<PAGE>   1

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                                 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, 2001

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

           FOR THE TRANSITION PERIOD FROM __________ TO __________ .

                       COMMISSION FILE NUMBER: 000-25331

                              CRITICAL PATH, INC.

<TABLE>
<S>                                            <C>
           A CALIFORNIA CORPORATION                    I.R.S. EMPLOYER NO. 91-1788300
</TABLE>

                               532 FOLSOM 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

     As of April 30, 2000, the company had outstanding 74,591,239 shares of
common stock, $0.001 par value per share.

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<PAGE>   2

                              CRITICAL PATH, INC.

                                     INDEX

<TABLE>
<CAPTION>
                                                                       PAGE
                                                                       ----
<S>      <C>                                                           <C>
         PART I
Item 1.  Condensed Consolidated Financial Statements (Unaudited)
         Condensed Consolidated Balance Sheet........................    1
         Condensed Consolidated Statement of Operations..............    2
         Condensed Consolidated Statement of Cash Flows..............    3
         Notes to Condensed Consolidated Financial Statements........    4
Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations...................................    8
         Supplemental Pro Forma Financial Data (Unaudited)...........   17
Item 3.  Quantitative and Qualitative Disclosures About Market
         Risk........................................................   18

         PART II
Item 1.  Legal Proceedings...........................................   19
Item 6.  Exhibits and Reports on Form 8-K............................   20
</TABLE>

     The following Condensed Consolidated Financial Statements and Notes thereto
of Critical Path, Inc. and discussions contain forward-looking statements. Our
actual results may differ significantly from those projected in these
forward-looking statements. The words "anticipate," "expect," "intend," "plan,"
"believe," "seek," and "estimate" and similar expressions are intended to
identify 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, difficulties of forecasting future results due
to our limited operating history, evolving business strategy and the emerging
nature of the market for our products and services, pending litigation and SEC
investigation, turnover of senior management and other key personnel,
difficulties of integrating acquired businesses, failure to expand our sales and
marketing activities, potential difficulties associated with strategic
relationships, investments and uncollected bills, risks associated with our
international operations, foreign currency fluctuations, unplanned system
interruptions and capacity constraints, software defects, and those discussed in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "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. We have 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.

                                        i
<PAGE>   3

                                     PART I

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                              CRITICAL PATH, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEET
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                              DECEMBER 31,     MARCH 31,
                                                                  2000           2001
                                                              ------------    -----------
                                                                              (UNAUDITED)
<S>                                                           <C>             <C>
Current assets
  Cash and cash equivalents.................................  $   216,542     $   171,634
  Restricted cash...........................................          215             158
  Accounts receivable, net..................................       38,938          29,485
  Other current assets......................................       10,252           9,457
                                                              -----------     -----------
          Total current assets..............................      265,947         210,734
Investments.................................................       10,610          10,136
Notes receivable from officers..............................        2,702           2,237
Property and equipment, net.................................       85,304          80,764
Intangible assets, net......................................       77,339          68,379
Other assets................................................        8,953          10,544
                                                              -----------     -----------
          Total assets......................................  $   450,855     $   382,794
                                                              ===========     ===========

                          LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
  Accounts payable..........................................  $    43,710     $    33,292
  Accrued expenses..........................................       10,377           8,400
  Deferred revenue..........................................       15,720          16,939
  Capital lease and other obligations, current..............        9,363           8,575
                                                              -----------     -----------
          Total current liabilities.........................       79,170          67,206
Convertible subordinated notes payable......................      300,000         300,000
Capital lease and other obligations, long-term..............        4,687           3,132
                                                              -----------     -----------
          Total liabilities.................................      383,857         370,338
                                                              -----------     -----------
Commitments and contingencies
Minority interest in consolidated subsidiary................          649              --
                                                              -----------     -----------
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 and 500,000, respectively
     Shares issued and outstanding: 74,135 and 74,295,
      respectively..........................................    2,130,329       2,144,546
  Notes receivable from shareholders........................       (1,205)         (1,217)
  Unearned compensation.....................................      (80,760)        (78,275)
  Accumulated deficit, including other comprehensive
     income.................................................   (1,982,015)     (2,052,598)
                                                              -----------     -----------
          Total shareholders' equity........................       66,349          12,456
                                                              -----------     -----------
          Total liabilities and shareholders' equity........  $   450,855     $   382,794
                                                              ===========     ===========
</TABLE>

  The accompanying notes are an integral part of these Condensed Consolidated
                             Financial Statements.
                                        1
<PAGE>   4

                              CRITICAL PATH, INC.

                 CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                                              -----------------------
                                                               MARCH 31,    MARCH 31,
                                                                 2000         2001
                                                              -----------   ---------
                                                                    (UNAUDITED)
<S>                                                           <C>           <C>
Net revenues
  Software license..........................................   $ 11,070     $  5,550
  Hosted messaging..........................................      9,095       14,439
  Professional service......................................      2,493        3,417
  Maintenance and support...................................      1,895        3,737
                                                               --------     --------
          Total net revenues................................     24,553       27,143
                                                               --------     --------
Cost of net revenues
  Software license..........................................      1,007          291
  Hosted messaging (excludes $493 and $385 in stock-based
     expenses)..............................................     11,880       17,938
  Professional service (excludes $0 and $433 in stock-based
     expenses)..............................................      1,056        2,966
  Maintenance and support (excludes $0 and $485 in
     stock-based expenses)..................................      1,404        2,586
  Amortization of purchased technology......................      2,114        5,672
  Acquisition-related retention bonuses.....................        390           --
  Stock-based expenses......................................        493        1,303
                                                               --------     --------
          Total cost of net revenues........................     18,344       30,756
                                                               --------     --------
Gross profit (loss).........................................      6,209       (3,613)
                                                               --------     --------
Operating expenses
  Sales and marketing (excludes $5,249 and $6,600 in
     stock-based expenses)..................................     13,605       18,712
  Research and development (excludes $477 and $1,097 in
     stock-based expenses)..................................      6,323        9,934
  General and administrative (excludes $977 and $8,733 in
     stock-based expenses)..................................      6,766       13,293
  Amortization of intangible assets.........................     47,699        4,133
  Acquisition-related retention bonuses.....................      2,679          170
  Stock-based expenses......................................      6,703       16,430
                                                               --------     --------
          Total operating expenses..........................     83,775       62,672
                                                               --------     --------
Loss from operations........................................    (77,566)     (66,285)
Interest and other income, net..............................      1,258        2,425
Interest expense............................................       (274)      (5,067)
Equity in net loss of joint venture.........................         --         (776)
                                                               --------     --------
Loss before income taxes....................................    (76,582)     (69,703)
Provision for income taxes..................................       (360)        (343)
                                                               --------     --------
Net loss....................................................   $(76,942)    $(70,046)
                                                               ========     ========
Net loss per share -- basic and diluted.....................   $  (1.52)    $  (0.97)
Weighted average shares -- basic and diluted................     50,570       72,137
</TABLE>

  The accompanying notes are an integral part of these Condensed Consolidated
                             Financial Statements.
                                        2
<PAGE>   5

                              CRITICAL PATH, INC.

