<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

/x/  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended April 30, 1998

/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from _____ to _____

                           Commission File No. 0-21359

                     INDUSTRI-MATEMATIK INTERNATIONAL CORP.
             (Exact name of registrant as specified in its charter)

           DELAWARE                                      51-0374596
(State of or other jurisdiction                       (I.R.S. Employer
of incorporation or organization)                    Identification No.)

                         One Commerce Center, Suite 748
                             12th and Orange Streets
                              Wilmington, DE 19807

(Address of principal executive offices)

Registrant's telephone number, including area code: 302-884-6713
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 par value
                                (Title of class)

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

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statement
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 on June 30, 1998, was approximately $178,000,000.

    At June 30, 1998, 32,923,552 shares of the registrant's Common Stock, $.01
par value, were outstanding.




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                       DOCUMENTS INCORPORATED BY REFERENCE

    The registrant incorporates by reference in Part III of this Report
specified portions of its definitive Proxy Statement to be filed with the
Securities and Exchange Commission in connection with its 1998 Annual Meeting of
Shareholders ("1998 Proxy Statement").



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                                     PART I

ITEM 1. BUSINESS

    INDUSTRI-MATEMATIK INTERNATIONAL CORP. ("IMI" or "Company"), was
incorporated in the State of Delaware in 1995 and conducts its business through
domestic and international subsidiaries. The Company's business was founded in
1967 by incorporation in Sweden as Industri-Matematik AB ("IMAB"). In May 1995,
the then stockholders of IMAB exchanged all of their IMAB shares for shares of
the Company's capital stock and IMAB became a wholly-owned subsidiary of the
Company. Pursuant to a Prospectus dated September 25, 1996, 5,060,000 shares of
the Company's Common Stock were sold to the public in an initial public offering
and the Company's Common Stock began trading on the Nasdaq National Market under
the symbol "IMIC". During fiscal 1998, pursuant to a Prospectus dated October
31, 1997, the Company completed a secondary public offering of 8,136,250 shares
of Common Stock.

    IMI develops, markets, and supports client/server application software that
enables manufacturers, distributors, and wholesalers to more effectively manage
the "supply chain." Supply chain management encompasses the execution of
multiple customer-focused order fulfillment processes, including order
management, pricing and sourcing, warehouse management, transportation
management, service management, and demand chain planning. The Company's
principal product, System ESS, has been designed specifically to meet the
complex or high-volume supply chain management requirements of medium and large
manufacturers, distributors, and wholesalers as well as third-party logistics
companies. System ESS allows customers to leverage the value of their existing
systems by integrating with legacy and new client/server manufacturing, advanced
planning, and financial management systems. Recent customers of IMI include
Black & Decker Corporation, British Airways PLC, Brunswick Corporation - Mercury
Marine, Campbell Soup Company, Canon U.S.A., Inc., Cargill, Inc., Carlton &
United Breweries, Dial Corporation, General Electric Plastics Interpharmgroup
B.V., Kellogg Company, McKesson General Medical, New Zealand Dairy Industry,
Pioneer Standard Electronics, Inc., Smuckers, Skyway Freight Systems, Inc.,
Starbucks Corporation, and VWR Scientific Products Corporation.

INDUSTRY BACKGROUND

    In recent years, there has been a fundamental shift in market power from
manufacturers and distributors to retailers and consumers. This shift resulted
from the convergence of a number of trends, including the rapid proliferation in
the number and variety of product offerings, shorter product life cycles, the
emergence of more informed and demanding consumers, and the evolution of the
retailing industry from local stores to large national and regional chains of
department and discount stores, "superstores", and specialty category stores.
These trends have continued to change the way manufacturers, distributors, and
wholesalers must conduct their businesses to compete effectively. Historically,
manufacturers dictated the terms of trade with retailers and consumers and,
consequently, organized their businesses primarily to increase manufacturing
efficiency and output. Today, customers increasingly are choosing suppliers
based on their ability to match product flow to actual customer demand. As a
result, manufacturers and distributors are reorganizing their businesses to
focus on satisfying customer demand through effective integrated order
fulfillment.

    Effective integrated order fulfillment is a complex logistics challenge,
requiring manufacturers and distributors to manage broadening product
portfolios, multinational distribution, reduced delivery response times,
frequent and customer-specific product promotions, lower customer inventory
levels, rapidly changing consumer behavior, and more complex manufacturing
strategies involving global sourcing and assembly from a network of internal and
outsourced manufacturers and suppliers. To compete more effectively,
manufacturers, distributors, and wholesalers must synchronize their internal
planning and 




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execution functions with external participants in the demand chain,
including consumers, retailers, distributors, manufacturing subcontractors, and
suppliers. The efficient management and operation of this "virtual enterprise"
requires capturing information from customer orders most effectively by using
electronic commerce to facilitate communication to and from customers and
delivering it to support manufacturing resource planning ("MRP"), financial
reporting, and decision support systems. Managing the flow of information for
this complex order fulfillment process is critical to monitoring such variables
as product profitability across customers and geographies, planning the timing
and impact of promotional activities, and meeting demand on a
customer-by-customer and product-by-product basis.

    In order to cope with the logistics challenges of delivering the right
product to the right location at the right time and at the right price,
manufacturers, distributors, and wholesalers, as well as industry consultants
and enterprise application software vendors, in recent years have emphasized the
need to integrate and more effectively manage what is commonly known as the
"supply chain." The supply chain refers to the movement of products from raw
material suppliers to manufacturers, to distributors, to wholesalers, to
retailers, and, ultimately, to consumers. In an attempt to achieve the effective
integration and management of their supply chains, many companies began to
replace their legacy manufacturing and distribution systems with client/server
enterprise resource planning ("ERP") systems which support MRP, financial
reporting, and some degree of logistics management functionality. These software
solutions traditionally focused on manufacturing efficiency and financial
reporting.

    Existing ERP systems focusing on supply chain management from a
manufacturer-centric or supply-driven point of view and attempting to meet the
changing requirements of today's customer-focused or demand-driven environment,
fail to achieve many of the following fundamental strategic objectives for
manufacturers, distributors, and wholesalers:

         Automating the Order Fulfillment Process. A high level of system
    functionality is required for effective fulfillment of orders placed by
    thousands of customers regarding specialized products under differing
    promotional and packaging schemes. Typically, integrated ERP systems are not
    optimized to meet these complex needs, leading to delayed shipments or added
    administrative costs. In particular, existing ERP systems typically cannot
    disaggregate large orders into their individual components, or "order
    lines", to cater to differing customer needs on a product by product basis.

         Management of a Heterogeneous Customer Base. As market power has
    shifted to retailers and consumers, manufacturers, distributors, and
    wholesalers now are forced to accommodate highly specific customer order
    fulfillment procedures and other requirements that are dictated by the
    retailer or consumer. Integrated ERP systems have been designed to maximize
    the output efficiency of the manufacturer and supplier and, typically, lack
    the capabilities necessary to track customer demand and respond efficiently
    to highly variable order fulfillment requirements.

         Scalability. The volume and complexity of customer orders necessitates
    a highly scalable order fulfillment solution. The Company believes that the
    leading integrated ERP systems do not meet the transaction volume
    requirements of many manufacturers, distributors, and wholesalers, which can
    require a solution capable of efficiently processing in excess of 10 million
    complex order lines per year.

         Globalized Logistics. Worldwide enterprises must manage their
    businesses across multiple legal entities, in multiple currencies, and in
    multiple languages, with product sourcing from a variety of physical
    locations, including company-owned manufacturing facilities and warehouses,
    public warehouses, and third-party suppliers. In order to support logistics
    across this type of global network, ERP systems typically require redundant
    systems in multiple locations.



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         Adaptability for Electronic Commerce. The virtual enterprise concept
    only can be implemented successfully if there is compatibility between
    internal and external information systems. Increasingly, electronic data
    interchange ("EDI") and other modes of electronic communication, such as the
    Internet, provide links between an enterprise and its customers and
    suppliers. ERP systems often lack the ease of connectivity required for
    electronic commerce.

         Timely Implementation. The order fulfillment process is a complex and
    mission-critical application. Companies require high-performance
    functionality 24 hours per day, 7 days per week. Many buyers of ERP systems
    have spent one or more years, and considerable resources, attempting to
    implement a client/server solution without significant success.

THE IMI SOLUTION

    IMI develops, markets, and supports software that enables manufacturers,
distributors, wholesalers, and retailers to more effectively fulfill their
customers' orders. The Company believes demand chain management is the next
stage in the evolution of logistics management, linking the various elements of
the supply chain from a customer-centric or demand-driven perspective. System
ESS has been designed specifically for the sophisticated order fulfillment
requirements of manufacturers, distributors, wholesalers, and retailers,
enabling them to match product flow to actual customer demand, thereby enhancing
revenue opportunities and reducing administrative and logistics/distribution
costs. The key strengths of System ESS include the following:

    Order Line Independence. System ESS was designed to allow the automation and
tracking of complex orders by treating each line of an order independently. This
"order line independence" allows a customer order to be serviced automatically
by any number of sales organizations, from any number of dispersed inventory
locations, and for any number of customer destinations. Moreover, order line
independence allows the individual order lines in a customer order to be
fulfilled simultaneously or sequentially. With System ESS, a customer can place
a single order that mixes supply modes, shipping dates and destinations, pricing
structures, discount schedules, special promotions, and terms of payment. In
addition, System ESS enables companies to automate the order fulfillment
process, reducing order cycle time and administrative costs, and presents
information in a form which is optimized for detailed measurement and planning.

    Customer-driven Software Architecture. Each business process function within
System ESS is highly flexible, accommodating a heterogeneous mix of customer
attributes, including pricing structures, delivery methods, order placement, and
billing procedures, and promotional activities. Robust customer definition
processes in System ESS enable companies to manage diverse customer accounts
efficiently and deliver tailored services for maximum customer satisfaction.

    Scalability. System ESS is based on a three-tier distributed architecture
that provides for enterprise-wide scalability. System ESS has been scaled in
some implementations to manage 700 or more simultaneous users. Its efficient use
of distributed computing also has enabled System ESS to execute and manage over
15 million complex order lines annually. The Company believes that the current
version of System ESS is capable of executing substantially higher volumes
without significant loss of efficiency.

    Globalized Logistics. System ESS enables companies to manage more
efficiently the complexities of global sales and distribution from a single
enterprise database. System ESS allows a company to implement a system for
customer order fulfillment on a global basis while maintaining business
structure flexibility with respect to order execution procedures, such as
warehousing and distribution. Moreover, the functionality of System ESS supports
the 



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complexities of cross-border transactions such as multiple currencies,
import/export laws, and documentation requirements.

    Integration with Complementary Products and Technologies. System ESS has
been designed specifically to maximize the value of existing and new
complementary systems performing manufacturing, finance, or decision support
functions as well as to integrate with EDI systems to facilitate electronic
commerce with customers and suppliers. System ESS currently uses the Oracle
relational database management system as its database server and supports the
leading UNIX-based and Windows NT servers as well as Windows clients. System ESS
has been designed to allow customers the freedom to choose the most functional
and advanced component applications for creating complete, robust enterprise
business systems.

    Timely Implementation. The Company has designed its product and service
offerings to enable customers to configure and implement the Company's software
solution on a timely basis, thereby reducing costs and increasing the customer's
return on investment. System ESS implementation assistance is provided for
customers through the Company's service organization and from leading systems
integrators.

STRATEGY

    The Company's objective is to be the leading global supplier of supply chain
management software solutions to manufacturers, distributors, wholesalers, and
third-party logistics companies. The key elements of IMI's strategy to achieve
this leading position are as follows:

    Target Markets. The Company to date has focused its marketing, sales, and
product development efforts towards establishing quality reference customers in
specific target markets, particularly the consumer packaged goods market and the
high-volume wholesale distribution industry. The Company is increasingly
targeting other vertical markets which are characterized by a need for highly
flexible solutions that can support large and complex transaction volumes,
including the health care, automotive parts, electronics, and industrial
products sectors as well as the third-party logistics sector.

    Expand Sales, Support, Service, and Marketing Organizations. IMI currently
sells and supports System ESS through direct sales and support organizations in
North America, Europe, and Australia. IMI plans to continue to invest
significantly in expanding its sales, support, service, and marketing
organizations primarily in North America and Asia/Pacific. As IMI increasingly
targets large, multinational customers and as existing customers migrate their
System ESS installations to other divisions internationally, the Company intends
to provide sales and support services on a worldwide basis. The Company opened
sales/ support offices in Australia, Germany, and the Netherlands in fiscal 1997
and in France and Canada in fiscal 1998. The Company now provides 24 hour, 7 day
per week support through telephone and electronic mail.

    Expand Usage Within Existing Customer Base. A substantial majority of the
Company's customers are large multinational enterprises that initially have
licensed System ESS for use within one or more specific divisions. IMI believes
that a significant opportunity exists within its established customer base to
expand usage of its software by licensing new sites and additional users.

    Enhance Core Product Functionality. The Company intends to continue to focus
its product development resources on the development and enhancement of demand
chain management software solutions. IMI has over 20 years of experience in
developing logistics management software. The Company intends to continue to
increase product functionality through both in-house development and selected
acquisitions. IMI currently is funding development efforts to increase order
volume throughput, support Windows NT servers, enhance and expand Internet and
Intranet applications, and introduce object-oriented technology.



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    Integrate with Complementary Products. The Company believes that the ability
to offer a software product that can integrate seamlessly with selected third
party components to provide a comprehensive solution tailored for a particular
vertical market is a key competitive advantage. The Company intends to continue
to integrate System ESS with complementary planning, manufacturing, finance, and
decision support systems developed by others. Global Partner agreements have
been signed to that effect with Oracle Corporation, Business Objects S.A.,
Frontec AMT AB, Taxware International, Inc., and Jetform Corporation as well as
regional agreements with additional software partners.

    Establish Partnerships to Leverage Third Party Strengths. In addition to its
direct sales and support organizations, the Company has and will continue to
establish partnerships with third parties to assist the Company in developing
customer relationships and in successfully customizing and implementing System
ESS. In connection with specific implementations, the Company has partnered with
Andersen Consulting, Computer Sciences Corporation, IBM and MCI Systemhouse in
the United States, and Cap Gemini and ECsoft Group in Europe.

PRODUCTS AND SERVICES

    IMI provides a solution for developing supply chain management systems:
System ESS, a client/server integrated order fulfillment system, and a set of
robust development tools. In addition, the Company and its third party systems
integrator partners provide a complete range of customer services, including
training, consulting, and maintenance.

System ESS

    System ESS is an open systems, client/server supply chain management
solution that provides full capabilities for managing and executing the entire
order fulfillment process, including order management, distribution management,
warehouse management, demand replenishment, price and promotion management,
global organization management, electronic commerce, decision support, and
service management. System ESS can currently operate on UNIX server platforms
from Hewlett-Packard Corporation, IBM, Digital Equipment Corporation , Sun
Corporation, as well as on Windows NT server platforms. System ESS provides an
object-oriented architecture, supports Internet-based electronic commerce and
currently supports 13 languages in total. System ESS supports Microsoft Windows
and Web- and Java-based clients. System ESS makes full use of relational
database technology, storing each field in its own column, using descriptive
column names and identifying primary key/foreign key relations. Since System ESS
makes optimal use of relational database technology, additional third party
tools and complementary applications are easily integrated with System ESS. At
the time System ESS is delivered to a client and installed on a customer's
system, System ESS is fully capable, without additional modification, of
providing the functionality described below. In general, relatively little
modification to, or customization of, the standard System ESS software is
required in order for the software to meet the basic functionality requirements
of individual customers

System ESS solution components include:

    Order Management. System ESS performs the core customer interaction
functions, including customer order receipt, validation, pricing, and invoicing.
The order management process initiates and concludes the entire integrated order
fulfillment process and enables users to monitor, troubleshoot, and proactively
expedite order exceptions throughout the order cycle. System ESS flexibly
manages a diverse set of order types, including standard orders, samples,
templates, export, assemble to order, stock transfers, and quotes.

    Distribution Management. System ESS manages the transactional processes
involving inbound and outbound product movement. The distribution management
process defines the configuration and interaction of all components in the
distribution network, such as warehouses and finished 



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goods. Through tight integration with order management and sophisticated product
reservation/allocation methods, System ESS distribution management enables
companies to manage efficiently the logistics of fulfilling a customer order.

    Warehouse Management. System ESS Open Warehouse is an object-oriented
software that plans, manages, and monitors the day-to-day work in a warehouse
optimizing personnel, space, and equipment resources. In addition to a
comprehensive outbound (pick-pack-ship) and inbound (finished goods receipt and
putaway) logistics solution, System ESS provides a solution for customer
returns, cross-docking, cycle count/physical inventory, and transportation
scheduling.

    Demand Replenishment. System ESS performs detailed inventory management
functions involving the sourcing and replenishment of goods in the distribution
network. System ESS establishes a "pull-driven" environment which optimizes
inventory levels and shipment of goods precisely when a customer needs them. Its
inventory and replenishment features are tightly integrated with the order
management process, synchronizing inventory replenishment with customer demand.
The System ESS demand replenishment process integrates with the distribution
management process to automatically trigger and execute stock transfers
throughout the distribution network and replenishment orders and drop shipments
from outside suppliers. Demand replenishment also supports vendor managed
inventory and continuous replenishment programs.

    Price and Promotion Management. System ESS administers and executes all
product pricing and promotion strategies. Specifically, the System ESS price
management process manages the product price list according to geography,
customer classification, or other user-defined parameters, as well as executing
and tracking a wide variety of product discounts, surcharges, accruals, and
rebates. System ESS automates business-critical promotion transactions among
manufacturers, field sales organizations, and customers to maximize invoice
accuracy and minimize administrative costs due to invoice inaccuracies.

    Global Organization Management. System ESS allows a company to define its
enterprise sales and distribution structures and manage multiple legal entities,
regardless of where they are physically located. It enables companies to
maintain flexible business structures that support product flow to global
customers, while efficiently handling business transactions worldwide.

    Electronic Commerce. System ESS provides a complete electronic messaging
architecture that is integrated with all requisite business processes between
customers and suppliers, including orders, order changes, and acknowledgments,
as well as shipping confirmations and invoices. In addition, through its
recently introduced Internet Workbench, System ESS provides order status and
tracking for participants in the demand chain, such as buyers, field
representatives, and customers. System ESS also supports ISO/Edifact, ANSI/X.12,
and UCS EDI standards. The Company currently is developing capabilities for
Internet-based order placement.

    Decision Support. System ESS continuously captures highly detailed data
regarding every customer purchase and related events and stores such data in an
information repository suitable for decision support processes. System ESS
provides decision support capabilities through a set of Microsoft Windows-based
client/server tools called the Customer Service Workbench, which provides tight
integration between the System ESS information repository and electronic mail,
spreadsheets, and event-trigger facilities. Other functions include integration
with Business Objects and the Company's proprietary Economic Value Analyzer, a
decision support tool that continuously monitors the return on working capital
and contains functions for volume, price, and capital simulations.

    Service Management. System ESS also includes a Service Management component
that enables companies to run customer-focused product installation and service
operations. The software helps companies manage after-sales product and field
service activities such as service 



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orders, warranty tracking, and call handling integrated with System ESS Order
Management capabilities. It enables efficient management and exchange of
customer information to synchronize product installation and service operations
with other departments, such as sales, finance, and shipping. Information on
customers, shipments, upgrades, and installations only needs to be entered once
into the system to be available across an extended enterprise, including remote
internal users via corporate Intranets, and customers, suppliers, and
subcontractors via the World Wide Web.

    In fiscal 1997, the Company acquired Ceratina International AB, a Swedish
warehouse management software company together with its product "Open
Warehouse," a warehouse management package that is currently being sold as a
stand-alone product and is being integrated with System ESS. Open Warehouse is
an object-oriented software application that plans, manages, and monitors the
day-to-day work in a warehouse optimizing personnel, space, and equipment
resources.

SYSTEM ESS PRICING

    The license fee for System ESS is determined based upon number of servers,
number of defined users, and the projected number of order lines to be processed
per year in the customer's system. During fiscal 1998, license fees for System
ESS ranged from $0.4 million to $4.7 million and averaged $1.6 million. The
Company expects that license fees will remain at this level or even increase as
the Company's product line expands, becomes more sophisticated, and manages
larger and more geographically dispersed locations. License and service and
maintenance revenues related to System ESS have in recent years and in the
future are expected to represent substantially all of the Company's revenues

SYSTEM ESS TOOLS

    The Company supports System ESS with a range of software tools developed by
the Company or by third parties. These tools are used by the Company to develop,
deliver, and maintain System ESS and by the Company's customers to implement,
develop extensions to, and support System ESS.

