<PAGE>

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                            1993            1994            1995(1)         1996            1997(2)
--------------------------------------------------------------------------------------------------------------------------------
                                                                 Year Ended December 31 (in thousands, except per share data)
STATEMENT OF OPERATIONS DATA
<S>                                                      <C>             <C>             <C>             <C>             <C>
Revenues:
     Software licenses                                   $ 3,128         $ 5,714         $11,983         $16,352         $22,948
     Maintenance                                           1,458           2,321           4,548           7,007           9,670
     Professional services                                 2,230           4,733           6,780           8,175           9,574
                                                         -----------------------------------------------------------------------
          Total revenues                                   6,816          12,768          23,311          31,534          42,192
                                                         -----------------------------------------------------------------------
Cost of revenues:
     Software licenses                                       145             197             784           1,245           1,191
     Maintenance                                             415           1,125           1,248           2,257           3,220
     Professional services                                   583           1,957           4,740           5,402           6,165
                                                         -----------------------------------------------------------------------
          Total cost of revenues                           1,143           3,279           6,772           8,904          10,576
                                                         -----------------------------------------------------------------------

                                                         -----------------------------------------------------------------------
Gross profit                                               5,673           9,489          16,539          22,630          31,616
                                                         -----------------------------------------------------------------------
Operating expenses:
     Selling and marketing                                 1,762           3,141           5,635           9,023          12,059
     Research and development                              2,114           3,388           7,720           8,414          10,245
     General and administrative                              917           1,562           3,099           5,338           7,802
     Write-off of purchased in-process
        research and development                              --              --           7,889              --             861
                                                         -----------------------------------------------------------------------
          Total operating expenses                         4,793           8,091          24,343          22,775          30,967
                                                         -----------------------------------------------------------------------
Operating income (loss)                                      880           1,398          (7,804)           (145)            649
Interest income (expense), net                              (200)             20              57             914           2,176
Other income                                                  --              --              --             158              --
                                                         -----------------------------------------------------------------------
Income (loss) before income taxes                            680           1,418          (7,747)            927           2,825
Provision (benefit) for income taxes                         120             661          (3,024)            414           1,029
                                                         -----------------------------------------------------------------------
Net income (loss)                                        $   560         $   757         $(4,723)        $   513         $ 1,796
--------------------------------------------------------------------------------------------------------------------------------
Basic earnings (loss) per share                          $  0.10         $  0.13         $ (0.74)        $  0.05         $  0.13
--------------------------------------------------------------------------------------------------------------------------------
Basic weighted average number of
   common shares-Outstanding                               5,672           5,645           6,351          10,571          13,540
--------------------------------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per share                        $  0.10         $  0.12         $ (0.74)        $  0.04         $  0.13
--------------------------------------------------------------------------------------------------------------------------------
Diluted weighted average number of
   common and equivalent shares-Outstanding                5,704           6,307           6,351          12,617          13,937
--------------------------------------------------------------------------------------------------------------------------------

<CAPTION>

                                                            1993            1994            1995            1996            1997
--------------------------------------------------------------------------------------------------------------------------------
                                                                                 December 31 (in thousands)
BALANCE SHEET DATA
<S>                                                      <C>             <C>             <C>             <C>             <C>
Cash and cash equivalents                                $ 1,987         $ 3,084         $ 1,594         $36,286         $23,660
Working capital                                            2,507           3,441           3,552          53,502          57,194
Total assets                                               6,493          11,912          22,788          77,613          85,308
Long-term obligations                                      2,318             472           2,688             377             250
Redeemable convertible preferred stock                       750             750             750              -              --
Stockholders' equity                                          33           5,121           9,493          64,168          67,751
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) On March 31, 1995, the Company purchased substantially all of the assets of
Chalke Incorporated for a purchase price of $12.7 million. See Notes 2 and 11 of
Notes to the Company's Consolidated Financial Statements.

(2) On November 14, 1997, the Company acquired Mabel Systems BV for a purchase
price of $2.5 million. See Notes 2 and 11 of Notes to the Company's Consolidated
Financial Statements.
<PAGE>

                                      14

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

OVERVIEW

The Company is a leading provider of client/server-based software solutions, and
related consulting services, designed to improve the efficiency and
effectiveness of the investment management function within a broad range of
organizations in the financial services industry. The Company was founded in
1986 to provide consulting services to support the investment management
functions of financial services organizations. In 1989, as a result of a joint
development arrangement, the Company introduced its first product, CAMRA
("Complete Asset Management, Reporting and Accounting"), a DOS-based program
designed to address the management of asset portfolios by mid- and large-size
financial institutions. In 1993, the Company released its first Windows-based
version of CAMRA and has continued to enhance the level of CAMRA's functionality
each year thereafter. In 1996, the Company released CAMRA 2000, a fully
functional 32-bit Windows based version of CAMRA. A majority of the Company's
revenues historically have been derived from sales of the CAMRA system. In 1993,
the Company introduced its FILMS ("Fully Integrated Loan Management System")
product, enabling mortgage professionals to process, analyze and report on a
comprehensive basis, information regarding their loan portfolios. On March 31,
1995, the Company acquired substantially all of the assets and operations of
Chalke Incorporated ("Chalke"), a supplier of asset/liability management and
modeling software and consulting services to the financial services industry.
Chalke's primary software product, PTS ("Profit Testing System"), provides an
economic model of insurance liabilities and assets to facilitate capital,
financial and risk management. On November 14, 1997, the Company acquired all of
the outstanding capital stock of Mabel Systems BV ("Mabel"), a supplier of
investment management software to the financial services industry. Mabel's
software product provides accounting, reporting, performance measurement, and
net asset value calculations for mutual funds and support for stock brokering
and custodial services. On December 31, 1997, the Company acquired all of the
outstanding stock of Shepro Braun Systems, Inc. ("Shepro"), a provider of
software and consulting services to the investment management and financial
services marketplace. Shepro's primary product, Total Return, is a portfolio
management and partnership accounting system oriented toward the hedge fund and
private wealth markets.

The Company enters into license, maintenance and professional services contracts
to provide software and services to its clients. License fees for the Company's
CAMRA and FILMS products are based on assets under management, while underlying
fees for PTS and Total Return software are determined on a per-CPU or per-site
basis or on the number of current users, and maintenance is provided on an
annually renewable basis for approximately 20% of the underlying software
license fee. License revenues are recognized upon the later of delivery of
software to the client or the completion of any significant vendor obligations
remaining after delivery, provided that collection of the resulting receivable
is considered probable. Maintenance revenues are recognized ratably over the
life of the contract. Professional services revenues are provided on a time and
material basis and are recognized as they are performed.

The Company's results of operations for 1995 reflect the acquisition of
substantially all of the assets and operations of Chalke for a purchase price of
$12.7 million (the "Chalke Acquisition"). In connection with the Chalke
Acquisition, which was accounted for under the purchase method, the Company
incurred a charge to operations of $7.9 million associated with the write-off of
purchased in-process research and development related to Chalke products that
were under development at the time of acquisition but had not yet reached
technological feasibility. The balance of the purchase price was allocated to
operating assets of $2.2 million, goodwill of $1.8 million and purchased
completed software of $795,000. The operating results of Chalke have been
included in the Company's operating results since the date of acquisition.
Deferred revenues of $1.5 million, including approximately $1.0 million of
annual maintenance revenues, for which Chalke had previously invoiced and
collected the cash, were not included in the Company's operating results. As
part of the allocation of the purchase price, the Company accrued the costs to
perform the obligations remaining under these maintenance contracts. Subsequent
to 1995, the Company recognized revenues and associated expenses in accordance
with normal accounting policies as the Chalke maintenance contracts were
renewed.

The Company's results of operations for 1997 reflect the acquisition of Mabel
for a purchase price of $850,000 plus 72,816 shares of Common Stock of the
Company with a
<PAGE>

                                      15

value of $750,000 and the assumption of liabilities (the "Mabel Acquisition").
In connection with the Mabel Acquisition, which was accounted for under the
purchase method, the Company incurred a charge to operations of $0.9 million
associated with the write-off of purchased in-process research and development
related to Mabel products that were under development at the time of acquisition
but had not yet reached technological feasibility. The balance of the purchase
price was allocated to goodwill of $0.3 million, purchased completed software of
$0.6 million and net operating assets of $0.7 million. The operating results of
Mabel have been included in the Company's operating results since the date of
acquisition.

The Company's results of operations for all years presented reflect the
acquisition of Shepro for 1.0 million shares of Common Stock of the Company (the
"Shepro Acquisition"). In connection with the Shepro Acquisition, which was
accounted for under the pooling-of-interests method, the Company has included
Shepro's operating results with the Company's operating results for each period
presented.

YEARS ENDED DECEMBER 31, 1995, 1996, 1997

Revenues
The Company's revenues are derived from software licenses and related
maintenance and professional services. Software licenses include hardware and
third-party software that is delivered as part of certain contracts. The
hardware and third-party software account for less than 5% of software license
revenues and less than 2.5% of total revenues in any year presented. Total
revenues increased 35% from $23.3 million in 1995 to $31.5 million in 1996, and
increased 34% to $42.2 million in 1997. The increase from 1995 to 1996 was
primarily attributable to sales of PTS 2000, which was released in the second
quarter of 1996, as well as the full-year inclusion of maintenance clients from
Chalke and increased demand for the Company's professional services. Inclusion
of the operating results of Chalke since the acquisition accounted for
approximately $4.2 million of the Company's total revenues during 1995. The
increase in 1997 revenues was due primarily to an increase in sales of CAMRA
2000 both domestically and internationally, and an increase in the number of
clients contracting for maintenance.

Software Licenses. Software license revenues increased 36% from $12.0 million in
1995 to $16.4 million in 1996, and increased 40% to $22.9 million in 1997. The
increase from 1995 to 1996 was primarily attributable to sales of PTS 2000,
which was added to the Company's product line in the second quarter of 1996. In
addition to PTS license sales, the Company has continued growth with its asset
management products, CAMRA and FILMS. The increase from 1996 to 1997 was
primarily attributable to an increase in sales of CAMRA2000 in North America,
Europe and Asia-Pacific.

Maintenance. Maintenance revenues increased 54% from $4.5 million in 1995 to
$7.0 million in 1996, and increased 38% to $9.7 million in 1997. The majority of
the growth from 1995 to 1996 was due to the addition of Chalke's maintenance
clients. CAMRA maintenance contracts also grew in this same period, due to a
continued increase in the Company's installed base of clients as a result of
additional license sales. The increase in maintenance revenues from 1996 to 1997
was primarily due to the continued growth in the Company's installed base of
clients.

Professional Services. Professional services increased 21% from $6.8 million in
1995 to $8.2 million in 1996, and increased 17% to $9.6 million in 1997. Demand
for the Company's implementation, conversion and training services has increased
primarily due to the Company's increasing number of license sales. As a result
of the Chalke Acquisition, the Company also includes actuarial consulting
services in its professional services revenues.

Cost of Revenues
The total cost of revenues increased 31% from $6.8 million in 1995 to $8.9
million in 1996, and increased 19% to $10.6 million in 1997. The gross margin
percentage increased from 71% in 1995 to 72% in 1996 to 75% in 1997, primarily
due to an increase in the gross margin percentage for professional services.