                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED
                                                              ----------------------
                                                              MARCH 31,    MARCH 31,
                                                                2000         2001
                                                              ---------    ---------
                                                                   (UNAUDITED)
<S>                                                           <C>          <C>
Operating
  Net loss..................................................  $(76,942)    $(70,046)
  Provision for doubtful accounts...........................       330        1,642
  Depreciation and amortization.............................     6,191       12,169
  Amortization of intangible assets.........................    49,813        9,805
  Amortization of stock-based costs and expenses............     7,212       17,745
  Equity in net loss of joint venture.......................        --          776
  Accounts receivable.......................................    (3,394)       8,310
  Other assets..............................................     2,401       (1,198)
  Accounts payable..........................................    (6,937)      (5,132)
  Accrued expenses..........................................     4,088       (1,625)
  Deferred revenue..........................................       (57)       1,332
                                                              --------     --------
          Net cash used in operating activities.............   (17,295)     (26,222)
                                                              --------     --------
Investing
  Notes receivable from officers............................      (100)          --
  Property and equipment purchases..........................   (11,046)      (6,156)
  Investments in unconsolidated entities....................     3,000           --
  Payments for acquisitions, net of cash acquired...........    (5,549)      (9,898)
  Promissory note receivable................................    10,000           --
  Restricted cash...........................................        --           57
                                                              --------     --------
          Net cash used in investing activities.............    (3,695)     (15,997)
                                                              --------     --------
Financing
  Proceeds from issuance of Preferred Stock, net............        --           --
  Proceeds from issuance of Common Stock, net...............     3,851          575
  Proceeds from convertible debt offering, net..............   290,250           --
  Proceeds from payments of shareholder notes receivable....        --           --
  Principal payments on lease obligations...................      (823)      (2,355)
  Purchase of Common Stock..................................        --          (51)
                                                              --------     --------
          Net cash provided by (used in) financing
            activities......................................   293,278       (1,831)
                                                              --------     --------
Net change in cash and cash equivalents.....................   272,288      (44,050)
Effect of exchange rates on cash and cash equivalents.......      (168)        (858)
Cash and cash equivalents at beginning of period............    75,932      216,542
                                                              --------     --------
Cash and cash equivalents at end of period..................  $348,052     $171,634
                                                              ========     ========
</TABLE>

  The accompanying notes are an integral part of these Condensed Consolidated
                             Financial Statements.
                                        3
<PAGE>   6

                              CRITICAL PATH, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

NOTE 1 -- BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  The Company

     Critical Path, Inc. was incorporated in California on February 19, 1997. In
connection with the Annual Shareholders meeting held in June 2000, the
shareholders approved the re-incorporation of Critical Path, Inc. in Delaware,
as well as an increase in the authorized shares of Common Stock from 150 million
to 500 million. In January 2001, the Company amended its articles of
incorporation to increase the authorized shares to 505 million; however the
Company has not yet been re-incorporated in Delaware. Critical Path, along with
its subsidiaries (collectively referred to herein as the "Company") provides
Internet messaging infrastructure solutions for corporate enterprises and
service providers worldwide. The unaudited condensed Consolidated Financial
Statements ("Financial Statements") of Critical Path, Inc. and Subsidiaries
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 condensed
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 2000 Annual Report on Form 10-K and as amended 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.

  Basis of Presentation

     The consolidated financial statements include the accounts of the Company,
and its wholly and majority owned subsidiaries. All significant intercompany
balances and transactions have been eliminated in consolidation.

  Segment and geographic information

     The Company does not currently manage its business in a manner that
requires it to report financial results on a segment basis. The Company
currently operates in one segment: Internet messaging infrastructure products
and services and management uses one measure of profitability. Revenue
information on a product basis has been disclosed in our statement of
operations. Included in software license revenue is InScribe Messaging revenue
of approximately $8.0 million and $2.6 million for the first quarters of 2000
and 2001, respectively. Included in hosted messaging revenue is InScribe Fax
Messaging revenue of approximately $3.2 million for the first quarters of 2000
and 2001.

NOTE 2 -- COMMITMENTS AND CONTINGENCIES

     Securities Class Actions. Beginning on February 2, 2001, a number of
securities class action complaints were filed against the Company, certain of
its current and former officers and directors and its independent accountants,
in the United States District Court for the Northern District of California. The
complaints have been filed as purported class actions by individuals who allege
that they purchased the Company's Common Stock during a purported class period;
the alleged class periods vary among the complaints and are in the process of
being consolidated into a single action. The complaints generally allege that,
in differing periods from December 1999 to February 1, 2001, the Company and
other named defendants made false or misleading statements of material fact
about the Company's financial statements, including its revenues, revenue
recognition policies, business operations and prospects for the year 2000 and
beyond. The complaints seek an unspecified amount in damages on behalf of
persons who purchased the Company's Common Stock during certain periods.

                                        4
<PAGE>   7
                              CRITICAL PATH, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

     Derivative Actions. Beginning on February 5, 2001, the Company has been
named as a nominal defendant in a number of derivative actions, purportedly
brought on its behalf, filed in the Superior Court of the State of California.
The derivative complaints allege that certain of the Company's current and
former officers and directors breached their fiduciary duties to the Company,
were unjustly enriched by their sales of the Company's Common Stock, engaged in
insider trading in violation of California law or published false financial
information in violation of California law. The plaintiffs seek unspecified
damages on the Company's behalf from each of the defendants. Because of the
nature of derivative litigation, any recovery in the action would inure to the
Company's benefit.

  Securities and Exchange Commission Investigation

     In February 2001, the Securities and Exchange Commission (the "SEC") issued
a formal order of investigation of the Company and certain unidentified
individuals associated with the Company with respect to non-specified accounting
matters, financial reports, other public disclosures and trading activity in the
Company's securities. While the Company does not know the current status of the
investigation or any possible actions that may be taken against the Company as a
result, any SEC action against us could harm the Company's business.

