INDUS INTERNATIONAL, INC.

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

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

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

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

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

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

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

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

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

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

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

	•		Proper maintenance of equipment and facilities can prevent costly failures, limit disruptions, and minimize downtime;

	•		More efficient use of personnel and better control of spare parts can reduce costs;

	•		Properly maintained equipment can run at higher production speeds and have longer life cycles;

	•		Delaying new equipment purchases lowers the capital expense budget; and

•

Proper regulatory compliance facilitated by Indus’ solutions can help companies avoid fines and forced shutdowns.

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

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

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

	•		providing added value to Indus’ existing customers;

	•		enabling Indus to compete in the service management space, creating new customer opportunities;

	•		lowering total cost of ownership for customers;

	•		strengthening the alliance between Indus and its utility customers; and

	•		providing a pathway for increased revenues, operational efficiencies and profitability.

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

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

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

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

	•		depth and breadth of products. Over the past 25 years, Indus has attained the leading market share position in the “Tier 1” market (customers having annual revenues greater than $1 billion dollars) for EAM software solutions;

	•		scalability of both its EAM and CIS products. Indus’ solutions are able to scale up to multiple thousands of users;

	•		substantial installed base of both the EAM Tier 1 market and CIS customers in the energy and utilities market. This provides Indus with a source for selling additional services and add-on modules, as well as providing client references that can help the Company close deals with new prospects; and

	•		domain knowledge, providing Indus with the expertise to enhance implementations with industry-specific best practices.

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

	•		utilities (from generating or production facilities to repair trucks);

	•		oil, gas and petrochemical (drilling platforms and large refining facilities);

	•		defense and transportation (airplanes, ships and tanks);

	•		pulp and paper (paper machines); and

	•		metals and mining (fabrication machinery and mines/production plants).

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

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

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

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

	•		Americas — with direct sales representatives in the US and Canada, and strategic alliances to expand the scope of sales opportunities;

	•		Europe, Middle East and Africa — with direct sales representatives in the UK and France, as well as alliances that extend Indus’ selling capability into continental Europe, the Middle East and Africa; and

	•		Asia-Pacific — with direct sales representatives in Australia and Japan and strategic alliances to expand the scope of sales opportunities.

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


	• Water and waste treatment

	• Nuclear power generation

	• Fossil power generation

	• Hydroelectric power generation

	• Energy transmission and substations

	• Energy distribution and delivery


	• Chemical, petrochemical, oil, and gas

	• Metals and mining

	• Pulp, paper and forest

	• Process manufacturing

	• Discrete manufacturing

	• Consumer packaged goods

	• Public transit


	• Commercial property management

	• Facilities maintenance services

	• Hospitality and leisure properties

	• Education and government

	• Hospitals and healthcare providers

	• Financial services properties

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

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

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

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

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

	•		asset and work management systems;

	•		materials and procurement systems;

	•		supply chain;

	•		eProcurement systems; and

	•		safety and compliance systems.

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

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

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

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

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

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

	•		Enterprise-wide access to information

	•		Cost controls for increased profitability

	•		Regulatory responsiveness

	•		Accurate information for making decisions

	•		Reduced cycle times from meter reading to collection of accounts receivable

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

	•		Flexible pricing options

	•		Robust rate modeling and bill calculation

	•		Support for a complex array of contract models

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

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

	•		Business intelligence and data warehousing

	•		Internet customer self-service and electronic bill payment and processing (EBPP)

	•		Data mining to support targeted communications and targeted marketing

	•		Customer contact tracking and employee metrics

	•		Internal work routing and approval

	•		Service order scheduling and schedule optimization

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

	•		BEA Systems Inc. - supports Indus customers’ need to design and automate business processes that integrate back-end applications and e-commerce technologies.

	•		Oracle - provides database platform as well as Oracle Financials integration. Indus is a member of the Oracle Partner Network, as a Certified Advantage Partner.

	•		Business Objects - provides business intelligence that lets organizations access, analyze, and share information internally with employees and externally with customers, suppliers, and partners.

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

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

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

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

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

	•		product quality, ROI, performance and functionality;

	•		adaptability to new trends driven by technology and customer requirements;

	•		cost of internal product development as compared with cost of purchase of products from outside vendors;

	•		ease and speed of implementation;

	•		cost of ongoing maintenance; and

	•		time-to-market with, and market acceptance of new products, enhancements, functionality and services.

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

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

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

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

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

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

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

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

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

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

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

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


	• goodwill impairment;

	• increased interest costs;

	• issuances of additional securities or debt; and

	• difficulties in integrating acquired businesses and assets.

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

	•		properly maintain and take advantage of the business or value of any acquired business and assets;

	•		identify suitable acquisition candidates;

	•		complete any additional acquisitions; or

	•		integrate any acquired businesses or assets into our operations.

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

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

	•		the relatively long sales cycles for our products;

	•		the variable size and timing of individual license transactions;

	•		delays associated with product development, including the development and introduction of new releases of existing products;

	•		the development and introduction of new operating systems and/or technological changes in computer systems that require additional development efforts;

	•		our success in, and costs associated with, developing, introducing and marketing new products;

	•		changes in the proportion of revenues attributable to licensing fees, hosting fees and services;

	•		changes in the level of operating expenses;

	•		software defects and other product quality problems and the costs associated with solving those problems; and

	•		successful completion of customer funded development.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

If we don’t respond to rapid technological change and evolving industry standards, we will be unable to compete effectively.

