<PAGE>
 
     
  AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 17, 1998     
                                                     REGISTRATION NO. 333-47095
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
 
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                               ----------------
                         
                      PRE-EFFECTIVE AMENDMENT NO. 2     
                                      TO
                                   FORM S-1
                            REGISTRATION STATEMENT
                       UNDER THE SECURITIES ACT OF 1933
 
                               ----------------
                          MANHATTAN ASSOCIATES, INC.
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
         GEORGIA                     7372                    58-2373424
     (STATE OR OTHER     (PRIMARY STANDARD INDUSTRIAL     (I.R.S. EMPLOYER
     JURISDICTION OF      CLASSIFICATION CODE NUMBER)  IDENTIFICATION NUMBER)
                               ----------------
    INCORPORATION OR  2300 WINDY RIDGE PARKWAY, SUITE 700
      ORGANIZATION)         ATLANTA, GEORGIA 30339
                                (770) 955-7070
              (ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
                               ----------------
                               ALAN J. DABBIERE
         CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
                          MANHATTAN ASSOCIATES, INC.
                      2300 WINDY RIDGE PARKWAY, SUITE 700
                            ATLANTA, GEORGIA 30339
                                (770) 955-7070
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                  INCLUDING AREA CODE, OF AGENT FOR SERVICE)
 
                               ----------------
                                  COPIES TO:
             JOHN C. YATES                     WILLIAM J. SCHNOOR, JR.
         LARRY W. SHACKELFORD              TESTA, HURWITZ & THIBEAULT, LLP
   MORRIS, MANNING & MARTIN, L.L.P.                125 HIGH STREET
     1600 ATLANTA FINANCIAL CENTER                HIGH STREET TOWER
       3343 PEACHTREE ROAD, N.E.             BOSTON, MASSACHUSETTS 02110
        ATLANTA, GEORGIA 30326                TELEPHONE: (617) 248-7000
       TELEPHONE: (404) 233-7000              FACSIMILE: (617) 248-7100
       FACSIMILE: (404) 365-9532
 
  APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
  If any of the securities being registered on this Form are offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") please check the following box. [_]
  If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
  If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
  If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
  THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.
 
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

<PAGE>
 
   
SUBJECT TO COMPLETION, DATED APRIL 17, 1998     

                     [OF MANHATTAN ASSOCIATES APPEARS HERE]
 
- --------------------------------------------------------------------------------
 3,000,000 SHARES
 
 COMMON STOCK
 
- --------------------------------------------------------------------------------
 
 All of the 3,000,000 shares of Common Stock, $.01 par value per share
 ("Common Stock"), are being sold by Manhattan Associates, Inc. ("Manhattan"
 or the "Company"). Prior to this offering (the "Offering"), there has been no
 public market for the Common Stock. It is currently estimated that the
 initial public offering price will be between $10.00 and $12.00 per share.
 See "Underwriting" for a discussion of the factors considered in determining
 the initial public offering price. The Company has applied to have the Common
 Stock approved for listing on the Nasdaq National Market under the symbol
 "MANH."
 
 FOR INFORMATION CONCERNING CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED BY
 PROSPECTIVE INVESTORS, SEE "RISK FACTORS" COMMENCING ON PAGE 5.
 
 THESE SECURITIES HAVE NOT BEEN APPROVED  OR DISAPPROVED BY THE SECURITIES  AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE  SECURITIES
 AND EXCHANGE COMMISSION  OR ANY  STATE SECURITIES COMMISSION  PASSED UPON  THE
 ACCURACY OR ADEQUACY OF  THIS PROSPECTUS. ANY  REPRESENTATION TO THE  CONTRARY
 IS A CRIMINAL OFFENSE.
 

<TABLE>
<CAPTION>
                                PRICE TO           UNDERWRITING           PROCEEDS TO
                                PUBLIC             DISCOUNT(1)            COMPANY(2)
  <S>                           <C>                <C>                    <C>
  Per Share                     $                  $                      $
  Total(3)                      $                  $                      $
</TABLE>

 
 (1) The Company and certain stockholders of the Company (the "Selling
     Stockholders") have agreed to indemnify the Underwriters against certain
     liabilities, including liabilities under the Securities Act of 1933, as
     amended. See "Underwriting."
 (2) Before deducting expenses estimated at $1,200,000, payable by the
     Company.
 (3) The Selling Stockholders have granted to the Underwriters a 30-day option
     to purchase up to an additional 450,000 shares of Common Stock solely to
     cover over-allotments. If such option is exercised in full, the total
     Price to Public, Underwriting Discount, Proceeds to Company and Proceeds
     to Selling Stockholders will be $  , $  , $   and $  , respectively. See
     "Underwriting."
 
 The shares of Common Stock are offered by the Underwriters, subject to prior
 sale, when, as and if delivered to and accepted by them, and subject to
 approval of certain legal matters by counsel and certain other conditions.
 The Underwriters reserve the right to withdraw, cancel or modify such offer
 and to reject orders in whole or in part. Delivery of the shares of Common
 Stock offered hereby to the Underwriters is expected to be made in New York,
 New York on or about      , 1998.
 
 DEUTSCHE MORGAN GRENFELL
 
             HAMBRECHT & QUIST
 
                                                 SOUNDVIEW FINANCIAL GROUP, INC.
 
 
 The date of this Prospectus is       , 1998
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A         +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE   +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY  +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT        +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR   +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE      +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE    +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF  +
+ANY SUCH STATE.                                                               +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

<PAGE>
 
TITLE:
     Manhattan Manages Complex Distribution Center Functions
 
GRAPHIC:
     At the top at the left is a graphic of a spreadsheet and on the right
     is the Manhattan Associates logo.
 
     Underneath those two graphics is text reading "Manhattan Manages
     Complex Distribution Center Functions."
 
     Beneath the text is a stylized diagram of a cross section of a
     warehouse with the following labels:
 
      1. Inbound shipment tracking
 
      2. Yard management
 
      3. Receipt of inbound goods
 
      4. Storage of goods
 
      5. Pick orders from storage racks
 
      6. Value-added services such as labeling and sorting products
 
      7. Custom order packing
 
      8. Pack and hold for later shipment
 
      9. Outbound customer compliant shipments
 
 
                                [INSIDE COVER]
 
 
 
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
 
  EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS, INCLUDING
SHARE AND PER SHARE INFORMATION, (I) GIVES EFFECT TO THE CONTRIBUTION OF THE
ASSETS AND LIABILITIES OF MANHATTAN ASSOCIATES SOFTWARE, LLC TO THE COMPANY AS
OF THE DATE OF THIS PROSPECTUS IN EXCHANGE FOR COMMON STOCK OF THE COMPANY,
AND (II) ASSUMES NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.

<PAGE>
 

                               PROSPECTUS SUMMARY
 
  The following summary should be read in conjunction with, and is qualified
by, the more detailed information and financial statements and notes thereto
appearing elsewhere in this Prospectus.
 

                                  THE COMPANY
 
  Manhattan provides information technology solutions for distribution centers
that are designed to enable the efficient movement of goods through the supply
chain. The Company's solutions are designed to optimize the receipt, storage
and distribution of inventory and the management of equipment and personnel
within a distribution center, and to meet the increasingly complex information
requirements of manufacturers, distributors and retailers. The Company's
solutions consist of software, including PkMS, a comprehensive and modular
software system; services, including design, configuration, implementation,
training and support; and hardware. The Company's objective is to be the
leading provider of information technology solutions to distribution centers by
enhancing its core product functionality, targeting new vertical markets and
expanding its sales and marketing organization. PkMS allows organizations to
manage the receiving, stock locating, stock picking, order verification, order
packing and shipment of products in complex distribution centers. PkMS is
designed to optimize the operation of a distribution center by increasing
inventory turnover, improving inventory accuracy, reducing response times,
reducing inventory levels, improving customer service and increasing the
productivity of labor, facilities and materials handling equipment. The Company
currently provides solutions to manufacturers, distributors and retailers
primarily in the apparel, consumer products, food service and grocery markets.
As of December 31, 1997, PkMS was licensed for use by more than 250 customers
including Calvin Klein, Dean Foods, Jockey International, Mikasa, Nordstrom,
Patagonia, Playtex Apparel, SEIKO Corporation of America, The Sports Authority,
Timberland and Warnaco.
 
                                  THE OFFERING
 
Common Stock offered................  3,000,000 shares
Common Stock to be outstanding        
 after the Offering.................  23,206,674 shares(1) 
Use of Proceeds.....................  To (i) repay the Company's line of
                                      credit; (ii) repay a note to the
                                      Company's Chief Executive Officer; (iii)
                                      fund new product development; (iv)
                                      finance potential future acquisitions;
                                      and (v) provide for other general
                                      corporate purposes.
Proposed Nasdaq National              
 Market symbol......................  MANH 
 
                             SUMMARY FINANCIAL DATA
                     (In thousands, except per share data)
 

<TABLE>   
<CAPTION>
                                                YEAR ENDED DECEMBER 31,
                                        ---------------------------------------
                                         1993    1994    1995    1996    1997
                                        ------- ------- ------- ------- -------
<S>                                     <C>     <C>     <C>     <C>     <C>
STATEMENT OF INCOME DATA:
Revenue................................ $ 3,309 $ 6,512 $11,221 $14,400 $32,457
Gross margin...........................   1,298   2,760   5,484   8,463  17,848
Income from operations.................     421   1,492   2,141   3,873   8,278
Historical income......................     423   1,497   2,181   3,976   8,334
      Historical diluted net income per
share.................................. $  0.02 $  0.08 $  0.11 $  0.20 $  0.40
    Shares used in computing historical
diluted net income per share...........  20,000  20,000  20,010  20,308  20,761
Pro forma net income(2)................ $   261 $   933 $ 1,381 $ 2,490 $ 5,311
Pro forma diluted net income per
 share(2)..............................                                 $  0.25
Shares used in computing pro forma
 diluted net income per share(3).......                                  20,951
</TABLE>
    
 

<TABLE>
<CAPTION>
                                                      DECEMBER 31, 1997
                                             -----------------------------------
                                                                    PRO FORMA
                                             ACTUAL  PRO FORMA(4) AS ADJUSTED(5)
                                             ------- ------------ --------------
<S>                                          <C>     <C>          <C>
BALANCE SHEET DATA:
Working capital (deficit)................... $ 6,268   $(3,553)      $25,937
Total assets................................  15,006    13,409        34,937
Stockholders' equity (deficit)..............   8,454      (585)       28,905
</TABLE>

- -------
(1) Based on the number of shares outstanding at February 28, 1998. Excludes
    (i) 3,355,716 shares of Common Stock issuable upon the exercise of options
    outstanding at February 28, 1998 under the Manhattan Associates, LLC Option
    Plan (the "LLC Option Plan") at a weighted average exercise price of $4.66
    per share, (ii) 729,784 shares of Common Stock issuable upon the exercise
    of options outstanding at February 28, 1998 issued outside of the LLC
    Option Plan at a weighted average exercise price of $1.20 per share, and
    (iii) 1,644,284 shares of Common Stock reserved for future issuance under
    the Company's 1998 Stock Incentive Plan (the "Stock Incentive Plan"). See
    "Management-Stock Option Plans" and Note 6 of Notes to Financial
    Statements.
(2) In connection with the contribution of the assets and liabilities of
    Manhattan Associates Software, LLC ("Manhattan LLC") to the Company as of
    the date of this Prospectus in exchange for Common Stock of the Company
    (the "Restructuring"), the Company will be subject to federal and state
    corporate income taxes. Pro forma net income is presented as if the Company
    had been subject to corporate income taxes for all periods presented. See
    '"Conversion from Limited Liability Company Status and Related
    Distributions" and Notes 3 and 9 of Notes to Financial Statements.
(3) See Note 1 of Notes to Financial Statements.
   
(4) Pro forma to reflect (i) the acquisition (the "PAC Acquisition") of
    Performance Analysis Corporation ("PAC") as if it had occurred on December
    31, 1997 for $2.2 million in cash and 106,666 shares of Common Stock valued
    at $10.00 per share, (ii) the purchase of 100,000 shares of Common Stock by
    a stockholder of the Company for $1.0 million (the "Stockholder
    Investment"), (iii) the establishment of net deferred tax assets of
    $365,000 in connection with the Restructuring, and (iv) the payment of the
    undistributed income, calculated on a tax basis, of Manhattan LLC of $8.7
    million at December 31, 1997 (the "LLC Distribution"). Pro forma
    adjustments for the PAC Acquisition include (i) the payment of cash of $2.2
    million and the issuance of 106,666 shares of Common Stock and (ii) the
    charge to income for acquired research and development of $2.1 million. See
    "Management's Discussion and Analysis of Financial Condition and Results of
    Operations" and Unaudited Pro Forma Balance Sheet and Notes thereto
    included elsewhere in this Prospectus.     
(5) Pro forma as adjusted to reflect the sale by the Company of the 3,000,000
    shares of Common Stock offered hereby at an assumed initial public offering
    price of $11.00 per share and the receipt of the estimated net proceeds
    therefrom. See "Use of Proceeds" and "Capitalization."
 
                                       3

<PAGE>
 

                                  THE COMPANY
 
  Manhattan provides information technology solutions for distribution centers
that are designed to enable the efficient movement of goods through the supply
chain. The Company's solutions are designed to optimize the receipt, storage
and distribution of inventory and the management of equipment and personnel
within a distribution center, and to meet the increasingly complex information
requirements of manufacturers, distributors and retailers. The Company's
solutions consist of software, including PkMS, a comprehensive and modular
software system; services, including design, configuration, implementation,
training and support; and hardware. The Company's objective is to be the
leading provider of information technology solutions to distribution centers
by enhancing its core product functionality, targeting new vertical markets
and expanding its sales and marketing organization. The Company believes that
organizations that have implemented the PkMS system experience improved
control and efficiency over distribution center operations, improved
information flow, and increased efficiency in managing distribution center
personnel and equipment.
 
  In order to remain competitive in a changing retail landscape, many
retailers have demanded that manufacturers and distributors employ industry
initiatives such as "Quick Response," which use technology to improve the flow
of information among manufacturers, distributors and retailers. As a result of
these retailer demands, distribution centers have increased in size,
complexity and cost. The efficient management of a distribution center
operation now requires collecting information regarding customer orders,
inbound shipments of products, products available on-site, product storage
locations, weights and sizes, and outbound shipping data (including customer-
or store-specific shipping requirements, routing data and carrier
requirements). This information must be analyzed dynamically to determine the
most efficient use of the distribution center's labor, materials handling
equipment, packaging equipment and shipping and receiving areas. Additionally,
manufacturers, distributors and retailers must exchange information with other
participants in the supply chain in order to effectively integrate the
operation of their distribution centers with the entire supply chain.
 
  PkMS allows organizations to manage the receiving, stock locating, stock
picking, order verification, order packing and shipment of products in complex
distribution centers. PkMS is designed to optimize the operation of a
distribution center by increasing inventory turnover, improving inventory
accuracy, reducing response times, reducing inventory levels, improving
customer service and increasing the productivity of labor, facilities and
materials handling equipment. In addition, through its recent acquisition of
Performance Analysis Corporation ("PAC"), the Company offers slotting
functionality, which helps determine the optimal storage location for
inventory within a distribution center.
 
  The Company currently provides solutions to manufacturers, distributors and
retailers primarily in the apparel, consumer products, food service and
grocery markets. As of December 31, 1997, PkMS was licensed for use by more
than 250 customers including Calvin Klein, Dean Foods, Jockey International,
Mikasa, Nordstrom, Patagonia, Playtex Apparel, SEIKO Corporation of America,
The Sports Authority, Timberland and Warnaco.
   
  The Company is a Georgia corporation formed to own all of the assets and
liabilities of Manhattan Associates Software, LLC, a Georgia limited liability
company ("Manhattan LLC"). Manhattan LLC was formed in 1995 by the
contribution of the assets, liabilities and intellectual property rights of
Pegasys Systems Incorporated ("Pegasys") and the contribution of certain
intellectual property rights from the other founders of Manhattan LLC. Pegasys
is controlled by Alan J. Dabbiere, the Company's Chairman of the Board, Chief
Executive Officer and President. After the Restructuring, Pegasys, and Mr.
Dabbiere through his control of Pegasys, will be a controlling stockholder of
the Company. See "Principal and Selling Stockholders." Unless the context
otherwise requires, references in this Prospectus to "Manhattan" or the
"Company" refer to Manhattan Associates, Inc., and its consolidated
subsidiary, PAC, acquired on February 16, 1998. The Company's principal
executive offices are located at 2300 Windy Ridge Parkway, Suite 700, Atlanta,
Georgia 30339 and its telephone number is (770) 955-7070.     
 
                                       4

<PAGE>
 

                                 RISK FACTORS
 
  An investment in the shares of Common Stock offered hereby involves a high
degree of risk. In addition to the other information in this Prospectus, the
following risk factors should be considered carefully in evaluating an
investment in the Common Stock offered by this Prospectus. When used in this
Prospectus, the words "expects," "anticipates," "estimates" and similar
expressions are intended to identify forward-looking statements. Such
statements are subject to risks and uncertainties that could cause actual
results to differ materially from those projected. These risks and
uncertainties include, but are not limited to, those risks discussed below and
elsewhere in this Prospectus. Actual results could differ materially from
those projected in the forward-looking statements as a result of the risk
factors discussed below and elsewhere in this Prospectus.
 
  LIMITED OPERATING HISTORY. The Company was founded and shipped its first
version of PkMS in 1990. The Company and its operations are subject to all of
the risks inherent in the establishment of a new business enterprise. The
Company's prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of
development, particularly companies in new and rapidly evolving markets.
Although the Company has experienced significant growth during the past five
years, the Company does not believe that prior growth rates are sustainable or
indicative of future operating results. There can be no assurance that the
Company will be able to increase its level of revenue or maintain
profitability in the future. Increases in operating expenses are expected to
continue and, together with pricing pressures, may result in a decrease in
operating income and operating margin percentage. The Company's limited
operating history makes the prediction of future operating results difficult
or impossible. Future operating results will depend on many factors,
including, without limitation, the degree and rate of growth of the markets in
which the Company competes and the accompanying demand for the Company's
software products, the level of product and price competition, the ability of
the Company to establish strategic marketing relationships and develop and
market new and enhanced products and to control costs, the ability of the
Company to expand its direct sales force and indirect distribution channels
both domestically and internationally, the ability of the Company to integrate
acquired businesses, and the ability of the Company to attract, train and
retain consulting, technical and other key personnel. See "Selected Financial
Data" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
 
  POTENTIAL VARIABILITY OF QUARTERLY OPERATIONS AND FINANCIAL RESULTS. The
Company's operations and related revenue and operating results could vary
substantially from quarter to quarter. Among the factors causing these
potential variations are fluctuations in the demand for the Company's
products, the level of product and price competition in the Company's markets,
the length of the Company's sales process, the size and timing of individual
transactions, the mix of products and services sold, delays in, or
cancellations of, customer implementations, the Company's success in expanding
its services and customer support organizations as well as its direct sales
force and indirect distribution channels, the timing of new product
introductions and enhancements by the Company or its competitors, commercial
strategies adopted by competitors, changes in foreign currency exchange rates,
customers' budget constraints, the Company's ability to control costs and
general economic conditions. A substantial portion of the Company's operating
expenses, particularly personnel and facilities costs, are relatively fixed in
advance of any particular quarter. As a result, any delay in the recognition
of revenue may cause significant variations in operating results in any
particular quarter. In addition, an increase or decrease in hardware sales,
which provide the Company with lower gross margins than sales of software
licenses or services, may contribute to the variability of the Company's
operating results in any particular quarter. As a result of the foregoing
factors, the Company's operating results for a future quarter may be above or
below the expectations of public market analysts
 
                                       5

<PAGE>
 
and investors. Should the Company's revenue and operating results fall below
expectations, the price of the Company's Common Stock would be materially
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
 
  DEPENDENCE ON SINGLE PRODUCT. The Company currently derives substantially
all of its revenue from sales of its PkMS software and related services and
hardware. The Company expects to continue to focus on distribution center
management systems as its primary line of business, and any factor adversely
affecting the market for distribution center management systems in general, or
the Company's products in particular, could adversely affect the Company's
business, financial condition and results of operations. The Company's future
financial performance will depend in large part on the successful development,
introduction and customer acceptance of new and enhanced versions of PkMS.
There can be no assurance that the Company will continue to be successful in
marketing PkMS or any new or enhanced versions of PkMS. The market for
distribution center management systems is intensely competitive, highly
fragmented and subject to rapid technological change. The Company's future
success will depend on continued growth in the market for distribution center
management systems. There can be no assurance that the market for distribution
center management systems will continue to grow. If this market fails to grow
or grows more slowly than the Company currently anticipates, the Company's
business, financial condition and results of operations would be materially
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business--Strategy" and "--Products and
Services."
 
  ABILITY TO MANAGE GROWTH. The Company has rapidly and significantly expanded
its operations and anticipates that significant expansion will continue to be
required in order to address potential market opportunities. The Company
anticipates significantly increasing the size of its sales, support, services,
marketing and research and development operations following the completion of
the Offering. There can be no assurance that such expansion will be
successfully completed or that it will generate sufficient revenue to cover
the Company's expenses. The Company has only recently begun the process of
developing the management and operational capabilities and financial and
accounting systems and controls necessary to support anticipated growth. For
example, the Company hired its current Chief Financial Officer, Michael J.
Casey, in November 1997. The Company did not previously have a Chief Financial
Officer. In January 1998, the Company upgraded certain of its management
information and accounting systems and the Company will need to continue to
upgrade these and other systems to accommodate its expanding operations. There
can be no assurance that the Company's expanded management information and
accounting systems will be sufficient to support the Company's continued
growth, if any. Similarly, the Company hired its Executive Vice President--
Sales and Marketing, Gregory Cronin, in December 1997, and he is responsible
for expanding the Company's sales and marketing operations. The ability of the
Company to manage its growth, if any, will depend in large part on its ability
to build effective management information and accounting systems, to generally
improve and expand its operational and sales and marketing capabilities, to
develop the management skills of its managers and supervisors, and to train,
motivate and manage both its existing employees and the additional employees
that will be required if the Company is to achieve its business objectives.
There can be no assurance that the Company will succeed in developing all or
any of these capabilities, and any failure to do so would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Strategy," "--Sales and Marketing" and
"Management."
 
  NEW MANAGEMENT TEAM; DEPENDENCE ON KEY PERSONNEL. The Company's future
success will depend to a significant extent on its Chairman of the Board,
Chief Executive Officer and
 
                                       6

<PAGE>
 
President, Alan J. Dabbiere, as well as the Company's other executive officers
and technical, managerial and marketing personnel. A significant portion of
the Company's senior management team has been in place for only a relatively
short period of time. Oliver M. Cooper, Michael J. Casey, Gregory Cronin, Neil
Thall, and David K. Dabbiere, the Company's Chief Operating Officer, Chief
Financial Officer, Executive Vice President--Sales and Marketing, Vice
President--Supply Chain Strategy and Vice President, General Counsel and
Secretary, respectively, joined the Company full-time in August 1997, November
1997, December 1997, January 1998 and March 1998, respectively. Accordingly,
each of these individuals has been involved with only the most recent
operating activity of the Company. The Company's success will depend to a
significant extent on the ability of its new executive officers to integrate
themselves into the Company's daily operations, to gain the trust and
confidence of the Company's other employees and to work effectively as a team.
The loss of the services of any of the Company's executive officers could have
a material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that any of these individuals
or any other key employee will not voluntarily terminate his employment with
the Company. The Company does not maintain key man life insurance on any of
its executive officers. The failure of the Company to maintain key man life
insurance on its executive officers could have a material adverse effect on
the Company's business, financial condition and results of operation. The
Company believes that its future success will also depend significantly on its
ability to attract, motivate and retain additional highly skilled technical,
managerial, consulting, sales and marketing personnel. Competition for such
personnel is intense, and there can be no assurance that the Company will be
successful in attracting, motivating and retaining the personnel required to
grow and operate profitably. Failure to attract, motivate and retain such
highly skilled personnel could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Employees" and "Management."
 
  LIMITED PREDICTABILITY OF SALES DUE TO LENGTH OF SALES PROCESS. The sale of
PkMS generally requires the Company to provide a significant level of
education to prospective customers regarding the use and benefits of the
product. Implementation of the Company's products involves a significant
commitment of resources by prospective customers and is commonly associated
with substantial integration efforts which must be performed by the Company
and/or the customer. For these and other reasons, the length of time between
the date of initial contact with the potential customer and execution of a
software license agreement typically ranges from three to six months, and is
subject to delays over which the Company may have little or no control. In
addition, as the average dollar size of the sale of the Company's products and
services increases, the Company expects the sales cycle to lengthen as a
result of a more time-consuming approval process typically required by its
potential customers. The Company's implementation cycle could also be
lengthened by increases in the size and complexity of its implementations. In
addition, the Company will need to continue hiring qualified personnel to
complete such installations. The failure of the Company to attract and retain
such personnel or the delay in, or cancellation of, sales or implementations
of PkMS could have a material adverse effect on the Company's business,
financial condition and results of operations and could cause the Company's
operating results to vary significantly from quarter to quarter. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Sales and Marketing."
 
  DEPENDENCE ON HARDWARE REVENUE. In conjunction with the licensing of PkMS,
the Company resells a variety of hardware products, developed and manufactured
by third parties, in order to provide the Company's customers with an
integrated distribution center management solution. Revenue from such hardware
sales can amount to a significant portion of the Company's total revenue in
any period. As the market for the distribution of hardware products becomes
more competitive, the Company's customers may choose to purchase such
 
                                       7

<PAGE>
 
hardware directly from the manufacturers or distributors of such products,
with a resultant decrease to the Company in such ancillary revenue and related
contribution to income. Hardware sales revenue as a percentage of total
revenue decreased in 1996 and 1997 and, as a result, the Company's
profitability is increasingly dependent upon growth in its software licenses
and services revenue. The failure of the Company to maintain or increase
hardware revenues may have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business--Products and Services."
 
  IMMIGRATION ISSUES. The Company believes that its success in part has
resulted from its ability to attract and retain persons with technical and
project management skills, some of whom are citizens of other countries,
principally India. Many of the Company's employees are employed by the Company
pursuant to the United States Immigration and Naturalization Service ("INS")
H-1(B), non-immigrant work-permitted visa classification. There is a limit on
the number of new H-1(B) petitions that the INS may approve in any year, and
in years in which this limit is reached, the Company may be unable to obtain
H-1(B) visas necessary to bring additional foreign employees to the U.S.
Compliance with existing U.S. immigration laws, or changes in such laws making
it more difficult to hire foreign nationals or limiting the ability of the
Company to retain H-1(B) employees in the U.S., could require the Company to
incur additional unexpected labor costs and expenses. Any such restrictions or
limitations on the Company's hiring practices could have a material adverse
effect on the Company's business, financial condition and results of
operations. Furthermore, Congress and administrative agencies with
jurisdiction over immigration matters have periodically expressed concerns
over the levels of immigration into the United States. These concerns have
often resulted in proposed legislation, rules and regulations aimed at
reducing the number of employment-based visas and permanent resident visas
that may be issued. Any changes in such laws making it more difficult to hire
foreign nationals or limiting the ability of the Company to retain foreign
employees could require the Company to incur additional unexpected labor costs
and expenses or result in the Company having insufficient qualified personnel
to carry on the business of the Company.
 
  The Company's Chief Technology Officer, Deepak Raghavan, is presently
employed pursuant to an H-1(B) non-immigrant work-permitted visa that may be
extended only through April 30, 2000. Mr. Raghavan's application for an EB-3
permanent immigrant visa is currently subject to a processing backlog which
may or may not be alleviated in time for his EB-3 permanent immigrant visa to
be issued before April 30, 2000. In the event that Mr. Raghavan's permanent
work permit is not issued prior to such date, he may be required to leave the
United States. In February 1998, Mr. Raghavan made a cash investment in the
Company which allows him to qualify for an EB-5 permanent immigrant investor
visa which may be granted sooner than the EB-3 permanent immigrant visa under
his current application. While Mr. Raghavan has applied for the immigrant
investor visa and the Company expects that such visa will be issued prior to
April 30, 2000, there can be no assurance that any visa permitting Mr.
Raghavan to remain in the United States will be issued prior to such date. In
the event Mr. Raghavan is required to leave the United States, the Company's
software development efforts, and thus its business, financial condition and
results of operations, may be materially adversely affected. See "Business--
Employees," "Management" and "Certain Transactions."
 
  COMPETITION. The market for the Company's products is intensely competitive,
highly fragmented and subject to rapid technological change. The Company's
competitors are diverse and offer a variety of solutions directed at various
aspects of the supply chain, as well as the enterprise as a whole. The
Company's existing competitors include distribution center management software
vendors, the corporate information technology departments of potential
 
                                       8

<PAGE>
 
customers capable of internally developing solutions, and smaller independent
companies that have developed or are attempting to develop distribution center
management software that competes with the Company's software solution.
 
  The Company may face competition in the future from business application
software vendors that may broaden their product offerings by internally
developing, or by acquiring or partnering with independent developers of,
distribution center management software, and Enterprise Resource Planning
("ERP") and Supply Chain Management ("SCM") applications vendors. To the
extent such ERP and SCM vendors develop or acquire systems with functionality
comparable or superior to the Company's products, their significant installed
customer bases, long-standing customer relationships and ability to offer a
broad solution could provide a significant competitive advantage over the
Company. In addition, it is possible that new competitors or alliances among
current and new competitors may emerge and rapidly gain significant market
share. Many of the Company's competitors and potential competitors have longer
operating histories, significantly greater financial, technical, marketing and
other resources, greater name recognition and a larger installed base of
customers than the Company. In order to be successful in the future, the
Company must continue to respond promptly and effectively to technological
change and competitors' innovations. There can be no assurance that current or
potential competitors of the Company will not develop products comparable or
superior in terms of price and performance features to those developed by the
Company. In addition, no assurance can be given that the Company will not be
required to make substantial additional investments in connection with its
research, development, marketing, sales and customer service efforts in order
to meet any competitive threat, or that the Company will be able to compete
successfully in the future. Increased competition will result in reductions in
market share, pressure for price reductions and related reductions in gross
margins, any of which could materially and adversely affect the Company's
ability to achieve its financial and business goals. There can be no assurance
that in the future the Company will be able to successfully compete against
current and future competitors. See "Business--Competition."
 
  RISKS ASSOCIATED WITH RECENT ACQUISITION AND POSSIBLE ACQUISITIONS. The
Company has recently completed the PAC Acquisition and may in the future
engage in selective acquisitions of other businesses that are complementary to
those of the Company, including other providers of distribution center
management solutions or technology. There can be no assurance that the Company
will be able to identify additional suitable acquisition candidates available
for sale at reasonable prices, consummate any acquisition or successfully
integrate any acquired business (including the PAC business) into the
Company's operations. Further, acquisitions may involve a number of special
risks, including diversion of management's attention, failure to retain key
acquired personnel, unanticipated events or circumstances, legal liabilities
and amortization of acquired intangible assets, some or all of which could
have a material adverse effect on the Company's business, results of
operations and financial condition. Problems with an acquired business could
have a material adverse effect on the performance of the Company as a whole.
The Company expects to finance any future acquisitions with the proceeds of
the Offering as well as with possible debt financing, the issuance of equity
securities (common or preferred stock) or combinations of the foregoing. There
can be no assurance that the Company will be able to arrange adequate
financing on acceptable terms. If the Company were to proceed with one or more
significant future acquisitions in which the consideration consisted of cash,
a substantial portion of the Company's available cash (possibly a portion of
the proceeds of the Offering) could be used to consummate the acquisitions. If
the Company were to consummate one or more significant acquisitions in which
the consideration consisted of stock, shareholders of the Company could suffer
dilution of their interests in the Company. Many business acquisitions must be
accounted for using the purchase method of accounting. Most of the businesses
that might become attractive acquisition candidates for the Company are likely
to
 
                                       9

<PAGE>
 
have significant intangible assets, and acquisition of these businesses, if
accounted for as a purchase, would typically result in substantial goodwill
amortization charges to the Company, reducing future earnings. In addition,
such acquisitions could involve acquisition-related charges, such as one-time
acquired research and development charges. For example, the Company intends,
in the first quarter of 1998, to record an acquired research and development
expense of approximately $2.1 million in connection with the PAC Acquisition.
See "Business--Strategy," "--Recent Developments" and Financial Statements.
 
