<PAGE>   1
 
   
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 29, 1999.
    
   
                                                      REGISTRATION NO. 333-69171
    
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                           -------------------------
 
   
                                AMENDMENT NO. 1
    
 
   
                                       TO
    
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                           -------------------------
                             WEBTRENDS CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                   <C>                                <C>
               OREGON                                7372                             93-1123283
   (STATE OR OTHER JURISDICTION OF       (PRIMARY STANDARD INDUSTRIAL              (I.R.S. EMPLOYER
   INCORPORATION OR ORGANIZATION)        CLASSIFICATION CODE NUMBER)            IDENTIFICATION NUMBER)
</TABLE>
 
   
                         851 SW SIXTH AVE., SUITE 1200
    
   
                             PORTLAND, OREGON 97204
    
                                 (503) 294-7025
              (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
       INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
                                SUSAN E. KIPPER
                             LAWCO OF OREGON, INC.
                        1211 SW FIFTH AVENUE, SUITE 1500
                             PORTLAND, OREGON 97204
                                 (503) 727-2000
           (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
                   INCLUDING AREA CODE, OF AGENT FOR SERVICE)
 
                                   COPIES TO:
 
<TABLE>
<S>                                            <C>
                ROY W. TUCKER                                 ROBERT P. LATTA
                NEIL NATHANSON                              ALISANDE M. ROZYNKO
                  J.T. YOUNG                               CHRISTIAN E. MONTEGUT
               PERKINS COIE LLP                    WILSON SONSINI GOODRICH & ROSATI, P.C.
       1211 SW FIFTH AVENUE, 15TH FLOOR                      650 PAGE MILL ROAD
            PORTLAND, OREGON 97204                          PALO ALTO, CA 94304
                (503) 727-2000                                 (650) 493-9300
</TABLE>
 
        APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
  As soon as practicable after this Registration Statement becomes effective.
 
    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]
 
    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
 
    If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.  [ ]
   
                           -------------------------
    
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
 
   
                 SUBJECT TO COMPLETION, DATED JANUARY 29, 1999
    
 
INITIAL PUBLIC OFFERING
PROSPECTUS
 
   
                        3,000,000 SHARES OF COMMON STOCK
    
 
   
                           $9.00 TO $11.00 PER SHARE
    
 
                                      LOGO
 
   
     WebTrends Corporation is selling 3,000,000 shares of its common stock in
this offering. In addition, certain of WebTrends' shareholders may sell an
aggregate of up to 450,000 shares depending on whether the underwriters exercise
their over-allotment option. WebTrends will not receive any of the proceeds from
the sale of shares by the shareholders.
    
 
                            Proposed Trading Symbol:
                         Nasdaq National Market "WEBT"
 
     INVESTING IN THIS STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 4.
 
                           -------------------------
 
<TABLE>
<CAPTION>
                                                                  TOTAL
                                                     --------------------------------
                                                        WITHOUT             WITH
                                        PER SHARE    OVER-ALLOTMENT    OVER-ALLOTMENT
                                        ---------    --------------    --------------
<S>                                     <C>          <C>               <C>
Price to Public.......................
Underwriting Discounts &
  Commissions.........................
WebTrends' Proceeds...................
Selling Shareholders' Proceeds........
</TABLE>
 
                           -------------------------
 
     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
 
   
DAIN RAUSCHER WESSELS                                 SOUNDVIEW TECHNOLOGY GROUP
    
   
  a division of Dain Rauscher Incorporated
    
   
    
<PAGE>   3
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                               PAGE
                               ----
<S>                            <C>
Prospectus Summary...........     1
Risk Factors.................     4
Use of Proceeds..............    15
Dividend Policy..............    15
Capitalization...............    16
Dilution.....................    17
Selected Financial Data......    18
Management's Discussion and
  Analysis of Financial
  Condition and Results of
  Operations.................    19
Business.....................    30
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                               PAGE
                               ----
<S>                            <C>
Management...................    48
Certain Transactions.........    56
Principal and Selling
  Shareholders...............    57
Description of Capital
  Stock......................    58
Shares Eligible for Future
  Sale.......................    60
Underwriting.................    62
Legal Matters................    64
Experts......................    64
Additional Information.......    64
Index to Financial
  Statements.................   F-1
</TABLE>
    
 
   
    
 
                                        i
<PAGE>   4
 
   
     "AuditTrack," "AlertTrack," "ClusterTrends," "CommerceTrends," "DBTrends,"
"FastTrends," "FireTrends," "Manage Your WWWorld," "SmartPass," "WebTrends," and
WebTrends' logo are all trademarks of the company. All other trade names,
trademarks, and service marks appearing in this prospectus are the property of
their respective holders.
    
<PAGE>   5
 
                               PROSPECTUS SUMMARY
 
   
     This summary highlights only selected information contained elsewhere in
this prospectus. Before making an investment in WebTrends' common stock, you
should read this entire prospectus and the Financial Statements and notes, all
of which should be consulted when reading this summary. Except where noted
otherwise, all information in this prospectus, including share and per share
information, assumes (1) the automatic conversion of all outstanding shares of
Class B Common Stock into shares of common stock upon completion of this
offering; (2) no exercise of the underwriters' over-allotment option; and (3)
WebTrends' 1 for 2 reverse split of its capital stock effected as of January 19,
1999. See "Description of Capital Stock" and "Underwriting."
    
 
                             WEBTRENDS CORPORATION
 
   
     WebTrends Corporation is a leading provider of enterprise management and
reporting solutions for Internet-based systems. We offer organizations a
comprehensive set of solutions that are integrated, modular, easy-to-use, and
scale to high-volume environments. Our enterprise management products facilitate
analysis and reporting of Web site traffic, quality, content and usage, Internet
advertising campaigns, and e-commerce activities, as well as the return on
investment from Internet-based systems. Internet-based systems include Web
servers, the computer servers that connect to the Internet's Worldwide Web,
intranets, which use Internet technology for communications within an
organization, and extranets, networks that use Internet technology for
communications between related organizations. Our solutions also help
organizations manage their Internet infrastructure by providing valuable
information about systems designed to implement secure communications, such as
firewalls and virtual private networks, as well as capacity and bandwidth
requirements. Our products have been specifically designed to enable
organizations to centrally manage and administer multiple Internet-based systems
across the enterprise regardless of the quantity or geographic locations of
servers supporting those systems.
    
 
   
     Our business has grown rapidly, with revenue increasing from $1.9 million
in 1996 to $8.0 million for the year ended December 31, 1998. We have been
profitable throughout this period. Since the introduction of our original Web
site traffic analysis product in 1996, we have introduced six new products:
WebTrends Enterprise Suite, WebTrends Professional Suite, WebTrends Suite for
Lotus Domino, WebTrends for Firewalls and VPNs, Server Cluster Add-on, and
WebTrends Security Analyzer. We plan to introduce two additional products,
WebTrends Enterprise Reporting Server for UNIX and CommerceTrends Add-on, by
June 1999.
    
 
   
     We market and deliver our award-winning products to both IT professionals
and other business managers. Over 20,000 customers have purchased our products,
including sophisticated Internet service providers and over one-third of the
Fortune 500 companies.
    
 
   
     WebTrends was incorporated in Delaware in 1993 and reorganized in Oregon in
1997. Our executive offices are located at 851 SW Sixth Avenue, Suite 1200,
Portland, Oregon 97204, our telephone number is 1-888-WEBTRENDS
(1-888-932-8736), and our Web site is located at http://www.webtrends.com.
    
