<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    Form 10-K

      [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              Exchange Act of 1934

                   For the fiscal year ended December 31, 1999

                    [ ]TRANSITION REPORT PURSUANT TO SECTION
                          13 OR 15(d) OF THE SECURITIES
                              Exchange Act of 1934

                         For the transition period from

                         Commission File Number 0-26138

                          Dendrite International, Inc.
             (Exact name of registrant as specified in its Charter)

<TABLE>
<CAPTION>
<S>                                                 <C>
         New Jersey                                            22-2786386
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                            Identification No.)

</TABLE>

                             1200 Mt. Kemble Avenue
                            Morristown, NJ 07960-6797
                                  973-425-1200

          (Address, including zip code, and telephone number (including
             area code) of registrant's principal executive office)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                 Title of Class
                           Common Stock, no par value

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter time period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ X ]

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

The aggregate market value of the shares of the Common Stock held by
nonaffiliates of the registrant was approximately $679,948,122 based upon the
closing price of the Common Stock on March 15, 2000, which was $21.00. The
number of shares of Common Stock outstanding on that date was 38,957,422.

                       DOCUMENTS INCORPORATED BY REFERENCE

DOCUMENT DESCRIPTION                                                  10-K PART

Registrant's Notice of Annual Meeting of Shareholders and
Proxy Statement for the 2000 fiscal year expected to be filed           III


<PAGE>   2

on or about April 5, 2000.

Note:   The reader should be aware that, unless otherwise indicated, for
        purposes of this Form 10-K, all share and per share data have been
        adjusted to reflect a three-for-two stock split of Dendrite's common
        stock, which became effective on October 8, 1999. Dendrite(R),
        Catalyst(TM), ForceAnalyzeRx(TM), ForceCompanion(TM), ForceOne(R),
        ForcePharma (TM), J Force(TM), Medicheck (TM), SalesPlus(TM), ScripMax
        (TM), Series 4(TM), Series 5(TM), Series 6(TM), and Voyager (TM) are
        either trademarks or registered trademarks of Dendrite International,
        Inc. All other servicemarks, trademarks and trade names referred to in
        this prospectus are the property of their respective owners. The Company
        and any of its U.S. or international subsidiaries are sometimes
        collectively referred to herein as "Dendrite," "we," "our" or "the
        Company."

                                     PART I

ITEM 1.   BUSINESS.

GENERAL

    Dendrite International, Inc. is a leading worldwide supplier of a
comprehensive range of sales force software products and support services to
the pharmaceutical industry. We design, develop and sell comprehensive customer
relationship management sometimes called CRM solutions that enable customers
to effectively manage the activities of large sales forces in complex selling
environments. These solutions also permit customers to coordinate diverse home
office functions, such as distribution of product literature, sales call
follow-up activities and organization of educational programs.

    Historically, we have focused our solutions on large sales forces within
the prescription-only pharmaceutical industry. We believe that our extensive
knowledge of the complex and unique selling processes in this industry and our
demonstrated ability to meet our customers' business needs have given us a
commanding position in this portion of our target market. We are presently the
world's largest supplier of customer relationship management solutions to the
prescription-only pharmaceutical industry based on the number of sales
representatives we support. In the fourth quarter of 1998 we announced our
global reach strategy which expanded our target market to mid-size
pharmaceutical companies as well as to subsidiaries in emerging markets. Our
customers' sales forces now range in size from as few as 50 representatives in
smaller European countries to several thousand representatives in the United
States.

    Our solutions enable our pharmaceutical customers to maximize the return on
the investments made conducting sales calls to physicians and improves the
profitability of their operations by allowing them to:

    - analyze prescriber patterns to target physicians to ensure the delivery
      of the right message at the right time;

    - coordinate the activities and sales call content of multiple sales forces
      calling on the same physicians;

    - provide integrated data from multiple sources quickly to direct
      individual sales representatives;

    - provide technical and support services to maximize the selling time of
      the sales representatives; and

    - provide Internet-based training and meetings to minimize out of territory
      time of the sales representatives.


    We also supply our solutions to manufacturers of consumer packaged goods.
Our consumer packaged goods or CPG products are targeted at manufacturers whose
sales representatives call on retail outlets and enable sales representatives to
manage all aspects of their call reporting obligations, including the
collection of pricing, promotions and product placement information. In
addition, our products can integrate sales information from a number of data
sources. By using our products, consumer packaged goods manufacturers can
measure the effect of their promotions activities and can effectively plan and
execute sales strategies in ways that bring them significant competitive
benefits.

    Our pharmaceutical customers include: Allergan; Aventis; Block;
Bristol-Meyers Squibb; Eli Lilly; Forrest; Johnson & Johnson; Kissei; Novo
Nordisk; Parke-Davis; Pfizer; Savage; Searle; SmithKline Beecham; Solvay;
Takeda; and 3M. Our customers in the consumer packaged goods market include:
Bacardi-Martini; Federal Express; Gillette; and Rayovac.

    Our current offering of sales force software products includes:
ForcePharma; Catalyst; Voyager; SalesPlus; J Force; Force Companion; Medicheck;
ForceOne; ForceAnalyzeRx; ScripMax and WebSessions, each of which is described
below under "Products and Services."

    We also offer a broad range of support services that enable our customers
to maximize the effectiveness of our software products. These services include
software configuration and implementation, technical and hardware support,
sales force support and data integration and analysis. We typically provide
these services under multi-year agreements.

                                      2
<PAGE>   3
     We develop and market a comprehensive range of sales force solutions
consisting of software products and a wide range of support services. These
solutions, among other things, enable our customers to:

     - centralize data to maintain a history of all contacts with each
       physician;

     - target specific physicians with specific messages;

     - realign sales territories;

     - reallocate sales personnel on a customer or formulary basis;

     - share data among sales representatives calling on the same physician;
       and

     - redeploy sales and marketing resources more rapidly and more precisely.

     Our sales force software products integrate and process large volumes of
time-sensitive sales-related data for use in developing sales strategies and
campaigns. Our current sales force software product offerings allow customers to
select many different combinations of features for different types of sales
forces. Our current product offerings typically do not require customization
(i.e., modification of source code) in order to be implemented, however, they
are generally significantly configured to address data, market and other
specific customer requirements.

     We price our sales force software products based on the geographic area in
which a customer uses our software product, the software configuration and the
total number of users. We also charge additional up front fees to configure and
install the software and to train the sales representatives as well as annual
fees for continuing services and project specific fees.

PHARMACEUTICAL SALES FORCE SOFTWARE PRODUCTS

     Our pharmaceutical sales force software products are designed to provide
information to those involved in sales and sales management and also to other
levels within each sales organization including its senior management. For
example, information directly related to sales, such as travel and expense
reports, may be provided to the finance and personnel departments. Similarly,
representatives in the field can provide information concerning a physician that
can assist managed care sales personnel. These systems create the linkage which
connects a customer's sales and management functions with other business
departments.

     We currently offer our pharmaceutical customers 4 primary software
products: ForcePharma; Catalyst; SalesPlus; and J Force. We also offer our
pharmaceutical customers 3 additional Windows CE(TM)-based software products
known as Force Companion, Voyager and Medicheck.

     FORCEPHARMA. ForcePharma is our sales force management software product
targeted at large multinational pharmaceutical customers. ForcePharma can be
configured to support sales representatives and managers at all levels within a
sales organization. The ForcePharma product can also be configured to address a
customer's specific business requirements, including the creation of new data
structures. New functions, which integrate fully with the existing
configuration, can be added over time, therefore allowing the customer to
acquire a system that is capable of evolving as the customer's business
requirements change. A typical major pharmaceutical customer will select a
configuration depending on the structure of the customer's sales force, the
geographic region involved and the type of pharmaceutical sales data available.
Each function is offered with specific continuing support services. The
ForcePharma software product can be combined with a number of our other CRM
tools to enhance its value to the customer.

     CATALYST. Our Catalyst product provides a suite of comprehensive SFE tools
tailored to the specific needs of mid-size pharmaceutical, medical device,
biopharmaceutical, biotechnology, and contract sales organizations. Catalyst's
flexible architecture and application development tools permit extensive
configuration to meet a customer's unique business requirements and subsequent
implementation within condensed time frames. Through the integration of
third-party sales data, comprehensive opportunity and contact management
functionality and sophisticated targeting capabilities, Catalyst empowers
healthcare product sales organizations with critical customer intelligence. Like
ForcePharma, Catalyst uses object-oriented programming technology and can be
configured for all user levels within a sales organization.

     SALESPLUS. SalesPlus is marketed to mid-tier European pharmaceutical
companies. We configure SalesPlus prior to sale, which saves our customers the
time and costs associated with configuration. This product is offered to those
pharmaceutical customers whose business needs do not require all of the features
of the ForcePharma product. Like ForcePharma, this product supports all levels
within a sales organization.

     J FORCE. Our J Force product was specifically developed for the Japanese
market and contains functionality similar to that of ForcePharma. J Force is
highly configured and has graphical user interface and local market requirements
that reflect the unique characteristics of the Japanese prescription-only
pharmaceutical market.

     FORCE COMPANION. Force Companion, our Windows CE(TM)-based companion
software, is designed to work in conjunction with Force Pharma and provides
sales representatives with access to critical client information at the point of
contact and allows for

                                       3
<PAGE>   4

remote information capture and subsequent synchronization with Force Pharma.

     VOYAGER. Voyager, a Windows CE(TM)-based handheld application provides
robust functionality comparable to many laptop applications at a reduced cost.
Optimized for growth-focused organizations of all sizes that require greater
portability, instant data access and lower cost of hardware ownership, Voyager
provides comprehensive functionality, two- or three-tier synchronization
capabilities, and a common enterprise architecture with Catalyst. Voyager
enables organizations to increase sales effectiveness by delivering and
capturing information at the prescriber point of contact and enabling sales
representatives to effectively and timely target prescribers.

     MEDICHECK. Medicheck, a Windows CE(TM)-based palm-top solution, is used by
pharmaceutical company sales representatives in emerging markets where highly
portable, lower cost hardware is essential. The multiple module palm-top system
replaces paper based systems and permits information sharing among multiple
levels within a sales organization.

     CPG INDUSTRY PRODUCT

     Our CPG software product is generally configured in a manner similar to our
pharmaceutical software products.

     FORCEONE. Force One is our sales force software product for the consumer
packaged goods or CPG markets and is sold in Europe, the United States and
Canada. ForceOne contains most of the same basic features as our ForcePharma
product, as well as features specifically created for the CPG industry. ForceOne
can be configured to support field sales representatives, their managers and key
account managers. The structure of our license, implementation and ongoing
service fees for our CPG customers is generally similar to that of our
pharmaceutical customers, however, to date this market segment has outsourced
very few ongoing support services.

ANALYTICAL TOOLS

     We currently offer certain analytical software and reporting tools under
the ForceAnalyzeRx and ScripMax product names, which may be used either with our
sales force software products or on a stand-alone basis. These software products
allow users to analyze data, such as prescription trends, and produce reports
based on the results of these analyses. These products also provide customers
with timely information that they can use in developing sales strategies. The
custom applications that we design with these products address a wide variety of
client business needs including sales, market research, clinical trials, new
product launch analyses and sales reporting.

     Additional capabilities of these analytical products include the ability
to: predict prescriber switching allowing early intervention to encourage or
forestall a change in prescribing behavior; provide detailed analysis of the
effectiveness of various promotional activities; provide promotional activity
optimization solutions; and deliver the results of such analysis to the user via
e-mail or over the Internet.

SERVICES

     Our customers generally enter into agreements covering software
implementation, technical and hardware support and sales force support services.
We also provide data related services including: data scrubbing; match, merge
and purge activities; and a variety of data analysis services. Virtually all
customers sign a software maintenance agreement that covers, among other things,
software defect resolution.

     For the year ended December 31, 1999, service revenues represented
approximately 86% of our total revenues. As a result of providing these ongoing
services, we have developed long-term strategic relationships with our
customers. For example, it is generally our experience that once we begin
supplying SFE solutions to our larger customers, we continue to provide support
services to them beyond the expiration of the initial service agreement. In
addition, as these relationships develop, our customers generally increase the
amount and variety of support services they purchase from us. These
relationships have accounted for some of the increase in our service-related
revenues.

     The complexity and size of the sales and market research databases being
integrated and manipulated by our software products require highly specialized
information systems skills, particularly as new sources of data must be
integrated. The creation of a customer's database requires loading third party
data onto a central server or servers and encoding that data with proprietary
Dendrite data links. This encoding process allows the data to be integrated into
a functional sales-related database used by our sales force software products.
We initially perform these services during installation and, if requested, may
continue to manage these information

                                       4
<PAGE>   5

systems over time. Many companies choose not to employ the information systems
staff needed to manage these large, complex databases and consider the
outsourcing of these tasks to us as both economically and operationally
advantageous.

     We offer a full range of support services to all of our customers. However,
because customers of our SalesPlus, Medicheck, and ForceOne products often
require less functionality, we expect the amount of support services for these
customers to be less than the amount provided to customers of our other
products.

     The principal categories of services we offer are implementation services,
technical and hardware support services and sales force support services.

     IMPLEMENTATION SERVICES. Our implementation services include: the
configuration, if applicable, and implementation of our sales force software
products to meet customer requirements; creation of the customer's specific
version of our data model; creation of the customer's integrated database; the
loading of data onto the customer's remote computer hardware and training
customer employees on use and capabilities of Dendrite sales force software
products.

     TECHNICAL AND HARDWARE SUPPORT SERVICES. Our technical and hardware support
service offerings consist of: the management of technical support for Dendrite
sales force software products; customization of source code, if applicable, to
meet the customer's needs; continued support of the customer's database,
including: loading and linking new releases of third party data purchased by the
customer; identifying new functional segments for data analysis; providing
software defect resolution and issuing performance enhancements; feature changes
and, in certain circumstances, new versions of products; operation and
maintenance of server computers; providing asset control and maintaining remote
computer hardware, including recapture of data on defective equipment and
replacement of defective equipment; and developing business interruption plans
for management of any unforeseen interference with Dendrite's provision of
ongoing support services, including coordinating the retention of a disaster
recoverY provider for the customer's servers.

     SALES FORCE SUPPORT SERVICES. Our sales force support services include:
project management; providing ongoing training on use and capabilities of
Dendrite sales force software products; assisting the customer in planning and
executing realignments of sales territories or functional (e.g.,
formulary-based) segments to allow more effective resource allocation; providing
direct customer service telephone support for Dendrite sales force and certain
third party software products (available seven days a week and in many foreign
languages); providing pro-active prescription data analysis at a territory and
physician level to a customer's sales representatives to improve sales and
promotional campaigns, and providing data integration and data management
services with data our customers obtain from third party sources.

     When a large customer licenses a Dendrite sales force software product, we
typically establish an implementation services and ongoing support group focused
on that customer, as well as a separate support service group composed of both
customer support and technical support personnel who are primarily dedicated to
servicing that customer. However, for customers with smaller sales forces or
sales forces with specialized needs, such as non-home country language
capability, the service group may have responsibility for more than one client.

     Typically, we provide services under a multi-year contract. In North
America, we enter into service agreements directly with our customers. Outside
North America, we enter into service agreements through our local wholly-owned
subsidiary. Depending upon the size of the customer and the scope of services to
be performed, a dedicated service group may be comprised of 5 to 100 persons.

SOFTWARE CONFIGURATION

     Our pharmaceutical sales force software products are configured to allow
information access and communication among geographically dispersed sales and
marketing personnel and regional and home offices. The core of the configuration
is a central database server, which stores the customer information and
integrates and controls all data flow from external points. Most of the servers
used by our customers are manufactured by IBM, Compaq, Hewlett-Packard or Sun
Microsystems and run on UNIX(TM) or Windows NT(R) operating systems. Servers are
purchased or leased by Dendrite's customers or leased for them by Dendrite. Some
smaller customers lease space on our servers located in various offices
worldwide.