    TRIM. TRIM is a 4GL application development tool which is optimized for
applications involving large transaction volumes and large numbers of concurrent
users. TRIM is licensed by the Company from Trifox, Inc. and was used by the
Company to develop System ESS. TRIM also is sold as an applications development
tool to customers requiring the ability to develop custom applications.

    SDCM. SDCM, the Software Development and Configuration Manager tool, allows
the Company to develop, deliver, and maintain System ESS. SDCM also allows
customers to develop customized System ESS functionality in a multi-user
environment, control the modification of programs, documentation, and databases,
as well as manage data security and system integrity in the implementation of
System ESS upgrades.

    Express Gateways. Express Gateways allow customers to easily integrate
System ESS with other management information systems, such as financial
reporting and manufacturing resource planning systems.

    Business Engineering Workbench. This is a Windows client-based tool focused
on enhancing the implementation process. This tool consists of two components:
Navigation Express and Implementation Express. Navigation Express provides a
comprehensive review of the key System ESS business concepts, routine flows, and
implementation codes and parameters. Implementation Express utilizes an upper
case facility to graphically document all System ESS business processes,
routines, and functions. These graphical views of the System ESS data model




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provide IMI customers with tools for mapping current and future business
processes against the System ESS business flows to enhance the overall
implementation process.

CUSTOMER SERVICE AND SUPPORT

    The Company believes that providing a high level of customer service and
technical support is essential to customer satisfaction and timely
implementation of System ESS. As of April 30, 1998, IMI had 418 employees in its
customer service and support organization providing software maintenance and
support, training, and consulting services.

IMI provides the following services and support to its customers:

The Company offers its customers post delivery professional services, consisting
primarily of training and implementation services pursuant to separate service
agreements.

Implementation and Technical Services. Customers also have the option of
purchasing implementation services for System ESS. Implementation services
typically involve assistance with the integration of System ESS with other
existing software applications and databases currently used by the customer.
Such existing software applications and databases will vary from customer to
customer, but may often include legacy management support, logistics, or ERP
applications. The integration of System ESS with a customer's existing
applications allows the customer to more efficiently utilize System ESS by
linking data flows between System ESS and various existing applications. Such
integration is not, however, a prerequisite to the basic functionality of System
ESS. Product extensions are developed using the same software tools used in
System ESS and SDCM documents all of the additions made to System ESS for each
customer for future upgrades of System ESS.

    The Company has established its Demand Chain Alliance ("DCA") Program, which
trains and certifies third party providers. DCA participants include: Cap Gemini
and Oracle Consulting worldwide, Advanced Technologies and Services, LLC,
Palarco, Inc., and Solutions Consulting, Inc. in the United States, Ceratina
Logistics OY, ECsoft, Ordina, Tamperen Systemitiimi, TT Tieto, Logistics
Consultancy Norway, and Medata in Europe. These companies provide systems
integration and expertise to IMI customers and aid in the implementation of and
ongoing technical consulting for System ESS software solutions. The
implementation of System ESS, which, depending on the customer, may include the
integration of System ESS with existing customer application software and
customer training, typically requires 3 to 12 months. There can be no assurance
that delays in the implementation process of System ESS for any given customer
will not have a material adverse effect on the Company's business, operating
results, and financial condition.

    Training Services. IMI customers can receive, for a fee, training either at
the customer's premises or at one of IMI's offices. Course offerings are divided
into three primary blocks: System ESS, System Administration, and System
Development. Customers who purchase training services receive training in the
use of System ESS, particularly in the use of some of the software's more
advanced features. Customers often purchase training services as a means of
efficiently introducing those staff members who will be users of the software to
the basic operation of the system. Such training services are not, however,
necessary to allow System ESS to function.

    Customer Support. The Company has fully-staffed support centers in
Australia, the United States, the United Kingdom, and Sweden. IMI provides 24
hour a day, 7 day a week support through telephone and electronic mail, and uses
logging/tracking systems for quality assurance.



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CUSTOMERS

    The Company's target customers are multinational manufacturers,
distributors, and wholesalers in the consumer packaged goods, health care,
electronics, automotive parts, and industrial products sectors, as well as other
high-volume wholesalers, and third-party logistics companies. As of April 30,
1998, the Company licensed the current generation of System ESS to 69 customers
worldwide. The following table sets forth a list of customers licensed in the 
last 3 fiscal years:

<TABLE>
<CAPTION>

Fiscal 1996                      Fiscal 1997                       Fiscal 1998
-----------                      -----------                       -----------
<S>                              <C>                               <C>
Alko (Finland)                   Spicers (UK, France)              Estee Lauder Inc (USA)
Canon Inc (USA)                  Land O'Lakes (USA)                Smuckers (USA)
Carlton & United Breweries       Landstingsservice (Sweden)        General Electric Plastics
(Australia)                                                        (USA, Netherlands)
First Brands (USA)               Skyway Freight Systems (USA)      Interpharm Group B.V.
                                                                   (Netherlands)
Hartz Mountain (USA)             Ralcorp (USA)                     Zurn Industries Inc (USA)
Hormel Foods (USA)               Forlagscentralen (Norway)         New Zealand Dairy Industry
                                                                   (New Zealand)
Kellogg (worldwide)              ColorLine (Norway)                General Domestic Appliances (UK)
Kiiltoo (Finland)                Agway (USA)                       VWR Scientific Products Corp
                                                                   (USA)
MoDo Merchants (UK)              Black & Decker (USA)              McKesson General Medical (USA)
Posten Logistik (Sweden)         ProSource (USA)                   Starkist Foods (USA)
Unisys (worldwide)               British Airways (UK)              Darigold Inc (USA)
                                 Satair (Denmark)                  Dial Corporation (USA)
                                 Paragon (USA)                     Brunswick Corp/Mercury Marina
                                 Starbucks (USA)                   (USA)
                                 Nike (Japan)                      Cargill Inc (USA)
                                 Pioneer Standard (USA)            Walker's Snack Foods (USA)
                                 Fel-Pro (USA)                     LeGrand (France)
                                                                   Haakon Gruppen (Norway)
                                                                   Sun Valley Foods Ltd (UK)
                                                                   Telia AB (Sweden)
</TABLE>

New license sales are often for large dollar amounts, typically ranging from
$0.4 million to $4.7 million, and averaging $1.6 million and, therefore,
individual customers have in the past accounted for more than 10% of total
revenues in particular quarterly periods. For the years ended April 30, 1996 and
April 30, 1997, the Company had no single customer representing more than 10% of
total revenues. In fiscal 1998, Oracle Corporation ("Oracle") contracted
implementation services representing 15% of the Company's total revenues. (See
below, "Sales and Marketing" for a description of the Company's relationship
with Oracle.) The Company believes that the loss of any of its customers would
not have a material adverse effect upon the Company's business, operating
results, or financial condition. Outside of the Oracle 



                                       10
<PAGE>


relationship, the Company does not expect any of its current customers to
account for 10% or more of its total revenues in fiscal 1999, but the Company
expects that individual customers (the identity of which likely will change on a
quarterly basis) will continue to account for 10% or more of the Company's total
quarterly revenues in future periods.

SALES AND MARKETING

    The Company sells and supports its products through direct sales and support
organizations in Sweden, the United States, Canada, Australia, Germany, the
Netherlands, the United Kingdom, and France. The Company maintains corporate
headquarters in Stockholm, Sweden, as well as facilities for product
development, sales, and support, and has sales and/or support services offices
in Tarrytown, New York; Boston, Massachusetts; Marlton, New Jersey; Chicago,
Illinois; Dallas, Texas; Alpharetta, Georgia; Portland, Oregon; Irvine,
California; Toronto, Canada; London, United Kingdom; Stuttgart, Germany; Zeist,
the Netherlands; Paris, France; Melbourne, Australia; and Gothenburg, Linkoping,
and Hassleholm, Sweden. As of April 30, 1998, the Company employed 81 sales and
marketing personnel. The Company intends to increase expenditures to expand its
direct sales and marketing organizations primarily in the United States, and
Asia/Pacific. To support its direct sales force, the Company conducts marketing
programs that include public relations, direct mail, trade shows, product
seminars, user group conferences, and ongoing customer communication programs.

    The Company also relies on informal arrangements with a number of consulting
and systems integration firms to enhance its marketing, sales, and customer
support efforts, particularly with respect to implementation and support of its
products as well as lead generation and assistance in the sale process. The
Company expects to continue to rely significantly upon such third parties for
marketing and sales, lead generation, product implementation, customer support
services, and end user training. For certain geographic information relating to
the Company's revenues, income (loss) from operations, and identifiable assets
by geographic location, see Note 17 of Notes to Consolidated Financial
Statements.

    Prior to 1997, the Company engaged in an informal joint marketing and sales
arrangement with Oracle pursuant to which the two companies jointly marketed to
customers in the consumer packaged goods industry. In January 1997, the Company
entered into a joint marketing agreement with Oracle for the consumer packaged
goods industry ("Oracle Agreement") pursuant to which the parties agreed for a
term of three years to jointly market and license the Oracle Solution Suite,
which incorporates the Company's System ESS software, certain Oracle software,
and other complementary software owned by third parties. The Oracle Agreement
provides for additional development of component software, integration of the
software components, and marketing and support of the Oracle Solution Suite. In
addition, Oracle has agreed not to develop or use in the consumer packaged goods
industry any other software with similar functionality to System ESS. Pursuant
to the Oracle Agreement, Oracle has agreed to pay the Company the total license
fees that Oracle receives from the customer for System ESS less specified
percentages. In the United States, Oracle and its distributors have the
exclusive right to sub-license System ESS software as part of the Oracle
Solution Suite in the consumer packaged goods industry. Outside of the United
States, Oracle and its distributors have a non-exclusive right to sub-license
System ESS as part of the Oracle Solution Suite in the consumer packaged goods
industry. The Company has retained the worldwide right to market System ESS to
customers in the consumer packaged goods industry as a "point" solution and in
any other manner which does not provide combined software substantially similar
to the Oracle Solution Suite. The Oracle Agreement may be renewed by the parties
for successive three-year terms, unless sooner terminated. The Oracle Agreement
may be terminated by either party for cause, by the Company if certain licensing
revenue levels are not met, or by Oracle if the Company fails to perform certain
technical support and product development obligations. In the event the Oracle
Agreement is terminated, the customer licenses shall continue and, under certain
circumstances, the Company's technical support obligations, and Oracle's related
payment 



                                       11
<PAGE>


obligations, will continue for up to three years. Pursuant to the Oracle
Agreement, the Company contracts implementation services to Oracle. See above,
"Customers".

    The Company and Oracle periodically enter into separate agent agreements
authorizing Oracle to sub-license the Company's System ESS software to customers
in the consumer packaged goods industry and other industries. Pursuant to such
agent agreements, Oracle pays to the Company a specified percentage of the
license fee for System ESS. In industries other than consumer packaged goods,
the Company also from time to time directly competes with Oracle's order
management software product.

    In the consumer packaged goods industry, System ESS is actively marketed and
sold as a "point" solution and as part of the Oracle Solution Suite. The
Company's sales of System ESS in the consumer packaged goods industry are
dependent upon the effectiveness of Oracle's efforts under the Oracle Agreement,
which the Company cannot control. There can be no assurance that Oracle will not
otherwise curtail or discontinue the Oracle Agreement at the end of the initial
three year term or that the Oracle Agreement will be beneficial to the Company,
either of which could have a material adverse effect on the business, operating
results, and financial condition of the Company. In industries other than
consumer packaged goods, there can be no assurance that Oracle will continue to
recommend the Company and its products to potential customers or enter into
separate agent agreements with the Company, either of which could have a
material adverse effect on the business, operating results, and financial
condition of the Company. See below, "Risk Factors--Dependence upon Relationship
with Oracle."

    Because the licensing of the Company's products generally involves a
significant capital expenditure by the customer, the Company's sales process is
subject to the delays and lengthy approval processes that are typically
associated with such expenditures. For these and other reasons, the sales cycle
associated with the licensing of the Company's products varies substantially
from customer to customer and typically lasts between 3 and 12 months, during
which time the Company may devote significant time and resources to a
prospective customer, including costs associated with multiple site visits,
product demonstrations, and feasibility studies, and experience a number of
significant delays over which the Company has no control. In addition the
Company's quarterly operating results are subject to certain seasonal
fluctuations.

PRODUCT DEVELOPMENT

    The Company has devoted significant resources to product development since
its inception and has increased such investments in recent years. The Company's
product development expenses for the years ended April 30, 1996, 1997, and 1998
were $6.8 million, $9.9 million, and $14.7 million respectively. As of April 30,
1998, the Company employed 138 people in product development. The Company
intends to increase its expenditures in product development in future periods.

    The Company believes that its future success depends upon its ability to
continue to enhance existing products, respond to changing customer
requirements, and develop and introduce new or enhanced products that keep pace
with technological developments and emerging industry standards. Customer
requirements include, but are not limited to, operability across distributed and
changing heterogeneous hardware platforms, operating systems, relational
databases, and networks. System ESS version 5.2, due for release in August 1998,
includes new and enhanced core application features, API's to other
applications, and four new optional modules: System ESS Open Warehouse for
advanced warehouse management, System ESS Demand Chain Planner for demand
forecasting and replenishment management, System ESS Service Manager for after
sales service management, and System ESS Economic Value Analyzer for decision
support management. System ESS is also Eurocurrency and Year 2000 compliant.



                                       12
<PAGE>


    There can be no assurance that the Company will be successful in developing
enhanced versions of System ESS or new products on a timely basis, or that such
enhancements or new products, when introduced will achieve market acceptance or
will adequately address the changing needs of the marketplace.

EMPLOYEES

    As of April 30, 1998, the Company employed a total of 695 full-time
employees, including 359 in Sweden, 212 in the United States, 67 in the United
Kingdom, 18 in the Netherlands, 13 in Germany, 22 in Australia, and 4 in France.
The Company believes its future success will depend in part upon its ability to
attract and retain highly skilled management, marketing, sales, consulting, and
product development personnel. Competition for such personnel is intense, and
there can be no assurance that the Company will be able to retain its key
employees or that it will be successful in attracting, assimilating, and
retaining such personnel in the future. Of the Company's 695 full-time
employees, 81 are in sales and marketing, 418 are in technical support and
maintenance, 138 are in product development, and 58 are in general
administrative functions. The Company does not have any collective bargaining
agreements with its employees and believes that its employee relations are good.
See below, "Risk Factors Dependence on and Need to Hire Additional Personnel in
All Areas."

RISK FACTORS

    This Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
that involve certain risks and uncertainties. Discussions containing such
forward-looking statements may be found in the material set forth below and
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Business," as well as in this Report generally, including
the documents incorporated by reference herein. Without limiting the foregoing,
the words "believes," "anticipates," "plans," "expects," and similar expressions
are intended to identify forward-looking statements. The Company's actual
results could differ materially from those anticipated in such forward-looking
statements as a result of certain factors, including those set forth under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Report and in the documents incorporated
by reference herein. These forward-looking statements are made as of the date of
this Report and the Company assumes no obligation to update such forward-looking
statements or to update the reasons why actual results could differ materially
from those anticipated in such forward-looking statements.

    Significant Fluctuations in Quarterly Operating Results and Seasonality;
Potential Quarterly Losses. The Company has experienced, and expects to continue
to experience, significant fluctuations in quarterly operating results that may
be caused by many factors, including, among others: the size and timing of
orders for the Company's products; the lengthy sales and implementation cycle
for the Company's products and delays in the implementation process;
introduction or enhancement of products by the Company or its competitors;
changes in pricing policy of the Company or its competitors; increased
competition; technological changes in computer systems and environments; the
ability of the Company to timely develop, introduce, and market new products and
new versions of existing products; quality control of products sold; market
readiness to deploy demand chain management products for distributed computing
environments; market acceptance of new products and product enhancements;
seasonality of revenue; customer order deferrals in anticipation of new products
and product enhancements; the Company's success in expanding its sales, support,
service, and marketing organizations; personnel changes; fluctuations in foreign
currency exchange rates; mix of license and service and maintenance revenues and
general economic conditions. Because a significant portion of the Company's
revenues has been, and the Company believes will continue to be, derived from
large orders, the timing of orders and their fulfillment has caused, and is
expected to continue to 



                                       13
<PAGE>


cause, material fluctuations in the Company's operating results, particularly on
a quarterly basis. In addition, the Company intends to continue to expand its
direct sales force, and the timing of such expansion and the rate at which new
sales people become productive also could cause material fluctuations in the
Company's quarterly operating results. As a result of these and other factors,
the Company believes that period-to-period quarterly comparisons of its results
of operations are not necessarily meaningful and should not be relied upon as
indications of future performance.

    The Company's quarterly operating results are also subject to certain
seasonal fluctuations. The Company's revenues, particularly its license
revenues, are typically strongest in its third and fourth fiscal quarters, which
end January 31 and April 30, respectively, and weakest in its first and second
fiscal quarters, which end July 31 and October 31, respectively. The Company's
revenues and operating results in its third fiscal quarter typically benefit
from purchase decisions made by the large concentration of customers with
calendar year-end budgeting, while revenues and operating results in its fourth
fiscal quarter typically benefit from the efforts of the Company's sales force
to meet fiscal year-end sales quotas. Like many enterprise application software
vendors with large average order sizes, in its first and second fiscal quarters,
the Company's sales force initiates sales activity directed to achieving fiscal
year-end goals. In addition, the Company's first and second fiscal quarters
include the months of July and August, when both sales and billable customer
services activity, as well as customer purchase decisions, are reduced,
particularly in Europe, due to summer vacation schedules. As a result of these
seasonal factors, the Company historically has experienced operating losses in
its first and/or second fiscal quarters and may continue to experience losses in
such quarters in the future.

    Because the Company generally ships software products within a short period
after receipt of an order, it typically does not have a material backlog of
unfulfilled orders. License revenues in any quarter are substantially dependent
on orders booked and shipped in that quarter and cannot be predicted with any
degree of certainty. The Company has historically recognized a significant
portion of license revenue in the last two weeks of a quarter. Any significant
shortfall of license revenues in relation to the Company's expectations or any
material delay of customer orders would have an immediate adverse effect on its
business, operating results and financial condition. Due to the foregoing
factors, it is possible that in future periods the Company's revenues and thus
its operating results may be below the expectations of public market analysts
and investors. In such event, the price of the Company's Common Stock could be
materially and adversely affected.

    No Assurance of Profitability. Although the Company achieved net income of
$6.9 million and $9.4 million for fiscal 1997 and 1998, respectively, there can
be no assurance that the Company will continue to be profitable in any future
period and recent operating results should not be considered indicative of
future financial performance. The Company plans to continue to increase
expenditures in order to fund the continued expansion of its worldwide
operations, including greater levels of product development and larger and more
geographically dispersed sales, support, service and marketing organizations.
Although the Company believes such expenditures ultimately will improve the
Company's operating results, to the extent such expenditures are incurred and
revenues do not correspondingly increase, the Company's operating results will
be materially and adversely affected. Future operating results will depend on
many factors, including the growth of the supply chain management software
market, market acceptance of System ESS or enhanced versions thereof,
competition, the success of the Company's expansion of its sales, support,
service and marketing organizations, general economic conditions and other
factors. No assurance can be given that the Company will be profitable in future
periods. See below,"Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

    Lengthy Sales and Implementation Cycle; Increasing Size of Orders. The sale
and implementation of the Company's products generally involves a significant
commitment of 



                                       14
<PAGE>


resources by prospective customers. During fiscal 1998, license fees for System
ESS generally ranged from $0.4 million to $4.7 million, and averaged $1.6
million. The Company expects that license fees will continue to increase in size
and the implementation of the Company's products will become more complex as
System ESS is used to manage larger and more geographically dispersed
installations. As a result, the Company's sales process often is subject to
delays associated with lengthy approval processes associated with significant
capital expenditures. For these and other reasons, the sales cycle associated
with the license of the Company's products varies substantially from customer to
customer and typically lasts between 3 and 12 months during which time the
Company may devote significant time and resources to a prospective customer,
including costs associated with multiple site visits, product demonstrations,
and feasibility studies, and experience a number of significant delays over
which the Company has no control. Any significant or ongoing failure by the
Company to ultimately achieve such sales could have a material adverse effect on
the Company's business, operating results, and financial condition. In addition,
following license sales, the implementation of System ESS typically involves
customer training, integration of System ESS with the customer's other existing
systems, and the development of product extensions to add customer-specific
functionality. The Company and/or a third party consultant may provide such post
delivery implementation services pursuant to a separate service agreement. A
successful implementation requires a close working relationship between the
Company, the customer, and, generally, third party consultants who assist in the
implementation process. Any inability of the Company to achieve such close
working relationships, or any inability of the Company's consulting services
organization or third party consultants to perform implementation services on a
timely basis, may result in delays in the customer implementation process. There
can be no assurance that delays in the implementation process of System ESS for
any given customer will not have a material adverse effect on the Company's
business, operating results, and financial condition. See below, "Management's
Discussion and Analysis of Financial Condition and Results of Operations"and
above, "Products and Services" and "Sales and Marketing."