                                        1
<PAGE>   6
 
                                  THE OFFERING
 
   
<TABLE>
<S>                                           <C>
Common stock Offered by WebTrends...........  3,000,000 shares
Common Stock to be Outstanding After the
  Offering..................................  11,218,964 shares
Nasdaq National Market Symbol...............  WEBT
                                              Working capital and general corporate
Use of Proceeds.............................  purposes. See "Use of Proceeds."
</TABLE>
    
 
   
     Common stock to be outstanding after the offering is based on shares
outstanding on December 31, 1998. It excludes 3,341,562 shares reserved for
issuance under our 1998 Stock Incentive Compensation Plan, 1997 Stock Incentive
Compensation Plan and 1999 Employee Stock Purchase Plan, of which 1,471,149
shares were subject to outstanding stock options at a weighted average exercise
price of $2.46 per share.
    
                                        2
<PAGE>   7
 
                         SUMMARY FINANCIAL INFORMATION
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
   
<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                    ----------------------------
                                                     1996      1997       1998
                                                    ------    -------    -------
<S>                                                 <C>       <C>        <C>
STATEMENT OF OPERATIONS DATA:
Total revenue.....................................  $1,865    $ 4,055    $ 8,008
Gross margin......................................   1,660      3,763      7,375
Income from operations............................     398        427        222
Net income........................................     405        287        219
Basic net income per share........................                .04        .03
Diluted net income per share......................                .04        .02
Shares used in basic net income per share
  calculation.....................................              8,126      8,211
Shares used in diluted net income per share
  calculation.....................................              8,126      9,003
</TABLE>
    
 
   
     Net income is not comparable for all periods shown, since, prior to 1997,
WebTrends was not taxable as an entity because the shareholders had elected to
be taxed individually based on their percentage ownership of the outstanding
common stock. Net income per share data is not presented for any period prior to
1997 as the capital structure prior to January 1, 1997 is not comparable to that
existing in 1997. See Notes 1 and 8 of the Notes to the Financial Statements.
    
 
   
     The following table presents balance sheet data, both historically and on a
pro forma basis, giving effect to WebTrends' sale in this offering of 3,000,000
shares of common stock at the assumed initial public offering price of $10.00
per share, after deducting estimated underwriting discounts and commissions and
estimated offering expenses. See "Use of Proceeds."
    
 
   
<TABLE>
<CAPTION>
                                                            DECEMBER 31, 1998
                                                          ----------------------
                                                          ACTUAL     PRO FORMA
                                                          ------    ------------
<S>                                                       <C>       <C>
BALANCE SHEET DATA:
Cash and cash equivalents...............................  $1,099      $27,999
Working capital.........................................     221       27,121
Total assets............................................   3,362       30,262
Total shareholders' equity..............................     842       27,742
</TABLE>
    
 
   
    
                                        3
<PAGE>   8
 
                                  RISK FACTORS
 
   
     In addition to the other information contained in this prospectus, you
should carefully read and consider the following risk factors before purchasing
our common stock. Investment in our common stock involves a high degree of risk.
    
 
   
WEBTRENDS HAS A LIMITED OPERATING HISTORY AND MAY NOT REMAIN PROFITABLE
    
 
   
     WebTrends was formed in August 1993, and we introduced our first Internet
product in February 1996. Due to our limited operating history, any evaluation
of our business and our prospects must be in light of the risks and
uncertainties often encountered by companies in their early stages of
development. These risks and uncertainties are particularly significant for
companies in rapidly evolving markets, such as the market for Internet products
and services. Many of these risks are discussed under the sub-headings below.
    
 
   
     We may not be able to successfully address any or all of these risks.
Failure to adequately do so could have a material adverse effect on our
business, results of operations, and financial condition. In addition, although
our revenue has increased in recent periods while we maintained profitability,
our revenue may not grow in future periods, may not grow at past rates, and we
may not maintain profitability on a quarterly or annual basis, or at all.
    
 
   
OUR OPERATING RESULTS ARE SUBJECT TO SEASONAL AND OTHER FLUCTUATION
    
 
   
     During our short operating history, we have experienced seasonality in our
operating results. While revenue from sales has continued to grow, the second
and third quarters of the year have been typically characterized by lower levels
of revenue growth. In addition to seasonal fluctuations, we may experience
significant fluctuations in our operating results from other causes. In
particular, as we increasingly focus on sales of our product suites rather than
stand-alone products and on larger purchases by larger customers, we expect the
sales cycle associated with the purchase of our products to lengthen.
Furthermore, the amount of revenue associated with particular licenses can vary
significantly based upon the number of products that are licensed and the number
of devices involved in the installation. In connection with our expansion, we
plan to increase our operating expenses to expand our sales and marketing
operations, develop new distribution channels, fund greater levels of research
and development, broaden professional services and support, and improve
operational and financial systems. Failure of our revenue to increase along with
these expenses during any fiscal period could have a materially adverse impact
on our financial results for that period. Potential fluctuations may also result
from other factors, some of which may be specific to WebTrends or its customers
and some of which may be general to our industry.
    
 
   
     Based on the foregoing, we believe that our quarterly revenue and results
from operations are likely to vary significantly in the future and that quarter
to quarter comparisons of our operating results may not be meaningful. You
should therefore not rely on the results of one quarter as an indication of
future performance. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Selected Quarterly Financial Results."
    
 
                                        4
<PAGE>   9
 
   
OUR RAPIDLY CHANGING MARKET INCREASES NEW PRODUCT RISK
    
 
   
     The market for our products is in the early stages of development and is
rapidly evolving. Accordingly, it is difficult to predict the future growth
rate, if any, and size of this market. As is common in such new and rapidly
evolving industries, demand and market acceptance for recently introduced
products are subject to high levels of uncertainty and risk. Furthermore, new
products can quickly render obsolete products that were only recently in high
demand. The market for our existing products may not be sustainable at its
current level. We launched several new products in calendar 1998 and January
1999. We have additional new product launches planned for 1999 as well as
upgrades to our existing products. The market for the recently introduced and
planned products may not expand or develop.
    
 
   
     Our markets are characterized by rapidly changing customer needs, evolving
industry standards, and rapid technological developments. Significant
competitive advantages accrue to companies that respond rapidly to such changes
with innovative product introductions and enhancements. Internet technology,
however, is complex, and new products and product enhancements can require long
development and testing periods. Releasing products prematurely may result in
quality problems that could damage our reputation. Accordingly, our future
success depends upon our ability to address the rapidly changing needs of our
customers by developing and introducing high quality products, product
enhancements, and services on a timely basis and by keeping pace with
technological developments and emerging industry standards. Any failure to
develop and release enhanced or new products, or delays or quality problems in
doing so, could have a material adverse effect on our business, results of
operations, and financial condition.
    
 
   
WEBTRENDS' MARKET IS HIGHLY COMPETITIVE
    
 
   
     We compete in the markets for Web site traffic analysis solutions, alerting
and monitoring solutions, firewall and proxy server traffic analysis solutions,
and security analysis solutions. These markets are intensely competitive,
increasingly subject to rapid changes, and significantly affected by new product
introductions and other activities of market participants. In addition, these
markets are highly fragmented, and our competitors vary depending upon the
market that our Internet management solutions address.
    