     The uncertainty associated with substantial unresolved lawsuits and the SEC
investigation could seriously harm the Company's business and financial
condition. In particular, the lawsuits or the investigation could harm its
relationships with existing customers and its ability to obtain new customers.
The continued defense of the lawsuits and conduct of the investigation could
also result in the diversion of management's time and attention away from
business operations, which could harm the Company's business. Negative
developments with respect to the lawsuits or the investigation could cause the
Company's stock price to decline significantly. In addition, although the
Company is unable to determine the amount, if any, that it may be required to
pay in connection with the resolution of these lawsuits or the investigation by
settlement or otherwise, the size of any such payment could seriously harm the
Company's financial condition.

NOTE 3 -- SHAREHOLDERS' EQUITY

WARRANTS

  Vectis Group, LLC

     In March 2001, the Company entered into an agreement with Vectis Group, LLC
("Vectis Group") to engage Vectis Group to act as an advisor to the Company with
respect to various strategic alternatives the Company is currently exploring. As
part of the agreement, Vectis Group agreed to provide consulting services to the
Company in exchange for a monthly retainer fee and warrants to purchase 500,000
shares of the Company's Common Stock with an exercise price of $2.00 per share,
issuable upon execution of the agreement. Using the Black-Scholes option-pricing
model and assuming a term of three years, the term of the agreement, and
expected volatility of 215%, the initial and final fair value of the warrant on
the effective date of the agreement approximated $732,000, which was recognized
upon the execution of the agreement in March 2001, as the relationship is
terminable at any time.

                                        5
<PAGE>   8
                              CRITICAL PATH, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

NOTE 4 -- OTHER COMPREHENSIVE LOSS

     The components of other comprehensive loss are as follows:

<TABLE>
<CAPTION>
                                                              MARCH 31,
                                                         --------------------
                                                           2000        2001
                                                         --------    --------
<S>                                                      <C>         <C>
Net loss...............................................  $(76,942)   $(70,046)
Unrealized investment gains (losses)...................    (2,717)        302
Foreign currency translation adjustments...............      (168)       (839)
                                                         --------    --------
Other comprehensive loss...............................  $(79,827)   $(70,583)
                                                         ========    ========
</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 5 -- NET LOSS PER SHARE

     Net loss per share is calculated as follows:

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED
                                                         --------------------------
                                                          MARCH 31,      MARCH 31,
                                                            2000           2001
                                                         -----------    -----------
                                                         (IN THOUSANDS, EXCEPT PER
                                                               SHARE AMOUNTS)
<S>                                                      <C>            <C>
Net loss...............................................    $(76,942)      $(70,046)
Weighted average shares outstanding....................      53,495         74,268
Weighted average common shares issued subject to
  repurchase agreements................................      (1,857)          (526)
Shares held in escrow related to acquisitions..........      (1,068)        (1,605)
                                                           --------       --------
Shares used in computation of basic and diluted loss
  per share............................................      50,570         72,137
                                                           ========       ========
Basic and diluted loss per share.......................       (1.52)         (0.97)
                                                           ========       ========
</TABLE>

     For the three-month period ended March 31, 2001, approximately 33.4 million
potential common shares 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.

NOTE 6 -- SUBSEQUENT EVENT

  Restructuring

     In the first quarter of 2001, the Company began developing a strategic plan
that involved reorganizing Critical Path's product and service offerings around
a group of core products deemed most imperative to its ability to serve the
Internet messaging infrastructure market. In the second quarter, implementation
of the plan has commenced and, accordingly, certain products and services that
have been determined to be non-core to the Company's strategy are being
strategically exited. The strategic plan also includes an initiative to reduce
operating costs through a reduction of approximately 450 personnel and a
consolidation of approximately two-thirds of the Company's office space in
keeping with the Company's increased focus on core messaging products and
services. The Company is currently implementing these actions and anticipates it
will incur one-time charges of approximately $15.0 to $25.0 million related to
losses on disposal of assets of non-core products and services, early
termination of office lease commitments, and employee severance payments. As a
result of these strategic initiatives, the Company anticipates that it will
realize future annual cost savings of

                                        6
<PAGE>   9
                              CRITICAL PATH, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                  (UNAUDITED)

approximately $30.0 to $50.0 million. The non-core products and services
comprised approximately 37% of total revenues in the first quarter of 2001 and
26% of total revenues during fiscal year 2000. It is expected that these
products and services will not be a part of the Company's revenue stream by the
fourth quarter of 2001.

                                        7
<PAGE>   10

                              CRITICAL PATH, INC.

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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 should be read with the Condensed Consolidated Financial Statements
and Notes thereto of Critical Path, Inc. included herein, as well as our 2000
Annual Report on Form 10-K and as amended on Form 10-K/A. The following
discussion contains forward-looking statements. Our actual results may differ
significantly from those projected in these forward-looking statements. The
words "anticipate," "expect," "intend," "plan," "believe," "seek," and
"estimate" and similar expressions are intended to identify 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, difficulties of forecasting future results due to our limited operating
history, evolving business strategy and the emerging nature of the market for
our products and services, pending litigation and SEC investigation, turnover of
senior management and other key personnel, difficulties of integrating acquired
businesses, failure to expand our sales and marketing activities, potential
difficulties associated with strategic relationships, investments and
uncollected bills, risks associated with our international operations, foreign
currency fluctuations, unplanned system interruptions and capacity constraints,
software defects, 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. We have 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, Inc. is a global provider of Internet messaging
infrastructure products and services. We provide solutions to manage the flow of
mission-critical information through an integrated portfolio of messaging,
directory, and security solutions. Our technology provides the messaging
infrastructure to support customers' new and existing eBusiness initiatives. Our
primary sources of revenue come from providing a wide range of messaging,
directory and collaboration licensed products and services. Critical Path was
founded in 1997 and is headquartered in San Francisco, with offices worldwide.

RESULTS OF OPERATIONS

     In view of the rapidly evolving nature of the our business, prior
acquisitions, organizational restructuring, and limited operating history, we
believe 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, 2001, we had 1011 employees, in comparison with
1041 employees at December 31, 2000 and 921 employees at March 31, 2000. We do
not believe that our historical growth rates for revenue, expenses, or personnel
are indicative of future results.

