MRO SOFTWARE INC - 10-Q Quarterly Report

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

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

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

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

For the transition period from ______________ to _______________

Commission File Number 0-23852

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

MASSACHUSETTS 04-2448516
(State or other jurisdiction (I.R.S employer
incorporation or organization) identification number)

100 CROSBY DRIVE, BEDFORD MASSACHUSETTS 01730
(Address of principal executive offices, including zip code)

(781) 280-2000
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act)

Yes [X] No [ ]

Number of shares outstanding of the Registrant's common stock as of the latest
practicable date: 24,539,200 shares of common stock, $.01 par value per share,
as of August 8, 2003.

MRO SOFTWARE, INC.
10-Q INDEX

2

MRO SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

JUNE 30, SEPTEMBER 30,
(IN THOUSANDS) 2003 2002
--------- -------------

ASSETS
Current assets:
Cash and cash equivalents $ 57,790 $ 67,315
Marketable securities 1,102 --
Accounts receivable, trade, less allowance
for doubtful accounts of $3,321 at June 30, 2003
and $3,421 at September 30, 2002 34,066 35,433
Prepaid expenses and other current assets 7,692 6,429
Deferred income taxes 2,792 2,613
--------- ---------
Total current assets 103,442 111,790
--------- ---------

Marketable securities 19,568 500
Property and equipment, net 8,717 10,156
Goodwill, net 46,210 46,370
Intangible assets, net 8,749 11,996
Other assets 3,685 2,285
Deferred income taxes 8,529 9,056
--------- ---------
Total assets $ 198,900 $ 192,153
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 14,633 $ 16,844
Accrued compensation 8,923 9,081
Other current liabilities 105 267
Deferred revenue 30,726 27,536
--------- ---------
Total current liabilities 54,387 53,728
--------- ---------

Other long term liabilities 26 379
Deferred revenue 1,314 26

Stockholders' equity
Preferred stock, $.01 par value;1,000 authorized,
none issued and outstanding
Common stock, $.01 par value;50,000 authorized;
24,525 and 24,267 issued at June 30, 2003
and September 30, 2002, respectively 245 243
Additional paid-in capital 114,565 112,700
Deferred compensation (349) (176)
Retained earnings 28,527 26,293
Accumulated other comprehensive income/(loss) 185 (1,040)
--------- ---------
Total stockholders' equity 143,173 138,020
--------- ---------
Total liabilities and stockholders' equity $ 198,900 $ 192,153
========= =========

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

3

MRO SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

THREE MONTHS ENDED NINE MONTHS EENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2003 2002 2003 2002
--------- --------- --------- ---------

Revenues:
Software $ 15,348 $ 12,398 $ 35,685 $ 34,000
Support and services 32,287 29,045 95,226 91,807
--------- --------- --------- ---------
Total revenues 47,635 41,443 130,911 125,807
--------- --------- --------- ---------

Cost of revenues:
Software 2,596 1,482 5,801 4,842
Support and services 14,662 15,032 44,103 47,663
--------- --------- --------- ---------
Total cost of revenues 17,258 16,514 49,904 52,505
--------- --------- --------- ---------

Gross profit 30,377 24,929 81,007 73,302

Operating expenses:
Sales and marketing 16,074 14,032 45,765 43,743
Product development 6,512 6,514 19,656 19,675
General and administrative 4,764 4,429 13,118 13,776
Amortization of goodwill and other intangibles 226 3,064 704 9,169
--------- --------- --------- ---------
Total operating expenses 27,576 28,039 79,243 86,363
--------- --------- --------- ---------

Income/(loss) from operations 2,801 (3,110) 1,764 (13,061)

Interest income 205 217 596 750
Other income, net 169 519 1,150 445
--------- --------- --------- ---------

Income/(loss) before income taxes 3,175 (2,374) 3,510 (11,866)

Provision/(benefit) for income taxes 1,158 (540) 1,276 (3,277)
--------- --------- --------- ---------
Net income/(loss) $ 2,017 $ (1,834) $ 2,234 $ (8,589)
========= ========= ========= =========

Net income/(loss) per share, basic $ 0.08 $ (0.08) $ 0.09 $ (0.38)
--------- --------- --------- ---------
Net income/(loss) per share, diluted $ 0.08 $ (0.08) $ 0.09 $ (0.38)
--------- --------- --------- ---------

Shares used to calculate net income/(loss) per share
Basic 24,457 23,334 24,390 22,807
Diluted 24,489 23,334 24,542 22,807

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

4

MRO SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

NINE MONTHS ENDED
JUNE 30,
----------------------------
(IN THOUSANDS) 2003 2002
--------- ---------

Cash flows from operating activities:
Net income/(loss) $ 2,234 $ (8,589)
Adjustments to reconcile net income/(loss) to net
cash provided by operating activities:
Depreciation 3,427 2,348
Amortization of goodwill and other intangibles 3,235 11,329
Loss on sale and disposal of property
and equipment 12 --
Gain on sale of INTERMAT, Inc. (407) --
Amortization of premium on marketable securities -- 43
Stock-based compensation 120 81
Deferred income taxes 414 (2,447)
Changes in operating assets and liabilities, net of effect of
acquisitions:
Accounts receivable 2,490 12,078
Prepaid expenses and other assets (1,206) (3,358)
Accounts payable, accrued expenses and other liabilities (3,380) (3,450)
Accrued compensation (421) (4,415)
Deferred revenue 3,407 6,448
--------- ---------
Net cash provided by operating activities 9,925 10,068
--------- ---------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired -- (1,286)
Acquisitions of property and equipment and other
capital expenditures (2,069) (570)
Purchase of marketable securities (32,983) --
Sale of marketable securities 12,775 5,682
--------- ---------
Net cash (used in)/provided by investing activities (22,277) 3,826
--------- ---------
Cash flows from financing activities:
Proceeds from exercise of stock options and employee
stock purchases 1,529 6,842
--------- ---------
Net cash provided by financing activities 1,529 6,842
--------- ---------
Effect of exchange rate changes on cash 1,298 830
--------- ---------
Net (decrease)/increase in cash and cash equivalents (9,525) 21,566

Cash and cash equivalents, beginning of period 67,315 42,115
--------- ---------
Cash and cash equivalents, end of period $ 57,790 $ 63,681
========= =========

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

5

MRO SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

A. BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements include the
accounts of MRO Software, Inc. ("MRO") and its majority-owned subsidiaries
(collectively, the "Company"), as of June 30, 2003 and have been prepared by the
Company in accordance with generally accepted accounting principles for interim
reporting and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. All intercompany accounts and transactions have been eliminated. In the
opinion of management, the accompanying unaudited consolidated financial
statements contain all adjustments, consisting only of those of a normal
recurring nature, necessary for a fair presentation of the Company's financial
position, results of operations and cash flows at the dates and for the periods
indicated. The results of operations for the periods presented herein are not
necessarily indicative of the results of operations to be expected for the
entire fiscal year, which ends on September 30, 2003, or for any other future
period.

These consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended September
30, 2002 included in the Company's Annual Report on Form 10-K filed with the
Securities and Exchange Commission on December 30, 2002.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Certain prior year financial statement items have been reclassified to conform
to the current year's format.

B. INCOME PER SHARE

Basic income (loss) per share is computed by dividing income or loss available
to common shareholders by the weighted average number of common shares
outstanding. Diluted income per share is computed by dividing income or loss
available to common shareholders by the weighted average number of common shares
outstanding plus dilutive potential common shares. For purposes of this
calculation, stock options are considered dilutive potential common shares in
periods in which they have a dilutive effect. All potential dilutive common
shares are excluded from the computation of net loss per share because they are
anti-dilutive.

6

Basic and diluted income/(loss) per share are calculated as follows:

THREE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 06/30/03 06/30/02
-------- --------

Net income/(loss) $ 2,017 $ (1,834)

Denominator:
Weighted average common shares
outstanding-basic 24,457 23,334

Effect of dilutive securities (1) 32 --
-------- --------
Weighted average common shares
outstanding-diluted 24,489 23,334
======== ========

Net income/(loss) per share, basic and diluted $ 0.08 $ (0.08)

NINE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE DATA) 06/30/03 06/30/02
-------- --------

Net income/(loss) $ 2,234 $ (8,589)

Denominator:
Weighted average common shares
outstanding-basic 24,390 22,807

Effect of dilutive securities (1) 152 --
-------- --------
eighted average common shares
outstanding-diluted 24,542 22,807
======== ========

Net income/(loss) per share, basic and diluted $ 0.09 $ (0.38)

(1) Options to purchase 4,389,000 shares and 1,832,000 shares of the Company's
Common Stock for the three months ended June 30, 2003 and 2002, respectively and
3,218,000 shares and 1,583,000 shares for the nine months ended June 30, 2003
and 2002, respectively, were outstanding but were not included in the
computations of diluted net income/(loss) per share because the exercise price
of the options was greater than the weighted average market price of the common
stock during the period. Common stock equivalents of 32,000 shares and 152,000
shares were included in the computation of diluted net income per share for the
three and nine months ended June 30, 2003. Common stock equivalents of 448,000
shares and 934,000 shares for the three and nine months ended June 30, 2002 were
excluded from the computation of diluted net loss per share, as the effect was
anti-dilutive due to the Company's net loss.

