- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(D)
of the securities exchange act of 1934

<Table>

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO
</Table>

COMMISSION FILE NUMBER 0-27030

INFINIUM SOFTWARE, INC.
(Exact name of registrant as specified in its charter)

<Table>

MASSACHUSETTS 04-2734036
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)

25 COMMUNICATIONS WAY, 02601
HYANNIS, MA (Zip Code)
(Address of principal executive office)
</Table>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(508) 778-2000

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

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

COMMON STOCK, PAR VALUE $0.01
(Title of class)
---------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

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

The aggregate market value of voting stock held by non-affiliates of the
registrant based upon the closing price of such stock as reported on the Nasdaq
Small Cap Market on December 12, 2001, was $17,704,334.

As of December 12, 2001, 13,514,759 shares of the registrant's Common Stock
were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Specifically identified information in the registrant's definitive proxy
statement for its Annual Meeting of Stockholders which is currently expected to
be held on February 8, 2002, to be filed pursuant to Regulation 14A is
incorporated by reference into Part III of this Form 10-K.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PART 1

ITEM 1. BUSINESS

All statements contained in this Form 10-K that are not historical facts,
including but not limited to, statements regarding anticipated future capital
requirements, the Company's future development plans, the Company's ability to
obtain debt, equity or other financing, and the Company's ability to generate
cash from operations, are based on current expectations. These statements are
forward looking in nature and involve a number of risks and uncertainties, as
more fully described herein. These statements are made pursuant to the Private
Securities Litigation Reform Act of 1995. Actual results may differ materially
from those described in the forward looking statements.

OVERVIEW

Infinium Software, Inc. (the Company or Infinium) develops, markets,
implements and maintains enterprise-level business software applications, which
are optimized for the IBM eServer iSeries (formerly the IBM AS/400), for
organizations with revenues generally in the range of $25 million to $2 billion.
These applications automate the human resources management, payroll, financial
management, customer relationship management and materials management functions
of organizations in a variety of industries worldwide including: hospitality and
gaming, manufacturing, healthcare, retail, financial services, transportation
and distribution. The Company also offers a comprehensive software solution
designed exclusively for the unique requirements of process manufacturers. In
addition to the applications optimized for the IBM platform, the Company also
offers human resources and payroll software for the Microsoft Windows NT
platform through its AdvaNTage Business Unit. The Company's IBM and NT software
can both be deployed over intranets and the Internet.

During fiscal year 2001, under the leadership of a new Chief Executive
Officer and President hired in February 2001, the Company reassessed its
business and established short term goals for fiscal 2001, which included
stabilizing the Company, focusing on its core competencies, improving the
profitability of the Company and preserving the Company's cash. As a part of
these efforts, the Company significantly reduced the Company's costs in the
third and fourth quarters of fiscal 2001.

The Company's revenue is primarily derived from two sources: software
license fees and services revenue. Software license fees include revenue from
non-cancelable software license agreements entered into between the Company and
its customers with respect to both the Company's products and third party
products marketed and/or distributed by the Company. The Company's service
revenue is comprised of software maintenance fees, fees for consulting and
training services and fees for the Application Services Provider business (the
ASP).

Revenues from the Company's ASP business consist of monthly fees from
ongoing services, including hosting, and are recognized daily as earned over the
contract term, which is typically three years. The monthly fee for application
services is typically fixed for the life of the contract, but subject to
increases in the event a customer requires additional applications, increases
its number of users or increases frequency of use. In September 2001, the
Company decided to discontinue its ASP operations because it did not present an
opportunity for timely profitability. As a result, the aforementioned revenues
are incorporated within the loss from operations of the ASP segment in the
accompanying financials.

SOFTWARE SOLUTIONS

IBM ISERIES SOFTWARE AND MODULES:

HUMAN RESOURCES/PAYROLL

Human Resources
Payroll
Training Administration
Flexible Benefits
Infinium Benefits Self-service
Infinium Manager Self-service
Infinium Employee Self-service
Infinium HR Self-service

CUSTOMER RELATIONSHIP MANAGEMENT

Sales Force Automation
Marketing Automation
Customer Service and Support Automation
Analytics and Reporting

MATERIALS MANAGEMENT

Purchase Management
Inventory Control
Electronic Exchange
Infinium Purchase and Order Self-service
FINANCIAL MANAGEMENT

General Ledger
Payables Ledger
Accounts Receivable
Fixed Assets
Purchase Management
Payables Exchange
Currency Management
Project Accounting
Infinium Invoice Matching Self-service
Global Taxation
Income Reporting

PROCESS MANUFACTURING

Manufacturing Control
Formula Management
Advanced Planning
Regulatory Management
Laboratory Analysis
Order Processing

Infinium's IBM e-Server i-Series solutions are integrated to provide a
comprehensive end-to-end solution for its customers.

The Company's Infinium Human Resources and Financial Management products
provide icon-based user access to the underlying accounting, statistical and
performance data through graphical "drag and drop" operations. Infinium Human
Resources is a Web-integrated solution with e-business capabilities, such as
manager and employee self-service, compensation and benefits management,
employee training and career-path tracking, workforce management and
line-manager empowerment. Infinium Financial Management is designed with strong
internal controls and Web-integrated capabilities include reporting and analysis
and self-service options.

Infinium Customer Relationship Management is a fully-integrated, highly
flexible, Web-based solution that supports business relationship management,
sales and marketing, and support services with a single, central market
database. Infinium Customer Relationship Management offers personal digital
assistant capabilities, Web-based information exchange, fast implementation, and
zero-maintenance desktop functionality.

The Infinium Materials Management products include requisitioning, on-line
approvals, receiving, and automatic sourcing and integrate closely with the
Financial Management product line. The Infinium Materials Management products
are often considered an extension of the core financial applications. The
Process Manufacturing products cover a full range of formula-based process
manufacturing operations and are fully integrated with the Company's Financial
Management product line.

MICROSOFT WINDOWS NT SOFTWARE:

AdvaNTage Human Resources
AdvaNTage Payroll
AdvaNTage Employee Self Service
AdvaNTage e-Resources

The Infinium AdvaNTage Human Resources system is fully integrated with
Infinium AdvaNTage Payroll and provides a complete Human Resources Management
tool and an Applicant Tracking Module. Employee Self Service is a Web-enabled
solution that plugs into the AdvaNTage Human Resources Management System.
Infinium eResources provides a set of Web native solutions that tracks past,
present, and future information about an organization's workforce.

CUSTOMER SUPPORT AND SOFTWARE MAINTENANCE

The Company believes that providing a high level of support to its
customers is a critical requirement for customer satisfaction and the long-term
success of the Company. The Company believes that it has established a strong
history of responsiveness to customer requirements and a high level of support,
which has resulted in a loyal customer base.

Infinium's primary customer support center is located at the Company's
headquarters in Hyannis, Massachusetts. The Company also maintains support
operations in Bend, Oregon, and in its United Kingdom, and Holland offices,
servicing customers outside North America. Infinium also supports its customers
in markets where it does not have a direct presence, through authorized
distributors.

In addition to telephone support, the Company offers an electronic support
capability, called "Web Link," which is accessible over the Internet. It
provides customers access to software release information, software bulletins
and updates, tips and techniques information, and ordinary customer support
dialogues, 24 hours per day, seven days per week.

The Company provides its software updates, enhancements and customer
support services under an annual maintenance arrangement offered to its
customers. Initial maintenance fees are typically based on a percentage of the
price of the licensed software.

CONSULTING AND EDUCATION SERVICES

Infinium's consulting services organization provides the Company's
customers with fee-based services, including software implementation assistance,
project management, software extension or customization, integration with
existing customer software, and similar services. The Company also trains and
certifies third-party organizations, such as consulting firms and system
integrators, to complement the Company's consulting services operations.

The Company offers a comprehensive series of fee-based training courses to
its customers. Courses can be taken at the Company's headquarters in Hyannis,
Massachusetts, at regional training centers, at a customer's site, and over the
Internet.

CUSTOMERS

The Company's software solutions are used by approximately 1,800 customers
worldwide. No single customer accounted for 10 percent or more of revenue in
fiscal years 1999, 2000, or 2001.

SALES AND MARKETING

The Company offers its software and services through direct sales and
business partner channels throughout the world.

Regional sales and consulting services offices are located in the following
metropolitan areas: Atlanta, Georgia; Las Vegas, Nevada; Chicago, Illinois; Los
Angeles, California; Bend, Oregon; London, United Kingdom; Toronto, Canada; and
Gouda, Holland. In addition, the Company has authorized resellers that license
Infinium software directly to customers. The Company also has an inside sales
operation that directs its efforts at the Company's existing customer base. The
Company conducts comprehensive marketing programs that include advertising,
direct mail, telemarketing, seminars, public relations, trade shows, customer
relations and investor relations.

SOFTWARE DEVELOPMENT

The Company devotes substantial resources to research and development in
order to maintain and enhance the competitiveness of its software. The Company
maintains multiple research and development operations, located in the following
metropolitan areas: Hyannis, Massachusetts; Bend, Oregon; London, United
Kingdom; and Gouda, Holland. In addition, the Company uses outsourcing
relationships to supplement its internal development resources.

ALLIANCE PROGRAM

The Company has a comprehensive Alliance Program with consulting, sales,
software, and platform partners supporting the Company's software throughout the
world. Through this program, the Company seeks to expand its sales channels as
well as technology, interoperability and support. The Infinium Alliance Program
consists of four categories of partners: Consulting Alliance Partners, Sales
Alliance Partners, Software Alliance Partners, and Platform Alliance Partners.
The Company is actively seeking to expand its Alliance Program in every
category. Alliance members are supported with joint marketing and sales
initiatives, trade show opportunities, as well as technology development,
training and integration resources.

COMPETITION

The enterprise business software solutions market is highly competitive and
rapidly changing. A number of companies offer software similar to the Company's
software and target the same customers as the Company. In addition, a number of
companies are planning to offer products over the Internet competitive to the
Company's products. The Company believes its ability to compete depends upon
many factors within and outside its control, including the timely development
and introduction of new software and software enhancements, software
functionality, performance, price, reliability, customer service and support,
sales and marketing efforts and software distribution. The Company believes that
it competes favorably on the basis of each of these factors.

The Company's primary competitors are presently J.D. Edwards & Company and
Lawson Software. The Company believes, however, that competition in its industry
is undergoing rapid change and that the barriers to competition between market
segments that have previously existed are decreasing. Due to the relatively low
barriers to entry in the software market, the Company expects additional
competition from these and other emerging companies. Many of the Company's
existing and potential competitors are substantially larger than the Company and
have significantly greater financial, technical and marketing resources and have
established extensive direct and indirect channels of distribution. As a result,
they may be able to respond more quickly to new or emerging technologies and
changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their software than the Company. The Company
also expects that competition will increase as a result of software industry
consolidation. In addition, current and potential competitors have established
or may establish cooperative relationships among themselves or prospective
customers. Accordingly, it is possible that new competitors or alliances among
competitors may emerge and rapidly acquire significant market share. Increased
competition may result in price reductions, reduced gross margins and loss of
market share, any of which could have a material adverse effect on the Company's
business, results of operations and financial condition. There can be no
assurance that the Company will be able to compete successfully against current
or future competitors or that competitive pressure will not have a material
adverse effect on the Company's business, operating results and financial
condition.

INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND LICENSES

The Company regards certain features of its internal operations, software
and documentation as confidential and proprietary, and relies on a combination
of contract, copyright, trademark, trade secret and patent laws and other
measures to protect its proprietary intellectual property. The Company has filed
a patent on certain technology. The Company has no registered patents, and
existing copyright laws afford the Company only limited protection. The Company
believes that, because of the rapid rate of technological change in the software
market, trade secret and copyright protections are less significant than factors
such as

the knowledge, ability and experience of the Company's employees, frequent
software enhancements and the timeliness and quality of support services.

The Company provides its software to customers under non-exclusive,
non-transferable licenses. The Company generally licenses its software solely
for the customer's internal operations and only on designated computers. In
certain circumstances, the Company makes available enterprise-wide licenses. The
Company provides source code to its customers for certain software and has
escrowed its source code for the benefit of all customers. The provision of
source code may increase the likelihood of misappropriation or other misuse of
the Company's intellectual property.

The Company licenses software from third-parties for use with its software.
The Company believes that no such license agreement to which it is presently a
party is material and that, if any such license agreement were to terminate for
any reason, the Company would be able to obtain a license or otherwise acquire
other comparable technology or software on terms that would not be materially
adverse to the Company.

EMPLOYEES

As of September 30, 2001, the Company had 344 full-time-equivalent
employees, including 75 in sales and marketing, 86 in software development, 129
in customer support and field services and 54 in administration. The Company's
success will depend, in large part, upon its ability to continue to attract and
retain qualified employees. None of the Company's employees are represented by a
labor union or are subject to a collective bargaining agreement. The Company
believes that its relations with its employees are good.

ITEM 2. PROPERTIES

The Company is headquartered in Hyannis, Massachusetts, where it leases an
aggregate of 65,000 square feet of space. Administrative, marketing, product
development and customer support operations are located in this Hyannis space.
The Company's obligation to lease 65,000 square feet of space in Marlborough,
Massachusetts for its discontinued Application Services Provider operations will
expire on March 31, 2002 as agreed upon September 26, 2001. The Company leases
12,360 square feet of space in Lexington, Massachusetts, however; the Company is
actively attempting to sub-lease the entire square footage of this space. The
Company leases approximately 13,000 square feet of space in the London, United
Kingdom area for product development, sales and consulting services purposes;
6,150 square feet of the space has been sublet to another company and the
Company is actively attempting to sub-lease the remaining space and move to a
smaller facility. The Company leases a 6,400 square foot office in the
Netherlands for sales, marketing, development and consulting services purposes.
The Company leases space in Malaysia for sales, marketing and development
purposes. In addition, the Company leases space predominately for use by field
operations located in the following metropolitan areas: Atlanta, Georgia;
Chicago, Illinois; Los Angeles, California; Las Vegas, Nevada; and Toronto,
Canada; the Company is actively attempting to sub-lease portions of its Atlanta,
Chicago and Los Angeles offices. Office facilities are also being leased for
senior management's use in Middleburg, Virginia. The Infinium AdvaNTage Business
Unit located in Bend, Oregon, leases 16,000 square feet of space for support,
field operations, training, marketing, and administration for the Company's
Infinium AdvaNTage software. The Company believes that its existing facilities
are more than adequate to meet current needs.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company
believes that it is not a party to any material legal proceedings which,
individually or in the aggregate, would have a material adverse effect on the
Company's results of operations or financial position.

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 fourth quarter of the fiscal year ended September 30, 2001, through
the solicitation of proxies or otherwise.

PART II

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

The Company's common stock formerly traded on the Nasdaq National Market,
is now traded on the Nasdaq Small Cap Market under the symbol "INFM." Public
trading of the common stock commenced on November 17, 1995, on the Nasdaq
National Market under the symbol "SFWR" until February 18, 1997, when the
Company changed the corporate name to Infinium Software, Inc. Prior to that
time, there was no public market for the Company's common stock. The following
table sets forth the high and low closing prices, as reported by Nasdaq, for the
periods indicated.

<Table>
<Caption>
HIGH LOW
------- -------

FISCAL 2001
First Quarter............................................. $ 3.125 $1.1875
Second Quarter............................................ 2.4375 1.2812
Third Quarter............................................. 1.500 0.950
Fourth Quarter............................................ 1.150 0.630
FISCAL 2000
First Quarter............................................. $7.0625 $4.0625
Second Quarter............................................ 8.000 4.9375
Third Quarter............................................. 6.625 3.000
Fourth Quarter............................................ 4.250 2.250
FISCAL 1999
First Quarter............................................. $ 9.000 $ 5.063
Second Quarter............................................ 6.938 3.813
Third Quarter............................................. 6.125 4.063
Fourth Quarter............................................ 5.813 4.281
</Table>

On December 12, 2001, there were approximately 740 holders of record.

The Company has never paid any cash dividends on its common stock and does
not anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain future earnings to fund the development and growth
of its business.

ITEM 6. SELECTED FINANCIAL DATA

Certain prior year amounts have been reclassified to conform with current
year's presentation in the following information.

