<PAGE>   1
 
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--------------------------------------------------------------------------------
 
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                             ---------------------
 
                                  FORM 10-Q/A
                          AMENDMENT NO. 2 TO FORM 10-Q
 
                                QUARTERLY REPORT
                        PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
 
                        FOR QUARTER ENDED MARCH 31, 1998
 
                         COMMISSION FILE NUMBER 0-23117
 
                              BEST SOFTWARE, INC.
             (Exact Name of Registrant as Specified in its Charter)
 
<TABLE>
<S>                                      <C>                            <C>                     
            VIRGINIA                                 7372                        54-1222526     
  (State or other jurisdiction           (Primary Standard Industrial         (I.R.S. Employer  
of incorporation or organization)         Classification Code Number)        Identification No.)
</TABLE>
 
                           11413 ISAAC NEWTON SQUARE
                                RESTON, VA 20190
                                 (703) 709-5200
  (Address, including zip code, and telephone number, including area code, of
                   registrant's principal executive offices)
 
                             ---------------------
 
     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 the number of shares outstanding of each of issuer's classes of
common stock as of the latest practicable date:
 
<TABLE>
<CAPTION>
                                                              NUMBER OF
                                                                SHARES
                                                            OUTSTANDING ON
                    TITLE OF CLASS                          APRIL 30, 1998
                    --------------                          --------------
<S>                                                      <C>
Common Stock, no par value.............................       11,261,278
</TABLE>
 
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<PAGE>   2
 
                              BEST SOFTWARE, INC.
 
        AMENDED FILING OF FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
 
     This Quarterly Report on Form 10-Q/A is being filed by Best Software, Inc.
(the "Company") to amend and restate Items 1 and 2 of Part I and Exhibits 11 and
27 of the Company's Form 10-Q for the quarter ended March 31, 1998 to reflect
the Company's re-evaluation of write-off for in-process research and development
with regard to a certain acquisition. See Note 1 to the Consolidated Financial
Statements.
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
PART I  FINANCIAL INFORMATION
  ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  Consolidated Balance Sheets as of March 31, 1998 and
     December 31, 1997......................................    3
  Consolidated Statements of Operations for the three months
     ended March 31, 1998 and 1997..........................    4
  Consolidated Statements of Cash Flows for the three months
     ended March 31, 1998 and 1997..........................    5
  Notes to Consolidated Financial Statements................    6
  ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
     CONDITION AND RESULTS OF OPERATIONS....................    8
  SIGNATURE.................................................   15
  EXHIBIT INDEX.............................................   16
</TABLE>
 
                                        2
<PAGE>   3
 
                                     PART I
 
ITEM 1.  FINANCIAL STATEMENTS
 
                              BEST SOFTWARE, INC.
 
                          CONSOLIDATED BALANCE SHEETS
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                               MARCH 31,    DECEMBER 31,
                                                                 1998           1997
                                                              -----------   ------------
                                                              (UNAUDITED)
<S>                                                           <C>           <C>
                                         ASSETS
Current assets:
  Cash and cash equivalents.................................    $23,521       $33,164
  Short-term investments....................................     20,074        12,268
  Accounts receivable, net of allowance ($1,001 and $991
     respectively)..........................................      5,857         4,661
  Inventory.................................................        296           280
  Prepaid expenses and other current assets.................      2,959         1,419
  Deferred tax asset........................................      1,000           700
                                                                -------       -------
          Total.............................................     53,707        52,492
                                                                -------       -------
Property and equipment, net.................................      2,766         2,182
Deferred tax asset..........................................      3,470         2,300
Acquired intangibles, net...................................      6,580            --
Other assets................................................        366            36
                                                                -------       -------
          Total.............................................    $66,889       $57,010
                                                                =======       =======
                          LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable and accrued expenses.....................    $13,332       $10,375
  Notes payable -- current..................................      1,455           650
  Deferred maintenance and services revenue.................     16,544        14,918
                                                                -------       -------
          Total.............................................     31,331        25,943
                                                                -------       -------
Note payable -- noncurrent..................................        117            --
Deferred maintenance and services revenue...................      1,090         1,313
Other noncurrent liabilities................................      1,176            --
                                                                -------       -------
          Total liabilities.................................     33,714        27,256
                                                                -------       -------
Shareholders' equity:
  Preferred stock, $0.01 par value; 1,000,000 shares
     authorized, none issued................................         --            --
  Common stock, no par value; 40,000,000 shares authorized;
     11,243,730 and 10,913,385 issued and outstanding,
     respectively...........................................     37,084        33,604
  Additional paid-in capital................................      1,335         1,000
  Deferred compensation.....................................       (116)         (124)
  Accumulated deficit.......................................     (5,128)       (4,726)
                                                                -------       -------
          Total shareholders' equity........................     33,175        29,754
                                                                -------       -------
          Total.............................................    $66,889       $57,010
                                                                =======       =======
</TABLE>
 
 The accompanying notes are an integral part of these consolidated statements.
 
