<PAGE>

                                   FORM 10-Q
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


(Mark One)

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

For the quarterly period ended January 31, 1997
                                            or

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

                        Commission file number: 0-27218

                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC
            (Exact name of registrant as specified in its charter)

           England                                            None
(Stated or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                           Identification No.)

                        1800 West Loop South, 9th Floor
                                Houston, Texas
                                     77027
                   (Address of principal executive offices)
                                  (Zip Code)

                                (713) 625-9300
             (Registrant's telephone number, including area code)

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

     As of February 28, 1997, 25,554,720 Ordinary Shares of the Registrant's
Stock, 10 pence par value, were issued and outstanding.
<PAGE>
 
                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC

                                   FORM 10-Q

                               JANUARY 31, 1997

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I.    FINANCIAL INFORMATION                                                              PAGE    
<S>                                                                                            <C>
           Item 1.  Financial Statements 
                    
                    Consolidate Balance Sheet as of January 31, 1997 and April 30, 1996          3
                
                    Consolidated Statement of Operations for the three and nine months
                    ended January 31, 1997 and January 31, 1996                                  4

                    Consolidated Statement of Cash Flows for the nine months
                    ended January 31, 1997 and January 31, 1996                                  5

                    Notes to the Consolidated Financial Statements                               6

           Item 2.  Management's Discussion and Analysis of Financial Condition and
                    Results of Operations                                                        8

PART II.   OTHER INFORMATION

           Item 1.  Legal Proceedings                                                           14

           Item 4.  Submission of Matters to a Vote of Security Holders                         14

           Item 5.  Other Information                                                           16

           Itme 6.  Exhibits and Reports on Form 8-K                                            16

           SIGNATURE                                                                            17
</TABLE> 
<PAGE>
 
PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC

                          CONSOLIDATED BALANCE SHEET
                 (IN THOUSANDS, EXCEPT PER SHARE INFORMATION)

 
 
                                               January 31,   April 30,
                                                  1997         1996
                                               -----------   ---------
                                               (unaudited)
                  Assets    
                                              
Current assets:                               
  Cash and cash equivalents                     $  8,715    $ 10,960    
  Trade accounts receivable                        3,923       9,579   
  Other current assets                             1,252       3,498   
                                                --------    --------   
    Total current assets                          13,890      24,037   
Furniture, fixture and equipment, net              1,469       2,982   
Other assets                                         160               
                                                --------    --------
                                                                       
    Total assets                                $ 15,359    $ 27,179   
                                                ========    ========   
                                                                       
 Liabilities and shareholders' equity (deficit)                         
                                                                       
Current liabilities:                            
  Current maturities of indebtedness            $    855    $  1,003
  Accounts payable                                   488       1,630   
  Deferred revenue                                 4,145       3,691   
  Accrued liabilities                              5,749       5,344   
  Executive Stock Option Trust indebtedness          966         903   
                                                --------    --------   
    Total current liabilities                     12,203      12,571    
Indebtedness                                         240         524    
Other liabilities                                  9,108       2,149    
                                                --------    --------    
    Total liabilities                             21,551      15,244    
                                                --------    --------    
Shareholders' equity (deficit):                                         
  Ordinary shares, 10 pence par value              4,257       4,253    
  Additional paid-in capital                      20,291      20,323    
  Executive Stock Option Trust indebtedness         (966)       (903)   
  Cumulative translation adjustment                 (205)        439    
  Accumulated deficit                            (29,569)    (12,177)   
                                                --------    --------    
    Total shareholders'equity (deficit)           (6,192)     11,935    
                                                --------    --------    
Commitments and contingencies                   
                                                --------    --------
    Total liabilities and shareholders' 
     equity (deficit)                           $ 15,359    $ 27,179          
                                                ========    ========  


         The accompanying note are an integral part of this statement.