CONSOLIDATED STATEMENT OF OPERATIONS DATA:

<Table>
<Caption>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------------------
2001 2000 1999 1998 1997
-------- -------- -------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenue:
Software license fees.................. $ 10,363 $ 20,473 $ 32,437 $ 40,704 $29,781
Services revenue....................... 63,707 72,261 89,568 73,490 56,861
-------- -------- -------- -------- -------
Total revenue....................... 74,070 92,734 122,005 114,194 86,642
-------- -------- -------- -------- -------
Operating costs and expenses:
Cost of software license
fees(1),(6),(7)..................... 8,157 7,101 14,518 7,210 5,070
Cost of services(1).................... 19,304 31,563 40,389 32,330 22,400
Research and development(1)............ 16,165 21,296 19,140 19,071 16,614
Sales and marketing.................... 27,182 36,102 40,135 36,632 30,449
General and administrative(1),(6)...... 16,431 15,620 14,514 9,351 7,336
Write-off of in-process research and
development acquired(2)............. -- -- -- 11,196 6,846
-------- -------- -------- -------- -------
Total operating costs and
expenses.......................... 87,239 111,682 128,696 115,790 88,715
-------- -------- -------- -------- -------
Loss from operations..................... (13,169) (18,948) (6,691) (1,596) (2,073)
Other income, net(3)..................... 22 6,104 2,633 1,744 1,923
-------- -------- -------- -------- -------
Income (loss) from continuing operations
before provision for (benefit from)
income taxes........................... (13,147) (12,844) (4,058) 148 (150)
Provision for (benefit from) income
taxes(3),(8)........................... (2,284) 6,860 (1,698) 47 (263)
-------- -------- -------- -------- -------
Income (loss) from continuing
operations............................. (10,863) (19,704) (2,360) 101 113
Discontinued operations:
Loss from operations of ASP
segment(4).......................... (11,658) (8,112) -- -- --
Loss from disposal of ASP segment(5)... (1,811) -- -- -- --
-------- -------- -------- -------- -------
Net loss:................................ $(24,332) $(27,816) $ (2,360) $ 101 $ 113
======== ======== ======== ======== =======
Earnings (loss) per share:
Basic earnings (loss) per share from
continuing operations............... $ (0.84) $ (1.56) $ (0.19) $ 0.01 $ 0.01
======== ======== ======== ======== =======
Basic and diluted loss per share from
ASP segment......................... $ (1.04) $ (0.64) $ -- $ -- $ --
======== ======== ======== ======== =======
Basic and diluted loss per share,
net................................. $ (1.88) $ (2.20) $ (0.19) $ 0.01 $ 0.01
======== ======== ======== ======== =======
Weighted average shares outstanding --
basic............................... 12,941 12,668 12,421 12,399 11,777
======== ======== ======== ======== =======
Weighted average shares outstanding --
diluted............................. 12,941 12,668 12,421 13,808 12,539
======== ======== ======== ======== =======
</Table>

- ---------------

(1) In fiscal year 1999, the Company incurred expenses of $9.5 million as a
result of costs associated with the write-off of discontinued product lines.
Of this amount, $6.3 million is included in cost of software license fees,
and $3.2 million is included in general and administrative costs (See Note
10 to the consolidated financial statements). In fiscal year 2000, the
Company realized operating losses from its discontinued product lines of
$5.7 million. Operating expenses of $6.2 million were incurred to provide
maintenance and support transition for customers to alternative software
platforms and to resolve disputes. Expenses for the discontinued lines
recorded in cost of service, research and development, and general and
administrative were $1.9 million, $2.1 million, and $2.2 million,
respectively.

(2) In connection with the acquisition of Time Open Systems Limited in 1997 and
Cort Directions, Inc. in 1998, $6.9 million and $7.8 million, respectively,
allocated to in-process research and development had not reached
technological feasibility and was charged to operations at the acquisition
date. Also in 1998, the Company acquired software code developed by a
third-party for $3.4 million and determined that it had not reached
technological feasibility. Accordingly, $3.4 million was written-off at the
acquisition date, aggregating a write-off of $11.2 million of in-process
research and development acquired in 1998.

(3) During the fourth quarter of fiscal year 2000, the Company established a
valuation allowance for its deferred tax asset balances, which resulted in a
fourth quarter charge of $14.0 million (See Note 15 to the consolidated
financial statements). The Company also received the benefit of a $4.9
million legal settlement associated with the defense of its intellectual
property (See Note 12 to the consolidated financial statements).

(4) Included in loss from operations of ASP segment is a $6.1 million charge for
the write-off of fixed asset balances [(primarily leasehold improvements)
(See Note 11 to the consolidated financial statements)].

(5) The Company discontinued its ASP business unit requiring the recognition of
a $1.8 million loss on its disposal (See Note 11 to the consolidated
financial statements).

(6) During fiscal year 2001, the Company wrote down $4.7 million of impaired
long-lived assets associated with the acquisition of Dexton, acquired in
January 2000, which was comprised of $721 thousand of goodwill, $2.4 million
of intangibles, and $1.6 million of acquired technology. Additionally, $525
thousand and $347 thousand of goodwill associated with the acquisitions of
iT-Soft in November 1999 and Cort Directions, Inc. in June 1998,
respectively, were written-off. Based on the declining historical and
forecasted operating results of Dexton, iT-Soft, and Cort the estimated
value of these assets to the Company had decreased and were written down to
net realizable value by the Company. All of the above charges have been
recorded in general and administrative expenses for fiscal 2001, with the
exception of acquired technology, which has been recorded in cost of
software license fees (See Note 7 to the consolidated financial statements).

(7) During fiscal year 2001, the Company determined that because of a declining
market for certain of its products and faster production of product updates,
capitalized software development costs on the balance sheet would be
amortized over 18 months as opposed to the three-year life previously used.
This resulted in additional amortization expenses of $2.7 million during
fiscal year 2001 (See Note 8 to the consolidated financial statements).

(8) During fiscal year 2001, the Company recorded a benefit of $2.3 million,
primarily as a result of the favorable resolution of potential tax
liabilities.

CONSOLIDATED BALANCE SHEET DATA:

<Table>
<Caption>
SEPTEMBER 30,
-------------------------------------------------
2001 2000 1999 1998 1997
-------- ------- ------- -------- -------
(IN THOUSANDS)

Cash, cash equivalents, and marketable
securities............................... $ 15,286 $20,738 $47,212 $ 46,293 $48,319
Total assets............................... 35,297 71,249 93,881 107,982 92,815
Deferred revenue........................... 28,988 36,654 37,807 42,475 36,702
Other long-term liabilities................ 524 1,291 343 -- --
Total liabilities.......................... 47,977 59,586 58,538 68,351 54,080
Stockholders' equity (deficit)............. (12,680) 11,663 35,343 39,631 38,735
</Table>

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

All statements contained herein that are not historical facts, including
but not limited to statements regarding anticipated future revenue and expense
levels and capital requirements, the Company's future product development and
marketing plans, the Company's ability to generate cash from operations, and the
Company's ability to attract and retain employees, are based on current
expectations. These statements are forward-looking in nature, involve a number
of risks and uncertainties, as more fully described under "Factors Affecting
Future Performance," and are made pursuant to the Private Securities Litigation
Reform Act of 1995. Actual results may differ materially from those described in
the forward-looking statements.

OVERVIEW

Infinium Software, Inc. ("Infinium" or "the Company") develops, markets and
supports enterprise-level business software applications and provides software
application services. Infinium offers Web-and server-based financial, human
resources, supply management, process manufacturing, business analytics and
customer relationship management solutions, services, support and deployment
options to its customers.

During fiscal year 2001, under the leadership of a new Chief Executive
Officer and President hired in February 2001, the Company reassessed its
business and established short term goals for fiscal 2001, which included
stabilizing the Company, focusing on its core competencies, improving the
profitability of the Company and preserving the Company's cash. As a part of
these efforts, the Company dramatically reduced the Company's costs in the third
and fourth quarters of fiscal 2001.

During the third quarter, the Company recorded $11.8 million in one-time
charges associated with headcount reductions, facilities consolidations,
write-offs of certain fixed assets, goodwill and intangible assets. The
headcount reductions included 22 percent of the Company's workforce. During the
fourth quarter, the Company decided to discontinue its Application Service
Provider ("ASP") business and recorded $7.9 million in charges associated with
fixed asset impairment and the costs of disposing this segment. As a result, the
accompanying financial statements have been adjusted to reflect the ASP business
as a discontinued operation. Also during the fourth quarter, the Company
recorded a charge of $1.2 million associated with the restructuring of its
AdvaNTage (also known as "Cort") Business Unit, including headcount reductions,
and write-offs of goodwill and intangibles.

The Company recognizes software license fee revenues in accordance with the
provisions of AICPA Statement of Position 97-2, Software Revenue Recognition,
AICPA Statement of Position 98-9, Modification of SOP 97-2, Software Revenue
Recognition, with Respect to Certain Transactions (SOP 98-9) and their related
interpretations. Revenue from software license fees is recognized when there is
evidence of an arrangement, the product has been delivered, fees are fixed or
determinable, and collection of the related receivable is deemed probable.
Revenues from sales of third party products are recorded net of royalties, in
accordance with Emerging Issue Task Force 99-19, Reporting Revenue Gross as a
Principle versus Net as an Agent. Generally, the Company's software products do
not require significant modification or customization. Installation of the
products is normally routine and is not essential to the functionality of the
product. The Companies sales frequently include maintenance contracts and
professional services with the sale of its software licenses. The Company has
established vendor-specific objective evidence of fair value (VSOE) for its
maintenance contracts and professional services, which is determined based upon
the prices charged to customers when these elements are sold separately.
Maintenance revenues, including those sold with the initial license fee, are
deferred based on VSOE, typically determined by the renewal rate of the annual
maintenance contract, and recognized ratably over the maintenance contract
period. Consulting and training service revenues, including those sold with
license fees, are recognized as the services are performed based on their
established VSOE. The amount of revenue allocated to the licenses sold with
services and/or maintenance is determined using the "residual method" of
accounting. Under the residual method, the total value of the arrangement is
allocated first to the undelivered elements based on their VSOE with the
remainder being allocated to license fees.

typically three years. The monthly fee for application services is typically
fixed for the life of the contract, but subject to increases in the event a
customer requires additional applications, increases its number of users or
increases frequency of use. The Company recognizes set-up fees for these
arrangements over the expected life of the customer relationship. Recognition of
revenue related to these arrangements commences on the date that the customer is
able to access and utilize the features and functionality of the applications as
intended. In September 2001, the Company decided to discontinue its ASP
operations because it did not present an opportunity for timely profitability.
As a result, the aforementioned revenues are incorporated within the loss from
operations of the ASP segment in the accompanying financials.

YEAR ENDED SEPTEMBER 30, 2001 COMPARED TO YEAR ENDED SEPTEMBER 30, 2000

REVENUE. Total revenue, exclusive of revenue associated with discontinued
operations, decreased 20 percent, from $92.7 million for the year ended
September 30, 2000 to $74.1 million for the year ended September 30, 2001. The
decrease was due to the reductions in the Company's consulting services and
software license fees.

Revenue from continuing operations in North America (United States and
Canada) decreased 21 percent, from $84.6 million for the year ended September
30, 2000 to $67.0 million for the year ended September 30, 2001. This is
representative of 91 percent of total revenue for both fiscal 2000 and fiscal
2001. EMEA (Europe, Middle East and Africa) revenue decreased 22 percent from
$7.2 million for the year ended September 30, 2000 to $5.6 million for the year
ended September 30, 2001, which was 8 percent of total revenue for both fiscal
2000 and 2001. Other international regions, including Asia Pacific and Latin
America, contributed approximately 1 percent of total revenue for both fiscal
2000 and fiscal 2001.

Software license fee revenue decreased 49 percent, from $20.5 million for
the year ended September 30, 2000 to $10.4 million for the year ended September
30, 2001. The Company believes that the decrease was primarily due to the
slowdown in technology spending, further complicated by restructuring within the
Company.

Service revenue, exclusive of revenue associated with discontinued
operations, decreased 12 percent, from $72.3 million for the year ended
September 30, 2000 to $63.7 million for the year ended September 30, 2001. The
decrease was primarily attributable to lower software license fee revenue. The
following table summarizes the composition and decrease in the Company's service
revenue:

<Table>
<Caption>
FISCAL YEAR ENDED % OF $
SEPTEMBER 30, (DECREASE)
--------------------- -------------
2001 2000 2000 - 2001
--------- --------- -------------
(IN THOUSANDS EXCEPT PERCENTAGE DATA)

Software maintenance revenue.......................... $42,783 $42,836 (--)%
Consulting services revenue........................... 20,924 29,425 (29)%
------- -------
Total service revenue................................. $63,707 $72,261 (12)%
======= =======
</Table>

COST OF SERVICES. Cost of services consists of costs to provide support,
implementation, consulting and training services to licensees. Cost of services,
exclusive of costs associated with discontinued operations in fiscal 2001 and
product lines discontinued in fiscal 2000 ($1.9 million), decreased 35 percent
from $29.7 million for the year ended September 30, 2000 to $19.3 million for
the year ended September 30, 2001. Cost of services as a percentage of service
revenue decreased from 41 percent for the year ended

September 30, 2000 to 30 percent for the year ended September 30, 2001. The
decrease is due to lower third-party consulting expenses and lower internal
consulting expenses associated with reduced headcount.

RESEARCH AND DEVELOPMENT. Research and development expenses consists
primarily of engineering personnel costs, contractor costs, and related
facilities and computers and communications overhead, reduced by capitalized
software development costs and research funding. The following table sets forth,
for the periods indicated, the relationship between the Company's research and
development expenses as recorded on its consolidated statements of operations
and its total research and development spending:

<Table>
<Caption>
FISCAL YEAR ENDED
SEPTEMBER 30,
2001 2000
------- -------
(IN THOUSANDS)

Research and development expenses........................... $16,165 $21,296
Capitalized software development costs...................... 2,353 1,557
------- -------
Research and development spending........................... $18,518 $22,853
======= =======
</Table>

Research and development expenses, exclusive of costs associated with
discontinued operations, was $21.3 million and $16.2 million for the years ended
September 30, 2000 and 2001, respectively. Research and development expenses as
a percentage of total revenue was 23 percent for the year ended September 30,
2000 and 22 percent for the year ended September 30, 2001. The Company
capitalized $1.6 million for the year ended September 30, 2000 and $2.4 million
for the year ended September 30, 2001. Additionally, research and development
spending decreased 19 percent from $22.9 million for the year ended September
30, 2000 to $18.5 million for the year ended September 30, 2001. Reductions are
primarily associated with reduced headcount. The Company continues to make
investments in research and development.

SALES AND MARKETING. Sales and marketing expenses consists primarily of
salaries, commissions, travel, promotional expenses, facilities, and computers
and communications overhead costs associated with the Company's sales and
marketing efforts. Sales and marketing expenses, exclusive of expenses
associated with discontinued operations, decreased 25 percent from $36.1 million
for the year ended September 30, 2000 to $27.2 million for the year ended
September 30, 2001. Sales and marketing expenses as a percentage of total
revenue decreased from 39 percent for the year ended September 30, 2000 to 37
percent for the year ended September 30, 2001. The decrease in expenses as both
a dollar amount and percentage was primarily due to lower sales costs from
headcount reductions as well as lower marketing costs as a result of the
company-wide emphasis on cost reduction in fiscal year 2001.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consists
primarily of compensation for executive and administrative personnel, associated
facilities, computers and communications overhead, provision for doubtful
accounts, amortization of intangible assets, insurance, and outside professional
fees. General and administrative expenses, exclusive of expenses associated with
discontinued operations, increased 5 percent, from $15.6 million for the year
ended September 30, 2000 to $16.4 million for the year ended September 30, 2001.
General and administrative expenses as a percentage of total revenue increased
from 17 percent for the year ended September 30, 2000 to 22 percent for the year
ended September 30, 2001. The increase in general and administrative expenses
was primarily due to one-time charges of $6.5 million comprised of the
following: $3.9 million associated with the write-off of goodwill and
intangibles, $1.6 million associated with the write-off of fixed assets, and
lease obligations and $1.0 million associated with the Company's reduction in
force and executive terminations. Non-recurring expenses included in general and
administrative expenses amounted to $2.2 million during fiscal year 2000.
Excluding these one-time charges associated with each fiscal year, general and
administrative expenses decreased 26 percent from $13.4 million for the year
ended September 30, 2000 to $9.9 million for the year ended September 30, 2001.
The decrease is due to cost savings associated with the Company's reduced
headcount and overall cost-cutting measures. Excluding these charges, general
and administrative expenses as a percentage of total revenue decreased from 14
percent for the year ended September 30, 2000, to 13 percent for the year ended
September 30, 2001. As a result of the write-off of goodwill, the Company
expects lower future general and administrative expenses.

OTHER INCOME, NET. Other income, net consists of interest income, interest
expenses, foreign currency exchange gains and losses, marketable equity
securities gains and losses and a legal settlement. During the fourth quarter of
fiscal 2000 the Company recorded a $4.9 million gain associated with a legal
settlement in defense of the Company's intellectual property. Other income, net
decreased from $6.1 million for the year ended September 30, 2000 to $22,000 for
the year ended September 30, 2001. The decrease was primarily attributed to the
settlement noted above, lower interest income due to lower cash, lower rates of
return available in the market, and marketable securities balances available for
investment and foreign exchange losses. Additionally, the Company recorded a
charge of $331 thousand to reflect the other than temporary decline in fair
value of one of these equity investments below its initial cost basis.

PROVISION FOR (BENEFIT FROM) INCOME TAXES. The provision for (benefit
from) federal, state and foreign income taxes was $6.9 million and ($2.3)
million for the years ended September 30, 2000 and 2001, respectively. The tax
benefit recognized for 2001 was primarily a result of the favorable resolution
of potential tax liabilities and the release of reserves as a result of
increased net operating losses. During fiscal year 2000, the Company established
a valuation allowance for its deferred tax assets which resulted in a $14.0
million charge and was primarily responsible for the provision (See Notes 2 and
15 to the consolidated financial statements).

DISCONTINUED APPLICATION SERVICE PROVIDER BUSINESS. In the fourth quarter
of fiscal year 2001, the Company decided to discontinue its ASP business unit.
The Company recorded a charge of $1.8 million associated with the disposal of
the ASP segment. Additionally, the Company realized operating losses from its
discontinued ASP business of $8.1 million and $11.7 million for the years ended
September 30, 2000 and 2001, respectively. Included in the loss from operations
of the discontinued segment is a $6.1 million charge for the write-off of
unrecoverable fixed asset balances.

