases or redemptions,
     or

o    for any transaction  from which the director  derived an improper  personal
     benefit.

     Our   certificate   of   incorporation   and  bylaws   also   provide   for
indemnification of our directors and officers to the fullest extent permitted by
Delaware law. We have entered into separate indemnification agreements with some
of our directors  and officers  that could  require us, among other  things,  to
indemnify  such  persons  against some  liabilities  that may arise by reason of
their status or service as directors or officers and to advance  their  expenses
as a  result  of  any  proceeding  against  them  as  to  which  they  could  be
indemnified.  We believe  that the  limitation  of  liability  provision  in our
certificate of incorporation and the indemnification  agreements  facilitate our
ability to  continue  to attract and retain  qualified  individuals  to serve as
directors and officers.



<PAGE>74



ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The percentage of beneficial ownership for the following table is based
on 15,201,595 shares of common stock outstanding as of March 14, 2000.

         Unless otherwise indicated, the address for each listed stockholder is:
c/o AremisSoft  Corporation,  Goldsworth House, Denton Way, Woking,  Surrey GU21
3LG, United Kingdom.  To our knowledge,  except as indicated in the footnotes to
this table or pursuant to applicable  community property laws, the persons named
in the table have sole voting and investment power with respect to the shares of
common stock indicated.

<TABLE>

<S>                                                 <C>                           <C>
          Name of Beneficial Owner                   Number of Shares                Percent
----------------------------------------             ----------------               ---------

Dr. Lycourgos K. Kyprianou(1)...........                  7,637,379                   48.90%
Info-quest S.A.(2) .....................                  7,220,713                   47.50
    AL. Pantou 25
    Athens 17671 Greece
Roys Poyiadjis(3).......................                  1,162,953                    7.46
Michael A. Tymvios......................                     10,000                       *
Noel R. Voice...........................                     35,000                       *
M.C. Mathews............................                     35,000                       *
Dann V. Angeloff........................                     40,000                       *
George H. Ellis.........................                     25,000                       *
H. Tate Holt............................                     20,000                       *
All  directors  and  executive  officers as a
group  (8 persons)......................                  8,965,332                   55.54

</TABLE>

-------------------------------------
(1)  Represents  shares  held  by LK  Global  (Holdings)  N.V.,  for  which  Dr.
     Kyprianou  has sole voting and  investment  power,  and includes  3,732,923
     shares held by Info-quest S.A. which is a party to a voting  agreement with
     LK Global Holdings N.V. and Dr. Kyprianou.

(2)  Represents  3,487,790 shares held by LK Global  (Holdings) N.V., which is a
     party to a voting agreement with Info-quest.

(3)  Represents  shares held by Onyx Capital,  Inc. for which Mr.  Poyiadjis has
     sole voting and investment power.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Info-Quest Private Placement

         In October  1999,  we raised  approximately  $17.6 million in a private
placement  of 1.6  million  shares  of  our  common  stock  to  Info-quest  S.A.
Concurrent  with the private  placement,  Info-quest  acquired an additional 1.2
million  shares of our common  stock from LK Global  (Holdings)  N.V., a company
controlled by Dr.  Kyprianou,  our chief executive  officer.  In connection with
this private placement, we agreed to increase the size of our board of directors
to ten  and  nominate  three  representatives  of  Info-quest  to our  board  of
directors so long as Info-quest  holds twenty percent or more of our outstanding
common  stock.  If we increase the size of our board of directors or  Info-quest
sells a portion of its shares,  the number of directors it may nominate  will be
adjusted in accordance with the agreement.  As a result of the private placement
and concurrent purchase from LK Global (Holdings) N.V., Info-quest's holdings of
our common stock exceeded  twenty percent of the  outstanding  common stock.  In
accordance  with the  agreement,  in November  1999 we increased the size of our
board to ten  directors  and  appointed  three  representatives  of  Info-quest:
Messrs. Fessas, Papadopolous and Malamas.