                                        3
<PAGE>   4
 
                              BEST SOFTWARE, INC.
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                                                      MARCH 31,
                                                              -------------------------
                                                                 1998          1997
                                                              -----------   -----------
                                                              (UNAUDITED)   (UNAUDITED)
<S>                                                           <C>           <C>
Revenue:
  License fees and royalty..................................    $ 6,803       $ 4,990
  Services..................................................      6,895         5,176
                                                                -------       -------
          Total.............................................     13,698        10,166
                                                                -------       -------
Cost of revenue:
  License fees and royalty..................................        440           803
  Services..................................................      2,139         1,565
                                                                -------       -------
          Total.............................................      2,579         2,368
                                                                -------       -------
Gross margin................................................     11,119         7,798
                                                                -------       -------
Operating expenses:
  Sales and marketing.......................................      4,704         3,544
  Research and development..................................      2,121         1,338
  General and administrative................................      1,710         1,392
  Write-off of purchased research and development...........      3,850            --
                                                                -------       -------
          Total.............................................     12,385         6,274
                                                                -------       -------
Operating (loss) income.....................................     (1,266)        1,524
Other income, net...........................................        594           125
                                                                -------       -------
(Loss) income from operations before income taxes...........       (672)        1,649
Income tax benefit..........................................       (270)         (455)
                                                                -------       -------
Net (loss) income...........................................    $  (402)      $ 2,104
                                                                =======       =======
Basic net (loss) income per share...........................    $ (0.04)      $  0.31
                                                                =======       =======
Diluted net (loss) income per share.........................    $ (0.04)      $  0.25
                                                                =======       =======
Basic weighted average shares outstanding...................     10,981         6,731
                                                                =======       =======
Diluted weighted average shares outstanding.................     10,981         8,356
                                                                =======       =======
</TABLE>
 
 The accompanying notes are an integral part of these consolidated statements.
 
                                        4
<PAGE>   5
 
                              BEST SOFTWARE, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                                                      MARCH 31,
                                                                 1998          1997
                                                              -----------   -----------
                                                              (UNAUDITED)   (UNAUDITED)
<S>                                                           <C>           <C>
Net (loss) income...........................................   $   (402)      $ 2,104
Adjustments to reconcile net income to net cash provided by
  operating activities:
  Depreciation and amortization.............................        383           264
  Compensation associated with stock options................          6            --
  Write-off of purchased research and development...........      3,850            --
  Deferred tax asset........................................     (1,470)       (1,097)
(Increase) decrease in assets:
  Accounts receivable (net).................................        200         1,934
  Inventory.................................................         (6)           50
  Prepaid expenses and other assets.........................       (586)          511
Increase (decrease) in liabilities:
  Accounts payable and accrued expenses.....................      2,552           534
  Deferred maintenance and services revenue.................        904          (430)
  Other (net)...............................................         (3)            3
                                                               --------       -------
     Net cash provided by operating activities..............      5,428         3,873
                                                               --------       -------
Cash flows from investing activities:
  Purchases of property and equipment.......................       (652)         (281)
  Purchases of short-term investments.......................    (13,695)           --
  Sales of short-term investments...........................      5,889            --
  Acquisition of HR Management Software GmbH................     (6,800)           --
                                                               --------       -------
     Net cash used in investing activities..................    (15,258)         (281)
                                                               --------       -------
Cash flows from financing activities:
  Proceeds from exercise of stock options and warrants......        193           409
  Purchase and retirement of treasury stock.................         (6)         (295)
  Cash dividends paid to shareholders.......................         --        (3,556)
  Principal payments under capital lease obligation.........         --           (16)
                                                               --------       -------
     Net cash provided by (used in) financing activities....        187        (3,458)
                                                               --------       -------
Net (decrease) increase in cash and cash equivalents........     (9,643)          134
Cash and cash equivalents, beginning of period..............     33,164        13,231
                                                               --------       -------
Cash and cash equivalents, end of period....................   $ 23,521       $13,365
                                                               ========       =======
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid during the period for:
     Income taxes...........................................   $     --       $    77
     Interest...............................................   $     13       $    24
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
  FINANCING ACTIVITIES:
     240,000 shares issued to HR Management Software GmbH...   $  3,630       $    --
</TABLE>
 
 The accompanying notes are an integral part of these consolidated statements.
 
                                        5
<PAGE>   6
 
                              BEST SOFTWARE, INC.
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF MARCH 31, 1998 (UNAUDITED)
 
1.   BASIS OF PRESENTATION AND RESTATEMENT
 
     The accompanying unaudited consolidated financial statements and notes
thereto have been prepared in accordance with generally accepted accounting
principles for interim financial information and should be read in conjunction
with the audited consolidated financial statements for the nine month transition
period ended December 31, 1997 included in the Company's Form 10-K. Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted as permitted by rules and regulations of the
Securities and Exchange Commission. Interim results of operations for the three
month period ended March 31, 1998 are not necessarily indicative of operating
results for the full fiscal year.
 