 
   
     In the market for Web site traffic analysis solutions, our primary
competitors are Andromedia, Inc., Accrue Software Inc., Internet Profiles
Corporation (I/Pro), Marketwave Corporation, and net.Genesis Corp. In the Web
site link analysis and quality control market, our primary competitors are
Tetranet Software Incorporated and Coast Software Inc. In the alerting and
monitoring market, our primary competitors are IPSwitch, Inc. and Geneva
Software, Inc. In the firewall and proxy analysis market, our primary
competitors are Telemate Software, Inc. and SecureIT, Inc., a division of
VeriSign, Inc. In the security analysis market, we expect to compete primarily
with ISS Group, Inc., Axent Technologies, Inc., and Network Associates, Inc.
Although the markets in which we compete are highly fragmented, we may face
additional competition from existing competitors if any of them were to broaden
the scope of their Internet management products either by developing or
acquiring additional products or distribution channels.
    
 
   
     We also compete with vendors of Internet servers, operating systems, and
networking hardware. In particular, Microsoft Corporation, Netscape
Communications Corp., Sun Microsystems, Inc., Oracle Corp., and others bundle
Internet management solutions with their Internet products. We expect this
bundling activity to increase in the future. The
    
 
                                        5
<PAGE>   10
 
bundling of competing products with standard features of operating systems,
Internet servers or networking hardware could render our products obsolete and
unmarketable. Even if the functionality, ease of use, and performance of the
products included with operating systems, Internet servers, or networking
hardware is inferior to our products, a significant number of customers may
elect to accept these products instead of purchasing additional software from
us.
 
   
     We believe that additional competitors will continue to enter the market as
the size and visibility of the market opportunity increases. These new market
entrants may include traditional system and network management software
developers. For example, Computer Associates International, Inc. is currently
beta testing an extension to its Unicenter TNG product line that includes
functions for alerting and monitoring, Web site traffic analysis, and link
analysis.
    
 
   
     We also face competition and potential competition from Web management
service providers, such as consulting firms, Web design firms, Internet audit
firms, site management vendors, Internet service providers, and independent
software vendors. These service providers may use our solutions, our
competitors' solutions, or custom-developed solutions to manage Web sites for
their customers who otherwise would have been sale opportunities for us. Certain
larger potential customers may rely on their IT departments to internally
develop Internet management solutions.
    
 
   
     Increased competition could result in pricing pressures, reduced margins,
or the failure of our products to achieve or maintain market acceptance, any of
which could have a material adverse effect on our business, results of
operations, and financial condition. Certain of our current and potential
competitors have longer operating histories, greater name recognition, access to
larger customer bases, and substantially greater financial, technical,
marketing, distribution, service, support, and other resources than we have. As
a result, they may be able to respond more quickly than we can to new or
changing opportunities, technologies, standards, or customer requirements. For
all of the foregoing reasons, we may not be able to compete successfully against
our current and future competitors.
    
 
   
OUR SUCCESS DEPENDS ON INCREASING MARKET AWARENESS OF OUR BRAND
    
 
   
     If we fail to successfully promote our brand name or if we incur
significant expenses promoting and maintaining our brand name, it could have a
material adverse effect on our business, results of operations, and financial
condition. Due in part to the emerging nature of the market for Internet
management solutions and the substantial resources available to many of our
competitors, there may be a time-limited opportunity to achieve and maintain a
significant market share. Developing and maintaining awareness of the
"WebTrends" brand name is critical to achieving widespread acceptance of our
enterprise management and reporting solutions. Furthermore, the importance of
brand recognition will increase as competition in the market for our products
increases. Successfully promoting and positioning the WebTrends brand will
depend largely on the effectiveness of our marketing efforts and our ability to
develop reliable and useful products at competitive prices. Therefore, we may
need to increase our financial commitment to creating and maintaining brand
awareness among potential customers.
    
 
   
OUR SALES OPERATIONS AND CHANNELS OF DISTRIBUTION REQUIRE EXPANSION
    
 
     In order to maintain and increase our current and future market share and
revenue, we will need to expand our direct and indirect sales operations and
channels of
 
                                        6
<PAGE>   11
 
   
distribution. Failure to do so could have a material adverse effect on our
business, results of operations, and financial condition. Most of our customers
license a limited number of our products. To maintain and increase our results
from operations, we must increase the number of products that each customer
licenses. This may require an increasingly sophisticated sales effort targeted
at Webmasters, other management personnel associated with a prospective
customer's Internet capabilities, and other functional managers throughout the
organization. In order to achieve increased sales, we plan to hire additional
telemarketing and direct field sales personnel. Any new hires will require
training and take time to achieve full productivity. We may not be able to hire
enough qualified individuals when needed, or at all, and we may not be able to
increase distribution through any other methods.
    
 
   
     Our future success also depends upon our ability to expand our
relationships with domestic and international channel partners, distributors,
value-added resellers, systems integrators, on-line and other resellers,
Internet service providers, original equipment manufacturers, and other partners
to build our indirect sales channel. We must also continue to expand and
maintain strategic relationships with key hardware and software vendors,
distribution partners, and customers. We may not be successful in these efforts,
and failure to maintain our existing relationships or develop additional
relationships could result in general declines in our growth, which could have a
material adverse effect on our business, results of operations, and financial
condition.
    
 
   
WEBTRENDS RELIES ON INDIRECT DISTRIBUTION CHANNELS
    
 
   
     We are making an effort to increase distribution of our products through
various indirect channels of distribution, including channel partners, value
added resellers, distributors, resellers, original equipment manufacturers,
Internet service providers, and others. We cannot predict the extent to which
any of these channel partners will be successful in marketing or distributing
our Internet management solutions. Many of these channel partners also market
and sell competitive products. We may not be able to effectively manage
potential conflicts among the various channel partners or prevent them from
devoting greater resources to supporting the products of other companies. The
loss of one or more of these channel partners, because of either their
preference for competing products or products they may develop internally, could
have a material adverse effect on our business, results of operations, and
financial condition. In addition, Network Trade Corporation, a third-party
export management company, has the primary responsibility for identifying
international distributors, resellers, and value added resellers for our
products. Accordingly, any disruption in our relationship with Network Trade,
which may be terminated by either party with 30 days' notice, could materially
slow our international sales growth, which could have a material adverse effect
on our business, results of operations, and financial condition.
    
 
   
     Reliance on indirect channels of distribution may subject us to greater
credit risk as the revenue from sales of our products to distributors and
certain other channel partners flows first through the distributors, and then to
us. In particular, Network Trade, while not technically a distributor, collects
payments from our international resellers and then remits those payments to us,
presenting a similarly increased credit risk. Revenues received from Network
Trade accounted for 16.7% of our total revenue for the year ended December 31,
1998. Failure of our channel providers to timely remit to us the proceeds from
sales of our products, or any failure to accurately forecast the demand for our
products, could have a material adverse effect on our business, results of
operations, and financial condition.
    
 
                                        7
<PAGE>   12
 
   
WEBTRENDS RELIES ON CERTAIN KEY PERSONNEL AND NEEDS ADDITIONAL PERSONNEL
    
 
   
     Our success depends largely upon the continued services of our executive
officers and other key management and development personnel. The loss of the
services of one or more of our executive officers, engineering personnel, or
other key employees could have a material adverse effect on our business,
results of operations, and financial condition. In particular, we rely on our
co-founders, Elijahu Shapira, Chief Executive Officer and Chairman of the Board,
and W. Glen Boyd, President, Chief Technical Officer, and director. Messrs.
Shapira and Boyd do not have employment agreements and, therefore, could
terminate their employment with us at any time without penalty. We do not
maintain key person life insurance policies on any of our employees. In
addition, because of the complexity of our products and technologies, we are
substantially dependent upon the continued service of our existing engineering
personnel.
    