     Remote databases are stored on laptop and palm-top computers used by sales
representatives in the field and updated regularly via modem. Regional sales
managers using personal computers may access the server via wide area networks.
Our customers are responsible for selecting computer equipment and for deciding
when to upgrade or replace it.

                                       5
<PAGE>   6

     Our pharmaceutical sales force software products permit a sales
representative to send updated information to the central database server.
Similarly, the sales representative can receive information concerning upcoming
calls as well as additional sales efforts planned by other sales representatives
within the same company. This server, in most cases located at one of our
facilities, contains the customer's own database of sales-related information
which is generally maintained and operated for the customer by us.

CUSTOMERS

     Our customers include major multinational pharmaceutical companies,
including: Allergan; Aventis; Block; Bristol-Myers Squibb; Eli Lilly;
Johnson & Johnson; Kissei; Novo Nordisk; Parke-Davis; Pfizer; Savage; Searle;
Smith-Kline Beecham; Solvay; Takeda; and 3M. In addition, in the CPG market, our
customers include: Bacardi-Martini; Federal Express; Gillette; and Rayovac.

     Approximately 37% of our total revenues in 1999 came from Pfizer and
Johnson & Johnson. Approximately 49% of our total revenues in 1998 came from
Pfizer, Johnson & Johnson and Parke-Davis. Approximately 51% of our total
revenues in 1997 came from Pfizer, Johnson & Johnson and Rhone-Poulenc Rorer.
The loss of all or a significant part of the business of any of these customers
could have a material adverse effect on us.

SALES AND MARKETING

     We actively market our sales force software products and services to
prescription-only and over the counter pharmaceutical, medical device,
biopharmaceutical, biotechnology and CPG companies worldwide using regional and
local sales and marketing personnel. Sales presentations are typically made to
the customer's management information services department or sales department.
The selection of a sales force software product often entails an extended
decision-making process that typically takes nine to eighteen months. This
process may involve senior levels of management and, in some cases, the board of
directors. See Item 7 -- "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Factors that May Affect Future Operating
Results -- Our quarterly results of operations may fluctuate significantly and
may not meet market expectations -- Our lengthy sales and implementation cycles
make it difficult to predict quarterly revenues".

     We work with a potential customer to identify its business requirements in
light of its markets, sales organization and operating structure. We draw upon
our broad product functionality and our experience in the applicable vertical
market to provide a comprehensive, yet highly targeted SFE solution.

     The positive response of our customers' sales representatives can influence
the decisions of those customers to license additional functionality and/or to
contract for expanded support services. Accordingly, we try to address the
concerns of sales personnel during the training portion of our implementation
services. We also promptly respond to customer communications and evaluate them
for indications of potential systemic problems or changing market trends.

     We believe that our relationships with existing customers create additional
sales and marketing opportunities. Further, we believe that our network of
international offices allows us to serve our existing customers in new
locations. Many of our prescription-only pharmaceutical customers also have
over-the-counter operations that provide us with additional sales opportunities.

     Finally, we have occasionally entered into arrangements with business
partners to market our products and/or services jointly. In addition, we
occasionally resell computer hardware and third-party software.

COMPETITION

     The current market for sales force software, customer relationship
management products and support services is highly competitive. Many companies
offer sales force automation or SFA and SFE products and/or services in the
prescription-only pharmaceutical and CPG industries. We believe that there are
approximately eight other companies that sell sales force software products and
specifically target the pharmaceutical industry, including:

     -     three competitors that are actively selling in more than one country;
           and

     -     two competitors that also offer sales force support services.

     SFA software products differ greatly in terms of functionality, flexibility
and the type of hardware platform supported. Vendors of SFA software products
also generally do not provide support services to the same extent as SFE or CRM
vendors. We believe that our sales

                                       6
<PAGE>   7

force software products and support services offer customers a more
comprehensive solution than SFA software products. We believe that potential
competitors must incur significant expense in order to develop an integrated,
configurable solution for the problems presented by complex multinational
selling environments. While we believe SFA software products are less compelling
solutions, these software products, nonetheless, often cost less than SFE or CRM
solutions. We also face competition from many vendors that market and sell SFA
and sales force software products and services in the CPG market. In addition,
we also compete with many companies that provide support services similar to our
services.

     Our sales force products and services compete with others principally on
the basis of the following factors:

     -        product flexibility and configuration;

     -        platform configuration;

     -        name recognition;

     -        global competence;

     -        service standards;

     -        breadth of customer base; and

     -        technical support and service.

     We believe our solutions compete favorably with respect to these
factors, and that we are positioned to maintain our market leadership position
through innovative new product and application developments and continued focus
on support services. Some of our existing competitors, as well as a number of
potential market entrants, have larger technical staffs, larger marketing and
sales organizations and greater financial resources than we do.

     In the prescription-only pharmaceutical vertical market, two of our
competitors, IMS Health Strategic Technologies and TVF (Cegedim), own and
control, either directly or through affiliated entities, proprietary data
collection systems. It may be possible for a competitor to gain a competitive
advantage in the pricing of its sales force software products with respect to
customers who are interested in purchasing the data it or its affiliates
collect. In addition, as new data sources emerge, companies providing such data
may enter the market and provide solutions to our customers directly.

     We believe that competition will increase as new competitors enter the
market to supply sales force software products and/or services and as existing
competitors expand their product lines, consolidate or offer more compelling
solutions. We also expect that we may encounter additional competition in
the future from firms offering outsourcing of information technology services
and from vendors of software products providing specialized applications not
offered by us, including enterprise resource planning vendors and data base
vendors. We also may face competition from CRM vendors who do not currently
compete in our vertical market. We also face potential competition from our
current customers and potential customers who may elect to design and install or
to operate their own sales force management systems.

PROPRIETARY RIGHTS

     We rely on a combination of methods to protect our proprietary intellectual
technology. These include:

     -        trade secret, copyright and trademark laws;

     -        license agreements with customers containing confidentiality
              provisions;

     -        confidentiality agreements with consultants, vendors and
              suppliers; and

     -        non-disclosure agreements with each of our executive officers and
              technical employees.

     Existing United States copyright laws provide only limited protection and
even less protection may be available under foreign laws.

                                       7
<PAGE>   8

EMPLOYEES

     As of December 31, 1999, we employed 1,333 employees: 962 in the United
States and Canada; 247 in Europe; 56 in the Pacific Rim; and 68 in Latin
America.

     We believe that relations with our employees are good. Our employees
generally are not part of any collective bargaining unit except for our
employees in France who are subject to a national collective bargaining
agreement. We believe that our future growth and success will depend upon our
ability to attract and retain skilled and motivated personnel, which is becoming
progressively more difficult for many technology and services companies in many
countries.

ADDITIONAL INFORMATION

     For additional information regarding the Company's business, see Item 7 of
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

ITEM 2.  PROPERTIES.

     We lease a 101,500 square foot building, which serves as our corporate
headquarters in Morristown, New Jersey; a 31,575 square foot building in
Stroudsburg, Pennsylvania, which houses customer support personnel; 26,280
square feet of office space in Basking Ridge, New Jersey, which houses customer
support personnel; a 10,000 square foot building in Stroudsburg, Pennsylvania
which serves as a hardware repair and maintenance facility; 9,490 square feet of
office space in Durham, North Carolina, which houses customer support personnel;
a 5,000 square foot warehouse in Somerset, New Jersey; and a 120 square foot
office in Newark, Delaware. We also lease a total of 57,670 square feet in
fifteen locations in Australia, Belgium, Brazil, Canada, Ecuador, France,
Germany, Hungary, Italy, Japan, Mexico, New Zealand, Spain and the United
Kingdom for local management, sales offices and customer support operations. We
believe that our existing U.S. corporate facilities will become insufficient for
our needs in 2000, but that adequate space will be available as needed.

     Servers located at our facilities are commonly maintained in a secured area
and are often subject to regular audit and inspection by our customers. We
maintain database servers located at our facilities for substantially all of our
U.S. customers and for a substantial majority of our international customers.
For these customers, we offer a business interruption service which is intended
to protect these customers' businesses in the event of any unforeseen
interruption, interference or disruption of the Company's provision of customer
support services. As part of this offering, we will assist a customer in
developing a business interruption plan, which will include the coordination of
the customer's retention of a disaster recovery provider.

ITEM 3.  LEGAL PROCEEDINGS.

     We are occasionally involved in litigation relating to personnel and other
claims arising in the ordinary course of business. We are not currently engaged
in any legal proceedings that are expected, individually or in the aggregate, to
have a materially adverse effect on our business.

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

     Not applicable.


                                     PART II

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

                                       8
<PAGE>   9

     Our common stock, no par value, is quoted on the Nasdaq National Market
under the symbol "DRTE". As of March 15, 2000 there were approximately 142
holders of record of our common stock.

     The following table sets forth for the periods indicated the high and low
sale prices for our common stock as reported by the Nasdaq National Market
System. Such market prices have been adjusted to give retroactive effect to the
three-for-two forward stock split of our common stock which became effective on
October 8, 1999.

<TABLE>
<CAPTION>

            Period                      High      Low
            ------                    --------   ------
<S>                                   <C>        <C>
Quarter Ended March 31, 1998........  $10.25     $6.29
Quarter Ended June 30, 1998.........   12.67      8.52
Quarter Ended September 30, 1998....   18.59     10.33
Quarter Ended December 31, 1998.....   19.66     10.83

Quarter Ended March 31, 1999........   21.17     13.63
Quarter Ended June 30, 1999.........   25.33     13.17
Quarter Ended September 30, 1999....   33.67     19.25
Quarter Ended December 31, 1999.....   39.00     25.00
</TABLE>

     We have never paid any cash dividends on our common stock and we do not
intend to pay any cash dividends on our common stock in the foreseeable future.
Our line of credit agreement with The Chase Manhattan Bank, N.A. requires us to
maintain a minimum net worth measured quarterly which is equal to our net worth
as of December 31, 1997 plus 50% of our net income earned after January 1, 1998
plus 75% of the net proceeds to us of any stock offerings. This covenant
effectively limits the amount of cash dividends we may pay. See Note 4 of "Notes
to Consolidated Financial Statements" for a discussion of our line of credit
agreement.

                                       9
<PAGE>   10

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA.

SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>

                                                                               YEAR ENDED DECEMBER 31,
                                              ---------------------------------------------------------------------------------
                                                 1995             1996               1997               1998            1999
                                              ----------   -----------------  -----------------  -----------------  -----------
                                                                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
STATEMENT OF OPERATIONS DATA:
Revenues:
<S>                                           <C>              <C>                <C>                <C>                <C>
     License fees...........................  $   6,961        $  10,310          $   9,074          $  14,955          $   24,244
      Services..............................     53,625           66,573             82,248            115,678             148,441
                                              ---------        ---------          ---------          ---------          ----------
                                                 60,586           76,883             91,322            130,633             172,685
Costs of revenues:
     Cost of license fees...................        712              832              1,758              2,314               2,360
     Cost of services.......................     27,153           37,771             45,078             57,887              72,380
                                              ---------        ---------          ---------          ---------          ----------
                                                 27,865           38,603             46,836             60,201              74,740
                                              ---------        ---------          ---------          ---------          ----------
     Gross margin...........................     32,721           38,280             44,486             70,432              97,945

Operating expenses:
     Selling, general and administrative....     23,073           28,519             33,305             44,046              56,927
     Research and development...............      2,518            7,361              3,674              4,584               7,669
     Mergers and acquisitions...............         --               --                 --                 --               3,466
     Write-off of in-process research and
       Development..........................         --            2,640                 --              1,230                  --
                                              ---------        ---------          ---------          ---------          ----------
                                                 25,591           38,520             36,979             49,860              68,062
                                              ---------        ---------          ---------          ---------          ----------
     Operating income (loss)................      7,130             (240)             7,507             20,572              29,883
Interest income.............................        559            1,168                531              1,099               1,880
Other income (expense)......................        227             (240)              (261)              (466)               (189)
                                              ---------        ---------          ---------          ---------          ----------
     Income (loss) before income taxes......      7,916              688              7,777             21,205              31,574
Income taxes................................      3,082            1,467              3,002              8,446              12,234
                                              ---------        ---------          ---------          ---------          ----------
Net income (loss)...........................  $   4,834        $    (779)         $   4,775          $  12,759          $   19,340
                                              =========        =========          =========          =========          ==========
Net income (loss) per share:
     Basic..................................  $    0.21        $   (0.02)         $    0.13          $    0.35          $     0.51
                                              =========        =========          =========          =========          ==========
     Diluted................................  $    0.14        $   (0.02)         $    0.13          $    0.32          $     0.48
                                              =========        =========          =========          =========          ==========
Shares used in computing net income (loss)
  per share:

     Basic..................................     23,501           35,370             35,601             36,080              37,725
                                              =========        =========          =========          =========          ==========
     Diluted................................     33,365           35,370             36,870             39,392              40,599
                                              =========        =========          =========          =========          ==========
</TABLE>

<TABLE>
<CAPTION>

                                                                                    DECEMBER 31,
                                                      --------------------------------------------------------------------
                                                         1995           1996           1997            1998         1999
                                                      ---------    -------------  -------------   -------------  ---------
                                                                                   (IN THOUSANDS)
BALANCE SHEET DATA:

<S>                                                   <C>            <C>            <C>             <C>            <C>
Working capital..................................     $  29,063      $  31,530      $  34,813       $  50,608      $  78,131
Total assets.....................................        47,704         54,176         57,876          81,831        124,720
Capital lease obligations, less current portion..            51            201            353             544            285
Stockholders' equity.............................        33,510         37,511         40,672          61,049        101,116
</TABLE>

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

FORWARD-LOOKING STATEMENTS

     This Form 10-K contains certain forward-looking statements that we believe
are within the meaning of Section 27A of the Securities Act of 1933 and Section
21-E of the Securities Exchange Act of 1934, which are intended to be covered by
the safe harbors created by such acts. For this purpose, any statements that are
not statements of historical fact may be deemed to be forward-looking
statements, including the statements under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business"
regarding our strategy, future operations, financial position and objectives of
management. Those statements in this Form 10-K containing the words "believes,"
"anticipates," "plans," "expects" and similar expressions constitute
forward-looking statements, although not all forward-looking statements contain
such identifying words. These forward-looking statements are based on our
current expectations, assumptions, estimates and projections about our company
and the pharmaceutical and consumer packaged goods industries. All
forward-looking statements involve risks and uncertainties, including those
risks identified under "Risk Factors," many of which are beyond our control.
Although we believe that the assumptions underlying our forward-looking
statements are reasonable, any of the assumptions could be inaccurate and actual
results may differ from those indicated by the forward-looking statements
included in this Form 10-K, as more fully described under "Risk Factors". In
light of the

                                       10
<PAGE>   11

significant uncertainties inherent in the forward-looking statements included in
this Form 10-K, you should not consider the inclusion of such information as a
representation by us or anyone else that we will achieve our objectives and
plans. Moreover, we assume no obligation to update these forward-looking
statements to reflect actual results, changes in assumptions or changes in other
factors affecting such forward-looking statements.

OVERVIEW

     We succeeded in 1991 to a business co-founded in 1986 by John E. Bailye,
the Company's current Chairman, President and Chief Executive Officer. The
business was established to provide Sales Force Effectiveness or SFE solutions
that would enable companies to manage, coordinate and control the activities of
large sales forces in complex selling environments, primarily in the
prescription-only pharmaceutical industry. Today, our solutions combine software
products with a wide range of specialized support services. These services
include software implementation, technical and hardware support and sales force
support. We develop, implement and service sales force software products through
our own sales, support and technical personnel located in 21 offices worldwide.

