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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended December 31, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from _______to______

Commission File Number 0-27030

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

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

25 Communications Way, Hyannis, MA 02601
(Address of principal executive offices, including Zip Code)

(508) 778-2000
(Registrant's telephone number, including area code)

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 12 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
----- -----

The number of shares outstanding of the registrant's Common Stock on January 31,
2002 was 13,453,206.

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INFINIUM SOFTWARE, INC.

INDEX

PAGE

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

Consolidated Balance Sheet at December 31, 2001 (unaudited) and
September 30, 2001 ............................................ 3

Consolidated Statement of Operations for the three months ended
December 31, 2001 (unaudited) and 2000 (unaudited) ............ 4

Consolidated Statement of Cash Flows for the three months ended
December 31, 2001 (unaudited) and 2000 (unaudited) ............ 5

Notes to Consolidated Financial Statements (unaudited) ........ 6

ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations ........................................... 11

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk ...... 15

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings ............................................... 16

ITEM 2. Changes in Securities ........................................... 16

ITEM 3. Defaults Upon Senior Securities ................................. 16

ITEM 4. Submission of Matters to a Vote of Security Holders ............. 16

ITEM 5. Other Information ............................................... 16

ITEM 6. Exhibits and Reports on Form 8-K ................................ 16

SIGNATURE ................................................................. 17

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

INFINIUM SOFTWARE, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

DECEMBER 31, SEPTEMBER 30,
2001 2001
---- ----
(UNAUDITED)

ASSETS

Current assets:

Cash and cash equivalents .............................................. $ 12,201 $ 13,210
Marketable securities at fair market value ............................. 1,461 2,076
Accounts receivable, less allowance for doubtful accounts of $1,602
and $1,876 at December 31, 2001 and September 30, 2001,
respectively ......................................................... 8,199 6,841
Prepaid expenses and other current assets .............................. 2,125 2,499
Net current assets of discontinued operations .......................... 382 233
-------- --------
Total current assets ........................................... 24,368 24,859

Property and equipment, net .............................................. 6,413 6,958
Capitalized software development costs, net .............................. 893 1,122
Other assets ............................................................. 2,358 2,358
-------- --------
Total assets ................................................... $ 34,032 $ 35,297
======== ========

LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:

Accounts payable ....................................................... $ 3,207 $ 4,345
Accrued expenses ....................................................... 11,440 12,505
Current liabilities of discontinued operations ......................... 519 1,094
Income taxes payable ................................................... 307 282
Lease obligations, short-term portion .................................. 248 239
Deferred revenue ....................................................... 26,026 27,588
-------- --------
Total current liabilities ...................................... 41,747 46,053
-------- --------

Lease obligations, long-term portion ..................................... 458 524
Deferred revenue ......................................................... 1,665 1,400
-------- --------
Total liabilities .............................................. 43,870 47,977
-------- --------

Common stock, $0.01 par value; authorized 40,000 shares, issued 13,662 and
13,365 shares at December 31, 2001 and September 30,
2001, respectively ..................................................... 137 134
Additional paid-in capital ............................................... 39,135 38,936
Deferred stock-based compensation ........................................ (428) (297)
Accumulated deficit ...................................................... (48,641) (51,362)
Accumulated other comprehensive loss ..................................... (11) (69)
-------- --------
(9,808) (12,658)
-------- --------
Less: treasury stock at cost, 188 and 171 shares at December 31, 2001
and September 30, 2001 ............................................... (30) (22)
-------- --------
Total stockholders' deficit .................................... (9,838) (12,680)
-------- --------
Total liabilities and stockholders' deficit .................... $ 34,032 $ 35,297
======== ========

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

INFINIUM SOFTWARE, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

THREE MONTHS ENDED
DECEMBER 31,
------------
2001 2000
---- ----

REVENUE:
Software license fees .......................... $ 2,160 $ 3,767
Services revenue ............................... 14,175 18,229
-------- --------
Total revenue .......................... 16,335 21,996
-------- --------