Cost of Software Licenses. Cost of software license revenues relates primarily
to royalties, as well as the costs of product media, packaging, documentation
and labor involved in the distribution of the Company's software. Included in
the cost of software license revenues is the cost of certain hardware and
third-party software that is delivered as part of certain contracts. The cost of
software license revenues increased 59% from $0.8 million in 1995 to $1.2
million in 1996, and remained stable at $1.2 million in 1997. The cost of
software license revenues as a percentage
<PAGE>

                                      16

of these revenues was 7%, 8%, and 5% in 1995, 1996, and 1997, respectively. The
decrease in the cost of software license revenues as a percentage of revenues
was primarily attributable to an increase in the average sales price of license
sales without a corresponding increase in costs.

Cost of Maintenance. Cost of maintenance revenues primarily comprises technical
customer support and development costs associated with product and regulatory
updates. The cost of maintenance revenues increased 81% from $1.2 million in
1995 to $2.3 million in 1996, and increased 43% to $3.2 million in 1997,
representing 27%, 32%, and 33%, respectively, of maintenance revenues in those
years. The increases in cost of maintenance revenues were primarily due to
increased headcount attributable to the development of a dedicated support
infrastructure to service the existing installed asset management and analytics
client base.

Cost of Professional Services. Cost of professional services revenues consist
primarily of the cost related to personnel utilized to provide implementation,
conversion and training services to the Company's software licensees, as well as
system integration, custom programming and actuarial consulting services. The
cost of professional services revenues increased 14% from $4.7 million in 1995
to $5.4 million in 1996, and increased 14% to $6.2 million in 1997, representing
70%, 66%, and 64%, respectively, of professional services revenues in those
years. The increases in cost of professional services revenues were attributable
to increased headcount in order to meet the increased demand. Increased
utilization, improved efficiencies and increased rates charged for consulting
time contributed to reducing the cost of professional services revenues as a
percentage of professional services revenues from 1995 to 1997.

Operating Expenses
Selling and Marketing. Selling and marketing expenses consist primarily of the
cost of personnel associated with the selling and marketing of the Company's
products, including salaries, commissions, and travel and entertainment. Such
expenses also include the cost of branch sales offices, advertising, trade
shows, marketing and promotional materials. Selling and marketing expenses
increased 60% from $5.6 million in 1995 to $9.0 million in 1996, and increased
34% to $12.1 million in 1997, representing 24%, 29%, and 29%, respectively, of
total revenues in those years. The increases in sales and marketing expenses
were largely attributable to costs associated with the hiring of additional
sales and marketing personnel, including recruiting fees, and expanding
international operations to include a dedicated international sales and
marketing operation.

Research and Development. Research and development expenses consist primarily of
personnel costs attributable to the development of new software products and the
enhancement of existing products. Research and development expenses increased 9%
from $7.7 million in 1995 to $8.4 million in 1996, and increased 22% to $10.2
million in 1997, representing 33%, 27%, and 24%, respectively, of total revenues
in those years. The Company's research and development expenses in 1995 and 1997
do not include the charge to operations of $7.9 million and $0.9 million
associated with the write-off of purchased in-process research and development
related to Chalke and Mabel products, respectively, that were under development
at the time of their respective acquisitions but had not yet reached
technological feasibility. See "Write-off of Purchased In-Process Research and
Development" below. Research and development expenses increased from 1995 to
1996 primarily due to ongoing development of Finesse 2000, and further
development of the Windows-based versions of CAMRA and FILMS. PTS 2000 was
released in the second quarter of 1996, while the Company discontinued
development of COPE as a stand-alone product during 1996. Research and
development expenses increased from 1996 to 1997 primarily due to continued
development of the Windows-based versions of CAMRA and FILMS, development of
enhancements to the functionality of each product and the development of
Antares.

General and Administrative. General and administrative expenses primarily
comprise personnel costs related to management, accounting, human resources and
administration and associated overhead costs, as well as fees for professional
services. General and administrative expenses increased 72% from $3.1 million in
1995 to $5.3 million in 1996 and increased 46% to $7.8 million in 1997,
representing 13%, 17%, and 18%, respectively, of total revenues in those years.
During 1995, the Company's general and administrative expenses included expenses
associated with the recruitment of several of the Company's executive officers
as well as the leasing of additional space to accommodate the Company's expanded
operations. During 1996, the Company recorded bad debt expense of $1.0 million,
the primary factor in the increase in general and administrative expenses. Other
factors related to the increase in general and administrative expenses included
increases in professional fees of $0.2 million, primarily
<PAGE>

                                      17

related to the Company's status as a public company. The inclusion of Chalke for
the entire year also contributed to the increase in general and administrative
expenses during 1996. During 1997, the Company recorded a charge of $1.2 million
for the closing of its Virginia office facility and the announced move of its
corporate headquarters. An increase in bad debt expense from $1.0 million in
1996 to $1.6 million in 1997, additions to management and related recruiting
fees, and an increase in professional fees, also contributed to the increase in
general and administrative expenses in 1997.

Write-off of Purchased In-Process Research and Development. In the first quarter
of 1995, the Company expensed $7.9 million of purchased in-process research and
development associated with two products acquired in March 1995 as part of the
Chalke Acquisition. In the fourth quarter of 1997, the Company expensed $0.9
million of purchased in-process research and development associated with the
Mabel product acquired in November 1997. Because these products had not reached
technological feasibility at the time of the respective acquisitions and, in the
Company's judgment, there was no alternative use for the related research and
development, such in-process research and development was charged to expense.

Interest Income (Expense). Net interest income increased from $57,000 in 1995 to
$0.9 million in 1996 and to $2.2 million in 1997. The increases were due to the
interest earned on investing the proceeds from the private sale of stock in 1995
and the Company's initial public offering in May 1996.

Provision (Benefit) for Income Taxes. The Company had effective tax rates of
approximately (39)%, 45% and 36% in 1995, 1996, and 1997, respectively.
Primarily as a result of the write-off of purchased in-process research and
development related to the Chalke Acquisition, the Company recognized a tax
benefit of $3.0 million in 1995. The increase in the 1996 effective tax rate
from 1995 was primarily related to losses from foreign operations for which
there is no tax benefit, and an increase in the disallowance of meals and
entertainment expenses, both of which were partially offset by interest income,
which was primarily exempt from federal income taxes. The decrease in the 1997
tax rate from 1996 was primarily related to the effects of interest income which
was primarily exempt from federal income taxes.

LIQUIDITY AND CAPITAL RESOURCES

During 1995, 1996, and 1997, the Company financed its operations primarily
through cash flows generated from operations and from private and public sales
of securities. Cash used in operations was $2.4 million and $0.2 million in 1995
and 1996, respectively, and cash provided by operations in 1997 was $9.6
million. The decrease in cash used in operations from 1995 to 1996 was primarily
attributable to the increase in operating profits and an increase in accrued
expenses and deferred maintenance revenues. Net accounts receivable increased
$3.2 million from 1995 to 1996, while unbilled accounts receivable increased
$0.4 million during the same period. Total revenues increased $8.2 million from
1995 to 1996. The net increase in cash provided by operations from 1996 to 1997
was primarily attributable to an increase in operating profits, improved
collections on accounts receivable, and an increase in accrued expenses and
deferred revenues. Total revenues increased $10.7 million from 1996 to 1997
while net accounts receivable decreased $1.4 million, and unbilled accounts
receivable increased $1.0 million. The improvement in accounts receivable
collection can be attributed to an increased focus on resolving specific client
issues, negotiating date-driven accelerated payment terms in contracts, and
suspended services for nonpayment.

Investing activities used cash of $8.6 million, $17.2 million and $22.0 million
in 1995, 1996, and 1997, respectively. In 1995, the Company used cash of $7.4
million to finance the Chalke Acquisition. The remaining $1.1 million was used
to acquire property and equipment. Investing activities in 1996 included $15.6
million for the purchase of investments in marketable securities and $1.6
million to acquire equipment and capitalized software. Investing activities in
1997 included $19.5 million for the purchase of investments in marketable
securities, $2.1 million to acquire equipment and capitalized software, and $0.1
million to partially finance the Mabel Acquisition.

Net cash of $9.5 million provided by financing activities in 1995 included the
issuance of Convertible Preferred Stock of $7.3 million and the issuance of
Common Stock upon the exercise of warrants for $1.5 million related to the
financing of Chalke. Net cash of $52.1 million provided by financing activities
in 1996 resulted from proceeds of $52.7 million from the issuance of Common
Stock in the Company's initial public offering and proceeds of
<PAGE>

                                      18

$0.8 million from the exercise of stock options, partially offset by the
repayment of $1.5 million of debt. Net cash of $0.6 million used in financing
activities in 1997 included $2.0 million in repayment of debt, partially offset
by the proceeds from the exercise of options and employee stock purchase plan of
$0.8 million and the release of restricted cash supporting a letter of credit of
$0.5 million.

As of December 31, 1997, the Company had $23.7 million in cash and cash
equivalents and $35.1 million of highly liquid marketable securities. The
Company believes that its current cash balances and net cash provided by
operating activities will be sufficient to meet its working capital and capital
expenditure requirements for at least the next 12 months.

The Share Purchase Agreement in connection with the Mabel Acquisition provides
for a payment in 2001 by the Company to the former Mabel shareholders,
contingent on their continued employment by the Company, and based on revenues
generated by the Mabel division from 1998-2000. The payment can range from $0 to
$1.9 million.

Year 2000 Compliance
The Company recognizes that it must ensure that its products and operations will
not be adversely impacted by the so-called "Year 2000" systems and software
failures which can arise in certain time-sensitive functions. The Company is
currently testing its products and expects them to be Year 2000 compliant in
1998. Costs associated with the testing and modifications, to make the Company's
products Year 2000 compliant, if any, are not expected to have a material
adverse effect on the Company's business, financial condition, or results of
operations. In addition, the Company is in the process of identifying
anticipated costs, problems, and uncertainties associated with making its
internal-use operating systems Year 2000 compliant. In general, the Company
expects to resolve the Year 2000 issue with respect to its computer systems and
software applications through upgrade, conversion, modification, or replacement,
of non-compliant systems and applications. There can be no assurance, however,
that the systems of other parties upon which the Company's business also relies
will be Year 2000 compliant. The costs of becoming Year 2000 compliant, or the
failure thereof by the Company or other parties, could have a material adverse
effect on the Company's business, financial condition, or results of operations.

CERTAIN FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

Fluctuations in Quarterly Performance. The Company's revenues and operating
results historically have varied substantially from quarter to quarter. The
Company's quarterly operating results may continue to fluctuate due to a number
of factors, including the timing, size, and nature of the Company's individual
license transactions; the timing of the introduction and the market acceptance
of new products or product enhancements by the Company or its competitors; the
relative proportions of revenues derived from license fees, maintenance,
consulting, and other recurring revenues and professional services; changes in
the Company's operating expenses; personnel changes and fluctuations in economic
and financial market conditions. The timing, size, and nature of individual
license transactions are important factors in the Company's quarterly operating
results. Many such license transactions involve large dollar amounts, and the
sales cycles for these transactions are often lengthy and unpredictable. There
can be no assurance that the Company will be successful in closing large license
transactions on a timely basis or at all.

Dependence on Financial Services Industry. The Company's clients include a range
of organizations in the financial services industry, and the success of such
clients is intrinsically linked to the health of the financial markets. In
addition, because of the capital expenditures required in connection with an
investment in the Company's products, the Company believes that demand for its
products could be disproportionately affected by fluctuations, disruptions,
instability, or downturns in the financial markets, which may cause clients and
potential clients to exit the industry or delay, cancel, or reduce any planned
expenditures for investment management systems and software products. Any
resulting decline in demand for the Company's products could have a material
adverse effect on the Company's business, financial condition, and results of
operations.

