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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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Form 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

|           |  |                                                                                         
|---------- |  | ----------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                         
|           |  |                                                                                         
|[   ]      |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934    
|           |  |                                                                                         
|           |  | For the fiscal year ended                                                               
|           |  |                                                                                         
|           |  | Or                                                                                      
|           |  |                                                                                         
|[x]        |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
|           |  |                                                                                         
|           |  | For the Transition Period from January 1, 2003 to March 31, 2003                        

Commission File Number: 0-22993



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INDUS INTERNATIONAL, INC.

(Exact name of Registrant as specified in its charter)

|                                                                                  |  |                                               
|--------------------------------------------------------------------------------- |  | ----------------------------------------------
|Delaware(State or other jurisdiction of
incorporation or organization)            |  | 94-3273443(I.R.S. Employer
Identification No.)
|                                                                                  |  |                                               
|3301 Windy Ridge Parkway
Atlanta, Georgia(Address of principal executive offices) |  | 30339(Zip code)                               

Registrants telephone number, including area code
(770) 952-8444

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of Class)



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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act rule 12b-2).  Yes [   ]   No [x]

The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the closing sale price $1.94 of the Common Stock on
September 30, 2002, as reported on the Nasdaq National Market, was
approximately $41,785,246. Shares of Common Stock held by each officer and
director and by each person who owns 5% or more of the outstanding Common Stock
have been excluded in that such persons may by deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes.

The number of shares outstanding of the registrants Common Stock, $.001
par value, was 42,093,830 at June 23, 2003.

DOCUMENTS INCORPORATED BY REFERENCE
None





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TABLE OF CONTENTS



|                                             |                                                                                                         |  |  |  |  |  |  | 
|-------------------------------------------- | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|                                             | CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS                                              
|PART I                                      
|                                             | Item 1. Description of Business                                                                        
|                                             | Item 2. Properties                                                                                     
|                                             | Item 3. Legal Proceedings                                                                              
|                                             | Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II                                     
|                                             | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                          
|                                             | Item 6. Selected Financial Data                                                                        
|                                             | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|                                             | Item 7A. Quantitative and Qualitative Disclosures About Market Risks                                   
|                                             | Item 8. Financial Statements and Supplementary Data                                                    
|                                             | Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure           
|PART III                                    
|                                             | Item 10. Directors and Executive Officers of the Registrant                                            
|                                             | Item 11. Executive Compensation                                                                        
|                                             | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|                                             | Item 13. Certain Relationships and Related Transactions                                                
|                                             | Item 14. Controls and Procedures                                                                       
|PART IV                                     
|                                             | Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                              
|SIGNATURES                                  
|EX-23.1 CONSENT OF ERNST & YOUNG LLP        
|EX-99.1 SECTION 906 CERTIFICATION OF THE CEO
|EX-99.2 SECTION 906 CERTIFICATION OF THE CFO



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##### Table of Contents



INDUS INTERNATIONAL, INC.

FORM 10-K
FOR THE TRANSITION PERIOD FROM JANUARY 1, 2003 TO MARCH 31, 2003

TABLE OF CONTENTS

|                                                          |  |                                                                                                |    |  |    |      |  | 
|--------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------- | -- |  | -- | ---- |  | 
|                                                          |  |                                                                                                |    |  |    | Page
|                                                          |  |                                                                                                |    |  |    |     
|Documents Incorporated by Reference                       |  | Cover                                                                                         
|Cautionary Statement Regarding Forward-Looking Statements |  |                                                                                                | 2  | 
|PART I                                                   
|Item 1                                                    |  | Description of Business                                                                        |    |  | 2  |     
|Item 2                                                    |  | Properties                                                                                     |    |  | 17 |     
|Item 3                                                    |  | Legal Proceedings                                                                              |    |  | 17 |     
|Item 4                                                    |  | Submission of Matters to a Vote of Security Holders                                            |    |  | 18 |     
|PART II                                                  
|Item 5                                                    |  | Market for
Registrant's Common Equity and Related Stockholder Matters                          |    |  | 18 |     
|Item 6                                                    |  | Selected Financial Data                                                                        |    |  | 19 |     
|Item 7                                                    |  | Management's
Discussion and Analysis of Financial Condition and Results of Operations          |    |  | 20 |     
|Item 7A                                                   |  | Quantitative and Qualitative Disclosures About Market Risks                                    |    |  | 30 |     
|Item 8                                                    |  | Financial Statements and Supplementary Data                                                    |    |  | 31 |     
|Item 9                                                    |  | Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure           |    |  | 57 |     
|PART III                                                 
|Item 10                                                   |  | Directors and Executive Officers of the Registrant                                             |    |  | 57 |     
|Item 11                                                   |  | Executive Compensation                                                                         |    |  | 58 |     
|Item 12                                                   |  | Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters |    |  | 63 |     
|Item 13                                                   |  | Certain Relationships and Related Transactions                                                 |    |  | 64 |     
|Item 14                                                   |  | Controls and Procedure                                                                         |    |  | 65 |     
|PART IV                                                  
|Item 15                                                   |  | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                               |    |  | 66 |     
|Signatures                                                |  |                                                                                                | 69 | 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Transition Report on Form 10-K, as well as documents incorporated
herein by reference, may contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. These forward-looking
statements are not based on historical facts, but rather reflect managements
current expectations concerning future results and events. These
forward-looking statements generally can be identified by the use of phrases
and expressions such as believe, expect, anticipate, intend, plan,
foresee, likely, will or other similar words or phrases. These
statements, which speak only as of the date given, are subject to certain risks
and uncertainties that could cause actual results to differ materially from our
historical experience and our expectations or projections. These risks
include, but are not limited to, the successful integration of the acquisition
of Indus Utility Systems, Inc. (IUS) including the challenges inherent in
diverting our managements attention and resources from other strategic matters
and from operational matters, the successful rationalization of the IUS
business and products, ability to realize anticipated or any synergies or
cost-savings from the acquisition, current market conditions for Indus and
IUS products and services, our ability to achieve growth in our core product
offerings and the combined Indus/IUS offerings, market acceptance and the
success of Indus and IUS products, the success of our product development
strategy, our competitive position, the ability to enter into new partnership
arrangements and to retain existing partnership arrangements, uncertainty
relating to and the management of personnel changes, timely development and
introduction of new products, releases and product enhancements, current
economic conditions and the timing and extent of a recovery, heightened
security and war or terrorist acts in countries of the world that affect our
business, and other risks identified in the section of this Report entitled
Description of Business  Factors Affecting Future Performance, beginning on
page 11. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect managements opinions only as of the
date hereof. The Company undertakes no obligation to revise or publicly
release the results of any revision to these forward-looking statements.




PART I




Item 1.Description of Business

General

Indus International, Inc. (the Company or Indus) is a leading provider
of integrated enterprise asset management (EAM) and supply chain software and
service products for capital-intensive industries worldwide that have very
complex assets. Through its March 2003 acquisition of Indus Utility Systems,
Inc. (IUS) (formerly SCT Utility Systems, Inc) from Systems & Computer
Technology Corporation, Indus has become a leading provider of customer
management and billing software to the energy and utilities markets.

Indus EAM

Indus EAM solutions help its customers better manage the full array of
their assets and optimize their enterprises. The Company provides three
principal EAM software solutions series -PassPort, EMPAC and Indus InSite.

PassPort and EMPAC are targeted to the large market, asset-intensive
industries, requiring complex functionality. Each provides a series of
business applications and business process improvement service packages that
meet the EAM needs of businesses such as utilities, oil and gas, pulp and
paper, mining and metals, defense, and process. These products are designed
for large-scale projects with extensive record keeping requirements and high
transaction volume.

Indus InSite is tailored for less asset-intensive industries that can
benefit from managing their assets and facilities more efficiently. These
industries include the facilities maintenance market in commercial and
industrial real estate, health care, financial services, leisure properties,
and government and educational facilities. In 2002 and continuing in 2003, the
Company began combining the architecture of EMPAC with that of Indus InSite
into a single product offering under the product name InSite. This new product
offering will be comprised of InSite EE, intended for capital intensive
industries, and InSite, for the less capital intensive industries.

Indus EAM products provide its customers with increased return on their
investment by enabling them to match the work that must be done with the
people, materials, tools, and permits required to do it. The more efficiently
these resources are used, the greater the reliability in plant facility and
factory availability, and the lower the related operating costs, thereby
increasing the customers return on assets. Examples of customer benefits
realized through Indus EAM products include:



| |  |  | Proper maintenance of equipment and facilities can prevent costly failures, limit disruptions, and minimize downtime;
| | - |  | ---------------------------------------------------------------------------------------------------------------------
|
| |  |  | More efficient use of personnel and better control of spare parts can reduce costs;                                  
|
| |  |  | Properly maintained equipment can run at higher production speeds and have longer life cycles;                       
|
| |  |  | Delaying new equipment purchases lowers the capital expense budget; and                                              

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| |  |  | Proper regulatory compliance facilitated by Indus solutions can help companies avoid fines and forced shutdowns.
| | - |  | -----------------------------------------------------------------------------------------------------------------

As a premier EAM supplier of complex functionality to asset intensive
industries, the Companys PassPort, EMPAC and Indus InSite software products
were licensed for use by over 300,000 end users in more than 40 countries at
March 31, 2003.

Acquisition of IUS

The Companys acquisition of IUS on March 5, 2003, adds customer
information systems (CIS), complex billing solutions, and customer
relationship management (CRM) software to the Indus EAM solution set. IUS is
a leading provider of CIS software in the energy and utilities market with over
200 client sites using components of IUS solutions. Its customer base includes
a broad spectrum of utilities, including investor owned utilities,
municipal/public utilities, and rural electric cooperatives. While IUS client
base represents utilities of all sizes, IUS services a significant number of
very large organizations, including approximately 43 percent of the
utility/energy companies in the United States with more than 1 million
customers. As of March 31, 2003, IUS products have been licensed to manage
approximately 63 million services and generate approximately 40 million bills
per month.

The Company believes that the acquisition creates a new competitive
landscape in the utilities market and greatly strengthens Indus competitive
position in this market. Indus now represents the first vendor that has the
capability to provide an integrated software solution for utilities customers
that ranges from the CIS suite of the IUS Banner software product to the asset
and work management solutions of Indus EAM products. This acquisition
redefines the utility industry marketplace, giving Indus the widest footprint
in an industry where Indus has been helping customers for over 25 years.

Strategic benefits of the acquisition include:



| |  |  | providing added value to Indus existing customers;                                            
| | - |  | -----------------------------------------------------------------------------------------------
|
| |  |  | enabling Indus to compete in the service management space, creating new customer opportunities;
|
| |  |  | lowering total cost of ownership for customers;                                                
|
| |  |  | strengthening the alliance between Indus and its utility customers; and                        
|
| |  |  | providing a pathway for increased revenues, operational efficiencies and profitability.        

Indus Solutions

EAM Solutions

The Company provides three principal EAM software solutions series -
PassPort, EMPAC and Indus InSite. PassPort and EMPAC are typically licensed by
customers, but both are also available as hosted products supported by Indus
through remote data centers while Indus InSite is a hosted solution. Indus
InSite EE will be available as either a licensed or hosted solution.

Beginning in 2002 and continuing throughout 2003, the Company is
re-architecting its three EAM solutions into two, after which the previously
separate EMPAC and Indus InSite products will be delivered to the marketplace
under the InSite product name. The Company believes that this more focused
strategy will deliver a wide range of business processes in a Web-architected
format that is easy to use and readily deployable. Clients who have previously
adopted InSite will have a greater range of functionality available to them
than would have been delivered under previous product plans. Clients who have
previously adopted EMPAC will have a new deployment option using
Web-architected technology, as well as increased functionality. This combined
product offering under the InSite product name will be delivered to the market
in two versions. One version, with lighter functionality that is appropriate
to markets with less complex asset management needs, will be provided under the
name Indus InSite. A more complex version, with more comprehensive
functionality (equivalent to EMPAC), will be provided under the name InSite
EE. Each version will have its own price points and maintenance agreements.

CIS Solutions

Through its acquisition of IUS, Indus also offers a broad array of CIS
solutions to the energy and utilities markets. Banner Advantage (Banner) is
the flagship CIS product and supports the core customer management and billing
processes of utilities. Banner allows clients to acquire customers, generate
customers bills, post payments to customers accounts and generate service
orders. Banner is augmented by IUS complex billing solution, EnerLink, which
helps energy and utility companies design, market, administer, and bill
innovative pricing options, regardless of market requirements. In 2002, a
companion system to Banner, CRM Essentials, was introduced to the market. CRM
Essentials was developed specifically for the functionality requirements of the
energy and utility industry making implementation easier. A single provider,
Indus, is now positioned to offer the combined functionalities of Banner,
EnerLink, and CRM Essentials as one complete solutions package, leveraging and
extending the value of the utilitys CIS investment. Fuels Management Systems
(FMS) manages the acquisition, transportation and inventory of fuels,
primarily coal, used to generate electricity.

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Key Competitive Strengths

The Company believes it has key competitive strengths that will help it
maintain its leadership within the EAM space, as well as the CIS space in the
energy and utilities markets. The Companys strategic assets and competitive
advantages include its:



| |  |  | depth and breadth of products. Over the past 25 years, Indus has
attained the leading market share position in the Tier 1 market
(customers having annual revenues greater than $1 billion dollars) for
EAM software solutions;                                                                        
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | scalability of both its EAM and CIS products. Indus solutions are
able to scale up to multiple thousands of users;                                                                                                                                                                                      
|
| |  |  | substantial installed base of both the EAM Tier 1 market and CIS
customers in the energy and utilities market. This provides Indus with
a source for selling additional services and add-on modules, as well as
providing client references that can help the Company close deals with
new prospects; and
|
| |  |  | domain knowledge, providing Indus with the expertise to enhance
implementations with industry-specific best practices.                                                                                                                                                                                   

Customers

The Company provides enterprise asset management software products for
large process industry customers in the following industries (and
representative assets):



| |  |  | utilities (from generating or production facilities to repair trucks);        
| | - |  | ------------------------------------------------------------------------------
|
| |  |  | oil, gas and petrochemical (drilling platforms and large refining facilities);
|
| |  |  | defense and transportation (airplanes, ships and tanks);                      
|
| |  |  | pulp and paper (paper machines); and                                          
|
| |  |  | metals and mining (fabrication machinery and mines/production plants).        

In addition, the Company intends to target industries with less complex
assets, such as facilities maintenance market in commercial and industrial real
estate, health care, financial services, leisure properties, and government and
educational facilities through its Indus InSite software product.

As of March 31, 2003, the Companys products were licensed for use by more
than 300,000 end-users in over 40 countries. For the three-month period ended
March 31, 2003, 11.2% of the Companys revenues related to our contract with
Magnox Electric plc, a wholly owned subsidiary of British Nuclear Fuels Ltd (
BNFL), which operates BNFLs nuclear power stations.

Sales and Marketing

Global Organization

Indus markets and sells its products to customers in asset-intensive and
facilities-intensive industries around the world. To address that market
effectively, the Company divides its target market by geography and by industry
segment, and tailors its sales strategy to suit the specific needs of each
market segment. In a given market segment, the Company may sell either
directly, through its internal sales force, or indirectly, through business
partner relationships and channel partner programs. These business partner
relationships and channel partner programs are typically comprised of referral
arrangements and reseller or distribution arrangements. In referral
arrangements the referring party is paid a fee for referring a customer, which
is typically based on a percentage of the license fee in the transaction. In
reseller or distribution arrangements, the partner typically has primary
control of the sales process and in some cases licenses Indus software directly
to the customer.

The direct sales organization is decentralized throughout the Companys
three global regions described below:



| |  |  | Americas  with direct sales representatives in the US and Canada,
and strategic alliances to expand the scope of sales opportunities;                                                                      
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Europe, Middle East and Africa  with direct sales representatives in
the UK and France, as well as alliances that extend Indus selling
capability into continental Europe, the Middle East and Africa; and
|
| |  |  | Asia-Pacific  with direct sales representatives in Australia and
Japan and strategic alliances to expand the scope of sales
opportunities.                                                                 

The Company maintains marketing staff in Atlanta, Georgia and Columbia,
South Carolina.

Vertical Segments



| |                                                                           
| | --------------------------------------------------------------------------
| | Indus focuses its sales and marketing efforts on the following industries:

4



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     Utilities



| |                                      
| | -------------------------------------
| |  Water and waste treatment          
|
| |  Nuclear power generation           
|
| |  Fossil power generation            
|
| |  Hydroelectric power generation     
|
| |  Energy transmission and substations
|
| |  Energy distribution and delivery   

     Energy Resource Extraction and Process Industries



| |                                        
| | ---------------------------------------
| |  Chemical, petrochemical, oil, and gas
|
| |  Metals and mining                    
|
| |  Pulp, paper and forest               
|
| |  Process manufacturing                
|
| |  Discrete manufacturing               
|
| |  Consumer packaged goods              
|
| |  Public transit                       

     Facilities Management & Maintenance



| |                                     
| | ------------------------------------
| |  Commercial property management    
|
| |  Facilities maintenance services   
|
| |  Hospitality and leisure properties
|
| |  Education and government          
|
| |  Hospitals and healthcare providers
|
| |  Financial services properties     

By addressing the needs of various vertical industries separately, the
Company can package and deliver its product offerings to meet the specific
needs of the industries its serves. The Company conducts comprehensive
industry-specific vertical marketing programs, which include public relations,
trade advertising, industry seminars, trade shows and ongoing customer
communication programs such as IndusWorld, the Companys international user
group.

Sales Cycle and Customer Life Cycle

While the sales cycle varies depending on the customer and the product
being sold, it generally requires from three to 18 months. The direct sales
cycle begins with the generation of a sales lead or the receipt of a request
for proposal from a prospect, followed by qualification of the lead, analysis
of the customers needs, response to a request for proposal, one or more
presentations to the customer utilizing the special knowledge of the industry
vertical pre-sales staff, customer internal sign-off activities, and contract
negotiation and finalization.

After implementation of an Indus solution, the Companys account executive
program provides regional support and specialized attention for each of its
customers. Account Executives assist in implementing licensed applications
over multi-year engagements, promote licensing of additional applications, and
encourage existing customers to identify and help fund new applications and
expanded core offerings.

Products and Services

The Company delivers world-class, business process-based, EAM and CIS
products, scaled and priced for specific industry segments. The Companys
PassPort and EMPAC software products are targeted towards industries with
highly complex assets. For industries with less complex assets, the Companys
Indus InSite hosted software product is the most appropriate solution. Banner
Advantage is the Companys flagship CIS product and supports the core customer
management and billing processes of utilities. Included with the Banner product
are the Companys other CIS products, which include EnerLink, CRM Essentials
and FMS. All of these products are implemented by the Companys professional
services organization and supported by its worldwide customer service
organization.

PassPort and EMPAC

PassPort and EMPAC support an organizations operations and maintenance
workforce, inventory management and procurement professionals, safety and
compliance engineers, and other decision making personnel affected by asset
care decisions throughout the enterprise. These solutions are delivered to
these professionals as a series of components, with each organization selecting
the components needed to support their specific business processes. These
solutions typically include the following components:

5



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| |  |  | asset and work management systems;
| | - |  | ----------------------------------
|
| |  |  | materials and procurement systems;
|
| |  |  | supply chain;                     
|
| |  |  | eProcurement systems; and         
|
| |  |  | safety and compliance systems.    

Other available components include: mobile computing, EAI (enterprise asset
integration) tools, sophisticated search capabilities, data warehousing
products, and integration to leading ERP products for financial and human
resources functions. Elements of some PassPort modules contain software
licensed from third parties and the baseline EMPAC software contains some
software licensed from a third party. If the Company loses the right to
license and distribute these third party elements, it believes it could license
or develop alternatives to such component technologies without materially
impacting its sales of either PassPort or EMPAC.

PassPort is an integrated work management and supply chain software
product, originally architected for the nuclear and highly regulated process
manufacturing environment. This depth of regulatory compliance, health and
safety, and personnel qualifications tracking in PassPort are the key
distinguishing features between it and the EMPAC product. Primary PassPort
customers are very large operations that need size scalability and product
depth, such as regulatory compliance for hazardous chemicals and radiation
exposure.

EMPAC is also an integrated maintenance, inventory, and purchasing
software product, originally designed for discrete manufacturing plants, mining
operations, paper mills and consumer packaged goods. Primary EMPAC customers
are medium and large operations that need flexible product configurability to
fit different plant sizes and product lines.

These Indus solutions seamlessly integrate with various third-party ERP
systems, including Oracle Corporations (Oracle) corporate financial
applications, SAP Corporations (SAP) financial applications, and PeopleSoft,
Incs (PeopleSoft) corporate financial, payroll, and human resources
applications. Beyond providing departmental information to affected workgroups
throughout the customer organization, EAM techniques employed by the Company
integrate process control systems and optimize capacity utilization through
just-in-time procurement strategies and deployment of complex maintenance
management practices.

Indus InSite

Indus InSite is a web-architected hosted solution designed to maintain and
control the assets of less asset-intensive industries in markets such as
commercial and industrial real estate, health care, financial services, leisure
properties, government and educational facilities. Elements of the Indus
InSite hosted software solution are licensed from third parties. If the
Company lost the right to license, host and distribute these third party
elements, it believes it could license or develop alternatives to such
components without materially impacting sales of Indus InSite. As discussed
above under EAM Solutions, the InSite product line is being combined with the
EMPAC product line to provide additional functionality to both product lines.
Upon completion in 2003, Indus InSite will offer J2EE compliant, web
services-based architecture encompassing the EMPAC server-side business
functionality. It will fully leverage the EMPAC business functionality and
table structure existing within the EMPAC database, and wrap EMPAC business
functions (such as stored procedures) with J2EE application services.

Banner and Other CIS Products

At the core of the Indus CIS offerings is the advanced architecture of the
Banner product that is sold as an independent solution or packaged with other
CIS products like EnerLink, CRM Essentials and FMS. Built on the Oracle9i
application server technology, Banner features an adaptive infrastructure that
takes advantage of Oracles world-class functionality for Internet and intranet
deployment and streamlined business processes. It is recognized as a customer
information solution, combining proven and scalable functionality to facilitate
benefits such as:



| |  |  | Enterprise-wide access to information                                      
| | - |  | ---------------------------------------------------------------------------
|
| |  |  | Cost controls for increased profitability                                  
|
| |  |  | Regulatory responsiveness                                                  
|
| |  |  | Accurate information for making decisions                                  
|
| |  |  | Reduced cycle times from meter reading to collection of accounts receivable

EnerLink is a complex billing solution that helps energy and utility
companies use integrated applications to design, market, administer, and bill
various pricing options-regardless of market requirements. This solution is
for billing commercial and industrial customers, and includes the following
features:



| |  |  | Flexible pricing options                      
| | - |  | ----------------------------------------------
|
| |  |  | Robust rate modeling and bill calculation     
|
| |  |  | Support for a complex array of contract models

6



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| |  |  | Integrated data management
| | - |  | --------------------------
|
| |  |  | Meter data access         

Although EnerLink is offered with Banner, it can also be sold as an
independent solution to interface with a clients legacy application or other
commercial third-party CIS.

Also enhancing the Companys CIS solution is the utility-specific layer of
CRM functionality called CRM Essentials, designed specifically for the energy
and utility marketplace. The CRM components can be deployed modularly, ensuring
that the implementation targets specific business needs. These components
include:



| |  |  | Business intelligence and data warehousing                                      
| | - |  | --------------------------------------------------------------------------------
|
| |  |  | Internet customer self-service and electronic bill payment and processing (EBPP)
|
| |  |  | Data mining to support targeted communications and targeted marketing           
|
| |  |  | Customer contact tracking and employee metrics                                  
|
| |  |  | Internal work routing and approval                                              
|
| |  |  | Service order scheduling and schedule optimization                              

Fuels Management Systems (FMS) manages the acquisition, transportation
and inventory of fuels, primarily coal, used to generate electricity. This
comprehensive system manages the most costly components of a utility or energy
provider. As utility and energy providers focus on improving operations, FMS
is a valuable asset to reduce cost and improve efficiencies. IUS currently has
four customers using FMS to manage more than 20 power plants.

Professional Services

The Companys EAM and CIS products include consulting services provided by
subject matter experts. These experts support the Indus sales organization by
helping customers implement advanced EAM maintenance principles, materials
management theories, and other advanced best practice strategies designed to
provide a competitive advantage to the customer. The knowledge gained from
prior customer implementations, the extensive plant experience of the Companys
employees, and the global experience of its user community, provides a high
quality information exchange as customers learn from the professional services
organization how the Indus software solutions address industry-specific
requirements.

Indus EAM products are typically implemented through the Companys
proprietary ABACUS tools and methodology. ABACUS consists of software-driven
analytical tools, implementation plans and educational resources that
consolidate the Companys extensive experience in implementing enterprise asset
management software products. ABACUS provides a step-by-step implementation
life cycle framework for all installation, integration, education and business
review activities. In addition, ABACUS enhances the ongoing effectiveness of
Indus software products and assists customers in improving their business
processes.

The Company has also developed strategic relationships with large systems
integrators, as well as smaller third-party implementers and providers. This
ensures that customers with specific requirements can leverage the value-added
services of these firms when implementing Indus software products. These
relationships are further described under Business-Strategic Relationships.

Hosted Products

PassPort, EMPAC and Indus InSite are available as hosted products fully
supported through remote data centers. The Indus Banner CIS solution is also
available as a hosted product. The Indus hosting services provide the EAM and
CIS excellence of Indus solutions, integrated Web-enabled applications, and the
Internets eBusiness opportunities. The Company is responsible for the
customers hosted system and is the single point of contact for any
functionality issues. The hosted product offers comprehensive functionality,
reduces implementation time, and guarantees service levels. Additionally, the
Indus hosted product integrates with customer legacy systems, delivering a true
best-of-breed product that includes many touch points with other industry
software application leaders such as Oracle and PeopleSoft.

The hosted product contains robust, layered security to protect customer
data. The Companys hosted product infrastructure partners provide a suite of
services that expertly manage mission-critical software. With a large,
multi-specialized, technical staff of certified engineers, the infrastructure
partners provide the level of services and expertise necessary to ensure
secure, scalable, high-performance operation 24 hours a day. Their services
include installation and maintenance of hardware and software, core software
expertise, high-volume backup and recovery systems, and constant, proactive
monitoring by their server operations center.

Customer Service and Software Maintenance

Indus World Wide Customer Service helps customers increase productivity
and system availability. The Company combines state-of-the-art technology and
a highly skilled team of professionals to deliver service through an
international infrastructure designed

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to respond promptly and effectively to customer needs. The Company offers
a variety of service options for each of its products. Indus World Wide
Customer Service Centers are strategically located in North America, the United
Kingdom, and the Asia Pacific region. Two of the Companys service programs
provide extended telephone service after business hours for production-down and
critical issues, 24 hours a day, either 5 or 7 days a week. Regardless of the
calls time or point-of-origin, the Companys toll-free number automatically
routes the customers call to a fully staffed Indus Customer Service Center.
By accessing a global customer service database, the Companys customer service
professionals can share the most up-to-date technical information and provide
fast, consistent responses to customer issues around the clock from anywhere in
the world.

eService is Indus Web-based mechanism for allowing its customers to
access information about the Companys products and services, as well as log
cases, suggest product enhancements, and search for patches or resolutions to
common product issues. This service is available on a 24 hours, 7-days-a-week
basis.

Training

The Indus Learning Center, the Companys training division, designs,
manages, and implements comprehensive education and training products for its
user community. The Companys training professionals provide instructional
design and courseware development services, training coordination support,
train-the-trainer and end-user programs, and technical training for customer
installations worldwide. Open enrollment training courses are provided at the
Companys training centers in Atlanta, Georgia; Columbia, South Carolina;
Woking, England; and Brisbane, Australia. Training is also provided at customer
sites at the customers option. The Indus Learning Center has developed a
comprehensive set of eLearning training materials to educate and train
customers and internal staff. The eLearning products include Web-based
training courses and Indus eClass, an on-line step-by-step guide for cycling
through Indus product screens.

Strategic Relationships

Through a network of strategic relationships established with more than 50
technology and service partners, Indus leverages its internal sales and
marketing efforts, expands its implementation capabilities, and enhances the
breadth of its solutions. This network includes relationships with systems
integrators such as Accenture, Deloitte Consulting, Cap Gemini Ernst & Young
and International Business Machines, as well as relationships with software
product partners such as Oracle, PeopleSoft, and BEA Systems, Inc. that extend
the functional footprint of Indus products. This collaborative effort with
third party software partners creates a software series that provides
interoperability with corporate and financial applications, and certain
industry specific systems.

Systems Integrators

The Company typically works with large systems integrators and smaller
implementers on an opportunity-by-opportunity basis. In some instances, the
Company has agreements with systems integrators that provide the framework for
the relationship, such as its agreements with Cap Gemini Ernst & Young U.S. LLC
and Deloitte Tohmatsu Consulting Co., Limited. In each case the agreement is
non-exclusive and does not obligate either party to any minimum commitments.
Instead, the parties agree to work together to identify joint opportunities
with the goal of furthering the implementation of the Companys products and
the professional services of the systems integrator or implementer. The
Company and the systems integrators work together on proposals to prospective
customers to license and implement the Companys software. The Company
typically enters into teaming arrangements that set forth the parties
respective obligations in the proposal process and their agreement to work
together. The Company will typically enter into a license agreement and a
maintenance and support agreement directly with customer, and the systems
integrator will typically have the direct contractual relationship with the
customer for professional services.

Indus Software Product Partners

The Company enters into strategic relationships with software product
partners to increase the number of software products it can provide to its
customers, enabling Indus to continue its focus on developing and delivering
functionally advanced EAM and CIS products. The Company believes that the need
to forge strategic partnerships is continually increasing as the needs of the
Companys customers evolve and the global marketplace expands. By combining
the Companys own market-leading EAM/CIS software with its partners
considerable strengths in market-focused products and services, Indus provides
its customers with the leverage needed to increase their return on assets,
while providing Indus with additional software license fees and services.

The Companys strategic relationships with third party software providers
take a variety of forms, such as reseller agreements and development
arrangements, that are intended to extend the functionality of the Indus
software solutions. Reseller agreements, such as the Companys agreement with
BEA Systems, Inc., typically allow the Company to develop software solutions
using third party software, and resell that third party software either in
connection with, or embedded in, the Companys software solutions. Development
agreements allow the Company to develop software to integrate its solutions
with that of the third party. This allows the Company to extend the
functionality of its software solutions by making them interoperable with
various third party applications. Examples of these types of arrangements
include the Companys agreements with PeopleSoft and Oracle, which allow the
Company

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to develop solutions that integrate with PeopleSofts corporate financial,
payroll and human resources applications and Oracle corporate financial
applications.

The following highlights several of the Companys partners:



| |  |  | BEA Systems Inc.- supports Indus customers need to design and
automate business processes that integrate back-end applications and
e-commerce technologies.                                     
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Oracle- provides database platform as well as Oracle Financials
integration. Indus is a member of the Oracle Partner Network, as a
Certified Advantage Partner.                                  
|
| |  |  | Business Objects- provides business intelligence that lets
organizations access, analyze, and share information internally with
employees and externally with customers, suppliers, and partners.

Indus Strategic Client Program

This program establishes the collaborative planning framework to recommend
improvements to the business processes of both Indus and its customers,
implement innovative and cost-effective solutions to business needs, and engage
the customer in the Companys strategic vision. The program improves the
competitive positioning of Indus and its strategic clients, enhances the return
on investment that strategic clients receive from implementing Indus products,
and continues the high quality and reliability of Indus products, project
support, and customer service. The Company and its strategic clients take
mutual responsibility for the overall success of the program.

Research and Development

The Company has dedicated research, development, and software engineering
functions, and regularly releases new products and enhancements to existing
products. Research and development efforts are directed at increasing overall
product functionality, improving product performance, and extending the
capabilities of the products to interoperate with selected third-party software
products available from alliance partners. These efforts include developing
new applications that address new horizontal and vertical functions.

The Company believes that research and development is most effectively
accomplished if customers are involved in the process. Through direct customer
involvement and consensus input from user group oversight committees, product
content is improved and the customer acceptance of new software deployment is
significantly increased. In addition, the interactive development process
promotes increased customer awareness of the products technological features
and fosters greater product loyalty.

The Company spent $12.7 million and $8.7 million on research and
development for the three-month periods ended March 31, 2002 and 2003,
respectively, and $51.6 million, $49.5 million and $45.7 million for the years
ended December 31, 2000, 2001 and 2002, respectively.

Competition

The EAM and CIS software products businesses are highly competitive and
constantly changing. They are significantly affected by new product and
technology innovations brought about by industry participants. The Company
believes that the principal competitive factors in its businesses will be:



| |  |  | product quality, ROI, performance and functionality;                                                    
| | - |  | --------------------------------------------------------------------------------------------------------
|
| |  |  | adaptability to new trends driven by technology and customer requirements;                              
|
| |  |  | cost of internal product development as compared with cost of purchase of products from outside vendors;
|
| |  |  | ease and speed of implementation;                                                                       
|
| |  |  | cost of ongoing maintenance; and                                                                        
|
| |  |  | time-to-market with, and market acceptance of new products, enhancements, functionality and services.   

In the EAM market, the Companys competitors include companies in the
enterprise, departmental, and point products market segments. At the
enterprise product level, the Companys main competitors are SAP, Oracle, and
Industrial and Financial Systems (IFS). In the departmental or plant
products market for Tier 1 customers, the Company competes primarily with
other EAM software vendors such as SAP, Oracle, Mincom Corp., and IFS. In the
market for Tier 2 customers (customers having annual revenues between $250
million and $1 billion), the Company competes primarily with MRO Software, Inc.
(formerly Project Software & Development, Inc.), Invensys, and Datastream
Systems, Inc. In addition, point products vendors such as Severn Trent
Systems, Synercom, and others provide competing software products to industry
sub-sectors such as transmission and distribution of electric power for
utilities. The Company also faces competition from suppliers of
custom-developed business application software that have

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focused largely on proprietary mainframe- and microcomputer-based systems
with highly customized software, such as the systems consulting groups of major
accounting firms and systems integrators.

