<PAGE>   1


                                 United States
                       Securities and Exchange Commission
                             Washington, D.C. 20549



                                    FORM 10-Q



[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended MARCH 31, 2000

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _________ to _________.

                         Commission file number 0-25331



                               CRITICAL PATH, INC.

A CALIFORNIA CORPORATION                          I.R.S. EMPLOYER NO. 91-1788300


                                320 FIRST STREET
                         SAN FRANCISCO, CALIFORNIA 94105
                                  415-808-8800




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

Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the latest practicable date: AS OF APRIL 30, 2000, THE COMPANY HAD
OUTSTANDING 62,198,881 SHARES OF COMMON STOCK, $ 0.001 PAR VALUE PER SHARE.


<PAGE>   2


CRITICAL PATH, INC.
INDEX


<TABLE>
<CAPTION>
                                                                                  Page
                                                                                  ----
<S>                                                                               <C>
Part I.  Financial Information

         Item 1.  Consolidated Financial Statements (Unaudited)

                           Consolidated Balance Sheet                               1

                           Consolidated Statement of Operations                     2

                           Consolidated Statement of Cash Flows                     3

                           Notes to Consolidated Financial Statements               4


         Item 2.  Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                              12

                  Supplemental Pro Forma Financial Data                            35

         Item 3.  Quantitative and Qualitative Disclosures About Market Risk       36


Part II. Other Information

         Item 1.  Legal Proceedings                                                37

         Item 2.  Changes in Securities and Use of Proceeds                        37

         Item 3.  Defaults Upon Senior Securities                                  37

         Item 4.  Submission of Matters to a Vote of the Security Holders          37

         Item 5.  Other Information                                                37

         Item 6.  Exhibits and Reports on Form 8-K                                 37
</TABLE>


<PAGE>   3


                         PART 1 -- FINANCIAL INFORMATION


ITEM 1 -- FINANCIAL STATEMENTS
CRITICAL PATH, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                      December 31,       March 31,
                                                                                          1999             2000
                                                                                      ------------      -----------
                                                                                                        (unaudited)
<S>                                                                                   <C>               <C>
ASSETS

Current Assets
     Cash and cash equivalents                                                        $    75,932       $   348,052
     Restricted cash                                                                          325               325
     Accounts receivable, net                                                              10,147            24,352
     Other current assets                                                                  40,800             9,306
                                                                                      -----------       -----------
          Total current assets                                                            127,204           382,035

     Investments                                                                           18,426            12,699
     Notes receivable from officers                                                           669               836
     Property and equipment, net                                                           52,517            66,877
     Intangible assets, net                                                               474,297         1,210,111
     Other assets                                                                             692             9,325
                                                                                      -----------       -----------
          Total assets                                                                $   673,805       $ 1,681,883
                                                                                      ===========       ===========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
     Accounts payable                                                                 $    35,621       $    36,736
     Accrued expenses                                                                       7,120            12,655
     Deferred revenue, current                                                              1,603            12,897
     Capital lease and other obligations, current                                           6,585             8,259
                                                                                      -----------       -----------
          Total current liabilities                                                        50,929            70,547

     Convertible subordinated notes payable                                                    --           300,000
     Deferred revenue, long-term                                                              215               203
     Capital lease and other obligations, long-term                                         5,669            10,967
                                                                                      -----------       -----------
          Total liabilities                                                                56,813           381,717
                                                                                      -----------       -----------

Commitments and contingencies

Shareholders' Equity
     Preferred Stock and paid-in-capital, $0.001 par value
          Shares authorized: 5,000
          Shares issued and outstanding:  none                                                 --                --
     Common Stock and paid-in-capital, $0.001 par value
          Shares authorized: 150,000
          Shares issued and outstanding:  46,937 and 61,984
            (net of 134 treasury shares at cost of $229)                                  864,699         1,633,261
     Notes receivable from shareholders                                                    (1,154)           (1,167)
     Unearned compensation                                                               (124,906)         (130,454)
     Accumulated deficit, including other comprehensive income                           (121,647)         (201,474)
                                                                                      -----------       -----------
          Total shareholders' equity                                                      616,992         1,300,166
                                                                                      -----------       -----------
          Total liabilities and shareholders' equity                                  $   673,805       $ 1,681,883
                                                                                      ===========       ===========
</TABLE>



       The accompanying notes are an integral part of these Consolidated
                             Financial Statements.

                                       1
<PAGE>   4


CRITICAL PATH, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
Three Months Ended March 31                        1999           2000
                                                 --------       --------
                                                       (unaudited)
<S>                                              <C>            <C>
Net revenues
     Licenses                                    $     --       $ 11,070
     Services                                       1,049         13,483
                                                 --------       --------
         Total net revenues                         1,049         24,553
                                                 --------       --------
Cost of net revenues
     Licenses                                          --          1,007
     Services                                       1,914         14,340
     Amortization of purchased technology              --          2,114
     Acquisition-related retention bonuses             --            390
     Stock-based expenses                             446            493
                                                 --------       --------
         Total cost of net revenues                 2,360         18,344
                                                 --------       --------
Gross profit (loss)                                (1,311)         6,209
                                                 --------       --------
Operating expenses
     Sales and marketing                            1,984         13,605
     Research and development                       1,379          6,323
     General and administrative                     1,550          6,766
     Acquisition-related retention bonuses             --          2,679
     Amortization of intangible assets                 --         47,699
     Stock-based expenses                          11,657          6,703
                                                 --------       --------
         Total operating expenses                  16,570         83,775
                                                 --------       --------

Loss from operations                              (17,881)       (77,566)

Interest and other income, net                        351          1,258
Interest expense                                      (64)          (274)
                                                 --------       --------

Loss before income taxes                          (17,594)       (76,582)

Provision for income taxes                             --           (360)
                                                 --------       --------
Net loss                                         $(17,594)      $(76,942)
                                                 ========       ========
Net loss per share - basic and diluted           $  (2.51)      $  (1.52)
                                                 ========       ========
Weighted average shares - basic and diluted         7,011         50,570
                                                 ========       ========
</TABLE>

  The accompanying notes are an integral part of these Consolidated
                             Financial Statements.

                                       2
<PAGE>   5


CRITICAL PATH, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
Three Months Ended March 31                                         1999            2000
                                                                  ---------       ---------
                                                                         (unaudited)
<S>                                                               <C>             <C>
Operations
      Net loss                                                    $ (17,594)      $ (76,942)
      Provision for doubtful accounts                                    24             330
      Depreciation and amortization                                     626           6,191
      Amortization of intangible assets                                  --          49,813
      Amortization of stock-based costs and expenses                 12,210           7,212
      Accounts receivable                                              (415)         (3,394)
      Other assets                                                     (741)          2,401
      Accounts payable                                                1,927          (6,937)
      Accrued expenses                                                 (167)          4,088
      Deferred revenue                                                 (500)            (57)
                                                                  ---------       ---------
         Net cash used in operating activities                       (4,630)        (17,295)
                                                                  ---------       ---------
Investing
      Notes receivable from officers                                   (170)           (100)
      Property and equipment purchases                                 (659)        (11,046)
      Investments in unconsolidated entities, net                        --           3,000
      Payments for acquisitions, net of cash acquired                    --          (5,549)
      Repayment of promissory note receivable                            --          10,000
                                                                  ---------       ---------
         Net cash used in investing activities                         (829)         (3,695)
                                                                  ---------       ---------
Financing
      Proceeds from issuance of Preferred Stock, net                 12,496              --
      Proceeds from issuance of Common Stock, net                     1,303           3,851
      Proceeds from convertible debt offering, net                       --         290,250
      Principal payments on lease obligations                          (398)           (823)
      Purchase of treasury stock                                       (227)             --
                                                                  ---------       ---------
         Net cash provided by financing activities                   13,174         293,278
                                                                  ---------       ---------
Net change in cash and cash equivalents                               7,715         272,288
Effect of exchange rates on cash and cash equivalents                    --            (168)
Cash and cash equivalents at beginning of period                     14,791          75,932
                                                                  ---------       ---------
Cash and cash equivalents at end of period                        $  22,506       $ 348,052
                                                                  =========       =========
</TABLE>


  The accompanying notes are an integral part of these Consolidated
                             Financial Statements.


                                       3
<PAGE>   6

CRITICAL PATH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

The unaudited Consolidated Financial Statements ("Financial Statements") of
Critical Path, Inc. and Subsidiaries (the "Company" or "Critical Path")
furnished herein reflect all adjustments that are, in the opinion of management,
necessary to present fairly the financial position and results of operations for
each interim period presented. All adjustments are normal recurring adjustments.
The Financial Statements should be read in conjunction with the consolidated
financial statements and notes thereto, together with management's discussion
and analysis of financial condition and results of operations, presented in the
Company's 1999 Annual Report on Form 10-K/A. The results of operations for the
interim periods presented herein are not necessarily indicative of the results
to be expected for the entire year.

NOTE 2 - ACQUISITIONS AND JOINT VENTURE

ISOCOR CORPORATION

On January 19, 2000, the Company acquired ISOCOR Corporation ("ISOCOR"), a
leading supplier of Internet messaging, directory and meta-directory software
solutions. The acquisition was accounted for using the purchase method of
accounting and accordingly, the purchase price was allocated to the tangible and
intangible net assets acquired on the basis of their respective fair values on
the acquisition date. The fair value of intangible assets was determined based
upon an independent valuation using a combination of methods, including an
income approach for the acquired existing and in-process technologies and the
customer base, and a replacement cost approach for the value of the assembled
workforce.

The total purchase price of approximately $274.9 million consisted of $226.7
million of the Company's Common Stock (5,043,054 shares), assumed stock options
with a fair value of $37.2 million, and other acquisition related expenses of
approximately $11.0 million, consisting primarily of payments for


                                       4
<PAGE>   7

CRITICAL PATH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

financial advisory and other professional fees. Of the total purchase price,
$18.7 million was allocated to net tangible assets, and the remainder was
allocated to intangible assets, including in-process technology ($200,000),
existing technology ($18.3 million), customer base ($9.8 million), assembled
workforce ($3.4 million) and goodwill ($224.5 million). The acquired in-process
technology was recognized as research and development expense in the period the
transaction was consummated. The fair value of other acquired intangible assets,
excluding goodwill, was capitalized and is being amortized over their estimated
useful lives of three years. Goodwill is being amortized using the straight-line
method over three years.

The ISOCOR acquisition was recognized as follows:

<TABLE>
<CAPTION>
                                                               (In thousands)
<S>                                                            <C>
     Fair value of assets acquired                             $  290,176
     Liabilities assumed                                          (15,291)
     Fair value of Common Stock and options issued               (263,885)
                                                               -----------
     Cash paid, including acquisition costs                        11,000
     Less: cash acquired                                           18,989
                                                               ----------
     Net cash acquired                                         $    7,989
                                                               ==========
</TABLE>

THE DOCSPACE COMPANY

On March 8, 2000, the Company acquired all outstanding stock of The docSpace
Company ("docSpace"), a provider of Web-based services for secure file delivery,
storage and collaboration. The acquisition was accounted for using the purchase
method of accounting and accordingly, the purchase price was allocated to the
tangible and intangible assets acquired on the basis of their respective fair
values on the acquisition date. The fair value of intangible assets was
determined based upon an independent valuation using a combination of methods,
including a cost approach for the acquired existing technology, and the
replacement cost approach for the value of the assembled workforce.