                                      -3-
<PAGE>
 
                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC

                     CONSOLIDATED STATEMENT OF OPERATIONS
                 (IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                        Three months ended                Nine months ended
                                                                            January 31,                      January 31,
                                                               -----------------------------------   ------------------------------
                                                                    1997                 1996             1997            1996
                                                                   ------               ------           ------          ------    
<S>                                                             <C>                  <C>                 <C>           <C>
Revenue:
  Product licenses                                                $ 3,402              $ 6,045           $  8,163         $17,885 
  Services                                                          2,165                3,574              7,510          12,432 
                                                                  -------              -------           --------         ------- 
   Total revenue                                                    5,567                9,619             15,673          30,317 
                                                                  -------              -------           --------         ------- 
Costs and expenses:                                                                                                               
  Cost of product licenses                                             54                  138                123             612 
  Cost of services                                                    826                1,836              3,363           5,178 
                                                                  -------              -------           --------         ------- 
   Total cost of revenue                                              880                1,974              3,486           5,790 
                                                                  -------              -------           --------         ------- 
Gross margin                                                        4,687                7,645             12,187          24,527 
                                                                  -------              -------           --------         ------- 
Sales and marketing                                                 2,395                5,277              9,134          14,496 
Research and development                                            1,104                2,058              4,263           5,847 
General and administrative                                            584                1,505              2,470           4,104 
Merger costs                                                                                                                  468 
Restructuring charge (benefit)                                     (3,512)                                 14,109                 
                                                                  -------              -------           --------         ------- 
  Total operating expenses                                            571                8,840             29,976          24,915 
                                                                  -------              -------           --------         ------- 
Operating income (loss)                                             4,116               (1,195)           (17,789)           (388)
Interest income                                                        85                  117                327             163 
Interest expense                                                      (26)                 (26)               (95)            (58)
Other income (expense)                                                                      (9)                15              (8)
                                                                  -------              -------           --------         ------- 
Income (loss) from continuing operations                                                                                          
  before income taxes                                               4,175               (1,113)           (17,542)           (291)
Income tax benefit                                                    150                  158                150                 
                                                                  -------              -------           --------         -------
                                                                                                                                  
Net Income (loss)                                                 $ 4,325              $  (955)          $(17,392)        $  (291)
                                                                  =======              =======           ========         ======= 
Income (loss) per Ordinary Share:                                   $0.16               $(0.04)            $(0.68)         $(0.01)
                                                                  =======              =======           ========         ======= 
Income (loss) per ADS: (1)                                          $0.33               $(0.08)            $(1.36)         $(0.02)
                                                                  =======              =======           ========         ======= 
 
Weighted average Ordinary and Ordinary Share
 equivalents outstanding                                           26,322               24,792             25,543          25,528
                                                                  =======              =======           ========         =======
</TABLE>
(1)  Adjusted to reflect the ratio of one ADS to two Ordinary Shares.


        The accompanying notes are an integral part of this statement.

                                      -4-
<PAGE>
 
                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC

                     CONSOLIDATED STATEMENT OF CASH FLOWS
                                (IN THOUSANDS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                            Nine months ended 
                                                                                                January 31,    
                                                                                           --------------------
                                                                                           1997            1996       
                                                                                           ----            ----
<S>                                                                                        <C>             <C>
Cash flow from operating activities:-
 Net income (loss)                                                                      $(17,392)        $  (291)      
 Adjustments to reconcile net income (loss) to cash                                                                      
  provided by operating activities:                                                                                      
   Depreciation and amortization                                                             378             519     
   Write-off of  assets from restructuring net of recoveries                               1,412                     
   Loss on sale of assets                                                                                     15   
   Changes in current assets and liabilities, net of                                         
    the effect of net assets write-offs from restructuring:                                  
     Trade accounts receivable                                                             3,869           2,280            
     Other current assets                                                                  1,058            (356)         
     Accounts payable                                                                     (1,142)            770          
     Accrued restructuring                                                                10,024          (3,386)         
     Accrued legal settlement                                                               (665)         (1,580)         
     Other accrued liabilities                                                              (431)           (320)         
     Deferred revenue                                                                      1,959          (1,378)         
   Other noncurrent assets and liabilities, net                                             (628)           (273)         
                                                                                        --------         -------          
     Net cash used by operating activities                                                (1,558)         (4,000)         
                                                                                        --------         -------          
Cash flows from investing activities:                                                                                     
 Purchases of furniture, fixtures and equipment                                             (227)         (1,686)         
 Sale of assets                                                                                               58  
                                                                                        --------         ------- 
     Net cash used by investing activities                                                  (227)         (1,628)         
                                                                                        --------         -------          
Cash flows from financing activities:                                                                                     
 Borrowings on indebtedness                                                                                1,020          
 Repayments of indebtedness                                                                 (432)           (574)         
 Issuance of Ordinary Shares, net                                                            (28)         11,923          
 Distributions to CCI shareholders                                                                            (7)         
                                                                                        --------         -------          
     Net cash provided (used) by financing activities                                       (460)         12,362          
                                                                                        --------         -------          
Increase (decrease) in cash                                                               (2,245)          6,734          
Beginning cash and cash equivalents                                                       10,960           5,026          
                                                                                        --------         -------          
                                                                                                                              