Product Concentration. To date, substantially all of the Company's revenues have
been attributable to the licensing of its CAMRA, PTS, FILMS, and Total Return
software and the provision of maintenance and consulting services in connection
therewith. The Company currently expects that the licensing of CAMRA, PTS,
FILMS, and Total Return software, and the provision of related services, will
account for a substantial portion of its revenues for the foreseeable
<PAGE>

                                      19

future. As a result, factors adversely affecting the pricing of or demand for
such products and services, such as competition or technological change, could
have a material adverse effect on the Company's business, financial condition,
and results of operations.

Management of Growth. The Company's business has grown significantly in size and
complexity over the past several years. The growth in the size and complexity of
the Company's business as well as its client base has placed and is expected to
continue to place a significant strain on the Company's management and
operations. The Company's ability to compete effectively and to manage future
growth, if any, will depend on its ability to continue to implement and improve
operational, financial, and management information systems on a timely basis and
to expand, train, motivate, and manage its work force. There can be no assurance
that the Company's personnel, systems, procedures, and controls will be adequate
to support the Company's operations. If the Company's management is unable to
manage growth effectively, the quality of the Company's products and its
business, financial condition, and results of operations could be materially
adversely affected.

Integration of Operations. The Company's success is dependent in part on its
ability to complete its integration of the operations of Mabel and Shepro in an
efficient and effective manner. The successful integration in a rapidly changing
financial services industry may be more difficult to accomplish than in other
industries. The combination of the three companies will require, among other
things, integration of the companies' respective product offerings and
coordination of their sales and marketing and research and development efforts.
There can be no assurance that such integration will be accomplished smoothly or
successfully. The difficulties of such integration may be increased by the
necessity of coordinating geographically separated organizations. The
integration of certain operations will require the dedication of management
resources which may temporarily distract attention from the day-to-day business
of the combined company. The inability of management to successfully integrate
the operations of the three companies could have a material adverse effect on
the business, financial condition, and results of operations of the Company.

Competition. The market for financial services software is competitive, rapidly
evolving, and highly sensitive to new product introductions and marketing
efforts by industry participants. Although the Company believes that none of its
competitors currently competes against the Company in each of the industry
segments served by the Company, there can be no assurance that such competitors
will not compete against the Company in the future in additional industry
segments. In addition, many of the Company's current and potential future
competitors have significantly greater financial, technical, and marketing
resources, generate higher revenues, and have greater name recognition than does
the Company.

Rapid Technological Change. The market for the Company's products and services
is characterized by rapidly changing technology, evolving industry standards,
and new product introductions. The Company's future success will depend in part
upon its ability to enhance its existing products and services and to develop
and introduce new products and services to meet changing client requirements.
The process of developing software products such as those offered by the Company
is extremely complex and is expected to become increasingly complex and
expensive in the future with the introduction of new platforms and technologies.
There can be no assurance that the Company will successfully complete the
development of new products in a timely fashion or that the Company's current or
future products will satisfy the needs of the financial markets.

Dependence on Database Supplier. The relational database design in many of the
Company's software products incorporates PFXplus, a "C"-based database
management system licensed to the Company by POWERflex Corporation Proprietary
Limited, an Australian vendor ("Powerflex"). If Powerflex were to increase its
fees under the license agreement, the Company's results of operations could be
materially adversely affected. Moreover, if Powerflex were to terminate the
license agreement, the Company would have to seek an alternative relational
database for its software products. While the Company believes that it could
migrate its products to an alternative database, there can be no assurance that
the Company would be able to license in a timely fashion a database with similar
features and on terms acceptable to the Company.

Dependence on Proprietary Technology. The Company's success and ability to
compete is dependent in part upon its proprietary technology. The Company relies
on a combination of trade secret, copyright, and trademark law, nondisclosure
agreements and technical measures to protect its proprietary technology. There
can be no assurance that the steps taken by the Company to limit access
<PAGE>

                                      20

to its proprietary technology will be adequate to deter misappropriation or
independent third-party development of such technology.

Product Defects and Product Liability. The Company's software products are
highly complex and sophisticated and could from time to time contain design
defects or software errors that could be difficult to detect and correct.
Errors, bugs, or viruses may result in loss of or delay in market acceptance or
loss of client data. Although the Company has not experienced material adverse
effects resulting from any software defects or errors, there can be no assurance
that, despite testing by the Company and its clients, errors will not be found
in new products, which errors could result in a delay in or inability to achieve
market acceptance and thus could have a material adverse impact upon the
Company's business, financial condition, and results of operations.

Key Personnel. The Company's success is dependent in part upon its ability to
attract, train, and retain highly-skilled technical, managerial, and sales
personnel. The loss of services of one or more of the Company's key employees
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company continues to hire a significant
number of additional sales, service, and technical personnel. Competition for
the hiring of such personnel in the software industry is intense. Locating
candidates with the appropriate qualifications, particularly in the desired
geographic location, can be difficult. Although the Company expects to continue
to attract and retain sufficient numbers of highly skilled employees for the
foreseeable future, there can be no assurance that the Company will do so.

Risks Associated with International Operations. The Company intends to continue
to expand its international sales activity as part of its business strategy. To
accomplish such continued expansion, the Company must establish additional
foreign operations and hire additional personnel, requiring significant
management attention and financial resources that could materially adversely
affect the Company's business, financial condition, or results of operations. An
increase in the value of the U.S. dollar relative to foreign currencies could
make the products more expensive and, therefore, potentially less competitive in
those markets. An increasing portion of the Company's international sales are
denominated in foreign currency. The Company hedges some of this risk; however,
significant fluctuations in the value of foreign currencies could have an
adverse effect on the earnings of the Company. In addition, the Company's
international business may be subject to a variety of risks, including
difficulties in obtaining U.S. export licenses, potentially longer payment
cycles, increased costs associated with maintaining international marketing
efforts, the introduction of non-tariff barriers and higher duty rates, and
difficulties in enforcement of contractual obligations and intellectual property
rights. There can be no assurance that such factors will not have a material
adverse effect on the Company's business, financial condition, or results of
operations.

Because of these and other factors, past financial performance should not be
considered an indication of future performance. The Company's quarterly
operating results may vary significantly, depending on factors such as the
timing, size, and nature of licensing transactions and new product introductions
by the Company or its competitors. Investors should not use historical trends to
anticipate future results and should be aware that the trading price of the
Company's common stock may be subject to wide fluctuations in response to
quarterly variations in operating results and other factors, including those
discussed above.

ACCOUNTING PRONOUNCEMENTS.

In June 1997, the FASB issued two pronouncements, Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," (SFAS No. 130)
and No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS No. 131). SFAS No. 130 establishes standards for reporting
and display of comprehensive income, which is defined as the equity of a
business enterprise during a period from nonowner sources. SFAS No. 130 is
effective for years beginning after December 15, 1997 and requires restatement
of financial statements for all prior years presented. The adoption of SFAS No.
130, to be included in the Company's March 1998 financial statements, is
expected to only impact the presentation of financial information.

SFAS No. 131 requires public companies to report all financial and descriptive
information about operating segments in their financial statements and requires
selected information about operating segments to be reported in interim
financial reports issued to shareholders. Operating segment financial
information is required to be reported on the basis that is used internally for
evaluating segment performance and allocation of resources. SFAS No. 131 is
effective for financial statements for periods beginning after Decem-
<PAGE>

                                      21

ber 15, 1997 and requires presentation of comparative information for prior
periods presented. The adoption of SFAS No. 131 is only expected to impact the
way the Company reports information about its operating segments.

In October 1997, the AICPA issued Statement of Position ("SOP") No. 97-2,
Software Revenue Recognition, which is effective in fiscal years beginning after
December 15, 1997. Retroactive application of the provisions of SOP 97-2 is
prohibited. The adoption of SOP 97-2, which will begin with financial statements
for the three months ending March 31, 1998, is not expected to have a material
impact on the Company's business, financial condition, and results of
operations.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
SS&C Technologies, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of SS&C
Technologies, Inc. and Subsidiaries (the "Company") as of December 31, 1996 and
1997, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 SS&C Technologies,
Inc. and Subsidiaries as of December 31, 1996 and 1997, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.

                                                        COOPERS & LYBRAND L.L.P.


Hartford, Connecticut
February 25, 1998, except Note 14,
the Subsequent Events footnote,
for which the date is March 20, 1998
<PAGE>

                                      22

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                       1996            1997
---------------------------------------------------------------------------------------------------------------------------
                                                                                                  December 31 (in thousands)
ASSETS
<S>                                                                                                 <C>             <C>
Current assets:
     Cash and cash equivalents                                                                      $36,286         $23,660
     Investments in marketable securities                                                            15,580          35,058
     Accounts receivable, net of allowance for doubtful
        accounts of $1,166 and $1,558, respectively                                                   9,012           7,591
     Unbilled accounts receivable, net of allowance for doubtful
        accounts of $300 and $678, respectively                                                       3,681           5,472
     Prepaid expenses and other current assets                                                          954           1,563
     Refundable income taxes                                                                            353             384
     Deferred income taxes                                                                              704             773
                                                                                                    -----------------------
          Total current assets                                                                       66,570          74,501
                                                                                                    -----------------------
Property and equipment:
     Land                                                                                               106             106
     Building and leasehold improvements                                                              1,225           1,324
     Equipment, furniture, and fixtures                                                               4,687           6,448
                                                                                                    -----------------------
                                                                                                      6,018           7,878
     Less accumulated depreciation                                                                   (2,632)         (3,860)
                                                                                                    -----------------------
          Net property and equipment                                                                  3,386           4,018
                                                                                                    -----------------------
Unbilled accounts receivable-related party (Note 13)                                                    630             420
Unbilled accounts receivable                                                                          1,387             828
Deferred income taxes                                                                                 3,230           3,205
Restricted cash equivalents                                                                             505               -
Goodwill, net of accumulated amortization
  of $631 and $1,000, respectively (Notes 2 and 11)                                                   1,173           1,134
Intangible and other assets, net of accumulated amortization
  of $1,018 and $655, respectively (Notes 2 and 11)                                                     732           1,202
                                                                                                    -----------------------
          Total assets                                                                              $77,613         $85,308
---------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Current portion of long-term debt-related party (Note 3)                                         1,390             668
     Current portion of long-term debt-other (Note 3)                                                   687             313
     Accounts payable                                                                                   561           1,440
     Accrued expenses                                                                                 2,742           4,077
     Accrued bonus payable                                                                              416           1,663
     Deferred licensing and professional services revenues                                            1,382           1,618
     Deferred maintenance revenues                                                                    5,890           7,528
                                                                                                    -----------------------
          Total current liabilities                                                                  13,068          17,307
                                                                                                    -----------------------
Long-term debt: (Note 3)
     Related party                                                                                      264             250
     Other                                                                                              113               -
                                                                                                    -----------------------
          Total liabilities                                                                          13,445          17,557
                                                                                                    -----------------------
Commitments and contingencies (Notes 6, 8, and 12)
Stockholders' equity: (Note 4)
     Common stock, $0.01 par value, 25,000 shares authorized;
        13,388 and 13,745 shares issued and outstanding, respectively                                   134             137
     Additional paid-in capital                                                                      67,305          69,089
     Accumulated deficit                                                                             (3,271)         (1,475)
                                                                                                    -----------------------
          Total stockholders' equity                                                                 64,168          67,751
                                                                                                    -----------------------
          Total liabilities and stockholders' equity                                                $77,613         $85,308
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                       1995            1996            1997
---------------------------------------------------------------------------------------------------------------------------
                                                               Year Ended December 31 (in thousands, except per share data)
<S>                                                                                 <C>             <C>             <C>
Revenues:
     Software licenses                                                              $11,983         $16,352         $22,948
     Maintenance                                                                      4,548           7,007           9,670
     Professional services                                                            6,780           8,175           9,574
                                                                                    --------- -----------------------------
          Total revenues                                                             23,311          31,534          42,192
                                                                                    --------- -----------------------------
Cost of revenues:
     Software licenses                                                                  784           1,245           1,191
     Maintenance                                                                      1,248           2,257           3,220
     Professional services                                                            4,740           5,402           6,165
                                                                                    --------- -----------------------------
          Total cost of revenues                                                      6,772           8,904          10,576
                                                                                    --------- -----------------------------
Gross profit                                                                         16,539          22,630          31,616
                                                                                    --------- -----------------------------
Operating expenses:
     Selling and marketing                                                            5,635           9,023          12,059
     Research and development                                                         7,720           8,414          10,245
     General and administrative                                                       3,099           5,338           7,802
     Write-off of purchased in-process research and development                       7,889               -             861
                                                                                    --------- -----------------------------
          Total operating expenses                                                   24,343          22,775          30,967
                                                                                    --------- -----------------------------
Operating income (loss)                                                              (7,804)           (145)            649
Interest income, net                                                                     57             914           2,176
Other income (Note 3)                                                                     -             158               -
                                                                                    --------- -----------------------------
Income (loss) before income taxes                                                    (7,747)            927           2,825
Provision (benefit) for income taxes (Note 5)                                        (3,024)            414           1,029
                                                                                    --------- -----------------------------
Net income (loss)                                                                   $(4,723)        $   513         $ 1,796
--------------------------------------------------------------------------------------------- -----------------------------
Basic earnings (loss) per share                                                     $ (0.74)        $  0.05         $  0.13
--------------------------------------------------------------------------------------------- -----------------------------
Basic weighted average number of common
   shares outstanding                                                                 6,351          10,571          13,540
--------------------------------------------------------------------------------------------- -----------------------------
Diluted earnings (loss) per share                                                   $ (0.74)        $  0.04         $  0.13
--------------------------------------------------------------------------------------------- -----------------------------
Diluted weighted average number of common
   and common equivalent shares outstanding                                           6,351          12,617          13,937
--------------------------------------------------------------------------------------------- -----------------------------
</TABLE>