In the CIS market, the Companys primary competitors include SPL
WorldGroup, PeopleSoft, SAP, Peace Software, Cayenta (a subsidiary of Titan),
and Orcaom.

Proprietary Rights and Licensing

The Company relies on a combination of the protections provided under
applicable copyright, trademark and trade secret laws, as well as on
confidentiality procedures, licensing arrangements and other contractual
arrangements to establish and protect its rights in its software. Despite the
Companys efforts, it may be possible for unauthorized third parties to copy
certain portions of the Companys products or to reverse engineer or obtain and
use information that the Company regards as proprietary. In addition, the laws
of certain countries do not protect the Companys proprietary rights to the
same extent as do the laws of the United States. Furthermore, the Company has
no patents, and existing copyright laws afford only limited protection.
Accordingly, there can be no assurance that the Company will be able to protect
its proprietary software against unauthorized third-party copying or use, which
could adversely affect the Companys competitive position.

The Company licenses its applications to customers under license
agreements, which are generally in standard form, although each license is
individually negotiated and may contain variations. The standard form
agreement allows the customer to use the Companys products solely on the
customers computer equipment for the customers internal purposes, and the
customer is generally prohibited from sub-licensing or transferring the
applications. The agreements generally provide that the Companys warranty for
its products is limited to correction or replacement of the affected product,
and in most cases the Companys warranty liability may not exceed the licensing
fees from the customer. The Companys standard form agreement also includes a
confidentiality clause protecting proprietary information relating to the
licensed applications.

The Companys products are generally provided to customers in object code
(machine-readable) format only. From time to time, in limited circumstances,
the Company has licensed source code (human-readable form) for its EAM
applications, subject to customary protections such as use restrictions and
confidentiality agreements. IUS has historically licensed source code for
certain applications, subject to customary protections such as use restrictions
and confidentiality agreements. In addition, customers can be beneficiaries of
a master source code escrow for the applications, pursuant to which the source
code will be released to end users upon the occurrence of certain events, such
as the commencement of bankruptcy or insolvency proceedings by or against the
Company, or certain material breaches of the agreement. The Company has the
right to object to the release of the source code in such circumstances, and to
submit the matter to dispute resolution procedures. In the event of any
release of the source code from escrow, the customers license is limited to
use of the source code to maintain, support and configure the licensed
applications.

The Company may from time to time receive notices from third parties
claiming infringement by the Companys products of proprietary rights of
others. As the number of software products in the industry increases and the
functionality of these products further overlap, the Company believes that
software developers may become increasingly subject to infringement claims.
Any such claims, with or without merit, can be time consuming and expensive to
defend or could require the Company to enter into royalty and licensing
agreements. Such agreements, if required, may not be available on terms
acceptable to the Company, or at all.

Indus, Indus Solution Series, IndusWorld, Indus InSite, PassPort Software
Solutions,ABACUS, ABACUS Toolkit, Sextant, PORTAL/G, PORTAL/95, PORTAL/97,
PORTAL/J, ViewPort, Prism Consulting, EMPAC, Enterprise MPAC,
IndusKnowledgeWarehouse, IndusConnect, IndusBuyDemand, IndusAnyWare, IndusASP,
Curator and EnerLink are trademarks and service marks of the Company. All
other brand names or trademarks are the property of their respective holders.

The Company was formed through the combination of The Indus Group, Inc., a
California corporation, and TSW International, Inc., a Georgia corporation, in
August 1997.

Employees

At May 31, 2003, Indus had approximately 970 full-time employees.

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FACTORS AFFECTING FUTURE PERFORMANCE

Our business may suffer from risks associated with growth and acquisitions, including the acquisition of IUS.

We expect to continue evaluating and pursuing acquisition and merger
opportunities on a selective basis. We cannot assure you that any business or
assets that we acquire, including the business and assets of IUS, will be
integrated into our existing business in an effective manner. Our inability to
effectively integrate the business and assets that we acquired in the
acquisition of IUS could materially harm our business.

All acquisitions, including the IUS acquisition, also involve specific
risks. Some of these risks include:

     the assumption of unanticipated liabilities and contingencies;

     diversion of our managements attention; and

     possible reduction of our reported asset values and earnings because of:



| |                                                              
| | -------------------------------------------------------------
| |  goodwill impairment;                                       
|
| |  increased interest costs;                                  
|
| |  issuances of additional securities or debt; and            
|
| |  difficulties in integrating acquired businesses and assets.

As we grow and attempt to integrate any business and assets that we may
acquire, including those in the IUS acquisition, we can give no assurance that
we will be able to:



| |  |  | properly maintain and take advantage of the business or value of any acquired business and assets;
| | - |  | --------------------------------------------------------------------------------------------------
|
| |  |  | identify suitable acquisition candidates;                                                         
|
| |  |  | complete any additional acquisitions; or                                                          
|
| |  |  | integrate any acquired businesses or assets into our operations.                                  

Our operating results have fluctuated in the past and may continue to fluctuate
significantly from quarter to quarter which could negatively affect our results
of operations and our stock price.

Our operating results have fluctuated in the past, and our results may
fluctuate significantly in the future. Our operating results may fluctuate
from quarter to quarter and may be negatively affected as a result of a number
of factors, including:



| |  |  | the relatively long sales cycles for our products;                                                                                                     
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the variable size and timing of individual license transactions;                                                                                       
|
| |  |  | delays associated with product development, including the development
and introduction of new releases of existing products;                           
|
| |  |  | the development and introduction of new operating systems and/or
technological changes in computer systems that require additional
development efforts;
|
| |  |  | our success in, and costs associated with, developing, introducing and marketing new products;                                                         
|
| |  |  | changes in the proportion of revenues attributable to licensing fees, hosting fees and services;                                                       
|
| |  |  | changes in the level of operating expenses;                                                                                                            
|
| |  |  | software defects and other product quality problems and the costs associated with solving those problems; and                                          
|
| |  |  | successful completion of customer funded development.                                                                                                  

Changes in operating expenses or variations in the timing of recognition
of specific revenues resulting from any of the these factors can cause
significant variations in operating results from quarter to quarter and may in
some future quarter result in losses or have a material adverse effect on our
business or results of operations.

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If we are unable to become profitable and cash flow positive in the near
future, our business and long-term prospects may be harmed.

We generated net operating losses of $33.8 million in 2002 and used cash
of approximately $22.4 million in 2002. From January 1, 2003 to March 31,
2003, we generated net operating losses of $9.9 million and used cash of
approximately $4.9 million. We do not expect to be profitable or cash flow
positive until the first quarter of calendar 2004, but we may not be profitable
or cash flow positive then or in any future quarters. Our inability to produce
future profitability or positive cash flow will negatively affect our capacity
to implement our business strategy and may require us to take actions in the
short-term that will impair the long-term prospects of our business. Our
inability to produce future profitability or positive cash flow may also result
in liquidity problems and impair our ability to finance our continuing business
operations on terms that are acceptable to us.

If the market does not accept our new products and new modules or upgrades to
the existing products that we launch from time to time, our operating results
and financial condition would be materially adversely affected.

From time to time, we launch new products and new modules or upgrades to
existing products. For example, in March 2002, we launched our hosted,
Internet-based enterprise asset management product, Indus InSite. There can
be no assurance that any of our new or enhanced products, including Indus
InSite, will be sold successfully or that they can achieve market acceptance.
Our future success with Indus InSite, our web-based offerings and other next
generation product offerings will depend on our ability to accurately determine
the functionality and features required by our customers, as well as the
ability to enhance our products and deliver them in a timely manner. We cannot
predict the present and future size of the potential market for our next
generation of products, and we may incur substantial costs to enhance and
modify our products and services in order to meet the demands of this potential
market.

We may not be able to successfully consolidate our EMPAC and Indus InSite
products, which could negatively affect our business.

In October 2002, we announced our plans to consolidate our EMPAC and Indus
InSite products onto a single development platform. There can be no assurances
that we can successfully consolidate these two products onto a single
development platform or that our existing EMPAC and MPAC-UX will migrate to the
new development platform, or that we can quickly and cost effectively affect
such migrations. Difficulties or delays in consolidating these two products or
in migrating customers to the new development platform could result in a
material adverse effect on our business, results of operation and financial
condition.

If we experience delays in product development or the introduction of new
products or new versions of existing products, our business and sales will be
negatively affected.

We have in the past experienced delays in product development that have
negatively affected our relationships with existing customers and have resulted
in lost sales of our products and services to existing and prospective
customers and our failure to recover our product development costs. There can
be no assurance that we will not experience further delays in connection with
our current product development or future development activities. In October
2002, we announced an accelerated development schedule for Indus InSite and
the planned consolidation of two products, EMPAC and Indus InSite, onto a
single development platform. If we are unable to develop and introduce new
products, or enhancements to existing products, or to execute the consolidation
of EMPAC and Indus InSite development platforms, in a timely manner in
response to changing market conditions or customer requirements, it may affect
our ability to execute the consolidation of the EMPAC and Indus InSite
products and our business, operating results and financial condition will be
materially and adversely affected. Because we have limited resources, we must
effectively manage and properly allocate and prioritize our product development
efforts and our porting efforts relating to newer products and operating
systems. There can be no assurance that these efforts will be successful or,
even if successful, that any resulting products or operating systems will
achieve customer acceptance.

Delays in implementation of our software or the performance of our professional
services may negatively affect our business.

Following license sales, the implementation of our products and their
extended solutions generally involves a lengthy process, including customer
training and consultation. In addition, we are often engaged by our existing
customers for other lengthy professional services projects. A successful
implementation or other professional services project requires a close working
relationship between us, the customer and, if applicable, third-party
consultants and systems integrators who assist in the process. These factors
may increase the costs associated with completion of any given sale, increase
the risks of collection of amounts due during implementation or other
professional services projects, and increase risks of cancellation or delay of
such projects. Delays in the completion of a product implementation or with
any other professional services project may require that the revenues
associated with such implementation or project be recognized over a longer
period than originally anticipated, or may result in disputes with customers
regarding performance by us and payment by the customers. Such delays in the
implementation have caused, and may in the future cause, material fluctuations
in our operating results. Similarly, customers may typically cancel
implementation projects at any time without penalty, and such cancellation
could have a material adverse effect on our business or results of operations.
Because

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our expenses are relatively fixed, a small variation in the timing of
recognition of specific revenues can cause significant variations in operating
results from quarter to quarter and may in some further quarter result in
losses or have a material adverse effect on our business or results of
operations.

If we are required to repay our note to SCT Financial Corporation or our 8%
convertible notes, we may have liquidity difficulties.

In connection with the acquisition of IUS, we executed a promissory note
in the principal amount of $10.0 million in favor of SCT Financial Corporation,
a subsidiary of Systems and Computer Technology Corporation. This note is due
on September 5, 2003 and bears interest at 6% per year. IUS, now a wholly
owned subsidiary of the Company, is a guarantor of the note and this guaranty
is secured by certain real property owned by IUS. We intend to repay the note
to SCT Financial Corporation prior to its maturity with the proceeds of a
third-party, commercial mortgage on the IUS real property or other financing
transaction. We believe that the fair market value of the property is
approximately $19.1 million. As a result of discussions with the commercial
lenders, we expect the proceeds of any financing transaction with respect to
the property will be sufficient to repay the note to SCT Financial Corporation.
However, we cannot assure investors that we will be able to refinance the note
to SCT Financial Corporation in a timely manner or on terms that are acceptable
to us. In such event, we may be required to repay the principal and interest
on the note out of cash on hand, which would materially adversely affect our
liquidity. If we are unable to repay the principal and interest on the note,
SCT Financial may foreclose on the security and seek to sell the real property
to pay off our obligations.

On March 5, 2003, we completed a private placement selling our 8%
convertible notes in an aggregate principal amount of approximately $14.5
million. The convertible notes are due on December 5, 2003, are convertible
into shares of common stock upon receipt of the requisite approval of our
stockholders. If our stockholders do not approve the issuance of the shares of
common stock on the conversion of the notes prior to their maturity date, we
will be required to repay the principal and interest on the notes out of cash
on hand, which would materially adversely affect our liquidity.

Continued decrease in demand for our products and services will impair our
business and could materially adversely affect our results of operation and
financial condition.

In recent quarters we have experienced a decrease in demand for our
products and related services, which we believe is due to unfavorable general
economic conditions and decreased capital spending by companies in the
industries we serve. If these economic conditions persist, our business,
results of operations and financial condition are likely to be materially
adversely affected.

Moreover, overall demand for enterprise software products in general may
grow slowly or decrease in upcoming quarters and years because of unfavorable
general economic conditions, decreased spending by companies in need of
enterprise asset management solutions or otherwise. This may reflect a
saturation of the market for enterprise software solutions generally, as well
as deregulation and retrenchment affecting the way companies purchase
enterprise asset management software. To the extent that there is a slowdown
in the overall market for enterprise asset management software, our business,
results of operations and financial condition are likely to be materially
adversely affected.

Recent changes in management may result in integration difficulties and
inefficiencies for our business.

We had significant turnover at the executive management level from 2000
through September 2002, including the appointment of a new Chief Financial
Officer in April 2002 and a new Chief Executive Officer in July 2002, the
elimination of the Chief Operating Officer position in July 2002, and the
appointment of a new Executive Vice President of Worldwide Operations in
September 2002. Our current executive management team has only recently begun
to work together, and they may be unable to integrate and work effectively as a
team. There can be no assurance that we will be able to motivate and retain
the current executive management team or that we will be able to work together
effectively. If we lose any members of our executive management team or they
are unable to work together effectively, our business, operations and financial
results could be adversely affected.

Our success depends upon our ability to attract and retain key personnel.

Our future success depends, in significant part, upon the continued
service of our key technical, sales and senior management personnel, as well as
our ability to attract and retain new personnel. For example, we are in the
process of filling several key sales positions. Competition for qualified
sales, technical and other personnel is intense, and there can be no assurance
that we will be able to attract, assimilate or retain additional highly
qualified employees in the future. Our ability to attract, assimilate and
retain key personnel may be adversely impacted by the fact that we have reduced
our work force by 27% in 2002 and 8% in May 2003 and that, in order to reduce
our operating expenses, we have generally not increased wages or salaries over
the last two years and have generally not awarded bonuses or other incentives
to our employees. If we are unable to offer competitive salaries and bonuses,
our key technical, sales and senior management personnel may be unwilling to
continue service for the Company, and it may be difficult for the Company to
attract new personnel. If we were unable to hire and retain personnel,
particularly in senior management

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positions, our business, operating results and financial condition would
be materially adversely affected. Additions of new personnel and departures of
existing personnel, particularly in key positions, can be disruptive and have a
material adverse effect on our business, operating results and financial
condition.

Our failure to realize the expected benefits of our recent restructurings,
including anticipated cost savings, could result in unfavorable financial
results.

Over the last several years we have undertaken several internal
restructuring initiatives. For example, during 2000 and 2001, we restructured
some of our operations by, among other things, relocating our corporate
headquarters and administrative functions to Atlanta, Georgia from San
Francisco, California. In March 2002, the Board of Directors approved a formal
restructuring plan that, among other things, resulted in a reduction in force
and the closing of our Dallas office. During the second half of 2002, due to
unfavorable financial performance since the fourth quarter of 2001 and
management reviews of worldwide operations, we reconfigured our business model
and implemented several reductions in workforce and other cost reductions to
restructure and resize the business. These types of internal restructurings
have operational risks, including reduced productivity and lack of focus as we
terminate some employees and assign new tasks and provide training to other
employees. In addition, there can be no assurance that we will achieve the
anticipated cost savings from these restructurings and any failure to achieve
the anticipated cost savings could cause our financial results to fall short of
expectations and adversely affect our financial position.

We have taken charges for restructuring of $2.1 million in 2000, $10.2
million in 2001, $8.2 million in 2002 and $2.2 million in the three-months
ended March 31, 2003, and there can be no assurance that additional charges for
restructuring expenses will not be taken in future years. Significant future
restructuring charges could cause financial results to be unfavorable.

The strain on our management may negatively affect our business and our ability
to execute our business strategy.

Changes to our business and customer base have placed a strain on
management and operations. Previous expansion had resulted in substantial
growth in the number of our employees, the scope of our operating and financial
systems and the geographic area of our operations, resulting in increased
responsibility for management personnel. Our recent restructuring activities
and our acquisition of IUS has recently placed additional demands on
management. In connection with our recent restructuring activities and our
acquisition of IUS, we will be required to effectively manage our operations,
improve our financial and management controls, reporting systems and procedures
on a timely basis and to train and manage our employee work force. There can
be no assurance that we will be able to effectively manage our operations and
failure to do so would have a material adverse effect on our business,
operating results and financial condition.

The market for our products is highly competitive, and we may be unable to
maintain or increase our market share.

Our success depends, in part, on our ability to develop more advanced
products more quickly and less expensively than our existing and potential
competitors and to educate potential customers of the benefits of licensing our
products. Some of our competitors have substantially greater financial,
technical, sales, marketing and other resources, as well as greater name
recognition and a larger customer base than us, which may allow them to
introduce products with more features, greater functionality and lower prices
than our products. These competitors could also bundle existing or new
products with other, more established products in order to effectively compete
with us.

Increased competition is likely to result in price reductions, reduced
gross margins and loss of sales volume, any of which could materially and
adversely affect our business, operating results, and financial condition. Any
material reduction in the price of our products would negatively affect our
gross revenues and could have a material adverse effect on our business,
operating results, and financial condition. There can be no assurance that we
will be able to compete successfully against current and future competitors,
and if we fail to do so we may be unable to maintain or increase or market
share.

If we dont respond to rapid technological change and evolving industry
standards, we will be unable to compete effectively.

The industries in which we participate are characterized by rapid
technological change, evolving industry standards in computer hardware and
software technology, changes in customer requirements and frequent new product
introductions and enhancements. The introduction of products embodying new
technologies, the emergence of new standards or changes in customer
requirements could render our existing products obsolete and unmarketable. As
a result, our success will depend in part upon our ability to continue to
enhance existing products and expand our products, continue to provide
enterprise asset management and customer information system products and
develop and introduce new products that keep pace with technological
developments, satisfy increasingly sophisticated customer requirements and
achieve customer acceptance. Customer requirements include, but are not
limited to, product operability and support across distributed and changing
heterogeneous hardware platforms, operating systems, relational databases and
networks. There can be no assurance that any future enhancements to existing
products or new products developed by us will achieve customer acceptance or
will adequately address the changing needs of the marketplace. There can also
be no assurance that we will be

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successful in developing and marketing enhancements to our existing
products or new products incorporating new technology on a timely basis.

Our growth is dependent upon the successful development of our direct and
indirect sales channels.

We believe that our future growth also will depend on developing and
maintaining successful strategic relationships or partnerships with systems
integrators and other technology companies. Our strategy is to continue to
increase the proportion of customers served through these indirect channels.
We are currently investing, and plan to continue to invest, significant
resources to develop these indirect channels. This investment could adversely
affect our operating results if these efforts do not generate license and
service revenue necessary to offset this investment. Also, our inability to
partner with our technology companies and qualified systems integrators could
adversely affect our results of operations. Because lower unit prices are
typically charged on sales made through indirect channels, increased indirect
sales could reduce our average selling prices and result in lower gross
margins. In addition, sales of our products through indirect channels will
reduce our consulting service revenues, as the third-party systems integrators
provide these services. As indirect sales increase, our direct contact with
our customer base will decrease, and we may have more difficulty accurately
forecasting sales, evaluating customer satisfaction and recognizing emerging
customer requirements. Further, in these cases, we depend heavily on these
third-party integrators to install our products and to train customers to us
our products. Incorrect product installation, failure to properly train the
customer, or general failure of an integrator to satisfy the customer could
have a negative effect on our relationship with the integrator and the
customer. Such problems could damage our reputation and the reputation of our
products and services. In addition, we may face additional competition from
these systems integrators and third-party software providers who develop,
acquire or market products competitive with our products.

Our strategy of marketing our products directly to customers and
indirectly through systems integrators and other technology companies may
result in distribution channel conflicts. Our direct sales efforts may compete
with those of our indirect channels and, to the extent different systems
integrators target the same customers, systems integrators may also come into
conflict with each other. Any channel conflicts that develop may have a
material adverse effect on our relationships with systems integrators or hurt
our ability to attract new systems integrators.

If we fail to comply with laws or government regulations, we may be subject to
penalties and fines.

We are not directly subject to regulation by any governmental agency,
other than regulations applicable to businesses generally, and there are
currently few laws or regulations addressing the products and services we
provide. We do, however, license our products and provide services, from time
to time, to the government, government agencies, government contractors and to
other customers that are in industries regulated by the government. As a
result, our operations, as they relate to its relationships with governmental
entities and customers in regulated industries, are governed by certain laws
and regulations. These laws and regulations are subject to change without
notice to us. In some instances, compliance with these laws and regulations
may be difficult or costly, which may negatively affect our business and
results of operation. In addition, if we fail to comply with these laws and
regulations, we may be subject to significant penalties and fines that could
materially negatively affect our business, results of operations and financial
position.

If we are unable to expand our international operations, our operating results
and financial condition could be materially and adversely affected.

International revenues (from sales outside the United States) accounted
for approximately 33% and 35% of total revenues for the three-months ended
March 31, 2002 and 2003, respectively, and 31%, 41% and 34% of total revenues
for the year ended December 31, 2000, 2001 and 2002, respectively. We maintain
an operational presence and have established support offices in the United
Kingdom, Canada, Australia, France and Japan. We expect international sales to
continue to become a more significant component of our business. However,
there can be no assurance that we will be able to maintain or increase
international market demand for our products. In addition, international
expansion may require us to establish additional foreign operations and hire
additional personnel. This may require significant management attention and
financial resources and could adversely affect our operating margin. To the
extent we are unable to expand foreign operations in a timely manner, our
growth, if any, in international sales will be limited, and our business,
operating results and financial condition could be materially and adversely
affected.

Exchange rate fluctuations between the U.S. Dollar and other currencies in
which we do business may result in currency translation losses.

At March 31, 2003, a significant portion of our cash was held in Pound
Sterling or other foreign currencies (Australian Dollars, Canadian Dollars,
Euros, Japanese Yen, and French Francs). In the future, we may need to
exchange some of the cash held in Pound Sterling, or other foreign currencies,
to U.S. Dollars. We do not engage in hedging transactions, and an unfavorable
foreign exchange rate at the time of conversion to U.S. Dollars would adversely
affect the net fair value of the foreign denominated cash upon conversion.

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The success of our international operations is subject to many uncertainties.

Our international business also involves a number of additional risks,
including:



| |  |  | lack of acceptance of localized products;                                                                                  
| | - |  | ---------------------------------------------------------------------------------------------------------------------------
|
| |  |  | cultural differences in the conduct of business;                                                                           
|
| |  |  | longer accounts receivable payment cycles;                                                                                 
|
| |  |  | greater difficulty in accounts receivable collection;                                                                      
|
| |  |  | seasonality due to the annual slow-down in European business activity during our third calendar quarter;                   
|
| |  |  | unexpected changes in regulatory requirements and royalty and withholding taxes that restrict the repatriation of earnings;
|
| |  |  | tariffs and other trade barriers;                                                                                          
|
| |  |  | the burden of complying with a wide variety of foreign laws; and                                                           
|
| |  |  | negative effects relating to hostilities, war or terrorist acts.                                                           

To the extent profit is generated or losses are incurred in foreign
countries, our effective income tax rate may be materially and adversely
affected. In some markets, localization of our products will be essential to
achieve market penetration. We may incur substantial costs and experience
delays in localizing our products, and there can be no assurance that any
localized product will ever generate significant revenues. There can be no
assurance that any of the factors described herein will not have a material
adverse effect on our future international sales and operations and,
consequently, our business, operating results and financial condition.

We have only limited protection of our proprietary rights and technology.

Our success is heavily dependent upon our proprietary technology. We rely
on a combination of the protections provided under applicable copyright,
trademark and trade secret laws, confidentiality procedures and licensing
arrangements, to establish and protect our proprietary rights. As part of our
confidentiality procedures, we generally enter into non-disclosure agreements
with our employees, distributors and corporate partners, and license agreements
with respect to our software, documentation and other proprietary information.
Despite these precautions, it may be possible for unauthorized third parties to
copy certain portions of our products or to reverse engineer or obtain and use
information that we regard as proprietary, to use our products or technology
without authorization, or to develop similar technology independently.
Moreover, the laws of some other countries do not protect our proprietary
rights to the same extent as do the laws of the United States. Furthermore, we
have no patents and existing copyright laws afford only limited protection. We
have made source code available from time-to time for certain of our products
and providing such source code may increase the likelihood of misappropriation
or other misuses of our intellectual property. Accordingly, there can be no
assurance that we will be able to protect our proprietary software against
unauthorized third-party copying or use, which could adversely affect our
competitive position.

We may not be successful in avoiding claims that we infringe others
proprietary rights.

We are not aware that any of our products infringe the proprietary rights
of third parties. There can be no assurance, however, that a third-party will
not assert that our technology violates its patents or other proprietary rights
in the future. As the number of software products in the industry increases
and the functionality of these products further overlap, we believe that
software developers may become increasingly subject to infringement claims.
Any such claims, with or without merit, can be time consuming and expensive to
defend or could require us to enter into royalty and licensing agreements.
Such royalty or license agreements, if required, may not be available on terms
acceptable to us or at all, which could have a material adverse effect upon our
business, operating results and financial condition.

As a result of lengthy sales and implementation cycle and the large size of our
typical orders, any delays we experience will affect our operating results.

The purchase and implementation of our software products by a customer
generally involves a significant commitment of capital over a long period of
time, with the risk of delays frequently associated with large capital
expenditures and implementation procedures within an organization, such as
budgetary constraints and internal approval review. During the sales process,
we may devote significant time and resources to a prospective customer,
including costs associated with multiple site visits, product demonstrations
and feasibility studies, and experience significant delays over which we will
have no control. Any such delays in the execution of orders have caused, and
may in the future cause, material fluctuations in our operating results.

Customer claims, whether successful or not, could be expensive and could harm
our business.

The sale and support of our products may entail the risk of product
liability claims. Our license agreements typically contain provisions designed
to limit exposure to potential product liability claims. It is possible,
however, that the limitation of liability provisions contained in such license
agreements may not be effective as a result of federal, state or local laws or
ordinances or

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unfavorable judicial decisions. A successful product liability claim
brought against us relating to our product or third-party software embedded in
our products could have a material adverse effect upon our business, operating
results and financial condition.

Additional shares will become eligible for sale in the future, which could
result in a decrease in the price of our common stock.

The market price of our common stock could drop as a result of sales of
large numbers of shares in the market, or the perception that such sales could
occur. We financed a portion of the purchase price of the acquisition of IUS
through the sale of approximately 6.8 million shares, or approximately 19.5%,
of our common stock and $14.5 million aggregate principal amount of convertible
notes that will automatically convert into shares of common stock at $1.50 a
share (approximately 9.8 million shares) upon approval of the conversion by our
stockholders. We intend to hold a stockholders meeting for the purpose of
allowing our stockholders to vote on the conversion of the convertible notes as
soon as is reasonably practicable.

We have filed a registration statement to register approximately 6.8
million shares for resale. Once such registration statement is declared
effective by the Commission, these shares will be freely transferable without
restriction or further registration under the Securities Act of 1933. We are
required to file another registration statement within 30 days of the
conversion of the convertible notes to register for resale the shares of our
common stock that will be issued upon the conversion. Once that registration
statement is declared effective by the Commission, those shares will also be
freely transferable.

Since there is minimal trading volume in our common stock, stockholders
wishing to sell even small numbers of shares could have a negative impact on
the price of our common stock. If the holders of significant amounts of our
common stock, including those stockholders who acquired shares of our common
stock in connection with the financing of the IUS acquisition, desire to sell
their shares, our stock price would be materially, negatively affected.




Item 2.Properties

Certain information concerning the Companys office space at March 31,
2003 is set forth below:

|                               |  |                                                                                   |  |         |  |          
|------------------------------ |  | --------------------------------------------------------------------------------- |  | ------- |  | ---------
|                               |  |                                                                                   |  | Square  |  | Ownership
|Location                       |  | Principal Use                                                                     |  | Footage |  | Interest 
|                               |  |                                                                                   |  |         |  |          
|Domestic Offices:              |  |                                                                                   |  |         |  |          
|Atlanta, GA                    |  | Corporate Headquarters,
Research and Development, Sales
and Marketing, Operations |  | 107,200 |  | Lease    
|Columbia, SC                   |  | Regional Operations, Research
and Development, Sales and
Marketing, Operations    |  | 140,000 |  | Own      
|San Francisco, CA              |  | Regional Operations, Research
and Development, Sales and
Marketing, Operations    |  | 38,505  |  | Lease    
|Lake Oswego, OR                |  | Regional Operations                                                               |  | 5,057   |  | Lease    
|Pittsburgh, PA                 |  | Regional Operations                                                               |  | 10,131  |  | Lease    
|Mississauga, Ontario           |  | Regional Operations                                                               |  | 4,335   |  | Lease    
|International Offices:         |  |                                                                                   |  |         |  |          
|Woking, Surrey, United
Kingdom |  | Regional Operations                                                               |  | 9,087   |  | Lease    
|Brisbane, Australia            |  | Regional Operations                                                               |  | 8,755   |  | Lease    
|Paris, France                  |  | Regional Operations                                                               |  | 6,660   |  | Lease    

The office space listed above comprises space in active use. Space leased
to third parties under sub-lease arrangements and excess space offered for
sublease has been excluded. See Note 6 to the Consolidated Financial
Statements for further discussion.

Management continually evaluates operational requirements and adjusts
facilities capacity where necessary.




Item 3.Legal Proceedings

On March 5, 2003, the Company acquired IUS from Systems and Computer
Technology Corporation (SCT). IUS (formerly known as SCT Utility Systems,
Inc.) is a defendant in a claim brought by KPMG Consulting, Inc. (now known as
BearingPoint, Inc.) on June 2, 2002 in the Circuit Court of the 11th Judicial
Circuit. The claim alleges damages of approximately $15.8 million based on
allegations of breach of contract and detrimental reliance on alleged promises
that were not fulfilled. IUS has asserted multiple defenses and counterclaims.
Pursuant to the terms of the Purchase Agreement among the Company and SCT and
its affiliates, SCT and those affiliates of SCT that were a party to the
Purchase Agreement agreed to defend IUS against the claims in this suit and to
indemnify the Company and IUS from all losses relating thereto.

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The Company has received an inquiry from the federal government requesting
documents and employee interviews related to certain Department of Energy
facilities with which the Company does business. The Company is cooperating
fully with this inquiry. The Company has recently been made aware that this
inquiry is the result of a qui tam complaint, which is currently under seal,
against the Company relating to its billing practices at these facilities. The
Company believes that it has meritorious defenses to the claims contained in
this action and intends to defend them vigorously. Based upon information
currently available to the Company and due to the inherent uncertainties of the
litigation process, the Company is unable to predict the outcome of such claims
or to determine whether an adverse outcome would have a material adverse effect
on the Companys financial condition or results of operations. However, the
Company estimates that the facilities in question generated less than 5% of the
Companys revenues during 2000, 2001 and 2002.

From time to time, the Company is involved in other legal proceedings
incidental to the conduct of its business. The outcome of these claims cannot
be predicted with certainty. The Company intends to defend itself vigorously
in these actions. However, any settlement or judgment may have a material
adverse effect on the Companys results of operations in the period in which
such settlement or judgment is paid or payment becomes probable.




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

No matters were submitted to a vote of security holders of the Company
during the three months ended March 31, 2003.




PART II




Item 5.Market for Registrants Common Equity and Related Stockholder Matters

The Companys common stock, $.001 par value, is traded on the Nasdaq
National Market under the symbol IINT. The following table sets forth the
high and low sales prices of the Companys common stock for the periods
indicated.

|                                       |                |   |      |      |     |   |      |      | 
|-------------------------------------- | -------------- | - | ---- | ---- | --- | - | ---- | ---- | 
|                                       |                |   | High |      | Low
|                                       |                |   |      |      |    
|Year ended December 31, 2001           |                |   |      |      |     |   |      |     
|                                       | First Quarter  |   | $    | 5.25 |     |   | $    | 1.63 | 
|                                       | Second Quarter |   |      | 9.09 |     |   |      | 3.94 | 
|                                       | Third Quarter  |   |      | 8.60 |     |   |      | 4.90 | 
|                                       | Fourth Quarter |   |      | 7.90 |     |   |      | 5.24 | 
|Year ended December 31, 2002           |                |   |      |      |     |   |      |     
|                                       | First Quarter  |   | $    | 7.85 |     |   | $    | 4.76 | 
|                                       | Second Quarter |   |      | 5.05 |     |   |      | 2.02 | 
|                                       | Third Quarter  |   |      | 2.58 |     |   |      | 1.00 | 
|                                       | Fourth Quarter |   |      | 1.93 |     |   |      | 1.24 | 
|Transition period ended March 31, 2003 |                | $ | 2.20 |      |     | $ | 1.44 |     

On June 23, 2003, there were 255 holders of record of our common stock.
Because many of the Companys shares are held by brokers and other institutions
on behalf of stockholders, we are unable to estimate the total number of
stockholders represented by these record holders.

The Company has not declared or paid any cash dividends on its common
stock and does not anticipate paying cash dividends in the foreseeable future.
The Company anticipates that any future earnings will be retained to finance
the continuing development of its business.