     In the opinion of management, all adjustments (consisting of normal
recurring entries) necessary for the fair presentation of the consolidated
financial position, results of operations, and changes in cash flows for the
periods presented have been included. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
 
     In a letter to the American Institute of Certified Public Accountants dated
September 9, 1998, the Securities and Exchange Commission ("SEC") expressed its
views on purchased in-process research and development ("IPR&D") charges. After
discussions with the Staff of the SEC and pursuant to the guidance in this
letter, the Company has reallocated the purchase price associated with its March
1998 acquisition of HR Management Software GmbH. As a result, the original
amount of purchase price that was allocated to IPR&D was reduced by $5.5 million
to $3.9 million, intangible assets were increased by $5.5 million to $6.6
million and will be amortized over three to seven years, and the deferred tax
asset was reduced by $2.1 million to $4.5 million. The Company believes this
change has no economic impact on the Company's financial position or liquidity.
 
     The effect of the restatement on the Company's previously reported
consolidated financial statements for the first quarter of 1998 is as follows
(in thousands except per share amounts):
 
<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                                                   MARCH 31, 1998
                                                              -------------------------
                                                              AS REPORTED    RESTATED
                                                              -----------   -----------
                                                              (UNAUDITED)   (UNAUDITED)
<S>                                                           <C>           <C>
Statement of Operations data:
     Write-off of purchased research and development........    $ 9,370       $ 3,850
     Total operating expenses...............................     17,905        12,385
     Loss from operations before income taxes...............     (6,192)         (672)
     Income tax benefit.....................................     (2,400)         (270)
     Net loss...............................................     (3,792)         (402)
     Basic and diluted net loss per share...................    $ (0.35)      $ (0.04)
</TABLE>
 
     Acquired intangibles were previously reported in other assets.
 
                                        6
<PAGE>   7
                              BEST SOFTWARE, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
<TABLE>
<CAPTION>
                                                                   MARCH 31, 1998
                                                              -------------------------
                                                              AS REPORTED    RESTATED
                                                              -----------   -----------
                                                              (UNAUDITED)   (UNAUDITED)
<S>                                                           <C>           <C>
Balance Sheet data:
     Deferred tax asset.....................................    $ 6,600       $ 4,470
     Acquired intangibles, net..............................      1,060         6,580
     Total assets...........................................     63,499        66,889
     Common Stock...........................................     33,454        37,084
     Additional Paid-in-capital.............................      4,965         1,335
     Accumulated deficit....................................     (8,518)       (5,128)
     Total shareholders' equity.............................     29,785        33,175
     Total liabilities and shareholders' equity.............    $63,499       $66,889
</TABLE>
 
2.  NET INCOME PER SHARE
 
     In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Account Standards ("SFAS") No. 128, "Earnings Per Share". SFAS No. 128
requires dual presentation of basic and diluted earnings per share. Basic
earnings per share includes no dilution and is computed by dividing net income
available to common shareholders by the weighted average number of common shares
outstanding for the period.
 
     In February 1998, the Securities and Exchange Commission released Staff
Accounting Bulletin (SAB) No. 98 on computation of earnings per share. SAB 98
replaces SAB 83 which previously required that all common stock, options and
warrants issued within one year of an Initial Public Offering be included in the
calculation of earnings per share as if outstanding for all periods presented.
Under SAB 98, only issuances of common stock, options and warrants issued for
nominal consideration in periods preceding an Initial Public Offering are
required to be included in the calculation of earnings per share as if they were
outstanding for all periods presented. In the periods preceding the Company's
Initial Public Offering, the Company had no issuances of common stock, options
or warrants for nominal consideration.
 
     Earnings per share for all 1997 periods presented has been restated to
comply with SFAS No. 128 and SAB No. 98.
 
     In accordance with SFAS No. 128, basic net income per share and diluted net
income per share can be reconciled as indicated below (in thousands, except per
share data) (unaudited):
 
<TABLE>
<CAPTION>
                                                 THREE MONTHS ENDED             THREE MONTHS ENDED
                                                   MARCH 31, 1998                 MARCH 31, 1997
                                            ----------------------------   ----------------------------
                                                              PER-SHARE                      PER-SHARE
                                            INCOME   SHARES     AMOUNT     INCOME   SHARES     AMOUNT
                                            ------   ------   ----------   ------   ------   ----------
<S>                                         <C>      <C>      <C>          <C>      <C>      <C>
Basic net (loss)income per share:
  (Loss) income available to common
     shareholders.........................  $(402)   10,981     $(0.04)    $2,104   6,731      $0.31
Effect of dilutive securities
  Preferred stock.........................               --                           625
  Options and warrants....................               --                         1,000
                                            -----    ------                ------   -----
Diluted net income per share:
  Income available to common
     shareholders.........................  $(402)   10,981     $(0.04)    $2,104   8,356      $0.25
                                            =====    ======                ======   =====
</TABLE>
 
                                        7
<PAGE>   8
                              BEST SOFTWARE, INC.
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
3.  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 
     The American Institute of Certified Public Accountants (the "AICPA") has
issued a Statement of Position (the "SOP") SOP 97-2, "Software Revenue
Recognition". The Company has adopted SOP 97-2 effective January 1, 1998. The
adoption of SOP 97-2 did not have a material impact on the Company.
 