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

                                      24

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                       1995            1996            1997
---------------------------------------------------------------------------------------------------------------------------
                                                                                      Year ended December 31 (in thousands)
Cash flows from operating activities:
<S>                                                                                <C>                <C>           <C>
     Net income (loss)                                                             $ (4,723)          $ 513         $ 1,796
                                                                                   ----------------------------------------
     Adjustments to reconcile net income (loss) to net cash provided by (used
        in) operating activities:
          Depreciation and amortization                                               1,327           1,923           2,002
          Deferred income taxes                                                      (3,615)           (610)            (44)
          Income tax benefit related to exercise of stock options                         -             161             221
          Purchased in-process research and development                               7,889               -             861
          Provision for doubtful accounts                                               517           1,027           1,592
          Changes in operating assets and liabilities, excluding effects from
            acquisitions:
               Accounts receivable                                                   (1,279)         (3,933)            812
               Unbilled accounts receivable                                          (3,175)           (687)         (1,745)
               Prepaid expenses and other current assets                               (420)           (267)           (563)
               Refundable income taxes                                                  (12)           (722)            (31)
               Accounts payable                                                        (113)            114             879
               Accrued expenses                                                        (538)            644           1,959
               Deferred licensing and professional services revenues                   (173)             39             236
               Deferred maintenance revenues                                          1,912           1,583           1,638
                                                                                   ----------------------------------------
               Total adjustments                                                      2,320            (728)          7,817
                                                                                   ----------------------------------------

                                                                                   ----------------------------------------
     Net cash provided by (used in) operating activities                             (2,403)           (215)          9,613
                                                                                   ----------------------------------------
Cash flows from investing activities:
     Additions to property and equipment, net                                        (1,131)         (1,537)         (1,767)
     Acquisition of Chalke, net of cash received (Note 11)                           (7,426)              -               -
     Acquisition of Mabel, net of cash received (Note 11)                                 -               -             (72)
     Additions to capitalized software and other intangibles                              -            (115)           (359)
     Investments in marketable securities, net                                            -         (15,580)        (19,478)
                                                                                   ----------------------------------------
     Net cash used in investing activities                                           (8,557)        (17,232)        (21,676)
                                                                                   ----------------------------------------
Cash flows from financing activities:
     Repayment of debt                                                                  (27)         (1,489)         (1,959)
     Proceeds from notes payable                                                        695             125              75
     Issuance of convertible preferred stock                                          7,316               -               -
     Issuance of common stock                                                         1,481          52,666             269
     Exercise of options                                                                  5             837             547
     Transfer of cash from restricted cash equivalents                                    -               -             505
                                                                                   ----------------------------------------
     Net cash provided by (used in) financing activities                              9,470          52,139            (563)
                                                                                   ----------------------------------------
Net increase (decrease) in cash and cash equivalents                                 (1,490)         34,692         (12,626)
Cash and cash equivalents, at beginning of year                                       3,084           1,594          36,286
                                                                                   ----------------------------------------
Cash and cash equivalents, at end of year                                           $ 1,594         $36,286         $23,660
---------------------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
---------------------------------------------------------------------------------------------------------------------------
   Cash paid for:
     Interest                                                                          $ 28           $ 257            $152
                                                                                   ----------------------------------------
     Income taxes                                                                       616           1,586             677
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Supplemental disclosure of non-cash investing activities:
   As more fully described in Note 11, effective March 31, 1995, the Company
     purchased all of the assets of Chalke Incorporated for $12.7 million.
   As more fully described in Note 11, effective November 14, 1997, the Company
     purchased all of the outstanding stock of Mabel Systems BV for $2.5
     million.
   As more fully described in Note 11, effective December 31, 1997, the Company
     purchased all of the outstanding stock of Shepro Braun Systems, Inc. for
     1.0 million shares of the Company's common stock.

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

                                      25

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                   Series B          Series C
                                  Convertible       Convertible         Common
                                 Preferred Stock   Preferred Stock       Stock                         Treasury Stock
                                ---------------------------------------------------                    ---------------
                                                                                              Retained
                                                                                       Addi-  Earnings                    Total
For the Years ended              Number            Number           Number            tional    (Accu-    Number         Stock-
December 31, 1995, 1996,             of                of               of           Paid-in   mulated       of        holders'
and 1997 (in thousands)          Shares   Amount   Shares   Amount  Shares   Amount  Capital  Deficit)   Shares   Cost   Equity
-------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>      <C>      <C>      <C>     <C>      <C>     <C>     <C>        <C>     <C>     <C>
Balance, at December 31, 1994       153   $   31        -    $   -   7,005    $  70  $ 6,527    $ 939    1,351 $(2,405) $ 5,162
     Issuance of Series C
        convertible
        preferred stock               -        -      155       31       -        -    7,285        -        -       -    7,316
     Exercise of options              -        -        -        -      60        1        4        -        -       -        5
     Issuance of common stock         -        -        -        -   1,015       10    1,471        -        -       -    1,481
     Net loss                         -        -        -        -       -        -        -   (4,723)       -       -   (4,723)
-------------------------------------------------------------------------------------------------------------------------------
Balance, at December 31, 1995       153       31      155       31   8,080       81   15,287   (3,784)   1,351  (2,405)   9,241
     Exercise of options              -        -        -        -     267        3      834        -        -       -      837
     Conversion of Series B
        and C preferred stock
        to common stock            (153)     (31)    (155)     (31)  3,079       31       31        -        -       -        -
     Conversion of Series A
        preferred stock to
        common stock                  -        -        -        -     248        2      748        -        -       -      750
     Issuance of common stock         -        -        -        -   3,065       31   52,635        -        -       -   52,666
     Income tax benefit related
        to exercise of stock
        options                       -        -        -        -       -        -      161        -        -       -      161
     Retirement of treasury
        stock                         -        -        -        -  (1,351)     (14)  (2,391)       -   (1,351)  2,405        -
     Net income                       -        -        -        -       -        -        -      513        -       -      513
-------------------------------------------------------------------------------------------------------------------------------
Balance, at December 31, 1996         -        -        -        -  13,388      134   67,305   (3,271)       -       -   64,168
     Exercise of options              -        -        -        -     230        2      545        -        -       -      547
     Issuance of common stock         -        -        -        -     127        1    1,018        -        -       -    1,019
     Income tax benefit related
        to exercise of stock
        options                       -        -        -        -       -        -      221        -        -       -      221
     Net income                       -        -        -        -       -        -        -    1,796        -       -    1,796
-------------------------------------------------------------------------------------------------------------------------------
Balance, at December 31, 1997         -    $   -        -    $   -  13,745    $ 137  $69,089 $ (1,475)       - $     -  $67,751
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                      26

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS

1. ORGANIZATION

SS&C Technologies, Inc. and Subsidiaries ("SS&C" or the "Company") (formerly
named Securities Software & Consulting, Inc.) is a leading provider of
client/server-based software solutions, and related consulting services,
designed to improve the efficiency and effectiveness of a broad range of
organizations in the financial services industry. The Company has developed a
family of software products that provides a full range of mission-critical
information management and analysis, accounting, reporting, and compliance tools
to help high-level investment professionals make informed real-time decisions
and automate many operational functions in today's increasingly complex and
fast-moving financial markets. The Company's products are focused on improving
the effectiveness of decision making through open, fully integrated access to
the quantitative analysis of transactions-based data, allowing investment
professionals to manage and analyze large amounts of data in the aggregate and
in detail on a timely basis.

The Company operates in one business segment and currently derives substantially
all of its revenue from the licensing of its CAMRA, PTS, FILMS, and Total Return
applications software to the financial services industry and the provision of
related maintenance, consulting, and training services in the areas of
investments, investment accounting, and software development. A majority of the
Company's revenues have historically been derived from sales of the CAMRA
system. The Company expects that the licensing of these products and the related
services will account for a substantial portion of its revenues in the future.
The Company's clients include a range of organizations that manage investment
portfolios, including asset managers, insurance companies, banks, mutual funds,
public and private pension funds, hedge funds, corporate treasuries, and
government agencies. The success of many of the Company's clients is
intrinsically linked to the health of the financial markets. Demand for its
products could be affected by fluctuations or downturns in the financial
markets, which may cause clients and potential clients to exit the industry or
delay, cancel, or reduce any planned expenditures for investment management
systems and software products.

2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

The preparation of the consolidated 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 and
the disclosure of contingent 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.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries, SS&C Ventures, Inc., SS&C
Technologies, Limited, SS&C Pacific, Inc., SS&C Technologies Sdn. Bhd., Shepro
Braun Systems, Inc. and Mabel Systems BV. All intercompany activity has been
eliminated in preparing the consolidated financial statements.

Revenue Recognition

The Company recognizes revenues in accordance with the Statement of Position
("SOP") No. 91-1 on software revenue recognition issued by the American
Institute of Certified Public Accountants ("AICPA").