  Net Revenues

     We derive most of our revenues through the sale of our Internet messaging
infrastructure solutions. These solutions include both licensed software
products and hosted messaging services. In addition, we receive revenues from
professional services and maintenance and support services. Software license
revenue is derived from perpetual and term licenses for our messaging,
directory, collaborative and enterprise application integration technologies.
Hosted messaging services relate to fees for our hosted messaging and
collaboration services. These are primarily based upon monthly contractual per
unit rates for the services involved, which are recognized on a ratable monthly
basis over the term of the contract. Professional services revenue is derived
from fees primarily related to training, installation and configuration services
and revenue is recognized as services are performed. Maintenance and support
revenue is derived from fees related to post-

                                        8
<PAGE>   11

contract customer support agreements associated with software product licenses
and revenue is recognized ratably over the term of the agreement.

     Software License. We recognized $5.6 million in license revenues during the
first quarter of 2001, as compared to $11.1 million in the same quarter in 2000.
This significant decrease from 2000 was attributed to several factors which
affected our operations in the first quarter of 2001. Delays in information
technology spending were experienced across many industries due to macroeconomic
conditions and these were exacerbated by circumstances at Critical Path. Many of
our customers who were evaluating our products during the early part of the
quarter delayed making decisions until they could gain a level of comfort in
Critical Path as we emerge from this management transition. Additionally, our
sales organization was distracted by the termination and resignation of much of
its leadership in the quarter and its focus on rebuilding, causing a reduction
in effectiveness.

     Hosted Messaging. We recognized $14.4 million in hosted messaging revenues
during the first quarter of 2001, as compared to $9.1 million in same quarter in
2000. This increase in 2001 resulted primarily from the completion of the
acquisition of RemarQ Communities in 2000. Additionally, we continued to
penetrate the hosted messaging market throughout the latter half of 2000.

     Professional Service. We recognized $3.4 million in professional service
revenues during the first quarter of 2001, as compared to $2.5 million in same
quarter in 2000. This increase in 2001 resulted primarily from the completion of
the PeerLogic, Inc. acquisition in 2000. Through the addition of PeerLogic we
experienced a significant increase in professional service revenues, however
this increase was partially offset in the first quarter by the decrease in
license product sales.

     Maintenance and Support. We recognized $3.7 million in maintenance and
support revenues during the first quarter of 2001, as compared to $1.9 million
in same quarter in 2000. This increase in 2001 resulted primarily from the
completion of the PeerLogic, Inc. acquisition in 2000. Through the addition of
PeerLogic we experienced a significant increase in maintenance service revenues
from new and existing maintenance contracts. Additionally, maintenance and
support revenue has increased from the first quarter of 2000 as a result of the
significant increase in license product sales throughout 2000.

     Critical Path's international operations accounted for approximately 30% of
net revenues in the first quarter of 2001. Revenues from international
operations accounted for approximately 50% of net revenues in the first quarter
of 2000. This significant decrease in the percentage of international revenues
related primarily to a reduction in enterprise information technology spending
during the first quarter of 2001, as it impacted the sale of our license
products in the international markets.

  Cost of Net Revenues

     Software License. Cost of net software license revenues consists primarily
of product media duplication, manuals and packaging materials, personnel and
facility costs, and third-party royalties. The overall decrease in cost of net
software license revenue was the result of reduced software license revenue and
an overall reduction in royalties paid to third parties.

     Hosted Messaging. Cost of net hosted messaging 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, and other
direct and allocated indirect costs. We added several new hosted messaging
clusters to our data centers during 2000, expanding the capacity of our hosting
network to manage current customer requirements and future growth. Additional
costs were incurred during the latter half of 2000 to add technology platforms
for new service offerings. As a result of these significant acquisitions of
equipment and operations resources, depreciation and other costs have increased
substantially in comparison with the first quarter of 2000.

     Professional Service. Cost of net professional service revenues consists
primarily of personnel costs including custom engineering, installation and
training services for both hosted and licensed solutions, and

                                        9
<PAGE>   12

other direct and allocated indirect costs. As a result of the 2000 acquisitions,
additional costs were incurred in the first quarter of 2001 on professional
service resources in comparison with the first quarter of 2000.

     Maintenance and Support. Cost of net maintenance and support revenues
consists primarily of personnel costs related to the customer support functions
for both hosted and licensed solutions, and other direct and allocated indirect
costs. As a result of the 2000 acquisitions, additional costs were incurred in
the first quarter of 2001 on customer support resources in comparison with the
first quarter of 2000.

     Cost of net service revenues was primarily impacted by the increased
compensation and other personnel costs resulting from the additional headcount
added through our acquisitions completed during the end of the first quarter and
duration of 2000, and through our continued efforts to enhance our portfolio of
product and service offerings. Operations, customer support, and professional
services staff increased to 349 employees at March 31, 2001 from 304 employees
at March 31, 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. Increases in
marketing and promotional expenses, incentive compensation payments to sales
personnel, and increases in compensation associated with additional headcount
added through our acquisitions completed during the end of the first quarter and
duration of 2000, resulted in the increase in sales and marketing expenses from
the first quarter of 2000 to the first quarter of 2001. Sales and marketing
staff increased to 286 employees at March 31, 2001 from 282 employees at March
31, 2000.

     Research and Development. Research and development expenses consist
primarily of compensation for technical staff, payments to outside contractors,
depreciation of capital equipment associated with research and development
activities, and, to a lesser extent, related overhead. This significant increase
in research and development expenses, resulted primarily from increased
compensation and other personnel costs from the additional headcount added
through our acquisitions completed during the end of the first quarter and
duration of 2000, causing the increase from the first quarter of 2000 to the
first quarter of 2001. Research and development staff increased to 244 employees
at March 31, 2001 from 209 employees at March 31, 2000.

     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. The significant
increase from the first quarter of 2000 to the first quarter of 2001 resulted
primarily from increased compensation and other personnel costs from the
additional headcount added through our acquisitions completed during the end of
the first quarter and duration of 2000. Additionally, we incurred higher fees
for outside professional services in the first quarter of 2001, in particular
higher legal fees related to the investigation and significantly higher
accounting fees related to the extended audit. General and administrative staff
increased to 132 employees at March 31, 2001 from 126 employees at March 31,
2000.