7

C. ACCOUNTING POLICIES

The Company accounts for stock-based employee compensation using the intrinsic
value method under the recognition and measurement principles of APB Opinion No.
25, "Accounting for Stock Issued to Employees" and related interpretations. With
the exception of restricted stock awards to non-employee members of the board of
directors, no stock-based compensation cost is reflected in net income, as all
stock-based awards granted under the Company's plans consist of stock options
that have an exercise price equal to the market value of the underlying common
stock on the date of grant. The following table illustrates the effect on net
income and earnings per share on a pro forma basis as if the Company had applied
the fair value recognition provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" to
stock-based employee compensation:

THREE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 06/30/03 06/30/02
-------- --------

Net loss
As reported $ 2,017 $ (1,834)
Deduct: stock-based employee
compensation expense determined under the
fair value based method for all awards, net
of related tax effects (3,108) (2,663)
-------- --------
Pro forma net loss $ (1,091) $ (4,497)
======== ========
Earnings per share:
Basic - as reported $ 0.08 $ (0.08)
Basic - pro forma $ (0.05) $ (0.19)
Diluted - as reported $ 0.08 $ (0.08)
Diluted - pro forma $ (0.05) $ (0.19)

NINE MONTHS ENDED
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 06/30/03 06/30/02
-------- --------

Net income/(loss)
As reported $ 2,234 $ (8,589)
Deduct: stock-based employee
compensation expense determined under the
fair value based method for all awards, net
of related tax effects (8,337) (7,424)
-------- --------
Pro forma net loss $ (6,103) $(16,013)
======== ========
Earnings per share:
Basic - as reported $ 0.09 $ (0.38)
Basic - pro forma $ (0.25) $ (0.70)
Diluted - as reported $ 0.09 $ (0.38)
Diluted - pro forma $ (0.25) $ (0.70)

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D. COMPREHENSIVE INCOME/(LOSS):

The following table reflects the components of comprehensive net income/(loss):

E. SEGMENT INFORMATION, GEOGRAPHIC DATA AND MAJOR CUSTOMERS:

The Company reports revenues and income under one reportable industry segment,
Strategic Asset Management. Our Strategic Asset Management software products and
services include MAXIMO for the Enterprise Asset Management (EAM) market and
MAXIMO MainControl for the IT Asset Management (ITAM) market. We also offer
Online Commerce Services (OCS) that enables the asset-centric procurement
capabilities of our EAM and ITAM software products. The Company does not
allocate expenses to these product groups, and all operating results are
assessed on an aggregate basis to make decisions about the allocation of
resources.

The Company manages its business in the following geographic areas: United
States, Other Americas (Canada and Latin America), Europe/Middle East and
Africa, and Asia Pacific. A summary of the Company's revenues by geographical
area is as follows:

9

The Company has subsidiaries in foreign countries, which sell the Company's
products and services in their respective geographic areas. Intercompany
revenues primarily represent shipments of software to international subsidiaries
and are eliminated from consolidated revenues.

F. GOODWILL AND OTHER INTANGIBLE ASSETS

In July 2001, the Financial Accounting Standards Board ("FASB") issued "SFAS"
No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other
Intangible Assets." These new statements require use of the purchase method of
accounting for all business combinations initiated after June 30, 2001, thereby
eliminating use of the pooling-of-interests method. Goodwill is no longer
amortized but tested annually for impairment. In addition, within six months of
adopting this accounting method, a transitional impairment test must be
completed, and any impairment identified must be treated as a cumulative effect
of a change in accounting principle. Additionally, new criteria have been
established that determine whether an acquired intangible asset should be
recognized separately from goodwill. The statements were effective

10

for business combinations initiated after June 30, 2001, with the entire
provisions of SFAS No. 142 becoming effective for the Company commencing with
its 2003 fiscal year. In the quarter ended March 31, 2003, the Company completed
its transitional impairment test and there were no impairments recognized.

The following is a reconciliation of reported net loss to adjusted net income
and reported net loss per share to adjusted net income per share had SFAS No.
142 been in effect for the three and nine months ended June 30, 2002.

Intangible assets as of June 30, 2003 and September 30, 2002 consist of the
following:

Other intangibles consist of customer contracts, backlog, customer lists and
non-compete agreements.

Amortization expense of intangible assets was $1.1 million and $3.8 million for
the three months ended June 30, 2003 and June 30, 2002, respectively and $3.2
million and $11.3 million for the

11

nine months ended June 30, 2003 and June 30, 2002, respectively. The 2002
amounts included amortization of goodwill. As of June 30, 2003, remaining
amortization expense on existing intangibles for the next five years is as
follows:

In the quarter ended March 31, 2003, $160 thousand of goodwill was disposed of
as a result of the sale of assets of INTERMAT, Inc. The change in the carrying
amount of goodwill as of June 30, 2003 is as follows:

G. SALE OF ASSETS

Sale of Assets of Catalog Services Operation

On January 17, 2003, the Company sold the assets that had been used in the
industrial data normalization services operations of its wholly owned subsidiary
INTERMAT, Inc. The assets included software and technology used in such
operations, contracts with customers, suppliers and vendors, and trademarks
associated with such operations. The Company retained comprehensive,
non-exclusive rights to the software and technology used in the business, which
has also been embedded in the Company's MAXIMO(R) and OCS offerings.

The assets were purchased by International Materials Solutions, Inc. (the
"Buyer"). As consideration for the assets, the Buyer assumed all liabilities
arising in connection with the assets and the associated business operations
from and after January 1, 2003 and delivered two promissory notes in the face
amount of $1 million each, together with a stock purchase warrant representing
the right to purchase five (5%) percent of the Buyer's common stock. One
promissory note is payable over a period of three years commencing July 1, 2003,
and the other promissory note is payable in full on June 30, 2006. Each note
bears interest at the prime rate plus one (1%) percent per year, and will
accelerate upon a change in control of the Buyer, or upon a default by Buyer
under certain obligations in the transaction documents. The gain

12

recorded on the sale of these assets was $407 thousand and is included in other
income. The fair value of the assets sold net of the liabilities assumed was
$554 thousand. For purposes of calculating the gain on the sale, the $1 million
of promissory note receivable, due and payable on June 30, 2006, has not been
valued due to uncertainty of collection and the stock purchase warrants were not
valued due to the limited operating history of the buyer.

H. GUARANTOR ARRANGEMENTS

In November 2002, the FASB issued Financial Accounting Standards Board
Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others", an
interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB
Interpretation No. 34 (FIN 45). FIN 45 requires that a guarantor recognize, at
the inception of a guarantee, a liability for the fair value of the obligation
undertaken by issuing the guarantee. FIN 45 also requires additional disclosures
to be made by a guarantor in its interim and annual financial statements about
its obligations under certain guarantees it has issued. The accounting
requirements for the initial recognition of guarantees are applicable on a
prospective basis for guarantees issued or modified after December 31, 2002. The
disclosure requirements are effective for all guarantees outstanding, regardless
of when they were issued or modified, during the second quarter of fiscal 2003.
The adoption of FIN 45 did not have a material effect on our consolidated
financial statements. The following is a summary of our agreements that we have
determined are within the scope of FIN 45.

On January 17, 2003, the Company sold the operating assets that had been used in
the industrial data normalization services operations of its wholly owned
subsidiary INTERMAT, Inc. Prior to the sale, the Company had guaranteed the
obligations of this subsidiary under the office lease of the subsidiary's
principal place of business. This guaranty remains in full force and effect
following the sale. The maximum potential amount due under this guaranty is
$882,000. In accordance with the terms of the sale, the buyer has assumed
primary liability under the lease and is obligated to indemnify the Company
against all obligations arising under the lease. Based on the Company's
evaluation of the buyer's ability to make the payments due under this lease, the
Company believes that the estimated fair value of this guaranty is minimal.
Accordingly, we have no liabilities recorded for this guaranty as of June 30,
2003.

We warrant that our software products will perform substantially in accordance
with the product specifications as contained in the associated end-user guide,
which is provided with the products, for a period of ninety days from initial
delivery of the products to the customer. Our sole obligation under this
warranty is to use reasonable efforts to correct a verified problem that is
brought to our attention during the warranty period, or if we are unable to
provide a correction we are obligated to accept the return of the product and
refund the license fee paid. We warrant that our professional services will be
provided in accordance with good professional practice, and that any software
developed by our services organization will perform substantially in accordance
with its approved specifications, for a period of thirty days from initial
delivery of the services to the customer. Our sole obligation under this
warranty is to use reasonable efforts to correct a verified problem that is
brought to our attention during the warranty period, or if we are unable to
provide a correction we are obligated to accept the return of the deliverables
and refund the fee paid for the services. If necessary, we would provide for the
estimated cost of product and services warranties based on specific warranty
claims and claim history. However,

13

we have never incurred significant expense under our product or services
warranties, our liability for breach of warranty is limited to the amount of the
license or services fees actually paid, and we maintain insurance covering such
claims in an amount sufficient to cover a refund of the license or services fees
paid by any particular customer during the last 12 months. As a result, we
believe the estimated fair value of these warranty obligations is minimal.
Accordingly, we have no liabilities recorded for these warranty obligations as
of June 30, 2003.