The Company licenses the right to use its software products to customers under
perpetual license agreements. The Company generally recognizes license revenues
on delivery of the software to the customer provided that collection of the
resulting receivable is considered probable, unless the Company has significant
future obligations remaining under the license agreement or there is significant
uncertainty about customer acceptance. If there are significant future
obligations or uncertainty about customer acceptance, revenue is recognized when
such obligations are satisfied and any uncertainty about acceptance becomes
insignificant.

The Company occasionally enters into license agreements requiring significant
customization of the Company's soft-
<PAGE>

                                      27

ware. These agreements are accounted for by the Company on a percentage of
completion basis. This method requires estimates to be made for costs to
complete the agreement utilizing an estimate of development man hours remaining.
Due to uncertainties inherent in the estimation process, it is at least
reasonably possible that completion costs may be revised. Such revisions are
recognized in the period in which the revisions are determined. Provisions for
estimated losses on uncompleted contracts are determined on a
contract-by-contract basis, and are made in the period in which such losses are
first estimated or determined.

The Company's software license agreements include a short-term, generally
six months or less, warranty period that the Company does not consider to be a
cancellation privilege.

The Company records accounts receivable and related deferred revenues upon the
execution of contracts for license and licensed lease agreements and upon
billing for maintenance agreements. Revenues from maintenance agreements are
recognized ratably over the term of the agreement. Unbilled accounts receivable
principally reflect revenues recognized pursuant to license agreements for which
milestone amounts are not contractually billable. Unbilled accounts receivable,
including those related to lease agreements, which are not contractually
billable in one year have been classified as noncurrent.

Professional services revenues include consulting and training provided to
customers, generally on a time and materials basis. Professional services
revenues are recognized as the services are performed.

The Company records an allowance for doubtful accounts based on individual
customer analyses. Write-offs of accounts receivable were $34,000, $69,000, and
$822,000 for the years ended December 31, 1995, 1996, and 1997, respectively.

Research and Development

Research and development costs associated with computer software are charged to
expense as incurred. In accordance with Statement of Financial Accounting
Standards ("SFAS") No. 86, capitalization of internally developed computer
software costs begins upon the establishment of technological feasibility based
on a working model. Capitalized software costs of $115,000 and $454,000 are
included in the December 31, 1996 and 1997 balance sheets, respectively, under
"Intangible and other assets."

The Company's policy is to amortize these costs upon a product's general release
to the customer. Amortization of capitalized software costs is calculated by the
greater of (a) the ratio that current gross revenues for a product bear to the
total of current and anticipated future gross revenues for that product or (b)
the straight-line method over the remaining estimated economic life of the
product including the period being reported on. It is reasonably possible that
those estimates of anticipated future gross revenues, the remaining estimated
economic life of the product, or both could be reduced significantly due to
competitive pressures.

Cash and Cash Equivalents and
Marketable Securities

The Company considers all highly liquid debt instruments with original
maturities of three months or less at the date of acquisition to be cash
equivalents. Debt securities with original maturities of more than three months
at the date of acquisition are classified as marketable securities. All
marketable securities mature within 12 months and are classified as current
assets. The Company classifies its entire investment portfolio of $55.3 million
at December 31, 1997, consisting of debt securities issued by state and local
governments of the United States and corporations, as available for sale
securities. With the cost of the debt securities approximating the fair market
value of the securities, no unrealized gain or loss has been recognized. The
Company did not have any material realized gains or losses during 1995, 1996,
and 1997.

Restricted Cash Equivalents

The Company had a letter of credit agreement with a U.S. bank for $505,000 in
connection with the purchase of the main-frame based investment accounting line
of business of an unrelated entity. The purchase agreement required the Company
to maintain an irrevocable letter of credit until the debt was paid in full. In
accordance with the terms of the letter of credit agreement, the Company had a
$505,000 certificate of deposit with the bank which is restricted to serve as
collateral for the letter of credit. The letter of credit was released in
January 1997 upon the settlement of the debt (see Note 3).

Hedging Transactions

The Company purchases from time to time forward contracts to attempt to minimize
the impact of exchange rate gains or losses from foreign currency transactions.
The forward contracts entered into are for periods of less than six months.
There were no outstanding forward contracts
<PAGE>

                                      28

at December 31, 1996. The Company had one forward contract outstanding at
December 31, 1997, which liquidated in February 1998.

Property and Equipment

Property and equipment are stated at cost. Depreciation of property and
equipment is calculated using a combination of straight-line and accelerated
methods over the estimated useful lives of the assets as follows:

Description
--------------------------------------------------------------------------------
Building                                  31.5 years
Equipment                                  3-5 years
Furniture and fixtures                    7-10 years
Leasehold improvements                    shorter of lease
                                          term or estimated
                                          useful life
--------------------------------------------------------------------------------

Maintenance and repairs are expensed as incurred. The costs of sold or retired
assets are removed from the related asset and accumulated depreciation accounts
and any gain or loss is included in operations.

Goodwill and Intangible Assets

Goodwill, associated with the Company's Chalke and Mabel acquisitions described
in Note 11, is being amortized on a straight-line basis over its estimated life
of approximately five years. The carrying amount of goodwill is evaluated for
future recoverability on a periodic basis, relying on a number of factors,
including the estimated life of the customer base under the annual maintenance
agreements, operating results for each division, business plans, budgets and
economic projections, and undiscounted cash flows. In addition, the Company's
evaluation considers non-financial data such as market trends, product
development cycles and changes in management's market emphasis. Amortization
expense associated with goodwill was $271,000, $361,000, and $369,000 for the
years ended December 31, 1995, 1996, and 1997, respectively.

Other intangible assets, excluding complete technology, are being amortized on a
straight-line basis over their estimated lives of two to three years. Complete
technology is amortized over approximately six years based on the ratio
that current gross revenues of the product bear to the total of current and
anticipated future gross revenues of the product.

Concentration of Credit Risk

Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of cash, cash equivalents, marketable
securities, and trade receivables. The Company invests its cash in deposits with
commercial banks or in municipal bond and bond funds with broker/dealers.
Concentrations of credit risk, with respect to trade receivables, are limited
due to the large number of customers comprising the Company's customer base and
their dispersion across many geographies. As of December 31, 1996 and 1997, the
Company had no significant concentrations of credit risk.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS 109, an asset and liability approach
is used to recognize deferred tax assets and liabilities for the future tax
consequences of items that have already been recognized in its financial
statements and tax returns. A valuation allowance is established against net
deferred tax assets if, based on the weight of available evidence, it is more
likely than not that some or all of the net deferred tax assets will not be
realized.

Foreign Currency

The functional currency of each foreign subsidiary is the local currency.
Accordingly, assets and liabilities of foreign subsidiaries are translated to
U.S. dollars at period end exchange rates and stockholders' equity at historical
rates. Revenues and expenses are translated using the average rates during the
period. The effects of foreign currency translation adjustments are immaterial
to the results of operations and the financial position of the Company.

Revenues from foreign sources totalled $5.4 million in 1997. Revenues from
foreign sources for 1995 and 1996 were immaterial to the total revenues of the
Company. Total assets in foreign locations were immaterial to the total assets
of the Company.

Basic and Diluted Earnings Per Share

The Company adopted SFAS No. 128, "Earnings Per Share," in 1997. Earnings per
share for all periods presented have been restated to conform to the
requirements of SFAS 128. The standard requires the replacement of the current
primary earnings per share presentation with a basic earnings per share
presentation. Basic earnings per share includes no dilution and is computed by
dividing income available to common stockholders by the weighted average number
of common shares outstanding for the period. The standard also requires
companies with complex capital stock structures to disclose diluted earnings per
<PAGE>

                                      29

share and, among other things, a reconciliation of the numerator and denominator
for purposes of the calculation. Diluted earnings per share is computed based
upon the weighted average number of common shares and common equivalent shares
outstanding after certain adjustments described below. The computation of
diluted earnings per share is based on net income (loss) divided by the weighted
average number of common and common equivalent shares outstanding during the
period after giving effect to all stock splits. Common equivalent shares
comprise stock options and warrants using the treasury stock method. Common
equivalent shares from stock options and warrants are excluded from the
computation if their effect is antidilutive. In addition, all preferred stock is
considered to be a common stock equivalent based on its terms and conditions
except that in 1995 all 3.3 million shares of preferred stock are excluded as
the effect of inclusion would be antidilutive.

Options to purchase 1.5 million and 1.0 million shares were outstanding at
December 31, 1995 and 1997, respectively, but were not included in the
computation of diluted earnings per share because the effect of including the
options would be antidilutive.

Income available to stockholders is the same for basic and diluted earnings per
share. A reconciliation of the shares outstanding is as follows (in thousands):

                                                   1995      1996      1997
--------------------------------------------------------------------------------
Basic weighted average shares outstanding         6,351    10,571    13,540
Weighted average common stock
 equivalents-options                                  -       660       397
Weighted average preferred stock                      -     1,386         -
                                                 ------    ------    ------
Diluted weighted average shares outstanding       6,351    12,617    13,937
--------------------------------------------------------------------------------
See Note 14 for issuance of shares subsequent to year end.

Accounting Standards

In June 1997, the FASB issued two pronouncements, Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," (SFAS No. 130)
and No. 131, "Disclosures about Segments of an Enterprise and Related
Information" (SFAS No. 131). SFAS No. 130 establishes standards for reporting
and display of comprehensive income, which is defined as the equity of a
business enterprise during a period from nonowner sources. SFAS No. 130 is
effective for years beginning after December 15, 1997 and requires restatement
of financial statements for all prior years presented. The adoption of SFAS No.
130, to be included in the Company's March 1998 financial statements, is
expected to only impact the presentation of financial information.

SFAS No. 131 requires public companies to report all financial and descriptive
information about operating segments in their financial statements and requires
selected information about operating segments to be reported in interim
financial reports issued to shareholders. Operating segment financial
information is required to be reported on the basis that is used internally for
evaluating segment performance and allocation of resources. SFAS No. 131 is
effective for financial statements for periods beginning after December 15, 1997
and requires presentation of comparative information for prior periods
presented. The adoption of SFAS No. 131 is expected to impact the way the
Company reports information about its operating segments.

In October 1997, the AICPA issued Statement Of Position ("SOP") No. 97-2,
Software Revenue Recognition, which is effective in fiscal years beginning after
December 15, 1997. Retroactive application of the provisions of SOP 97-2 from
the previously issued SOP on software revenue recognition is prohibited. The
adoption of SOP 97-2, which will begin with financial statements for the three
months ending March 31, 1998, is not expected to have a material impact on
the Company's business, financial condition, and results of operations.

Reclassification

Certain amounts in the 1996 consolidated financial statements have been
reclassified to be comparable with the 1997 presentation. These classifications
have had no effect on net income, working capital, or net equity.