On July 15, 1999, the Companys Board of Directors approved a stock
repurchase program for up to 2,000,000 shares of the Companys outstanding
common stock. The Company is authorized to use available cash to buy back its
shares in open market transactions from time to time, subject to price and
market conditions. No purchases were made in the period of 2001 through March
31, 2003. As of March 31, 2003, the Company held, as treasury stock, 435,500
shares that had been repurchased at a cost of $2.2 million under the program.

In April 2002, the Company entered into an agreement with Robert Felton, a
founder of the Company and former Chief Executive Officer and Chairman of the
Board of Directors. Under this agreement, the Company repurchased 500,000
shares of the Companys common stock from Mr. Felton at a price of $5.00 per
share, which approximated market value at the time of the agreement, for an
aggregate purchase price of $2.5 million. As part of this agreement, Mr.
Felton agreed not to transfer or enter into any agreement to transfer the
remainder of his shares of the Companys stock for a period of one year. These
repurchased shares are also held as treasury stock.

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Item 6.Selected Financial Data

The following selected consolidated financial data of the Company is
qualified by reference to and should be read in conjunction with the
consolidated financial statements and notes thereto and other financial
information included elsewhere herein. The summary consolidated balance sheet
data as of December 31, 2001, 2002 and March 31, 2003 and summary consolidated
statements of operations data for the years ended December 31, 2000, 2001,
2002, and the three-month transition period ended March 31, 2003 are derived
from and qualified by reference to the audited consolidated financial
statements of the Company, which are included elsewhere herein. The summary
consolidated balance sheet data as of December 31, 1998, 1999 and 2000 and the
summary consolidated statement of operations for the years ended December 31,
1998 and 1999 are derived from the audited consolidated financial statements of
the Company which are not included herein, but have been previously filed with
the SEC. The summary consolidated statement of operations for the three-month
period ended March 31, 2002 is derived from the unaudited consolidated
financial statements of the Company, which are included elsewhere herein.

|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |        |        | 
|------------------------------------------------- | ------------------------------- | ------------------------ | ------- | ------------------------ | ------- | --------- | ------ | ------------------------------------- | ------- | ---- | ------- | ------- | ------- | ---- | ------- | -------- | ------- | - | ------- | ------- | ------- | - | ------ | ------------------ | ------ | - | ------ | ------ | ------ | 
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        | THREE MONTHS ENDED
|                                                  |                                 |                          |         | YEARS ENDED DECEMBER 31, |         | MARCH 31,
|                                                  |                                 |                          |         |                          |         |          
|                                                  |                                 |                          |         | 1998                     |         | 1999      |        | 2000                                  |         | 2001 |         | 2002    |         | 2002 |         | 2003 (2)
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |         
|                                                  |                                 |                          |         |                          |         |           |        | (in thousands, except per share data) |         |      |         |         |         |      |         |         
|STATEMENT OF OPERATIONS DATA:                     |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|REVENUES:                                         |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|                                                  | Software licensing fees         |                          | $       | 55,546                   |         |           | $      | 19,071                                |         |      | $       | 12,622  |         |      | $       | 21,005   |         |   | $       | 15,527  |         |   | $      | 4,428              |        |   | $      | 2,637  |       
|                                                  | Services, maintenance and other |                          |         | 139,931                  |         |           |        | 159,434                               |         |      |         | 133,067 |         |      |         | 155,009  |         |   |         | 101,638 |         |   |        | 28,015             |        |   |        | 24,597 |       
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|                                                  |                                 | Total revenues           |         |                          | 195,477 |           |        |                                       | 178,505 |      |         |         | 145,689 |      |         |          | 176,014 |   |         |         | 117,165 |   |        |                    | 32,443 |   |        |        | 27,234 | 
|Cost of revenues (1)                              |                                 |                          | 103,517 |                          |         |           | 98,050 |                                       |         |      | 90,880  |         |         |      | 81,116  |          |         |   | 58,984  |         |         |   | 15,800 |                    |        |   | 15,409 |       
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|Gross margin                                      |                                 |                          | 91,960  |                          |         |           | 80,455 |                                       |         |      | 54,809  |         |         |      | 94,898  |          |         |   | 58,181  |         |         |   | 16,643 |                    |        |   | 11,825 |       
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|OPERATING EXPENSES:                               |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|                                                  | Research and development        |                          |         | 30,372                   |         |           |        | 33,801                                |         |      |         | 51,607  |         |      |         | 49,522   |         |   |         | 45,745  |         |   |        | 12,708             |        |   |        | 8,717  |       
|                                                  | Sales and marketing             |                          |         | 31,517                   |         |           |        | 31,667                                |         |      |         | 49,348  |         |      |         | 30,242   |         |   |         | 29,942  |         |   |        | 7,565              |        |   |        | 6,549  |       
|                                                  | General and administrative      |                          |         | 15,270                   |         |           |        | 18,145                                |         |      |         | 20,944  |         |      |         | 17,398   |         |   |         | 13,305  |         |   |        | 2,926              |        |   |        | 3,959  |       
|                                                  | Restructuring expenses          |                          |         |                         |         |           |        |                                      |         |      |         | 2,063   |         |      |         | 10,188   |         |   |         | 8,199   |         |   |        | 3,396              |        |   |        | 2,166  |       
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|                                                  |                                 | Total operating expenses |         |                          | 77,159  |           |        |                                       | 83,613  |      |         |         | 123,962 |      |         |          | 107,350 |   |         |         | 97,191  |   |        |                    | 26,595 |   |        |        | 21,391 | 
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|Income (loss) from operations                     |                                 |                          | 14,801  |                          |         |           | (3,158 | )                                     |         |      | (69,153 | )       |         |      | (12,452 | )        |         |   | (39,010 | )       |         |   | (9,952 | )                  |        |   | (9,566 | )     
|Gain on sale of investment in
TenFold Corporation |                                 |                          |        |                          |         |           | 38,170 |                                       |         |      |        |         |         |      |        |          |         |   |        |         |         |   |       |                    |        |   |       |       
|Other income (expense) net                        |                                 |                          | (936    | )                        |         |           | 3,120  |                                       |         |      | 3,712   |         |         |      | 2,412   |          |         |   | 1,303   |         |         |   | 446    |                    |        |   | (50    | )     
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|Income (loss) before taxes                        |                                 |                          | 13,865  |                          |         |           | 38,132 |                                       |         |      | (65,441 | )       |         |      | (10,040 | )        |         |   | (37,707 | )       |         |   | (9,506 | )                  |        |   | (9,616 | )     
|Provision (benefit) for income taxes              |                                 |                          | 450     |                          |         |           | 14,295 |                                       |         |      | (6,666  | )       |         |      | 36      |          |         |   | (3,944  | )       |         |   | 2      |                    |        |   | 277    |       
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|Net income (loss)                                 |                                 | $                        | 13,415  |                          |         | $         | 23,837 |                                       |         | $    | (58,775 | )       |         | $    | (10,076 | )        |         | $ | (33,763 | )       |         | $ | (9,508 | )                  |        | $ | (9,893 | )     
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|INCOME (LOSS) PER SHARE:                          |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|                                                  | Basic                           |                          | $       | 0.44                     |         |           | $      | 0.74                                  |         |      | $       | (1.72   | )       |      | $       | (0.29    | )       |   | $       | (0.96   | )       |   | $      | (0.27              | )      |   | $      | (0.27  | )     
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|                                                  | Diluted                         |                          | $       | 0.38                     |         |           | $      | 0.68                                  |         |      | $       | (1.72   | )       |      | $       | (0.29    | )       |   | $       | (0.96   | )       |   | $      | (0.27              | )      |   | $      | (0.27  | )     
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|Shares used in computing per share data:          |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|                                                  | Basic                           |                          |         | 30,717                   |         |           |        | 32,109                                |         |      |         | 34,248  |         |      |         | 34,857   |         |   |         | 35,237  |         |   |        | 35,359             |        |   |        | 37,210 |       
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       
|                                                  | Diluted                         |                          |         | 35,263                   |         |           |        | 35,274                                |         |      |         | 34,248  |         |      |         | 34,857   |         |   |         | 35,237  |         |   |        | 35,359             |        |   |        | 37,210 |       
|                                                  |                                 |                          |         |                          |         |           |        |                                       |         |      |         |         |         |      |         |          |         |   |         |         |         |   |        |                    |        |   |        |       

|                           |  |                |         |           |      |   |         |  |      |   |         |  |      |   |          |  |  |   |         |  |  |   |         |  |  |   |         |  
|-------------------------- |  | -------------- | ------- | --------- | ---- | - | ------- |  | ---- | - | ------- |  | ---- | - | -------- |  |  | - | ------- |  |  | - | ------- |  |  | - | ------- | -
|                           |  | DECEMBER 31,   |         | MARCH 31,
|                           |  |                |         |          
|                           |  |                | 1998    |           | 1999 |   | 2000    |  | 2001 |   | 2002    |  | 2002 |   | 2003 (2)
|                           |  |                |         |           |      |   |         |  |      |   |         |  |      |   |         
|                           |  | (in thousands) |         |           |      |   |         |  |      |  
|BALANCE SHEET DATA:        |  |                |         |           |      |   |         |  |      |   |         |  |      |   |          |  |  |   |         |  |  |   |         |  |  |   |         |  
|Working capital            |  | $              | 58,609  |           |      | $ | 95,872  |  |      | $ | 43,466  |  |      | $ | 43,393   |  |  | $ | 14,393  |  |  | $ | 14,393  |  |  | $ | (16,842 | )
|Total assets               |  |                | 150,785 |           |      |   | 168,901 |  |      |   | 140,732 |  |      |   | 139,167  |  |  |   | 100,390 |  |  |   | 121,620 |  |  |   | 144,510 |  
|Short-term debt            |  |                | 21,005  |           |      |   | 301     |  |      |   | 71      |  |      |   | 4        |  |  |   | 266     |  |  |   | 1       |  |  |   | 24,790  |  
|Long-term debt             |  |                | 257     |           |      |   | 163     |  |      |   | 71      |  |      |   |         |  |  |   | 124     |  |  |   |        |  |  |   | 52      |  
|Total stockholders equity |  |                | 86,075  |           |      |   | 118,352 |  |      |   | 68,957  |  |      |   | 60,946   |  |  |   | 28,276  |  |  |   | 51,619  |  |  |   | 28,434  |  



---

|(1) |  | Includes a $6.8 million write down of third-party software available
for sale in 2000.
|--- |  | --------------------------------------------------------------------------------------

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|(2) |  | Includes results from IUS operations from date of acquisition on
March 5, 2003.
|--- |  | -------------------------------------------------------------------------------




Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations

In addition to historical information, this Managements Discussion and
Analysis of Financial Condition and Results of Operations (MD&A) may contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements are not based on historical
facts, but rather reflect managements current expectations concerning future
results and events. These forward-looking statements generally can be
identified by the use of phrases and expressions such as believe, expect,
anticipate, intend, plan, foresee, likely, will or other similar
words or phrases. These statements, which speak only as of the date given, are
subject to certain risks and uncertainties that could cause actual results to
differ materially from our historical experience and our expectations or
projections. These risks include, but are not limited to, the successful
integration of the acquisition of IUS, including the challenges inherent in
diverting our managements attention and resources from other strategic matters
and from operational matters, the successful rationalization of the IUS
business and products, ability to realize anticipated or any synergies or
cost-savings from the acquisition, current market conditions for Indus and IUS
products and services, our ability to achieve growth in our core product
offerings and the combined Indus/IUS offerings, market acceptance and the
success of Indus and IUS products, the success of our product development
strategy, our competitive position, the ability to enter into new partnership
arrangements and to retain existing partnership arrangements, uncertainty
relating to and the management of personnel changes, timely development and
introduction of new products, releases and product enhancements, current
economic conditions and the timing and extent of a recovery, heightened
security and war or terrorist acts in countries of the world that affect our
business, and other risks identified in the section of this Report entitled
Description of Business-Factors Affecting Future Performance, beginning on
page 11. Readers are cautioned not to place undue reliance on these
forward-looking statements, which reflect managements opinions only as of the
date hereof. The Company undertakes no obligation to revise or publicly
release the results of any revision to these forward-looking statements.

In the MD&A and other sections that follow there will be references to the
MoD contract. In the fourth quarter of 2000, the Company entered into a
contract to provide the United Kingdom Ministry of Defense (MoD) with
software, support and services. This contract generated 23.3% of revenue in
2001. In January 2002, the MoD announced it was suspending all work on the
contract due to budgetary constraints. As a result of this suspension, the
Company engaged in a significant restructuring effort in an attempt to
right-size its work force and facilities.

Critical Accounting Policies

Managements discussion and analysis of the Companys financial condition
and results of operations is based upon the Companys consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities. On an on-going basis, the
Company evaluates its estimates, including those related to revenue
recognition, accounts receivable and allowance for doubtful accounts, deferred
tax assets, property and equipment, investments, accrued expenses,
restructuring, debt covenants, and contingencies and litigation. The Company
bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of
which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions or
conditions.

The Company has identified the policies below as critical to the Companys
business operations and the understanding of the Companys results of
operations. Senior management has discussed the development and selection of
these policies and the disclosures below with the Audit Committee of the Board
of Directors. For a detailed discussion of the application of these and other
accounting policies, see Note 1 in the Notes to Consolidated Financial
Statements.

Revenue Recognition

Revenue recognition rules for software companies are very complex and
often subject to interpretation. Very specific and detailed guidelines in
measuring revenue are followed; however, certain judgments affect the
application of the Companys revenue policy. Revenue results are difficult to
predict, and any shortfall in revenue or delay in recognizing revenue could
cause operating results to vary significantly from quarter to quarter and could
result in future operating losses.

Revenue is generated through two sources: (a) software license revenue and
(b) support and service revenue. Software license revenue is generated from
licensing the rights to use our products directly to end-users and indirectly,
to a lesser extent, through third-party resellers. Support and service revenue
is generated from sales of customer support services (maintenance contracts),
consulting services, hosting services and training services performed for
customers that license the Companys products.

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For license arrangements that do not require modification of the software,
revenue is recognized in accordance with accounting standards for software
companies, including Statement of Position, or SOP, 97-2, Software Revenue
Recognition, as amended by SOP 98-4 and SOP 98-9, related interpretations,
including Technical Practice Aids, and SEC Staff Accounting Bulletin No. 101.

License revenue is recognized when a non-cancelable license agreement
becomes effective as evidenced by a signed contract, product shipment, a fixed
or determinable license fee, and assurance of collection. If the license fee
is not fixed or determinable, revenue is recognized as payments become due from
the customer. If a nonstandard acceptance period is provided, revenue is
recognized upon the earlier of customer acceptance and the expiration of the
acceptance period.

In software arrangements that include rights to multiple software products
and/or services, the total arrangement fee is allocated among each of the
deliverables using the residual method, under which revenue is allocated to
undelivered elements based on vendor-specific objective evidence of fair value
of such undelivered elements and the residual amounts of revenue are allocated
to delivered elements. Elements included in multiple element arrangements
could consist of software products, maintenance (which includes customer
support services and unspecified upgrades), and consulting services.
Vendor-specific objective evidence is based on the price charged when an

element is sold separately or, in the case of an element not yet sold
separately, the price established by authorized management, if it is probable
that the price, once established, will not change once the element is sold
separately.

Revenue from the Companys professional consulting and implementation
services is generally time and material based and is recognized as the work is
performed. Delays in project implementation will result in delays in revenue
recognition. Some professional consulting services involve fixed-price and/or
fixed-time arrangements and are recognized using contract accounting, which
requires the accurate estimation of the cost, scope and duration of each
engagement. Revenue and the related costs for these projects are recognized on
the percentage-of-completion method, with progress-to-completion measured by
using labor cost inputs and with revisions to estimates reflected in the period
in which changes become known. Project losses are provided for in their
entirety in the period they become known, without regard to the
percentage-of-completion. If the Company does not accurately estimate the
resources required or the scope of work to be performed, or does not manage its
projects properly within the planned periods of time or satisfy its obligations
under the contracts, then future consulting margins on these projects may be
negatively affected or losses on existing contracts may need to be recognized.

Revenue from maintenance and support services is recognized ratably over
the term of the support contract, typically one year.

Revenue from web hosting (also referred to as ASP or application service
provider) services is recognized based upon contractually agreed upon rates per
user or service, over a contractually defined time period.

Accounts Receivable and Allowance for Doubtful Accounts

Billed and unbilled accounts receivable comprise trade receivables that
are credit based and do not require collateral. The Company maintains an
allowance for doubtful accounts for estimated losses resulting from the
inability of its customers to make required payments. The Company records a
provision for uncollectible accounts on sales in the same period as the related
revenues are recorded. These estimates are based upon historical collection
patterns. If the historical data the Company uses to calculate these estimates
does not properly reflect future collections, revenue could be overstated. On
an ongoing basis, the Company also evaluates the collectibility of accounts
receivable based upon historical collections and an assessment of the
collectibility of specific accounts. The Company evaluates the collectibility
of specific accounts using a combination of factors, including the age of the
outstanding balance(s), evaluation of the accounts financial condition and
credit scores, recent payment history, and discussions with the Companys
account executive for the specific customer and with the customer directly.
Based upon this evaluation of the collectibility of accounts receivable, any
increase or decrease required in the allowance for doubtful accounts is
reflected in the period in which the evaluation indicates that a change is
necessary. If the financial condition of the Companys customers were to
deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. The allowance amounted to $5.7 million,
$3.4 million and $4.4 million as of December 31, 2001 and 2002 and March 31,
2003, respectively, which includes $1.3 million at December 31, 2002 and March
31, 2003 relating to a specific customer dispute.

The Company generates a significant portion of revenues and corresponding
accounts receivable from sales to the utility industry. As of March 31, 2003,
approximately $12.4 million of our accounts receivable were attributable to
software license fees and support and services sales to utility customers. In
determining the Companys allowance for doubtful accounts, we have considered
the utility industrys financial condition, as well as the financial condition
of individual utility customers. Recently there have been well-publicized
issues with certain utility companies as a result of activities in the
unregulated wholesale sectors. While our utility industry customers are
generally in the regulated or retail sector, their unregulated affiliated
activities might affect our ability to collect amounts due. We monitor the
credit status of our customers and, where deemed necessary, provide for
potential uncollectibility.

The Company generated 11.2% ($3.1 million) of its revenues in the
three-month period ended March 31, 2003 from a single customer, Magnox Electric
plc, located in the United Kingdom. As of March 31, 2003, approximately $1.9
million of the Companys accounts receivable were attributable to this
customer. The Company does not anticipate accounts receivable collectibility
issues

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related to this customers account. In 2002 this customer provided 12.6%
of revenues, with approximately $2.3 million in accounts receivable at December
31, 2002. This amount was fully collected. In 2001, the MoD contract provided
23.3% of revenues, with approximately $7.9 million in accounts receivable at
December 31, 2001. This amount was fully collected.

The Company generates a significant portion of its revenues and
corresponding accounts receivable through sales denominated in currencies other
than the U.S. Dollar. As of March 31, 2003, approximately $3.5 million of the
Companys gross billed accounts receivable were denominated in foreign
currencies, of which approximately $2.4 million were denominated in British
Pounds. Historically, the foreign currency gains and losses on these
receivables have not been significant, and the Company has determined that
foreign currency derivative products are not required to hedge the Companys
exposure. If there were a significant decline in the British Pound exchange
rate, the U.S. Dollar equivalents received from our customers could be
significantly less than the reported amount. A decline in the exchange rate of
the British Pound to the U.S. Dollar of 10% from the rate as of March 31, 2003
would result in the Company receiving $240,000 less if the Pounds were
converted to U.S. Dollars at that rate.

Valuation of intangible assets and goodwill

The IUS acquisition has resulted in, and future acquisitions typically
will result in, the recording of goodwill, which represents the excess of the
purchase price over the fair value of assets acquired, as well as other
definite-lived intangible assets.

In the first quarter of 2002, the Company adopted SFAS No. 142, Goodwill
and Other Intangible Assets. Under SFAS No. 142, goodwill is no longer subject
to amortization; instead it is subject to new impairment testing criteria.
Other intangible assets will continue to be amortized over their estimated
useful lives, although those with indefinite lives are not to be amortized but
are tested at least annually for impairment, using a lower of cost or fair
value approach. The company did not identify any asset impairment at March 31,
2003. The Company will continue to test for impairment on an annual basis as
of March 31, or on an interim basis if circumstances change that would indicate
the possibility of an impairment. The impairment review requires an analysis
of future projections and assumptions about the Companys operating
performance. Should such a review indicate the assets are impaired, an expense
would be recorded for the impaired assets.

Restructuring

The Company has accrued the cost of redundant leased office space in San
Francisco, CA, Dallas, TX and Pittsburgh, PA through restructuring charges in
the period 2000 through March 31, 2003. The accrual is included in the
consolidated financial statements in Other Accrued Liabilities for amounts due
within one year and Obligations under Capital Leases and Other Liabilities for
amounts due after one year. The redundant office space was a result of the
Companys relocation of its headquarters and certain administrative functions
from San Francisco to Atlanta, GA in 2000 and 2001, and the suspension of the
MoD contract in 2002. Additions to the accrual were made in 2002 and 2003 due
to additional vacated office space and the deterioration of the rental markets
in all three locations; this deterioration has resulted in the Company
receiving less than anticipated amounts in sublease arrangements due to lower
lease rates and longer times taken to sublease the office space. The Company
reviews this accrual and evaluates its adequacy on an ongoing basis. Should
rental conditions deteriorate to the point where the redundant office space is
not ever leased, the Company will incur additional charges totaling
approximately $1.6 million over the period from fiscal year 2004 through 2008.
Should rental conditions improve, it is possible that higher than anticipated
sublease income will be generated. Any required increase or decrease in this
accrual will be reflected in the period in which the evaluation indicates that
a change is necessary.

Results of Operations

Operating Results

The following table sets forth for the periods indicated the percentage of
total revenues represented by certain line items in the Companys statements of
operations:

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##### Table of Contents



|                                     |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |      |       |  
|------------------------------------ | ------------------------------------------------------------------------------------ | ------------------------ | ----- | ---------------------------- | ----- | ------------------ | ---- | ---- | ----- | ---- | ----- | ---- | ----- | - | ----- | ---- | ----- | - | ----- | ---- | ----- | -
|                                     |                                                                                      |                          |       | PERCENTAGE OF TOTAL REVENUES
|                                     |                                                                                      |                          |       |                             
|                                     |                                                                                      |                          |       | FISCAL YEARS ENDED           |       | THREE MONTHS ENDED
|                                     |                                                                                      |                          |       | DECEMBER 31,                 |       | MARCH 31,         
|                                     |                                                                                      |                          |       |                              |       |                   
|                                     |                                                                                      |                          |       | 2000                         |       | 2001               |      | 2002 |       | 2002 |       | 2003
|                                     |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |     
|Statement of Operations Data:        |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     
|Revenues:                            |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     
|                                     | Software licensing fees                                                              |                          |       | 8.7                          | %     |                    |      | 11.9 | %     |      |       | 13.3 | %     |   |       | 13.6 | %     |   |       | 9.7  | %    
|                                     | Services, and maintenance and other                                                  |                          |       | 91.3                         | %     |                    |      | 88.1 | %     |      |       | 86.7 | %     |   |       | 86.4 | %     |   |       | 90.3 | %    
|                                     |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     
|                                     |                                                                                      | Total revenues           |       |                              | 100.0 | %                  |      |      | 100.0 | %    |       |      | 100.0 | % |       |      | 100.0 | % |       |      | 100.0 | %
|Cost of revenues:                    |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     
|                                     | Software licensing fees (including $6,838
writedown of third party software in 2000) |                          |       | 6.6                          | %     |                    |      | 0.8  | %     |      |       | 2.5  | %     |   |       | 0.4  | %     |   |       | 0.8  | %    
|                                     | Services, maintenance and other                                                      |                          |       | 55.8                         | %     |                    |      | 45.3 | %     |      |       | 47.8 | %     |   |       | 48.3 | %     |   |       | 55.8 | %    
|                                     |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     
|Total cost of revenues               |                                                                                      |                          | 62.4  | %                            |       |                    | 46.1 | %    |       |      | 50.3  | %    |       |   | 48.7  | %    |       |   | 56.6  | %   
|                                     |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     
|                                     |                                                                                      |                          | 37.6  | %                            |       |                    | 53.9 | %    |       |      | 49.7  | %    |       |   | 51.3  | %    |       |   | 43.4  | %   
|                                     |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     
|Operating expenses:                  |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     
|                                     | Research and development                                                             |                          |       | 35.4                         | %     |                    |      | 28.1 | %     |      |       | 39.0 | %     |   |       | 39.2 | %     |   |       | 32.0 | %    
|                                     | Sales and marketing                                                                  |                          |       | 33.9                         | %     |                    |      | 17.2 | %     |      |       | 25.6 | %     |   |       | 23.3 | %     |   |       | 24.0 | %    
|                                     | General and administrative                                                           |                          |       | 14.4                         | %     |                    |      | 9.9  | %     |      |       | 11.4 | %     |   |       | 9.0  | %     |   |       | 14.5 | %    
|                                     | Restructuring expenses                                                               |                          |       | 1.4                          | %     |                    |      | 5.8  | %     |      |       | 7.0  | %     |   |       | 10.5 | %     |   |       | 8.0  | %    
|                                     |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     
|                                     |                                                                                      | Total operating expenses |       |                              | 85.1  | %                  |      |      | 61.0  | %    |       |      | 83.0  | % |       |      | 82.0  | % |       |      | 78.5  | %
|                                     |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     
|Loss from operations                 |                                                                                      |                          | (47.5 | )%                           |       |                    | (7.1 | )%   |       |      | (33.3 | )%   |       |   | (30.7 | )%   |       |   | (35.1 | )%  
|Other income (expense) net           |                                                                                      |                          | 2.5   | %                            |       |                    | 1.4  | %    |       |      | 1.1   | %    |       |   | 1.4   | %    |       |   | (0.2  | )%  
|                                     |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     
|Loss before income taxes             |                                                                                      |                          | (45.0 | )%                           |       |                    | (5.7 | )%   |       |      | (32.2 | )%   |       |   | (29.3 | )%   |       |   | (35.3 | )%  
|Provision (benefit) for income taxes |                                                                                      |                          | (4.6  | )%                           |       |                    |     |      |       |      | (3.4  | )%   |       |   |      |      |       |   | 1.0   | %   
|                                     |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     
|Net loss                             |                                                                                      |                          | (40.4 | )%                           |       |                    | (5.7 | )%   |       |      | (28.8 | )%   |       |   | (29.3 | )%   |       |   | (36.3 | )%  
|                                     |                                                                                      |                          |       |                              |       |                    |      |      |       |      |       |      |       |   |       |      |       |   |       |     

On March 28, 2003, the Company decided to change its fiscal year end from
December 31 of each year to March 31 of each year. The following discussion of
historical operating results compares the three-month period ended March 31,
2003 to the same period in the prior year. For the previous fiscal year,
ending December 31, 2002, the comparison is for the twelve-month periods ending
December 31, 2001 and 2000.

Three-Month Period Ended March 31, 2002 Compared to the Three-Month Period
Ended March 31, 2003

Revenues.The Companys revenues are derived from software licensing fees
and from services, which include implementation and training services, customer
funded development, hosting services, and support fees. Total revenue
decreased 16.1% from $32.4 million in the three-month period ended March 31,
2002 to $27.2 million in the three-month period ended March 31, 2003. The
decrease in total revenue was due to a slow-down in the demand for services and
lower software licensing fee revenue of $1.8 million due to weak capital
spending in the markets that the Company serves. Revenue for the three-month
period ended March 31, 2003 includes approximately $3.1 million in IUS revenues
for the period from March 6 to March 31, 2003.

Revenues from software licensing fees were 13.6% and 9.7% of total
revenues for the three-month periods ended March 31, 2002 and 2003,
respectively. Revenues from software license fees decreased from $4.4 million
in the three-month period ended March 31, 2002 to $2.6 million in the
three-month period ended March 31, 2003. This decrease is a result of a lower
level of new license revenue bookings during 2002, which resulted in less
deferred license revenue to recognize in three months ended March 31, 2003.
During 2001 and 2002, the Company signed new licensing contracts valued at
$27.0 million and $7.2 million, respectively. No license revenues from IUS
were recognized during the three-month period ended March 31, 2003.

Revenues from services were 86.4% and 90.3% of total revenues for the
three-month periods ended March 31, 2002 and 2003, respectively. Revenues from
professional services decreased 12.2% from $28.0 million in the three-month
period ended March 31, 2002 to $24.6 million in the three-month period ended
March 31, 2003. The decrease resulted from a lower level of consulting
services, which we believe was due to the Companys lower level of new license
bookings during 2002 and the three months ended March 31, 2003. Included in
revenues from services for the three-month period ended March 31, 2003 is $3.1
million related to IUS.

From a geographic perspective, revenue from international customers (from
sales outside the United States) accounted for 33%, and 35% of revenues for the
three-month periods ended March 31, 2002 and 2003, respectively. In the
aggregate, the regions

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identified as EMEA (Europe, Middle East and Africa), Canada, and APAC
(Australia, Asia and the Pacific Rim) represented the following percentages of
total revenues:

|                                       |  |                    |    |      |  |  |    |  
|-------------------------------------- |  | ------------------ | -- | ---- |  |  | -- | -
|                                       |  | Three Months Ended
|                                       |  | March 31,         
|                                       |  |                   
|                                       |  | 2002               |    | 2003
|                                       |  |                    |    |     
|EMEA (Europe, Middle East & Africa)    |  |                    | 27 | %    |  |  | 26 | %
|Canada                                 |  |                    | 4  | %    |  |  | 5  | %
|APAC (Australia, Asia & Pacific Rim)   |  |                    | 2  | %    |  |  | 4  | %
|Total International (sales outside US) |  |                    | 33 | %    |  |  | 35 | %

Most of the Companys existing contracts are denominated in U.S. Dollars,
thus foreign currency fluctuations have not significantly impacted the results
of operations. Historically, foreign currency gains and losses have not been
significant, and the Company has determined that foreign currency derivative
products are not required to hedge the Companys exposure.

The Magnox project in the United Kingdom represented 16.2% and 11.2% of
the Companys total revenues for the three-month periods ended March 31, 2002
and 2003, respectively.

Cost of Revenues.Cost of revenues consists of: (i) personnel and related
costs for implementation and consulting services, (ii) training and customer
support services, and (iii) license fees to third parties upon the sale of the
Companys products containing third-party software. Gross profits on license
fees are substantially higher than gross profits on services revenues,
reflecting the low packaging and production costs of software products compared
with the relatively high personnel costs associated with providing
implementation, maintenance, consulting and training services.

Cost of revenues decreased 2.5% from $15.8 million in the three-month
period ended March 31, 2002 to $15.4 million in the three- month period ended
March 31, 2003. As a percentage of total revenue, cost of revenues was 48.7%
and 56.6% for the three-month periods ended March 31, 2002 and 2003,
respectively. The decrease in absolute dollars in cost of revenues was due to
reduced staffing levels as a result of staffing reductions throughout 2002.
The 7.9% increase in cost of revenues, as a percentage of total revenues, was
due to lower revenues without a corresponding decrease in related costs.

The cost of software licensing fees was $0.1 million and $0.2 million for
the three-month periods ended March 31, 2002 and 2003, respectively. As a
percentage of total revenue, cost of software licensing fees was 0.4% and 0.8%
for the three-month periods ended March 31, 2002 and 2003, respectively. The
increase in cost of revenues was due to a product mix in which license fees
recognized in the three-month period ended March 31, 2003 were more dependent
on third-party products than in the three-month period ended March 31, 2002.

The cost of services revenue was $15.7 million and $15.2 million for the
three-month periods ended March 31, 2002 and 2003, respectively. As a
percentage of total revenue, cost of services revenues were 48.3% and 55.8% for
the three-month periods ended March 31, 2002 and 2003, respectively. The
increase in cost percentage in the three-month period ended March 31, 2003 was
attributable to a lower level of new software licenses, which result in
additional services revenue, and the inclusion of IUS services, the cost of
which was $2.0 million for the three-month period ended March 31, 2003.

Research and Development (R&D).Research and development expenses consist
of personnel and related costs, computer processing costs and third-party
consultant fees attributable to the development of new software application
products and enhancements to existing products.

Research and development expenses decreased 31.4% from $12.7 million in
the three-month period ended March 31, 2002 to $8.7 million in the three-month
period ended March 31, 2003, and represented 39.2% and 32.0%, respectively, of
total revenues in those three-month periods. The reduction in research and
development expense was a result of staffing reductions and capitalization of
certain development costs of $0.4 million in the three-month period ended March
31, 2003. IUS research & development expenses of $0.7 million are included in
the results for the three-month period ended March 31, 2003.

Sales and Marketing.Sales and marketing expenses include personnel
costs, sales commissions, and the costs of advertising, public relations and
participation in industry conferences and trade shows.

Sales and marketing expenses decreased 13.5% from $7.6 million in the
three-month period ended March 31, 2002 to $6.5 million in the three-month
period ended March 31, 2002. As a percentage of total revenues, sales and
marketing expenses were 23.3% and

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24.0% for the three-month periods ended March 31, 2002 and 2003,
respectively. IUS sales and marketing expenses of $0.6 million are included in
the results for the three-month period ended March 31, 2003.

The decrease in sales and marketing expenses related to a continuing
review and rationalization of ongoing sales and marketing investments in the
Companys vertical and geographic markets. This resulted in lower salaries and
benefit costs from reductions in headcount and a more focused advertising and
promotion program, which taken together resulted in lower expenses.