  ESTABLISHMENT OF INDIRECT CHANNELS; POTENTIAL FOR CHANNEL CONFLICT. Although
the Company has historically focused its efforts on marketing through its
direct sales force, the Company is increasing resources dedicated to
developing indirect marketing channels such as systems integrators. There can
be no assurance that the Company will be able to attract and retain a
sufficient number of systems integrators to market successfully the Company's
PkMS product. In addition, there can be no assurance that the Company's
potential systems integrators will not develop, acquire or market products
competitive with the Company's PkMS product. In addition, sales of PkMS
through its indirect channels are also likely to reduce the Company's gross
profits from its consulting services as the Company's third party systems
integrators provide these services. Selling through indirect channels may
limit the Company's contact with its customers. As a result, the Company's
ability to accurately forecast sales, evaluate customer satisfaction and
recognize emerging customer requirements may be hindered. The Company's
strategy of marketing its PkMS product directly to customers and indirectly
through systems integrators may result in distribution channel conflicts. The
Company's direct sales efforts may compete with those of its indirect channels
and, to the extent different systems integrators target the same customers,
systems integrators may also come into conflict with each other. As the
Company strives to expand its indirect distribution channels, there can be no
assurance that emerging channel conflicts will not have a material adverse
effect on its relationships with potential systems integrators or adversely
affect its ability to attract new systems integrators. See "Business--
Strategy" and "--Sales and Marketing."
 
  RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION. Revenue outside of North
America has not been significant to date; however, a key element of the
Company's strategy is to increase its international sales. The Company expects
to face competition from foreign distribution center management system
providers in their respective native countries. To successfully expand
international sales, the Company will need to recruit and retain international
systems integrators. There can be no assurance that the Company will be able
to maintain or increase international sales of its products or that the
Company's international distribution channels will be able to adequately
market, service and support the Company's products. International operations
generally are subject to certain risks, including dependence on independent
resellers, fluctuations in foreign currency exchange rates, compliance with
foreign regulatory and market requirements, variability of foreign economic
conditions and changing restrictions imposed by United States export laws.
Additional risks inherent in the Company's international business activities
generally include unexpected changes in regulatory requirements, tariffs and
other trade barriers, costs of localizing products for foreign countries, lack
of acceptance of localized products in foreign countries, longer accounts
receivable payment cycles, difficulties in managing international operations,
difficulties in enforcing intellectual property rights and the burdens of
complying with a wide variety of foreign laws. Currently, the Company does not
operate sales offices outside of the United States. The Company intends to
establish international sales offices, and such operations will be subject to
certain additional risks, including difficulties in staffing and managing such
operations and potentially adverse tax consequences including restrictions on
the repatriation of earnings. There can be no assurance that such factors will
not have a material adverse effect on the Company's future international sales
and, consequently, the Company's business, financial condition and results of
operations.
 
                                      10

<PAGE>
 
To date, all of the Company's sales have been made in United States dollars
and the Company has not engaged in any hedging transactions through the
purchase of derivative securities or otherwise. However, should the Company's
revenue from international sales increase as intended, and should such sales
be denominated in foreign currencies, the failure of the Company to adopt an
adequate hedging strategy to guard against foreign currency fluctuations could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business--Strategy" and "--
Sales and Marketing."
 
  CONCENTRATION OF CONTROL. Upon completion of the Offering, the Company's
directors, officers and their affiliates will beneficially own approximately
85.1% of the Company's outstanding Common Stock. In particular, Alan J.
Dabbiere, the Chairman of the Board, Chief Executive Officer and President of
the Company, will beneficially own approximately 47.9% of the Company's
outstanding Common Stock. As a result, these stockholders will have the
ability to elect the Company's directors and to determine the outcome of
corporate actions requiring stockholder approval. This concentration of
ownership may have the effect of delaying or preventing a change of control of
the Company. See "Management" and "Principal and Selling Stockholders."
 
  RISKS ASSOCIATED WITH RAPID TECHNOLOGICAL ADVANCES; NECESSITY OF DEVELOPING
NEW PRODUCTS. The market for distribution center management systems is subject
to rapid technological change, changing customer needs, frequent new product
introductions and evolving industry standards that may render existing
products and services obsolete. As a result, the Company's position in this
market could be eroded rapidly by unforeseen changes in customer requirements
for application features, functions and technologies. The Company's growth and
future operating results will depend in part upon its ability to enhance
existing applications and develop and introduce new applications that meet or
exceed technological advances in the marketplace, that meet changing customer
requirements, that respond to competitive products and that achieve market
acceptance. Although the Company is presently developing a client/server
version of its PkMS product, there can be no assurance that this product will
be completed to meet potential customer demands, if any, on a timely basis.
The Company's product development and testing efforts have required, and are
expected to continue to require, substantial investments by the Company. There
can be no assurance that the Company will continue to possess sufficient
resources to make necessary investments in technology. In addition, there can
be no assurance that the Company's products will meet the requirements of the
marketplace and achieve market acceptance, or that the Company's current or
future products will conform to industry standards in the markets they serve.
If the Company is unable, for technological or other reasons, to develop and
introduce new and enhanced products in a timely manner, the Company's
business, financial condition and results of operations could be materially
adversely affected. See "Business--Product Development."
 
  POTENTIAL LIABILITY TO CLIENTS. Many of the Company's installations involve
products that are critical to the operations of its clients' businesses and
provide benefits that may be difficult to quantify. Any failure in a client's
system could result in a claim for substantial damages against the Company,
regardless of the Company's responsibility for such failure. Although the
Company attempts to limit contractually its liability for damages arising from
negligent acts, errors, mistakes or omissions, there can be no assurance the
limitations of liability set forth in its contracts will be enforceable in all
instances or would otherwise protect the Company from liability for damages.
Although the Company maintains general liability insurance coverage, including
coverage for errors or omissions, there can be no assurance that such coverage
will continue to be available on reasonable terms or will be available in
sufficient amounts to cover one or more large claims, or that the insurer will
not disclaim coverage as to any future claim.
 
                                      11

<PAGE>
 
The successful assertion of one or more large claims against the Company that
exceed available insurance coverage or changes in the Company's insurance
policies, including premium increases or the imposition of large deductible or
co-insurance requirements, could adversely affect the Company's business,
financial condition and results of operations.
 
  CONVERSION FROM LIMITED LIABILITY COMPANY ("LLC") STATUS AND UTILIZATION OF
SIGNIFICANT PORTION OF THE OFFERING PROCEEDS TO SATISFY INDEBTEDNESS INCURRED
TO FUND DISTRIBUTIONS TO CURRENT STOCKHOLDERS. Manhattan LLC was formed by the
contribution of the assets, liabilities and intellectual property rights of
Pegasys and the contribution of certain intellectual property rights from the
other founders of Manhattan LLC. Manhattan LLC has operated as an LLC, taxable
as a partnership under the provisions of the Internal Revenue Code of 1986, as
amended (the "Code") and generally taxable as a partnership under comparable
provisions of state income tax laws. An LLC which is taxable as a partnership
generally is not subject to income tax at the entity level. Instead, an LLC's
taxable income generally passes through to its owners and is taxed to such
owners as personal income. Historically, Manhattan LLC has distributed its
earnings to its owners as the Company's working capital needs permitted. Since
the Company's working capital needs are anticipated to be satisfied for at
least the next twelve months by the proceeds of this Offering, prior to this
Offering Manhattan LLC will disburse its accumulated undistributed earnings to
its owners.
 
  As of the date of this Prospectus, the assets and liabilities of Manhattan
LLC will be contributed to the Company in exchange for Common Stock of the
Company in a transaction intended to be non-taxable under Section 351 of the
Code (the "Restructuring"). Manhattan LLC will then distribute the Common
Stock of the Company received to its stockholders as of the date of this
Prospectus and Manhattan LLC will subsequently be dissolved. Purchasers of the
Common Stock in the Offering will not receive any portion of the Common Stock
distributed to the stockholders of Manhattan LLC in connection with the
Restructuring. After the Restructuring, the Company will be taxable for
federal and state income tax purposes as a "C" corporation.
   
  Manhattan LLC has entered into a line of credit for working capital purposes
and to fund the disbursement of the undistributed earnings to the stockholders
of Manhattan LLC that will be made prior to the completion of the Offering.
Prior to the Offering, this distribution will cause the Company to sustain, on
a pro forma basis as of December 31, 1997, a working capital deficit of $3.6
million and stockholders' deficit of $585,000. The Company will use a portion
of the proceeds of the Offering to fund the repayment of all outstanding
amounts under its line of credit, pursuant to which the Company may borrow up
to $8,000,000. The Company will also use a portion of the proceeds of the
Offering to repay all outstanding indebtedness under a note to the Company's
Chief Executive Officer, the balance of which was $1,937,000 (including
accrued interest) as of February 28, 1998. The Company does not anticipate
incurring any additional borrowings under the note to the Company's Chief
Executive Officer prior to completion of the Offering. There can be no
assurance that the remaining net proceeds of the Offering will be sufficient
to pay for future acquisitions, planned research and development projects and
other growth-oriented activities, which could require the Company to incur
additional debt or other financing that could impose restrictive covenants and
other terms having a material adverse effect on the Company's business,
financial condition and results of operations. Purchasers of Common Stock in
the Offering will not receive any portion of the distributions to the
stockholders of Manhattan LLC prior to the Restructuring. See "Conversion from
Limited Liability Company Status and Related Distributions," "Use of
Proceeds," "Certain Transactions" and Notes 1 and 9 of Notes to Financial
Statements.     
 
  INTELLECTUAL PROPERTY RIGHTS. The Company relies on a combination of
copyright, trade secret, trademark, service mark and trade dress laws,
confidentiality procedures and contractual provisions to protect its
proprietary rights in its products and technology. There can be no assurance,
however, that the confidentiality agreements on which the Company relies to
protect
 
                                      12

<PAGE>
 
its trade secrets and proprietary technology will be adequate. Further, the
Company may be subject to additional risks as it enters into transactions in
countries where intellectual property laws are not well developed or are
poorly enforced. Legal protections of the Company's rights may be ineffective
in such countries. Litigation to defend and enforce the Company's intellectual
property rights could result in substantial costs and diversion of resources
and could have a material adverse effect on the Company's business, financial
condition and results of operations, regardless of the final outcome of such
litigation. Despite the Company's efforts to safeguard and maintain its
proprietary rights both in the United States and abroad, there can be no
assurance that the Company will be successful in doing so, or that the steps
taken by the Company in this regard will be adequate to deter misappropriation
or independent third party development of the Company's technology or to
prevent an unauthorized third party from copying or otherwise obtaining and
using the Company's products or technology. Any such events could have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
  As the number of supply chain management applications in the industry
increases and the functionality of these products further overlaps, software
development companies like the Company may increasingly become subject to
claims of infringement or misappropriation of the intellectual property rights
of others. There can be no assurance that third parties will not assert
infringement or misappropriation claims against the Company in the future with
respect to current or future products. Any claims or litigation, with or
without merit, could be time-consuming, result in costly litigation, diversion
of management's attention and cause product shipment delays or require the
Company to enter into royalty or licensing arrangements. Such royalty or
licensing arrangements, if required, may not be available on terms acceptable
to the Company, if at all, which could have a material adverse effect on the
Company's business, financial condition and results of operations. Adverse
determinations in such claims or litigation could also have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Proprietary Rights."
 
  BROAD MANAGEMENT DISCRETION AS TO USE OF PROCEEDS. A substantial portion of
the net proceeds to be received by the Company in connection with the Offering
is allocated to working capital and general corporate purposes. Accordingly,
management will have broad discretion with respect to the expenditure of such
proceeds. Purchasers of shares of Common Stock offered hereby will be
entrusting their funds to the Company's management, upon whose judgment they
must depend, with limited information concerning the specific working capital
requirements and general corporate purposes to which the funds will ultimately
be applied. See "Use of Proceeds."
 
  CERTAIN ANTI-TAKEOVER PROVISIONS. The Board of Directors has authority to
issue up to 20,000,000 shares of preferred stock and to fix the rights,
preferences, privileges and restrictions, including voting rights, of the
preferred stock without further vote or action by the Company's stockholders.
The rights of the holders of the Common Stock will be subject to, and may be
adversely affected by, the rights of the holders of a preferred stock that may
be issued in the future. While the Company has no present intention to issue
shares of preferred stock, such issuance, while providing desired flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company. In addition, the
Company's Articles of Incorporation and Bylaws contain provisions that may
discourage proposals or bids to acquire the Company. These provisions could
have the effect of making it more difficult for a third party to acquire
control of the Company. See "Description of Capital Stock--Certain Articles of
Incorporation and Bylaw Provisions."
 
 
                                      13

<PAGE>
 
  SHARES ELIGIBLE FOR FUTURE SALE. Sales of a substantial number of shares of
Common Stock in the public market following the Offering could adversely
affect the market price of the Common Stock prevailing from time to time. The
number of shares of Common Stock available for sale in the public market is
limited by restrictions under the Securities Act of 1933, as amended (the
"Securities Act"), and lock-up agreements executed by officers, directors,
optionholders and all stockholders of the Company under which such security
holders have agreed not to sell or otherwise dispose of any of their shares
for a period of 180 days after the date of this Prospectus without the prior
written consent of Deutsche Morgan Grenfell Inc. In addition to the 3,000,000
shares of Common Stock offered hereby (assuming no exercise of the
Underwriters' over-allotment option), there will be 20,206,674 shares of
Common Stock outstanding as of the date of this Prospectus, all of which are
"restricted" shares under the Securities Act. As a result of the lock-up
agreements described above and the provisions of Rules 144(k), 144 and 701
promulgated under the Securities Act ("Rule 144(k)," "Rule 144" and "Rule
701," respectively), the restricted shares will be available for sale in the
public market as follows: (i) no shares will be eligible for immediate sale on
the date of this Prospectus, (ii) approximately 19,870,008 shares will become
eligible for sale 180 days after the date of this Prospectus (assuming no
release from the lock-up agreements) upon expiration of lock-up agreements and
(iii) approximately 336,666 shares will become eligible for sale in February
1999. In addition, the Company intends to register for offer and sale under
the Securities Act 5,729,784 shares of Common Stock issued or issuable under
the Company's stock option plans and other stock options. See "Shares Eligible
for Future Sale" and "Underwriting."
 
  NO PRIOR PUBLIC MARKET FOR COMMON STOCK; POSSIBLE VOLATILITY OF STOCK
PRICE. Prior to the Offering, there has been no public market for the Common
Stock. Although the Company has made application for the quotation of the
Common Stock on the Nasdaq National Market, there can be no assurance that an
active trading market will develop or be sustained after the Offering. In the
event that the Company fails to appoint two independent Directors within 90
days after the Offering, Nasdaq could terminate the listing of the Common
Stock on the Nasdaq National Market, which would have a material adverse
effect on the liquidity and trading price of the Common Stock. The initial
public offering price of the Common Stock offered hereby will be determined by
negotiation between the Company, the Selling Stockholders and the Underwriters
and may bear no relationship to the market price of the Common Stock after the
Offering. The market price of the Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results and
other factors. In addition, the securities markets and, in particular the high
technology stock market sector, have experienced significant price and volume
fluctuations from time to time that have often been unrelated or
disproportionate to the operating performance of particular companies. These
broad fluctuations may adversely affect the market price of the Common Stock.
See "Underwriting."
 
  DILUTION. The purchasers of the Common Stock offered hereby will experience
immediate and significant dilution in the pro forma net tangible book value of
the Common Stock from the initial pubic offering price. See "Dilution."
 
  YEAR 2000 COMPLIANCE. Many currently installed computer systems and software
products are coded to accept only two digit entries in the date code field.
Beginning in the year 2000, these date code fields will need to accept four
digit entries to distinguish twenty-first century dates from twentieth century
dates. As a result, over the next two years, computer systems and/or software
used by many companies may need to be upgraded to comply with such "Year 2000"
requirements. Significant uncertainty exists in the software industry
concerning the potential effects associated with such compliance. The latest
versions of the Company's products are designed to be Year 2000 compliant. The
Company is in the process of determining
 
                                      14

<PAGE>
 
the extent to which its earlier software products as implemented in the
Company's installed customer base are Year 2000 compliant, as well as the
impact of any non-compliance on the Company and its customers. The Company
does not currently believe that the effects of any Year 2000 non-compliance in
the Company's installed base of software will result in a material adverse
effect on the Company's business, financial condition or results of
operations. However, the Company's investigation is in its preliminary stages,
and no assurance can be given that the Company will not be exposed to
potential claims resulting from system problems associated with the century
change. There can also be no assurance that the Company's software products
that are designed to be Year 2000 compliant contain all necessary date code
changes.
 
  The Company believes that the purchasing patterns of customers and potential
customers may be affected by Year 2000 issues in a variety of ways. Many
companies are expending significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may
result in reduced funds available to purchase software products such as those
offered by the Company. Potential customers may also choose to defer
purchasing Year 2000 compliant products until they believe it is absolutely
necessary, thus potentially resulting in stalled market sales within the
industry. Conversely, Year 2000 issues may cause other companies to accelerate
purchases, thereby causing an increase in short-term demand and a consequent
decrease in long-term demand for software products. Additionally, Year 2000
issues could cause a significant number of companies, including current
Company customers, to reevaluate their current software needs and as a result
switch to other systems or suppliers. Any of the foregoing could result in a
material adverse effect on the Company's business, financial condition and
results of operations.
 
                                      15

<PAGE>
 
  CONVERSION FROM LIMITED LIABILITY COMPANY STATUS AND RELATED DISTRIBUTIONS
 
  Manhattan LLC was formed by the contribution of the assets, liabilities and
intellectual property rights of Pegasys and the contribution of certain
intellectual property rights of the other founders of Manhattan LLC. Manhattan
LLC has operated as a limited liability company ("LLC") taxable as a
partnership under the provisions of the Internal Revenue Code of 1986, as
amended (the "Code") and comparable provisions of state income tax laws. An
LLC which is taxable as a partnership under the Code is generally not subject
to income tax at the entity level. Instead, an LLC's taxable income generally
passes through to its owners and is taxed to such owners as personal income.
Historically, Manhattan LLC has distributed its earnings to its owners as the
Company's working capital needs permitted. Since the Company's working capital
needs are anticipated to be satisfied for at least the next twelve months by
the proceeds of this Offering, prior to this Offering Manhattan LLC will
disburse its accumulated earnings to its owners.
   
  As of the date of this Prospectus, the assets and liabilities of Manhattan
LLC will be contributed to the Company in exchange for Common Stock of the
Company. Manhattan LLC will then distribute the Common Stock of the Company
received to its stockholders as of the date of this Prospectus and Manhattan
LLC will subsequently be dissolved. After the Restructuring, the Company will
be taxable for federal and state income tax purposes as a "C" corporation. The
transfer of assets and liabilities to Manhattan LLC as part of the
Restructuring is intended to qualify as a tax-free transfer under Section 351
of the Code, pursuant to which the Company will not recognize any gain or loss
for federal income tax purposes. Purchasers of the Common Stock in the
Offering will not receive any portion of the Common Stock distributed to the
stockholders of Manhattan LLC in connection with the Restructuring.     
 
  Prior to the completion of the Offering, the Company intends to distribute
all undistributed earnings, calculated on a tax basis, to the stockholders of
Manhattan LLC. As of December 31, 1997, the undistributed earnings, calculated
on a tax basis, of the Company was $8.7 million and the Company expects to
accumulate additional undistributed earnings from January 1, 1998 through the
date of the Restructuring. These distributions will be funded through a series
of payments from available Company cash and from the proceeds of a line of
credit the Company has established. It is anticipated that any such advances
or balance on the line of credit incurred to fund these distributions will be
repaid using a portion of the net proceeds of the Offering. Purchasers of the
Common Stock in the Offering will not receive any portion of the distributions
to the stockholders of Manhattan LLC prior to the Restructuring. See "Risk
Factors--Conversion from Limited Liability Company ("LLC") Status and
Utilization of Significant Portion of the Offering Proceeds to Satisfy
Indebtedness Incurred to Fund Distributions to Current Stockholders" and "Use
of Proceeds."
 
 
                                      16

<PAGE>
 

                                USE OF PROCEEDS
 
  The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered by the Company hereby are estimated to be approximately
$29.5 million, assuming an initial public offering price of $11.00 per share
and after deducting estimated underwriting discounts and estimated expenses
payable by the Company in connection with the Offering.
 
  From the net proceeds of the Offering, the Company will repay any amounts
outstanding under its line of credit. The line of credit provides for the
Company to borrow, subject to certain conditions, up to $8,000,000, secured by
certain of the assets of the Company, at an interest rate of the commercial
lender's prime rate plus one-half percent per year. As of March 31, 1998, the
Company had no advances outstanding under this line of credit. This line of
credit, in part, will be used to fund the LLC Distribution and to make
additional distributions to the stockholders of Manhattan LLC based on income
earned from January 1, 1998 through the date of the Restructuring. See "Risk
Factors--Conversion from Limited Liability Company ("LLC") Status and
Utilization of Significant Portion of the Offering Proceeds to Satisfy
Indebtedness Incurred to Fund Distributions to Current Stockholders,"
"Conversion from Limited Liability Company Status and Related Distributions"
and "Certain Transactions."
 
  In addition, the Company will use a portion of the net proceeds of the
Offering to repay a Grid Promissory Note (the "1995 Note") payable to its
Chairman of the Board, Chief Executive Officer and President, Alan J.
Dabbiere. The 1995 Note is payable on demand and bears interest at a rate of
5% per year. As of February 28, 1998, the balance of the 1995 Note (including
accrued interest) was $1,937,000.
 
  The remaining net proceeds will be used for working capital and other
general corporate purposes. Such purposes may include the funding of new
product development efforts and possible acquisitions of, or investments in,
businesses and technologies that are complementary to those of the Company.
The Company has no specific agreements, commitments or understandings with
respect to any such acquisitions or investments. The amounts actually expended
for each purpose may vary significantly and are subject to change at the
Company's discretion depending upon certain factors, including economic or
industry conditions, changes in the competitive environment and strategic
opportunities that may arise. Pending application of the net proceeds as
described above, the Company intends to invest the net proceeds of the
Offering in interest-bearing securities. See "Risk Factors--Broad Management
Discretion as to Use of Proceeds" and "Business--Strategy."
 

                                DIVIDEND POLICY
 
  The Company historically has made distributions to its stockholders related
to its limited liability company status and the resulting tax payment
obligations imposed on its stockholders. Other than the distributions to be
made as described under "Conversion from Limited Liability Company Status and
Related Distributions," the Company does not intend to declare or pay cash
dividends in the foreseeable future. Management anticipates that all earnings
and other cash resources of the Company, if any, will be retained by the
Company for investment in its business. The Company is prevented by its line
of credit agreement from paying cash dividends without the consent of its
commercial lender.
 
                                      17

<PAGE>
 

                                CAPITALIZATION
   
  The following table sets forth at December 31, 1997, the short-term
obligations and capitalization of the Company on an actual, pro forma and pro
forma as adjusted basis. This table should be read in conjunction with the
Company's Financial Statements and the Unaudited Pro Forma Balance Sheet and
Notes thereto, appearing elsewhere in this Prospectus.     
 

<TABLE>   
<CAPTION>
                                                      DECEMBER 31, 1997
                                               ---------------------------------
                                                                    PRO FORMA AS
                                               ACTUAL  PRO FORMA(1) ADJUSTED(2)
                                               ------  ------------ ------------
                                                 (IN THOUSANDS, EXCEPT SHARE
                                                            DATA)
<S>                                            <C>     <C>          <C>
Note payable to stockholder, current portion.  $1,019     $1,019      $   --
                                               ======     ======      =======
Stockholders' equity:
  Preferred stock, no par value; 20,000,000
   shares authorized; no shares issued or
   outstanding actual, pro forma and pro
   forma as adjusted.........................     --         --           --
  Common stock, $.01 par value; 100,000,000
   shares authorized actual, pro forma and
   pro forma as adjusted, 20,000,008 shares
   issued and outstanding, actual, 20,206,674
   shares issued and outstanding, pro forma;
   23,206,674 shares issued and outstanding,
   pro forma as adjusted(3)..................     200        202          232
  Additional paid-in capital.................   1,459      3,524       32,984
  Retained earnings..........................   7,458     (3,648)      (3,648)
  Deferred compensation......................    (663)      (663)        (663)
                                               ------     ------      -------
    Total stockholders' equity...............   8,454       (585)      28,905
                                               ------     ------      -------
      Total capitalization...................  $8,454     $ (585)     $28,905
                                               ======     ======      =======
</TABLE>
    
- --------
   
(1) Pro forma to reflect (i) the payment of cash of $2.2 million and the
    issuance of 106,666 shares of Common Stock valued at $10.00 per share in
    connection with the PAC Acquisition, (ii) the charge to income for
    acquired research and development of $2.1 million in connection with the
    PAC Acquisition, (iii) the Stockholder Investment, (iv) the establishment
    of net deferred tax assets in connection with the Restructuring, and (v)
    the payment of the LLC Distribution. See "Management's Discussion and
    Analysis of Financial Condition and Results of Operations", "Conversion
    from Limited Liability Company Status and Related Distribution" and Note 3
    of Note to Financial Statements and Unaudited Pro Forma Balance Sheet and
    Notes thereto included elsewhere in this Prospectus.     
(2) Pro forma as adjusted to reflect the sale by the Company of the 3,000,000
    shares of Common Stock offered hereby at an assumed initial public
    offering price of $11.00 per share and the receipt of the estimated net
    proceeds therefrom. See "Use of Proceeds."
(3) Excludes (i) 3,355,716 shares of Common Stock issuable upon the exercise
    of options outstanding at February 28, 1998 under the LLC Option Plan at a
    weighted average exercise price of $4.66 per share, (ii) 729,784 shares of
    Common Stock issuable upon the exercise of options outstanding at February
    28, 1998 issued outside of the LLC Option Plan at a weighted average
    exercise price of $1.20 per share, and (iii) 1,644,284 reserved for future
    issuance under the Company's Stock Incentive Plan (the "Stock Incentive
    Plan"). See "Management-Stock Option Plans" and Note 6 of Notes to
    Financial Statements.
 
                                      18

<PAGE>
 
                                   DILUTION
 
  As of December 31, 1997, the net tangible book value of the Company was
approximately $8.3 million, or $0.42 per share of Common Stock. The pro forma
net tangible book deficit as of December 31, 1997 was approximately $1.5
million or $0.08 per share. Pro forma net tangible book value (deficit) per
share represents the amount of the Company's total tangible assets less total
liabilities, divided by the number of shares of Common Stock outstanding after
giving effect to the PAC Acquisition, the Stockholder Investment, the
establishment of the deferred tax assets in connection with the
Recapitalization and the payments of the LLC Distribution. After giving effect
to the sale by the Company of the 3,000,000 shares of Common Stock offered
hereby at an assumed initial public offering price of $11.00 per share and the
application of the estimated net proceeds therefrom after deducting the
estimated underwriting discount and estimated offering expenses, the pro forma
net tangible book value of the Company at December 31, 1997 would have been
approximately $28.0 million, or $1.21 per share of Common Stock. This
represents an immediate increase in net tangible book value of $1.29 per share
to existing stockholders and an immediate decrease in net tangible book value
of $9.79 per share to new investors. The following table illustrates this
unaudited per share dilution to new investors:
 

<TABLE>
   <S>                                                           <C>     <C>
   Assumed initial public offering price per share..............         $11.00
     Net book value per share as of December 31, 1997........... $ 0.42
     Decrease per share attributable to pro forma adjustments...  (0.50)
                                                                 ------
     Pro forma net tangible book deficit per share as of
      December 31, 1997.........................................  (0.08)
     Increase in net book value per share attributable to new
      investors.................................................   1.29
                                                                 ------
   Pro forma net tangible book value per share as of December
    31, 1997 after the Offering.................................           1.21
                                                                         ------
   Dilution per share to new investors..........................         $ 9.79
                                                                         ======
</TABLE>

  The following table sets forth, as of December 31, 1997, on a pro forma
basis, after giving effect to the number of shares issued in the PAC
Acquisition and the Stockholder Investment, the number of shares of Common
Stock previously issued by the Company, the total consideration reflected in
the accounts of the Company and the average price per share to the existing
stockholders and new investors, assuming the sale by the Company of 3,000,000
shares of Common Stock at an assumed initial public offering price of $11.00
per share, and before deducting the estimated underwriting discounts and
estimated offering expenses:
 

<TABLE>   
<CAPTION>
                             SHARES PURCHASED  TOTAL CONSIDERATION
                            ------------------ ------------------- AVERAGE PRICE
                              NUMBER   PERCENT   AMOUNT    PERCENT   PER SHARE
                            ---------- ------- ----------- ------- -------------
<S>                         <C>        <C>     <C>         <C>     <C>
Existing stockholders...... 20,206,674   87.1% $ 3,060,000    8.0%    $ 0.15
New investors..............  3,000,000   12.9   33,000,000   92.0      11.00
                            ----------  -----  -----------  -----
  Total.................... 23,206,674  100.0% $36,060,000  100.0%
                            ==========  =====  ===========  =====
</TABLE>
    
 
  Assuming full exercise of the Underwriters' over-allotment option, the
percentage of shares held by existing stockholders would be 85.1% of the total
number of shares of Common Stock to be outstanding after the Offering, and the
number of shares held by new stockholders would be increased to 3,450,000
shares, or 14.9% of the total number of shares of Common Stock to be
outstanding after the Offering. See "Risk Factors--Dilution," "Management" and
"Principal and Selling Stockholders."
 
  The calculation of net tangible book value and the other computations above
assume no exercise of outstanding options. The Company has options outstanding
at February 28, 1998 to acquire 4,085,500 shares at exercise prices ranging
from $0.24 to $10.00 per share and a weighted average exercise price of $4.02
per share. The exercise of these options will have the effect of increasing
the net tangible book value dilution of new investors in the Offering.
 
                                      19

<PAGE>
 
                            SELECTED FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
  The selected financial data of the Company set forth below should be read in
conjunction with the financial statements of the Company, including the Notes
thereto, and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere herein. The statement of income data
for the years ended December 31, 1995, 1996, and 1997, and the balance sheet
data as of December 31, 1996, and 1997, are derived from, and are qualified by
reference to, the audited financial statements included elsewhere in this
Prospectus. The balance sheet data as of December 31, 1995 is derived from the
audited balance sheet not included herein. The statement of income data for
the years ended December 31, 1993 and 1994, and the balance sheet data as of
December 31, 1993 and 1994 are derived from the Company's unaudited financial
statements not included herein. In the opinion of management, the unaudited
financial statements have been prepared on a basis consistent with the
financial statements which appear elsewhere in the Prospectus, and include all
adjustments, consisting only of normal recurring adjustments necessary for a
fair statement of the financial position and results of operations for these
unaudited years. Historical and pro forma results are not necessarily
indicative of results to be expected in the future.
 