    Dependence upon Relationship with Oracle. An important part of the Company's
operating results depend upon its marketing and sales relationship with Oracle.
For the fiscal years ended April 30, 1997 and April 30, 1998, the Company
generated 63% and 53% of its license revenues and 35% and 39% of its total
revenues, respectively, through various joint marketing efforts with Oracle.
Prior to 1997, the Company engaged in an informal joint marketing and sales
arrangement with Oracle pursuant to which the two companies jointly marketed to
customers in the consumer packaged goods industry. In January 1997, the Company
entered into the Oracle Agreement pursuant to which the parties agreed for a
term of three years to jointly market and license the Oracle Solution Suite,
which incorporates the Company's System ESS software and certain Oracle
software, and other complementary software owned by third parties. The Oracle
Agreement provides for additional development of component software, integration
of the software components, and marketing and support of the Oracle Solution
Suite. In addition, Oracle has agreed not to develop or use in the consumer
packaged goods industry any other software with similar functionality to System
ESS. Pursuant to the Oracle Agreement, Oracle has agreed to pay the Company the
total license fees that Oracle receives from the customer for System ESS less
specified percentages. In the United States, Oracle and its distributors have
the exclusive right to sub-license System ESS software as part of the Oracle
Solution Suite in the consumer packaged goods industry. Outside of the United
States, Oracle and its distributors have a non-exclusive right to sub-license
System ESS as part of the Oracle Solution Suite in the consumer packaged goods
industry. In addition, the Company has retained the worldwide right to market
System ESS to customers in the consumer packaged goods industry as a "point"
solution and in any other manner which does not provide combined software
substantially similar to the Oracle Solution Suite. The Company and Oracle
periodically enter into separate agent agreements authorizing Oracle to
sub-license the Company's System ESS software to customers in the consumer
packaged 



                                       15
<PAGE>


goods industry and other industries. Pursuant to such agent agreements, Oracle
pays to the Company a specified percentage of the license fee for System ESS. In
industries other than consumer packaged goods, the Company also from time to
time directly competes with Oracle's order management software product.
See below, "Competition."

    In the consumer packaged goods industry, the Company actively markets and
sells System ESS as a "point" solution and as part of the Oracle Solution Suite.
The Company's sales of System ESS in the consumer packaged goods industry are
dependent in part upon the effectiveness of Oracle's efforts under the Oracle
Agreement which the Company cannot control. There can be no assurance that
Oracle will not otherwise curtail or discontinue the Oracle Agreement at the end
of the initial three year term or that the Oracle Agreement will be beneficial
to the Company, either of which circumstances could have a material adverse
effect on the business, operating results, and financial condition of the
Company. In industries other than consumer packaged goods, there can be no
assurance that Oracle will continue to recommend the Company and its products to
potential customers or enter into separate agent agreements with the Company,
either of which could have a material adverse effect on the business, operating
results, and financial condition of the Company. See above, "Sales and
Marketing."

    Competition. The Company's products are targeted at the emerging market for
demand chain management software products which is intensely competitive and
characterized by rapid technological change. The Company's competitors are
diverse and offer a variety of solutions directed at various segments of the
supply and demand chain as well as the enterprise as a whole. These competitors
include (i) enterprise application software vendors which offer client/server
ERP solutions, such as SAP AG, Baan Company N.V., J.D. Edwards & Company, System
Software Associates, Inc. and, in vertical markets other than consumer packaged
goods, Oracle, (ii) companies offering standardized or customized products on
mainframe and/or mid-range computer systems, (iii) internal development efforts
by corporate information technology departments, (iv) smaller independent
companies which have developed or are attempting to develop advanced logistics
execution software which complements or competes with the Company's software
solutions, and (v) other business application software vendors who may broaden
their product offerings by internally developing, or by acquiring or partnering
with independent developers of, advanced logistics execution software. In
addition, many of the Company's competitors have longer operating histories,
significantly greater financial, technical, marketing, and other resources,
greater name recognition, and a larger installed base of customers than the
Company. In order to be successful in the future, the Company must continue to
respond promptly and effectively to the challenges of technological change and
competitors' innovations. The Company's competitors may be able to respond more
quickly to new or emerging technologies and changes in customer requirements or
devote greater resources to the development, promotion, and sale of their
products than the Company. The Company also expects to face additional
competition as other established and emerging companies enter the market for
order fulfillment software and new products and technologies are introduced. In
addition, current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties,
thereby increasing the ability of their products to address the needs of the
Company's prospective customers. Accordingly, it is possible that new
competitors or alliances among current and new competitors may emerge and
rapidly gain significant market share resulting in price reductions, fewer
customer orders, and reduced gross margins, any one of which could materially
adversely affect the Company's business, operating results, and financial
condition. There can be no assurance that the Company will be able to compete
successfully with existing or new competitors or that competition will not have
a material adverse effect on the Company's business, operating results, and
financial condition. See above, "Competition."

    Need to Hire Additional Personnel in All Areas and Dependence on Key
Employees. The Company believes its future success and ability to achieve
revenue growth will depend in significant part upon its ability to attract and
retain highly skilled management, sales, support, service, marketing, and
product development personnel. Competition for such personnel is intense, and
recruiting such personnel is becoming increasingly difficult because of the
strong world-wide economy. In addition, the loss of one or more of the Company's
key personnel 



                                       16
<PAGE>


could have a material adverse effect on the Company's business, operating
results, and financial condition. The Company does not have, and does not intend
to obtain, key man life insurance on any of its executive management personnel.
There can be no assurance that the Company will be able to retain its key
employees or that it will be successful in attracting, assimilating, and
retaining such personnel in the future. Failure to attract, assimilate, and
retain key personnel could have a material adverse effect on the Company's
business, operating results, and financial condition.

    Reliance on and Need to Develop Additional Relationships with Third 
Parties. The Company relies on informal arrangements with a number of 
consulting and systems integration firms to enhance its sales, support, 
service, and marketing efforts, particularly with respect to implementation 
and support of its products as well as lead generation and assistance in the 
sale process. Such firms include Cap Gemini, IBM, and Oracle worldwide, 
Andersen Consulting, LLP, Advanced Technologies and Services, LLC, Computer 
Sciences Corporation, Ernst & Young, LLP, Palarco Inc., Solutions Consulting, 
Inc., and SHL Systemhouse, Inc. and Unisys Corporation in the United States 
and Ceratina Logistics OY, Computer Management Group, EcSoft, Ernst & Young, 
LLP, Logistics Consultancy Norway, Logica, Medata, Ordina, Tamperen 
Systemitiimi, and TT Tieto in Europe, Tietho, and ECsoft Group plc in Europe. 
The Company expects to continue to rely significantly upon such third parties 
for marketing and sales, lead generation, product implementation, customer 
support services, end user training, and lead generation. The Company will 
need to expand its relationships with these parties and enter into 
relationships with additional third parties in order to support revenue 
growth. Many such firms have similar, and often more established, 
relationships with the Company's principal competitors. There can be no 
assurance that these and other third parties will provide the level and 
quality of service required to meet the needs of the Company's customers, 
that the Company will be able to maintain an effective, long term 
relationship with such third parties, or that such third parties will 
continue to meet the needs of the Company's customers. If the Company is 
unable to develop and maintain effective relationships with these and other 
third parties, or if such parties fail to meet the needs of the Company's 
customers, the Company's business, operating results, and financial condition 
could be adversely affected. Further, there can be no assurance that these 
third party implementation providers, many of which have significantly 
greater financial, technical, personnel, and marketing resources than the 
Company, will not market software products in competition with the Company in 
the future or will not otherwise reduce or discontinue their relationships 
with or support of the Company and its products. See above, "Products and 
Services" and "Sales and Marketing."

    Risks Associated with Expanding Multinational Operations. The Company's
future success and ability to achieve revenue growth depends upon the successful
continued international expansion of its sales, support, service, and marketing
organizations and its ability to establish indirect distribution channels,
including resellers, systems solution vendors, application software vendors, and
systems integrators. The Company's products currently are marketed in the United
States, Europe, and Asia/Pacific. Such international expansion has required that
the Company establish additional offices and hire additional personnel. This has
required and is expected to continue to require significant management attention
and financial resources and could adversely affect the Company's operating
margins and ability to achieve and sustain profitability. To the extent the
Company is unable to continue to effect these additions efficiently and in a
timely manner, its growth, if any, in international sales will be limited, and
the Company's business, operating results, and financial condition could be
materially and adversely affected. Further, the Company intends to continue to
expand its international operations by increasing the number of direct customer
support personnel in existing markets and additional international markets.
Accordingly, the Company's business, and its ability to expand its operations
internationally, is subject to risks inherent in international business
activities, including, in particular, general economic conditions in each
country, foreign currency exchange rate fluctuations, overlap of different tax
structures, management of an organization spread over various countries,
unexpected changes in 




                                       17
<PAGE>


regulatory requirements, compliance with a variety of foreign laws and
regulations, and longer accounts receivables payment cycles in certain
countries. Other risks associated with international operations include import
and export licensing requirements, trade restrictions, and changes in tariff
rates. There can be no assurance that any of the foregoing factors will not have
a material adverse effect on the Company's ability to continue to expand its
international operations and, in general, its business, operating results, and
financial condition. See above, "Sales and Marketing."

    Management of Growth. The Company currently is experiencing a period of
rapid growth that has placed and is expected to continue to place a strain on
the Company's administrative, financial, and operational resources. The Company
increased the size of its direct sales force from 51 people at April 30, 1997,
to 69 people at April 30, 1998, and the number of customer service and support
personnel from 223 people at April 30, 1997, to 418 people at April 30, 1998.
The Company plans to continue to expand internationally and to continue to
increase the number of its sales, support, service, and marketing and customer
support personnel significantly in fiscal 1999, which planned expansion, if
achieved, would place a further strain on the Company's resources and increase
operating costs. The Company's ability to manage its staff and growth
effectively will require it to continue to improve its operations, financial,
and management controls, and reporting systems and procedures, to train,
motivate, and manage its employees, and, as required, install new management
information and control systems. There can be no assurance that the Company will
implement improvements to such management information and control systems in an
efficient and timely manner or that, if implemented, such improved systems will
be adequate to support the Company's operations. Any inability of the Company to
successfully manage future expansion, if any, could have a material adverse
effect on the Company's business, financial condition, or operating results.

    Dependence on Principal Product. License and service and maintenance
revenues related to System ESS have represented a substantial portion of the
Company's revenues in recent years and are expected to continue to represent
substantially all of the Company's revenues in the future. The Company's success
depends on continued market acceptance of System ESS software and services as
well as the Company's ability to introduce new versions of System ESS or other
products to meet the evolving needs of its customers. There can be no assurance
that System ESS will continue to achieve market acceptance or that the Company
will introduce enhanced versions of System ESS on a timely basis, or at all, to
meet the evolving needs of its customers. Any reduction in demand for System
ESS, increased competition in the market for demand chain management software,
technological change, or other factors could have a material adverse effect on
the Company's business, operating results and financial condition. See below,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and above, "Products and Services."

    Dependence on Emerging Market for Demand Chain Management Software. The
Company currently derives, and is expected to continue to derive, substantially
all of its revenues from licenses and services related to System ESS, a
client/server demand chain management software product. Although demand for
System ESS has grown in recent periods, the market for enterprise-wide
management software in general, and for demand chain management software in
particular, is still emerging and there can be no assurance that it will
continue to grow or that, even if the market does grow, businesses will continue
to adopt System ESS. The Company has spent, and intends to continue to spend,
considerable resources educating potential customers generally about demand
chain management, about the need for order fulfillment software solutions and
specifically about System ESS. However, there can be no assurance that such
expenditures will enable System ESS to achieve any additional degree of market
acceptance. If the demand chain management software market fails to grow or
grows more slowly than the Company currently anticipates, the Company's
business, operating results, and financial condition could be materially and
adversely affected. See below, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and above, "Products and
Services."



                                       18
<PAGE>


    Rapid Technological Change and Requirement for Frequent Product Transitions.
The market for the Company's products is characterized by rapid technological
developments, evolving industry standards, and rapid changes in customer
requirements. The introduction of products embodying new technologies, the
emergence of new industry standards, or changes in customer requirements could
render the Company's existing products obsolete and unmarketable. As a result,
the Company's success depends upon its ability to continue to enhance existing
products, respond to changing customer requirements, and develop and introduce
in a timely manner new or enhanced products that keep pace with technological
developments and emerging industry standards. Customer requirements include, but
are not limited to, operability across distributed and changing heterogeneous
hardware platforms, operating systems, relational databases, and networks. The
System ESS client operates on Windows 3.1, Windows 95, and Windows NT platforms.
System ESS currently provides support for 13 languages. System ESS can currently
operate on UNIX server platforms for Hewlett-Packard Corporation, IBM, Digital
Equipment Corporation, and Sun Corporation as well as on Windows NT server
platforms. The Company continues to enhance its System ESS products to operate
on such platforms in order to meet customers' requirements. There can be no
assurances that the Company will be successful in developing enhanced versions
of System ESS or new products on a timely basis, or that such enhancements or
new products, when introduced, will achieve market acceptance or will adequately
address the changing needs of the marketplace. If the Company is unable to
develop and introduce new products or enhancements to existing products in a
timely manner in response to changing market conditions or customer
requirements, the Company's business, operating results and financial condition
could be materially and adversely affected. See above, "Product Development."

    Risk of Software Defects. Software products as complex as those offered by
the Company frequently contain errors or defects, especially when first
introduced or when new versions or enhancements are released. Despite product
testing, the Company has in the past released products with defects, discovered
software errors in certain of its new versions after introduction, and
experienced delays or lost revenue during the period required to correct these
errors. The Company regularly introduces new releases and periodically
introduces new versions of System ESS. There can be no assurance that, despite
testing by the Company and by its customers, defects and errors will not be
found in existing products or in new products, releases, versions, or
enhancements after commencement of commercial shipments. Any such defects and
errors could result in adverse customer reactions, negative publicity regarding
the Company and its products, harm to the Company's reputation, loss of or delay
in market acceptance, or require product changes, any of which could have a
material adverse effect upon the Company's business, operating results, and
financial condition. See above, "Products and Services."

    Product Liability. The Company's license agreements with customers typically
contain provisions designed to limit the Company's exposure to potential product
liability claims. The limitation of liability provisions contained in such
license agreements may not be effective. The Company's products are generally
used to manage data critical to large organizations and, as a result, the sale
and support of products by the Company may entail the risk of product liability
claims. A successful liability claim brought against the Company could have a
material adverse effect upon the Company's business, operating results, and
financial condition. See above, "Products and Services."

    Dependence on Proprietary Technology; Risks of Infringement. The Company's
success depends, in part, upon the protection of its proprietary technology. The
Company relies on a combination of copyright, trademark, and trade secret laws,
confidentiality procedures, and license arrangements to establish and protect
its proprietary rights. As part of its confidentiality procedures, the Company
licenses its software pursuant to signed license agreements that impose
restrictions on the licensee's ability to utilize the software and generally
enters into non-disclosure agreements with its employees, distributors, and



                                       19
<PAGE>


partners, and limits access to and distribution of its software, documentation,
and other proprietary information. Despite these precautions, it may be possible
for a third party to copy the Company's products or otherwise obtain and use the
Company's proprietary technology without authorization. In addition, the laws of
certain countries do not protect the Company's proprietary rights to the same
extent as do the laws of the United States or Sweden. Accordingly, third parties
may copy or otherwise obtain and use the Company's proprietary technology
without authorization. There can be no assurance that the Company's protection
of its proprietary rights will be adequate or that the Company's competitors
will not independently develop similar technology or duplicate illegally the
Company's products.

    The Company is not aware that any of its products infringe the proprietary
rights of third parties. There can be no assurance, however, that third parties
will not claim such infringement by the Company with respect to current or
future products. The Company expects that software product developers
increasingly will be subject to such claims as the number of products and
competitors in the Company's industry segment grows and the functionality of
products in the industry segment overlap. Any such claims, with or without
merit, could result in costly litigation that could absorb significant
management time, which could have a material adverse effect on the Company's
business, operating results, and financial condition. Such claims might require
the Company to enter into royalty or license agreements. Such royalty or license
agreements, if required, may not be available on terms acceptable to the Company
or at all, which could have a material adverse effect upon the Company's
business, operating results, and financial condition.

    Exposure to Currency Fluctuations. A significant portion of the Company's
business is conducted in currencies other than the U.S. dollar (the currency in
which its financial statements are stated), primarily the Swedish krona and, to
a lesser extent, the U.K. pound sterling, the German mark, the Dutch guilder,
the French franc, the Australian dollar, and the Canadian dollar. The Company
incurs a significant portion of its expenses in Swedish krona, including all of
its product development expenses and a substantial portion of its general and
administrative expenses. As a result, appreciation of the value of the Swedish
krona relative to the other currencies in which the Company generates revenues,
particularly the U.S. dollar, could adversely affect operating results. The
financial statements of the Company are translated from the functional currency
of the operating subsidiaries into U.S. dollars, the Company's reporting
currency, utilizing the current rate method. Accordingly, assets and liabilities
are translated at exchange rates in effect at the end of the reporting period,
and revenues and expenses are translated at the average exchange rate during the
period. All translation gains or losses from the translation into the Company's
reporting currency are included as a separate component of stockholders' equity.
Fluctuations in the Swedish krona and other currencies relative to the U.S.
dollar will effect period to period comparison of the Company's reported results
of operations. Due to constantly changing currency exposures and the volatility
of currency exchange rates, there can be no assurance that the Company will not
experience currency losses in the future, nor can the Company predict the effect
of exchange rate fluctuations upon future operating results. The Company does
not currently undertake hedging transactions to cover its currency exposure, but
the Company may choose to hedge a portion of its currency exposure in the future
as it deems appropriate. See below, "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

    Possible Volatility of Stock Price. The market price for the Common Stock
has in the past been, and in the future could be, subject to significant
fluctuations in response to a number of factors, including the announcement of
new products or product enhancements by the Company or its competitors,
quarterly variations in the Company's results of operations, or results of
operations of its competitors or companies in related industries, changes in
earnings or revenue estimates, or recommendations by securities analysts,
developments in the Company's industry, general market conditions, and other
factors, including factors unrelated to the operating performance of the Company
or its competitors. In addition, stock prices for many companies in the
technology and emerging growth sectors have experienced wide fluctuations 



                                       20
<PAGE>


that have often been unrelated to the operating performance of such companies.
Such factors and fluctuations, as well as general economic, political, and
market conditions, such as recessions, could materially and adversely affect the
market price of the Company's Common Stock.

    Control by Management and Current Stockholders; Indemnification of Officers
and Directors. The Company's executive officers and directors and their
affiliates, in the aggregate, own beneficially 50.6% of the Company's
outstanding Common Stock as of April 30, 1998. In particular, Warburg, Pincus
Investors, L.P. ("Warburg") owns beneficially 37.3% of the Company's outstanding
Common Stock as of such date. As a result, Warburg can exercise significant
influence over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions. The
voting power of Warburg and the Company's officers and directors under certain
circumstances could have the effect of delaying, deferring, or preventing a
change in control of the Company, and making certain transactions more difficult
or impossible absent the support of such stockholders, including proxy contests,
mergers involving the Company, tender offers, open-market purchase programs, or
other purchases of Common Stock that could give stockholders of the Company the
opportunity to realize a premium over the then prevailing market price for
shares of Common Stock. The Company has entered into agreements with its
officers and directors indemnifying them against losses they may incur in legal
proceedings arising from their service to the Company.