General and Administrative.General and administrative expenses include
the costs of finance, human resources and administrative operations. General
and administrative expenses increased $1.1 million from $2.9 million in the
three-month period ended March 31, 2002 to $4.0 million in the three-month
period ended March 31, 2003. These expenses represented 9.0% and 14.5% of
total revenues in those three-month periods, respectively. IUS general and
administrative expenses of $0.5 million are included in the results for the
three-month period ended March 31, 2003.

The increase in general and administrative expenses in the three-month
period ended March 31, 2003 resulted from higher legal and accounting expenses
that resulted from the acquisition of IUS and the inclusion of IUS general and
administrative expenses.

Restructuring Expenses.The Company recorded $3.4 million and $2.2
million in restructuring charges in the three-month periods ended March 31,
2002 and 2003, respectively.

The Company recorded restructuring expenses of approximately $3.4 million
in the first quarter of 2002, related to the suspension of the MoD project and
subsequent demobilization and reduction in workforce. A formal restructuring
plan was approved by the Board of Directors in March 2002 and included
approximately $947,000 for computer lease termination costs, approximately
$728,000 of severance payments related to the elimination of 81 global
positions, and approximately $1.7 million in lease termination costs associated
with the closing of the Companys Dallas office and reducing leased space in
the Companys Pittsburgh office.

In the three-month period ended March 31, 2003, the Company recorded
restructuring expenses of $2.2 million related to a further space consolidation
in the Companys San Francisco office. This consolidation made an additional
floor available for sublease.

In connection with the acquisition of IUS, Indus management formulated a
plan to restructure pre-acquisition IUS through staffing reductions. In
connection with this plan, the Company recorded a liability of $675,000
representing anticipated severance costs for approximately 50 employees of IUS
in various job functions. The costs were recognized as a liability assumed in
the purchase business combination. The liability will be paid entirely in cash,
with the complete amount being paid in the fiscal year ending March 31, 2004.
It is expected that annual savings aggregating in excess of $4.0 million will
be realized as a result of these staffing reductions. As of March 31, 2003, no
payments had been made in connection with these reductions.

Through March 31, 2003, approximately $9.8 million of these costs have
been paid. Of the balance remaining to be paid, $4.2 million was included in
other current liabilities and $8.7 million in other non-current liabilities,
all of which relates to anticipated costs associated with redundant office
space in San Francisco, CA, Dallas, TX, and Pittsburgh, PA.

Interest and Other Income and Interest Expense.Interest income is
generated from the Companys investments in marketable securities and
interest-bearing cash and cash equivalents. Interest and other income
decreased 83% from $500,000 in the three-month period ended March 31, 2002 to
$86,000 in the three-month period ended March 31, 2003. The decrease in
interest income is a result of a decrease in the average cash balances
available for investment for the period.

Interest expense is related to capital lease arrangements and debt
financing used to fund the IUS acquisition on March 6, 2003. In connection
with the acquisition of IUS, the Company executed a promissory note in the
principal amount of $10 million in favor of SCT Financial Corporation, a
subsidiary of Systems and Computer Technology Corporation. This note is due on
September 5, 2003 and bears interest at 6% per year. The Company also issued
8% convertible notes which are due on December 5, 2003. As a result of this
activity, interest expense increased from $54,000 for the three-month period
ended March 31, 2002 to $136,000 for the three- month period ended March 31,
2003.

Provision for Income Taxes.The provision for income taxes of $2,000 and
$277,000 in the three-month periods ended March 31, 2002 and 2003,
respectively, includes federal, state and foreign income taxes. As of March
31, 2003, the Company has net operating loss carryforwards, for tax purposes,
of approximately $56.3 million, which, subject to certain limitations, may be
used to offset future income through 2022. As of March 31, 2003, the Company
had a net operating loss carryforward of approximately $6.5 million related to
stock option deductions. The tax benefit for this carryforward will be
directly allocated to contributed capital as realized.

Financial Accounting Standards Board Statement No. 109 provides for the
recognition of deferred tax assets if realization of the assets is more likely
than not. Based upon the weight of available evidence, which includes
historical supporting performance and the reported cumulative net losses for
the most recent three years, the Company has provided a full valuation
allowance against its net deferred tax asset at March 31, 2003.

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Net Income (Loss).The Company incurred net losses of $9.5 million and
$9.9 million in the three-month periods ended March 31, 2002 and 2003,
respectively. Included in the net loss for the three-month period ended March
31, 2003 is a net loss of $0.7 million incurred by IUS.

Year Ended December 31, 2000 Compared to the Year Ended December 31, 2001 and
Compared to the Year Ended December 31, 2002

Revenues.The Companys revenues are derived from software licensing fees
and from services, which include implementation and training services, customer
funded development, hosting services, and support fees. Total revenue
increased 20.8% from $145.7 million in 2000 to $176.0 million in 2001, before
decreasing 33.4% to $117.2 million in 2002. The increase in total revenue from
2000 to 2001 was due to an increase in software license fees of $8.4 million
and services of $21.9 million. Services growth was primarily attributable to
the MoD project in the amount of $35.3 million, offset by a $6.6 million
decline in revenue from the multi-year implementation contract with British
Energy. The $58.8 million decrease in total revenue from 2001 to 2002 was
primarily attributable to the suspension of the MoD project in the amount of
$37.4 million, and the continuing wind down of the British Energy project of
$4.7 million, along with a slow-down in the demand for services and lower
software licensing fee revenue of $5.5 million due to weak capital spending in
the markets that the Company serves.

Revenues from software licensing fees were 8.7%, 11.9% and 13.3% of total
revenues for 2000, 2001 and 2002, respectively. Revenues from software license
fees increased 66.4% from $12.6 million in 2000 to $21.0 million in 2001. This
increase in 2001 was primarily attributable to $9.1 million of new license
revenue in the utility vertical market. Revenues from software license fees
decreased 26.1% from $21.0 million in 2001 to $15.5 million in 2002. This
decrease in 2002 is a result of a lower level of new license revenue bookings
during 2002. During 2000, 2001 and 2002, the Company signed new licensing
contracts valued at $28.0 million, $27.0 million and $7.2 million,
respectively.

Revenues from services were 91.3%, 88.1% and 86.7% of total revenues for
2000, 2001 and 2002, respectively. Revenues from services increased 16.5% from
$133.1 million in 2000 to $155.0 million in 2001, or an increase of $21.9
million. Services provided under the United Kingdoms MoD project increased
approximately $35.3 million, offset by a decline of $6.6 million in revenue
recognized under a multi-year implementation contract with British Energy.
Revenues from professional services decreased 34.4% from $155.0 million in 2001
to $101.6 million in 2002. Of that decrease, $37.4 million resulted from the
suspension of the MoD contract and $4.7 million from the British Energy
contract as it winded down toward completion in 2003. The remaining decrease
resulted from a lower level of consulting services, which we believe was due in
part to the Companys lower level of new license bookings during 2002.

From a geographic perspective, revenue from international customers (from
sales outside the United States) accounted for 31%, 41% and 34% of revenues for
2000, 2001 and 2002, respectively. Revenue growth from international customers
in 2001 as compared to 2000 was attributable to the MoD project. In the
aggregate, the regions identified as EMEA (Europe, Middle East and Africa),
Canada, and APAC (Australia, Asia and the Pacific Rim) represented the
following percentages of total revenues:

|                                       |  |              |    |      |  |      |    |   |  |  |    |  
|-------------------------------------- |  | ------------ | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                                       |  | Years Ended 
|                                       |  | December 31,
|                                       |  |             
|                                       |  | 2000         |    | 2001 |  | 2002
|                                       |  |              |    |      |  |     
|EMEA (Europe, Middle East & Africa)    |  |              | 23 | %    |  |      | 35 | % |  |  | 26 | %
|Canada                                 |  |              | 4  | %    |  |      | 3  | % |  |  | 5  | %
|APAC (Australia, Asia & Pacific Rim)   |  |              | 4  | %    |  |      | 3  | % |  |  | 3  | %
|Total International (sales outside US) |  |              | 31 | %    |  |      | 41 | % |  |  | 34 | %

Most of the Companys existing contracts are denominated in U.S. Dollars,
thus foreign currency fluctuations have not significantly impacted the results
of operations. Historically, foreign currency gains and losses have not been
significant, and the Company has determined that foreign currency derivative
products are not required to hedge the Companys exposure.

The Magnox project represented 12.6% of the Companys total revenues for
2002. The MoD project represented 23.3% of total revenues for 2001.

Cost of Revenues.Cost of revenues consists of: (i) personnel and related
costs for implementation and consulting services, (ii) training and customer
support services, and (iii) license fees to third parties upon the sale of the
Companys products containing third-party software. Gross profits on license
fees are substantially higher than gross profits on services revenues,
reflecting the low

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packaging and production costs of software products compared with the
relatively high personnel costs associated with providing implementation,
maintenance, consulting and training services.

Cost of revenues decreased 10.7% from $90.9 million in 2000 to $81.1
million in 2001 and decreased 27.3% to $59.0 million in 2002. As a percentage
of total revenue, cost of revenues was 62.4%, 46.1% and 50.3% for 2000, 2001
and 2002, respectively. The 2001 cost of revenue decrease in absolute dollars
was due to a $6.8 million third-party software write down in 2000. The write
down was made to properly reflect the future estimated economic value of the
third-party software. The decrease in cost of revenues in 2001, as a
percentage of revenues, was due to the aforementioned $6.8 million write down
in 2000 and a higher proportion of license fees (which have lower costs than
services revenues) in 2001 versus 2000 for both license fees and services. The
2002 decrease in absolute dollars in cost of revenues was due to a reduced
level of new license revenue in 2002 and staffing reductions throughout 2002.
The 4.2% increase in cost of revenues in 2002, as a percentage of total
revenues, was due to higher costs related to license revenues due to higher
component levels of third-party software costs, and third-party software write
downs of $318,000 to adjust the balances of the third-party software licenses
to reflect anticipated use over the remaining lives of the licenses.

The cost of software licensing fees was $9.6 million, $1.4 million and
$3.0 million for 2000, 2001 and 2002, respectively. As a percentage of total
revenue, cost of software licensing fees was 6.6%, 0.8% and 2.5% for 2000, 2001
and 2002, respectively. The cost of software license fees in 2000 was impacted
by the previously noted $6.8 million third-party software write down.
Excluding this write down, the 2000 cost would have approximated 1.9%. The
lower cost for 2001 over 2000 is the result of product mix, where license fees
recognized in 2001 were less dependent on third-party products than in 2000.
The 2002 increase in cost of revenues was due to a write down of third-party
product of $318,000 as well as a product mix in which license fees recognized
in 2002 were more dependent on third-party products than in 2001.

The cost of services revenue was $81.3 million, $79.7 million and $56.0
million for 2000, 2001 and 2002, respectively. As a percentage of total
revenue, cost of services revenues were 55.8%, 45.3% and 47.8% for 2000, 2001
and 2002, respectively. The decrease in cost percentage in 2001 was a result
of improved utilization rates for services personnel and higher realized
billable rates per hour. The increase in cost percentage in 2002 was a result
of lower professional services utilization because of the suspension of the MoD
project and a lower level of new software licenses, which generally result in
additional services revenue.

Research and Development (R&D).Research and development expenses consist
of personnel and related costs, computer processing costs and third-party
consultant fees attributable to the development of new software application
products and enhancements to existing products.

Research and development expenses decreased 4.0% from $51.6 million in
2000 to $49.5 million in 2001, and decreased 7.6% to $45.7 million in 2002, and
represented 35.4%, 28.1% and 39.0%, respectively, of total revenues in those
years. The Companys higher research and development expense levels in 2000
and 2001 reflect the Companys investment in the Indus InSite Internet-based
product. InSite development continued in 2002, but at a lower level, resulting
in lower costs for the year.

Through December 31, 2002, the Company expensed all software development
costs as incurred since the time between development of a working model and
release to the market has been insignificant.

Sales and Marketing.Sales and marketing expenses include personnel
costs, sales commissions, and the costs of advertising, public relations and
participation in industry conferences and trade shows.

Sales and marketing expenses decreased 38.7% from $49.3 million in 2000 to
$30.2 million in 2001, and remained relatively constant at $29.9 million in
2002. As a percentage of total revenues, sales and marketing expenses were
33.9%, 17.2% and 25.6% for 2000, 2001 and 2002, respectively.

The decrease in sales and marketing expenses from 2000 to 2001 related to
a continuing review and rationalization of ongoing sales and marketing
investments in the Companys vertical and geographic markets. This resulted in
lower salaries and benefit costs from reductions in headcount and a more
focused advertising and promotion program, which taken together resulted in
lower expenses.

General and Administrative.General and administrative expenses include
the costs of finance, human resources and administrative operations. General
and administrative expenses decreased 16.9% from $20.9 million in 2000 to $17.4
million in 2001, and decreased 23.5% to $13.3 million in 2002. These expenses
represented 14.4%, 9.9% and 11.4% of total revenues in those years,
respectively.

The decreases in general and administrative expenses in 2001 and 2002
resulted from a general reduction in expenses as the Company completed its
relocation of its headquarters to Atlanta in 2001.

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Restructuring Expenses.The Company recorded $2.1 million, $10.2 million
and $8.2 million in restructuring charges in 2000, 2001 and 2002, respectively.

Restructuring charges in 2000 and 2001 resulted from the relocation of the
Companys headquarters and certain administrative functions from San Francisco
to Atlanta. This relocation was approved by the Board of Directors in July
2000 and includes costs of approximately $2.8 million for severance payments
related to the elimination of 56 global positions, and approximately $9.5
million for lease termination costs associated with reducing leased office
space in the Companys San Francisco office. The San Francisco office lease
expires May 31, 2008.

The Company recorded restructuring costs of approximately $3.4 million in
the first quarter of 2002, related to the suspension of the MoD project and
subsequent demobilization and reduction in workforce. A formal restructuring
plan was approved by the Board of Directors in March 2002 and included
approximately $947,000 for computer lease termination costs, approximately
$728,000 of severance payments related to the elimination of 81 global
positions, and approximately $1.7 million in lease termination costs associated
with the closing of the Companys Dallas office and reducing leased space in
the Companys Pittsburgh office.

In the second and fourth quarters of 2002, the Company recorded
restructuring expenses of $4.0 million and $0.8 million, respectively. These
expenses related to a change in the Companys estimates of excess lease costs
associated with subleasing redundant office space in San Francisco, Dallas and
Pittsburgh. Due to the surplus office space in these markets, lease rates have
significantly declined.

Through December 31, 2002, approximately $9.2 million of these costs have
been paid. Of the balance remaining to be paid, $2.9 million was included in
other current liabilities and $7.8 million in other non-current liabilities,
all of which relates to anticipated costs associated with redundant office
space in San Francisco, CA, Dallas, TX, and Pittsburgh, PA.

Interest and Other Income and Interest Expense.Interest income is
generated from the Companys investments in marketable securities and
interest-bearing cash and cash equivalents. Interest and other income
decreased 35% from $3.7 million in 2000 to $2.4 million in 2001, and decreased
46% to $1.3 million in 2002. The year-over-year decrease in interest income in
2001 and 2002 is a result of lower interest rate environments in 2001 and 2002
and a decrease in the average cash balances available for investment for those
years.

Provision for Income Taxes.The income tax benefit of $6.7 million in
2000 relates to refundable federal income taxes previously paid as a result of
net operating loss carrybacks. In 2002, U.S. federal income tax law changed to
allow the carryback of losses for five years rather than two years under the
prior law. As a result of this change, the Company recorded a 2002 income tax
benefit of $4.7 million. The provision for income taxes of $36,000 in 2001
includes federal, state and foreign income taxes. As of December 31, 2002, the
Company has net operating loss carryforwards, for tax purposes, of
approximately $47.1 million, which, subject to certain limitations, may be used
to offset future income through 2022. As of December 31, 2002, the Company had
a net operating loss carryforward of approximately $5.8 million related to
stock option deductions. The tax benefit for this carryforward will be
directly allocated to stockholders equity as realized.

Financial Accounting Standards Board Statement No. 109 provides for the
recognition of deferred tax assets if realization of the assets is more likely
than not. Based upon the weight of available evidence, which includes
historical supporting performance and the reported cumulative net losses for
the most recent three years, the Company has provided a full valuation
allowance against its net deferred tax asset at December 31, 2002.

Net Income (Loss).The Company reported net losses of $58.8 million in
2000, $10.1 million in 2001, and $33.8 million in 2002. The $48.7 million
reduction in net loss from 2000 to 2001 is attributable to a $40.1 million
increase in gross margin in 2001, due to a $30.3 million increase in revenues
and to an increase in gross profit margin percentage of total revenues from
37.6% in 2000 to 53.9% in 2001. In addition, operating expenses (including
restructuring expenses) were reduced 13.4%, or $16.6 million, from 2000 to
2001, partially offset by $1.3 million of lower interest income in 2001 and the
aforementioned $6.7 million income tax credit in 2000. The $23.7 million
increase in net loss from 2001 to 2002 is primarily attributable to a $36.7
million decrease in gross margin in 2002, due to a $58.8 million decrease in
revenues and to a decrease in gross profit margin percentage of total revenues
from 53.9% in 2001 to 49.7% in 2002, due to the suspension of the MoD project
as well as a weakness in capital spending in the primary markets served by the
Company. This decrease is partially offset by a reduction in operating
expenses in 2002 of $10.2 million and a $3.9 million net income tax benefit in
2002.

Liquidity and Capital Resources

At March 31, 2003, the Companys principal sources of liquidity consisted
of approximately $32.7 million in cash and cash equivalents, $0.8 million in
short-term marketable securities and $5.4 million in short and long-term
restricted cash. The Company had a revolving bank line of credit of $15.0
million, which required a restricted compensating balance to be provided for
any amounts

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borrowed against the facility. The revolving credit facility expired on
May 31, 2003. The Company presently intends to enter into a new revolving
credit facility.

The Company maintained a standby letter of credit at March 31, 2003 in the
amount of approximately $2.3 million. Subsequent to March 31, 2003, the
Company entered into an additional letter of credit in the amount of $0.9
million. These letters of credit require the Company to maintain a
corresponding compensating balance equal to the amount of the letters of
credit.

Cash provided by (used in) operations was ($22.3) million, $13.8 million
and ($13.5) million in 2000, 2001 and 2002, respectively. In 2000, cash
generated from an increase in deferred revenue and the receipt of $9.1 million
in U.S. federal income tax refunds partially reduced the cash used to finance
the Companys net loss for the period. In 2001, cash generated from improved
working capital management and the receipt of $7.7 million in U.S. federal
income tax refunds were more than sufficient to offset the cash used to finance
the Companys net loss for the period. In 2002, cash generated from accounts
receivable reductions and the receipt of $3.0 million in federal income tax
refunds partially offset the cash used to finance the Companys net loss for
the period. The effect of exchange rate differences on cash was ($34,000),
($251,000) and $1.5 million in 2000, 2001 and 2002, respectively.

Cash used in operations was ($40,000) and ($2.4) million for the
three-month periods ended March 31, 2002 and 2003, respectively. In the
three-month period ended March 31, 2002, $14.7 million of cash generated from
accounts receivable changes, primarily from improved collections, offset the
cash used to finance the Companys $9.5 million net loss for the period and
other working capital usage. In the three-month period ended March 31, 2003,
$7.1 million of cash generated from accounts receivable changes offset the cash
used to finance the Companys net loss and other working capital usage for the
period.

Cash provided by (used in) investing activities was $34.5 million, $6.7
million and ($9.7) million in 2000, 2001 and 2002, respectively. In 2002, the
Company used net cash of $0.5 million from the sale/purchase of marketable
securities. Capital expenditures were $4.0 million for 2002 and were made
primarily to support the Companys internal information systems. Restricted
cash increased by $5.0 million during 2002, which was related to a $2.3 million
compensating balance necessary to support the Companys standby letter of
credit held by its San Francisco office landlord, and a $2.9 million
performance bond that was established in April 2002 for the Magnox project,
which matures in July 2003.

Cash provided by (used in) investing activities was $0.8 million and
($26.3) million for the three-month periods ended March 31, 2002 and 2003,
respectively. In the three-month period ended March 31, 2002, capital
expenditures of $0.8 million to support the Companys internal information
systems were offset by net cash of $1.7 million from the sale of the Companys
marketable securities. In the three-month period ended March 31, 2003, net
cash paid for IUS acquisition of $29.0 million was offset by net cash of $3.4
million was generated by the sale of the Companys marketable securities.

Financing activities provided $9.0 million in 2000 and $2.1 million in
2001, due to the exercise of stock options and the sale of common stock under
the employee stock purchase plan. Financing activities in 2002 resulted in a
use of cash of $0.7 million, due to a $2.5 million repurchase of the Companys
stock, offset by $1.6 million generated from the exercise of employee stock
options and stock purchases under the employee stock purchase plan. In April
2002, the Company entered into an agreement with Robert W. Felton, a founder of
the Company and former Chief Executive Office and Chairman of the Board of
Directors to purchase 500,000 shares of the Companys common stock from Mr.
Felton at a price of $5.00 per share, for an aggregate purchase price of $2.5
million. As part of this agreement, Mr. Felton agreed not to transfer or enter
into any agreement to transfer the remainder of his shares of the Companys
common stock for a period of one year.

Financing activities provided $1.0 million and $23.3 million for the
three-month periods ended March 31, 2002 and 2003, respectively. Cash provided
for the three-month period ended March 31, 2002 was generated from the exercise
of employee stock options. For the three-month period ended March 31, 2003,
the private placement of the Companys stock (net of $0.8 million in expenses)
and convertible debt of $23.4 million provided the cash related to financing
activities.

As of March 31, 2003, the Companys primary commitments are its leased
office space in Atlanta, Georgia; San Francisco, California; and Woking,
England. The Company leases its office space under non-cancelable lease
agreements that expire at various times through 2012. Net rent payable under
these leases in fiscal year 2004 is anticipated to be $8.1 million.

On March 5, 2003, the Company completed a private placement, selling
6,826,664 shares of its common stock at an aggregate purchase price of
approximately $10.2 million and issuing its 8% Convertible Notes in an
aggregate principal amount of approximately $14.5 million. The 8% Convertible
Notes are due on December 5, 2003, are convertible into shares of common stock
upon receipt of the requisite approval of the Companys stockholders and, once
approved, will automatically be converted at the rate of $1.50 per share into
approximately 9.8 million shares of common stock, subject to adjustment as
provided in the notes. The proceeds of this private placement were used to
finance a portion of the purchase price for the Companys acquisition of IUS.

Also, in connection with the acquisition of IUS, the Company executed a
promissory note in the principal amount of $10 million in favor of SCT
Financial Corporation, a subsidiary of Systems and Computer Technology
Corporation. This note is due on September

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5, 2003 and bears interest at 6% per year. IUS is a guarantor of the note
and this guaranty is secured by certain real property owned by IUS. The
Company intends to repay the note to SCT Financial Corporation prior to its
maturity with the proceeds of a third-party mortgage on the IUS real property
or other financing transaction. The Company believes that the fair market
value of the property is approximately $19.1 million. As a result of
discussions with the commercial lenders, the Company expects that the proceeds
of any financing transaction with respect to the property will be sufficient to
repay in full the note to SCT Financial Corporation.

The cost of the IUS acquisition approximated $35.8 million, which the
Company financed with approximately $24.8 million from the private placement
and the $10.0 million promissory note in favor of SCT Financial Corporation.
The Company does not believe that the costs of transition of IUS will have a
material effect on the Companys liquidity in the current fiscal year.

Except as discussed in this MD&A and for operating/capital leases, the
Company has no guarantees of debt or similar capital commitments to third
parties, written options on non-financial assets, standby repurchase
agreements, or other commercial commitments. The Company does not anticipate
any material capital expenditures for the next 12 months.

Funding for the IUS acquisition was obtained by the issuance of an
additional 6.8 million shares of the Companys common stock, increasing common
shares outstanding, which resulted in a lower per-share loss for the
three-month period ended March 31, 2003 than would have been reported had the
additional shares not been issued. This stock issuance resulted in
corresponding increases in common stock and additional paid-in-capital on the
Companys balance sheet and had no impact on the Companys statements of
operations for the three-month period.

The Company believes that its existing cash, cash equivalents and
marketable securities, together with anticipated cash flows from operations,
will be sufficient to meet its cash requirements for at least the next 12
months. However, if the stockholders do not approve the issuance of the shares
upon conversion of the convertible notes, the Company will have to pay an
aggregate of $14.5 million to holders of the convertible notes. Moreover, if
management is not successful in completing the refinancing of the note to SCT
Financial Corporation, the Company will have to pay $10 million to SCT
Financial Corporation upon maturity of the note on September 5, 2003. Such
occurrences could result in a material adverse effect on the Companys
financial condition.

The foregoing statement regarding the Companys expectations for continued
liquidity is a forward-looking statement, and actual results may differ
materially depending on a variety of factors, including variable operating
results, continued operating losses, presently unexpected uses of cash and the
factors discussed under the section Description of Business  Factors
Affecting Future Performance.




Item 7A.Quantitative and Qualitative Disclosures About Market Risks

The Companys cash flow can be exposed to market risks primarily in the
form of changes in interest rates in its short-term borrowings available under
its revolving bank line of credit as well as its investments in certain
available-for-sale securities. The Companys cash management and investment
policies restrict investments to highly liquid, low risk debt instruments. The
Company currently does not use interest rate derivative instruments to manage
exposure to interest rate changes. A hypothetical 100 basis point adverse move
(decrease in) interest rates along the entire interest rate yield curve would
adversely affect the net fair value of all interest sensitive financial
instruments by approximately $0.3 million at March 31, 2003.

We provide our services to customers primarily in the United States and,
to some extent, in Europe, Asia Pacific and elsewhere throughout the world. As
a result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
Sales are primarily made in U.S. Dollars; however, as we continue to expand
our operations, more of our contracts may be denominated in Australian Dollars,
British Pounds, Euros and Japanese Yen. A strengthening of the U.S. Dollar
could make our products less competitive in foreign markets. A hypothetical 5%
unfavorable foreign currency exchange move versus the U.S. Dollar, across all
foreign currencies, would adversely affect the net fair value of foreign
denominated cash, cash equivalent and investment financial instruments by
approximately $1.1 million at March 31, 2003.

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Item 8.Financial Statements and Supplementary Data

INDUS INTERNATIONAL, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                               |  |  |    | 
|---------------------------------------------- |  |  | -- | 
|REPORT OF INDEPENDENT AUDITORS                 |  |  | 32 | 
|CONSOLIDATED BALANCE SHEETS                    |  |  | 33 | 
|CONSOLIDATED STATEMENTS OF OPERATIONS          |  |  | 34 | 
|CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY |  |  | 35 | 
|CONSOLIDATED STATEMENTS OF CASH FLOWS          |  |  | 36 | 
|NOTES TO CONSOLIDATED FINANCIAL STATEMENTS     |  |  | 37 | 

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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Indus International, Inc.

We have audited the accompanying consolidated balance sheets of Indus
International, Inc. as of December 31, 2001, 2002, and March 31, 2003 and the
related consolidated statements of operations, stockholders equity and cash
flows for each of the three years in the period ended December 31, 2002, and
for the three months ended March 31, 2003. 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 auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Indus International, Inc. as of December 31, 2001, 2002, and March 31, 2003,
and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 2002, and for the three months
ended March 31, 2003, in conformity with accounting principles generally
accepted in the United States.



| | /s/ Ernst & Young LLP
| | ---------------------

Atlanta, Georgia
May 13, 2003

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INDUS INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share amounts)


|                                                       |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |          |         |  
|------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------------------------------------------------- | ------ | ------------ | ------- | ------------ | ------ | --------- | ------- | - | ------ | -------- | ------- | -
|                                                       |                                                                                                                                                                          |                                                    |        | December 31, |         | December 31, |        | March 31,
|                                                       |                                                                                                                                                                          |                                                    |        | 2001         |         | 2002         |        | 2003     
|                                                       |                                                                                                                                                                          |                                                    |        |              |         |              |        |          
|ASSETS                                                 |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |         
|Current assets:                                        |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |         
|                                                       | Cash and cash equivalents                                                                                                                                                |                                                    | $      | 59,901       |         |              | $      | 37,527    |         |   | $      | 32,667   |        
|                                                       | Marketable securities                                                                                                                                                    |                                                    |        | 1,757        |         |              |        | 2,171     |         |   |        | 757      |        
|                                                       | Restricted cash, current                                                                                                                                                 |                                                    |        |             |         |              |        | 2,883     |         |   |        | 2,834    |        
|                                                       | Billed accounts receivable, net of allowance for doubtful
accounts of $5,713, $3,445 and $4,375 at December 31,
2001, December 31, 2002 and March 31, 2003,
respectively |                                                    |        | 31,337       |         |              |        | 22,387    |         |   |        | 26,301   |        
|                                                       | Unbilled accounts receivable                                                                                                                                             |                                                    |        | 14,666       |         |              |        | 3,411     |         |   |        | 12,841   |        
|                                                       | Income tax receivable                                                                                                                                                    |                                                    |        | 1,592        |         |              |        | 5,300     |         |   |        | 5,226    |        
|                                                       | Other current assets                                                                                                                                                     |                                                    |        | 5,283        |         |              |        | 3,680     |         |   |        | 8,634    |        
|                                                       |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |         
|                                                       |                                                                                                                                                                          | Total current assets                               |        |              | 114,536 |              |        |           | 77,359  |   |        |          | 89,260  |  
|Property and equipment, net                            |                                                                                                                                                                          |                                                    | 21,877 |              |         |              | 17,471 |           |         |   | 38,088 |         
|Acquired intangible assets                             |                                                                                                                                                                          |                                                    | 68     |              |         |              | 45     |           |         |   | 13,258 |         
|Investment and other assets                            |                                                                                                                                                                          |                                                    | 2,686  |              |         |              | 5,515  |           |         |   | 3,904  |         
|                                                       |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |         
|                                                       |                                                                                                                                                                          | Total assets                                       |        | $            | 139,167 |              |        | $         | 100,390 |   |        | $        | 144,510 |  
|                                                       |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |         
|LIABILITIES AND STOCKHOLDERS EQUITY                   |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |         
|Current liabilities:                                   |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |         
|                                                       | Notes payable                                                                                                                                                            |                                                    | $      |             |         |              | $      |          |         |   | $      | 24,516   |        
|                                                       | Accounts payable                                                                                                                                                         |                                                    |        | 6,190        |         |              |        | 5,207     |         |   |        | 5,102    |        
|                                                       | Income tax payable                                                                                                                                                       |                                                    |        | 1,961        |         |              |        | 4,770     |         |   |        | 5,038    |        
|                                                       | Other accrued liabilities                                                                                                                                                |                                                    |        | 23,018       |         |              |        | 15,807    |         |   |        | 20,568   |        
|                                                       | Current portion of obligations under capital leases                                                                                                                      |                                                    |        | 4            |         |              |        | 266       |         |   |        | 274      |        
|                                                       | Deferred revenue                                                                                                                                                         |                                                    |        | 39,970       |         |              |        | 36,916    |         |   |        | 50,604   |        
|                                                       |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |         
|                                                       |                                                                                                                                                                          | Total current liabilities                          |        |              | 71,143  |              |        |           | 62,966  |   |        |          | 106,102 |  
|Obligations under capital leases and other liabilities |                                                                                                                                                                          |                                                    | 7,078  |              |         |              | 9,148  |           |         |   | 9,974  |         
|Commitments and contingencies                          |                                                                                                                                                                          |                                                    |       |              |         |              |       |           |         |   |       |         
|Stockholders equity:                                  |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |         
|                                                       | Preferred stock, $.001 par value                                                                                                                                         |                                                    |        |              |         |              |        |           |         |   |        |          |        
|                                                       |                                                                                                                                                                          | Shares authorized: 10 million; shares issued: none |        |              |        |              |        |           |        |   |        |          |        |  
|                                                       | Common stock, $.001 par value                                                                                                                                            |                                                    |        |              |         |              |        |           |         |   |        |          |        
|                                                       |                                                                                                                                                                          | Shares authorized: 100 million                     |        |              |         |              |        |           |         |   |        |          |         |  
|                                                       |                                                                                                                                                                          | Shares issued: December 31, 2001 - 35,210,251      |        |              |         |              |        |           |         |   |        |          |         |  
|                                                       |                                                                                                                                                                          | Shares issued: December 31, 2002 - 35,237,403      |        |              |         |              |        |           |         |   |        |          |         |  
|                                                       |                                                                                                                                                                          | Shares issued: March 31, 2003 - 42,065,530         |        |              | 35      |              |        |           | 36      |   |        |          | 42      |  
|                                                       | Additional paid-in capital                                                                                                                                               |                                                    |        | 123,671      |         |              |        | 125,608   |         |   |        | 135,279  |        
|                                                       | Treasury stock                                                                                                                                                           |                                                    |        |              |         |              |        |           |         |   |        |          |        
|                                                       |                                                                                                                                                                          | Shares: December 31, 2001 - 435,500                |        |              |         |              |        |           |         |   |        |          |         |  
|                                                       |                                                                                                                                                                          | Shares: December 31, 2002 - 935,500                |        |              |         |              |        |           |         |   |        |          |         |  
|                                                       |                                                                                                                                                                          | Shares: March 31, 2003 - 935,500                   |        |              | (2,181  | )            |        |           | (4,681  | ) |        |          | (4,681  | )
|                                                       | Note receivable from stockholder                                                                                                                                         |                                                    |        | (55          | )       |              |        |          |         |   |        |         |        
|                                                       | Deferred compensation                                                                                                                                                    |                                                    |        | (157         | )       |              |        | (104      | )       |   |        | (79      | )      
|                                                       | Accumulated deficit                                                                                                                                                      |                                                    |        | (58,287      | )       |              |        | (92,050   | )       |   |        | (101,943 | )      
|                                                       | Accumulated other comprehensive loss                                                                                                                                     |                                                    |        | (2,080       | )       |              |        | (533      | )       |   |        | (184     | )      
|                                                       |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |         
|                                                       |                                                                                                                                                                          | Total stockholders equity                         |        |              | 60,946  |              |        |           | 28,276  |   |        |          | 28,434  |  
|                                                       |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |         
|                                                       |                                                                                                                                                                          | Total liabilities and stockholders equity         |        | $            | 139,167 |              |        | $         | 100,390 |   |        | $        | 144,510 |  
|                                                       |                                                                                                                                                                          |                                                    |        |              |         |              |        |           |         |   |        |         

See accompanying notes.