<TABLE>   
<CAPTION>
                                                 YEAR ENDED DECEMBER 31,
                                         ---------------------------------------
                                          1993    1994    1995    1996    1997
                                         ------- ------- ------- ------- -------
<S>                                      <C>     <C>     <C>     <C>     <C>
STATEMENT OF INCOME DATA:
 Revenue:
 Software license......................  $ 1,018 $ 1,781 $ 2,463 $ 3,354 $ 7,160
 Services..............................      814   1,587   3,503   6,236  14,411
 Hardware..............................    1,477   3,144   5,255   4,810  10,886
                                         ------- ------- ------- ------- -------
  Total revenue........................    3,309   6,512  11,221  14,400  32,457
 Cost of revenue:
 Software license......................        2       2       6     177     461
 Services..............................      731   1,293   1,740   2,026   6,147
 Hardware..............................    1,278   2,457   3,991   3,734   8,001
                                         ------- ------- ------- ------- -------
  Total cost of revenue................    2,011   3,752   5,737   5,937  14,609
                                         ------- ------- ------- ------- -------
 Gross margin..........................    1,298   2,760   5,484   8,463  17,848
 Operating expenses:
 Research and development..............      168     328   1,138   1,236   3,025
 Sales and marketing...................      368     526   1,147   1,900   3,570
 General and administrative............      341     414   1,058   1,454   2,975
                                         ------- ------- ------- ------- -------
  Total operating expenses.............      877   1,268   3,343   4,590   9,570
                                         ------- ------- ------- ------- -------
 Income from operations................      421   1,492   2,141   3,873   8,278
 Other income, net.....................        2       5      40     103      56
                                         ------- ------- ------- ------- -------
 Income before pro forma income taxes..      423   1,497   2,181   3,976   8,334
 Pro forma income taxes................      162     564     800   1,486   3,023
                                         ------- ------- ------- ------- -------
 Pro forma net income(1)...............  $   261 $   933 $ 1,381 $ 2,490 $ 5,311
                                         ======= ======= ======= ======= =======
 Historical diluted net income per
  share................................  $  0.02 $  0.08 $  0.11 $  0.20 $  0.40
 Shares used in computing historical
  net income per share.................   20,000  20,000  20,010  20,308  20,761
 Pro forma diluted net income per
  share(2).............................                                  $  0.25
 Shares used in computing pro forma
  diluted net income per share(2)......                                   20,951
</TABLE>
    
 

<TABLE>
<CAPTION>
                                           DECEMBER 31,             PRO FORMA
                                 --------------------------------- DECEMBER 31,
                                 1993  1994   1995   1996   1997     1997(3)
                                 ---- ------ ------ ------ ------- ------------
<S>                              <C>  <C>    <C>    <C>    <C>     <C>
BALANCE SHEET DATA:
Working capital (deficit)....... $470 $1,974 $3,199 $4,116 $ 6,268   $(3,553)
Total assets....................  747  2,949  5,332  7,276  15,006    13,409
Total Stockholders' equity
 (deficit)......................  500  1,997  3,755  4,882   8,454      (585)
</TABLE>

- --------
(1) In connection with the Restructuring, the Company will be subject to
    federal and state corporate income taxes. Pro forma net income is
    presented as if the Company had been subject to corporate income taxes for
    all periods presented. See "Conversion From Limited Liability Company
    Status and Related Distributions" and Notes 3 and 9 of Notes to Financial
    Statements.
(2) See Note 1 of Notes to Financial Statements.
   
(3) Pro forma to reflect the PAC Acquisition as if it had occurred on January
    1, 1997 for $2.2 million in cash and 106,666 shares of Common Stock valued
    at $10.00 per share. Pro forma includes the historical results for the
    Company and PAC adjusted for (i) the charge to income for acquired
    research and development of $2.1 million and (ii) increased amortization
    of $210,000 for purchased software and intangible assets amortized over a
    three and seven year life, respectively. See "Management's Discussion and
    Analysis of Financial Condition and Results of Operations" and Unaudited
    Pro Forma Balance Sheet and Notes thereto included elsewhere in this
    Prospectus.     
 
                                      20

<PAGE>
 

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
  The following discussion should be read in conjunction with the Selected
Financial Data and the Financial Statements and Notes thereto included
elsewhere in this Prospectus. Certain statements in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations" are
forward-looking statements. The forward-looking statements contained herein
are based on current expectations and entail various risks and uncertainties
that could cause actual results to differ materially from those expressed in
such forward-looking statements. For a more detailed discussion of these and
other business risks, see "Risk Factors."
 
OVERVIEW
 
  Manhattan provides information technology solutions for distribution centers
that are designed to enable the efficient movement of goods through the supply
chain. The Company's solutions are designed to optimize the receipt, storage
and distribution of inventory and the management of equipment and personnel
within a distribution center, and to meet the increasingly complex information
requirements of manufacturers, distributors and retailers. The Company's
solutions consist of software, including PkMS, a comprehensive and modular
software system; services, including design, configuration, implementation,
training and support; and hardware. The Company currently provides solutions
to manufacturers, distributors and retailers primarily in the apparel,
consumer products, food service and grocery markets.
 
  The Company's revenue consists of revenue from the licensing of PkMS; fees
for consulting, implementation, training and maintenance services; and revenue
from the resale of complementary radio frequency and computer equipment. In
recent years, the Company has experienced an increase in services revenue and
a decrease in hardware revenue as a percentage of total revenue. Services
revenue generally provides the Company with greater profit margins than
hardware revenue. The change in the composition of the Company's total revenue
has resulted in an increase in the Company's gross margin resulting in
increased net income.
 
  The Company recognizes software license revenue in accordance with the
provisions of American Institute of Certified Public Accountants Statement of
Position No. 91-1, SOFTWARE REVENUE RECOGNITION. Accordingly, software license
revenue is recognized upon shipment of the software following execution of a
contract, provided that no significant vendor obligations remain outstanding,
amounts are due within one year, and collection is considered probable by
management. If significant post-delivery obligations exist, the software
license revenue, as well as other components of the contract, are recognized
using contract accounting.
 
  The Company's services revenue consists of revenue generated from services
and maintenance related to the Company's software solutions. Services revenue
is derived from fees based on consulting, implementation and training services
contracted under separate service agreements. Revenue related to consulting,
implementation and training services performed by the Company are recognized
as the services are performed. Maintenance revenue represents amounts paid,
generally in advance, by users for the support and enhancements to the
software. Maintenance revenue is recognized ratably over the term of the
maintenance agreement, typically 12 months.
 
  Hardware revenue is generated from the resale of a variety of hardware
products, developed and manufactured by third parties, that are integrated
with and complementary to the Company's software solution. As part of a
complete distribution center management solution, the Company's customers
frequently purchase hardware from the Company in
 
                                      21

<PAGE>
 
conjunction with the licensing of PkMS. These products include computer
hardware, radio frequency terminal networks, bar code printers and scanners
and other peripherals. Hardware revenue is recognized upon shipment. The
Company generally purchases hardware from its vendors only after receiving an
order from a customer. As a result, the Company does not maintain hardware
inventory in any significant amounts.
 
  As a result of the election to report as a limited liability company that is
treated as a partnership for income tax purposes, the Company has not been
subject to federal and state income taxes. Pro forma net income amounts
discussed herein include additional provisions for income taxes on a pro forma
basis as if the Company were liable for federal and state income taxes as a
taxable corporate entity throughout the years presented. The pro forma tax
provision is calculated by applying the Company's statutory tax rate to pretax
income, adjusted for permanent tax differences. The Company's status as a
limited liability company will terminate immediately prior to the
effectiveness of the Offering and the Company will thereafter be taxed as a
business corporation.
   
  On February 16, 1998, the Company purchased all of the outstanding stock of
Performance Analysis Corporation ("PAC") for approximately $2.2 million in
cash and 106,666 shares of the Company's Common Stock valued at $10.00 per
share. PAC is a developer of distribution center slotting software. The
acquisition will be accounted for as a purchase. The purchase price of
approximately $3.3 million has been allocated to the assets acquired and
liabilities assumed, including acquired research and development of
approximately $2.1 million, purchased software of $500,000, and other
intangible assets of $300,000. Purchased software will be amortized over an
estimated three-year useful life and other intangible assets will be amortized
over a seven-year period. In connection with the PAC Acquisition, the Company
will record a charge to income of $2.1 million in the first quarter of 1998
for acquired research and development. The financial results referred to
herein reflect the historical results of the Company. The results have not
been adjusted on a pro forma basis to reflect the acquisition of PAC. PAC is
currently in the process of developing a Windows-NT version of its existing
product, SLOT-IT. In addition, the Company plans to focus development efforts
on integrating the SLOT-IT application into a future product. The Company
currently estimates the cost to complete the development of the Windows NT
version of SLOT-IT and to fully integrate the product into PkMS to range from
approximately $500,000 to $1,000,000. The Company expects to complete
development and to begin to benefit from the acquired project in the last half
of 1999. There are no assurances that the Company will be able to successfully
complete these projects or that such products, if completed, will achieve
market acceptance. If such projects are unsuccessful, the Company's business,
financial condition and results of operations would likely be materially
adversely affected.     
 
  In addition, on February 16, 1998, the Company received an investment of
$1.0 million by Deepak Raghavan, the Chief Technology Officer and a Director
of the Company. This investment provided the Company with additional working
capital. In exchange for his investment, Mr. Raghavan received 100,000 shares
of the Common Stock of the Company.
 
                                      22

<PAGE>
 
RESULTS OF OPERATIONS
 
  The following table sets forth certain operating data as a percentage of
total revenue for the years indicated:
 

<TABLE>   
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                      -------------------------
                                                       1995     1996     1997
                                                      -------  -------  -------
<S>                                                   <C>      <C>      <C>
STATEMENT OF INCOME DATA:
Revenue:
 Software license....................................    22.0%    23.3%    22.1%
 Services............................................    31.2     43.3     44.4
 Hardware............................................    46.8     33.4     33.5
                                                      -------  -------  -------
  Total revenue......................................   100.0    100.0    100.0
                                                      -------  -------  -------
Cost of revenue:
 Software license....................................      --      1.2      1.4
 Services............................................    15.5     14.1     18.9
 Hardware............................................    35.6     25.9     24.7
                                                      -------  -------  -------
  Total cost of revenue..............................    51.1     41.2     45.0
                                                      -------  -------  -------
Gross margin.........................................    48.9     58.8     55.0
Operating expenses:
 Research and development............................    10.1      8.6      9.3
 Sales and marketing.................................    10.2     13.2     11.0
 General and administrative..........................     9.4     10.1      9.2
                                                      -------  -------  -------
  Total operating expenses...........................    29.7     31.9     29.5
                                                      -------  -------  -------
Income from operations...............................    19.2     26.9     25.5
Other income, net....................................     0.3      0.7      0.2
                                                      -------  -------  -------
Income before pro forma income taxes.................    19.5     27.6     25.7
 Pro forma income taxes..............................     7.2     10.3      9.3
                                                      -------  -------  -------
Pro forma net income.................................    12.3%    17.3%    16.4%
                                                      =======  =======  =======
</TABLE>
    
 
YEARS ENDED DECEMBER 31, 1997 AND 1996
 
 REVENUE
 
  Total revenue increased 125.4% to $32.5 million in 1997 from $14.4 million
in 1996. Total revenue consists of software license revenue, revenue derived
from consulting, maintenance and other services and revenue from the sale of
hardware.
 
    Software License. Software license revenue increased 113.5% to $7.2
  million in 1997 from $3.4 million in 1996. The increase in revenue from
  software licenses was primarily due to an increase in the number of
  licenses of the Company's PkMS product and an increase in the average price
  of software licenses. The increase in the average price of software
  licenses is primarily due to increased product functionality and market
  acceptance of PkMS.
 
    Services. Services revenue increased 131.1% to $14.4 million in 1997 from
  $6.2 million in 1996. The increase in revenue from services was principally
  due to the increased demand for these services resulting from the increased
  demand for the Company's PkMS product.
 
    Hardware. Hardware revenue increased 126.3% to $10.9 million in 1997 from
  $4.8 million in 1996. The increase in revenue from hardware was principally
  due to the increased demand for the Company's PkMS product.
 
                                      23

<PAGE>
 
 Cost of Revenue
 
    COST OF SOFTWARE LICENSE. Cost of software license revenue consists of
  the costs of software reproduction and delivery, media, packaging,
  documentation and other related costs and the amortization of capitalized
  software. Cost of software license revenue increased to $461,000, or 6.4%
  of software license revenue, in 1997 from $177,000, or 5.3% of software
  license revenue, in 1996. As a percentage of software license revenue, cost
  of software license revenue remained relatively constant in 1997 as
  compared to 1996.
 
    COST OF SERVICES. Cost of services revenue consists primarily of
  consultant salaries and other personnel-related expenses incurred in system
  implementation projects and software support services. Cost of services
  revenue increased to $6.2 million, or 42.7% of services revenue, in 1997
  from $2.0 million, or 32.5% of services revenue, in 1996. The increase in
  cost of services revenue as a percentage of services revenue is principally
  due to an increase in services personnel, which resulted in an initial
  increase in non-billable time incurred for training of these new personnel.
 
    COST OF HARDWARE. Cost of hardware revenue increased to $8.0 million, or
  73.5% of hardware revenue, in 1997 from $3.7 million, or 77.6% of hardware
  revenue, in 1996. The decrease in the cost of hardware as a percentage of
  hardware revenue is principally due to an increase in sales of hardware
  products with higher gross margins as compared to the prior year.
 
 Operating Expenses
 
    RESEARCH AND DEVELOPMENT. Research and development expenses principally
  consist of salaries and other personnel-related costs for personnel
  involved in the Company's product development efforts. The Company's
  research and development expenses increased by 144.7% to $3.0 million in
  1997, or 9.3% of total revenue, from $1.2 million in 1996, or 8.6% of total
  revenue. The increase in research and development expenses resulted from
  the addition of research and development personnel in 1997. Significant
  product development efforts include the continued development of PkMS and
  the development of a client/server version of PkMS. The Company believes
  that a continued commitment to product development will be required for the
  Company to remain competitive and expects the dollar amount of research and
  development expenses to increase in the near future.
 
    SALES AND MARKETING. Sales and marketing expenses include salaries,
  commissions and other personnel-related costs, travel expenses, advertising
  programs and other promotional activities. Sales and marketing expenses
  increased by 87.9% to $3.6 million in 1997, or 11.0% of total revenue, from
  $1.9 million in 1996, or 13.2% of total revenue. The increase in sales and
  marketing expenses was the result of additional sales and marketing
  personnel, an increase in sales commissions and expanded marketing program
  activities.
 
    GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
  primarily of salaries and other personnel-related costs of executive and
  financial personnel, as well as facilities, legal, insurance, accounting
  and other administrative expenses. General and administrative expenses
  increased by 104.6% to $3.0 million in 1997, or 9.2% of total revenue, from
  $1.5 million in 1996, or 10.1% of total revenue. The increase in general
  and administrative expenses was principally due to increased staffing and
  other administrative expenses necessary to support the Company's growth.
 
 Income Taxes
 
    PRO FORMA PROVISION FOR INCOME TAXES. The pro forma provision for income
  taxes was $3.0 million in 1997, as compared to $1.5 million in 1996, as a
  result of the Company's substantially increased income in 1997.
 
                                      24

<PAGE>
 
YEARS ENDED DECEMBER 31, 1996 AND 1995
 
 REVENUE
 
  Total revenue increased 28.3% to $14.4 million in 1996 from $11.2 million in
1995. The increase in total revenue was primarily due to an increase in
revenue from services and an increase in revenue from software licenses.
 
    Software License. Software license revenue increased 36.2% to $3.4
  million in 1996 from $2.5 million in 1995. The increase in revenue from
  software licenses was due to increased acceptance of the Company's products
  and an increase in the average price of software licenses. The increase in
  the average price of software licenses is primarily due to increased
  product functionality and market acceptance of PkMS.
 
    Services. Services revenue increased 78.0% to $6.2 million in 1996 from
  $3.5 million in 1995. The increase in revenue from services was primarily
  due to the increased demand for these services resulting from the increase
  in the number of PkMS licenses in 1996.
 
    Hardware. Hardware revenue decreased 8.5% to $4.8 million in 1996 from
  $5.3 million in 1995. The decrease in revenue from hardware was due to
  higher proportional demand for hardware products in 1995 as compared to
  1996.
 
 COST OF REVENUE
 
    Cost of Software License. Cost of software license revenue increased to
  $177,000, or 5.3% of software license revenue, in 1996 from $6,000, or 0.2%
  of software license revenue, in 1995. The increase in cost of software
  license revenue as a percentage of software license revenue was principally
  due to an increase in the amortization expense of capitalized software.
 
    Cost of Services. Cost of services revenue increased to $2.0 million, or
  32.5% of services revenue, in 1996 from $1.7 million, or 49.7% of services
  revenue, in 1995. The decrease in cost of services revenue as a percentage
  of services revenue was principally due to improved utilization of services
  employees as the Company realized increased operating leverage from its
  services.
 
    Cost of Hardware. Cost of hardware revenue decreased to $3.7 million, or
  77.6% of hardware revenue, in 1996 from $4.0 million, or 75.9% of hardware
  revenue, in 1995. The increase in the cost of hardware revenue as a
  percentage of hardware revenue in 1996 as compared to 1995 was attributable
  to an increase in the volume of sales of hardware products with lower gross
  margins as compared to the prior year.
 
 OPERATING EXPENSES
 
    Research and Development. The Company's research and development expenses
  increased by 8.6% to $1.2 million in 1996, or 8.6% of total revenue, from
  $1.1 million in 1995, or 10.1% of total revenue. The increase in research
  and development expenses was principally due to the addition of development
  personnel to enhance existing products and for new product development
  efforts.
 
    Sales and Marketing. Sales and marketing expenses increased by 65.7% to
  $1.9 million in 1996, or 13.2% of total revenue, from $1.2 million in 1995,
  or 10.2% of total revenue. The increase in sales and marketing expenses was
  principally due to the addition of sales and marketing personnel, an
  increase in sales commissions associated with increased revenue and to
  increased marketing program activities.
 
                                      25

<PAGE>
 
    GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
  by 37.4% to $1.5 million in 1996, or 10.1% of total revenue, from $1.1
  million in 1995, or 9.4% of total revenue. The increase in general and
  administrative expenses was principally due to an increase in financial and
  administrative personnel and legal and accounting fees necessary to support
  the Company's growth.
 
 Income Taxes
     
    PRO FORMA PROVISION FOR INCOME TAXES. The pro forma provision for income
  taxes was $1.5 million in 1996 as compared to $800,000 in 1995, as a result
  of the Company's substantially increased income in 1996.     
 
YEARS ENDED DECEMBER 31, 1995 AND 1994
 
 Revenue
 
  Total revenue increased 72.3% to $11.2 million in 1995 from $6.5 million in
1994. The increase in total revenue was due to an increase in all areas of the
Company's business.
 
    SOFTWARE LICENSE. Software license revenue increased 38.3% to $2.5
  million in 1995 from $1.8 million in 1994. The increase in revenue from
  software licenses was due to increased acceptance of the Company's PkMS
  product and an increase in the average price of software licenses. The
  increase in the average price of software licenses is primarily due to
  increased product functionality and market acceptance of PkMS.
 
    SERVICES. Services revenue increased 120.7% to $3.5 million in 1995 from
  $1.6 million in 1994. The increase in revenue from services was principally
  attributable to an increased demand for these services resulting from the
  increase in the number of PkMS licenses in 1995.
 
    HARDWARE. Hardware revenue increased 67.1% to $5.3 million in 1995 from
  $3.1 million in 1994. The increase in revenue from hardware was due to an
  increased demand for the Company's PkMS product.
 
 Cost of Revenue
 
    COST OF SOFTWARE LICENSE. Cost of software license revenue increased to
  $6,000, or 0.2% of software license revenue, in 1995 from $2,000, or 0.1%
  of software license revenue, in 1994.
 
    COST OF SERVICES. Cost of services revenue increased to $1.7 million, or
  49.7% of services revenue, in 1995 from $1.3 million, or 81.5% of services
  revenue, in 1994. The decrease in cost of services revenue as a percentage
  of revenue is principally due to improved utilization of employees as the
  Company realized increased operating leverage from its services
  infrastructure.
 
    COST OF HARDWARE. Cost of hardware revenue increased to $4.0 million, or
  75.9% of hardware revenue, in 1995 from $2.5 million, or 78.1% of hardware
  revenue, in 1994. The decrease in the cost of hardware revenue as a
  percentage of hardware revenue is principally due to a decrease in the
  volume of sales of hardware products with lower margins as compared to the
  prior year.
 
 Operating Expenses
 
    RESEARCH AND DEVELOPMENT. The Company's research and development expenses
  increased by 247.0% to $1.1 million in 1995, or 10.1% of total revenue,
  from $328,000 in
 
                                      26

<PAGE>
 
  1994, or 5.0% of total revenue. The increase in research and development
  resulted from the addition of development personnel to enhance its products
  and for new product development efforts.
         
    SALES AND MARKETING. Sales and marketing expenses increased by 118.1% to
  $1.2 million in 1995, or 10.2% of total revenue, from $526,000 in 1994, or
  8.1% of total revenue. The increase in sales and marketing expenses was due
  to the addition of sales and marketing personnel and increased marketing
  expenses.
 
    GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
  by 155.6% to $1.1 million in 1995, or 9.4% of total revenue, from $414,000
  in 1994, or 6.4% of total revenue. The increase in general and
  administrative expenses was due to an increase in legal and accounting fees
  as well as other administrative expenses necessary to support the Company's
  growth.
 
 Income Taxes
     
    PRO FORMA PROVISION FOR INCOME TAXES. The pro forma provision for income
  taxes was $800,000 in 1995, as compared to $564,000 in 1994, as a result of
  the Company's increased income in 1995.     
 
                                      27

<PAGE>
 
QUARTERLY RESULTS OF OPERATIONS
 
  The following table presents certain unaudited quarterly statements of
income data for each of the Company's last eight quarters in the period ended
December 31, 1997, as well as the percentage of the Company's total revenue
represented by each item. The information has been derived from the Company's
audited Financial Statements. The unaudited quarterly Financial Statements
have been prepared on substantially the same basis as the audited Financial
Statements contained herein. In the opinion of management, the unaudited
quarterly Financial Statements include all adjustments, consisting only of
normal recurring adjustments that the Company considers to be necessary to
present fairly this information when read in conjunction with the Company's
Financial Statements and notes thereto appearing elsewhere herein. The results
of operations for any quarter are not necessarily indicative of the results to
be expected for any future period.
 

<TABLE>
<CAPTION>
                                                        QUARTER ENDED
                          -------------------------------------------------------------------------
                          MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
                            1996     1996     1996      1996     1997     1997     1997      1997
                          -------- -------- --------- -------- -------- -------- --------- --------
                                            (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                       <C>      <C>      <C>       <C>      <C>      <C>      <C>       <C>
STATEMENT OF INCOME
 DATA:
Revenue:
 Software license.......   $1,120   $  520   $  705    $1,009   $1,494   $1,833   $1,981    $1,852
 Services...............    1,301    1,489    1,808     1,638    2,509    3,466    3,820     4,616
 Hardware...............      963    1,453      878     1,516    2,241    2,469    3,081     3,095
                           ------   ------   ------    ------   ------   ------   ------    ------
 Total revenue..........    3,384    3,462    3,391     4,163    6,244    7,768    8,882     9,563
Cost of revenue:
 Software license.......       51       40       42        44       89      105      122       145
 Services...............      289      421      591       725      983    1,326    1,691     2,147
 Hardware...............      807    1,031      672     1,224    1,644    1,953    2,230     2,174
                           ------   ------   ------    ------   ------   ------   ------    ------
 Total cost of revenue..    1,147    1,492    1,305     1,993    2,716    3,384    4,043     4,466
                           ------   ------   ------    ------   ------   ------   ------    ------
Gross margin............    2,237    1,970    2,086     2,170    3,528    4,384    4,839     5,097
Operating expenses:
 Research and
  development...........      210      248      352       426      428      662      791     1,144
 Sales and marketing....      434      468      493       505      507      913      989     1,161
 General and
  administrative........      303      317      376       458      398      589      981     1,007
                           ------   ------   ------    ------   ------   ------   ------    ------
 Total operating
  expenses..............      947    1,033    1,221     1,389    1,333    2,164    2,761     3,312
                           ------   ------   ------    ------   ------   ------   ------    ------
Income from operations..    1,290      937      865       781    2,195    2,220    2,078     1,785
Other income, net.......       22       25       33        23       23       16        9         8
                           ------   ------   ------    ------   ------   ------   ------    ------
Income before pro forma
 income taxes...........    1,312      962      898       804    2,218    2,236    2,087     1,793
Pro forma income taxes..      491      359      336       300      804      811      757       651
                           ------   ------   ------    ------   ------   ------   ------    ------
Pro forma net income....   $  821   $  603   $  562    $  504   $1,414   $1,425   $1,330    $1,142
                           ======   ======   ======    ======   ======   ======   ======    ======
Pro forma diluted net
 income per share.......   $ 0.04   $ 0.03   $ 0.03    $ 0.02   $ 0.07   $ 0.07   $ 0.06    $ 0.05
                           ======   ======   ======    ======   ======   ======   ======    ======
Shares used in pro forma
 diluted net income per
 share .................   20,397   20,397   20,397    20,397   20,397   20,673   20,673    21,661
                           ======   ======   ======    ======   ======   ======   ======    ======
</TABLE>

 

<TABLE>
<CAPTION>
                                              AS A PERCENTAGE OF TOTAL REVENUE
                          -------------------------------------------------------------------------
                          MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
                            1996     1996     1996      1996     1997     1997     1997      1997
                          -------- -------- --------- -------- -------- -------- --------- --------
<S>                       <C>      <C>      <C>       <C>      <C>      <C>      <C>       <C>
Revenue:
 Software license.......    33.1%    15.0%     20.8%    24.2%    23.9%    23.6%     22.3%    19.4%
 Services...............    38.4     43.0      53.3     39.4     40.2     44.6      43.0     48.3
 Hardware...............    28.5     42.0      25.9     36.4     35.9     31.8      34.7     32.3
                           -----    -----     -----    -----    -----    -----     -----    -----
 Total revenue..........   100.0    100.0     100.0    100.0    100.0    100.0     100.0    100.0
Cost of revenue:
 Software license.......     1.5      1.2       1.3      1.1      1.4      1.4       1.4      1.5
 Services...............     8.6     12.2      17.4     17.4     15.7     17.1      19.0     22.4
 Hardware...............    23.8     29.7      19.8     29.4     26.3     25.1      25.1     22.7
                           -----    -----     -----    -----    -----    -----     -----    -----
 Total cost of revenue..    33.9     43.1      38.5     47.9     43.4     43.6      45.5     46.6
                           -----    -----     -----    -----    -----    -----     -----    -----
Gross margin............    66.1     56.9      61.5     52.1     56.6     56.4      54.5     53.4
Operating expenses:
 Research and
  development...........     6.2      7.2      10.4     10.2      6.9      8.5       8.9     12.0
 Sales and marketing....    12.9     13.5      14.5     12.1      8.1     11.7      11.1     12.1
 General and
  administrative........     8.9      9.2      11.1     11.1      6.4      7.6      11.0     10.5
                           -----    -----     -----    -----    -----    -----     -----    -----
 Total operating
  expenses..............    28.0     29.9      36.0     33.4     21.4     27.8      31.0     34.6
                           -----    -----     -----    -----    -----    -----     -----    -----
Income from operations..    38.1     27.0      25.5     18.7     35.2     28.6      23.5     18.8
Other income, net.......     0.7      0.7       1.0      0.6      0.3      0.2       0.1      0.1
                           -----    -----     -----    -----    -----    -----     -----    -----
Income before pro forma
 income taxes...........    38.8%    27.7%     26.5%    19.3%    35.5%    28.8%     23.6%    18.9%
                           =====    =====     =====    =====    =====    =====     =====    =====
</TABLE>

 
 
                                      28

<PAGE>
 
  The Company's operations and related revenue and operating results could
vary substantially from quarter to quarter. Among the factors causing these
potential variations are fluctuations in the demand for the Company's
products, the level of product and price competition in the Company's markets,
the length of the Company's sales process, the size and timing of individual
transactions, the mix of products and services sold, delays in, or
cancellations of, customer implementations, the Company's success in expanding
its services and customer support organizations as well as its direct sales
force and indirect distribution channels, the timing of new product
introductions and enhancements by the Company or its competitors, commercial
strategies adopted by competitors, changes in foreign currency exchange rates,
customers' budget constraints, the Company's ability to control costs and
general economic conditions. A substantial portion of the Company's operating
expenses, particularly personnel and facilities costs, are relatively fixed in
advance of any particular quarter. As a result, any delay in the recognition
of revenue may cause significant variations in operating results in any
particular quarter. In addition, an increase or decrease in hardware sales,
which provide the Company with lower gross margins than sales of software
licenses or services, may contribute to the variability of the Company's
operational results in any particular quarter. As a result of the foregoing
factors, the Company's operating results for a future quarter may be above or
below the expectations of public market analysts and investors. Should the
Company's revenue and operating results fall below expectations, the price of
the Company's Common Stock would be materially adversely affected. See "Risk
Factors--Potential Variability of Quarterly Operations and Financial Results."
 
  The Company's ability to undertake new projects and increase revenue is
substantially dependent on the availability of the Company's consulting
services personnel to assist in the implementation of the Company's software
solution. The Company believes that supporting greater-than-anticipated growth
in revenue would require the Company to rapidly hire additional skilled
personnel for the Company's consulting services group, and there can be no
assurance that qualified personnel could be located, trained or retained in a
timely and cost-effective manner.
 
  As a result of the foregoing and other factors, the Company believes that
quarter-to-quarter comparisons of results are not necessarily meaningful, and
such comparisons should not be relied upon as indications of future
performance. Fluctuations in operating results may also result in volatility
in the price of the shares of the Company's Common Stock. See "Risk Factors--
Potential Variability of Quarterly Operations and Financial Results," "--
Ability to Manage Growth" and "--New Management Team; Dependence on Key
Personnel."
 
LIQUIDITY AND CAPITAL RESOURCES
 
  Since inception, the Company has funded its operations to date primarily
through cash generated from operations. In addition, the Company has also
borrowed money from its majority shareholder. As of December 31, 1997, the
Company had $3.2 million in cash and cash equivalents.
 
  The Company's operating activities provided cash of $7.0 million in 1997,
$4.0 million in 1996 and $3.1 million in 1995. Cash from operating activities
arose principally from the Company's profitable operations and was utilized
for working capital purposes, principally increases in accounts receivable.
The increase in accounts receivable primarily reflected the Company's
continued revenue growth.
 
  Cash used for investing activities was approximately $1.8 million in 1997,
$485,000 in 1996 and $418,000 in 1995. The Company's use of cash was primarily
for the purchase of capital equipment, such as computer equipment and
furniture and fixtures, to support the Company's growth.
 
                                      29

<PAGE>
 
  Cash used for financing activities was approximately $5.1 million in 1997,
$2.9 million in 1996 and $273,000 in 1995. The principal use of cash was
distributions to the Company's stockholders, partially reduced by borrowings
from the Company's majority stockholder. See "Use of Proceeds" and "Certain
Transactions."
   
  The Company has entered into a line of credit with Silicon Valley Bank to
fund its proposed distribution to the Manhattan LLC stockholders and to fund
its continuing working capital needs. The line of credit does not contain any
conditions or restrictive covenants that would materially affect the Company's
business, financial condition or results of operations. Prior to the Offering,
this distribution will cause the Company to sustain, on a pro forma basis as
of December 31, 1997, a working capital deficit of $3.6 million and a
stockholders' deficit of $585,000. There can be no assurance that the
remaining net proceeds from the Offering will be sufficient to pay for future
acquisitions, planned research and development projects and other growth-
oriented activities, which could require the Company to incur additional debt
or other financing that could impose restrictive covenants and other terms
having a material adverse effect on the Company's business, financial
condition and results of operations. See "Risk Factors--Conversion From
Limited Liability Company ("LLC") Status and Utilization of Significant
Portion of the Offering Proceeds to Satisfy Indebtedness Incurred to Fund
Distributions to Current Stockholders."     
 
 
NEW ACCOUNTING PRONOUNCEMENTS
 
  In June 1997, the Financial Accounting Standards Board issued Statement No.
130 ("SFAS 130"), "Reporting Comprehensive Income." SFAS No. 130 is designed
to improve the reporting of changes in equity from period to period. The
Company will adopt SFAS No. 130 effective with its fiscal year ending December
31, 1998.
 
  In June 1997, the Financial Accounting Standards Board issued Statement No.
131 ("SFAS 131"), "Disclosures About Segments of an Enterprise and Related
Information." SFAS No. 131 requires that an enterprise disclose certain
information about operating segments. The Company will adopt SFAS No. 131
effective with its fiscal year ending December 31, 1998.
 
  In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position 97-2 ("SOP 97-2"), "Software Revenue
Recognition." SOP 97-2 supersedes SOP 91-1, and is effective for the Company
beginning after December 15, 1997. SOP 97-2 provides further guidance on
recognizing revenue on software transactions.
 
  The Company's management does not believe that the adoption of these
pronouncements will have a material impact on the Company's financial position
or results of operations.
 