     In 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosures about Segments of an
Enterprise and Related Information". SFAS No. 131 becomes effective for the
Company's year-end 1998 financial statements. The Company is evaluating this
statement to determine the impact on its reporting and disclosure requirements.
The Company adopted SFAS No. 130 effective January 1, 1998 which requires
companies to report comprehensive income which is the total of net income plus
all changes in equity during a period except those resulting from investment by
owners and distribution to owners. Comprehensive income is identical to net
income (loss) for all periods presented herein. The Company expects
comprehensive income in future periods to differ as it will encompass foreign
currency translation adjustments due to the Company's Canadian operations and
German acquisition.
 
4.  ACQUISITION
 
     In March 1998, the Company acquired HR Management Software GmbH (HRS), a
provider of human resource software in the European marketplace. The acquisition
price was for approximately $10.4 million consisting of $6.4 million in cash,
240,000 shares of Common Stock, and out-of-pocket acquisition costs of
approximately $400,000. The closing occurred on March 31, 1998; therefore, the
results of operations of HRS are included beginning April 1, 1998. The
acquisition was accounted for as a purchase and the Company recorded a charge of
approximately $3.9 million in the first quarter of 1998 to in-process research
and development, after giving effect to the re-evaluation described in Note 1
above.
 
     The remaining purchase price resulted in an excess of the purchase price
over the fair value of the net assets of approximately $6.6 million. The Company
also acquired tangible assets of approximately $2.7 million consisting primarily
of accounts receivable and fixed assets and assumed liabilities of $2.7 million.
 
     The following consolidated proforma information assumes the HRS acquisition
occurred on January 1, 1997 (in thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                                                               MARCH 31,
                                                       -------------------------
                                                          1998          1997
                                                       -----------   -----------
                                                       (UNAUDITED)   (UNAUDITED)
<S>                                                    <C>           <C>
Revenue..............................................    $15,150       $11,292
Loss from operations before income taxes.............       (656)       (2,111)
Net loss.............................................       (386)         (192)
Loss per share.......................................      (0.34)        (0.02)
</TABLE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
     This Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risk and
uncertainties. For this purpose, the following discussion of the financial
condition and results of operations of the Company should be read in conjunction
with the Form 10-K, the Consolidated Financial Statements and Notes thereto.
Statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes", "anticipates", "plans", "expects", and similar expressions are
intended to identify forward-looking statements. Important factors known to Best
Software, Inc. that could cause such
 
                                        8
<PAGE>   9
 
material differences are discussed under the caption "Certain Factors That May
Affect Future Results" in Item 7 of the Company's annual report on Form 10-K,
which is incorporated herein by reference. These and other important factors
could cause the Company's actual results to differ materially from those
indicated by such forward-looking statements. The Company undertakes no
obligations to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.
 
                                    OVERVIEW
 
     The Company is a leader in corporate resource management software, helping
organizations to better manage their people, assets and budgeting processes. The
Company's feature-rich, cost-effective solutions are easy to implement and
enhance productivity by automating management, compliance and reporting
functions in areas of specialized expertise that entail complex and frequently
changing laws and regulations. The Company's solutions have been designed to
complement core accounting systems and are scaleable from stand-alone desktop
applications running on personal computers to multi-user work group and
client/server programs designed for use on personal computer local area
networks. As of March 31, 1998, the Company had over 43,000 licensed customer
locations.
 
     Prior to fiscal 1994, substantially all of the Company's revenues from the
FAS and Abra product lines were derived from licenses of DOS-based versions of
these products. Since fiscal 1994, the Company has introduced Microsoft Windows
versions of these products and, since fiscal 1995, a significant number of the
Company's DOS customers have migrated to the Company's Windows-based products.
Additionally, since the introduction of multi-user versions of its products in
fiscal 1995 and fiscal 1996, the Company has sold an increased number of
multi-user licenses of its FAS and Abra products. Upon the introduction of a new
product or an enhanced version of an existing product, the Company has typically
derived significant license fee revenue from trade-ups by existing customers.
Typically, the license fees paid for trade-ups are lower than the license fees
for an initial license. In addition, the Windows-based products and the
multi-user products generally have higher average license fees and gross margins
than the DOS-based products.
 