     We generate revenues from both services and licenses. Service revenues,
which account for a substantial majority of our revenues, consist of fees from a
wide variety of contracted services which we make available to our customers,
generally under multi-year contracts. We generate implementation fees from
services provided to configure and implement the sales force software products
for our customers, sometimes as part of longer projects when enhancing customer
relationships is our goal. We receive technical and hardware support fees for
services related to, among other things, ongoing technical support, maintenance
of our customers' databases, operations of our customers' server computers,
maintenance for our customers' remote hardware and asset control. Technical and
hardware support fees also include fees for software maintenance services such
as software defect resolution and performance enhancements. We charge fees for
these maintenance services based on a percentage of total license fees plus
configuration fees, if any. We receive sales force support fees for organizing
and managing support of our customers' sales force, including training,
telephone support and data analysis services. Ongoing support fees are generally
negotiated at the commencement of a contract. However, it is our experience that
our larger customers increase the amount of services they purchase from us over
time. Fees for these additional services are typically based on the labor and
materials used to provide the applicable service.

     We charge our customers license fees to use our proprietary computer
software. Customers generally pay one-time perpetual license fees based upon the
number of users, the territory covered and the particular software licensed by
the customer.

     The Company generally recognizes license fees as revenue using the
percentage of completion method over a period of time that commences with the
exceution of a license agreement and ends when the product configuration is
complete and it is ready for use in the field. This period of time usually
includes initial customization or configuration and concludes with quality
assurance and testing. In those historically rare cases when there is no
initial customization or configuration the company generally recognizes the
license fees from those products upon delivery assuming any services to be
provided are not essential to the functionality of the software. Additionally,
license revenues will be recognized immediately when user count for previously
delivered software increases and/or a third party is used for implementation
and configuration. The Company's software licensing agreements provide for a
warranty period (typically 180 days from the date of excution of the
agreement). The portion of the license fee associated with the warranty period
is unbundled from the license fee and is recognized ratably over the warranty
period. The Company does not recognize any license fees unless persuasive
evidence of an arrangement exists, the license amount is fixed and determinable
and collectability is probable.


     The United States, the United Kingdom, France and Japan are our main
markets. We generated approximately 36% of our total revenues outside the United
States during the year ended December 31, 1997; approximately 23% during the
year ended December 31, 1998; and approximately 24% during the year ended
December 31, 1999.

     We bill services provided by our foreign branches and subsidiaries in local
currency. License fees for our products are generally billed in U.S. dollars
regardless of where they originate. Foreign license fees are shown as United
States revenues in Note 10 of "Notes to Consolidated Financial Statements."
Operating results generated in local currencies are translated into U.S.
dollars at the average exchange rate in effect for the reporting period.

     Our operating profits by geographic segments are shown in Note 10 of "Notes
to Consolidated Financial Statements". Our geographic operating profits are
affected primarily by our use of local technical and customer support personnel,
costs associated with opening new facilities or expanding existing facilities
and our ability to increase service revenues faster than the growth in selling,
general and administrative expenses.

                                       11
<PAGE>   12

MERGERS AND ACQUISITIONS

     We regularly evaluate opportunities to acquire products or businesses
that represent strategic enhancements to our operations. Such acquisition
opportunities, if they arise, and are successfully completed, may involve
the use of cash or equity instruments. We currently have no agreements to
make any acquisitions.

     In accordance with this policy, the Company has engaged in the following
acquisitions over the last few years:

     On July 24, 1998, the Company acquired 100% of the capital stock of
Associated Business Computing, N.V. and an affiliated company (collectively,
"ABC") for approximately $4,013,000 and transaction costs of $150,000. The
purchase was accounted for under the purchase method of accounting, whereby the
purchase price is allocated to the assets and liabilities assumed of ABC based
on their respective fair market values at the acquisition date. The excess of
purchase price over the fair value of net assets acquired was assigned to
identifiable intangibles. The Company assigned $1,230,000 to in-process research
and development and such amount was written-off in the accompanying consolidated
statements of operations. The Company also recorded $2,226,000 as goodwill.
ABC's results of operations have been included in the Company's consolidated
financial statements from the date of acquisition.

     On May 27, 1999, the Company exchanged 2,220,807 shares of its common stock
for all the outstanding shares of common stock of CorNet International, Ltd.
("CorNet"), a provider of sales force effectiveness solutions for the U.S.
pharmaceutical, consumer and business to business markets. The merger has been
accounted for under the pooling of interests method. Accordingly, the Company's
financial statements have been restated to reflect the acquisition of CorNet
under the pooling of interests method.

     On June 30, 1999, the Company purchased all of the assets and assumed
certain liabilities, as defined, of Marketing Management International, Inc. and
certain affiliated companies (collectively, "MMI"), providers of palm-top
software and paper based sales force effectiveness solutions and consulting
services to subsidiaries of multinational pharmaceutical companies operating in
emerging markets, such as Latin America, Eastern Europe and Southeast Asia.
Under the terms of the acquisition agreement, MMI received $6,640,000 in cash,
which includes estimated transaction costs, and $3,435,000 in Dendrite common
stock. The acquisition has been accounted for using the purchase method with the
purchase price allocated to the fair value of the acquired assets and
liabilities. The excess purchase price over the fair value of the net assets
acquired has been allocated between capitalized software development costs and
goodwill based upon an independent appraisal. MMI's results of operations have
been included in the Company's consolidated financial statements from the date
of acquisition.

     On January 6, 2000, the Company purchased all of the assets and assumed
certain liabilities, as defined, of Analytika, Inc. ("Analytika"), a provider of
advanced analytical products, consulting services and outsourced operations
services to the pharmaceutical industry. The final purchase price was
approximately $9,000,000 in Dendrite common stock and assumed liabilities, with
transaction costs of $400,000. The acquisition will be accounted for using the
purchase method with the purchase price allocated to the fair value of the
acquired assets and liabilities. The excess purchase price over the fair value
of the net assets acquired will be allocated between capitalized software
development costs and goodwill based upon an independent appraisal.

                                       12
<PAGE>   13

RESULTS OF OPERATIONS

     The following table sets forth our results of operations expressed as a
percentage of total revenues for the periods indicated:

<TABLE>
<CAPTION>

                                                                 YEAR ENDED
                                                                DECEMBER 31,
                                                        ----------------------------
                                                        1997        1998        1999
                                                        ----        ----        ----
Revenues:
<S>                                                      <C>         <C>         <C>
    License fees...................................       10%         11%         14%
    Services.......................................       90          89          86
                                                        ----        ----        ----
                                                         100         100         100
Costs of Revenues:
    Cost of license fees...........................        2           2           2
    Cost of services...............................       50          44          42
                                                        ----        ----        ----
                                                          52          46          44
                                                        ----        ----        ----
    Gross Margin...................................       48          54          56

Operating Expenses:
    Selling, general and administrative............       36          33          33
    Research and development.......................        4           4           4
    Mergers and acquisitions.......................       --          --           2
    Write-off in-process research and development..       --           1          --
                                                        ----        ----        ----
                                                          40          38          39
                                                        ----        ----        ----
     Operating income.........................             8          16          17
Other income.......................................        1          --           1
                                                        ----        ----        ----
     Income before income taxes....................        9          16          18
Income taxes.......................................        4           6           7
                                                        ----        ----        ----
Net Income ........................................        5%         10%         11%
                                                        ====        ====        ===
</TABLE>

     Certain reclassifications have been made to prior year amounts to conform
with current year presentations. During the second quarter of 1998, we
determined that costs associated with certain activities that were previously
classified as research and development expense should be classified as cost of
services as these expenditures relate to client-specific activities. For
consistency of presentation, all prior periods have been reclassified.

YEARS ENDED DECEMBER 31, 1998 AND 1999

     REVENUES. Total revenues increased $42,052,000 to $172,685,000 in 1999, up
32% from $130,633,000 in 1998.

     License fee revenues increased $9,289,000 to $24,244,000 in 1999, up 62%
from $14,955,000 in 1998. License fee revenues as a percentage of total revenues
were 14% in 1999 as compared to 11% in 1998. This increase was attributable
primarily to sales to new pharmaceutical customers, sales force expansions and
software upgrades by existing pharmaceutical customers.

     Service revenues increased $32,763,000 to $148,441,000 in 1999, up 28% from
$115,678,000 in 1998. Service revenues as a percentage of total revenues were
86% in 1999 as compared to 89% in 1998. The increase in the absolute dollar
amount of service revenues was primarily the result of an increase in the number
of installed users of Dendrite sales force software products at both new and
existing customers, as well as the provision of additional services for our
existing customers. The Company expects the approximate current relationship of
license to service revenues to continue in the future.

     COST OF REVENUES. Cost of revenues increased $14,539,000 to $74,740,000 in
1999, up 24% from 60,201,000 in 1998.

     Cost of license fees increased $46,000 to $2,360,000 in 1999 up 2% from
$2,314,000 in 1998. Cost of license fees for 1999 represents the amortization of
purchased software and capitalized software development costs of $1,654,000 and
third party vendor license fees of $706,000. Cost of license fees for 1998
represents the amortization of capitalized software development costs of
$1,392,000 and third party vendor license fees of $922,000. The increase in the
amortization of capitalized software development costs in 1999 was primarily due
to the increase in purchased capitalized software associated with the
acquisitions of ABC and MMI software development costs in 1999 as compared to
1998.

     Cost of services increased $14,493,000 to $72,380,000 in 1999, up 25% from
$57,887,000 in 1998. This increase was primarily due to an increase in staff
required to support greater client activity including the use of higher cost
consultants and contractors. As a percentage of service revenues however, cost
of services decreased from 50% of service revenues in 1998 to 49% in 1999. This

                                       13
<PAGE>   14

decrease was primarily the result of increased operational efficiencies in 1999.

     Total Gross Margin for 1999 rose to 57%, up from 54% in 1998. This increase
is due to the improvement in both service and license margins as described
above, as well as the higher proportion of license to service revenues in 1999.
This is due to the launch of several new products. The Company believes that
the appropriate targeted gross margin rate should be between 58%-60%.

     SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES. SG&A expenses
increased $12,881,000 to $56,927,000 in 1999, up 29% from $44,046,000 in 1998.
As a percentage of revenues, SG&A expenses remained constant at 33% for the
years ended 1999 and 1998. The increase in the absolute dollar amount of SG&A
expenses was primarily attributable to an increase in sales and marketing
expenses from both our existing businesses and our newly acquired businesses, as
well as increases related to additional leased facilities in Morristown, New
Jersey. The Company's annual targeted SG&A expenses, as a percentage of total
revenues, are 30-32%.

RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased
$3,085,000 to $7,669,000 in 1999 up 67% from $4,584,000 in 1998. The increase in
research and development expenses during the most recent period was attributable
primarily to increased spending on development of our laptop pharmaceutical
sales force software products and a new version of our palmtop pharmaceutical
sales force software product. With respect to future research and development
expenses, subject to market conditions, we currently anticipate that such
expenses will be approximately 4% to 6% of revenues.

     MERGERS AND ACQUISITIONS. During the second quarter 1999, the Company
acquired CorNet in a transaction accounted for as a pooling of interests and
incurred a one time expense for the costs related to the acquisition and the
cancellation of a proposed common stock offering.

     WRITE-OFF OF IN-PROCESS RESEARCH AND DEVELOPMENT COSTS. On July 24, 1998,
we acquired 100% of the capital stock of ABC. We assigned $1,230,000 to
in-process research and development and such amount was written-off in the
accompanying statement of operations for the three months ended September 30,
1998.

     PROVISION FOR INCOME TAXES. The effective rate decreased to 39% in 1999
from 40% in 1998. The effective rate for both the years ended December 31, 1999
and 1998 included one-time charges, which are not deductible for tax purposes.
Excluding the effect of these charges the effective rate would have been reduced
to 36% in 1999 from 38% in 1998. This decrease was due to the continued
implementation of tax planning strategies throughout the world.

YEARS ENDED DECEMBER 31, 1997 AND 1998

     REVENUES. Total revenues increased $39,311,000 to $130,633,000 in 1998, up
43% from $91,322,000 in 1997.

     License fee revenues increased $5,881,000 to $14,955,000 in 1998, up 65%
from $9,074,000 in 1997. This increase was attributable primarily to the
recognition of revenues related to license fees from several significant
contracts in the pharmaceutical division, sales to new customers in our consumer
business division and increased sales of third party software.

     Service revenues increased $33,430,000 to $115,678,000 in 1998, up 41% from
$82,248,000 in 1997. This increase was primarily the result of an increase in
our installed base of sales force software products for both new and existing
customers, the commencement of major product rollouts, as well as the provision
of additional services to our existing customers.

     COST OF REVENUES. Cost of revenues increased $13,365,000 to $60,201,000 in
1998, up 29% from $46,836,000 in 1997.

     Cost of license fees increased $556,000 to $2,314,000 in 1998, up 32% from
$1,758,000 in 1997. In 1998, the cost of license fees represents the
amortization of capitalized costs of $1,392,000 and third party vendor license
fees of $922,000. Cost of license fees for 1997 represents the amortization of
capitalized costs of $1,100,000 and third party vendor license fees of $658,000.
The increase in the amortization of capitalized software development costs in
1998 was due to the increase in gross capitalized software development costs in
1998 as compared to 1997. The increase in third party vendor license fees in
1998 was attributable to the increase in third party software sales in 1998.

     Cost of services increased $12,809,000 to $57,887,000 in 1998, up 28% from
$45,078,000 in 1997. This increase was primarily due to an increase in staff
required to support greater client activity including the use of higher cost
consultants and contractors. As a percentage of service revenues, however, cost
of services decreased from 55% of service revenues in 1997 to 50% in 1998. This
decrease was primarily the result of increased operational efficiencies in 1998
as well as unusually high costs in the first quarter of 1997.

     The total gross margin for 1998 rose to 54% from 49% in 1997. This increase
is primarily attributable to the improved service's margin resulting from
increased operational efficiencies in 1998.

                                       14
<PAGE>   15

     SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES. SG&A expenses
increased $10,741,000 to $44,046,000 in 1998 up 32% from $33,305,000 in 1997.
This increase was primarily attributable to increased staff required for sales
and support operations. As a percentage of revenue, SG&A expenses decreased from
36% in 1997 to 33% in 1998, due to leveraging the fixed cost elements in general
and administrative expenses over a higher revenue base.

     RESEARCH AND DEVELOPMENT. Research and development expenses increased
$910,000 to $4,584,000 in 1998 up 25% from $3,674,000 in 1997. As a percentage
of revenues, research and development expenses remained relatively constant at
4%. The increase in research and development expenses during the most recent
period wasprimarily attributable to increased spending on development of our CPG
products, the continued development of ForceMultiplieRx and the development of
our next generation pharmaceutical sales force software product, ForcePharma.
With respect to future research and development expenses, subject to market
conditions, we currently anticipate that such expenses will be approximately 4%
to 6% of total revenues.

     WRITE-OFF OF IN-PROCESS RESEARCH AND DEVELOPMENT COSTS. We incurred a
one-time charge of $1,230,000 to record the write-off of in-process research and
development costs resulting from the acquisition of ABC. This amount represents
the estimated fair values, based on an independent appraisal, related to
in-process research and development projects which had not yet reached
technological feasibility.

     PROVISION FOR INCOME TAXES. The effective tax rate, excluding the impact of
the write-off of in-process research and development which is not tax
deductible, decreased to 38% for the year ended December 31, 1998 as opposed to
39% during 1997. This decrease was due primarily to the implementation of tax
minimization strategies throughout the world.

QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth certain unaudited consolidated statement of
operations data expressed in U.S. dollars for our eight most recently ended
fiscal quarters. This data has been derived from our unaudited consolidated
financial statements and, in the opinion of management, includes all adjustments
consisting only of normal recurring adjustments necessary for a fair
presentation in accordance with generally accepted accounting principles. Our
results of operations for a particular quarter are not necessarily indicative of
our results of operations for any future period. Our quarterly results have
varied considerably in the past and are likely to vary from quarter to quarter
in the future. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Factors that May Affect Future Operating Results --
Our quarterly results of operations may fluctuate significantly and may not meet
market expectations" in this Item 7.