Ending cash and cash equivalents                                                        $  8,715         $11,760     
                                                                                        ========         =======     
</TABLE>

        The accompanying notes are an integral part of this statement.

                                      -5-
<PAGE>
 
                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THE SIX MONTHS ENDED
                               OCTOBER 31, 1996
                                   UNAUDITED



NOTE 1 - BASIS OF PRESENTATION:

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles of the United States
for interim financial reporting and in accordance with Form 10-Q and Rule 10.01
of Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles of the United
States for complete financial statements. In the opinion of management, the
unaudited consolidated financial statements contained in this report reflect all
adjustments, consisting of only normal recurring adjustments considered
necessary for a fair presentation of the financial position and the results of
operations for the interim periods presented. Operating results for interim
periods are not necessarily indicative of results for the full year. These
unaudited consolidated financial statements, footnote disclosures and other
information should be read in conjunction with the financial statements and the
notes thereto included in the Company's annual 10-K filed with the Securities
and Exchange Commission on July 29, 1996.

NOTE 2 - ACQUISITIONS:

In August 1995, the Company acquired Corporate Computing Inc. (CCI), in exchange
for 700,000 Ordinary Shares of the Company. The acquisition was accounted for as
a pooling of interests. CCI's operations have been included in the consolidated
financial statements for all periods presented.

NOTE 3 - SHAREHOLDERS' EQUITY:

In the period May 1, 1996 through January 31, 1997, options to purchase 49,000
Ordinary Shares at exercise prices of .4625 to .85 Pounds Sterling per share
were exercised. At January 31, 1997, there were options to purchase 4,123,250
Ordinary Shares, including 655,450 of options related to Ordinary Shares held by
the Executive Share Option Trust which are currently outstanding for earnings
per share calculation purposes.

NOTE 4 - EARNINGS PER SHARE AND ORDINARY SHARE EQUIVALENTS:

Earnings per Ordinary Share and earnings per ADS are computed using the weighted
average number of Ordinary Shares and Ordinary Share equivalents outstanding
during the period. Ordinary Share equivalents, to the extent they would be
dilutive, include the number of shares issuable upon exercise of stock options,
less the number of shares that could have been repurchased with the exercise
proceeds using the treasury stock method.

NOTE 5 - RESTRUCTURING CHARGE/BENEFIT:

On August 2, 1996, the Board of Directors approved a plan to restructure the
Company's operations. Under the approved plan, the Company recorded a
restructuring charge of $17.6 million in the three months ending October 31,
1996. This charge was comprised of approximately $10.6 million in abandoned
lease costs, which are payable through 2014, $3.1 million in severance and
personnel costs and $3.9 million for the impairment of certain net operating
assets outside the U. S.

                                      -6-
<PAGE>
 
                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           FOR THE SIX MONTHS ENDED
                               OCTOBER 31, 1996
                                  UNANUDITED



The amount of restructuring charge which remains accrued at January 31, 1997 is
as follows:

Accrued abandoned leaseholds and other costs         $ 9,943
Current accrued restructuring costs                   (1,895)
                                                      ------ 
Non-current accrued restructuring costs              $ 6,956
                                                      ------

During the three months ended January 31, 1997, the Company recorded a
restructuring benefit of $3.5 million. Approximately $2.1 million represented
proceeds from the sale of the Systems Engineer product line and the remainder
related to sublease arrangements and other recoveries of charges recorded in
the previous period.