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

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

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

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

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

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

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

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

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

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

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

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

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

	•		lack of acceptance of localized products;

	•		cultural differences in the conduct of business;

	•		longer accounts receivable payment cycles;

	•		greater difficulty in accounts receivable collection;

	•		seasonality due to the annual slow-down in European business activity during our third calendar quarter;

	•		unexpected changes in regulatory requirements and royalty and withholding taxes that restrict the repatriation of earnings;

	•		tariffs and other trade barriers;

	•		the burden of complying with a wide variety of foreign laws; and

	•		negative effects relating to hostilities, war or terrorist acts.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(2)

Includes results from IUS operations from date of acquisition on March 5, 2003.

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

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

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

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

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

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

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

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

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

In software arrangements that include rights to multiple software products and/or services, the total arrangement fee is allocated among each of the deliverables using the residual method, under which revenue is allocated to undelivered elements based on vendor-specific objective evidence of fair value of such undelivered elements and the residual amounts of revenue are allocated to delivered elements. Elements included in multiple element arrangements could consist of software products, maintenance (which includes customer support services and unspecified upgrades), and consulting services. Vendor-specific objective evidence is based on the price charged when an element is sold separately or, in the case of an element not yet sold separately, the price established by authorized management, if it is probable that the price, once established, will not change once the element is sold separately.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We have audited the accompanying consolidated balance sheets of Indus International, Inc. as of December 31, 2001, 2002, and March 31, 2003 and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2002, and for the three months ended March 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


		Fiscal Years Ended									Three Months Ended
		December 31,									March 31,

		2000			2001			2002			2002			2003

											(unaudited)
Net loss		$	(58,775	)	$	(10,076	)	$	(33,763	)	$	(9,508	)	$	(9,893	)

Weighted average shares of common stock outstanding			34,248			34,857			35,237			35,359			37,210

Basic net loss per share		$	(1.72	)	$	(0.29	)	$	(0.96	)	$	(0.27	)	$	(0.27	)

Calculation of shares outstanding for computing diluted net loss per share:
Shares used in computing basic net loss per share			34,248			34,857			35,237			35,359			37,210
Shares to reflect the effect of the assumed exercise of:
	Employee stock options		—			—			—			—			—
	Warrants		—			—			—			—			—
	Convertible Notes		—			—			—			—			—

Shares used in computing diluted net loss per share			34,248			34,857			35,237			35,359			37,210

Diluted net loss per share		$	(1.72	)	$	(0.29	)	$	(0.96	)	$	(0.27	)	$	(0.27	)

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

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

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

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

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


		Fiscal Years Ended									Three Months Ended
		December 31,									March 31,

		2000			2001			2002			2002			2003

											(unaudited)
Net loss as reported		$	(58,775	)	$	(10,076	)	$	(33,763	)	$	(9,508	)	$	(9,893	)
Add: Total stock-based compensation expense determined under the intrinsic value method		$	48		$	81		$	53		$	18		$	25
Deduct: Total stock-based compensation expense determined under fair-value based method for all awards		$	(12,483	)	$	(8,743	)	$	(4,809	)	$	(1,552	)	$	(1,509	)

Pro forma net loss		$	(71,210	)	$	(18,738	)	$	(38,519	)	$	(11,042	)	$	(11,377	)

Loss per share:
Basic:
	As reported	$	(1.72	)	$	(0.29	)	$	(0.96	)	$	(0.27	)	$	(0.27	)

	Pro forma	$	(2.08	)	$	(0.54	)	$	(1.09	)	$	(0.31	)	$	(0.31	)

Diluted:
	As reported	$	(1.72	)	$	(0.29	)	$	(0.96	)	$	(0.27	)	$	(0.27	)

	Pro forma	$	(2.08	)	$	(0.54	)	$	(1.09	)	$	(0.31	)	$	(0.31	)

Shares used in computing per share data
Basic			34,248			34,857			35,237			35,359			37,210

Diluted			34,248			34,857			35,237			35,359			37,210

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


					Options Outstanding
		Shares
		Available						Weighted-
		for						Average
		Grant			Shares			Exercise Price

Balances at December 31, 1999			4,644,569			6,931,766		$	5.24
	Shares authorized		500,000			—			—
	Options granted		(5,721,073	)		5,721,073		$	6.20
	Options forfeited		2,291,705			(2,291,705	)	$	5.86
	Options exercised		—			(1,476,933	)	$	9.03
	Plan shares expired		(133,859	)		—			—

Balances at December 31, 2000			1,581,342			8,884,201		$	5.66
	Shares authorized		2,500,000			—			—
	Options granted		(1,673,100	)		1,673,100		$	5.12
	Options forfeited		1,707,981			(1,707,981	)	$	6.46
	Options exercised		—			(275,691	)	$	6.93
	Plan shares expired		(92,332	)		—			—

Balances at December 31, 2001			4,023,891			8,573,629		$	5.43
	Shares authorized		—			—			—
	Options granted		(3,587,000	)		3,587,000		$	2.50
	Options forfeited		2,401,457			(2,401,457	)	$	5.09
	Options exercised		—			(290,742	)	$	5.64
	Plan shares expired		(58,445	)		—			—

Balances at December 31, 2002			2,779,903			9,468,430		$	4.46
	Shares authorized		—			—			—
	Options granted		(628,500	)		628,500		$	1.74
	Options forfeited		248,989			(248,989	)	$	4.83
	Options exercised		—			(1,463	)	$	1.24
	Plan shares expired		(50,844	)		—			—