     During the quarter ended March 31, 1998, the Company introduced two new
products, FAS Property Tax and Best Internet Recruiter. FAS Property Tax,
powered by Vertex Tax Intelligence released in February 1998, is a comprehensive
property tax software program that automates and simplifies the personal
property tax filing and compliance process. The program utilizes FAS asset data
and, based on each jurisdiction's requirements, completes various
jurisdiction-specific property tax forms. Best FAS Property Tax allows customers
to review and adjust valuations, calculate and compare estimated values with
actual assessed values, process tax bills and bill taxes back to various
departments or external customers. Best Internet Recruiter, also released in
February 1998, is a recruiting service that enables employers to quickly and
conveniently place job listings on some of the Internet's largest and most
effective employment sites, then select and analyze resumes through a single Web
site. The product enables employers to easily and cost-effectively manage all
their on-line recruiting needs as well as track job offers through acceptance or
rejection.
 
     In March 1998, the Company announced Best! Imperativ HRMS, a human resource
and payroll management software which leverages the Microsoft BackOffice
platform. The system will provide organizations with a Web-based, three-tier
client/server solution with lower total cost of ownership and easy
implementation. Best! Imperativ HRMS will offer employee self-service modules to
work with the multiple human resource and payroll requirements. The Company
anticipates the release of the product in the second quarter of 1998.
 
     In April 1998, the Company released the newest fixed asset management
system, Best! Imperativ Asset Accounting, a client/server solution that delivers
control over fixed assets with accurate, timely reporting at a lower total cost
of ownership. The product utilizes the Microsoft BackOffice platform and allows
integration into a variety of financial accounting packages. Best! Imperativ
Asset Accounting provides scalability and compliance with changing Internal
Revenue Service (IRS) and Generally Accepted Accounting Principles (GAAP) rules.
 
                                        9
<PAGE>   10
 
     In addition to revenue from product licenses, the Company derives
significant recurring revenue from maintenance and support agreements. Under its
maintenance and support agreements, the Company provides technical support and
periodic software updates. In late fiscal 1997, the Company launched its
consulting services, which include installation, set-up and conversion services.
Training and consulting revenue are anticipated to have lower gross margins than
revenue from maintenance and support agreements. Maintenance and support
agreements are generally priced as a percentage of the initial license fee for
the underlying products.
 
     The Company recognizes revenue on license fees upon shipment of the
product, net of provisions for returns and allowances, provided that no
significant Company obligations remain and that collection of the resulting
account receivable is probable. For products with free trial periods, revenue is
recognized upon acceptance of the product by the customer. Revenue from the MYOB
License is recognized ratably within each year of the term of the license
agreement, based on specified annual royalty payments. Revenue from maintenance
and support agreements is recognized pro rata over the term of the agreements,
which is generally one year. Revenue from other services, such as training and
consulting, is recognized as the services are provided.
 
                               OPERATING RESULTS
 
     The following table sets forth for the periods indicated certain
consolidated statement of operations data expressed as a percentage of total
revenue:
 
<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED
                                                                          MARCH 31,
                                                              ---------------------------------
                                                                 1998                  1997
                                                                 ----                  ----
                                                              (UNAUDITED)           (UNAUDITED)
<S>                                                           <C>                   <C>
Revenue:
  License fees and royalty..................................      49.7%                 49.1%
  Services..................................................      50.3                  50.9
                                                                 -----                 -----
          Total.............................................     100.0                 100.0
                                                                 -----                 -----
Cost of revenue:
  License fees and royalty..................................       3.2                   7.9
  Services..................................................      15.6                  15.4
                                                                 -----                 -----
          Total.............................................      18.8                  23.3
                                                                 -----                 -----
Gross margin................................................      81.2                  76.7
                                                                 -----                 -----
Operating expenses:
  Sales and marketing.......................................      34.3                  34.9
  Research and development..................................      15.5                  13.2
  General and administrative................................      12.5                  13.6
  Write-off of purchased research and development...........      28.1                   0.0
                                                                 -----                 -----
          Total.............................................      90.4                  61.7
                                                                 -----                 -----
Operating (loss) income.....................................      (9.2)                 15.0
Other income, net...........................................       4.3                   1.2
                                                                 -----                 -----
(Loss) income from operations before income taxes...........      (4.9)                 16.2
Income tax benefit..........................................      (2.0)                 (4.5)
                                                                 -----                 -----
Net (loss) income...........................................      (2.9)%                20.7%
                                                                 =====                 =====
</TABLE>
 
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
 
     License Fees and Royalty Revenue.  License fees and royalty revenue
consists of fees from software licenses and royalties from the MYOB License.
License fees and royalty revenue increased from $5.0 million
 
                                       10
<PAGE>   11
 
for the three months ended March 31, 1997 to $6.8 million for the three months
ended March 31, 1998, representing an increase of 36.3%. As a percentage of
total revenue, license fees and royalty revenue was 49.1% for the three months
ended March 31, 1997 and 49.7% for the three months ended March 31, 1998,
respectively. The dollar increase in license fees and royalty revenue was due to
an increase in license fee revenue from FAS and Abra products, which resulted
primarily from increased sales of higher priced Windows-based and multi-user
products. Royalties from the MYOB License increased from $221,250 during the
three months ended March 31, 1997 to $413,250 for the three months ended March
31, 1998. The royalty is based on the total revenue of the licensee attributable
to this product line, with the royalty rate escalating over the four-year
license period. The Company does not anticipate generating any additional
revenue from this product line upon termination of the license agreement in June
2000.
 