                                      30

<PAGE>
 

 
                                  BUSINESS
 
OVERVIEW
 
  Manhattan provides information technology solutions for distribution centers
that are designed to enable the efficient movement of goods through the supply
chain. The Company's solutions are designed to optimize the receipt, storage
and distribution of inventory and the management of equipment and personnel
within a distribution center, and to meet the increasingly complex information
requirements of manufacturers, distributors and retailers. The Company's
solutions consist of software, including PkMS, a comprehensive and modular
software system; services, including design, configuration, implementation,
training and support; and hardware. The Company currently provides solutions
to manufacturers, distributors and retailers primarily in the apparel,
consumer products, food service and grocery markets. As of December 31, 1997,
PkMS was licensed for use by more than 250 customers including Calvin Klein,
Dean Foods, Jockey International, Mikasa, Nordstrom, Patagonia, Playtex
Apparel, SEIKO Corporation of America, The Sports Authority, Timberland and
Warnaco.
 
INDUSTRY BACKGROUND
 
  Over the past two decades, the flow of goods through the supply chain from
manufacturers to consumers has undergone significant changes. These changes
began in the United States textile industry, which, faced with increased
global competition, implemented an industry-wide initiative in the 1980s to
lower the cost of goods sold through more efficient inventory management. This
initiative, which became known as "Quick Response," uses technology to improve
the flow of information among manufacturers, distributors and retailers. Quick
Response has allowed retailers to more rapidly advise manufacturers and
distributors of their inventory replenishment needs and has allowed
manufacturers and distributors to more efficiently restock retailers. As a
result, textile product retailers have been able not only to reduce their idle
inventory and cost of goods sold, but also to offer a broader range of
products.
 
  More recently, the consumer products industry experienced a similar supply
chain re-engineering, driven primarily by the emergence of national superstore
chains and category stores. The business model of these stores, which promotes
wider product offerings, lower gross profit margins and a higher rate of
inventory turnover than traditional stores, represented a competitive threat
to retailers of similar products.
 
  In order to remain competitive in this changing retail landscape, many
retailers have demanded that manufacturers and distributors apply Quick
Response principles to their supply chain operations to achieve lower costs
and higher levels of service. Retailers' demands include more sophisticated
distribution services, such as more frequent store-specific inventory
replenishments, more customized packing of goods within each delivery to
reduce in-store unpacking times, more sophisticated packaging and labeling of
goods to meet merchandising strategies, and the exchange of trading
information in compliance with electronic data interchange ("EDI") standards.
Demand for these more sophisticated distribution services requires significant
modification of distribution center operations for manufacturers and
distributors. For example, a manufacturer that previously may have made one
bulk shipment to each of six customer distribution centers each month may now
be required to ship more than 10,000 custom-packed and labeled orders per
month directly to multiple customers' stores or to the customers' distribution
centers for immediate reshipment to stores.
 
  As a result of these retailer demands, distribution centers have increased
in size, complexity and cost. Distribution centers today can comprise one
million square feet or more with thousands of stock keeping units ("SKUs") and
multi-million dollar investments in automated materials handling equipment.
The efficient management of a distribution center operation now
 
                                      31

<PAGE>
 
requires collecting information regarding customer orders, inbound shipments
of products, products available on-site, product storage locations, weights
and sizes, and outbound shipping data (including customer- or store-specific
shipping requirements, routing data and carrier requirements). This
information must be analyzed dynamically to determine the most efficient use
of the distribution center's labor, materials handling equipment, packaging
equipment and shipping and receiving areas. Additionally, manufacturers,
distributors and retailers must exchange information with other participants
in the supply chain in order to effectively integrate the operation of their
distribution centers with the entire supply chain.
 
  In response to these new distribution center challenges, companies have
implemented information technology systems designed to manage this new
distribution environment. Gartner Group, an independent industry analysis and
research firm, estimates that the distribution center management systems
market totaled more than $900 million in revenue in 1997, and that the market
is currently growing at 35% annually. Furthermore, Gartner Group projects that
the majority of the current installed base of largely internally developed
software will be replaced by 2001. An effective distribution center management
system must have the ability to integrate with: (i) enterprise resource
planning ("ERP") systems; (ii) supply chain management ("SCM") systems such as
transportation, order management and demand planning; and (iii) the existing
distribution center equipment, including related radio frequency ("RF")
equipment and automated materials handling equipment. In addition, customers
frequently require their distribution center management systems to incorporate
customer-driven modifications to their packaging, information and
transportation services, new technologies and newly-defined best practices in
their industry. Distribution center management systems also must operate with
high reliability and efficiency while supporting very high transaction volumes
and multiple users, and therefore are almost exclusively deployed on UNIX or
large-scale enterprise servers.
 
  Traditionally, distribution center management systems have been highly
customized, difficult to upgrade and have required costly and lengthy
implementations. Furthermore, these systems have not readily supported the
increased volumes and complexities associated with recent advances in supply
chain re-engineering initiatives. Most providers of these systems have not
focused on specific vertical markets but rather have attempted to customize
their solutions to differing vertical market demands with each implementation.
As a result, many of these providers have been unable to effectively leverage
industry-specific expertise for use in future implementations.
 
THE MANHATTAN SOLUTION
 
  Manhattan provides information technology solutions for distribution centers
that are designed to enable the efficient movement of goods through the supply
chain. The Company's solutions are designed to optimize the receipt, storage
and distribution of inventory and the management of equipment and personnel
within a distribution center, and to meet the increasingly complex information
requirements of manufacturers, distributors and retailers. The Company's
solutions consist of software, including PkMS, a comprehensive and modular
software system; services, including design, configuration, implementation,
training and support; and hardware. In addition, through its recent
acquisition of PAC, the Company offers slotting functionality, which helps
determine the optimal storage location for inventory within a distribution
center. The Company currently provides solutions to manufacturers,
distributors and retailers primarily in the apparel, consumer products, food
service and grocery markets.
 
  PkMS allows organizations to manage the receiving, stock locating, stock
picking, order verification, order packing and shipment of products in complex
distribution centers. PkMS is designed to optimize the operation of a
distribution center by increasing inventory turnover, improving inventory
accuracy, reducing response times, reducing inventory levels, improving
 
                                      32

<PAGE>
 
customer service and increasing the productivity of labor, facilities and
materials handling equipment. The Company has developed robust, high volume
systems for manufacturers, distributors and retailers of consumer products to
support Quick Response and other industry and supply chain initiatives. PkMS
employs leading relational database technology and can be easily integrated
with third party software applications, including the ERP and SCM systems of
its customers.
 
  The Manhattan solutions feature PkMS, a modular software system that,
together with the Company's consulting, implementation and maintenance
services, provides:
 
  .  COMPREHENSIVE FUNCTIONALITY--PkMS addresses a full range of requirements
     of modern, complex distribution centers with an existing product rather
     than custom-designed and developed applications. PkMS provides
     comprehensive functionality for specific vertical markets incorporating
     industry-wide initiatives.
 
  .  EASE OF IMPLEMENTATION--PkMS' modular design, along with the Company's
     knowledge of specific vertical markets and expertise in planning and
     installation, allows the Company's solutions to be implemented more
     rapidly than highly-customized distribution center management systems. A
     typical implementation can often be completed within six months. Because
     of its modular design, PkMS can be implemented in phases to meet
     specific customer demands.
 
  .  TIMELY RESPONSE TO INDUSTRY INITIATIVES--PkMS features a comprehensive
     maintenance program to provide its customers with timely software
     upgrades offering increased functionality and technological advances
     which address emerging supply chain and other industry initiatives.
 
  .  FLEXIBILITY AND CONFIGURABILITY--PkMS is designed to be easily
     configured to meet a distribution center's specific requirements and
     reconfigured to meet changing customer requirements.
 
  .  SCALEABILITY--PkMS is designed to facilitate the management of evolving
     distribution center systems to accommodate increases in the number of
     system users, complexity and distribution volume.
 
  In addition, through its recent acquisition of PAC, the Company offers
slotting functionality, which helps determine the optimal storage location for
inventory within a distribution center. See "--Recent Developments."
 
STRATEGY
 
  The Company's objective is to be the leading provider of information
technology solutions that enable distribution centers to more efficiently
manage the movement of goods through the supply chain. The Company will
continue to provide solutions to targeted vertical markets by offering
advanced, highly functional, highly scaleable applications that allow
customers to leverage their investment in distribution centers and meet
frequently-changing customer requirements. The Company's strategy to achieve
this objective includes the following key elements:
 
  Enhance Core Product Functionality. The Company intends to continue to focus
its product development resources on the development and enhancement of PkMS
to extend its functionality and enable its operation on client/server
platforms. The Company identifies further enhancements to PkMS through on-
going customer consulting engagements and implementations, interactions with
its user groups and participation in industry standards and research
committees. The Company intends to continue to achieve these development
objectives through both its internal research and development activities and
selected acquisitions of complementary products and technologies.
 
 
                                      33

<PAGE>
 
  Target New Vertical Markets. The Company to date has focused its marketing,
sales and product development efforts on specific vertical markets,
particularly in the apparel manufacturing industry. The Company is
increasingly targeting additional vertical markets, including food service,
grocery and other retailers. In addition, the Company plans to target other
vertical markets that adopt Quick Response, Efficient Consumer Response and
similar industry initiatives.
 
  Expand Sales, Services and Marketing Organizations. Manhattan currently
sells and supports PkMS through its direct sales and services personnel. The
Company plans to invest significantly in expanding its sales, services and
marketing organizations and to pursue strategic marketing partnerships with
systems integrators and third party software application providers.
 
  Develop International Sales. The Company has historically focused its sales
efforts on customers in the United States. The Company intends to add sales
personnel and establish offices focused on international opportunities and
pursue strategic marketing partnerships with international systems integrators
and third party software application providers.
 
  Expand Integration with Complementary Products. The Company believes that
the ability to offer a software solution that can extend integration with
leading third party software applications will continue to provide a
significant competitive advantage. The Company intends to continue to develop
PkMS to integrate with complementary SCM, ERP and other business applications.
 
PRODUCTS AND SERVICES
 
  Software. PkMS, the Company's principal software product, features a modular
design which permits customers to selectively implement specific functionality
depending on the needs of each distribution facility or operation.
 
                                      34

<PAGE>
 
  The following table describes the functions of the PkMS modules:
 

<TABLE>
  <C>                    <S>
         MODULE                             DESCRIPTION
  INVENTORY MANAGEMENT   MANAGES THE RECEIPT, PUT-AWAY AND MOVEMENT OF ALL
     SYSTEM ("IMS")      INVENTORY THROUGHOUT THE DISTRIBUTION CENTER
</TABLE>


<TABLE>
  <C>                    <S>
        Receiving        . Verifies the accuracy of incoming shipments against
                           the advanced shipping notice
                         . Designates incoming inventory for quality audit and
                           immediate out-going shipment (cross-docking)
                         . Manages receiving yard by scheduling time, dock
                           location and priority of shipments
- -------------------------------------------------------------------------------
      Stock Locator      . Enhances inventory movement efficiency by directing
                           put-away, minimizing travel distances and optimizing
                           storage capacity
                         . Tracks movement of inventory by allowing real-time
                           inquiries by location, SKU and other criteria
- -------------------------------------------------------------------------------
       Cycle Count       . Enables more efficient inventory counts by
                           permitting specific zones of a distribution center
                           to be "frozen" without interrupting ongoing
                           operations
                         . Automatically generates cycle count tasks for
                           specific SKUs, locations or other user-designated
                           criteria
- -------------------------------------------------------------------------------
  Work Order Management  . Directs the assembly of finished goods within a
                           distribution center to match customer demands
- -------------------------------------------------------------------------------
     Radio Frequency     . Allows the real-time collection of inventory product
  Functions for the IMS    information and location with remote, hand-held
                           mobile devices for integration with the IMS
                         . Communicates real-time task assignments to workers
                           in remote locations of the distribution center
- -------------------------------------------------------------------------------
     Task Management     . Coordinates the sequence of distribution center
   System for the IMS      tasks to optimize labor efficiency
 
  OUTBOUND DISTRIBUTION  MANAGES THE PICKING, PACKING AND SHIPPING OF ORDERS IN
     SYSTEM ("ODS")        EFFICIENT RELEASE WAVES
 
</TABLE>


<TABLE>
  <C>                    <S>
     Wave Management      . Selects, prioritizes and groups outgoing orders in manageable increments based upon user-defined
                            criteria
                          . Routes picktickets based upon retailer requirements and pre-determines carton contents to minimize
                            the number of outgoing cartons
                          . Facilitates stock replenishment for active picking and packing locations
- ------------------------------------------------------------------------------------------------------------------------------
      Verification        . Provides automatic verification of orders and identifies order shortages and overages to maximize
                            shipping accuracy at several different points within the order fulfillment process
- ------------------------------------------------------------------------------------------------------------------------------
     Radio Frequency      . Allows the real-time collection of shipment information and location with remote, hand-held mobile
  Functions for the ODS     devices
                          . Communicates real-time task assignments to workers in remote locations of the distribution center
- ------------------------------------------------------------------------------------------------------------------------------
   Freight Management     . Sorts orders by specific freight carriers, calculates shipping charges and controls load
         System             sequencing based upon truck routes
                          . Generates all documentation required for shipping such as bills of lading and retailer-compliant
                            required manifests
- ------------------------------------------------------------------------------------------------------------------------------
     Parcel Shipping      . Calculates all shipping charges for parcel shipments, generates tracking numbers and provides
         System             appropriate documentation for parcel carriers
- ------------------------------------------------------------------------------------------------------------------------------
    Order Allocation      . Prioritizes and allocates orders based on current aggregate inventory levels for customers whose
         System             host system is unable to perform this function
   ADVANCE SHIP NOTICE    ENABLES A CUSTOMER'S SUPPLIERS IN REMOTE LOCATIONS TO CREATE ADVANCED SHIP NOTICES FOR THE
     ENABLER SYSTEM       CUSTOMER'S RECEIVING DISTRIBUTION CENTER
</TABLE>

 
                                       35

<PAGE>
 
  Through its recent acquisition of PAC, the Company offers SLOT-IT, a
software application with "slotting" functionality. Slotting is the process by
which inventory items are stored in the optimal physical location within a
distribution center. By using decision-support algorithms, SLOT-IT helps
determine the optimal location based upon such factors as historical shipment
volumes, seasonal demands, location of related products, and physical size and
stacking characteristics of a product. Historically, distribution centers
using SLOT-IT have realized increased efficiency in managing stock locating,
stock picking, order packing and shipment of products.
 
  Consulting Services. The Company's consulting services provide its customers
with expertise and assistance in planning and implementing the Company's
solutions. To ensure a successful product implementation, consultants assist
customers with the initial installation of a system, the conversion and
transfer of the customer's historical data onto the Company's system, and
ongoing training, education and upgrades. The Company believes that its
consulting services enable the customer to implement PkMS rapidly, ensure the
customer's success with the Company's solution, strengthen the relationship
with the customer, and add to the Company's industry-specific knowledge base
for use in future implementations and product development efforts.
 
  Although the Company's consulting services are optional, substantially all
of its customers utilize these services for the implementation and ongoing
support of the Company's software products. Consulting services are billed on
an hourly basis. The Company believes that the complexity of platforms on
which the current products operate and the increased complexity of its planned
client/server product will result in an increased demand for consulting
services. Accordingly, the Company plans to substantially increase the number
of consultants to support anticipated growth in product implementations and
upgrades. To the extent the Company is unable to attract, train and retain
qualified consulting personnel, the Company's operating results may be
adversely affected. See "Risk Factors--Ability to Manage Growth" and "--New
Management Team; Dependence on Key Personnel."
 
  The Company's consulting services group consists of business consultants,
systems analysts and technical personnel devoted to assisting customers in all
phases of systems implementation including planning and design, customer-
specific configuring of modules, and on-site implementation or conversion from
existing systems. The Company's consulting personnel undergo training on
distribution center operations and the Company's products. The Company
believes that this training, together with the ease of implementation of its
products, enables it to productively utilize newly-hired consulting personnel
more rapidly than its competitors. The Company may increasingly utilize third
party consultants, such as those from major systems integrators, to assist in
certain implementations.
 
  Maintenance. PkMS features a comprehensive maintenance program which
provides its customers with timely software upgrades offering increased
functionality and technological advances which incorporate emerging supply
chain and other industry initiatives. As of December 31, 1997, a majority of
the Company's customers had subscribed to the Company's comprehensive
maintenance support program. The Company has the ability to remotely access
the customer's system in order to perform diagnostics, on-line assistance and
software upgrades. All of the Company's annual maintenance agreements entitle
customers to software product upgrades. The Company offers a standard annual
maintenance option providing for customer telephone support during normal
business hours for 15% of the current software license fee and 24 hour
maintenance for 20% percent of the current software license fee.
 
                                      36

<PAGE>
 
  Hardware. The Company's products operate on multiple hardware platforms
utilizing various hardware systems and interoperate with many third party
software applications and legacy systems. This open system capability enables
customers to continue using their existing computer resources and to choose
among a wide variety of existing and emerging computer hardware and peripheral
technologies.
 
  In conjunction with the licensing of PkMS, the Company resells a variety of
hardware products developed and manufactured by third parties in order to
provide the Company's customers with an integrated distribution center
management solution. These products include computer hardware, radio frequency
terminal networks, bar code printers and scanners, and other peripherals. The
Company resells all third party hardware products pursuant to agreements with
manufacturers or through distributor authorized reseller agreements pursuant
to which the Company is entitled to purchase hardware products at discount
prices and to receive technical support in connection with product
installations and any subsequent product malfunctions. The Company generally
purchases hardware from its vendors only after receiving an order from a
customer. As a result, the Company does not maintain hardware inventory in any
significant amounts.
 
SALES AND MARKETING
 
  To date, substantially all of the Company's revenue has been generated
through its direct sales force. The Company plans to continue to invest
significantly in expanding its sales, support, services and marketing
organizations within the United States, and to pursue strategic marketing
partnerships. The Company conducts comprehensive marketing programs that
include advertising, public relations, trade shows, joint programs with
vendors and consultants and ongoing customer communication programs. The sales
cycle typically begins with the generation of a sales lead or the receipt of a
request for proposal from a prospective customer. The sales lead or request
for proposal is followed by the qualification of the lead or prospect, an
assessment of the customer's requirements, a formal response to the request
for proposal, presentations and product demonstrations, site visits to an
existing customer utilizing the Company's distribution center management
system and contract negotiation. The sales cycle can vary substantially from
customer to customer but typically requires three to six months.
 
                                      37

<PAGE>
 
CUSTOMERS
 
  To date, the Company's customers have been primarily manufacturers,
distributors and retailers in the apparel, consumer products, food service and
grocery market segments. The Company plans to expand its presence in the
health and beauty products, industrial products and automotive products
markets. As of December 31, 1997, PkMS was licensed for use by more than 250
customers including Calvin Klein, Dean Foods, Jockey International, Mikasa,
Nordstrom, Patagonia, Playtex Apparel, SEIKO Corporation of America, The
Sports Authority, Timberland and Warnaco. The following table sets forth a
representative list of the Company's customers as of December 31, 1997, that
have purchased at least $100,000 in products and services from the Company.
 
APPAREL MANUFACTURERS  FOOD SERVICE AND DISTRIBUTION  HEALTH AND BEAUTY
Aris Isotoner          Abbott Food Services           PRODUCTS
ASICS Tiger            Arrow Industries               Andrew Jergens
Authentic Fitness      Austin Quality Foods           Beiersdorf USA
Calvin Klein           Burns Philp Food               Bonne Bell
 
Duck Head Apparel      Canned Foods
Espirit                Dean Foods                     INDUSTRIAL PRODUCTS
Farah (U.S.A.)         Maines Paper and Food Service  American Tack & Hardware
Garan Manufacturing    Zacky Farms                    Delta International
                                                      Machinery
 
Hugo Boss
Jockey International   CONSUMER PRODUCTS              Familian Pipe & Supply
London Fog             Brother International          Liberty Hardware
Oxford Industries      Bulova                         PPG Architectural
Patagonia              Conair Group                   Coatings
Playtex Apparel        Hunter Fan                     Rain Bird Sales
 
Stride Rite            Lenox
Timberland             Mikasa                         RETAILERS
Warnaco                Remington Products             Edison Brothers
                       SEIKO Corp. of America         Holiday Stores
                       Tandy Brands Accessories       Nordstrom
                                                      The Sports Authority
 
  The Company's top five customers in aggregate accounted for 22% and 26% of
the Company's total revenue in 1997 and 1996, respectively. No single customer
accounted for 10% or more of the Company's total revenue during any of the
three years ended December 31, 1997.
 
  Customers of PAC, which the Company recently acquired, operate primarily in
the grocery market segment. PAC customers include Associated Wholesale
Grocers, Food Lion, Nautica, Stop & Shop and SUPERVALU. See "--Recent
Developments."
 
PRODUCT DEVELOPMENT
 
  The Company's development efforts are focused on adding new functionality to
existing products and enhancing the operability of its products across
distributed and changing heterogeneous hardware platforms, operating systems
and relational database systems. The Company believes that its future success
depends in part upon its ability to continue to enhance existing products,
respond to changing customer requirements and develop and introduce new or
enhanced products that incorporate new technological developments and emerging
industry standards. To that end, the Company's development efforts frequently
focus on base system enhancements incorporating new user requirements and
potential features identified through customer interaction and systems
implementations. As a result, the Company is able to continue to offer its
customers a highly configurable product with increasing functionality rather
than a custom-developed software program.
 
                                      38

<PAGE>
 
  The Company is currently devoting a significant portion of its research and
development efforts to the development of a client/server version of PkMS
which will operate using the Windows 95 operating system and the Windows NT,
UNIX and AS/400 server operating environments. As part of this development
effort, the Company is employing a multi-tiered architecture based on a CORBA
interface that facilitates scaleability and standardizes interfaces to other
enterprise software applications. The Company is also employing object-
oriented design frameworks which may require less code and may simplify future
maintenance and upgrades. The Company intends to employ a more intuitive
graphical user interface in the client/server version of PkMS and to employ
installation "wizards" designed to ease the installation and configuration of
the product.
 
  The Company is also currently developing new functionality for PkMS, such as
features designed to enhance worker productivity, improve yard management and
schedule inbound shipment receiving appointments. The Company also plans to
focus development efforts on integrating the SLOT-IT application, which was
recently acquired in connection with the PAC acquisition, into future releases
of PkMS. The Company plans to continue to conduct its development efforts
internally in order to retain development knowledge and promote the continuity
of programming standards.
 
  The Company's research and development expenditures for the years ended
December 31, 1997, 1996 and 1995 were $3.0 million, $1.2 million and $1.1
million, respectively. The Company intends to continue to increase its
investment in product development in the future.
 
COMPETITION
   
  The Company's products are targeted at the distribution center management
systems market, which is intensely competitive and characterized by rapid
technological change. The principal competitive factors affecting the market
for the Company's products include vendor and product reputation; product
architecture, functionality and features; ease and speed of implementation;
return on investment; product quality, price and performance; and level of
support. The Company believes that it competes favorably with respect to each
of these factors. The Company's competitors are diverse and offer a variety of
solutions directed at various aspects of the supply chain, as well as the
enterprise as a whole. The Company's existing competitors include: (i)
distribution center management software vendors including Catalyst
International, Inc., EXE Technologies, Inc., Haushahn Systems & Engineers and
McHugh Software International, Inc.; (ii) the corporate information technology
departments of potential customers capable of internally developing solutions;
and (iii) smaller independent companies that have developed or are attempting
to develop distribution center management software that competes with the
Company's software solution.     
 
  The Company may face competition in the future from (i) business application
software vendors that may broaden their product offerings by internally
developing, or by acquiring or partnering with independent developers of,
distribution center management software; and (ii) ERP and SCM applications
vendors. To the extent such ERP and SCM vendors develop or acquire systems
with functionality comparable or superior to the Company's products, their
significant installed customer bases, long-standing customer relationships and
ability to offer a broad solution could provide a significant competitive
advantage over the Company. In addition, it is possible that new competitors
or alliances among current and new competitors may emerge and rapidly gain
significant market share. Increased competition could result in price
reductions, fewer customer orders, reduced gross margins and loss of market
share.
 
  Many of the Company's competitors and potential competitors have longer
operating histories, significantly greater financial, technical, marketing and
other resources, greater name
 
                                      39

<PAGE>
 
recognition and a larger installed base of customers than the Company. In
order to be successful in the future, the Company must continue to respond
promptly and effectively to technological change and competitors' innovations.
There can be no assurance that current or potential competitors of the Company
will not develop products comparable or superior in terms of price and
performance features to those developed by the Company. In addition, no
assurance can be given that the Company will not be required to make
substantial additional investments in connection with its research,
development, marketing, sales and customer service efforts in order to meet
any competitive threat, or that the Company will be able to compete
successfully in the future. Increased competition will result in reductions in
market share, pressure for price reductions and related reductions in gross
margins, any of which could materially and adversely affect the Company's
ability to achieve its financial and business goals. There can be no assurance
that in the future the Company will be able to successfully compete against
current and future competitors. See "Risk Factors--Competition."
 
PROPRIETARY RIGHTS
 
  The Company relies on a combination of copyright, trade secret, trademark,
service mark and trade dress laws, confidentiality procedures and contractual
provisions to protect its proprietary rights in its PkMS product and
technology. The Company has registered trademarks in "PkMS" and the Manhattan
Associates, Inc. logo. The Company has no registered copyrights. The Company
generally enters into confidentiality agreements with its employees,
consultants, clients and potential clients and limits access to, and
distribution of, its proprietary information. The Company licenses PkMS to its
customers in source code format and restricts the customer's use for internal
purposes without the right to sublicense the PkMS product. However, the
Company believes that the foregoing measures afford only limited protection.
Despite the Company's efforts to safeguard and maintain its proprietary rights
both in the United States and abroad, there can be no assurance that the
Company will be successful in doing so or that the steps taken by the Company
in this regard will be adequate to deter misappropriation or independent third
party development of the Company's technology or to prevent an unauthorized
third party from copying or otherwise obtaining and using the Company's
products or technology. In addition, policing unauthorized use of the
Company's products is difficult, and while the Company is unable to determine
the extent to which piracy of its software products exist, software piracy
could become a problem.
 
  As the number of supply chain management applications in the industry
increases and the functionality of these products further overlaps, companies
that develop software, like Manhattan, may increasingly become subject to
claims of infringement or misappropriation of the intellectual property rights
of others. There can be no assurance that third parties will not assert
infringement or misappropriation claims against the Company in the future with
respect to current or future products. Any claims or litigation, with or
without merit, could be time-consuming, result in costly litigation, diversion
of management's attention and cause product shipment delays or require the
Company to enter into royalty or licensing arrangements. Such royalty or
licensing arrangements, if required, may not be available on terms acceptable
to the Company, if at all, which could have a material adverse effect on the
Company's business, financial condition and results of operations. Adverse
determinations in such claims or litigation could also have a material adverse
effect on the Company's business, financial condition and results of
operations.
 
  The Company may be subject to additional risks as it enters into
transactions in countries where intellectual property laws are not well
developed or are poorly enforced. Legal protections of the Company's rights
may be ineffective in such countries. Litigation to defend and enforce the
Company's intellectual property rights could result in substantial costs and
 
                                      40

<PAGE>
 
diversion of resources and could have a material adverse effect on the
Company's business, financial condition and results of operations, regardless
of the final outcome of such litigation. Despite the Company's efforts to
safeguard and maintain its proprietary rights both in the United States and
abroad, there can be no assurance that the Company will be successful in doing
so, or that the steps taken by the Company in this regard will be adequate to
deter misappropriation or independent third party development of the Company's
technology or to prevent an unauthorized third party from copying or otherwise
obtaining and using the Company's products or technology. Any such events
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Risk Factors--Intellectual Property
Rights."
 
EMPLOYEES
 
  As of December 31, 1997, the Company had 191 full-time employees. None of
the employees of the Company is covered by a collective bargaining agreement.
The Company considers its relations with its employees to be good. As of
February 28, 1998, certain of the Company's employees were employed pursuant
to the H-1(B), non-immigrant work-permitted visa classification. See "Risk
Factors--Immigration Issues."
 
  The Company believes its future success will depend in large part on its
ability to recruit and retain qualified employees, especially experienced
software engineering personnel. The competition for such personnel is intense,
and there can be no assurance that the Company will be successful in retaining
or recruiting key personnel. See "Risk Factors--Ability to Manage Growth" and
"--New Management Team; Dependence on Key Personnel."
 

PROPERTIES
 
  The Company's principal administrative, sales, marketing, support, and
research and development facility is located in approximately 63,000 square
feet of modern office space in Atlanta, Georgia. This facility is leased to
the Company through December 31, 2002. Management believes its current
facilities are adequate for its present requirements. However, the Company
expects in the future to expand into additional facilities.
 
COMPANY HISTORY
   
  The Company is a Georgia corporation formed to own all of the assets and
liabilities of Manhattan LLC. Manhattan LLC was formed in 1995 by the
contribution of the assets, liabilities and intellectual property rights of
Pegasys Systems Incorporated ("Pegasys") and the contribution of certain
intellectual property rights from the other founders of Manhattan LLC. Pegasys
is controlled by Alan J. Dabbiere, the Company's Chairman of the Board, Chief
Executive Officer and President. After the Restructuring, Pegasys, and Mr.
Dabbiere through his control of Pegasys, will be a controlling stockholder of
the Company. See "Principal and Selling Stockholders."     
 
RECENT DEVELOPMENTS
 
  On February 16, 1998, the Company purchased all of the outstanding stock of
Performance Analysis Corporation for $2.2 million in cash and 106,666 shares
of the Company's Common Stock valued at $10.00 per share. PAC is a developer
of distribution center slotting software. The PAC acquisition will be
accounted for as a purchase. The purchase price of approximately $3.3 million
has been allocated to the assets acquired and liabilities assumed including
acquired research and development of $2.1 million, purchased software of
$500,000, and other intangible
 
                                      41

<PAGE>
 
assets of $300,000. Purchased software will be amortized over an estimated
three-year useful life and other intangible assets will be amortized over a
seven-year period. In connection with the PAC Acquisition, the Company will
record a charge to income of approximately $2.1 million in the first quarter
of 1998 for acquired research and development.
 
  In the past year, the Company has appointed five persons as executive
officers to fill new positions created to allow the Company to execute its
growth strategy and to provide the infrastructure necessary for a public
company. In addition, the Company intends to add Brian J. Cassidy and Charles
W. McCall as members of its Board of Directors within 90 days after the date
of this Prospectus. See "Risk Factors--New Management Team; Dependence on Key
Personnel" and "Management."
 
LEGAL PROCEEDINGS
 
  The Company is not a party to any material legal proceedings.
 
                                      42

<PAGE>
 

                                  MANAGEMENT
 
DIRECTORS, EXECUTIVE OFFICERS AND OTHER KEY EMPLOYEES
 
  The directors and executive officers of the Company and their ages as of
February 26, 1998, are as follows:
 

<TABLE>
<CAPTION>
      NAME                    AGE                     POSITION
      ----                    ---                     --------
<S>                           <C> <C>
Alan J. Dabbiere.............  36 Chairman of the Board of Directors, Chief
                                  Executive Officer and President(1)
Deepak Raghavan..............  32 Chief Technology Officer and Director
Gregory Cronin...............  50 Executive Vice President--Sales and Marketing
Oliver M. Cooper.............  41 Chief Operating Officer
David K. Dabbiere............  39 Vice President, General Counsel and Secretary
Michael J. Casey.............  34 Chief Financial Officer and Treasurer
Neil Thall...................  51 Vice President--Supply Chain Strategy
</TABLE>

- --------
(1) Member of the Executive Committee.
 
 Directors and Executive Officers
 
  ALAN J. DABBIERE, a founder of the Company, has served as Chief Executive
Officer and President of the Company since its inception in 1990 and Chairman
of the Board since February 1998. From 1986 until 1990, Mr. Dabbiere was
employed by Kurt Salmon Associates, a management consulting firm specializing
in consumer products manufacturing and retailing, where he specialized in
consulting for the retail and consumer products manufacturing industries. At
Kurt Salmon Associates, Mr. Dabbiere participated in Quick Response pilot
projects focused on the value of an integrated supply-chain initiative. Mr.
Dabbiere serves on the American Apparel Manufacturer Association's Management
Systems Committee.
 