YEAR ENDED SEPTEMBER 30, 2000 COMPARED TO YEAR ENDED SEPTEMBER 30, 1999

REVENUE. Total revenue, exclusive of revenue associated with discontinued
operations, decreased 24 percent, from $122.0 million for the year ended
September 30, 1999 to $92.7 million for the year ended September 30, 2000. The
decrease was due to the reductions in the Company's consulting services and
software license fees.

Revenue from continuing operations in North America (United States and
Canada) decreased 26 percent, from $113.5 million for the year ended September
30, 1999 to $84.6 million for the year ended September 30, 2000. This is
representative of 93 percent and 91 percent of total revenue for fiscal 1999 and
fiscal 2000, respectively. EMEA (Europe, Middle East and Africa) revenue
decreased 12 percent from $8.2 million for the year ended September 30, 1999 to
$7.2 million for the year ended September 30, 2000, which was 7 percent and 8
percent of total revenue for fiscal 1999 and 2000, respectively. Other
international regions, including Asia Pacific and Latin America, contributed
approximately 1 percent of total revenue for both fiscal 1999 and 2000.

Software license fee revenue decreased 37 percent, from $32.4 million for
the year ended September 30, 1999 to $20.5 million for the year ended September
30, 2000. The Company believes that the decrease was primarily due to the
elimination of revenues related to discontinued products, potential customers
deciding to postpone software acquisitions to focus on their Year 2000
compliance issues in the first quarter of fiscal 2000 and the subsequent slow
recovery in the market for the licensing of back office applications.

Service revenue, exclusive of revenue associated with discontinued
operations, decreased 19 percent, from $89.6 million for the year ended
September 30, 1999 to $72.3 million for the year ended September 30, 2000. The
decrease was primarily attributable to lower software license fee revenue and
elimination of Year 2000

consulting services after the first quarter of 2000. The following table
summarizes the composition and decrease in the Company's service revenue:

<Table>
<Caption>
% OF $
FISCAL YEAR ENDED INCREASE
SEPTEMBER 30, (DECREASE)
--------------------- -------------
2000 1999 1999 - 2000
--------- --------- -------------
(IN THOUSANDS EXCEPT PERCENTAGE DATA)

Software maintenance revenue.......................... $42,836 $42,153 2%
Consulting services revenue........................... 29,425 47,415 (38)%
------- ------- ---
Total service revenue............................... $72,261 $89,568 (19)%
======= ======= ===
</Table>

COST OF SOFTWARE LICENSE FEES. Cost of software license fees consists
primarily of amortization expenses related to capitalized software development
costs, royalties on the sale of third-party products and the cost of product
media, manuals and shipping. Cost of license fees decreased from $14.5 million
or 45 percent of software license fees in fiscal 1999, to $7.1 million, or 35
percent of license fees in fiscal 2000. Excluding the 1999 charges related to
product discontinuance of $6.3 million (which includes $5.6 million related to
the write-off of capitalized purchased software and $700 thousand related to the
write-off of prepaid royalties for third-party products sold with the
discontinued product line), cost of software license fees decreased 13 percent
from $8.2 million for the year ended September 30, 1999 to $7.1 million for the
year ended September 30, 2000. Exclusive of the changes related to product
discontinuances in fiscal 1999, cost of software license fees as a percentage of
software license fee revenue increased from 25 percent for the year ended
September 30, 1999 to 35 percent for the year ended September 30, 2000. The
decrease of such costs resulted primarily from the elimination of amortization
of capitalized software costs related to a discontinued product during fiscal
1999. The increase as a percentage of license fee revenues was due to a decrease
in software license fees and an increase in third-party royalty fees.

COST OF SERVICES. Cost of services consists of costs to provide support,
implementation, consulting and training services to licensees. Cost of services,
exclusive of cost associated with discontinued operations, decreased 22 percent
from $40.4 million for the year ended September 30, 1999 to $31.6 million for
the year ended September 30, 2000. Cost of services as a percentage of service
revenue decreased from 45 percent for the year ended September 30, 1999 to 44
percent for the year ended September 30, 2000. The decrease is primarily due to
lower third-party consulting fees.

<Table>
<Caption>
FISCAL YEAR ENDED
SEPTEMBER 30,
-----------------
2000 1999
------- -------
(IN THOUSANDS)

Research and development expenses........................... $21,296 $19,140
Capitalized software development costs...................... 1,557 5,793
------- -------
Research and development spending........................... $22,853 $24,933
======= =======
</Table>

Research and development expenses, exclusive of expenses associated with
discontinued operations, was $19.1 million and $21.3 million for the years ended
September 30, 1999 and 2000, respectively. Research and development expenses as
a percentage of total revenue was 16 percent for the year ended September 30,
1999 and 23 percent for the year ended September 30, 2000. The Company
capitalized $5.8 million for the year ended September 30, 1999 and $1.6 million
for the year ended September 30, 2000. Additionally, research and development
spending decreased 8 percent from $24.9 million for the year ended September 30,
1999 to $22.9 million for the year ended September 30, 2000. For the year ended
September 30, 2000, research and

development expenses associated with discontinued product lines was $2.1
million. The Company continues to make significant investments in research and
development. The Company believes that development spending is critical to
building long-term product and technology advantages in the market.

SALES AND MARKETING. Sales and marketing expenses consists primarily of
salaries, commissions, travel, promotional expenses, facilities, and computers
and communications overhead costs. Sales and marketing expenses, exclusive of
expenses associated with discontinued operations, decreased 10 percent from
$40.1 million for the year ended September 30, 1999 to $36.1 million for the
year ended September 30, 2000. Sales and marketing expenses as a percentage of
total revenue increased from 33 percent for the year ended September 30, 1999 to
39 percent for the year ended September 30, 2000. The decrease expense was
primarily due to reduced commissions resulting from lower sales levels. These
costs were partially offset by increased investments in the Company's corporate
image and brand awareness marketing which resulted in the increase as a
percentage of overall revenue.

WRITE-OFF OF DISCONTINUED PRODUCT LINES. In the fourth quarter of fiscal
year 1999, the Company decided to discontinue new release development of
Infinium Financials and Infinium Human Resources for Microsoft Windows NT. The
Company had agreed to provide maintenance and consulting services for existing
customers until November 2000. Of the $9.5 million of estimated costs related to
these actions, $2.3 million is related to impaired receivables, $5.6 million
relates to the write-off of capitalized and purchased software, $900 thousand is
related to the write-off of goodwill associated with the Company's acquisition
of Time Open Systems Limited, and $700 thousand is related to the write-off of
prepaid royalties for third-party products sold with the discontinued product
lines.

In fiscal year 2000, the Company realized operating losses from its
discontinued product line of $5.7 million. Operating expenses of $6.2 million
was incurred to provide maintenance and support, to transition customers to
alternative software platforms and to resolve disputes. Expenses recorded in
cost of service, research and development, and general and administrative were
$1.9 million, $2.1 million, and $2.2 million, respectively.

OTHER INCOME, NET. Other income, net consists of interest income, interest
expense, foreign exchange gains and losses, marketable equity securities gains
and losses and a legal settlement. During the fourth quarter of fiscal 2000 the
Company recorded a $4.9 million gain associated with a legal settlement in
defense of the Company's intellectual property. Other income, net increased 132
percent from $2.6 million for the year ended September 30, 1999 to $6.1 million
for the year ended September 30, 2000. The increase was primarily attributed to
the settlement noted above.

PROVISION FOR (BENEFIT FROM) INCOME TAXES. The provision for (benefit
from) federal, state and foreign income taxes was ($1.7) million and $6.9
million for the years ended September 30, 1999 and 2000, respectively. The tax
benefit realized during fiscal year 1999 was attributed to the charge to
operations of $9.5 million for the write-off of discontinued product lines. The
effective tax rate was (42 percent) for the year ended September 30, 1999 and 33
percent for the year ended September 30, 2000. During the fourth quarter

the Company established a valuation allowance for its deferred tax assets which
resulted in a $14.0 million charge (See Notes 2 and 15 to the consolidated
financial statements).

DISCONTINUED ASP BUSINESS. The results of operations for the discontinued
ASP business for fiscal year 2000 have been stated separately on the
consolidated statement of operations for comparative purposes.

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2001, the Company had cash, cash equivalents, and
marketable securities of $15.3 million, resulting from a net use of cash, cash
equivalents, and marketable securities of $5.5 million during fiscal year 2001.
Operating activities consumed $1.7 million and included $5.8 million used in
discontinued operations. The net loss, which includes an $11.7 million operating
loss associated with the ASP business unit, and a $1.8 million estimated loss
from the disposal of the discontinued operations, totaled $24.3 million.
Investing activities consumed $2.9 million and included $2.3 million used to
fund capitalized software, and $700 thousand used to fund purchases of property,
computers and equipment. Financing activities consumed $61 thousand. Proceeds
from the exercise of stock options and the employee stock purchase plan provided
$104 thousand, offset by $143 thousand of payments on capital lease obligations
and $22 thousand paid to purchase treasury stock. In October 2001 the Company
entered into a line of credit with a financial institution under which it can
borrow up to $3.0 million, based on certain asset-based balances. The agreement,
which extends to December 31, 2002, contains certain financial covenants
including a prohibition against the payment of dividends, as well as, minimum
net deficit targets ranging from $19 million in 2001 to $10 million in May 2002.
The Company has not borrowed under this line of credit. The interest rate on any
funds that are borrowed would be at prime plus 1 percent.

Days sales outstanding ("DSO") decreased to 36 days at September 30, 2001,
compared to 58 days at September 30, 2000. The Company calculates DSO by
dividing the ending accounts receivable balance, net of allowance for doubtful
accounts, by the annualized revenue for the most recent fiscal quarter,
multiplied by 360. The Company believes that this method of deriving DSO is
indicative of actual results due to the cyclical nature of software license and
service transactions, which are often consummated near the end of the quarter,
as well as the fluctuation of transactions from one quarter to the next. The
Company's accounts receivable balance at September 30, 2001, net of the
allowance for doubtful accounts, was $6.8 million. This compares with $16.2
million as of September 30, 2000.

Deferred revenue decreased $7.7 million, from $36.7 million at September
30, 2000, to $29.0 million at September 30, 2001. The decrease in deferred
revenue primarily resulted from a decrease in the deferred consulting services
component of revenue.

The Company has incurred net operating losses in each of the last three
fiscal years ended September 2001, 2000 and 1999, and generated a negative cash
flow from operations in each of the last two years. In addition, software
license fee sales and services revenues have decreased in each of the last three
fiscal years. As of September 30, 2001, the Company had a working capital
deficit of $21.2 million and a retained deficit of $12.7 million. Included in
the working capital deficit is $27.6 million of deferred revenue. During fiscal
year 2001, under the leadership of a new Chief Executive Officer and President
hired in February 2001, the Company reassessed its business and established
short term goals for fiscal 2001, which included stabilizing the Company,
focusing on its core competencies, improving the profitability of the Company
and preserving the Company's cash. As a part of these efforts, the Company
significantly reduced the Company's costs in the third and fourth quarters of
fiscal 2001. As part of its cost reduction efforts, in September 2001, due to
continued historical operating losses from its Application Service Provider
("ASP") business segment and because the ASP did not present an opportunity for
timely profitability, the Company's management decided to discontinue the ASP by
phasing out of the business segment over a period of six months. As a result,
this business segment is classified as a discontinued operation in the
consolidated statement of operations. During fiscal 2001, the Company also
reduced its headcount by 36 percent. The Company believes that it has sufficient
cash, cash equivalents and marketable securities on hand to fund its operations
through at least fiscal 2002.

While operating activities may provide cash in certain periods, to the
extent the Company anticipates growth in the future, the Company anticipates
that its operating and investing activities may use cash, and, consequently,
such growth may require the Company to obtain additional sources of financing.

The Company's working capital and other capital requirements may change
because of unanticipated changes in business conditions or delays in market
acceptance of new products. Other considerations such as further expansion of
operations or research and development activities, competitive and technological
developments, and possible future acquisitions of businesses and/or product
rights may also affect the Company's capital requirements. There is no assurance
that the Company will be able to raise sufficient debt or equity capital on
terms that it considers acceptable, if at all. Accordingly, there can be no
assurance that the Company may not experience liquidity problems as a result or
because of adverse market conditions or other unfavorable events.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 141 ("SFAS No. 141"), Business Combinations. SFAS No. 141 requires the use
of the purchase method of accounting for all business combinations initiated
after June 30, 2001 and eliminates the pooling-of-interests method. The Company
adopted SFAS No. 141 which would apply to any future acquisitions entered into
by the Company.

In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 (SFAS No. 142), Goodwill and Other Intangible Assets. SFAS No. 142
requires that goodwill and other intangible assets with indefinite lives no
longer be amortized, but instead be tested for impairment at least annually. In
addition, the standard includes provisions for the reclassification of certain
existing intangibles as goodwill and reassessment of the useful lives of
existing intangibles. The Company plans to adopt SFAS No. 142 in the first
quarter of fiscal year 2002 and does not anticipate that the adoption of this
standard will have a material impact on its financial statements as the Company
has no goodwill or intangible assets related to prior acquisitions.

In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS 144). SFAS 144 supercedes SFAS
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, and provides for a single accounting model for
long-lived assets to be disposed of. This statement is effective for fiscal
years beginning after December 15, 2001. The Company anticipates that the
adoption of SFAS 144 will not have a significant effect on its financial
position or its results of operations.

FACTORS AFFECTING FUTURE PERFORMANCE

PRODUCT CONCENTRATION. As the Company's primary current source of revenue
comes from customers using IBM midrange computers, future revenue from licenses
of present products and sales of services and recurring maintenance revenue are
therefore dependent on continued widespread use of the IBM eServer iSeries
(formerly the IBM AS/400) and the continued support of such computers by IBM. In
addition, because the Company's current IBM eServer iSeries (formerly the IBM
AS/400) product line requires the use of related operating systems, the Company
may be required to adapt its products to any changes made in such operating
systems in the future. The Company's inability to adapt to future changes in the
operating systems, or delays in doing so, could have a material adverse effect
on the Company's business, operating results, and financial condition.

RAPID TECHNOLOGICAL CHANGE AND EVOLVING MARKET. The business applications
software market is characterized by rapid technological change, frequent new
product introductions, evolving industry standards, and changes in customer
demands.

The introduction of products embodying new technologies and the emergence
of new industry standards can render existing products obsolete and
unmarketable. The Company's success will depend in part on its ability to
enhance products and services to meet changing customer requirements. There can
be no assurance that the Company will be successful in developing and marketing
product enhancements or new products that respond to technological change or
evolving industry standards; that the Company will not experience

difficulties that could delay or prevent the successful development,
introduction, and marketing of these products and enhancements; or that any new
products or product enhancements it may introduce will achieve market
acceptance. In addition, there can be no assurance that the Company will not
encounter product development delays in the future or that, despite testing by
the Company, errors will not be found in new products or product enhancements
after commencement of commercial shipments, resulting in loss of market share,
delay in market acceptance, or warranty claims that could have a material
adverse effect upon the Company's business, operating results, and financial
condition. The Company is continuing to develop software applications to operate
over the Internet and within corporate intranets. The Company's development and
implementation of versions of its business software applications to operate in
this manner involves more intense competition from a larger number of
competitors. The adoption of Internet-based software applications could be
limited by concerns over transaction security and user privacy, the performance
of the Internet, and potential customers not seeing the value of these
solutions.

COMPETITION. The business applications software market is highly
competitive and rapidly changing. A number of companies offer products similar
to the Company's products and target the same customers as the Company. In
addition, a number of companies are planning to offer products over the Internet
competitive to the Company's products. The Company believes its ability to
compete depends upon many factors within and outside its control, including the
timely development and production of new products and product enhancements,
product functionality, performance, price, reliability, customer service and
support, sales and marketing efforts, and product distribution. The Company
believes that competition in its industry is undergoing rapid change and that
the barriers to competition between market segments that have previously existed
are decreasing. Due to the relatively low barriers to entry in the software
market, the Company expects additional competition from other established and
emerging companies in the client/server business applications software market as
well as from companies in the expanding Internet business applications market
that the Company has entered. Increased competition may result in price
reductions, reduced gross margins, and loss of market share, any of which would
have a material adverse effect on the Company's business, operating results, and
financial condition. There can be no assurance that the Company will be able to
compete successfully against current or future competitors or that competitive
pressures will not have a material adverse effect on the Company's business,
operating results, and financial condition.

POTENTIAL FLUCTUATION OF QUARTERLY RESULTS. The Company's quarterly
revenue and operating results have varied significantly in the past and are
likely to vary substantially from quarter to quarter in the future. Such
fluctuations may result in volatility in the price of the Company's common
stock. Quarterly revenue and operating results may fluctuate as a result of a
variety of factors, including the Company's lengthy sales cycle, the proportion
of revenue attributable to license fees versus services revenue, changes in the
level of operating expenses, demand for the Company's products, the introduction
of new products and product enhancements by the Company or its competitors,
changes in customer budgets, competitive conditions in the industry, and general
economic conditions. Further, the purchase of the Company's products often
involves a significant commitment of capital by its customers with the attendant
delays frequently associated with large capital expenditures and authorization
procedures within an organization. For these and other reasons, the sales cycles
for the Company's products are typically lengthy and subject to a number of
significant risks over which the Company has little or no control. The Company
historically has operated with little software license backlog because its
software products are generally shipped as orders are received. The Company has
often recognized a substantial portion of its revenue in the last month of the
quarter and often in the last week of that month. As a result, license fees in
any quarter are substantially dependent on orders booked and shipped in the last
month or last week of that quarter. Accordingly, a small variation in the timing
of recognition of revenue for specific transactions would adversely and
disproportionately affect the Company's operating results for a quarter because
the Company establishes its expenditure levels on the basis of its expected
future revenue and only a small portion of the Company's expense varies with its
revenue. The Company believes that period-to-period comparisons of results of
operations are not necessarily meaningful and should not be relied upon as
indicative of future performance.