Under our standard end-user license agreement, we agree to indemnify our
customers against infringement claims that may be brought by third parties
asserting that our products infringe on certain intellectual property rights. In
our services agreements with customers, we will also as a matter of standard
practice agree to indemnify customers (a) against claims that may be brought by
third parties asserting that the results of our services infringe on certain
intellectual property rights, (b) against damages caused by our breach of
certain confidentiality provisions in the contract, and (c) against damages to
personal property, and death, caused by our services personnel while on-site at
customer premises. These indemnification provisions are generally based on our
standard contractual terms. All such provisions, whether based on our standard
contracts or negotiated with a given customer, are entered into in the normal
course of business based on an assessment that the risk of loss is remote. The
terms of the indemnifications vary in duration and nature, and our obligations
to indemnify are frequently unlimited as to amount. There have been no demands
for indemnity and the contingencies triggering the obligation to indemnify have
not occurred to our knowledge and are not expected to occur. The Company
maintains insurance that covers such indemnification obligations, and the amount
of coverage that we maintain is sufficient to cover a refund of the services
fees received from any particular customer during the last 12 months.
Historically, the Company has not made any material payments pursuant to any
such indemnity obligations. Accordingly, we have no liabilities recorded for any
such indemnity obligations as of June 30, 2003.

When as part of an acquisition we acquire a company, we assume liability for
certain events or occurrences that took place prior to the date of acquisition.
The maximum potential amount of future payments we could be required to make for
such obligations is undeterminable at this time. All of these obligations were
grandfathered under the provisions of FIN No. 45 as they were in effect prior to
December 31, 2002. Accordingly, we have no liabilities recorded for the
assumption of any such liabilities as of June 30, 2003.

Pursuant to the Company's Articles of Organization, the Company is obligated to
indemnify its directors, officers and other individuals serving at the request
of the Company as a director or officer or in a similar capacity in another
entity to the fullest extent authorized under Massachusetts Business Corporation
Law. The Company maintains Directors and Officers insurance that covers these
indemnification obligations, up to the dollar amount of coverage maintained.
Since these indemnification obligations are generally not subject to limitation
with respect to duration or amount, the Company does not believe that it is
possible to determine the maximum potential amount due under these
indemnifications. All of these indemnification agreements were grandfathered
under the provisions of FIN No. 45 as they were in effect prior to December 31,
2002. Accordingly, we have no liabilities recorded for any such agreements as of
June 30, 2003.

14

I. COMMON STOCK

On January 27, 2003, each non-employee director received an outright grant of
6,250 shares of restricted stock vesting on a quarterly basis over three years
in twelve equal installments vesting on the 15th day of the second month of each
quarter, subject to acceleration under certain circumstances. The shares were
recorded at fair market value on the date of issuance as deferred compensation
and the related amount is being recorded as general and administration expenses
over the vesting period.

J. ACCOUNTING PRONOUNCEMENTS

In June 2002, the "FASB" issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 146"). This statement addresses
financial accounting and reporting for costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)" ("EITF 94-3"). SFAS 146 requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. EITF 94-3 allowed for an exit cost
liability to be recognized at the date of an entity's commitment to an exit
plan. SFAS 146 also requires that liabilities recorded in connection with exit
plans be initially measured at fair value. The provisions of SFAS 146 are
effective for exit or disposal activities that are initiated after December 31,
2002, with early adoption encouraged. The Company adopted SFAS 146 on October 1,
2002 and does not expect that the adoption will have a material impact on its
financial position, results of operations or cash flows.

In May 2003, the "FASB" issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity". This statement
establishes new standards for classification, measurement and disclosure of
certain types of financial instruments having characteristics of both
liabilities and equity, including instruments that are mandatorily redeemable
and that embody obligations requiring or permitting settlement by transferring
assets or by issuing an entity's own shares. SFAS No. 150 is effective for
financial instruments entered into or modified after May 31, 2003 and for
contracts in existence at the start of the first interim period beginning after
June 15, 2003. As of June 30, 2003, the Company had no financial instruments
that could be classified with characteristics of both liabilities and equity.

15

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

In addition to historical information, this Quarterly Report on Form 10-Q, 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).
The following and similar expressions identify forward-looking statements:
"expects", "anticipates", and "estimates". Forward-looking statements include,
without limitation, statements related to: the Company's plans, objectives,
expectations and intentions; the timing of, availability and functionality of
products under development or recently introduced; and market and general
economic conditions. Important factors that could cause actual results to differ
materially from those suggested by the forward-looking statements for various
reasons, include those discussed under the heading "Factors Affecting Future
Performance" below. These forward-looking statements speak only as of the date
of this Quarterly Report, and the Company disclaims any obligation to update
such forward looking statements as a result of any change in circumstances or
otherwise.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's discussion and analysis of its financial conditions and results of
operations are based upon its consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
that management make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. These estimates and assumptions are
affected by management's application of accounting policies.

Critical accounting policies, in which different judgments and estimates by our
management could materially affect our reported condition and results of
operations, include revenue recognition, estimating the allowance for doubtful
accounts, deferred tax assets, and the valuation of long-lived assets. These
critical accounting policies and estimates should be read in conjunction with
the critical accounting policies and estimates included in the Company's Annual
Report on Form 10-K filed with the Securities and Exchange Commission on
December 30, 2002. The Company includes and updates critical accounting policies
and estimates in interim periods if a new critical accounting policy is adopted
or amended or if there are material changes in related judgments or conditions
underlying the Company's estimates in the interim period.

DEFERRED INCOME TAXES

The Company accounts for income taxes under the asset and liability approach for
accounting and reporting for income taxes in accordance with SFAS No. 109. The
Company computes deferred income taxes, net of valuation allowances, for the
estimated future tax effects of temporary differences between the financial
statement and tax basis of assets and liabilities, the expected tax benefit of
operating loss carryforwards and the expected benefit of tax credit
carryforwards. Changes in deferred tax assets and liabilities are recorded in
the provision for

16

income taxes. The Company continually assesses the realizability of its deferred
tax asset. A valuation allowance is recorded to reduce deferred tax assets to
the amount of future expected tax benefit when it is more likely than not to be
realized. All available evidence, both positive and negative, is considered in
the determination of recording a valuation allowance. We consider future taxable
income and ongoing tax planning strategies when assessing the need for a
valuation allowance. Negative evidence that would suggest the need for a
valuation allowance for the Company consists of our recent cumulative operating
losses. However, since these operating losses are attributable to several
charges that we believe are non-recurring in nature, the Company has not
recorded a valuation allowance in relation to these losses. The non-recurring
charges contributing to the Company's recent cumulative operating losses consist
of goodwill amortization from acquisitions and a large initial investment into
the Internet e-Commerce market. Positive evidence that would negate the need for
a valuation allowance consists of the current year cumulative pre-tax profits
and the projected pre-tax profits, as well as, a strong earnings history for the
Company prior to these operating loss years. The Company believes future taxable
income will be sufficient to realize the deferred tax benefit of the net
deferred tax assets. In the event that it is determined that our financial
projections change and it becomes more likely than not that we cannot realize
the net deferred tax assets, an adjustment to the net deferred tax assets will
be made and will result in a charge to income in the period such a determination
is made. The net deferred tax asset amount as of June 30, 2003 is $11.3 million.

The Company has established a valuation allowance with respect to certain
Canadian net operating loss carryforwards, the net operating losses acquired
from Applied Image Technologies, Inc. (AIT), and various state net operating
loss carryforwards. The valuation allowance was based upon expected earnings
within individual tax jurisdictions and statutory limitations imposed by tax
jurisdictions, which will more likely than not reduce our ability to realize the
net operating loss carryforwards. The related valuation allowance as of June 30,
2003 is $2.1 million.

OVERVIEW

MRO Software is a leading global provider of strategic asset management software
and related services. Strategic asset management is the management and
optimization of our customers' critical assets - those that have a significant
impact on operations and performance, including assets used in production,
facilities, fleet and Information Technology (IT) operations. The Company's
strategic asset management software products and services allow our customers to
manage the complete lifecycle of their strategic assets, including: planning,
procurement, deployment, tracking, maintenance and retirement. Our strategic
asset management software products and services include MAXIMO for the
Enterprise Asset Management (EAM) market and MAXIMO MainControl for the IT Asset
Management (ITAM) market. We also offer Online Commerce Services (OCS) that
enable the asset-centric procurement capabilities of our EAM and ITAM software
products through the MRO Operations Center. Asset-centric procurement is a
combination of products and services designed to support the requirements of
industrial asset-related procurement. Using MRO Software's products and
services, our customers improve production reliability, labor efficiency,
material optimization, software license compliance, lease management, warranty
and service management and provisioning across their critical asset base.