The total purchase price of $258.0 million consisted of $30.0 million cash,
Common Stock (3,805,820 shares) valued at $218.0 million, and other acquisition
costs of approximately $10.0 million. Of the total purchase price, approximately
$7.1 million has been allocated to net tangible liabilities and the remainder
has been allocated to intangible assets, including assembled workforce
($500,000), existing technology ($21.5 million), and goodwill ($243.1 million).
The fair value of acquired intangible assets, excluding goodwill, was
capitalized and is being amortized over their estimated useful lives of three
years. Goodwill is being amortized using the straight-line method over three
years.

The docSpace acquisition was recognized as follows:

<TABLE>
<CAPTION>
                                                                 (In thousands)
<S>                                                              <C>
     Fair value of assets acquired                               $  266,128
     Liabilities assumed                                             (8,154)
     Fair value of Common Stock issued                             (217,979)
                                                                 -----------
     Cash paid, including acquisition costs                          39,995
     Less: cash acquired                                                153
                                                                 ----------
     Net cash paid                                               $   39,842
                                                                 ==========
</TABLE>


                                       5
<PAGE>   8

CRITICAL PATH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

REMARQ COMMUNITIES, INC.

On March 30, 2000, the Company acquired RemarQ Communities, Inc. ("RemarQ"), a
provider of Internet collaboration services for corporations, Web portals and
Internet service providers. The acquisition was accounted for using the purchase
method of accounting and accordingly, the purchase price was allocated to the
tangible and intangible net assets acquired on the basis of their respective
fair values on the acquisition date. The total purchase price of approximately
$267.6 million, consisted of Common Stock (3,868,450 shares) valued at $259.3
million, assumed stock options with an estimated fair market value of $7.7
million, and other acquisition related expenses of approximately $600,000,
consisting primarily of payments for legal and other professional fees. Of the
total purchase price, approximately $7.8 million was allocated to net tangible
assets, and the remainder was allocated to intangible assets, including existing
technology ($4.5 million), assembled workforce ($3.3 million), customer base
($5.9 million), and goodwill totaling ($246.1 million). The fair value of the
acquired intangible assets, excluding goodwill, was capitalized and is being
amortized over their estimated useful lives of two to three years. Goodwill is
being amortized using the straight-line method over three years.

The RemarQ acquisition was recognized as follows:

<TABLE>
<CAPTION>
                                                               (In thousands)
<S>                                                            <C>
         Fair value of assets acquired                         $  279,033
         Liabilities assumed                                      (11,453)
         Fair value of Common Stock and options issued           (267,000)
                                                               -----------
         Cash paid, including acquisition costs                       580
         Less: cash acquired                                       11,203
                                                               ----------
         Net cash acquired                                     $   10,623
                                                               ==========
</TABLE>

Pro Forma Results

The following unaudited pro forma information presents the Company's
consolidated results of operations for the three months ended March 31, 1999 and
2000, as if the acquisitions had been consummated at the beginning of each
period. The pro forma consolidated results of operations include certain pro
forma adjustments, including the amortization of intangible assets and the
accretion of the acquisition-related retention bonuses.

<TABLE>
<CAPTION>
         Three Months Ended March 31                   1999              2000
                                                       ----              ----
<S>                                                    <C>               <C>
         (in thousands, except per share data)
         Net revenues                                   9,423            27,962
         Net loss                                     (89,293)         (130,874)
         Net loss per share -
           basic and diluted                            (4.95)            (2.31)
</TABLE>

The pro forma results are not necessarily indicative of those that would have
actually occurred had the acquisitions taken place at the beginning of the
periods presented.

CRITICAL PATH PACIFIC

The Company has signed a memorandum of understanding to enter into a joint
venture with Mitsui and Co., Ltd. and NTT Communications Corporation to bring
messaging solutions to Japan. The Company's ownership in the joint venture upon
inception will be 40%. The Company will account for its investment in this joint
venture using the equity method.


                                       6
<PAGE>   9

CRITICAL PATH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

NOTE 3 - ACQUISITION-RELATED RETENTION BONUS

In connection with the acquisitions of dotOne Corporation ("dotOne"), Amplitude
Software Corporation ("Amplitude"), Xeti, Inc. ("Xeti"), FaxNet Corporation
("FaxNet"), ISOCOR, and docSpace, the Company established a retention bonus
program in the aggregate amount of $20.7 million to provide incentives for
certain former employees of these companies to continue their employment with
Critical Path. Payment of bonuses to the listed employees will occur one year
following the date of acquisition, unless the listed employees voluntarily
terminate their employment with the Company prior to the respective
acquisition's one-year anniversary. The aggregate amount of the eligible bonuses
is reduced for the bonus amount allocated to each former dotOne, Amplitude,
Xeti, FaxNet, ISOCOR, and docSpace employee that chooses to terminate his or her
employment with the Company. A ratable share of the adjusted eligible bonus
amount will be accrued and charged to compensation expense over the respective
12-month period commencing on the date the bonuses are granted. As of March 31,
2000, the aggregate, adjusted eligible bonus amount was $18.3 million, and the
amount recognized as compensation expense was $3.1 million during the three
months then ended. Based on the functions of the employees scheduled to receive
acquisition-related retention bonuses, $390,000 of the compensation charge was
allocated to cost of net revenues and the remaining $2.7 million was allocated
to operating expenses.


NOTE 4 - INTANGIBLE ASSETS

<TABLE>
<CAPTION>
                                                December 31,            March 31,
         (In thousands)                             1999                  2000
                                                    ----                  ----
<S>                                              <C>                  <C>
         Goodwill                                $  475,368           $ 1,192,425
         Customer list                               12,800                28,500
         Assembled workforce                          6,960                14,160
         Existing technology                          9,940                55,640
         Patent license                               1,488                 1,488
                                                   ---------          -----------
                                                    506,556             1,292,213
         Less:  accumulated amortization            (32,259)              (82,102)
                                                 -----------          ------------
             Intangible assets, net              $  474,297           $ 1,210,111
                                                 ==========           ============
</TABLE>

Related amortization of intangible assets was $49.8 million during the three
months ended March 31, 2000. There was no amortization of intangible assets
during the first quarter of 1999.


NOTE 5 - BORROWINGS

On March 30, 2000, the Company issued $300 million of five-year, 5.75%
Convertible Subordinated Notes ("Notes") due April 1, 2005, to qualified
institutional buyers in reliance on Rule 144A under the Securities Act of 1933.
Holders may convert the Notes into shares of Critical Path's Common Stock at any
time before their maturity or the business day before their redemption or
repurchase by Critical Path. The conversion rate is 9.8546 shares per $1,000
principal amount of Notes, subject to adjustment in certain circumstances. This
rate is equivalent to a conversion price of approximately $101.48 per share.

The Company incurred approximately $10.8 million in debt issuance costs,
consisting primarily of payments for an underwriting discount and legal and
other professional fees. These costs have been capitalized and will be
recognized as a component of interest expense on a straight-line basis over the
five-year term of the Notes.

                                       7
<PAGE>   10

CRITICAL PATH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

Interest is payable on April 1 and October 1 of each year with the first
interest payment due on October 1, 2000. The Notes are subordinated in right of
payment to all senior debt of Critical Path and effectively subordinated to all
existing and future debt and all other liabilities of Critical Path's
subsidiaries.

On or after the third business day after April 1, 2003, through March 31, 2004,
the Company has the option to redeem all or a portion of the Notes that have not
been previously converted at the redemption price equal to 102.30% of the
principal amount. During the period from April 1, 2004 through March 31, 2005,
the Company has the option to redeem all or a portion of the Notes that have not
been previously converted at the redemption price equal to 101.15% of the
principal amount. Thereafter the redemption price is equal to 100% of principal
amount. The Notes are non-callable for three years. In the event of a "Change in
Control," as defined in the Notes' Offering Circular, the Holders have the
option of requiring the Company to repurchase any Notes held at a price of 100%
of the principal amount of the Notes plus accrued interest to the date of
repurchase.


NOTE 6 - COMMITMENTS AND CONTINGENCIES

Contingencies

On March 8, 2000, the Company acquired docSpace, which is involved in a patent
infringement action with Tumbleweed Communications Corp. The lawsuit relates to
a Tumbleweed patent that describes an apparatus for delivering documents via the
Internet. The Company has denied the allegations of infringement and has
counterclaimed for violations of the antitrust laws and related state law
claims. Both parties have moved for summary judgement. This case is in the
preliminary phase and the Company is not currently able to assess the impact, if
any, on its financial position or results of operations.

The Company is party to various legal proceedings in the ordinary course of its
business. The Company believes that the ultimate outcome of these matters will
not have a material adverse impact on its financial position, results of
operations, or operating cash flow.


NOTE 7 - SHAREHOLDERS' EQUITY

WARRANTS

America Online/ICQ

In January of 1999, the Company entered into an agreement with ICQ, Inc.
("ICQ"), a subsidiary of America Online, Inc., pursuant to which the
Company provides email hosting services that are integrated with ICQ's instant
messaging service provided to ICQ's customers. As part of the agreement, ICQ
agreed to provide sub-branded advertising for the Company in exchange for
warrants to purchase 2,442,766 shares of the Company's Common Stock, issuable
upon attainment of each of five milestones.

As of March 31, 2000, four of the five milestones had been attained.
Aggregate charges to stock-based expenses of $7.9 million and $2.1 million were
recorded during the three-month periods ended March 31, 1999 and 2000,
respectively, related to these warrants. The remaining shares underlying the
fifth milestone were remeasured using the March 31, 2000, closing price of the
Company's Common Stock of $85.00 resulting in a revised aggregate fair value of
all vested and unvested warrants of $94.6 million.


                                       8
<PAGE>   11

CRITICAL PATH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Qwest Communications Corporation

In October of 1999, the Company entered into an agreement with Qwest
Communications Corporation ("Qwest"), a telecommunications company, pursuant to
which the Company provides email hosting services to Qwest's customers. As part
of the agreement, Qwest agreed to provide sub-branded advertising for Critical
Path in exchange for warrants to purchase up to a maximum of 3,534,540 shares of
Common Stock upon attainment of each of six milestones.

As of March 31, 2000, only the first of the six milestones had been attained.
None of the remaining milestones are considered probable and as a result, the
fair value of the warrants relating to the shares underlying the second through
sixth milestones have not been recognized. During the three-month period ended
March 31, 2000, $1.9 million was charged to stock-based expense related to these
vested warrants.