Due to the foregoing factors and other factors set forth in this Form 10-K,
it is likely that in some future quarter the Company's operating results will be
below the expectations of the Company and public market

analysts and investors. In such event, the price of the Company's common stock
would likely be materially adversely affected.

SEASONALITY. The Company's business has experienced and is expected to
continue to experience significant seasonality. In recent years, the Company has
had greater demand for its products in its fourth fiscal quarter and has
experienced lower revenue in its succeeding first and second fiscal quarters.
The fluctuations are caused primarily by customer purchasing patterns and the
Company's sales recognition programs, which reward and recognize sales personnel
on the basis of achievement of annual performance quotas.

DISCONTINUED PRODUCTS AND SEGMENT. In fiscal year 1999, the Company
decided to discontinue new release development of Infinium Financials for
Microsoft Windows NT and Infinium Human Resources for Microsoft Windows NT, in
order to focus additional resources towards deploying its other financial and
human resource systems over the Internet and expanding the breadth of its
product lines. Additionally, in September 2001, the Company decided to
discontinue its ASP segment because it did not present an opportunity for timely
profitability and was therefore determined to no longer be aligned with the
Company's strategic direction. The Company has worked with the customers of the
discontinued products and segment to provide various alternative solutions,
including migration to the Company's other financial and human resources
applications and identifying partners to continue to provide new release
development of the discontinued products and transitioning ASP customers to
internal processing or other ASP providers. However, there can be no assurance
that the Company will not continue to encounter customer litigation resulting
from these discontinuances that could have a material adverse effect upon the
Company's financial condition. The Company is continuing to develop its
financial and human resources systems for the IBM eServer iSeries (formerly the
IBM AS/400) and the AdvaNTage Human Resources, Payroll and e-Resources systems
for Microsoft Windows NT, which it acquired from Cort.

INTERNATIONAL OPERATIONS. Revenue from customers outside North America
represented 7 percent, 9 percent, and 9 percent of the Company's total revenue
in fiscal 1999, 2000, and 2001, respectively. The Company believes that its
revenue and future operating results will depend, in part, on its ability to
increase sales in international markets. There can be no assurance that the
Company will be able to maintain or increase its current level of international
revenue. Risks inherent in the Company's international business activities
generally include unexpected changes in regulatory requirements, tariffs, and
other trade barriers, costs, and difficulties of localizing products for foreign
countries, lack of acceptance of localized products in foreign countries, longer
accounts receivable payment cycles, difficulties in managing international
operations, potentially adverse tax consequences, including restrictions on the
repatriation of earnings, the burdens of complying with a wide variety of
foreign laws, and economic instability. There can be no assurance that such
factors would not have a material adverse effect on the Company's future
international revenue and, consequently, on the Company's business, operating
results, and financial condition.

OPERATING LOSSES. The Company experienced net losses of $24.3 million,
$27.8 million and $2.4 million for the fiscal years ended September 30, 2001,
2000 and 1999, respectively. The Company expects, through its recent cost
cutting measures, to improve its earnings results in the future. If the Company
does achieve profitability, it may not be able to sustain or increase
profitability on a long term basis.

CHANGES IN MANAGEMENT. During the past year, the Company's management team
has experienced significant change. In February 2001, James McGowan was elected
by the Board of Directors as the Company's Chief Executive Officer, President
and a member of the Board of Directors. In addition, several of the Company's
senior executives have ceased to serve in that capacity and there have been
other changes in senior management in the Company. Such changes can cause
disruption in the Company's operations and results. Additionally, due to the
competitive nature of the industry, the Company may not be able to retain its
existing management and may be unable to hire qualified individuals to fill open
positions on terms acceptable to the Company.

CHANGE IN STOCK LISTING. The Company's common stock had been traded on the
Nasdaq National Market but, because of a determination by the Nasdaq National
Market that the Company no longer continued to meet all the requirements for
continued listing on the Nasdaq National Market, its stock is now
19

traded on the Nasdaq Small Cap Market. This change in listing may have had, and
may continue to have, a negative impact on the value of the Company's common
stock, because stocks trading on the Nasdaq Small Cap Market are typically less
liquid than those traded on the Nasdaq National Market. In addition, in the
future, Nasdaq may determine that the Company no longer continues to meet all of
the requirements for continued listing on the Nasdaq Small Cap Market.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about the Company's market risk involves forward
looking statements. Actual results could differ materially from those discussed
in the forward looking statements. The Company is exposed to market risk related
to changes in interest rates and foreign currency exchange rates. The Company
does not use derivative financial instruments for speculative or trading
purposes.

INTEREST RATE RISK

The Company is exposed to market risk from changes in interest rates
primarily through its investing and borrowing activities. In addition, the
Company's ability to finance future acquisition transactions may be impacted if
the Company is unable to obtain appropriate financing at acceptable rates. The
Company's investing strategy to manage interest rate exposure is to invest in
short-term, highly liquid investments. The Company maintains a portfolio of
highly liquid cash equivalents and short-term investments (primarily in
high-grade municipal notes). At September 30, 2001, the fair value of the
Company's short-term investments approximated market value.

FOREIGN CURRENCY RISK

The Company faces exposure to movements in foreign currency exchange rates.
These exposures may change over time as business practices evolve and could have
a material adverse effect on the Company's business, financial condition and
results of operations. The Company does not use derivative financial instruments
to hedge foreign currency exposures or for trading. Historically, the Company's
primary exposures have been related to the operations of its foreign
subsidiaries. In fiscal 2001, the net impact of foreign currency changes was
$278 thousand.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

This item may be found under Item 14(a) (1) and (2) below on Page 21

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

There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item with respect to the Directors of the
Company is hereby incorporated by reference to the information contained under
the heading "Election of Directors" in the Company's definitive proxy statement
of the Company's 2001 Annual Meeting of Stockholders which will be filed with
the Securities and Exchange Commission within 120 days after the close of the
fiscal year (the "Definitive Proxy Statement").

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is hereby incorporated by reference
to the information under the heading "Executive Compensation" in the Definitive
Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is hereby incorporated by reference
to the information contained under the heading "Stock Ownership of Certain
Beneficial Owners and Management" in the Definitive Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is hereby incorporated by reference
to the information contained under the heading "Certain Relationships and
Related Transactions" in the Definitive Proxy Statement.

PART IV

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

(a) Financial Statements, Schedule and Exhibits

The financial statements, schedule and exhibits listed below are included
in or incorporated by reference as part of this Report:

1. Financial Statements

<Table>
<Caption>
PAGE
----

Report of Independent Accountants........................... F-1
Consolidated balance sheet at September 30, 2001 and 2000... F-2
Consolidated statement of operations for the years ended
September 30, 2001, 2000, and 1999........................ F-3
Consolidated statement of stockholders' equity (deficit) for
the years ended September 30, 2001, 2000, and 1999........ F-4
Consolidated statement of cash flows for the years ended
September 30, 2001, 2000, and 1999........................ F-5
Notes to consolidated financial statements.................. F-6
</Table>

2. Schedule

The following Financial Statement Schedule of the Company is filed as
part of this Report:

<Table>
<Caption>
PAGE
----

Schedule II Valuation and Qualifying Accounts............... F-29
</Table>

Schedules not listed above have been omitted because they are not
applicable, not required, or the information required to be set forth therein is
included in the consolidated financial statements or the notes thereto.

3. Exhibits

See attached Index to Exhibits on page 23.

(b) Reports on Form 8-K

On July 13, 2001, the Company filed Form 8-K in connection with the
Company's movement from the NASDAQ National Market to the NASDAQ Smallcap
Market.

(c) The Company hereby files as part of this Annual Report on Form 10-K the
Exhibits listed in the attached Exhibit Index.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, this th day of
December 2001.

INFINIUM SOFTWARE, INC.

By:/s/ WILLIAM B. GERRAUGHTY, JR.
------------------------------------
Senior Vice President and Chief
Financial Officer

We, the undersigned officers and directors of Infinium Software, Inc.,
hereby severally constitute and appoint James E. McGowan and William B.
Gerraughty, Jr., and each of them singly, our true and lawful attorneys, with
full power to them, and each of them singly, to sign for us in our names in the
capacities to do all things in our names and on behalf in such capacities to
enable Infinium Software, Inc. to comply with the provisions of the Securities
Exchange Act of 1934, as amended, and all requirements of the Securities
Exchange Commission.

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

<Table>
<Caption>
SIGNATURE TITLE DATE
--------- ----- ----

/s/ JAMES E. MCGOWAN Chief Executive Officer And December 21, 2001
------------------------------------------------ Director
James E. McGowan

/s/ WILLIAM B. GERRAUGHTY, JR. Senior Vice President And Chief December 21, 2001
------------------------------------------------ Financial Officer
William B. Gerraughty, Jr.

/s/ ROBERT A. PEMBERTON Chairman of the Board December 21, 2001
------------------------------------------------
Robert A. Pemberton

/s/ MANUEL CORREIA Director December 21, 2001
------------------------------------------------
Manuel Correia

/s/ MICHAEL A. CUSUMANO Director December 21, 2001
------------------------------------------------
Michael A. Cusumano

/s/ FRED LUCONI Director December 21, 2001
------------------------------------------------
Fred Luconi

/s/ ROLAND D. PAMPEL Director December 21, 2001
------------------------------------------------
Roland D. Pampel

/s/ ROBERT P. SCHECHTER Director December 21, 2001
------------------------------------------------
Robert P. Schechter
</Table>

INFINIUM SOFTWARE, INC.

INDEX TO EXHIBITS

<Table>
<Caption>
EXHIBIT
NO. DESCRIPTION
- ------- -----------

3.1 -- Articles of Organization of the Registrant, as amended, are
incorporated herein by reference to Exhibit 3.1 to the
Registrant's Form 10-K for the annual period ended September
30, 1999.
3.2 -- By-Laws of the Registrant, as amended, are incorporated
herein by reference to Exhibit 3(I) to the Registrant's Form
10-Q for the quarterly period ended March 31, 1997.
4.1 -- Shareholder Rights Agreement dated as of February 5, 1999 is
incorporated herein by reference to Exhibit 1 to the
Registrant's Registration Statement on Form 8-A , filed on
February 23, 1999, File No. 001-14855.
10.1 -- Loan and Security Agreement, dated October 26, 2001, between
Silicon Valley Bank and Infinium Software, Inc.
10.2* -- 1989 Stock Option Plan, as amended as of October 1, 1994 is
incorporated herein by reference to Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-97866).
10.3* -- 1995 Stock Plan is incorporated herein by reference to
Exhibit 10.3 to the Registrant's Registration Statement on
Form S-1 (Registration No. 33-97866).
10.4* -- 1995 Employee Stock Purchase Plan is incorporated herein by
reference to Exhibit 10.4 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-97866).
10.5* -- 1995 Non-Employee Director Stock Option Plan is incorporated
herein by reference to Exhibit 10.5 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-97866).
10.6 -- Lease dated March 31, 1995 between the Registrant and
Independence Park Associates Realty Trust as of August 1995
is incorporated herein by reference to Exhibit 10.6 to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-97866).
10.7* -- Form of Senior Management Plan.
10.8* -- Executive Severance Plan, is incorporated herein by
reference to Exhibit 10.8 to the Registrant's Form 10-K for
the annual period ended September 30, 1999
10.9* -- Form of 1995 Stock Plan Option Agreement is incorporated
herein by reference to Exhibit 10.16 to the Registrant's
Registration Statement on Form S-1 (Registration No.
33-97866).
10.10* -- Register of Amendments, Subsections 3.1 and 7.3.4, 1989
Stock Option Plan is incorporated herein by reference to
Exhibit 10.17 to the Registrant's Registration Statement on
Form S-1 (Registration No. 33-97866).
10.11* -- Register of Amendments, Article 5, 1995 Employee Stock
Purchase Plan is incorporated herein by reference to Exhibit
10.18 to the Registrant's Registration Statement on Form S-1
(Registration No. 33-97866).
10.12* -- Form of Restricted Stock Agreement.
10.13* -- Stock Option Agreement for Former Chief Operating Officer is
incorporated herein by reference to Exhibit 10.13 to the
Registrant's Form 10-K for the annual period ended September
30, 2000.
10.14* -- Employment Agreement for Chief Executive Officer is
incorporated herein by reference to Exhibit 10.13 to the
Registrant's Form 10-Q for the quarterly period ended March
31, 2001.
10.15* -- Executive Severance Plan for new executives
10.16* -- Form of 1995 Stock Plan Option Agreement
21.1 -- Schedule of Subsidiaries of the Registrant
23.1 -- Consent of PricewaterhouseCoopers LLP
</Table>

- ---------------

* Indicates a management contract or any compensatory plan, contract or
arrangement required to be filed as an exhibit to Item 14(c).

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Infinium Software, Inc.:

In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 21 present fairly, in all material
respects, the financial position of Infinium Software, Inc. and its subsidiaries
at September 30, 2001 and 2000, and the results of their operations and their
cash flows for each of the three years in the period ended September 30, 2001 in
conformity with accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement schedule listed in
the index appearing under Item 14(a)(2) on page 21 presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and the financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

/s/ PRICEWATERHOUSECOOPERS LLP

Boston, Massachusetts
October 26, 2001

F-1

INFINIUM SOFTWARE, INC.

CONSOLIDATED BALANCE SHEET

<Table>
<Caption>
SEPTEMBER 30,
-------------------------
2001 2000
----------- -----------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)

ASSETS
Current assets:
Cash and cash equivalents................................. $ 13,210 $ 17,665
Marketable securities at fair market value................ 2,076 3,073
Accounts receivable, less allowance for doubtful accounts
of $1,876 and $3,455 at September 30, 2001 and 2000,
respectively........................................... 6,841 16,218
Prepaid expenses and other current assets................. 2,499 4,465
Net current assets of discontinued operations............. 233 --
-------- --------
Total current assets................................... 24,859 41,421
-------- --------
Property and equipment, net................................. 6,958 16,574
Capitalized software development costs, net................. 1,122 5,569
Goodwill and other intangible assets, net................... -- 5,327
Other assets................................................ 2,358 2,358
-------- --------
Total assets........................................... $ 35,297 $ 71,249
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 4,345 $ 6,836
Accrued expenses.......................................... 13,599 14,293
Income taxes payable...................................... 282 441
Lease obligations, short-term portion..................... 239 71
Deferred revenue.......................................... 27,588 35,273
-------- --------
Total current liabilities.............................. 46,053 56,914
-------- --------
Lease obligations, long-term portion........................ 524 291
Deferred revenue............................................ 1,400 1,381
Other long-term liabilities (Note 6)........................ -- 1,000
-------- --------
Total liabilities...................................... 47,977 59,586
-------- --------
Commitments and contingencies (Note 20)
Common stock, $0.01 par value; authorized 40,000 shares,
issued 13,365 and 12,927 shares at September 30, 2001 and
2000, respectively........................................ 134 129
Additional paid-in capital.................................. 38,936 38,327
Deferred stock-based compensation........................... (297) --
Accumulated deficit......................................... (51,362) (26,876)
Accumulated other comprehensive income (loss)............... (69) 293
-------- --------
(12,658) 11,873
Less: Treasury stock at cost, 171 and 43 shares at September
30, 2001 and 2000, respectively........................... (22) (210)
-------- --------
Total stockholders' equity (deficit)................... (12,680) 11,663
-------- --------
Total liabilities and stockholders' equity (deficit)... $ 35,297 $ 71,249
======== ========
</Table>

The accompanying notes are an integral part of the consolidated financial
statements.
F-2

INFINIUM SOFTWARE, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

<Table>
<Caption>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------
2001 2000 1999
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Revenue:
Software license fees..................................... $ 10,363 $ 20,473 $ 32,437
Services revenue.......................................... 63,707 72,261 89,568
-------- -------- --------
Total revenue.......................................... 74,070 92,734 122,005
-------- -------- --------
Operating costs and expenses:
Cost of software license fees............................. 8,157 7,101 14,518
Cost of services.......................................... 19,304 31,563 40,389
Research and development.................................. 16,165 21,296 19,140
Sales and marketing....................................... 27,182 36,102 40,135
General and administrative................................ 16,431 15,620 14,514
-------- -------- --------
Total operating costs and expenses..................... 87,239 111,682 128,696
-------- -------- --------
Loss from operations........................................ (13,169) (18,948) (6,691)
Other income, net........................................... 22 6,104 2,633
-------- -------- --------
Loss from continuing operations before provision for
(benefit from) income taxes............................... (13,147) (12,844) (4,058)
Provision for (benefit from) income taxes................... (2,284) 6,860 (1,698)
-------- -------- --------
Net loss from continuing operations......................... (10,863) (19,704) (2,360)
Discontinued operations:
Loss from operations of ASP segment......................... (11,658) (8,112) --
Loss from disposal of ASP segment........................... (1,811) -- --
-------- -------- --------
Net loss.................................................... $(24,332) $(27,816) $ (2,360)
======== ======== ========
Loss per share data:
Basic and diluted loss per share from continuing
operations............................................. $ (0.84) $ (1.56) $ (0.19)
======== ======== ========
Basic and diluted loss per share from ASP segment......... $ (1.04) $ (0.64) $ --
======== ======== ========
Basic and diluted loss per share, net..................... $ (1.88) $ (2.20) $ (0.19)
======== ======== ========
Weighted average shares outstanding -- basic and
diluted................................................ 12,941 12,668 12,421
======== ======== ========
</Table>