<PAGE>75


         We also  granted  Info-quest  preemptive  rights to acquire  from us at
anytime we make further  issuances of our equity or convertible  debt securities
an amount of our securities  necessary to maintain,  after any future  issuance,
its percentage of ownership in us immediately before the issuance.

         Info-quest may require us to register under the Securities Act all or a
portion of its shares at our expense.  In addition if we propose to register any
of our  securities  either  for  our  own  account  or the  account  of  others,
Info-quest  is  entitled  to include  their  shares in the  registration  at our
expense.  However,  Info-quest  agreed not to sell or transfer any of the shares
sold it by us until  October  2000 without our prior  written  consent if, after
giving affect to the sale, Info-quest would hold less than twenty percent of our
outstanding  common  stock.  Finally,  Info-quest  granted  us a right  of first
refusal  with  respect to any of the shares  sold to it by us that it decides to
sell in the future.

         In connection with the private placement to Info-quest in October 1999,
Info-quest  entered into a voting  agreement with LK Global  (Holdings)  N.V., a
company  controlled by Dr.  Kyprianou,  our chief  executive  officer,  in which
Info-quest  and LK Global  (Holdings)  agreed to vote all of our shares owned by
them for a slate of  directors,  seven of which are nominated by us and three of
which are nominated by Info-quest, for a total of ten directors. Pursuant to the
voting agreement, both parties shall also agree on the voting of their shares on
all other matters.  If Info-quest and LK Global  (Holdings)  cannot agree on the
voting of their shares for any  particular  matter,  neither of the parties will
vote their shares on that matter.

Officer Loans

         During  the third and  fourth  quarters  of 1998,  Mr.  Poyiadjis,  our
president,  made loans to us in the aggregate  principal amount of approximately
$1.7 million.  The loans were reflected in a promissory  note dated December 31,
1998,  bearing  interest  at the rate of LIBOR plus 2% per annum.  We repaid the
loan in May 1999 and the largest aggregate amount  outstanding under the note at
any time  during  1999 was $1.8  million.  The  purpose of the loans made by Mr.
Poyiadjis was to provide us with additional working capital.

         On May 15,  1998,  we loaned $2.6 million to Dr.  Kyprianou,  our chief
executive  officer,  which was evidenced by a promissory note. The loan was made
to Dr. Kyprianou in order to provide temporary  liquidity to Dr. Kyprianou.  The
loan  accrued  interest  at the rate of LIBOR plus 2% per annum.  Dr.  Kyprianou
repaid the loan in November 1999 and the largest  aggregate  amount  outstanding
under the note at any time during 1999 was $1.9 million.

         For a description of the employment and  indemnification  agreements we
have entered into with some of our directors and executive officers,  please see
Item 10 of this report entitled "Executive Compensation."

Registration Rights

         In connection  with the private  placement to third party  investors of
our  common  stock and a  convertible  note in 1998,  we granted  the  investors
registration rights.  Pursuant to their registration rights, the holders thereof
may require us to register all or a portion of their  shares at our expense.  In
addition,  if we propose to register  any of our  securities  either for our own
account or the account of others,  these investors are entitled to include their
shares in the registration at our expense.

         We have also entered into  registration  rights agreements with each of
Dr. Kyprianou and Mr. Poyiadjis,  who, as of March 14, 2000, beneficially own in
the aggregate 4,267,410 shares of our common stock of which 4,071,980 shares are
subject  to the  registration  rights  agreements,  exclusive  of the  shares of
Info-quest  which Dr. Kyprianou may be deemed to beneficially own as a result of
the voting agreement.  Under these  agreements,  Dr. Kyprianou and Mr. Poyiadjis
each have the right to require us to use our best  efforts to register  all or a
portion of their 4,071,980 shares at our expense. In addition,  if we propose to
register  any of our  securities  either for our own  account or the  account of

<PAGE>76


others,  Dr. Kyprianou and Mr. Poyiadjis are entitled to include their shares at
our expense. Dr. Kyprianou and Mr. Poyiadjis' registration rights are assignable
to parties who agree to be bound by the terms of registration rights.