OPERATING COSTS AND EXPENSES:
Cost of software license fees .................. 376 1,416
Cost of services ............................... 4,148 5,474
Research and development ....................... 2,793 3,918
Sales and marketing ............................ 4,301 8,017
General and administrative ..................... 1,952 2,380
-------- --------
Total operating costs and expenses ..... 13,570 21,205
-------- --------

Income from operations ........................... 2,765 791
Other income (loss), net ......................... (44) 230
-------- --------
Income from continuing operations before provision
for income taxes ........................... 2,721 1,021
Provision for income taxes ....................... -- --
-------- --------
Income from continuing operations ................ 2,721 1,021

DISCONTINUED OPERATIONS:
Loss from operations of ASP segment .............. -- (1,926)
-------- --------

NET INCOME (LOSS) ................................ $ 2,721 $ (905)
======== ========

Basic and diluted income per share from
continuing operations ....................... $ 0.21 $ 0.08
======== ========

Basic and diluted loss per share from
ASP segment ................................. $ -- $ (0.15)
======== ========

Basic and diluted income (loss) per share, net ... $ 0.21 $ (0.07)
======== ========

Weighted average shares outstanding - basic ...... 13,035 12,884
======== ========

Weighted average shares outstanding - diluted .... 13,206 12,884
======== ========

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

INFINIUM SOFTWARE, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

THREE MONTHS ENDED
DECEMBER 31,
------------
2001 2000
---- ----

Cash flows from operating activities:

Net income (loss) ....................................................... $ 2,721 $ (905)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Loss from discontinued operations .................................. -- 1,926
Depreciation and amortization ...................................... 792 1,794
Write-down of marketable securities ................................ 8 --
Allowance for doubtful accounts .................................... 20 40
Non-cash compensation .............................................. 71 15
Changes in operating assets and liabilities, net of effects from the
acquisitions of businesses:
Accounts receivable ............................................ (1,404) 5,653
Prepaid expenses and other current assets ...................... 367 1,529
Accounts payable ............................................... (343) (1,390)
Accrued expenses and other long-term liabilities ............... (1,049) (2,132)
Income taxes payable ........................................... 28 930
Deferred revenue ............................................... (1,251) (4,272)
-------- --------
Net cash (used in) provided by continuing operations ........... (40) 3,188
Net cash used in discontinued operations ....................... (1,510) (1,964)
-------- --------
Net cash (used in) provided by operating activities ................. (1,550) 1,224
-------- --------

Cash flows from investing activities:
Purchase of marketable securities ..................................... -- (1,276)
Sale of marketable securities ......................................... 607 499
Purchase of property and equipment .................................... (9) (292)
Capitalization of internal software development costs ................. (8) (819)
-------- --------
Net cash provided by (used in) investing activities ........... 590 (1,888)
-------- --------

Cash flows from financing activities:
Payments on capitalized lease obligations .............................. (57) (22)
Purchase of treasury stock ............................................. (8) --
Proceeds from exercise of stock options and employee stock
purchase plan ....................................................... 1 --
-------- --------
Net cash used in financing activities ......................... (64) (22)
-------- --------

Effect of foreign exchange rate changes on cash and cash
equivalents ......................................................... 15 57
-------- --------
Net decrease in cash and cash equivalents ............................... (1,009) (629)
-------- --------
Cash and cash equivalents, beginning of period .......................... 13,210 17,665
Cash and cash equivalents, end of period ................................ $ 12,201 $ 17,036
======== ========

Supplemental disclosure of non-cash investing and financing activities:
Issuance of restricted stock .......................................... $ 234 $ --

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

INFINIUM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)

1. BASIS OF PRESENTATION

The information at December 31, 2001 and September 30, 2001 and for the
three month periods ended December 31, 2001 and December 31, 2000 is unaudited,
but includes all adjustments (consisting only of normal recurring entries) which
the Company's management believes to be necessary for the fair presentation of
the financial position, results of operations, and changes in cash flows for the
periods presented. The accompanying interim consolidated financial statements
should be read in conjunction with the financial statements and related notes
included in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2001. Certain information and notes normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the Securities and Exchange
Commission rules and regulations. Interim results of operations for the three
month period ended December 31, 2001 are not necessarily indicative of operating
results for the full fiscal year.