3. LONG-TERM DEBT

Long-term debt consists of the following (in thousands):
                                                                  December 31,
                                                               ----------------
                                                                  1996     1997
-------------------------------------------------------------------------------
7.91% note payable, due to a related party                     $ 1,390     $ --
6.81% note payable                                                 450       --
Note payable to former Mabel shareholders, at
 no interest, due in three equal installments on
 November 14, 1998, 1999, and 2000                                  --      375
Due to former Mabel shareholders                                    --      286
9% notes payable to former Shepro sellershareholders,
 payable on demand; paid in full in January 1998                   264      257
Variable note payable to a bank, due July 1998, interest
 paid monthly at the prime rate plus 0.75%,
 paid in full in January 1998                                      125      200
Variable note payable to a bank, due in 36 equal
 installments of principal, interest paid monthly
 at the prime rate plus 0.75%, due December 1998,
 paid in full in January 1998                                      208      108
9.5% note payable to a bank, due June 1998,
paid in full in January 1998                                        17        5
                                                               ----------------
                                                                 2,454    1,231
Less current portion-related party                              (1,390)    (668)
Less current portion-other                                        (687)    (313)
                                                               ----------------
Long-term debt                                                 $   377  $   250
-------------------------------------------------------------------------------
<PAGE>

                                      30

The 7.91% note payable to a related party was issued in connection with the
Company's acquisition of the assets and operations of Chalke Incorporated
("Chalke") (see Note 11). The term of the promissory note dated March 31, 1995
was for repayment in two equal installments of $1,500,000 on March 31, 1996 and
March 31, 1997. The promissory note included interest accruing annually from
March 31, 1995 at the applicable federal rate. The applicable rate at March 31,
1995 was 7.91%. The present value of the $3,000,000 two-year loan at 7.91% was
$2,678,000. Interest expense for the years ended December 31, 1995, 1996, and
1997 was $187,000, $193,000, and $162,000, respectively.

The 6.81% note payable was issued in connection with the Company's acquisition
of packaged software and related assets (see Note 11). The note was issued at
$505,000 and required the Company to make periodic payments on the debt based
upon specific percentages of revenues collected by the Company related to
customers utilizing the acquired product. In connection with the outstanding
note payable of $450,000 and invoices and accrued interest of $138,000, a
settlement was reached in December 1996 whereby the Company would pay $450,000
in total for all of the outstanding obligations. The payment was made in January
1997. The balance of $138,000 is included in other income on the accompanying
1996 statement of operations.

The note payable to former Mabel shareholders was issued in connection with the
Company's acquisition of the assets and operations of Mabel Systems BV
("Mabel") (see Note 11). The terms of the purchase agreement are for the Company
to pay $375,000 in three equal installments of $125,000 on the first, second and
third anniversary of the closing date of the acquisition. Each payment is
conditional on the continued employment of the former shareholders with the
Company as of the date of the payment. Due to former Mabel shareholders of
$286,000 is the remaining amount on the final adjustment of the purchase price
to be paid based on the final net equity of Mabel as of the closing date, as
stipulated in the share purchase agreement.

The 9% notes payable to former Shepro shareholders represent loans made to
Shepro by certain former shareholders of Shepro. There were no restated payment
terms and the loans were paid in full in January 1998. The notes payable to a
bank were issued to provide working capital for Shepro and to secure financing
for computer equipment. Outstanding balances at December 31, 1997 were paid in
full in January 1998.

4. CAPITAL STOCK

During 1994, the Company authorized the issuance of 152,778 shares of a new
series of preferred stock, Series B convertible preferred stock (the "Series B
stock"). On September 20, 1994, the Company entered into a stock purchase
agreement in which it issued 152,778 shares of Series B stock at $40.00 per
share, before costs of the transaction.

During 1995, the Company authorized the issuance of 155,132 shares of a new
series of preferred stock, Series C convertible preferred stock (the "Series C
stock"). On March 31, 1995 and April 13, 1995, the Company entered into stock
purchase agreements in which it issued the 155,132 shares of Series C stock at
$47.50 per share, before transaction costs.

In connection with the issuance of the Series C stock, holders of outstanding
warrants exercised their rights to purchase 900,000 shares of common stock for
$1,401,000. At the time of issuance of the Series C stock, the authorized shares
of common stock were increased from 10,224,720 to 11,673,400. At December 31,
1995, 3,326,600 shares of the common stock were reserved for issuance upon the
conversion of the Series A, Series B, and Series C stock. At December 31, 1996
and 1997, 2,920,000 and 3,039,000 shares, respectively, were reserved for the
stock option plans.

On April 25, 1996, the Company reincorporated in the State of Delaware and
exchanged each outstanding share of common stock for ten shares of common stock,
$.01 par value, and exchanged each outstanding share of preferred stock Series
A, Series B, and Series C for one share of preferred stock Series A, Series B,
and Series C, respectively. Effective with the reincorporation, all the treasury
stock was extinguished. Holders of outstanding options were entitled, upon
exercise, to purchase ten times the number of common stock shares provided in
each option, at an exercise price per share of one-tenth the price per share
provided in the option. The outstanding preferred stock was converted into ten
shares of common stock for each share of preferred stock. The Company authorized
a total of 25,000,000 shares of common stock, $.01 par value, and a total of
1,000,000 shares of preferred stock, $.01 par value. The outstanding Series A,
Series B, and Series C preferred stock was subsequently converted into common
stock on June 5, 1996, the closing date of the Company's initial public
offering. As of December 31, 1997 there was no preferred stock outstanding.
<PAGE>

                                      31

The Company consummated an initial public offering of 3,750,000 shares of common
stock on June 5, 1996, of which 723,750 shares were sold by selling
stockholders. The Company received proceeds from the offering of approximately
$52,639,000, net of underwriting discounts and commissions and offering expenses
payable by the Company.

All shares, warrants, options, and par values have been restated in the
financial statements and footnotes to reflect the effects of the split of the
Company's common stock.

5. INCOME TAXES

The sources of income (loss) before income taxes were as follows:

                                                    1995    1996    1997
--------------------------------------------------------------------------------
                                          Year Ended December 31, (in thousands)
US                                                $(7,483) $1,527  $3,599
Foreign                                              (264)   (600)   (774)
                                                  ------------------------------
Income (loss) before income taxes                 $(7,747) $  927  $2,825
--------------------------------------------------------------------------------


The income tax provision (benefit) for the years ended December 31, 1995, 1996,
and 1997 consist of the following:

                                                      1995    1996    1997
--------------------------------------------------------------------------------
                                           Year Ended December 31 (in thousands)
Current:
 Federal                                           $   434    $736  $1,080
 Foreign                                                --      --      63
 State                                                 157     202     283
Deferred:
 Federal                                            (2,757)   (427)   (280)
 State                                                (858)    (97)   (117)
--------------------------------------------------------------------------------
Total                                              $(3,024)   $414  $1,029
--------------------------------------------------------------------------------

The effective tax rates were (39.0)%, 44.7%, and 36.4% for the years ended
December 31, 1995, 1996, and 1997, respectively, and are reconciled from the
expected tax expense (benefit) (the expected tax expense (benefit) is computed
by applying the U.S. Federal corporate income tax rate of 34% to income before
income taxes) as follows:


                                                1995          1996         1997
--------------------------------------------------------------------------------
                                           Year Ended December 31 (in thousands)
Computed "expected" tax
 expense (benefit)                           $(2,507)      $    302     $   960
Increase (decrease) in income taxes
 resulting from: State income taxes
(net of Federal income tax benefit)             (459)            70         110
  Tax exempt interest income                      --           (327)       (553)
  Tax effects of foreign operations               --            306         326
  Meals and entertainment                         38             61          50
  Other                                          (96)             2         136
                                             ----------------------------------
Income tax expense (benefit)                 $(3,024)      $    414     $ 1,029
--------------------------------------------------------------------------------

The components of the net deferred tax asset at December 31, 1996 and 1997 are
as follows:


                                                          1996            1997
--------------------------------------------------------------------------------
                                                             (in thousands)
Deferred tax assets                                     $4,707         $ 5,375
Deferred tax liabilities                                  (773)         (1,397)
                                                         -----------------------
 Net deferred tax asset                                 $3,934         $ 3,978
--------------------------------------------------------------------------------


The components of deferred income taxes at December 31, 1996 and 1997 are as
follows:


                                             1996                  1997
--------------------------------------------------------------------------------
                                                              (in thousands)
                                      Deferred  Deferred   Deferred   Deferred
                                        Tax       Tax        Tax        Tax
                                       Assets Liabilities   Assets  Liabilities
--------------------------------------------------------------------------------
Purchased in-process
 research and development              $2,922     $  --      $2,810    $    --
Accounting method
 change-cash to accrual                    --       609          --        305
Accounting method
 change-advance payments                  588        --         441         --
Capitalized software                       --        --          --        181
Acquired technology                       336        --         461         --
Accrued expenses                          352       119         582        118
Accounts receivable                       471        --       1,081        793
Other                                      38        45          --         --
                                       -----------------------------------------
  Total                                $4,707    $  773      $5,375     $1,397
--------------------------------------------------------------------------------
<PAGE>

                                      32

6. LEASES

The Company is obligated under noncancelable operating leases for office space
and office equipment. Total related expense for the years ended December 31,
1995, 1996, and 1997 was $652,000, $1,064,000, and $1,203,000, respectively.
Future minimum lease payments under these operating leases are as follows (in
thousands):


Year ending December 31,
--------------------------------------------------------------------------------
1998                                                                     $ 1,779
1999                                                                       1,525
2000                                                                       1,439
2001                                                                       1,248
2002                                                                         767
Thereafter                                                                 3,786
                                                                         -------
                                                                         $10,544
--------------------------------------------------------------------------------


The Company leases a portion of its building and subleases other office space to
unrelated parties under noncancelable leases. The Company received rent under
these leases of $19,000, $54,000, and $99,000 for the years ended December 31,
1995, 1996, and 1997, respectively. Minimum, future lease receipts under these
leases are as follows (in thousands):

Year ending December 31,
--------------------------------------------------------------------------------
1998                                                                     $   444
1999                                                                         430
2000                                                                         417
2001                                                                         434
2002                                                                          67
                                                                          ------
                                                                          $1,792
--------------------------------------------------------------------------------


7. RELOCATION EXPENSES

The Company closed its Virginia office facility in October 1997 and relocated
certain employees to its corporate headquarters. The Company expensed $0.5
million related to the office facility closing, including severance packages and
outplacement services totalling $0.1 million for nine employees. The amount
accrued as of December 31, 1997 was $0.2 million, primarily for unoccupied lease
fees under the current lease.

In 1997, the Company also announced plans to relocate its corporate facilities.
In connection with the relocation, and in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" (SFAS No. 121) and EITF No.
94-3, the Company has recognized in general and administrative expense an
impairment loss of $0.5 million on the building and furniture it currently
occupies and uses. Under the current lease, the Company is also obligated to
continue making payments from the expected date of the relocation through
November 30, 1998. Unoccupied lease fees of $143,000 were included in general
and administrative expense for the year ended December 31, 1997.

8. LICENSE AND ROYALTY AGREEMENTS

During 1995, the Company was a party to two license and royalty agreements as a
result of the joint development of software products. One of these agreements
was with a related party. The related party development partner was paid a 3%
royalty based on a percentage of license fee revenues collected related to the
Company's CAMRA and FILMS products. The second agreement called for royalty
payments of 3% on a certain module until $22,000 had been paid. The total
royalty expense included in the cost of software licensing revenues under these
agreements of $187,000 for the year ended December 31, 1995, includes $166,000,
to a related party. As more fully described in Note 13, on January 27, 1996, the
Company licensed its CAMRA and FILMS applications software and certain other
programs to the related party pursuant to a software license agreement. Under
the terms of this agreement, all outstanding accounts receivable and accounts
payable between the parties as of January 27, 1996 were forgiven, including
amounts payable by the Company under certain royalty agreements. The agreement
also terminated the requirement for the Company to pay royalties to the related
party in the future. The second agreement was paid in full during 1996. The
Company has no future obligations under royalty agreements related to CAMRA and
FILMS products.