Worldsport Network Ltd.

In December of 1999, the Company entered into an agreement with Worldsport
Network Ltd. ("Worldsport"), the sole and exclusive provider of Internet
solutions for the General Association of International Sports Federations
("GAISF") and a majority of the international federations it recognizes.
Worldsport offers Critical Path's advanced Web-based email and calendaring
services to the entire GAISF network and its members. As part of the agreement,
Worldsport agreed to provide sub-branded advertising for the Company in exchange
for warrants to purchase up to a 1.25% equity interest in the Company on a fully
diluted basis upon attainment of each of five milestones.

As of March 31, 2000, none of the milestones were considered probable and as a
result, the fair value associated with these warrants has not been recognized.

In January of 2000, the docSpace Company entered into an agreement with a major
telecommunications company ("Telco") pursuant to which the docSpace Company
would provide secure messaging services to the Telco's customers. As part of the
agreement, Telco agreed to provide marketing, publicity, and promotional
services to docSpace. As a result of the completion of the Company's acquisition
of docSpace, Critical Path assumed warrants that allowed Telco to purchase up to
a maximum of 349,123 shares of Common Stock upon attainment of each of three
milestones.

Subsequent to the acquisition, the Company entered into discussions with Telco
to modify its relationship. Accordingly, the vesting provisions of the proposed
agreement are being modified to reflect the requirements of the new
relationship.

As of March 31, 2000, none of the vesting milestones had been attained; however,
the Company believes that all shares underlying these warrants are probable of
issuance. As a result, the shares underlying these milestones were remeasured
using the March 31, 2000, closing price of the Company's Common Stock of $85.00,
resulting in a revised fair value of the warrants of $25.9 million. The fair
value of the warrants will be recognized on a straight-line basis over the
greater of the term of the contract or the expected period of benefit of the
strategic relationship. During the three-month period ended March 31, 2000, no
amount has been recognized as stock-based expense related to these warrants.


                                       9
<PAGE>   12

CRITICAL PATH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

COMPREHENSIVE LOSS

The components of comprehensive loss, net of tax, are as follows:

<TABLE>
<CAPTION>
     Three months Ended March 31                             1999              2000
     (In thousands)                                          ----              ----
<S>                                                     <C>              <C>
     Net loss                                           $ (17,594)       $(76,942)
     Unrealized investment losses                            -             (2,717)
     Foreign currency translation adjustments                -               (168)
                                                        ----------       ---------
     Comprehensive loss                                 $ (17,594)       $(79,827)
                                                        ==========       =========
</TABLE>

Accumulated other comprehensive loss consists of unrealized gains (losses) on
available-for-sale securities, net of tax, and cumulative translation
adjustments, as presented on the accompanying consolidated balance sheet.


NOTE 9 - NET LOSS PER SHARE

Net loss per share is calculated as follows:

<TABLE>
<CAPTION>
    Three months Ended March 31                                 1999               2000
    (in thousands, except per share amounts)                    ----               ----
<S>                                                        <C>                <C>
    Net loss                                               $(17,594)          $(76,942)
                                                           --------           --------
    Weighted average shares outstanding                      10,405             53,495
    Weighted average shares subject
         to repurchase agreements                            (3,394)            (1,857)
    Weighted average shares held in escrow
         related to acquisitions                                 --             (1,068)
                                                           --------           --------
    Shares used in computation of basic and
         diluted loss per share                               7,011             50,570
                                                           ========           ========
    Net loss per share - basic and diluted                 $  (2.51)          $  (1.52)
                                                           ========           ========
</TABLE>


                                       10
<PAGE>   13

CRITICAL PATH, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

At March 31, 1999 and 2000, approximately 16.0 million and 31.0 million
potential common shares, respectively, were excluded from the determination of
diluted net loss per share, as the effect of such shares on a weighted average
basis is anti-dilutive.


                                       11
<PAGE>   14

CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

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

The following discussion and analysis of Critical Path, Inc., and Subsidiaries
("Company" or "Critical Path") should be read in conjunction with the
Consolidated Financial Statements and Notes thereto of the Company included
herein, as well as the Company's 1999 Annual Report on Form 10-K/A. The
following discussion contains forward-looking statements. The Company's actual
results may differ significantly from those projected in these forward-looking
statements. Factors that might cause future results to differ materially from
those projected in the forward-looking statements include, but are not limited
to, future enhancements of our service and product offerings, potential
expansion of our employee base and operating assets, acquisitions, competition,
development of new strategic relationships, opening of new data centers and
sales offices, additional investments in technology, and those discussed in
"Additional Factors That May Affect Future Operating Results" and elsewhere in
this report. Readers are cautioned not to place undue reliance on these
forward-looking statements. The Company has no obligation to publicly release
the results of any revisions to these forward-looking statements to reflect
events or circumstances after the date of this filing.


OVERVIEW

Critical Path is the leading global provider of complete end-to-end Internet
messaging and collaboration solutions for wireless, Internet-centric,
telecommunication and corporate businesses. Through its allsourcing strategy,
Critical Path is the only advanced messaging provider to offer businesses the
flexibility to outsource, midsource or insource all or part of their messaging
and collaboration applications. Critical Path has built an industry-leading
global infrastructure with data centers connected to key Internet exchange
points. The Company is headquartered in San Francisco, with offices in locations
nationwide and in Canada, Germany, England, Ireland, France, Denmark, Italy,
Switzerland, Brazil and Argentina. The Company was founded in February 1997.

ACQUISITIONS

ISOCOR CORPORATION. On January 19, 2000, the Company acquired ISOCOR Corporation
("ISOCOR"), a leading supplier of Internet messaging, directory and
meta-directory software solutions. The acquisition was accounted for using the
purchase method of accounting and accordingly, the purchase price was allocated
to the tangible and intangible net assets acquired on the basis of their
respective fair values on the acquisition date. The fair value of intangible
assets was determined based upon an independent valuation using a combination of
methods, including an income approach for the acquired existing and in-process
technologies and the customer base, and a replacement cost approach for the
value of the assembled workforce.

The total purchase price of approximately $274.9 million consisted of $226.7
million of the Company's Common Stock (5,043,054 shares), assumed stock options
with a fair value of $37.2 million, and other acquisition related expenses of
approximately $11.0 million, consisting primarily of payments for financial
advisory and other professional fees. Of the total purchase price, $18.7 million
was allocated to net tangible assets, and the remainder was allocated to
intangible assets, including in-process technology ($200,000), existing
technology ($18.3 million), customer base ($9.8 million), assembled workforce
($3.4 million) and goodwill ($224.5 million). The acquired in-process technology
was recognized as research and development expense in the period the transaction
was consummated. The fair value of the other acquired intangible assets,
excluding goodwill, was capitalized and is being amortized over their estimated
useful lives of three years. Goodwill is being amortized using the straight-line
method over three years.

THE DOCSPACE COMPANY. On March 8, 2000, the Company acquired all outstanding
stock of The docSpace Company ("docSpace"), a provider of Web-based services for
secure file delivery, storage and collaboration. The acquisition was accounted
for using the purchase method of accounting and accordingly, the purchase price
was allocated to the tangible and intangible assets acquired on the basis of
their respective fair values on the acquisition date. The fair value of
intangible assets was determined based upon an independent valuation using a
combination of methods, including a cost approach for the acquired existing
technology, and the replacement cost approach for the value of the assembled
workforce.

The total purchase price of $258.0 million consisted of $30.0 million cash,
Common Stock (3,805,820 shares) valued at $218.0 million, and other acquisition
costs of approximately $10.0 million. Of the total purchase price, approximately
$7.1 million has been allocated to net tangible liabilities and the remainder
has been allocated to intangible assets, including assembled workforce
($500,000), existing technology ($21.5 million), and goodwill ($243.1 million).
The fair value of the acquired intangible assets, excluding goodwill, was
capitalized and is being amortized over their estimated useful lives of three
years. Goodwill is being amortized using the straight-line method over three
years.

REMARQ COMMUNITIES, INC. On March 30, 2000, the Company acquired all outstanding
stock of RemarQ Communities, Inc. ("RemarQ"), a provider of Internet
collaboration services for corporations, Web portals and Internet service
providers. The acquisition was accounted for using the purchase method of
accounting and accordingly, the purchase price was allocated to the tangible and
intangible assets acquired on the basis of their respective fair values on the
acquisition date. The total purchase price of approximately $267.6 million
consisted of Common Stock (3,868,450 shares) valued at $259.3 million, assumed
stock options valued at approximately $7.7 million, and other acquisition
related expenses of approximately $600,000. Of the total purchase price,
approximately $7.8 million has been allocated to net tangible assets and the
remainder was allocated to intangible assets, including existing technology
($4.5 million), assembled workforce ($3.3 million), customer base ($5.9
million), and goodwill totaling approximately ($246.1 million). The fair value
of the acquired intangible assets, excluding goodwill, was capitalized and is
being amortized over their


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

estimated useful lives of two to three years. Goodwill is being amortized using
the straight-line method over three years.

WARRANTS

America Online/ICQ. In January of 1999, the Company entered into an agreement
with ICQ, Inc. ("ICQ"), a subsidiary of America Online, Inc., pursuant to which
the Company provides email hosting services that are integrated with ICQ's
instant messaging service provided to ICQ's customers. As part of the agreement,
ICQ agreed to provide sub-branded advertising for the Company in exchange for
warrants to purchase 2,442,766 shares of Series B Preferred Stock, issuable upon
attainment of each of five milestones.

As of March 31, 2000, four of the five milestones had been attained. Aggregate
charges to stock-based expenses of $7.9 million and $2.1 million were recorded
during the three-month periods ended March 31, 1999 and 2000, respectively,
related to these warrants. The remaining shares underlying the fifth milestone
were remeasured using the March 31, 2000, closing price of the Company's Common
Stock of $85.00 resulting in a revised aggregate fair value of all vested and
unvested warrants of $94.6 million.

Qwest Communications Corporation. In October of 1999, the Company entered into
an agreement with Qwest Communications Corporation ("Qwest"), a
telecommunications company, pursuant to which the Company provides email hosting
services to Qwest's customers. As part of the agreement, Qwest agreed to provide
sub-branded advertising for Critical Path in exchange for warrants to purchase
up to a maximum of 3,534,540 shares of Common Stock upon attainment of each of
six milestones.

As of March 31, 2000, only the first of the six milestones had been attained.
None of the milestones are considered probable and as a result, the fair value
of the warrants relating to the shares underlying the second through sixth
milestones have not been recognized. During the three-month period ended March
31, 2000, $1.9 million was charged to stock-based expense related to these
vested warrants.