<TABLE>
<CAPTION>

                                                                                 QUARTERS ENDED
                                      ---------------------------------------------------------------------------------------------
                                       MARCH 31     JUNE 30    SEPT. 30     DEC. 31    MARCH 31     JUNE 30    SEPT. 30     DEC. 31
                                         1998        1998        1998        1998        1999        1999        1999        1999
                                      ---------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
                                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                   <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
Statement of Operations Data:
Revenues:
    License fees.................     $   3,273   $   4,735   $   1,621   $   5,326   $   4,054   $   6,747   $   6,891   $  6,552
    Services.....................        23,564      27,930      33,314      30,870      33,580      35,104      38,855     40,902
                                      ---------   ---------   ---------   ---------   ---------   ---------   ---------   --------
                                         26,837      32,665      34,935      36,196      37,634      41,851      45,746     47,454
Costs of Revenues:
    Cost of license fees.........           361       1,024         379         550         398         592         535        835
    Cost of services.............        12,270      14,751      16,248      14,618      16,503      17,722      18,847     19,307
                                      ---------   ---------   ---------   ---------   ---------   ---------   ---------   --------
                                         12,631      15,775      16,627      15,168      16,901      18,314      19,382     20,142
                                      ---------   ---------   ---------   ---------   ---------   ---------   ---------   --------
    Gross margin.................        14,206      16,890      18,308      21,028      20,733      23,537      26,364     27,312

Operating Expenses:
    Selling, general and
       administrative............         9,374      10,826      11,254      12,592      12,627      14,397      14,716     15,186
    Research and development.....         1,111       1,094       1,059       1,320       1,638       1,835       2,393      1,803
    Mergers and acquisitions.....            --          --          --          --          --       3,466          --         --
    Write-off of in-process
       research and development..            --          --       1,230          --          --          --          --         --
                                      ---------   ---------   ---------   ---------   ---------   ---------   ---------   --------
                                         10,485      11,920      13,543      13,912      14,265      19,698      17,109     16,989
                                      ---------   ---------   ---------   ---------   ---------   ---------   ---------   --------
      Operating income ..........         3,721       4,970       4,765       7,116       6,468       3,839       9,255     10,323
Interest income..................           196         215         283         405         418         440         408        613
Other income (expense)...........          (344)        (30)        120        (212)       (125)         43         (10)       (97)
                                      ---------   ---------   ---------   ---------   ---------   ---------   ---------   ---------
    Income before
      income taxes (benefit).....         3,573       5,155       5,168       7,309       6,761       4,322       9,653     10,839
Income taxes (benefit)...........         1,408       1,949       2,320       2,769       2,562       2,296       3,475      3,901
                                      ---------   ---------   ---------   ---------   ---------   ---------   ---------   --------
Net income ......................     $   2,165   $   3,206   $   2,848   $   4,540   $   4,199   $   2,026   $   6,178   $  6,938
                                      =========   =========   =========   =========   =========   =========   =========   ========
Net income per share:
</TABLE>

                                       15
<PAGE>   16
<TABLE>
<S>                                   <C>         <C>         <C>         <C>         <C>         <C>         <C>         <C>
    Basic........................     $    0.06   $    0.09   $    0.08   $    0.12   $    0.11   $    0.05   $    0.16   $   0.18
                                      =========   =========   =========   =========   =========   =========   =========   ========
    Diluted......................     $    0.06   $    0.08   $    0.07   $    0.11   $    0.11   $    0.05   $    0.15   $   0.17
                                      =========   =========   =========   =========   =========   =========   =========   ========
Shares used in computing net
 income per share:
    Basic........................        35,694      35,835      36,266      36,534      37,026      37,545      38,025     38,305
                                      =========   =========   =========   =========   =========   =========   =========   ========
    Diluted......................        38,306      38,943      39,702      40,118      39,690      40,104      41,012     41,527
                                      =========   =========   =========   =========   =========   =========   =========   ========
</TABLE>


LIQUIDITY AND CAPITAL RESOURCES

     We finance our operations primarily through cash generated by operating
activities. Net cash provided by operating activities was $31,811,000 for the
year ended December 31, 1999, compared to cash provided by operating activities
of $27,387,000 for the year ended December 31, 1998. This increase was due
primarily to higher net income and by the cash tax benefit provided from the
exercise of stock options during the year ended December 31, 1999, compared to
the year ended December 31, 1998.

     Cash used in investing activities was $21,916,000 in the year ended
December 31, 1999, compared to cash used in investing activities of $13,370,000
in the year ended December 31, 1998. This increase was due primarily to
increased purchases of short-term investments as well as the purchase of ABC in
the year ended December 31, 1998.

     On January 16, 1997, our Board of Directors (the "Board of Directors" or
the "Board") approved a stock buy-back program initially limited to $3,000,000,
which, subject to further Board review and approval, could be increased to a
maximum of $10,000,000, but not greater than 9% of Dendrite's outstanding shares
of common stock. During the twelve month period ending December 31, 1997,
Dendrite repurchased 601,500 shares of common stock for a value of $1,927,000.
Dendrite did not repurchase any shares of common stock during the year ending
December 31, 1998 and 1999.

     We obtained $7,903,000 of cash from financing activities in the year ended
December 31, 1999, compared to obtaining $2,471,000 in cash from financing
activities in the year ended December 31, 1998. The change in our cash provided
from financing activities was due to an increase in the issuance of common
stock, primarily from the exercise of employee stock options during the year
ended December 31, 1999.

     We maintain a $15.0 million revolving line of credit agreement with The
Chase Manhattan Bank, N.A. The agreement is available to finance working capital
needs and possible future acquisitions. The terms of this agreement require us
to maintain a minimum consolidated net worth, among other covenants, measured
quarterly, which is equal to our net worth as of December 31, 1999, plus 50% of
our net income earned after January 1, 1998 plus 75% of the net proceeds to us
of any equity offering. This covenant effectively limits the amount of cash
dividends we may pay. At December 31, 1999, there were no borrowings outstanding
under the agreement and we satisfied all of our covenant obligations.

     Our working capital was approximately $78,131,000 at December 31, 1999 and
$50,608,000 at December 31, 1998. We have no significant capital spending or
purchasing commitments other than normal purchase commitments and commitments
under facility and capital leases.

YEAR 2000 READINESS DISCLOSURE

      We spent approximately $355,000 to evaluate, test and
remediate, if necessary, our internal computer software and operating systems,
collectively, our Internal Programs and Systems, for Year 2000 compliance
problems. These costs were funded with cash from our operations and such costs
were expensed or capitalized, depending on the nature of the expenditure. Since
January 1, 2000, the Company has not had any Year 2000-related problems
associated with its Internal Programs and Systems or software products licensed
to its customers, and is not aware of any Year 2000-related problems associated
with the systems or software of its vendors, distributors or suppliers. Although
the Company expects most material Year 2000 compliance problems to have arisen
or occurred on or after January 1, 2000, there can be no assurance, however,
that the Year 2000 problem will not adversely affect the Company's business,
financial condition, results of operations or cash flows.

FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

        OUR BUSINESS IS HEAVILY DEPENDENT ON THE PHARMACEUTICAL INDUSTRY

     Most of our sales force software products and services are currently

                                       16
<PAGE>   17

used in connection with the marketing and sale of prescription-only drugs. This
market is undergoing a number of significant changes. These include:

-   consolidations and mergers which may reduce the number of our existing and
    potential customers, also could alter implementation or purchase cycles;

-   reclassification of formerly prescription-only drugs to permit their
    over-the-counter sale;

-   competitive pressures on our pharmaceutical customers resulting from the
    continuing shift to delivery of healthcare through managed care
    organizations; and

-   changes in law, such as government mandated price reductions for
    prescription- only drugs, that affect the healthcare systems in the
    countries where our customers and potential customers are located.

     We cannot assure you that we can respond effectively to any or all of these
and other changes in the marketplace. Our failure to do so could have a material
adverse effect on our business, operating results or financial condition.

         OUR QUARTERLY RESULTS OF OPERATIONS MAY FLUCTUATE SIGNIFICANTLY
                      AND MAY NOT MEET MARKET EXPECTATIONS

     Our results of operations may vary from quarter to quarter due to lengthy
sales and implementation cycles for our products, our fixed expenses in relation
to our fluctuating revenues and variations in our customers' budget cycles, each
of which is discussed below. As a result, you should not rely on
quarter-to-quarter comparisons of our results of operations as an indication of
future performance. It is possible that in some future period our results of
operations may be below the expectations of the public market analysts and
investors. If this happens, the price of our common stock may decline.

          OUR LENGTHY SALES AND IMPLEMENTATION CYCLES MAKE IT DIFFICULT
                       TO PREDICT OUR QUARTERLY REVENUES

     The selection of a sales force software product often entails an extended
decision-making process because of the strategic implications and substantial
costs associated with a customer's license of the software. Given the importance
of the decision, senior levels of management often are involved and, in some
instances, the board of directors may be involved in this process. As a result,
the decision-making process typically takes nine to eighteen months, although in
some cases it may take even longer. Accordingly, we cannot control or predict
the timing of our execution of contracts with customers.

     In addition, an implementation process of three to six months is customary
before the software is rolled out to a customer's sales force. However, if a
customer were to delay or extend its implementation process, our quarterly
revenues may decline below expected levels and could adversely affect our
results of operations.

   OUR FIXED COSTS MAY LEAD TO FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS
                      IF REVENUES FALL BELOW EXPECTATIONS

     We establish our expenditure levels for product development, sales and
marketing and some of our other operating expenses based in large part on our
expected future revenues and anticipated competitive conditions. In particular,
we frequently add staff in advance of new business to permit adequate time for
training. If the new business is subsequently delayed or canceled, we will have
incurred expenses without the associated revenues. In addition, we may increase
sales and marketing expenses if competitive pressures become greater than we
currently anticipate. Since only a small portion of our expenses varies directly
with our actual revenues, our operating results and profitability are likely to
be adversely and disproportionately affected if our revenues fall below
expectations.

     OUR BUSINESS IS AFFECTED BY VARIATIONS IN OUR CUSTOMERS' BUDGET CYCLES

     We have historically realized a greater percentage of our license fees and
service revenues in the second half of the year than in the first half because,
among other things, our customers typically spend more of their annual budget
authorization for SFE solutions in the second half of the year. However, the
relationship between the amounts spent in the first and second halves of a year
may vary from year to year and from customer to customer. In addition, changes
in our customers' budget authorizations may reduce the amount of revenues we
receive from the license of additional software or the provision of additional
services. As a result, our operating results could be adversely affected.

                                       17
<PAGE>   18

  WE DEPEND ON A FEW MAJOR CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR REVENUES

     We derive a significant portion of our revenues from a limited number of
customers (considering all affiliates of each customer as part of that
customer). Approximately 36% of our total revenues in 1999 came from Pfizer and
Johnson & Johnson. Approximately 49% of our total revenues in 1998 came from
Pfizer, Johnson & Johnson and Parke-Davis. Approximately 51% of our total
revenues in 1997 came from Pfizer, Johnson & Johnson and Rhone-Poulenc Rorer. We
believe that the costs to our customers of switching to a competitor's software
product, or of taking significant system management functions in-house, are
substantial. Nevertheless, some of our customers have switched, and in the
future, other customers may switch to software products and/or services offered
by our competitors or by in-house staff. If any of our major customers were to
make such a change, our business, operating results or financial condition would
be materially and adversely affected.

      WE MAY BE UNABLE TO SUCCESSFULLY INTRODUCE NEW PRODUCTS OR RESPOND TO
                              TECHNOLOGICAL CHANGE

     The market for CRM products changes rapidly because of frequent
improvements in computer hardware and software technology. Our future success
will depend, in part, on our ability to:

-   use available technologies and data sources to develop new products and
    services and to enhance our current products and services;

-   introduce new solutions that keep pace with developments in our target
    markets; and

-   address the changing and increasingly sophisticated needs of our customers.

     We cannot assure you that we will successfully develop and market new
products or product enhancements that respond to technological advances in the
marketplace, or that we will do so in a timely fashion. We also cannot assure
you that our products will adequately and competitively address the needs of the
changing marketplace.

     Competition for software products has been characterized by shortening
product cycles. We may be materially and adversely affected by this trend if the
product cycles for our products prove to be shorter than we anticipate. If that
happens, our business, operating results or financial condition could be
adversely affected.

     To remain competitive, we also may have to spend more of our revenues on
product research and development than we have in the past. As a result, our
results of operations could be materially and adversely affected.

     Further, our software products are technologically complex and may contain
previously undetected errors or failures. Such errors have occurred in the past
and we cannot assure you that, despite our testing, our new products will be
free from errors. Errors that result in losses or delays could have a material
adverse effect on our business, operating results or financial condition.

  INCREASED COMPETITION MAY RESULT IN PRICE REDUCTIONS AND DECREASED DEMAND FOR
                            OUR PRODUCTS AND SERVICES

     We believe there are eight other companies that sell sales force software
products that specifically target the pharmaceutical industry, including:

-   Three competitors that are actively selling sales force software products in
    more than one country; and

-   Two competitors that also offer sales force support services.

     We believe the sales force software products and/or services offered by
most of our competitors do not address the variety of Pharmaceutical and CPG
customer needs that our solutions address. However, these competing solutions
may cost less than our solutions. We also face competition from many vendors
that market and sell sales force automation and CRM solutions in the consumer
packaged goods or CPG market. In addition, we also compete with various
companies that provide support services similar to our services. We believe our
ability to compete depends on many factors, some of which are beyond our
control, including:

-   the number and success of new market entrants supplying competing sales
    force products or support services;

                                       18
<PAGE>   19

-   expansion of product lines by, or consolidation among, our existing
    competitors; and

-   development and/or operation of in-house sales force software products or
    services by our customers and potential customers.

     Some of our competitors and potential competitors are part of large
corporate groups and have longer operating histories and significantly greater
financial, sales, marketing, technology and other resources than we have. We
cannot assure you that we will be able to compete successfully with these
companies or that competition will not have a material adverse effect on our
business, operating results or financial condition.

          SOME OF OUR CUSTOMERS RELY ON OUR COMPETITORS FOR MARKET DATA

     Current market data on the sales of prescription-only pharmaceutical
products is an important element for the operation of our sales force software
products in the prescription-only pharmaceutical industry. Our customers use
this data to guide and organize their sales forces and marketing efforts. Some
of the leading purveyors of this market information compete with us either
directly or through affiliates or may compete with us in the future. If these
purveyors of market information require pharmaceutical companies to use their
sales force products and/or services, our business, operating results and
financial condition may be materially and adversely affected.

   OUR INTERNATIONAL OPERATIONS HAVE RISKS THAT OUR DOMESTIC OPERATIONS DO NOT

     The sale of our products and services in foreign countries accounts for,
and is expected in the future to account for, a material part of our revenues.
These sales are subject to risks inherent in international business activities,
including:

-   any adverse change in the political or economic environments in these
    countries;

-   any adverse change in tax, tariff and trade or other regulations;

-   the absence or significant lack of legal protection for intellectual
    property rights;

-   exposure to exchange rate risk for service revenues which are denominated in
    currencies other than U.S. dollars; and

-   difficulties in managing an organization spread over various jurisdictions.

                 WE MAY FACE RISKS ASSOCIATED WITH ACQUISITIONS

       Our business could be materially and adversely affected as a result of
the risks associated with acquisitions. As part of our business strategy, we
have acquired businesses that offer complementary products, services, or
technologies. These acquisitions are accompanied by the risks commonly
encountered in an acquisition of a business, including:

-   the effect of the acquisition on our financial and strategic position;

-   the failure of an acquired business to further our strategies;

-   the difficulty of integrating the acquired business;

-   the diversion of our management's attention from other business concerns;

-   the impairment of relationships with customers of the acquired business;

-   the potential loss of key employees of the acquired company; and

-   the maintenance of uniform company-wide standards, procedures and policies.