                                      -7-
<PAGE>
 
                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC

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



INTRODUCTION

When used in this discussion, the words "believes", "anticipated", "expects"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties which could cause
actual results to differ materially from those projected. See Item 6 - Exhibit
99 "Important Factors Regarding Forward-Looking Statements" which is
incorporated herein by reference. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the results of
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

OVERVIEW

On August 2, 1996, the Board of Directors approved a plan to restructure the
Company's operations and made certain changes to executive management. Included
in the restructuring was a shift in the Company's development and marketing
efforts to focus substantially all its resources on the Company's Process
Engineer product line, eliminating or substantially reducing its development and
marketing investment in the System Engineer, Insight, GUI Guidelines and Client
Server Guidelines product lines. The Company also discontinued its direct sales
and service operations outside the US, replacing its non-U.S. operations with
third-party distributor relationships. There is no assurance that such
distributors will be successful. Also, the Company discontinued its telesales
operations in the US. The Company's future ability to generate sustained
profitability is dependent on the Company's Process Engineer product line and
the Company's direct sales operations in the US. There is no assurance that the
Company will be able to generate or sustain profitability. The Company has not
historically been successful in selling its Process Engineer product line
outside the US.

In connection with the Company's restructuring plan, the Company recorded a
$17.6 million restructuring charge in the three months ended October 31, 1996.
The restructuring charge was comprised primarily of lease costs, severance and
other employee costs and impairment of certain operating assets, principally
outside the U. S. As a result of this charge, the Company recorded a net loss
for the nine months ended January 31, 1997 and expects to record a net loss for
the fiscal year ending April 30, 1997. The restructuring actions have resulted
and may continue to result in a substantial reduction in the Company's cash
balance. The estimated total cash requirements associated with the restructuring
actions exceed the Company's cash balances, however, currently, such cash
requirements extend over many years. Additionally, the Company's restructuring
plan could result in additional claims or liabilities which the Company has not
anticipated or included in the restructuring charge. Unanticipated claims or
liabilities could result in additional cash needs for the Company.


                                      -8-
<PAGE>
 
                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC

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



During the three months ended January 31, 1997, the Company recorded a
restructuring benefit of $3.5 million. Approximately $2.1 million represented
proceeds from the sale of the Systems Engineer product line and the remainder
related to sublease arrangements and other recoveries of charges recorded in the
previous period.  The Company expects additional recoveries, primarily through
sublease or other arrangements, however, there is no assurance that such
recoveries will actually occur.

As a result of the significant changes in the business, the results of
operations and financial position of the Company as of and for the three and
nine month periods ended January 31, 1997 are substantially different than for
the comparative prior periods.

THREE MONTHS ENDED JANUARY 31, 1997 COMPARED TO THREE MONTHS ENDED 
JANUARY 31, 1996

Total Revenue

Total revenue decreased 41% from $9.6 million in the three months ended January
31, 1996 to $5.6 million in the three months ended January 31, 1997. This
decrease was attributable to the elimination of the direct sales and service
operations outside the U.S. and a decline in Systems Engineer license revenue in
the U.S.  The Systems Engineer product line was sold in December of 1996.

Product Licenses. The Company's product license revenue in the three months
ended January 31, 1997 was predominantly related to its Process Engineer product
line. Product license revenue decreased 44% from $6.0 million in the three
months ended January 31, 1996 to $3.4 million in the three months ended January
31, 1997. This decline, which reflected a reduction in the number of licenses
sold, is due to the elimination of the direct sales and service operations
outside the U.S. and a decline in Systems Engineer license revenue in the U.S.
The Systems Engineer product line was sold in December of 1996.

Services. The Company provides maintenance and implementation services to its
customers. Maintenance services include technical support and access to product
upgrades. Implementation services include product installation, training and
assisting customers with the effective deployment of LBMS products. Overall
services revenue decreased 39% from $3.6 million for the three months ended
January 31, 1996 to $2.2 million for the three months ended January 31, 1997,
primarily due to the elimination of the direct sales and service operations
outside the U.S. The sale of the Systems Engineer product line may result a
reduction in service revenue in fiscal 1998.

Cost of Revenue

Cost of Product Licenses. Cost of product licenses consists of sublicense fees,
product media and duplication cost, manuals, packaging materials and shipping
expenses. Cost of product licenses was $0.1 million in each of the three month
periods ended January 31, 1996 and 1997.

                                      -9-
<PAGE>
 
                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC

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



Cost of Services.  Cost of services consists primarily of personnel costs for
implementation, training and customer support.  Cost of services was $1.8
million and $.8 million in the three months ended January 31, 1996 and 1997,
respectively, resulting in a gross margin of 49% and 62% of the related service
revenue in each respective period. The improvement in gross margin percentage
predominately reflects a reduction in implementation and training costs and an
improvement in implementation and training personnel utilization.