Worldsport Network Ltd. In December of 1999, the Company entered into an
agreement with Worldsport Network Ltd. ("Worldsport"), the sole and exclusive
provider of Internet solutions for the General Association of International
Sports Federations ("GAISF") and a majority of the international federations it
recognizes. Worldsport offers Critical Path's advanced Web-based email and
calendaring services to the entire GAISF network and its members. As part of the
agreement, Worldsport agreed to provide sub-branded advertising for the Company
in exchange for warrants to purchase up to a 1.25% equity interest in the
Company on a fully diluted basis upon attainment of each of five milestones.

As of March 31, 2000, none of the milestones were considered probable and as a
result, the fair value associated with these warrants has not been recognized.

In January of 2000, the docSpace Company entered into an agreement with a major
telecommunications company ("Telco"), pursuant to which the docSpace Company
would provide secure messaging services to the Telco's customers. As part of the
agreement, Telco agreed


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

to provide marketing, publicity, and promotional services to docSpace. As a
result of the completion of the Company's acquisition of docSpace, Critical Path
assumed warrants that allowed Telco to purchase up to a maximum of 349,123
shares of Common Stock upon attainment of each of three milestones.

Subsequent to the acquisition, the Company entered into discussions with Telco
to modify its relationship. Accordingly, the vesting provisions of the proposed
agreement are being modified to reflect the requirements of the new
relationship.

As of March 31, 2000, none of the vesting milestones had been attained; however,
the Company believes that all shares underlying these warrants are probable of
issuance. As a result, the shares underlying these milestones were remeasured
using the March 31, 2000, closing price of the Company's Common Stock of $85.00,
resulting in a revised fair value of the warrants of $25.9 million. The fair
value of the warrants will be recognized on a straight-line basis over the
greater of the term of the contract or the expected period of benefit of the
strategic relationship. During the three-month period ended March 31, 2000, no
amount has been recognized as stock-based expense related to these warrants.

The Company believes that each of its warrant agreements could have a
significant current and potential future impact on the Company's results of
operations. The Company expects that future changes in the trading price of the
Company's Common Stock at the end of each quarter, and at the time certain
milestones are considered probable and achieved, may cause additional
substantial changes in the ultimate amount of the related stock-based charges.



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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

In view of the rapidly evolving nature of the Company's business, recent
acquisitions, and limited operating history, the Company believes that
period-to-period comparisons of revenues and operating results, including gross
profit margin and operating expenses as a percentage of total net revenues, are
not meaningful and should not be relied upon as indications of future
performance. At March 31, 2000, the Company had 921 employees, in comparison
with 488 employees at December 31, 1999 and 182 at March 31, 1999. The Company
does not believe that its historical growth rates for revenue, expenses, or
personnel are indicative of future results.

NET REVENUES

Net revenues increased to $24.6 million during the first quarter of 2000 from
$1.0 million during the same period in 1999. In addition to the impact from the
Company's acquisitions, this increase in net revenue resulted from a substantial
increase in the number of email boxes the Company hosted during the first
quarter of 2000 in comparison with the first quarter of the previous year. The
Company also recognized $11.1 million from licensing its software products
during the first quarter of 2000 as compared to no license revenues in the first
quarter of 1999. The Company's international operations accounted for
approximately 50% of net revenues during the first quarter of 2000.

In connection with certain customer contracts executed in 1998, the Company
granted warrants and stock purchase rights to purchase Series B Convertible
Preferred Stock. The fair value of these warrants and stock purchase rights,
determined using the Black-Scholes option-pricing model, was recognized ratably
as a sales discount over the terms of the respective agreements. Amortization of
this discount amounted to $106,000 for the first quarter of 1999, and had no
impact on the first quarter of 2000.


COST OF NET REVENUES

Services. Cost of net services revenues consists primarily of costs incurred in
the delivery and support of messaging services, including depreciation of
capital equipment used in network infrastructure, amortization of purchased
technology, Internet connection charges, accretion of acquisition-related
retention bonuses, personnel costs incurred in operations, customer support
functions and professional services including custom engineering, installation
and training services, and other direct and allocated indirect costs.

Licenses. Cost of net license revenues consists primarily of product
media duplication, manuals and packaging materials, personnel and facility costs
associated with the assembly operation, and third-party royalties relating to
licensed technology.


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

During the first quarter of 2000, total cost of net revenues was $18.3 million,
or 75% of net revenues, in comparison with costs of $2.4 million, or 225% of net
revenues, for the first quarter of 1999. During the first quarter of 2000, the
Company added eight new hosted mail clusters to its data centers, expanding the
capacity of its hosting network to manage it current customer needs and
anticipated growth. Additional costs were incurred during the first quarter of
2000 to add technology platforms for new service offerings. As a result of these
significant acquisitions of equipment, depreciation expense for such equipment
during the first quarter of 2000 increased substantially in comparison with the
same quarter in 1999.

Cost of net revenues was also impacted by the increased compensation and other
personnel costs resulting from the additional headcount added through the
Company's eight acquisitions completed during the last 12 month period, and
through its continued efforts to enhance its complete end-to-end messaging
services. Operations, customer support, and professional services staff
increased from 50 employees at March 31, 1999, to 304 employees at March 31,
2000.

During the quarter ended March 31, 2000, the Company recognized stock-based
charges associated with employee stock options in the amount of $493,000. In
addition, charges associated with amortization of acquired technology and
acquisition-related retention bonuses in the amounts of $2.1 million and
$390,000, respectively, were also recognized in cost of net revenues during the
first quarter of 2000.


OPERATING EXPENSES

Sales and Marketing. Sales and marketing expenses consist primarily of
compensation for sales and marketing personnel, advertising, public relations,
other promotional costs, and, to a lesser extent, related overhead. Sales and
marketing expenses during the quarter ended March 31, 2000, amounted to $13.6
million, or 55% of net revenues, in comparison with approximately $2.0 million,
or 189% of net revenues, during the first quarter in 1999. Increases in
marketing and promotional expenses, incentive compensation payments to sales
personnel, and increases in compensation associated with additional headcount
accounted for the increase in sales and marketing expenses. Sales and marketing
staff increased from 61 employees to 282 employees at March 31, 1999 and 2000,
respectively.

Research and Development. Research and development expenses consist primarily
of compensation for technical staff, payments to outside contractors, and, to a
lesser extent, related overhead. The Company recognizes research and development
expenses, including in-process research and development costs, as they are
incurred. Research and development expenses amounted to $6.3 million, or 26% of
net revenues, during the quarter ended March 31, 2000, in comparison with $1.4
million, or 131% of net revenues, for the first quarter of 1999.

These significant increases resulted primarily from increases in personnel as
the Company continues to develop and enhance its messaging service and product
offerings and to develop new electronic messaging services and products.
Research and development staff increased from 52 employees to 209 employees at
March 31, 1999 and 2000, respectively.


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

General and Administrative. General and administrative expenses consist
primarily of compensation for personnel, fees for outside professional
services, occupancy costs and, to a lesser extent, related overhead. General and
administrative expenses amounted to approximately $6.8 million, or 28% of net
revenues, during the quarter ended March 31, 2000, in comparison with $1.6
million, or 148% of net revenues, during the first quarter of 1999. These
increases were attributable primarily to increases in compensation associated
with additional headcount and higher fees for outside professional services.
General and administrative staff increased from 19 employees to 126 employees at
March 31, 1999 and 2000, respectively.

Acquisition-Related Bonus Program

In connection with the acquisitions of dotOne Corporation ("dotOne"), Amplitude
Software Corporation ("Amplitude"), Xeti, Inc. ("Xeti"), FaxNet Corporation
("FaxNet"), ISOCOR, and docSpace, the Company established a retention bonus
program in the aggregate amount of $20.7 million to provide incentives for
certain former employees of these companies to continue their employment with
Critical Path. Payment of bonuses to the listed employees will occur one year
following the date of acquisition, unless the listed employees voluntarily
terminate their employment with the Company prior to the respective
acquisition's one-year anniversary. The aggregate amount of the eligible bonuses
is reduced for the bonus amount allocated to each former dotOne, Amplitude,
FaxNet, ISOCOR, and docSpace employee that chooses to terminate his or her
employment with the Company. A ratable share of the adjusted eligible bonus
amount will be accrued and charged to compensation expense over the respective
12-month period commencing on the date the bonuses are granted. As of March 31,
2000, the aggregate, adjusted eligible bonus amount was $18.3 million, and the
amount recognized as compensation expense was $3.1 million during the three
months then ended. Based on the functions of the employees scheduled to receive
acquisition-related retention bonuses, $390,000 of the compensation charge was
allocated to cost of net revenues and the remaining $2.7 million was allocated
to operating expenses.

Amortization of Intangible Assets

In connection with its acquisitions of the Connect Service business of Fabrik
Communications ("Fabrik"), dotOne, Amplitude, Xeti, FaxNet, ISOCOR, docSpace and
RemarQ accounted for under the purchase method of accounting, the Company
recorded goodwill and other intangible assets representing the excess of the
purchase price paid over the fair value of net assets acquired. Other intangible
assets primarily include assembled workforce, customer base and existing
technology. The aggregate amortization of these intangibles was $49.8 million
during the first quarter of 2000. There were no acquisitions during the first
quarter of 1999. The Company anticipates that future amortization of intangibles
associated with its 1999 and first quarter 2000 acquisitions will continue to be
amortized on a straight-line basis over their expected useful lives ranging from
two to eight years.


                                       17
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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

It is likely that the Company will continue to expand its business through
acquisitions and internal development. Any additional acquisitions or impairment
of goodwill and other purchased intangibles could result in additional merger
and acquisition related costs.

Stock-Based Expenses

In connection with certain stock option grants and Common Stock issuances during
the years ended December 31, 1998 and 1999, the Company recognized unearned
compensation totaling $19.9 million and $22.3 million, respectively, which is
being amortized over the vesting periods of the related options. Amortization
expense recognized during the first quarters of 1999 and 2000 totaled
approximately $3.7 million and $3.2 million, respectively. Approximately
$446,000 and $493,000 of amortized unearned compensation was allocated to cost
of net revenues, and the remaining $3.2 million and $2.7 million was amortized
to operating expenses for the quarters ended March 31, 1999 and 2000,
respectively.

The Company incurred stock-based expenses for warrants the Company granted to
ICQ (a subsidiary of AOL), Qwest, AT&T and a lessor and for Common Stock issued
to one other strategic partner. Amortization of the fair value of these warrants
and Common Stock resulted in stock-based expenses of approximately $8.4 million
and $4.0 million for the quarters ended March 31, 1999 and 2000, respectively.
The decrease in amortization expense during the period resulted from the
decrease in the market price of the Company's Common Stock as of March 31, 2000.

Interest and Other Income and Interest Expense

Interest and other income consists primarily of interest earnings on cash and
cash equivalents as well as net realized gains (losses) on foreign exchange
transactions. Interest income amounted to $351,000 million and $1.1 million
during the quarters ended March 31, 1999 and 2000, respectively. The Company
completed private placements of equity securities in April 1998, September 1998,
and January 1999, and closed public offerings of Common Stock in April 1999 and
June 1999. As a result, interest income increased significantly during the
latter half of 1999 and into 2000 in comparison with early 1999 due to higher
cash balances available for investing. The Company also recognized net realized
gains from foreign exchange transactions associated with its international
operations in the amount of $170,000 during the first quarter of 2000.