  Amortization of Intangible Assets

     In connection with our 1999 and 2000 acquisitions, which were all accounted
for using the purchase method of accounting, we recorded goodwill and other
intangible assets, primarily for assembled workforce, customer base, and
existing technology. During the fourth quarter of 2000, we recognized a $1.3
billion charge related to the impairment of certain goodwill and other
intangible assets. As a result of this impairment charge amortization expense
decreased significantly from the first quarter of 2000 to the first quarter of
2001. Based on the types of identifiable intangibles acquired, amortization
expense of $5.7 million was allocated to cost of net revenues and the remaining
amortization expense of $4.1 million was allocated to operating expenses.

  Acquisition-Related Retention Bonuses

     In connection with the numerous acquisitions completed in 1999 and 2000, we
established various retention bonus programs that in the aggregate amounted to
approximately $20.7 million in incentives for certain former employees of these
companies to encourage their continued employment with Critical Path.

                                        10
<PAGE>   13

The significant decrease in acquisition-related retention bonus expense resulted
from the completion during fiscal year 2000 of all but one of the
acquisition-related retention bonus programs.

  Stock-Based Expenses

     Warrants. During 1999 and 2000, we issued warrants to purchase shares of
our preferred and common stock pursuant to certain strategic agreements with
ICQ, Inc., Qwest Communications Corporation, Worldsport Network Ltd., one of our
lessors, and a major telecommunications company. These issuances allowed the
warrantholders to purchase an aggregate of 7.1 million shares of our common
stock in exchange for sub-branded advertising and various other services. During
the first quarters of 2000 and 2001, we recognized stock-based expenses related
to these warrants of approximately $4.0 million and $4.9 million, respectively.
We believe that these warrant agreements could have a significant current and
future impact on our results of operations.

     In March 2001, we entered into an agreement with Vectis Group, LLC ("Vectis
Group") to engage Vectis Group to act as an advisor to Critical Path with
respect to various strategic alternatives we are currently exploring. As part of
the agreement, Vectis Group agreed to provide consulting services to us in
exchange for a monthly retainer fee and warrants to purchase 500,000 shares of
Critical Path common stock, issuable upon execution of the agreement. Using the
Black-Scholes option-pricing model and assuming a term of three years, the term
of the agreement, and expected volatility of 215%, the initial and final fair
value of the warrant on the effective date of the agreement approximated
$732,000, which was recognized upon the execution of the agreement in March
2001, as the relationship is terminable at anytime.

  Interest and Other Income (Expense)

     Interest and other income (expense) consists primarily of interest earnings
on cash and cash equivalents as well as net realized gains (losses) on foreign
exchange transactions. On March 30, 2000, we issued $300.0 million of five-year,
5.75% Convertible Subordinated Notes due April 1, 2005. As a result, interest
income increased significantly between the first quarter of 2000 and the first
quarter of 2001, due to higher cash balances available for investing. Interest
income amounted to $1.1 million and $2.3 million in the first quarters of 2000
and 2001, respectively. We also recognized net gains from foreign currency
transactions associated with our international operations in the amounts of
$136,000 and $170,000 during the first quarter of 2001 and 2000, respectively.

  Interest Expense

     Interest expense consists primarily of the interest and amortization of
related issuance costs related to the Convertible Subordinated Notes we issued
in March 2000, and interest on certain capital leases. We incurred approximately
$4.3 million in interest expense on the Convertible Subordinated Notes, and
approximately $538,000 related to amortization of debt issuance costs during the
first quarter of 2001. Interest expense on the Convertible Subordinated Notes
and amortization of related debt issuance costs was insignificant during the
first quarter of 2000. Interest on capital leases and other long-term
obligations amounted to approximately $264,000 during the first quarter of 2001
and $258,000 during the first quarter of 2000. Additionally, amortization of
stock-based charges associated with warrants issued in connection with certain
financing arrangements in 1998 and 1999, amounted to $12,000 during the first
quarter of 2001 and $16,000 during the first quarter of 2000.

  Equity in Net Loss of Critical Path Pacific

     In June 2000, we established a joint venture, Critical Path Pacific, with
Mitsui and Co., Ltd., NTT Communications Corporation and NEC Corporation to
deliver advanced Internet messaging solutions to businesses in Asia. We invested
$7.5 million and hold a 40% ownership interest in the joint venture. This
investment is being accounted for using the equity method. During the first
quarter of 2001, we recorded equity in net loss of joint venture of
approximately $776,000.

                                        11
<PAGE>   14

  Provision for Income Taxes

     No current provision or benefit for U.S. federal or state income taxes has
been recorded as we have incurred net operating losses for income tax purposes
since our inception. No deferred provision or benefit for federal or state
income taxes has been recorded as we are in a net deferred tax asset position
for which a full valuation allowance has been provided due to uncertainty of
realization. We recognized a provision for foreign income taxes during the first
quarter of 2001 as certain of our European operations generated income taxable
in certain European jurisdictions.

LIQUIDITY AND CAPITAL RESOURCES

     During the first quarter of 2001 we have begun investing a portion of our
cash in high grade, low risk investments with an average maturity of twelve
months. As of March 31, 2001, our cash balance was $171.6 million and our
working capital amounted to approximately $143.5 million. During the first
quarter of 2001, we used approximately $44.9 million in cash. We expect, after
incurring special one-time charges and realizing the expected quarterly cost
savings in connection with our strategic restructuring, the implementation of
certain worldwide cost control policies and procedures, and the potential
increase in revenue volume once we move beyond the issues experienced in the
first quarter, that we have sufficient cash to operate the duration of 2001.

     We used cash to fund operating activities during the first quarter of 2001
primarily due to our net loss adjusted for non-cash charges and
acquisition-related retention bonus payments. Our cash disbursements related
primarily to compensation for our employees. In addition, we used cash to fund
various other operating costs, which are identified in the Results of Operations
portion of this section.

     We used cash in investing activities during first quarter of 2001 to
purchase property, equipment and other capital expenditures, however the cash
used for those capital expenditures in 2001 has significantly reduced from 2000.
The outlay in capital expenditures during the first quarter of 2001 was
primarily related to the acquisition of the outstanding interest in CP Italia, a
consolidated subsidiary, an investment banking fee related to the ISOCOR
acquisition and the installation of additional network infrastructure equipment
in our data centers. Additionally, we invested in licenses of new software
platforms, leasehold improvements for our buildings, and furniture and equipment
for new employees.

     We used cash from financing activities during the first quarter of 2001 to
retire principal on capital lease obligations. These uses were offset by net
proceeds from the sale of the Company's common stock. We received cash proceeds
from financing activities during 2000 from the sale of $300.0 million in
convertible subordinated notes, as well as from the exercise of employee stock
options and the purchase of stock under our employee stock purchase plan. These
cash proceeds were partially offset by payments to retire principal on capital
lease obligations.