    Effect of Certain Charter Provisions; Antitakeover Effects of the Company's
Charter, By-laws, and Delaware Law. The Company's Board of Directors has the
authority to issue up to 15,000,000 shares of Preferred Stock and to determine
the price, preferences, privileges, and restrictions, including voting rights,
of those shares without any further vote or action by the stockholders. The
rights of the holders of Common Stock will be subject to, and may be adversely
affected by, the rights of the holders of any Preferred Stock that may be issued
in the future. The issuance of Preferred Stock could have the effect of making
it more difficult for a third party to acquire a majority of the outstanding
voting stock of the Company. In addition, the Company is subject to the
antitakeover provisions of Section 203 of the Delaware General Corporation Law,
which prohibits the Company from engaging in a "business combination" with an
"interested 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. The application of
Section 203 also could have the effect of delaying, deferring, or preventing a
change of control of the Company. Further, certain provisions of the Company's
Certificate of Incorporation and By-laws may have the effect of discouraging,
delaying, or preventing a merger, tender offer, or proxy contest involving the
Company, which could adversely affect the market price of the Company's Common
Stock.

    Registration Rights. A total of 17,877,268 shares of Common Stock held by
certain stockholders are entitled to certain registration rights. If such
stockholders, by exercising their registration rights, cause a large number of
shares to be registered and sold in the public market, the sale of such shares
could have a material adverse effect on the market price for the Company's
Common Stock and could materially adversely effect the Company's ability to
raise additional capital when or if required.

    Enforceability of U.S. Judgments against Non-U.S. Officers and Directors. A
substantial portion of the Company's assets are located outside the United
States. In addition, members of the Board of Directors of the Company and
certain experts named herein are residents of countries other than the United
States. As a result, it may not be possible for investors to effect service of
process within the United States upon such persons or to enforce against such
persons judgments of courts of the United States predicated upon civil
liabilities under the United States Federal securities laws. There can be no
assurance that United States investors will be able to enforce against the
members of the Board of Directors or certain experts named herein who are
residents of Sweden or countries other than the United States, any judgments in
civil and commercial matters, including judgments under the federal 



                                       21
<PAGE>


securities laws. In addition, there is doubt as to whether a Swedish court would
impose civil liability on the members of the Board of Directors of the Company
in an original action predicated solely upon the Federal securities laws of the
United States brought in a court of competent jurisdiction in Sweden against the
Company or such members.

    Holding Company Structure. All of the operations of the Company are and will
be conducted through direct and indirect subsidiaries. The Company's cash flow
will depend upon the operating results and cash flow of its subsidiaries and the
payment of funds by those subsidiaries to the Company in the form of loans,
dividends, or otherwise. The subsidiaries are separate and distinct legal
entities and have no obligation, contingent or otherwise, to make funds
available to the Company, whether in the form of loans, dividends, or otherwise.
Applicable law in certain countries may limit the ability of a subsidiary to pay
dividends in the absence of sufficient distributable reserves or for other
reasons. The Company's Swedish, United Kingdom, German, Dutch, French, United
States, Australian, and Canadian subsidiaries are not subject to any current
exchange controls. However, future exchange controls in these counties, or the
existence of such controls in other countries in which the Company establishes
subsidiaries, could limit or restrict the ability of the Company to obtain
loans, dividends, or otherwise access financial resources in such subsidiaries.
In addition, the Company's subsidiaries may from time to time in the future
become parties to financing arrangements which may contain limitations on the
ability of such subsidiaries to pay dividends or to make loans or advances to
the Company. In the event of any insolvency, bankruptcy, or similar proceedings,
creditors of the subsidiaries would generally be entitled to priority over the
stockholders of the Company with respect to assets of the affected subsidiary.

ITEM 2. FACILITIES

    The Company's principal product development, and its Nordic service,
support, sales, and marketing facilities are located in Stockholm, Sweden, where
the Company currently leases approximately 69,000 square feet under two lease
agreements expiring in August of 1999 and September 2000. In August of 1999 the
Company will move all Stockholm operations under a new 5 year lease beginning
August 1999 of approximately 98,000 square feet. The Company also leases office
space for its eight sales and service offices in the United States,
significantly 27,000 square feet in Marlton, New Jersey expiring in January
2000, and in addition to that three smaller offices in Sweden, and one each in
the United Kingdom, Germany, the Netherlands, Australia, France, and Canada. The
Company believes that it will be able to locate sufficient office space to allow
the Company to expand according to its plans for the next two fiscal years.

ITEM 3. LEGAL PROCEEDINGS

    The Company is not a party to any legal proceeding that would have a
material adverse effect on the Company's business, operating results, or
financial condition.

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 April 30, 1998.



                                       22
<PAGE>



                            PART II

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

The Company's Common Stock, $.01 par value, has traded on the Nasdaq National
Market under the symbol "IMIC" since September 26, 1996. Prior to the
commencement of the Company's initial public offering on that date, there was no
public market for the Company's Common Stock. The following table sets forth,
for the fiscal quarters indicated, the high and low closing prices per share for
the respective quarterly periods, as reported in published financial sources.

<TABLE>
<CAPTION>

Fiscal Year 1997                                   High              Low
----------------                                   ----              ---
<S>                                                <C>            <C>
Second Quarter (ended October 31, 1996)            $ 12           $  9
Third Quarter (ended January 31, 1997)               13              7 1/2
Fourth Quarter (ended April 30, 1997)                 9              6

</TABLE>


<TABLE>
<CAPTION>

Fiscal Year 1998                                   High              Low
----------------                                   ----              ---
<S>                                                <C>            <C>
First Quarter (ended July 31, 1997)                $ 16 1/2       $  9 1/2
Second Quarter (ended October 31, 1997)              28 3/16        11 5/8
Third Quarter (ended January 31, 1998)               30 3/8         20 3/4
Fourth Quarter (ended April 30, 1998)                33 1/2         21 3/4

</TABLE>

As of June 30, 1998, there were 92 shareholders of record including Cede &
Company in its capacity as nominee for the Depository Trust Company.

DIVIDEND POLICY

The Company has never declared or paid any dividends on its Common Stock and
does not intend to do so in the foreseeable future. It is the present intention
of the Company to retain any future earnings to provide funds for the operation
and expansion of its business. The Swedish Company Act imposes certain
limitations on the ability of IMAB to pay dividends to the Company.

ITEM 6. SELECTED FINANCIAL DATA

    The following selected consolidated financial data is qualified by reference
to, and should be read in conjunction with, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," in Item 7 of this
Form 10-K and the Consolidated Financial Statements and Notes thereto and the
other financial information included in Item 14 of this Form 10-K. The selected
consolidated financial data set forth below for the Company as of April 30,
1997, and April 30, 1998, and for each of the three years in the period ended
April 30, 1998, are derived from audited financial statements included elsewhere
herein. The selected consolidated financial data set forth below for the Company
as of April 30, 1994, 1995, and 1996, and for each of the two years in the
period ended April 30, 1995, are derived from the financial statements
not included elsewhere herein.




                                       23
<PAGE>



Five Year Review:

<TABLE>
<CAPTION>

                                                                           Year Ended April 30,
                                                       1994         1995         1996         1997         1998
                                                                 (in thousands, except per share data)
<S>                                                 <C>         <C>           <C>          <C>          <C>
Consolidated Statement of Operations Data:
  Revenues:
   Licenses ....................................    $  5,254     $ 10,661     $ 15,474     $ 26,147     $ 36,090
   Services and maintenance ....................      11,950       14,543       23,103       31,747       57,632
   Other .......................................       1,576        2,540        1,432        1,718        1,662
                                                    ---------    --------     --------     --------     --------
   Total revenues ..............................      18,780       27,744       40,009       59,612       95,384
                                                    ---------    --------     --------     --------     --------
  Cost of revenues:
   Licenses ....................................         721        2,172        2,717        1,540          790
   Services and maintenance ....................      10,030       12,424       16,813       22,871       41,826
   Other .......................................         831        2,252          947        1,001        1,029
                                                    ---------    --------     --------     --------     --------
   Total cost of revenues ......................      11,582       16,848       20,477       25,412       43,645
                                                      --------     --------     --------     --------     --------
   Gross profit ................................       7,198       10,896       19,532       34,200       51,739
                                                      --------     --------     --------     --------     --------
  Operating expenses:
   Product development .........................       5,517        7,009        6,822        9,935       14,684
   Sales and marketing .........................       3,056        5,720        7,746       14,997       20,878
   General and administrative...................       3,688        4,192        3,579        4,399        7,103
                                                    ---------    --------     --------     --------     --------

   Total operating expenses ....................      12,261       16,921       18,147       29,331       42,665
                                                    ---------    --------     --------     --------     --------
  Income (loss) from operations ................      (5,063)      (6,025)       1,385        4,869        9,074
  Other income (expense):
   Interest income .............................          40           15           13          643        3,490
   Interest expense ............................        (229)        (689)        (744)        (253)        (123)
   Miscellaneous income (expense)...............        (227)        (384)         (12)         (21)        (286)
                                                    ---------    --------     --------     --------     --------
  Income (loss) from continuing
   operations before income taxes...............      (5,479)      (7,083)         642        5,238       12,155
  Provision (benefit) for income taxes..........          40         (941)        (781)        (190)       2,762
                                                      --------     --------     --------     --------     --------
  Income (loss) from continuing operations .....      (5,519)      (6,142)       1,423        5,428        9,393
  Income (loss) from discontinued operations ...        (151)        (246)         327          374         --
  Gain on sale of discontinued operations 
   (net of income tax of $372) .................        --           --           --          1,100         --
                                                    ---------    --------     --------     --------     --------
  Net income (loss) ............................    $ (5,670)    $ (6,388)    $  1,750     $  6,902     $  9,393
                                                    ---------    --------     --------     --------     --------
                                                    ---------    --------     --------     --------     --------
  Net income per share data-assuming dilution(1):
  Income from continuing operations ............                              $   0.06     $   0.20     $   0.30
  Income from discontinued operations ..........                                  0.01         0.01         --
  Gain on sale of discontinued operations ......                                    --         0.04         --
                                                                                --------     --------     --------
  Net income per share-assuming dilution .......                              $   0.07     $   0.25     $   0.30
                                                                                --------     --------     --------
                                                                                --------     --------     --------
  Shares used in per share calculation-assuming
    dilution ...................................                                25,223       28,063       30,821
                                                                                --------     --------     --------
                                                                                --------     --------     --------

</TABLE>



                                       24
<PAGE>


<TABLE>
<CAPTION>


                                                                       April 30,
                                               1994           1995         1996       1997        1998
                                                                     (in thousands)
<S>                                         <C>             <C>         <C>         <C>         <C>
Consolidated Balance Sheet Data:
 Cash and cash equivalents................. $    75         $   160      $   558     $ 9,023     41,982
 Short-term investments....................      --              --           --       9,952     69,416
 Working capital (2).......................     174          (3,478)      (1,364)     30,831    120,479
 Total assets..............................  13,364          15,508       21,324      50,963    149,329
 Capital lease obligations,
  less current portion.....................      18             267          624         554        281
 Total stockholders' equity................   1,779          (2,097)         502      34,754    124,573

</TABLE>

----------
(1) See Note 2 of Notes to Consolidated Financial Statements for an 
explanation of the determination of shares used in calculating net income per 
share-assuming dilution.

(2) The Company's working capital position as at April 30, 1995, and April 30,
1996, was due, in part, to the classification of the Company's credit 
facilities as short-term borrowings. See Note 7 of Notes to Consolidated 
Financial Statements.

                                       25

<PAGE>


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

    This Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act that
involve certain risks and uncertainties. Discussions containing such
forward-looking statements may be found in the material set forth below and
under "Risk Factors" and "Business," as well as in this Report generally,
including the documents incorporated by reference herein. Without limiting the
foregoing, the words "believes," "anticipates," "plans," "expects," and similar
expressions are intended to identify forward-looking statements. The Company's
actual results could differ materially from those anticipated in such
forward-looking statements as a result of certain factors, including those set
forth under "Risk Factors" appearing elsewhere in this Report and in the
documents incorporated by reference herein. These forward-looking statements are
made as of the date of this Report and the Company assumes no obligation to
update such forward-looking statements or to update the reasons why actual
results could differ materially from those anticipated in such forward-looking
statements.

OVERVIEW

    IMI develops, markets, and supports client/server application software that
enables manufacturers, distributors, and wholesalers to more effectively manage
the supply chain. The Company was founded in 1967 as a custom software
development and consulting services organization. The Company developed and
delivered its first distribution logistics software in 1974, its first
UNIX-based version in 1984, and its first Oracle-based client/server version in
1991. In 1993, the Company introduced its current generation product, System
ESS, which was designed to meet the needs of multinational manufacturers,
distributors, and wholesalers. The Company's operating expenses have increased
substantially in the last 5 years as the Company has made significant
investments outside Sweden in sales and marketing, customer support, and product
development related to System ESS. As a result of these investments, greater
market acceptance of System ESS and expansion of its business outside Sweden,
the Company's revenues have grown, increasing from $ 59.6 million in fiscal 1997
to $ 95.4 million in fiscal 1998. The Company has been profitable in its three
most recent fiscal years, but there can be no assurance that the Company will
sustain profitability on a quarterly or annual basis in the future.

    A substantial majority of the Company's revenues in the last three years
have been attributable to license fees and related services, including software
maintenance and support, implementation, consulting, and training. The Company
expects that license and services revenues related to System ESS will continue
to constitute predominantly all of the Company's revenues in the foreseeable
future. License revenues are recognized upon the signing of the license
agreement and shipment of the product if no significant vendor obligations
remain and collection of the resulting receivable is probable. Annual
maintenance and support revenues consist of ongoing support and product updates
and are recognized ratably over the term of the maintenance agreement. Revenues
from implementation, training, and consulting services are recognized when the
relevant services are performed. The Company recognized revenues, in all periods
presented, in accordance with the American Institute of Certified Public
Accountants Statement of Position 91-1, "Software Revenue Recognition."

    Revenues from sales in the United States increased from $ 29.8 million in
fiscal 1997 to $53.5 million in fiscal 1998, revenues from sales in Europe
increased from $ 23.9 million in fiscal 1997 to $35.5 million in fiscal 1998,
and revenues from sales in Asia/Pacific increased from $6.0 million to $6.3
million over the same period.

    The Company plans to increase expenditures in order to fund the continued
expansion of its worldwide operations, including greater levels of product
development and larger and more geographically dispersed sales, support,
service, and marketing organizations. Although the Company believes such
expenditures will ultimately improve the Company's operating results, to 



                                       26
<PAGE>


the extent such expenditures are incurred and revenues do not correspondingly
increase, the Company's operating results will be materially adversely affected.
Future operating results will depend on many factors, including the growth of
the demand chain management software market, market acceptance of the Company's
products, competition, the success of the Company's expansion of its sales,
support, service, and marketing organizations, general economic conditions, and
other factors.

    A significant portion of the Company's business is conducted in currencies
other than the U.S. dollar (the currency in which its financial statements are
stated), primarily the Swedish krona and, to a lesser extent, the U.K. pound
sterling, German mark, Dutch guilder, the French franc, the Australian dollar,
and the Canadian dollar. The Company incurs a significant portion of its
expenses in Swedish krona, including all of its product development expenses and
a substantial portion of its general and administrative expenses. As a result,
appreciation of the value of the Swedish krona relative to the other currencies
in which the Company generates revenues, particularly the U.S. dollar, could
adversely affect operating results. The financial statements of the Company are
translated from the functional currency of the operating subsidiaries into U.S.
dollars, the Company's reporting currency, utilizing the current rate method.
Accordingly, assets and liabilities are translated at exchange rates in effect
at the end of the reporting period, and revenues and expenses are translated at
the average exchange rate during the period. All translation gains or losses
from the translation into the Company's reporting currency are included as a
separate component of stockholders' equity. Fluctuations in the Swedish krona
and other currencies relative to the U.S. dollar will affect period to period
comparison of the Company's reported results of operations. Due to the
constantly changing currency exposures and the volatility of currency exchange
rates, there can be no assurance that the Company will not experience currency
losses in the future, nor can the Company predict the effect of exchange rate
fluctuations upon future operating results. The Company does not currently
undertake hedging transactions to cover its currency exposure, but the Company
may choose to hedge a portion of its currency exposure in the future as it deems
appropriate.

RESULTS OF OPERATIONS

    For the fiscal periods indicated, the following table sets forth the
percentage of total revenues represented by certain items reflected in the
Company's consolidated statements of operations:

<TABLE>
<CAPTION>

                                                              Year Ended April 30,

                                                        1998          1997          1996
<S>                                                    <C>           <C>           <C>
Consolidated Statement of Operations Data:

Revenues:
 Licenses...................................            37.8%         43.9%         38.7%
 Services and maintenance                               60.4          53.2          57.7
 Other......................................             1.8           2.9           3.6
                                                       -------       ------        ------
  Total revenues............................           100.0         100.0         100.0

Cost of revenues:

</TABLE>

                                       27
<PAGE>

<TABLE>
<CAPTION>

                                                              Year Ended April 30,

                                                        1998          1997          1996
<S>                                                    <C>           <C>           <C>

  Licenses...................................            0.8           2.6           6.8
  Services and maintenance...................           43.9          38.3          42.0
  Other......................................            1.1           1.7           2.4
                                                        -----         -----         -----
   Total cost of revenues....................           45.8          42.6          51.2
                                                        -----         -----         -----
   Gross profit..............................           54.2          57.4          48.8
                                                        -----         -----         -----
Operating expenses:
 Product development..........................          15.4          16.7          17.1
 Sales and marketing..........................          21.9          25.1          19.4
 General and administrative...................           7.4           7.4           8.9
                                                        -----         -----         -----
  Total operating expenses....................          44.7          49.2          45.4
                                                        -----         -----         -----
Income from operations........................           9.5           8.2           3.4
Other income (expense):
 Interest income..............................           3.6           1.1           0.0
 Interest expense.............................          (0.1)         (0.4)         (1.9)
 Miscellaneous income (expense)...............          (0.3)          0.0           0.0
                                                        -----         -----         -----
Income from continuing
 operations before income taxes...............          12.7           8.9           1.5
Provision (benefit) for income taxes..........           2.9          (0.3)         (2.0)
                                                        -----         -----         -----
Income from continuing operations.............           9.8           9.2           3.5
Income from discontinued operations...........            --           0.6           0.8
Gain on sale of discontinued operations.......            --           1.8            --
                                                        -----         -----         -----
Net income....................................           9.8%         11.6%          4.3%

</TABLE>



                                       28
<PAGE>


COMPARISON OF FISCAL YEARS 1998, 1997, and 1996

REVENUES

    Total revenues consist of revenues derived from sales of software licenses
and related services, including software maintenance and support,
implementation, consulting, and training. Total revenues increased 60.0% to
$95.4 million in fiscal 1998 from $59.6 million in fiscal 1997 and increased
49.0% in fiscal 1997 from $40.0 million in fiscal 1996. The increase in revenues
during these periods was primarily due to increased license fees from the
Company's System ESS product and related service and maintenance fees.

    Licenses. License revenues increased 38.0% to $36.1 million in fiscal 1998
from $26.1 million in fiscal 1997 and increased 69.0% in fiscal 1997 from $15.5
million in fiscal 1996. License revenues constituted 37.8%, 43.9%, and 38.7% of
total revenues in fiscal 1998, 1997, and 1996, respectively. The increases in
license revenues were primarily due to growing market acceptance of the
Company's software products and continued expansion of the Company's sales and
marketing organization, particularly into new geographical areas and new
vertical markets. In January, 1997, the former marketing and sales arrangement
with Oracle was replaced in part by the Oracle Agreement. Under the Oracle
Agreement, revenue with respect to System ESS license sales which are related to
the Oracle Solution Suite for the consumer packaged goods industry are accounted
for net of amounts retained by Oracle. In fiscal 1998, 53% of the Company's
license revenues and 39% of the Company's total revenues was derived from
customers introduced to the Company by Oracle.

    Service and Maintenance. Service and maintenance revenues increased 81.5% to
$57.6 million in fiscal 1998 from $31.7 million in fiscal 1997 and increased
37.4% from $23.1 million in fiscal 1996. Service and maintenance revenues
constituted 60.4%, 53.2%, and 57.7% of total revenues in fiscal 1998, 1997, and
1996, respectively. The significant increases in the dollar amount of service
and maintenance revenues were primarily due to the increase in services related
to a greater number of System ESS licenses sold, as well as the high percentage
of maintenance agreement renewals for licenses sold in prior years. The Company
expects service and maintenance revenues to increase in total dollar amounts but
decrease as a percentage of total revenues in coming periods based upon the
Company's sales and marketing strategy to increase its utilization of
third-party implementation services to enable it to more rapidly penetrate its
target markets.