During the quarters ended March 31, 1999 and 2000, the Company incurred interest
expense on capital lease obligations and stock-based charges in the amount of
$64,000 and $274,000, respectively, of which $48,000 and $258,000 related to the
amortization of stock-based charges and the remainder to interest payments on
capital lease obligations. The Company expects to incur significant interest
charges on a quarterly basis on the amounts outstanding under its $300 million
five-year, 5.75% Convertible Subordinated Notes due April 1, 2005, issued on
March 30, 2000.



                                       18
<PAGE>   21
CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

Income Taxes

No provision for federal or state income taxes has been recorded as the Company
has incurred net operating losses from its inception through March 31, 2000. The
Company recognized a provision for foreign income taxes during the first quarter
of 2000 in the amount of $360,000 as certain of the Company's European
operations generated income taxable in certain jurisdictions. As of December 31,
1999, the Company had approximately $94.9 million of federal and state net
operating loss carryforwards, which expire in varying amounts through 2019 and
2005, respectively, available to offset future taxable income. Under the Tax
Reform Act of 1986, the amounts of and benefits from net operating loss
carryforwards may be impaired or limited in certain circumstances. For example,
the amount of net operating losses that the Company may utilize in any one year
would be limited in the presence of a cumulative ownership change of more than
50% over a three-year period. At December 31, 1999, the Company also had
research and development credit carryforwards of approximately $1.2 million and
$717,000 for federal and state purposes, respectively. These research and
development credit carryforwards begin to expire through 2019 for federal
purposes, and do not expire for state purposes. Because there is significant
doubt as to whether the Company will realize any benefit from this deferred tax
asset, the Company has established a full valuation allowance as of December 31,
1999.


LIQUIDITY AND CAPITAL RESOURCES

The Company invests excess cash primarily in money market funds and other
highly liquid securities with maturities of less than 90 days with the intent
to make such funds readily available for operating purposes. During the quarter
ended March 31, 2000, the Company's cash and cash equivalents increased by
approximately $272.1 million.

For the quarter ended March 31, 2000, the Company used $17.3 million in cash to
fund operating activities primarily due to its net loss adjusted for non-cash
costs, notably the amortization of intangibles resulting from the Company's
acquisitions. For the quarter ended March 31, 1999, the Company used $4.6
million to fund operating activities primarily due to its net loss adjusted for
non-cash costs, notably the amortization of unearned compensation resulting from
the issuance of warrants and other stock-based compensation arrangements.

Cash used in investing activities during the quarter ended March 31, 2000, was
approximately $3.7 million. The Company disbursed $11.0 million to purchase
property and equipment. Installation of network infrastructure equipment in the
Company's data centers, licenses of new software platforms, and purchases of
furniture and equipment for new employees accounted for the significant increase
in capital expenditures. The Company expects that investments in property and
equipment will continue to grow as the Company seeks to increase its capacity to
provide end-to-end messaging and collaboration services. In addition, the
Company completed its acquisitions of ISOCOR, docSpace and RemarQ during the
first quarter of 2000, and as a result, expended approximately $5.5 million in
cash proceeds and other acquisition costs, net of cash received. Furthermore,
the Company advanced approximately $100,000 to an officer pursuant to a
promissory note. These uses of cash were offset by the receipt of $10.0 million
previously advanced to a privately-held company pursuant to a promissory note.
During the first quarter of 1999, the Company issued $170,000 in notes to
certain officers of the Company and capital expenditures totaled $659,000.

Cash from financing activities during the quarter ended March 31, 2000, was
$293.3 million. The Company received $290.3 million in net proceeds from the
sale of its $300 million five-year, 5.75% Convertible Subordinated Notes due
April 2005, as well as approximately $3.9 million from the exercise of stock
options. These increases were offset by payments totaling $823,000 to retire
principal on capital lease obligations. During the quarter ended March 31,
1999, the Company completed the second round of the Series B Convertible
Preferred Stock financing through the issuance of approximately 3.2 million
shares, including 454,544 shares issued pursuant to outstanding stock purchase
rights, for net proceeds of $12.5 million. Also in January 1999, the Company
sold 1,090,909 shares of Common Stock for net proceeds of $1.3 million. In
addition, the Company paid $898,000 to retire principal on capital lease
obligations and $227,000 to purchase treasury stock.

The Company currently has no material commitments other than those under
operating lease arrangements. The Company has experienced a substantial
increase in its capital expenditures and operating lease arrangements since its
inception and anticipates that this will continue in the future. The Company
expects to incur capital expenditures of approximately $25.0 million during the
remaining nine months of 2000, including significant cash expenditures in
connection with its financial accounting integration system.

Additionally, the Company will continue to evaluate possible acquisitions of,
or investments in, businesses, products and technologies that are complementary
to those of the Company, which may require the use of cash. In the first
quarter of 2000, the company completed its acquisitions of ISOCOR, docSpace and
RemarQ and as a result, expended approximately $46.6 million in cash consisting
of approximately $25.0 million in consideration and $21.6 million in other
acquisition costs, consisting primarily of financial advisory and other
professional fees. The Company expects that future acquisitions of businesses
and other strategic assets will require considerable outlays of capital.
Management believes that existing capital resources will enable it to maintain
current and planned operations for at least the next 12 months. However,
operating and investing activities on a long-term basis may require the Company
to seek additional equity or debt financing.


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

WE HAVE A LIMITED OPERATING HISTORY UPON WHICH YOU CAN EVALUATE OUR BUSINESS AND
FACE RISKS ASSOCIATED WITH EARLY STAGE COMPANIES THAT MAY ADVERSELY AFFECT OUR
BUSINESS.

Because we have had a limited operating history, it is difficult to evaluate our
business and we may face various risks, expenses and difficulties associated
with early stage companies. You should consider the risks, expenses and
difficulties that we may encounter when making your investment decision. These
risks include our ability to:

        - Acquire businesses and technologies;

        - Integrate the operations of the companies that we have recently
          acquired;

        - Manage growing domestic and international operations;

        - Create and maintain strategic relationships;

        - Expand sales and marketing activities;

        - Expand our customer base and retain key clients;

        - Introduce new services;

        - Compete in a highly competitive market;

        - Upgrade our systems and infrastructure to handle any increases in
          messaging traffic;

        - Reduce service interruptions; and

        - Recruit and retain key personnel.

WE HAVE A HISTORY OF LOSSES, EXPECT CONTINUING LOSSES AND WE MAY NEVER ACHIEVE
PROFITABILITY.

As of March 31, 2000, we had an accumulated deficit of approximately $206.4
million. We have not achieved profitability in any period, and expect to
continue to incur net losses for the foreseeable future. We expect that our
operating expenses will increase as we spend resources on building our business
and that this increase may have a negative effect on operating results and
financial condition in the near term.

We have spent heavily on technology and infrastructure development. We expect to
continue to spend substantial financial and other resources on developing and
introducing new end-to-end Internet messaging and collaboration solutions, and
expanding our sales and marketing organizations, strategic relationships and
operating infrastructure. We expect that our cost of revenues, sales and
marketing expenses, general and administrative expenses, operations and customer
support expenses, and depreciation and amortization expenses will continue to
increase in absolute dollars and may increase as a


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

percent of revenues. If revenues do not correspondingly increase, our operating
results and financial condition could be negatively affected. Should we continue
to incur net losses in future periods, we may not be able to increase the number
of employees or investment in capital equipment, sales and marketing programs,
and research and development in accordance with our present plans. We may never
obtain sufficient revenues to achieve profitability. If we do achieve
profitability, we may not sustain or increase profitability in the future. This
may, in turn, cause our stock price to decline.

DUE TO OUR LIMITED OPERATING HISTORY AND THE EMERGING NATURE OF THE INTERNET
MESSAGING AND COLLABORATION SOLUTIONS MARKET, FUTURE REVENUES ARE UNPREDICTABLE,
AND OUR QUARTERLY OPERATING RESULTS MAY FLUCTUATE.

We cannot accurately forecast our revenues as a result of our limited operating
history and the emerging nature of the Internet messaging and collaboration
solutions market. Our revenues could fall short of expectations if we experience
delays or cancellations of even a small number of orders. We often offer
volume-based pricing, which may affect operating margins. A number of factors
are likely to cause fluctuations in operating results, including, but not
limited to:

        - Continued growth of the Internet in general and of messaging and
          collaboration usage in particular;

        - Demand for outsourced messaging services;

        - Demand for licensing of messaging, directory, and other products;

        - Our ability to attract and retain customers and maintain customer
          satisfaction;

        - Our ability to upgrade, develop and maintain our systems and
          infrastructure;

        - The amount and timing of operating costs and capital expenditures
          relating to expansion of business and infrastructure;

        - Technical difficulties or system outages;

        - The announcement or introduction of new or enhanced services by
          competitors;

        - Our ability to attract and retain qualified personnel with Internet
          industry expertise, particularly sales and marketing personnel;

        - The pricing policies of competitors;

        - Failure to increase international sales; and

        - Governmental regulation surrounding the Internet and messaging in
          particular.


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

In addition to the factors set forth above, operating results will be impacted
by the extent to which we incur non-cash charges associated with stock-based
arrangements with employees and non-employees. In particular, we have incurred
and expect to continue to incur substantial non-cash charges associated with the
grant of warrants to our customers and other parties with which we have
commercial relationships. For example, we recognized a $2.1 million non-cash
charge to advertising expense during the first quarter of 2000 in connection
with the amortization of a warrant to ICQ, a subsidiary of America Online.

Period-to-period comparisons of operating results are not a good indication of
future performance. It is likely that operating results in some quarters will be
below market expectations. In this event, the price of our Common Stock is
likely to decline.

FURTHER ACQUISITIONS COULD RESULT IN DILUTION, OPERATING DIFFICULTIES AND OTHER
CONSEQUENCES.

We expect to acquire or invest in additional businesses, products, services and
technologies that complement or augment our service offerings and customer base.
Since January 1999, we have completed the acquisition of eight companies for an
aggregate consideration consisting of cash, Common Stock and the assumption of
stock options and warrants totaling approximately $1.3 billion.

We are currently engaged in discussions with a number of companies regarding
strategic acquisitions or investments. Although these discussions are ongoing,
we have not signed any definitive agreements, and cannot assure you that any of
these discussions will result in actual acquisitions. To be successful, we will
need to identify suitable acquisition candidates, integrate disparate
technologies and corporate cultures and manage a geographically dispersed
company. We cannot assure you that we will be able to do this successfully.
Acquisitions could divert attention from other business concerns and could
expose us to unforeseen liabilities. In addition, we may lose key employees
while integrating any new companies.