                                       19
<PAGE>   20

                 These factors could have a material adverse effect on our
revenues and earnings. We expect that the consideration paid for future
acquisitions, if any, could be in the form of cash, stock, rights to purchase a
stock or a combination of these. To the extent that we issue shares of stock or
other rights to purchase stock in connection with any future acquisition,
existing shareholders will experience dilution and potentially decreased
earnings per share.

     OUR SUCCESS DEPENDS ON RETAINING OUR KEY SENIOR MANAGEMENT TEAM AND ON
                  ATTRACTING AND RETAINING QUALIFIED PERSONNEL

     Our future success depends, to a significant extent, upon the contributions
of our executive officers and key sales, technical and customer service
personnel. Our future success also depends on our continuing ability to attract
and retain highly qualified technical and managerial personnel. Competition for
such personnel is intense. We have at times experienced difficulties in
recruiting qualified personnel and we may experience such difficulties in the
future. Any such difficulties could adversely affect our business, operating
results or financial condition.

     OUR INABILITY TO MANAGE OUR GROWTH COULD ADVERSELY AFFECT OUR BUSINESS

     To manage our growth effectively we must continue to strengthen our
operational, financial and management information systems and expand, train and
manage our work force. However, we may not be able to do so effectively or on a
timely basis. Failure to do so could have a material and adverse effect upon our
business, operating results or financial condition.

    OUR BUSINESS DEPENDS ON PROPRIETARY TECHNOLOGY THAT WE MAY NOT BE ABLE TO
                               PROTECT COMPLETELY

     We rely on a combination of trade secret, copyright and trademark laws,
non-disclosure and other contractual agreements and technical measures to
protect our proprietary technology. We cannot assure you that the steps we take
will prevent misappropriation of this technology. Further, protective actions we
have taken or will take in the future may not prevent competitors from
developing products with features similar to our products. In addition,
effective copyright and trade secret protection may be unavailable or limited in
certain foreign countries. We have, on occasion, in response to a request by our
customer, entered into agreements which require us to place our source code in
escrow to secure our service and maintenance obligations.

     Further, we believe that our products and trademarks do not infringe upon
the proprietary rights of third parties. However, third parties may assert
infringement claims against us in the future that may result in the imposition
of damages or injunctive relief against us. In addition, any such claims may
require us to enter into royalty arrangements. Any of these results could
materially and adversely affect our business, operating results or financial
condition.

  THERE ARE CHARACTERISTICS IN THE CONSUMER PACKAGED GOODS MARKET THAT DIFFER
                    FROM THE PHARMACEUTICAL MARKET.

     We market and sell CRM solutions to companies in the CPG market. The
selling environment in this market has unique characteristics that differentiate
it from the pharmaceutical market. In addition, we believe that the CPG market
is composed of sub-markets, each of which may have unique characteristics.
Accordingly, we cannot assure you that we will be able to replicate in this
market the success we have achieved in the ethical pharmaceutical market.

                     PROVISIONS OF OUR CHARTER DOCUMENTS AND
            NEW JERSEY LAW MAY DISCOURAGE AN ACQUISITION OF DENDRITE

     Provisions of our Restated Certificate of Incorporation, our By-laws and
New Jersey law may make it more difficult for a third party to acquire us. For
example, the Board of Directors may, without the consent of the stockholders,
issue preferred stock with rights senior to those of the common stock.

              OUR COMMON STOCK MAY BE SUBJECT TO PRICE FLUCTUATIONS

     The market price of our common stock may be significantly affected by the
following factors:

-   the announcement or the introduction of new products by us or our
    competitors;

                                       20
<PAGE>   21

-   quarter-to-quarter variations in our operating results and changes in
    earnings estimates by analysts;

-   market conditions in the technology, healthcare and other growth sectors;
    and

-   general consolidation in the healthcare information industry which may
    result in the market perceiving us or other comparable companies as
    potential acquisition targets.

     Further, the stock market has experienced on occasion extreme price and
volume fluctuations. The market prices of the equity securities of many
technology companies have been especially volatile and often have been unrelated
to the operating performance of such companies. These broad market fluctuations
may have a material adverse effect on the market price of our common stock.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN CURRENCY RISK

     Because we have operations in a number of countries and our service
agreements in such countries are denominated in a foreign currency, we face
exposure to adverse movements in foreign currency exchange rates. As currency
rates change, translation of the income statements of our international entities
from local currencies to U.S. dollars affects year-over-year comparability of
operating results. We do not hedge translation risks because we generally
reinvest the cash flows from international operations.

     Management estimates that a 10% change in foreign exchange rates would
impact reported operating profit by less than $500,000. This sensitivity
analysis disregards the possibility that rates can move in opposite directions
and that losses from one area may be offset by gains from another area.

     The introduction of the Euro as a common currency for members of the
European Monetary Union took place on January 1, 1999. The eleven participating
countries will issue sovereign debt exclusively in Euro and will redenominate
outstanding sovereign debt. The legal currencies will continue to be used as
legal tender through January 1, 2002, at which point the legacy currencies will
be canceled and Euro bills and coins will be used for cash transactions in the
participating countries. There can be no assurance that such Euro conversion
will not adversely effect our business, financial condition, results of
operations or cash flows. We have not determined what impact, if any, the Euro
has on our foreign exchange exposure.

INTEREST RATE RISK

     We earn interest income from our larger balances of cash and short term
investments. This interest income is subject to market risk related to changes
in interest rates primarily to our investment portfolio. We invest in
instruments that meet high credit quality standards, as specified in our
investment policy. The policy also limits the amount of credit exposure to any
one issue, issuer and type of investment.

     As of December 31, 1999, our investments consisted primarily of commercial
paper maturing over the following three months. Due to the average maturity and
conservative nature of our investment portfolio, a sudden change in interest
rates would not have a material effect on the value of the portfolio. Management
estimates that if the average yield of the Company's investments decreased by
100 basis points, our interest income for the year ended December 31, 1999 would
have decreased by less than $500,000. This estimate assumes that the decrease
occurred on the first day of 1999 and reduced the yield of each investment
instrument by 100 basis points. The impact of future changes in investment
yields on our future interest income will depend largely on the gross amount of
our investments.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The Company's 1999 Financial Statements, together with the report thereon
of Arthur Andersen LLP, are included elsewhere herein. See Item 14 for a list of
Financial Statements and Financial Statement Schedules.

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

     Not applicable.

                                       21
<PAGE>   22

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Information regarding directors and executive officers of the Company will
be set forth in the Registrant's Notice of Annual Meeting of Shareholders and
Proxy Statement, expected to be filed on or about April 5, 2000 (the "Proxy
Statement"), which information is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION.

     Information regarding the Company's compensation of its directors and
executive officers will be set forth in the Proxy Statement, which information
is incorporated herein by reference.

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

     Information regarding security ownership of certain beneficial owners and
management will be set forth in the Proxy Statement, which information is
incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Information regarding transactions with the Company's directors and
executive officers will be set forth in the Proxy Statement, which information
is incorporated herein by reference.

                                     PART IV

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

     (a) The following documents are filed as part of this report:

     1.     Financial Statements:

            Report of Independent Public Accountants
            Consolidated Balance Sheets
            Consolidated Statements of Operations
            Consolidated Statements of Stockholders' Equity
            Consolidated Statements of Cash Flows
            Notes to Consolidated Financial Statements

     2.     Financial Statement Schedules:

            None.

     3.     Exhibits:

            3.1    Restated Certificate of Incorporation of the Company, as
                   amended (incorporated herein by reference to Exhibit 3.1 to
                   the Company's Quarterly Report on Form 10-Q, filed with the
                   Securities and Exchange Commission (the "Commission") June
                   30, 1996)

            3.2    By-laws of the Company, as amended (incorporated herein by
                   reference to the Exhibit to the Company's Quarterly Report on
                   Form 10-Q for the quarter ended September 30, 1995, filed
                   with the Commission November 13, 1995)

            4.1    Specimen of Stock Certificate (incorporated herein by
                   reference to Exhibit 4.1 to the Company's Registration
                   Statement on Form S-1, filed with the Commission May 17,
                   1995)

                                       22
<PAGE>   23

            4.2    Registration Rights Agreement dated October 2, 1991 between
                   the several purchasers named therein and the Company
                   (incorporated herein by reference to Exhibit 4.2 to the
                   Company's Registration Statement on Form S-1, filed with the
                   Commission May 17, 1995)

            4.3    Amendment to Registration Rights Agreement dated April 23,
                   1992 between the Company and the parties named therein as
                   shareholders of the Company (incorporated herein by reference
                   to Exhibit 4.3 of Amendment 1 to the Company's Registration
                   Statement on Form S-1, filed with the Commission May 17,
                   1995)

            10.1   1992 Stock Plan, as amended*

            10.2   1992  Senior Management Stock Option Plan , as
                   amended*

            10.3   1997 Stock Incentive Plan, as amended*

            10.4   1997 Employee Stock Purchase Plan (incorporated herein by
                   reference to Exhibit 4.2 to the Company's Registration
                   Statement on Form S-8, filed with the Commission April 1,
                   1997)*

            10.5   Lease of 1200 Mount Kemble Avenue, Morristown, New Jersey
                   (incorporated herein by reference to Exhibit 10.40 to the
                   Company's Registration Statement on Form S-1, filed with the
                   Commission May 17, 1995)

            10.6   Form of Indemnification Agreement dated as of October 28,
                   1998 (incorporated herein by reference to Exhibit 10.1 to the
                   Company's Quarterly Report on Form 10-Q, filed with the
                   Commission November 18, 1998)*

            10.7   Amended and Restated Credit Agreement, entered into as of
                   November 30, 1998, between the Company and The Chase
                   Manhattan Bank, N.A. (incorporated herein by reference to
                   Exhibit 10.7 to the Company's Annual Report on Form 10-K,
                   filed with the Commission March 26, 1999)

            10.8   Employment Agreement dated March 25, 1997 with John E. Bailye
                   (incorporated herein by reference to Exhibit 10.1 to the
                   Company's Quarterly Report on Form 10-Q/A filed with the
                   Commission May 16, 1997)*

            10.9   Employment Agreement dated June 2, 1997 with George T. Robson
                   (incorporated herein by reference to Exhibit 10.1 to the
                   Company's Quarterly Report on Form 10-Q, filed with the
                   Commission August 14,1997)*

            10.10  Employment Agreement dated June 9, 1997 with Mark Cieplik
                   (incorporated herein by reference to Exhibit 10.2 to the
                   Company's Quarterly Report on Form 10-Q, filed with the
                   Commission August 14, 1997)*

            10.11  Employment Agreement dated July 24, 1997 with Bruce Savage
                   (incorporated herein by reference to Exhibit 10.1 to the
                   Company's Quarterly Report on Form 10-Q, filed with the
                   Commission November 14, 1997)*

            10.12  Employment Agreement dated October 1, 1991 with Teresa F.
                   Winslow (incorporated herein by reference to Exhibit 10.50 to
                   the Company's Registration Statement on Form S-1, filed with
                   the Commission February 5, 1996)*

            10.13  Consulting Agreement dated as of January 5, 1998 with Edward
                   Kfoury (incorporated herein by reference to Exhibit 10.1 of
                   the Company's Quarterly Report filed with the Commission May
                   14, 1998.)

            10.14  Deferred Compensation Plan dated as of September 1,1998
                   (incorporated herein by reference to Exhibit 10.1 of the
                   Company's Quarterly Report filed with the Commission August
                   14, 1998.)*

                                       23
<PAGE>   24

            10.15  Deferred Compensation Plan Trust Agreement dated as of
                   September 1, 1998 (incorporated herein by reference to
                   Exhibit 10.2 of the Company's Quarterly Report filed with the
                   Commission August 14, 1998.)*

            21     Subsidiaries of the Registrant

            23.1   Consent of Arthur Andersen LLP

            23.2   Consent of KPMG LLP

            27     Financial Data Schedule

       (b) Reports on Form 8-K.

       The Company filed a current report on Form 8-K on June 1, 1999 pursuant
to "Item 5. Other Events." relating to the acquisition of CorNet International
Ltd. consummated on May 27, 1999.

*   These contracts are identified pursuant to the requirement in Item 14 to
    identify "each management contract or compensatory plan or arrangement
    required to be filed as an exhibit".

                                       24
<PAGE>   25

                                   SIGNATURES

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

                          DENDRITE INTERNATIONAL, INC.

Date:  March 30, 2000              By:    /s/ John E. Bailye
                                          ------------------
                                          John E. Bailye
                                          Chief Executive Officer and President

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT
HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
Name                         Title                                     Date
----                         -----                                     ----
<S>                          <C>                                <C>
/s/ John E. Bailye           Chief Executive Officer,            March 30, 2000
------------------
John E. Bailye               President and Director
                             (Principal Executive Officer)

/s/ George T. Robson         Executive Vice President            March 30, 2000
--------------------         and Chief Financial Officer
George T. Robson             (Principal Financial Officer
                             and Principal Accounting Officer)

/s/ Bernard M. Goldsmith     Director                            March 30, 2000
------------------------
Bernard M. Goldsmith

/s/ Edward J. Kfoury         Director                            March 30, 2000
--------------------
Edward J. Kfoury

/s/ Paul A. Margolis         Director                            March 30, 2000
--------------------
Paul A. Margolis

/s/ John H. Martinson        Director                            March 30, 2000
---------------------
John H. Martinson

/s/ Terence H. Osborne       Director                            March 30, 2000
----------------------
Terence H. Osborne

</TABLE>

                                       25
<PAGE>   26



                    Report of Independent Public Accountants

To Dendrite International, Inc.:

     We have audited the accompanying consolidated balance sheets of Dendrite
International, Inc. (a New Jersey corporation) and Subsidiaries as of December
31, 1998 and 1999, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of CorNet International, Ltd., a company acquired during 1999 in a
transaction accounted for as a pooling of interests, as discussed in Note 2, as
of December 31, 1998 and 1997 and for each of the years in the two-year period
ended December 31, 1998. Such statements are included in the consolidated
financial statements of Dendrite International, Inc. and reflect total assets
and total revenues of 9 percent and 14 percent in 1998, and 8 percent and 14
percent in 1997, respectively, of the related consolidated totals. These
statements were audited by other auditors whose report has been furnished to us
and our opinion, insofar as it relates to amounts included for CorNet
International, Ltd., is based solely upon the report of the other auditors.

     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 and the report of other auditors provide a reasonable
basis for our opinion.

     In our opinion, based upon our audit and the report of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of Dendrite International, Inc. and
Subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.

                                         ARTHUR ANDERSEN LLP

Philadelphia, Pa.,
January 21, 2000

                                       F-1
<PAGE>   27



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To CorNet International, Ltd.:

We have audited the accompanying consolidated balance sheets of CorNet
International, Ltd. (a Pennsylvania Corporation) as of December 31, 1997 and
1998, and the related consolidated statements of operations, shareholders'
equity and cash flows for each of the two years in the period ended December
31, 1998, which are not presented herein. 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, which are not
presented herein, present fairly, in all material respects, the financial
position of CorNet International, Ltd as of December 31, 1997 and 1998, and the
results of their operations and their cash flows for each of the two years in
the period ended December 31, 1998, in conformity with generally accepted
accounting principles.