    Other. Other revenues are primarily third-party hardware sales to help
certain customers implement System ESS. Other revenues decreased 3.3% to $1.7
million in fiscal 1998 from $1.7 million in fiscal 1997 and increased 20.0% in
fiscal 1997 from $1.4 million in fiscal 1996. Other revenues constituted 1.8%,
2.9%, and 3.6% of total revenues in fiscal 1998, 1997, and 1996, respectively.
The Company has deliberately reduced its emphasis on providing third-party
hardware and support, and its strategy is to minimize its efforts in this area
except on an as needed basis. The Company expects other revenues to fluctuate
generally in absolute dollars and to decline significantly as a percentage of
total revenues.

COST OF REVENUES

    Cost of revenues was $43.6 million, $25.4 million, and $20.5 million in
fiscal 1998, 1997, and 1996 representing 45.8%, 42.6%, and 51.2% of total
revenues, respectively. As a percentage of total revenues, cost of revenues
increased from fiscal 1997 to fiscal 1998 but decreased from fiscal 1996 to
fiscal 1997. The increase in fiscal 1998 was primarily due to the fact that the
gross margin on services and maintenance revenues is lower than the gross margin
on license revenues, and this difference was partially offset by an increase in
the gross margin on license revenues. The decrease in fiscal 1997 was primarily
due to the fact that the gross margin on license revenues is higher than the
gross margin on services and maintenance revenues. The Company anticipates that
if revenues from licenses of System ESS increase as a percentage of total
revenues, the costs of revenues will again decline as a percentage of total
revenues.



                                       29
<PAGE>


    The following table sets forth, for the periods indicated, the cost of
revenues for each revenue category and the cost of revenues represented as a
percentage of each revenue category:

<TABLE>
<CAPTION>

                                                                       Year Ended April 30,
                                              1998                       1997                       1996
                                         ---------------------------------------------------------------------------
                                         Cost        % of           Cost        % of       Cost        % of
                                         Of          Revenue        Of          Revenue    Of          Revenue
                                         Revenues    Category       Revenues    Category   Revenues    Category
                                                            (in thousands, except percentage data)
<S>                                     <C>         <C>            <C>         <C>            <C>      <C>
Licenses                                $   790          2.2%       $ 1,540       5.9%      $ 2,717       17.6%
Services and maintenance                 41,826         72.6         22,871      72.0        16,813       72.8
Other                                     1,029         61.9          1,001      58.3           947       66.1
                                        -------                     -------                 -------       
 Total cost of revenues                 $43,645         45.8%       $25,412      42.6%      $20,477       51.2%
                                        -------                     -------                 -------       
                                        -------                     -------                 -------       

</TABLE>


    Cost of License Revenues. Cost of license revenues consists primarily of
commissions and license fees paid to third parties in fiscal years 1998, 1997,
and 1996, particularly fees paid to Oracle pursuant to an informal joint
marketing and sales arrangement. Cost of license revenues was $0.8 million, $1.5
million, and $2.7 million in fiscal 1998, 1997, and 1996, and 2.2%, 5.9%, and
17.6% of license revenues, respectively. The decrease in the absolute dollar
amount of the cost of license revenues was principally related to the fact that
revenues received under the new Agreement with Oracle are net of fees retained
by Oracle.

    Cost of Service and Maintenance Revenues. Cost of service and maintenance
revenues consists primarily of costs associated with consulting, implementation,
training, and ongoing support. Cost of service and maintenance revenues was
$41.8 million, $22.9 million, and $16.8 million in fiscal 1998, 1997, and 1996,
representing 72.6%, 72.0%, and 72.8% of service and maintenance revenues,
respectively. The increase in cost of service and maintenance revenues in
absolute dollars was primarily due to the increase in the number of personnel
providing consulting and training services to customers. Although the Company
intends to continue to enter into informal joint marketing arrangements with
third parties, including systems integrators, who might provide services to the
Company's customers, the Company expects to continue to increase the number of
its service personnel in the future as the number of licensees of System ESS
increases.

    Cost of Other Revenues. Cost of other revenues consists primarily of the
cost of third party hardware supplied to certain customers. Cost of other
revenues was $1.0 million, $1.0 million, and $0.9 million in fiscal 1998, 1997,
and 1996, representing 61.9%, 58.3%, and 66.1% of other revenues, respectively.
The Company has deliberately reduced its emphasis on providing third-party
hardware and support, and its strategy is to minimize its efforts in this area
except on an as needed basis. The Company expects cost of other revenues to
fluctuate on a period to period basis, to remain at the current level in
absolute dollars, and to decline significantly as a percentage of total cost of
revenues.



                                       30
<PAGE>


    Product Development. Product development expenses consist primarily of
salaries and other related costs for the Company's engineering staff. Product
development expenses were $14.7 million, $9.9 million, and $6.8 million in
fiscal 1998, 1997, and 1996, representing 15.4%, 16.7%, and 17.1% of total
revenues, respectively. Product development expenses, in absolute dollars,
increased significantly in fiscal 1998 and 1997 from fiscal 1997 and 1996 due to
the build-up of development staff and engagement of third party consultants. As
a percentage of total revenues, product development expenses declined in fiscal
1998 from 1997 and in fiscal 1997 from 1996 primarily due to an increase in
revenues related to System ESS. The Company believes that a significant level of
investment for product development is required to remain competitive and,
accordingly, the Company anticipates that product development expenses will
increase in the future in absolute dollars but remain at about the fiscal 1998
level as a percentage of total revenues.

    In accordance with the Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards ("SFAS") No. 86, software
development costs are expensed as incurred until technological feasibility has
been established, after which time such costs are capitalized until the product
is available for general release to customers. To date, costs incurred after
establishment of technological feasibility have been immaterial and, as a
result, all product development costs have been expensed as incurred.

    Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, commissions, and bonuses, and other related costs for sales and
marketing personnel, as well as certain partner royalties. Sales and marketing
expenses were $20.9 million, $15.0 million, and $7.7 million in fiscal 1998,
1997, and 1996, representing 21.9%, 25.1%, and 19.4% of total revenues,
respectively. The increase in sales and marketing expenses in absolute dollars
from fiscal 1997 to fiscal 1998 and from fiscal 1996 to fiscal 1997 was
primarily due to increased headcount as the Company expanded its sales offices
in Europe and North America. The Company intends to continue the expansion of
its sales and marketing efforts and anticipates that sales and marketing
expenses will increase in absolute dollars and as a percentage of total revenues
in the future.

    General and Administrative. General and administrative expenses consist
primarily of salary expenses and related expenses for administrative and
executive staff. General and administrative expenses were $7.1 million, $4.4
million, and $3.6 million in fiscal 1998, 1997, and 1996, representing 7.4%,
7.4%, and 8.9% of total revenues, respectively. General and administrative
expenses increased in fiscal 1998 from fiscal 1997 and in fiscal 1997 from
fiscal 1996 due to increased headcount. The Company believes that general and
administrative expenses will generally increase in absolute dollars but remain
at the fiscal 1998 level as a percentage of total revenues.

    Other Income (Expense). Other income comprises interest income, interest
expenses, and miscellaneous income and expenses. Interest income was
approximately $3.5 million and $0.6 million in fiscal 1998 and 1997, whereas in
fiscal 1996 interest income was $0.0 million. The increase in 1998 compared to
1997 and 1996 is due to the Company's investment of a portion of the proceeds of
its initial and secondary public offerings in short-term investments and
interest-bearing accounts. Interest expenses have decreased from approximately
$0.7 million in fiscal 1996 to approximately $0.2 million in fiscal 1997 and
$0.1 million in fiscal 1998. The decrease in fiscal 1997 was the result of the
Company's repayment of its outstanding loans after the initial public offering.

    Discontinued Operations. In fiscal 1997, the Company sold its 55% owned
subsidiary, Pargon AB ("Pargon") for $2.9 million in cash. The capital gain on
this transaction was $1.1 million (net of income tax of $0.4 million). Pargon's
business was focused on microprocessor compiler software and systems consulting
services, and, therefore, did not fit the Company's strategy of focusing on
System ESS.


                                       31
<PAGE>


    Provision for Income Taxes. Provision for income taxes was $2.8 million 
in fiscal 1998, whereas in fiscal 1997 and 1996 the Company recorded a 
benefit for income taxes of $0.2 million and $0.8 million, respectively. The 
benefits related primarily to the reduction of the Company's valuation 
allowance on deferred tax assets. At April 30, 1997, the Company had 
approximately $2.8 million of gross deferred tax assets comprised primarily 
of net operating loss carryforwards in Sweden. During fiscal 1998, all of the 
net operating loss carryforwards in Sweden were utilized.

LIQUIDITY AND CAPITAL RESOURCES

    During fiscal 1998 the Company completed a secondary public offering of
8,136,250 Common shares priced at $20 per share of which 4,030,625 shares were
sold by the Company. After deducting the underwriter's discount, the net
proceeds to the Company was $19.075 per share or $76.9 million.

    Since its inception, the Company has financed and met its capital
expenditure requirements through cash flows from operations, short-term
borrowings, and, during fiscal 1997 and fiscal 1998, through sales of equity
securities. Cash from operations was $15.2 million in fiscal 1998 and $1.0
million in fiscal 1996, while $2.2 million was used in operating activities in
fiscal 1997. Net proceeds from borrowings were $0.9 million in fiscal 1998,
while total repayment of borrowings were $8.1 million and $1.0 million in fiscal
1997 and 1996, respectively. Cash flows from issuance of common stock were $79.9
million, $28.2 million, and $1.2 million in fiscal 1998, 1997, and 1996,
respectively. The Company purchased approximately $3.6 million, $2.2 million,
and $1.3 million of office equipment and other property in fiscal 1998, 1997,
and 1996, respectively. At April 30, 1998, the Company did not have any material
commitments for capital expenditures.

    At April 30, 1998, the Company had $120.5 million of working capital,
including $42.0 million in cash and cash equivalents and $69.4 in short term
investments, as compared to $30.8 million of working capital at April 30, 1997.
The increase in working capital was primarily attributed to the Company's
secondary public offering which was completed in November, 1997 and which
generated net proceeds of $76.2 million after deducting offering expenses and
the underwriting discount.

    Accounts receivable, net of allowance for doubtful accounts, increased to
$24.3 million at April 30, 1998, from $22.5 million at April 30, 1997. Contract
receivables, primarily scheduled amounts due from customers on terms which are
longer than typical trade terms, increased to $2.2 million at April 30 1998,
from $1.0 million at April 30, 1997. Based upon the nature of the Company's
customers and its past collection experience, the Company does not expect to
encounter collection difficulties with respect to such accounts that would have
a material effect on the Company's financial position or results of operations.

    Average days' sales outstanding, including contract receivables measured at
the end of each quarter and related to total fiscal 1998 revenues, was 78 days
for fiscal 1998 as compared to 93 days in fiscal 1997. Average days' sales
outstanding can fluctuate for a variety of reasons including the mix of license
and services revenue in any period, as payment terms for license fees tend to be
somewhat longer than for services and maintenance.

    Total deferred revenue increased to $6.0 million at April 30, 1998, from
$3.7 million at April 30, 1997, primarily as a result of payments received from
customers for maintenance fees that will be recognized on a prorated basis.



                                       32
<PAGE>


    The Company believes that existing cash and cash equivalent balances,
short-term investment balances, and potential cash flow from operations will
satisfy the Company's working capital and capital expenditure requirements for
at least the next 12 months. However, any material acquisitions of complementary
businesses, products, or technologies could require the Company to obtain
additional sources of financing.

RECENT PRONOUNCEMENT REGARDING REVENUE RECOGNITION.

    In October 1997, the American Institute of Certified Public Accountants 
issued Statement of Position 97-2 "Software Revenue Recognition" ("SOP 
97-2"), which provides guidance on when revenue should be recognized and in 
what amounts for licensing, selling, leasing, or otherwise marketing computer 
software. SOP 97-2 is effective for transactions entered into in fiscal years 
beginning after December 15, 1997. The Company does not believe the adoption 
of SOP 97-2 will have a significant impact on its current revenue recognition 
policies.

YEAR 2000.

    The Company's System ESS is Year 2000 compliant; when used before as well 
as for a significant period after January 1, 2000, System ESS can with 
retained functionality store, process, and receive date and time data for 
periods before and after the turn of the century if correct date and time 
data are inputted. In addition, the Company has taken steps required to make 
its internal management information systems Year 2000 compliant. The Company 
does not anticipate any material adverse affect upon its business, operating 
results, and financial condition with respect to a Year 2000 issue.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is included in Part IV Item 14 (a)(1) and
(2).

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

None.



                                       33
<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    Reference is made to the information to be set forth in the 1998 Proxy
Statement under the caption "Election of Directors".

ITEM 11. EXECUTIVE COMPENSATION

    Reference is made to the information to be set forth in the 1998 Proxy
Statement under the caption "Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    Reference is made to the information to be set forth in the 1998 Proxy
Statement under the caption "Ownership of Common Stock."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    Reference is made to the information to be set forth in the 1998 Proxy
Statement under the caption "Certain Business Relationships."


                                       34
<PAGE>


                                     PART IV

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

    (a) Documents filed as a part of this Report:

    (1) Consolidated Financial Statements. The following consolidated financial
    statements of Industri-Matematik International Corporation are filed as part
    of this report:

    Report of Independent Accountants

    Consolidated Balance Sheets as of April 30, 1997, and April 30, 1998.

    Consolidated Statements of Operations for the years ended April 30, 1996,
    1997, and 1998.

    Consolidated Statements of Changes in Stockholders' Equity for the years
    ended April 30, 1996, 1997, and 1998.

    Consolidated Statements of Cash Flows for the years ended April 30, 1996,
    1997, and 1998.

    Notes to Consolidated Financial Statements.

    Consent of Independent Accountants dated July 29, 1998

    Schedules other than those listed above are omitted for the reason that they
are not required, are not applicable, or the required information is shown in
the Consolidated Financial Statements or Notes thereto.

    Individual financial statements of the Company and its subsidiaries are
    omitted because all subsidiaries included in the Consolidated Financial
    Statements are 100% owned.

    (b) No reports on Form 8-K have been filed by the Company during the last
quarter of the period covered by this Report.

    Schedules other than the one listed above are omitted because they are not
required or are not applicable, or the required information is shown in the
consolidated financial statements or notes thereto contained in this Annual
Report on Form 10-K.

    (c) Exhibits

    The exhibits required by Item 601 of Regulation S-K are listed below and are
filed or incorporated by reference as part of this Annual Report on Form 10-K.



                                       35
<PAGE>

<TABLE>
<CAPTION>

Number     Description
-------    -----------
<S>        <C>

3.1        Amended and restated Certificate of Incorporation of the Company(1)

3.2        Amended and Restated By-Laws of the Company(1)

10.1       Registration and Expense Agreement among the Company, Martin
           Leimdorfer, and Warburg Pincus Investors, L.P.(1)

10.2       Registration Rights Agreement among the Company, Martin
           Leimdorfer, and Warburg Pincus Investors, L.P.(1)

10.3       Stock Option Plan of the Company(1)

10.4       Form of Agreements of Restricted Stock Program(1)

10.5       Employee Stock Purchase Plan of the Company(2)

10.6       Amended and Restated Employment Agreement dated April 3, 1997 between
           Stig Durlow and the Company(3)

10.7       Agreement dated September 26, 1997, between Lars-Goran Peterson and the Company

10.8       Agreement effective May 1, 1997, between Mats Lillienberg and the Company

10.9       Employment Agreement dated May 7, 1989, between Carl Joelsson and Industri-Matematik Projektledning AB and supplemented
           by Agreement dated November 5, 1997, between Carl Joelsson and the Company

10.10      Employment Agreement dated January 10, 1991, between Per-Olof
           Ekholtz and Industri-Matematik Datasystem AB and supplemented
           by Agreement dated September 18, 1997, between Per-Olof Ekholtz
           and the Company

10.11      Employment Agreement dated March 16, 1998, between John P. Geraci, Jr. and the Company

10.12      Lease Contract for Commercial Premises No. 2003-0017-1 dated April 1, 1997, between
           Lansforsakringsbolagen AB and Industri-Matematik, AB(4)

10.13      Lease Contract for Commercial Premises No. 2003-0009-1 dated October 1, 1997, between Lansforsakringsbolagen AB and
           Industri-Matematik, AB(4)

10.14      Agreement and Amendment to Lease Contract for Commercial Premises No. 2003-0009-1 dated October 17, 1997, between
           Lansforsakringsbolagen AB and Industri-Matematik, AB(4)

10.15      Form of Indemnity Agreement with Officers and Directors(1)

21         Subsidiaries of the Company

23         Consent of Independent Public Accountants

27         Financial Data Schedule

</TABLE>



                                       36
<PAGE>


----------
(1) Incorporated by reference from the Exhibits to the Company's Registration
Statement on Form S-1 (No. 333-5495).

(2) Incorporated by reference to the Exhibit to the Company's Post-Effective
Amendment Number 1 to the Registration Statement on Form S-8 (No. 333-5495).

(3) Incorporated by reference from the Exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended April 30, 1997.

(4) Incorporated by reference from the Exhibits to the Company's Registration
Statement on Form S-3 (No. 333-37355)

    (d) Financial Statement Schedules

    None.


                                       37
<PAGE>


                     REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Stockholders of Industri-Matematik International 
Corp.

We have audited the accompanying consolidated balance sheets of
Industri-Matematik International Corp. and subsidiaries as of April 30, 1997 and
1998, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended April 30, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
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 Industri-Matematik
International Corp. and subsidiaries as of April 30, 1997 and 1998, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended April 30, 1998 in conformity with generally
accepted accounting principles in the United States.

Stockholm, Sweden
July 29, 1998

OHRLINGS COOPERS & LYBRAND AB

By: /S/ ROBERT BARNDEN
    -------------------------
    Robert Barnden



                                       38


<PAGE>



             INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                 (in thousands, except share and per share data)

<TABLE>
<CAPTION>


                                                                                                           April 30,
                                                                                                        1997        1998
<S>                                                                                                      <C>          <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................................................        $  9,023    $  41,982
  Short-term investments....................................................................           9,952       69,416
  Accounts receivable, less allowance for doubtful accounts
  of $205 and $210 at April 30, 1997 and 1998, respectively.................................          22,463       24,289
  Contract receivables......................................................................           1,010        2,180
  Prepaid expenses..........................................................................           1,773        2,824
  Income taxes receivable...................................................................              28          402
  Other current assets......................................................................             111          501
                                                                                                      ------      -------
       Total current assets.................................................................          44,360      141,594
                                                                                                      ------      -------
                                                                                                      ------      -------
Non current assets:
  Property and equipment, net...............................................................           3,484        5,011
  Deferred income taxes.....................................................................           1,643            5
  Goodwill..................................................................................           1,107        1,002
  Other non current assets..................................................................             369        1,717
                                                                                                      ------      -------
       Total non current assets.............................................................           6,603        7,735
                                                                                                     -------      -------
          Total assets......................................................................        $ 50,963    $ 149,329
                                                                                                      ------      -------
                                                                                                      ------      -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of capital lease obligations.........................................               $  422       $  274
  Current portion of notes payable..........................................................              --          486
  Accounts payable..........................................................................           1,426        2,439
  Accrued expenses and other current liabilities............................................           2,455        6,016
  Accrued payroll and employee benefits.....................................................           5,509        5,938
  Deferred revenue..........................................................................           3,717        5,962
                                                                                                      ------      -------
       Total current liabilities............................................................          13,529       21,115
                                                                                                      ------      -------
                                                                                                      ------      -------
Long-term liabilities:
  Capital lease obligations.................................................................             554          281
  Notes payable.............................................................................              --          840
  Accrued pension liability.................................................................           1,674        2,132
  Deferred income taxes.....................................................................              68           --
  Other long-term liabilities...............................................................             384          388
                                                                                                      ------      -------
       Total long-term liabilities..........................................................           2,680        3,641
                                                                                                       -----       ------
     Total liabilities......................................................................          16,209       24,756
                                                                                                      ------      -------
                                                                                                      ------      -------
</TABLE>


                                       39
<PAGE>

<TABLE>
<CAPTION>


                                                                                                           April 30,
                                                                                                        1997        1998
<S>                                                                                                      <C>          <C>
Commitments and contingencies (Note 14)