Certain reclassifications have been made to the prior period financial
statements to conform to the current period presentation.

2. COMPREHENSIVE INCOME (LOSS)

The table below sets forth comprehensive income and loss as defined by
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, for the three month periods ended December 31, 2001 and
2000:

THREE MONTHS ENDED
DECEMBER 31,
------------
2001 2000
---- ----

Net income (loss) ............................... $ 2,721 $ (905)
Other comprehensive income (loss):
Foreign currency translation adjustments ........ 30 4
Unrealized gain (loss) on investments, net
of related tax effect: ...................... 28 (536)
------- -------

Comprehensive income (loss) ..................... $ 2,779 $(1,437)
======= =======

INFINIUM SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)

3. NET INCOME (LOSS) PER COMMON SHARE

The Company computes basic and diluted earnings per share in accordance
with SFAS No. 128, Earnings per Share. The following table reconciles the
numerator and denominator of the basic and diluted loss per share computations
shown in the Consolidated Statement of Operations.

As per generally accepted accounting principles, the computation of net
income (loss) per share is based on the weighted average basic and diluted
shares outstanding. The computation of basic and diluted earnings per share for
the three month periods ended December 31, 2001 and 2000 is as follows:

THREE MONTHS
ENDED
DECEMBER 31,
------------
2001 2000
---- ----

(in thousands, except per share amounts)
BASIC AND DILUTED INCOME (LOSS) PER SHARE:
Numerator:
Net income (loss): ................................. $ 2,721 $ (905)
======== ========

Denominator:
Weighted average common shares outstanding - basic . 13,035 12,884
Dilutive options ................................... 71 --
Dilutive unvested restricted stock ................. 100 --
-------- --------
Weighted average common shares outstanding - diluted 13,206 12,884
======== ========
Basic and diluted income (loss) per share .......... $ 0.21 $ (0.07)
======== ========

Options to purchase 2,162,000 and 2,607,000 weighted average shares of
common stock outstanding for the three month periods ended December 31, 2001 and
2000, respectively, were excluded from the calculation of diluted net income
(loss) per share as the effect of their inclusion would have been anti-dilutive.
Also excluded from the calculation of diluted net income (loss) per share were
156,000 weighted average shares of unvested restricted stock for the three month
period ended December 31, 2001 as the effect of their inclusion would have been
anti-dilutive. Total options outstanding were 2,362,000 and 2,439,000 for the
periods ended December 31, 2001 and 2000, respectively.

INFINIUM SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)

4. SEGMENT INFORMATION AND GEOGRAPHIC AREAS

The following table presents a summary of operating information for the
three month periods ended December 31, 2001 and 2000:

THREE MONTHS ENDED
DECEMBER 31,
------------
2001 2000
---- ----

Revenue:
North American operations:
Infinium ............................. $ 14,216 $ 18,800
Cort payroll unit .................... 823 1,380
-------- --------
Total North American operations .......... 15,039 20,180
International operations ................. 1,296 1,816
-------- --------
Total consolidated revenue ............ $ 16,335 $ 21,996
======== ========

Income from operations:
North American operations:
Infinium ............................. $ 2,292 $ 1,804
Cort payroll unit .................... 148 (176)
-------- --------
Total North American operations .......... 2,440 1,628
International operations ................. 325 (837)
-------- --------
Consolidated continuing operations .... $ 2,765 $ 791
======== ========

ASP revenues were $408 for the three months ended December 31, 2000
which is included in the loss from operations of ASP segment in the Statement of
Operations.

The following table summarizes identifiable assets by business segment
as of December 31, 2001 and September 30, 2001:

DECEMBER 31, SEPTEMBER 30,
------------ -------------
2001 2001
---- ----

Identifiable assets:
North American operations:
Infinium ................................ $30,642 $31,794
Cort payroll unit ....................... 823 435
Net assets of discontinued operations ... 382 233
------- -------
Total North American operations ............. 31,847 32,462
International operations .................... 2,185 2,835
------- -------
Consolidated ............................. $34,032 $35,297
======= =======

INFINIUM SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)

5. 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, and the cost of the additional restricted
stock grants was $436 for the awards to executive management and $42 for the
awards to other employees. The combined cost of these events approximates $860,
which will be amortized over the vesting period of the restricted stock grants,
which range from 21 to 24 months. During the quarter ended December 31, 2001,
the Company recognized $58 in expense for the restricted stock grants.