                                                  KPMG LLP

Allentown, Pennsylvania
February 16, 1999

                                       F-2

<PAGE>   28

                  DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>

                                                                                  DECEMBER 31,
                                                                             ------------------------
                                                                               1998            1999
                                                                             ---------      ---------
                                ASSETS

CURRENT ASSETS:
<S>                                                                          <C>            <C>
     Cash and cash equivalents........................................       $  32,555      $  50,024
     Short-term investments...........................................           9,614         15,151
     Accounts receivable, net.........................................          20,378         29,374
     Prepaid expenses and other.......................................           3,391          3,659
     Prepaid taxes....................................................             921            114
     Deferred tax asset...............................................             675          1,368
                                                                             ---------      ---------
          Total current assets........................................          67,534         99,690
PROPERTY AND EQUIPMENT, net...........................................           7,221         10,249
DEFERRED TAXES........................................................           1,077             --
GOODWILL, net.........................................................           2,496          8,716
PURCHASED CAPITALIZED SOFTWARE, net                                                779          2,399
CAPITALIZED SOFTWARE DEVELOPMENT COSTS, net...........................            2724          3,666
                                                                             ---------      ---------
                                                                             $  81,831      $ 124,720
                                                                             =========      =========
                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable.................................................       $   2,249      $   3,735
     Income taxes payable.............................................           1,036             --
     Accrued compensation and benefits................................           4,321          6,000
     Other accrued expenses...........................................           7,493          8,001
     Deferred revenues................................................           1,827          3,822
                                                                             ---------      ---------
          Total current liabilities...................................          16,926         21,558
                                                                             ---------      ---------
DEFERRED RENT.........................................................             392             --
                                                                             ---------      ---------
CAPITALIZED LEASE OBLIGATIONS.........................................             544            285
DEFERRED TAXES........................................................           2,920          1,761
                                                                             ---------      ---------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY:
     Preferred stock, no par value, 10,000,000 shares authorized, none
        issued........................................................              --             --
     Common stock, no par value, 150,000,000 shares authorized;
        37,245,675 and 39,042,606 shares issued as of  December 31, 1998
        and 1999  respectively; 36,644,175 and 38,441,106 shares outstanding
        as of December 31, 1998 and 1999 respectively ................          41,442         61,550
     Retained earnings................................................          23,998         43,338
     Deferred compensation............................................          (1,970)          (777)
     Accumulated other comprehensive income...........................            (494)        (1,068)
     Less treasury stock, at cost.....................................          (1,927)        (1,927)
                                                                             ---------      ---------
          Total stockholders' equity..................................          61,049        101,116
                                                                             ---------      ---------
                                                                             $  81,831      $ 124,720
                                                                             =========      =========
</TABLE>

The accompanying notes are an integral part of these statements.

                                       F-3

<PAGE>   29

                  DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                                                  YEAR ENDED DECEMBER 31,
                                                            -------------------------------------------------------------------
                                                                     1997                   1998                   1999
                                                            ---------------------  ---------------------  ---------------------
REVENUES:
<S>                                                               <C>                    <C>                    <C>
     License fees.........................................        $   9,074              $  14,955              $   24,244
     Services.............................................           82,248                115,678                 148,441
                                                                  ---------              ---------              ----------
                                                                     91,322                130,633                 172,685
                                                                  ---------              ---------              ----------
COSTS OF REVENUES:
     Cost of license fees.................................            1,758                  2,314                   2,360
     Cost of services.....................................           45,078                 57,887                  72,380
                                                                  ---------              ---------              ----------
                                                                     46,836                 60,201                  74,740
                                                                  ---------              ---------              ----------
          Gross margin....................................           44,486                 70,432                  97,945
                                                                  ---------              ---------              ----------
OPERATING EXPENSES:
     Selling, general and administrative..................           33,305                 44,046                  56,927
     Research and development.............................            3,674                  4,584                   7,669
     Write-off of in-process research and development.....               --                  1,230                      --
     Mergers and acquisitions.............................               --                     --                   3,466
                                                                  ---------              ---------              ----------
                                                                     36,979                 49,860                  68,062
                                                                  ---------              ---------              ----------
          Operating income................................            7,507                 20,572                  29,883
INTEREST INCOME...........................................              531                  1,099                   1,880
OTHER (EXPENSE)/INCOME....................................             (261)                  (466)                   (189)
                                                                  ---------              ---------              ----------
          Income (loss) before income taxes...............            7,777                 21,205                  31,574
INCOME TAXES..............................................            3,002                  8,446                  12,234
                                                                  ---------              ---------              ----------
NET INCOME ...............................................        $   4,775              $  12,759              $   19,340
                                                                  =========              =========              ==========
NET INCOME  PER SHARE:
     Basic................................................        $    0.13              $    0.35              $     0.51
                                                                  =========              =========              ==========
     Diluted..............................................        $    0.13              $    0.32              $     0.48
                                                                  =========              =========              ==========
SHARES USED IN COMPUTING NET INCOME PER SHARE:
     Basic................................................           35,601                 36,080                  37,725
                                                                  =========              =========              ==========
     Diluted..............................................           36,870                 39,392                  40,599
                                                                  =========              =========              ==========
</TABLE>

The accompanying notes are an integral part of these statements.

                                       F-4
<PAGE>   30

                  DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                              ACCUMULATED
                                     COMMON STOCK                               OTHER                                   TOTAL
                                     ------------   RETAINED    DEFERRED    COMPREHENSIVE  COMPREHENSIVE  TREASURY  STOCKHOLDERS'
                                   SHARES   DOLLARS  EARNINGS  COMPENSATION      INCOME        INCOME        STOCK      EQUITY
                                   -------  -------  --------   -----------      ------        ------        -----      ------
<S>                                <C>      <C>      <C>           <C>          <C>                         <C>        <C>
BALANCE, DECEMBER 31,
1996.............................  35,699   $32,726  $ 6,464       $(1,227)     $  (453)                    $    --    $ 37,510
    Issuance of common stock.....     500       616       --           (20)          --                          --         596
    Amortization of deferred
      Compensation...............      --        --       --           106           --                          --         106
    Purchase of 601,500 shares
      of treasury stock..........    (602)       --       --            --           --                      (1,927)     (1,927)
  Comprehensive income:
    Net income...................      --        --    4,775            --           --        $4,775            --       4,775
    Other comprehensive
      income:
        Currency translation
          Adjustment.............      --        --       --            --         (388)         (388)           --        (388)
        Comprehensive income.....                                                              $4,387
                                   ------    ------   ------        ------       ------        ======        ------      ------
BALANCE, DECEMBER 31, 1997.......  35,597    33,342   11,239        (1,141)        (841)                     (1,927)     40,672
    Issuance of common stock.....   1,047     6,740       --        (1,257)          --                          --       5,483
    Amortization of deferred
      Compensation...............      --        --       --           428           --                          --         428
    Stock option income
      tax benefits...............             1,360       --            --                                       --       1,360
  Comprehensive income:
    Net income...................      --        --   12,759            --           --       $12,759            --      12,759
    Other comprehensive
      Income:
        Currency translation
          Adjustment.............      --        --       --            --          347           347            --         347
        Comprehensive income.....                                                             $13,106
                                   ------    ------   ------        ------       ------       =======        ------      ------
BALANCE, DECEMBER 31, 1998.......  36,644    41,442   23,998        (1,970)        (494)                     (1,927)     61,049
    Issuance of common stock.....   1,797    11,621       --           899                                               12,520
    Amortization of deferred
      Compensation...............      --        --       --           294                                       --         294
    Stock option income
      tax benefits...............      --     8,487       --          ----                                       --       8,487
  Comprehensive income:
    Net income...................      --        --   19,340            --           --       $19,340            --      19,340
    Other comprehensive
        Income:
         Currency translation
          Adjustment.............      --       --       --            --          (574)         (574)          --        (574)
       Comprehensive income......
                                   ------    ------   ------        ------       ------                      ------      ------
BALANCE, DECEMBER 31,
 1999............................  38,441   $61,550  $43,338       $  (777)     $(1,068)      $18,766       $(1,927)   $101,116
                                   ======   =======  =======        ======     ========       =======      ========    ========
</TABLE>

The accompanying notes are an integral part of these statements.

                                       F-5
<PAGE>   31

                  DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                              YEAR ENDED DECEMBER 31,
                                                                               ----------------------------------------------------
                                                                                  1997                 1998                 1999
                                                                               ---------            ---------             ---------
OPERATING ACTIVITIES:
<S>                                                                            <C>                  <C>                  <C>
  Net income............................................................       $   4,775            $  12,759            $   19,340
  Adjustments to reconcile net income to net cash provided by  (used in)
  operating activities:
     Depreciation and amortization......................................           3,417                4,197                 6,118
     Compensation expense...............................................              --                   --                   688
     Deferred income taxes (benefit)....................................             749                   25                    24
     Tax benefit from employee stock options                                          --                1,360                 8,487
     Write-off of in-process research and development...................              --                1,230                    --
     Changes in assets and liabilities, net of effect from acquisition:
       (Increase) decrease in accounts receivable.......................          (5,230)               6,099                (6,047)
       Increase in prepaid expenses and other...........................            (772)                (870)                 (371)
       (Increase) decrease in prepaid income taxes......................           1,397                 (921)                1,052
       Increase in accounts payable and accrued expenses................             922                3,335                 3,136
       Increase (decrease) in deferred rent.............................            (128)                (206)                 (392)
       Increase (decrease) in income taxes payable......................            (378)                  22                (2,219)
       (Increase) decrease in deferred revenues.........................            (691)                 357                 1,995
                                                                               ---------            ---------             ---------
          Net cash provided by operating activities.....................           4,061               27,387                31,811
                                                                               ---------            ---------             ---------
INVESTING ACTIVITIES:
  Purchases of short-term investments...................................          (3,800)             (13,552)              (39,341)
  Sales of short-term investments.......................................           9,266                6,893                33,804
  Purchases of businesses, net of cash acquired.........................              --               (2,295)               (6,640)
  Purchases of property and equipment...................................          (2,022)              (2,779)               (7,512)
  Additions to capitalized software development costs...................            (919)              (1,637)               (2,227)
                                                                               ---------            ---------            -----------
          Net cash provided by (used in) investing activities...........           2,525              (13,370)              (21,916)
                                                                               ---------            ----------           -----------
FINANCING ACTIVITIES:
  Payments on capital lease obligations.................................            (188)                (302)                 (788)
  Purchase of treasury stock............................................          (1,927)                  --                    --
  Issuance of common stock..............................................             596                3,703                 8,691
  Proceeds from bank loan...............................................           5,805                4,625                    --
  Repayments from bank loan.............................................          (5,572)              (5,555)                   --
                                                                               ---------            ---------            ----------
          Net cash provided by (used in) financing activities...........          (1,286)               2,471                 7,903
                                                                               ----------           ---------            ----------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH.........................            (283)                 130                  (329)
                                                                               ----------           ---------            -----------
NET INCREASE (DECREASE) IN CASH.........................................           5,017               16,618                17,469
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR............................          10,920               15,937                32,555
                                                                               ---------            ---------            ----------
CASH AND CASH EQUIVALENTS, END OF YEAR..................................       $  15,937            $  32,555            $   50,024
                                                                               =========            =========            ==========
</TABLE>

The accompanying notes are an integral part of these statements.



                                      F-6

<PAGE>   32

                  DENDRITE INTERNATIONAL, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

THE COMPANY

     Dendrite International, Inc. and Subsidiaries (the "Company") provides
comprehensive Sales Force Effectiveness solutions used to manage, coordinate and
control the activities of large sales forces in complex selling environments
primarily within the ethical pharmaceutical industry. The Company also markets
its products in the consumer packaged goods industry. The Company's solutions
combine proprietary software products with extensive system support services.

     On May 27, 1999, the Company acquired Cornet International, Ltd ("CorNet")
in a transaction accounted for as a pooling of interests (see Note 2).
Accordingly, the accompanying financial statements have been restated to reflect
the acquisition of CorNet under the pooling of interests method.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

     The consolidated financial statements include the accounts of Dendrite
International, Inc. and its wholly-owned subsidiaries. All intercompany balances
and transactions have been eliminated in consolidation. Pursuant to Statement of
Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation,"
substantially all assets and liabilities of the Company's wholly-owned
international subsidiaries are translated at their respective period-end
currency exchange rates and revenues and expenses are translated at average
currency exchange rates for the period. The resulting translation adjustments
are accumulated in a separate component of stockholders' equity. All foreign
currency transaction gains and losses are included in other expense on the
accompanying statements of operations and are immaterial in each year.

Use of Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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.

Revenue Recognition

     The Company generally recognizes license fees as revenue using the
percentage of completion method over a period of time that commences with the
execution of a license agreement and ends when the product configuration is
completed and it is ready for use in the field. This period of time usually
includes initial customization or configuration and concludes with quality
assurance and testing. In those historically rare cases when there is no
initial customization or configuration the company generally recognizes the
license fees from those products upon delivery, assuming any services to be
provided are not essential to the functionality of the software. Additionally,
license revenues will be recognized immediately when user count for previously
delivered software increases and/or a third party is used for implementation
and configuration. The Company's software licensing agreements provide for a
warranty period (typically 180 days from the date of execution of the
agreement). The portion of the license fee associated with the warranty period
is unbundled from the license fee and is recognized ratably over the warranty
period. The Company does not recognize any license fees unless persuasive
evidence of an arrangement exists, the license amount is fixed and determinable
and collectability is probable.

                                       F-7
<PAGE>   33

     The Company recognizes license fees when it resells certain third party
software. The cost of third party software is included in cost of license fees
in the accompanying statements of operations. For the years ended December 31,
1997, 1998 and 1999, the Company recorded $796,000, $1,208,000 and $1,640,000,
respectively, of license fees and $658,000, $922,000 and $706,000, respectively,
of cost of license fees relating to third party software.

     Revenues from services are recognized as the services are performed.
Revenues from customer maintenance, support and data server rental agreements
are recognized ratably over the term of the agreements.

     Services are generally provided under multiyear contracts. The contracts
specify the payment terms, which are generally over the term of the contract and
generally provide for termination in the event of breach, as defined in the
contract.

Deferred Revenues

     Deferred revenues represent amounts collected from or invoiced to customers
in excess of revenues recognized. This predominantly occurs in two
situations A) Annual billings of software maintenance fees and B) Upfront
billings of license fees that are recognized over time. The value of deferred
revenues will increase and decrease based on the timing of invoices and
recognition of license revenues.

Cash and Cash Equivalents

     The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents.

Supplemental Cash Flow Information

     For the years ended December 31, 1997, 1998 and 1999, the Company paid
interest of $85,000, $86,000 and $42,000. For the years ended December 31, 1997,
1998 and 1999, the Company paid income taxes of $1,273,000, $7,776,000 and
$5,828,000, respectively.

     The following table lists noncash assets that were acquired and liabilities
that were assumed as a result of the acquisitions discussed in Note 2:

<TABLE>
<CAPTION>

                                                                  YEAR ENDED DECEMBER 31,
                                                          ---------------------------------------
                                                              1998                      1999
                                                          ------------              -------------
Noncash assets:
<S>                                                       <C>                       <C>
  Accounts receivable.............................        $    301,000              $   1,826,000
  Prepaid expenses................................              59,000                         --
  Property and equipment..........................             408,000                         --
  Capitalized software development costs..........             850,000                  1,989,000
  Goodwill........................................           2,226,000                  7,235,000
                                                          ------------              -------------
                                                             3,844,000                 11,050,000
Assumed liabilities:
  Accounts payable................................            (294,000)                  (243,000)
  Income taxes payable............................            (121,000)                   (39,000)
  Other accrued expenses..........................            (396,000)                  (300,000)
  Deferred revenues...............................            (107,000)                  (393,000)
  Deferred taxes..................................            (323,000)                        --
                                                          ------------              -------------
     Net noncash assets acquired..................           2,603,000                 10,075,000
Write-off of in-process research and development..           1,230,000                         --
Purchase price paid in stock......................          (1,538,000)                (3,435,000)
                                                          ------------              -------------
Cash paid, net of cash acquired...................        $  2,295,000              $   6,640,000
                                                          ============              =============
</TABLE>

Short-Term Investments

     The Company follows SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." Management determines the appropriate
classification of debt and equity securities at the time of purchase and
reevaluates such designation as of each balance sheet date. The Company invests
in highly rated corporate bonds and municipal bonds. At December 31, 1998 and
1999, all marketable securities have been classified as available-for-sale.
Available-for-sale securities are carried at fair value, based on quoted

                                      F-8
<PAGE>   34

market prices, with unrealized gains and losses, net of tax, reported as a
separate component of stockholders' equity. Realized gains and losses, computed
using specific identification, and declines in value determined to be permanent
are recognized in the statement of operations.