         In connection with our initial public offering in April 1999, we issued
warrants to Roth Capital  Partners,  Inc.,  formerly  known as  Cruttenden  Roth
Incorporated.  The warrants  are  exercisable  beginning  April 27, 2000 and the
holders have the right,  subject to  limitations,  to require us to register the
shares of our common stock  issuable upon exercise of the warrants.  The expense
of one registration  which is requested by Roth Capital  Partners,  Inc. will be
borne by us. All expenses of any subsequent registration shall be borne by them.
If we propose to register  any of our  securities  either for our own account or
the account of others,  the holders are also entitled to include their shares at
our expense.

         For a description of the registration rights granted to Info-quest, see
"Info-quest Private Placement" above.

                                                      PART IV

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


(a)  Financial Statements

     1.   The financial statements, as set forth under Item 8, are filed as part
          of this report on Form 10-K.

     2.   Schedules II - Valuation  and  Qualifying  Accounts for the year ended
          December 31, 1999 and 1998 are included herein and all other schedules
          are  omitted,  as the  required  information  is  inapplicable  or the
          information is presented in the consolidated  financial  statements or
          the related notes.

(b)  Report on Form 8-K

         On March 6, 2000, we filed with the Securities and Exchange  Commission
         a Form 8-K/A  amending a Form 8-K dated December 30, 1999 regarding the
         completion of the  acquisition of  ennovations.com.  The purpose of the
         amendment was to file the financial  information  required by Item 7 of
         Form 8-K.

(c)  Exhibit Index

        Number        Description of Document

         2.1        Agreement of Merger  between the  Registrant  and AremisSoft
                    Corporation, a Nevada corporation dated March 5, 1999(1)
         2.2        Plan and  Agreement  of  Reorganization  between  AremisSoft
                    Corporation,  a Nevada corporation and LK Global Information
                    Systems, B.V.(1)
         2.3        Addendum  to  the  Plan  and  Agreement  of  Reorganization
                    between  AremisSoft  Corporation,   a  Nevada
                    corporation and LK Global Information Systems, B.V.(1)
         3.1        Certificate of Incorporation of the Registrant(1)
         3.2        Bylaws of the Registrant(1)
         4.1        Specimen Common Stock Certificate(1)
         4.2        Form of Warrant to purchase Common Stock(1)
        10.1        1998 Stock Option Plan(1)
        10.2        Form of Incentive Stock Option Agreement(1)
        10.3        Form of Nonqualified Stock Option Agreement(1)
        10.4        Employment  Agreement  with Dr.  Lycourgos  K.  Kyprianou,
                    Chairman  of the  Board  and  Chief  Executive Officer(1)
        10.5        Employment  Agreement  with Roys  Poyiadjis,  President  and
                    Vice Chairman of the Board(1)
<PAGE>77


        10.6       Indemnification  Agreement  between the Registrant  and Dr.
                   Lycourgos  K.  Kyprianou(1)
        10.7       Indemnification Agreement between the Registrant and
                   Roys Poyiadjis(1)
        10.8       Convertible  Promissory  Note made by the Registrant in favor
                   of Arthur Sterling and Marie Sterling(1)
        10.9       Registration Rights Agreement between the Registrant and Dr
                   Lycourgos K. Kyprianou(1)
        10.10      Registration Rights Agreement between the Registrant and Roys
                   Poyiadjis(1)
        10.11      Form  of  Registration   Rights   Agreement   between  the
                   Registrant  and  investors  in  the Registrant's October 1997
                   private placement(1)
        10.12      Form of Registration Rights Agreement between the Registrant
                   and  investors  in the  Registrant's  February  1998 private
                   placement(1)
        10.13      Stock  Purchase  Agreement  between the Registrant and
                   Info-quest SA(1)
        10.14      Contracts  between the Registrant and the National  Health
                   Insurance Fund of Bulgaria(1)
        10.15      Share Purchase  Agreement  between the  Registrant  and
                   e-nnovations.com(2)
        21.1       Subsidiaries  of  the  Registrant(1)
        27.1       Financial Data Schedule

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

(1)  Previously filed with the Registrant's  Registration  Statement on Form S-1
     (No. 333-31768) filed on March 6, 2000.