17

During fiscal 2002, the Company's product offerings were Strategic MRO,
Enterprise Catalog Management, and OCS. As all of these products were
complementary to one another, the Company reported in one operating segment. In
June 2002, we acquired MainControl, Inc. and its IT asset management product,
MC/Empower (re-branded MAXIMO MainControl). During the course of the fiscal
year, we also began incorporating portions of our e-Commerce technologies into
MAXIMO and we redefined our OCS and Enterprise Catalog Management service
offerings, creating an asset-centric procurement solution that would complement
our strategic asset management software products (MAXIMO and MAXIMO
MainControl).

At the beginning of fiscal 2003, the Strategic MRO offerings were renamed
strategic asset management and consist of the MAXIMO and MAXIMO MainControl
products. Our Online Commerce Services (OCS) enable the asset-centric
procurement capabilities of our software products. Enterprise Catalog Management
services were offered up until January 17, 2003 (see INTERMAT, Inc. sale in the
following paragraph). The Company continues to report in one operating segment
and does not allocate expenses to these product groups. The Company's management
assesses operating results on an aggregate basis to make decisions about the
allocation of resources.

Total MAXIMO revenues represented 92% and 96% of total revenues for the three
months ended June 30, 2003 and 2002, respectively and 92% and 94% of total
revenues for the nine months ended June 30, 2003 and 2002, respectively. Total
MAXIMO MainControl revenues represented 7% and 0% of total revenues for the
three months ended June 30, 2003 and 2002, respectively and 6% and 0% for the
nine months ended June 30, 2003 and 2002, respectively. OCS revenues represented
2% of total revenues for the three and nine months ended June 30, 2003 and 2002,
respectively.

On January 17, 2003, the Company sold the operating assets of its INTERMAT
industrial data normalization services operations and recorded a gain of $407
thousand (recorded as other income). Under the terms of the sale, the Company
retained comprehensive, non-exclusive rights to the software and technology used
in the business, which has been embedded in the Company's MAXIMO and Online
Commerce Services offerings. Also, due to the sale of this business, the Company
will no longer sell Enterprise Catalog Management services.

18

RESULTS OF OPERATIONS

REVENUES

The Company's revenues are derived primarily from two sources: (i) software
licenses, and (ii) fees for support and services.

Software license revenues increased 24% to $15.3 million from $12.4 million for
the three months ended June 30, 2003 and 2002, respectively and 5% to $35.7
million from $34.0 million for the nine months ended June 30, 2003 and 2002,
respectively. The increase for the three months ended June 30, 2003 as compared
to June 30, 2002 is mainly attributable to increases in MAXIMO software license
revenues, which increased 15% to $14.2 million from $12.3 million for the three
months ended June 30, 2003 and 2002, respectively. During the three months ended
June 30, 2003, the Company concluded a large MAXIMO software license sale in the
amount of $3.8 million. IT asset management software licenses (MAXIMO
MainControl) were $1.1 million and $1.9 million for the three and nine months
ended June 30, 2003, respectively. There were no software license revenues
related to our IT asset management product for the three and nine months ended
June 30, 2002, which was purchased in June 2002.

Support revenues increased 17% to $16.4 million from $14.0 million for the three
months ended June 30, 2003 and 2002, respectively and increased 21% to $48.2
million from $39.9 million for the nine months ended June 30, 2003 and 2002,
respectively. Support revenues have increased as a result of a cumulative
increase in the number of MAXIMO customers, the addition of contracts assumed
from the MainControl business and a strong renewal rate (95%) for maintenance
contracts. MAXIMO support revenues increased 12% to $15.5 million from $13.8
million for the three months ended June 30, 2003 and 2002, respectively and
increased 15% to $45.5 million from $39.6 million for the nine months ended June
30, 2003 and 2002, respectively. MAXIMO MainControl support revenues, primarily
attributable to contracts assumed in connection with the June 2002 acquisition
of MainControl, Inc., were $873 thousand and $123 thousand for the three months
ended June 2003 and 2002, respectively and $2.7 million and $123 thousand for
the nine months ended June 30, 2003 and 2002, respectively.

Service revenues increased 6% to $15.9 million from $15.0 million for the three
months ended June 30, 2003 and 2002, respectively and decreased 9% to $47.0
million from $51.9 million for the nine months ended June 30, 2003 and 2002,
respectively. The increase in service revenues

19

for the three months ended June 30, 2003 as compared to the three months ended
June 30, 2002 is primarily attributable to an increase in IT asset management
services of $1 million. The overall decline in service revenues for the nine
months ended June 30, 2003 as compared to the nine months ended June 30, 2002 is
attributable to a decline in MAXIMO service revenues of $4.1 million and a
decline in Enterprise Catalog Management service revenues of $3.1 million,
partially offset by an increase in IT asset management revenues of $2.6 million.
(See below).

MAXIMO service revenues increased 4% to $14.1 million from $13.6 million for the
three months ended June 30, 2003 and 2002, respectively and decreased 9% to
$41.0 million from $45.1 million for the nine months ended June 30, 2003 and
2002, respectively. The decrease in MAXIMO service revenues for the nine months
ended June 30, 2003 as compared to the nine months ended June 30, 2002 is
primarily due to a cumulative decline in the number of MAXIMO software licenses
sold, which reduced the demand for services related to customer implementations.
The Company derives a large portion of its services revenues from the
implementation of MAXIMO software that has recently been sold to new customers,
and our services revenues are therefore driven largely by our recent MAXIMO
license sales. In addition, the Company has been subject to increased
competition from independent consulting firms, who implement MAXIMO with other
enterprise-wide solutions. MAXIMO MainControl service revenues were $1.1 million
and $130 thousand for the three months ended June 2003 and 2002, respectively
and $2.7 million and $130 thousand for the nine months ended June 30, 2003 and
2002, respectively.

OCS revenues decreased 11% to $747 thousand from $837 thousand for the three
months ended June 30, 2003 and 2002, respectively and 15% to $2.3 million from
$2.7 million for the nine months ended June 30, 2003 and 2002, respectively. The
decline in OCS revenues is attributable to a decrease in the number of customers
renewing annual service contracts. The Company will maintain its current
infrastructure and development activities in OCS commensurate with the level of
sales, while simultaneously controlling operating and administrative expenses.
Enterprise Catalog Management revenues decreased 100% to $0 from $664 thousand
for the three months ended June 30, 2003 and 2002, respectively and 75% to $1.2
million from $4.8 million for the nine months ended June 30, 2003 and 2002,
respectively. The Company sold the assets related to its Enterprise Catalog
Management Services operations of the Company in January 2003 and therefore will
not recognize any more services revenue related to Enterprise Catalog
Management.

20

COST OF REVENUES

Cost of software license revenues consists of software purchased for resale,
royalties paid to vendors of third party software, the cost of software product
packaging and media, certain employee costs related to software duplication,
packaging and shipping, and amortization of acquired technology. The increase in
cost of software license revenues for the three and nine months ended June 30,
2003 as compared to the three and nine months ended June 30, 2002, is primarily
attributable to software purchased for resale related to our MAXIMO Mobile Suite
product and amortization of acquired technology. Cost of software increased $1.0
million and $600 thousand due to increase in demand for the three and nine
months ended June 30, 2003 as compared to the three and nine months ended June
30, 2002. Amortization of acquired technology was $844 thousand and $754
thousand for the three months ended June 30, 2003 and 2002, respectively and
$2.5 million and $2.1 million for the nine months ended June 30, 2003 and 2002,
respectively. The increase in amortization is attributable to technology
acquired from MainControl, Inc.

Cost of support and services consists primarily of personnel costs for employees
and the related costs of benefits and facilities, costs for utilization of third
party consultants, and costs to support the MRO Operations Center. Cost of
support revenues increased 33% to $2.8 million from $2.1 million for the three
months ended June 30, 2003 and 2002, respectively and 27% to $8.0 million from
$6.2 million for the nine months ended June 30, 2003 and 2002, respectively. The
increase in cost of support revenues was primarily attributable to an increase
in personnel. Cost of support revenues, as a percentage of total support
revenues was 17% and 15% for both the three and nine months ended June 30, 2003
and 2002, respectively. The increase in the cost of support revenues as a
percentage of support revenues for the three and nine months ended June 30, 2003
is attributable to an increase in personnel costs without a commensurate
increase in revenues.

Cost of service revenues decreased 8% to $11.9 million from $12.9 million for
the three months ended June 30, 2003 and 2002, respectively and 13% to $36.1
million from $41.5 million for the nine months ended June 30, 2003 and 2002,
respectively. The decrease in the cost of service revenues for the three months
ended June 30, 2003 as compared to the three months ended June 30, 2002 was
attributable to a decrease of $1.0 million due to the reduction in personnel and

21

related benefits and facilities costs related to the sale of the operating
assets of INTERMAT, Inc. in January 2003. The decrease in the cost of service
revenues for the nine months ended June 30, 2003 as compared to the nine months
ended June 30, 2002 was primarily attributable to a decrease of $4.3 million
attributable to the reduction in personnel and related benefits and facilities
costs related to the sale of operating assets of INTERMAT, Inc. in January 2003
and a $1.1 million decrease for the costs of third party consultants
implementing the Company's products due to reduced utilization of external
consultants. Cost of service revenues, as a percentage of total service revenues
was 75% and 86% for the three months ended June 30, 2003 and 2002, respectively
and 77% and 80% for the nine months ended June 30, 2003 and 2002, respectively.
Improved margins are primarily the result of the sale of the operating assets of
INTERMAT, Inc., which was a lower-margin business.