  DEEPAK RAGHAVAN, a founder of the Company, has served as Chief Technology
Officer of the Company since its inception in 1990 and as a Director of the
Company since February 1998. From 1987 until 1990, Mr. Raghavan was a Senior
Software Engineer for Infosys Technologies Limited, a software development
company, where he specialized in the design and implementation of information
systems for the apparel manufacturing industry.
 
  GREGORY CRONIN has served as Executive Vice President--Sales and Marketing
of the Company since December 1997. Prior to joining the Company, Mr. Cronin
served as President and Chief Operating Officer of McHugh Software
International, Inc., a competing developer of distribution center management
and transportation management software, from 1992 until December 1997. Before
he was appointed as President and Chief Operating Officer of McHugh Software
International, Inc., Mr. Cronin served in several other capacities with that
company, including Senior Vice President--Sales and Marketing.
 
  OLIVER M. COOPER has served as Chief Operating Officer of the Company since
August 1997. Prior to joining the Company, Mr. Cooper served as Vice
President--Sales and New Business Development for Compression Labs, Inc., a
publicly traded developer of video conferencing and compression products from
October 1995 until July 1997. Prior to joining Compression Labs, Inc., Mr.
Cooper served in several capacities from October 1988 to September 1995 with
Scientific-Atlanta, Inc., most recently as Vice President and General
Manager--Broadband Communications Group.
 
  DAVID K. DABBIERE has served as Vice President, General Counsel and
Secretary of the Company since March 1998. From 1984 to 1998, Mr. Dabbiere was
employed by The Procter &
 
                                      43

<PAGE>
 
Gamble Company most recently as Associate General Counsel. Mr. Dabbiere was
responsible for, among other duties, the intellectual property matters for
Procter & Gamble's Beauty Care & Cosmetic and Fragrances sectors.
 
  MICHAEL J. CASEY has served as Chief Financial Officer of the Company since
November 1997. Prior to joining the Company, Mr. Casey served as Chief
Financial Officer of Intellivoice Communications, Inc., a developer of voice
recognition software applications from April 1997 until November 1997. From
February 1996 to February 1997, Mr. Casey was Chief Financial Officer,
Treasurer and Secretary of Colorocs Information Technologies, Inc., a publicly
traded information technology company. From 1992 to 1996, Mr. Casey served as
Vice President--Finance for IQ Software Corporation, a publicly traded
software developer. Prior to 1992, Mr. Casey was employed by Arthur Andersen
LLP, where he served the technology and communications industries. Mr. Casey
is a member of the American Institute of Certified Public Accountants and is a
Certified Public Accountant in the State of Georgia.
 
  NEIL THALL has served as Vice President--Supply Chain Strategy of the
Company since January 1998. From 1992 to 1997, Mr. Thall served as President
of Neil Thall Associates, a software development and management consulting
subsidiary of HNC Software, Inc. that specialized in inventory management,
Quick Response and vendor managed inventory initiatives. Prior to 1992, Mr.
Thall was employed by Kurt Salmon Associates as National Service Director--
Retail Consulting, where he specialized in the development and implementation
of information systems for major department stores, specialty and mass
merchant chains.
 
 Other Key Employees
 
  DEEPAK M.J. RAO, a founder of the Company, has served as a Vice President of
the Company since its inception in 1990. From 1987 until 1990, Mr. Rao was an
Assistant Project Manager for Infosys Technologies Limited, a software
development company, where he specialized in the design and implementation of
information systems for the banking industry.
 
  PONNAMBALAM MUTHIAH, a founder of the Company, has served as a Vice
President of the Company since its inception in 1990. From 1987 until 1990,
Mr. Muthiah was a Senior Software Engineer for Infosys Technologies Limited, a
software development company, where he specialized in the design and
implementation of information systems for the apparel manufacturing industry.
 
  ZACHARY TODARO has been employed by the Company since April 1993 and has
served as Director of Consulting Services of the Company since August 1997.
Prior to serving as Director of Consulting Services, Mr. Todaro served in
several capacities with the Company including sales, product development and
consulting.
 
  JEFFRY W. BAUM joined the Company in February 1998 as Vice President--
International Business Development. From January 1997 until February 1998, Mr.
Baum served as Vice President--Sales and Marketing of Haushahn Systems &
Engineers, a warehouse management systems and material handling automation
provider. From March 1, 1992 until December 1996, Mr. Baum served as Senior
Account Manager at Haushahn. Prior to that, he served in a variety of business
development, account management and marketing positions with Logisticon, Inc.
and Hewlett-Packard.
 
  DANIEL BASMAJIAN, SR. Mr. Basmajian has served as President of Performance
Analysis Corporation since 1987. Performance Analysis Corporation became a
wholly-owned subsidiary of the Company in February 1998, when the Company
acquired all of its issued and outstanding shares.
 
 
                                      44

<PAGE>
 
 Election of Directors
 
  The Company intends to add Brian J. Cassidy and Charles W. McCall as members
of its Board of Directors within 90 days after the date of this Prospectus. It
will be necessary for the Company to appoint these or two other independent
directors within the 90 day time period in order to maintain its Nasdaq
National Market listing. Failure to appoint two such directors could result in
a delisting of the Common Stock from the Nasdaq National Market.
 
  BRIAN J. CASSIDY has served as the Vice-Chairman and Co-Founder of
LiveContent Inc., a developer and supplier of research tools for the Internet,
since April 1996. Prior to joining LiveContent Inc., Mr. Cassidy served as
Vice President of Business Development of Saros Corporation, a developer of
document management software, from January 1993 to March 1996. Prior to
joining Saros Corporation, Mr. Cassidy was employed by Oracle Corporation, as
Joint Management Director of European Operations and a member of the Executive
Management Board from 1983 to 1988 and as Worldwide Vice President of Business
Development from 1988 to 1990.
 
  CHARLES W. MCCALL has served as President and Chief Executive Officer of HBO
& Company, a developer and supplier of software for the healthcare industry,
since 1991. Mr. McCall has been a member of the Board of Directors of HBO &
Company since 1991 and has served as Chairman of the Board of Directors since
February 1998. Prior to joining HBO & Company, Mr. McCall served as President
and Chief Executive Officer of CompuServe, Inc., a computer communications and
information services company. Mr. McCall also serves on the Board of Directors
of EIS International, Inc., WestPoint Stevens, Inc. and AMERIGROUP Inc.
 
  The Board of Directors is divided into three classes, each of whose members
serve for a staggered three-year term. The Board is currently comprised of one
Class I director (Mr. Dabbiere), one Class II director (Mr. Raghavan) and no
Class III directors. Following the proposed election of Messrs. Cassidy and
McCall to the Board of Directors, Mr. Cassidy is expected to be a Class I
director and Mr. McCall is expected to be a Class III director. At each annual
meeting of shareholders, a class of directors will be elected for a three-year
term to succeed the directors of the same class whose terms are then expiring.
The terms of the initial Class I directors, Class II directors and Class III
directors will expire upon the election and qualification of successor
directors at the 1999, 2000 and 2001 annual meetings of stockholders,
respectively. There are no family relationships between any of the directors
or executive officers of the Company, except that Alan J. Dabbiere is the
brother of David K. Dabbiere. See "Risk Factors--No Prior Public Market for
Common Stock; Possible Volatility of Stock Price" and "Description of Capital
Stock--Certain Articles of Incorporation and Bylaw Provisions."
 
EMPLOYMENT AGREEMENTS
 
  Mr. Cronin has entered into an employment agreement with the Company
effective as of November 15, 1997. Pursuant to this agreement, Mr. Cronin is
entitled to receive an annual base salary of $200,000 and is entitled to a
performance-related bonus of up to $100,000 per year. In addition, Mr. Cronin
received a signing bonus of $100,000 and an option to purchase 350,000 shares
of the Company's Common Stock which shall vest in equal annual installments
beginning November 14, 1998. Under the terms of the agreement, Mr. Cronin has
agreed to assign to the Company all patents, copyrights and other intellectual
property developed by him during the course of his employment with the
Company. In addition, Mr. Cronin has agreed not to solicit customers of the
Company for a period of one year following the termination of his employment
with the Company. In connection with any termination of Mr. Cronin's
employment, other than for cause or voluntarily by Mr. Cronin, Mr. Cronin will
be entitled to receive a severance payment within 30 days of termination equal
to the amount of his annual base salary.
 
                                      45

<PAGE>
 
   
  Mr. Cooper has entered into an employment agreement with the Company
effective as of August 11, 1997. Pursuant to this agreement, Mr. Cooper is
entitled to receive an annual base salary of $175,000 and is entitled to a
performance-related bonus of up to $75,000 per year. In addition, Mr. Cooper
received an option to purchase 200,000 shares of the Company's Common Stock of
which 60,000 shares vest over the first six months of the option term
beginning on August 11, 1997, 40,000 shares vest on each of August 11, 1998
and August 11, 1999, and 60,000 shares vest on August 11, 2000. Under the
terms of the agreement, Mr. Cooper has agreed to assign to the Company all
patents, copyrights and other intellectual property developed by him during
the course of his employment with the Company. In addition, Mr. Cooper has
agreed not to solicit customers of the Company for a period of one year
following his voluntary termination or termination without cause from the
Company. In connection with any termination of Mr. Cooper's employment during
the first two years of his employment, other than a termination for cause or
voluntarily by Mr. Cooper, Mr. Cooper will be entitled to receive a severance
payment equal to fifty percent of his base salary.     
 
  Mr. Casey has entered into an employment agreement with the Company
effective as of November 10, 1997. Pursuant to this agreement, Mr. Casey is
entitled to receive an annual base salary of $120,000 and is entitled to a
performance-related bonus of up to $25,000 per year. In addition, Mr. Casey
received a signing bonus of $20,000 and an option to purchase 100,000 shares
of the Company's Common Stock of which 20,000 shares vest over the first six
months of the option term beginning on November 10, 1997, 26,668 shares vest
on November 10, 1998, and 26,668 shares vest on each of November 10, 1999 and
November 10, 2000. Under the terms of the agreement, Mr. Casey has agreed to
assign to the Company all patents, copyrights and other intellectual property
developed by him during the course of his employment with the Company. In
addition, Mr. Casey has agreed not to solicit customers of the Company for a
period of one year following the termination of his employment with the
Company. In connection with any termination of Mr. Casey's employment during
the first two years of his employment, other than a termination based on gross
negligence or willful misconduct, Mr. Casey will be entitled to receive a
severance payment within 30 days of termination equal to fifty percent of his
base salary.
 
  Mr. Thall has entered into an employment agreement with the Company
effective as of November 25, 1997. Pursuant to this agreement, Mr. Thall is
entitled to receive an annual base salary of $200,000 and is entitled to a
performance-related bonus of up to $40,000 per year. In addition, Mr. Thall
received an option to purchase 150,000 shares of the Company's Common Stock of
which 40,000 shares vested as of November 25, 1997, 40,000 shares vest on each
of November 25, 1998 and November 25, 1999, and 30,000 shares vest on
November 25, 2000. Under the terms of the agreement, Mr. Thall has agreed to
assign to the Company all patents, copyrights and other intellectual property
developed by him during the course of his employment with the Company. In
addition, Mr. Thall has agreed not to solicit customers of the Company for a
period of one year following his voluntary termination or termination without
cause from the Company.
 
BOARD COMMITTEES
 
  The Board of Directors has established an Executive Committee comprised of
Messrs. Dabbiere and Raghavan. The Executive Committee is empowered to
exercise all authority of the Board of Directors of the Company, except as
limited by the Georgia Business Corporation Code ("GBCC"). Under Georgia law,
an Executive Committee may not, among other things, approve or propose to
stockholders actions required to be approved by stockholders, fill vacancies
on the Board of Directors or any of its committees, amend or repeal the bylaws
of the Company or approve a plan of merger not requiring stockholder approval.
Upon the addition of the two or more outside directors, the Company will name
directors to serve on the Compensation and Audit Committees. The Compensation
Committee will be responsible for reviewing and recommending salaries, bonuses
and other compensation for the Company's officers. The Compensation Committee
will also be responsible for administering the Company's stock
 
                                      46

<PAGE>
 
option plans and for establishing the terms and conditions of all stock
options granted under these plans. The Audit Committee will be responsible for
recommending independent auditors, reviewing with the independent auditors the
scope and results of the audit engagement, monitoring the Company's financial
policies and internal control procedures and reviewing and monitoring the
provisions of non-audit services by the Company's auditors. The full Board of
Directors will perform the functions of the Compensation and Audit Committees
until the election of outside directors.
 
DIRECTOR COMPENSATION
 
  Following the consummation of the Offering, the non-employee members of the
Board of Directors will receive fees of $1,000 for each board meeting attended
and $500 for each committee meeting attended which is held independently of a
board meeting. The Company may grant stock options to the non-employee members
of the Board of Directors.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
  During 1997, compensation of executive officers of the Company was
determined by Alan J. Dabbiere, Chairman of the Board, Chief Executive Officer
and President of the Company. After completion of the Offering and appointment
of outside directors, the Company will establish a Compensation Committee to
review the performance of executive officers, establish overall employee
compensation policies and recommend to the Board of Directors major
compensation programs. No member of the Compensation Committee will be an
executive officer of the Company.
 

EXECUTIVE COMPENSATION
 
  Summary Compensation Table. The following table sets forth the total
compensation paid or accrued by the Company in 1997 for its Chief Executive
Officer and each executive officer of the Company whose total annual salary
and bonuses determined at December 31, 1997 exceeded $100,000 (collectively,
the "Named Executive Officers").
 

<TABLE>
<CAPTION>
                                                                    LONG-TERM
                                                                   COMPENSATION
                                     ANNUAL COMPENSATION              AWARDS
                              ------------------------------------ ------------
                                                                    NUMBER OF
                                                                    SECURITIES
                                                      ALL OTHER     UNDERLYING
 NAME AND PRINCIPAL POSITION   SALARY   BONUS      COMPENSATION(1)   OPTIONS
 ---------------------------  -------- --------    --------------- ------------
<S>                           <C>      <C>         <C>             <C>
Alan J. Dabbiere............. $250,000 $406,170(2)       --              --
 Chairman of the Board, Chief
  Executive Officer and
  President
Deepak Raghavan..............  175,525      --           --              --
 Chief Technology Officer
Gregory Cronin ..............   17,692  100,000(3)       --          350,000
 Executive Vice President--
  Sales and Marketing
Oliver M. Cooper.............   69,327   70,000(3)       --          200,000
 Chief Operating Officer
</TABLE>

- --------
(1) In accordance with the rules of the Securities and Exchange Commission
    (the "Commission"), other compensation in the form of perquisites and
    other personal benefits has been omitted because such perquisites and
    other personal benefits constituted less than the lesser of $50,000 or 10%
    of the total annual salary and bonus for the Named Executive Officer for
    such year.
(2) Represents bonuses and sales commissions. Bonuses awarded and paid in 1997
    were based upon 1997 performance.
(3) Represents a bonus paid to Messrs. Cronin and Cooper in December 1997 and
    August 1997, respectively, upon joining the Company.
 
                                      47

<PAGE>
 
OPTION GRANTS IN LAST FISCAL YEAR
 
  The following table sets forth all individual grants of stock options during
the year ended December 31, 1997, to each of the Named Executive Officers:

<TABLE>
<CAPTION>
                                                                                 POTENTIAL REALIZABLE
                                                                                   VALUE AT ASSUMED
                                                                                 ANNUAL RATES OF STOCK
                                                                                  PRICE APPRECIATION
                                            INDIVIDUAL GRANTS                     FOR OPTION TERM(1)
                         ------------------------------------------------------- ---------------------
                            NUMBER OF    PERCENT OF TOTAL
                           SECURITIES    OPTIONS GRANTED  EXERCISE OR
                           UNDERLYING    TO EMPLOYEES IN  BASE PRICE  EXPIRATION
          NAME           OPTIONS GRANTED   FISCAL YEAR     PER SHARE     DATE       5%         10%
          ----           --------------- ---------------- ----------- ---------- ---------------------
<S>                      <C>             <C>              <C>         <C>        <C>       <C>
Alan J. Dabbiere........         --             --             --           --         --          --
Deepak Raghavan.........         --             --             --           --         --          --
Gregory Cronin(2).......     350,000           14.0%         $3.50     11/14/07  $ 770,396 $ 1,952,335
Oliver M. Cooper(3).....     200,000            8.0%         $2.50      8/11/07  $ 314,447 $   796,871
</TABLE>

 
- --------
(1) Amounts represent hypothetical gains that could be achieved for the
    respective options if exercised at the end of the option term. These gains
    are based on the fair market value per share on the date of grant ($2.50
    in the case of Mr. Cooper and $5.00 in the case of Mr. Cronin) and assumed
    rates of stock price appreciation of 5% and 10% compounded annually from
    the date the respective options were granted to their expiration date.
    These assumptions are mandated by the rules of the Securities and Exchange
    Commission and are not intended to forecast future appreciation of the
    Company's stock price. The potential realizable value computation is net
    of the applicable exercise price, but does not take into account federal
    or state income tax consequences and other expenses of option exercises or
    sales of appreciated stock. Actual gains, if any, are dependent upon the
    timing of such exercise and the future performance of the Company's Common
    Stock. There can be no assurance that the rates of appreciation in this
    table can be achieved. This table does not take into account any
    appreciation in the price of the Common Stock to date.
   
(2) This option was granted on November 14, 1997 with an exercise price below
    the fair market value of the Common Stock on the date of grant as
    determined by the Board of Directors. The Board of Directors determined
    the fair market value based on various factors including independent
    appraisals, the illiquidity of the Common Stock representing a minority
    interest in the Company, values of similarly situated companies and the
    Company's future prospects. The option is a nonqualified stock option
    which vests beginning November 14, 1998 in equal annual installments over
    three years and has a ten year term.     
   
(3) This option was granted on August 11, 1997 with an exercise price equal to
    the fair market value of the Common Stock on the date of grant as
    determined by the Board of Directors. The option is a nonqualified stock
    option, and 60,000 shares vest over the first six months of the option
    term in equal monthly installments, 40,000 shares vest on each of August
    11, 1998 and August 11, 1999 and the remaining 60,000 shares vest on
    August 11, 2000. The option has a ten year term.     
 
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
 
  No Named Executive Officer exercised any stock option during 1997. The
following table summarizes the value of the outstanding options held by the
Named Executive Officers at December 31, 1997:
 

<TABLE>
<CAPTION>
                                                                  VALUE OF UNEXERCISED
                         NUMBER OF SECURITIES UNDERLYING              IN-THE-MONEY
                               UNEXERCISED OPTIONS               OPTIONS AT FISCAL YEAR-
                               AT FISCAL YEAR-END                        END(1)
                         -----------------------------------    -------------------------
          NAME            EXERCISABLE       UNEXERCISABLE       EXERCISABLE UNEXERCISABLE
          ----           --------------    -----------------    ----------- -------------
<S>                      <C>               <C>                  <C>         <C>
Alan J. Dabbiere........                --                   --      --              --
Deepak Raghavan.........                --                   --      --              --
Gregory Cronin..........                --              350,000      --      $1,400,000
Oliver M. Cooper........                --              200,000      --       1,000,000
</TABLE>

- --------
(1) Based on the estimated fair market value of the Company's Common Stock as
    of December 31, 1997 of $7.50 per share, less the exercise price payable
    upon exercise of such options. The Board of Directors determined the fair
    market value based on various factors including independent appraisals,
    the illiquidity of the Common Stock representing a minority interest in
    the Company, values of similarly situated companies and the Company's
    future prospects.
 
STOCK OPTION PLANS
 
  Manhattan Associates, LLC Option Plan. The Manhattan Associates, LLC Option
Plan (the "LLC Option Plan") became effective on January 1, 1997. The
aggregate number of shares reserved for issuance under the LLC Option Plan was
5,000,000 shares. The purpose of the LLC Option Plan was to provide incentives
for key employees, officers, consultants and directors to promote the success
of the Company and to enhance the Company's ability to attract and retain the
services of such persons. Options granted under the LLC Option Plan were not
options
 
                                      48

<PAGE>
 
intended to qualify as "incentive stock options" under Section 422 of the
Code. As of February 28, 1998, no additional options may be granted pursuant
to the LLC Option Plan.
 
  As of February 28, 1998, options to purchase 3,355,716 shares of Common
Stock were outstanding under the LLC Option Plan at a weighted average
exercise price of $4.66 per share, and no shares of Common Stock have been
issued upon exercise of options granted under the LLC Option Plan.
 
  STOCK INCENTIVE PLAN. The Company's 1998 Stock Incentive Plan (the "Stock
Incentive Plan") was adopted by the Board of Directors and approved by the
shareholders of the Company in February 1998. Up to 5,000,000 shares of Common
Stock (subject to adjustment in the event of stock splits and other similar
events), less the number of shares issued under the LLC Option Plan, may be
issued pursuant to stock options and other stock incentives granted under the
Stock Incentive Plan. As of February 28, 1998, no options to purchase shares
of Common Stock or other stock incentives were outstanding under the Stock
Incentive Plan and no shares of Common Stock had been issued pursuant to or
upon the exercise of options or other stock incentives granted under the Stock
Incentive Plan.
 
  The Stock Incentive Plan provides for the grant of incentive stock options
intended to qualify under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), nonstatutory stock options, restricted stock awards and
stock appreciation rights ("SARs", and, together with the other options and
incentives, "Awards"). Officers, employees, directors, advisors and
consultants of the Company and any subsidiaries of the Company are eligible to
be granted Awards under the Stock Incentive Plan. Under present law, however,
incentive stock options may be granted only to employees. The granting of
Awards under the Stock Incentive Plan is discretionary. The Company will be
required to recognize compensation expense over the vesting period of any SARs
granted.
 
  Optionees receive the right to purchase a specified number of shares of
Common Stock at a specified option price and subject to such other terms and
conditions as are specified in connection with the option grant. Options may
be granted at an exercise price that may be less than, equal to or greater
than the fair market value of the Common Stock on the date of grant. Under
present law, incentive stock options may not be granted at an exercise price
less than the fair market value of the Common Stock on the date of grant (or
less than 110% of the fair market value in the case of incentive stock options
granted to optionees holding more than 10% of the voting power of the
Company). The Stock Incentive Plan permits the payment of the exercise price
of options to be in the form of cash, or if the individual option agreement so
provides, by surrender to the Company of shares of Common Stock or by a
cashless exercise through a brokerage transaction.
 
  The Stock Incentive Plan will be administered by the Board of Directors. The
Board may appoint a committee consisting of at least two nonemployee
directors, which may be the Compensation Committee, to administer the Stock
Incentive Plan. To date, no such committee has been formed pending the
election of nonemployee directors to the Board of Directors. The Board and any
such committee will have the authority to adopt, amend and repeal the
administrative rules, guidelines and practices relating to the Stock Incentive
Plan generally and to interpret the provisions thereof. The Board of Directors
and any such committee may amend, modify or terminate any outstanding Award
and with respect to new Awards will determine (i) the number of shares of
Common Stock covered by options, restricted stock awards or SARs, the dates
upon which such options or SARs become exercisable and the restrictions on
restricted stock lapse, (ii) the exercise price of options and SARs and the
purchase price, if any, of restricted stock, (iii) the duration of options and
SARs and (iv) conditions and duration of restrictions on restricted stock.
 
  No Award may be made under the Stock Incentive Plan after February 2008, but
Awards previously granted may extend beyond that time. The Board of Directors
may at any time
 
                                      49

<PAGE>
 
terminate the Stock Incentive Plan. Any such termination will not affect
outstanding options, restricted stock or SARs.
 
  OTHER OPTIONS. In addition to options issued under the LLC Option Plan, as
of February 28, 1998, the Company has outstanding options to purchase an
aggregate of 729,784 shares of Common Stock to employees outside of the LLC
Option Plan and the Stock Incentive Plan at weighted average exercise price of
$1.20 per share.
 
DEFERRED COMPENSATION PLANS
 
  401(k) Profit Sharing Plan. The Company maintains a 401(k) Plan (the "401(k)
Plan") which is intended to be a tax-qualified contribution plan under Section
401(k) of the Code. Pursuant to the 401(k) Plan, participants may contribute,
subject to certain Code limitations, up to 10% of eligible compensation, as
defined, to the 401(k) Plan. Employees are eligible for this arrangement upon
completion of their first calendar month of employment. The Company will
match contributions made by employees pursuant to the 401(k) Plan at a rate of
50% of the participant's contributions, up to 6% of the eligible compensation
being contributed after the participant's first year of employment, subject to
certain Code limitations. All employees of the Company who have completed one
year of service with the Company consisting of at least 1,000 hours of
employment are eligible for the matching contribution. The Company may make an
additional contribution to participants' 401(k) Plans each year at the
discretion of the Board of Directors. The portion of a participant's account
attributable to his or her own contributions is 100% vested. The portion of
the account attributable to Company contributions (including matching
contributions) vests over 5 to 7 years of service with the Company.
Distributions from the 401(k) Plan may be made in the form of a lump-sum cash
payment or in installment payments.
 
  Defined Contribution Plan. The Company sponsors a defined contribution
pension plan (the "Pension Plan") covering substantially all employees of the
Company. Under the Pension Plan, the Company contributes up to 8% of a
participant's eligible compensation, as defined, to the Pension Plan after the
participant's first year of employment.
 
  PAC 401(K) PROFIT SHARING PLAN. Performance Analysis Corporation, which was
acquired by the Company on February 16, 1998, sponsors a 401(k) Profit Sharing
Plan (the "PAC 401(k) Plan"), covering substantially all employees of PAC.
Under the PAC 401(k) Plan's deferred compensation arrangement, eligible
employees who elect to participate in the PAC 401(k) Plan may contribute up to
15% of eligible compensation, as defined, to the PAC 401(k) Plan. The PAC
401(k) Plan may allow for a matching contribution which is determined by the
PAC each plan year.
 
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
 
  The Company's Articles of Incorporation provide that the liability of the
directors for monetary damages shall be limited to the fullest extent
permissible under Georgia law. This limitation of liability does not affect
the availability of injunctive relief or other equitable remedies.
 
  The Company's Bylaws provide that the Company will indemnify each of its
officers, directors, employees and agents to the extent that he or she is or
was a party, or is threatened to be made a party, to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative because he or she is or was a director,
officer, employee or agent of the Company, against reasonable expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
in connection with such action, suit or
 
                                      50

<PAGE>
 
proceeding; provided, however, that no indemnification shall be made for (i)
any appropriation, in violation of his or her duties, of any business
opportunity of the Company, (ii) acts or omissions which involve intentional
misconduct or a knowing violation of law, (iii) any liability under Section
14-2-832 of the Georgia Business Corporation Code ("GBCC"), which relates to
unlawful payments of dividends and unlawful stock repurchases and redemptions
or (iv) any transaction from which he or she derived an improper personal
benefit. The Company has entered into indemnification agreements with certain
officers and directors providing indemnification similar to that provided in
the Bylaws.
 
                                      51

<PAGE>
 

                             CERTAIN TRANSACTIONS
 
LLC DISTRIBUTION AND RESTRUCTURING
   
  As of the date of this Prospectus, Manhattan LLC will contribute all of its
assets and liabilities, including the stock of PAC, to the Company in exchange
for Common Stock of the Company (the "Restructuring"). Prior to the
Restructuring, an amount equal to all undistributed earnings, calculated on a
tax basis, will be distributed to Manhattan LLC's stockholders through a
combination of distributions from internally generated cash and from proceeds
from borrowings under the Company's line of credit. As of December 31, 1997,
the Company's undistributed earnings, calculated on a tax basis, was $8.7
million, and the Company expects to accumulate additional undistributed income
from January 1, 1998 through the date of the Restructuring. A portion of the
net proceeds of the Offering will be used to repay balances incurred under the
Company's line of credit. The stockholders of the Company who will receive
funds through the distribution include Alan J. Dabbiere, Deepak Raghavan,
David K. Dabbiere, Joel D. Dabbiere, Peter V. Dabbiere, Deepak M.J. Rao and
Ponnambalam Muthiah. See "Conversion From Limited Liability Company Status and
Related Distributions" and Notes 1 and 9 of Notes to Financial Statements.
    
TAX INDEMNIFICATION AGREEMENTS
 
  The Company has entered into tax indemnification agreements (the "Tax
Indemnification Agreements") with Pegasys, Alan J. Dabbiere, Deepak Raghavan,
the Company's Chief Technology Officer, and two other founders of the Company,
Deepak Rao and Ponnambalam Muthiah, and certain entities affiliated with such
individuals. Each of the Tax Indemnity Agreements provide for, among other
things, the indemnification of the Company by these persons for any federal
and state income taxes (including interest and penalties) incurred by the
Company if for any reason Manhattan LLC were to be taxable as a "C"
corporation during the period prior to the Restructuring and for any tax
liabilities incurred by the Company by reason of the Restructuring. The
liability of each of such persons to the Company may not exceed the amount of
any distributions received (directly or indirectly) by such persons from
Manhattan LLC, net of any taxes attributable to his distributed share of
Manhattan LLC's income. The Tax Indemnification Agreements also provide for
the indemnification by the Company of each party for certain additional taxes,
interest and penalties resulting from Manhattan LLC being taxed as a
partnership.
 

RELATED PARTY TRANSACTIONS
 
  On December 31, 1995, the Company entered into a Grid Promissory Note (the
"1995 Note") with Alan J. Dabbiere. Pursuant to the 1995 Note, Mr. Dabbiere
loaned the Company $1,000,000 on December 31, 1995 at an interest rate of 5%
per year, payable on demand. The balance of the 1995 Note, including accrued
interest, was $1,019,000 as of December 31, 1997. On February 6, 1998, the
Company borrowed an additional $900,000 under the 1995 Note. The balance of
the 1995 Note at February 28, 1998 (including accrued interest) was
$1,937,000. The proceeds of the 1995 Note were used for working capital. The
Company intends to repay the 1995 Note with the proceeds of the Offering.
 
  On February 16, 1998, Deepak Raghavan, the Chief Technology Officer of the
Company, invested $1,000,000 in the Company to purchase 100,000 shares of
Common Stock. The proceeds of Mr. Raghavan's investment were used for working
capital.
 
  During 1995, 1996 and 1997, Peter V. Dabbiere, a brother of Alan J.
Dabbiere, was employed by the Company as director of the Company's hardware
sales, and received aggregate payments of $63,667, $75,536 and $100,942,
respectively. Peter Dabbiere was granted an option on January 1, 1997,
pursuant to the LLC Option Plan, to purchase 25,000 shares of the
 
                                      52

<PAGE>
 
Company's Common Stock at $2.50 per share. Peter Dabbiere was also granted an
option by Pegasys on May 5, 1997 to purchase 50,000 shares of Common Stock at
$2.50 per share from Pegasys. This option was exercised on May 5, 1997.
 
  During 1995, 1996 and 1997, Joel D. Dabbiere, a brother of Alan J. Dabbiere,
was employed by the Company as a senior account executive, and received
aggregate payments of $119,109, $175,494 and $254,104, respectively. Joel
Dabbiere was granted an option on July 1, 1997, pursuant to the LLC Option
Plan, to purchase 80,000 shares of the Company's Common Stock at $2.50 per
share. Joel Dabbiere was also granted an option by Pegasys on May 5, 1997 to
purchase 80,000 shares of Common Stock at $2.50 per share from Pegasys. This
option was exercised on May 5, 1997.
 
  During 1995, 1996 and 1997, David K. Dabbiere, a brother of Alan J.
Dabbiere, provided legal and management consulting services to the Company,
and received aggregate payments of $25,733, $38,126, and $53,767,
respectively. David Dabbiere was granted an option on February 28, 1998,
pursuant to the LLC Option Plan, to purchase 160,000 shares of the Company's
Common Stock at $10.00 per share, respectively. David Dabbiere was also
granted an option by Pegasys on May 5, 1997 and February 28, 1998 to purchase
50,000 and 130,000 shares, respectively, of the Company's Common Stock at
$2.50 and $9.50 per share, respectively, from Pegasys. These options were
exercised on May 5, 1997 and February 28, 1998, respectively.
 
  All cash compensation paid to Alan Dabbiere's brothers was comparable to
compensation that would have been paid to unaffiliated persons. All options
were granted with an exercise price equal to fair market value as determined
by the Company's Board of Directors. As of December 31, 1997, there were no
fees outstanding for the services provided by these individuals.
 