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INDUS INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)


|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |        |        | 
|---------------------------------------- | ------------------------------------------------------------------------------------ | ------------------------ | ------- | ------------------ | ------- | ------------------ | ------- | ------- | ------- | ---- | ------- | ------- | ------- | - | ------ | ----------- | ------ | - | ------ | ------ | ------ | 
|                                         |                                                                                      |                          |         | Fiscal Years Ended |         | Three Months Ended
|                                         |                                                                                      |                          |         | December 31,       |         | March 31,         
|                                         |                                                                                      |                          |         |                    |         |                   
|                                         |                                                                                      |                          |         | 2000               |         | 2001               |         | 2002    |         | 2002 |         | 2003   
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |        
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        | (unaudited) |        |   |        |       
|Revenues:                                |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|                                         | Software licensing fees                                                              |                          | $       | 12,622             |         |                    | $       | 21,005  |         |      | $       | 15,527  |         |   | $      | 4,428       |        |   | $      | 2,637  |       
|                                         | Services, maintenance and other                                                      |                          |         | 133,067            |         |                    |         | 155,009 |         |      |         | 101,638 |         |   |        | 28,015      |        |   |        | 24,597 |       
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|                                         |                                                                                      | Total revenues           |         |                    | 145,689 |                    |         |         | 176,014 |      |         |         | 117,165 |   |        |             | 32,443 |   |        |        | 27,234 | 
|Cost of revenues:                        |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|                                         | Software licensing fees (including $6,838
writedown of third party software in 2000) |                          |         | 9,579              |         |                    |         | 1,378   |         |      |         | 2,997   |         |   |        | 114         |        |   |        | 226    |       
|                                         | Services, maintenance and other                                                      |                          |         | 81,301             |         |                    |         | 79,738  |         |      |         | 55,987  |         |   |        | 15,686      |        |   |        | 15,183 |       
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|Total cost of revenues                   |                                                                                      |                          | 90,880  |                    |         |                    | 81,116  |         |         |      | 58,984  |         |         |   | 15,800 |             |        |   | 15,409 |       
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|                                         |                                                                                      |                          | 54,809  |                    |         |                    | 94,898  |         |         |      | 58,181  |         |         |   | 16,643 |             |        |   | 11,825 |       
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|Operating expenses:                      |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|                                         | Research and development                                                             |                          |         | 51,607             |         |                    |         | 49,522  |         |      |         | 45,745  |         |   |        | 12,708      |        |   |        | 8,717  |       
|                                         | Sales and marketing                                                                  |                          |         | 49,348             |         |                    |         | 30,242  |         |      |         | 29,942  |         |   |        | 7,565       |        |   |        | 6,549  |       
|                                         | General and administrative                                                           |                          |         | 20,944             |         |                    |         | 17,398  |         |      |         | 13,305  |         |   |        | 2,926       |        |   |        | 3,959  |       
|                                         | Restructuring expenses                                                               |                          |         | 2,063              |         |                    |         | 10,188  |         |      |         | 8,199   |         |   |        | 3,396       |        |   |        | 2,166  |       
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|                                         |                                                                                      | Total operating expenses |         |                    | 123,962 |                    |         |         | 107,350 |      |         |         | 97,191  |   |        |             | 26,595 |   |        |        | 21,391 | 
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|Loss from operations                     |                                                                                      |                          | (69,153 | )                  |         |                    | (12,452 | )       |         |      | (39,010 | )       |         |   | (9,952 | )           |        |   | (9,566 | )     
|Interest and other income                |                                                                                      |                          | 3,784   |                    |         |                    | 2,454   |         |         |      | 1,362   |         |         |   | 500    |             |        |   | 86     |       
|Interest expense                         |                                                                                      |                          | (72     | )                  |         |                    | (42     | )       |         |      | (59     | )       |         |   | (54    | )           |        |   | (136   | )     
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|Loss before income taxes                 |                                                                                      |                          | (65,441 | )                  |         |                    | (10,040 | )       |         |      | (37,707 | )       |         |   | (9,506 | )           |        |   | (9,616 | )     
|Provision (benefit) for income taxes     |                                                                                      |                          | (6,666  | )                  |         |                    | 36      |         |         |      | (3,944  | )       |         |   | 2      |             |        |   | 277    |       
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|Net loss                                 |                                                                                      | $                        | (58,775 | )                  |         | $                  | (10,076 | )       |         | $    | (33,763 | )       |         | $ | (9,508 | )           |        | $ | (9,893 | )     
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|Net loss per share:                      |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|                                         | Basic                                                                                |                          | $       | (1.72              | )       |                    | $       | (0.29   | )       |      | $       | (0.96   | )       |   | $      | (0.27       | )      |   | $      | (0.27  | )     
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|                                         | Diluted                                                                              |                          | $       | (1.72              | )       |                    | $       | (0.29   | )       |      | $       | (0.96   | )       |   | $      | (0.27       | )      |   | $      | (0.27  | )     
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|Shares used in computing per share data: |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|                                         | Basic                                                                                |                          |         | 34,248             |         |                    |         | 34,857  |         |      |         | 35,237  |         |   |        | 35,359      |        |   |        | 37,210 |       
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       
|                                         | Diluted                                                                              |                          |         | 34,248             |         |                    |         | 34,857  |         |      |         | 35,237  |         |   |        | 35,359      |        |   |        | 37,210 |       
|                                         |                                                                                      |                          |         |                    |         |                    |         |         |         |      |         |         |         |   |        |             |        |   |        |       

See accompanying notes.

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INDUS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(in thousands)

|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |         |         |  
|---------------------------- | --------------------------------------------------------- | ---------------------------------------- | ------ | ------------ | - | ------- | -- | ------- | - | ------ | ------- | -------- | - | -------- | ------ | -------- | - | ------ | ---- | -------- | - | -------- | -------- | ----------- | ------- | ----- | ------ | - | ----- | - | ------- | ------- | ------- | -
|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      | Deferred |   | Retained |          | Accumulated |         |       |        |  
|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      | Compen-  |   | Earnings |          | Other       |         | Total
|                             |                                                           |                                          |        | Common Stock |   | Addl   |    | Trea-   |   | sation |         | (Accumu- |   | Compre-  |        | Stock-  
|                             |                                                           |                                          |        |              |   | Paid-In |    | sury    |   | &      |         | lated    |   | hensive  |        | holders
|                             |                                                           |                                          |        | Shares       |   | $ Amt   |    | Capital |   | Stock  |         | Other    |   | Deficit) |        | Loss     |   | Equity
|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |       
|Balance at December 31, 1999 |                                                           |                                          | 32,992 |              |   | $       | 33 |         |   | $      | 112,473 |          |   | $        | (2,181 | )        |   | $      | (700 | )        |   | $        | 10,564   |             |         | $     | (1,837 | ) |       | $ | 118,352 |        
|                             | Exercise of stock options                                 |                                          |        | 1,485        |   |         |    | 2       |   |        |         | 7,899    |   |          |        |         |   |        |      |         |   |          |          |            |         |       |        |  |       |   |         | 7,901   |        
|                             | Sale of common stock under ESPP                           |                                          |        | 218          |   |         |    |        |   |        |         | 941      |   |          |        |         |   |        |      |         |   |          |          |            |         |       |        |  |       |   |         | 941     |        
|                             | Notes receivable from stockholder                         |                                          |        |             |   |         |    |        |   |        |         |         |   |          |        |         |   |        |      | 524      |   |          |          |            |         |       |        |  |       |   |         | 524     |        
|                             | Deferred stock compensation                               |                                          |        |             |   |         |    |        |   |        |         |         |   |          |        |         |   |        |      |         |   |          |          |            |         |       |        |  |       |   |         |        |        
|                             | Amortization of deferred compensation                     |                                          |        |             |   |         |    |        |   |        |         |         |   |          |        |         |   |        |      | 48       |   |          |          |            |         |       |        |  |       |   |         | 48      |        
|                             | Comprehensive loss:                                       |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |         |        
|                             |                                                           | Net loss                                 |        |              |  |         |    |         |  |        |         |          |  |          |        |          |  |        |      |          |  |          |          |             | (58,775 | )     |        |   |      |   |         |         | (58,775 | )
|                             |                                                           | Unrealized gain on marketable
securities |        |              |  |         |    |         |  |        |         |          |  |          |        |          |  |        |      |          |  |          |          |             |        |       |        |   |      |   |         |         |        |  
|                             |                                                           | Foreign currency translation             |        |              |  |         |    |         |  |        |         |          |  |          |        |          |  |        |      |          |  |          |          |             |        |       |        |   | (34   | ) |         |         | (34     | )
|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |        
|                             | Total comprehensive income                                |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         | (58,809 | )      
|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |        
|Balance at December 31, 2000 |                                                           |                                          | 34,695 |              |   | $       | 35 |         |   | $      | 121,313 |          |   | $        | (2,181 | )        |   | $      | (128 | )        |   | $        | (48,211  | )           |         | $     | (1,871 | ) |       | $ | 68,957  |        
|                             | Exercise of stock options                                 |                                          |        | 276          |   |         |    |        |   |        |         | 1,330    |   |          |        |         |   |        |      |         |   |          |          |            |         |       |        |  |       |   |         | 1,330   |        
|                             | Sale of common stock under ESPP                           |                                          |        | 240          |   |         |    |        |   |        |         | 894      |   |          |        |         |   |        |      |         |   |          |          |            |         |       |        |  |       |   |         | 894     |        
|                             | Notes receivable from stockholder                         |                                          |        |             |   |         |    |        |   |        |         |         |   |          |        |         |   |        |      | (31      | ) |          |          |            |         |       |        |  |       |   |         | (31     | )      
|                             | Deferred stock compensation                               |                                          |        |             |   |         |    |        |   |        |         | 134      |   |          |        |         |   |        |      | (134     | ) |          |          |            |         |       |        |  |       |   |         |        |        
|                             | Amortization of deferred compensation                     |                                          |        |             |   |         |    |        |   |        |         |         |   |          |        |         |   |        |      | 81       |   |          |          |            |         |       |        |  |       |   |         | 81      |        
|                             | Comprehensive loss:                                       |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |         |        
|                             |                                                           | Net loss                                 |        |              |  |         |    |         |  |        |         |          |  |          |        |          |  |        |      |          |  |          |          |             | (10,076 | )     |        |   |      |   |         |         | (10,076 | )
|                             |                                                           | Unrealized gain on marketable
securities |        |              |  |         |    |         |  |        |         |          |  |          |        |          |  |        |      |          |  |          |          |             |        |       |        |   | 42    |   |         |         | 42      |  
|                             |                                                           | Foreign currency translation             |        |              |  |         |    |         |  |        |         |          |  |          |        |          |  |        |      |          |  |          |          |             |        |       |        |   | (251  | ) |         |         | (251    | )
|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |        
|                             | Total comprehensive income                                |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         | (10,285 | )      
|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |        
|Balance at December 31, 2001 |                                                           |                                          | 35,211 |              |   | $       | 35 |         |   | $      | 123,671 |          |   | $        | (2,181 | )        |   | $      | (212 | )        |   | $        | (58,287  | )           |         | $     | (2,080 | ) |       | $ | 60,946  |        
|                             | Exercise of stock options                                 |                                          |        | 291          |   |         |    | 1       |   |        |         | 1,041    |   |          |        |         |   |        |      |         |   |          |          |            |         |       |        |  |       |   |         | 1,042   |        
|                             | Sale of common stock under ESPP                           |                                          |        | 168          |   |         |    |        |   |        |         | 459      |   |          |        |         |   |        |      |         |   |          |          |            |         |       |        |  |       |   |         | 459     |        
|                             | Notes receivable from stockholder                         |                                          |        |             |   |         |    |        |   |        |         |         |   |          |        |         |   |        |      | 55       |   |          |          |            |         |       |        |  |       |   |         | 55      |        
|                             | Warrant exercise                                          |                                          |        | 68           |   |         |    |        |   |        |         | 198      |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         | 198     |        
|                             | Benefit from Carryback of Net
Operating Loss              |                                          |        |             |   |         |    |        |   |        |         | 182      |   |          |        |         |   |        |      |         |   |          |          |            |         |       |        |  |       |   |         | 182     |        
|                             | Purchase of treasury stock                                |                                          |        | (500         | ) |         |    |        |   |        |         |         |   |          |        | (2,500   | ) |        |      |         |   |          |          |            |         |       |        |  |       |   |         | (2,500  | )      
|                             | Amortization of deferred compensation                     |                                          |        |             |   |         |    |        |   |        |         | 57       |   |          |        |         |   |        |      | 53       |   |          |          |            |         |       |        |  |       |   |         | 110     |        
|                             | Comprehensive loss:                                       |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |         |        
|                             |                                                           | Net loss                                 |        |              |  |         |    |         |  |        |         |          |  |          |        |          |  |        |      |          |  |          |          |             | (33,763 | )     |        |   |      |   |         |         | (33,763 | )
|                             |                                                           | Unrealized gain on marketable
securities |        |              |  |         |    |         |  |        |         |          |  |          |        |          |  |        |      |          |  |          |          |             |        |       |        |   | 27    |   |         |         | 27      |  
|                             |                                                           | Foreign currency translation             |        |              |  |         |    |         |  |        |         |          |  |          |        |          |  |        |      |          |  |          |          |             |        |       |        |   | 1,520 |   |         |         | 1,520   |  
|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |        
|                             | Total comprehensive income                                |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         | (32,216 | )      
|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |        
|Balance at December 31, 2002 |                                                           |                                          | 35,238 |              |   | $       | 36 |         |   | $      | 125,608 |          |   | $        | (4,681 | )        |   | $      | (104 | )        |   | $        | (92,050  | )           |         | $     | (533   | ) |       | $ | 28,276  |        
|                             | Exercise of stock options                                 |                                          |        | 1            |   |         |    |        |   |        |         | 2        |   |          |        |         |   |        |      |         |   |          |          |            |         |       |        |  |       |   |         | 2       |        
|                             | Issuance of common stock in private
placement transaction |                                          |        | 6,827        |   |         |    | 6       |   |        |         | 9,669    |   |          |        |         |   |        |      |         |   |          |          |            |         |       |        |  |       |   |         | 9,675   |        
|                             | Amortization of deferred compensation                     |                                          |        |             |   |         |    |        |   |        |         |         |   |          |        |         |   |        |      | 25       |   |          |          |            |         |       |        |  |       |   |         | 25      |        
|                             | Comprehensive loss:                                       |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |         |        
|                             |                                                           | Net loss                                 |        |              |  |         |    |         |  |        |         |          |  |          |        |          |  |        |      |          |  |          |          |             | (9,893  | )     |        |   |      |   |         |         | (9,893  | )
|                             |                                                           | Unrealized gain on marketable
securities |        |              |  |         |    |         |  |        |         |          |  |          |        |          |  |        |      |          |  |          |          |             |        |       |        |   |      |   |         |         |        |  
|                             |                                                           | Foreign currency translation             |        |              |  |         |    |         |  |        |         |          |  |          |        |          |  |        |      |          |  |          |          |             |        |       |        |   | 349   |   |         |         | 349     |  
|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |        
|                             | Total comprehensive income                                |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         | (9,544  | )      
|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |        
|Balance at March 31, 2003    |                                                           |                                          | 42,066 |              |   | $       | 42 |         |   | $      | 135,279 |          |   | $        | (4,681 | )        |   | $      | (79  | )        |   | $        | (101,943 | )           |         | $     | (184   | ) |       | $ | 28,434  |        
|                             |                                                           |                                          |        |              |   |         |    |         |   |        |         |          |   |          |        |          |   |        |      |          |   |          |          |             |         |       |        |   |       |   |         |        

See accompanying notes.

35



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##### Table of Contents



INDUS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |         |        |  
|------------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------- | -------- | ------------------------ | ------ | --------- | ------- | ---- | ------ | ---- | ------- | ---- | ------ | - | ------ | ------------------ | ------ | - | ------- | ------- | ------ | -
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        | Three Months Ended
|                                                                                            |                                              |                                       |          | Years Ended December 31, |        | March 31,
|                                                                                            |                                              |                                       |          |                          |        |          
|                                                                                            |                                              |                                       |          | 2000                     |        | 2001      |         | 2002 |        | 2002 |         | 2003
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |     
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        | (unaudited)        |        |   |         |        
|Cash flows from operating activities:                                                       |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Net loss                                                                                    |                                              | $                                     | (58,775  | )                        |        | $         | (10,076 | )    |        | $    | (33,763 | )    |        | $ | (9,508 | )                  |        | $ | (9,893  | )      
|Adjustments to reconcile net income
to net cash provided by (used in) operating
activities: |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|                                                                                            |                                              | Depreciation and amortization         |          |                          | 8,472  |           |         |      | 8,067  |      |         |      | 8,541  |   |        |                    | 1,991  |   |         |         | 2,332  |  
|                                                                                            |                                              | Provision for doubtful accounts       |          |                          | 1,388  |           |         |      | 333    |      |         |      | (2,267 | ) |        |                    | (1,984 | ) |         |         | (336   | )
|                                                                                            |                                              | Amortization of deferred compensation |          |                          | 48     |           |         |      | 81     |      |         |      | 53     |   |        |                    | 18     |   |         |         | 25     |  
|                                                                                            |                                              | (Gain) loss on sale of fixed assets   |          |                          |       |           |         |      | 95     |      |         |      | 205    |   |        |                    | (45    | ) |         |         | 84     |  
|                                                                                            | Changes in operating assets and liabilities: |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |         |       
|                                                                                            |                                              | Billed accounts receivable            |          |                          | 209    |           |         |      | 2,165  |      |         |      | 11,217 |   |        |                    | 14,749 |   |         |         | 7,055  |  
|                                                                                            |                                              | Unbilled accounts receivable          |          |                          | 696    |           |         |      | (1,627 | )    |         |      | 11,255 |   |        |                    | 5,267  |   |         |         | (4,279 | )
|                                                                                            |                                              | Income tax receivable                 |          |                          | (5,983 | )         |         |      | 4,553  |      |         |      | (3,693 | ) |        |                    | (912   | ) |         |         | 60     |  
|                                                                                            |                                              | Other current assets                  |          |                          | (399   | )         |         |      | 1,491  |      |         |      | 1,587  |   |        |                    | (2,975 | ) |         |         | (670   | )
|                                                                                            |                                              | Other assets                          |          |                          | 1,597  |           |         |      | 2,427  |      |         |      | (405   | ) |        |                    | 125    |   |         |         | (290   | )
|                                                                                            |                                              | Accounts payable                      |          |                          | 335    |           |         |      | 323    |      |         |      | (984   | ) |        |                    | 14     |   |         |         | (298   | )
|                                                                                            |                                              | Deferred income taxes                 |          |                          | 9,512  |           |         |      |       |      |         |      |       |   |        |                    |       |   |         |         |       |  
|                                                                                            |                                              | Income taxes payable                  |          |                          |       |           |         |      | 1,747  |      |         |      | 2,788  |   |        |                    | 1,334  |   |         |         | 286    |  
|                                                                                            |                                              | Other accrued liabilities             |          |                          | 4,391  |           |         |      | 3,133  |      |         |      | (5,244 | ) |        |                    | (5,025 | ) |         |         | 1,143  |  
|                                                                                            |                                              | Deferred revenue                      |          |                          | 16,822 |           |         |      | 1,381  |      |         |      | (3,055 | ) |        |                    | (3,089 | ) |         |         | 2,362  |  
|                                                                                            |                                              | Other                                 |          |                          | (642   | )         |         |      | (214   | )    |         |      | 255    |   |        |                    |       |   |         |         |       |  
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Net cash provided by (used in) operating
activities                                         |                                              |                                       | (22,329  | )                        |        |           | 13,879  |      |        |      | (13,510 | )    |        |   | (40    | )                  |        |   | (2,419  | )      
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Cash flows from investing activities:                                                       |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Purchase of marketable securities                                                           |                                              |                                       | (361,567 | )                        |        |           | (52,041 | )    |        |      | (52,953 | )    |        |   | (3,387 | )                  |        |   | (8,993  | )      
|Sale of marketable securities                                                               |                                              |                                       | 408,422  |                          |        |           | 66,192  |      |        |      | 52,399  |      |        |   | 5,056  |                    |        |   | 12,411  |        
|Increase in restricted cash                                                                 |                                              |                                       |         |                          |        |           |        |      |        |      | (5,159  | )    |        |   |       |                    |        |   | (6      | )      
|Acquisition of business                                                                     |                                              |                                       |         |                          |        |           |        |      |        |      |        |      |        |   |       |                    |        |   | (29,020 | )      
|Acquisition of property and equipment                                                       |                                              |                                       | (12,346  | )                        |        |           | (7,467  | )    |        |      | (3,994  | )    |        |   | (853   | )                  |        |   | (667    | )      
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Net cash provided by (used in) investing activities                                         |                                              |                                       | 34,509   |                          |        |           | 6,684   |      |        |      | (9,707  | )    |        |   | 816    |                    |        |   | (26,275 | )      
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Cash flows from financing activities:                                                       |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Net repayment of capital leases/notes payable                                               |                                              |                                       | (322     | )                        |        |           | (139    | )    |        |      | (170    | )    |        |   | (2     | )                  |        |   | (64     | )      
|Proceeds from issuance of convertible notes, net
of issuance costs                          |                                              |                                       |         |                          |        |           |        |      |        |      |        |      |        |   |       |                    |        |   | 13,716  |        
|Proceeds from issuance of common stock, net
of issuance costs                               |                                              |                                       | 8,842    |                          |        |           | 2,224   |      |        |      | 1,938   |      |        |   | 976    |                    |        |   | 9,677   |        
|Changes in stockholder receivables                                                          |                                              |                                       | 524      |                          |        |           | (31     | )    |        |      | 55      |      |        |   | 39     |                    |        |   |        |        
|Purchase of treasury stock                                                                  |                                              |                                       |         |                          |        |           |        |      |        |      | (2,500  | )    |        |   |       |                    |        |   |        |        
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Net cash provided by (used in) financing activities                                         |                                              |                                       | 9,044    |                          |        |           | 2,054   |      |        |      | (677    | )    |        |   | 1,013  |                    |        |   | 23,329  |        
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Effect of exchange rate differences on cash                                                 |                                              |                                       | (34      | )                        |        |           | (251    | )    |        |      | 1,520   |      |        |   | (628   | )                  |        |   | 505     |        
|Net increase/(decrease) in cash and cash equivalents                                        |                                              |                                       | 21,190   |                          |        |           | 22,366  |      |        |      | (22,374 | )    |        |   | 1,161  |                    |        |   | (4,860  | )      
|Cash and cash equivalents at beginning of period                                            |                                              |                                       | 16,345   |                          |        |           | 37,535  |      |        |      | 59,901  |      |        |   | 59,901 |                    |        |   | 37,527  |        
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Cash and cash equivalents at end of period                                                  |                                              | $                                     | 37,535   |                          |        | $         | 59,901  |      |        | $    | 37,527  |      |        | $ | 61,062 |                    |        | $ | 32,667  |        
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Supplemental disclosures of cash flow information:                                          |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Interest paid                                                                               |                                              | $                                     | 72       |                          |        | $         | 42      |      |        | $    | 59      |      |        | $ | 7      |                    |        | $ | 10      |        
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Income taxes paid                                                                           |                                              | $                                     | 729      |                          |        | $         | 1,631   |      |        | $    | 315     |      |        | $ | 32     |                    |        | $ | 81      |        
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Income tax refunds                                                                          |                                              | $                                     | 9,262    |                          |        | $         | 8,021   |      |        | $    | 3,703   |      |        | $ | 659    |                    |        | $ |        |        
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Supplemental noncash financing activities:                                                  |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Acquisition of business:                                                                    |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|                                                                                            | Fair value of assets acquired                |                                       | $        |                         |        |           | $       |     |        |      | $       |     |        |   | $      |                   |        |   | $       | 51,462  |       
|                                                                                            | Fair value of liabilities assumed*           |                                       |          |                         |        |           |         |     |        |      |         |     |        |   |        |                   |        |   |         | (25,697 | )     
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Net assets acquired                                                                         |                                              |                                       |         |                          |        |           |        |      |        |      |        |      |        |   |       |                    |        |   | 25,765  |        
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|                                                                                            | Due from seller                              |                                       |          |                         |        |           |         |     |        |      |         |     |        |   |        |                   |        |   |         | 3,255   |       
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        
|Net acquisition-related cash paid                                                           |                                              | $                                     |         |                          |        | $         |        |      |        | $    |        |      |        | $ |       |                    |        | $ | 29,020  |        
|                                                                                            |                                              |                                       |          |                          |        |           |         |      |        |      |         |      |        |   |        |                    |        |   |         |        



---

|* |  | Includes obligation to seller of $10.0 million
|- |  | ----------------------------------------------

See accompanying notes.

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##### Table of Contents



INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(information as of March 31, 2002 is unaudited)

1.       Nature of Business and Significant Accounting Policies

Organization and Business

Business

Indus International, Inc. (the Company) is a multi-product company that
develops, markets, implements and supports integrated Enterprise Asset
Management (EAM) and Supply Chain software and service products for
capital-intensive industries worldwide. The Companys software and service
products help customers maximize return on assets and improve efficiencies in
core business functions in the utilities, oil and gas, defense, pulp and paper,
metals and mining and process industries worldwide. In March 2003, the Company
acquired Indus Utility Systems, Inc. (IUS) (formerly known as SCT Utility
Systems, Inc.) and related operations. IUS develops, markets, implements and
supports customer information systems (CIS), complex billing and customer
relationship management (CRM) software to a broad spectrum of utilities,
primarily in the United States.

Significant Customers

In 2001, Magnox Electric plc (Magnox) selected the Company to provide
work management and compliance system software for eight nuclear stations. The
Company is providing a total business solution, including the PassPort product
suite, implementation services, and five years of application hosting via
Indus web hosting services. Magnox is a wholly-owned subsidiary of British
Nuclear Fuels Ltd (BNFL), operating BNFLs nuclear power stations. The
Magnox contract represented 3.8% and 12.6% of the Companys revenue for the
years ended December 31, 2001 and 2002, respectively, and 16.2% and 11.2% of
the Companys revenue for the three-month periods ended March 31, 2002 and
2003, respectively. In 2001, the United Kingdoms Ministry of Defense (MoD)
selected the Company as the application provider for logistics and asset
management. The MoD project represented 23.3% of total revenues for 2001. The
MoD suspended this project indefinitely in the first quarter of 2002 and, as a
result, revenues from the project during 2002 were insignificant. Another
customer accounted for 12.2% of the Companys total revenues in 2000.

Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated. Certain prior period amounts have been reclassified to
conform to the current presentation.

Revenue Recognition

The Company provides its software to customers under contracts that
provide for both software license fees and implementation and other services.
The revenues from software license fees are recognized in accordance with AICPA
Statements of Position (SOP) 97-2, 98-4, and 98-9, and SEC Staff Accounting
Bulletin No. 101. Revenue for software is recognized when persuasive evidence
of a non-cancelable license agreement exists, delivery has occurred, the
license fee is fixed or determinable, and collection is probable. Revenue from
services, which generally are time and material based, are recognized as the
work is performed. When software is licensed through indirect sales channels,
licensing fees are recognized as revenue when the reseller sells the software
to an end user customer and the criteria described above have been met. For
arrangements that include rights to multiple software products and/or services,
the total arrangement fee is allocated among each of the elements using the
residual method, under which revenue applicable to the undelivered elements is
deferred based on vendor specific objective evidence of fair value, where it
exists, and the residual amount of revenue is allocated to the delivered
elements. Vendor-specific objective evidence is based on the price charged
when an element is sold separately or, in the case of an element not yet sold
separately, the price established by authorized management, if it is probable
that the price, once established, will not change once the element is sold
separately.

Revenue is recognized using contract accounting for arrangements involving
significant customization or modification of the software or where software
services are considered essential to the functionality of the software.
Revenue from these software arrangements is recognized using the
percentage-of-completion method with progress-to-completion measured using
labor cost inputs and with revisions to estimates reflected in the period in
which changes become known. Project losses are provided for in their entirety
in the period in which they become known.

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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Revenue from maintenance and support services is recognized ratably over
the term of the support contract, typically one year.

Revenue from web hosting (also referred to as application service
provider or ASP) services is recognized based upon contractually agreed upon
rates per user or service, over a contractually defined time period. Under
some web hosting arrangements, customers have a license to the software and are
entitled to take possession of the software at any time during the hosting
period, while other customers are only entitled to use the software through the
hosting arrangement. For arrangements in which the customer has the
contractual right to take possession of the software at any time during the
hosting period without significant penalty, the Company recognizes revenue
under the accounting policies disclosed in its revenue recognition accounting
policy for software arrangements.

Unbilled accounts receivable represent amounts related to revenue under
existing contracts that has been recorded either as deferred revenue or earned
revenue but which has not yet been billed. Generally, unbilled amounts are
billed within one year of the sale of product or performance of services.

For arrangements that include multiple elements, the revenue is allocated
to the various elements based on vender-specific objective evidence of fair
value established by independent sale of the elements when sold separately.

Deferred revenue represents fees for services and products that have not
yet met the criteria to be recognized as revenue. At March 31, 2003, the
balance of $50.6 million was comprised of $33.6 million of deferred
maintenance, support and services revenue and $17.0 million of deferred license
revenue.

Deferred maintenance and support represents amounts invoiced prior to
performance of maintenance services, which are typically one year and are
amortized on a straight-line basis as the service is provided. Deferred
services are amounts invoiced prior to performance of professional services.

Deferred license revenue represents license fee contracts revenue which
was deferred because either the fee is not fixed or determinable or a
nonstandard acceptance period is provided. Revenue on these amounts is
recognized as the fee becomes fixed and determinable and acceptance has
occurred.

Foreign Currency Translation

The functional currencies of the Companys foreign subsidiaries are their
respective local currencies. The financial statements of foreign subsidiaries
have been translated into U.S. Dollars. All balance sheet accounts have been
translated using the exchange rates in effect at the balance sheet date. The
gains and losses resulting from the translation of the accounts of the
Companys foreign subsidiaries have been reported in other comprehensive income
(loss) within stockholders equity. The foreign statements of operations have
been translated during the year using average exchange rates. Gains and losses
resulting from foreign currency transactions are included in determination of
net income (loss). Historically, the foreign currency gains and losses have
not been significant, and the Company has determined that foreign currency
derivative products are not required to hedge the Companys exposure.

Concentration of Credit Risk

Financial instruments where the Company may be subject to concentrations
of credit risk consist principally of cash and cash equivalents, short-term
investments and trade accounts receivable. The Company invests excess cash
primarily in money market funds and commercial paper, which are highly liquid
securities that bear minimal risk. In addition, the Company has investment
policies and procedures that are reviewed periodically to minimize credit risk.
The Companys customers are generally large companies in the utilities, oil
and gas, defense, pulp and paper, metals and mining and process industries.
The Company performs ongoing credit evaluations and generally does not require
collateral. In addition, the Company routinely assesses the financial strength
of its customers and, as a consequence, believes that its accounts receivable
credit risk exposure is limited.

The Company added to its allowance for doubtful accounts approximately
$3.1 million in 2000, $3.4 million in 2001, reversed approximately $807,000 in
2002, and added approximately $1.0 million for the three-month period ended
March 31, 2003. The changes were based on an evaluation of specific accounts
and aging categories. Total write-offs of uncollectible amounts were $1.7
million in 2000, $3.1 million in 2001, $1.5 million in 2002 and $0.1 million
for the three months ended March 31, 2003. The write-offs in 2001 were not
attributable to any major accounts, but were a result of the write-off of many
older items which had been previously reserved.

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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

One customer (Magnox) represented 16.2% and 11.2% of total revenue for the
three-month periods ended March 31, 2002 and 2003, respectively. This same
customer represented 12.6% of total revenues for 2002 and 10.7% of total billed
and unbilled accounts receivable at December 31, 2002. One customer (MoD)
represented 23.3% of total revenues for 2001 and 17.2% of total billed and
unbilled accounts receivable at December 31, 2001. Another customer accounted
for 12.2% of the Companys total revenues in 2000.

Cash Equivalents and Marketable Securities

The Company considers all non-auctionable, highly liquid, low risk debt
instruments with maturities of three months or less from the date of purchase
to be cash equivalents. The Company generally invests its cash and cash
equivalents in money market funds, and commercial paper and corporate notes.

The Company presently classifies all marketable securities as
available-for-sale investments and carries them at fair market value.
Unrealized holding gains and losses, net of taxes, are included in accumulated
other comprehensive income (loss) within stockholders equity.

Restricted Cash

Restricted cash of approximately $5.4 million includes $2.8 million in
other current assets and $2.6 million in other non-current assets. The $2.8
million restricted cash in other current assets is a $2.8 million performance
bond denominated in British pounds (GBP 1.8 million) maturing in July 2003,
which was established in April 2002 for the Magnox project. The $2.6 million
in non-current assets is comprised of a $2.3 million compensating balance
arrangement to support a standby letter of credit for the same amount, held by
the Companys San Francisco office landlord, and a $0.3 million certificate of
deposit used as security for a letter of credit.

The recoverability of the cash used for the performance bond is tied to
satisfactory fulfillment of specific performance criteria in the Magnox
contract. The cash used for the standby letter of credit with the San
Francisco office landlord will be recoverable upon fulfillment of the Companys
lease obligation in May 2008.