     Services Revenue.  Services revenue includes revenue from maintenance and
support agreements and training and consulting services. Services revenue
increased from $5.2 million for the three months ended March 31, 1997 to $6.9
million for the three months ended March 31, 1998, representing an increase of
33.2%. As a percentage of total revenue, services revenue decreased from 50.9%
for the three months ended March 31, 1997 to 50.3% for the three months ended
March 31, 1998. The dollar increase in services revenue was primarily due to an
increase in the number of maintenance and support agreements, which resulted
from a larger installed base of customers, and a higher average contract value
resulting from increased sales of higher priced license products. To a lesser
extent, the increase in services revenue was due to the Company's increased
focus on offering training and other consulting services, which include
installation, set-up and data conversion activities.
 
     Cost of License Fees and Royalty Revenue.  Cost of license fees and royalty
revenue consists primarily of the costs of media, product manuals, shipping and
fulfillment, and royalties paid to third parties. Cost of license fees and
royalty revenue decreased from $803,000 for the three months ended March 31,
1997 to $440,000 for the three months ended March 31, 1998, representing an
decrease of 45.2%. As a percentage of license fees and royalty revenue, cost of
license fees and royalty revenue decreased from 16.1% to 6.5% for the
three-month periods ended March 31, 1997 and 1998, respectively. The decrease in
cost of license fees and royalty revenue as a percentage of license fees and
royalty revenue was primarily due to increased sales of higher margin
Windows-based and multi-user products and cost improvements on the license media
and fulfillment operations. To a lesser extent, the decrease was due to royalty
revenue received under the MYOB License, for which the associated costs are
nominal.
 
     Cost of Services Revenue.  Cost of services revenue consists primarily of
personnel costs, telephone charges and other costs related to providing
telephone support, training and consulting services. Cost of services revenue
increased from $1.6 million for the three months ended March 31, 1997 to $2.1
million for the three month period ended March 31, 1998, representing a 36.7%
increase. As a percentage of services revenue, cost of services revenue
increased from 30.2% to 31.0% for the three-month periods ended March 31, 1997
and 1998, respectively. The increase in cost of services revenue as a percentage
of services revenue was primarily due to ramping up professional services.
 
     Sales and Marketing.  Sales and marketing expenses consist primarily of
direct mail programs, advertising, and other marketing programs, personnel
costs, commissions, travel and operating costs. Sales and marketing expenses
increased from $3.5 million for the three months ended March 31, 1997, to $4.7
million for the three months ended March 31, 1998, representing an increase of
32.7%. As a percentage of total revenue, sales and marketing expenses decreased
slightly from 34.9% to 34.3% for the three-month periods ended March 31, 1997
and 1998, respectively. The dollar increase was primarily due to new product
releases, increased website activities and general product awareness.
 
     Research and Development.  Research and development expenses consist
primarily of personnel costs and fees paid to outside consultants. Research and
development expenses increased from $1.3 million for the three months ended
March 31, 1997 to $2.1 million for the three months ended March 31, 1998,
representing an increase of 58.5%. As a percentage of total revenue, research
and development expenses increased from 13.2% to 15.5% for the three-month
periods ended March 31, 1997 and 1998, respectively. The increase in
 
                                       11
<PAGE>   12
 
research and development expenses was primarily the result of increased expenses
relating to the development of a new budgeting product and the Best! Imperativ
products discussed above.
 
     General and Administrative.  General and administrative expenses include
the costs of corporate operations, finance and accounting, human resources and
other general operations. General and administrative expenses increased from
$1.4 million for the three months ended March 31, 1997 to $1.7 million for the
three months ended March 31, 1998, representing an increase of 22.8%. As a
percentage of total revenue, general and administrative expenses decreased from
13.6% to 12.5% for the three-month periods ended March 31, 1997 and 1998,
respectively. The dollar increase in general and administrative expenses was the
result of increased staffing and related expenses necessary to manage and
support the expansion of the Company's operations.
 
     Write-off of Purchased Research and Development.  The write-off is the
result of the purchased research and development associated with the Company's
acquisition of HRS described in Note 4 of the financial statements. The one time
charge of approximately $3.9 million represents 28.1% of total revenue for the
three months ended March 31, 1998.
 