The accompanying notes are an integral part of the consolidated financial
statements.
F-3

INFINIUM SOFTWARE, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2001, 2000, AND 1999
<Table>
<Caption>
RETAINED ACCUMULATED
COMMON ADDITIONAL DEFERRED EARNINGS OTHER TREASURY
SHARES COMMON PAID-IN STOCK (ACCUMULATED COMPREHENSIVE STOCK
ISSUED STOCK CAPITAL COMPENSATION DEFICIT) INCOME (LOSS) AT COST
------ ------ ---------- ------------ ------------ ------------- --------
(IN THOUSANDS)

Balance at September 30, 1998...... 12,607 $126 $36,644 $ -- $ 4,473 $(319) $(1,293)
------ ---- ------- ----- -------- ----- -------
Income tax provision from exercise
of stock options.................. (338)
Purchase of treasury stock at
cost.............................. (2,968)
Treasury stock reissued upon
exercise of stock options and
employee stock purchase plan...... (925) 2,241
Comprehensive loss:
Net loss for the year............. (2,360)
Unrealized gain on marketable
equity securities............... 74
Cumulative translation
adjustment...................... (12)
Comprehensive loss..............
------ ---- ------- ----- -------- ----- -------
Balance at September 30, 1999...... 12,607 126 36,306 -- 1,188 (257) (2,020)
------ ---- ------- ----- -------- ----- -------
Stock issued in connection with
Dexton acquisition................ 320 3 1,837
Treasury stock reissued upon
exercise of stock options and
employee stock purchase plan...... 184 (248) 1,810
Comprehensive loss:
Net loss for the year............. (27,816)
Unrealized gain on marketable
equity securities............... 525
Cumulative translation
adjustment...................... 25
Comprehensive loss..............
------ ---- ------- ----- -------- ----- -------
Balance at September 30, 2000...... 12,927 129 38,327 -- (26,876) 293 (210)
------ ---- ------- ----- -------- ----- -------
Issuance of restricted stock....... 430 4 855 (859)
Executive option compensation...... 62 (62)
New shares issued for employee
stock purchase plan............... 8 1 11
Treasury stock reissued for
employee stock purchase plan...... 36 (154) 210
Purchase of treasury stock at
cost.............................. (22)
Amortization of deferred stock
compensation...................... 269
Cancellation of restricted stock... (355) 355
Comprehensive loss:
Net loss for the year............. (24,332)
Unrealized loss on marketable
equity securities............... (571)
Cumulative translation
adjustment...................... 209
Comprehensive loss..............
------ ---- ------- ----- -------- ----- -------
Balance at September 30, 2001...... 13,365 $134 $38,936 $(297) $(51,362) $ (69) $ (22)
====== ==== ======= ===== ======== ===== =======

<Caption>
TOTAL
STOCKHOLDERS'
EQUITY COMPREHENSIVE
(DEFICIT) (LOSS)
------------- -------------
(IN THOUSANDS)

Balance at September 30, 1998...... $ 39,631
--------
Income tax provision from exercise
of stock options.................. (338)
Purchase of treasury stock at
cost.............................. (2,968)
Treasury stock reissued upon
exercise of stock options and
employee stock purchase plan...... 1,316
Comprehensive loss:
Net loss for the year............. (2,360) $ (2,360)
Unrealized gain on marketable
equity securities............... 74 74
Cumulative translation
adjustment...................... (12) (12)
--------
Comprehensive loss.............. $ (2,298)
-------- ========
Balance at September 30, 1999...... 35,343
--------
Stock issued in connection with
Dexton acquisition................ 1,840
Treasury stock reissued upon
exercise of stock options and
employee stock purchase plan...... 1,746
Comprehensive loss:
Net loss for the year............. (27,816) $(27,816)
Unrealized gain on marketable
equity securities............... 525 525
Cumulative translation
adjustment...................... 25 25
--------
Comprehensive loss.............. $(27,266)
-------- ========
Balance at September 30, 2000...... 11,663
--------
Issuance of restricted stock.......
Executive option compensation......
New shares issued for employee
stock purchase plan............... 12
Treasury stock reissued for
employee stock purchase plan...... 92
Purchase of treasury stock at
cost.............................. (22)
Amortization of deferred stock
compensation...................... 269
Cancellation of restricted stock...
Comprehensive loss:
Net loss for the year............. (24,332) $(24,332)
Unrealized loss on marketable
equity securities............... (571) (571)
Cumulative translation
adjustment...................... 209 209
--------
Comprehensive loss.............. $(24,694)
-------- ========
Balance at September 30, 2001...... $(12,680)
========
</Table>

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

F-4

INFINIUM SOFTWARE, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

<Table>
<Caption>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------
2001 2000 1999
--------- --------- ---------
(IN THOUSANDS)

Cash flows from operating activities:
Net loss.................................................. $(24,332) $(27,816) $ (2,360)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Loss from discontinued operations....................... 11,658 8,112
Loss on disposal of discontinued operations............. 1,811 -- --
Depreciation and amortization........................... 11,123 8,680 15,138
Write-down of goodwill and intangibles.................. 3,937 -- --
Loss on disposal of fixed assets........................ 546 -- --
Write-down of marketable securities..................... 331
Non-cash compensation................................... 270 -- --
Allowance for doubtful accounts......................... (1,578) (774) 2,679
Deferred income taxes................................... -- 7,295 (1,287)
Changes in operating assets and liabilities, net of
effects from corporate acquisitions:
Accounts receivable................................... 10,602 1,907 8,181
Prepaid expenses and other current assets............. 1,955 (325) 1,941
Other assets.......................................... -- (163) 969
Accounts payable...................................... (2,473) (1,233) (360)
Accrued expenses...................................... (2,360) 1,519 (2,834)
Income taxes payable.................................. (149) (315) (2,525)
Deferred revenue...................................... (7,204) (1,574) (4,644)
-------- -------- --------
Net cash provided by (used in) continuing operations:... 4,137 (4,687) 14,898
Net cash used in discontinued operations:............... (5,836) (14,886)
-------- -------- --------
Net cash provided by (used in) operating activities:.... (1,699) (19,573) 14,898
-------- -------- --------
Cash flows from investing activities:
Purchase of marketable securities......................... (4,123) (4,148) (20,714)
Sale of marketable securities............................. 4,219 25,713 30,186
Purchase of property and equipment........................ (658) (2,877) (6,473)
Capitalization of internal software development costs..... (2,353) (1,557) (5,843)
Corporate acquisitions, net of cash acquired (Note 6)..... -- (4,575) --
-------- -------- --------
Net cash provided by (used in) investing activities..... (2,915) 12,556 (2,844)
-------- -------- --------
Cash flows from financing activities:
Proceeds from the exercise of stock options and employee
stock purchase plan..................................... 104 1,746 1,316
Payments on capital lease obligations..................... (143) -- --
Purchase of treasury stock................................ (22) -- (2,968)
-------- -------- --------
Net cash (used in) provided by financing activities..... (61) 1,746 (1,652)
-------- -------- --------
Effect of foreign exchange rate on cash..................... 220 (163) (11)
Net increase (decrease) in cash and cash equivalents........ (4,455) (5,434) 10,391
-------- -------- --------
Cash and cash equivalents, beginning of year................ 17,665 23,099 12,708
Cash and cash equivalents, end of year...................... $ 13,210 $ 17,665 $ 23,099
======== ======== ========
Supplemental cash flow information:
Cash paid during the year for:
Interest................................................ $ 117 $ 25 $ --
Income taxes paid (refunded), net of refunds received... $ (2,089) $ (785) $ 2,209
Supplemental disclosure of non-cash investing and financing
activities:
Equipment purchased under capital leases.................. $ 338 $ -- $ 452
Common stock issued in acquisition........................ $ -- $ 1,840 $ --
Note payable incurred in acquisition...................... $ -- $ 1,500 $ --
Issuance of restricted stock.............................. $ 859 $ -- $ --
</Table>

The accompanying notes are an integral part of the consolidated financial
statements.
F-5

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY

Founded in 1981, Infinium (Infinium or the Company) develops, markets, and
supports enterprise-level business software applications. The Company's software
products automate the financial management, human resource management, and
materials management functions of organizations in a broad range of industries
worldwide. The Company also offers a specialized manufacturing system designed
to manage process-manufacturing operations. The Company offers products that are
designed for IBM eServer iSeries (formerly the IBM AS/ 400) computers and the
AdvaNTage Human Resources and Payroll products for the Microsoft Windows NT
operating system. The Company's products can be deployed in a number of
different networking environments, including local area networks, wide area
networks, intranets, and the Internet.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned domestic and foreign subsidiaries. All inter-company
transactions and balances have been eliminated from the consolidated financial
statements. Certain prior year amounts have been reclassified to conform with
current year presentation. The Company's fiscal year end is September 30.
References to 2001, 2000, and 1999 refer to the fiscal year ended September 30,
unless otherwise noted.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, and disclosures of contingent assets and liabilities, at the date
of the financial statements and the reported amounts of revenue and expense
during the reporting period. These estimates include assessing the
collectibility of accounts receivable, the realization of deferred tax assets
and useful lives for amortization periods of tangible and intangible assets,
among others. The markets for the Company's products are characterized by
intense competition, rapid technological development and frequent product
introduction, all of which could impact the future realizability of the
Company's assets. Actual results could differ from these estimates.

F-6

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

Revenue from software license fees is recognized when there is evidence of
an arrangement, the product has been delivered, fees are fixed or determinable,
and collection of the related receivable is deemed probable. Revenues from sales
of third party products are recorded net of royalties, in accordance with
Emerging Issue Task Force 99-19, Reporting Revenue Gross as a Principle versus
Net as an Agent. Generally, the Company's software products do not require
significant modification or customization. Installation of the products is
normally routine and is not essential to the functionality of the product. The
Companies sales frequently include maintenance contracts and professional
services with the sale of its software licenses. The Company has established
vendor-specific objective evidence of fair value (VSOE) for its maintenance
contracts and professional services, which is determined based upon the prices
charged to customers when these elements are sold separately. Maintenance
revenues, including those sold with the initial license fee, are deferred based
on VSOE, typically determined by the renewal rate of the annual maintenance
contract, and recognized ratably over the maintenance contract period.
Consulting and training service revenues, including those sold with license
fees, are recognized as the services are performed based on their established
VSOE. The amount of revenue allocated to the licenses sold with services and/or
maintenance is determined using the "residual method" of accounting. Under the
residual method, the total value of the arrangement is allocated first to the
undelivered elements based on their VSOE with the remainder being allocated to
license fees.

Revenues from the Company's Application Services Provider business consist
of monthly fees from ongoing services, including hosting, and are recognized
daily as earned over the contract term, typically three years. The monthly fee
for application services is typically fixed for the life of the contract, but
subject to increases in the event a customer requires additional applications,
increases its number of users or increases frequency of use. The Company
recognizes set-up fees for these arrangements over the expected life of the
customer relationship. Recognition of revenue related to these arrangements
commences on the date that the customer is able to access and utilize the
features and functionality of the applications as intended.

CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

The Company invests its excess cash primarily in securities of government
agencies, high-grade commercial paper, and mutual funds that invest primarily in
the securities of government agencies. These investments are subject to minimal
credit and market risk. The Company considers all highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents. Marketable securities include equity investments and securities
purchased with an original maturity of greater than three months.

The Company accounts for its investments under the provisions of Statement
of Financial Accounting Standards No. 115 ("SFAS No. 115"), Accounting for
Certain Investments in Debt and Equity Securities. SFAS No. 115 requires that,
except for debt securities classified as held-to-maturity, investments in debt
and equity securities should be reported at fair value. At September 30, 2001
and 2000, all of the Company's investments are classified as available-for-sale.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and depreciated over their
estimated useful lives using the straight-line method. Property and equipment
held under capital leases, which involve a transfer of ownership, are amortized
over the estimated useful life of the asset. Other property and equipment held
under leasehold improvements are amortized over the shorter of the lease term or
the estimated useful life of the related asset. Upon retirement or sale, the
cost of assets disposed of and the related accumulated depreciation are removed
from the

F-7

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

accounts and any resulting gain or loss is credited or charged to income.
Repairs and maintenance costs are expensed as incurred.

GOODWILL AND LONG-LIVED ASSETS

Goodwill is the excess of the purchase price over the fair value of net
assets acquired. Goodwill is amortized on a straight-line basis over the periods
benefited, typically two to five years. The Company evaluates the possible
impairment of goodwill and long-lived assets, including intangible assets,
whenever events or circumstances indicate the carrying value of the asset may
not be recoverable. In reviewing for impairment, the Company compares the
carrying value of such assets to the estimated undiscounted future cash flows
expected from the use of the assets and their eventual disposition. An
impairment loss, equal to the difference between the assets' fair value and
their carrying value, is recognized when the estimated future cash flows are
less than their carrying amount.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially expose the Company to concentrations
of credit risk include accounts receivable. To minimize this risk, the Company
generally requires a cash deposit upon contract signing. In addition, the
Company maintains reserves for potential credit losses. Such losses, in the
aggregate, have not exceeded management expectations. At times, the Company may
maintain cash balances in excess of federally insured limits.

RESEARCH AND DEVELOPMENT AND CAPITALIZED SOFTWARE DEVELOPMENT COSTS

Research and development expenses, other than certain software development
costs, are charged to expense as incurred. In accordance with the provisions of
Statement of Financial Accounting Standards No. 86 ("SFAS No. 86"), Accounting
for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed,
the Company capitalizes certain software development costs upon technological
feasibility. Amortization of capitalized software development costs is provided
upon commercial release of the products at the greater of the ratio of current
product revenue to the total of current and anticipated product revenue or on a
straight-line basis over the estimated economic life of the software, which the
Company has determined to be 18 to 36 months (See Note 8).

Costs of software applications developed or obtained for internal use that
are incurred during the applications' development stage are capitalized in
accordance with AICPA Statement of Position 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. Such costs eligible
for capitalization have not been significant to date.

FOREIGN CURRENCY TRANSLATION

Balance sheet accounts of the Company's foreign operations are translated
from foreign currencies into U.S. dollars at period-end exchange rates while
income and expenses are translated using average rates during the year.
Translation gains or losses related to net assets located outside of the United
States of America are shown as a component of accumulated other comprehensive
loss in stockholders equity (deficit). Gains or losses resulting from foreign
currency transactions (transactions denominated in a currency other than the
entity's functional currency) are reflected in other income, net in the
consolidated statement of operations.

INCOME TAXES

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their tax bases.
Deferred tax assets and liabilities are measured using enacted statutory tax
rates in effect in the year in which the differences are expected to reverse. A
deferred tax asset is established for the expected future benefit of net
operating loss and credit carry-forwards. Under Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"), Accounting for Income Taxes, the
Company cannot recognize a deferred tax asset for the future benefit of its net
operating losses,

F-8

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

tax credits and temporary differences unless the Company can establish that it
is "more likely than not" that the deferred tax asset would be realized. Due to
the Company's recent history of net losses, the Company has not recognized a tax
asset and has recorded a full valuation allowance against its otherwise
recognizable deferred tax asset, in accordance with SFAS No. 109.

LOSS PER SHARE

Basic earnings loss per share is determined by dividing net loss applicable
to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted loss per share is determined by dividing
net loss applicable to common stockholders by the weighted average number of
common shares and common share equivalents outstanding during the period. Common
share equivalents result from the assumed exercise of outstanding stock options,
the proceeds of which are then assumed to have been used to repurchase
outstanding common stock using the treasury stock method. Common share
equivalents are included in the calculation of loss per share only when
dilutive. Options to purchase 2.5 million, 2.6 million, and 3.3 million shares
at September 2001, 2000, and 1999, respectively, have been excluded from the
calculation of diluted loss per share, as their effect would have been
anti-dilutive.

The computation of basic and diluted loss per share for the years ended
September 30, 2001, 2001, and 1999 is as follows:

<Table>
<Caption>
FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------------
2001 2000 1999
----------------------------- ----------------------------- ----------------------------
(LOSS) SHARES PER SHARE (LOSS) SHARES PER SHARE (LOSS) SHARES PER SHARE
-------- ------ --------- -------- ------ --------- ------- ------ ---------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

Basic loss per share:
Loss available to common
stockholders............... $(24,332) 12,941 $(1.88) $(27,816) 12,668 $(2.20) $(2,360) 12,421 $(0.19)
Effect of dilutive securities:
Stock options................ -- -- -- -- -- -- -- -- --
-------- ------ ------ -------- ------ ------ ------- ------ ------
Diluted loss per share:
Loss available to common
stockholders............... $(24,332) 12,941 $(1.88) $(27,816) 12,668 $(2.20) $(2,360) 12,421 $(0.19)
======== ====== ====== ======== ====== ====== ======= ====== ======
</Table>

STOCK COMPENSATION

The Company's employee stock plans are accounted for in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations, which includes FIN 44, Accounting for
Certain Transactions an Interpretation of APB Opinion No. 25. In October 1996,
the Company adopted the disclosure requirements of Statement of Financial
Accounting Standards No. 123 ("SFAS No. 123"), Accounting for Stock-Based
Compensation. (See Note 16.)