Property and Equipment

     Fixed assets are stated at cost. Depreciation and amortization are provided
generally on the straight-line basis over the estimated useful lives of the
respective assets, which range from 3 to 15 years. Leasehold improvements are
amortized using the straight-line method over the estimated useful lives of the
assets or the lease terms, whichever are shorter. Maintenance, repairs and minor
replacements are charged to expense as incurred.

Capitalized Software Development Costs and Purchased Capitalized Software

     In accordance with SFAS No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed," the Company capitalizes
certain costs related to the development of new software products or the
enhancement of existing software products for sale or license. These costs are
capitalized from the point in time that technological feasibility has been
established, as evidenced by a working model or a detailed working program
design, to the point in time that the product is available for general release
to customers. Capitalized software development costs are amortized on a product
by product basis over the greater of the ratio of current revenues to total
anticipated revenues or on a straight-line basis over the estimated economic
lives of the products (no longer than four years), beginning with the release to
the customer. Research and development costs incurred prior to establishing
technological feasibility and costs incurred subsequent to general product
release to customers are charged to expense as incurred. The Company continually
evaluates whether events or circumstances have occurred that indicate that the
remaining useful lives of the capitalized software development costs should be
revised or that the remaining balance of such assets may not be recoverable. As
of December 31, 1999, management believes that no revisions to the remaining
useful lives or write-down of capitalized development costs is required.

     Capitalized software development costs are net of accumulated amortization
of $4,362,000 and $5,647,000 at December 31, 1998 and 1999, respectively. The
Company capitalized software development cost of $919,000, $1,637,000 and
$2,227,000 for the years ended December 31, 1997, 1998 and 1999, respectively.
Amortization of capitalized software development costs for the years ended
December 31, 1997, 1998 and 1999, was $1,100,000, $1,321,000 and $1,285,000,
respectively and is included in cost of license fees in the accompanying
consolidated statements of operations.

     In connections with certain business acquisitions, the Company has
purchased software that was determined to have reached technological
feasibility. During 1998 the Company purchased $850,000 of capitalized software
in connection with the acquisition of Associated Business Computing N.V. and an
affiliated company (collectively, "ABC"). During 1999, the Company purchased
$1,989,000 of capitalized software in connection with the acquisition of
Marketing Management International, Inc. and subsidiaries (collectively, "MMI").

     Capitalized software from the acquisition of other companies is net of
accumulated amortization of $71,000 and $440,000 at December 31, 1998 and 1999
respectively. Purchased capitalized software is being amortized on a
straight-line basis over a period ranging from five to seven years. Amortization
of purchased capitalized software for the years ended December 31, 1998 and 1999
was $71,000 and $369,000, respectively, and is included in cost of license fees
in the accompanying consolidated statement of operations.

     In aggregate capitalized software development costs are net of accumulated
amortization of $4,433,000 and $6,087,000 at December 31, 1998 and 1999,
respectively. In aggregate amortization of capitalized software development
costs for the years ended December 31, 1997, 1998, and 1999, was $1,100,000
$1,392,000 and $1,654,000, respectively.

                                       F-9
<PAGE>   35

Goodwill

     Goodwill of $10,322,000 is being amortized on a straight-line basis over
five to seven years (see Note 2). Amortization of goodwill for the years ended
December 31, 1997, 1998 and 1999 was $172,000, $305,000 and $1,015,000,
respectively.

Impairment of Long-Lived Assets

     The Company follows SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company
reviews its long-lived assets, including property and equipment, capitalized
software development costs, and goodwill for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may not
be fully recoverable. To determine recoverability of its long-lived assets, the
Company evaluates the probability that future undiscounted net cash flows,
without interest charges, will be less than the carrying amount of the assets.
Impairment is measured at fair value.

Income Taxes

     The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax bases of assets and liabilities and are measured using enacted tax rates
that are expected to be in effect when the differences reverse.

     At December 31, 1999, there were approximately $4,891,000 of accumulated
undistributed earnings of subsidiaries outside the United States that are
considered to be reinvested indefinitely. If such earnings were remitted to the
Company, applicable U.S. federal income and foreign withholding taxes may be
partially offset by foreign tax credits.

Major Customers

     In the year ended December 31, 1997, the Company derived approximately 28%
and 13% of its revenues from its two largest customers. In the year ended
December 31, 1998, the Company derived approximately 31%, and 11% of its
revenues from its two largest customers, both of which were among the Company's
largest customers in 1997. In the year ended December 31, 1999, the Company
derived approximately 26%, and 11% of its revenues from its two largest
customers, both of which were among the Company's largest customers in 1997 and
1998.

Concentration of Credit Risk

     Financial instruments that potentially subject the Company to concentration
of credit risk consist principally of cash balances and trade receivables. The
Company invests its excess cash with large banks. The Company's customer base
principally comprises companies within the ethical pharmaceutical industry. The
Company does not require collateral from its customers.

Net Income Per Share

     The Company has presented net income per share pursuant to Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," and the
Securities and Exchange Commission Staff Accounting Bulletin No. 98.

     Basic income per share (Basic EPS) was computed by dividing the net income
for each year by the weighted average number of shares of common stock
outstanding for each year. Diluted income per share (Diluted EPS) was computed
by dividing net income for each year by the weighted average number of shares
of common stock and common stock equivalents outstanding during each year.

     The computation of shares used for Basic EPS and Diluted EPS is as follows:

                                       F-10
<PAGE>   36

<TABLE>
<CAPTION>

                                                              YEAR ENDED DECEMBER 31,
                      ---------------------------------------------------------------------------------------------------
                                             1997                                               1998
                      ------------------------------------------------     ----------------------------------------------
                            INCOME
                             LOSS            SHARES          PER-SHARE       INCOME            SHARES         PER-SHARE
                          (NUMERATOR)     (DENOMINATOR)       AMOUNT       (NUMERATOR)      (DENOMINATOR)      AMOUNT
                          -----------     -------------     ----------     -----------      -------------    ------------
<S>                        <C>                                              <C>
Net income.........        $  4,775                                         $ 12,759
Basic EPS..........                          35,601          $0.13                             36,080         $0.35
Effect of dilutive
  securities
  Stock options....                           1,269                                             3,312
                                            -------                                           -------
Diluted EPS........                          36,870          $0.13                             39,392         $0.32
                                            =======          =====                            =======         =====
</TABLE>

<TABLE>
<CAPTION>

                                                 1999
                         -----------------------------------------------------
                           INCOME                SHARES             PER-SHARE
                         (NUMERATOR)          (DENOMINATOR)          AMOUNT
                         -----------          -------------        -----------
<S>                       <C>
Net income.........       $  19,340
Basic EPS..........                                 37,725             $0.51
Effect of dilutive
  securities
  Stock options....                                  2,874
                                                     -----
Diluted EPS........                                 40,599             $0.48
                                                    ======              ====
</TABLE>

Recently Issued Accounting Pronouncements

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). This Statement establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities
and is effective for all fiscal quarters of fiscal years beginning after June
15, 1999. Management believes that SFAS 133 will have no impact on the Company's
consolidated financial statements.

Recapitalization

     In August 1998 and October 1999, the Company amended its articles of
incorporation to reflect a 2-for-1 and 3-for-2 forward stock split,
respectively, of its common shares and to change the number of authorized common
shares to 150,000,000. All references in the consolidated financial statements
to the number of shares and to per share amounts have been retroactively
restated to reflect these changes.

Reclassifications

     Certain reclassifications have been made to prior year amounts to conform
with current year presentation.

2.  ACQUISITIONS:

     On July 24, 1998, the Company acquired 100% of the capital stock of
Associated Business Computing, N.V. and an affiliated Company (collectively,
"ABC") for approximately $4,013,000 and transaction costs of $150,000. The
purchase was accounted for under the purchase method of accounting, whereby the
purchase price is allocated to the assets and liabilities assumed of ABC based
on their respective fair market values at the acquisition date. The excess of
purchase price over the fair value of net assets acquired was assigned to
identifiable intangibles. The Company assigned $1,230,000 to in-process research
and development and such amount was written-off in the accompanying consolidated
statements of operations. The Company also recorded $2,226,000 as goodwill and
$850,000 as capitalized software. ABC's results of operations have been included
in the Company's consolidated financial statements from the date of acquisition.

                                      F-11
<PAGE>   37

     On May 27, 1999, the Company exchanged 2,220,807 shares of its common stock
for all the outstanding shares of common stock of CorNet. The merger has been
accounted for under the pooling-of-interest method. Accordingly, the Company's
financial statements have been restated to reflect the acquisition of CorNet
under the pooling of interests method.

     Separate results of Dendrite International, Inc. and CorNet for the three
month period and two years prior to the consummation of the merger are as
follows:

<TABLE>
<CAPTION>
                                                        Dendrite               Cornet              Combined
                                                  ----------------------------------------------------------------
Three months ended March 31, 1999 (unaudited)
<S>                                               <C>                    <C>                  <C>
Total Revenue                                     $      32,402,000      $     5,232,000      $     37,634,000
Net Income                                        $       3,688,000      $       511,000      $      4,199,000
Year ended December 31, 1998
Total  revenue                                    $     112,518,000      $    18,115,000      $    130,633,000
Net income                                        $      11,267,000      $     1,492,000      $     12,759,000
Year ended December 31, 1997
Total  revenue                                    $      78,446,000           12,876,000      $     91,322,000
Net income                                        $       4,610,000      $       165,000      $      4,775,000
</TABLE>

     On June 30, 1999, the Company purchased all of the assets of Marketing
Management International, Inc. ("MMI"), as well as assumed certain liabilities,
as defined, for $6,640,000 in cash, which includes estimated transaction costs,
and $3,435,000 in stock. The acquisition has been accounted for using the
purchase method with the purchase price allocated to the fair value of the
acquired assets and liabilities. The excess purchase price over the fair value
of the net assets acquired will be allocated between capitalized software
development costs and goodwill based upon an independent appraisal. The Company
recorded $7,235,000 as goodwill and $1,989,000 as capitalized software. MMI's
results of operations have been included in the Company's consolidated
financial statements from the date of acquisition.

3.     PROPERTY AND EQUIPMENT:

<TABLE>
<CAPTION>

                                                           DECEMBER 31,
                                                -----------------------------------
                                                    1998                  1999
                                                -------------         -------------
<S>                                             <C>                   <C>
Computer hardware and other equipment.....      $  10,596,000         $  15,312,000
Furniture and fixtures....................          2,188,000             2,590,000
Leasehold improvements....................          2,028,000             2,420,000
                                                -------------         -------------
Gross Property and Equipment                       14,812,000            20,322,000
Less -- Accumulated depreciation and
  amortization............................         (7,591,000)          (10,073,000)
                                                -------------         -------------
                                                $   7,221,000         $  10,249,000
                                                =============         =============
</TABLE>

4.  REVOLVING LINE OF CREDIT:

     During the year ended December 31, 1998, the Company amended its revolving
line of credit agreement with a bank which provides for borrowings of up to
$15,000,000 and is available to finance working capital needs and possible
future acquisitions. The agreement requires, among other covenants, that the
Company maintain a minimum consolidated net worth, measured quarterly, which is
equal to the Company's net worth as of December 31, 1997 plus 50% of the
Company's net income earned after January 1, 1998, and 75% of the net proceeds
of any stock offerings. This covenant has the effect of limiting the amount of
cash dividends the Company may pay. As of December 31, 1999, approximately
$37,400,000 was available for the payment of dividends under this covenant. The
line of credit expires on November 30, 2001. The Company has never had any
borrowings under this revolving line of credit.

      In addition, CorNet maintained a line of credit with a bank which
permitted short term borrowings up to $1,500,000. Interest expense for this line
of credit for the years ended December 31, 1997, 1998 and 1999 was $45,000,
$35,000 and $42,000, respectively. This line of credit expired on June 30, 1999
and was not renewed.

                                      F-12
<PAGE>   38

5.  INCOME TAXES:

     The components of income before income taxes were as follows:

<TABLE>
<CAPTION>

                                       YEAR ENDED DECEMBER 31,
              -------------------------------------------------------------------------
                        1997                     1998                     1999
              -----------------------  -----------------------  -----------------------
<S>                <C>                       <C>                     <C>
 Domestic...       $   6,226,000             $20,765,000             $  29,663,000
 Foreign....           1,551,000                 440,000                 1,911,000
                   -------------             -----------             -------------
                   $   7,777,000             $21,205,000             $  31,574,000
                   =============             ===========             =============
</TABLE>

The components of income taxes were as follows:

<TABLE>
<CAPTION>

                                                           YEAR ENDED DECEMBER 31,
                                ---------------------------------------------------------------------------
                                          1997                      1998                     1999
                                ------------------------  ------------------------ ------------------------
Current Provision:
<S>                                    <C>                      <C>                      <C>
  Federal.....................         $2,032,000               $  7,797,000             $  9,528,000
  State.......................             31,000                    295,000                1,612,000
  Foreign.....................            190,000                    329,000                1,070,000
                                       ----------               ------------             ------------
                                        2,253,000                  8,421,000               12,210,000
Deferred Provision (Benefit):
  Federal.....................             25,000                   (301,000)                 524,000
  State.......................            376,000                    366,000                   (8,000)
  Foreign.....................            348,000                    (40,000)                (492,000)
                                       ----------               ------------             ------------
                                          749,000                     25,000                   24,000
                                       ----------               ------------             ------------
                                       $3,002,000               $  8,446,000             $ 12,234,000
                                       ==========               ============             ============
</TABLE>

     The reconciliation of the statutory Federal income tax rate to the
Company's effective income tax rate is as follows:

<TABLE>
<CAPTION>

                                                                            YEAR ENDED DECEMBER 31,
                                                                  ---------------------------------------
                                                                  1997             1998              1999
                                                                  ----             ----              ----
<S>                                                             <C>              <C>               <C>
Federal statutory tax rate.................................       34.0%            34.0%             35.0%
Impact of foreign subsidiaries subject to higher (lower) tax
  rates....................................................        0.1               --              (0.3)
State income taxes, net of federal tax benefit.............        4.8              3.8               2.4
Nondeductible expenses.....................................        0.3              0.8               0.8
Write-off of in-process research and development...........         --              2.2                --
Nondeductible pooling costs................................         --               --               2.2
Tax credits utilized.......................................       (0.6)            (1.0)             (1.7)
Other......................................................         --               --               0.3
                                                                  ----             ----              ----
                                                                  38.6%            39.8%             38.7%
                                                                  ====             ====              ====
</TABLE>

     The tax effect of temporary differences as established in accordance with
SFAS No. 109 that give rise to deferred income taxes is as follows:

<TABLE>
<CAPTION>

                                                          DECEMBER 31,
                                               ---------------------------------
                                                    1998                1999
                                               -------------       -------------
Gross deferred tax asset:
<S>                                            <C>                 <C>
  Depreciation and amortization...........     $     426,000       $     377,000
  Foreign net operating loss..............         1,309,000           1,894,000
  Accruals and revenues not currently
     deductible...........................           301,000           1,026,000
  Other...................................           475,000             145,000
                                               -------------       -------------
                                               $   2,511,000       $   3,442,000
                                               =============       =============
Gross deferred tax liability:
  Capitalized software development costs..     $  (1,357,000)      $  (1,857,000)
  Other...................................        (2,322,000)         (1,978,000)
                                               -------------       -------------
                                               $  (3,679,000)      $  (3,835,000)
                                               =============       =============
</TABLE>

     The Company has recorded a deferred tax asset of $1,894,000 reflecting the
benefit of approximately $4,600,000 in foreign loss carryforwards, which expire
in varying amounts commencing in 2000. Realization is dependent on generating
sufficient foreign taxable income prior to the expiration of the loss
carryforwards. Although realization is not assured, management believes it is
more likely than not that all of the deferred tax asset will be realized. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.