(2)  Incorporated  by reference to the  Registrant's  Form 8-K filed on December
     29, 1999


<PAGE>78

      REPORT OF PANNELL KERR FORSTER, INDEPENDENT AUDITORS, ON SCHEDULE II

         We have audited the  consolidated  financial  statements  of AremisSoft
Corporation as of December 31, 1999 and 1998, and for each of the three years in
the period  ended  December  31, 1999 and have issued our report  thereon  dated
March 2, 2000 (included elsewhere in this report).  Our audits also included the
financial statement  schedules listed in Item 8 of this report.  These schedules
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion based on our audits.

         In our opinion,  the financial  statement  schedules referred to above,
when considered in relation to the basic financial  statements taken as a whole,
present fairly, in all material respects, the information set forth therein.

 /s/ PANNELL KERR FORSTER

 London, England
 March 5, 2000

<PAGE>79
                                   SCHEDULE II

            AREMISSOFT CORPORATION VALUATION AND QUALIFYING ACCOUNTS

                                 (In thousands)

<TABLE>
<S>                                              <C>                 <C>             <C>            <C>         <C>
                                                                        Add Items
                                                                        Charged to
                                                    Balance at          Costs and      Exchange                     Balance at
Description                                     Beginning of Period      Expenses     Difference    Deductions    End of Period
-----------                                     -------------------      --------     ----------    ----------    -------------
Year Ended December 31, 1997
Allowance for doubtful accounts                        $484                $560          $(16)         $  57           $971
Year Ended December 31, 1998
Allowance for doubtful accounts                         971                 110            10            452            639
Year Ended December 31, 1999
Allowance for doubtful accounts                         639                 652            19            765            507


</TABLE>

<PAGE>80


                                   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 on Form 10-K to
be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 30, 2000                           AREMISSOFT CORPORATION


                                      By: /s/ DR. LYCOURGOS K. KYPRIANOU
                                              ---------------------------
                                              Dr. Lycourgos K. Kyprianou,
                                              Chief Executive Officer

         Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the  following  persons,  which  include the  principal
executive officer,  the principal  financial officer and a majority of the board
of directors on behalf of the  Registrant and in the capacities and on the dates
indicated.

            Signature                                        Date
------------------------------------                   ---------------


/s/ DR. LYCOURGOS K. KYPRIANOU                         March 30, 2000
------------------------------------
Dr. Lycourgos K. Kyprianou,
Chairman of the Board and
Chief Executive Officer


/s/ ROYS POYIADJIS                                     March 30, 2000
-----------------------------------
Roys Poyiadjis,
President and Vice Chairman of the Board


/s/ MICHAEL TYMVIOS                                    March 30, 2000
-----------------------------------
Michael Tymvios,
Chief Financial Officer


/s/ DANN V. ANGELOFF                                   March 30, 2000
-----------------------------------
Dann V. Angeloff,
Director

/s/ GEORGE H. ELLIS                                    March 28, 2000
-----------------------------------
George H. Ellis,
Director


<PAGE>81


/s/ TATE HOLT                                          March 28, 2000
----------------------------------
Tate Holt,
Director


/s/ NOEL VOICE                                         March 28, 2000
-----------------------------------
Noel Voice,
Director

/s/ M.C. MATHEWS                                       March 29, 2000
-----------------------------------
M.C. Mathews,
Director


/s/ THEODOROS FESSAS                                   March 30, 2000
-----------------------------------
Theodoros Fessas,
Director


/S/ GEORGE PAPADOPOULOS                                March 30, 2000
-----------------------------------
George Papadopoulos,
Director


/s/ JOHN MALAMAS                                       March 30, 2000
-----------------------------------
John Malamas,
Director