COMPREHENSIVE INCOME

Comprehensive income for the Company includes net income, the effects of
currency translation, which are charged or credited to the cumulative
translation adjustment account within stockholders' equity, and the unrealized
gain (loss) on investments available-for-sale, which is recorded within
stockholders' equity. Comprehensive income for all periods presented is included
in the consolidated statement of stockholders' equity.

RECENTLY ISSUED ACCOUNTING STANDARDS

F-9

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company has adopted SFAS No. 141 which would
apply to any future acquisitions entered into by the Company.

In June 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 ("SFAS No. 142"), Goodwill and Other Intangible Assets. SFAS No. 142
requires that goodwill and other intangible assets with indefinite lives no
longer be amortized, but instead be tested for impairment at least annually. In
addition, the standard includes provisions for the reclassification of certain
existing intangibles as goodwill and reassessment of the useful lives of
existing intangibles. The Company plans to adopt SFAS No. 142 in the first
quarter of fiscal year 2002 and does not anticipate that the adoption of this
standard will have a material impact on its financial statements as the Company
has no goodwill or intangible assets related to prior acquisitions.

3. CASH EQUIVALENTS AND MARKETABLE SECURITIES

Following is a summary of the fair market value of available-for-sale
securities, by balance sheet classification, as of September 30, 2001 and 2000:

<Table>
<Caption>
SEPTEMBER 30,
-----------------
2001 2000
------- -------
(IN THOUSANDS)

Cash equivalents:
State government obligations.............................. $ 5,326 $ 3,804
Money market funds........................................ 3,166 5,228
Marketable securities:
State government obligations.............................. 1,905 1,998
Corporate debt obligations/securities..................... 171 1,075
------- -------
$10,568 $12,105
======= =======
</Table>

Cash equivalents and marketable securities are carried at fair market
value, which approximates amortized cost. The contractual maturities of all
available-for-sale securities classified as cash equivalents are less than three
months. A majority of the available-for-sale securities classified as marketable
securities have contractual maturities of less than one year. All of the
Company's marketable securities are classified as current at September 30, 2001,
and 2000 as these funds are highly liquid and are available to meet working
capital needs and to fund current operations. The Company also holds investments
in equity securities that are marked to market value in accordance with FAS 115.
Gross unrealized gains in these equity securities were $599 thousand and $28
thousand as of September 30, 2001 and 2000, respectively. The Company
periodically evaluates the carrying value of its investments for other than
temporary impairment. During fiscal year 2001, the Company recorded a charge of
$331 thousand to reflect the other than temporary decline in fair value of one
of these equity investments below its initial cost basis. The investee company
for which the impairment charge was recorded has experienced a significant
decline in operating and financial results during the past year, in comparison
to the results forecasted at the time this investment was purchased by the
Company. This charge is included in the condensed consolidated statement of
operations classification other income, net. It is reasonably possible that the
Company may incur additional impairment charges for this investment in future
reporting periods.

F-10

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. BALANCE SHEET COMPONENTS

Prepaid expenses and other current assets consist of the following:

<Table>
<Caption>
SEPTEMBER 30,
---------------
2001 2000
------ ------
(IN THOUSANDS)

Prepaid rents and insurance................................. $1,080 $ 853
Prepaid commissions and royalties........................... 742 1,171
Non-trade receivables....................................... 401 1,427
Other prepaid expenses and current assets................... 276 1,014
------ ------
$2,499 $4,465
====== ======
</Table>

Property and equipment, net consists of the following:

<Table>
<Caption>
SEPTEMBER 30,
-------------------
USEFUL LIFE 2001 2000
------------ -------- --------
(IN THOUSANDS)

Computer equipment...................................... 2 to 5 years $ 18,913 $ 20,554
Furniture and fixtures.................................. 5 years 3,594 3,831
Leasehold improvements.................................. Lease term 4,615 10,197
Land.................................................... 287 287
-------- --------
27,409 34,869
Less accumulated depreciation and amortization (20,451) (18,295)
-------- --------
$ 6,958 $ 16,574
======== ========
</Table>

During fiscal year 2001, the Company's discontinued ASP segment recorded a
$6.1 million fixed asset write-off. This write-off, largely associated with
leasehold improvements, determined to be unrecoverable in September 2001 in
accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of (SFAS 121).

Depreciation expense of property, plant, and equipment for the years ended
September 30, 2001, 2000 and 1999 amounted to $4.1 million, $4.2 million, and
$3.6 million, respectively. Depreciation expense related to the Company's
discontinued ASP segment were $994 thousand and $264 thousand for fiscal years
2001 and 2000, respectively.

Capitalized software development costs, net consist of the following:

<Table>
<Caption>
SEPTEMBER 30,
-------------------
2001 2000
-------- --------
(IN THOUSANDS)

Internal development costs.................................. $ 27,537 $ 25,184
Purchased from third parties................................ 3,865 3,865
-------- --------
31,402 29,049
Less accumulated amortization............................... (30,280) (23,480)
-------- --------
$ 1,122 $ 5,569
======== ========
</Table>

During fiscal year 2000, the Company acquired Dexton Information Systems,
B.V. (Dexton), which resulted in the capitalization of $2.1 million of software.

F-11

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Amortization expense of capitalized software development costs for the
years ended September 30, 2001, 2000, and 1999 amounted to $6.8 million, $3.6
million, and $4.5 million, respectively. Included in software amortization costs
for fiscal year 2001 is the write-off of $1.6 million of Dexton acquired
technology and $2.7 million of charges associated with a change in the Company's
estimated useful life of capitalized software (See Note 8). During the year
ended September 30, 1999, the Company wrote off $5.6 million in capitalized
development costs and purchased software related to the discontinued product
lines discussed in Note 10.

Goodwill and other intangible assets, net consist of the following:

<Table>
<Caption>
SEPTEMBER 30,
PERIOD OF -----------------
AMORTIZATION 2001 2000
------------ ------- -------
(IN THOUSANDS)

Goodwill 5 years..... $ 5,237 $ 5,237
Workforce in place........................................ 2 to 5 years 802 802
Customer Base............................................. 5 years 716 716
------- -------
6,755 6,755
Less accumulated amortization............................. (6,755) (1,428)
------- -------
$ -- $ 5,327
======= =======
</Table>

During the year ended September 30, 2001, the Company recognized impairment
of its goodwill and intangible assets as discussed in Note 7.

During the year ended September 30, 2000, the Company recorded $5.0 million
and $766 thousand of goodwill and intangibles associated with its acquisitions
of Dexton and iT-Soft (M.) Sdn. Bhd. (iT-Soft). During the year ended September
30, 1999, the Company wrote off $853 thousand in goodwill and workforce in place
related to the discontinued product lines discussed in Note 10.

Accrued expenses consist of the following:

<Table>
<Caption>
SEPTEMBER 30,
-----------------
2001 2000
------- -------
(IN THOUSANDS)

Employee compensation and benefits.......................... $ 3,564 $ 4,877
Accrued royalties........................................... 462 470
Accrued professional fees................................... 587 1,349
Dexton acquisition payable.................................. 1,000 500
Other....................................................... 7,986 7,097
------- -------
$13,599 $14,293
======= =======
</Table>

F-12

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. OTHER INCOME, NET

Other income, net consists of the following:

<Table>
<Caption>
FISCAL YEAR ENDED
SEPTEMBER 30,
-----------------------
2001 2000 1999
----- ------ ------
(IN THOUSANDS)

Interest income............................................. $ 748 $1,233 $1,445
Interest expense............................................ (117) (25) --
Gain on marketable equity securities........................ -- -- 1,188
Write down of marketable equity security to market value.... (331) -- --
Foreign exchange loss....................................... (278) 26 --
Legal settlement............................................ -- 4,870 --
----- ------ ------
$ 22 $6,104 $2,633
===== ====== ======
</Table>

6. ACQUISITIONS

On January 13, 2000, the Company acquired all of the outstanding capital
stock of Dexton, a privately held supplier of Web-based customer relationship
management solutions located in the Netherlands. The operating results of this
acquired business have been included in the consolidated statement of operations
from the date of acquisition. The purchase price of $7.6 million was comprised
of $3.5 million in cash, a $500 thousand payment made in January in 2001, and a
$1.0 million payment due in January 2002, the issuance of 320 thousand shares of
Infinium common stock and acquisition expenses of $749 thousand. The acquisition
was accounted for as a purchase, consequently, the purchase price was allocated
to the acquired assets and assumed liabilities, based on their fair value at the
date of acquisition, as follows:

<Table>
<Caption>
(IN THOUSANDS)
--------------

Net tangible assets acquired................................ $ 460
Intangible assets acquired:
Customer base............................................. 716
Workforce................................................. 802
Current technology........................................ 2,162
Goodwill.................................................. 3,449
------
Total.................................................. $7,589
======
</Table>

On November 29, 1999, the Company acquired substantially all of the assets
and liabilities of iT-Soft, a privately held value-added reseller of Infinium
solutions located in Malaysia. The operating results of this acquired business
have been included in the consolidated statement of operations from the date of
acquisition. The transaction was consummated for $650 thousand in cash which was
paid during the quarter ended December 31, 1999 and $84 thousand in acquisition
expenses. The difference of $766 thousand between the purchase price and the net
book value of the acquired assets and liabilities was allocated to goodwill.

The acquisitions of Dexton and iT-Soft were accounted for as purchases.
Accordingly, the results of operations of Dexton and iT-Soft and the fair market
values of the acquired assets and assumed liabilities are included in the
Company's financial statements as of their respective acquisition dates. The
acquisitions were immaterial for purposes of pro forma financial statement
presentation.

F-13

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. IMPAIRMENT OF LONG-LIVED ASSETS

The Company reviews long-lived assets, including goodwill, for impairment
whenever events or changes in business circumstances indicate that the carrying
amount of the assets may not be fully recoverable or that the useful lives of
these assets are no longer appropriate. If an impairment is indicated, the asset
is written down to its estimated fair value. During fiscal year 2001, the
Company wrote down $4.7 million of impaired long-lived assets associated with
the acquisition of Dexton, which was comprised of $721 thousand of goodwill,
$2.4 million of intangibles, and $1.6 million of acquired technology.
Additionally, $525 thousand and $347 thousand of goodwill associated with the
acquisition of iT-Soft and Cort Directions, Inc., respectively, were written
off. Based on the declining historical and forecasted operating results of
Dexton, iT-Soft, and Cort, the estimated value of these assets to the Company
has decreased. Based on the Company's expectation of future undiscounted net
cash flows, these assets have been written down to their net realizable value.
All of the above charges have been recorded in general and administrative
expenses, with the exception of acquired technology, which has been recorded in
cost of software license fees.

8. CHANGE IN ESTIMATED USEFUL LIFE OF CAPITALIZED SOFTWARE

At the beginning of the third quarter of fiscal year 2001, the Company
determined that, because of a declining sales environment for certain of its
products and faster production of product updates, certain capitalized software
development costs on the balance sheet as of April 1, 2001 should be amortized
prospectively over 18 months as opposed to the three-year life previously used.
This resulted in additional amortization expense of $2.3 million for the year
ended September 30, 2001. At the beginning of the fourth quarter, due to similar
circumstances, the Company determined that certain other capitalized software
development costs on the balance sheet as of July 1, 2001 should also be
amortized prospectively over 18 months as opposed to the three-year life
previously used. This resulted in additional amortization expense of $416
thousand for the year ended September 30, 2001.

9. RESTRUCTURING AND OTHER SPECIAL ITEMS

During fiscal 2001, the Company executed a plan to reduce its workforce as
part of a continued company-wide cost-cutting effort. As a result of this
action, 136 employees were involuntary terminated, representing 28 percent of
the Company's workforce. Severance costs and related employee termination
benefit costs of $2.2 million associated with these terminations have been
recorded as a restructuring charge in fiscal year 2001. During fiscal year 2000,
the Company recorded $1.9 million of expenses related to an 18 percent reduction
in its workforce. These costs, which will be paid out through the second quarter
of fiscal 2002, have been included in the Company's consolidated statement of
operations as follows, based on employee function:

<Table>
<Caption>
2001 2000
------ ------
(IN THOUSANDS)

Cost of service and license fees............................ 428 539
Research and development.................................... 663 563
Sales and marketing......................................... 659 558
General and administrative.................................. 462 199
------ ------
$2,212 $1,859
====== ======
</Table>

As of September 30, 2001 and 2000, the Company had accrued liability
balances of $970 thousand, and $579 thousand, respectively, relating to these
severance costs.

In addition to the above amounts, the Company recorded severance and
benefits costs of $1.1 million associated with the termination of four
executives of the Company. Of this total charge, $546 thousand was recorded as
sales and marketing expenses and $527 thousand was recorded as general and
administrative expenses in the Company's consolidated statement of operations.
As of September 30, 2001, $405 thousand had been paid out to the

F-14

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

former executives, leaving an accrued liability balance of $668 thousand. The
remaining balance will be paid out through the end of fiscal year 2002.

As part of the restructuring plan, the Company consolidated certain
facilities. This consolidation led to the write-off of fixed assets in the
amount of $546 thousand and the establishment of additional reserves for future
lease obligation payments totaling $841 thousand. These charges have been
recorded in general and administrative expenses. As of September 30, 2001, the
Company had accrued liabilities of $612 thousand associated with the
consolidation of these facilities. Additionally, $177 thousand was recorded for
non-facilities leases and other administrative costs associated with the
restructuring.

10. DISCONTINUED PRODUCT LINES

In September 1999, the Company decided to discontinue new release
development of Infinium Financials for Microsoft Windows NT and Infinium Human
Resources for Microsoft Windows NT. The Company provided maintenance and
consulting services for existing customers until November 2000. Of the $9.5
million estimated costs related to these actions, $6.3 million, including $5.6
million related to the write-off of capitalized and purchased software due to
unamortized capitalized costs exceeding the net realizable value of those assets
and $727 thousand related to the write-off of prepaid royalties for third-party
products sold with the discontinued product lines, is included in cost of
software license fees. The remaining $3.2 million, including $2.3 million
related to impaired receivables and $853 thousand related to the write-off of
goodwill associated with the Company's acquisition of Time, is included in
general and administrative expenses. The Company will continue to develop new
releases and provide maintenance and consulting services for its AdvaNTage
Payroll and Human Resources products for Microsoft Windows NT.

In fiscal year 2000, the Company realized operating losses from its
discontinued product line of $5.7 million. Operating expenses of $6.2 million
was incurred to provide maintenance and support transition for customers to
alternative software platforms and resolve disputes. Expenses for the
discontinued lines recorded in cost of service, research and development, and
general and administrative were $1.9 million, $2.1 million, and $2.2 million,
respectively.

11. DISCONTINUED OPERATIONS

In September 2001, due to continued historical operating losses from its
Application Service Provider ("ASP") business segment and the industry outlook
for the ASP business generally, the Company's management decided to discontinue
ASP by phasing out of the business segment over a period of six months. As a
result, this business segment is classified as a discontinued operation in the
consolidated statement of operations. Revenues from the Company's ASP business
consist of monthly fees from ongoing services, including hosting, and are
recognized daily as earned over the contract term, typically three years.
Revenues attributable to the ASP business segment were $2.2 million and $321
thousand for fiscal year 2001 and 2000, respectively. The remaining net assets
related to the ASP segment consist of accounts receivable from customers and
current deferred revenue balances. In connection with the discontinuance of ASP,
the Company wrote off $6.1 million of leasehold improvements and computers and
equipment associated with the ASP business, determined to be unrecoverable in
accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of (SFAS 121). This charge has been
classified within loss from operations of ASP segment in the consolidated
statement of operations for fiscal year 2001.

12. LEGAL SETTLEMENTS

During the fourth fiscal quarter of 2000, the Company received the benefit
of a $4.9 million legal settlement associated with the defense of its
intellectual property. The benefit is recorded in other income. During fiscal
2000, the Company settled disputes associated with its discontinued product
line. These amounts are included in general

F-15

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

and administrative expenses. During the second fiscal quarter of 1999, the
Company settled a dispute with a former business partner for $350 thousand. The
payment is classified within general and administrative expenses.

13. GAIN ON INVESTMENT IN CONDUIT SOFTWARE, INC.

During the third quarter of 1998, the Company made a $750 thousand equity
investment in Conduit Software, Inc. ("Conduit"), a developer of employee
self-service software. During the third quarter of 1999, Conduit was acquired in
a stock for stock transaction by ProBusiness Services, Inc. ("ProBusiness"), and
the Company was granted ProBusiness shares in exchange for its Conduit shares.
Subsequently, during fiscal 1999, the Company sold 90 percent of its ProBusiness
stock for $1.9 million. This resulted in a realized gain of $1.2 million that is
included in other income. The remaining 10 percent of the stock is included in
marketable securities at fair market value, and an unrealized gain on marketable
equity securities of $28 thousand, related to the remaining 10 percent of the
stock, is included in stockholders' equity.

14. LINE OF CREDIT

In October 2001, the Company entered into a line of credit with a financial
institution under which it can borrow up to $3 million, based on certain
asset-based balances. The agreement, which extends to December 31, 2002,
contains certain financial covenants including a prohibition against the payment
of dividends as well as minimum net deficit targets ranging from $19 million in
2001 to $10 million in May 2002. The Company has not borrowed under this line of
credit. The interest rate on any funds that are borrowed would be at prime plus
1 percent.