The Company is also a party to a royalty agreement as a result of the joint
development of Finesse 2000. Under the terms of the agreement, the joint
developer will receive a 10% royalty on all software license revenues of Finesse
2000 until $349,000 has been paid. Total royalty expense for 1997 was $54,000.

The Company also has non-exclusive rights, acquired by the Company in the Chalke
acquisition, to integrate software into certain Company products. Under the
terms of the agreement, the licensor of the software is paid minimum monthly
royalties and additional royalties based on a per-
<PAGE>

                                      33

centage of the related license fee revenues collected. These payments range
between 20% and 43% of sales of the related software products. The Company also
entered into an agreement in 1996 which allows the Company to integrate software
into a certain Company product. Under this agreement, the licensor is paid
$1,500 for the first 200 clients that purchase the Company's product containing
this software and a maintenance agreement for that product. The fee is reduced
to $1,000 per client for each client thereafter. The Company is obligated to pay
on a cumulative basis at least $25,000 per quarter. The total royalty expense
under these agreements for the years ended December 31, 1996 and 1997 was
$452,000 and $425,000, respectively.

In connection with the Shepro acquisition, the Company was a party to a
development and royalty agreement with an unrelated third party. The agreement
called for a royalty of 20% on all software license sales for the core modules
developed during the project, up to a full recovery of all costs incurred by the
third party on this project. The total royalty expense under this agreement for
the years ended December 31, 1995, 1996, and 1997 was $46,000, $195,000, and
$184,000, respectively. The Company made the final payment on outstanding
royalties in February 1998. The Company is also a party to a development and
royalty agreement for the development of a trading system. Under this agreement,
if the system is accepted, the Company will pay a 20% royalty on all software
license sales of the trading system, up to $100,000. There is a clause in the
agreement that allows for an additional royalty amount so the net cost of the
system to the customer would be no more than 75% of the amount the Company
charges to other customers. There is no set fee at this time. If the system is
not accepted, the limit on the royalty is $400,000. As of December 31, 1997, the
customer had not accepted the system and no royalties have been accrued.

9. DEFINED CONTRIBUTION PLANS

On January 1, 1992, the Company established its 401(k) Profit Sharing Plan and
Trust (the "Plan"). The Plan covers substantially all employees. Each employee
may elect to contribute to the Plan, through payroll deductions, up to 15% of
his or her salary, subject to certain limitations. The Plan provides for a
Company match of employees' contributions in an amount equal to 50% of an
employee's contributions up to $1,000, in addition to discretionary
contributions as determined by the Board of Directors.

In connection with the acquisition of Shepro, the Company assumed the pre-
existing deferred compensation plan for Shepro employees, which was established
in January 1995. Under the plan, each eligible employee may elect to contribute
to the plan up to 15% of their salary, subject to certain limitations. This plan
provides for a Company match in an amount equal to 25% of an employee's
contributions up to 6%.

During the years ended December 31, 1995, 1996, and 1997, the Company incurred
$88,000, $102,000, and $158,000, respectively, of expense related to these
plans.

10. STOCK OPTION AND PURCHASE PLANS

During 1993, the Board of Directors approved an employee stock option plan
("1993 Plan") which was in place through December 1994 and reserved 1,000,000
shares of common stock for issuance under this plan. During 1994, the Board of
Directors approved a new plan ("1994 Plan"), effective January 1, 1995, for
which 1,000,000 shares of common stock were reserved. The 1994 Plan was amended
in October 1995 and April 1996 to reserve additional shares of common stock for
issuance under the plan, bringing the total shares of common stock reserved for
issuance to 3,000,000. Options issued under the 1993 Plan remain under the terms
of that plan. There were options to purchase 25,500 shares of common stock
outstanding under the 1993 Plan at December 31, 1997. No new options will be
granted under this plan. Options under the 1993 Plan are fully vested and expire
in 1998. Generally, options outstanding under the 1994 Plan vest ratably over
three, four or five years and expire ten years subsequent to the grant. There
were options to purchase 2,231,700 shares of common stock outstanding under the
1994 Plan at December 31, 1997 and 432,208 shares available for option grants.

The purchase price of the shares subject to each option granted will not be less
than 100% of the fair market value of the Company's common stock at the date of
grant. Options granted prior to the issuance of the Series B preferred stock are
exercisable for five years from the date of grant. Options issued subsequent to
the Series B preferred stock have vesting periods of three to five years from
the date of grant. As of December 31, 1997, options to purchase 25,500 and
515,236 shares of common stock were then exercisable under the 1993 Plan and
1994 Plan, respec-
<PAGE>

                                      34

tively. As of December 31, 1996, options to purchase 128,000 and 353,916 shares
of common stock were then exercisable under the 1993 Plan and 1994 Plan,
respectively.

In April 1996, the Company also adopted the 1996 Director Stock Option Plan
which provides for non-employee directors to receive options to purchase common
stock of the Company at an exercise price equal to the fair market value of the
common stock at the date of grant. The Company has reserved a total of 150,000
shares of common stock for issuance under this plan. As of December 31, 1997,
30,000 shares had been issued under the Director Stock Option Plan.

The following table summarizes stock option transactions for the years ended
December 31, 1995, 1996 and 1997.

                                                                        Weighted
                                                                         Average
                                                                        Exercise
                                                           Shares         Price
--------------------------------------------------------------------------------
Outstanding at December 31, 1994                           630,000         $1.93
Granted                                                  1,074,000          4.34
Canceled                                                  (167,500)         2.06
Exercised                                                  (60,000)         0.08
                                                         -----------------------

Outstanding at December 31, 1995                         1,476,500          3.75
Granted                                                    217,000          8.31
Canceled                                                  (152,500)         5.13
Exercised                                                 (266,792)         3.14
                                                         -----------------------

Outstanding at December 31, 1996                         1,274,208          4.49
Granted                                                  1,526,500          8.60
Canceled                                                  (283,208)         5.12
Exercised                                                 (230,300)         2.38
                                                         -----------------------

Outstanding at December 31, 1997                         2,287,200         $7.37
--------------------------------------------------------------------------------


The following table summarizes information about stock options outstanding at
December 31, 1997:

<TABLE>
<CAPTION>
                             Options Outstanding                 Options Exercisable
---------------------------------------------------------------------------------------
                                   Weighted
                                    Average     Weighted                      Weighted
Range of         Number            Remaining     Average        Number         Average
Exercise       Outstanding        Contractual   Exercise     Exercisable      Exercise
Prices         at 12/31/97        Life (Years)    Price      at 12/31/97       Price
---------------------------------------------------------------------------------------
<S>            <C>                <C>           <C>           <C>             <C>
$0.07-$0.07      25,500               0.5         $0.07         25,500          $0.07
4.00-5.75       892,700               7.0         $4.83        391,416          $4.25
6.00-8.63       594,000               9.0         $7.07        101,742          $7.03
9.00-11.00      775,000               9.9        $10.76         22,078          $9.00
---------------------------------------------------------------------------------------
</TABLE>

The exercise price for each of the above grants was determined by the Board of
Directors of the Company to be equal to the fair market value of the Company's
common stock on the date of grant. Exercise prices for grants are determined by
the closing sale price of the stock on the Nasdaq National Market on the date of
the grant.

In April 1996, the Company adopted the 1996 Employee Stock Purchase Plan which
permits employees of the Company to purchase shares of common stock pursuant to
payroll deductions at a price equal to 85% of the fair market value of the
Company's common stock on either the first or last day of the purchase period,
whichever is lower. The initial purchase period was from October 1, 1996 to
March 31, 1997. The second purchase period was from April 1, 1997 to September
30, 1997. The third purchase period was from October 1, 1997 to March 31, 1998.
As of December 31, 1997, employees had deposited with the Company, through
payroll deductions, $82,000 to purchase shares through the stock purchase plan
at March 31, 1998. The Company reserved a total of 200,000 shares of common
stock for issuance under this Plan.

The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized for the stock option plans and employee stock purchase plan. Had
compensation cost for the Company's stock option plans and employee stock
purchase plan been determined consistent with SFAS No. 123, the Company's net
income (loss) and earnings per share would have been adjusted to the pro forma
amounts (in thousands, except per share data) indicated in the table below:

                                                    1995       1996        1997
--------------------------------------------------------------------------------
Net income (loss) as reported                   $  (4,723)   $   513    $  1,796
--------------------------------------------------------------------------------
Net income (loss) pro forma                     $  (4,934)   $    24    $    653
--------------------------------------------------------------------------------
Basic earnings (loss) per share, as reported    $   (0.74)   $  0.05    $   0.13
--------------------------------------------------------------------------------
Basic earnings (loss) per share, pro forma      $   (0.78)   $  0.00    $   0.05
--------------------------------------------------------------------------------
Diluted earnings (loss) per share, as reported  $   (0.74)   $  0.04    $   0.13
--------------------------------------------------------------------------------
Diluted earnings (loss) per share, pro forma    $   (0.78)   $  0.00    $   0.05
--------------------------------------------------------------------------------


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1995, 1996, and 1997: dividend yield of 0%;
expected volatility of 0%, 80%, and 66% in 1995, 1996, and 1997, respectively;
risk-free interest rate of 6.8%, 6.1%, and 6.1% in 1995, 1996, and 1997,
respectively; and expected lives of 5.5 years for 1995 and 1996, and 5 years in
1997. The compensation cost for the stock option plans was $211,000,
<PAGE>

                                      35

$472,000, and $1,075,000 for 1995, 1996, and 1997, respectively. The
weighted-average fair value of options granted using this option-pricing model
in 1995, 1996, and 1997 was $1.34, $5.87, and $3.91, respectively.

The fair value of each estimated stock grant under the employee stock purchase
plan is based on the price of the stock at the beginning of the offering period
using the Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1996 and 1997, respectively: dividend yield of
0%; expected volatility of 80% and 66%; risk-free interest rate of 5.32% and
5.33%; and expected lives of six months. The compensation cost for the employee
stock purchase plan was $17,000 and $68,000 for 1996 and 1997, respectively.


11. ACQUISITIONS

On December 31, 1997, the Company acquired all of the outstanding stock of
Shepro Braun Systems, Inc. ("Shepro"), a provider of software and consulting
services to the investment management and financial services marketplace, for
1,000,000 shares of Common Stock of the Company in exchange for the 10,400
shares of common stock of Shepro in a business combination accounted for as a
pooling-of-interests. Accordingly, the financial statements for all periods
prior to the combination have been restated to reflect the combined operations.
The results of operations presented below for the years ended December 31, 1995,
1996, and 1997 present the Company and Shepro as stand-alone entities. There
were no intercompany transactions and no adjustments to net assets of the
combining companies to adopt the same accounting practices.


                                                                        Total
                                        Company          Shepro        Company
------------------------------------------------------------------------------
                                                     (in thousands)
1995
Revenues                               $ 18,802        $  4,509       $ 23,311
------------------------------------------------------------------------------
Net loss                               $ (4,349)       $   (374)      $ (4,723)
------------------------------------------------------------------------------

1996
Revenues                               $ 26,407        $  5,127       $ 31,534
------------------------------------------------------------------------------
Net income                             $    473        $     40       $    513
------------------------------------------------------------------------------
1997
Revenues                               $ 36,527        $  5,665       $ 42,192
------------------------------------------------------------------------------
Net income (loss)                      $  1,917        $   (121)      $  1,796
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Shepro had elected to be treated as a Subchapter S Corporation for income tax
purposes and, as such, no Federal income taxes have been provided related to
the results of Shepro's operations in the statement of operations presented.