Property and Equipment

Property and equipment is stated at cost. Equipment under capital leases
is stated at the lower of fair market value or the present value of the minimum
lease payments at the inception of the lease.

Depreciation on office and computer equipment and furniture is computed
using the straight-line method over estimated useful lives of four to seven
years. Leasehold improvements are amortized using the straight-line method
over the shorter of the related lease term or their estimated useful lives.
Software purchased for internal use is amortized using the straight-line method
over estimated useful lives of four to five years.

Software Development Costs

The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards (SFAS) No. 86, Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,
whereby costs for the development of new software products and substantial
enhancements to existing software products are expensed as incurred until
technological feasibility has been established, at which time any additional
costs are capitalized. Technological feasibility is established upon
completion of a working model. Through December 31, 2002, software development
costs incurred subsequent to the establishment of technological feasibility
have not been significant, and all software development costs have been charged
to research and development expense in the accompanying consolidated statements
of operations.

In the three-month period ended March 31, 2003, the Company capitalized
certain development costs of $0.4 million related to the internationalization
of its products to Asian markets. All other software development costs
incurred during that period were charged to research and development expense.

Internal-Use Software

SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use, requires that entities capitalize certain costs related to
internal use software once certain criteria have been met. Capitalized
internal-use software development costs associated with the Companys
information systems are included in property and equipment and are depreciated
on a straight-line

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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

basis over three year periods. Depreciation expense recorded
for the three months ended March 31, 2002 and March 31, 2003 was approximately
$501,000 and $643,000, respectively, and for the years ended December 31, 2000,
2001 and 2002 was approximately $1.1 million, $1.8 million and $2.4 million,
respectively. (Capitalized costs represent external software and
implementation services purchases).

Acquisition-Related Intangible assets

Acquisition-related intangible assets are stated at cost less accumulated
amortization. The intangible assets include values for developed technology,
customer base, contracts and trade names. These intangible assets are being
amortized on a straight-line basis over a period of two to fifteen years.
Total amortization expense for intangible assets was $152,000 for the
three-month period ended March 31, 2003 and is included in operating expense in
the accompanying Consolidated Statements of Operations.

Acquisition-related intangible assets consist of the following (in thousands):

March 31,2003Acquired trademarks
    
    $
    730Acquired technology
    
    
    2,400Acquired contracts and customer base
    
    
    9,810Total acquired intangible assets
    
    
    12,940Less accumulated amortization
    
    
    (152
    )Net intangible assets
    
    $
    12,788


The weighted-average amortization period for these intangible assets is
approximately eleven years. Trademarks and technology have weighted-average
amortization periods of five years and contracts and customer base has a
weighted-average amortization period of thirteen years. The Company expects
amortization expense for the next five years to be as follows based on
intangible assets as of March 31, 2003 (in thousands):

2004
    
    
    1,7802005
    
    
    1,7402006
    
    
    1,2002007
    
    
    1,2002008
    
    
    1,1597,079


Goodwill and Impairment

In the first quarter of 2002 the Company adopted SFAS No. 142, Goodwill
and Other Intangible Assets. Under SFAS No. 142, goodwill, which represents
the excess of purchase price over fair value of net assets acquired,is no
longer subject to amortization; instead it will be subject to new impairment
testing criteria. The Company evaluates the carrying value of goodwill as of
March 31 and between annual evaluations if events occur or circumstances change
that would more likely than not reduce the fair value of the asset below its
carrying amount. The Company has recorded goodwill of $0.4 million associated
with the acquisition of IUS on March 5, 2003 and has recorded no impairment
losses during the three-month period ended March 31, 2003. This goodwill is
included in Acquired Intangible Assets in the Consolidated Balance Sheet at
March 31, 2003.

Notes Payable

Notes payable represents short-term borrowings. The Company includes in
notes payable only those principal balances which are to be paid within the
subsequent twelve-month period. The notes payable balance at March 31, 2003
includes a $10.0 million 6% promissory note to SCT Financial Corporation
secured by IUS real property, due September 5, 2003, and $14.5 million in 8%
convertible notes due December 5, 2003 that are convertible to shares of the
Companys common stock upon shareholder approval. The 8% convertible notes
will be converted into common shares of the Companys stock automatically upon
approval of the issuance of new shares from shareholders.

40



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##### Table of Contents



INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Advertising Costs

Advertising costs are charged to expense in the period the costs are
incurred. Advertising expense was approximately $198,000 and $47,000 for the
three months ended March 31, 2002 and 2003, respectively, and was approximately
$920,000, $214,000 and $846,000 for years ended December 31, 2000, 2001 and
2002, respectively, and are included in Sales and Marketing in the accompanying
Consolidated Statements of Operations.

Income Taxes

Income taxes are computed in accordance with SFAS No. 109, Accounting for
Income Taxes, which requires the use of the liability method in accounting for
income taxes. Under SFAS No. 109, deferred tax assets and liabilities are
measured based on differences between the financial reporting and tax bases of
assets and liabilities using enacted tax rates and laws that are expected to be
in effect when the differences are expected to reverse.

Per Share Data

Basic earnings per share is calculated using the weighted average common
shares outstanding during the periods. Common equivalent shares from stock
options, warrants and convertible notes using the treasury stock method or the
if-converted method, have been excluded from the diluted per share calculations
because the effect of inclusion would be antidilutive.

The components of basic and diluted earnings per share were as follows (in
thousands, except per share amounts):

Fiscal Years Ended
    
    Three Months EndedDecember 31,
    
    March 31,2000
    
    2001
    
    2002
    
    2002
    
    2003(unaudited)Net loss
    
    $
    (58,775
    )
    
    $
    (10,076
    )
    
    $
    (33,763
    )
    
    $
    (9,508
    )
    
    $
    (9,893
    )Weighted average shares of common stock
outstanding
    
    
    34,248
    
    
    
    34,857
    
    
    
    35,237
    
    
    
    35,359
    
    
    
    37,210Basic net loss per share
    
    $
    (1.72
    )
    
    $
    (0.29
    )
    
    $
    (0.96
    )
    
    $
    (0.27
    )
    
    $
    (0.27
    )Calculation of shares outstanding for computing
diluted net loss per share:Shares used in computing basic net loss
per share
    
    
    34,248
    
    
    
    34,857
    
    
    
    35,237
    
    
    
    35,359
    
    
    
    37,210Shares to reflect the effect of the assumed
exercise of:Employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Convertible Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares used in computing diluted net
loss per share
    
    
    34,248
    
    
    
    34,857
    
    
    
    35,237
    
    
    
    35,359
    
    
    
    37,210Diluted net loss per share
    
    $
    (1.72
    )
    
    $
    (0.29
    )
    
    $
    (0.96
    )
    
    $
    (0.27
    )
    
    $
    (0.27
    )


The Company has excluded all outstanding stock options, warrants and
convertible notes to purchase common stock from the calculation of diluted net
loss per share because all securities are antidilutive for all periods
presented. As of December 31, 2000, 2001 and 2002, and March 31, 2002 and
2003, stock options, warrants and convertible notes to purchase common stock in
the amount of 9,257,103, 8,946,531, 9,772,963, 8,888,239 and 19,908,179 were
outstanding. The 8% Convertible Notes which are convertible

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##### Table of Contents



INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

into approximately
9.7 million shares of common stock upon receipt of the requisite approval of
the Companys stockholders were outstanding at March 31, 2003. See Notes 7 and
8 for further information on those securities.

Use of Estimates

The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates. Those accounts that are affected by the use of estimates are
revenues from services (the determination of the scope and duration of the
engagement and the status of completion to date), the allowance for doubtful
accounts (the valuation of the credit worthiness of our customers), and accrued
restructuring costs (the determination of rental obligations for excess office
space).

Stock Based Compensation

As permitted under SFAS No. 123, Accounting for Stock-Based
Compensation, as amended by SFAS No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, the Company accounts for stock based
compensation in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees, and accordingly recognizes no
compensation expense for the stock option grants as long as the exercise price
is equal to or more than the fair value of the shares at the date of grant.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options vesting period. The
Companys pro forma information net loss including pro forma compensation
expense, net of tax for the three months ended March 31, 2002 and 2003, and for
the years ended December 31, 2000, 2001 and 2002, respectively, is as follows
(in thousands except per share amounts):

Fiscal Years Ended
    
    Three Months EndedDecember 31,
    
    March 31,2000
    
    2001
    
    2002
    
    2002
    
    2003(unaudited)Net loss as reported
    
    $
    (58,775
    )
    
    $
    (10,076
    )
    
    $
    (33,763
    )
    
    $
    (9,508
    )
    
    $
    (9,893
    )Add: Total stock-based compensation expense
determined under the intrinsic value method
    
    $
    48
    
    
    $
    81
    
    
    $
    53
    
    
    $
    18
    
    
    $
    25Deduct: Total stock-based compensation expense
determined under fair-value based method for
all awards
    
    $
    (12,483
    )
    
    $
    (8,743
    )
    
    $
    (4,809
    )
    
    $
    (1,552
    )
    
    $
    (1,509
    )Pro forma net loss
    
    $
    (71,210
    )
    
    $
    (18,738
    )
    
    $
    (38,519
    )
    
    $
    (11,042
    )
    
    $
    (11,377
    )Loss per share:Basic:As reported
    
    $
    (1.72
    )
    
    $
    (0.29
    )
    
    $
    (0.96
    )
    
    $
    (0.27
    )
    
    $
    (0.27
    )Pro forma
    
    $
    (2.08
    )
    
    $
    (0.54
    )
    
    $
    (1.09
    )
    
    $
    (0.31
    )
    
    $
    (0.31
    )Diluted:As reported
    
    $
    (1.72
    )
    
    $
    (0.29
    )
    
    $
    (0.96
    )
    
    $
    (0.27
    )
    
    $
    (0.27
    )Pro forma
    
    $
    (2.08
    )
    
    $
    (0.54
    )
    
    $
    (1.09
    )
    
    $
    (0.31
    )
    
    $
    (0.31
    )Shares used in computing per share dataBasic
    
    
    34,248
    
    
    
    34,857
    
    
    
    35,237
    
    
    
    35,359
    
    
    
    37,210Diluted
    
    
    34,248
    
    
    
    34,857
    
    
    
    35,237
    
    
    
    35,359
    
    
    
    37,210


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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

The weighted average fair value of options granted under all plans was
$4.91 and $1.43 for the three months ended March 31, 2002 and 2003,
respectively; and $4.34, $3.91 and $2.22 for years ended December 31, 2000,
2001 and 2002, respectively.

Recent Accounting Pronouncements

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 addresses the
financial accounting and reporting for costs associated with exit or disposal
activities, including a definition of Restructuring, and nullifies EITF 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity. SFAS No. 146 requires companies to recognize costs
associated with exit or disposal activities when they are incurred rather than
at the date of a commitment to an exit or disposal plan. The effective date of
SFAS No. 146 is January 1, 2003, with early application encouraged. The
Company adopted SFAS No. 146 on January 1, 2003, and its adoption did not have
a significant impact on its financial statements.

In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure. SFAS No. 148 amends
SFAS No. 123, Accounting for Stock-Based Compensation, to provide alternative
methods of transition to Statement 123s fair value method of accounting for
stock-based employee compensation. SFAS No. 148 also amends the disclosure
provisions of SFAS No. 123 and Accounting Principles Board Opinion No. 28,
Interim Financial Reporting, to require disclosure in the summary of
significant accounting policies of the effects of an entitys accounting policy
with respect to stock-based compensation, regardless of whether the Company
accounts for that compensation using the fair value method of SFAS No. 123 or
the intrinsic value method of APB No. 25, Accounting for Stock Issued to
Employees. SFAS No. 148s amendment of the transition and annual disclosure
requirements of SFAS No. 123 are effective for fiscal years ending after
December 15, 2002 and were adopted on January 1, 2003. The Company accounts
for stock-based compensation using the intrinsic value method prescribed in APB
No. 25 and related interpretations. Management has not yet evaluated the
alternative transition methods if the Company were to adopt the fair value
provisions of SFAS No. 123 under this new standard.

On November 25, 2002, the FASB issued Interpretation No. 45, or FIN 45,
Guarantors Accounting and Disclosure Requirements for Guarantees, including
Indirect Guarantees of Indebtedness of Others, and Interpretation of FASB
Statements No. 5, 57 and 107 and Rescission of FASB Interpretation No. 34. FIN
45 clarifies the requirements of SFAS No. 5, Accounting for Contingencies,
relating to the guarantors accounting for, and disclosure of, the issuance of
certain types of guarantees. The disclosure provisions of FIN 45 are effective
for financial statements of interim or annual periods that end after December
15, 2002. The Company adopted FIN 45 on January 1, 2003 and there was no
financial impact associated with the adoption.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable
Interest Entities. FIN 46 provides guidance for companies having ownership of
variable interest entities, typically referred to as special purpose entities,
in determining whether to consolidate such variable interest entities. FIN 46
has immediate applicability for variable interest entities created after
January 31, 2003 or interests in variable interest entities obtained after that
date. For interests in variable interest entities obtained prior to February
1, 2003, FIN 46 becomes effective on July 1, 2003. The Company does not
believe the adoption will have a significant effect on its consolidated
financial position or results of operations.

2.       Marketable Securities

The Company attempts to maximize total investment returns while
maintaining a conservative investment policy that emphasizes preservation of
principal through high credit quality requirements (A1/P1, MIG 1A or better, AA
or better) and maintenance of liquidity with maximum effective maturity of any
single issue not to exceed two years. The Company currently classifies all
marketable securities as available-for-sale investments and carries them at
fair market value.

The following is a summary of marketable securities, all of which are
available-for-sale (in thousands):

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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31,
    
    March 31,2001
    
    2002
    
    2003Money market funds
    
    $
    131
    
    
    $
    401
    
    
    $
    403Government agency notes
    
    
    1,601
    
    
    
    2,206
    
    
    
    202Commercial paper and corporate notes
    
    
    2,109
    
    
    
    6,364
    
    
    
    451Auction rate notes
    
    
    1,175
    
    
    
    
    
    
    
    $
    5,016
    
    
    $
    8,971
    
    
    $
    1,056Included in:Cash and cash equivalents
    
    $
    1,397
    
    
    $
    4,797
    
    
    $
    299Marketable securities
    
    
    1,757
    
    
    
    2,171
    
    
    
    757Investments and other assets
    
    
    1,862
    
    
    
    2,003
    
    
    
    $
    5,016
    
    
    $
    8,971
    
    
    $
    1,056


Maturities of investment securities classified as available-for-sale at
March 31, 2003 by contractual maturity are shown below (in thousands):

Due within one year
    
    $
    1,056$
    1,056


At December 31, 2001, 2002 and March 31, 2003, the gross amortized cost of
marketable securities approximates the estimated fair value. There have been
no significant realized gains or losses on sales of marketable securities.

3.       Property and Equipment

Property and equipment is recorded at cost and consists of the following
(in thousands):

December 31,
    
    March 31,2001
    
    2002
    
    2003Land and buildings
    
    $
    
    
    
    $
    
    
    
    $
    19,125Furniture and fixtures
    
    
    6,465
    
    
    
    6,380
    
    
    
    7,164Office equipment
    
    
    38,993
    
    
    
    40,828
    
    
    
    41,909Leasehold improvements
    
    
    3,847
    
    
    
    4,323
    
    
    
    4,141Internal-use software
    
    
    12,408
    
    
    
    13,605
    
    
    
    14,05761,713
    
    
    
    65,136
    
    
    
    86,396Less accumulated depreciation and amortization
    
    
    39,836
    
    
    
    47,665
    
    
    
    48,308$
    21,877
    
    
    $
    17,471
    
    
    $
    38,088


Depreciation and amortization expense, totaled $2.0 million and $2.3
million for the three months ended March 31, 2002 and 2003 respectively, and
totaled $7.0 million, $8.0 million and $8.5 million for the years ended
December 31, 2000, 2001 and 2002, respectively.

4.       Other Accrued Liabilities

Other accrued liabilities consist of the following (in thousands):

44



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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

December 31,
    
    March 31,2001
    
    2002
    
    2003Accrued commissions
    
    $
    1,476
    
    
    $
    635
    
    
    $
    264Accrued payroll and related expenses
    
    
    6,866
    
    
    
    4,382
    
    
    
    5,494Accrued taxes payable
    
    
    5,359
    
    
    
    1,849
    
    
    
    2,765Accrued restructuring expenses
    
    
    1,628
    
    
    
    2,887
    
    
    
    4,209Accrued project reserves
    
    
    1,444
    
    
    
    580
    
    
    
    807Accrued legal and accounting expenses
    
    
    1,674
    
    
    
    1,116
    
    
    
    1,953Other
    
    
    4,571
    
    
    
    4,358
    
    
    
    5,076$
    23,018
    
    
    $
    15,807
    
    
    $
    20,568


5.       Lines of Credit

The Company has a revolving bank line of credit in the amount of $15.0
million, which expires on May 31, 2003. During the first quarter of 2002, the
Company generated a net loss of $9.5 million. This loss triggered a default of
the profitability and minimum tangible net worth covenants within the Companys
revolving bank line of credit. This default required the Company to establish
and maintain a restricted compensating balance with the lender, California Bank
and Trust, equal to all outstanding credit line and letter of credit usage. On
April 1, 2002, the Company established a restricted, interest bearing,
compensating balance account for $2.3 million, to support a standby letter of
credit for the same amount, held by the Companys San Francisco office
landlord. No other usage of the line of credit is anticipated and the Company
intends to maintain the restricted compensating balance for as long as
required.

Except as previously discussed, there were no other borrowings outstanding
under this line of credit at December 31, 2001, 2002 and March 31, 2003. The
line of credit agreement contains certain affirmative and negative covenants.
The Company was either in compliance with or had received waivers for each of
the financial covenants at December 31, 2001, 2002 and March 31, 2003. The
lender has provided the Company with waivers of the covenant defaults for the
first quarter of 2002, and each quarter thereafter, up to and including the
quarter ending March 31, 2003 (the line of credit expires on May 31, 2003), if
the Company maintains the required compensating balance. The Company is not in
reliance on the line of credit, except for the $2.3 million standby letter of
credit.

6.       Commitments

The Company leases its office facilities under various operating lease
agreements. The leases require monthly rental payments in varying amounts
through 2012. These leases also require the Company to pay property taxes,
normal maintenance and insurance on the leased facilities.

Total rental expense under these leases was approximately $1.7 million and
$1.5 million for the three months ended March 31, 2002 and 2003, respectively,
and approximately $8.1 million, $7.0 million and $6.6 million for the years
ended December 31, 2000, 2001 and 2002, respectively. Future minimum lease
payments under all non-cancelable leases are as follows (in thousands):

Operating
    
    CapitalYears Ending March 31,
    
    Leases
    
    Leases2004
    
    $
    9,807
    
    
    $
    2952005
    
    
    9,113
    
    
    
    552006
    
    
    7,503
    
    
    
    2007
    
    
    6,566
    
    
    
    2008
    
    
    6,511
    
    
    
    Thereafter
    
    
    8,572
    
    
    
    Total minimum payments required
    
    $
    48,072
    
    
    $
    350Less amounts representing interest
    
    
    
    
    
    
    (24
    )Present value of minimum lease payments
    
    
    
    
    
    $
    326Less current portion
    
    
    
    
    
    
    (274
    )Obligations under capital leases, long-term
    
    
    
    
    
    $
    52


At December 31, 2001, 2002 and March 31, 2003, the Company had capital
lease obligations of approximately $4,000, $390,000 and $326,000, respectively.
Equipment leased under capital leases is included in property and equipment.
Equipment under capital

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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

leases was approximately $4.1 million at December 31,
2001 and $4.6 million at both December 31, 2002 and March 31, 2003, with
accumulated depreciation of $4.1 million, $4.1 million and $4.2 million,
respectively.

As of March 31, 2003, the Company has subleased 43,981 square feet related
to excess office space in its San Francisco location and 3,570 square feet in
its Pittsburgh location, and has available for sublease 54,153 square feet in
San Francisco, Pittsburgh, Dallas and Irvine. Future reduction in rent
anticipated from existing subleases is shown in the below chart (in thousands):

Sub LeaseYears Ending March 31,
    
    Income2004
    
    $
    1,0062005
    
    
    1,0492006
    
    
    1,0412007
    
    
    1,0142008
    
    
    1,014Thereafter
    
    
    169Total sublease income under current contracts
    
    $
    5,293


The Company has a commitment to purchase development services expertise in
the form of labor hours, which the business is utilizing in its development
efforts. The purchase commitment extends through December 22, 2007. During
the remainder of the term of the commitment, the business will purchase
approximately $3.2 million of labor hours at agreed upon labor rates, which
approximate the Companys fully absorbed labor rates.

7.       Stockholders Equity

The Board of Directors is authorized, subject to any limitations
prescribed by Delaware law, to provide for the issuance of shares of preferred
stock in one or more series, to establish from time to time the number of
shares to be included in each such series, to fix the powers, preferences and
rights of the shares of each wholly un-issued series and any qualifications,
limitations or restrictions thereon, and to increase or decrease the number of
shares of any such series (but not below the number of shares of such series
then outstanding), without any further vote or action by the stockholders. The
Board of Directors may authorize the issuance of preferred stock with voting or
conversion rights that could adversely affect the voting power of other rights
of the holders of common stock. Thus, the issuance of preferred stock may have
the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no current plan to issue any shares of preferred
stock.

In July 1999, the Companys Board of Directors approved a stock repurchase
program for up to 2,000,000 shares of the Companys outstanding common stock.
The Company is authorized to use available cash to buy back its shares in open
market transactions from time to time, subject to price and market conditions.
As of March 31, 2003, the Company held, as treasury stock, 435,500 shares that
had been repurchased at a cost of approximately $2.2 million under the program.

In April 2002, the Company entered into an agreement with Robert Felton, a
founder of the Company and former Chief Executive Officer and Chairman of the
Board of Directors. Under this agreement, the Company repurchased 500,000
shares of the Companys common stock from Mr. Felton at a price of $5.00 per
share, which approximated market value at the time of the agreement, for an
aggregate purchase price of $2.5 million. As part of this agreement, Mr.
Felton agreed not to transfer or enter into any agreement to transfer the
remainder of his shares of the Companys stock for a period of one year. These
repurchased shares are also held as treasury stock.

On March 5, 2003, the Company completed a private placement offering to
purchasers of approximately 6.8 million shares of the Companys common stock,
par value $0.001 (the Shares), at a purchase price of $1.50 per share, or a
total of approximately $10.2 million, and approximately $14.5 million of the
Companys 8% convertible notes due December 5, 2003 in order to fund the IUS
acquisition. The convertible notes are convertible into shares of common stock
at face value plus accrued interest only upon receipt of the requisite approval
by the Companys stockholders, and, upon approval, will automatically be
converted at the same price per share as the Shares, subject to certain
adjustments. While the number of shares to be issued in exchange for the
convertible notes is dependent upon the timing of stockholder approval, due to
accrued interest being a part of the consideration, the Company estimates that
between 9.8 million and 10.0 million additional shares will be issued.

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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

At March 31, 2003, the Company had 329,219 outstanding warrants to
purchase an equal number of shares of the Companys common stock at an exercise
price of $2.58 per share. These stock purchase warrants can be exercised at
any time from June 20, 1994 to and including June 20, 2004. The warrant
agreement provides that the exercise price and the number of shares purchasable
shall be adjusted according to the formula set forth in the warrant agreement
if the Company issues shares of its common stock at a purchase price that is
less than the warrant exercise price. The outstanding warrants and warrant
exercise price have been adjusted based on the provisions in the warrant
agreement due to the private placement offering of 6.8 million shares at $1.50
per share on March 5, 2003. At such time as the 8% convertible notes convert
into common stock, the warrant exercise price and the number of shares will
again be adjusted in accordance with the warrant agreement. The size of the
adjustments will depend on the date of the conversion because accrued interest
under the notes also converts into common stock.

Related parties, consisting of the Companys Chairman and CEO and certain
principal stockholders, purchased 11% and 38% of the common stock and
convertible notes, respectively. The Company believes that these transactions
were carried out at an arms-length basis, given the fact that a majority of
the purchasers of these securities were unrelated third parties.

8.       Stock Plans

Stock Option and Benefit Plans

The Company has three stock option plans under which employees, directors
and consultants may be granted rights to purchase common stock.

1997 Stock Plan

The 1997 Stock Plan provides for the grant of incentive or non-statutory
stock options to employees, including officers and directors, and non-statutory
options only to consultants of the Company. A total of 12,500,000 shares have
been reserved for issuance under the Stock Plan. The incentive stock options
will be granted at not less than fair market value of the stock on the date of
grant. The options generally vest over one to four years and have a maximum
term of ten years.

1997 Directors Option Plan

Each director who is not an employee of the Company is automatically
granted a non-statutory stock option to purchase 50,000 shares of common stock
of the Company (the First Option) on the date such person becomes a director
or, if later, on the effective date of the 1997 Directors Option Plan (the
Director Option Plan). Thereafter, each such person will automatically be
granted an option to acquire 17,500 shares of the Companys common stock (the
Subsequent Option) upon such outside directors re-election at each Annual
Meeting of Stockholders, provided that on such date such person has served on
the Board of Directors for at least six months. A total of 700,000 shares have
been reserved for issuance under the Director Option Plan. Each option granted
under the Directors Option Plan will become exercisable as to 25% of the
shares subject on each anniversary date of the option grant.

1998 Indus International, Inc. Company Share Option Plan

The 1998 Indus International, Inc. Company Share Option Plan (the UK
Stock Plan) provides for the grant of stock options to employees of Indus
International, Ltd. (a UK foreign subsidiary of the Company). A total of
500,000 shares of the Companys common stock have been reserved for issuance
under the Stock Plan. Options were granted in the amounts of 135,235 in 2000
and 69,250 in 2001; there were no options granted in 2002 and 2003. Options of
37,625 in 2000, 50,050 in 2001, 43,930 in 2002, and 4,500 in 2003 were
cancelled or expired. A total of 40,100 options have been exercised to date.
The stock options will be granted at not less than fair market value of the
stock on the date of grant. The options generally vest over one to three years
and have a maximum term of three years.

Combined activity under all of the Companys stock option plans was as
follows:

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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Options OutstandingSharesAvailable
    
    
    
    
    
    Weighted-for
    
    
    
    
    
    AverageGrant
    
    Shares
    
    Exercise PriceBalances at December 31, 1999
    
    
    4,644,569
    
    
    
    6,931,766
    
    
    $
    5.24Shares authorized
    
    
    500,000
    
    
    
    
    
    
    
    Options granted
    
    
    (5,721,073
    )
    
    
    5,721,073
    
    
    $
    6.20Options forfeited
    
    
    2,291,705
    
    
    
    (2,291,705
    )
    
    $
    5.86Options exercised
    
    
    
    
    
    
    (1,476,933
    )
    
    $
    9.03Plan shares expired
    
    
    (133,859
    )
    
    
    
    
    
    
    Balances at December 31, 2000
    
    
    1,581,342
    
    
    
    8,884,201
    
    
    $
    5.66Shares authorized
    
    
    2,500,000
    
    
    
    
    
    
    
    Options granted
    
    
    (1,673,100
    )
    
    
    1,673,100
    
    
    $
    5.12Options forfeited
    
    
    1,707,981
    
    
    
    (1,707,981
    )
    
    $
    6.46Options exercised
    
    
    
    
    
    
    (275,691
    )
    
    $
    6.93Plan shares expired
    
    
    (92,332
    )
    
    
    
    
    
    
    Balances at December 31, 2001
    
    
    4,023,891
    
    
    
    8,573,629
    
    
    $
    5.43Shares authorized
    
    
    
    
    
    
    
    
    
    
    Options granted
    
    
    (3,587,000
    )
    
    
    3,587,000
    
    
    $
    2.50Options forfeited
    
    
    2,401,457
    
    
    
    (2,401,457
    )
    
    $
    5.09Options exercised
    
    
    
    
    
    
    (290,742
    )
    
    $
    5.64Plan shares expired
    
    
    (58,445
    )
    
    
    
    
    
    
    Balances at December 31, 2002
    
    
    2,779,903
    
    
    
    9,468,430
    
    
    $
    4.46Shares authorized
    
    
    
    
    
    
    
    
    
    
    Options granted
    
    
    (628,500
    )
    
    
    628,500
    
    
    $
    1.74Options forfeited
    
    
    248,989
    
    
    
    (248,989
    )
    
    $
    4.83Options exercised
    
    
    
    
    
    
    (1,463
    )
    
    $
    1.24Plan shares expired
    
    
    (50,844
    )
    
    
    
    
    
    
    Balances at March 31, 2003
    
    
    2,349,548
    
    
    
    9,846,478
    
    
    $
    4.27


The following table summarizes information about stock options outstanding
as of March 31, 2003:

Options Outstanding
    
    Options Vested andExercisableWeighted-Number
    
    Average
    
    Weighted-
    
    Number
    
    Weighted-Outstanding
    
    Remaining
    
    Average
    
    Exercisable
    
    AverageRange of
    
    at March 31,
    
    Contractual
    
    Exercise
    
    at March 31,
    
    ExerciseExercise Prices
    
    2003
    
    Life
    
    Price
    
    2003
    
    Price$  0.2830 - $  2.8750
    
    
    3,422,144
    
    
    
    9.12
    
    
    $
    1.57
    
    
    
    270,611
    
    
    $
    1.99$  3.3800 - $  3.8750
    
    
    285,882
    
    
    
    4.04
    
    
    $
    3.45
    
    
    
    268,514
    
    
    $
    3.42$  3.9375 - $  3.9375
    
    
    891,234
    
    
    
    7.55
    
    
    $
    3.94
    
    
    
    477,759
    
    
    $
    3.94$  3.9400 - $  4.5000
    
    
    916,367
    
    
    
    7.79
    
    
    $
    4.45
    
    
    
    501,367
    
    
    $
    4.49$  4.5620 - $  4.5620
    
    
    1,139,676
    
    
    
    4.64
    
    
    $
    4.56
    
    
    
    1,139,676
    
    
    $
    4.56$  4.5900 - $  5.9600
    
    
    1,026,125
    
    
    
    8.66
    
    
    $
    5.56
    
    
    
    236,784
    
    
    $
    5.56$  6.0000 - $  7.6000
    
    
    487,250
    
    
    
    8.17
    
    
    $
    6.64
    
    
    
    151,371
    
    
    $
    6.62$  7.6250 - $  7.6250
    
    
    862,500
    
    
    
    6.83
    
    
    $
    7.63
    
    
    
    862,500
    
    
    $
    7.63$  7.6800 - $  8.0625
    
    
    665,300
    
    
    
    7.20
    
    
    $
    7.99
    
    
    
    446,526
    
    
    $
    8.01$13.7500 - $15.3750
    
    
    150,000
    
    
    
    2.11
    
    
    $
    13.97
    
    
    
    150,000
    
    
    $
    13.97Totals
    
    
    9,846,478
    
    
    
    7.66
    
    
    $
    4.27
    
    
    
    4,505,108
    
    
    $
    5.63


48



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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

1997 Employee Stock Purchase Plan

The 1997 Employee Stock Purchase Plan had 1,000,000 shares of common stock
reserved for issuance. The plan allowed for eligible employees to purchase
stock at 85% of the lower of the fair market value of the Companys common
stock as of the first day of each six-month offering period or the fair market
value of the stock at the end of the offering period. Purchases were limited
to 10% of each employees compensation and a maximum of 4,000 shares. Under
the plan the Company issued 218,151, 239,601 and 167,606 shares in 2000, 2001
and 2002, respectively, at prices ranging from $1.50 to $3.33 per share.
Effective November 1, 2002, the 1997 Employee Stock Purchase Plan was concluded
as all the authorized shares under the plan had been distributed. The Company
anticipates seeking stockholder approval for a new Employee Stock Purchase Plan
at its 2003 Annual Meeting of stockholders.

9.       Alternative Method of Valuing Stock Options

For employee stock options granted with exercise prices at or above the
existing market, the Company records no compensation expense. Compensation
costs for stock options granted to employees is measured by the excess, if any,
of the quoted market price of the Companys stock at the date of grant over the
amount an employee must pay to acquire the stock.

Pro forma information regarding net income and earnings per share is
required by SFAS No. 123, as amended by SFAS No. 148, and described and
disclosed in Note 1, and has been determined as if the Company had accounted
for its employee stock options under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions for 2000, 2001, 2002 and three months ended March 31, 2003,
respectively: risk free interest rate of 6.12%, 5.06%, 4.25% and 2.99%;
dividend yields of 0%; volatility of 139%, 89%, 128% and 107%; and a
weighted-average expected life of the option of 5 years.

10.       Employee Benefit and Profit-Sharing Plans

The Company has a defined contribution 401(K) plan. All employees over
the age of 18 who have completed at least three months of service are eligible
to participate. Each participant may elect to have amounts deducted from his
or her compensation and contribute to the plan up to the maximum amount imposed
by Federal law. All employee contributions are fully vested at the time the
employee becomes an active participant. The Companys matching contributions
are equal to 50% of pre-tax contributions, up to 3% of eligible pay. This
match is distributed to all eligible employees participating in the plan. The
matching contribution is made quarterly. The Companys matching contributions
were approximately $108,000 and $157,000 for the three months ended March 31,
2002 and 2003 respectively, and were approximately $984,000, $1,389,000 and
$559,000 for the years ended 2000, 2001 and 2002, respectively.