OPERATING EXPENSES

Sales and marketing expenses increased 15% to $16.1 million from $14.0 million
for the three months ended June 30, 2003 and 2002, respectively and 5% to $45.8
million from $43.7 million for the nine months ended June 30, 2003 and 2002,
respectively. The increase for the three and nine months ended June 30, 2003
compared to the three and nine months ended June 30, 2002 is primarily due to an
increase of $1.4 million in sales commissions paid on revenues from software
licenses sold and $700 thousand of severance costs related to a reorganization
of the worldwide sales and marketing organization.

Product development expenses remained flat for the three and nine months ended
June 30, 2003 and 2002, respectively. The Company expects to continue to make
enhancements to MAXIMO 5, integrate MAXIMO MainControl into its overall product
architecture and develop industry-specific functionality, in a manner
commensurate with future expectations of revenues and income from sales of the
resulting product enhancements and functionality.

General and administrative expenses increased 8% to $4.8 million from $4.4
million for the three months ended June 30, 2003 and 2002, respectively and
decreased 5% to $13.1 million from

22

$13.8 million for the nine months ended June 30, 2003 and 2002, respectively.
The increases for the three months ended June 30, 2003 as compared to the three
months ended June 30, 2002 is primarily attributable to an increase in insurance
policy premiums, mainly Director's and Officer's insurance, and bad debt
provisions. The decrease for the nine months ended June 30, 2003 compared to the
nine months ended June 30, 2002 is due to a decrease in the utilization of third
party corporate services, partially offset by the increases in insurance policy
premiums and bad debt provisions.

The decrease in amortization of goodwill and other intangibles expense is due to
the adoption of SFAS No. 142 by the Company on October 1, 2002. In accordance
with SFAS No. 142, goodwill is no longer amortized. Intangibles and other
identifiable assets will continue to be amortized. Goodwill amortization was
$2.9 million and $8.8 million for the three and nine months ended June 30, 2002.
Other intangible amortization expense was $226 thousand and $121 thousand for
the three months ended June 30, 2003 and 2002, respectively and $704 thousand
and $330 thousand for the nine months ended June 30, 2003 and 2002,
respectively. The increases for the three and nine months ended June 30, 2003
are due to amortization of intangibles acquired from MainControl, Inc.

NON-OPERATING EXPENSES

Interest income is attributable to interest earned on marketable securities and
cash equivalents. The change in other income was due to fluctuations in foreign
currency exchange rates and the gain on the sale of the operating assets of
INTERMAT, Inc. in January 2003. (See below.)

Included in other income for the nine months ended June 30, 2003 is a gain of
$407 thousand for the sale of the operating assets related to INTERMAT, Inc. The
assets were purchased by International Materials Solutions, Inc. (the "Buyer").
As consideration for the assets, the Buyer assumed all liabilities arising in
connection with the assets and the associated business operations from and after
January 1, 2003 and delivered two promissory notes in the face amount of $1
million each, together with a stock purchase warrant representing the right to
purchase five (5%) percent of the Buyer's common stock. One promissory note is
payable over a period of three years commencing July 1, 2003, and the other
promissory note is payable in full on June 30, 2006. The Company received the
first installment payment of this promissory note in July 2003. Each note bears
interest at the prime rate plus one (1%) percent per year, and will accelerate
upon a change in control of the Buyer, or upon a default by Buyer under certain
obligations in the transaction documents. The fair value of assets sold net of
the liabilities assumed was $554 thousand. For purposes of calculating the gain
on the sale, the $1 million of promissory note receivable, due and payable on
June 30, 2006, has not been valued due to uncertainty of

23

collection and the stock purchase warrants were not valued due to the limited
operating history of the buyer.

INCOME TAXES

The Company's effective tax rate for the nine months ended June 30, 2003 was
36%. The effective tax rate for the nine months ended June 30, 2002 was a
benefit of 28%. The difference between the effective tax rate and the federal
statutory tax rate of 35% in 2003 is due to the non-deductible nature of certain
intangible and goodwill costs.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2003, the Company had cash and cash equivalents of $57.8 million,
marketable securities of $20.7 million, and working capital of $49.1 million.

Cash provided by operating activities was $9.9 million for the nine months ended
June 30, 2003 was primarily attributable to income generated from operations and
the collection of accounts receivable, offset by payments of liabilities.

Cash used in investing activities was $22.3 million for the nine months ended
June 30, 2003 and was primarily used in the purchase of marketable securities
($33.0 million) and acquisition of fixed assets, primarily computer equipment.

Cash provided by financing activities was $1.5 million for the nine months ended
June 30, 2003 and represents proceeds from the Company's Employee Stock Purchase
Plan.

As of June 30, 2003, the Company's principal commitments consist primarily of
office space and equipment operating leases for its U.S. and European
headquarters. The Company's corporate headquarters are under lease through
December 31, 2009. The Company leases its other facilities and certain equipment
under non-cancelable operating lease agreements that expire at various dates
through June 30, 2019.

The Company may use a portion of its cash to acquire additional businesses,
products or technologies complementary to its business. The Company also plans
to continue to make investments over the next year in its products and
technology.

The Company expects that its cash flow from operations together with its current
cash and marketable securities will be sufficient to meet its working capital
and capital expenditure requirements through at least June 30, 2004. The
Company's liquidity and working capital requirements, including the current
portions of any long-term commitments, are satisfied through its cash flow from
operations, leaving its cash reserves available for acquisitions, other
investments and unanticipated expenditures. The Company has no long-term debt
obligations. The factors, which might impact the Company's cash flows, include
those, which might impact the Company's business and operations generally, as
described below under the heading "Factors Affecting Future Performance".

24

FACTORS AFFECTING FUTURE PERFORMANCE

The nature of forward-looking information is that such information involves
significant assumptions, risks and uncertainties. Certain public documents of
the Company and statements made by our authorized officers, directors,
employees, agents and representatives, acting on behalf of the Company, may
include forward-looking information, which will be influenced by the factors
described below, and by other assumptions, risks and uncertainties.
Forward-looking information is based on assumptions, estimates, forecasts and
projections regarding the Company's future results as well as the future
effectiveness of the Company's strategic plans and future operational decisions.
Forward-looking statements made by or on behalf of the Company are subject to
the risk that the forecasts, projections, and expectations of management, or
assumptions underlying such forecasts, projections and expectations, may prove
to be inaccurate. Accordingly, actual results and the Company's implementation
of its plans and operations may differ materially from forward-looking
statements made by or on behalf of the Company. The following discussion
identifies certain important factors that could affect the Company's actual
results and actions and could cause such results and actions to differ
materially from forward-looking statements.

OUR BUSINESS IS SENSITIVE TO GENERAL ECONOMIC CONDITIONS, AND OVERALL DOWNTURNS
IN THE ECONOMY AND IN INDUSTRIAL SPENDING, AND OUR FORECASTING SYSTEMS HAVE
NEVER BEEN TESTED UNDER CONDITIONS OF EXTENDED ECONOMIC DOWNTURN.

Over the past several quarters, the US and worldwide economies have experienced
difficult conditions, with a negative effect on our revenues and operations. As
industrial companies experience downturns, they often delay or cease spending on
capital assets and IT infrastructure (including software and related services).
As a result, our revenues have in the past fallen, and may again in the future
fall, below expectations. The slump in the economy in general, and the market
for IT software and services in particular, have continued for an extended
period of time. While our forecasting systems and metrics have generally been
reliable in informing our projections and guidance for future performance, the
current economic downturn has persisted for a length of time that is
unprecedented in the Company's recent history, our forecasting systems may not
be valid under such conditions, and our expectations and guidance for future
performance may not be accurate. If the US and worldwide economies do not
recover and if growth and IT spending do not materialize, our revenues may be
decreased, and there could be a material and adverse result on our operating
results and financial condition.

THE TRADITIONAL MARKET FOR OUR MAXIMO PRODUCT IS MATURE AND SATURATED AND
PRESENTS LIMITED OPPORTUNITY FOR GROWTH.

MAXIMO has been the industry-leading plant floor capital asset maintenance
product for a number of years, and we have acquired a large number of customers
in this market. However, most large industrial organizations have made
significant investments in systems that support the maintenance of their capital
assets, and opportunities for new MAXIMO sales in this market segment are more
limited than they have been in the past. In addition, the emergence and growth
of this market have attracted a large number of competitors, and most of the
largest software companies that sell into complementary markets have developed
competing asset maintenance products. It is likely that this market segment will
continue to mature, there will be fewer sales opportunities

25

in our traditional asset maintenance market, and competitive forces will put
downward pressure on our average sales prices and rates of success. While we
continue to strengthen our MAXIMO offering, these efforts may not be sufficient
to overcome the effects of maturity and saturation in our traditional market,
and our revenues, margins, results of operation and financial condition may be
materially and adversely impacted.

OUR EFFORTS TO REACH INTO NEW MARKETS WITH MAXIMO AND WITH NEW PRODUCTS MAY NOT
BE SUCCESSFUL.