We expect to pay for acquisitions by issuing additional Common Stock, which
would dilute current shareholders. We may also use cash to make acquisitions. It
may be necessary for us to raise additional funds through public or private
financings. We cannot assure you that we will be able to raise additional funds
at any particular point in the future or on favorable terms. In addition, we may
be required to amortize significant amounts of goodwill and other intangible
assets in connection with future acquisitions, which would materially increase
operating expenses.

WE WILL FACE TECHNICAL, OPERATIONAL AND STRATEGIC CHALLENGES THAT MAY PREVENT US
FROM SUCCESSFULLY INTEGRATING REMARQ, DOCSPACE, ISOCOR, FAXNET, XETI, AMPLITUDE,
DOTONE AND FABRIK.

Acquisitions involve risks related to the integration and management of acquired
technology, operations and personnel. The integration of RemarQ, docSpace,
ISOCOR, FaxNet, Xeti, Amplitude, dotOne, and Fabrik Communications into our
business has been and will be a complex, time consuming and expensive process
and may disrupt our business if not completed in a timely


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

and efficient manner. We must operate as a combined organization utilizing,
common information and communication systems, operating procedures, financial
controls and human resources practices. In particular, we are currently
evaluating, upgrading or replacing our financial information systems and
establishing uniformity among the systems of the acquired businesses. We may
encounter substantial difficulties, costs and delays involved in integrating the
operations of our subsidiaries, including:

        - potential incompatibility of business cultures;

        - perceived adverse changes in business focus;

        - potential conflicts in sponsor, advertising or strategic
          relationships; and

        - the loss of key employees and diversion of the attention of management
          from other ongoing business concerns.

Consequently, we may not be successful in integrating acquired businesses or
technologies and may not achieve anticipated revenue and cost benefits. We also
cannot guarantee that these acquisitions will result in sufficient revenues or
earnings to justify our investment in, or expenses related to, these
acquisitions or that any synergies will develop. If we fail to execute our
acquisition strategy successfully for any reason, our business will suffer
significantly.

WE HAVE EXPERIENCED RAPID GROWTH THAT HAS PLACED A STRAIN ON RESOURCES AND OUR
FAILURE TO MANAGE GROWTH COULD CAUSE OUR BUSINESS TO SUFFER.

We have expanded our operations rapidly and intend to continue this expansion.
The number of our employees increased from 93 on December 31, 1998 to 921 on
March 31, 2000. This expansion has placed, and is expected to continue to place,
a significant strain on managerial, operational and financial resources. To
manage any further growth, we will need to improve or replace our existing
operational, customer service and financial systems, procedures and controls.
Any failure to properly manage these systems and procedural transitions could
impair our ability to attract and service customers, and could cause us to incur
higher operating costs and delays in the execution of our business plan. We will
also need to continue the expansion of our operations and employee base. Our
management may not be able to hire, train, retain, motivate and manage required
personnel. In addition, our management may not be able to successfully identify,
manage and exploit existing and potential market opportunities. If we cannot
manage growth effectively, our business and operating results could suffer.

IF WE FAIL TO EXPAND SALES AND MARKETING ACTIVITIES, WE MAY BE UNABLE TO EXPAND
OUR BUSINESS.

Our ability to increase revenues will depend on our ability to successfully
recruit, train and retain sales and marketing personnel. We plan to continue to
invest significant resources to expand our sales and marketing organizations.
Competition for additional qualified personnel is intense and we may not be able
to hire and retain personnel with relevant experience.


                                       24
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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

The complexity and implementation of our Internet messaging services require
highly trained sales and marketing personnel to educate prospective customers
regarding the use and benefits of our services. Current and prospective
customers, in turn, must be able to educate their end-users. With our relatively
brief operating history and our plans for expansion, we have considerable need
to recruit, train and retain qualified staff. Any delays or difficulties
encountered in these staffing efforts would impair our ability to attract new
customers and to enhance our relationships with existing customers. This in turn
would adversely impact the timing and extent of revenues. Because the majority
of our sales and marketing personnel have recently joined us and have limited
experience working together, our sales and marketing organizations may not be
able to compete successfully against the larger and more experienced sales and
marketing organizations of our competitors. If we do not successfully expand
sales and marketing activities, our business could suffer and our stock price
could decline.

UNPLANNED SYSTEM INTERRUPTIONS AND CAPACITY CONSTRAINTS COULD REDUCE OUR ABILITY
TO PROVIDE MESSAGING AND COLLABORATION SERVICES AND COULD HARM OUR BUSINESS AND
REPUTATION.

Our customers have in the past experienced some interruptions in our messaging
service. We believe that these interruptions will continue to occur from time to
time. These interruptions are due to hardware failures, unsolicited bulk email,
or "spam," attacks and operating system failures. For example, in January 2000,
our customers experienced a service interruption due to an operating system
failure. Our revenues depend on the number of end-users who use our messaging
services. Our business will suffer if we experience frequent or long system
interruptions that result in the unavailability or reduced performance of
systems or networks or reduce our ability to provide email services. We expect
to experience occasional temporary capacity constraints due to sharply increased
traffic, which may cause unanticipated system disruptions, slower response
times, impaired quality and degradation in levels of customer service. If this
were to continue to happen, our business and reputation could suffer
dramatically.

We have entered into service agreements with some customers that require minimum
performance standards, including standards regarding the availability and
response time of messaging services. If we fail to meet these standards, our
customers could terminate their relationships with us and we could be subject to
contractual monetary penalties. Any unplanned interruption of services may
adversely affect our ability to attract and retain customers.

IF WE DO NOT SUCCESSFULLY ADDRESS THE RISKS INHERENT IN THE EXPANSION OF OUR
INTERNATIONAL OPERATIONS, OUR BUSINESS COULD SUFFER.

We intend to continue to expand into international markets and to spend
significant financial and managerial resources to do so. If revenues from
international operations do not exceed the expense of establishing and
maintaining these operations, our business, financial condition and operating
results will suffer. At present, we have international operations in Canada,
Argentina, Brazil, Denmark, France, Germany, Ireland, Italy, Switzerland and the
United Kingdom and for the three months ended March 31, 2000 we derived
approximately 50% of our revenues from international sales. We have limited
experience in international operations and may not be able to compete


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

effectively in international markets. We face certain risks inherent in
conducting business internationally, such as:

        - Unexpected changes in regulatory requirements including U.S. export
          restrictions on encryption technologies;

        - Difficulties and costs of staffing and managing international
          operations;

        - Differing technology standards;

        - Difficulties in collecting accounts receivable and longer collection
          periods;

        - Political and economic instability;

        - Fluctuations in currency exchange rates;

        - Imposition of currency exchange controls;

        - Potentially adverse tax consequences; and

        - Reduced protection for intellectual property rights in some countries.

Any of these factors could adversely affect international operations and,
consequently, business and operating results. Specifically, failure to
successfully manage international growth could result in higher operating costs
than anticipated, or could delay or preclude altogether our ability to generate
revenues in key international markets.

WE DEPEND ON STRATEGIC RELATIONSHIPS AND OTHER SALES CHANNELS AND THE LOSS OF
ANY STRATEGIC RELATIONSHIPS COULD HARM OUR BUSINESS AND HAVE AN ADVERSE IMPACT
ON REVENUES.

We depend on strategic relationships to expand distribution channels and to
undertake joint product development and marketing efforts. Our ability to
increase revenues depends upon marketing services through new and existing
strategic relationships. We have entered into written agreements with ICQ (a
subsidiary of America Online), E*TRADE, Network Solutions, Sprint, MCI Worldcom
and US West, among others. We depend on a broad acceptance of outsourced
messaging services on the part of potential partners and acceptance of our
company as the supplier for these outsourced messaging services. We also depend
on joint marketing and product development through strategic relationships to
achieve market acceptance and brand recognition. For example, through our
relationship with E*TRADE, we can conduct shared advertising campaigns and
include messaging services in E*TRADE's international strategic relationships.
Our agreements with strategic partners typically do not restrict them from
introducing competing services. These agreements typically are for terms of one
to three years, and automatically renew for additional one-year periods unless
either party gives prior notice of its intention to terminate the agreement. In
addition, these agreements are terminable by our partners without cause, and
some agreements are terminable by us, upon 30-120 days' notice. Most of the
agreements also provide for the partial refund of fees paid or other monetary
penalties in the event that our services fail to meet defined minimum
performance standards. Distribution partners may choose not to renew existing
arrangements on commercially acceptable terms, or at all. If we lose any
strategic relationships, fail to renew these agreements or relationships or fail
to develop new strategic relationships, business will suffer. The loss of any
key strategic relationships would have an adverse impact on current and future
revenue. In addition to strategic relationships, we also depend on the ability
of our customers to sell and market our services to their end-users.


                                       26
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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

WE MAY NOT BE ABLE TO RESPOND TO THE RAPID TECHNOLOGICAL CHANGE OF THE INTERNET
MESSAGING AND COLLABORATION INDUSTRY.

The Internet messaging industry is characterized by rapid technological change,
changes in user and customer requirements and preferences, and the emergence of
new industry standards and practices that could render our existing services,
proprietary technology and systems obsolete. We must continually improve the
performance, features and reliability of our services, particularly in response
to competitive offerings. Our success depends, in part, on our ability to
enhance our existing email and messaging services and to develop new services,
functionality and technology that address the increasingly sophisticated and
varied needs of prospective customers. If we don't properly identify the feature
preferences of prospective customers, or if we fail to deliver email features
that meet the standards of these customers, our ability to market our service
successfully and to increase revenues could be impaired. The development of
proprietary technology and necessary service enhancements entail significant
technical and business risks and require substantial expenditures and lead-time.
We may not be able to keep pace with the latest technological developments. We
may also be unable to use new technologies effectively or adapt services to
customer requirements or emerging industry standards.

IF OUR SYSTEM SECURITY IS BREACHED, OUR BUSINESS AND REPUTATION COULD SUFFER.

A fundamental requirement for online communications is the secure transmission
of confidential information over public networks. Third parties may attempt to
breach our security or that of our customers. If these attempts are successful,
customers' confidential information, including customers' profiles, passwords,
financial account information, credit card numbers or other personal information
could be breached. We may be liable to our customers for any breach in security
and a breach could harm our reputation. We rely on encryption technology
licensed from third parties. Although we have implemented network security
measures, our servers are vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions, which could lead to interruptions, delays or
loss of data. We may be required to expend significant capital and other
resources to license encryption technology and additional technologies to
protect against security breaches or to alleviate problems caused by any breach.
Failure to prevent security breaches may have a material adverse effect on
business and operating results.


                                       27
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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

WE WILL CONTINUE TO DEPEND ON BROAD MARKET ACCEPTANCE FOR OUTSOURCED
INTERNET-BASED EMAIL SERVICE.