Balances at March 31, 2003			2,349,548			9,846,478		$	4.27

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


			Options Outstanding						Options Vested and
									Exercisable
					Weighted-
			Number		Average		Weighted-		Number		Weighted-
			Outstanding		Remaining		Average		Exercisable		Average
Range of			at March 31,		Contractual		Exercise		at March 31,		Exercise
Exercise Prices			2003		Life		Price		2003		Price

	$ 0.2830 - $ 2.8750			3,422,144		9.12	$	1.57		270,611	$	1.99
	$ 3.3800 - $ 3.8750			285,882		4.04	$	3.45		268,514	$	3.42
	$ 3.9375 - $ 3.9375			891,234		7.55	$	3.94		477,759	$	3.94
	$ 3.9400 - $ 4.5000			916,367		7.79	$	4.45		501,367	$	4.49
	$ 4.5620 - $ 4.5620			1,139,676		4.64	$	4.56		1,139,676	$	4.56
	$ 4.5900 - $ 5.9600			1,026,125		8.66	$	5.56		236,784	$	5.56
	$ 6.0000 - $ 7.6000			487,250		8.17	$	6.64		151,371	$	6.62
	$ 7.6250 - $ 7.6250			862,500		6.83	$	7.63		862,500	$	7.63
	$ 7.6800 - $ 8.0625			665,300		7.20	$	7.99		446,526	$	8.01
	$13.7500 - $15.3750			150,000		2.11	$	13.97		150,000	$	13.97

		Totals		9,846,478		7.66	$	4.27		4,505,108	$	5.63

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

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

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

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


			Fiscal Years Ended						Three Months Ended
			December 31,						March 31,

			2000		2001		2002		2002		2003

									(unaudited)
Revenues (based on selling location):
	United States		$	101,256	$	104,442	$	76,757	$	21,610	$	17,724
	International:
		United Kingdom		29,816		60,234		28,299		8,428		6,696
		Canada		5,854		4,719		5,852		1,434		1,429
		Other foreign countries		8,763		6,619		6,257		971		1,385

	Total International			44,433		71,572		40,408		10,833		9,510

		Total consolidated revenues	$	145,689	$	176,014	$	117,165	$	32,443	$	27,234

Long-lived assets:
	United States		$	19,096	$	19,368	$	16,060	$	18,422	$	36,914
	International:
		United Kingdom		1,979		1,742		1,098		1,570		855
		Canada		686		471		80		434		98
		Other foreign countries		472		296		233		299		221

Total consolidated long-lived assets			$	22,233	$	21,877	$	17,471	$	20,725	$	38,088

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

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

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

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

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

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

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

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


(In thousands)		Severance and
		Related Costs			Equipment		Facilities			Total

Balance at December 31, 1999		$	—		$	—	$	—		$	—

	Payments in 2000		(466	)		—		—			(466	)
	Accruals in 2000		803			—		1,260			2,063
	Adjustments in 2000		—			—		—			—

Balance at December 31, 2000		$	337		$	—	$	1,260		$	1,597

	Payments in 2001		(1,716	)		—		(2,189	)		(3,905	)
	Accruals in 2001		1,553					—			1,553
	Adjustments in 2001		—			—		8,261			8,261

Balance at December 31, 2001		$	174		$	—	$	7,332		$	7,506

	Payments in 2002		(110	)		—		(2,461	)		(2,571	)
	Accruals in 2002		—			—		—			—
	Adjustments in 2002		(64	)		—		3,615			3,551

Balance at December 31, 2002		$	—		$	—	$	8,486		$	8,486

	Payments in 2003		—			—		(416	)		(416	)
	Accruals in 2003		—			—		2,166			2,166
	Adjustments in 2003		—			—		—			—

Balance at March 31, 2003		$	—		$	—	$	10,236		$	10,236

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


		Reported			Reported			Reported			Reported
		March 31,			June 30,			September 30,			December 31,

2003
Total revenues		$	27,234
Cost of revenues			15,409

Gross margin			11,825
Net loss		$	(9,893	)

Net loss per share
	-Basic	$	(0.27	)
	-Diluted	$	(0.27	)
2002
Total revenues		$	32,443		$	31,032		$	26,457		$	27,233
Cost of revenues			15,800			16,475			13,868			12,841

Gross margin			16,643			14,557			12,589			14,392
Net loss		$	(9,508	)	$	(15,069	)	$	(3,283	)	$	(5,903	)

Net loss per share
	-Basic	$	(0.27	)	$	(0.43	)	$	(0.09	)	$	(0.17	)
	-Diluted	$	(0.27	)	$	(0.43	)	$	(0.09	)	$	(0.17	)
2001
Total revenues		$	42,377		$	43,135		$	44,207		$	46,295
Cost of revenues			21,032			20,424			19,757			19,903

Gross margin			21,345			22,711			24,450			26,392
Net income (loss)		$	(6,409	)	$	(6,696	)	$	383		$	2,646

Net income (loss) per share
	-Basic	$	(0.18	)	$	(0.19	)	$	0.01		$	0.08
	-Diluted	$	(0.18	)	$	(0.19	)	$	0.01		$	0.07

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

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

Mr. Babka has served as Executive Vice President Finance and Administration and Chief Financial Officer of the Company since April 2002. From August 2000 to March 2002, Mr. Babka served as Vice President, Finance and Chief Financial Officer for the Global Accounts Business Unit of Concert Communications, an international Joint Venture between AT&T and British Telecom, a voice and data service provider. From August 1999 to August 2000, Mr. Babka served as Vice President and Corporate Controller for Global Crossing Ltd, where he headed the implementation of an ERP system for that company’s worldwide operations. From July 1997 to August 1999, he was a Senior Vice President and Chief Financial Officer for the Technology and Operations Group of Bank of America, N.A.