  The Board of Directors of the Company has adopted a resolution whereby all
future transactions, including any loans from the Company to its officers,
directors, principal stockholders or affiliates, will be approved by a
majority of the Board of Directors, including a majority of the independent
and disinterested members of the Board of Directors, if required by law, or a
majority of the disinterested stockholders and will be on terms no less
favorable to the Company than could be obtained from unaffiliated third
parties.
 
                                      53

<PAGE>
 
                      PRINCIPAL AND SELLING STOCKHOLDERS
 
  The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of February 28, 1998,
and as adjusted to reflect the sale by the Company of the shares offered
hereby with respect to: (i) each director of the Company; (ii) each of the
Named Executive Officers; (iii) each stockholder known by the Company to be
the beneficial owner of more than 5% of the Company's Common Stock; and (iv)
all executive officers and directors as a group. Except as otherwise noted,
the persons or entities named in the table have sole voting and investment
power with respect to all the shares of Common Stock beneficially owned by
them.
 

<TABLE>
<CAPTION>
                            BENEFICIAL OWNERSHIP          BENEFICIAL OWNERSHIP
                          PRIOR TO THE OFFERING(2)      AFTER THE OFFERING(2)(3)
NAMED EXECUTIVE OFFICERS  ------------------------------------------------------------
    AND DIRECTORS(1)         SHARES        PERCENTAGE      SHARES        PERCENTAGE
- ------------------------  --------------- ----------------------------- --------------
<S>                       <C>             <C>           <C>             <C>
Alan J. Dabbiere(4).....       11,118,576         55.0%      11,118,576         47.9%
Deepak Raghavan(5)......        2,809,944         13.9%       2,809,944         12.1%
Gregory Cronin..........              --           --               --           --
Oliver M. Cooper(6).....           60,000            *           60,000            *
Deepak Rao(7)...........        2,777,944         13.7%       2,777,944         12.0%
Ponnambalam Muthiah(8)..        2,816,644         13.9%       2,816,644         12.1%
All directors and
 executive officers as a
 group (7 persons)(9)...       14,385,186         70.2%      14,385,186         61.3%
</TABLE>

- --------
 * Less than 1% of the outstanding Common Stock.
(1) Except as set forth herein, the street address of the named beneficial
    owner is c/o Manhattan Associates, Inc., 2300 Windy Ridge Parkway, Suite
    700, Atlanta, Georgia 30339.
(2) For purposes of calculating the percentage beneficially owned, the number
    of shares of Common Stock deemed outstanding prior to the Offering
    includes (i) 20,206,674 shares outstanding as of February 28, 1998 and
    (ii) shares issuable by the Company pursuant to options held by the
    respective person or group which may be exercised within 60 days following
    February 28, 1998 ("Presently Exercisable Options"). The number of shares
    of Common Stock deemed outstanding after this offering includes an
    additional 3,000,000 shares that are being offered for sale by the Company
    in this offering. Beneficial ownership is determined in accordance with
    the rules of the Securities and Exchange Commission that deem shares to be
    beneficially owned by any person or group who has or shares voting and
    investment power with respect to such shares. Presently Exercisable
    Options are deemed to be outstanding and to be beneficially owned by the
    person or group holding such options for the purpose of computing the
    percentage ownership of such person or group but are not treated as
    outstanding for the purpose of computing the percentage ownership of any
    other person or group.
(3) If the Underwriters exercise their over-allotment option to purchase up to
    450,000 shares, then the following stockholders named in the table above
    will sell up to the following number of additional shares: Alan J.
    Dabbiere, 87,500 shares; Deepak Raghavan, 187,500 shares; Deepak Rao,
    87,500 shares; and Ponnambalam Muthiah, 87,500 shares.
(4) Consists of 11,118,576 shares held by Pegasys, a corporation controlled by
    Mr. Dabbiere, 80% of the equity interest of which is held by a trust for
    the benefit of Mr. Dabbiere's siblings, certain extended relatives and any
    future descendants. Mr. Dabbiere disclaims beneficial ownership of the
    shares held by Pegasys which are allocable to the interest held by the
    trust.
(5) Includes 2,703,944 shares held by a limited partnership controlled by Mr.
    Raghavan, the 99% limited partnership interest of which is owned by a
    trust for the benefit of his descendants, and 6,000 shares held by
    Mr. Raghavan for the benefit of his minor child. Mr. Raghavan disclaims
    beneficial ownership of the shares held by the limited partnership which
    are allocable to the interest held by the trust and the shares held for
    the benefit of his child.
(6) Consists of 60,000 shares issuable pursuant to Presently Exercisable
    Options.
(7) Includes 2,471,544 shares held by a limited partnership controlled by Mr.
    Rao, the 99% limited partnership interest of which is held by a trust for
    the benefit of his descendants, and 6,400 shares held by Mr. Rao for the
    benefit of his minor children. Mr. Rao disclaims beneficial ownership of
    the shares held by the limited partnership which are allocable to the
    interest held by the trust and the shares held for the benefit of his
    children.
(8) Includes 2,000,000 shares held by a limited partnership controlled by
    Ponnambalam Muthiah, the 99% limited partnership interest of which is held
    by a trust for the benefit of his descendants, and 12,000 shares held by
    him for the benefit of his minor children. Ponnambalam Muthiah disclaims
    beneficial ownership of the shares held by the limited partnership which
    are allocable to the interest held by the trust and the shares held for
    the benefit of his children.
(9) Includes 11,118,576 shares held by a corporation controlled by Mr.
    Dabbiere; 2,703,944 shares held by a limited partnership controlled by Mr.
    Raghavan; 6,000 shares held by Mr. Raghavan's child, who is a minor; and
    276,666 shares issuable pursuant to Presently Exercisable Options.
 
                                      54

<PAGE>
 

                         DESCRIPTION OF CAPITAL STOCK
 
  Upon completion of the Offering, the Company's authorized capital stock will
consist of 100,000,000 shares of Common Stock, $.01 par value per share, and
20,000,000 shares of preferred stock, no par value per share. As of February
28, 1998, the Company had issued and outstanding 20,206,674 shares of Common
Stock. The following description of the capital stock of the Company is a
summary and is qualified in its entirety by the provisions of the Company's
Articles of Incorporation and Bylaws, copies of which have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
 
COMMON STOCK
 
  Holders of shares of Common Stock are entitled to one vote per share for the
election of directors and all matters to be submitted to a vote of the
Company's stockholders. Subject to the rights of any holders of preferred
stock which may be issued in the future, the holders of shares of Common Stock
are entitled to share ratably in such dividends as may be declared by the
Board of Directors and paid by the Company out of funds legally available
therefore. In the event of dissolution, liquidation or winding up of the
Company, holders of shares of Common Stock are entitled to share ratably in
all assets remaining after payment of all liabilities and liquidation
preferences, if any. Holders of shares of Common Stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of
Common Stock are, and the shares of Common Stock to be issued by the Company
in connection with the Offering will be, duly authorized, validly issued,
fully paid and nonassessable.
 
PREFERRED STOCK
 
  The Board of Directors is authorized, subject to certain limitations
prescribed by laws, without further stockholder approval, to issue from time
to time up to an aggregate of 20,000,000 shares of preferred stock in one or
more series and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions on the shares of each such series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption (including sinking fund provisions),
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designations of such series. The issuance of
preferred stock may have the effect of delaying, deferring or preventing a
change of control of the Company. There are no outstanding shares of Preferred
Stock and no series have been designated.
 
CERTAIN ARTICLES OF INCORPORATION AND BYLAW PROVISIONS
 
  The Bylaws of the Company provide that special meetings of stockholders may
be called only by: (i) the Board of Directors; (ii) the Chairman of the Board
of Directors (if any); (iii) the Chief Executive Officer; (iv) the President
of the Company; or (v) holders of not less than 35% of all votes entitled to
be cast on any issued proposed to be considered at the proposed special
meeting. The Bylaws and Articles of Incorporation also provide for a staggered
Board of Directors and permit removal of directors with or without cause. See
"Management--Directors, Executive Officers and Other Key Employees."
 
  The Company's Bylaws establish an advance notice procedure for the
nomination, other than by or at the direction of the Board of Directors or a
committee thereof, of candidates for election as directors, as well as for
other stockholder proposals to be considered at shareholders meetings. Notice
of stockholder proposals and directors nominations must be given timely in
writing to the Secretary of the Company before the meeting at which such
matters are to be acted upon or directors are to be elected. Such notice, to
be timely, must be
 
                                      55

<PAGE>
 
received at the principal executive offices of the Company with respect to
stockholder proposals and elections to be held at the annual meeting, not less
than 60 days before the date of the meeting at which the director(s) are to be
elected or the proposal is to be considered, however if less than 70 days
notice or prior public disclosure of the date of the scheduled meeting is
given or made, notice by the stockholder, to be timely, must be delivered or
received not later than the close of business on the tenth day following the
earlier of the day on which notice of the date of the meeting is mailed to
stockholders or public disclosure of the date of such meeting is made.
 
  Notice to the Company from a stockholder who intends to present a proposal
or to nominate a person for election as a director at a stockholders' meeting
must contain certain information about the stockholder giving such notice and,
in the case of director nominations, all information that would be required to
be included in a proxy statement soliciting proxies for the election of the
proposed nominee (including such person's written consent to serve as a
director if so elected). If the presiding officer at the meeting of
stockholders determines that a stockholder's proposal or nomination is not
made in accordance with the procedures set forth in the Bylaws, such proposal
or nomination, at the direction of such presiding officer, may be disregarded.
The notice requirement for stockholder proposals contained in the Bylaws does
not restrict a stockholder's right to include proposals in the Company's
annual proxy materials pursuant to rules promulgated under the Securities
Exchange Act of 1934, as amended.
 
  The Bylaws provide that directors may be removed with or without cause by
the affirmative vote, at any annual or special meeting of the stockholders,
but only if notice of such proposed removal was contained in the notice of
such meeting. The Board of Directors and the stockholders shall both have the
power to increase or decrease the authorized number of directors. Newly
created directorships resulting from any increase in the number of directors
or any vacancy of the Board of Directors may be filled by the affirmative vote
of a majority of the remaining directors then in office or, if not filled by
the directors, by the stockholders.
 
  The Articles of Incorporation provide that in discharging the duties of
their respective positions and in determining what is believed to be in the
best interest of the Company, the Board of Directors, any committee of the
Board of Directors and any individual director, in addition to considering the
effects of any action on the Company or is stockholders, may, to the extent
permitted by applicable Georgia law, in his or her sole discretion, consider
the interests of the employees, customers, suppliers and creditors of the
Company and its subsidiaries, the communities in which offices or other
establishments of the Company and its subsidiaries are located and all other
factors such director(s) may consider pertinent; provided, however, that this
provision of the Company's Articles of Incorporation solely grants
discretionary authority to the directors, and no constituency shall be deemed
to have been given any right to consideration thereby.
 
  The preceding provisions of the Articles of Incorporation may be changed
only upon the affirmative vote of holders of at least a 66 2/3% of the total
number of the then outstanding shares of capital stock of the Company that are
entitled to vote generally in the election of directors, voting together as a
single class.
 
  The provisions of the Articles of Incorporation and Bylaws summarized in the
preceding six paragraphs contain provisions that may have the effect of
delaying, deferring or preventing a non-negotiated merger or other business
combination involving the Company. These provisions are intended to encourage
any person interested in acquiring the Company to negotiate with and obtain
the approval of the Board of Directors in connection with the transaction.
Certain of these provisions may, however, discourage a future acquisition of
the Company not approved
 
                                      56

<PAGE>
 
by the Board of Directors in which stockholders might receive an attractive
value for their shares or that a substantial number or even a majority of the
Company's stockholders might believe to be in their best interest. As a
result, stockholders who desire to participate in such a transaction may not
have the opportunity to do so. Such provisions could also discourage bids for
the Common Stock at a premium, as well as create a depressive effect on the
market price of the Common Stock.
 
LISTING
 
  Application has been made to include the Company's Common Stock on the
Nasdaq National Market under the trading symbol "MANH."
 
TRANSFER AGENT AND REGISTRAR
 
  The transfer agent for the Company's Common Stock is ChaseMellon Shareholder
Services.
 
                                      57

<PAGE>
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
  Prior to the Offering, there has been no public market for the securities of
the Company. Upon completion of the Offering, the Company will have
outstanding 23,206,674 shares of Common Stock (assuming no exercise of the
underwriters' over-allotment option or options outstanding under the Company's
stock option plans). Of these shares, the 3,000,000 shares sold in the
Offering will be freely tradable without restriction or further registration
under the Securities Act of 1933, as amended (the "Securities Act"), unless
they are purchased by "affiliates" of the Company as that term is defined in
Rule 144 under the Securities Act (which sales would be subject to certain
limitations and restrictions described below). The remaining 20,206,674 shares
are "restricted shares" under Rule 144 (the "Restricted Shares"). Restricted
Shares may be sold in the public market only if registered under the
Securities Act or if they qualify for an exemption from registration under
Rule 144, Rule 144(k) or Rule 701 promulgated under the Securities Act. The
holders of all remaining 20,206,674 shares have agreed not to offer, pledge,
sell, offer to sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of, directly or
indirectly any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for shares of Common Stock (other than gifts)
until 180 days after the date of this Prospectus without the prior written
consent of Deutsche Morgan Grenfell Inc. As a result of the contractual
restrictions described herein and the provisions of Rule 144, Rule 144(k) and
Rule 701, the Restricted Shares will be available for sale in the public
market as follows: (i) no shares will be available for immediate sale on the
date of this Prospectus, (ii) approximately 19,870,008 shares will become
eligible for sale 180 days after the date of this Prospectus (assuming no
release from the lock-up agreements) upon expiration of lock-up agreements,
and (iii) approximately 206,666 shares will become eligible for sale February
16, 1999 and 130,000 shares will become eligible for sale February 28, 1999.
See "Underwriting." Deutsche Morgan Grenfell Inc. in its sole discretion and
without notice may earlier release for sale in the public market all or any
portion of the shares subject to the lock-up agreement.
 
  In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned shares for a least one year (including the holding
period of any prior owner except an affiliate) is entitled to sell in
"brokers' transactions" or to market makers, within any three-month period a
number of shares that does not exceed the greater of: (i) one percent of the
number of shares of Common Stock then outstanding (approximately 232,067
shares immediately after the Offering) or (ii) the average weekly trading
volume in the Common Stock during the four calendar weeks preceding the
required filing of a Form 144 with respect to such sale. Sales under Rule 144
are subject to the availability of current public information about the
Company. Under Rule 144(k), a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least two
years, is entitled to sell such shares without having to comply with the
manner of sale, public information, volume limitation or notice filing
provisions of Rule 144. Unless otherwise restricted, "144(k) shares" may
therefore be sold immediately upon the completion of the Offering. Under Rule
701 under the Securities Act, persons who purchase shares upon exercise of
options granted prior to the Offering are entitled to sell such shares 90 days
after the Offering in reliance on Rule 144, without having to comply with the
holding period requirements of Rule 144 and, in the case of non-affiliates,
without having to comply with the volume limitation or notice filing
provisions of Rule 144.
 
  After the completion of this offering, the Company intends to file a
Registration Statement on Form S-8 (the "Form S-8") under the Securities Act
to register the 5,729,784 shares of Common Stock reserved for issuance under
the Stock Incentive Plan, the LLC Option Plan and
 
                                      58

<PAGE>
 
other options. The Company has agreed with the Underwriters not to file a Form
S-8 until at least 90 days after the date of this Prospectus. After the date
of such filing, if not otherwise subject to a lock-up agreement, shares
purchased pursuant to such plans and options generally would be available for
resale in the public market. See "Management--Stock Option Plans."
 
                                      59

<PAGE>
 

                                 UNDERWRITING
 
  The Underwriters named below, for whom Deutsche Morgan Grenfell Inc.,
Hambrecht & Quist LLC and SoundView Financial Group, Inc. are acting as
Representatives (the "Representatives"), have severally agreed, subject to the
terms and subject to the conditions in the Underwriting Agreement (the form of
which will be filed as an exhibit to the Company's Registration Statement of
which this Prospectus is a part), to purchase from the Company the respective
number of shares of Common Stock indicated opposite their respective names.
The Underwriters are committed to purchase all of the shares, if they purchase
any.
 

<TABLE>
<CAPTION>
                                                                       NUMBER OF
   UNDERWRITER                                                          SHARES
   -----------                                                         ---------
   <S>                                                                 <C>
   Deutsche Morgan Grenfell Inc.......................................
   Hambrecht & Quist LLC..............................................
   SoundView Financial Group, Inc.....................................
                                                                       ---------
     Total............................................................ 3,000,000
                                                                       =========
</TABLE>

 
  The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to the approval of certain legal matters
by counsel and to various other conditions.
 
  The Representatives have advised the Company that the Underwriters initially
propose to offer the Common Stock to the public on the terms set forth on the
cover page of this Prospectus. The Underwriters may allow selected dealers
(who may include the Underwriters) a concession not in excess of $   a share
under the initial public offering price. The selected dealers may reallow a
concession not in excess of $   a share to other dealers and other selling
terms may be changed by the Representatives. The Common Stock is offered
subject to receipt and acceptance by the Underwriters, and to certain other
conditions, including the right to reject orders in whole or in part. The
Underwriters do not intend to sell any of the shares of Common Stock offered
hereby to accounts for which they exercise discretionary authority.
 
  Pursuant to the Underwriting Agreement, the Selling Stockholders have
granted to the Underwriters an option to purchase up to 450,000 additional
shares of Common Stock, respectively, to cover over-allotments, if any, at the
initial public offering price, less the underwriting discount set forth on the
cover page of this Prospectus. Such option is exercisable for 30 days from the
date of this Prospectus. To the extent such option is exercised, each
Underwriter will be committed, subject to certain conditions, to purchase
approximately the same percentage of such additional shares of Common Stock as
the number set forth next to such Underwriter's name in the preceding table
bears to the total number of shares of Common Stock offered hereby. The
Selling Stockholders will be obligated, pursuant to the option, to sell such
shares to the Underwriters.
 
  See "Shares Eligible for Future Sale" for a description of certain
arrangements by which all officers, directors and all stockholders of the
Company have agreed not to sell or otherwise
 
                                      60

<PAGE>
 
   
dispose of Common Stock or convertible securities of the Company for up to 180
days after the date of the final Prospectus without the prior consent of
Deutsche Morgan Grenfell Inc. ("DMG") The Company has agreed in the
Underwriting Agreement that it will not, directly or indirectly, without the
prior written consent, and in the sole discretion, of DMG contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of any shares of Common Stock or any securities convertible into or
exchangeable for Common Stock, for a period of 180 days after the date of the
final Prospectus without the consent, and in the sole discretion, of DMG,
except under certain circumstances. DMG has no present intention to release
any of the shares pursuant to the lock-up agreements. It has been the practice
of DMG to consider releasing shares from lock-up agreements based on a variety
of factors, including the market price of the Common Stock, the volume of
shares traded and other market conditions. DMG does not expect to provide
notice to the stockholders of any such releases from the lock-up agreements.
    
  The Underwriting Agreement provides that the Company, and the Selling
Stockholders in the event the over-allotment option is exercised, will
indemnify the several Underwriters against certain liabilities, including
civil liabilities under the Securities Act, or will contribute to payments the
Underwriters may be required to make in respect thereof.
 
  Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiation
between the Company, the Selling Stockholders and the Representatives. The
principal factors to be considered in determining the initial public offering
price include the information set forth in this Prospectus and otherwise
available to the Representatives; the history and the prospects for the
industry in which the Company competes; the ability of the Company's
management; the prospects for future earnings of the Company; the present
state of the Company's development and its current financial condition; the
general condition of the securities markets at the time of this Offering; and
the recent market prices of, and the demand for, publicly traded common stock
of generally comparable companies. Each of the Representatives has informed
the Company that it currently intends to make a market in the shares
subsequent to the effectiveness of this Offering, but there can be no
assurance that the Representatives will take any action to make a market in
any securities of the Company.
 
  Certain persons participating in this Offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the
open market, including by entering stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means the
placing of any bid or effecting of any purchase for the purpose of pegging,
fixing or maintaining the price of the Common Stock. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created
in connection with this Offering. A penalty bid means an arrangement that
permits the Underwriters to reclaim a selling concession from a syndicate
member in connection with this Offering when shares of Common Stock sold by
the syndicate member are purchased in syndicate covering transactions. Such
transactions may be effected on the Nasdaq National Market, in the over-the-
counter market or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.
 
                                      61

<PAGE>
 

                                 LEGAL MATTERS
 
  The validity of the issuance of the shares of the Common Stock offered
hereby will be passed upon for the Company and the Selling Stockholders by
Morris, Manning & Martin, L.L.P., Atlanta, Georgia. Certain legal matters in
connection with this Offering will be passed upon for the Underwriters by
Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
 

                                    EXPERTS
 
  The financial statements and schedule included in this Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated
in their reports with respect thereto, and are included herein in reliance
upon the authority of said firm as experts in giving said reports.
 
                            ADDITIONAL INFORMATION
 
  The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all
amendments, schedules and exhibits thereto, the "Registration Statement")
under the Securities Act with respect to the shares of Common Stock offered
hereby. This Prospectus, which constitutes a part of the registration
Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock offered hereby, reference is made
to the Registration Statement. Statements made in this Prospectus as to the
contents of any contract, agreement or other document are not necessarily
complete, and in each instance, reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. The Registration
Statement and the exhibits and schedules thereto may be inspected without
charge at the public reference facilities maintained by the Commission in Room
1024, 450 Fifth Street, N. W., Washington, D.C. 20549, and at the following
regional offices of the Commission: Seven World Trade Center, Room 1400, New
York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.
W., Washington, D.C. 20549, Room 1024, at prescribed rates. In addition, the
Company is required to file electronic versions of these documents with the
Commission through the Commissions Electronic Data Gathering, Analysis, and
Retrieval (EDGAR) system. The Commission maintains a World Wide Web Site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. Information concerning the Company is also available for
inspection at the offices of the Nasdaq National Market, Reports Section, 1735
K Street, N.W., Washington, D.C. 20006.
 
  The Company intends to furnish to its stockholders annual reports containing
financial statements audited by an independent public accounting firm and
quarterly reports for the first three quarters of each fiscal year containing
unaudited financial information.
 
                                      62

<PAGE>
 

                         INDEX TO FINANCIAL STATEMENTS
 

<TABLE>   
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
MANHATTAN ASSOCIATES, INC. FINANCIAL STATEMENTS:
Report of Independent Public Accountants..................................   F-2
Balance Sheets as of December 31, 1996 and 1997...........................   F-3
Statements of Income for the Years Ended December 31, 1995, 1996 and 1997.   F-4
Statements of Stockholders' Equity for the Years Ended December 31, 1995,
 1996 and 1997............................................................   F-5
Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and
 1997.....................................................................   F-6
Notes to Financial Statements.............................................   F-7
PERFORMANCE ANALYSIS CORPORATION FINANCIAL STATEMENTS:
Report of Independent Public Accountants..................................  F-20
Balance Sheet as of December 31, 1997.....................................  F-21
Statement of Income and Retained Earnings for the Year Ended December 31,
 1997.....................................................................  F-22
Statement of Cash Flows for the Year Ended December 31, 1997..............  F-23
Notes to Financial Statements.............................................  F-24
UNAUDITED PRO FORMA BALANCE SHEET:
Unaudited Pro Forma Balance Sheet as of December 31, 1997.................  F-30
Notes to Unaudited Pro Forma Balance Sheet................................  F-31
</TABLE>
    
 
                                      F-1

<PAGE>
 
  After the restructuring discussed in Note 10 to the financial statements of
Manhattan Associates, Inc. is effected, we expect to be in a position to
render the following audit report.
 
ARTHUR ANDERSEN LLP
 
Atlanta, Georgia
February 16, 1998
 

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Manhattan Associates, Inc.:
 
  We have audited the accompanying balance sheets of MANHATTAN ASSOCIATES,
INC. (a Georgia corporation, formerly Manhattan Associates, LLC) as of
December 31, 1996 and 1997 and the related statements of income, stockholders'
equity, and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Manhattan Associates, Inc.
as of December 31, 1996 and 1997 and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1997
in conformity with generally accepted accounting principles.
 
Atlanta, Georgia
 
                                      F-2

<PAGE>
 
                           MANHATTAN ASSOCIATES, INC.
 
                                 BALANCE SHEETS
                 
              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)     
 

<TABLE>   
<CAPTION>
                                                                DECEMBER 31,
                                                               ---------------
                                                                1996    1997
                                                               ------  -------
                            ASSETS
<S>                                                            <C>     <C>
Current assets:
  Cash and cash equivalents................................... $3,199  $ 3,194
  Accounts receivable, net of a $325 and $970 allowance for
   doubtful accounts, in 1996 and 1997, respectively..........  3,311    9,242
  Deferred income taxes.......................................    --       --
  Other current assets........................................    --       384
                                                               ------  -------
    Total current assets......................................  6,510   12,820
                                                               ------  -------
Property and equipment:
  Property and equipment......................................    792    2,605
    Less accumulated depreciation.............................   (313)    (662)
                                                               ------  -------
  Property and equipment, net.................................    479    1,943
                                                               ------  -------
Intangible assets, net of accumulated amortization of $133
 and $266 in 1996 and 1997, respectively .....................    267      133
Other assets..................................................     20      110
                                                               ------  -------
    Total assets.............................................. $7,276  $15,006
                                                               ======  =======
             LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Cash overdraft.............................................. $  --   $   --
  Accounts payable............................................    422    2,479
  Accrued compensation and benefits...........................    151      753
  Accrued liabilities.........................................    253      455
  Notes payable to stockholders...............................    969    1,019

  Deferred revenue............................................    599    1,846
  Deferred income taxes.......................................    --       --
                                                               ------  -------
    Total current liabilities.................................  2,394    6,552
                                                               ------  -------
Deferred income taxes.........................................    --       --
Commitments and contingencies
Stockholders' equity:
  Preferred stock, no par value; 20,000,000 shares authorized,
   no shares issued or outstanding in 1996 and 1997 and in
   1997 pro forma.............................................    --       --
  Common stock, $.01 par value; 100,000,000 shares authorized,
   20,000,008 shares issued and outstanding in 1996 and 1997 .    200      200
  Additional paid-in-capital..................................    414    1,459
  Retained earnings (deficit).................................  4,268    7,458
  Deferred compensation.......................................    --      (663)
                                                               ------  -------
    Total stockholders' equity (deficit)......................  4,882    8,454
                                                               ------  -------
    Total liabilities and stockholders' equity................ $7,276  $15,006
                                                               ======  =======
</TABLE>
    
 
      The accompanying notes are an integral part of these balance sheets.
 
                                      F-3

<PAGE>
 
                           MANHATTAN ASSOCIATES, INC.
 
                              STATEMENTS OF INCOME
 
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 

<TABLE>   
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                        -----------------------
                                                         1995    1996    1997
                                                        ------- ------- -------
<S>                                                     <C>     <C>     <C>
Revenue:
  Software license..................................... $ 2,463 $ 3,354 $ 7,160
  Services.............................................   3,503   6,236  14,411
  Hardware.............................................   5,255   4,810  10,886
                                                        ------- ------- -------
    Total revenue......................................  11,221  14,400  32,457
                                                        ------- ------- -------
Cost of revenue:
  Software license.....................................       6     177     461
  Services.............................................   1,740   2,026   6,147
  Hardware.............................................   3,991   3,734   8,001
                                                        ------- ------- -------
    Total cost of revenue..............................   5,737   5,937  14,609
                                                        ------- ------- -------
Gross margin ..........................................   5,484   8,463  17,848
Operating expenses:
  Research and development.............................   1,138   1,236   3,025
  Sales and marketing..................................   1,147   1,900   3,570
  General and administrative...........................   1,058   1,454   2,975
                                                        ------- ------- -------
    Total operating expenses...........................   3,343   4,590   9,570
                                                        ------- ------- -------
Income from operations.................................   2,141   3,873   8,278
Other income, net......................................      40     103      56
                                                        ------- ------- -------
Historical income...................................... $ 2,181 $ 3,976 $ 8,334
                                                        ======= ======= =======
Historical basic net income per share.................. $  0.11 $  0.20 $  0.42
                                                        ======= ======= =======
Historical diluted net income per share................ $  0.11 $  0.20 $  0.40
                                                        ======= ======= =======
Income before pro forma income taxes................... $ 2,181 $ 3,976 $ 8,334
Pro forma income taxes.................................     800   1,486   3,023
                                                        ------- ------- -------
Pro forma net income................................... $ 1,381 $ 2,490 $ 5,311
                                                        ======= ======= =======
Pro forma basic net income per share...................                 $  0.26
                                                                        =======
Pro forma diluted net income per share.................                 $  0.25
                                                                        =======
</TABLE>
    
 
        The accompanying notes are an integral part of these statements.
 
                                      F-4

<PAGE>
 
                           MANHATTAN ASSOCIATES, INC.
 
                       STATEMENTS OF STOCKHOLDERS' EQUITY
 
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 

<TABLE>   
<CAPTION>
                           COMMON STOCK    ADDITIONAL                            TOTAL
                         -----------------  PAID-IN   RETAINED    DEFERRED   STOCKHOLDERS'
                           SHARES   AMOUNT  CAPITAL   EARNINGS  COMPENSATION    EQUITY
                         ---------- ------ ---------- --------  ------------ -------------
<S>                      <C>        <C>    <C>        <C>       <C>          <C>
Balance, December 31,
 1994...................        200  $--     $  --    $ 1,997      $ --         $ 1,997
  Stock issued upon
   formation of
   Manhattan Associates,
   LLC.................. 11,428,376   114       --       (114)       --             --
  Distributions to
   stockholders.........        --    --        --       (923)       --            (923)
  Issuance of common
   stock and repurchase
   of option (Note 1)...  8,571,432    86       414       --         --             500
  Income before pro
   forma income taxes...        --    --        --      2,181        --           2,181
                         ----------  ----    ------   -------      -----        -------
Balance, December 31,
 1995................... 20,000,008   200       414     3,141        --           3,755
  Distributions to
   stockholders.........        --    --        --     (2,849)       --          (2,849)
  Income before pro
   forma income taxes...        --    --        --      3,976        --           3,976
                         ----------  ----    ------   -------      -----        -------
Balance, December 31,
 1996................... 20,000,008   200       414     4,268        --           4,882
  Issuance of stock
   options..............        --    --        970       --        (970)           --
  Issuance of stock
   options to consultant
   (Note 7).............        --    --         75       --         --              75
  Distributions to
   stockholders.........        --    --        --     (5,144)       --          (5,144)
  Amortization of
   deferred
   compensation.........        --    --        --        --         307            307
  Income before pro
   forma income taxes...        --    --        --      8,334        --           8,334
                         ----------  ----    ------   -------      -----        -------
Balance, December 31,
 1997................... 20,000,008  $200    $1,459   $ 7,458      $(663)       $ 8,454
                         ==========  ====    ======   =======      =====        =======
</TABLE>
    
 
        The accompanying notes are an integral part of these statements.
 
                                      F-5

<PAGE>
 
                           MANHATTAN ASSOCIATES, INC.
 