The market for outsourced Internet-based email service is new and rapidly
evolving. Concerns over the security of online services and the privacy of users
may inhibit the growth of the Internet and commercial online services. We cannot
estimate the size or growth rate of the potential market for our service
offerings, and we do not know whether our service will achieve broad market
acceptance. To date a substantial portion of our revenues have been derived from
sales of email service offerings and we currently expect that email service
offerings will account for a substantial portion of our revenues for the
foreseeable future. We depend on the widespread acceptance and use of
outsourcing as an effective solution for email. If the market for outsourced
email fails to grow or grows more slowly than we currently anticipate, our
business would suffer dramatically.

WE EXPECT THE MESSAGING SERVICES MARKET WILL BE VERY COMPETITIVE AND WE WILL
NEED TO COMPETE SUCCESSFULLY IN THIS MARKET.

We expect that the market for Internet-based email service will be intensely
competitive. In addition to competing with companies that develop and maintain
in-house solutions, we compete with email service providers, such as USA.NET,
Inc. and mail.com, and with product-based companies, such as Software.com, Inc.
and Lotus Development Corporation. We believe that competition will increase and
that companies such as Microsoft, which currently offers email products
primarily to Internet service providers that provide access to the Internet; web
hosting companies; web sites intended to be major starting sites for users when
they connect to the Internet, commonly referred to as web portals; and
corporations may leverage their existing relationships and capabilities to offer
email services.

We believe competition will increase as current competitors increase the
sophistication of their offerings and as new participants enter the market. Many
current and potential competitors have longer operating histories, larger
customer bases, greater brand recognition and significantly greater financial,
marketing and other resources than we do and may enter into strategic or
commercial relationships with larger, more established and better-financed
companies. Further, any delays in the general market acceptance of the email
hosting concept would likely harm our competitive position. Any delay would also
allow competitors additional time to improve their service or product offerings,
and provide time for new competitors to develop email service solutions and
solicit prospective customers within our target markets. Increased competition
could result in pricing pressures, reduced operating margins and loss of market
share, any of which could cause our business to suffer.

IF WE DO NOT SUCCESSFULLY ADDRESS SERVICE DESIGN RISKS, OUR REPUTATION COULD BE
DAMAGED AND OUR BUSINESS AND OPERATING RESULTS COULD SUFFER.

We must accurately forecast the features and functionality required by target
customers. In addition, we must design and implement service enhancements that
meet customer requirements in a timely and efficient manner. We may not
successfully determine customer requirements and may be unable to satisfy
customer demands. Furthermore, we may not be able to design and implement a
service incorporating desired features in a timely and efficient manner. In
addition, if any new service we launch is not favorably received by customers


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

and end-users, our reputation could be damaged. If we fail to accurately
determine customer feature requirements or service enhancements or to market
services containing such features or enhancements in a timely and efficient
manner, our business and operating results could suffer materially.

WE NEED TO UPGRADE OUR SYSTEMS AND INFRASTRUCTURE TO ACCOMMODATE INCREASES IN
MESSAGING TRAFFIC.

We must continue to expand and adapt our network infrastructure as the number of
users and the amount of information we wish to transmit increases, and as their
requirements change. The expansion and adaptation of our network infrastructure
will require substantial financial, operational and management resources. Due to
the limited deployment of services to date, the ability of our network to
connect and manage a substantially larger number of customers at high
transmission speeds is unknown, and we face risks related to the network's
ability to operate with higher customer levels while maintaining expected
performance.

As the frequency and complexity of messaging increases, we will need to make
additional investments in our infrastructure, which may be expensive. In
addition, we may not be able to accurately project the rate or timing of
messaging traffic increases or upgrade our systems and infrastructure to
accommodate future traffic levels, which may cause service degradation or
outages. We may also not be able to achieve or maintain a sufficiently high
capacity of data transmission as customer usage increases. Customer demand for
our services could be greatly reduced if we fail to maintain high capacity data
transmission. In addition, as we upgrade our network infrastructure to increase
capacity available to customers, we are likely to encounter equipment or
software incompatibility that may cause delays in implementations. We may not be
able to expand or adapt our network infrastructure to meet additional demand or
customers' changing requirements in a timely manner or at all.

BECAUSE WE PROVIDE MESSAGING AND COLLABORATION SERVICES OVER THE INTERNET, OUR
BUSINESS COULD SUFFER IF EFFICIENT TRANSMISSION OF DATA OVER THE INTERNET IS
INTERRUPTED.

The recent growth in the use of the Internet has caused frequent interruptions
and delays in accessing the Internet and transmitting data. To date we have not
experienced a significant adverse effect from these interruptions. However,
because we provide messaging and collaboration services over the Internet,
interruptions or delays in Internet transmissions will adversely affect
customers' ability to send or receive their messages. We rely on the speed and
reliability of the networks operated by third parties. Therefore, our market
depends on improvements being made to the entire Internet infrastructure to
alleviate overloading and congestion.

We depend on telecommunications network suppliers such as Level 3, Qwest, Exodus
and TeleHouse to transmit messages across their networks. In addition, to
deliver our services, we rely on a number of public and private peering
interconnections, which are arrangements among access providers to carry one
another's traffic. If these providers were to discontinue these arrangements,
and alternative providers did not emerge or were to increase the cost of
providing access, our ability to transmit messaging traffic would be reduced.


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

If we were to increase our current prices to accommodate any increase in the
cost of providing access, it could negatively impact sales. If we did not
increase prices in response to rising access costs, margins would be negatively
affected. Furthermore, if additional capacity is not added as traffic increases,
our ability to distribute content rapidly and reliably through these networks
will be adversely affected.

IF WE ENCOUNTER SYSTEM FAILURES, WE MAY NOT BE ABLE TO PROVIDE ADEQUATE SERVICE
AND OUR BUSINESS AND REPUTATION COULD BE DAMAGED.

Our ability to successfully receive and send messages and provide acceptable
levels of customer service largely depends on the efficient and uninterrupted
operation of computer and communications hardware and network systems. Our
systems and operations are vulnerable to damage or interruption from fire,
flood, earthquake, power loss, telecommunications failure and similar events.
The occurrence of any of the foregoing risks could subject us to contractual
monetary penalties if we fail to meet minimum performance standards, and could
have a material adverse effect on business and operating results and damage our
reputation.

WE MUST RECRUIT AND RETAIN OUR KEY EMPLOYEES TO EXPAND OUR BUSINESS.

Our success depends on the skills, experience and performance of senior
management and other key personnel, many of whom have worked together for only a
short period of time. For example, our Chief Operating Officer and Chief
Financial Officer have joined us within the past three months. The loss of the
services of any senior management or other key personnel, including the
President, David Thatcher, and Chief Executive Officer, Douglas Hickey, could
materially and adversely affect business results. We do not have long-term
employment agreements with any executive officers and other key personnel. Our
success also depends on our ability to recruit, retain and motivate other highly
skilled sales and marketing, technical and managerial personnel. Competition for
these people is intense, and we may not be able to successfully recruit, train
or retain qualified personnel. In particular, we may not be able to hire a
sufficient number of qualified software developers.

UNKNOWN SOFTWARE DEFECTS COULD DISRUPT SERVICES, WHICH COULD HARM OUR BUSINESS
AND REPUTATION.

Our service offerings depend on complex software, both internally developed and
licensed from third parties. Complex software often contains defects,
particularly when first introduced or when new versions are released. We may not
discover software defects that affect new or current services or enhancements
until after they are deployed. Although we have not experienced any material
software defects to date, it is possible that, despite testing, defects may
occur in the software. These defects could cause service interruptions, which
could damage our reputation or increase service costs, cause us to lose revenue,
delay market acceptance or divert development resources, any of which could
cause business to suffer.



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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

WE MAY NEED ADDITIONAL CAPITAL AND RAISING ADDITIONAL CAPITAL MAY DILUTE
EXISTING SHAREHOLDERS.

We believe that existing capital resources will enable us to maintain current
and planned operations for at least the next 12 months. However, we may be
required to raise additional funds due to unforeseen circumstances. If capital
requirements vary materially from those current planned, we may require
additional financing sooner than anticipated. Such financing may not be
available in sufficient amounts or on terms acceptable to us and may be dilutive
to existing shareholders.

WE MAY NOT BE ABLE TO PROTECT INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS.

We regard our copyrights, service marks, trademarks, trade secrets and similar
intellectual property as critical to our success, and we rely on trademark and
copyright law, trade secret protection and confidentiality and/or license
agreements with employees, customers and partners to protect proprietary rights.
Despite these precautions, unauthorized third parties may infringe or copy
portions of our services or reverse engineer or obtain and use information that
we regard as proprietary. End-user license provisions protecting against
unauthorized use, copying, transfer and disclosure of the licensed program may
be unenforceable under the laws of certain jurisdictions and foreign countries.
The status of United States patent protection in the software industry is not
well defined and will evolve as the U.S. Patent and Trademark Office grants
additional patents. We have several patents pending in the United States and may
seek additional patents in the future. We do not know if the patent application
or any future patent application will be issued with the scope of the claims
sought, if at all, or whether any patents received will be challenged or
invalidated. In addition, the laws of some foreign countries do not protect
proprietary rights to the same extent as do the laws of the United States. Our
means of protecting proprietary rights in the United States or abroad may not be
adequate and competitors may independently develop similar technology.

Third parties may infringe or misappropriate copyrights, trademarks and similar
proprietary rights belonging to us. In addition, other parties have asserted and
may assert infringement claims against us. For example, a company that we
acquired is a party to a lawsuit involving alleged infringement of a third
party's patent. The recently acquired company has denied the allegations of
infringement and has made counterclaims. Although we have not received notice of
any other alleged patent infringement, we cannot be certain that our products do
not infringe issued patents that may relate to our products. In addition,
because patent applications in the United States are not publicly disclosed
until the patent is issued, applications may have been filed which relate to our
software products. We may be subject to legal proceedings and claims from time
to time in the ordinary course of business, including claims of alleged
infringement of trademarks and other intellectual property rights of third
parties. Intellectual property litigation is expensive and time-consuming and
could divert management's attention away from operating our business.

WE MAY NEED TO LICENSE THIRD-PARTY TECHNOLOGIES AND WE FACE RISKS IN DOING SO.

We intend to continue to license certain technology from third parties,
including web server and encryption technology. The market is evolving and we


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

may need to license additional technologies to remain competitive. We may not be
able to license these technologies on commercially reasonable terms or at all.
In addition, we may fail to successfully integrate any licensed technology into
our services. These third-party in-licenses may expose us to increased risks,
including risks related to the integration of new technology, the diversion of
resources from the development of proprietary technology, and an inability to
generate revenues from new technology sufficient to offset associated
acquisition and maintenance costs. An inability to obtain any of these licenses
could delay product and service development until equivalent technology can be
identified, licensed and integrated. Any such delays in services could cause our
business and operating results to suffer.

THE TRADING PRICES AND VOLUMES OF OUR STOCK HAVE BEEN VOLATILE AND WE EXPECT
THAT THIS VOLATILITY WILL CONTINUE.