 
   
     Our future success also depends on our ability to attract and retain highly
qualified personnel. We may not be successful in attracting or retaining
qualified personnel, which could have a material adverse effect on our business,
results of operations, and financial condition. We intend to hire a number of
additional sales, support, marketing, and research and development personnel.
The competition for qualified personnel in the computer software and Internet
markets is intense, and we may be unable to attract, assimilate, or retain
additional highly qualified personnel in the future. Additionally, we attempt to
hire engineers with high levels of experience in designing and developing
software and Internet-related products in time-pressured environments. There is
a limited number of qualified engineers in our geographic location, resulting in
intense competition for the services of such engineers.
    
 
   
OUR RATE OF GROWTH STRAINS OUR SYSTEMS AND MANAGEMENT RESOURCES
    
 
   
     Any failure to properly manage our growth could have a material adverse
effect on our business, results of operations, and financial condition. Since
our inception, we have experienced significant expansion in our operations. We
intend to pursue further expansion throughout the foreseeable future to take
advantage of existing and potential market opportunities. This rapid growth
places significant challenges on our management, administrative, and operational
resources. To properly manage this growth, we must, among other things,
implement and improve additional and existing administrative and operational
systems, procedures, and controls on a timely basis.
    
 
   
     Our expansion will continue to place a significant strain on our
management, operational, and financial resources. In 1998, we added a number of
key managerial, technical, and operations personnel, including a Chief Financial
Officer, a Vice President of Sales, a Vice President of Marketing, and a Vice
President of Research and Development. We expect to add other key personnel in
the future. Additionally, we are significantly increasing our employee base. To
manage the expected growth of our operations and personnel, we will be required
to significantly improve or replace existing management, operational, and
financial systems. We will also need to expand our finance, administrative, and
operations staff. We may not be able to complete the necessary improvements to
our systems, procedures, and controls necessary to support our future operations
in a timely manner. Management may not be able to hire, train, retain, motivate,
and manage required personnel and may not be able to successfully identify,
manage, and exploit existing and potential market opportunities.
    
 
                                        8
<PAGE>   13
 
   
WEBTRENDS' INTERNATIONAL SALES ARE SIGNIFICANT AND POSE CERTAIN RISKS
    
 
   
     Approximately 22.0% and 27.5% of our total revenue for the years ended
December 31, 1997 and December 31, 1998, respectively, were attributable to
sales made outside the United States. We believe that our future growth will
require continued expansion of our operations in international markets. To
expand internationally, we must continue to develop our international
distribution channels and increase our investment in marketing and product
awareness. If we are unable to do so in a timely and effective manner, our
growth, if any, in international sales will be limited, and could have a
material adverse effect on our business, results of operations, and financial
condition. To date, our revenue from international operations has primarily been
denominated in United States dollars, although some sales have been denominated
in foreign currencies. An increase in the value of the United States dollar
relative to foreign currencies would make our products more expensive and,
therefore, potentially less competitive in those markets. Moreover, even if
international operations are successfully expanded, we may not be able to
maintain or increase international market demand for our products.
    
 
     Our international operations are subject to the risks inherent in
international business activities, including, in particular:
 
     - Management of an organization spread over various countries;
 
   
     - Longer accounts receivable payment cycles and other collection
       difficulties, such as difficulties obtaining and enforcing judgments
       against delinquent customers, in certain countries;
    
 
     - Compliance with a variety of foreign laws and regulations;
 
     - Unexpected changes in regulatory requirements;
 
     - Overlap of different tax structures;
 
     - Foreign currency exchange rate fluctuations;
 
     - Import and export licensing requirements;
 
   
     - Trade restrictions, changes in tariffs, and freight rates; and
    
 
     - Regional economic conditions.
 
   
     Such factors could have a material adverse effect on our future
international sales and, consequently, our business, results of operations, and
financial condition. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Sales, Marketing, and
Distribution."
    
 
   
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY
    
 
   
     We regard substantial elements of our Internet management solutions as
proprietary and attempt to protect them by relying on patent, trademark, service
mark, trade dress, copyright, and trade secret laws and restrictions, as well as
confidentiality procedures and contractual provisions. Any steps we take to
protect our intellectual property may be inadequate, time consuming, and
expensive. Furthermore, despite our efforts, we may be unable to prevent
third-parties from infringing upon or misappropriating our intellectual
property. Any such infringement or misappropriation could have a material
adverse effect on our business, results of operations, and financial condition.
We currently have no issued patents. We have two patent applications pending.
These or any new patent applications may not result in issued patents and may
not provide us with any competitive advantages,
    
 
                                        9
<PAGE>   14
 
   
or may be challenged by third parties. Legal standards relating to the validity,
enforceability, and scope of protection of certain intellectual property rights
in Internet-related industries are uncertain and still evolving, and the future
viability or value of any of our intellectual property rights is uncertain.
Effective trademark, copyright, and trade secret protection may not be available
in every country in which our products are distributed or made available through
the Internet. Furthermore, our competitors may independently develop similar
technology that substantially limits the value of our intellectual property. See
"Business -- Proprietary Rights."
    
 
   
OTHERS MAY BRING INFRINGEMENT CLAIMS AGAINST US
    
 
     In addition to the technology we have developed internally, we also use
code libraries developed and maintained by third parties and have acquired or
licensed certain technologies from other companies. Our internally developed
technology, the code libraries, or the technology we acquired or licensed may
infringe on a third party's intellectual property rights and such third parties
may bring claims against us alleging infringement of their intellectual property
rights. Any such infringement or claim of infringement could have a material
adverse affect on our business, result of operations, and financial condition.
 
     In recent years, there has been significant litigation in the United States
involving patents and other intellectual property rights. We are not currently
involved in any intellectual property litigation. We may, however, be a party to
litigation in the future to protect our intellectual property or as a result of
an alleged infringement of others' intellectual property. Such claims and any
resulting litigation could subject us to significant liability for damages and
invalidation of our proprietary rights. Such litigation, regardless of its
success, would likely be time-consuming and expensive to defend and would divert
management time and attention. Any potential intellectual property litigation
could also force us to do one or more of the following:
 
     - Cease selling, incorporating, or using products or services that
       incorporate the challenged intellectual property;
 
     - Obtain from the holder of the infringed intellectual property right a
       license to sell or use the relevant technology, which license may not be
       available on reasonable terms, or at all; and
 
     - Redesign those products or services that incorporate such technology.
 
   
     Any of these results could have a material adverse effect on our business,
results of operations, and financial condition.
    
 
   
EVOLVING REGULATION OF THE INTERNET MAY AFFECT US ADVERSELY
    
 
     As Internet commerce continues to evolve, increasing regulation by federal,
state, or foreign agencies becomes more likely. Such regulation is likely in the
areas of user privacy, pricing, content, and quality of products and services.
Taxation of Internet use, or other charges imposed by government agencies or by
private organizations for accessing the Internet, may also be imposed. Laws and
regulations applying to the solicitation, collection, or processing of personal
or consumer information could affect our activities. Furthermore, any regulation
imposing fees for Internet use could result in a decline in the use of the
Internet and the viability of Internet commerce, which could have a material
adverse effect on our business, results of operations, and financial condition.
 