Stockholders' equity:
  Common Stock; voting, $.01 par value; 35,000,000 and
    62,500,000 shares authorized; 15,591,558 and 32,917,552
    issued and outstanding..................................................................             156          329
  Class B Common Stock; non-voting, $.01 par value; 12,500,000
    shares authorized; 12,088,200 and 0 shares issued
    and outstanding.........................................................................             121           --
  Additional paid-in capital................................................................          43,379      127,886
  Retained earnings (deficit)...............................................................         (4,106)        5,287
  Cumulative translation adjustment.........................................................         (2,270)      (2,426)
  Notes receivable from stockholders (Note 13)..............................................         (2,526)      (6,503)
                                                                                                     -------      -------
       Total stockholders' equity...........................................................          34,754      124,573
                                                                                                     -------      -------
       Total liabilities and stockholders' equity...........................................        $ 50,963     $149,329
                                                                                                     -------      -------
                                                                                                     -------      -------
</TABLE>


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


                                       40
<PAGE>




             INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                                   Year Ended April 30,
                                                                              1996          1997        1998

<S>                                                                            <C>           <C>          <C>
Revenues:

  Licenses.....................................................           $ 15,474      $ 26,147     $ 36,090
  Services and maintenance.....................................             23,103        31,747       57,632
  Other........................................................              1,432         1,718        1,662
                                                                            ------        ------       ------
       Total revenues..........................................             40,009        59,612       95,384
                                                                            ------        ------       ------
Cost of revenues:

  Licenses.....................................................              2,717         1,540          790
  Services and maintenance.....................................             16,813        22,871       41,826
  Other........................................................                947         1,001        1,029
                                                                            ------        ------       ------
       Total cost of revenues..................................             20,477        25,412       43,645
                                                                            ------        ------       ------
       Gross profit............................................             19,532        34,200       51,739
                                                                            ------        ------       ------
Operating expenses:

  Product development..........................................              6,822         9,935       14,684
  Sales and marketing..........................................              7,746        14,997       20,878
  General and administrative...................................              3,579         4,399        7,103
                                                                            ------        ------       ------
       Total operating expenses................................             18,147        29,331       42,665
                                                                            ------        ------       ------
Income from operations.........................................              1,385         4,869        9,074
                                                                            ------        ------       ------
                                                                            ------        ------       ------
Other income (expense):

  Interest income..............................................                 13           643        3,490
  Interest expense.............................................              (744)         (253)        (123)
  Miscellaneous expense........................................               (12)          (21)        (286)
                                                                            ------        ------       ------
Income from continuing operations before income taxes..........                642         5,238       12,155
Provision (benefit) for income taxes...........................              (781)         (190)        2,762
                                                                            ------        ------       ------
Income from continuing operations..............................              1,423         5,428        9,393
Income from discontinued operations (Note 19)..................                327           374           --
Gain on sale of discontinued operations
        (net of income tax of $372)............................                 --         1,100           --
                                                                            ------        ------       ------
Net income.....................................................            $ 1,750       $ 6,902      $ 9,393
                                                                            ------        ------       ------
                                                                            ------        ------       ------

</TABLE>

Net income per share data: (Note 2)



                                       41
<PAGE>

<TABLE>
<CAPTION>

                                                                              Year Ended April 30,
                                                                              1996          1997        1998

<S>                                                                            <C>           <C>          <C>
Income from continuing operations..............................            $  0.06       $  0.20      $  0.31
Income from discontinued operations............................               0.01          0.01           --
Gain on sale of discontinued operations........................                 --          0.04           --
                                                                            ------        ------       ------
Net income per share...........................................            $  0.07       $  0.25      $  0.31
                                                                            ------        ------       ------
                                                                            ------        ------       ------
Net income per share data-assuming dilution:

Income from continuing operations..............................            $  0.06       $  0.20      $  0.30
Income from discontinued operations............................               0.01          0.01           --
Gain on sale of discontinued operations........................                 --          0.04           --
                                                                            ------        ------       ------
Net income per share-assuming dilution.........................            $  0.07       $  0.25      $  0.30
                                                                            ------        ------       ------
                                                                            ------        ------       ------

</TABLE>


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



                                       42
<PAGE>


             INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                        (in thousands, except share data)

<TABLE>
<CAPTION>


                                                                                         Notes            Total
                          Convertible           Class B  Additional  Retained   Cumul.   Receivable       Stock-
                          Preferred    Common   Common   Paid-in     earnings   Transl.  From             holders
                          Stock        Stock    Stock    Capital    (Deficit)   Adjus.   Stockholders     Equity
<S>                       <C>          <C>      <C>      <C>         <C>         <C>      <C>             <C>
Balance as of
  May 1, 1995               $146        $76       $4      $11,490    ($12,620)  ($1,193)                  ($2,097)

Issuance of
 1,256,985 shares of
 Common Stock under
 Restricted Stock
 Program                                 12                2,614                           ($2,626)             0

Issuance of
 612,468 shares of
 Common Stock                             6                1,219                                            1,225

Currency translation
 Adjustment                                                                        (376)                     (376)

Net income                                                              1,750                               1,750
                            ----        ----     ----     -------    ---------  --------  --------        --------

Balance as of
 April 30, 1996              146         94        4      15,323      (10,870)   (1,569)    (2,626)           502

Conversion of
  Convertible
  Preferred Stock           (146)        29      117                                                            0

Issuance of
  3,200,000 shares
  of Common Stock
  under Initial Public
  Offering, net of
  Expenses                               32               28,085                                           28,117

Issuance of 35,500 shares
  of Common Stock under
  Stock Option Plan                       1                   70                                               71

Repurchase of 49,995
  shares of Common Stock
  under Restricted Stock
  Program                                --                  (99)        (138)                 100          (137)

</TABLE>


                                       43
<PAGE>

<TABLE>
<CAPTION>


                                                                                         Notes            Total
                          Convertible           Class B  Additional  Retained   Cumul.   Receivable       Stock-
                          Preferred    Common   Common   Paid-in     earnings   Transl.  From             holders
                          Stock        Stock    Stock    Capital    (Deficit)   Adjus.   Stockholders     Equity
<S>                       <C>          <C>      <C>      <C>         <C>         <C>      <C>             <C>
Currency translation
  Adjustment                                                                       (701)                     (701)

Net income                                                              6,902                               6,902
                            ----        ----     ----     -------    ---------  --------  --------        --------
Balance as of
  April 30, 1997              --        156      121      43,379       (4,106)   (2,270)    (2,526)        34,754

Conversion of
  Class B Common Stock
  To Common Stock                       121     (121)                                                           0

Issuance of
  4,030,625 shares
  of Common Stock
  under Follow-on Public
  Offering, net of
  Expenses                               40               76,160                                          76,200

Issuance of 618,484 shares
  of Common Stock under
  Stock Option Plan                       6                1,404                                           1,410

Issuance of 325,000 shares
  of Common Stock under
  Restricted Stock Program                3                4,669                            (4,672)            0

Issuance of 263,685 shares
  of Common Stock under ESPP              3                1,487                                           1,490

Income tax benefit 
  arising from stock 
  compensation plans                                         787                                             787

Payments on Notes
  Receivable                                                                                   695           695

Currency translation
  Adjustment                                                                       (156)                    (156)

Net income                                                              9,393                              9,393
                            ----        ----     ----     -------    ---------  --------  --------      --------
Balance as of
 April 30, 1998            $  --       $329     $ --    $127,886       $5,287   $(2,426)   $(6,503)     $124,573


</TABLE>


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


                                       44
<PAGE>


             INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (in thousands)

<TABLE>
<CAPTION>

                                                                                     Year Ended April 30,
                                                                                  1996             1997             1998
<S>                                                                               <C>              <C>              <C>
Cash flows from operating activities
  Net income (loss)........................................................     $ 1,750          $ 6,902            9,393
  Adjustments to reconcile net income (loss) to
  net cash provided by (used in) operating
  activities:
    Depreciation and amortization..........................................       1,063            1,062            1,939
    Provision for doubtful accounts........................................          99            (192)                4
    Deferred income taxes..................................................       (876)            (278)            1,587
    Accrued interest on short-term investments.............................          --               --            (393)
    (Gain) loss on disposal of property and equipment......................         (3)               29               27
    (Gain) loss on disposal of other shares................................          --            (111)               --
    (Gain) loss on disposal of discontinued operation......................          --          (1,100)               --
    Write-down of other shares.............................................          --               --                3
    Changes in operating assets and liabilities:
    Accounts receivable....................................................     (5,070)          (9,123)          (2,099)
    Contract receivables and prepaid expenses..............................       1,789            (604)          (1,715)
    Income taxes receivable................................................         224               16            (387)
    Other assets...........................................................        (36)            (203)          (1,735)
    Accounts payable.......................................................         135              (5)              989
    Accrued expenses and other current liabilities.........................         361          (2,331)            4,511
    Accrued payroll and employee benefits and deferred revenue.............       1,626            3,565            2,673
    Accrued pension liability..............................................         214              435              437
                                                                               --------          -------          -------
    Net cash provided by (used in) continuing operations...................       1,276           (1,938)          15,234
    Net cash used in discontinued operations...............................        (322)            (288)              --
                                                                               --------          -------          -------
    Net cash flows provided by (used in) operating activities..............         954          (2,226)           15,234
                                                                               --------          -------          -------
Cash flows from investing activities:
  Purchase of short-term investments.......................................          --         (35,847)        (278,637)
  Proceeds from sale of short-term investments.............................          --          25,895          219,475
  Additions to property and equipment......................................     (1,269)          (2,202)          (3,605)
  Payment for Ceratina.....................................................          --               --          (1,025)
  Cash acquired in Ceratina................................................          --              348               --
  Proceeds from sale of property and equipment.............................          17               19              246
  Proceeds from sale of other shares.......................................          --              138               --
  Proceeds from sale of discontinued operations............................          --            2,900               --
  Collection of notes receivable...........................................          --               --              695
                                                                               --------         --------          -------
    Net cash flows used in investing activities............................     (1,252)          (8,749)         (62,851)
                                                                               --------          -------          -------


</TABLE>


                                       45
<PAGE>

<TABLE>
<CAPTION>

                                                                                     Year Ended April 30,
                                                                                  1996             1997             1998
<S>                                                                               <C>              <C>              <C>
Cash flows from financing activities:
  Net borrowings (payments) under lines of credit..........................       5,281          (7,670)               --
  Payments on short-term borrowings........................................     (5,994)            (101)               --
  Proceeds from notes payable..............................................          --               --            1,539
  Payments on notes payable................................................          --               --            (213)
  Principal payments on capital lease obligations..........................       (305)            (346)            (434)
  Issuance of Common Stock.................................................       1,225           28,188           79,887
  Repurchase of Common Stock under Restricted Stock Program................          --            (137)               --
  Other....................................................................         484            (360)            (203)
                                                                               --------         --------          -------
    Net cash flows provided by financing activities........................         691           19,574           80,576
                                                                               --------         --------          -------
Translation differences on cash and cash equivalents.......................           5            (134)                0
                                                                               --------         --------          -------

Net increase in cash and cash equivalents..................................         398            8,465           32,959
Cash and cash equivalents at beginning of year.............................         160              558            9,023
                                                                               --------         --------          -------
Cash and cash equivalents at end of year...................................    $    558          $ 9,023         $ 41,982
                                                                               --------         --------          -------
                                                                               --------         --------          -------

Supplemental disclosures of cash flow information: Cash paid (received) during
the year for:
  Interest.................................................................    $    621          $   380          $   189
                                                                               --------         --------          -------
                                                                               --------         --------          -------
  Income taxes.............................................................    $   (40)          $    81          $   689
                                                                               --------         --------          -------
                                                                               --------         --------          -------

</TABLE>


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



                                       46
<PAGE>


             INDUSTRI-MATEMATIK INTERNATIONAL CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Nature of Business and Organization

    Industri-Matematik International Corp. ("Company"), a Delaware corporation,
and its subsidiaries (collectively, "Companies"), develop, market, implement,
and support client/server demand chain management software. The Companies'
primary software product, System ESS, has been designed to provide for the
complex and high throughput order fulfillment requirements of manufacturers,
distributors, and wholesalers. The Company has operating subsidiaries located
and primarily conducts business in the United States, Sweden, the United
Kingdom, the Netherlands and Germany. During fiscal 1998, subsidiaries were
established in Australia, France, and Canada.

    The Company was formed on May 1, 1995 as the parent of Industri-Matematik AB
("IMAB"), a company domiciled in Sweden, pursuant to a corporate reorganization.
The reorganization was effected by issuing all the shares of the Company's stock
to the stockholders of IMAB based upon the number and class of shares of IMAB
owned by each in exchange for all of the outstanding stock of IMAB. The
reorganization was accounted for in a manner similar to a pooling-of-interests.
The consolidated accounts comprise the accounts of the Companies as if they had
been owned by the Company throughout the entire reporting period.

2. Significant Accounting Policies

 Principles of Consolidation

    The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.

    In fiscal 1997, the Company sold its business segments operated by its 55%
owned subsidiary, Pargon AB ("Pargon"), a company domiciled in Sweden. In
accordance with Accounting Principles Board Opinion ("APB") No. 30, the segments
of Pargon have been presented as discontinued operations in the accompanying
consolidated financial statements. (See Note 19 for further discussion and
disclosure.)

 Revenue Recognition

    License revenues represent sales of the Companies' System ESS software.
Service revenues represent sales from consulting implementation and training
services. Annual maintenance and support revenues consist of ongoing support and
sales of product updates. Other revenues primarily represent hardware sales.

    The Companies recognize revenue in accordance with the American Institute of
Certified Public Accountants Statement of Position ("SOP") 91-1, Software
Revenue Recognition. Software license fees are recognized upon the signing of
the license agreement and shipment of the product to the customer provided that
no significant vendor obligations remain and collection of the resulting
receivables is probable. Revenues relating to services are recognized as
services are performed. Annual payments for maintenance agreements are generally
received in advance and are non-refundable. Maintenance revenues are recognized
ratably over the term of the contract. Other revenues are recognized when
shipment is made to the customer. 



                                       47
<PAGE>


Unrecognized revenue relating to maintenance contracts are reflected as deferred
revenue in the accompanying consolidated balance sheets.

    Under the terms of the Company's License Agreements, the only warranty
provided is that the software will function in accordance with the operation
documentation by a specified date. As this warranty is effective for a very
limited time period and historically the Company has had no warranty claims, the
Company's policy is to record no warranty provision upon the recognition of
license revenues. In addition, due to the Companies' insignificant product
returns and price adjustments in the past, no provision is made for product
returns and price adjustments upon recognition of software license revenues.
Insignificant vendor obligations are recorded at the time products are shipped.

    In January 1997, the Company entered into a written Agreement with Oracle
Corporation ("Oracle") pursuant to which the two companies agreed to market the
Oracle Solution Suite incorporating the Company's System ESS software to
potential customers in the consumer packaged goods ("CPG") industry. (See Note
15 for further discussion.) Under the Agreement, revenues with respect to System
ESS license sales which are related to the Oracle Solution Suite for the CPG
industry are accounted for net of fees retained by Oracle.

 Product Development Costs

    Software development costs are accounted for in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed."

    Costs incurred in the product development of new software products are
expensed as incurred until technological feasibility has been established. To
date, the establishment of technological feasibility of the Company's products
and general release substantially coincide. As a result, the Companies have not
capitalized any software development costs since such costs have been
immaterial.

 Property and Equipment

    Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Depreciation and amortization are computed using the
straight-line method based upon estimated useful lives of the assets as follows:

<TABLE>
<CAPTION>

                                                         Estimated useful lives
         <S>                                              <C>
         Computer equipment                                    3 years
         Furniture and fixtures                                5 to 10 years
         Automobiles                                           5 years
         Leasehold improvements                                3 to 5 years
</TABLE>


    Equipment purchased under capital leases is amortized on a straight-line
basis over the lesser of the estimated useful life of the asset or the lease
term.

    Upon retirement or sale of property and equipment, cost and accumulated
depreciation on such assets are removed from the accounts and any gains or
losses are reflected in the statement of operations. Maintenance and repairs are
charged to expense as incurred.



                                       48
<PAGE>


 Goodwill

    Goodwill represents the excess of cost over the fair value of assets 
acquired and is amortized using the straight-line method over a period of 10 
years. Amortization was $0, $40,000, and $114,000 for the fiscal years ended 
April 30, 1996, 1997, and 1998, respectively. Accumulated amortization was 
$40,000 and $154,000 as of April 30, 1997 and 1998, respectively. The Company 
reviews the carrying value of goodwill for impairment whenever events or 
changes in circumstances indicate that the carrying amount may not be 
recoverable.

 Foreign Currency Translation

    The functional currency of the Company's foreign subsidiaries is the
applicable local currency. The translation from the respective foreign
currencies to U.S. dollars is performed for balance sheet accounts using current
exchange rates in effect at the balance sheet date and for income statement
accounts using a weighted average exchange rate during the period. Gains or
losses resulting from such translation are included as a separate component of
stockholders' equity. Gains or losses resulting from foreign currency
transactions are included in miscellaneous income (expense). For the fiscal
years ended April 30, 1996, 1997 and 1998 foreign exchange gains (losses) of
$65,000, ($75,000), and ($121,000),respectively, were recorded by the Companies.

 Concentration of Risk

    Financial instruments which potentially subject the Companies to
concentrations of credit risk consist principally of accounts receivable with
customers and short-term investments. Credit risk with respect to accounts
receivable, however, is limited due to the number of customers comprising the
Companies' customer base and their dispersion principally across the United
States, Scandinavia, the United Kingdom, the Netherlands, and Australia. The
Companies' customers are generally multi-national companies in the food and
beverage, pharmaceutical, consumer electronics, automotive parts, and industrial
sector industries. The Companies perform ongoing credit evaluations of their
customers and do not require collateral. The Companies maintain allowances for
potential credit losses and such losses have been within management's
expectations. Short-term investments are placed with high credit quality
financial institutions or in short-duration, high quality debt securities.

    A significant portion of the Company's business is conducted in 
currencies other than the U.S. dollar (the currency in which its financial 
statements are stated), primarily the Swedish krona and, to a lesser extent, 
the U.K. pound sterling, the German mark, the Dutch guilder, the French 
franc, the Australian dollar, and the Canadian dollar. The Company incurs a 
significant portion of its expenses in Swedish krona, including all of its 
product development expenses and a substantial portion of its general and 
administrative expenses. As a result, appreciation of the value of the 
Swedish krona relative to the other currencies in which the Company generates 
revenues, particularly the U.S. dollar, could adversely affect operating 
results. The Company does not currently undertake hedging transactions to 
cover its currency exposure, but the Company may choose to hedge a portion of 
its currency exposure in the future as it deems appropriate. 

    License and service and maintenance revenues related to System ESS have 
represented a substantial portion of the Company's revenues in recent years 
and are expected to continue to represent substantially all of the Company's 
revenues in the future. The Company's success depends on continued market 
acceptance of System ESS software and services as well as the Company's 
ability to introduce new versions of System ESS or other products to meet the 
evolving needs of its customers.

 Cash, Cash Equivalents and Short-Term Investments

    The Companies consider all highly liquid, low risk debt instruments
purchased with maturity dates of three months or less from the date of purchase
to be cash equivalents. Cash equivalents are stated at fair market value, which
approximates cost, based on quoted market prices. The Company's short-term
investments comprise fixed income securities with remaining maturities of more
than 90 days at the time of purchase. The Company has classified its short-term
investments in fixed income securities as available-for-sale securities, which
are carried at their fair value based upon the quoted market prices of those
investments at April 30, 1997 and 1998. Accordingly, the change in unrealized
gains and losses with respect to these securities is recorded as a direct
increase or decrease in stockholders' equity, net of deferred income tax, if
any.

    Fixed income securities available for sale are purchased with the original
intent to hold to maturity, but which may be available for sale if market
conditions warrant, or if the Company's investment policies dictate, in order to
maximize the Company's investment yield. Realized gains and losses are included
in earnings and are derived using the specific identification method for
determining the cost of securities sold. When impairment of the value of an
investment is considered other than temporary, the decrease in value is reported
in earnings as a realized investment loss and a new cost basis is established.



                                       49
<PAGE>
 Use of Estimates

    The preparation of the financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that affect the reported amounts of assets and contingent 
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting years. Actual results could differ 
from those estimates.

 Net Income Per Share

    Net income per share amounts have been computed in accordance with SFAS No. 
128, "Earnings per Share". For each of the periods presented, net income per 
share amounts were computed based on the weighted average number of shares of 
common stock outstanding during the period. Net income per share - assuming 
dilution amounts were computed based on the weighted average number of shares of
common stock and potential common stock outstanding during the period. Potential
common stock relates to stock options outstanding for which the dilutive effect
is calculated using the treasury stock method.

    The weighted average number of shares of common stock for the years ended 
April 30, 1996, and 1997, assumed the three-for-one stock split and the 
conversion of all Convertible Preferred Stock into Common Stock and Class B
Common Stock upon the closing of the Company's initial public offering using the
if-converted method as of the beginning of the reporting period.