Our stock price and trading volumes have been highly volatile since our initial
public offering on March 29, 1999. We expect that this volatility will continue
in the future due to factors such as:

        - Actual or anticipated fluctuations in results of operations;

        - Changes in or failure to meet securities analysts' expectations;

        - Announcements of technological innovations and acquisitions;

        - Introduction of new services by us or our competitors;

        - Developments with respect to intellectual property rights;

        - Conditions and trends in the Internet and other technology industries;
          and

        - General market conditions.

In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
common stocks of technology companies, particularly Internet companies. These
broad market fluctuations may result in a material decline in the market price
of our common stock. In the past, following periods of volatility in the market
price of a particular company's securities, securities class action litigation
has often been brought against that company. We may become involved in this type
of litigation in the future. Litigation is often expensive and diverts
management's attention and resources, which could have a material adverse effect
on our business and operating results.

GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES COULD IMPAIR THE GROWTH OF THE
INTERNET AND DECREASE DEMAND FOR OUR SERVICES OR INCREASE OUR COST OF DOING
BUSINESS.

Although there are currently few laws and regulations directly applicable to the
Internet and messaging services, a number of laws have been proposed involving
the Internet, including laws addressing user privacy, pricing, content,
copyrights, distribution, antitrust and characteristics and quality


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

of products and services. Further, the growth and development of the market for
messaging services may prompt calls for more stringent consumer protection laws
that may impose additional burdens on those companies conducting business
online. The adoption of any additional laws or regulations may impair the growth
of the Internet or commercial online services which could decrease the demand
for our services and increase our cost of doing business, or otherwise harm
business and operating results. Moreover, the applicability to the Internet of
existing laws in various jurisdictions governing issues such as property
ownership, sales and other taxes, libel and personal privacy is uncertain and
may take years to resolve.

WE MAY HAVE LIABILITY FOR INTERNET CONTENT AND WE MAY NOT HAVE ADEQUATE
LIABILITY INSURANCE.

As a provider of messaging services, we face potential liability for defamation,
negligence, copyright, patent or trademark infringement and other claims based
on the nature and content of the materials transmitted via our services. We do
not and cannot screen all of the content generated by our users, and we could be
exposed to liability with respect to this content. Furthermore, some foreign
governments, such as Germany, have enforced laws and regulations related to
content distributed over the Internet that are more strict than those currently
in place in the United States.

Although we carry general liability and umbrella liability insurance, our
insurance may not cover claims of these types or may not be adequate to
indemnify us for all liability that may be imposed. There is a risk that a
single claim or multiple claims, if successfully asserted against us, could
exceed the total of our coverage limits. There is also a risk that single claim
or multiple claims asserted against us may not qualify for coverage under our
insurance policies as a result of coverage exclusions that are contained within
these policies. Should either of these risks occur, capital contributed by our
stockholders may need to be used to settle claims. Any imposition of liability,
particularly liability that is not covered by insurance or is in excess of
insurance coverage could have a material adverse effect on our reputation and
business and operating results, or could result in the imposition of criminal
penalties.

FUTURE SALES OF OUR COMMON STOCK MAY DEPRESS THE PRICE OF OUR COMMON STOCK.

As of April 30, 2000, we had approximately 62.2 million shares of Common Stock
outstanding. Sales of a substantial number of shares of Common Stock in the
public market could cause the market price of our Common Stock to decline. In
the near future, 7.6 million shares will become eligible for sale under S-3
registration statements that we will file to meet our registration rights
obligations in connection with recent acquisitions. Up to 2.9 million shares may
be issued upon the conversion of our Convertible Subordinated Notes and will
become eligible for sale under an S-3 registration statement that we will file
to meet our registration rights obligations in connection with our sale of
Convertible Subordinated Notes. Certain of our shareholders and warrantholders
have registration rights with respect to the Common Stock and Common Stock
issuable under the warrants.


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CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

OUR DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL SHAREHOLDERS WILL BE ABLE TO
EXERT SIGNIFICANT INFLUENCE OVER US.

As a result of our offerings, our directors, executive officers and principal
shareholders will beneficially own a substantial portion of our outstanding
Common Stock. These shareholders, if they vote together, will be able to
exercise significant influence over all matters requiring shareholder approval,
including the election of directors and approval of significant corporate
transactions. This concentration of ownership may also delay or prevent a change
in control of our company.

OUR ARTICLES OF INCORPORATION AND BYLAWS CONTAIN PROVISIONS WHICH COULD DELAY OR
PREVENT A CHANGE IN CONTROL.

Our Articles of Incorporation and Bylaws contain provisions that could delay or
prevent a change in control of our company. These provisions could limit the
price that investors might be willing to pay in the future for shares of our
Common Stock. Some of these provisions:

        - Authorize the issuance of preferred stock which can be created and
          issued by the board of directors without prior stockholder approval,
          commonly referred to as "blank check" preferred stock, with rights
          senior to those of Common Stock;

        - Prohibit shareholder action by written consent; and

        - Establish advance notice requirements for submitting nominations for
          election to the board of directors and for proposing matters that can
          be acted upon by shareholders at a meeting.


                                       34
<PAGE>   36

SUPPLEMENTAL PRO FORMA FINANCIAL DATA

The following supplemental pro forma financial information presents the
Company's consolidated results of operations for the quarters ended March 31,
1999 and 2000, excluding the impact of certain special charges consisting of (i)
stock-based compensation charges associated with outstanding options and
warrants, (ii) amortization of intangible assets associated with purchase
business combinations, and (iii) accruals for employee retention bonuses
associated with purchase business combinations. This supplemental presentation
is for informational purposes only and is not intended to replace the
consolidated operating results prepared and presented in accordance with
generally accepted accounting principles.

<TABLE>
<CAPTION>
Three Months Ended March 31                     1999           2000
(in thousands, except per share amounts)      --------       --------
<S>                                           <C>            <C>
Net revenues
     Licenses                                 $     --       $ 11,070
     Services                                    1,155         13,483
                                              --------       --------
        Total net revenues                       1,155         24,553
                                              --------       --------
Cost of net revenues
     Licenses                                       --          1,007
     Services                                    1,914         14,340
                                              --------       --------
        Total cost of net revenues               1,914         15,347
                                              --------       --------
Gross profit (loss)                               (759)         9,206
                                              --------       --------
Operating expenses
     Sales and marketing                         1,984         13,605
     Research and development                    1,379          6,323
     General and administrative                  1,550          6,766
                                              --------       --------
        Total operating expenses                 4,913         26,694
                                              --------       --------
Loss from operations                            (5,672)       (17,488)

Interest and other income (expense), net           303          1,000
                                              --------       --------
Loss before income taxes                        (5,369)       (16,488)

Provision for income taxes                          --           (360)
                                              --------       --------
Net loss                                      $ (5,369)      $(16,848)
                                              --------       --------
Net loss per share - basic and diluted        $  (0.77)      $  (0.33)
                                              --------       --------
Weighted average shares - basic and diluted      7,011         50,570
                                              --------       --------
</TABLE>


                                       35
<PAGE>   37

CRITICAL PATH, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS

ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not have any derivative financial instruments as of March 31,
2000. However, the Company is exposed to interest rate risk. The Company employs
established policies and procedures to manage its exposure to changes in the
market risk of its marketable securities, which are classified as
available-for-sale as of March 31, 2000.

The Company's capital lease obligations and $300 million five-year, 5.75%
Convertible Subordinated Notes due April 2005, have fixed interest rates and
fixed redemption amounts. The fair value of these instruments is affected by
changes in market interest rates. The Company believes that the market risk
arising from holdings of its financial instruments is not material.

A substantial portion of the Company's worldwide operations has a functional
currency other than the United States Dollar. In particular, the Company
maintains substantial development operations in Ireland, where the functional
currency is the Irish Pound; Germany, where the functional currency is the
German Mark; and Italy, where the functional currency is the Italian Lira. In
addition, a significant portion of the Company's revenue is also denominated in
currencies other than the United States Dollar. Fluctuations in exchange rates
may have a material adverse effect on the Company's results of operations and
could also result in exchange losses. The impact of future exchange rate
fluctuations cannot be predicted adequately. To date, the Company has not sought
to hedge the risks associated with fluctuations in exchange rates, but may
undertake such transactions in the future. There can be no assurance that any
hedging techniques implemented by the Company would be successful or that the
Company's results of operations will not be materially adversely affected by
exchange rate fluctuations.


                                       36
<PAGE>   38

PART 2 -- OTHER INFORMATION

ITEM 1 -- LEGAL PROCEEDINGS

See Footnote 6, "Commitments and Contingencies", in the Notes to Consolidated
Financial Statements.


ITEM 2 -- CHANGES IN SECURITIES AND USE OF PROCEEDS

See Footnote 2, "Acquisitions and Joint Venture", in the Notes to Consolidated
Financial Statements.


ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

ITEM 5 -- OTHER INFORMATION

     None.


ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K

a)   Exhibits

<TABLE>
<S>               <C>

    4.5           Indenture dated March 31, 2000, by and between Critical Path,
                  Inc. and State Street Bank and Trust Company of California,
                  N.A., Trustee, relating to the $300 million five-year, 5.75%
                  Convertible Subordinated  Notes due April 1, 2005.

   10.28          Secured Promissory Note and Security Agreement dated January
                  18, 2000, by and between Critical Path, Inc. and Mark Rubash.

   27.1           Financial Data Schedule
</TABLE>


27.1     Financial Data Schedule

b)   Reports on Form 8-K


1. On February 3, 2000, the Company filed a report on Form 8-K announcing the
   acquisition of ISOCOR.

2. On March 20, 2000, the Company filed a report on Form 8-K announcing the
   acquisition of The docSpace Company.

3. On March 28, 2000, the Company filed a report on Form 8-K/A (as an amendment
   to the Form 8-K filed on March 20, 2000) to report the financial
   information required in connection with its acquisition of The docSpace
   Company.


                                       37
<PAGE>   39

SIGNATURE


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

Date: May 15, 2000
                                            CRITICAL PATH, INC.


                                            By: /s/ Mark J. Rubash
                                                --------------------------------
                                            Mark J. Rubash
                                            Executive Vice President and Chief
                                            Financial Officer
                                            (Duly Authorized Officer and
                                            Principal Financial and Accounting
                                            Officer)


                                       38
<PAGE>   40

CRITICAL PATH, INC.


                                    EXHIBITS
                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
Exhibit No.       Description
-----------       -----------
<S>               <C>

    4.5           Indenture dated March 31, 2000, by and between Critical Path,
                  Inc. and State Street Bank and Trust Company of California,
                  N.A., Trustee, relating to the $300 million five-year, 5.75%
                  Convertible Subordinated  Notes due April 1, 2005.

   10.28          Secured Promissory Note and Security Agreement dated January
                  18, 2000, by and between Critical Path, Inc. and Mark Rubash.

   27.1           Financial Data Schedule
</TABLE>





                                       39