     In connection with the acquisition of HRS, the Company allocated $3.9
million of the $10.4 million purchase price to incomplete research and
development projects. This allocation represents the estimated fair value based
on future cash flows that have been adjusted by the project's cost-based
completion percentage of 35 percent. At the acquisition date, the development of
this project had not yet reached technological feasibility and the in-process
research & development ("IPR&D") in progress had no alternative future uses.
Accordingly, these costs were expensed as of the acquisition date. The remainder
of the purchase price was allocated to completed technology, other intangibles
and goodwill in the amounts of $793,000, $278,000, and $5,515,000 respectively.
These amounts are being amortized over periods ranging from three to seven
years.
 
     The Company used an independent third-party appraiser to assess and value
the IPR&D. The values assigned to this asset were determined by identifying
significant research projects for which technological feasibility had not been
established. In the case of HRS, this included the development, programming and
testing activities associated with the creation of Generation X, a new HR system
for the European middle market. Valuation of non Generation X development
efforts in the future has been excluded from the research and development
appraisal.
 
     The nature of the efforts to develop the acquired in-process technology
into a commercially viable product relate to the completion of all planning,
designing, and prototyping and testing activities that are necessary to
establish that the proposed technologies meet their design specifications
including functional, technical, and economic performance requirements.
 
     The value assigned to purchased in-process technology was determined by
estimating the contribution of the purchased in-process technology in developing
a commercially viable product, estimating the resulting net cash flows from the
expected sales of such a product, adjusted by the project's cost-based
completion percentage and discounted to the present value using an appropriate
discount rate.
 
     Revenue growth rates for HRS were estimated by a third party appraiser
based on a detailed forecast prepared by management, as well as the appraiser's
discussions with finance, marketing, and engineering representatives of Best and
HRS. Revenue growth rates beyond 2000 were based on industry growth
expectations. Allocation of total HRS projected revenues to IPR&D was based on
the appraiser's discussions with Best and HRS management. The preponderance of
future revenues is expected to originate from the sale of products that are not
yet completed. HRS's existing products and technologies are rapidly approaching
obsolescence and future performance is highly dependent on the successful
completion of new HR systems being developed by HRS.
 
     Selling, general and administrative expenses and profitability estimates
were determined based on management forecasts as well as an analysis of
comparable companies' margin expectations, including those of the Company.
 
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<PAGE>   13
 
     The projections utilized in the transaction pricing and purchase price
allocation analysis exclude the potential synergistic benefits related
specifically to Best's ownership. Due to the relatively early stage of the
development and reliance on future, unproven products and technologies, the cost
of capital (discount rate) for HRS was estimated using venture capital rates of
return. Due to the nature of the forecast and the risks associated with the
projected growth and profitability of the development projects, a discount rate
of 30 to 33 percent was used to discount cash flows from the in-process
products. Because the in-process projects are such an integral part of the
business enterprise, only a moderate increase in the discount rate for the
in-process technology was deemed appropriate. This discount rate is commensurate
with HRS's market position, the uncertainties in the economic estimates
described above, the inherent uncertainty surrounding the successful development
of the purchased in-process technology, the useful life of such technology, the
profitability levels of such technology, the uncertainty surrounding the
European economy, the impact of the Euro conversion on the European economy, and
the uncertainty related to technological advances that could render even HRS's
development stage technologies obsolete.
 
     The Company believes that the foregoing assumptions used in the forecasts
were reasonable at the time of the acquisition. The in-process projects and
technologies acquired are progressing as planned, with no material changes
between actual results and the assumptions utilized in the allocation analysis.
No assurance can be given, however, that the underlying assumptions used to
estimate sales, development costs or profitability, or the events associated
with such projects, will transpire as estimated. For these reasons, actual
results may vary from projected results.
 
     Remaining development efforts for HRS's research and development include
various phases of development, programming and testing. Costs to complete the
IPR&D are expected to approximate $4.3 million over the next two to three years.
Anticipated completion dates for the projects in progress will occur in 1999 at
which time the Company expects to begin generating the economic benefits from
the technologies. Funding for such projects is expected to be obtained from
internally generated sources.
 
     As evidenced by the continued support of the development of Generation X
and derivative products, management believes the Company has a reasonable chance
of successfully completing the research and development programs. However, as
with all of Best's software segments, there is risk associated with the
completion of the HRS research and development projects, and there is no
assurance that technological or commercial success will be achieved.
 
     If the development of Generation X and derivative products is unsuccessful,
the sales and profitability of the Company may be adversely affected in future
periods. Commercial results are also subject to uncertain market events, and
risks, which are beyond the Company's control, such as trends in technology,
changes in government regulation, market size and growth, and product
introduction or other actions by competitors.
 
     Other Income, Net.  Other income consists primarily of earnings from
investments, net of any interest expense. Other income, net was $125,000 for the
three months ended March 31, 1997 and $594,000 for the three months ended March
31, 1998. The significant dollar increase was due to increased interest income
through investing the proceeds of the Initial Public Offering.
 