On October 26, 2001, additional restricted stock grants of 296,000
shares were awarded to executive management and other employees. The fair market
value of the Company's stock was $0.79 per share at the close of business on
October 26, 2001. The cost of these additional restricted stock grants was $234
which will be amortized over 36 months. During the quarter ended December 31,
2001, the Company recognized $13 in expense.

During the quarter ended December 31, 2001, the Company repurchased
16,000 shares of restricted stock for an aggregate repurchase price of $8.

6. 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 $2,212 associated with these terminations were recorded as a
restructuring charge in fiscal year 2001. During the three months ended December
31, 2001, the Company did not make any adjustments to the restructuring accrual.

As of December 31, 2001 and September 30, 2001, the Company had accrued
liability balances of $643 and $970, respectively, relating to these severance
costs. The remaining balance will be paid out through October 2002.

In addition to the above amounts, during fiscal 2001 the Company
recorded severance and benefits costs of $1,073 associated with the termination
of four executives of the Company. As of December 31, 2001 and September 30,
2001, the Company had accrued liability balances of $493 and $668, respectively,
relating to these severance costs. The remaining balance will be paid out
through the end of fiscal year 2002.

INFINIUM SOFTWARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)

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 and the establishment of additional reserves for future lease
obligation payments totaling $841. As of December 31, 2001 and September 30,
2001, the Company had accrued liabilities of $533 and $612, respectively,
associated with the consolidation of these facilities. Additionally, $177 was
recorded for non-facilities leases and other administrative costs associated
with the restructuring.

7. 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. The remaining net assets
related to the ASP segment consist of accounts receivable from customers and
current deferred revenue balances and accrued liabilities for the cost of
disposal. 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 was classified within loss from
operations of ASP segment in the consolidated statement of operations for fiscal
year 2001.

During the three months ended December 31, 2001, the ASP business
segment incurred a loss from operations of $575 which was offset against the
accrual of $1,094 originally booked in fiscal year 2001 for estimated losses in
accordance with APB Opinion No. 30, Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions. At
December 31, 2001, the remaining accrual for discontinued operations was $519
which is consistent with management's original estimate.

8. 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 expires on 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 must also follow non-financial
covenants including the receipt of the financial institution's consent in the
event of a merger or consolidation with another entity and consent to acquire
any assets or incur any debts outside the normal course of business. The Company
was in compliance with all covenants at December 31, 2001. 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.

ITEM 2. 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" contained herein and in the Company's Annual
Report on Form 10-K for the year ended September 30, 2001, 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", "the Company") develops, markets
and supports enterprise-level business software applications. 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.

RESULTS OF OPERATIONS

QUARTER ENDED DECEMBER 31, 2001 COMPARED TO QUARTER ENDED DECEMBER 31, 2000

The following table sets forth the Company's consolidated statement of
operations data expressed as a percentage of total revenue and the percentage of
dollar increase or decrease from period to period for the three months ended
December 31, 2001 and 2000:

THREE MONTHS ENDED DECEMBER 31,
-------------------------------
% OF TOTAL % OF $
REVENUE INCREASE
------- (DECREASE)
2001 2000 2000 TO 2001
---- ---- ------------

REVENUE:

Software license fees .................. 13% 17% (43)%
Services revenue ....................... 87 83 (22)
---- ----
Total revenue ....................... 100 100 (26)
---- ----
OPERATING COSTS AND EXPENSES:

Cost of software license fees .......... 3 6 (73)
Cost of services ....................... 25 25 (24)
Research and development ............... 17 18 (29)
Sales and marketing .................... 26 36 (46)
General and administrative ............. 12 11 (18)
---- ----
Total operating costs and expenses .. 83 96 (36)
---- ----
Income from operations ................... 17 4 250
Other income (loss), net ................. 0 1 (119)
---- ----
Income from continuing
operations before provision for
income taxes............................ 17 5 167
Provision for income taxes ............... 0 0 N/A
---- ----
Income from continuing operations ........ 17 5 167
DISCONTINUED OPERATIONS:

Loss from operations of ASP segment ...... 0 (9) 100
---- ----
NET INCOME (LOSS) ........................ 17% (4)% 401%
==== ====

REVENUE. Total revenue declined $5.7 million, or 26%, from $22.0
million for the quarter ended December 31, 2000 to $16.3 million for the quarter
ended December 31, 2001. Software license fees decreased from $3.8 million for
the quarter ended December 31, 2000 to $2.2 million for the quarter ended
December 31, 2001. This decrease reflects a slowdown in general technology
spending. Services revenue, comprised of maintenance fee revenue and consulting
services revenue, declined 22%, from $18.2 million for the quarter ended
December 31, 2000 to $14.2 million for the quarter December 31, 2001. This
decrease was due primarily to a decrease in demand for the Company's consulting
service offerings due to lower software license sales. The components of
services revenue are as follows:

THREE MONTHS ENDED DECEMBER 31,
-------------------------------
(in thousands, % decrease
except % data)
2001 2000 2000 TO 2001
---- ---- ------------

Maintenance fee revenue ... $ 10,680 $ 10,744 (1)%
Consulting services revenue 3,495 7,485 (53)
-------- --------
Total services revenue

$ 14,175 $ 18,229 (22)%
======== ========

COST OF SOFTWARE LICENSE FEES. Cost of software license fees consists
primarily of amortization expense related to capitalized software and the cost
of product media, manuals and shipping. Cost of software license fees decreased
73%, from $1.4 million for the quarter ended December 31, 2000 to $376 thousand
for the quarter ended December 31, 2001. This decrease in dollar amount is
mainly due to a $485 thousand decrease in third party royalties and a $534
thousand decrease in capitalized software amortization due to the write-off of
capitalized software in fiscal year 2001.

COST OF SERVICES. Cost of services consists of costs to provide
support, implementation, consulting, related facilities overhead, computer and
communications overhead and training services to licensees. Cost of services
decreased 24%, from $5.5 million for the quarter ended December 31, 2000 to $4.1
million for the quarter ended December 31, 2001. The decrease is due to a
decrease in third party consulting expenses and a reduction in headcount
associated with the Company's reduction in force during fiscal year 2001. Cost
of services as a percentage of service revenue was 30% and 29% for the quarters
ended December 31, 2000 and 2001, respectively.

RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of engineering personnel, related facilities overhead, computer and
communications overhead, and third party contractor costs. Research and
development costs are reduced by capitalized software development costs and,
when applicable, research funding. Research and development expenses decreased
29% from $3.9 million for the quarter ended December 31, 2000 to $2.8 million
for the quarter ended December 31, 2001. The decrease in dollar amount is due to
$1.9 million related to personnel reductions and general company-wide cost
reduction measures, offset by an $812 thousand decrease in capitalized software
development costs.

SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries, commissions, travel, promotional expenses, facilities and computers
and communications costs for direct sales offices. Sales and marketing expenses
decreased 46% from $8.0 million for the quarter ended December 31, 2000 to $4.3
million for the quarter ended December 31, 2001. The decrease in dollar amount
was primarily due to $1.2 million related to personnel reductions associated
with the Company's reduction-in-force during fiscal year 2001, $598 thousand
related to lower commission expense due to lower sales volume and $2.0 million
related to lower marketing and sales costs due to a company-wide emphasis on
expense reduction.

GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries of executive and administrative personnel as well as
provisions for doubtful accounts, insurance, investor relations and professional
service fees. General and administrative expenses decreased 18% from $2.4
million for the quarter ended December 31, 2000 to $2.0 million for the quarter
ended December 31, 2001. The decrease in dollar amount was primarily due to a
decrease of $157 thousand primarily due to the Company's reduced headcount and
$146 thousand due to decreased external consulting expense.

OTHER INCOME (LOSS), NET. Other income (loss), net consists of interest
income, interest expense, foreign currency exchange gain and losses, and
marketable equity securities gains and losses. Other income (loss), net
decreased $274 thousand due to lower interest income due to lower interest rates
and lower cash and marketable securities balances, and foreign exchange losses.