Given the maturity and saturation of our traditional asset maintenance market,
in order to maintain revenues at their current levels and to grow our business,
we are attempting to broaden our product offerings and find additional sources
of revenues, in two ways. First, we are tailoring and extending MAXIMO to meet
the needs of specific industries in which the Company has a presence, such as
the nuclear, transportation, power transportation and distribution, and other
industries. We refer to these industry-specific MAXIMO offerings as "Industry
Solutions". Second, we are attempting, through the MainControl acquisition and
additional internal development, to deliver products that address markets that
are new to the Company, such as the IT asset management and consolidated service
desk markets. There can be no assurance that we will be able to develop and
market these Industry Solutions or new products on time, with acceptable quality
and in a manner which meets the requirements of customers in these markets. If
our Industry Solutions and newly acquired or developed products do not gain
market acceptance and generate revenues from new industries or markets, we may
not be able to grow our business or maintain revenues at current levels, and our
revenues, margins, results of operation and financial condition may be
materially and adversely impacted.

IF WE ARE UNABLE TO KEEP PACE WITH THE RAPID CHANGES IN TECHNOLOGY AND CUSTOMER
DEMAND THAT CHARACTERIZE OUR INDUSTRY, OUR COMPETITIVE POSITION COULD BE
IMPAIRED.

The computer software industry is characterized by rapid technological advances,
changes in customer requirements and frequent product introductions and
enhancements by us and by our competitors. Our success depends on our ability to
continue to enhance our current products, and to develop and introduce new
products that keep pace with technological developments, respond to evolving
customer requirements and changing industry standards, and achieve market
acceptance. In particular, we believe that we must continue to respond quickly
to users' needs for new functionality and to advances in hardware and operating
systems, and that we must continue to create products that conform to industry
standards regarding the communication and interoperability among software,
hardware and communications products of different vendors. If we fail to
anticipate or respond adequately to technological developments and changes in
customer requirements, or if we have any significant delays in product
development or introduction, then we could lose competitiveness and revenues. We
cannot give any assurance that we will be successful in developing and marketing
new products or product enhancements, or that we will not experience significant
delays in our development efforts. In addition, we cannot give any assurance
that our new products and product enhancements will achieve market acceptance.
Finally, when we develop new products or enhancements to our existing products,
it is possible that potential customers will defer or delay their decisions to
purchase existing products while the newer products and enhancements are being
developed, released and proven

26

in the market. Such delays could have a material and adverse impact on ongoing
sales of existing products, and on the Company's business and our results of
operations.

WE DEPEND SUBSTANTIALLY ON OUR MAXIMO PRODUCT, AND ANY DEVELOPMENTS THAT CAUSE
REDUCED MARKET ACCEPTANCE OF MAXIMO WOULD HARM OUR BUSINESS.

Most of our revenues are derived from the licensing of our MAXIMO family of
products and sales of related services and support. Our financial performance
depends largely on continued market acceptance of MAXIMO, and on the acceptance
and market penetration of MAXIMO 5, the new Internet-centric version of MAXIMO.
We believe that continued market acceptance of MAXIMO, and our revenue stability
and growth, will largely depend on our ability to continue to enhance and
broaden the capabilities of MAXIMO 5, both by broadening the core MAXIMO
functionality and by developing specialized functionality targeted at key
customer industries. New Internet technologies, standards and applications are
developing rapidly and are continuously being introduced, competing for
acceptance in the market, and changing, and we must accurately anticipate
technology trends and make the right choices in order to keep MAXIMO 5 at the
forefront in its market from a technological perspective. Any factor adversely
affecting sales of MAXIMO, such as delays in further development, significant
software flaws, incompatibility with significant hardware platforms, operating
systems or databases, increased competition, poor technology decisions or
negative evaluations of the product, would have a material adverse effect on the
Company's business and our results of operations. In addition, as with any new
software product, it is possible that our customers will experience difficulties
in implementing MAXIMO 5 and achieving the desired performance, either as a
result of the inherent instability of new technology, or of a perceived
shortfall in the functionality of a new product in comparison with the prior,
more mature versions. If our MAXIMO 5 customers have difficulties installing and
using the software or if they are not satisfied with the performance or
functionality of MAXIMO 5, and if we were therefore unable to obtain customer
references, our MAXIMO sales would suffer, which would have an adverse impact on
our business and our results of operations.

THE MARKET ADDRESSED BY OUR MAXIMO MAINCONTROL PRODUCT IS IN TURMOIL, AND A
SIGNIFICANT NEW COMPETITOR MAY EMERGE.

Our MAXIMO MainControl product is targeted at the IT asset maintenance (ITAM)
market. In the past, Peregrine Systems, Inc. had the biggest single share of
this market. Peregrine filed for bankruptcy protection in September 2002. As a
result of Peregrine's bankruptcy, this market has become fragmented, and some
market analysts and prospective MAXIMO MainControl customers have questioned the
validity of the product category, and adopted a "wait and see" attitude towards
purchasing products in this market. Peregrine's Plan of Reorganization was
recently confirmed, and as a result Peregrine may successfully emerge from
bankruptcy. It remains to be seen whether Peregrine's reorganization has enabled
Peregrine to streamline its operations and restructure its pre-bankruptcy
liabilities in a manner that will render it as a stronger competitor in the ITAM
market, and there can be no assurance that this market will coalesce and gain
momentum, or that the Company will achieve its desired market share.

27

OUR SALES EFFORTS DEPEND IN PART ON STRATEGIC RELATIONSHIPS WITH OTHER
COMPANIES.

We have entered into strategic relationships with various larger companies, such
as IBM Corporation, Deloitte Consulting L.P., Rockwell Automation, A.T. Kearney,
Inc., and others. In order to generate revenue through these relationships, we
must integrate our products and solutions with those of the other companies.
Each party to those strategic relationships must coordinate with and support
each other's sales and marketing efforts, and each party must make significant
sales and marketing investments.

We have in the past successfully engaged in cooperative software sales efforts
with PeopleSoft, Inc., a vendor of an enterprise resource planning ("ERP")
system that does not compete with our products, and with which MAXIMO is
successfully integrated. PeopleSoft recently acquired J.D. Edwards & Co., which
does market a product that competes with MAXIMO, and Oracle Corporation (which
markets a product in competition with MAXIMO) recently offered to acquire
PeopleSoft. As a result, it is highly likely that PeopleSoft will cease to act
in cooperation with the Company, as it either markets its new J.D. Edwards
product or promotes Oracle's product, and our software sales may decline as a
result.

In addition, we have agreed to develop a version of MAXIMO which will operate
with IBM's Websphere, AIX and DB2 products, and to market the IBM versions of
our products in preference to other versions. MAXIMO sales will therefore be
affected by the success and acceptance of the IBM Websphere, AIX and DB2
products relative to those of IBM's competitors. We may experience difficulties
in gaining market acceptance of the IBM version of our products, and
difficulties in integrating and coordinating our products and sales efforts with
those of IBM. Finally, our alliance with IBM may be viewed negatively by
customers or prospects that have not adopted the IBM technology platform, and
competitive alliances may emerge among other Companies that are more attractive
to our customers and prospective customers.

OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS AND TO SEASONAL
VARIATION.

We have experienced, and may in the future experience, significant
period-to-period fluctuations in revenues and operating results, which may
negatively impact the price of our stock. In addition, our quarterly revenues
and operating results have fluctuated historically due to the number and timing
of product introductions and enhancements, customers' delaying their purchasing
decisions in anticipation of new product releases, the budgeting and purchasing
cycles of customers, the timing of product shipments and the timing of marketing
and product development expenditures. We typically realize a significant portion
of our revenue from sales of software licenses in the last two weeks of a
quarter, frequently even in the last few days of a quarter. Failure to close a
small number of large software license contracts may have a significant impact
on revenues for the quarter and could, therefore, result in significant
fluctuations in quarterly revenues and operating results. Accordingly, we
believe that period-to-period comparisons of results of operations are not
necessarily meaningful and should not be relied upon as an indication of future
performance.

28

WE FACE CHALLENGES WITH THE MAINCONTROL ACQUISITION, AND WE MAY NOT BE
SUCCESSFUL IN ADDRESSING A NEW AND BROADER MARKET.

We recently acquired MainControl, Inc., which developed a product that enables
companies to manage, track and maintain their information technology (IT)
assets, such as computers, telephones and networks. One of the assumptions
underlying our acquisition of MainControl was that our existing customers might
be interested in purchasing our new IT product. With the acquisition of
MainControl, our positioning with existing and prospective customers has changed
in that we are now offering products which can manage more of a company's
critical physical assets, such as IT assets, in addition to those managed by
MAXIMO, such as plant floor assets, vehicles and facilities. However, in many
cases the people who purchased MAXIMO may not have responsibility for management
of their company's IT assets. If we are unable to obtain access to executive
levels in our customers' and prospective customers' organizations, we will be
unable to sell a solution that covers more than just the plant floor assets, the
vehicle fleet, the facilities or the IT assets. Moreover, it is possible that
our attempts to characterize this combination of target markets as a single or
composite market will not be accepted within the industry, by market analysts or
by our customers, and as a result we might not gain the cross-market sales
opportunities and synergies that we hoped for in the MainControl acquisition.
Finally, we have announced our intention to integrate the MAXIMO MainControl
product into our MAXIMO 5 platform, utilizing the same leading edge
Internet-centric architecture and technologies, in order to provide a common
platform from which a customer's critical assets may be managed. It is also
possible that prospective customers may prefer to wait until this integrated
solution is available before purchasing MAXIMO MainControl, and it is possible
that during the interim period while the integrated version is under development
such customers may decide to purchase a competing product; in either case
revenues from MAXIMO MainControl would be deferred, or lost entirely, and there
could be a material and adverse impact on our business and results of
operations.