                                      F-13
<PAGE>   39

6.  EQUITY PLANS:

STOCK OPTION PLANS

     The Company has three stock option plans that provide for the granting of
options, the awarding of stock and the purchase of stock. Options granted under
the three stock option plans generally vest over a four-year period and are
exercisable over a period not to exceed ten years both as determined by the
Board of Directors. Incentive stock options are granted at fair value.
Nonqualified options are granted at exercise prices determined by the Board of
Directors.

     Information with respect to the options under the three stock option plans
is as follows:

<TABLE>
<CAPTION>

                                                    EXERCISE PRICE       WEIGHTED AVERAGE
                                     SHARES            PER SHARE          EXERCISE PRICE
                                     ------            ---------          --------------

<S>                                <C>             <C>                         <C>
Outstanding December 31, 1996      1,754,550       $ 0.14 - $10.50             $   3.60
  Granted........................  4,460,753       $ 2.09 - $ 6.98                 4.70
  Exercised......................   (394,226)      $ 0.14 - $ 3.33                (0.48)
  Canceled.......................   (335,615)      $ 0.14 - $10.50                (5.94)
                                  ----------       ---------------         ------------
Outstanding December 31, 1997....  5,485,462       $ 0.14 - $10.50                 4.57
  Granted........................  1,888,620       $ 2.09 - $15.15                10.26
  Exercised......................   (837,579)      $ 0.14 - $10.50                (3.73)
  Canceled.......................   (564,841)      $ 0.14 - $10.50                (4.38)
                                  ----------       ---------------         ------------
Outstanding December 31, 1998....  5,971,662       $ 0.14 - $15.15                 6.51
  Grants.........................  2,116,202       $10.97 - $27.88                17.52
  Exercises...................... (1,551,242)      $ 0.14 - $14.92                (4.70)
  Canceled.......................   (278,467)      $ 1.45 - $19.79                (9.13)
                                  ----------       ---------------         ------------
Outstanding December 31, 1999....  6,258,155       $ 0.98 - $27.88                10.56
                                  ==========       ===============         ============
</TABLE>

     At December 31, 1999, there were 2,211,088 options exercisable at
$0.98-$15.15 per share. The aggregate exercise price of these options was
$14,573,707 as of December 31, 1999.

     The Company adopted the disclosure requirement of SFAS No. 123, "Accounting
for Stock-Based Compensation," effective for the Company's December 31, 1996
financial statements. The Company applies Accounting Principles Board Opinion
No. 25 and related interpretations in accounting for its plans. Accordingly,
compensation cost has been computed for the stock option plans based on the
intrinsic value of the stock option at the date of grant, which represents the
difference between the exercise price and the fair value of the Company's stock.
As the exercise price of the stock options equaled the fair value of the
Company's stock at the date of option issuance, no compensation cost has been
recorded in the accompanying statements of operations. Had compensation cost for
the three option plans and the employee stock purchase plan been determined
consistent with SFAS No. 123, the Company's net income and net income per share
would have been adjusted to the following pro forma amounts:

<TABLE>
<CAPTION>

                                                              YEAR ENDED DECEMBER 31,
                                   ----------------------------------------------------------------------------
                                             1997                      1998                      1999
                                   ------------------------  ------------------------  ------------------------
Net income:
<S>                                      <C>                       <C>                       <C>
  As reported....................        $  4,775,000              $ 12,759,000              $  19,340,000
  Pro forma......................        $  2,473,000              $  6,545,000              $  11,483,000
Basic income per share:
  As reported....................        $        .13              $        .35              $         .51
  Pro forma......................        $        .07              $        .18              $         .30
Diluted income per share:
  As reported....................        $        .13              $        .33              $         .48
  Pro forma......................        $        .07              $        .17              $         .28
</TABLE>

     Because the SFAS No. 123 method of accounting is not required to be applied
to options granted prior to January 1, 1995, the resulting pro forma
compensation cost may not be representative of that to be expected in future
years. The weighted average fair value of options granted was $4.86, $11.35 and
$12.01 for the years ended December 31, 1997, 1998 and 1999, respectively.

     Information with respect to the options outstanding under the three stock
option plans at December 31, 1999 is as follows:

                                      F-14

<PAGE>   40

<TABLE>
<CAPTION>

                                                           WEIGHTED
                                        WEIGHTED           AVERAGE
                                         AVERAGE           REMAINING          NUMBER
     EXERCISE PRICE                     EXERCISE          CONTRACTUAL        OF VESTED
        PER SHARE          SHARES         PRICE              LIFE             SHARES
-----------------------  ----------  --------------  -------------------  ----------
<S>                       <C>           <C>                    <C>         <C>
         $0.98-$2.65        529,010     $ 2.38                 7.38          229,840
         $3.48-$6.42      2,311,653     $ 5.56                 7.58        1,357,749
        $7.83-$10.97        887,316     $ 9.07                 7.91          482,330
       $13.83-$14.92        583,907     $14.19                 8.94           87,433
       $15.08-$16.75      1,405,844     $16.58                 9.27           53,736
       $19.50-$27.85        540,425     $22.84                 9.49                0
       -------------     ----------     ------                 ----        ---------
                          6,258,155     $10.56                 8.28        2,211,088
                         ==========     ======                 ====        =========
</TABLE>

     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used for
grants in 1997, 1998 and 1999: risk-free interest rates ranging from 5.4% to
6.9% based on the rate in effect on the date of grant; no expected dividend
yield; expected lives of 4.0 to 6.0 years for the options; and expected
volatility of 70%.

EMPLOYEE STOCK PURCHASE PLAN

     In 1997, the Company established an employee stock purchase plan that
provides full-time employees the opportunity to purchase shares at 85% of fair
value on dates determined by the Board of Directors, up to a maximum 10% of
their eligible compensation or $21,250, whichever is less. There were 450,000
shares available for purchase under this plan, of which 63,354, 83,787 and
72,122 were purchased in 1997,1998 and 1999, respectively.

ANNIVERSARY STOCK PLAN

     The Company grants 200 shares of the Company's common stock to all
employees who commenced employment prior to December 31, 1998 in July following
their fifth anniversary of employment. The cost of the anniversary stock plan is
accrued over the employment period of the employees.

7.  SAVINGS AND DEFERRED COMPENSATION PLANS:

     The Company maintains Employee Savings Plans (the "Plans") that cover
substantially all of its full-time U.S. and U.K. employees. All eligible
employees may elect to contribute a portion of their wages to the Plans, subject
to certain limitations. In addition, the Company contributes to the Plans at the
rate of 50% of the employee's contributions up to a maximum of 3% of the
employee's salary. The Company's contributions to the Plans were $300,000,
$416,000 and $492,000 in the years ended December 31, 1997, 1998 and 1999,
respectively.

     The Company also maintains a noncontributory pension plan that covers
substantially all of its full-time Japanese employees. All contributions to this
pension plan are made by the Company in accordance with prescribed statutory
requirements. The Company's contributions to the Plan were $76,000, $74,000 and
$41,000 for the years ended December 31, 1997, 1998 and 1999, respectively.

     In 1998, the Company created a deferred compensation plan. Under the plan,
eligible, highly compensated employees, as defined, can elect to defer a portion
of their compensation and determine the nature of the investments which will be
used to calculate earnings on the deferred amounts. The Company will record the
deferrals as a liability and intends to place a corresponding amount into a
trust fund.

                                      F-15
<PAGE>   41

8.  COMMITMENTS AND CONTINGENCIES:

     The Company leases office facilities and equipment under various operating
leases with remaining noncancelable lease terms generally in excess of one year.
Rent expense was $5,237,000, $5,992,000 and $7,390,000 for the years ended
December 31, 1997, 1998 and 1999, respectively. Future minimum rental payments
at December 31, 1999, on these leases are as follows:

<TABLE>
<CAPTION>
<S>          <C>
2000........ $   6,639,000
2001........     4,947,000
2002........     2,338,000
2003........     1,470,000
2004........       632,000
Thereafter..       544,000
             -------------
             $  16,570,000
             =============
</TABLE>

     From time to time the Company is involved in certain legal actions arising
in the ordinary course of business. In the Company's opinion, the outcome of
such actions will not have a material adverse effect on the Company's financial
position or results of operations.

9. RELATED-PARTY TRANSACTIONS:

     The Company paid approximately $33,000 and $15,000 for the years ended
December 31, 1997 and 1999, respectively, to an entity owned by the President
and Chief Executive Officer of the Company for rental and usage of an aircraft.
There were no payments made to this entity during 1998.

10.        GEOGRAPHIC SEGMENT DATA:

     See Note 1 for a brief description of the Company's business. The Company
is organized by geographic locations and has one reportable segment: the United
States. All license fees are recorded in the United States; service fees are
recorded in the location in which the sale originates and the service is
performed. All transfers between geographic areas have been eliminated from
consolidated net sales. Operating income consists of total net sales recorded in
the location less operating expenses and does not include interest income, other
expense or income taxes. This data is presented in accordance with SFAS No. 131
"Disclosure About Segments of an Enterprise and Related Information".

<TABLE>
<CAPTION>

                                                 YEAR ENDED DECEMBER 31,
                               ----------------------------------------------------------
                                    1997                  1998                  1999
                               -------------      --------------------     --------------
<S>                            <C>                <C>                      <C>
Revenues:
United States.............     $  61,915,000      $        103,765,000     $  138,352,000
All Other.................        29,407,000                26,868,000         34,333,000
                               -------------      --------------------     --------------
                               $  91,322,000              $130,633,000       $172,685,000
                               =============      ====================     ==============
Operating income:
United States.............     $   6,183,000                20,453,000     $   26,893,000
All Other.................         1,324,000                   119,000          2,991,000
                               -------------      --------------------     --------------
                               $   7,507,000      $         20,572,000     $   29,884,000
                               =============      ====================     ==============
Identifiable assets:
United States.............     $  43,150,000      $         67,211,000     $   94,805,000
All Other.................        14,726,000                14,620,000         29,915,000
                               -------------      --------------------     --------------
                               $  57,876,000      $         81,831,000     $  124,720,000
                               =============      ====================     ==============
</TABLE>

11.        SUBSEQUENT EVENTS:

     On January 6, 2000, the Company purchased all of the assets and assumed
certain liabilities, as defined, of Analytika, Inc. ("Analytika"), a provider
of advanced analytical products, consulting services and outsourced operations
services to the pharmaceutical industry. The final purchase price was
approximately $9,000,000 in stock and assumed liabilities, with transaction
costs of $400,000. The acquisition will be accounted for using the purchase
method with the purchase price allocated to the fair value of the acquired
assets and liabilities. The excess purchase price over the fair value of the
net assets acquired will be allocated between capitalized software development
costs and goodwill based upon an independent appraisal.

                                      F-16
<PAGE>   42


                                  EXHIBIT INDEX

             Exhibit
               No.                           Exhibit

                 3.1        Restated Certificate of Incorporation of the
                            Company, as amended (incorporated herein by
                            reference to Exhibit 3.1 to the Company's Quarterly
                            Report on Form 10-Q, filed with the Securities and
                            Exchange Commission (the "Commission") June 30,
                            1996)

                 3.2        By-laws of the Company, as amended (incorporated
                            herein by reference to the Exhibit to the Company's
                            Quarterly Report on Form 10-Q for the quarter ended
                            September 30, 1995, filed with the Commission
                            November 13, 1995)

                 4.1        Specimen of Stock Certificate (incorporated herein
                            by reference to Exhibit 4.1 to the Company's
                            Registration Statement on Form S-1, filed with the
                            Commission May 17, 1995)

                 4.2        Registration Rights Agreement dated October 2, 1991
                            between the several purchasers named therein and the
                            Company (incorporated herein by reference to Exhibit
                            4.2 to the Company's Registration Statement on Form
                            S-1, filed with the Commission May 17, 1995)

                 4.3        Amendment to Registration Rights Agreement dated
                            April 23, 1992 between the Company and the parties
                            named therein as shareholders of the Company
                            (incorporated herein by reference to Exhibit 4.3 of
                            Amendment 1 to the Company's Registration Statement
                            on Form S-1, filed with the Commission May 17, 1995)

                10.1        1992 Stock Plan, as amended.

                10.2        1992 Senior Management Stock Option Plan, as
                            amended.

                10.3        1997 Stock Incentive Plan , as amended.

                10.4        1997 Employee Stock Purchase Plan (incorporated
                            herein by reference to Exhibit 4.2 to the Company's
                            Registration Statement on Form S-8, filed with the
                            Commission April 1, 1997)

                10.5        Lease of 1200 Mount Kemble Avenue, Morristown, New
                            Jersey (incorporated herein by reference to Exhibit
                            10.40 to the Company's Registration Statement on
                            Form S-1, filed with the Commission May 17, 1995)

                10.6        Form of Indemnification Agreement dated as of
                            October 28, 1998 (incorporated herein by reference
                            to Exhibit 10.1 to the Company's Quarterly Report on
                            Form 10-Q, filed with the Commission November 18,
                            1998)

                10.7        Amended and Restated Credit Agreement, entered into
                            as of November 30, 1998, between the Company and The
                            Chase Manhattan Bank N.A. (incorporated herein by
                            reference to Exhibit 10.7 to the Company's Annual
                            Report on Form 10-K, filed with the commission March
                            26, 1999)

                10.8        Employment Agreement dated March 25, 1997 with John
                            E. Bailye (incorporated herein by reference to
                            Exhibit 10.1 to the Company's Quarterly Report on
                            Form 10-Q/A filed with the Commission May 16, 1997)

                10.9        Employment Agreement dated June 2, 1997 with George
                            T. Robson (incorporated herein by reference to
                            Exhibit 10.1 to the Company's Quarterly Report on
                            Form 10-Q, filed with the Commission August 14,
                            1997)

               10.10        Employment Agreement dated June 9, 1997 with Mark
                            Cieplik (incorporated herein by reference to Exhibit
                            10.2 to the Company's Quarterly Report on Form 10-Q,
                            filed with the Commission August 14, 1997)

               10.11        Employment Agreement dated July 24, 1997 with Bruce
                            Savage


<PAGE>   43

                            (incorporated herein by reference to Exhibit
                            10.1 to the Company's Quarterly Report on Form 10-Q,
                            filed with the Commission November 14, 1997)

               10.12        Employment Agreement dated October 1, 1991 with
                            Teresa F. Winslow (incorporated herein by reference
                            to Exhibit 10.50 to the Company's Registration
                            Statement on Form S-1, filed with the Commission
                            February 5, 1996)

               10.13        Consulting Agreement dated as of January 5, 1998
                            with Edward Kfoury (incorporated herein by reference
                            to exhibit 10.1 of the Company's Quarterly Report
                            filed with the Commission May 14, 1998.)

               10.14        Deferred Compensation Plan dated as of September 1,
                            1998 (incorporated herein by reference to Exhibit
                            10.1 of the Company's Quarterly Report filed with
                            the Commission August 14, 1998.)

               10.15        Deferred Compensation Plan Trust Agreement dated as
                            of September 1, 1998 (incorporated herein by
                            reference to Exhibit 10.2 of the Company's Quarterly
                            Report filed with the Commission August 14, 1998.)

                  21        Subsidiaries of the Registrant

                23.1        Consent of Arthur Andersen LLP

                23.2        Consent of KPMG LLP

                  27        Financial Data Schedule