Operating Expenses

Sales and Marketing. Sales and marketing expenses consist primarily of salaries
and commissions of sales and marketing personnel, travel and promotional
expenses and related indirect costs. Sales and marketing expenses decreased 55%
from $5.3 million, or 55% of total revenue, in the three months ended January
31, 1996 to $2.4 million, or 43% of total revenue, for the three months ended
January 31, 1997. This decrease of $2.9 million is due to the elimination of
sales and marketing costs outside the U.S.

Research and Development. Research and development expenses consist primarily of
cost of research and development personnel and related indirect costs. Research
and development expenses were $2.1 million, or 21% of total revenue, for the
three months ended January 31, 1996 compared to $1.1 million, or 20% of total
revenue for the three months ended January 31, 1997. The decrease in research
and development expenses reflect the elimination or substantial reduction in
development efforts related to the Systems Engineer, Insight, GUI Guidelines and
Client Server Guidelines products. Development headcount and expenses related to
the Process Engineer product line were increased in the three months ended
January 31, 1997 compared to the three months ended January 31, 1996.

General and Administrative. General and administrative expenses consist
primarily of salaries of financial, administrative and management personnel and
related indirect costs. General and administrative expenses decreased 61% from
$1.5 million for the three months ended January 31, 1996 to $0.6 million for the
three months ended January 31, 1997. The decrease resulted from the elimination
of general and administrative expenses outside the U.S. and a reduction of
general and administrative expenses, principally leasehold costs, in the U.S.

Operating Income. The Company generated income from operations of $4.1 million,
including a restructuring benefit of $3.5 million, in the three months ended
January 31, 1997 compared to a loss from operations of $1.2 million for the
comparable period in 1996.

Income taxes. During the three month period ended January 31, 1997, the Company
recorded a tax benefit of $0.2 million related to recovery of taxes paid in
prior years. The Company did not record a income tax expense for income
recognized in the three month period ended January 31, 1997, due to the Company
has losses for the nine months ended January 31, 1997.

                                      -10-
<PAGE>
 
                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC

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



NINE MONTHS ENDED JANUARY 31, 1997 COMPARED TO NINE MONTHS ENDED 
JANUARY 31, 1996

Total Revenue

Total revenue decreased 48% from $30.3 million in the nine months ended January
31, 1996 to $15.7 million in the nine months ended January 31, 1997. This
decrease was attributable to the elimination of the direct sales and service
operations outside the U.S. and a decline in Systems Engineer license revenue in
the U.S.  The Systems Engineer product line was sold in December 1996.

Product Licenses. The Company's product license revenue in the nine months ended
January 31, 1997 was predominantly related to its Process Engineer product line.
Product license revenue decreased 54% from $17.9 million in the nine months
ended January 31, 1996 to $8.2 million in the nine months ended January 31,
1997. This decline, which reflected a reduction in the number of licenses sold,
is due to the elimination of the direct sales and service operations outside the
U.S. and a decline in Systems Engineer license revenue in the U.S.  The Systems 
Engineer product line was sold in December 1996.

Services. The Company provides maintenance and implementation services to its
customers. Maintenance services include technical support and access to product
upgrades. Implementation services include product installation, training and
assisting customers with the effective deployment of LBMS products. Overall
services revenue decreased 40% from $12.4 million for the nine months ended
January 31, 1996 to $7.5 million for the nine months ended January 31, 1997,
primarily due to the elimination of the direct sales and service operations
outside the U.S. The sale of the Systems Engineer product line may result a
reduction in service revenue in fiscal 1998.

Cost of Revenue

Cost of Product Licenses. Cost of product licenses consists of sublicense fees,
product media and duplication cost, manuals, packaging materials and shipping
expenses. Cost of product licenses was $0.6 million and $0.1 million in the nine
months ended January 31, 1996 and 1997, respectively, resulting in a gross
margin of 97% and 99% for each respective period. The increase in margin is the
result of a change in the mix of products from products with license fees
payable to a third party licenser to products without such third party fees.