PRODUCTS AND TECHNOLOGIES WE ACQUIRE THROUGH ACQUISITIONS MAY FAIL TO MEET OUR
EXPECTATIONS.

We may from time to time purchase software products or technologies from other
companies, or acquire them as part of our acquisition of other companies, such
as our acquisition of MainControl. While we exercise due diligence in
determining whether acquired products or technologies are suitable and of
commercial quality, there can be no assurances that the new products or
technologies will ultimately meet our expectations, that we will be able to
employ and retain the personnel necessary for us to effectively exploit the new
products or technologies, that we will be able to successfully integrate the new
products or technologies with or into our existing products and product
architecture, that we will be able to effectively distribute the new products or
technologies through our existing sales force and channels, that we will be able
to retain existing customers and revenue streams that may have been associated
with the new products or technologies prior to their acquisition by us, or that
such existing customers may not demand that we remedy problems that were not
known or disclosed to us at the time of the acquisition. As a result of the
foregoing, we may not realize the benefits intended from such acquisitions or
recover its investments, which would have a material adverse impact on our
business and our results of operations.

29

WE FACE INTENSE COMPETITION IN THE MARKETS WE SERVE.

The market for strategic asset maintenance software such as MAXIMO and MAXIMO
MainControl is fragmented by geography, by hardware platform and by industry
orientation, and is characterized by a large number of competitors including
both independent software vendors and certain enterprise resource planning
("ERP") vendors. Independent software vendors include DataStream Systems, Inc.
and Indus International, Inc. MAXIMO also competes with integrated ERP systems,
which include integrated maintenance modules offered by several large vendors,
such as SAP, Oracle, JD Edwards and others. MAXIMO MainControl competes with
companies in IT asset management market, such as Peregrine Systems, Inc. and
Computer Associates, Inc. Currently, MAXIMO competes with products of a number
of large vendors, some of which have traditionally provided maintenance software
operating in a client/server environment and our now developing or offering
systems that are web-architected. MAXIMO also encounters competition from
vendors of low cost maintenance management systems designed initially for use by
a single user or limited number of users as vendors of these products upgrade
their functionality and performance to enter the enterprise market.

Certain of our competitors have greater financial, marketing, service and
support and technological resources than we do. To the extent that such
competitors increase their focus on the asset maintenance or planning and cost
systems markets, or on the industrial supply chain market, we could be at a
competitive disadvantage.

OUR INTERNATIONAL OPERATIONS SUBJECT US TO SPECIAL RISKS.

A significant portion of our total revenues and expenses are derived and
incurred from operations outside the United States. Our ability to sell our
products internationally is subject to a number of risks. General economic and
political conditions in each country could adversely affect demand for our
products and services. Exposure to currency fluctuations and greater difficulty
in collecting accounts receivable could affect our sales. We could be affected
by the need to comply with a wide variety of foreign import laws, United States
export laws and regulatory requirements. Trade protection measures and import
and export licensing requirements subject us to additional regulation and may
prevent us from shipping products to a particular market and increase our
operating costs.

OUR SOFTWARE PRODUCTS ARE DEPENDENT ON THIRD PARTY PROVIDERS OF SOFTWARE AND
SERVICES, AND FAILURE OF THESE PARTIES TO PERFORM AS EXPECTED, OR TERMINATION OF
OUR RELATIONSHIPS WITH THEM, COULD HARM OUR BUSINESS.

We have entered into nonexclusive license agreements with other software
vendors, pursuant to which we incorporate into our products and solutions
software providing certain application development, hardware and network
discovery, user interface, business intelligence, content and graphics
capabilities developed by these companies. We have also agreed to bundle IBM's
Websphere application server, its AIX operating system and DB2 database programs
with MAXIMO. If we cannot renew these licenses (at all or on commercially
reasonable terms), or if any of such vendors were to become unable to support
and enhance their products, we could be

30

required to devote additional resources to the enhancement and support of these
products or to acquire or develop software providing equivalent capabilities,
which could cause delays in the development and introduction of products
incorporating such capabilities.

WE MAY HAVE EXPOSURE TO ADDITIONAL INCOME TAX LIABILITIES.

We are subject to income taxes in both the United States and various foreign
jurisdictions. The amount of taxes paid is subject to our interpretation of
applicable tax laws in the jurisdictions in which we file. Periodically, we are
subject to income tax audits. While we believe that we have complied with all
applicable tax laws, there can be no assurance that a governing tax authority
will not have a different interpretation of the law and assess us with
additional taxes. Should we be assessed with additional taxes, there could be a
material and adverse effect on our results of operations or financial condition.

CHANGES IN REGULATIONS OR CRITICAL ACCOUNTING POLICIES COULD MATERIALLY AND
ADVERSELY AFFECT US.

New laws, regulations or standards related to us or our products, and new
accounting pronouncements, could be implemented or changed in a manner that
could adversely affect our business, results of operations or financial
condition.

WE MAY BE FORCED TO PERFORM MORE FIXED PRICE SERVICES CONTRACTS OR CONTRACTS FOR
FUTURE DEVELOPMENT.

A trend may be emerging among customers in our market towards demanding
consulting and implementation services on a fixed price basis, whereby the
Company agrees to deliver the contract requirements for a fixed fee, regardless
of the number of person-hours actually provided, as opposed to our traditional
services arrangements where we deliver services on a time and materials basis.
In addition, when our Industry Solutions are first delivered, they may not
include all of the functionality required by the initial customers, and we may
complete the development effort under a services contract with the customer. In
cases where services are provided either for the future delivery of
functionality or on a fixed price basis and our standard software is licensed at
the same time, and if the services are essential to the overall solution desired
by the customer or if the Company cannot determine the fair value of the
services being delivered, then the Company may be required to recognize the
license revenue from such transactions under the contract method of accounting.
This would likely result in a postponement of recognition of, or even a
reduction in, software license revenues.

WE MAY BE UNABLE TO EFFECTIVELY PROTECT OUR INTELLECTUAL PROPERTY.

Our success is dependent upon our proprietary technology. We currently have two
United States patents (and other corresponding patents or applications pending
in various foreign countries), and we protect our technology primarily through
copyrights, trademarks, trade secrets and employee and third-party nondisclosure
agreements. Our software products are sometimes licensed to customers under
"shrink wrap" or "click wrap" licenses included as part of the product packaging
or acknowledged by customers who register on-line. Although, in larger sales,
our shrink-wrap and click wrap licenses may be accompanied by specifically
negotiated agreements signed by the licensee, in many cases our shrink-wrap and
click wrap licenses are not

31

negotiated with or signed by individual licensees. Certain provisions of our
shrink-wrap and click wrap licenses, including provisions protecting against
unauthorized use, copying, transfer and disclosure of the licensed program, and
limitations or liabilities and exclusions of remedies, may be unenforceable
under the laws of certain jurisdictions. In addition, the laws of some foreign
countries do not protect our proprietary rights to the same extent, as do the
laws of the United States. We cannot give any assurance that the steps that we
have taken to protect our proprietary rights will be adequate to prevent
misappropriation of our technology or development by others of similar
technology. Although we believe that our products and technology do not infringe
on any valid claim of any patent or any other proprietary rights of others, we
cannot give any assurance that third parties will not assert infringement claims
in the future. Litigation may be necessary to enforce our intellectual property
rights, to protect our trade secrets, to determine the validity and scope of the
proprietary rights of others, or to defend against claims of infringement or
invalidity. Such litigation could result in substantial costs and diversion of
resources, could result in the deterioration or outright loss of our patent
rights, copyrights or other intellectual property, and could potentially have a
material adverse result on our operating results and financial condition.

LOSS OF THE SERVICES OF ONE OR MORE OF OUR KEY EXECUTIVE OFFICERS OR INABILITY
TO RECRUIT NEEDED SALES, SERVICES AND TECHNICAL PERSONNEL COULD ADVERSELY AFFECT
OUR BUSINESS.

We are highly dependent on certain key executive officers, technical and sales
employees, and the loss of one or more of such employees could have an adverse
impact on our future operations. We do not have employment contracts with any
personnel, and we do not maintain any so-called "key person" life insurance
policies on any personnel. We continue to hire a significant number of
additional sales, services and technical personnel. Competition for hiring of
such personnel in the software industry is intense, and from time to time we may
experience difficulty in locating candidates with the appropriate qualifications
within the desired geographic locations, or with certain industry specific
expertise. There can be no assurance that we will be able to retain our existing
personnel or attract additional qualified employees.