                                       10
<PAGE>   15
 
   
WEBTRENDS IS SUBJECT TO THE RISK OF PRODUCT LIABILITY CLAIMS
    
 
   
     Our products are used to monitor the activity levels of our customers'
Internet sites, to provide real-time monitoring of firewalls, and to provide
real-time monitoring, alerting, and recovery of Internet servers. These and
other functions that our products provide are often critical to our customers,
especially in light of the considerable resources many organizations spend on
the development and maintenance of their Web sites. Additionally, our security
products often contribute to vital protection of a company's internal systems
and information. As a result, the licensing and support of our products may
expose us to the risk of product liability and related claims. Our end-user
licenses contain provisions that limit our exposure to such claims, but these
provisions may not be enforceable in certain jurisdictions. Additionally, we
maintain limited products liability insurance. To the extent our contractual
limitations are unenforceable or such claims are not covered by insurance, a
successful products liability claim could have a material adverse effect on our
business, results of operations, and financial condition.
    
 
     Our products and product enhancements are very complex and may from time to
time contain errors or result in failures that we did not detect or anticipate
when introducing such products or enhancements to the market. The computer
hardware environment is characterized by a wide variety of non-standard
configurations that make pre-release testing for programming or compatibility
errors very difficult and time consuming. Despite our testing, errors may still
be discovered in some new products or enhancements after the products or
enhancements are delivered to customers. The occurrence of these errors could
result in adverse publicity, loss of or delay in market acceptance, or claims by
customers against us, any of which could have a material adverse effect on our
business, results of operations, and financial condition. See
"Business -- Products and Services."
 
   
SOME OF OUR PRODUCTS MAY NOT BE YEAR 2000 COMPLIANT
    
 
     The "Year 2000 Issue" generally refers to the problems that some date
sensitive software may have in determining the correct century beginning in the
year 2000. For example, many systems will not recognize a difference between the
years 1900 and 2000 because they use only the last two digits of the year (00)
in their programming. Failure of such software or systems to recognize the
correct century could result in system failures or miscalculations causing
disruptions of operations and an inability to engage in similar ordinary
business activities.
 
   
     We have not tested our products in every possible computer environment, and
therefore such products may not be fully Year 2000 compliant. Certain older
versions of our products are not Year 2000 compliant; however, corrections for
such non-compliance are available. We have not tested for Year 2000 compliance
certain products that we no longer market that run on Novell systems, some of
which remain in use. These older products may not be Year 2000 compliant.
Failure of our products to be Year 2000 compliant could result in significant
decreases in market acceptance of our products and legal liability for defective
software, either of which would have a material adverse effect on our business,
results of operations, and financial condition.
    
 
   
     If our suppliers, vendors, major distributors, and partners fail to correct
their Year 2000 problems, such failure could result in an interruption in, or a
failure of, certain of our normal business activities or operations. Such
failures could have a material adverse effect on our business, results of
operations, and financial condition. Due to the general uncertainty inherent in
the Year 2000 problem resulting from the uncertainty of the Year 2000 readiness
of third-party suppliers and vendors, we are unable to determine at this
    
 
                                       11
<PAGE>   16
 
time whether the consequences of the Year 2000 failures will have a material
effect on our business, results of operations, and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Year 2000."
 
   
OUR SUCCESS DEPENDS ON CONTINUED USE AND EXPANSION OF THE INTERNET
    
 
   
     Continued expansion in the sales of our Internet management solutions will
depend upon the adoption of the Internet as a widely used medium for commerce
and communication. The Internet may not prove to be a viable commercial
marketplace because of inadequate development of the necessary infrastructure,
such as a reliable network backbone, or timely development of complementary
products, such as high speed modems. The Internet infrastructure may not be able
to support the demands placed on it by continued growth. Additionally, the
Internet could lose its viability due to delays in the development or adoption
of new standards and protocols to handle increased levels of Internet activity,
security, reliability, cost, ease of use, accessibility, and quality of service.
If the Internet does not continue to become a widespread communications medium
and commercial marketplace, the demand for our Internet management solutions
could be significantly reduced, which could have a material adverse effect on
our business, results of operations, and financial condition.
    
 
   
WE MAY BE UNABLE TO ADOPT OUR PRODUCTS TO CHANGES IN INTERNET TECHNOLOGY
    
 
   
     Even if the infrastructure, standards, or protocols of the Internet, or
complementary services, products, or facilities are developed, we may be
required to make significant expenditures to adapt our products to the changing
or emerging technologies. For example, if the format of Internet log files were
to change, our solutions for traffic analysis may not function as designed, and
we may incur significant expenses in developing new products that would be
compatible with the new format. We may not be successful in either developing
such software or timely introducing it to the market. Any such changes in
technology could have a material adverse effect on our business, results of
operations, and financial condition.
    
 
   
OUR MANAGEMENT WILL HAVE BROAD DISCRETION IN USE OF PROCEEDS
    
 
   
     The net proceeds from the sale of the common stock we are offering for sale
will be added to our general working capital upon completion of this offering.
We have not reserved or allocated the proceeds for any specific purpose, and we
cannot specify with certainty how we will use the net proceeds. Accordingly, our
management will have considerable discretion in the application of the net
proceeds. The net proceeds may be used for corporate purposes that do not
increase WebTrends' profitability or market value. Pending application of the
proceeds, they may be placed in investments that do not produce income or that
lose value. See "Use of Proceeds."
    
 
   
OUR OWNERSHIP IS CONCENTRATED
    
 
   
     Our officers and directors will beneficially own at least 67% and possibly
as much as 73% of the outstanding common stock after this offering, depending on
whether and to what extent the underwriters exercise their over-allotment
option. As a result, they will be able to exercise control over all matters
requiring shareholder approval. Our articles of incorporation and bylaws do not
provide for cumulative voting; therefore, these controlling shareholders will
have the ability to elect all of our directors. The controlling shareholders
will also have the ability to approve or disapprove significant corporate
transactions without further vote by the investors who purchase common stock
pursuant to this offering. This
    
 
                                       12
<PAGE>   17
 
ability to exercise control over all matters requiring shareholder approval
could prevent or significantly delay another company or person from acquiring or
merging with us. See "Management" and "Principal and Selling Shareholders."
 
   
OUR ANTI-TAKEOVER PROVISIONS AND PREFERRED STOCK MAY REDUCE THE MARKET PRICE OF
OUR COMMON STOCK
    
 
   
     Certain provisions of our articles of incorporation and bylaws may have the
effect of delaying, preventing, or making a merger or acquisition less desirable
to a potential acquirer, even where shareholders may consider the acquisition or
merger favorable. Such provisions include:
    
 
   
     - The ability of the board of directors, without further shareholder
       approval, to issue up to 15 million shares of preferred stock in one or
       more series and to determine the rights (including voting rights) and
       terms associated with such preferred stock;
    
 
   
     - Providing for a classified board of directors with three-year terms in
       certain circumstances;
    
 
     - Prohibiting cumulative voting for the election of directors;
 
   
     - Requiring approval by a super-majority of the shareholders to effect
       certain amendments to the articles of incorporation or bylaws; and
    
 
     - Requiring certain procedures to be followed before matters can be
       proposed for consideration at shareholder meetings.
 
   
     The issuance of preferred stock may have the effect of delaying, deferring,
or preventing a change in control without further action by the shareholders.
Any such issuance may materially adversely affect the market price of the common
stock and the voting rights of the holders of common stock. The issuance of
preferred stock may also result in the loss of the voting control of holders of
common stock to the holders of the preferred stock. See "Description of Capital
Stock -- Preferred Stock."
    