     Benefit for Income Taxes.  The benefit for income taxes was $455,000 and
$270,000 for the three months ended March 31, 1997 and 1998, representing 27.6%
and 40.2% of income (loss) before taxes, respectively. For the three months
ended March 31, 1997, the difference between the expected tax provision based on
Federal statutory rates and the effective tax rate resulted principally from tax
benefits relating to a reduction of the valuation allowance against the
Company's deferred tax asset based on management's analysis of current levels of
earnings and anticipated operating results.
 
                        LIQUIDITY AND CAPITAL RESOURCES
 
     The Company funds its operations through cash provided by operations. The
Company had cash, cash equivalents and short-term investments of $43.6 million
at March 31, 1998. The Company's short-term investments include securities of
U.S. Government agencies, municipalities and corporations.
 
                                       13
<PAGE>   14
 
     For the three months ended March 31, 1998 and 1997, net cash provided by
operating activities was $5.4 million and $3.9 million, respectively. The
increase in cash provided by operating activities was primarily a result of an
increase in current liabilities and the net effect of the one-time charge
against earnings for purchased research and development from the acquisition of
HRS.
 
     Net cash used in investing activities for the three months ended March 31,
1998 and 1997 was $15.3 million and $281,000, respectively. The increase in cash
used in investing activities was related to the purchases of short-term
investments with the proceeds from the Initial Public Offering and the
acquisition of HRS. In the three months ended March 31, 1998 and 1997, cash was
used for the purchase of property and equipment of $652,000 and $281,000
respectively. Although the Company does not currently have any material
identifiable commitments for capital expenditures, the Company expects to
continue to invest in the acquisition of property and equipment in the ordinary
course of its business. The Company does not have any material commitments
related to its royalty obligations arising from licenses of certain products and
technologies used in the Company's products.
 
     Net cash provided by (used in) financing activities for the three months
ended March 31, 1998 and 1997 was $187,000 and ($3.5) million, respectively.
During the three months ended March 31, 1997, the principal use of cash was the
payment of a dividend, the repurchase of treasury shares and the repayment of a
note.
 
     The Company believes that the net proceeds from the offering and cash
generated from operations will be sufficient to fund its operations for at least
the next 12 months.
 
                                YEAR 2000 ISSUES
 
     Certain computer programs were written using two digits rather than four to
define the applicable calendar year. Such programs may recognize a date using
"00" as the year 1900 rather than the year 2000. This is referred to as the
"Year 2000 Issue."
 
     The Company's products accept and store 4-digit date formats. The Company's
Windows-based Abra Human Resources and Payroll Management products are Year 2000
compatible. For the FAS Windows-based products, the only significant
date-related restriction of which the Company is currently aware, is that the
"placed in service date" field will not allow new assets to be entered in years
beyond the year 2019. By definition, this restriction will not negatively impact
a user for approximately 20 years. The Company believes that this restriction
will be corrected prior to it becoming a significant concern. Certain DOS
versions of FAS and some DOS versions of the Abra product lines are not Year
2000 compatible. The existing customers of the versions that are not Year 2000
compatible either have been informed or are in the process of being informed of
the programs' limitations and that the Company will not support the product
beyond 1999. The Company is conducting campaigns to convert these customers to
its compliant programs.
 
     All costs of the above measures are being funded out of current operations.
 
     Additionally, the Company has performed an assessment of its principal
internal management information system software to determine if they are Year
2000 compliant. Management's assessment is that minimal modifications will be
necessary to the Company's existing principal internal management information
system software to achieve Year 2000 compliance. The Company expects its
principal internal management information systems to be fully Year 2000
compliant by 1999. The Company also faces risks to the extent that third party
suppliers of products, services and systems purchased by the Company and others
with whom the Company transacts business on a worldwide basis do not have
business systems or products that comply with the Year 2000 requirements.
Although the Company is currently analyzing the impact, if any, of the Year 2000
issue surrounding such third party interactions, failure of any critical
technology components to operate properly in the Year 2000 and beyond may have
an adverse impact on business operations or require the Company to incur
unanticipated expenses to remedy any problems.
 
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<PAGE>   15
 
                                   SIGNATURE
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
                                          BEST SOFTWARE, INC.
 
                                          By:    /s/ DAVID N. BOSSERMAN
                                            ------------------------------------
                                                     David N. Bosserman
                                                 Executive Vice President,
                                                Chief Financial Officer and
                                                          Treasurer
 
Date: April 22, 1999
 
                                       15
<PAGE>   16
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C>           <S>
    11        -- Computation of Earnings per Share
    27        -- Financial Data Schedule*
</TABLE>
 
---------------
* Submitted only with the electronic filing of this document with the Commission
  pursuant to Regulation S-T under the Securities Act of 1933, as amended.
 
                                       16