                            STATEMENTS OF CASH FLOWS
 
                                 (IN THOUSANDS)
 

<TABLE>   
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                   ---------------------------
                                                    1995      1996      1997
                                                   -------  --------  --------
<S>                                                <C>      <C>       <C>
Cash flows from operating activities:
  Pro forma net income............................ $ 1,381  $  2,490  $  5,311
                                                   -------  --------  --------
  Adjustments to reconcile pro forma net income to
   net cash provided by operating activities:
    Pro forma income taxes........................     800     1,486     3,023
    Depreciation and amortization.................      55       276       483
    Stock compensation............................     --        --        382
    Accrued interest on note payable to
     stockholder..................................      35        33        50
    Changes in operating assets and liabilities:
      Accounts receivable, net....................     524    (1,114)   (5,931)
      Other assets................................      (5)       (1)     (474)
      Accounts payable............................     222        26     2,057
      Accrued liabilities.........................      51       324       804
      Deferred revenue............................      17       434     1,247
                                                   -------  --------  --------
        Total adjustments.........................   1,699     1,464     1,641
                                                   -------  --------  --------
        Net cash provided by operating activities.   3,080     3,954     6,952
                                                   -------  --------  --------
Cash flows from investing activities:
  Purchases of property and equipment.............    (168)     (485)   (1,813)
  Purchased software..............................    (250)      --        --
                                                   -------  --------  --------
        Net cash used in investing activities.....    (418)     (485)   (1,813)
                                                   -------  --------  --------
Cash flows from financing activities:
  Distributions to stockholders...................    (923)   (2,849)   (5,144)
  Repurchase of option (Note 1)...................    (250)      --        --
  Borrowings under note payable to stockholder ...     900       --        --
                                                   -------  --------  --------
        Net cash used in financing activities.....    (273)   (2,849)   (5,144)
                                                   -------  --------  --------
Increase (decrease) in cash and cash equivalents..   2,389       620        (5)
Cash and cash equivalents, beginning of year......     190     2,579     3,199
                                                   -------  --------  --------
Cash and cash equivalents, end of year............  $2,579    $3,199    $3,194
                                                   =======  ========  ========
Supplemental cash flow disclosure:
  Purchase of minority ownership through the
   forgiveness of a payable (Note 1).............. $   600  $    --   $    --
                                                   =======  ========  ========
</TABLE>
    
 
        The accompanying notes are an integral part of these statements.
 
                                      F-6

<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                         NOTES TO FINANCIAL STATEMENTS
 
                       DECEMBER 31, 1995, 1996 AND 1997
 
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
ORGANIZATION AND BUSINESS
 
  Manhattan Associates, Inc. ("Manhattan" or the "Company") develops, markets,
and supports supply chain execution systems primarily focused on distribution
center management. The Company's primary product, PkMS, is a comprehensive and
modular designed software system that assists in the management of inventory,
storage, distribution, equipment, and personnel within a distribution center.
The Company also provides professional services including design,
configuration, implementation, training, and support.
 
BASIS OF PRESENTATION
 
  In connection with the Company's anticipated initial public offering (the
"Offering") Manhattan Associates, Inc., a Georgia corporation, was formed. The
attached financial statements include the accounts of Manhattan Associates,
LLC ("Manhattan LLC") from January 1, 1996 to December 31, 1997 and include
the accounts of Pegasys Systems Incorporated ("Pegasys") prior to January 1,
1996. Prior to December 31, 1995, Manhattan operated as Pegasys which was, at
the time, 100% owned by Manhattan LLC's current majority shareholder
("Majority Holder"). As of the effective date of the Offering Manhattan LLC
will contribute its assets and liabilities to the Company in exchange for
common stock of the Company (the "Restructuring"). Unless otherwise indicated,
all references to the Company or Manhattan assume the completion of the
Restructuring and include Manhattan LLC and Pegasys.
 
RECAPITALIZATION AND ACQUISITION
 
  Pegasys co-developed certain technology, which was ultimately incorporated
into PkMS, with certain of Manhattan LLC's minority shareholders ("Minority
Holders") and a consultant (the "Consultant"). The Minority Holders and the
Consultant each held an option that was granted in 1993 before the technology
was developed to purchase a percentage of Manhattan LLC upon its formation.
The option contained no expiration date and was fully vested at the date of
grant. On December 31, 1995, Manhattan LLC was formed as a 100% wholly-owned
subsidiary of Pegasys, and Pegasys transferred all of its assets, liabilities,
and intellectual property rights to Manhattan LLC.
   
  Subsequent to the formation of Manhattan LLC, the Minority Holders exercised
their option to purchase 8,571,432 shares, which at the time represented 42.9%
of Manhattan LLC's stock. The exercise of the option included the contribution
of the technology rights owned by the Minority Holders. As the Minority
Holders are considered promoters, the transfer of the technology was recorded
at historical cost in accordance with Staff Accounting Bulletin No. 48.
Additionally, the Minority Holders also forgave certain receivables from
Pegasys in the amount of $600,000 and the Company repurchased the option from
the Consultant for $250,000 which was recorded as a treasury stock
transaction. These transactions are included in the line item "issuance of
common stock and repurchase of option" in the accompanying statements of
stockholders' equity.     
 
                                      F-7

<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       DECEMBER 31, 1995, 1996 AND 1997
 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Cash and Cash Equivalents
 
    The Company considers all highly liquid investments purchased with
  original maturities of three months or less to be cash or cash equivalents.
 
  Use of Estimates
 
    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. Estimates also affect the reported amounts of
  revenues and expenses during the reporting period. Actual results could
  differ from those estimates.
 
  Fair Value of Financial Instruments
 
    The carrying values of cash, trade accounts receivable, trade accounts
  payable, and other financial instruments included in the accompanying
  balance sheets approximate their fair values principally due to the short-
  term maturities of these instruments.
 
  Risks Associated with Single Product Line, Technological Advances, and
  Hardware Revenue
 
    The Company currently derives substantially all its revenues from sales
  of its PkMS software and related services and hardware. Any factor
  adversely affecting the distribution center market could have an adverse
  effect on the Company's business, financial condition, and results of
  operations.
 
    The market for distribution center management systems is subject to rapid
  technological change, changing customer needs, frequent new product
  introductions, and evolving industry standards that may render existing
  products and services obsolete. As a result, the Company's position in this
  market could be eroded rapidly by unforeseen changes in customer
  requirements for application features, functions, and technologies. The
  Company's growth and future operating results will depend, in part, upon
  its ability to enhance existing applications and develop and introduce new
  applications that meet changing customer requirements, that respond to
  competitive products and that achieve market acceptance.
 
    The Company resells a variety of hardware products developed and
  manufactured by third parties. Revenue from such hardware sales can amount
  to a significant portion of the Company's total revenue in any period. As
  the market for distribution of hardware products becomes more competitive,
  the Company's customers may find it attractive to purchase such hardware
  directly from the manufacturer of such products, with a resultant decrease
  in the Company's revenues from hardware.
 
  Revenue Recognition
 
    The Company's revenue consists of revenues from the licensing of PkMS;
  fees from consulting, implementation, training, and maintenance services;
  and revenue from the sale of complementary radio frequency and computer
  equipment. The Company recognizes
 
                                      F-8

<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       DECEMBER 31, 1995, 1996 AND 1997
 
  software license revenue in accordance with the provisions of American
  Institute of Certified Public Accountants Statement of Position ("SOP") No.
  91-1, "Software Revenue Recognition." Accordingly, software license revenue
  is recognized upon shipment of the software following execution of a
  contract, provided that no significant vendor obligations remain
  outstanding, amounts are due within one year, and collection is considered
  probable by management. If significant post-delivery obligations exist, the
  revenue from the sale of the software license, as well as other components
  of the contract, is recognized using percentage of completion accounting.
 
    The Company's services revenue consists of revenue generated from
  consulting and maintenance related to the Company's software product.
  Services revenue is derived from fees based on consulting, implementation,
  and training services contracted under separate service agreements. Revenue
  related to consulting, implementation, and training services performed by
  the Company are recognized as the services are performed. Maintenance
  revenue represents amounts paid, generally in advance, by users for the
  support and enhancements to the software. Maintenance revenue is recognized
  ratably over the term of the maintenance agreement, typically 12 months.
 
    Hardware revenue is generated from the resale of a variety of hardware
  products, developed and manufactured by third parties, that are integrated
  with and complementary to the Company's software solution. As part of a
  complete distribution center management system solution the Company's
  customers frequently purchase hardware from the Company in conjunction with
  the licensing of PkMS. These products include computer hardware, radio
  frequency terminals networks, bar code printers and scanners, and other
  peripherals. Hardware revenue is recognized upon shipment. The Company
  generally purchases hardware from its vendors only after receiving an order
  from a customer. As a result, the Company does not maintain hardware
  inventory.
 
  Deferred Revenue
 
    Deferred revenue primarily represents amounts collected prior to complete
  performance of maintenance services. Revenue may also be deferred prior to
  the delivery of software.
 
  Returns and Allowances
     
    The Company provides for the costs of returns and product warranty claims
  at the time of sale. The Company has not experienced significant returns or
  warranty claims to date and, as a result, has not recorded a provision for
  the cost of returns and product warranty claims at December 31, 1996 and
  1997.     
 
  Property and Equipment
 
    Property and equipment consists of furniture, computers, other office
  equipment, purchased software, and leasehold improvements. The Company
  depreciates the cost of furniture, computers, other office equipment and
  purchased software on a straight-line basis over their estimated useful
  lives (three years for computer equipment and software,
 
                                      F-9


<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       DECEMBER 31, 1995, 1996 AND 1997
 
  five years for office equipment, seven years for furniture). Leasehold
  improvements are amortized over the term of the lease. Depreciation and
  amortization expense for property and equipment for the years ended
  December 31, 1995, 1996, and 1997 was $55,000, $143,000, and $349,000,
  respectively.
 
    Property and equipment, at cost, consist of the following:
 

<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                                 --------------
                                                                 1996    1997
                                                                 ------ -------
   <S>                                                           <C>    <C>
   Computer equipment and software.............................. $ 534  $ 1,547
   Furniture and office equipment...............................   258    1,055
   Leasehold improvements.......................................   --         3
                                                                 -----  -------
                                                                   792    2,605
   Less accumulated depreciation and amortization...............  (313)    (662)
                                                                 -----  -------
                                                                 $ 479  $ 1,943
                                                                 =====  =======
</TABLE>

 
  Intangible Assets
     
    Intangible assets include purchased software. The asset is being
  amortized on a straight-line basis over a period of 3 years. Total
  amortization expense relating to the purchased software was $133,000 in
  each of the years ended December 31, 1996 and 1997, and is included in cost
  of software licenses in the accompanying statements of income.     
 
  Income Taxes
 
    Manhattan LLC was treated as a partnership, and Pegasys was an S
  Corporation under the provisions of the Internal Revenue Code of 1986, as
  amended; therefore, neither company was subject to federal income taxes.
  The income or loss of Manhattan LLC and Pegasys was included in the owners'
  individual federal and state tax returns, and as such, no provision for
  income taxes is recorded in the accompanying statements of income. The
  Company and Pegasys have historically made distributions on behalf of the
  owners to pay anticipated tax liability.
 
    The accompanying statements of income reflect a provision for income
  taxes on a pro forma basis as if the Company were liable for federal and
  state income taxes as a taxable corporate entity for the years presented.
  The pro forma income tax provision has been computed by applying the
  Company's anticipated statutory tax rate to pretax income, adjusted for
  permanent tax differences (Note 3).
 
  Capitalized Software Development Costs
 
    Research and development expenses are charged to expense as incurred.
  Computer software development costs are charged to research and development
  expense until technological feasibility is established, after which
  remaining software production costs are capitalized in accordance with
  Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting
  for Costs of Computer Software to Be Sold, Leased, or Otherwise
 
                                     F-10

<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       DECEMBER 31, 1995, 1996 AND 1997
 
  Marketed." The Company has defined technological feasibility as the point
  in time at which the Company has a working model of the related product.
  Historically, the development costs incurred during the period between the
  achievement of technological feasibility and the point at which the product
  is available for general release to customers have not been material.
  Accordingly, the Company has concluded that the amount of development costs
  capitalizable under the provisions of SFAS No. 86 was not material to the
  financial statements for the years ended December 31, 1995, 1996, and 1997.
  Therefore, the Company has expensed all internal software development costs
  as incurred for the years ended December 31, 1995, 1996, and 1997.
 
  Impairment of Long-Lived and Intangible Assets
 
    The Company periodically reviews the values assigned to long-lived
  assets, including property and intangible assets, to determine whether any
  impairments are other than temporary. Management believes the long-lived
  assets in the accompanying balance sheets are appropriately valued.
 
  Basic and Diluted Net Income Per Share
 
    Basic net income per share is computed using historical or pro forma net
  income divided by the weighted average number of shares of common stock
  outstanding ("Weighted Shares") for the period presented.
 
    Diluted net income per share is computed using historical or pro forma
  net income divided by (i) Weighted Shares, and (ii) the treasury stock
  method effect of common equivalent shares ("CES's") outstanding for each
  period presented. Pro forma basic and diluted net income per share also
  includes the number of shares pursuant to the Securities and Exchange
  Commission Staff Accounting Bulletin 1B.3, that at the assumed public
  offering price would yield proceeds in the amount necessary to pay the
  stockholder distribution discussed in Note 9 that is not covered by the
  earnings for the year ("Distribution Shares").
 
    No adjustment is necessary for historical and pro forma net income for
  net income per share presentation. The following is a reconciliation of the
  shares used in the computation of net income per share:
 

<TABLE>
<CAPTION>
                                    1995                  1996                  1997
                            --------------------- --------------------- ---------------------
                              BASIC     DILUTED     BASIC     DILUTED     BASIC     DILUTED
                            ---------- ---------- ---------- ---------- ---------- ----------
   <S>                      <C>        <C>        <C>        <C>        <C>        <C>
   Weighted shares......... 20,000,008 20,000,008 20,000,008 20,000,008 20,000,008 20,000,008
   Effect of CES's.........        --      10,033         --    307,503        --     761,300
                            ---------- ---------- ---------- ---------- ---------- ----------
                            20,000,008 20,010,041 20,000,008 20,307,511 20,000,008 20,761,308
                            ========== ========== ========== ========== ========== ==========
</TABLE>

 

<TABLE>
<CAPTION>
                                                                 PRO FORMA
                                                           ---------------------
                                                             BASIC     DILUTED
                                                           ---------- ----------
   <S>                                                     <C>        <C>
   Weighted Shares........................................ 20,000,008 20,000,008
   Shares sold to Minority Holder (Note 9)................    100,000    100,000
   Distribution Shares....................................     89,788     89,788
   Effect of CES's........................................         --    761,300
                                                           ---------- ----------
                                                           20,189,796 20,951,096
                                                           ========== ==========
</TABLE>

 
                                     F-11

<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       DECEMBER 31, 1995, 1996 AND 1997
 
 
    Basic and diluted net income per share for the year ended December 31,
  1995 has been adjusted to reflect the shares issued in the 1995 Acquisition
  as if these shares were outstanding for the entire year.
 
  Stock-Based Compensation Plan
 
    The Company accounts for its stock-based compensation plan for stock
  issued to employees under Accounting Principles Board ("APB") Opinion No.
  25, "Accounting for Stock Issued to Employees," and, accordingly, records
  deferred compensation for options granted at an exercise price below the
  fair value of the underlying stock. The deferred compensation is presented
  as a component of equity in the accompanying balance sheets and is
  amortized over the periods to be benefited, generally the vesting period of
  the options. Effective in fiscal year 1996, the Company adopted the pro
  forma disclosure option for stock-based compensation issued to employees of
  Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
  for Stock-Based Compensation."
 
  New Accounting Pronouncements
 
    In June 1997, the Financial Accounting Standards Board issued SFAS No.
  130, "Reporting Comprehensive Income." SFAS No. 130 is designed to improve
  the reporting of changes in equity from period to period. The Company will
  adopt SFAS No. 130 effective with its fiscal year ending December 31, 1998.
  Management does not expect SFAS No. 130 to have a significant impact on the
  Company's financial statements.
 
    In June 1997, the Financial Accounting Standards Board issued SFAS No.
  131, "Disclosures About Segments of an Enterprise and Related Information."
  SFAS No. 131 requires that an enterprise disclose certain information about
  operating segments. The Company will adopt SFAS No. 131 effective with its
  fiscal year ending December 31, 1998. The Company does not expect that SFAS
  No. 131 will require significant revision of prior disclosures.
 
    The American Institute of Certified Public Accountants has issued SOP 97-
  2, "Software Revenue Recognition." This SOP is effective for the Company
  for transactions entered into after December 31, 1997. The Company will
  adopt the SOP in the first quarter of 1998. The adoption of the standard is
  not expected to have a significant impact on the Company's financial
  statements.
 
2. RELATED PARTY TRANSACTIONS
 
  During the years ended December 31, 1995, 1996, and 1997, the Company
contracted with parties related to the Majority Holder for marketing and legal
services for an aggregate amount of $209,000, $289,000, and $389,000
respectively. In the opinion of management, the rates, terms, and
considerations of the transactions with related parties approximate those with
unrelated entities. At December 31, 1996 and 1997, there were no fees
outstanding for the services provided.
 
3. INCOME TAXES
 
  After the Restructuring, the Company will be subject to future federal and
state income taxes and will record net deferred tax assets. The assets and
liabilities below will be reflected on the balance sheet of the Company with a
corresponding non-recurring income amount in the
 
                                     F-12


<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       DECEMBER 31, 1995, 1996 AND 1997
 
statement of income at the completion of the Offering. Deferred tax assets and
liabilities are determined based on the difference between the financial
accounting and the tax bases of assets and liabilities. Significant components
of the Company's pro forma deferred tax assets and liabilities as of December
31, 1997 are as follows:
 

<TABLE>
<S>                                                                     <C>
Deferred tax assets:
  Accounts receivable.................................................. $366,000
  Accrued liabilities..................................................   41,000
  Other................................................................    3,000
                                                                        --------
                                                                         410,000
                                                                        --------
Deferred tax liabilities:
  Depreciation.........................................................   45,000
                                                                        --------
Net deferred tax assets................................................ $365,000
                                                                        ========
</TABLE>

 
  The components of the pro forma income tax provision for the years ended
December 31, 1995, 1996, and 1997 are as follows:
 

<TABLE>
<CAPTION>
                                                  1995        1996       1997
                                                ---------  ---------- ----------
<S>                                             <C>        <C>        <C>
Current:
  Federal...................................... $ 635,000  $1,272,000 $2,565,000
  State........................................    75,000     150,000    303,000
                                                ---------  ---------- ----------
                                                  710,000   1,422,000  2,868,000
                                                ---------  ---------- ----------
Deferred:
  Federal......................................  (116,000)     57,000    138,000
  State........................................   (14,000)      7,000     17,000
                                                ---------  ---------- ----------
                                                 (130,000)     64,000    155,000
                                                ---------  ---------- ----------
    Total...................................... $ 580,000  $1,486,000 $3,023,000
                                                =========  ========== ==========
</TABLE>

 
  The following is a summary of the items which resulted in recorded pro forma
income taxes to differ from taxes computed using the statutory federal income
tax rate for the years ended December 31, 1995, 1996, and 1997:
 

<TABLE>
<CAPTION>
                                                               1995  1996  1997
                                                               ----  ----  ----
<S>                                                            <C>   <C>   <C>
Tax provision at federal statutory rate....................... 34.0% 34.0% 34.0%
Effect of:
  State income tax, net of federal benefit....................  3.9   3.9   3.9
  Research and development credits............................ (1.9)  (.9) (1.9)
  Other.......................................................  0.7   0.4   0.3
                                                               ----  ----  ----
Pro forma income taxes........................................ 36.7% 37.4% 36.3%
                                                               ====  ====  ====
</TABLE>

 
4. NOTE PAYABLE TO STOCKHOLDER
 
  The Company's short-term debt consists of a note payable (the "Stockholder
Note") to the Majority Holder, bearing interest at 5%. The Stockholder Note is
due on demand and unpaid interest accrues to the principle balance. The
balance of the Stockholder Note including accrued interest was $969,000 and
$1,019,000 as of December 31, 1996 and 1997, respectively. Subsequent to
December 31, 1997, the Company borrowed additional amounts under the
Stockholder Note. See Note 9.
 
                                     F-13

<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       DECEMBER 31, 1995, 1996 AND 1997
 
5. EMPLOYEE BENEFIT PLAN
 
  The Company sponsors the Manhattan Associates 401(k) Plan and Trust (the
"401(k) Plan"), a qualified profit sharing plan with a 401(k) feature covering
substantially all employees of the Company. Under the 401(k) Plan's deferred
compensation arrangement, eligible employees who elect to participate in the
401(k) Plan may contribute up to 10% of eligible compensation, as defined, to
the 401(k) Plan. The Company provides for a 50% matching contribution up to 6%
of eligible compensation being contributed after the participant's first year
of employment. During the years ended December 31, 1995, 1996, and 1997, the
Company made matching contributions to the 401(k) Plan of $0, $48,000, and
$53,000, respectively.
 
  The Company also has a defined contribution pension plan (the "Pension
Plan") covering substantially all employees of the Company.
The Company provides up to 8% of the participant's yearly compensation after
the participant's first year of employment. During the years ended December
31, 1995, 1996, and 1997, the Company made matching contributions to the
Pension Plan of $148,000, $162,000, and $224,000, respectively.
 
6. STOCK OPTION PLAN
 
  The Company has a stock option plan, the Manhattan Associates LLC Option
Plan (the "Plan"). The Plan is administered by a committee appointed by the
Board of Directors. The total number of shares to be purchased under the Plan
may not exceed 5,000,000 shares. The options are granted at terms determined
by the committee; however, the option cannot have a term exceeding ten years.
The options are exercisable only upon the occurrence of an exercise event
which is the earlier of (1) a change in control, as defined, at which time all
options are fully vested, (2) the date which is nine years and six months
following option grant, or (3) to the extent vested, upon the occurrence of an
initial public offering or whenever more than 50% of the issued and
outstanding shares are acquired by persons who are not shareholders or
affiliates. The agreement provides the Company with the right to repurchase
the options at fair market value prior to an initial public offering. The
Company has 2,368,166 options outstanding under the Plan at December 31, 1997
and has 2,631,834 available for future grants.
 
  Prior to the establishment of the Plan, the Company issued options to
purchase 661,784 shares of common stock to certain employees. These grants
contain provisions similar to options issued under the Plan.
 
                                     F-14


<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       DECEMBER 31, 1995, 1996 AND 1997
 
  A summary of changes in outstanding options during the years ended December
31, 1995, 1996, and 1997 is as follows:
 

<TABLE>
<CAPTION>
                                                                        WEIGHTED
                                                                        AVERAGE
                                                                        EXERCISE
                                                    OPTIONS     PRICE    PRICE
                                                   ---------  --------- --------
<S>                                                <C>        <C>       <C>
December 31, 1994.................................       --   $     --   $ --
  Granted.........................................   533,326       0.24   0.24
  Canceled........................................       --         --     --
  Exercised.......................................       --         --     --
                                                   ---------
December 31, 1995.................................   533,326       0.24   0.24
  Granted.........................................   128,458       0.56   0.56
  Canceled........................................       --         --     --
  Exercised.......................................       --         --     --
                                                   ---------
December 31, 1996.................................   661,784  0.24-0.56   0.30
  Granted......................................... 2,495,166  2.50-7.50   2.99
  Canceled........................................  (127,000)      2.50   2.50
  Exercised.......................................       --         --     --
                                                   ---------
December 31, 1997................................. 3,029,950  0.24-7.50   2.42
                                                   =========
</TABLE>

 
  None of the options are exercisable at December 31, 1997. Upon completion of
the Offering 612,765 options outstanding at December 31, 1997 will become
exercisable.
 
  The Company recorded deferred compensation of $840,000 on options granted
during 1997 as the exercise price was less than the deemed fair value of the
underlying common stock. The Company amortizes deferred compensation over a
period not to exceed six years. The Company recognized compensation expense of
$307,000 for the year ended December 31, 1997 and had deferred compensation
expense of $533,000 at December 31, 1997.
 
  Subsequent to year-end, the Company granted 761,500 options at exercise
prices ranging from $7.50 to $10.00 to employees under the Plan. The Company
recorded deferred compensation on these options of $679,500.
 
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123
 
  Pro forma information regarding net income and net income per share is
required by SFAS No. 123, which also requires that the information be
determined as if the Company had accounted for its employee stock option
grants under the fair value method required by SFAS No. 123. The fair value of
each option grant has been estimated as of the date of grant using the Black-
Scholes option pricing model with the following assumptions:
 

<TABLE>
<CAPTION>
                                                     1995      1996      1997
                                                   --------- --------- ---------
<S>                                                <C>       <C>       <C>
Dividend yield....................................       --        --        --
Expected volatility...............................       65%       65%       65%
Risk-free interest rate at the date of grant...... 5.8%-6.3% 5.8%-6.3% 5.7%-6.3%
Expected life..................................... 4-6 years 4-6 years 1-6 years
</TABLE>

 
                                     F-15

<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       DECEMBER 31, 1995, 1996 AND 1997
 
  Using these assumptions, the fair values of the stock options granted during
the years ended December 31, 1995, 1996 and 1997 are $64,882, $34,629 and
$3,625,313, respectively, which would be amortized over the vesting period of
the options.
 
  The weighted average fair market value of options at the date of grant for
the years ended December 31, 1995, 1996 and 1997 was $0.14, $0.30 and $1.67,
respectively.
 
  The following pro forma information adjusts the pro forma net income and pro
forma net income per share of common stock for the impact of SFAS No. 123:
 

<TABLE>
<CAPTION>
                                                            1995   1996   1997
                                                           ------ ------ ------
<S>                                                        <C>    <C>    <C>
Pro forma net income:
  As reported............................................. $1,001 $2,490 $5,311
  Pro forma in accordance with SFAS No. 123............... $  998 $2,474 $4,842
Pro forma basic net income per share:
  As reported............................................. $ 0.05 $ 0.12 $ 0.26
  Pro forma in accordance with SFAS No. 123............... $ 0.05 $ 0.12 $ 0.24
Pro forma diluted net income per share:
  As reported............................................. $ 0.05 $ 0.12 $ 0.25
  Pro forma in accordance with SFAS No. 123............... $ 0.05 $ 0.12 $ 0.23
</TABLE>

 
  The following table summarizes the range of exercise price, weighted average
exercise price, and weighted average remaining contractual lives for the
options outstanding as of December 31, 1997:
 
 

<TABLE>
<CAPTION>
                                                                     WEIGHTED
                                                                      AVERAGE
                                                  WEIGHTED WEIGHTED  REMAINING
                                        RANGE OF  AVERAGE  AVERAGE  CONTRACTUAL
                              NUMBER OF EXERCISE    FAIR   EXERCISE    LIFE
        YEAR OF GRANT          SHARES     PRICE    VALUE    PRICE     (YEARS)
        -------------         --------- --------- -------- -------- -----------
<S>                           <C>       <C>       <C>      <C>      <C>
1995
 Options granted at fair
  market value                  533,326 $    0.24  $0.24    $0.24      7.81
1996
 Options granted at fair
  market value                  128,458      0.56   0.56     0.56      8.64
1997
 Options granted at fair
  market value                1,650,166      2.50   2.50     2.50      9.24
 Options granted at less than
  fair market value             650,000 3.50-4.25   5.25     3.85      9.90
 Options granted at fair
  market value                   68,000      7.50   7.50     7.50      9.96
                              ---------
                              3,029,950
                              =========
</TABLE>

 
7. STOCKHOLDERS' EQUITY
 
OPERATING AGREEMENT
 
  All owners of the Company's common stock are parties to the Company's
operating agreement (the "Operating Agreement"). This Operating Agreement
provides, among other things, the right of first refusal to the Company and
then to all other stockholders of the Company to purchase any selling
stockholders' shares at a price equal to that offered to outside third
parties. Upon completion of the Offering, these provisions of the Operating
Agreement will terminate.
 
                                     F-16


<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       DECEMBER 31, 1995, 1996 AND 1997
 
ISSUANCE OF STOCK
 
  On May 5, 1997, the Majority Holder granted to two employees and a
consultant, all of whom are related to the Majority Holder, options to
purchase shares of the Company's stock from the Majority Holder. This grant
did not result in additional shares being outstanding as the shares under
option were currently outstanding and held by the Majority Holder. This grant
included a grant of an option to purchase 80,000 and 50,000 shares of the
Company's stock held by the Majority Holder to two employees of the Company
and a grant of an option to purchase 50,000 shares of the Company's stock held
by the Majority Holder to a consultant of the Company. The stock options were
then exercised by the employees and the consultant of the Company for a
nonrecourse, noninterest-bearing note to the Majority Holder with a term equal
to the contractual term of the option. The exercise price was equal to the
fair value of the Company' s stock at the date of grant of $2.50 per share.
The Company recorded the grant to the employees of the Company under APB
Opinion No. 25 and recorded no compensation expense on the date of grant as
the grant was issued at fair value and due to the nonvariable nature of the
nonrecourse note. The Company recorded $75,000 of compensation expense in the
year ended December 31, 1997 for the option granted to the consultant.
 
8. COMMITMENTS AND CONTINGENCIES
 
LEASES
 
  On September 24, 1997, the Company entered into a 62-month lease for office
space beginning on November 1, 1997. The lease requires monthly payments of
$90,000 for the 14-month period ended December 31, 1998 subject to annual
increases as defined. Prior to the lease entered into on September 24, 1997,
the Company was party to a lease agreement ending in 2001. The agreement
required monthly payments of approximately $20,000 subject to an increase of
3% in each 12-month period after the first year. Additionally, the Company
received the first month's rent free. The 3% escalation and the first month's
free rent were recognized on a straight-line basis over the life of the lease.
Accordingly, as of December 31, 1996 and 1997, the Company has recorded a
liability for deferred rent in the amount of $122,000 and $108,000,
respectively, included in accrued liabilities in the accompanying balance
sheets.
 
  The Company terminated their occupancy under the previous lease, and is
still bound by the terms of the lease. Management believes that the Company
has adequately accrued for the estimated costs exceeding future estimated
sublease rental receipts.
 
  Rents charged to expense were approximately $130,000, $257,000, and $466,000
for the years ended December 31, 1995, 1996, and 1997, respectively. Aggregate
future minimum lease payments under noncancellable operating leases as of
December 31, 1997 are as follows (in thousands):
 

<TABLE>
      <S>                                                                 <C>
      December 31:
        1998............................................................. $1,361
        1999.............................................................  1,369
        2000.............................................................  1,380
        2001.............................................................  1,234
        2002 and thereafter..............................................  1,084
                                                                          ------
                                                                          $6,428
                                                                          ======
</TABLE>

 
                                     F-17


<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       DECEMBER 31, 1995, 1996 AND 1997
 

LEGAL MATTERS
 
  Many of the Company's installations involve products that are critical to
the operations of its clients' businesses. Any failure in a Company product
could result in a claim for substantial damages against the Company,
regardless of the Company's responsibility for such failure. Although the
Company attempts to limit contractually its liability for damages arising from
product failures or negligent acts or omissions, there can be no assurance the
limitations of liability set forth in its contracts will be enforceable in all
instances.
 
  The Company is subject to legal proceedings and claims which have arisen in
the ordinary course of business. In the opinion of management, the amount of
potential liability with respect to these actions will not materially affect
the financial position or results of operations of the Company.
 
9.SUBSEQUENT EVENTS
 
DISTRIBUTION
 
  Prior to the completion of the Offering, the Company intends to distribute
all undistributed income, calculated on a tax basis, to the shareholders of
Manhattan LLC. As of December 31, 1997, the undistributed income, calculated
on a tax basis, of the Company was $8,704,000 and the Company expects to
accumulate additional undistributed income from January 1, 1998 through the
date of the Restructuring. These distributions will be funded through a series
of payments from available Company cash and from the proceeds of the Company's
line of credit. It is anticipated that any such advances or balance on the
line of credit incurred to fund these distributions will be repaid using a
portion of the net proceeds of the Offering.
 
STOCKHOLDER NOTE
 
  Subsequent to December 31, 1997, the Company borrowed an additional $900,000
from the Majority Holder under the Stockholder Note. The balance of the
Stockholder Note will be repaid with the proceeds of the Offering.
 
SALE OF STOCK TO MINORITY HOLDER
 
  One of the Company's Minority Holders purchased 100,000 shares of the
Company's common stock for $1,000,000 on February 16, 1998.
 
ACQUISITION
 
  On February 16, 1998, the Company purchased all of the outstanding stock of
Performance Analysis Corporation ("PAC") for $2,200,000 in cash and 106,666
shares of the Company's common stock valued at $10.00 per share (the "PAC
Acquisition"). PAC is a developer of distribution center slotting software.
The PAC Acquisition will be accounted for as a purchase.
 
  The purchase price of approximately $3,300,000, has been allocated to the
assets acquired and liabilities assumed of $464,000, including acquired
research and development of $2,067,000, purchased software of $500,000, and
other intangible assets of $300,000. Purchased software will be amortized over
an estimated three-year useful life and other intangible assets will be
amortized over a seven-year useful life. In connection with the PAC
Acquisition, the Company plans to record a charge to income of $2,067,000 in
the first quarter of 1998 for acquired research and development.
 