    Pursuant to the Securities and Exchange Commission Staff Accounting 
Bulletins, common and common equivalent shares issued at prices below the
anticipated public offering price during the twelve months immediately preceding
the initial filing date have been included in the calculation as outstanding for
the entire year ended April 30, 1996, and the entire interim period of the year
ended April 30, 1997, in which the initial public offering was made (using the
treasury stock method and the anticipated initial public offering price). The
determination of common stock and common stock equivalents outstanding for the
interim periods after the initial public offering in the fiscal year ended April
30, 1997, are based upon the weighted average number of shares outstanding and
the dilutive effect of common stock equivalents outstanding, determined using
the treasury stock method and the average market price for the period.

    For each of the periods presented, income available to common shareholders
(the numerator) used in the computation of earnings per share was the same as 
the numerator used in the computation of earnings per share - assuming dilution.
A reconciliation of the denominators used in the computations of earnings per
share and earnings per share - assuming dilution is as follows:

<TABLE>
<CAPTION>
                                                    Year Ended April 30, 
                                             1996          1997            1998
<S>                                    <C>             <C>              <C>
  Weighted average shares outstanding     24,494,300    27,280,000      30,208,852
  Effect of dilutive stock options           729,000       783,312         611,678
                                        ------------   -----------      -----------
  Adjusted weighted average shares
  outstanding assuming dilution           25,223,300    28,063,312      30,820,530
                                        ------------   -----------      -----------
                                        ------------   -----------      -----------
</TABLE>

 Cash Flow Information

    Cash flows in foreign currencies have been converted to U.S. dollars at an
approximate weighted average exchange rate or the exchange rates in effect at
the time of the cash flows, where determinable.

                                       50
<PAGE>

 Fair Value of Financial Instruments

    SFAS No. 107, "Disclosure about Fair Value of Financial Instruments."
requires the disclosure of estimated fair values for all financial instruments
for which it is practicable to estimate fair value. Financial instruments
including cash and cash equivalents, receivables and payables, deferred revenue,
and current portions of long-term debt are deemed to approximate fair value due
to their short maturity. The carrying amount of long-term debt with banks and
capitalized lease obligations are also deemed to approximate their fair values.

 Income taxes

    The Companies account for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS 109, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured by applying enacted statutory tax rates that are
applicable to the future years in which deferred tax assets or liabilities are
expected to be settled or realized, to the differences between the financial
statement carrying amount and the tax bases of existing assets and liabilities.
Under SFAS 109, the effect of a change in tax rates on deferred tax assets and
liabilities is recognized in net income in the period in which the tax rate
change is enacted. The statement also requires a valuation allowance against net
deferred tax assets if, based upon the available evidence, it is more likely
than not that some or all of the deferred tax assets may not be realized.

 Effect of Recent Pronouncements

    In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive 
Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and 
Related Information". SFAS No. 130 establishes standards for reporting and 
display of comprehensive income and its components in a full set of 
general-purpose financial statements. SFAS No. 131 establishes revised 
guidelines for determining an entity's operating segments and the type and 
level of financial information to be disclosed. It requires entities to 
report segment information in quarterly reports issued to shareholders. In 
February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about 
Pensions and Other Postretirement Benefits", which revises the disclosure 
requirements for pensions and other postretirement benefit plans. The Company 
will be required to comply with all three statements in the fiscal year 
ending April 30, 1999. The Company believes that the implementation of these 
statements will not have a significant impact on the nature of information 
disclosed in the financial statements. 

    In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative 
Instruments and Hedging Activities", which establishes a new model of 
accounting for derivatives and hedging activities and supersedes and amends a 
number of existing standards. The provisions of SFAS 133 are effective for 
all fiscal quarters of years beginning after June 15, 1999. The Company 
believes that this statement will not have an impact on the financial 
position, results of operations, or cash flows, as the Company does not hold 
any derivative instruments or engage in hedging activities at the present 
time.

    In October 1997, the American Institute of Certified Public Accountants 
issued Statement of Position 97-2 "Software Revenue Recognition" ("SOP 
97-2"), which provides guidance on when revenue should be recognized and in 
what amounts for licensing, selling, leasing, or otherwise marketing computer 
software. SOP 97-2 is effective for transactions entered into in fiscal years 
beginning after December 15, 1997. The Company does not believe the adoption 
of SOP 97-2 will have a significant impact on its current revenue recognition 
policies.

3. Short-term investments

    Short-term investments are comprised of fixed income securities which are 
classified as available-for-sale securities. As of April 30, 1997, the 
Company had one Federal Agency security with an amortized cost of $9,952,000 
which approximates fair value. As of April 30, 1998 the Company had two 
Federal Agency securities with an amortized cost of $34,818,000 and 
$34,598,000 which approximate fair value. The Federal Agency securities 
mature within one year. During the years ended April 30, 1997 and 1998, 
maturities of fixed income securities resulted in proceeds of $25,895,000 and 
$219,475,000, respectively.

                                       51
<PAGE>



4. Accounts Receivable Allowance for Doubtful Accounts

    The following table provides a summary of the activity in the accounts
receivable allowance for doubtful accounts for the years ended April 30, 1996,
1997, and 1998:

<TABLE>
<CAPTION>

                                                                   Year Ended April 30,
                                                              1996          1997          1998
                                                                      (in thousands)
<S>                                                            <C>           <C>           <C>
Balance at beginning of period                             $    205      $    321           205
Charged to expense..............................                265            80           336
Deductions......................................               (149)         (196)         (331)
                                                           --------      --------      --------
 Balance at end of period                                   $   321      $    205           210
                                                           --------      --------      --------
                                                           --------      --------      --------

</TABLE>


5. Property and Equipment

  Property and equipment is recorded at cost, less accumulated depreciation.
Property and equipment consists of:

<TABLE>
<CAPTION>

                                                                                April 30,
                                                                            1997          1998
                                                                             (in thousands)
<S>                                                                       <C>           <C>
Computer equipment............................................            $ 4,564         6,736
Furniture and fixtures........................................              1,494         2,509
Automobiles...................................................                755           541
Leasehold improvements........................................                248           422
                                                                          -------       -------
                                                                            7,061        10,208
Less: accumulated depreciation and amortization                            (3,577)       (5,197)
                                                                          -------       -------
                                                                          $ 3,484       $ 5,011
                                                                          -------       -------
                                                                          -------       -------

</TABLE>


  Included in property and equipment are assets leased under capital lease
obligations as follows:

<TABLE>
<CAPTION>

                                                              April 30,
                                                        1997             1998
                                                           (in thousands)

<S>                                                   <C>              <C>
Computer equipment............................        $  384              387
Furniture and fixtures........................           379              383

</TABLE>


                                       52
<PAGE>

<TABLE>
<CAPTION>

                                                              April 30,
                                                        1997             1998
                                                           (in thousands)

<S>                                                   <C>              <C>

Automobiles...................................           730              525
Leasehold improvements........................            27               --
                                                      ------           ------
                                                       1,520            1,295
Less accumulated amortization                          (535)            (769)
                                                      ------           ------
                                                     $  985            $ 526
                                                      ------           ------
                                                      ------           ------
</TABLE>

    The amortization expense on capital leases amounted to $337,000 and $438,000
for the years ended April 30, 1997 and 1998, respectively.

6. Income Taxes

    Income (loss) from continuing operations before income taxes was distributed
geographically as follows:

<TABLE>
<CAPTION>

                                                    Year Ended April 30,
                                              1996         1997         1998
                                                      (in thousands)
<S>                                       <C>          <C>           <C>
Domestic................................  $     87       $  342         1,850
Foreign.................................       555        4,896        10,305
                                          --------       ------       -------
 Total..................................  $    642       $5,238        12,155
                                          --------       ------       -------
                                          --------       ------       -------

</TABLE>

  Components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>

                                                                               Year Ended April 30,
                                                                         1996          1997       1998
                                                                                  (in thousands)

<S>                                                                    <C>           <C>          <C>
Current:
Federal.....................................................           $   --       $   122       $   731
State.......................................................                5            13           337
Foreign.....................................................              100             2            43
 Total current provision..................................                105           137         1,111
Deferred:
Federal.....................................................           $   58       $  (70)       $     5
State.......................................................                2            46            22
Foreign.....................................................             (946)         (303)        1,624
                                                                       ------        ------        ------
 Total deferred provision (benefit)                                      (886)         (327)        1,651
                                                                       ------        ------        ------
 Total provision (benefit) for income taxes                             $(781)       $ (190)        2,762
                                                                       ------        ------        ------
                                                                       ------        ------        ------

</TABLE>


                                       53
<PAGE>

The approximate tax effects of temporary differences which give rise to net
deferred taxes are:

<TABLE>
<CAPTION>

                                                                                     April 30,
                                                                                 1997         1998
                                                                                   (in thousands)
<S>                                                                            <C>            <C>
Deferred income taxes, noncurrent asset

 Net operating loss carryforwards.......................................        $2,774        $   82
 Depreciation...........................................................          --             (86)
 Revenue Recognition....................................................          --              84
 Timing difference reserve (Sweden).....................................          --             (55)
 Other..................................................................           (18)            6
                                                                                ------        ------
 Total deferred income taxes, noncurrent asset..........................         2,756            31
 Valuation allowance....................................................        (1,113)          (26)
                                                                                ------        ------
 Total net deferred income taxes, noncurrent asset......................         1,643             5
                                                                                ------        ------
Deferred income taxes, long-term liability
 Net operating loss carryforwards.......................................            44          --
 Depreciation...........................................................           (84)         --
 Other..................................................................           (28)         --
                                                                                ------        ------
 Total deferred income taxes, long-term liability.......................           (68)         --
                                                                                ------        ------
 Total net deferred tax asset...........................................        $1,575        $    5
                                                                                ------        ------
                                                                                ------        ------
</TABLE>


    A reconciliation of the provision (benefit) for income taxes to the amount
computed by applying the statutory rates is as follows:

<TABLE>
<CAPTION>

                                                                   Year Ended April 30,
                                                  1996                   1997                      1998
                                               $         %            $           %            $            %
                                                                     (in thousands)
<S>                                       <C>         <C>         <C>           <C>         <C>          <C>
Statutory rate                            $   218        34%      $  1,780        34%       $  4,133      34%
Benefit of utilization of net
 operating loss and tax credit
 carryforwards                               (542)      (85)          (128)       (2)           --        --
Valuation of temporary
 Differences                               (1,176)     (183)        (1,614)      (31)         (1,037)     (8)
Deferred revenues                             620        96             --        --            --        --
Foreign taxes                                 (33)       (5)          (317)       (6)           (586)     (5)
Other                                         132        21             89         1             252       2
                                          --------     ------     ---------      ----       --------     ----
Effective tax rate                        $  (781)     (122)%     $   (190)       (4)%         2,762      23%
                                          --------     ------     ---------      ----       --------     ----
                                          --------     ------     ---------      ----       --------     ----

</TABLE>


                                       54
<PAGE>

    As of April 30, 1997, the Companies had net operating loss carryforwards 
of approximately $10,020,000 available to offset future taxable income of 
which $9,793,000 is related to net operating loss carryforwards in IMAB. 
During the fiscal year ended April 30, 1998, all of the net operating loss 
carryforwards in IMAB were utilized.

    The Companies have not recorded deferred income taxes applicable to
undistributed earnings of foreign subsidiaries that are indefinitely reinvested
in foreign operations.

    The sale of common stock by Company employees who participate in the 
Company's stock compensation plans created disqualifying dispositions that 
resulted in reductions to income taxes currently payable and a corresponding 
increase to additional paid-in capital totaling $787,000 for the year ended 
April 30, 1998. These reductions are "permanent differences" and do not 
affect the provisions for deferred or current income tax expense. As of April 
30, 1998, the Company has $3,266,000 of such reductions available to reduce 
future federal taxes payable through April 30, 2013.

7. Borrowings

    During the year ended April 30, 1997, proceeds from the Company's initial
public offering were utilized to repay all outstanding short-term debt.

    During the year ended April 30, 1997, the Company closed all credit
facilities except for the line of credit facility denominated in U.S. dollars.
As of April 30, 1997 and 1998, available and unused lines of credit amount to
$1,036,000.

    In September 1997, a U.S. subsidiary of the Company entered into a 
collateralized credit facility agreement that enables it to borrow up to 
$2,000,000 to finance computer and networking equipment purchases through 
December 1998. Initial borrowings of $1,253,771 bear interest monthly at 
9.05% per annum. Monthly interest on subsequent borrowings under the 
facility are fixed and determined based upon the 3 year U.S. Treasury Note 
rate on the date of borrowing plus 3.04%. In December 1997, the subsidiary 
borrowed an additional $285,514 under the facility which bears interest 
monthly at 8.89% per annum. Each borrowing transaction is payable over 36 
monthly installments of principal and interest and is collateralized by the 
underlying equipment being purchased. The collateralized credit facility is 
guaranteed by the Company.

8. Accrued Expenses and Other Current Liabilities



                                       55
<PAGE>


<TABLE>
<CAPTION>

                                                                 April 30,
                                                            1997            1998
                                                               (in thousands)
<S>                                                       <C>              <C>
Accrued purchases.............................            $  651           $1,799
Accrued consultancy...........................                --            1,463
Accrued maintenance...........................                --              670
Acquisition of Ceratina.......................             1,025               --
Accrued pension taxes.........................               407              451
Value-added tax...............................               160              431
Employee withholding taxes....................                --              601
Income tax payable............................                --              115
Other.........................................               212              486
                                                           -----            -----
                                                          $2,455           $6,016
                                                           -----            -----
                                                           -----            -----
</TABLE>

9. Accrued Payroll and Employee Benefits

<TABLE>
<CAPTION>

                                                                April 30,
                                                           1997            1998
                                                              (in thousands)

<S>                                                       <C>              <C>
Accrued commissions...............................        $2,500           $  636
Accrued payroll taxes.............................         1,392            1,030
Accrued vacation pay..............................         1,030            1,528
Accrued salaries and bonus........................           297            1,708
Accrued pension expenses..........................           290              365
Debt for ESPP.....................................            --              671
                                                           -----           ------
                                                          $5,509           $5,938
                                                           -----           ------
                                                           -----           ------

</TABLE>

10. Employee Benefit Plans

    The Companies provide retirement benefits for substantially all employees 
in the United States and in foreign locations. During the fiscal year ended 
April 30, 1998, the Company's French subsidiary established a defined benefit 
plan which is not significant at the present time. In the U.S., the U.K., and 
the Netherlands, the Companies sponsor defined contribution plans. In 
addition, IMAB has a supplemental defined contribution plan for certain key 
management.

    The Companies' Swedish subsidiary, IMAB, participates in several pension
plans (non-contributory for employees), which cover substantially all employees
of its Swedish operations. The plans are administered by a national
organization, Pensionsregistreringsinstitutet ("PRI"), in which most companies
in Sweden participate. The level of benefits and actuarial assumptions are
established by the national organization and, accordingly, IMAB may not change
benefit levels or actuarial assumptions. The Company accounts for pensions in
accordance with SFAS No. 87, "Employers' Accounting for Pensions" using the
projected unit credit cost method.

    The net periodic pension cost related to continuing operations is comprised
of the following:



                                       56
<PAGE>


<TABLE>
<CAPTION>

                                                                                   Year Ended April 30,
                                                                             1996          1997          1998
                                                                                      (in thousands)
<S>                                                                          <C>           <C>           <C>
Service cost...........................................................      $164          $263           241
Interest cost..........................................................        85           171           192
Amortization of actuarial net loss or gain.............................       (9)             4            11
Amortization of transition obligation..................................         3             3             3
                                                                             ----          ----          ----
Net periodic pension cost..............................................      $243          $441          $447
                                                                             ----          ----          ----
                                                                             ----          ----          ----
</TABLE>


    The following table shows the plans funded status and amounts recognized in
the consolidated balance sheet:

<TABLE>
<CAPTION>

                                                                                      April 30,
                                                                                   1997        1998
                                                                                    (in thousands)
<S>                                                                               <C>         <C>
Actuarial present value of benefit obligation:
Vested benefit obligation.................................................        $1,470       2,009
Additional benefits due to salary increases..............................            590         633
                                                                                  ------      ------
Projected benefit obligation ("PBO")......................................         2,060       2,642
Fair value of plan assets.................................................        --              --
                                                                                  ------      ------
Unfunded PBO..............................................................         2,060       2,642
Unrecognized actuarial (gain) or loss.....................................         (366)       (493)
Unrecognized transition obligation........................................          (20)        (17)
                                                                                  ------      ------
Accrued pension liability.................................................        $1,674      $2,132
                                                                                  ------      ------
                                                                                  ------      ------

</TABLE>


  The actuarial assumptions used in computing the pension amounts above were:

<TABLE>
<CAPTION>
                                                                   Years Ended April 30,
                                                           1996             1997           1998
<S>                                                       <C>              <C>              <C>
Discount rate.........................                     8.0%             8.0%             5.5%
Salary increase.......................                     5.0%             5.0%             3.0%
Inflation.............................                     4.0%             4.0%             2.0%

</TABLE>

 Defined Contribution Plans

    Contributions by the Companies relating to their defined contribution plans
for the years ended April 30, 1996, 1997, and 1998 were $504,000, $685,000, and
$815,000 respectively.



                                       57
<PAGE>


11. Capital Lease Obligations

<TABLE>
<CAPTION>

                                                                                   April 30,
                                                                                  1997     1998
                                                                                 (in thousands)
<S>                                                                             <C>       <C>
Obligations under capital leases, imputed interest rates of 11.0%-
20.0% and 10.2%-22.1% in 1997 and 1998, respectively, terms vary
from 36 to 60 months, collateralized by the underlying assets..................  $ 976    $ 555
Less current portion............................................................  (422)    (274)
                                                                                  -----    -----
Capital lease obligations....................................................... $ 554    $ 281
                                                                                  -----    -----
                                                                                  -----    -----
</TABLE>


    Future minimum payments, by year and in the aggregate, under noncancellable
capital leases consist of the following as of April 30, 1998.

<TABLE>
<CAPTION>

                                      Future minimum payments
                                        on capital leases
                                         (in thousands)
<S>                                     <C>
Fiscal Year Ending April 30,
1999...............................         $  337
2000...............................            285
2001...............................             83
2002...............................              4
2003...............................              0
Thereafter.........................              0
                                             -----
Total future minimum lease payments         $  709
                                             -----
                                             -----
</TABLE>

12. Stockholders' Equity

    The Company's Amended and Restated Certificate of Incorporation as in effect
as of April 30, 1998, authorizes (i) 15,000,000 shares of preferred stock
("Preferred Stock") at par value of $0.01 and (ii) 75,000,000 shares of Common
Stock at par value of $0.01 of which 12,500,000 shares have been designated as
Class B Common Stock. No shares of Preferred Stock were outstanding at April 30,
1998. Holders of Common Stock are entitled to one vote for each share held.
Holders of Class B Common Stock have no voting rights. All holders of Common
Stock and Class B Common Stock are entitled to receive dividends in the same
amount per share.

    Pursuant to the Amended and Restated Certificate of Incorporation,
outstanding shares of Class B Common Stock, upon any transfer of such shares by
the holder thereof, will be automatically converted into a like number of shares
of Common Stock, subject to adjustment upon certain events with respect to the
Common Stock. In addition, holders of Class B Common Stock have the right to
convert such shares to Common Stock at any time provided that after conversion
the holder may not control more than 49% of the Common Stock.

    All outstanding shares of Convertible Preferred Stock were converted into
Common Stock (20%) and Class B Common Stock (80%) on the date of the initial
public offering during the fiscal 



                                       58
<PAGE>


year ended April 30, 1997. All outstanding shares of Class B Common Stock were
converted into Common Stock on the date of the secondary public offering during
the fiscal year ended April 30, 1998.

    Total stockholders' equity includes an amount of SEK 40,800,000
(approximately U.S. $6,000,000) in IMAB which is restricted as to usage
according to Swedish Company Law. The amount only can be used to cover a net
deficit, for an increase in share capital, or for other uses as agreed by the
courts.

    In May 1996, the Company's Board of Directors approved a three-for-one stock
split of its issued and outstanding Common Stock, Class B Common Stock, and
Convertible Preferred Stock without change to the par value, which became
effective in July 1996. All per share, weighted average shares outstanding and
option data presented in the consolidated financial statements have been
retroactively adjusted to reflect the effects of the split unless otherwise
indicated.