11.       Segment Information

Segment information is as follows (in thousands):

49



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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Fiscal Years Ended
    
    Three Months EndedDecember 31,
    
    March 31,2000
    
    2001
    
    2002
    
    2002
    
    2003(unaudited)Revenues (based on selling location):United States
    
    $
    101,256
    
    
    $
    104,442
    
    
    $
    76,757
    
    
    $
    21,610
    
    
    $
    17,724International:United Kingdom
    
    
    29,816
    
    
    
    60,234
    
    
    
    28,299
    
    
    
    8,428
    
    
    
    6,696Canada
    
    
    5,854
    
    
    
    4,719
    
    
    
    5,852
    
    
    
    1,434
    
    
    
    1,429Other foreign countries
    
    
    8,763
    
    
    
    6,619
    
    
    
    6,257
    
    
    
    971
    
    
    
    1,385Total International
    
    
    44,433
    
    
    
    71,572
    
    
    
    40,408
    
    
    
    10,833
    
    
    
    9,510Total consolidated revenues
    
    $
    145,689
    
    
    $
    176,014
    
    
    $
    117,165
    
    
    $
    32,443
    
    
    $
    27,234Long-lived assets:United States
    
    $
    19,096
    
    
    $
    19,368
    
    
    $
    16,060
    
    
    $
    18,422
    
    
    $
    36,914International:United Kingdom
    
    
    1,979
    
    
    
    1,742
    
    
    
    1,098
    
    
    
    1,570
    
    
    
    855Canada
    
    
    686
    
    
    
    471
    
    
    
    80
    
    
    
    434
    
    
    
    98Other foreign countries
    
    
    472
    
    
    
    296
    
    
    
    233
    
    
    
    299
    
    
    
    221Total consolidated long-lived assets
    
    $
    22,233
    
    
    $
    21,877
    
    
    $
    17,471
    
    
    $
    20,725
    
    
    $
    38,088


The Companys software license fee revenue is generated by two product
groups: Enterprise Asset Management (EAM) solutions and Customer Information
Systems (CIS) solutions. For the periods shown in the above table, all
software license fee revenue was generated by EAM products.

12.       Restructuring Expenses

The Company recorded restructuring costs of $3.4 million and $2.2 million
for the three months ended March 31, 2002 and 2003, respectively, and $2.1
million, $10.2 million and $8.2 million for the years ended December 31, 2000,
2001 and 2002, respectively.

The restructuring costs of $2.1 million and $10.2 million for 2000 and
2001 were in connection with the ongoing relocation of the Companys
headquarters and certain administrative functions to Atlanta, Georgia,
severance payments related to the elimination of 56 global positions, and
charges representing the estimated excess lease costs associated with
subleasing redundant San Francisco office space. This relocation was approved
by the Board of Directors in July 2000 and included costs of approximately $2.8
million for severance pay for employees affected, and approximately $9.5
million for lease termination costs associated with reducing leased space in
San Francisco. The San Francisco office leases expire May 31, 2008.

The Company recorded restructuring costs of approximately $3.4 million in
the first quarter of 2002, in connection with the suspension of the MoD project
and the Companys subsequent demobilization and reduction in workforce and
required support office facilities. A formal restructuring plan was approved
by the Board of Directors in March 2002 and included costs of approximately
$947,000 for computer lease termination costs, approximately $728,000 of
severance payments related to the elimination of 81 global positions, and
approximately $1.7 million for lease termination costs associated with closing
the Companys Dallas office and reducing leased space in the Companys
Pittsburgh office. The Dallas lease expires December 31, 2005 and the
Pittsburgh lease expires September 30, 2005.

In the second and fourth quarters of 2002, the Company incurred additional
restructuring expenses of $4.8 million. These expenses related to a change in
the Companys estimates of excess lease costs associated with subleasing
redundant office space in San Francisco, Dallas and Pittsburgh. Due to the
excess capacity of available lease space in the San Francisco market, lease
rates have declined from approximately $60 per square foot at the beginning of
2001 to the $18-$20 per square foot range, which is below the Companys actual
lease cost of $45 per square foot. In Dallas and Pittsburgh, current lease
rates for both markets are in the $10-$14 range, which is below the Companys
actual lease costs of $25-$26 per square foot.

In the three-month period ended March 31, 2003, the Company recorded
restructuring expenses of $2.2 million related to a further space consolidation
in the Companys San Francisco offices. An additional floor was made available
for sublease due to the cumulative effect of staff reductions.

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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

As further described in Note 15 to the Consolidated Financial Statements,
at the time of acquisition of IUS, Indus recorded a liability for IUS employee
severance costs. These costs were recognized as a liability assumed in the
acquisition.

Below is an analysis of the three restructure provisions and the activity
in the resultant accruals:

Company headquarters relocation:

(In thousands)
    
    Severance andRelated Costs
    
    Equipment
    
    Facilities
    
    TotalBalance at December 31, 1999
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Payments in 2000
    
    
    (466
    )
    
    
    
    
    
    
    
    
    
    
    (466
    )Accruals in 2000
    
    
    803
    
    
    
    
    
    
    
    1,260
    
    
    
    2,063Adjustments in 2000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at December 31, 2000
    
    $
    337
    
    
    $
    
    
    
    $
    1,260
    
    
    $
    1,597Payments in 2001
    
    
    (1,716
    )
    
    
    
    
    
    
    (2,189
    )
    
    
    (3,905
    )Accruals in 2001
    
    
    1,553
    
    
    
    
    
    
    
    
    
    
    
    1,553Adjustments in 2001
    
    
    
    
    
    
    
    
    
    
    8,261
    
    
    
    8,261Balance at December 31, 2001
    
    $
    174
    
    
    $
    
    
    
    $
    7,332
    
    
    $
    7,506Payments in 2002
    
    
    (110
    )
    
    
    
    
    
    
    (2,461
    )
    
    
    (2,571
    )Accruals in 2002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjustments in 2002
    
    
    (64
    )
    
    
    
    
    
    
    3,615
    
    
    
    3,551Balance at December 31, 2002
    
    $
    
    
    
    $
    
    
    
    $
    8,486
    
    
    $
    8,486Payments in 2003
    
    
    
    
    
    
    
    
    
    
    (416
    )
    
    
    (416
    )Accruals in 2003
    
    
    
    
    
    
    
    
    
    
    2,166
    
    
    
    2,166Adjustments in 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at March 31, 2003
    
    $
    
    
    
    $
    
    
    
    $
    10,236
    
    
    $
    10,236


MoD project suspension:

(In thousands)
    
    Severance andRelated Costs
    
    Equipment
    
    Facilities
    
    TotalBalance at December 31, 2001
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Payments in 2002
    
    
    (652
    )
    
    
    (953
    )
    
    
    (639
    )
    
    
    (2,244
    )Accruals in 2002
    
    
    
    
    
    
    
    
    
    
    1,720
    
    
    
    1,720Adjustments in 2002
    
    
    657
    
    
    
    953
    
    
    
    1,140
    
    
    
    2,750Balance at December 31, 2002
    
    $
    5
    
    
    $
    
    
    
    $
    2,221
    
    
    $
    2,226Payments in 2003
    
    
    
    
    
    
    
    
    
    
    (206
    )
    
    
    (206
    )Accruals in 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Adjustments in 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at March 31, 2003
    
    $
    5
    
    
    $
    
    
    
    $
    2,015
    
    
    $
    2,020


IUS Acquisition:

(In thousands)
    
    Severance andRelated Costs
    
    Equipment
    
    Facilities
    
    TotalBalance at December 31, 2002
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Payments in 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accruals in 2003
    
    
    675
    
    
    
    
    
    
    
    
    
    
    
    675Adjustments in 2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at March 31, 2003
    
    $
    675
    
    
    $
    
    
    
    $
    
    
    
    $
    675


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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

The $12.9 million remaining accrual at March 31, 2003 is allocated between
current and long-term classification on the Companys consolidated balance
sheet, with $4.2 million included as current (less than one year) within other
accrued liabilities and $8.7 million included as long-term (greater than one
year) within obligations under capital lease and other liabilities.

The Company could incur future increases or decreases to its existing
accruals in the event that the underlying assumptions used to develop the
Companys estimates of excess lease costs, such as the timing and the amount of
any sublease income, change.

13.       Income Taxes

The provision for income taxes (credits) consists of the following (in
thousands):

Fiscal Years Ended
    
    Three Months EndedDecember 31,
    
    March 31,2001
    
    2002
    
    2003Current:Federal
    
    $
    
    
    
    $
    (4,799
    )
    
    $
    State and foreign
    
    
    36
    
    
    
    855
    
    
    
    27736
    
    
    
    (3,944
    )
    
    
    277Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    State and foreign
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    36
    
    
    $
    (3,944
    )
    
    $
    277


Pre-tax loss attributable to foreign and domestic operations is summarized
below:

Fiscal Years Ended
    
    Three Months EndedDecember 31,
    
    March 31,2000
    
    2001
    
    2002
    
    2003Loss before income taxesUnited States
    
    $
    (59,420
    )
    
    $
    (13,168
    )
    
    $
    (38,978
    )
    
    $
    (11,179
    )International:Europe, Middle East & Africa
    
    
    (1,504
    )
    
    
    4,723
    
    
    
    1,311
    
    
    
    1,491Asia
    
    
    185
    
    
    
    (41
    )
    
    
    (97
    )
    
    
    27Canada
    
    
    (2,237
    )
    
    
    (1,080
    )
    
    
    621
    
    
    
    132Australia
    
    
    (2,465
    )
    
    
    (474
    )
    
    
    (564
    )
    
    
    (87
    )Total consolidated loss before income taxes
    
    $
    (65,441
    )
    
    $
    (10,040
    )
    
    $
    (37,707
    )
    
    $
    (9,616
    )


The effective rate of the provision for income taxes reconciles to the
amount computed by applying the federal statutory rate to income before
provision for income taxes as follows:

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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Year Ended
    
    Three Months EndedDecember 31,
    
    March 31,2001
    
    2002
    
    2003Federal statutory rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State taxes, net of federal benefit
    
    
    
    
    
    
    
    
    
    
    Foreign taxes
    
    
    (0.3
    )
    
    
    1.1
    
    
    
    2.7Reported losses and tax credits not benefited
    
    
    (33.9
    )
    
    
    (31.0
    )
    
    
    (44.2
    )Other
    
    
    (1.2
    )
    
    
    5.4
    
    
    
    3.6(0.4
    %)
    
    
    10.5
    %
    
    
    (2.9
    %)


Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the net deferred tax assets are as follows (in thousands):

December 31,
    
    March 31,2001
    
    2002
    
    2003Accounts receivable allowances
    
    $
    1,831
    
    
    $
    3,050
    
    
    $
    3,991Depreciation
    
    
    176
    
    
    
    381
    
    
    
    194Other (prepaid license writedown)
    
    
    2,598
    
    
    
    2,449
    
    
    
    3,086Nondeductible accruals
    
    
    3,130
    
    
    
    976
    
    
    
    1,458Deferred revenue
    
    
    3,678
    
    
    
    1,820
    
    
    
    536Net operating loss carryforwards
    
    
    7,943
    
    
    
    18,065
    
    
    
    22,276Research and other credit carryforwards
    
    
    4,066
    
    
    
    6,391
    
    
    
    6,984Foreign tax credits and losses
    
    
    8,326
    
    
    
    3,423
    
    
    
    2,87731,748
    
    
    
    36,555
    
    
    
    41,402Valuation allowance
    
    
    (31,748
    )
    
    
    (36,555
    )
    
    
    (41,402
    )$
    
    
    
    $
    
    
    
    $
    


The net valuation allowance increased by approximately $4.3 million, $4.8
million, and $4.8 million for the periods ended December 31, 2001, 2002 and
March 31, 2003, respectively. Approximately $2.3 million of the valuation
allowance for the deferred tax asset at March 31, 2003 relates to benefits of
stock option deductions which, when recognized, will be directly allocated to
contributed capital.

As of March 31, 2003 the Company had federal net operating loss
carryforwards of approximately $56.3 million. The Company also had federal
research tax credit carryforwards of approximately $4.5 million and state
research tax credit carryforwards of approximately $2.5 million. The federal
net operating loss and credit carryforwards will expire beginning in the year
2020, if not utilized. The Company also has foreign net operating loss
carryforwards of approximately $8.0 million. The Company also has foreign tax
credits of approximately $0.2 million, which will expire in the years 2003
through 2004 if not utilized.

The utilization of the net operating losses and credits may be subject to
a substantial annual limitation due to the change in ownership provisions of
the Internal Revenue Code of 1986 and similar state provisions. The annual
limitations may result in the expiration of net operating losses and credits
before utilization.

14.       Litigation

In June 2000, the Company was served with a demand for arbitration by
William Grabske, the Companys former Chief Executive Officer. Mr. Grabske was
seeking enforcement of a purported Settlement Agreement and Mutual Release.
Mr. Grabske sought severance pay and reimbursement of expenses of approximately
$1.0 million plus interest, options for approximately 200,000 shares of stock
in the Company, and fees and costs. The Company asserted various
counterclaims. In December 2002, the Company and Mr. Grabske entered into a
Separation Agreement and Mutual Release pursuant to which the Company and Mr.
Grabske agreed, among other things, to dismiss with prejudice their respective
claims in the arbitration. The Separation Agreement and Mutual Release did not
require any payments to Mr. Grabske by the Company.

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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

On March 5, 2003, the Company acquired IUS from Systems and Computer
Technology Corporation (SCT). IUS (formerly known as SCT Utility Systems,
Inc.) is a defendant in a claim brought by KPMG Consulting, Inc. on June 2,
2002 in the Circuit Court of the 11th Judicial Circuit. The claim alleges
damages of approximately $15.8 million based on allegations of breach of
contract and detrimental reliance on alleged promises that were not fulfilled.
IUS has asserted multiple defenses and counterclaims. Pursuant to the terms of
the Purchase Agreement among the Company and SCT and its affiliates, SCT and
those affiliates of SCT that were a party to the Purchase Agreement agreed to
defend IUS against the claims in this suit and to indemnify the Company and IUS
from all losses relating thereto.

From time to time, the Company is involved in other legal proceedings
incidental to the conduct of its business. The outcome of these claims cannot
be predicted with certainty. The Company intends to defend itself vigorously
in these actions. However, any settlement or judgment may have a material
adverse effect on the Companys results of operations in the period in which
such settlement or judgment is paid or payment becomes probable.

The Company does not believe that, individually or in aggregate, the legal
matters to which it is currently a party are likely to have a material adverse
effect on its results of operations or financial condition.

15.       Acquisition

On March 5, 2003, the Company completed its acquisition of SCT Utility
Systems, Inc. (SCTUS), a subsidiary of Systems & Computer Technology
Corporation (SCT). At the time of acquisition, SCTUS was renamed Indus
Utility Systems, Inc. (IUS). IUS is a provider of customer information system
software solutions for energy and utility companies principally in North
America. The Company believes the acquisition will provide utility customers
with a single provider for their important software requirements. The
aggregate purchase price of $35.8 million was financed with a cash payment of
$24.5 million, a $10.0 million 6% promissory note to SCT Financial Corporation
secured by IUS real property, and payment of other direct acquisition expenses
totaling $1.4 million, comprised of $0.8 million in debt issuance costs and
$0.6 million in equity issuance costs. The acquisition has been accounted for
under the purchase method of accounting and the results of operations are
included in the Companys operations beginning March 6, 2003.

On the same date, the Company completed a private placement offering to
purchasers of approximately 6.8 million shares of the Companys common stock,
par value $0.001 (the Shares), at a purchase price of $1.50 per share, or a
total of approximately $10.2 million, and issued approximately $14.5 million of
the Companys 8% convertible notes due nine months after issuance in order to
fund the IUS acquisition. The convertible notes are convertible into shares of
common stock at face value plus accrued interest only upon receipt of the
requisite approval of new share issuance by the Companys stockholders, and,
upon approval, will automatically be converted at the same price per share as
the Shares, subject to certain adjustments. While the number of shares to be
issued in exchange for the convertible notes is dependent upon the timing of
stockholder approval, due to accrued interest being a part of the
consideration, the Company estimates that between 9.8 million and 10.0 million
additional shares will be issued.

The following table summarizes the estimated fair values of the assets
acquired, and liabilities assumed at the date of acquisition, March 5, 2003 (in
thousands):

Current assets
    
    
    
    
    
    $
    15,820Property and equipment
    
    
    
    
    
    
    22,197Other assets
    
    
    
    
    
    
    75Intangible assets subject to amortizationTrademarks (5 year life)
    
    
    730Technology (5 year life)
    
    
    2,400Contracts and Customer Base (2-15 year life)
    
    
    9,810Total intangible assets
    
    
    
    
    
    
    12,940Goodwill
    
    
    
    
    
    
    430Total assets acquired
    
    
    
    
    
    
    51,462Total liabilities assumed
    
    
    
    
    
    
    15,697Net assets acquired
    
    
    
    
    
    $
    35,765


The goodwill will not be amortized, but will be reviewed for impairment on
an annual basis. This goodwill is included in Acquired Intangible Assets in
the Consolidated Balance Sheet at March 31, 2003.

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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Unaudited pro forma consolidated operating results for the twelve-month
period ended December 31, 2002 and three-month periods ended March 31, 2002 and
2003, assuming that the acquisition had occurred at January 1, 2002 are as
follows:

Twelve Months
    
    Three Months
    
    Three MonthsEnded
    
    Ended
    
    EndedDecember 31,
    
    March 31,
    
    March 31,2002
    
    2002
    
    2003Revenues
    
    $
    186,796
    
    
    $
    51,668
    
    
    $
    35,656Pro forma net loss
    
    
    (31,964
    )
    
    
    (9,260
    )
    
    
    (11,094
    )Pro forma net loss per share
    
    
    (0.76
    )
    
    
    (0.22
    )
    
    
    (0.26
    )


Prior to the acquisition date, Indus management began formulating a plan
to restructure pre-acquisition IUS through staffing reductions. In connection
with this plan, the Company recorded a liability of $675,000 representing
anticipated severance costs for approximately 50 employees of IUS in various
job functions. These costs are accounted for in accordance with EITF Issue No.
95-3, Recognition of Liabilities in Connection with Purchase Business
Combinations. The costs were recognized as a liability assumed in the
purchase business combination and included in the allocation of the cost to
acquire IUS. The liability will be paid entirely in cash, with the complete
amount being paid in the fiscal year ending March 31, 2004. It is expected
that annual savings aggregating in excess of $4.0 million will be realized as a
result of these staffing reductions. As of March 31, 2003, no payments had
been made in connection with these terminations.

16.       Quarterly Results of Operations (unaudited, except for the three months ended March 31, 2003)

The following is a summary of the quarterly results of operations for the
three months ended March 31, 2003, and for the years ended December 31, 2002
and 2001 (in thousands, except per share amounts):

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INDUS INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Reported
    
    Reported
    
    Reported
    
    ReportedMarch 31,
    
    June 30,
    
    September 30,
    
    December 31,2003Total revenues
    
    $
    27,234Cost of revenues
    
    
    15,409Gross margin
    
    
    11,825Net loss
    
    $
    (9,893
    )Net loss per share-Basic
    
    $
    (0.27
    )-Diluted
    
    $
    (0.27
    )2002Total revenues
    
    $
    32,443
    
    
    $
    31,032
    
    
    $
    26,457
    
    
    $
    27,233Cost of revenues
    
    
    15,800
    
    
    
    16,475
    
    
    
    13,868
    
    
    
    12,841Gross margin
    
    
    16,643
    
    
    
    14,557
    
    
    
    12,589
    
    
    
    14,392Net loss
    
    $
    (9,508
    )
    
    $
    (15,069
    )
    
    $
    (3,283
    )
    
    $
    (5,903
    )Net loss per share-Basic
    
    $
    (0.27
    )
    
    $
    (0.43
    )
    
    $
    (0.09
    )
    
    $
    (0.17
    )-Diluted
    
    $
    (0.27
    )
    
    $
    (0.43
    )
    
    $
    (0.09
    )
    
    $
    (0.17
    )2001Total revenues
    
    $
    42,377
    
    
    $
    43,135
    
    
    $
    44,207
    
    
    $
    46,295Cost of revenues
    
    
    21,032
    
    
    
    20,424
    
    
    
    19,757
    
    
    
    19,903Gross margin
    
    
    21,345
    
    
    
    22,711
    
    
    
    24,450
    
    
    
    26,392Net income (loss)
    
    $
    (6,409
    )
    
    $
    (6,696
    )
    
    $
    383
    
    
    $
    2,646Net income (loss) per share-Basic
    
    $
    (0.18
    )
    
    $
    (0.19
    )
    
    $
    0.01
    
    
    $
    0.08-Diluted
    
    $
    (0.18
    )
    
    $
    (0.19
    )
    
    $
    0.01
    
    
    $
    0.07


56



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Item 9.    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.




PART III




Item 10.    Directors and Executive Officers of the Registrant

The following table sets forth certain information for the persons who are
members of the board of directors or who are executive officers of the Company.

Name
    
    Age
    
    PositionJeffrey A. Babka
    
    
    50
    
    
    Executive Vice President Finance and Administration, Chief
Financial Officer and SecretaryGayle A. Crowell
    
    
    52
    
    
    Director, Audit Committee MemberGregory J. Dukat
    
    
    42
    
    
    Executive Vice President of Worldwide OperationsEdward Grzedzinski
    
    
    48
    
    
    Director, Compensation Committee MemberWilliam H. Janeway
    
    
    60
    
    
    Director, Compensation Committee MemberJoseph P. Landy
    
    
    42
    
    
    DirectorThomas R. Madison, Jr.
    
    
    57
    
    
    Chairman of the Board and Chief Executive OfficerThomas S. Robertson
    
    
    60
    
    
    Director, Audit Committee MemberThomas E. Timbie
    
    
    45
    
    
    Director, Audit Committee Member




---

Mr. Babka has served as Executive Vice President Finance and
Administration and Chief Financial Officer of the Company since April 2002.
From August 2000 to March 2002, Mr. Babka served as Vice President, Finance and
Chief Financial Officer for the Global Accounts Business Unit of Concert
Communications, an international Joint Venture between AT&T and British
Telecom, a voice and data service provider. From August 1999 to August 2000,
Mr. Babka served as Vice President and Corporate Controller for Global Crossing
Ltd, where he headed the implementation of an ERP system for that companys
worldwide operations. From July 1997 to August 1999, he was a Senior Vice
President and Chief Financial Officer for the Technology and Operations Group
of Bank of America, N.A.

Ms. Crowell has served as a director of the Company since October 19,
2000. Since July 2001, Ms. Crowell has been a full time consultant to Warburg
Pincus LLC., focused on investments in enterprise software and services. Ms.
Crowell served as president, chief executive officer and chairperson of the
board of directors of RightPoint from 1998 until its acquisition by E.piphany
in January 2000 and then served as the president of E.piphany.net and as a
member of the E.piphany board before becoming a consultant to Warburg Pincus
LLC. From 1994 to 1998, Ms. Crowell was Senior Vice President and General
Manager of worldwide field operations for Mosaix, Inc. She serves as
chairperson of the board of directors at Evolve Software and also serves as a
director of several privately held companies.

Mr. Dukat has served as Executive Vice President of Worldwide Operations
of the Company since September 2002. From September 2001 to April 2002, he was
the Chief Executive Officer for 180 Commerce, Inc, a startup reverse supply
chain enterprise software company. From October 1989 to September 2001, Mr.
Dukat served in various positions at J.D. Edwards, an enterprise software
provider, most recently as Vice President and General Manager.

Mr. Grzedzinski has served as a director of the Company since February 1,
2001. He is the president and chief executive officer of NOVA Information
Systems, which he co-founded in 1991. He also served as chairman of the board
of directors of NOVA Information Systems from 1993 until July 2001, at which
time NOVA Information Systems became a wholly-owned subsidiary of US Bancorp.
Mr. Grzedzinski also serves as vice chairman of US Bancorp and serves as the
chairman of the board of directors of EuroConex Technologies Ltd.

Mr. Janeway has served as a director of the Company since August 25, 1997.
From March 17, 1999 to December 19, 2001, Mr. Janeway served as Chairman of
the Board of the Company. From 1994 to August 25, 1997, he served as a
director of TSW International, Inc., one of the predecessor entities of the
Company. Since 1988, he has held various positions as a managing director at
Warburg Pincus LLC where he has led its investing activities in the technology sector.
Since 2000, Mr. Janeway has served as vice chairman of Warburg Pincus LLC. Mr. Janeway serves

57



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##### Table of Contents



on the Board of Directors as a nominee of Warburg, Pincus Investors, LLC. Mr.
Janeway also serves as a director of BEA Systems, Inc., Manugistics, Inc.,
VERITAS Software and several privately held companies.

Mr. Landy has served as a director of the Company since August 25, 1997.
From 1992 to August 25, 1997, he served as a director of TSW International,
Inc. Since 1994, Mr. Landy has been a managing director of Warburg Pincus.
Since 2000, Mr. Landy has also served as Executive Managing Director of Warburg
Pincus. Throughout his tenure at Warburg Pincus, Mr. Landy has focused on
investments ranging from information technology to Internet applications and
infrastructure to communications applications. Mr. Landy serves on the Board
of Directors as nominee of Warburg Pincus. Mr. Landy also serves as a director
of The Cobalt Group, Inc. and several privately held companies.

Mr. Madison has served as Chairman of the Board of the Company since
December 19, 2001 and as a director of the Company since April 24, 2001. He
has served as Chief Executive Officer of the Company since July 2002. From
January 2001 until December 2001, Mr. Madison served as an independent
management consultant. From May 1999 until January 2001, Mr. Madison served as
president and chief executive officer of Talus Solutions, an implementer of
products and services that optimize pricing strategies and practices based upon
customer buying behaviors. From March 1994 until May 1999, Mr. Madison served
as group president and corporate vice president of Computer Sciences Corp. Mr.
Madison also serves as a director of several privately held companies.

Dr. Robertson has served as a director of the Company since April 1, 2002.
He is the Dean of the Goizueta Business School at Emory University, a position
he assumed in July 1998. Prior to taking this position at Emory University, he
was a member of the faculty of the London Business School since 1994, with his
most recent position being Deputy Dean. Dr. Robertson also serves as a
director of PRG Schultz International, Inc.

Mr. Timbie has served as a director of the Company since April 1, 2002. He
is the president of Timbie & Company, LLC, a financial consulting firm he
founded in 2000. Formerly, he was interim vice president and chief financial
officer of e-dr. Network, Inc, a business-to-business exchange in the optical
device market from January 2000 to October 2000. From April 1996 to December
1999, Mr. Timbie was the vice president and chief financial officer of Xomed
Surgical Products, Inc., a medical device company. Mr. Timbie also serves as a
director and audit committee chairman of Wright Medical Group, Inc., Medical
Staffing Network Holdings, Inc. and American Medical Systems Holdings, Inc.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the
Companys directors and executive officers, and persons who own more than ten
percent of a registered class of the Companys equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of common stock and other equity securities of the
Company. Officers, directors and persons who own greater than ten percent of a
registered class of the Companys equity securities are required by Securities
and Exchange Commission regulation to furnish the Company with copies of all
Section 16(a) forms they file.

Based solely on its review of copies of the forms furnished to the
Company, the Company believes that delinquent filings were made by the
following individuals for the following transactions: Form 4s for Messrs.
Janeway, Landy, Crowell, Grzedzinski, Robertson and Timbie in connection with
option grants made on March 28, 2003 were filed one day late on March 31, 2003;
a Form 4 for Mary McCormick in connection with an option grant in January 2003
was filed late on March 13, 2003; and a Form 4 for John Gregg in connection
with an option grant on March 6, 2003 was filed late on March 12, 2003. Other
than the filings indicated, to the Companys knowledge, based solely on review
of the copies of such reports furnished to the Company, during the transition
period ended March 31, 2003, all officers, directors and 10% stockholders
complied with all Section 16(a) filing requirements.




Item 11.    Executive Compensation

On March 28, 2003, the Company changed its fiscal year end from December
31 to March 31. The following table therefore includes compensation
information for the three-month transition period from January 1, 2003 to March
31, 2003 (the Transition Period) and for the three most recently completed
fiscal years to all individuals serving as the Companys Chief Executive
Officer during the last completed fiscal year and the Companys executive
officers who were serving in such capacity at the end of the last completed
fiscal year (collectively, the Named Executive Officers):

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SUMMARY COMPENSATION TABLE

Long-term
    
    All OtherCompensation
    
    CompensationAnnual Compensation
    
    Awards
    
    ($)(2)Other Annual
    
    SecuritiesYear/
    
    
    
    
    
    
    
    
    
    Compensation
    
    UnderlyingName and Principal Position
    
    Period
    
    Salary ($)
    
    Bonus ($)
    
    ($)(1)
    
    OptionsThomas R. Madison, Jr.
    
    TransitionChief Executive Officer
    
    Period
    
    $
    100,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    and Chairman of the Board
    
    
    2002
    
    
    
    325,000
    
    
    
    
    
    
    
    
    
    
    
    896,000
    
    
    
    2001
    
    
    
    8,653
    
    
    
    
    
    
    
    
    
    
    
    50,000
    (3)
    
    
    Kent O. Hudson (4)
    
    TransitionFormer President and
    
    Period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    137,500Chief Executive Officer
    
    
    2002
    
    
    
    275,000
    
    
    $
    237,600
    
    
    $
    68,650
    
    
    
    
    
    
    
    1,380,3502001
    
    
    
    550,000
    
    
    
    137,500
    
    
    
    77,880
    
    
    
    
    
    
    
    2,5602000
    
    
    
    538,732
    
    
    
    268,654
    
    
    
    
    
    
    
    1,000,000
    
    
    
    5,950Jeffrey A. Babka (5)
    
    TransitionExecutive Vice President Finance
    
    Period
    
    
    62,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    and Administration, Chief
    
    
    2002
    
    
    
    176,042
    
    
    
    59,065
    
    
    
    
    
    
    
    450,000
    
    
    
    Financial Officer and SecretaryGregory J. Dukat (6)
    
    TransitionExecutive Vice President of
    
    Period
    
    
    62,500
    
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    Worldwide Operations
    
    
    2002
    
    
    
    72,928
    
    
    
    
    
    
    
    
    
    
    
    450,000
    
    
    
    




|(1) |  | Other Annual Compensation is itemized as follow:
|--- |  | --------------------------------------------------



| |  |  | In the Transition Period, Mr. Dukat was reimbursed for a health
club membership.
| | - |  | --------------------------------------------------------------------------------



| |  |  | In 2002, Mr. Hudson received $68,400 in payment for accrued and
unused vacation as of the date he ceased to be an employee of the
Company and $250 in reimbursement of club memberships.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In 2001, Mr. Hudson received $75,000 in relocation expenses, $2,530
in reimbursement of his physical examination at the Mayo Clinic and
$350 in reimbursement of club membership.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | All Other Compensation is itemized as follows:
|--- |  | ------------------------------------------------



| |  |  | In the Transition Period, Mr. Hudson received $137,500 in severance
payments under the terms of his employment agreement.
| | - |  | -------------------------------------------------------------------------------------------------------------------------



| |  |  | In 2002, Mr. Hudson received $1,375,000 in severance payments under
the terms of his employment agreement with the Company, $1,020 in
vested 401(k) matching contributions from the Company, and $4,330 in
life and health insurance premiums.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In 2001, Mr. Hudson received $1,200 in vested 401(k) matching
contributions from the Company and $1,360 in life and health insurance
premiums.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In 2000, Mr. Hudson received $5,950 in life and health insurance
premiums.
| | - |  | --------------------------------------------------------------------------



|(3) |  | Mr. Madison received an option grant on April 24, 2001 to purchase 50,000
shares of the Companys common stock as an independent director under the
1997 Director Option Plan prior to becoming the Companys Chairman of the
Board on December 19, 2001.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) |  | Mr. Hudson resigned his positions at the Company effective June 30, 2002.
|--- |  | -------------------------------------------------------------------------



|(5) |  | Mr. Babka became the Executive Vice President Finance and Administration,
Chief Financial Officer and Secretary of the Company effective April 2002.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------



|(6) |  | Mr. Dukat became the Executive Vice President of Worldwide Operations of
the Company effective September 2002.
|--- |  | --------------------------------------------------------------------------------------------------------------

OPTION GRANTS IN TRANSITION PERIOD AND LAST FISCAL YEAR

The following table sets forth information regarding each grant of options
to purchase common stock of the Company made to a Named Executive Officer
during the Transition Period and 2002. Options were granted under the
Companys 1997 Stock Option Plan. All options were granted at an exercise
price equal to the fair market value of the Companys common stock on the date
of grant. Options may terminate before their expiration upon the death,
permanent disability or termination of status as an employee or consultant of a
particular Named Executive Officer.

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##### Table of Contents



Individual GrantsPotential Realizable Value atNumber of
    
    Percent of
    
    
    
    
    
    
    
    
    
    Assumed Annual Rates of StockSecurities
    
    Total Options
    
    
    
    
    
    
    
    
    
    Price Appreciation for OptionUnderlying
    
    Granted to
    
    Exercise
    
    
    
    
    
    Term ($) (1)Options
    
    Employees in
    
    Price per
    
    ExpirationName
    
    Granted
    
    Fiscal Year
    
    Share ($)
    
    Date
    
    5%
    
    10%Thomas R. Madison, Jr
Transition Period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2002
    
    
    446,000
    
    
    
    13.1
    %
    
    $
    5.40
    
    
    
    3/4/12
    
    
    $
    1,514,630
    
    
    $
    3,838,369450,000
    
    
    
    13.2
    
    
    
    1.38
    
    
    
    7/10/12
    
    
    
    390,544
    
    
    
    989,714Jeffrey A. Babka
Transition Period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2002
    
    
    350,000
    
    
    
    10.3
    
    
    
    4.55
    
    
    
    4/3/12
    
    
    
    1,001,515
    
    
    
    2,538,035100,000
    
    
    
    2.9
    
    
    
    1.38
    
    
    
    7/10/12
    
    
    
    86,787
    
    
    
    219,936Gregory J. Dukat
Transition Period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2002
    
    
    450,000
    
    
    
    13.2
    
    
    
    1.50
    
    
    
    9/16/12
    
    
    
    424,504
    
    
    
    1,075,776




---

|(1) |  | Potential gains are net of exercise price, but before taxes associated
with exercise. Potential realizable value is based on the assumption that
the common stock of the Company appreciates at the annual rate shown
(compounded annually) from the date of grant until the expiration of the
option term. These values are calculated based on Securities and Exchange
Commission requirements and do not reflect the Companys estimate of
future stock price growth. Actual gains, if any, on stock option
exercises are dependent on the future performance of the Companys common
stock and overall market conditions.
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

AGGREGATE OPTION EXERCISES IN TRANSITION PERIOD AND LAST FISCAL YEAR AND
TRANSITION PERIOD-END AND YEAR-END VALUES

The following table sets forth information concerning the shares of common
stock acquired and the value realized upon the exercise of stock options during
the Transition Period and 2002, the number of shares of common stock underlying
exercisable and unexercisable options held by each of the Named Executive
Officers as of March 31, 2003 and December 31, 2002 and the values of
unexercised in-the-money options as of those dates.