 
   
     Provisions of the Oregon Business Corporation Act and the Control Share Act
also may delay, prevent, or discourage someone from acquiring or merging with
us. See "Description of Capital Stock -- Oregon Control Share and Business
Combination Statutes."
    
 
   
TRADING IN OUR COMMON STOCK MAY BE LIMITED
    
 
   
     A public market for trading our common stock has not existed prior to this
offering. We applied to list the common stock on the Nasdaq National Market for
purposes of establishing a public market for trading. We do not know the extent
to which investor interest will lead to the development of a trading market or
how liquid that market might be. The initial public offering price for the
common stock will be determined through negotiations among the selling
shareholders, the underwriters, and us. If you purchase shares of common stock,
you may not be able to resell those shares at or above the initial public
offering price. See "Underwriting."
    
 
                                       13
<PAGE>   18
 
   
THE MARKET PRICE FOR OUR COMMON STOCK, LIKE OTHER TECHNOLOGY STOCKS, MAY BE
VOLATILE
    
 
   
     The market price of the common stock could be subject to significant
fluctuations in response to any of the following factors:
    
 
     - Variations in actual and anticipated operating results (see
       "-- Seasonality; Potential Fluctuations in Operating Results");
 
     - Changes in earnings estimates by analysts;
 
   
     - Failure to meet analysts' performance expectations; and
    
 
   
     - Lack of liquidity.
    
 
   
     The stock markets have, in general, and with respect to Internet companies
in particular, recently experienced stock price and volume volatility that has
affected the market prices of companies. The stock markets may continue to
experience volatility that may adversely affect the market price of the common
stock.
    
 
   
     The stock prices for many companies in the technology and emerging growth
sector have experienced wide fluctuations that have often been unrelated to the
operating performance of such companies. Fluctuations such as these may affect
the market price of the common stock. Additionally, securities class action
claims have been brought against issuing companies in the past where such
periods of volatility in the market price of a company's securities have taken
place. Such litigation could result in substantial costs and a diversion of
management's attention and resources, and any adverse determination in such
litigation could also subject us to significant liabilities, any or all of which
could have a material adverse effect on our business, results of operations, and
financial condition.
    
 
   
YOU SHOULD NOT RELY ON OUR FORWARD-LOOKING STATEMENTS
    
 
   
     This prospectus contains forward-looking statements that involve risks and
uncertainties. Discussions containing forward-looking statements may be found in
the material set forth under "Business" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," as well as within
this prospectus generally. In addition, when used in this prospectus, the words
"believes," "intends," "anticipates," "expects," and similar expressions are
intended to identify forward-looking statements. Forward-looking statements are
subject to a number of risks and uncertainties. Actual results could differ
materially from those described in the forward-looking statements as a result of
the risk factors set forth in this section and the information provided in this
prospectus generally. We do not intend to update any forward-looking statements.
    
 
                                       14
<PAGE>   19
 
                                USE OF PROCEEDS
 
   
     At an assumed initial public offering price of $10.00 per share, which is
the mid-point of the estimated initial public offering price range set forth on
the cover page of this prospectus, the net proceeds from the sale of shares of
common stock to be sold by WebTrends are expected to be approximately $26.9
million, after deduction of underwriting discounts and commissions and estimated
offering expenses payable by WebTrends. WebTrends will not receive any proceeds
from the sale of common stock by the selling shareholders.
    
 
   
     Among the purposes of this offering are the following:
    
 
   
     - To obtain additional equity capital;
    
 
   
     - To create a public market for the common stock;
    
 
   
     - To facilitate WebTrends' ability to access the public equity markets in
       the future;
    
 
   
     - To provide liquidity to certain of the existing shareholders; and
    
 
   
     - To provide increased visibility and credibility to WebTrends,
       facilitating expansion in a marketplace in which many of its competitors
       and customers are public companies.
    
 
   
     The board of directors and management of WebTrends have significant
flexibility in applying the net proceeds of this offering. The amounts and
timing of WebTrends' actual expenditures will depend upon numerous factors,
including the status of WebTrends' product development efforts, competition, and
marketing and sales activities. WebTrends anticipates using the net proceeds of
this offering for working capital and general corporate purposes. Although
WebTrends currently has no agreements or commitments to do so, it may also use a
portion of the net proceeds to license or acquire new products or technologies
or to acquire or invest in businesses complementary to its own. WebTrends has no
current plans or proposals pending for any such acquisitions or investments.
Pending the use of the net proceeds, WebTrends intends to invest them in
government securities and short-term, investment-grade, interest-bearing
securities. See "Risk Factors -- Our Management will have Broad Discretion in
Use of Proceeds."
    
 
                                DIVIDEND POLICY
 
   
     WebTrends did not declare any cash dividends on its capital stock in 1997
or 1998. WebTrends intends to retain its present and future earnings, if any, to
finance the growth and development of its business. It does not intend to pay
cash dividends in the foreseeable future, and the amounts and payment of future
dividends, if any, will be determined by its board of directors.
    
 
                                       15
<PAGE>   20
 
                                 CAPITALIZATION
 
   
     The following table sets forth the capitalization of WebTrends as of
December 31, 1998, (a) on a historical basis and (b) on an adjusted basis,
giving effect to the sale of 3,000,000 shares of common stock being sold by
WebTrends in this offering at an assumed initial public offering price of $10.00
per share, and after deducting estimated underwriters discounts and commissions
and estimated offering expenses payable by WebTrends.
    
 
   
     The information shown below excludes 3,341,562 shares reserved for issuance
under WebTrends' stock option and stock purchase plans, of which 1,471,149 were
issuable upon exercise of stock options outstanding as of December 31, 1998,
with a weighted average exercise price of $2.46 per share. Upon the closing of
this offering, the Class A Common Stock will be redesignated common stock, no
par value per share, and will be the only authorized class of common stock. Each
share of Class B Common Stock will automatically be converted into one share of
such common stock, and the recorded value of the Class B Common Stock will be
transferred to common stock. The information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and WebTrends' Financial Statements and related notes
thereto and other financial information included elsewhere in this prospectus.
    
 
   
<TABLE>
<CAPTION>
                                                               DECEMBER 31, 1998
                                                            -----------------------
                                                            ACTUAL     AS ADJUSTED
                                                            -------    ------------
                                                            (DOLLARS IN THOUSANDS)
<S>                                                         <C>        <C>
Shareholders' equity:
  Preferred Stock, no par value per share; 15 million
     shares authorized, no shares issued and outstanding,
     actual and adjusted..................................   $  --       $    --
  Class A Common Stock, no par value per share; 30 million
     shares authorized, 8,210,527 shares issued and
     outstanding, actual; 60 million shares authorized,
     11,218,964 shares issued and outstanding, as
     adjusted.............................................     260        27,480
  Class B Common Stock, no par value per share; 30 million
     shares authorized, 8,437 shares issued and
     outstanding, actual; no shares authorized, no shares
     issued and outstanding, as adjusted..................     320            --
Deferred compensation.....................................    (282)         (282)
Retained earnings.........................................     544           544
                                                             -----       -------
  Total shareholders' equity..............................     842        27,742
                                                             -----       -------
          Total capitalization............................   $ 842       $27,742
                                                             =====       =======
</TABLE>
    
 
   
    
 
                                       16
<PAGE>   21
 
                                    DILUTION
 
   
     As of December 31, 1998, WebTrends' net tangible book value was
approximately $842,000 or $0.10 per share of common stock. Net tangible book
value per share represents the amount of WebTrends' tangible assets less the
amount of its liabilities, divided by the number of shares of common stock
outstanding.
    