ADDITIONAL FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

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

     As of March 31, 2001, we had an accumulated deficit, including other
comprehensive income, of approximately $2.1 billion. We have not achieved
profitability in any period, and expect to continue to incur net losses in
accordance with generally accepted accounting principles for the foreseeable
future. We expect that our operating expenses will decrease as a result of our
strategic restructuring, however we will continue to spend resources on
maintaining and strengthening our business and this 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 may
continue to spend substantial financial and other resources to develop and
introduce new end-to-end Internet messaging infrastructure products and
services, and improve our sales and marketing organizations, strategic
relationships and operating infrastructure. In addition, in future periods we
will continue to incur significant non-cash charges related to the ten
acquisitions we completed in 1999 and 2000 and stock-based compensation. We
expect that our cost of revenues, sales and marketing expenses, general and
administrative expenses,

                                        12
<PAGE>   15

operations and customer support expenses, and depreciation and amortization
expenses could continue to increase in absolute dollars and may increase as a
percent of revenues. If revenues do not correspondingly increase, our operating
results and financial condition could be harmed. Should we continue to incur net
losses in future periods, we may not be able to retain employees, fund
investments in capital equipment, sales and marketing programs, and research and
development to successfully compete against our competitors. 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, EVOLVING BUSINESS STRATEGY AND THE
EMERGING NATURE OF THE INTERNET MESSAGING INFRASTRUCTURE 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, evolving business strategy and the emerging nature of the
Internet messaging infrastructure market. Forecasting is further complicated by
rapid changes in our business due to the ten acquisitions we completed in 1999
and 2000, our current strategic restructuring, as well as significant
fluctuations in license revenues as a percentage of total revenues from an
insignificant percentage in 1999 to 38% in 2000 to 20% in the first quarter of
2001. 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 the use of messaging
       infrastructure products and services 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 attract and retain qualified personnel with Internet
       industry expertise, particularly sales and marketing personnel;

     - The reaction of our customers and potential customers to our ongoing
       integration of acquired businesses;

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

     - The budgeting cycles of our customers and potential customers;

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

     - Our ability to effectively respond to the rapid technology change of the
       Internet messaging infrastructure market;

     - Technical difficulties or system outages; and

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

     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 stock options to employees and non-employees and
the grant of warrants to our customers and other parties with which we have
commercial relationships. These grants of options and warrants also may be
dilutive to existing shareholders.

     Our operating results also could be impacted by a decision to eliminate a
product or service offering through termination, sale or other disposition or to
sustain certain products and services at a minimum level where customer
commitments prevent us from eliminating the offering altogether. Decisions to
eliminate or

                                        13
<PAGE>   16

limit our offering of a product or service will involve the expenditure of
capital, the realization of losses, a reduction in our workforce, facility
consolidation, and/or the elimination of revenues along with the associated
costs, any of which could harm our financial condition and operating results.

     As a result of the foregoing, 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.

PENDING LITIGATION COULD SERIOUSLY HARM OUR BUSINESS.

     Since February 2001, various of our shareholders have filed separate
lawsuits against us, our independent accountants and certain of our current and
former officers and directors. The uncertainty associated with substantial
unresolved lawsuits could seriously harm our business, financial condition and
reputation. In particular, the lawsuits could harm our relationships with
existing customers and our ability to obtain new customers. The continued
defense of the lawsuits also could result in the diversion of our management's
time and attention away from business operations, which could harm our business.
Negative developments with respect to the lawsuits could cause our stock price
to decline significantly. In addition, although we are unable to determine the
amount, if any, that we may be required to pay in connection with the resolution
of these lawsuits by settlement or otherwise, the size of any such payment could
seriously harm our financial condition. Most of the lawsuits have been filed as
purported class actions by persons who claim that they purchased our common
stock during a purported class period. The complaints generally allege that we
and the other named defendants made false or misleading statements of material
fact about our financial statements, including our revenues, revenue recognition
practices, business operations and prospects for the year 2000 and beyond. The
complaints, in general, do not specify the amount of damages that plaintiffs
seek. As a result, we are unable to estimate the possible range of damages that
might be incurred as a result of the lawsuits. We have not set aside any
financial reserves relating to potential damages associated with any of these
lawsuits.

LIMITATIONS OF OUR DIRECTOR AND OFFICER LIABILITY INSURANCE MAY HARM OUR
BUSINESS.

     Our liability insurance for actions taken by officers and directors during
the period from March 1999 to March 2001, the period during which events related
to securities class action lawsuits against us and certain of our current and
former executive officers are alleged to have occurred, provide only limited
liability protection. If these policies do not adequately cover our expenses
related to those lawsuits, our business and financial condition could be
seriously harmed.

     Under California law, in connection with our charter documents and
indemnification agreements we entered into with our executive officers and
directors, we must indemnify our current and former officers and directors to
the fullest extent permitted by law. The indemnification covers any expenses and
liabilities reasonably incurred in connection with the investigation, defense,
settlement or appeal of legal proceedings.

THE PENDING SECURITIES AND EXCHANGE COMMISSION INVESTIGATION COULD HARM OUR
BUSINESS.

     In February 2001, the Securities and Exchange Commission, or SEC, issued a
formal order of investigation of us and certain unidentified individuals
associated with us. The investigation relates to non-specified accounting
matters, financial reports, other public disclosures and trading activity in our
stock. While we do not know the current status of the investigation or any
possible actions that may be taken against us as a result, any negative
developments with respect to the investigation or any SEC action against us
could harm our business and cause our stock price to decline significantly.

WE MAY NOT BE ABLE TO MAINTAIN OUR LISTING ON THE NASDAQ NATIONAL MARKET.

     In connection with our listing on The NASDAQ National Market (NASDAQ) we
must maintain compliance with several requirements related to the trading price
of our stock, our financial condition and board of directors, among other
issues. As a result of the turnover on our Board of Directors, we might not
comply with The Nasdaq National Market's Audit Committee Rules, which require
audit committees to be comprised of at least three independent directors on or
before June 14, 2001, however, we do intend to satisfy
                                        14
<PAGE>   17

the Audit Committee Rules prior to June 14, 2001. In the event that we are not
able to comply with this or any of the other requirements we may be delisted
from the NASDAQ. Such action may negatively affect our standing with NASDAQ,
which in turn would harm our business and its financial condition.