Cost of Services. Cost of services consists primarily of personnel costs for
implementation, training and customer support. Cost of services was $5.2 million
and $3.7 million in the nine months ended January 31, 1996 and 1997,
respectively, resulting in a gross margin of 58% and 55% of the related service
revenue in each respective period. The reduction of the gross margin percentage
predominately reflects the reduction in implementation and training revenue
without a corresponding decrease in implementation and training costs,
principally in the three months ended July 31, 1996.

Operating Expenses

Sales and Marketing. Sales and marketing expenses consist primarily of salaries
and commissions of sales and marketing personnel, travel and promotional
expenses and related indirect costs. Sales and marketing expenses decreased 37%
from $14.5 million, or 48% of total revenue, in the nine months ended January
31, 1996 to $9.1

                                      -11-
<PAGE>
 
                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC

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



million, or 58% of total revenue, for the nine months ended January 31, 1997.
This decrease of $5.4 million is due to the elimination of sales and marketing
costs outside the U.S.

Research and Development. Research and development expenses consist primarily of
cost of research and development personnel and related indirect costs. Research
and development expenses were $5.8 million, or 19% of total revenue, for the
nine months ended January 31, 1996 compared to $4.3 million, or 27% of total
revenue for the nine months ended January 31, 1997. The decrease in research and
development expenses reflect the elimination or substantial reduction in
development efforts related to the Systems Engineer, Insight, GUI Guidelines and
Client Server Guidelines products subsequent to July 31, 1996. Development
headcount and expenses related to the Process Engineer product line were
increased in the nine months ended January 31, 1997 compared to the nine months
ended January 31, 1996.

General and Administrative. General and administrative expenses consist
primarily of salaries of financial, administrative and management personnel and
related indirect costs. General and administrative expenses decreased 40% from
$4.1 million for the nine months ended January 31, 1996 to $2.5 million for the
nine months ended January 31, 1997. The decrease resulted from the elimination
of general and administrative expenses outside the U.S. and a reduction of
general and administrative expenses, principally leasehold costs, in the U.S.
subsequent to July 31, 1996.

Operating Income. The Company generated a loss from operations of $17.8 million,
including a restructuring charge (net of benefit) of $14.1 million, in the nine
months ended January 31, 1997 compared to a loss from operations of $0.4
million, including a $0.5 million charge for merger costs, for the comparable
period in 1995.

Income taxes. During the nine month period ended January 31, 1997, the Company
recorded a tax benefit of $0.2 million related to recovery of taxes paid in
prior years. No additional tax benefit was recorded related to the Company's
losses because such benefit can not be recognized, under the liability method,
until future taxable income is reasonably assured.

Liquidity and Capital Resources

At January 31, 1997, the Company had cash and equivalents of $8.7 million and
working capital of $1.7 million. The Company has revolving lines of credit
available approximating $2 million. At February 28, 1997, approximately $500,000
is available to be drawn from on these credit facilities. The Company generated
approximately $1.9 million in cash from operations for the nine months ended
January 31, 1997 before payments of approximately $3.4 million related to the
Company's restructuring activities and a prior period legal settlement. The
Company had capital expenditures of $0.2 million for the nine months ended
January 31, 1997 compared to $1.7 million for the same period in the prior year.
The Company does not currently have any significant capital commitments.

The implementation of the Company's restructuring plan has consumed significant
amounts of cash during the six months ended January 31, 1997 and may continue to
consume cash over the remainder of the fiscal year. Management believes the cash
requirements related to the restructuring charge for the remainder of fiscal
1997 could be as much as $0.7 million. These requirements are to fund
anticipated lease costs and costs associated with

                                      -12-
<PAGE>
 
                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC

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



the elimination of the Company's cost base outside the U.S. While management
believes sufficient cash reserves currently exist to sustain the anticipated
restructured operations for the remainder of the fiscal year, there is no
assurance that the Company will have adequate liquidity and capital resources
for fiscal 1998, if the Company is not successful in generating cash from on-
going operations and recovering future lease costs through sublease or other
arrangements. See Exhibit 99 for further discussions about potential risk
factors.

                                      -13-
<PAGE>
 
                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC



PART II. - OTHER INFORMATION

ITEM 1.  Legal Proceedings: - From time to time the Company has legal or
administrative proceedings which are generally incidental to its normal business
activities. While the outcome of any such proceeding can not be accurately
predicted, the Company does not believe the ultimate resolution of any such
existing matters should have a material adverse effect on its financial position
or results of operations.