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

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

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

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

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

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

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

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

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

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

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

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


										Long-term			All Other
										Compensation			Compensation
				Annual Compensation						Awards			($)(2)

								Other Annual		Securities
		Year/						Compensation		Underlying
Name and Principal Position		Period		Salary ($)		Bonus ($)		($)(1)		Options

Thomas R. Madison, Jr.		Transition
	Chief Executive Officer	Period		$	100,000		—		—		—			—
	and Chairman of the Board		2002		325,000		—		—		896,000			—
			2001		8,653		—		—		50,000	(3)		—
Kent O. Hudson (4)		Transition
	Former President and	Period			—		—		—		—		$	137,500
	Chief Executive Officer		2002		275,000	$	237,600	$	68,650		—			1,380,350
			2001		550,000		137,500		77,880		—			2,560
			2000		538,732		268,654		—		1,000,000			5,950
Jeffrey A. Babka (5)		Transition
	Executive Vice President Finance	Period			62,500		—		—		—			—
	and Administration, Chief		2002		176,042		59,065		—		450,000			—
	Financial Officer and Secretary
Gregory J. Dukat (6)		Transition
	Executive Vice President of	Period			62,500		—		85		—			—
	Worldwide Operations		2002		72,928		—		—		450,000			—

•

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

•

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

•

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

•

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

•

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

•

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

(3)

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

(5)

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

(6)

Mr. Dukat became the Executive Vice President of Worldwide Operations of the Company effective September 2002.

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


		Individual Grants
											Potential Realizable Value at
		Number of		Percent of							Assumed Annual Rates of Stock
		Securities		Total Options							Price Appreciation for Option
		Underlying		Granted to			Exercise				Term ($) (1)
		Options		Employees in			Price per		Expiration
Name		Granted		Fiscal Year			Share ($)		Date		5%		10%

Thomas R. Madison, Jr Transition Period			—		—			—		—		—		—
	2002		446,000		13.1	%	$	5.40		3/4/12	$	1,514,630	$	3,838,369
			450,000		13.2			1.38		7/10/12		390,544		989,714
Jeffrey A. Babka Transition Period			—		—			—		—		—		—
	2002		350,000		10.3			4.55		4/3/12		1,001,515		2,538,035
			100,000		2.9			1.38		7/10/12		86,787		219,936
Gregory J. Dukat Transition Period			—		—			—		—		—		—
	2002		450,000		13.2			1.50		9/16/12		424,504		1,075,776

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

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


					Number of Securities				Value of Unexercised
					Underlying				in-the-Money Options at
					Unexercised Options at				Fiscal
	Shares		Value		March 31, 2003				Year-End ($)(1)
	Acquired on		Realized
Name	Exercise		($)		Exercisable		Unexercisable		Exercisable		Unexercisable

Thomas R. Madison, Jr Transition Period		—		—		123,999		822,001	$	0	$	144,000
2002		—		—		12,500		933,500		0		117,000
Kent O. Hudson Transition Period		—		—		750,000		—		0		0
2002		—		—		750,000		—		0		0
Jeffrey A. Babka Transition Period		—		—		87,500		362,500		0		32,000
2002		—		—		87,500		362,500		0		26,000
Gregory J. Dukat Transition Period		—		—		—		450,000		0		90,000
2002		—		—		—		450,000		0		63,000

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


	Shares		Approximate
	Beneficially		Percentage
Name and Address	Owned(1)		of Ownership(1)

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

(3)		Robert W. Felton, the Company and WPI entered into a Stock Purchase Agreement dated January 13, 1999 (the “Felton Purchase Agreement”). Under the Felton Purchase Agreement, WPI purchased 5,000,000 shares of the Company’s common stock from Mr. Felton and WPI agreed that with respect to any proposal presented to the Company’s stockholders it will exercise its voting right with respect to any shares of capital stock of the Company owned by it such that the votes of WPI and its affiliates are limited to 50% or less of the votes eligible to be cast on such proposal, except that WPI may vote its shares of capital stock in excess of such 50% vote in the same proportions as the other stockholders of the Company vote their shares of capital stock entitled to vote on such proposal.

(4)		Includes 45,000 shares for Mr. Janeway and 40,000 shares for Mr. Landy that are subject to options exercisable within 60 days of June 17, 2003, which were granted to each of Messrs. Janeway and Landy in their capacity as directors.

(5)		Represents shares reported on Schedule 13G for the period ended December 31, 2002 of which Liberty Wanger Asset Management, L.P and WAM Acquisition GP, Inc., its general partner, have shared voting and investment power. Of these 3,720,000 shares beneficially owned by WAM, Liberty Acorn Trust has shared voting and investment power over 3,300,000 shares. The address of WAM is 227 West Monroe Street, Suite 3000, Chicago, Illinois 60606.