WE HAVE EXPERIENCED AND MAY CONTINUE TO EXPERIENCE TURNOVER OF SENIOR MANAGEMENT
AND KEY PERSONNEL, WHICH COULD HARM OUR BUSINESS AND OPERATIONS.

     We are currently engaged in a search for a Chief Executive Officer. Our
success depends on our ability to recruit and hire a Chief Executive Officer. If
we are not able to successfully recruit a Chief Executive Officer our business
will be seriously harmed. Additionally, the loss of the services of key
personnel could harm our business results. Our success depends on our ability to
recruit, retain and motivate highly skilled sales and marketing, operational,
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 the first quarter of 2001, we announced a series of changes in Critical
Path management and the Board of Directors. In the early part of the second
quarter of 2001, we announced a series of additional changes in Critical Path
management and the Board of Directors. It is possible that this high turnover at
our senior management levels will continue and that other senior executive
officers also will resign. Additionally, our management team has not worked
together for a significant length of time and may not be able to work together
effectively to successfully implement our strategy. If the management team is
unable to accomplish our business objectives, our ability to grow our business
could be severely impaired.

     We do not have long-term employment agreements with any of our executive
officers and key personnel. In addition, we do not maintain key person life
insurance on our employees and have no plans to do so. The loss of the services
of one or more of our current senior executive officers or key personnel could
harm our business and affect our ability to successfully implement our business
objectives.

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

     Our ability to increase revenues will depend on our ability to successfully
recruit, train and retain sales and marketing personnel. Competition for
qualified personnel is intense and we may not be able to hire and retain
personnel with relevant experience. The complexity and implementation of our
Internet messaging infrastructure products and 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. Any delays or difficulties encountered in
our staffing efforts would impair our ability to attract new customers and
enhance our relationships with existing customers. This in turn would adversely
impact the timing and extent of revenues. Because we have experienced high
turnover in our sales force and the majority of our current 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 sales and marketing organizations of our competitors. If we do not
successfully operate our sales and marketing activities, our business could
suffer and our stock price could decline.

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

     We derived 30% of our revenue from international sales in the first quarter
of 2001 and 38% of our revenue from international sales in 2000. We intend to
continue to operate in 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. We have limited
experience in international operations and may not be able to compete
effectively in international markets. We face certain risks inherent in
conducting business internationally, including:

     - Difficulties and costs of staffing and managing international operations;

     - Fluctuations in currency exchange rates and imposition of currency
       exchange controls;

                                        15
<PAGE>   18

     - Differing technology standards;

     - Difficulties in collecting accounts receivable and longer collection
       periods;

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

     - Political and economic instability;

     - Potential adverse tax consequences; and

     - Reduced protection for intellectual property rights in some countries.

     Any of these factors could harm our international operations and,
consequently, our business and consolidated 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 MAY NEED ADDITIONAL CAPITAL AND RAISING ADDITIONAL CAPITAL MAY DILUTE
EXISTING SHAREHOLDERS.

     We believe that existing capital resources will enable use to maintain
current and planned operations through December 31, 2001. However, we may be
required to raise additional funds due to unforeseen circumstances. If capital
requirements vary materially from those currently 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.

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, including actual or anticipated
fluctuations in results of operations and changes in or failure to meet market
expectations. For example, in February 2001, after we announced a revision of
our fourth quarter results of operations, our stock was suspended from trading
on Nasdaq for a period of time, and subsequently the market price of our stock
declined. In addition, the stock market itself is experiencing and may continue
to experience significant price and volume fluctuations that have affected the
market prices for the stocks of technology companies, particularly Internet
companies. These broad market fluctuations may continue to result in a material
decline in the market price of our common stock.

OUR ARTICLES OF INCORPORATION AND BYLAWS CONTAIN PROVISIONS THAT 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 that can be created and issued
       by the board of directors without prior shareholder 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.

     In March 2001, we adopted a shareholder rights plan or "poison pill." This
plan could cause the acquisition of our company by a party not approved by our
board of directors to be prohibitively expensive.

                                        16
<PAGE>   19

                     SUPPLEMENTAL PRO FORMA FINANCIAL DATA
                                  (UNAUDITED)

     The following supplemental pro forma financial information presents
Critical Path's condensed consolidated results of operations during the first
quarter of 2001 and 2000, excluding the impact of certain special charges
consisting of (i) amortization of intangible assets associated with purchase
business combinations, (ii) accruals for employee retention bonuses associated
with purchase business combinations, and (iii) stock-based compensation
associated with outstanding options and warrants. 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,    MARCH 31,
                                                                2000         2001
                                                              ---------    ---------
<S>                                                           <C>          <C>
Net revenues
  Software license..........................................  $ 11,070     $  5,550
  Hosted messaging..........................................     9,095       14,439
  Professional service......................................     2,493        3,417
  Maintenance and support...................................     1,895        3,737
                                                              --------     --------
          Total net revenues................................    24,553       27,143
                                                              --------     --------
Cost of net revenues
  Software license..........................................     1,007          291
  Hosted messaging..........................................    11,880       17,938
  Professional service......................................     1,056        2,966
  Maintenance and support...................................     1,404        2,586
                                                              --------     --------
          Total cost of net revenues........................    15,347       23,781
                                                              --------     --------
Gross profit (loss).........................................     9,206        3,362
                                                              --------     --------
Operating expenses
  Sales and marketing.......................................    13,605       18,712
  Research and development..................................     6,323        9,934
  General and administrative................................     6,766       13,293
                                                              --------     --------
          Total operating expenses..........................    26,694       41,939
                                                              --------     --------
Loss from operations........................................   (17,488)     (38,577)
Interest and other income (expense), net....................     1,258        2,425
Interest expense............................................      (258)      (5,051)
Equity in net loss of joint venture.........................        --         (776)
                                                              --------     --------
Loss before income taxes....................................   (16,488)     (41,979)
Provision for income taxes..................................      (360)        (343)
                                                              --------     --------
Net loss....................................................  $(16,848)    $(42,322)
                                                              ========     ========
Net loss per share -- basic and diluted.....................  $  (0.33)    $  (0.59)
Weighted average shares -- basic and diluted................    50,570       72,137
</TABLE>

                                        17
<PAGE>   20

           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     As of March 31, 2001, our investment portfolio consisted of
available-for-sale securities, excluding those classified as cash equivalents,
of $4.4 million. These securities consist of strategic equity investments in
corporate partners, certain of which are publicly traded and marketable and
certain of which are privately held. These securities are subject to equity
price risk. Critical Path's long-term obligations consist of our $300.0 million
five-year, 5.75% Convertible Subordinated Notes due April 2005, and certain
fixed rate capital leases. We do not attempt to reduce or eliminate our market
exposure on these securities.