Number of Securities
    
    Value of UnexercisedUnderlying
    
    in-the-Money Options atUnexercised Options at
    
    FiscalShares
    
    Value
    
    March 31, 2003
    
    Year-End ($)(1)Acquired on
    
    RealizedName
    
    Exercise
    
    ($)
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableThomas R. Madison, Jr
Transition Period
    
    
    
    
    
    
    
    
    
    
    123,999
    
    
    
    822,001
    
    
    $
    0
    
    
    $
    144,0002002
    
    
    
    
    
    
    
    
    
    
    12,500
    
    
    
    933,500
    
    
    
    0
    
    
    
    117,000Kent O. Hudson
Transition Period
    
    
    
    
    
    
    
    
    
    
    750,000
    
    
    
    
    
    
    
    0
    
    
    
    02002
    
    
    
    
    
    
    
    
    
    
    750,000
    
    
    
    
    
    
    
    0
    
    
    
    0Jeffrey A. Babka
Transition Period
    
    
    
    
    
    
    
    
    
    
    87,500
    
    
    
    362,500
    
    
    
    0
    
    
    
    32,0002002
    
    
    
    
    
    
    
    
    
    
    87,500
    
    
    
    362,500
    
    
    
    0
    
    
    
    26,000Gregory J. Dukat
Transition Period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,000
    
    
    
    0
    
    
    
    90,0002002
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    450,000
    
    
    
    0
    
    
    
    63,000




---

|(1) |  | Determined by taking the difference between the closing price of
the Companys common stock on March 31, 2003 of $1.70 per share (for
the Transition Period) and December 31, 2002 of $1.64 per share (for
2002), less the exercise price of the option granted, multiplied by the
number of shares subject to the option. If the exercise price of the
option exceeds the closing price, the value of the option is not
in-the-money and the value is deemed to be zero.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Employment Contracts and Termination of Employment and Change-In-Control Arrangements

Thomas R. Madison, Jr.The Company has entered into an employment
agreement with Thomas R. Madison, Jr., its Chief Executive Officer and Chairman
of the Board, dated as of April 29, 2003. The employment agreement continues
in effect until terminated by the Company, with or without cause, by Mr.
Madison for good reason or no reason, or by reason of Mr. Madisons death or
disability. Under this employment agreement, Mr. Madison is to receive an
annual base salary of $400,000, and a discretionary bonus of up to one hundred
percent of his base salary, payable, if at all, at the discretion of the
Compensation Committee of the Board of Directors.

If Mr. Madisons employment is terminated without cause or it is
terminated by Mr. Madison for good reason (as those terms are defined in the
employment agreement), Mr. Madison will receive one year of his base salary
payable over twelve months, a bonus payment equal to his base salary payable in
a lump sum, full COBRA benefits for 18 months, and his options (to the extent
vested) shall be exercisable for 15 months. If the employment agreement
terminates due to Mr. Madisons death or disability, Mr. Madison or his
beneficiary will receive one year of his base salary payable over 12 months, a
bonus payment equal to one year of his base salary payable in a lump sum, with
respect to disability, full COBRA benefits for 12 months, and his options (to
the extent vested) shall be exercisable for 15 months.

In addition, Mr. Madisons employment agreement contains provisions
related to a change in control (as defined in the agreement) of the Company.
Upon the earlier of six months following a change of control, or termination of
his employment without cause or by Mr. Madison for good reason following the
change of control, Mr. Madisons options shall fully vest and become
exercisable and may be exercised for 15 months. In the event that Mr.
Madisons employment is terminated without cause or by Mr. Madison for good
reason following a change of control, or he terminates his employment with or
without cause after six months following the change of control, he shall
receive one year of his base salary payable in a lump sum, a bonus payment
equal to one year of his base salary payable in a lump sum, full COBRA benefits
for 18 months, and his options (to the extent vested) shall be exercisable for
15 months.

Jeffrey A. Babka.The Company has entered into an employment agreement
with Jeffrey A. Babka, its Executive Vice President Finance and Administration
and Chief Financial Officer, dated as of April 29, 2003. The employment
agreement continues in effect until terminated by the Company, with or without
cause, by Mr. Babka for good reason or no reason, or by reason of Mr. Babkas
death or disability. Under this employment agreement, Mr. Babka is to receive
an annual base salary of $250,000, and a discretionary bonus of up to one
hundred percent of his base salary, payable, if at all, at the discretion of
the Compensation Committee of the Board of Directors.

If Mr. Babkas employment is terminated without cause or it is
terminated by Mr. Babka for good reason (as those terms are defined in the
employment agreement), Mr. Babka will receive one year of his base salary
payable over 12 months, full COBRA benefits for 18 months, and his options (to
the extent vested) shall be exercisable for 15 months. If the employment
agreement terminates due to Mr. Babkas death or disability, Mr. Babka or his
beneficiary will receive one year of his base salary payable over 12 months,
with respect to disability, full COBRA benefits for 12 months, and his options
(to the extent vested) shall be exercisable for 15 months.

In addition, Mr. Babkas agreement contains provisions related to a change
in control (as defined in the agreement) of the Company. Upon the earlier of
six months following a change of control, or termination of his employment
without cause or by Mr. Babka for good reason following the change of control,
his options shall fully vest and become exercisable and may be exercised for 15
months. In the event that Mr. Babkas employment is terminated without cause
or by Mr. Babka for good reason following a change of control, or Mr. Babka
terminates his employment with or without cause after six months following the
change of control, Mr. Babka shall receive one year of his base salary payable
in a lump sum, full COBRA benefits for 18 months, and his options (to the
extent vested) shall be exercisable for 15 months.

Gregory J. Dukat.The Company has entered into an employment agreement
with Gregory J. Dukat, its Executive Vice President of Worldwide Operations,
dated September 16, 2002. The agreement provides for at-will employment.
Under this employment agreement, Mr. Dukat is to receive an annual base salary
of $250,000 and a discretionary bonus of up to one hundred percent of his base
salary, payable, if at all, at the discretion of the Companys Compensation
Committee or the Board of Directors. The agreement also provides for an option
to purchase 450,000 shares of the Companys common stock.

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##### Table of Contents



If Mr. Dukats employment is terminated without cause or it is
terminated by Mr. Dukat for good reason (as those terms are defined in the
employment agreement), Mr. Dukat will receive one year of his base salary and
full COBRA benefits for 12 months.

In addition, the Company entered into a change of control severance
agreement with Mr. Dukat, dated September 16, 2002. The agreement provides
that if within 12 months following a change in control (as that term is defined
in the change of control severance agreement), Mr. Dukats employment is
terminated without cause or it is terminated by Mr. Dukat for good reason
(as those terms are defined in the change of control severance agreement), Mr.
Dukat shall receive one year of his base salary, full COBRA benefits and his
options shall accelerate and be automatically vested in full and become
exercisable.

Director Compensation

During 2002, directors received no cash fees for services provided in that
capacity but were reimbursed for out-of-pocket expenses they incurred in
connection with their attendance at meetings. As of March 28, 2003, the Board
of Directors approved the payment of cash fees for services provided by each of
our independent directors (as defined under NASD Rule 4200(a)(14)) in that
capacity in the amount of $10,000 annually. Additional annual cash
compensation is paid to independent directors that serve on committees, as
follows: the chairperson of the Audit Committee, if independent, will receive
an additional $10,000; the chairperson of the Compensation Committee, if
independent, will receive an additional $5,000; all other members of the Audit
Committee, if independent, will receive an additional $2,000; and all other
members of the Compensation Committee, if independent, will receive an
additional $1,000. Edward Grzedzinski, Thomas A. Robertson, Thomas Timbie are
independent directors (as defined under NASD Rule 4200(a)(14)). Gayle A.
Crowell is considered an independent director for purposes of eligibility to
receive this cash compensation. All cash compensation is paid in quarterly
installments and is contingent on continued service on the Board or the
applicable committee. During 2003, non-independent directors will continue to
receive no cash fees for services provided in that capacity but will be
reimbursed for out-of-pocket expenses incurred in connection with attendance at
meetings.

Under the Companys 1997 Director Option Plan (the Director Option
Plan), the Company has reserved 700,000 shares of common stock for issuance to
the directors of the Company pursuant to non-qualified stock options. As of
December 31, 2002, options to purchase an aggregate of 390,000 shares were
outstanding under the Director Option Plan at a weighted average exercise price
of $5.628 per share, of which options to purchase 100,000 shares were fully
vested and immediately exercisable; no options had been exercised pursuant to
the Plan; and 310,000 shares remained available for future grant.

Pursuant to the Director Option Plan, each director who is not an employee
of the Company is automatically granted a non-qualified option to purchase
50,000 shares of common stock on the date such person becomes a director.
Thereafter, each such person is automatically granted an option to acquire
17,500 shares of the Companys common stock upon such outside directors
re-election at each Annual Meeting of Stockholders, provided that on such date
such person has served on the Board of Directors for at least six months. All
options granted under the Director Option Plan will become exercisable as to
25% of the shares subject to such option on each anniversary of its date of
grant. In addition, each director appointed to serve as a chairperson of either
the Audit Committee or the Compensation Committee is automatically granted a
non-qualified option to purchase 5,000 shares of common stock of the Company on
the date of such appointment and a non-qualified option to purchase an
additional 5,000 shares of common stock of the Company at each Annual Meeting
of Stockholders should he or she continue to serve in such capacity, provided
that on such date such person shall have served as a committee chairperson for
at least six months. Options granted to the chairpersons of the Audit and
Compensation Committees become exercisable as to 100% of the shares subject to
such option on the first anniversary of the date of the grant.

Effective February 1, 2002 when he commenced his service on the Board of
Directors, Mr. Grzedzinski received options to purchase 50,000 shares at an
exercise price of $6.20 per share. Effective April 1, 2002 when they commenced
service on the Board of Directors, Dr. Robertson and Mr. Timbie each received
options to purchase 50,000 shares at an exercise price of $5.22 per share.
Effective April 23, 2002, Mr. Timbie and Mr. Janeway each received options to
purchase 5,000 shares at an exercise price of $4.37 per share in connection
with their service as chairpersons of the Audit Committee and the Compensation
Committee, respectively. Effective May 8, 2002, Mr. Janeway, Mr. Landy and Ms.
Crowell each received automatic grants of options to purchase 10,000 shares at
an exercise price of $4.04 per share upon their reelection to the Board.

As of March 28, 2003, the Board of Directors approved a one-time grant of
an option to acquire 15,000 shares of the Companys common stock under the 1997
Stock Plan to each non-employee director, including Ms. Crowell,

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Mr.
Grzedzinski, Mr. Janeway, Dr. Robertson and Mr. Timbie, with an exercise price
of $1.69 per share. All options granted under this Board action will become
exercisable as to 25% of the shares subject to such option on each anniversary
of its date of grant.

Compensation Committee Interlocks and Insider Participation

The Companys Compensation Committee during the Transition Period
consisted of William H. Janeway and Edward Grzedzinski. During 2002, the
Companys Compensation Committee initially consisted of Mr. Janeway and Jeanne
D. Wohlers, and was reconfigured in April 2002 to consist of Mr. Janeway and
Mr. Grzedzinski. No interlocking relationship existed during the Transition
Period or 2002 nor presently exists between any member of the Companys
Compensation Committee and any member of the compensation committee of any
other company.




Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The table below sets forth, as of June 17, 2003, certain information with
respect to the beneficial ownership of the Companys common stock by (i) each
person known by the Company to own beneficially more than five percent (5%) of
the outstanding shares of Common Stock; (ii) each Named Executive Officer;
(iii) each director of the Company; and (iv) all current directors and
executive officers as a group.

Shares
    
    ApproximateBeneficially
    
    PercentageName and Address
    
    Owned(1)
    
    of Ownership(1)Warburg, Pincus Investors, LP (2)(3)
    
    
    14,839,429
    
    
    
    34.98
    %William H. Janeway (2)(4)
    
    
    14,884,429
    
    
    
    35.32Joseph P. Landy (2)(4)
    
    
    14,879,429
    
    
    
    35.31Liberty Wanger Asset Management, L.P.(5)
    
    
    3,720,000
    
    
    
    8.84Liberty Acorn Trust (5)
    
    
    3,300,000
    
    
    
    7.84P.A.W. Capital Corp. (6)
    
    
    2,313,333
    
    
    
    5.50Peter A. Wright (6)
    
    
    2,313,333
    
    
    
    5.50Thomas R. Madison, Jr. (7)
    
    
    253,999
    
    
    
    *Jeffrey A. Babka (7)
    
    
    201,500
    
    
    
    *Gayle A. Crowell (8)
    
    
    82,500
    
    
    
    *Gregory J. Dukat
    
    
    
    
    
    
    *Edward Grzedzinski (7)
    
    
    22,500
    
    
    
    *Thomas E. Timbie (8)
    
    
    17,500
    
    
    
    *Thomas S. Robertson (8)
    
    
    12,500
    
    
    
    *Kent O. Hudson (8)
    
    
    750,000
    
    
    
    1.75All current directors and executive officers as
a group (9 persons)
    
    
    15,514,928
    
    
    
    36.29




---

|*   |  | Less than 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(1) |  | Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission that deems shares to be beneficially
owned by any person who has or shares voting power or investment power
with respect to such shares. Unless otherwise indicated below, the
persons and entities named in the table have sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable. Shares of the Companys common
stock that will be issuable to the identified person or entity pursuant to
stock options or warrants that are either immediately exercisable or
exercisable within sixty days of June 17, 2003 are deemed to be
outstanding and to be beneficially owned by the person holding such
options or warrants for the purpose of computing the percentage ownership
of such person but are not treated as outstanding for the purpose of
computing the percentage ownership of any other person.                                                                                                                                                                            
|   
|(2) |  | Represents shares held by Warburg, Pincus Investors, LP (WPI). Warburg
Pincus & Co. (WP) is the sole General Partner of WPI. Warburg Pincus
LLC (WP LLC) manages WPI. The members of WP LLC are substantially the
same as the partners of WP. William H. Janeway and Joseph P. Landy,
directors of Indus International, Inc., are vice chairman and
co-president, respectively, of WP LLC and general partners of WP. Messrs.
Janeway and Landy may be deemed to have an indirect pecuniary interest
(within the meaning of Rule 16a-1 under the Securities Exchange Act of
1934, as amended) in an indeterminate portion of the shares beneficially
owned by WPI. Because of their affiliation with WP, WPI and WP LLC,
14,839,429 of the shares are indicated as owned by Messrs. Janeway and
Landy. Messrs. Janeway and Landy each disclaim beneficial ownership, for
purposes of Section 16 of the Exchange Act or otherwise, of all such
shares owned by WP, WPI and WP LLC. Their address is c/o of Warburg
Pincus LLC, 466 Lexington Avenue, New York, New York 10017. Includes
329,219 shares issuable upon the exercise of currently exercisable
warrants held by WPI.

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|(3) |  | Robert W. Felton, the Company and WPI entered into a Stock Purchase
Agreement dated January 13, 1999 (the Felton Purchase Agreement). Under
the Felton Purchase Agreement, WPI purchased 5,000,000 shares of the
Companys common stock from Mr. Felton and WPI agreed that with respect to
any proposal presented to the Companys stockholders it will exercise its
voting right with respect to any shares of capital stock of the Company
owned by it such that the votes of WPI and its affiliates are limited to
50% or less of the votes eligible to be cast on such proposal, except that
WPI may vote its shares of capital stock in excess of such 50% vote in the
same proportions as the other stockholders of the Company vote their
shares of capital stock entitled to vote on such proposal.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(4) |  | Includes 45,000 shares for Mr. Janeway and 40,000 shares for Mr. Landy
that are subject to options exercisable within 60 days of June 17, 2003,
which were granted to each of Messrs. Janeway and Landy in their capacity
as directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(5) |  | Represents shares reported on Schedule 13G for the period ended December
31, 2002 of which Liberty Wanger Asset Management, L.P and WAM Acquisition
GP, Inc., its general partner, have shared voting and investment power.
Of these 3,720,000 shares beneficially owned by WAM, Liberty Acorn Trust
has shared voting and investment power over 3,300,000 shares. The address
of WAM is 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606.                                                                                                                                                                                                                                                                                                                                                         
|   
|(6) |  | Represents shares reported on Schedule 13G for the period ended December
31, 2002 of which P.A.W. Capital Corp. and Peter A. Wright have shared
voting power and investment power. Peter A. Wright is the sole
shareholder of P.A.W. Capital Corp. P.A.W. Capital Corp. is the general
partner of P.A.W. Capital Partners, L.P. P.A.W. Capital Partners, LP is
the general partner of P.A.W. Partners, LP and the manager of P.A.W.
Offshore Fund. The address of each of the entities is 10 Glenville
Street, Greenwich, Connecticut 06831-3638.                                                                                                                                                                                                                                                             
|   
|(7) |  | For Mr. Madison, includes 248,999 shares subject to options exercisable
within 60 days of June 17, 2003. For Mr. Babka, includes 200,000 shares
subject to options exercisable within 60 days of June 17, 2003. For Mr.
Grzedzinski, includes 12,500 shares subject to options exercisable within
60 days of June 17, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(8) |  | Represents shares subject to options exercisable within 60 days of June
17, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

Equity Compensation Plan Information

The following table gives information about the common stock that may be
issued under all of the Companys existing equity compensation plans as of
March 31, 2003.

(a) Number of
    
    
    
    
    
    (c) Number of SecuritiesSecurities to be Issued
    
    (b) Weighted Average
    
    Remaining Available for FutureUpon Exercise of
    
    Exercise Price of
    
    Issuance Under EquityOutstanding Options,
    
    Outstanding Options,
    
    Compensation Plans (ExcludingPlan Category
    
    Warrants and Rights
    
    Warrants and Rights
    

Securities Reflected in Column (a))Equity Compensation Plans
Approved by Stockholders
    
    
    9,846,478
    
    
    
    4.27
    
    
    
    2,349,548




---

|* |  | All of the Companys Equity Compensation Plans have been approved by its
Stockholders
|- |  | -------------------------------------------------------------------------------------




Item 13.    Certain Relationships and Related Transactions

On March 5, 2003, the Company issued each of WPI, and affiliate of the
Company, and Mr. Madison, the Companys Chief Executive Officer and Chairman of
the Board, 8% convertible notes pursuant to a Purchase Agreement dated as of
February 12, 2003. WPI purchased approximately $4.9 million principal amount
of the notes, and Mr. Madison purchased $100,000 principal amount of the notes.
WPI also purchased 72,666 shares of common stock of the Company pursuant to
the Purchase Agreement. In connection with the issuance of the common stock
and the notes by the Company, the Company also entered into registration rights
agreements pursuant to which the Company agreed to file registration statements
registering all of the shares of common stock issued and all of the common
stock to be issued upon conversion of the notes for resale. The Company is
required to perform various other related actions pursuant to the registration
rights agreement and to indemnify the selling stockholders from certain
liabilities in connection with the registration of their shares for resale.
The terms of the financing of the

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Companys acquisition of IUS, including the
sale of the common stock and the convertible notes, were negotiated by
representatives of the independent third party purchasers, by the Company, and,
on behalf of the Company, by C.E. Unterberg, Towbin, the Companys placement
agent. The Company believes that these transactions were on terms no less
favorable to the Company than could have been obtained from unaffiliated third
parties on an arms length basis.




Item 14.    Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure
that information required to be disclosed in our Exchange Act reports is
recorded, processed, summarized and reported within the time periods specified
in the Commissions rules and forms, and that such information is accumulated
and communicated to the management, including the Chief Executive Officer and
Chief Financial Officer, as appropriate, to allow timely decisions regarding
required disclosure. Management necessarily applied its judgment in assessing
the costs and benefits of such controls and procedures, which, by their nature,
can provide only reasonable assurance regarding managements control
objectives, and concluded that our disclosure regarding such controls and
procedures was effective at reaching that level of reasonable assurance.

Within 90 days prior to the date of filing of this report, we carried out
an evaluation, under the supervision and with the participation of management,
including the Chief Executive Officer and the Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Exchange Act Rule 13a-14. Based upon the foregoing, the
Chief Executive Officer along with the Chief Financial Officer concluded that
our disclosure controls and procedures are effective, in all material respects,
in the timely alerting of them to material information relating to our company
and its consolidated subsidiaries required to be included in our Exchange Act
reports. There have been no significant changes in our internal controls or in
other factors that could significantly affect internal controls subsequent to
the date we carried out the evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

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PART IV




Item 15.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) (1) Financial Statements

The Financial Statements required by this item, together with the report
of independent auditors, are filed as part of this Form 10-K. See Index to
Consolidated Financial Statements under Item 8.

(2) Financial Statement Schedule

Schedules have been omitted because they are not applicable or are not
required or the information required to be set forth therein is included in
the Consolidated Financial Statements or Notes thereto.

(3) Exhibits

The following exhibits are filed herewith or incorporated by reference.

ExhibitNumber
    
    Description2.1
    
    Purchase Agreement, dated as of February 12, 2003, by and among the
Registrant, SCT Utility Systems, Inc., SCT, SCT Financial Corporation, SCT
Property, Inc., SCT International Limited, SCT Technologies (Canada) Inc., SCT
Software & Resource Management Corporation and Systems & Computer Technology
International B.V. (incorporated by reference to Exhibit 10.1 to the Form 8-K
filed on February 14, 2003)2.2
    
    Amendment No. 1 to Purchase Agreement, dated as of March 5, 2003, by and among
the Registrant, SCT Utility Systems, Inc., SCT, SCT Financial Corporation, SCT
Property, Inc., SCT International Limited, SCT Technologies (Canada) Inc., SCT
Software & Resource Management Corporation and Systems & Computer Technology
International B.V. (incorporated by reference to Exhibit 10.3 to the Form 8-K
filed on March 6, 2003)3.1
    
    Registrants Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 to the Registration Statement on Form S-4 (No. 333-33113) filed on
August 7, 1997 (the 1997 Proxy Statement))3.2
    
    Registrants Amended and Restated Bylaws (incorporated by reference to Exhibit
3.2 to the Annual Report on Form 10-K/A filed on June 30, 2003)4.1
    
    Registration Rights Agreement entered into among the Registrant, Warburg,
Pincus Investors, L.P. (Warburg), Robert W. Felton, Richard W. MacAlmon,
John W. Blend, III and John R. Oltman (incorporated by reference to Exhibit
4.1 to the 1997 Proxy Statement)4.2
    
    Nomination Agreement entered into among the Registrant, Warburg and Robert W.
Felton (incorporated by reference to Exhibit 4.6 to the 1997 Proxy Statement)4.3
    
    Registration Rights Agreement for Shares, dated as of February 12, 2003, by
and among the Company and each of the Purchasers of the Shares, as listed on
the Schedule of Purchasers accompanying the Purchase Agreement (incorporated
by reference to Exhibit 10.3 to the Form 8-K filed on February 14, 2003)4.4
    
    Registration Rights Agreement for Conversion Shares, dated as of February 12,
2003, by and among the Company and each of the Purchasers of the Notes, as
listed on the Schedule of Purchasers accompanying the Purchase Agreement
(incorporated by reference to Exhibit 10.4 to the Form 8-K filed on February
14, 2003)4.5
    
    Form of Convertible Note (incorporated by reference to Exhibit 4.1 to the Form
8-K filed on March 6, 2003)10.1*
    
    Indus International, Inc. 1997 Stock Plan (incorporated by reference to
Exhibit 10.1 to the 1997 Proxy Statement)


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ExhibitNumber
    
    Description10.2*
    
    Amendment No. 1 to the Indus International, Inc. 1997 Stock Plan (incorporated
by reference to Exhibit 99.1 to the Registration Statement on Form S-8 filed
with the Commission on July 5, 2001)10.3*
    
    Amendment No. 2 to the Indus International, Inc. 1997 Stock Plan (incorporated
by reference to Exhibit 99.2 to the Registration Statement on Form S-8 filed
with the Commission on July 5, 2001)10.4*
    
    Amendment No. 3 to the Indus International, Inc. 1997 Stock Plan (incorporated
by reference to Exhibit 99.3 to the Registration Statement on Form S-8 filed
with the Commission on July 5, 2001)10.5*
    
    Indus International, Inc. 1997 Director Option Plan (incorporated by reference
to Exhibit 10.3 to the 1997 Proxy Statement)10.6*
    
    Rules of the Indus International, Inc. Company Share Option Plan (the UK
Option Plan) (incorporated by reference to Exhibit 10.7 of the Registrants
Annual Report on Form 10-K for the fiscal year ended December 31, 2001)10.7
    
    Stock Purchase Warrant dated August 25, 1997 between the Registrant and
Warburg Pincus Investors, L.P., as amended by that certain Amendment to Stock
Purchase Warrant dated October 23, 2001 (incorporated by reference to Exhibit
10.8 of the Registrants Annual Report on Form 10-K for the fiscal year ended
December 31, 2001)10.8
    
    Stock Purchase Agreement dated January 13, 1999 between Robert W. Felton,
Warburg Pincus Investors, L.P. and the Registrant (incorporated by reference
to Exhibit 10.37 to the Registrants Annual Report on Form 10-K for the fiscal
year ended December 31, 1998)10.9
    
    Amended and Restated Lease Agreement for the Registrants Atlanta, Georgia
corporate headquarters by and between Cousins Properties Incorporated and the
Registrant dated August 1, 2000 (incorporated by reference to Exhibit 10.12 to
the Registrants Annual Report on Form 10-K for the fiscal year ended December
31, 2000)10.10
    
    Office Lease Agreement for the Registrants San Francisco, California regional
office between EOP60 Spear, L.L.C. and the Registrant dated March 3, 2000, as
amended (incorporated by reference to Exhibit 10.8 to the Registrants
Annual Report on Form 10-K for the fiscal year ended December 31, 2000)10.11*
    
    Employment Agreement dated as of April 29, 2003 by and between the Registrant
and Thomas R. Madison (incorporated by reference to Exhibit 10.11 to the
Annual Report on Form 10-K/A filed on June 30, 2003)10.12*
    
    Employment Agreement dated as of April 29, 2003 by and between the Registrant
and Jeffrey A. Babka (incorporated by reference to Exhibit 10.12 to the Annual
Report on Form 10-K/A filed on June 30, 2003)10.13*
    
    Letter Agreement dated April 10, 2002 between the Registrant and Robert Felton
(incorporated by reference to Exhibit 10.2 to the Registrants Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2002)10.14*
    
    Amendment to the Indus International, Inc. 1997 Director Option Plan
(incorporated by reference to Exhibit 10.3 to the Registrants Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 2002)10.15*
    
    Amendment to the Indus International, Inc. 1997 Director Option Plan
(incorporated by reference to Exhibit 10.1 to the Registrants Quarterly
Report on Form 10-Q for the fiscal quarter ended June 30, 2002)10.16*
    
    Employment Agreement dated September 16, 2002 by and between the Registrant
and Gregory J. Dukat (incorporated by reference to Exhibit 10.2 to the
Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended June
30, 2002)


67



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ExhibitNumber
    
    Description10.17*
    
    Change of Control Severance Agreement dated September 16, 2002 by and between
the Registrant and Gregory J. Dukat (incorporated by reference to Exhibit 10.3
to the Registrants Quarterly Report on Form 10-Q for the fiscal quarter ended
June 30, 2002)10.18
    
    Purchase Agreement, dated as of February 12, 2003, by and among the Company
and each of the Purchasers listed on the Schedule of Purchasers accompanying
the Purchase Agreement (incorporated by reference to Exhibit 10.2 to the Form
8-K filed on February 14, 2003)10.19
    
    Promissory Note, dated March 5, 2003, issued by the Registrant in favor of SCT
Financial Corporation (incorporated by reference to Exhibit 10.1 to the Form
8-K filed on March 6, 2003)10.20
    
    Guaranty and Suretyship Agreement, dated March 5, 2003, by Indus Utility
Systems, Inc. (f/k/a SCT Utility Systems, Inc.) in favor of SCT Financial
Corporation (incorporated by reference to Exhibit 10.2 to the Form 8-K filed
on March 6, 2003)10.21*
    
    Amendment to the Indus International, Inc. 1997 Director Option Plan
(incorporated by reference to Exhibit 10.21 to the Annual Report on Form
10-K/A filed on June 30, 2003)21.1
    
    Subsidiaries of Registrant (incorporated by reference to Exhibit 21.1 to the
Annual Report on Form 10-K filed on March 31, 2003)23.1
    
    Consent of Ernst & Young LLP, Independent Auditors24.1
    
    Power of Attorney, included on the signature page of this report99.1
    
    Statement of the Chief Executive Officer of the Company, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
200299.2
    
    Statement of the Chief Financial Officer of the Company, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002




---

|* |  | Designates management contract or compensatory plan or arrangement
|- |  | ------------------------------------------------------------------
| 
| |  | Previously filed                                                  

(b) Reports on Forms 8-K.

On February 14, 2003, the Company filed a Current Report on Form 8-K
pursuant to Item 5 (Other Events), announcing that the Company had entered into
a definitive agreement to acquire the Global Energy and Utility Solutions
business unit of Systems & Computer Technology Corporation (now known as Indus
Utility Systems).

On March 6, 2003, the Company filed a Current Report on Form 8-K pursuant
to Item 2 (Acquisition or Disposition of Assets), announcing the completion of
the acquisition of Indus Utility Systems and the completion of a private
placement offering.

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SIGNATURES

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

Indus International, Inc.By:
    
    /s/ Thomas R. Madison, Jr.Thomas R. Madison, Jr.Chairman of the Board and
Chief Executive OfficerDate: June 30, 2003


KNOW ALL PERSONS BY THESE PRESENT, that each person whose signature
appears below constitutes and appoints Thomas R. Madison, Jr. and Jeffrey A.
Babka, jointly and severally, his/her attorneys-in-fact, each with the power of
substitution, for him/her in any and all capacities, to sign any amendments to
this report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or
his/her substitute or substitutes may do or cause to be done by virtue hereof.

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:

Signature
    
    Title
    
    Date/s/ Thomas R. Madison, Jr.Thomas R. Madison, Jr.
    
    Chairman of the Board and Chief
Executive Officer (Principal Executive
Officer), Director
    
    June 30, 2003/s/ Jeffrey A. BabkaJeffrey A. Babka
    
    Executive Vice President Finance and
Administration, Chief  Financial Officer
and Secretary  (Principal Financial and
Accounting Officer)
    
    June 30, 2003/s/ Gayle A. CrowellGayle A. Crowell
    
    Director
    
    June 30, 2003/s/ Edward GrzedzinskiEdward Grzedzinski
    
    Director
    
    June 30, 2003/s/ William H. JanewayWilliam H. Janeway
    
    Director
    
    June 30, 2003Joseph P. Landy
    
    Director
    
    June 30, 2003/s/ Thomas S. RobertsonThomas S. Robertson
    
    Director
    
    June 30, 2003/s/ Thomas
E. Timbie
Thomas E. Timbie
    
    Director
    
    June 30, 2003


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CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECURITIES
EXCHANGE ACT RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Thomas R. Madison, Jr., Chief Executive Officer of Indus International,
Inc., certify that:

1.     I have reviewed this transition report on Form 10-K of Indus
International, Inc.;

2.     Based on my knowledge, this transition report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
transition report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this transition report, fairly present in all material
respects the financial condition, results of operations and cash flows of
registrant as of, and for, the periods presented in this transition report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this transition report is being
prepared;

(b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of the date within 90 days prior to the filing date of this
transition report (the Evaluation Date); and

(c) presented in this transition report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and that the audit
committee of the registrants board of directors (or persons performing the
equivalent functions):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6.     The registrants other certifying officers and I have indicated in this
transition report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

By:
    

/s/  Thomas R.
Madison, Jr.Thomas R. Madison, Jr.Chairman of the Board and
Chief Executive OfficerDate: June 30, 2003


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##### Table of Contents



CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO
SECURITIES EXCHANGE ACT RULES 13A-14 AND 15D-14 AS ADOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jeffrey A. Babka, Chief Financial Officer of Indus International, Inc.,
certify that:

1.     I have reviewed this transition report on Form 10-K of Indus
International, Inc.;

2.     Based on my knowledge, this transition report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
transition report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this transition report, fairly present in all material
respects the financial condition, results of operations and cash flows of
registrant as of, and for, the periods presented in this transition report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this transition report is being
prepared;

(b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of the date within 90 days prior to the filing date of this
transition report (the Evaluation Date); and

(c) presented in this transition report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and that the audit
committee of the registrants board of directors (or persons performing the
equivalent functions):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal
controls; and

6.     The registrants other certifying officers and I have indicated in this
transition report whether there were significant changes in internal controls
or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

By:
    

/s/  Jeffrey
A. BabkaJeffrey A. BabkaExecutive Vice President Finance and
Administration, Chief Financial Officer and
SecretaryDate: June 30, 2003


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