OUR STOCK PRICE HAS BEEN VOLATILE, AND YOU COULD INCUR LOSSES AS A RESULT OF
FUTURE FLUCTUATIONS IN OUR STOCK PRICE.

There have recently been significant fluctuations in the market price of our
common stock. In addition, the stock market in general has recently experienced
substantial price and volume fluctuations, which have particularly affected the
market prices of many software and e-Commerce companies and which have often
been unrelated to the operating performance of such companies. These broad
market fluctuations also may adversely affect the market price of our common
stock. In addition, general macroeconomic and market conditions unrelated to our
performance may also affect demand for our products and services, our results of
operations, and our stock price.

32

OTHER RISKS

The foregoing is not a complete description of all risks relevant to our future
performance, and the foregoing should be read and understood together with and
in the context of similar discussions which may be contained in the documents
that we file with the SEC in the future. We undertake no obligation to release
publicly any revision to the foregoing or any update to any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events.

33

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

The Company's primary exposures to market risk are the effect of fluctuations in
interest rates earned on its cash and cash equivalents and marketable securities
and exposures to foreign currency exchange rate fluctuations.

At June 30, 2003, the Company held $78.5 million in cash equivalents and
marketable securities consisting of taxable and tax-exempt municipal securities.
Cash equivalents are classified as available for sale and valued at amortized
cost, which approximates fair market value. A hypothetical 10 percent increase
in interest rates would not have a material impact on the fair market value of
these instruments due to their short maturity.

The Company develops its products in the United States and markets them in North
America, Europe, Middle East and Africa, Australia, Asia Pacific and Latin
America. 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. Currently, the Company has no hedging contracts.

ITEM 4. CONTROLS AND PROCEDURES

MRO Software carries out periodic evaluations, under the supervision of the
Company's management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon such
evaluations, the Chief Executive Officer and the Chief Financial Officer
concluded that, as of June 30, 2003, our disclosure controls and procedures were
effective to timely alert them to any material information relating to the
Company (including its consolidated subsidiaries) that would be required to be
included in our periodic filings with the Securities and Exchange Commission.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
their evaluation.

The Company intends to continue to review and evaluate the design and
effectiveness of our disclosure controls and procedures on an ongoing basis and
to improve our controls and procedures over time and to correct any deficiencies
that we may discover in the future. Our goal is to ensure that our senior
management has timely access to all material financial and non-financial
information concerning our business. While we believe the present design of our
disclosure controls and procedures is effective to achieve our goal, future
events affecting our business may require us to modify our disclosure controls
and procedures.

34

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS
NONE

ITEM 2 RECENT SALES OF UNREGISTERED SECURITIES, USE OF PROCEEDS FROM
REGISTERED SECURITIES CHANGES IN SECURITIES
NONE

ITEM 3 DEFAULTS UPON SENIOR SECURITIES
NONE

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE

ITEM 5. OTHER INFORMATION

CERTIFICATION UNDER SARBANES-OXLEY ACT

OUR CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER HAVE FURNISHED TO THE
SEC THE CERTIFICATION WITH RESPECT TO THIS REPORT THAT IS REQUIRED BY SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

3.1 Amended and Restated Articles of Organization of the Company
(included as Exhibit 3.3 to the Company's Registration
Statement on Form S-1, Registration No. 33-76420, and
incorporated herein by reference)

3.2 Restated By-Laws of the Company, as amended (included as
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1996, File No. 0-23852,
and incorporated herein by reference)

3.3 Amendment to By-Laws adopted on February 1, 2001 (included as
Exhibit 3.3 to the Company's Current Report on Form 10-Q for
the quarter ended March 31, 2001, File No. 0-23852 and
incorporated herein by reference)

3.4 Form of Certificate of Designation of Series A Junior
Participating Preferred Stock of MRO Software, Inc. (which is
attached as Exhibit A to the Rights Agreement included as
Exhibit 4 (b) to the Company's Current Report on Form 8-K
dated February 2, 1998, File No. 0-23852, and incorporated
herein by reference)

3.5 Amendment to Articles of Organization adopted on December 15,
1999 (included as Exhibit 3.4 to the Company's Form 10-Q for
the quarter ended December 31, 1999, File No. 0-23852, and
incorporated herein by reference)

35

3.6 Amendment to Articles of Organization, dated March 6, 2001
(included as Exhibit 3.4 to the Company's Current Report on
Form 8-K dated March 9, 2001, File No. 0-23852, and
incorporated herein by reference)

4. Instruments defining the Rights of Security Holders, Including
Indentures

4.1 Specimen certificate for the Common Stock, $.01 par value, of
the Company (included as Exhibit 4.1 to the Company's Current
Report on Form 10-Q for the quarter ended December 31,2001,
File No. 0-23852 and incorporated herein by references)

4.2 Article 4B of the Amended and Restated Articles of
Organization of the Company (included as Exhibit 4.1 to the
Company's Registration Statement on Form S-1, Registration No.
33-76420, and incorporated herein by reference)

4.3 Rights Agreement dated as of January 27, 1998, between the
Company and BankBoston, N.A. as Rights Agent (included as
Exhibit 4 (a) to the Company's Current Report on Form 8-K
dated February 2, 1998, File No. 0-23852, an incorporated
herein by reference)

4.4 Form of Certificate of Designation of Series A Junior
Participating Preferred Stock of the Company (included as
Exhibit 4 (b) to the Company's Current report on Form 8-K
dated February 2, 1998, File No. 0-23852, and incorporated
herein by reference)

4.5 Form of Rights Certificate (included as Exhibit 4 (c) to the
Company's Current Report on Form 8-K dated February 2, 1998,
File No. 0-23852, and incorporated herein by reference)

31.1 Certification 302
31.2 Certification 302

32.1 Certification 906

(b) Reports on Form 8-K

On April 2, 2003, the Company filed a current report on Form 8-K
disclosing its preliminary results for the quarter ended March 31,
2003.

On April 18, 2003, the Company filed a current report on Form 8-K
disclosing its results of operations for the quarter ended March 31,
2003.

On July 17, 2003, the Company filed a current report on Form 8-K
disclosing its results of operations for the quarter ended June 30,
2003.

36

SIGNATURES

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

MRO SOFTWARE, INC.

Date: August 14, 2003 By: /s/ Peter J. Rice
--------------- -------------------------
Peter J. Rice
Executive Vice President -
Finance and Administration,
Chief Financial Officer and
Treasurer
(Principal Financial Officer)

37

EXHIBIT INDEX

EXIBIT NO. DESCRIPTION
---------- -----------

3.1 Amended and Restated Articles of Organization of the Company
(included as Exhibit 3.3 to the Company's Registration
Statement on Form S-1, Registration No. 33-76420, and
incorporated herein by reference)

3.2 Restated By-Laws of the Company, as amended (included as
Exhibit 3.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended September 30, 1996, File No. 0-23852,
and incorporated herein by reference)

3.3 Amendment to By-Laws adopted on February 1, 2001 (included as
Exhibit 3.3 to the Company's Current Report on Form 10-Q for
the quarter ended March 31, 2001, File No. 0-23852 and
incorporated herein by reference)

3.4 Form of Certificate of Designation of Series A Junior
Participating Preferred Stock of MRO Software, Inc. (which is
attached as Exhibit A to the Rights Agreement included as
Exhibit 4 (b) to the Company's Current Report on Form 8-K
dated February 2, 1998, File No. 0-23852, and incorporated
herein by reference)

3.5 Amendment to Articles of Organization adopted on December 15,
1999 (included as Exhibit 3.4 to the Company's Form 10-Q for
the quarter ended December 31, 1999, File No. 0-23852, and
incorporated herein by reference)

3.6 Amendment to Articles of Organization, dated March 6, 2001
(included as Exhibit 3.4 to the Company's Current Report on
Form 8-K dated March 9, 2001, File No. 0-23852, and
incorporated herein by reference)

4. Instruments defining the Rights of Security Holders, Including
Indentures

4.1 Specimen certificate for the Common Stock, $.01 par value, of
the Company (included as Exhibit 4.1 to the Company's Current
Report on Form 10-Q for the quarter ended December 31,2001,
File No. 0-23852 and incorporated herein by references)

4.2 Article 4B of the Amended and Restated Articles of
Organization of the Company (included as Exhibit 4.1 to the
Company's Registration Statement on Form S-1, Registration No.
33-76420, and incorporated herein by reference)

4.3 Rights Agreement dated as of January 27, 1998, between the
Company and BankBoston, N.A. as Rights Agent (included as
Exhibit 4 (a) to the Company's Current Report on Form 8-K
dated February 2, 1998, File No. 0-23852, an incorporated
herein by reference)

4.4 Form of Certificate of Designation of Series A Junior
Participating Preferred Stock of the Company (included as
Exhibit 4 (b) to the Company's Current report on Form 8-K
dated February 2, 1998, File No. 0-23852, and incorporated
herein by reference)

4.5 Form of Rights Certificate (included as Exhibit 4 (c) to the
Company's Current Report on Form 8-K dated February 2, 1998,
File No. 0-23852, and incorporated herein by reference)

31.1 Certification 302
31.2 Certification 302

32.1 Certification 906