     A significant portion of our worldwide operations has a functional currency
other than the United States dollar. Accordingly, we are exposed to foreign
currency exchange rate risk inherent in our sales commitments, anticipated
sales, and assets and liabilities of these operations. Fluctuations in exchange
rates may harm our results of operations and could also result in exchange
losses. The impact of future exchange rates fluctuations cannot be predicted
adequately. To date, we have not sought to hedge the risks associated with
fluctuations in exchange rates.

     Information relating to quantitative and qualitative disclosure about
market risk is set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

                                        18
<PAGE>   21

                          PART 2 -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

     We are a party to lawsuits in the normal course of our business. Litigation
in general, and securities and intellectual property litigation in particular,
can be expensive and disruptive to normal business operations. Moreover, the
results of complex legal proceedings are difficult to predict. Other than as
described below, we are not a party to any other material legal proceedings.

  Securities Class Actions

     Beginning on February 2, 2001, a number of securities class action
complaints were filed against us, certain of our current and former officers and
directors and our independent accountants in the United States District Court
for the Northern District of California. The complaints have been filed as
purported class actions by individuals who allege that they purchased our common
stock during a purported class period; the alleged class periods vary among the
complaints and are in the process of being consolidated into a single action.
The complaints generally allege that, in differing periods from December 1999 to
February 1, 2001, we and other named the defendants made false or misleading
statements of material fact about our financial statements, including our
revenues, revenue recognition policies, business operations and prospects for
the year 2000 and beyond. The complaints seek an unspecified amount in damages
on behalf of persons who purchased Critical Path stock during certain periods.

  Derivative Actions

     Beginning on February 5, 2001, we have been named as a nominal defendant in
a number of derivative actions, purportedly brought on our behalf, filed in the
Superior Court of the State of California. The derivative complaints allege that
certain of Critical Path's current and former officers and directors breached
their fiduciary duties to us, engaged in abuses of their control of us, were
unjustly enriched by their sales of our common stock, engaged in insider trading
in violation of California law or published false financial information in
violation of California law. The plaintiffs seek unspecified damages on our
behalf from each of the defendants. Because of the nature of derivative
litigation, any recovery in the action would inure to our benefit.

  SEC Investigation

     In February 2001, the Securities and Exchange Commission issued a formal
order of investigation of Critical Path and certain unidentified individuals
associated with Critical Path with respect to non-specified accounting matters,
financial reports, other public disclosures and trading activity in our
securities. While we do not know the current status of the investigation or any
possible actions that may be taken against us as a result, any SEC action
against us could harm our business.

     The uncertainty associated with substantial unresolved lawsuits and the SEC
investigation could seriously harm our business and financial condition. In
particular, the lawsuits or the investigation could harm our relationships with
existing customers and our ability to obtain new customers. The continued
defense of the lawsuits and conduct of the investigation could also result in
the diversion of our management's time and attention away from business
operations, which could harm our business. Negative developments with respect to
the lawsuits or the investigation could cause our stock price to decline
significantly. In addition, although we are unable to determine the amount, if
any, that we may be required to pay in connection with the resolution of these
lawsuits or the investigation by settlement or otherwise, the size of any such
payment could seriously harm our financial condition.

                                        19
<PAGE>   22

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits

<TABLE>
    <S>    <C>
     3.1*  Amended and Restated Articles of Incorporation
     3.2*  Amendment to the Articles of Incorporation
     3.3*  Amended and Restated Bylaws
     4.1*  Form of Common Stock Certificate
     4.2*  Preferred Stock Rights Agreement, dated as of March 29, 2001
           between Critical Path, Inc. and Computershare, including the
           Certificate of Determination, the form of Rights Certificate
           and the Summary of Rights attached thereto as Exhibits A, B
           and C, respectively.
</TABLE>

---------------
* See Exhibit Index attached hereto, which is incorporated herein by reference.

     (b) Reports on Form 8-K

     On February 6, 2001, we filed a report on Form 8-K under Item 5, announcing
an investigation undertaken by the Company's Board of Directors.

     On February 14, 2001, we filed a report on Form 8-K under Item 5,
announcing a series of changes in the Company's management.

     On February 16, 2001, we filed a report on Form 8-K under Item 5,
announcing the revision of the Company's fourth quarter results.

     On April 2, 2001, we filed a report on Form 8-K under Item 5, announcing
the Company's Board of Directors had approved the adoption of a Shareholder
Rights Plan.

                                        20
<PAGE>   23

                                   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, 2001                        CRITICAL PATH, INC.

                                          By: /s/ LAWRENCE P. REINHOLD
                                            ------------------------------------
                                                    Lawrence P. Reinhold
                                                 Executive Vice President,
                                                  Chief Financial Officer
                                                (Duly Authorized Officer and
                                                          Principal
                                             Financial and Accounting Officer)

                                        21
<PAGE>   24

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                        EXHIBIT DESCRIPTION
-------                       -------------------
<C>       <S>
 3.1(1)   Amended and Restated Articles of Incorporation
 3.2(2)   Amendment to the Articles of Incorporation
 3.3(1)   Amended and Restated Bylaws
 4.1(3)   Form of Common Stock Certificate
 4.2(4)   Preferred Stock Rights Agreement, dated as of March 29, 2001
          between Critical Path, Inc. and Computershare, including the
          Certificate of Determination, the form of Rights Certificate
          and the Summary of Rights attached thereto as Exhibits A, B
          and C, respectively.
</TABLE>

------------------------
(1) Incorporated by reference from Exhibits 3(i)(b) and 3(ii)(b) of Critical
    Path, Inc.'s Registration Statement on Form S-1 (File Number 333-71499)
    filed with the Securities and Exchange Commission on January 29, 1999.

(2) Incorporated by reference from Exhibit 3.2 of Critical Path, Inc.'s Form
    10-K for the year ended December 31, 2000.

(3) Incorporated by reference from Exhibit 4.1 of Critical Path, Inc.'s
    Registration Statement on Form S-1, Amendment Number 1 (File Number
    333-71499) filed with the Securities and Exchange Commission on February 24,
    1999.

(4) Incorporated by reference from Exhibit 4.5 of Critical Path, Inc.'s Form 8-A
    filed on May 7, 2001.

                                        22