ITEM 4.  Submission of Matters to a Vote of Security Holders: -

The Annual General Meeting of Learmonth & Burchett Management Systems Plc (the
"Company") was held at the Company's executive offices located at 1800 West Loop
South, Suite 900, Houston, Texas, on November 15, 1996 at 11:00 a.m. central
standard time for the following purposes:

     As ORDINARY BUSINESS:

     1.  To adopt the Directors' Report and the audited accounts for the year
         ended April 30, 1996.
 
         Votes for             Votes Against
         ---------             -------------
         10,707,822            0
 
     2.  To re-elect Gerald N. Christopher, who was appointed as a Director on
         August 2, 1996.
 
         Votes for             Votes Against
         ---------             -------------
         10,707,822            0
 
     3.  To re-elect Michael S. Bennett, who was appointed as a Director on 
         August 2, 1996.
 
         Votes for             Votes Against
         ---------             -------------
         10,707,822            0
 
     4.  To re-elect David B. Rodway, who retires as a Director by rotation.
 
         Votes for             Votes Against
         ---------             -------------
         10,706,822            1,000
 
     5.  To re-elect Rainer H. Burchett, who retires as a Director by rotation.
 
         Votes for             Votes Against
         ---------             -------------
         10,704,822            3,000

     The following directors are not up for re-election until the next annual
     Shareholder meeting:

     Roger A. Learmonth
     G. Felda Hardymon

                                      -14-
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                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC



     6.  To re-appoint the auditors Price Waterhouse to hold office until the
         next Annual General Meeting and to authorize the Directors to fix their
         remuneration.

         Votes for             Votes Against
         ---------             -------------
         10,707,822            0

     7.  To approve the payment of fees to the non-Executive Directors of the
         Company of an aggregate of up to (Pounds)55,000 in the year to April
         30, 1997 (being in excess of the (Pounds)40,000 limit currently set
         forth in the Company's Articles of Association).

         Votes for             Votes Against
         ---------             -------------
         10,690,784            17,038

     As SPECIAL BUSINESS, Resolutions 8, 9, 10, 11 and 12 to be treated as
     Ordinary Resolutions and Resolution 13 to be treated as a Special
     Resolution:

     8.  To adopt the 1996 Equity Incentive Plan.
 
         Votes for             Votes Against
         ---------             -------------
         10,704,660            3,162
 
     9.  To adopt the 1996 U.S. Employee Stock Purchase Plan.
 
         Votes for             Votes Against
         ---------             -------------
         10,704,660            3,162
 
    10.  To adopt the 1996 Non-employee Directors' Share Option Plan.
 
         Votes for             Votes Against
         ---------             -------------
         10,702,986            4,836
 
    11.  To amend the Executive Share Option Scheme and certain option
         certificates relating to options granted thereunder.
 
         Votes for             Votes Against
         ---------             -------------
         10,694,381            13,441
 
    12.  To authorize the Directors to allot shares.
 
         Votes for             Votes Against
         ---------             -------------
         10,693,381            14,441
 
    13.  To approve disapplication of preemptive rights of holders of 
         ordinary shares.
 
         Votes for             Votes Against
         ---------             -------------
         10,689,166            18,656
 
    No broker non-votes were recorded.

                                      -15-
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                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC


ITEM 5.  Other Information: - The London Stock Exchange (the Exchange) closed
the USM at the end of 1996. The Company previously announced that it has decided
to rely upon the Nasdaq National Market as the Company's principal market for
its Ordinary Shares upon the closing of the USM on December 31, 1996.

ITEM 6.  Exhibits and Reports on Form 8-K


(a)  Exhibits

       99     Important Factors Regarding Forward-Looking Statements.

(b)  Reports on Form 8-K

     Not Applicable.

                                      -16-
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                  LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC


                                  SIGNATURES

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

Date: March 15, 1997               LEARMONTH & BURCHETT MANAGEMENT SYSTEMS PLC


                                   By:  /s/ Michael S. Bennett
                                       _______________________________________
                                       Michael S. Bennett, 
                                       Chief Executive Officer 



                                   By:  /s/ Stephen E. Odom
                                       _______________________________________
                                       Stephen E. Odom, 
                                       Chief Financial Officer and Senior Vice 
                                       President - Finance and Administration

                                      -17-