(6)		Represents shares reported on Schedule 13G for the period ended December 31, 2002 of which P.A.W. Capital Corp. and Peter A. Wright have shared voting power and investment power. Peter A. Wright is the sole shareholder of P.A.W. Capital Corp. P.A.W. Capital Corp. is the general partner of P.A.W. Capital Partners, L.P. P.A.W. Capital Partners, LP is the general partner of P.A.W. Partners, LP and the manager of P.A.W. Offshore Fund. The address of each of the entities is 10 Glenville Street, Greenwich, Connecticut 06831-3638.

(7)		For Mr. Madison, includes 248,999 shares subject to options exercisable within 60 days of June 17, 2003. For Mr. Babka, includes 200,000 shares subject to options exercisable within 60 days of June 17, 2003. For Mr. Grzedzinski, includes 12,500 shares subject to options exercisable within 60 days of June 17, 2003.

(8)		Represents shares subject to options exercisable within 60 days of June 17, 2003.

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

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

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

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

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

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

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

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


Exhibit
Number		Description

2.1		Purchase Agreement, dated as of February 12, 2003, by and among the Registrant, SCT Utility Systems, Inc., SCT, SCT Financial Corporation, SCT Property, Inc., SCT International Limited, SCT Technologies (Canada) Inc., SCT Software & Resource Management Corporation and Systems & Computer Technology International B.V. (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on February 14, 2003)

2.2		Amendment No. 1 to Purchase Agreement, dated as of March 5, 2003, by and among the Registrant, SCT Utility Systems, Inc., SCT, SCT Financial Corporation, SCT Property, Inc., SCT International Limited, SCT Technologies (Canada) Inc., SCT Software & Resource Management Corporation and Systems & Computer Technology International B.V. (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on March 6, 2003)

3.1		Registrant’s Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Registration Statement on Form S-4 (No. 333-33113) filed on August 7, 1997 (the “1997 Proxy Statement”))

3.2		Registrant’s Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K/A filed on June 30, 2003)

4.1		Registration Rights Agreement entered into among the Registrant, Warburg, Pincus Investors, L.P. (“Warburg”), Robert W. Felton, Richard W. MacAlmon, John W. Blend, III and John R. Oltman (incorporated by reference to Exhibit 4.1 to the 1997 Proxy Statement)

4.2		Nomination Agreement entered into among the Registrant, Warburg and Robert W. Felton (incorporated by reference to Exhibit 4.6 to the 1997 Proxy Statement)

4.3		Registration Rights Agreement for Shares, dated as of February 12, 2003, by and among the Company and each of the Purchasers of the Shares, as listed on the Schedule of Purchasers accompanying the Purchase Agreement (incorporated by reference to Exhibit 10.3 to the Form 8-K filed on February 14, 2003)

4.4		Registration Rights Agreement for Conversion Shares, dated as of February 12, 2003, by and among the Company and each of the Purchasers of the Notes, as listed on the Schedule of Purchasers accompanying the Purchase Agreement (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on February 14, 2003)

4.5		Form of Convertible Note (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on March 6, 2003)

10.1*		Indus International, Inc. 1997 Stock Plan (incorporated by reference to Exhibit 10.1 to the 1997 Proxy Statement)


Exhibit
Number		Description

10.2*		Amendment No. 1 to the Indus International, Inc. 1997 Stock Plan (incorporated by reference to Exhibit 99.1 to the Registration Statement on Form S-8 filed with the Commission on July 5, 2001)

10.3*		Amendment No. 2 to the Indus International, Inc. 1997 Stock Plan (incorporated by reference to Exhibit 99.2 to the Registration Statement on Form S-8 filed with the Commission on July 5, 2001)

10.4*		Amendment No. 3 to the Indus International, Inc. 1997 Stock Plan (incorporated by reference to Exhibit 99.3 to the Registration Statement on Form S-8 filed with the Commission on July 5, 2001)

10.5*		Indus International, Inc. 1997 Director Option Plan (incorporated by reference to Exhibit 10.3 to the 1997 Proxy Statement)

10.6*		Rules of the Indus International, Inc. Company Share Option Plan (the “UK Option Plan) (incorporated by reference to Exhibit 10.7 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001)

10.7		Stock Purchase Warrant dated August 25, 1997 between the Registrant and Warburg Pincus Investors, L.P., as amended by that certain Amendment to Stock Purchase Warrant dated October 23, 2001 (incorporated by reference to Exhibit 10.8 of the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001)

10.8		Stock Purchase Agreement dated January 13, 1999 between Robert W. Felton, Warburg Pincus Investors, L.P. and the Registrant (incorporated by reference to Exhibit 10.37 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998)

10.9		Amended and Restated Lease Agreement for the Registrant’s Atlanta, Georgia corporate headquarters by and between Cousins Properties Incorporated and the Registrant dated August 1, 2000 (incorporated by reference to Exhibit 10.12 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000)

10.10		Office Lease Agreement for the Registrant’s San Francisco, California regional office between EOP—60 Spear, L.L.C. and the Registrant dated March 3, 2000, as amended (incorporated by reference to Exhibit 10.8 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2000)

10.11*		Employment Agreement dated as of April 29, 2003 by and between the Registrant and Thomas R. Madison (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K/A filed on June 30, 2003)

10.12*		Employment Agreement dated as of April 29, 2003 by and between the Registrant and Jeffrey A. Babka (incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-K/A filed on June 30, 2003)

10.13*		Letter Agreement dated April 10, 2002 between the Registrant and Robert Felton (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002)

10.14*		Amendment to the Indus International, Inc. 1997 Director Option Plan (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002)

10.15*		Amendment to the Indus International, Inc. 1997 Director Option Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2002)