13. Stock Compensation Plans

 Stock Option Plan

    In May 1995, the Company adopted the Industri-Matematik International Corp.
Stock Option Plan (the "U.S. Plan"). The U.S. Plan provides for grants of
incentive stock options to key employees (including officers and employee
directors) of the Companies and non-incentive stock options to members of the
Company's Board of Directors, consultants and other advisors of the Company who
are not employees. The maximum term for either form of option is ten years. A
total of 3,000,000 shares of Common Stock were reserved for future issuance
under the U.S. Plan, of which 1,706,519 are available for grant as of April 
30, 1998.

    The Company's board of directors believes that all stock options were
granted with an exercise price equal to the fair value of the Company's Common
Stock on the date of the grant, based on the facts, circumstances and
limitations existing at the time of their determinations.

The following is a summary of option transactions and exercise prices as it 
relates to the Company's U.S. Plan:

<TABLE>
<CAPTION>
                                                                                                   Weighted
                                                                                                    Average
                                                           Shares           Price per share      Exercise Price
                                                       --------------       ---------------      --------------
<S>                                  <C>                 <C>                 <C>                     <C>
                                     Granted             1,089,975            $2.00 - $6.00           $2.28
                                     Exercised                --
                                     Terminated           (150,000)           $2.00 - $6.00           $4.00
                                                       --------------
Outstanding at April 30, 1996                              939,975                $2.00               $2.00
                                                       --------------
                                                       --------------

                                     Granted               215,000           $7.875 - $9.00           $8.95
                                     Exercised             (35,500)               $2.00               $2.00
                                     Terminated            (75,000)               $2.00               $2.00
                                                       --------------
Outstanding at April 30, 1997                            1,044,475            $2.00 - $9.00           $3.43
                                                       --------------
                                                       --------------

                                     Granted               577,500           $11.06 - $31.22         $20.74
                                     Exercised            (618,484)           $2.00 - $9.00           $2.28
                                     Terminated           (363,993)          $2.00 - $20.38           $7.80
                                                       --------------
Outstanding at April 30, 1998                              639,498           $2.00 - $31.22          $17.68
                                                       --------------
                                                       --------------

Vested at April 30, 1998                                    42,999           $2.00 - $9.00            $7.86
                                                       --------------
                                                       --------------
</TABLE>

The following table summarizes information concerning outstanding and 
exercisable options as of April 30, 1998:

<TABLE>
<CAPTION>
                          Options Outstanding
---------------------------------------------------------------------------------
                                                 Weighted Average                         Options Exercisable
                              ---------------------------------------------------      ----------------------
                                                                                                       Weighted
                              Number of         Remaining Life                         Number of        Average
Range of Exercise Prices       Options            (Years)          Exercise Price       Options     Exercise Price
------------------------      ---------     ------------------     --------------      ---------    --------------
<S>                           <C>               <C>                  <C>                <C>           <C>

        $2.00                   26,998             7.01                 2.00             6,999          2.00
     7.88 to 11.13             227,500             8.51                 9.40            36.000          9.00
    15.38 to 22.25             100,000             9.48                19.50               --           0.00
    24.75 to 31.13             285,000             9.85                25.14               --           0.00
------------------------      ---------     ------------------     --------------      ---------    ---------  
    $2.00 to 31.13             639,498             9.20                17.68            42,999          7.86
                              ---------                                                ---------
                              ---------                                                ---------
</TABLE>


                                       59
<PAGE>


 Restricted Stock Program

    In May 1995, the Company instituted a restricted stock program pursuant to
which shares of the Company's Common Stock were purchased by certain key
employees of the Company's operating subsidiary in Sweden in exchange for
nonrecourse promissory notes. The shares were issued through a wholly owned
subsidiary of the Company, Software Finance Corporation ("SFC"). Principal on
the promissory notes is due either nine or ten years after issuance with
interest being due and payable annually.

    Under the Restricted Stock Program the total number of shares sold were
1,256,985 at a weighted average price of $2.09 per share for total proceeds of
$2,626,000. During the fiscal year ended April 30, 1997, 49,995 shares sold
pursuant to the Restricted Stock Program were repurchased from one shareholder
for $237,476. During the fiscal year ended April 30, 1998, 325,000 shares were
sold at a weighted average price of $14.38 per share for total proceeds of
$4,672,000.

    Under the terms of the restricted stock program, SFC has an option to
repurchase the shares issued to each employee provided it pays an annual option
premium. The exercise price to be paid by SFC upon exercise of a purchase option
is the fair market value, provided that if the option to purchase is exercised
prior to the end of a stated period, then the exercise price is the initial
purchase price for a percentage of the shares after the first anniversary of the
option agreement, generally decreasing by 20% each subsequent year, as a result
of which the exercise price is the fair market value. The annual option premium
paid by SFC is at a rate substantially equal to the interest due on the
non-recourse promissory note.

    The restricted stock shares are included within Common Stock and additional
paid-in capital in Stockholders' equity while the non-recourse promissory notes
are classified as a contra-account as notes receivable from Stockholders, and
shown in Stockholders' equity. SFC has the right and obligation to apply against
the payment of any principal due on the employee's promissory note any amounts
payable by SFC to the recipient of the Shares as the exercise price under the
Option Agreement. The Company has the ability to prevent the recipients from
selling the purchased securities. The Company has not recognized any
compensation expense in respect of the restricted stock in the statements of
operations since the purchase price of the restricted stock did not differ from
the estimated fair market value of the Common Stock on the date of issuance. The
restricted stock shares issued under this program and dividends paid are subject
to a pledge and security interest held by SFC.

  Employee Stock Purchase Plan

    Effective February 26, 1997, the Company adopted the Industri-Matematik
International Corp. 1997 Employee Stock Purchase Plan ("ESPP") to provide
eligible employees an opportunity to purchase shares of Company Common Stock at
a discount from market value through payroll deductions and other contributions.
600,000 shares were reserved for purchase pursuant to the ESPP. The ESPP
establishes purchase periods of up to 27 months and two 6-month accrual periods
per calendar year commencing each January 1 and July 1. On the last day of each
accrual period, participant account balances are used to purchase shares of
Common Stock at the lesser of 85% of the fair market value of the Common Stock
on such date or on the first day of the purchase period. No participant may
purchase more than 500 shares in any accrual period Employees purchased 263,685
shares at an average price of $5.65 per share under the ESPP during the fiscal
year ended April 30, 1998.

    As permitted by the provisions of Financial Accounting Standard No. 123
"Accounting for Stock-Based Compensation" (SFAS 123), the Company applies APB
Opinion 25 "Accounting for 



                                       60
<PAGE>



Stock Issued to Employees" and related interpretations in accounting for its
stock-based employee compensation plans. Accordingly, no compensation cost has
been recognized for the Company's stock options or for purchases under the
Company's ESPP. If compensation cost for the Company's stock option plans and
its ESPP had been determined based on the fair value at the grant dates as
defined by FAS 123, the Company's pro forma net income and earnings per share
would have been as follows:


<TABLE>
<CAPTION>

                                                                            Years ended April 30,
                                                                       1996          1997         1998
                                                                   (in thousands, except per share data)
<S>                                                                 <C>           <C>           <C>
Net income            As reported............................       $ 1,750        $ 6,902      $ 9,393
                      Pro forma..............................         1,298          6,386        7,857

Net income per share  As reported............................       $  0.07        $  0.25      $  0.30
-assuming dilution    Pro forma..............................          0.05           0.23         0.25

</TABLE>

    The fair value of each option grant is estimated on the date of the grant 
using the Black-Scholes options-pricing model with the following 
weighted-average assumptions used for grants in the years ended April 30, 
1996, 1997 and 1998: 

<TABLE>
<CAPTION>
                                     Years ended April 30,
                                    1996      1997     1998
                                   ------    ------   ------
<S>                                <C>       <C>      <C>
Expected term.....................      5         5        5
Volatility factor.................  80.0%     80.0%    86.5%
Risk-free interest rate...........  6.20%     6.67%    5.89%
Dividend yield....................  0.00%     0.00%    0.00%
Fair value........................  $1.63     $6.43   $14.78
</TABLE>

    Shares issued under the Company's ESPP were valued at the difference between
the market value of the stock and the discounted purchase price of the shares on
the date of purchase. The date of grant and the date of purchase coincide for
this plan.

    The weighted average grant date fair value of options granted to employees
under the ESPP was $2.19 during the year ended April 30, 1998.

14. Commitments and Contingencies

 Operating leases

    The Companies lease office facilities and certain office equipment under
various noncancelable operating lease agreements.

    Aggregate future minimum lease payments under noncancelable operating leases
are as follows as of April 30, 1998:

<TABLE>
<CAPTION>

                                              Future minimum payments
    Fiscal Year Ending April 30,               on operating leases
                                                  (in thousands)
    <S>                                        <C>
    1999......................................    $   3,412
    2000......................................        4,380
    2001......................................        3,584
    2002......................................        2,473

</TABLE>

                                       61

<PAGE>


<TABLE>
<CAPTION>

                                              Future minimum payments
    Fiscal Year Ending April 30,               on operating leases
                                                  (in thousands)
    <S>                                        <C>
    2003......................................        2,334
    Thereafter................................        6,717
                                                   --------
    Total future minimum lease payments            $ 22,900
                                                   --------
                                                   --------
</TABLE>


    Total rent expense under the leases was $973,000, $2,226,000, and $2,730,000
for the years ended April 30, 1996, 1997, and 1998, respectively.

 Litigation

    The Companies have not had a record of material disputes. The Companies are
not a party to any litigation that would have a material adverse effect on their
business, operating results, liquidity, or financial condition.

15. Relationship with Oracle

    In January 1997, the Company entered into a written agreement with Oracle
pursuant to which the two companies agreed to market the Oracle Solution Suite
incorporating the Company's System ESS software to potential customers in the
consumer packaged goods industry. The agreement deals with development of
component software, integration, marketing, and support. Pursuant to the written
agreement, Oracle pays the Company specified percentages of the total fees that
Oracle receives from the customer. The Company has the right to market System
ESS to customers in the consumer packaged goods industry as a joint solution or
in any manner which does not encompass all of the elements of the Oracle
Solution Suite. In addition, outside of the scope of the Oracle Solution Suite,
the Company and Oracle periodically enter into separate agent agreements with
respect to a customer authorizing Oracle to license the Company's System ESS
software to that customer. Pursuant to the agent agreements, Oracle pays to the
Company a specified amount for the particular license. For the fiscal years
ended April 30, 1996, 1997 and 1998, 58%, 63% and 53%, respectively, of the
Company's license revenues and 24%, 35% and 39%, respectively, of the Company's
total revenues was derived from customers introduced to the Company by Oracle.

16. Related Party Transactions

    The Companies had a consulting arrangement with a shareholder of the Company
which expired on October 31, 1996. Pursuant to this arrangement, the shareholder
received $306,000 and $228,000 from the Companies during the years ended April
30, 1996 and 1997, respectively.

    As of April 30, 1997, the Company had a short-term loan receivable with an
employee of the Company in the amount of $100,000. The loan was repaid during
the fiscal year ended April 30, 1998.

17. Geographic Information

    The Companies' operations are located primarily in the United States,
Sweden, the United Kingdom, the Netherlands, Germany, Australia, and France.

    The following table sets forth information relating to revenues, income
(loss) from operations and identifiable assets by geographic location of
subsidiaries:


                                       62

<PAGE>


<TABLE>
<CAPTION>

                                                                   Year Ended April 30,
                                                          1996             1997             1998
                                                                       (in thousands)
<S>                                                    <C>              <C>              <C>
Revenues:
  United States..................................      $ 12,805         $ 18,432         $ 35,832
  Sweden.........................................        25,439           35,629           50,221
  United Kingdom.................................         2,955            8,227            8,732
  Netherlands....................................            --               --            2,689
  Germany........................................            --               --            1,852
  France.........................................            --               --              555
  Australia......................................            --               --            1,244
  Interco. & Other...............................        (1,190)          (2,676)          (5,741)
                                                        -------          -------          -------
                                                       $ 40,009         $ 59,612         $ 95,384
                                                        -------          -------          -------
                                                        -------          -------          -------
Income (loss) from operations:
  United States..................................      $    214         $    747        $    (47)
  Sweden.........................................         1,098            4,938            8,857
  United Kingdom.................................            73            (234)              186
  Netherlands....................................            --            (295)                1
  Germany........................................            --               --              (8)
  France.........................................            --               --                0
  Australia......................................            --               --              (4)
  Interco. & Other...............................            --            (287)               89
                                                        -------          -------          -------
                                                       $  1,385         $  4,869         $  9,074
                                                        -------          -------          -------
                                                        -------          -------          -------
Identifiable assets:
  United States..................................                       $ 63,908         $164,363
  Sweden.........................................                         25,695           44,319
  United Kingdom.................................                          4,984            8,345
  Netherlands....................................                            156            3,402
  Germany........................................                             --            2,055
  France.........................................                             --              508
  Australia......................................                             --            1,781
  Discontinued Operations........................                             --               --
  Interco. & Other...............................                       (43,780)         (75,444)
                                                                         -------          -------
                                                                        $ 50,963         $149,329
                                                                         -------          -------
                                                                         -------          -------

</TABLE>


    The Company's export sales are less than 10 percent of total revenue. The
disclosure of export sales by geographic area, therefore, is not required
according to SFAS No. 14 "Financial Reporting for Segments of a Business
Enterprise." The following table is presented to show revenues by customer
location: 



                                       63
<PAGE>

<TABLE>
<CAPTION>

                                                                   Year Ended April 30,
                                                          1996             1997             1998
                                                                     (in thousands)
<S>                                                    <C>              <C>              <C>
Revenues:
  United States..................................      $ 18,212         $ 29,767         $ 53,545
  Sweden.........................................        13,516           11,536           13,519
  United Kingdom.................................         3,081            8,253            9,177
  Netherlands....................................            --               --            5,155
  France.........................................            --               --              987
  Other Europe...................................         3,249            4,064            6,672
  Asia/Pacific...................................         1,951            5,992            6,329
                                                        -------          -------          -------
                                                       $ 40,009         $ 59,612         $ 95,384
                                                        -------          -------          -------
                                                        -------          -------          -------

</TABLE>


 Major customers

    For the years ended April 30, 1996 and 1997, the Companies had no single
customers with sales comprising more than 10% of total revenues. For the year
ended April 30, 1998, the Companies recorded revenues from one customer, Oracle,
which comprised 15% of total revenues, comprising sales of integration services
in connection with the Oracle Agreement referred to in Note 15 above.

18. Acquisition of Ceratina

    On April 24, 1997, the Company acquired all of the outstanding shares of
Ceratina International AB ("Ceratina"), a Swedish-based warehouse management
software company, for $1,025,000. This amount was paid in May 1997 and is,
therefore, shown as other current liability at April 30, 1997. The Ceratina
acquisition agreement provides that the Company will be required to pay
additional consideration of $45,000 on the signing of each new license agreement
for warehouse software. This provision applies to license agreements made from
the date of the acquisition to April 30, 2000 and is limited to a total of
$768,000. The Company estimates that it is more likely than not that
approximately $384,000 will be required to be paid as additional consideration.
The results of Ceratina have been combined with those of the Company since
January 1, 1997.

    The acquisition was accounted for using the purchase method. Accordingly, a
portion of the purchase price was allocated to the net assets acquired based on
their estimated fair values. The fair value of the tangible assets acquired and
liabilities assumed was $781,000 and $516,000, respectively. The excess of the
purchase price over the net assets acquired, which includes the estimated
additional consideration as described above, amounted to $1,144,000. This amount
was recorded as goodwill and is being amortized over ten years on a
straight-line basis.

    The results of operations of Ceratina are immaterial with respect to the
Company as a whole.

19. Discontinued Operations

    On January 20, 1997, the Company sold its stock representing 55% ownership
in Pargon AB for $2,900,000 in cash. The Company recorded a gain of $1,100,000
(net of taxes of $372,000) on the sales. Pargon AB operated in two segments
constituting the production and sale of microprocessor compilers and consultancy
services for relational data base management systems ("RDBMS"). The
Microprocessor compiler segment includes the development and supply through



                                       64
<PAGE>


direct sale of compilers for microprocessors used by manufacturers of domestic
appliances and cellular communications equipment. The RDBMS consultancy segment
related to the supply of RDBMS consultancy services to public sector
institutions in Sweden.

    The disposal of these business segments has been accounted for as
discontinued operations in accordance with APB No. 30 and therefore, their
operations have been separately presented in the consolidated financial
statements. Revenues, cost of revenues, operating expenses, other income and
expense and provisions for income taxes for the fiscal year 1996 and 1997 have
been reclassified for amounts associated with the discontinued operations.

    Summary operating results associated with the discontinued operations of
Pargon AB for the years ended April 30, 1996 and 1997 were as follows:

<TABLE>
<CAPTION>

                                                                                 Year Ended April 30,
                                                                                 1996          1997
                                                                                   (in thousands)
<S>                                                                             <C>           <C>
Revenues..........................................................              $8,149        $6,783
                                                                                ------        ------
                                                                                ------        ------
Gross profit......................................................              $3,826        $3,836
                                                                                ------        ------
                                                                                ------        ------
Operating expenses................................................              $2,928        $2,906
                                                                                ------        ------
                                                                                ------        ------
Minority interest.................................................              $  275        $  424
                                                                                ------        ------
                                                                                ------        ------
Income (loss) from discontinued operations before
 income taxes ...................................................              $  590        $  519
Provision for income taxes........................................                263           145
                                                                                ------        ------
Income (loss) from discontinued operations after
 provision for income taxes.......................................             $  327        $  374
                                                                                ------        ------
                                                                                ------        ------

</TABLE>


20. Quarterly Information (Unaudited)

  Summarized quarterly consolidated financial information for 1997 and 1998 is
as follows:

<TABLE>
<CAPTION>

                                                                        Quarter Ended
                             July 31,      Oct. 31,      Jan. 31,     April 30,     July 31,      Oct. 31,      Jan. 31,  April 30,
                               1996          1996          1997          1997         1997          1997          1998      1998
                                                            (in thousands, except per share data)
<S>                          <C>           <C>           <C>           <C>          <C>           <C>           <C>        <C>
Total revenues               $9,217       $13,504       $15,611       $21,280      $15,706       $23,234       $26,952     $29,492
Gross profit                  3,943         6,706         9,381        14,170        8,038        13,513        15,896      14,292
Income (loss)
 from continuing
 operations                  (1,064)          184         2,201         4,107          630         3,190         4,141       1,432
Income (loss)
 from discontinued


</TABLE>


                                       65
<PAGE>
<TABLE>
<CAPTION>

                                                                        Quarter Ended
                             July 31,      Oct. 31,      Jan. 31,     April 30,     July 31,      Oct. 31,      Jan. 31,  April 30,
                               1996          1996          1997          1997         1997          1997          1998       1998
                                                            (in thousands, except per share data)
<S>                          <C>           <C>           <C>           <C>          <C>           <C>           <C>           <C>
 operations                       2           263           109          --             --            --            --           --
Net income
 (loss)                      (1,062)          549         3,308         4,107          630         3,190         4,141        1,432
Net income (loss) per
 share-assuming
 dilution                     (0.04)         0.02          0.12          0.14         0.02          0.11          0.13         0.04
Weighted average
 number of
 shares-assuming
 dilution                    24,502        25,568        28,443        28,338       28,445        28,960        32,867       33,009

</TABLE>



                                       66
<PAGE>


                                   SIGNATURES

    Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                     INDUSTRI-MATEMATIK INTERNATIONAL CORP.

July 28, 1998                        By: /S/ STIG G. DURLOW
                                          ----------------------------------
                                         Stig G. Durlow, Chairman, President,
                                         and Chief Executive Officer

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

July 28, 1998                            /S/ STIG G. DURLOW
                                          ----------------------------------
                                          Stig G. Durlow, Principal
                                          Executive Officer, Director

July 28, 1998                            /S/ LARS-GORAN PETERSON
                                          ----------------------------------
                                          Lars-Goran Peterson, Principal
                                          Financial and Accounting
                                          Officer

July 28, 1998                            /S/ JEFFREY A. HARRIS
                                          ----------------------------------
                                          Jeffrey A. Harris, Director

July 28, 1998                            /S/ WILLIAM H. JANEWAY
                                          ----------------------------------
                                          William H. Janeway, Director

July 28, 1998                            /S/ MARTIN LEIMDORFER
                                          ----------------------------------
                                          Martin Leimdorfer, Director

July 28, 1998                            /S/ GEOFFREY W. SQUIRE
                                          ----------------------------------
                                          Geoffrey W. Squire, Director