LIQUIDITY AND CAPITAL RESOURCES

As of December 31, 2001, the Company had cash, cash equivalents and
marketable securities of $13.7 million resulting from a net use of cash, cash
equivalents and marketable securities of $1.6 million during the first three
months of fiscal year 2002. Operating activities used $1.6 million and included
$1.5 million used in discontinued operations. Cash flows from operations for the
three-month period ended December 31, 2001 was mainly due to an increase in
accounts receivable of $1.4 million due to higher sales at the end of the
quarter, decrease in accounts payable and accrued expenses of $2.8 million due
to payments for severance, bonuses and payroll, decrease in deferred revenue of
$1.3 million, partially offset by net income of $2.7 million and depreciation
and amortization expense of $792 thousand.

Cash flows provided from investing activities was $590 thousand for the
three-month period ended December 31, 2001 which included $607 thousand from
sale of marketable securities, partially offset by the purchase of property and
equipment of $8 thousand and capitalized software development costs of $8
thousand.

Cash flows used in financing activities was $64 thousand for the
three-month period ended December 31, 2001 which included payments of
capitalized lease obligations of $57 thousand and purchase of treasury stock of
$8 thousand.

The Company does not have any special purpose entities or off-balance
sheet financing arrangements.

Days sales outstanding ("DSO") increased to 45 days at December 31,
2001 compared to 36 days at September 30, 2001. The Company calculates DSO by
dividing the ending accounts receivable balance, net of allowances for doubtful
accounts, by the annualized revenue for the 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 nearer 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 December 31, 2001, net of allowances for doubtful accounts
was $8.2 million versus $6.8 million as of September 30, 2001.

Deferred revenue decreased $1.3 million, from $29.0 million at
September 30, 2001 to $27.7 million at December 31, 2001. The decrease in
deferred revenue primarily resulted from a decrease in the deferred consulting
services component of revenue due to lower prepaid customer bookings during the
first three months of fiscal 2002.

Prior to the first quarter of fiscal 2002, the Company had 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. For the quarter ended
December 31, 2001, the Company had net income of $2.7 million. As of December
31, 2001, the Company had a working capital deficit of $17.4 million and a
retained deficit of $9.8 million. Included in the working capital deficit is
$26.0 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
has realized reduced overhead expenses as a result of these restructuring
efforts during the first quarter of fiscal 2002. 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.

FACTORS AFFECTING FUTURE PERFORMANCE

The factors affecting the Company's future performance have not changed
significantly from those enumerated in the Company's Annual Report on Form 10-K
for the year ended September 30, 2001.

ITEM 3. 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. 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 December 31, 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 the three month period ended December
31, 2001, the net impact of foreign currency changes was not material.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable

Item 2. Changes in Securities

Not applicable

Item 3. Defaults Upon Senior Securities

Not applicable

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

The Company's Annual Meeting of Stockholders was held on Friday,
February 8, 2002. At the meeting, the stockholders elected the
following Class III directors to the Board of Directors:

Name For Against
---- --- -------

Michael A. Cusumano 8,448,861 2,649,365
Roland D. Pampel 11,046,029 52,197

The terms of Manuel Correia and Fred L. Luconi as Class I directors and
James E. McGowan, Robert A. Pemberton and Robert P. Schechter as Class
II directors continued after the meeting.

Also at the meeting, the stockholders ratified the selection of
PricewaterhouseCoopers LLP as independent accountants of the Company
for the fiscal year ending September 30, 2002:

For Against Abstain
--- ------- -------

8,845,006 2,224,654 28,566

Item 5. Other Information

Not applicable

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

10.16 Separation Agreement for Executive Employee

10.17 Option Agreement with Chairman of the Board

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended
December 31, 2001.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934,
Infinium Software, Inc. has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

Dated: February 13, 2002

INFINIUM SOFTWARE, INC.
by:

/s/ William B. Gerraughty, Jr.
------------------------------
William B. Gerraughty, Jr.
Chief Financial Officer