10.16*		Employment Agreement dated September 16, 2002 by and between the Registrant and Gregory J. Dukat (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2002)


Exhibit
Number		Description

10.17*		Change of Control Severance Agreement dated September 16, 2002 by and between the Registrant and Gregory J. Dukat (incorporated by reference to Exhibit 10.3 to the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2002)

10.18		Purchase Agreement, dated as of February 12, 2003, by and among the Company and each of the Purchasers listed on the Schedule of Purchasers accompanying the Purchase Agreement (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on February 14, 2003)

10.19		Promissory Note, dated March 5, 2003, issued by the Registrant in favor of SCT Financial Corporation (incorporated by reference to Exhibit 10.1 to the Form 8-K filed on March 6, 2003)

10.20		Guaranty and Suretyship Agreement, dated March 5, 2003, by Indus Utility Systems, Inc. (f/k/a SCT Utility Systems, Inc.) in favor of SCT Financial Corporation (incorporated by reference to Exhibit 10.2 to the Form 8-K filed on March 6, 2003)

10.21*		Amendment to the Indus International, Inc. 1997 Director Option Plan (incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K/A filed on June 30, 2003)

21.1†		Subsidiaries of Registrant (incorporated by reference to Exhibit 21.1 to the Annual Report on Form 10-K filed on March 31, 2003)

23.1		Consent of Ernst & Young LLP, Independent Auditors

24.1†		Power of Attorney, included on the signature page of this report

99.1		Statement of the Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.2		Statement of the Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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

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

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

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

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


Signature	Title	Date

/s/ Thomas R. Madison, Jr. Thomas R. Madison, Jr.	Chairman of the Board and Chief Executive Officer (Principal Executive Officer), Director	June 30, 2003

/s/ Jeffrey A. Babka Jeffrey A. Babka	Executive Vice President Finance and Administration, Chief Financial Officer and Secretary (Principal Financial and Accounting Officer)	June 30, 2003

/s/ Gayle A. Crowell Gayle A. Crowell	Director	June 30, 2003

/s/ Edward Grzedzinski Edward Grzedzinski	Director	June 30, 2003

/s/ William H. Janeway William H. Janeway	Director	June 30, 2003

Joseph P. Landy	Director	June 30, 2003

/s/ Thomas S. Robertson Thomas S. Robertson	Director	June 30, 2003

/s/ Thomas E. Timbie Thomas E. Timbie	Director	June 30, 2003

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


(Mark One)

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

		For the fiscal year ended

		Or

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

		For the Transition Period from January 1, 2003 to March 31, 2003


Delaware (State or other jurisdiction of incorporation or organization)		94-3273443 (I.R.S. Employer Identification No.)

3301 Windy Ridge Parkway Atlanta, Georgia (Address of principal executive offices)		30339 (Zip code)


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


		Square	Ownership
Location	Principal Use	Footage	Interest

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


		High		Low

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


		Page

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


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


																		THREE MONTHS ENDED
			YEARS ENDED DECEMBER 31,															MARCH 31,

			1998			1999			2000			2001			2002			2002			2003 (2)

						(in thousands, except per share data)
STATEMENT OF OPERATIONS DATA:
REVENUES:
	Software licensing fees		$	55,546		$	19,071		$	12,622		$	21,005		$	15,527		$	4,428		$	2,637
	Services, maintenance and other			139,931			159,434			133,067			155,009			101,638			28,015			24,597

		Total revenues		195,477			178,505			145,689			176,014			117,165			32,443			27,234
Cost of revenues (1)				103,517			98,050			90,880			81,116			58,984			15,800			15,409

Gross margin				91,960			80,455			54,809			94,898			58,181			16,643			11,825

OPERATING EXPENSES:
	Research and development			30,372			33,801			51,607			49,522			45,745			12,708			8,717
	Sales and marketing			31,517			31,667			49,348			30,242			29,942			7,565			6,549
	General and administrative			15,270			18,145			20,944			17,398			13,305			2,926			3,959
	Restructuring expenses			—			—			2,063			10,188			8,199			3,396			2,166

		Total operating expenses		77,159			83,613			123,962			107,350			97,191			26,595			21,391

Income (loss) from operations				14,801			(3,158	)		(69,153	)		(12,452	)		(39,010	)		(9,952	)		(9,566	)
Gain on sale of investment in TenFold Corporation				—			38,170			—			—			—			—			—
Other income (expense) net				(936	)		3,120			3,712			2,412			1,303			446			(50	)

Income (loss) before taxes				13,865			38,132			(65,441	)		(10,040	)		(37,707	)		(9,506	)		(9,616	)
Provision (benefit) for income taxes				450			14,295			(6,666	)		36			(3,944	)		2			277

Net income (loss)			$	13,415		$	23,837		$	(58,775	)	$	(10,076	)	$	(33,763	)	$	(9,508	)	$	(9,893	)

INCOME (LOSS) PER SHARE:
	Basic		$	0.44		$	0.74		$	(1.72	)	$	(0.29	)	$	(0.96	)	$	(0.27	)	$	(0.27	)

	Diluted		$	0.38		$	0.68		$	(1.72	)	$	(0.29	)	$	(0.96	)	$	(0.27	)	$	(0.27	)

Shares used in computing per share data:
	Basic			30,717			32,109			34,248			34,857			35,237			35,359			37,210