                                     F-18


<PAGE>
 
                          MANHATTAN ASSOCIATES, INC.
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                       DECEMBER 31, 1995, 1996 AND 1997
 
10.RESTRUCTURING
 
  On       , to effect the Restructuring, Manhattan LLC contributed all of its
assets and liabilities to the Company in exchange for common stock of the
Company. Manhattan LLC then distributed the common stock of the Company
received to its stockholders and Manhattan LLC was dissolved. All share and
per share data in the accompanying financial statements have been adjusted to
reflect the Restructuring.
 
                                     F-19

<PAGE>
 
 
                  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To Performance Analysis Corporation:
 
  We have audited the accompanying balance sheet of PERFORMANCE ANALYSIS
CORPORATION (a North Carolina corporation) as of December 31, 1997 and the
related statement of income and retained earnings and cash flows for the year
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
 
  We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Performance Analysis
Corporation as of December 31, 1997 and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.
 
 
ARTHUR ANDERSEN LLP
 
Atlanta, Georgia
February 16, 1998

 
                                     F-20

<PAGE>
 
                        PERFORMANCE ANALYSIS CORPORATION
 
                                 BALANCE SHEET
 
                               DECEMBER 31, 1997
 

<TABLE>
<S>                                                                   <C>
                                    ASSETS
Current assets:
  Cash and cash equivalents.......................................... $467,000
  Accounts receivable, net of a $22,400 allowance for doubtful
   accounts..........................................................  337,200
  Deferred income taxes..............................................   16,400
                                                                      --------
    Total current assets.............................................  820,600
                                                                      --------
Furniture and equipment:
  Furniture and equipment............................................  125,500
  Less accumulated depreciation......................................  (94,600)
                                                                      --------
    Furniture and equipment, net.....................................   30,900
                                                                      --------
Other assets:
  Deposits...........................................................    1,600
                                                                      --------
    Total assets..................................................... $853,100
                                                                      ========
                     LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
  Accrued liabilities................................................ $124,800
  Income taxes payable...............................................   74,100
  Deferred revenue...................................................  130,300
  Customer deposits..................................................   53,400
                                                                      --------
    Total current liabilities........................................  382,600
                                                                      --------
Deferred income taxes................................................    6,000
                                                                      --------
Commitments and contingencies
Stockholder's equity:
  Common stock, $1.00 par value; 10,000 shares authorized, 1,000
   issued and outstanding............................................    1,000
  Retained earnings..................................................  463,500
                                                                      --------
    Total stockholder's equity.......................................  464,500
                                                                      --------
    Total liabilities and stockholder's equity....................... $853,100
                                                                      ========
</TABLE>

 
       The accompanying notes are an integral part of this balance sheet.
 
                                      F-21

<PAGE>
 
                        PERFORMANCE ANALYSIS CORPORATION
 
                   STATEMENT OF INCOME AND RETAINED EARNINGS
 
                          YEAR ENDED DECEMBER 31, 1997
 

<TABLE>
<S>                                                                  <C>
Revenue:
  Software license.................................................. $  737,600
  Services..........................................................    599,900
                                                                     ----------
    Total revenue...................................................  1,337,500
                                                                     ----------
Cost of services revenue............................................    253,500
                                                                     ----------
Gross margin........................................................  1,084,000
Operating expenses:
  Research and development..........................................    363,800
  Sales and marketing...............................................    322,900
  General and administrative........................................    144,000
                                                                     ----------
    Total operating expenses........................................    830,700
                                                                     ----------
Income from operations..............................................    253,300
Other income, net...................................................     24,700
                                                                     ----------
Income before provision for income taxes............................    278,000
Provision for income taxes..........................................     88,900
                                                                     ----------
Net income..........................................................    189,100
Retained earnings, balance December 31, 1996........................    274,400
                                                                     ----------
Retained earnings, balance December 31, 1997........................ $  463,500
                                                                     ==========
</TABLE>

 
         The accompanying notes are an integral part of this statement.
 
                                      F-22

<PAGE>
 
                        PERFORMANCE ANALYSIS CORPORATION
 
                            STATEMENT OF CASH FLOWS
 
                          YEAR ENDED DECEMBER 31, 1997
 

<TABLE>
<S>                                                                  <C>
Cash flows from operating activities:
  Net income........................................................ $ 189,100
                                                                     ---------
  Adjustments to reconcile net income to net cash provided by
   operating activities:
    Depreciation....................................................    17,800
    Changes in operating assets and liabilities:
      Accounts receivable, net......................................  (253,500)
      Deposits......................................................     5,000
      Accrued liabilities...........................................    55,100
      Deferred income taxes.........................................    33,700
      Income taxes payable..........................................    16,600
      Deferred revenue..............................................    84,800
      Customer deposits.............................................   (41,500)
      Deferred taxes, noncurrent....................................     1,700
                                                                     ---------
        Total adjustments...........................................   (80,300)
                                                                     ---------
        Net cash provided by operating activities...................   108,800
                                                                     ---------
Cash flows from investing activities:
  Purchases of furniture and equipment..............................   (12,200)
                                                                     ---------
Increase in cash and cash equivalents...............................    96,600
Cash and cash equivalents, beginning of year........................   370,400
                                                                     ---------
Cash and cash equivalents, end of year.............................. $ 467,000
                                                                     =========
Supplemental cash flow disclosure:
  Cash paid for interest............................................ $     --
                                                                     =========
  Income taxes paid................................................. $  24,100
                                                                     =========
</TABLE>

 
         The accompanying notes are an integral part of this statement.
 
                                      F-23

<PAGE>
 
                       PERFORMANCE ANALYSIS CORPORATION
 

                         NOTES TO FINANCIAL STATEMENTS
 
                               DECEMBER 31,1997
 
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
 
Organization
 
  Performance Analysis Corporation ("the "Company") was established in 1983 in
the state of North Carolina. The Company is a developer of distribution center
slotting software. The Company offers periodic ongoing maintenance support of
its products. The Company also offers fee-based installation and training. The
Company markets its products throughout the southeastern United States and
Canada.
 
Cash and Cash Equivalents
 
  The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash or cash equivalents.
 
Furniture and Equipment
 
  Furniture and equipment are recorded at cost and are depreciated primarily
using straight line depreciation over three to seven years.
 
Income Taxes
 
  The provision for income taxes is based on income recognized for financial
statement purposes and includes the effects of temporary differences between
such income and that recognized for tax return purposes.
 
Revenue Recognition
 
  The Company's revenue consists of software license revenue and fees for
services complementary to its software products, including installation,
training, and maintenance.
 
  Revenue from software license is recognized upon signing of a contract and
delivery of the product, if there are no significant vendor obligations and
provided that amounts are due within one year and collection is considered
probable. If significant postdelivery obligations exist, the revenue from the
sale of the software license as well as other components of the contract is
recognized using contract accounting. Maintenance and support revenue
represent amounts paid by users for the support and enhancements of the
software. Revenues from these support services are recognized ratably over the
term of the software support services agreement, typically 12 months. If
maintenance is included in the original license contract, such amounts are
unbundled from the license fee and recognized over the free contracted support
period. Revenues and expenses relating to implementation and training
performed by the Company are recognized as the services are performed.
 
Deferred Revenues
 
  Revenue may be deferred due to installation, training and support services
not yet performed.
 
Customer Deposits
 
  Amounts collected prior to the delivery of software products represent a
customer deposit.
 
Capitalized Software Development Costs
 
  Research and development expenses are charged to expense as incurred.
Computer software development costs are charged to research and development
expense until
 
                                     F-24

<PAGE>
 
                       PERFORMANCE ANALYSIS CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
 
technological feasibility is established, after which remaining software
production costs are capitalized in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 86, "Accounting for Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed." The Company has defined
technological feasibility as the point in time at which the Company has a
working model of the related product. Historically, the development costs
incurred during the period between the achievement of technological
feasibility and the point at which the product is available for general
release to customers have not been material. Accordingly, the Company has
concluded that the amount of development costs capitalizable under the
provisions of SFAS No. 86 was not material to the financial statements for the
year ended December 31, 1997. Therefore, the Company has charged all software
development costs to expense as incurred for the years ended December 31,
1997.
 
Warranty Costs
 
  The Company generally warranties its products for 30 to 90 days and provides
for estimated warranty costs upon delivery of such products. Warranty cost
have not been and are not anticipated to be significant.
 
Concentrations of Credit Risk
 
  Concentrations of credit risk with respect to accounts receivable are
limited due to the wide variety of customers and markets for which the
Company's services are provided. As a result, as of December 31, 1997, the
Company did not consider itself to have any significant concentrations of
credit risk. During 1997, the Company's five largest customers accounted for
approximately 37% of the Company's total revenues. Although the particular
customers may change from period to period, the Company expects that large
sales to a limited number of customers will continue to account for a
significant percentage of its revenues in any particular period for the
foreseeable future.
 
Use of Estimates
 
  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, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expense during the
reporting period. Actual results could differ from those estimates.
 
Fair Value of Financial Instruments
 
  The book values of accounts receivable, accrued liabilities and other
financial instruments approximate their fair values principally because of the
short-term maturities of these instruments.
 
 
                                     F-25


<PAGE>
 
                       PERFORMANCE ANALYSIS CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
 
  In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." SFAS No. 130 is designed to improve the
reporting of changes in equity from period to period. SFAS No. 130 is
effective for the Company's fiscal year ending December 31, 1998. Management
does not expect SFAS No. 130 to have a significant impact on the Company's
financial statements.
 
  In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." SFAS
No. 131 requires that an enterprise disclose certain information about
operating segments. SFAS No. 131 is effective for financial statements for the
Company's fiscal year ending December 31, 1998. The Company does not expect
that SFAS No. 131 will require significant revision of prior disclosures.
 
  The American Institute of Certified Public Accountants has issued SOP 97-2,
"Software Revenue Recognition." The adoption of the standard is not expected
to have a significant impact on the Company's financial statements.
 
2. INCOME TAXES
 
  Deferred tax assets and liabilities are determined based on the difference
between the financial accounting and tax bases of assets and liabilities.
Significant components of the Company's deferred tax assets and liabilities as
of December 31, 1997 are a follows:
 

<TABLE>
      <S>                                                              <C>
      Deferred tax assets:
        Accrued liabilities........................................... $ 72,000
        Deferred revenue..............................................   85,500
        Allowance for doubtful accounts...............................    9,200
                                                                       --------
                                                                        166,700
                                                                       --------
      Deferred tax liabilities:
        Receivables...................................................  150,300
        Depreciation..................................................    6,000
                                                                       --------
                                                                        156,300
                                                                       --------
      Net deferred tax asset.......................................... $ 10,400
                                                                       ========
</TABLE>

 
                                     F-26

<PAGE>
 
                       PERFORMANCE ANALYSIS CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
 
  The components of the income tax provision for the years ended December 31,
1997 are as follows:
 

<TABLE>
      <S>                                                               <C>
      Current:
        Federal........................................................ $47,400
        State..........................................................   5,600
      Deferred
        Federal........................................................  32,100
        State..........................................................   3,800
                                                                        -------
          Provision for income taxes................................... $88,900
                                                                        =======
</TABLE>

 
  The following is a summary of the items which caused recorded income taxes
to differ from taxes computed using the statutory federal income tax rate for
the year ended December 31, 1997:
 

<TABLE>
      <S>                                                                  <C>
      Tax provision at statutory rate:
        Federal........................................................... 34.0%
        State.............................................................  4.0
                                                                           ----
                                                                           38.0
        State income tax benefit.......................................... (1.2)
        Research and development credits.................................. (6.2)
        Other.............................................................  1.4
                                                                           ----
      Provision for income taxes.......................................... 32.0%
                                                                           ====
</TABLE>

 
4. EMPLOYEE BENEFIT PLAN
 
  The Company sponsors the 401(k) Profit Sharing Plan (the "Plan"), covering
substantially all employees of the Company. Under the Plan's deferred
compensation arrangement, eligible employees who elect to participate in the
Plan may contribute up to 15% of eligible compensation, as defined, to the
Plan. The Company may provide for a matching contribution which is determined
by the Company each plan year. During the year ended December 31, 1997, the
Company made matching contributions to the Plan of $11,000.
 
5. COMMITMENTS AND CONTINGENCIES
 
LEASE COMMITMENTS
 
  At December 31, 1997, the future minimum operating lease payments under
noncancelable operating leases were as follows:
 

<TABLE>
      <S>                                                                <C>
      1998.............................................................. $52,250
      1999..............................................................  53,590
      2000..............................................................   3,921
</TABLE>

 
  The Company's operating leases are primarily for office space and other
equipment. Total rental expense for operating leases was $51,700 in 1997.
 
 
                                     F-27

<PAGE>
 
                       PERFORMANCE ANALYSIS CORPORATION
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
                               DECEMBER 31, 1997
 
LEGAL PROCEEDINGS
 
  The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the amount of
potential liability with respect to these potential actions would not
materially affect the financial position or results of operations of the
Company.
 
6. SUBSEQUENT EVENT
 
SALE OF THE COMPANY
 
  On February 16, 1998, the Company was acquired by Manhattan Associates, LLC
("Manhattan"), pursuant to which the Company became a 100% wholly owned
subsidiary of Manhattan Associates, LLC. The Company exchanged all of the
Company's outstanding common stock for cash of $2,200,000 and 106,666 shares
of Manhattan common stock.
 
                                     F-28

<PAGE>
 
                       
                    UNAUDITED PRO FORMA BALANCE SHEET     
   
  The following Unaudited Pro Forma Balance Sheet as of December 31, 1997 was
prepared as if the following transactions had occurred on December 31, 1997:
(i) the acquisition of Performance Analysis Corporation ("PAC") (the "PAC
Acquisition"); (ii) the purchase of 100,000 shares of common stock by a
minority holder; (iii) the establishment of deferred taxes as a result of the
Restructuring; and (iv) the payment of the undistributed income, calculated on
a tax basis, as of December 31, 1997. The Unaudited Pro Forma Balance Sheet
does not purport to represent the Company's results as if these transactions
had occurred on December 31, 1997.     
   
  The Unaudited Pro Forma Balance Sheet is derived from the historical
financial statements of the Company and PAC and the assumptions and
adjustments described in the accompanying notes. In the opinion of management,
all adjustments necessary to present fairly such unaudited pro forma balance
sheet have been made. The pro forma information does not give effect to the
proceeds to the Company of the Offering.     
 
                                     F-29

<PAGE>
 
                        
                     UNAUDITED PRO FORMA BALANCE SHEET     
                                
                             DECEMBER 31, 1997     
                 
              (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)     
 

<TABLE>   
<CAPTION>
                            MANHATTAN                               PRO FORMA
                         ASSOCIATES, INC.    PAC      PRO FORMA    DECEMBER 31,
                            HISTORICAL    HISTORICAL ADJUSTMENTS       1997
                         ---------------- ---------- -----------   ------------
<S>                      <C>              <C>        <C>           <C>
         ASSETS
Current assets:
 Cash and cash
  equivalents...........     $ 3,194         $467      $(2,200)(a)   $   --
                                                         1,000 (b)
                                                          (700)(b)
                                                        (8,704)(d)
                                                         6,943 (d)
 Accounts receivable,
  net of a $992
  allowance for doubtful
  accounts, pro forma...       9,242          337                      9,579
 Deferred income taxes..         --            16          411 (c)       427
 Other current assets...         384          --                         384
                             -------         ----                    -------
  Total current assets..      12,820          820                     10,390
                             -------         ----                    -------
Property and equipment:
 Property and equipment.       2,605          125          (94)        2,636
  Less accumulated
   depreciation.........        (662)         (94)          94          (662)
                             -------         ----                    -------
 Property and equipment,
  net...................       1,943           31                      1,974
                             -------         ----                    -------
Intangible assets, net
 of accumulated
 amortization of $266,
 pro forma..............         133          --           300 (a)       933
                                                           500 (a)
Other assets............         110            2                        112
                             -------         ----                    -------
 Total assets...........     $15,006         $853                    $13,409
                             =======         ====                    =======
Current liabilities:
 Cash overdraft.........     $   --           --       $ 6,943 (d)   $ 6,943
 Accounts payable.......       2,479          --            66 (a)     2,545
 Accrued compensation
  and benefits..........         753          --                         753
 Accrued liabilities....         455          198                        653
 Notes payable to
  stockholders..........       1,019                                   1,019
 Deferred revenue.......       1,846          184                      2,030
                             -------         ----                    -------
  Total current
   liabilities..........       6,552          382                     13,943
                             -------         ----                    -------
Deferred income taxes...         --             6           45 (c)        51
Stockholders' equity:
 Preferred stock, no
  shares issued or
  outstanding, pro
  forma.................         --           --                         --
 Common stock,
  20,206,674 shares
  issued and
  outstanding, pro
  forma.................         200            1            1 (a)       202
                                                            (1)(a)
                                                             1 (b)
 Additional paid-in-
  capital...............       1,459          --           999 (b)     3,524
                                                         1,066 (a)
 Retained earnings
  (deficit).............       7,458          464          365 (c)    (3,648)
                                                        (2,067)(a)
                                                        (8,704)(d)
                                                          (700)(b)
 Deferred compensation..        (633)         --          (464)(a)      (663)
                             -------         ----                    -------
  Total stockholders'
   equity (deficit).....       8,454          465                       (585)
                             -------         ----                    -------
  Total liabilities and
   stockholders' equity.     $15,006         $853                    $13,409
                             =======         ====                    =======
</TABLE>
    
                             
                          See accompanying Notes.     
 
                                     F- 30

<PAGE>
 
                   
                NOTES TO UNAUDITED PRO FORMA BALANCE SHEET     
   
  The pro forma balance sheet reflects the following as if they occurred on
December 31, 1997:     
   
(a) Reflects the following for the purchase of PAC: (i) the payment of cash of
    $2,200,000, (ii) the issuance of 106,666 shares of common stock valued at
    $10.00 per share for a total of $1,066,660, (iii) $66,000 in transaction
    costs, (iv) the establishment of purchased software of $500,000 and other
    intangible assets of $300,000, (v) the charge to income of $2,067,000 for
    acquired research and development and (vi) the elimination of the stock of
    PAC of $1,000 and the retained earnings of PAC of $464,000.     
   
(b) Reflects the purchase of 100,000 shares of common stock by a minority
    holder for $1,000,000. The minority holder contributed cash of $300,000
    for this investment. The Company made an additional distribution earned
    since January 1, 1998 of $700,000 to the minority holder that was
    subsequently reinvested in the Company.     
   
(c) Reflects the establishment of deferred tax assets of $411,000 and deferred
    tax liabilities of $45,000.     
   
(d) Reflects the payment of the undistributed income, calculated on a tax
    basis, of approximately $8,704,000 as of December 31, 1997 which generated
    a cash overdraft of $6,943,000.     
       
                                     F-31

<PAGE>
 

<TABLE>
 <C>      <S>
 TITLE:   Manhattan Associates' Blue Chip Customer Base
 GRAPHIC: In the top left corner is text reading: "Manhattan Associates' Blue
          Chip Customer Base" and "250 Customers". To the right of the text is
          the Manhattan Associates logo. The body of the page consists of the
          Logos of the following Manhattan customers: Conair, Nordstrom,
          Patagonia, Duck Head, Playtex, Remington, Seiko, Delta, Mikasa, Dean
          Foods, Rain Bird, PPG, Familian and Brother.
</TABLE>

 
 
 
                              [INSIDE BACK COVER]
 
 
  PkMS(R) and the Manhattan Associates, Inc. logo are registered trademarks of
the Company. This Prospectus also includes trademarks, service marks and trade
names of other companies.

<PAGE>
 
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON STOCK
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS
OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
 
 
                              TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
Prospectus Summary........................................................    3
The Company...............................................................    4
Risk Factors..............................................................    5
Conversion from Limited Liability Company Status and Related
 Distributions............................................................   16
Use of Proceeds...........................................................   17
Dividend Policy...........................................................   17
Capitalization............................................................   18
Dilution..................................................................   19
Selected Financial Data...................................................   20

Management's Discussion and Analysis of Financial Condition and Results of
 Operations...............................................................   21
Business..................................................................   31
Management................................................................   43
Certain Transactions......................................................   52
Principal and Selling Stockholders........................................   54
Description of Capital Stock..............................................   55
Shares Eligible for Future Sale...........................................   58
Underwriting..............................................................   60
Legal Matters.............................................................   62
Experts...................................................................   62
Additional Information....................................................   62
Index to Financial Statements.............................................  F-1
</TABLE>

 
UNTIL      , 1998 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPAT-
ING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
 
 
                  [LOGO OF MANHATTAN ASSOCIATES APPEARS HERE]
 
 
 
 
 
 
 3,000,000 SHARES
 
 COMMON STOCK
 
 
 DEUTSCHE MORGAN GRENFELL
 
 HAMBRECHT & QUIST
 
 SOUNDVIEW FINANCIAL GROUP, INC.
 
 PROSPECTUS
 
      , 1998

<PAGE>
 

                                    PART II
 

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 

<TABLE>
   <S>                                                               <C>
   Securities and Exchange Commission registration fee.............. $   12,213
   NASD and Blue Sky fees and expenses.............................. $   20,000
   Nasdaq National Market listing fee............................... $  112,795
   Accountants' fees and expenses................................... $  300,000
   Legal fees and expenses.......................................... $  300,000
   Transfer Agent's fees and expenses............................... $   15,000
   Printing and engraving expenses.................................. $  200,000
   Miscellaneous.................................................... $  239,992
     Total Expenses................................................. $1,200,000
</TABLE>

 

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
  The Company's Bylaws provide that the Company shall indemnify each of its
officers, directors, employees and agents to the extent that he or she is or
was a party, or is threatened to be made a party, to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative because he or she is or was a director,
officer, employee or agent of the Company, against reasonable expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
in connection with such action, suit or proceeding; provided, however, that no
indemnification shall be made for (i) any appropriation, in violation of his
duties, of any business opportunity of the Company, (ii) acts or omissions
which involve intentional misconduct or a knowing violation of law, (iii) any
liability under Section 14-2-832 of the GBCC, which relates to unlawful
payments of dividends and unlawful stock repurchases and redemptions, or (iv)
any transaction from which he derived an improper personal benefit.
 
  Section 6(b) of the Underwriting Agreement filed as Exhibit 1.1 hereto also
contains certain provisions pursuant to which certain officers, directors and
controlling persons of the Company may be entitled to be indemnified by the
underwriters named therein.
 

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
 
  During the past three years, the Registrant has sold the securities set
forth below which were not registered under the Securities Act.
 
  In connection with the restructuring of Company from a limited liability
company to a business corporation, Manhattan Associates, Inc. will issue
20,206,674 shares of Common Stock to stockholders of Manhattan Associates
Software, LLC ("Manhattan LLC") on the date of the Prospectus in consideration
for their contribution of all of the assets and liabilities of Manhattan LLC
to the Company in a transaction exempt under Sections 4(2) of the Securities
Act.
 
  In connection with the organization of the Company, in January 1998, the
Company issued an aggregate of 100 shares of its Common Stock to Alan J.
Dabbiere, Deepak Raghavan, Deepak M.J. Rao and Ponnambalam Muthiah at a price
of $1.00 per share in a transaction exempt under Section 4(2) of the
Securities Act. These shares will be redeemed simultaneously with the
consummation of the Restructuring at their original purchase price.
 
  In connection with an investment by Deepak Raghavan, the Chief Technology
Officer of the Company, of $1,000,000 in Manhattan LLC on February 16, 1998,
Manhattan LLC issued 100,000 of its shares to Mr. Raghavan in a transaction
exempt under Section 4(2) of the Securities Act.
 
                                     II-1

<PAGE>
 
  In connection with the acquisition of all of the outstanding shares of
Performance Analysis Corporation ("PAC") on February 16, 1998, Manhattan LLC
issued 106,666 of its shares valued at an aggregate value of $1,066,660, to
Daniel Basmajian, Sr., the sole stockholder of Performance Analysis
Corporation, a North Carolina corporation, in a transaction exempt from
registration under Rules 505 and 506 of Regulation D and Section 4(2) of the
Securities Act.
   
  In connection with the initial formation of Manhattan LLC, Manhattan LLC
issued 875,000 of its shares valued at an aggregate value of $3,855,000 to
Alan J. Dabbiere, Deepak Raghavan, Deepak M.J. Rao and Ponnambalam Muthiah,
who are also the members of the Board of Managers of Manhattan LLC, in a
transaction exempt from registration under Section 4(2) of the Securities Act.
       
  Giving effect to the Restructuring, the Company has issued options to
certain executives, key employees and consultants to purchase the following
shares of its Common Stock on the dates indicated pursuant to Section 4(2) and
Rule 701:     
 

<TABLE>
<CAPTION>
                                                                 NUMBER OF
     DATE OF GRANT                                           SHARES PURCHASABLE
     -------------                                           ------------------
   <S>                                                       <C>
   April 8, 1997............................................       80,000
   April 28, 1997...........................................      120,000
   July 1, 1997.............................................      197,000
   August 1, 1997...........................................       22,000
   August 11, 1997..........................................      200,000
   September 24, 1997.......................................      130,000
   November 14, 1997........................................      350,000
   November 25, 1997........................................      150,000
   December 1, 1997.........................................      120,000
   December 2, 1997.........................................        5,000
   December 9, 1997.........................................       15,000
   December 15, 1997........................................       68,000
   December 22, 1997........................................       10,000
   January 2, 1998..........................................      441,500
   January 12, 1998.........................................       16,000
   January 15, 1998.........................................      220,000
   January 23, 1998.........................................        4,000
   January 26, 1998.........................................        1,000
   February 2, 1998.........................................       69,000
   February 4, 1998.........................................        3,000
   February 6, 1998.........................................       36,000
   February 16, 1998........................................      174,000
   February 18, 1998........................................        2,000
   February 19, 1998........................................       11,000
   February 28, 1998........................................      160,000
   March 2, 1998............................................        5,500
   March 9, 1998............................................        6,000
   March 16, 1998...........................................        4,000
</TABLE>

 
                                     II-2

<PAGE>
 

ITEM 16. EXHIBITS
 

<TABLE>   
<CAPTION>
 EXHIBIT
 NUMBER                                DESCRIPTION
 -------                               -----------
 <C>     <S>
  1.1*   Form of Underwriting Agreement.
  2.1*   Amended and Restated Subscription and Contribution Agreement between
         Manhattan Associates Software, LLC, the direct and indirect
         stockholders of Manhattan Associates Software, LLC and the Registrant
         dated March 31, 1998.
  3.1*   Articles of Incorporation of the Registrant.
  3.2*   Bylaws of the Registrant.
  4.1*   Provisions of the Articles of Incorporation and Bylaws of the
         Registrant defining rights of the holders of Common Stock of the
         Registrant.
  4.2*   Specimen Stock Certificate.
  5.1*   Opinion of Morris, Manning & Martin, L.L.P., Counsel to the
         Registrant, as to the legality of the shares being registered.
  10.1*  Lease Agreement by and between Wildwood Associates, a Georgia general
         partnership, and the Registrant dated September 24, 1997.
  10.2*  First Amendment to Lease between Wildwood Associates, a Georgia
         general partnership, and the Registrant, dated October 31, 1997.
  10.3*  Summary Plan Description of the Registrant's Money Purchase Plan &
         Trust, effective January 1, 1997.
  10.4*  Summary Plan Description of the Registrant's 401(k) Plan and Trust,
         effective January 1, 1995.
  10.5*  Form of Indemnification Agreement with certain directors and officers
         of the Registrant.
  10.6*  Contribution Agreement between the Registrant and Daniel Basmajian,
         Sr.
  10.7*  Form of Tax Indemnification Agreement for direct and indirect
         stockholders of Manhattan Associates Software, LLC.
  10.8*  Second Amendment to Lease between Wildwood Associates, a Georgia
         general partnership, and the Registrant, dated February 27, 1998.
  10.9*  Share Purchase Agreement between Deepak Raghavan and the Registrant
         effective as of February 16, 1998.
 10.10*  Manhattan Associates, Inc. Stock Incentive Plan.
 10.11*  Manhattan Associates, LLC Option Plan.
 10.12*  Grid Promissory Note of the Registrant in favor of Alan J. Dabbiere.
 10.13*  Loan and Security Agreement by and between Silicon Valley Bank and the
         Registrant, dated March 30, 1998.
 10.14*  Executive Employment Agreement executed by Neil Thall.
 10.15*  Executive Employment Agreement executed by Michael Casey.
 10.16*  Executive Employment Agreement executed by Greg Cronin.
 10.17*  Employment Agreement executed by Oliver Cooper.
 10.18*  Form of License Agreement, Software Maintenance Agreement and
         Consulting Agreement.
 21.1*   List of Subsidiaries.
 23.1    Consent of Arthur Andersen LLP.
 23.2*   Consent of Morris, Manning & Martin, L.L.P. (included in Exhibit 5.1).
 24.1*   Powers of Attorney (included on signature page).
 27.1*   Financial Data Schedule.
 99.1*   Report of Independent Public Accountants.
 99.2*   Consents of Independent Directors to be Named in the Registration
         Statement.
</TABLE>
    
- --------
 * Previously Filed.
 
                                      II-3

<PAGE>
 

ITEM 17. UNDERTAKINGS
 
  (a) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
 
  (b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
 
  (c) The Registrant hereby undertakes that:
 
    (i) For purposes of determining any liability under the Securities Act,
  the information omitted from the form of prospectus filed as part of this
  Registration Statement in reliance upon Rule 430A and contained in the form
  of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
  497(h) under the Securities Act shall be deemed to be part of the
  Registration Statement as of the time it was declared effective.
 
    (ii) For purposes of determining any liability under the Securities Act,
  each post-effective amendment that contains a form of prospectus shall be
  deemed to be a new registration statement relating to the securities
  offered therein, and the offering of such securities at that time shall be
  deemed to be the initial bona fide offering thereof.
 
                                     II-4

<PAGE>
 

                                   SIGNATURES
   
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 2 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ATLANTA,
STATE OF GEORGIA ON THE 17TH DAY OF APRIL, 1998.     
 
                                        Manhattan Associates, Inc.
 
                                                   /s/ Alan J. Dabbiere
                                        By: ___________________________________
                                                   ALAN J. DABBIERE
                                                CHAIRMAN OF THE BOARD,
                                              CHIEF EXECUTIVE OFFICER AND
                                                       PRESIDENT
 
 
  PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
 
   
             SIGNATURE                       TITLE                 DATE
 
        /s/ Alan J. Dabbiere          Chairman of the         
- ------------------------------------   Board, Chief           April 17, 1998
          ALAN J. DABBIERE             Executive Officer           
                                       and President
                                       (Principal
                                       Executive Officer)
 
        /s/ Michael J. Casey          Chief Financial        
- ------------------------------------   Officer and            April 17, 1998
          MICHAEL J. CASEY             Treasurer              
                                       (Principal
                                       Financial and
                                       Accounting
                                       Officer)
 
        /s/ Deepak Raghavan           Director                
- ------------------------------------                          April 17, 1998
          DEEPAK RAGHAVAN                                     
 
     
 
                                      II-5

<PAGE>
 
                                                                     SCHEDULE II
 
                           MANHATTAN ASSOCIATES, INC.
                       VALUATION AND QUALIFYING ACCOUNTS
                        ALLOWANCE FOR DOUBTFUL ACCOUNTS
 

<TABLE>
<CAPTION>
       BALANCE AT   CHARGED TO                          BALANCE AT
        BEGINNING   COSTS AND  CHARGED TO               END OF THE
      OF THE PERIOD  EXPENSES  OTHER ACCTS  DEDUCTIONS    PERIOD
      ------------- ---------- -----------  ----------  ----------
<S>   <C>           <C>        <C>          <C>         <C>
1995    $    --      $242,780   $    --      $142,780 b  $100,000
1996     100,000      225,000        --           --      325,000
1997     325,000      395,000    250,000 a        --      970,000
</TABLE>

- --------
a Charged to services revenue
b Represents the write-off of accounts previously reserved





<PAGE>
 
                                                                    EXHIBIT 23.1



                   CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


As independent public accountants, we hereby consent to the use of our reports
(and to all references to our firm) included in or made part of this
Registration Statement.





ARTHUR ANDERSEN LLP
    
Atlanta, Georgia
April 16, 1998