15. INCOME TAXES

The components of the provision for (benefit from) income taxes are as
follows:

<Table>
<Caption>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------
2001 2000 1999
--------- --------- ---------
(IN THOUSANDS)

Current:
Federal................................................... $(2,155) $(1,169) $ (719)
State..................................................... -- 67 55
Foreign................................................... (129) (135) 394
------- ------- -------
Total current.......................................... (2,284) (1,237) (270)
------- ------- -------
Deferred:
Federal................................................... -- 7,499 (1,253)
State..................................................... -- 370 (175)
Foreign................................................... -- 228 --
------- ------- -------
Total deferred......................................... -- 8,097 (1,428)
------- ------- -------
$(2,284) $ 6,860 $(1,698)
======= ======= =======
</Table>

F-16

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The income tax provision (benefit) differs from an amount computed by
applying the U.S. statutory federal income tax rate to pretax income as follows:

<Table>
<Caption>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------
2001 2000 1999
--------- --------- ---------
(IN THOUSANDS)

Statutory federal income tax................................ $(9,049) $(7,125) $(1,379)
State income taxes.......................................... (397) (225) (79)
Research and development credits............................ -- -- --
Foreign tax rate differential............................... 76 139
Decrease in reserves........................................ (2,284) -- --
Other....................................................... (1,123) 115 (379)
Increase in valuation allowance............................. 10,569 14,019 --
------- ------- -------
$(2,284) $ 6,860 $(1,698)
======= ======= =======
</Table>

Deferred tax assets and liabilities are composed of the following:

<Table>
<Caption>
FISCAL YEAR ENDED
SEPTEMBER 30,
-------------------
2001 2000
-------- --------
(IN THOUSANDS)

Deferred tax assets:
Net operating loss and tax credit carryforwards........... $ 19,700 $ 6,789
Intangible assets......................................... 1,705 4,168
Deferred revenue.......................................... 1,676 2,781
1,961
Accrued expenses and reserves not currently deductible.... 265 2,151
Other..................................................... -- 172
-------- --------
Total deferred tax assets.............................. 25,307 16,061
-------- --------
Deferred tax liabilities:
Prepaid expenses deducted currently....................... 372 550
Capitalized software development costs.................... 347 1,076
Other..................................................... -- 416
-------- --------
Total deferred tax liabilities......................... 719 2,042
-------- --------
Total....................................................... 24,588 14,019
Less -- Valuation allowance................................. (24,588) (14,019)
-------- --------
$ -- $ --
======== ========
</Table>

Under SFAS No. 109, the Company cannot recognize a deferred tax asset for
the future benefit of its net operating losses, tax credits and temporary
differences unless the Company can establish that it is more likely than not
that the deferred tax asset would be realized. Due to the Company's recent
history of net losses, the Company is precluded from recording a tax asset and
has recorded a full valuation allowance against its otherwise recognizable
deferred tax asset, in accordance with SFAS No. 109.

During fiscal year 2001, the Company recorded a benefit of $2.3 million,
primarily as a result of the favorable resolution of potential tax liabilities
and a decrease of reserves as a result of increased net operating losses.

F-17

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of September 30, 2001, the Company had net operating loss and tax credit
carryforwards of approximately $48.4 million and $2.3 million, respectively,
which expire at various dates through 2020.

Ownership changes, as defined in the Internal Revenue Code, may limit the
amount of net operating loss and tax credit carryforwards that can be utilized
to offset future taxable income or tax liability. The amount of the annual
limitation is determined in accordance with Section 382 of the Internal Revenue
Code.

Provision has not been made for U.S. or additional foreign taxes on
undistributed earnings of foreign subsidiaries because those earnings are
intended to be permanently reinvested. Such earnings would become taxable upon
the sale or liquidation of these foreign subsidiaries or upon the remittance of
dividends. It is not practical to estimate the amount of additional tax that
might be payable on the foreign earnings. Upon remittance, certain foreign
countries impose withholding taxes that are then available, subject to certain
limitations, for use against the Company's U.S. tax liability. The amount of
withholding tax that would be payable upon remittance of the entire amount of
undistributed earnings would not be material.

16. STOCKHOLDERS' EQUITY

STOCK OPTIONS

In October 1995, the Board of Directors approved the 1995 Stock Plan ("the
1995 Plan"), which provides for the issuance of up to 3.5 million shares of
common stock pursuant to the grant of qualified and non-qualified stock options,
stock awards or purchase rights to employees, consultants, directors, and
officers of the Company. Additionally, in February 1999, the Company amended the
1995 Plan to provide for the issuance of an additional 1.0 million shares of
common stock. The options generally vest over a four-year period and have a term
of 10 years. The Compensation Committee is composed of members of the Company's
Board of Directors. The option price is set at the fair market value of the
Company's stock on the date of the option grant, as determined by the
Compensation Committee.

The Company also has a 1989 Incentive Stock Option Plan ("the 1989 Plan")
and a 1984 Incentive Stock Option Plan ("the 1984 Plan"), which authorized
options for 2.8 million and 1.4 million shares of common stock, respectively,
under terms similar to those described in the preceding paragraph. In
conjunction with the approval of the 1995 Plan, the Board of Directors formally
terminated the 1989 Plan, and as such no future grants will be made under this
Plan. Authority to grant additional options under the 1984 Plan has expired.

In October 1995, the Board of Directors approved the 1995 Non-Employee
Director Stock Option Plan ("the Director Plan") under which options to purchase
a maximum of 210 thousand shares of the Company's common stock may be granted to
non-employee directors. Under the Director Plan, each non-employee director will
be granted an option to purchase 28 thousand shares of common stock upon first
joining the Board of Directors and 4.0 thousand shares at each successive annual
meeting of stockholders, beginning at the Company's annual meeting of
stockholders for the fiscal year ended September 30, 1996, at an exercise price
per share equal to the then fair market value per common share. Options granted
under the Director Plan become exercisable in four equal annual installments
commencing one year after the date of grant provided that the optionee then
remains a director or consultant. The term of each option granted under the
Director Plan will be for a period of ten years from the date of the grant.

At September 30, 2001, the Company had 1.7 million shares of its common
stock available for future grant and had reserved 2.5 million shares of its
common stock for issuance upon exercise of outstanding stock options under the
Plans.

F-18

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Transactions under the 1984, 1989, 1995, and the Director Plans during the
years ended September 30, 2001, 2000, and 1999 are summarized as follows:

<Table>
<Caption>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------
2001 2000 1999
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------------- ------ -------------- ------ --------------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

Outstanding at beginning of
period.......................... 2,581 $6.19 3,264 $7.57 2,926 $8.28
Granted......................... 1,766 1.56 1,324 4.85 1,183 5.64
Exercised....................... -- -- (266) 5.10 (189) 4.06
Cancelled....................... (1,859) 5.75 (1,741) 7.93 (656) 8.27
------ ------ -----
Outstanding at end of period...... 2,488 3.23 2,581 6.19 3,264 7.57
====== ====== =====
Options exercisable at end of
period.......................... 731 6.01 1,400 6.78 1,792 7.79
Weighted average fair value of
options granted during the
period.......................... $0.99 $3.24 $3.62
</Table>

All options were granted at fair market value in fiscal years 2001, 2000,
and 1999 except as noted below:

Executive Compensation:

On October 4, 2000, the Company issued 200 thousand options to purchase the
Company's common stock to an executive of the Company at a price of $2.25 per
share. The difference between the market value and the exercise price of the
options is recorded as deferred stock-based compensation in the stockholders'
equity (deficit) section of the balance sheet. Compensation expense is recorded
over the vesting period of the options. Upon termination of the executive's
employment during fiscal year 2001, the remaining outstanding options vested
immediately, in accordance with the terms of the executive's original employment
agreement. As a result, the remainder of the deferred stock-based compensation
was expensed immediately.

The following table summarizes the employee and director stock options
outstanding at September 30, 2001:

<Table>
<Caption>
FISCAL YEAR ENDED SEPTEMBER 30, 2001
------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
RANGE OF SHARES CONTRACTUAL LIFE AVERAGE SHARES AVERAGE
EXERCISE PRICES OUTSTANDING (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------- ----------- ---------------- -------------- ----------- --------------
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)

$ 0.68-$ 4.24 1,806 7.66 $ 1.91 233 $ 3.85
4.25- 6.49 533 6.92 5.49 358 5.52
6.50- 9.99 63 5.53 7.07 58 7.12
10.00- 14.99 33 4.34 11.16 33 11.16
$15.00-$16.13 53 6.14 16.03 49 16.02
----- ---
2,488 731
===== ===
</Table>

F-19

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FAIR VALUE DISCLOSURES

Had compensation cost for the Company's option plans, employee stock
purchase plan and restricted stock plan been determined based on the fair value
at the grant dates, as prescribed in SFAS No. 123, the Company's net loss and
net loss per share would have been as follows:

<Table>
<Caption>
FISCAL YEAR ENDED SEPTEMBER 30,
--------------------------------
2001 2000 1999
--------- --------- --------
(IN THOUSANDS, EXCEPT FOR
PER SHARE DATA)

Net loss:
As reported.............................................. $(24,332) $(27,816) $(2,360)
Pro forma................................................ (24,879) (30,295) (6,014)
Basic loss per share:
As reported.............................................. $ (1.88) $ (2.20) $ (0.19)
Pro forma................................................ (1.92) (2.39) (0.48)
Diluted loss per share:
As reported.............................................. $ (1.88) $ (2.20) $ (0.19)
Pro forma................................................ (1.92) (2.39) (0.48)
</Table>

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes method with the following assumptions used for grants during
the applicable period: dividend yield of 0.0 percent for all periods; risk-free
interest rates (weighted average) 4.66 percent, 6.37 percent, and 5.00 percent
for options granted during the year ended September 30, 1999, 2000, and 2001,
respectively; weighted average expected option term of five years for all
periods; and volatilities of 75 percent for the year ended September 30, 1999,
77 percent for the year ended September 30, 2000, and 80 percent for the year
ended September 30, 2001. The fair value of shares purchased under the Employee
Stock Purchase Plan is based on the number of shares purchased and the
pre-discounted purchase price. The fair value of options cancelled in connection
with the issuance of restricted stock were valued at the time of cancellation
using an expected option life of 1.75 years for vested options and 2 years for
unvested options.

1995 EMPLOYEE STOCK PURCHASE PLAN

On October 2, 1995, the Board of Directors approved the 1995 Employee Stock
Purchase Plan (the Purchase Plan), which enables eligible employees to purchase
shares of the Company's common stock. The Purchase Plan is administered by the
Compensation Committee of the Board of Directors. Under the Purchase Plan,
eligible employees may purchase common shares during six-month payment periods.
The exercise price per share is 85 percent of the lesser of the market price per
share on the first or last business day of the six-month period. The maximum
number of shares of common stock that an employee may purchase in any six-month
period is 500 shares. An employee's rights under the Purchase Plan terminate
upon voluntary withdrawal from the plan at any time or upon termination of
employment. The Company has reserved 1.4 million shares of common stock for
issuance under the Purchase Plan.

The first period commenced on November 17, 1995 (the effective date of the
Company's initial public offering) and ended on June 30, 1996. Employees
purchased 48 thousand shares of stock at $9.35 per share. In subsequent
six-month periods, employees purchased 40 thousand shares of stock at $7.12 per
share, 33 thousand shares of stock at $7.44 per share, 39 thousand shares of
stock at $8.29 per share, 32 thousand shares of stock at $11.79 per share, 58
thousand shares of stock at $5.31 per share, 55 thousand shares of stock at
$4.46 per share, 48 thousand shares of stock at $4.41 per share, 52 thousand
shares of stock at $3.40 per share, 50 thousand shares of stock at $1.33 per
share, and 39 thousand shares of stock at $0.96 per share.

F-20

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK REPURCHASE PROGRAM

In February 1998, the Company announced a stock repurchase program for up
to $6.0 million of common stock to use to meet requirements of its employee
stock option and stock purchase plans. No minimum number or value of shares to
be repurchased was fixed nor was a time limit set for the duration of the
program. The Company repurchased 191 thousand shares at an aggregate cost of
$2.9 million and reissued 102 thousand shares during the year ended September
30, 1998. The Company repurchased 622 thousand shares at an aggregate cost of
$3.0 million for the year ended September 30, 1999, and reissued 301 thousand
shares during that same 12-month period. On October 29, 1999, the Company's
Board of Directors approved a new stock repurchase program (the "1999 Program")
authorizing the Company to repurchase an additional $10 million of common stock
to use to meet requirements of its employee stock option and stock purchase
plan. No minimum number or value of shares to be repurchased has been fixed for
the new program nor has a time limit as to the duration of the program been
established. During fiscal 2000, the Company did not repurchase any shares of
common stock under the 1999 Program. During fiscal 2001, the Company repurchased
210 thousand shares of common stock for an aggregate repurchase price of $22
thousand and reissued 82 thousand shares. In addition, during fiscal 2001, the
Company issued 430 thousand shares of restricted common stock, 192 thousand
shares of which were from repurchases in fiscal 2001 of unvested restricted
common stock from departed employees (at a repurchase price of $0.01 per share).

ISSUANCE OF RESTRICTED STOCK

On January 10, 2001, the Company instituted a Stock Option Exchange Program
(the Program). Under the provisions of the Program, employees were allowed to
exchange any of their stock options for shares of restricted stock on January
31, 2001, in general, at a rate of three options for each share of restricted
stock. At January 31, 2001, the Company issued approximately 179,000 shares and
cancelled approximately 537,000 options. At the close of business on January 31,
2001, the share price of the Company's stock was $2.13 per share. On February 9,
2001, additional restricted stock grants of 225,000 shares were awarded to
executive management and an additional 16,000 and 10,000 restricted stock grants
were awarded to other employees on January 22, 2001 and March 12, 2001,
respectively. The fair market value of the Company's stock was $1.50 per share
at the close of business on January 22, 2001 and $1.94 and $1.75 per share at
the close of business on February 9, 2001 and March 12, 2001, respectively. The
cost of the Program was $382 thousand, and the cost of the additional restricted
stock grants was $436 thousand for the awards to executive management and $42
thousand for the awards to other employees. The combined cost of these events
approximates $860 thousand, which will be amortized over the vesting period of
the restricted stock grants, which range from 21 to 24 months. During the year
ended September 30, 2001, the Company recognized $108 thousand in expenses for
the Program, $72 thousand in expenses for executive management, and $26 thousand
for the grants to other employees.

17. RETIREMENT SAVINGS PLAN

The Company has a savings and profit sharing plan covering all eligible
employees, which is qualified under Section 401(k) of the Internal Revenue Code
of 1986, as amended. The Company may, at its option, provide matching
contributions of up to 50 percent of each participating employee's contributions
to the plan, subject to a maximum of up to 3 percent of compensation. Total
contributions by the Company to the plan for the years ended September 30, 2001,
2000, and 1999 were $413 thousand, $794 thousand, and $843 thousand,
respectively.

In June 1996, a Group Personal Pension Plan was established for eligible
employees in the United Kingdom, allowing employees to contribute a percentage
of their salaries into a personal retirement savings plan. Company contributions
to individual plans aggregated $83 thousand, $135 thousand, and $157 thousand
for the years ended September 30, 2001, 2000, and 1999, respectively.

A Registered Retirement Savings Plan was established in August 1997,
allowing eligible employees in Canada to contribute a percentage of their
compensation into a retirement savings plan. Total contributions by the Company
F-21

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

to this plan for the years ended September 30, 2001, 2000, and 1999 were $21
thousand, $28 thousand, and $33 thousand, respectively.

Contributions for retirement savings plans associated with the Company's
entities in Malaysia and the Netherlands were $53 thousand and $51 thousand,
respectively, in fiscal year 2001 and $32 thousand and $8 thousand,
respectively, in fiscal year 2000.

18. SEGMENT INFORMATION AND GEOGRAPHIC AREAS

Effective October 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131 (SFAS No. 131), Disclosures About Segments of an
Enterprise and Related Information. SFAS No. 131 superseded Statement of
Financial Accounting Standards No. 14 ("SFAS No. 14"), Financial Reporting for
Segments of a Business Enterprise. SFAS No. 131 establishes standards for
disclosures about operating segments, products and services, geographic areas,
and major customers.

The Company has determined that its reportable business segments are North
American Operations (all operations in the United States and Canada, including
Infinium, the Cort Payroll Unit and ASP) and International Operations.

The Company offers enterprise-level business software applications designed
to automate back-office and certain front-office operations of its customers.
The Company's products can function as stand-alone applications or as integrated
suites of applications and may be integrated with products from other vendors.
The Company's products are designed to provide users significant functionality
as well as the flexibility and ease of use of network-centric computing, while
retaining low cost of ownership.

In the fourth quarter of fiscal year 2001, the Company decided to
discontinue its ASP business unit. The Company recorded a charge of $1.8 million
associated with the disposal of the ASP segment. Additionally, the Company
realized operating losses from its discontinued ASP business of $8.2 million and
$11.7 million for the year's ended September 30, 2000 and 2001, respectively.
Included in the loss from operations of the discontinued segment is a $6.1
million charge for the write-off of fixed asset balances.