	Diluted			35,263			35,274			34,248			34,857			35,237			35,359			37,210


			PERCENTAGE OF TOTAL REVENUES

			FISCAL YEARS ENDED									THREE MONTHS ENDED
			DECEMBER 31,									MARCH 31,

			2000			2001			2002			2002			2003

Statement of Operations Data:
Revenues:
	Software licensing fees			8.7	%		11.9	%		13.3	%		13.6	%		9.7	%
	Services, and maintenance and other			91.3	%		88.1	%		86.7	%		86.4	%		90.3	%

		Total revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%
Cost of revenues:
	Software licensing fees (including $6,838 writedown of third party software in 2000)			6.6	%		0.8	%		2.5	%		0.4	%		0.8	%
	Services, maintenance and other			55.8	%		45.3	%		47.8	%		48.3	%		55.8	%

Total cost of revenues				62.4	%		46.1	%		50.3	%		48.7	%		56.6	%

				37.6	%		53.9	%		49.7	%		51.3	%		43.4	%

Operating expenses:
	Research and development			35.4	%		28.1	%		39.0	%		39.2	%		32.0	%
	Sales and marketing			33.9	%		17.2	%		25.6	%		23.3	%		24.0	%
	General and administrative			14.4	%		9.9	%		11.4	%		9.0	%		14.5	%
	Restructuring expenses			1.4	%		5.8	%		7.0	%		10.5	%		8.0	%

		Total operating expenses		85.1	%		61.0	%		83.0	%		82.0	%		78.5	%

Loss from operations				(47.5	)%		(7.1	)%		(33.3	)%		(30.7	)%		(35.1	)%
Other income (expense) net				2.5	%		1.4	%		1.1	%		1.4	%		(0.2	)%

Loss before income taxes				(45.0	)%		(5.7	)%		(32.2	)%		(29.3	)%		(35.3	)%
Provision (benefit) for income taxes				(4.6	)%		—			(3.4	)%		—			1.0	%

Net loss				(40.4	)%		(5.7	)%		(28.8	)%		(29.3	)%		(36.3	)%


	Years Ended
	December 31,

	2000			2001			2002

EMEA (Europe, Middle East & Africa)		23	%		35	%		26	%
Canada		4	%		3	%		5	%
APAC (Australia, Asia & Pacific Rim)		4	%		3	%		3	%
Total International (sales outside US)		31	%		41	%		34	%


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


													Deferred			Retained			Accumulated
													Compen-			Earnings			Other			Total
			Common Stock					Add’l		Trea-			sation			(Accumu-			Compre-			Stock-
								Paid-In		sury			&			lated			hensive			holders’
			Shares			$ Amt		Capital		Stock			Other			Deficit)			Loss			Equity

Balance at December 31, 1999				32,992		$	33	$	112,473	$	(2,181	)	$	(700	)	$	10,564		$	(1,837	)	$	118,352
	Exercise of stock options			1,485			2		7,899		—			—			—			—			7,901
	Sale of common stock under ESPP			218			—		941		—			—			—			—			941
	Notes receivable from stockholder			—			—		—		—			524			—			—			524
	Deferred stock compensation			—			—		—		—			—			—			—			—
	Amortization of deferred compensation			—			—		—		—			48			—			—			48
	Comprehensive loss:
		Net loss		—			—		—		—			—			(58,775	)		—			(58,775	)
		Unrealized gain on marketable securities		—			—		—		—			—			—			—			—
		Foreign currency translation		—			—		—		—			—			—			(34	)		(34	)

	Total comprehensive income																						(58,809	)

Balance at December 31, 2000				34,695		$	35	$	121,313	$	(2,181	)	$	(128	)	$	(48,211	)	$	(1,871	)	$	68,957
	Exercise of stock options			276			—		1,330		—			—			—			—			1,330
	Sale of common stock under ESPP			240			—		894		—			—			—			—			894
	Notes receivable from stockholder			—			—		—		—			(31	)		—			—			(31	)
	Deferred stock compensation			—			—		134		—			(134	)		—			—			—
	Amortization of deferred compensation			—			—		—		—			81			—			—			81
	Comprehensive loss:
		Net loss		—			—		—		—			—			(10,076	)		—			(10,076	)
		Unrealized gain on marketable securities		—			—		—		—			—			—			42			42
		Foreign currency translation		—			—		—		—			—			—			(251	)		(251	)

	Total comprehensive income																						(10,285	)

Balance at December 31, 2001				35,211		$	35	$	123,671	$	(2,181	)	$	(212	)	$	(58,287	)	$	(2,080	)	$	60,946
	Exercise of stock options			291			1		1,041		—			—			—			—			1,042
	Sale of common stock under ESPP			168			—		459		—			—			—			—			459
	Notes receivable from stockholder			—			—		—		—			55			—			—			55
	Warrant exercise			68			—		198														198
	Benefit from Carryback of Net Operating Loss			—			—		182		—			—			—			—			182
	Purchase of treasury stock			(500	)		—		—		(2,500	)		—			—			—			(2,500	)
	Amortization of deferred compensation			—			—		57		—			53			—			—			110
	Comprehensive loss:
		Net loss		—			—		—		—			—			(33,763	)		—			(33,763	)
		Unrealized gain on marketable securities		—			—		—		—			—			—			27			27
		Foreign currency translation		—			—		—		—			—			—			1,520			1,520

	Total comprehensive income																						(32,216	)