 
   
     Giving effect to the issuance of 3,000,000 shares of common stock offered
by WebTrends at an assumed initial public offering price of $10.00 per share,
after the deduction of estimated underwriting discounts and offering expenses
payable by WebTrends, adjusted net tangible book value as of December 31, 1998
would have been approximately $2.47 per share. This represents an immediate
increase in net tangible book value of $2.37 per share to existing shareholders
and an immediate dilution of $7.53 per share to purchasers of shares in this
offering. The following table illustrates the per share dilution:
    
 
   
<TABLE>
<S>                                                           <C>      <C>
Assumed initial public offering price per share.............           $10.00
  Net tangible book value per share before this offering....  $0.10
  Increase per share attributable to new investors..........   2.37
                                                              -----
Adjusted net tangible book value per share after this
  offering..................................................             2.47
                                                                       ------
Dilution per share to new investors in this offering........           $ 7.53
                                                                       ======
</TABLE>
    
 
   
     The following table sets forth information as of December 31, 1998, after
giving effect to this offering at an assumed initial public offering price of
$10.00 per share, as to the number of shares of common stock purchased from
WebTrends, the total consideration paid to WebTrends, and the average price paid
per share by existing shareholders and by new investors purchasing common stock
in this offering.
    
 
   
<TABLE>
<CAPTION>
                       SHARES PURCHASED(1)(2)      TOTAL CONSIDERATION
                       -----------------------    ----------------------    AVERAGE PRICE
                         NUMBER       PERCENT       AMOUNT       PERCENT      PER SHARE
                       -----------    --------    -----------    -------    -------------
<S>                    <C>            <C>         <C>            <C>        <C>
Existing                8,218,964       73.3%     $   265,119       0.9%        $0.03
  shareholders.......
New investors........   3,000,000       26.7       30,000,000      99.1         10.00
                       ----------      -----      -----------     -----
          Total......  11,218,964      100.0%     $30,265,119     100.0%
                       ==========      =====      ===========     =====
</TABLE>
    
 
   
     The information in the table above does not include the 1,471,149 shares
issuable upon exercise of stock options outstanding as of December 31, 1998,
with a weighted average exercise price of $2.46 per share. Furthermore, if the
underwriters exercise their over-allotment option in full, sales by selling
shareholders in this offering will reduce the number of shares held by existing
shareholders to 7,768,964 shares, or 69.2% of the total number of shares
outstanding, and will increase the number of shares held by new investors to
3,450,000 shares, or 30.8% of the total number of shares outstanding after this
offering. See "Management -- Employee Benefit Plans," "Description of Capital
Stock -- Stock Options;" and "Principal and Selling Shareholders."
    
 
                                       17
<PAGE>   22
 
                            SELECTED FINANCIAL DATA
 
   
     The following selected financial data is qualified by reference to, and
should be read in conjunction with, the Financial Statements and notes thereto,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," and other financial information appearing elsewhere in this
prospectus. The statement of operations data set forth below for each of the
years in the three-year period ended December 31, 1998, and the balance sheet
data as of December 31, 1997 and 1998, are derived from, and qualified by
reference to, the audited financial statements appearing elsewhere in this
prospectus. The statement of operations data set forth below for the year ended
December 31, 1995, and the balance sheet data as of December 31, 1995 and 1996
are derived from, and qualified by reference to, audited financial statements.
The statement of operations data set forth below, for the year ended December
31, 1994, and the balance sheet data as of December 31, 1994, are derived from,
and qualified by reference to, unaudited financial statements. The unaudited
financial statements have been prepared on the same basis as the audited
financial statements and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the information set forth therein. Historical results are not
necessarily indicative of the results that may be expected in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
    
 
   
<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                              --------------------------------------
                                                              1994   1995    1996     1997     1998
                                                              ----   ----   ------   ------   ------
                                                              (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                           <C>    <C>    <C>      <C>      <C>
STATEMENTS OF OPERATIONS DATA
Revenue:
  Software licenses.........................................  $276   $617   $1,858   $3,837   $7,206
  Support services..........................................    --     20        7      218      802
                                                              ----   ----   ------   ------   ------
         Total revenue......................................   276    637    1,865    4,055    8,008
Cost of revenue.............................................     7     39      205      292      633
                                                              ----   ----   ------   ------   ------
  Gross margin..............................................   269    598    1,660    3,763    7,375
                                                              ----   ----   ------   ------   ------
Operating expenses:
  Research and development..................................    34     91      403    1,059    2,211
  Sales and marketing.......................................    12    152      552    1,528    3,642
  General and administrative................................   126    187      307      749    1,300
                                                              ----   ----   ------   ------   ------
         Total operating expenses...........................   172    430    1,262    3,336    7,153
                                                              ----   ----   ------   ------   ------
Income from operations......................................    97    168      398      427      222
Other income, net...........................................     1      1        7       10       29
                                                              ----   ----   ------   ------   ------
Income before income taxes..................................    98    169      405      437      251
Income taxes(1).............................................                            150       32
                                                              ----   ----   ------   ------   ------
Net income(1)...............................................  $ 98   $169   $  405   $  287   $  219
                                                              ====   ====   ======   ======   ======
Basic net income per share(2)...............................                         $  .04   $  .03
Diluted net income per share(2).............................                            .04      .02
                                                                                     ======   ======
Shares used in basic net income per share calculation(2)....                          8,126    8,211
Shares used in diluted net income per share
  calculation(2)............................................                          8,126    9,003
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                                                          DECEMBER 31,
                                                              ------------------------------------
                                                              1994   1995   1996    1997     1998
                                                              ----   ----   ----   ------   ------
                                                                         (IN THOUSANDS)
<S>                                                           <C>    <C>    <C>    <C>      <C>
BALANCE SHEET DATA
Cash and cash equivalents...................................  $108   $179   $321   $  807   $1,099
Working capital (deficit)...................................   158    319   (103)     260      221
Total assets................................................   198    365    910    1,886    3,362
Long-term obligations.......................................    70     72     --        7       --
Total shareholders' equity..................................    98    267     47      584      842
</TABLE>
    
 
-------------------------
   
(1) Prior to 1997, WebTrends was an S Corporation and therefore did not pay
    federal or state corporate income taxes.
    
 
   
(2) See Note 1 of Notes to Financial Statements for the determination of shares
    used in computing basic and diluted net income per share. Net income per
    share data is not presented for any period prior to 1997 as WebTrends'
    capital structure prior to January 1, 1997 is not comparable to that
    existing in 1997. See Note 8 of the Notes to the Financial Statements.
    
 
                                       18
<PAGE>   23
 
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
   
     The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Financial Statements and related notes thereto
included elsewhere in this prospectus. The following "Management's Discussion
and Analysis of Financial Condition and Results of Operations" contains
forward-looking statements that involve risks and uncertainties, such as
WebTrends' plans, objectives, expectations, and intentions. WebTrends' actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not limited to, those
discussed below, those set forth under "Risk Factors," and elsewhere in this
Prospectus.
    
 
OVERVIEW
 
   
     WebTrends Corporation provides comprehensive, integrated, scaleable,
modular, and easy-to-use solutions that enable organizations to cost-effectively
manage and report on their Internet-based systems. WebTrends was incorporated on
August 31, 1993 and reorganized effective January 1, 1997. Prior to 1997,
WebTrends was not taxable as an entity because the shareholders had elected to
be taxed individually based on their percentage ownership of the outstanding
common stock.
    