On November 14, 1997, the Company acquired all of the outstanding stock of Mabel
Systems BV for $2.5 million, which includes $100,000 of direct costs associated
with the acquisition. The purchase has been paid in the form of cash for
$475,000, 72,816 shares of common stock of the Company valued at $750,000,
$375,000 due in three equal annual installments of $125,000 on the anniversary
date of the transaction, the assumption of liabilities of $623,000, and
$286,000 due to former Mabel Shareholders. The share purchase agreement also
calls for a contingent payment to be made in 2001. The payment is contingent on
the continued employment of the former Mabel shareholders and is based on the
revenues generated by the Mabel division. The payment can range from $0 to $1.9
million for revenues over $12 million. The acquisition was accounted for as a
purchase and, accordingly, the net assets and results of operations of Mabel
have been included in the consolidated financial statements from the acquisition
date. The purchase price was first allocated to tangible assets based on their
net realizable value or fair market value on the date of the acquisition. The
remaining portion of the purchase price is allocated to identified intangible
assets and goodwill.

The following summarizes the allocation of the purchase price.

------------------------------------------------------------------------------
Cash                                                                     $ 403
Accounts receivable                                                        260
Other                                                                       46
Equipment and furniture                                                     21
Complete technology                                                        588
Incomplete technology                                                      861
Goodwill                                                                   330
                                                                        ------
                                                                        $2,509
------------------------------------------------------------------------------


The allocation to complete technology is based on future risk-adjusted
discounted cash flows. Complete technology has been capitalized and included in
the caption "Intangible and other assets" in the accompanying consolidated
balance sheets. Amortization expense associated with complete technology was
$47,000 for the year ended December 31, 1997.

The allocation to incomplete technology is also based on future risk-adjusted
discounted cash flows and has been expensed in 1997, in accordance with
generally accepted accounting principles. Incomplete technology relates to the
<PAGE>

                                      36

objective of making Mabel's software Windows compliant. A majority of the Mabel
modules must be rewritten and translated to English and a full, rigorous test
program must be conducted before the Windows application can be considered
technologically feasible. As of the acquisition date, the incomplete technology
had not achieved technological feasibility and had no alternative uses.

The unaudited pro forma condensed consolidated results of operations presented
below for the years ended December 31, 1996 and 1997, assumes the Mabel
acquisition occurred at the beginning of the year. The unaudited pro forma
condensed statement of operations for the year ended December 31, 1997 excludes
the $861,000 write-off of purchased in-process research and development.


                                                1996                     1997
--------------------------------------------------------------------------------
                                           (in thousands except per share data)
Total revenues                                $33,002                  $43,521
Operating income                                1,205                    1,750
Net income                                        702                    2,751
Basic earnings per share                         0.07                      .20
Diluted earnings per share                       0.06                      .20
--------------------------------------------------------------------------------

These pro forma results are not necessarily indicative of results of operations
that would have actually occurred had the acquisition taken place at the
beginning of each period, or of future operations of the combined companies.

On March 31, 1995, the Company purchased substantially all of the assets and
operations of Chalke for $12,703,000. The purchase has been paid in the form of
cash of $7,426,000, net of cash received from Chalke and a line of credit
repayment, a promissory note with a present value of $2,678,000, the assumption
of liabilities of $2,599,000, including the costs of effecting the transaction.

The Chalke acquisition was accounted for as a purchase and, accordingly, the net
assets and results of operations of Chalke have been included in the
consolidated financial statements from the acquisition date. The purchase price
was first allocated to tangible assets based on their net realizable value or
fair market value on the date of the acquisition. The remaining portion of the
purchase price is allocated to identified intangible assets and goodwill.

The following summarizes the allocation of the purchase price (in thousands).


-------------------------------------------------------------------------------
Cash                                                                    $    49
Accounts receivable                                                       1,581
Property and equipment                                                      572
Complete technology                                                         795
Other assets                                                                 13
Incomplete technology                                                     7,889
Goodwill                                                                  1,804
                                                                        -------
 Total purchase price                                                   $12,703
-------------------------------------------------------------------------------

The allocation to complete technology is based on future risk-adjusted
discounted cash flows. Complete technology has been capitalized and included in
the caption "Intangible and other assets" in the accompanying consolidated
balance sheets. Amortization expense associated with complete technology was
$243,000 for the years ended December 31, 1996 and 1997.

The allocation to incomplete technology is also based on future risk-adjusted
discounted cash flows and has been expensed in 1995, in accordance with
generally accepted accounting principles. The incomplete technology had not
achieved technological feasibility and had no alternative uses.

The values allocated to complete and incomplete technology were determined after
extensive evaluation of the status of the products as they existed at the time
of acquisition, an assessment of their commercial viability and, in the case of
the two products considered to be incomplete technology, an analysis of the
additional costs necessary to reach technological feasibility.

The COPE product consisted of several modules, all of which were necessary to
meet the needs of its target market--large financial institutions. As of the
acquisition date, development of none of the modules had been completed and the
validity of the relevant algorithms had not been validated. PTS 2000 was also
incomplete as the product existed only as an early stage prototype and the core
development was still in the tool set and the object-oriented design stage.

Neither product had any alternative future use (in other research and
development projects or otherwise) as they were not commercially viable at the
time of acquisition and could not be utilized with any of the Company's existing
products. The Company discontinued the development of COPE as a stand-alone
product in 1996.
<PAGE>

                                      37

Future discounted cash flows require estimates of future revenues and expenses,
analysis of future market conditions and an estimate of the future economic life
of the product. Estimates were based on management's analysis of the data
available at the time. It is reasonably possible that the estimates could change
significantly in the near term as, in the case of incomplete technology, the new
products are introduced into the market and the existing complete technology
product faces new competitive pressures.

The Company assumed the current liabilities of Chalke as of March 31, 1995,
totaling $3,025,000, which included an outstanding line of credit, trade
accounts payable, and various accrued expenses. The line of credit was repaid by
the Company in accordance with the purchase agreement.

In August 1994, the Company acquired packaged software and other assets from an
unrelated entity for a purchase price of $840,000. Payment of the purchase price
consisted of cash of $160,000 at the closing; the Company's agreement, under
separately executed licensing and maintenance agreements, to provide the seller
with a CAMRA software license and five years of maintenance valued at $75,000
and $100,000, respectively; and a note payable for the remaining $505,000 which
was subsequently reduced by $55,000 in a non-cash exchange for a license
agreement. The acquisition has been accounted for as a purchase and,
accordingly, the assets and results of operations are included in the
consolidated financial statements from the acquisition date. The assets received
in the acquisition, principally the packaged software and customer lists, net of
accumulated amortization of $373,000 and $653,000 as of December 31, 1995 and
1996, respectively, are included in intangible and other assets. In 1997, the
assets received in the acquisitions were fully amortized and written off.
Amortization was being provided over a three-year period. The results of
operations from this acquisition are immaterial.

12. COMMITMENTS AND CONTINGENCIES

On March 18, 1997 and April 8, 1997, two separate purported class action
lawsuits ("Complaints") were filed against the Company, certain of its officers
and the two leading managers of the Company's initial public offering. On July
8, 1997, a Consolidated Amended Class Action Complaint was filed in the United
States District Court for the District of Connecticut (the "Consolidated
Complaint") in which the Complaints were consolidated and amended.

The Consolidated Complaint claims that the Prospectus for the Company's initial
public offering allegedly made material misrepresentations in violation of
Sections 11 and 12(2) of the Securities Act of 1933. The plaintiffs in the suit
are seeking an undetermined amount of damages and costs and expenses of the
litigation. The Company and the leading managers have each filed a motion to
dismiss the Consolidated Complaint on the grounds that it fails to state a claim
against the Company and the leading managers, respectively. The plaintiffs have
filed an opposition to the motion to dismiss, to which each of the Company and
the leading managers have filed a reply to such opposition. The Company believes
it has meritorious defenses to the claims made in the lawsuit and intends to
contest the Consolidated Complaint vigorously; however, legal counsel for the
Company is unable to predict, with any degree of certainty, the outcome of such
claims. While the resolution of these claims could affect the Company's results
of operations in future periods, the Company does not expect these matters to
have a material adverse effect on its consolidated financial position. However,
the Company is unable to predict the ultimate outcome or the potential financial
impact of these claims.

13. RELATED PARTY TRANSACTIONS

In 1995, the Company entered into licensing and maintenance contracts with
several related parties that have ownership interests in the Company, as well as
representation on the Company's Board of Directors. Total licensing, maintenance
and professional services fee revenues under these agreements were $263,000 for
the year ended December 31, 1995. Amounts collected under these agreements
totaled $295,000 for the year ended December 31, 1995. At December 31, 1995,
$228,000 remained payable from these parties to the Company.

As described in Note 8, the Company licensed its CAMRA and FILMS applications
software and certain other programs to a related party for a total purchase
price of $2,055,000, including a five-year maintenance program beginning in
February 1996. The purchase price was allocated to license fees of $1,544,000,
maintenance fees over the five-year period of $375,000 and deferred interest of
$136,000 resulting from an extended payment plan. Terms include $900,000 payable
upon execution of the agreement and quarterly installments of $53,000 for five
years. All out-
<PAGE>

                                      38

standing receivables and payables between the parties as of January 27, 1996,
including those described in the previous paragraph, were forgiven, resulting in
an additional $105,000 allocated to the purchase price. Interest was imputed at
9% for payments on the license fee. The amount collected from the related party
during the year ended December 31, 1997 was $212,000, including sales tax and
other products not related to this agreement.

The Company also licenses its CAMRA applications software to another related
party from which the Company derived revenues of $63,000 in 1995. This license
was transferred under the agreement dated January 27, 1996 such that all
licenses and maintenance agreements with these three related parties, which are
affiliated with each other, are governed by one agreement.

The Company has employment agreements with certain executive officers and
certain other employees. Certain agreements contain non-compete clauses for
periods ranging from one to two years.


14. SUBSEQUENT EVENTS

On March 20, 1998, the Company completed its acquisition (the "Quantra
Acquisition") of substantially all of the assets of Quantra Corporation
("Quantra") pursuant to an Asset Purchase Agreement, dated as of March 20, 1998,
among the Company, Quantra and AEGON USA Realty Advisors, Inc., the controlling
stockholder of Quantra. The purchase price for the Quantra Acquisition consisted
of 546,019 shares of the Company's Common Stock, $3,500,000 in cash and the
assumption of certain liabilities of Quantra, plus the costs of effecting the
transaction. The Company used authorized but previously unissued shares of
Common Stock and cash from working capital in connection with the acquisition.
The Quantra Acquisition will be accounted for as a purchase. The Company and
Quantra also entered into an Escrow Agreement pursuant to which $1,230,200 of
the cash consideration will be held in escrow to reimburse the Company in
connection with certain acquisition costs and the breaches of representations,
warranties or covenants, if any, by Quantra. Quantra is a provider of real
estate equity and debt investment management software systems.

On March 9, 1998, the Company announced the signing of a letter of intent to
purchase substantially all of the shares of capital stock of Savid
International, Inc., a supplier of financial software specifically designed to
help organizations manage their debt and derivative portfolios. The Company
expects that the Savid acquisition will be accounted for as a purchase.