Balance at December 31, 2002				35,238		$	36	$	125,608	$	(4,681	)	$	(104	)	$	(92,050	)	$	(533	)	$	28,276
	Exercise of stock options			1			—		2		—			—			—			—			2
	Issuance of common stock in private placement transaction			6,827			6		9,669		—			—			—			—			9,675
	Amortization of deferred compensation			—			—		—		—			25			—			—			25
	Comprehensive loss:
		Net loss		—			—		—		—			—			(9,893	)		—			(9,893	)
		Unrealized gain on marketable securities		—			—		—		—			—			—			—			—
		Foreign currency translation		—			—		—		—			—			—			349			349

	Total comprehensive income																						(9,544	)

Balance at March 31, 2003				42,066		$	42	$	135,279	$	(4,681	)	$	(79	)	$	(101,943	)	$	(184	)	$	28,434


	March 31,
	2003

Acquired trademarks	$	730
Acquired technology		2,400
Acquired contracts and customer base		9,810

Total acquired intangible assets		12,940
Less accumulated amortization		(152	)

Net intangible assets	$	12,788


	Operating		Capital
Years Ending March 31,	Leases		Leases

2004	$	9,807	$	295
2005		9,113		55
2006		7,503		—
2007		6,566		—
2008		6,511		—
Thereafter		8,572		—

Total minimum payments required	$	48,072	$	350

Less amounts representing interest				(24	)

Present value of minimum lease payments			$	326
Less current portion				(274	)

Obligations under capital leases, long-term			$	52


	Sub Lease
Years Ending March 31,	Income

2004	$	1,006
2005		1,049
2006		1,041
2007		1,014
2008		1,014
Thereafter		169

Total sublease income under current contracts	$	5,293


	Year Ended						Three Months Ended
	December 31,						March 31,

	2001			2002			2003

Federal statutory rate		35.0	%		35.0	%		35.0	%
State taxes, net of federal benefit		—			—			—
Foreign taxes		(0.3	)		1.1			2.7
Reported losses and tax credits not benefited		(33.9	)		(31.0	)		(44.2	)
Other		(1.2	)		5.4			3.6

		(0.4	%)		10.5	%		(2.9	%)


Current assets			$	15,820
Property and equipment				22,197
Other assets				75
Intangible assets subject to amortization
	Trademarks (5 year life)	730
	Technology (5 year life)	2,400
	Contracts and Customer Base (2-15 year life)	9,810

	Total intangible assets			12,940
Goodwill				430

Total assets acquired				51,462
Total liabilities assumed				15,697

Net assets acquired			$	35,765


	Twelve Months			Three Months			Three Months
	Ended			Ended			Ended
	December 31,			March 31,			March 31,
	2002			2002			2003

Revenues	$	186,796		$	51,668		$	35,656
Pro forma net loss		(31,964	)		(9,260	)		(11,094	)
Pro forma net loss per share		(0.76	)		(0.22	)		(0.26	)


Name	Age		Position

Jeffrey A. Babka		50	Executive Vice President Finance and Administration, Chief Financial Officer and Secretary
Gayle A. Crowell		52	Director, Audit Committee Member
Gregory J. Dukat		42	Executive Vice President of Worldwide Operations
Edward Grzedzinski		48	Director, Compensation Committee Member
William H. Janeway		60	Director, Compensation Committee Member
Joseph P. Landy		42	Director
Thomas R. Madison, Jr.		57	Chairman of the Board and Chief Executive Officer
Thomas S. Robertson		60	Director, Audit Committee Member
Thomas E. Timbie		45	Director, Audit Committee Member

*		Less than 1%

(1)		Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission that deems shares to be beneficially owned by any person who has or shares voting power or investment power with respect to such shares. Unless otherwise indicated below, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of the Company’s common stock that will be issuable to the identified person or entity pursuant to stock options or warrants that are either immediately exercisable or exercisable within sixty days of June 17, 2003 are deemed to be outstanding and to be beneficially owned by the person holding such options or warrants for the purpose of computing the percentage ownership of such person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

(2)		Represents shares held by Warburg, Pincus Investors, LP (“WPI”). Warburg Pincus & Co. (“WP”) is the sole General Partner of WPI. Warburg Pincus LLC (“WP LLC”) manages WPI. The members of WP LLC are substantially the same as the partners of WP. William H. Janeway and Joseph P. Landy, directors of Indus International, Inc., are vice chairman and co-president, respectively, of WP LLC and general partners of WP. Messrs. Janeway and Landy may be deemed to have an indirect pecuniary interest (within the meaning of Rule 16a-1 under the Securities Exchange Act of 1934, as amended) in an indeterminate portion of the shares beneficially owned by WPI. Because of their affiliation with WP, WPI and WP LLC, 14,839,429 of the shares are indicated as owned by Messrs. Janeway and Landy. Messrs. Janeway and Landy each disclaim beneficial ownership, for purposes of Section 16 of the Exchange Act or otherwise, of all such shares owned by WP, WPI and WP LLC. Their address is c/o of Warburg Pincus LLC, 466 Lexington Avenue, New York, New York 10017. Includes 329,219 shares issuable upon the exercise of currently exercisable warrants held by WPI.

*		Designates management contract or compensatory plan or arrangement

†		Previously filed


	Indus International, Inc.

	By:	/s/ Thomas R. Madison, Jr.

		Thomas R. Madison, Jr. Chairman of the Board and Chief Executive Officer

Date: June 30, 2003


	By:	/s/ Jeffrey A. Babka

		Jeffrey A. Babka Executive Vice President Finance and Administration, Chief Financial Officer and Secretary

Date: June 30, 2003