The Company offers through its AdvaNTage Business Unit a comprehensive
human resources management system (HRMS) developed for Microsoft's Windows NT
operating system called Infinium AdvaNTage HRMS, and Employee Self Service
system and a Web-native enterprise resource management portal called Infinium
AdvaNTage e-Resources. The HRMS product suite includes two applications, a
payroll and a human resources information system. The Infinium AdvaNTage Payroll
system is designed to easily manage the most complex payroll requirements. The
Infinium AdvaNTage HRMS system is designed to be a proactive personnel,
benefits, and applicant management tool. The Infinium AdvaNTage e-Resources
system is designed to provide a centrally managed business intelligence,
recruitment, self service and fully functional human resources solution,
delivered over the internet and through a browser.

The Infinium AdvaNTage HRMS, Payroll, Employee Self Service and e-Resources
systems can be utilized either as separate applications or as an integrated
suite. The systems utilize Microsoft SQL server database management systems.

F-22

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table presents a summary of operating information and certain
year-end balance sheet information by business segment for the years ended
September 30, 2001, 2000, and 1999:

<Table>
<Caption>
FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------------
2001 2000 1999
--------- --------- ---------
(IN THOUSANDS)

Revenue:
North American operations:
Infinium................................................ $ 62,332 $ 79,228 $107,814
Cort payroll unit....................................... 4,717 5,384 5,677
ASP..................................................... 2,231 321 --
-------- -------- --------
Total North American Operations......................... 69,280 84,933 113,491
International operations................................ 7,021 8,122 8,514
-------- -------- --------
Consolidated............................................ 76,301 93,055 122,005
Less discontinued operations............................ (2,231) (321) --
-------- -------- --------
Consolidated continuing operations...................... $ 74,070 $ 92,734 $122,005
======== ======== ========
Operating loss:
North American operations:
Infinium................................................ $ (7,639) $(11,840) $ (2,505)
Cort payroll unit....................................... (1,729) (1,140) (637)
ASP..................................................... (11,658) (8,112) --
-------- -------- --------
Total North American Operations......................... (21,026) (21,092) (3,142)
International operations................................ (3,801) (5,968) (3,549)
-------- -------- --------
Consolidated............................................ (24,827) (27,060) (6,691)
Less discontinued operations............................ 11,658 8,112 0
-------- -------- --------
Consolidated continuing operations...................... $(13,169) $(18,948) $ (6,691)
======== ======== ========
Identifiable Assets:
North American operations:
Infinium................................................ $ 31,794 $ 57,519 $ 87,015
Cort payroll unit....................................... 435 1,902 1,798
ASP-Discontinued Operations............................. 233 7,211 --
-------- -------- --------
Total North American Operations......................... 32,462 66,632 88,813
International operations................................ 2,835 4,617 5,068
-------- -------- --------
Consolidated............................................ $ 35,297 $ 71,249 $ 93,881
======== ======== ========
</Table>

Geographically, revenues are reflected in the geographic areas from which
the sales are made. Fiscal years 2001 and 2000 revenues from discontinued
operations of $2.2 million and $321 thousand, respectively, are included in

F-23

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

United States balances. Information related to the Company's revenues from
unaffiliated customers in different geographical areas is as follows:

<Table>
<Caption>
FISCAL YEAR ENDED SEPTEMBER 30,
-------------------------------
2001 2000 1999
-------- -------- ---------
(IN THOUSANDS)

Revenues
United States............................................. $67,690 $82,422 $109,060
United Kingdom............................................ 4,096 5,723 7,749
Canada.................................................... 1,589 2,510 4,431
Other..................................................... 2,926 2,400 765
------- ------- --------
Consolidated.............................................. $76,301 $93,055 $122,005
======= ======= ========
</Table>

Information related to the Company's long-lived assets by geographical area
is as follows:

<Table>
<Caption>
SEPTEMBER 30,
---------------------------
2001 2000 1999
------- ------- -------
(IN THOUSANDS)

Long-lived assets
United States............................................. $10,241 $28,772 $18,544
United Kingdom............................................ 61 133 286
Canada.................................................... 76 73 62
Other..................................................... 60 850 58
------- ------- -------
Consolidated.............................................. $10,438 $29,828 $18,950
======= ======= =======
</Table>

No single customer accounted for more than 10 percent of the Company's
consolidated revenues for the years ended September 30, 2001, 2000, and 1999.

19. RELATED PARTY TRANSACTIONS

LIFE INSURANCE TRUSTS

One current principal stockholder and two former principal stockholders of
the Company have split-dollar life insurance policies (the Policies). The
Policies are owned by various trusts. The trusts have executed Collateral
Assignment Agreements for the benefit of the Company. Under the Collateral
Assignment Agreements, the Company originally paid the annual premiums under the
Policies. Effective October 1, 1996, the Collateral Assignment Agreements for
the two former principal stockholders were amended so that the trusts (rather
than the Company) were obligated from that date to make all premium payments
under the Policies. In March 1998, the Company paid the last premium payments
required under the current principal stockholder's Policies to make them
self-funding as of that date. The Company has made no premium payments under the
Policies for the years ended September 30, 2001, 2000, and 1999, respectively.
The premium payments made under the Policies were recorded as advances to the
trusts and are secured by the cash surrender value of related insurance
policies. Cash advances in excess of the cash surrender value of the related
insurance policies were expensed when advanced. Total advances due from the
trusts amounted to $2.1 million at September 30, 2001 and are included in other
assets on the consolidated balance sheet. The Collateral Assignment Agreements
can be terminated (i) by the applicable trust on 30 days' written notice to the
Company, (ii) upon the failure of the applicable trust to make annual premium
payments, (iii) at the applicable trust's election to receive a release of the
assignment of the Policies from the Company, or (iv) by the Company if the cash
surrender value declines and the Company is not willing to accept substitute
collateral. Upon termination of the Collateral Assignment Agreement, the trust
must immediately repay to the Company the amounts of premium advances made by
the Company. If a Collateral Assignment Agreement is

F-24

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

not terminated and the principal stockholder dies, the death benefits will be
paid first to the Company to the extent of the advances.

OTHER

During fiscal year 2000, the Company entered into a consulting agreement
with Wianno Ventures which is controlled by a relative of an executive officer
of the Company. The Company incurred and paid $122 thousand in fees for services
rendered. Management believes the services rendered and fees incurred are based
on terms and conditions which occur during the normal course of business.

20. COMMITMENTS AND CONTINGENCIES

LEASES

The Company has several operating lease agreements primarily involving real
estate and computers and equipment. The Company also has a capital lease
involving computer equipment. These leases are non-cancelable and expire on
various dates through 2002 except for the Company's Lexington, Massachusetts,
facility lease, which expires in 2003; Hyannis, Massachusetts, facility lease,
which expires in 2005; Alpharetta, Georgia, facility lease, which expires in
2003; London, England, facility lease, which expires in 2014;; Lisle, Illinois,
facility lease, which expires in 2005; Las Vegas, Nevada, facility lease, which
expires in 2004; Irvine, California, facility lease, which expires in 2005;
Markham, Ontario facility lease which expires in 2006; and a computer equipment
lease that expires in 2005.

The following is a schedule by year of future minimum lease payments under
capital and operating leases, together with the present value of the net minimum
lease payments as of September 30, 2001:

<Table>
<Caption>
CAPITAL OPERATING
FISCAL YEAR LEASES LEASES
- ----------- ------- ---------
(IN THOUSANDS)

2002........................................................ $ 372 $ 4,032
2003........................................................ 325 2,844
2004........................................................ 231 2,164
2005........................................................ 152 1,357
2006........................................................ 474
Thereafter.................................................. 0 3,478
------ -------
Total future minimum lease payments......................... $1,080 $14,349
Less amount representing interest........................... (317)
------
Present value of net minimum lease payments................. 763
Less current maturities of capital lease obligations........ (239)
------
Capital lease obligations, less current portion............. $ 524
======
</Table>

Total rent expense for operating leases was $5.8 million, $5.7 million, and
$5.0 million for the years ended September 30, 2001, 2000, and 1999,
respectively. Total interest paid for capital leases was $117 thousand and $25
thousand for fiscal year 2001 and 2000, respectively. Accumulated amortization
related to equipment leased under capital leases was $294 thousand as of
September 30, 2001.

LEGAL MATTERS

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business; including,
litigation related to the discontinuance of its NT product lines. The Company

F-25

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

believes that it is not a party to any legal proceedings which individually or
in the aggregate, would have a material adverse effect on the Company's results
of operations or financial position.

21. SELECTED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table sets forth the unaudited quarterly statement of
operations data for each of the eight quarters in the period ended September 30,
2001. In the opinion of management, the unaudited financial results include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of our results of operations for those periods and have been
prepared on the same basis as the audited consolidated financial statements. The
"as adjusted" column reflects the discontinuance of the Company's ASP business
segment (See Note 11). The results of operations for any quarter are not
necessarily indicative of the results of operations for any future period.

<Table>
<Caption>
Q1'00 Q2'00 Q3'00 Q4'00
Q1'00 AS Q2'00 AS Q3'00 AS Q4'00 AS
AS PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY
ADJUSTED REPORTED ADJUSTED REPORTED ADJUSTED REPORTED ADJUSTED REPORTED
-------- ---------- -------- ---------- -------- ---------- -------- ----------
($000'S, EXCEPT PER SHARE DATA)

Revenue:
Software license fees.......... 3,758 3,758 4,552 4,552 5,132 5,132 7,031 7,031
Service revenue................ 19,763 19,763 18,034 18,034 16,759 16,780 17,705 18,005
------- ------ ------ ------ ------ ------- ------- -------
Total Revenue.................... 23,521 23,521 22,586 22,586 21,891 21,912 24,736 25,036
------- ------ ------ ------ ------ ------- ------- -------
Operating costs and expenses:
Cost of software license
fees......................... 1,561 1,561 1,574 1,574 1,752 1,752 2,214 2,214
Cost of services............... 8,662 8,731 8,745 9,123 7,764 8,267 6,392 7,707
Research & development......... 5,017 5,017 4,629 4,629 6,139 6,139 5,511 5,567
Sales & marketing.............. 8,317 8,317 9,036 9,236 9,937 13,620 8,812 9,637
General & administrative....... 2,705 2,705 3,006 3,125 4,340 4,842 5,569 6,352
------- ------ ------ ------ ------ ------- ------- -------
Total operating costs and
expenses....................... 26,262 26,331 26,990 27,687 29,932 34,620 28,498 31,477
------- ------ ------ ------ ------ ------- ------- -------
Income (loss) from operations.... (2,741) (2,810) (4,404) (5,101) (8,041) (12,708) (3,762) (6,441)
Other income, net................ 404 404 374 374 295 295 5,031 5,031
------- ------ ------ ------ ------ ------- ------- -------
Income (loss) from continuing
operations before provisions
for (benefit from) taxes....... (2,337) (2,406) (4,030) (4,727) (7,746) (12,413) 1,269 (1,410)
Provision for(benefit from)
income taxes................... (891) (891) (1,534) (1,534) (4,215) (4,215) 13,500 13,500
------- ------ ------ ------ ------ ------- ------- -------
Income (loss) from continuing
operations..................... (1,446) (1,515) (2,496) (3,193) (3,531) (8,198) (12,231) (14,910)
Discontinued operations:
Loss from operations of ASP
segment...................... 69 0 697 0 4,667 0 2,679 0
Loss from disposal of ASP
segment......................
------- ------ ------ ------ ------ ------- ------- -------
Net Loss......................... (1,515) (1,515) (3,193) (3,193) (8,198) (8,198) (14,910) (14,910)
======= ====== ====== ====== ====== ======= ======= =======
</Table>

F-26

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Earnings Per Share:
Basic Earnings (Loss) per share
from continuing operations... $ (0.11) $(0.12) $(0.20) $(0.25) $(0.28) $ (0.64) $ (0.95) $ (1.16)
======= ====== ====== ====== ====== ======= ======= =======
Basic (Loss) per share from ASP
segment...................... $ (0.01) $(0.00) $(0.05) $(0.00) $(0.36) $ (0.00) $ (0.21) $ (0.00)
======= ====== ====== ====== ====== ======= ======= =======
Basic and diluted (Loss) per
share, net................... $ (0.12) $(0.12) $(0.25) $(0.25) $(0.64) $ (0.64) $ (1.16) $ (1.16)
======= ====== ====== ====== ====== ======= ======= =======
Weighted average shares
outstanding -- basic......... 12,242 12,242 12,709 12,709 12,838 12,838 12,884 12,884
======= ====== ====== ====== ====== ======= ======= =======
Weighted average shares
outstanding -- diluted....... 12,242 12,242 12,709 12,709 12,838 12,838 12,884 12,884
======= ====== ====== ====== ====== ======= ======= =======
</Table>

<Table>
<Caption>
Q1'01 Q2'01 Q3'01 Q4'01
Q1'01 AS Q2'01 AS Q3'01 AS Q4'01 AS
AS PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY AS PREVIOUSLY
ADJUSTED REPORTED ADJUSTED REPORTED ADJUSTED REPORTED ADJUSTED REPORTED
-------- ---------- -------- ---------- -------- ---------- -------- ----------
($000'S, EXCEPT PER SHARE DATA)

Revenue:
Software license fees.......... 3,767 3,767 3,010 3,010 1,319 1,319 2,267 2,267
Service revenue................ 18,229 18,637 15,902 16,510 14,601 15,403 14,975 14,975
------- ------- ------- ------- ------- -------- ------- -------
Total Revenue.................... 21,996 22,404 18,912 19,520 15,920 16,722 17,242 17,242
------- ------- ------- ------- ------- -------- ------- -------
Operating costs and expenses:
Cost of software license
fees......................... 1,416 1,416 1,231 1,231 4,782 4,782 728 728
Cost of services............... 5,474 7,115 5,218 6,808 4,975 6,437 3,637 3,637
Research & development......... 3,918 3,918 3,948 3,948 4,689 4,689 3,610 3,610
Sales & marketing.............. 8,017 8,552 7,178 7,632 6,992 7,291 4,995 4,995
General & administrative....... 2,380 2,538 2,921 2,921 8,161 8,268 2,969 2,969
------- ------- ------- ------- ------- -------- ------- -------
Total operating costs and
expenses....................... 21,205 23,539 20,496 22,540 29,599 31,467 15,939 15,939
------- ------- ------- ------- ------- -------- ------- -------
Income (loss) from operations.... 791 (1,135) (1,584) (3,020) (13,679) (14,745) 1,303 1,303
Other income, net................ 230 230 80 80 (12) (12) (276) (276)
------- ------- ------- ------- ------- -------- ------- -------
Income (loss) from continuing
operations before provision for
(benefit from) taxes........... 1,021 (905) (1,504) (2,940) (13,691) (14,757) 1,027 1,027
Provision for(benefit from)
income taxes................... 0 0 0 0 (817) (817) (1,467) (1,467)
------- ------- ------- ------- ------- -------- ------- -------
Income (loss) from continuing
operations..................... 1,021 (905) (1,504) (2,940) (12,874) (13,940) 2,494 2,494
Discontinued operations:
Loss from operations of ASP
segment........................ 1,926 0 1,436 0 1,066 0 7,230 7,230
Loss from disposal of ASP
segment........................ 1,811 1,811
------- ------- ------- ------- ------- -------- ------- -------
Net Loss......................... (905) (905) (2,940) (2,940) (13,940) (13,940) (6,547) (6,547)
======= ======= ======= ======= ======= ======== ======= =======
</Table>

F-27

INFINIUM SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Earnings Per Share:
Basic Earnings (Loss) per share
from continuing operations... $ 0.08 $ (0.07) $ (0.12) $ (0.23) $ (1.00) $ (1.08) $ 0.19 $ 0.19
======= ======= ======= ======= ======= ======== ======= =======
Basic (Loss) per share from ASP
segment...................... $ (0.15) $ 0.00 $ (0.11) $ 0.00 $ (0.08) $ 0.00 $ (0.70) $ (0.70)
======= ======= ======= ======= ======= ======== ======= =======
Basic and diluted (Loss) per
share, net................... $ (0.07) $ (0.07) $ (0.23) $ (0.23) $ (1.08) $ (1.08) $ (0.51) $ (0.51)
======= ======= ======= ======= ======= ======== ======= =======
Weighted average shares
outstanding -- basic......... 12,884 12,884 12,920 12,920 12,950 12,950 13,002 13,002
======= ======= ======= ======= ======= ======== ======= =======
Weighted average shares
outstanding -- diluted....... 12,884 12,884 12,920 12,920 12,950 12,950 13,004 13,004
======= ======= ======= ======= ======= ======== ======= =======
</Table>

F-28

SCHEDULE II

INFINIUM SOFTWARE, INC.

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

<Table>
<Caption>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------- --------- ----------------------- ---------- -------- --------
CHARGED TO CHARGED TO
DESCRIPTION BEGINNING EXPENSE OTHER DEDUCTIONS OTHER ENDING
- ----------- --------- ---------- ---------- ---------- -------- --------

FISCAL YEAR 2001
Allowance for Doubtful Accounts.... $ 3,455 $ 217 $ -- $(1,796) $-- $ 1,876
Tax Valuation Allowance............ 14,019 -- 10,569 -- -- 24,588
FISCAL YEAR 2000
Allowance for Doubtful Accounts.... 4,229 126 -- (949) 49 3,455
Tax Valuation Allowance............ -- -- 14,019 -- -- 14,019
FISCAL YEAR 1999
Allowance for Doubtful Accounts.... $ 1,650 $2,679 $ -- $ (100) $-- $ 4,229
</Table>

F-29