 
   
     Since the year ended December 31, 1996, WebTrends has generated most of its
revenue from licensing its traffic analysis and management suite products and
related support services. WebTrends' initial traffic analysis product, the
WebTrends Log Analyzer, was introduced in February 1996 and is currently offered
in version 4.5. In September and November 1997, respectively, WebTrends
introduced its Enterprise and Professional Suite products. The Professional
Suite integrates Web site traffic analysis with proxy server traffic analysis,
link analysis, quality control, content management, as well as monitoring,
alerting, and recovery. The Enterprise Suite enables users to manage more
complex server configurations and to integrate Web site traffic analysis data
with existing databases, permitting advanced, custom analyses. Both products are
currently in version 3.0. In May 1998, WebTrends introduced the WebTrends Suite
for Lotus Domino, which is the first software package on the market to offer
full management, reporting, and analysis for Lotus Domino Web Servers. In June
1998, WebTrends introduced WebTrends for Firewalls and VPNs, which is a
real-time solution to manage, report, and monitor firewall activity. In January
1999, WebTrends introduced the WebTrends Security Analyzer, which helps secure
Internet servers and other Internet devices. Prior to 1996, WebTrends generated
substantially all of its revenue from the license of its AuditTrack product and
related products developed as solutions for managing Novell networks. WebTrends
continues to sell AuditTrack, and revenue from this product represented
approximately 13.2% of total revenue during 1998. It expects that revenue from
its AuditTrack product will decrease both in absolute dollars and as a
percentage of revenue as sales of its Internet products continue to increase.
    
 
   
     Software license revenue consists of fees for licenses of WebTrends'
software products. Revenue allocated to software licenses is recognized upon
delivery of software, assuming no significant obligations or customer acceptance
rights exist. WebTrends generally provides a thirty-day right of return for each
product sold. Estimated sales returns and allowances are recorded upon shipment
of the product.
    
 
   
     WebTrends sells a portion of its products domestically and internationally
through resellers. Revenue from sales to domestic resellers is managed directly
by WebTrends, and it recognizes revenue from sales primarily at the time of
shipment, net of estimated returns
    
 
                                       19
<PAGE>   24
 
   
and allowances. Revenue from sales to international resellers is managed by a
third party export management company and revenue is recognized upon sales from
the reseller to a third party or end user.
    
 
   
     Support services revenue consists of annual subscriptions for upgrades,
post customer support services. and professional services. Revenue allocated to
subscriptions, which allow the subscriber to purchase the right to obtain
upgrades, when and if available, are paid in advance and revenues are recognized
ratably over the term of the subscription. Revenue allocated to professional
services is recognized as the services are performed.
    
 
   
     WebTrends generates revenue through direct sales to end users and through
its indirect distribution channels. Direct sales are generated by its telesales
organization, direct field sales force, and through on-line sales. The indirect
distribution channel includes distributors, resellers, and value added
resellers. WebTrends also conducts joint marketing and distribution programs
with certain strategic partners. It derives its international revenue primarily
through its indirect distribution channel.
    
 
   
     Approximately 22.0% and 27.5% of WebTrends' total revenue for the years
ended December 31, 1997 and 1998, respectively, was attributable to sales made
outside the United States. It expects that international sales will continue to
represent a significant portion of its total revenue. WebTrends' international
sales are currently denominated in U.S. dollars. As a result, increases in the
value of the U.S. dollar relative to foreign currencies could make its products
more expensive and, therefore, potentially less competitive in those markets.
    
 
   
     WebTrends has recorded net deferred compensation of approximately $282,000
as of December 31, 1998, which represents the difference between the exercise
price and the fair value of the shares of common stock issuable upon the
exercise of stock options that were granted to employees in July and August
1998. The deferred compensation is being amortized over the vesting period of
the stock options.
    
 
   
     Software development costs have been accounted for in accordance with
Statement of Financial Accounting Standards No. 86, Accounting for the Costs of
Computer Software to be Sold, Leased, or Otherwise Marketed. Under the standard,
capitalization of software development costs begins upon the establishment of
technological feasibility, subject to net realizable value considerations. To
date, the period between achieving technological feasibility and the general
availability of such software has been short; therefore, software development
costs qualifying for capitalization have been immaterial. Accordingly, WebTrends
has not capitalized any software development costs and charged all such costs to
research and development expense.
    
 
   
     WebTrends has grown rapidly, with revenue increasing from $1.9 million in
1996 to $8.0 million in 1998. During this period, it has experienced continued
profitability and, as of December 31, 1998, had retained earnings of $544,000.
However, this growth rate and profitability may not be sustainable, and it
should not be relied upon as predictive of future performance. WebTrends expects
to continue to increase its expenditures in all areas in order to execute its
business plan. In particular, WebTrends currently expects to expand its sales
and marketing operations, expand its international distribution channels,
increase its investment in product development, and improve its internal
operating and financial infrastructure. As a result, it does not expect to
increase profitability in line with revenue growth.
    
 
   
     WebTrends' prospects must be considered in light of the risks and
uncertainties frequently encountered by companies in the early stages of
development, particularly
    
 
                                       20
<PAGE>   25
 
   
companies in new and rapidly evolving markets. WebTrends may not be successful
in addressing such risks and difficulties or sustaining or increasing
profitability in the future. See "Risk Factors -- WebTrends has a Limited
Operating History and May Not Remain Profitable," "-- Our Rapidly Changing
Market Increases Product Risk," and "-- Our Rate of Growth Strains Our System
and Management Resources."
    
 
RESULTS OF OPERATIONS
 
   
     The following table sets forth certain historical operating information of
WebTrends, as a percentage of total revenue, for the periods indicated.
    
 
   
<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                                         -----------------------
                                                         1996     1997     1998
                                                         -----    -----    -----
<S>                                                      <C>      <C>      <C>
Statement of Operations Data
  Revenue:
     Software licenses.................................   99.6%    94.6%    90.0%
     Support services..................................    0.4      5.4     10.0
                                                         -----    -----    -----
          Total revenue................................  100.0    100.0    100.0
  Cost of revenue......................................   11.0      7.2      7.9
                                                         -----    -----    -----
     Gross margin......................................   89.0     92.8     92.1
                                                         -----    -----    -----
  Operating expenses:
     Research and development..........................   21.6     26.1     27.6
     Sales and marketing...............................   29.6     37.7     45.5
     General and administrative........................   16.5     18.5     16.2
                                                         -----    -----    -----
          Total operating expenses.....................   67.7     82.3     89.3
                                                         -----    -----    -----
Income from operations.................................   21.3     10.5      2.8
Other income, net......................................    0.4      0.3      0.4
                                                         -----    -----    -----
Income before income taxes.............................   21.7     10.8      3.2
Income taxes...........................................     --      3.7      0.4
                                                         -----    -----    -----
Net income.............................................   21.7%     7.1%     2.8%
                                                         =====    =====    =====
</TABLE>
    
 
REVENUE
 
   
     Total revenue increased from $1.9 million in 1996 to $4.1 million in 1997,
and $8.0 million in 1998. The increases reflect year to year revenue growth of
117.4% and 97.5%, respectively.
    
 
   
     Software Licenses. Software license revenue represented 90% or more of
total revenue for all periods reported. Software license revenue increased from
$1.9 million in 1996, to $3.8 million in 1997, and $7.2 million in 1998. The
increase in software license revenue from 1996 to 1997 is primarily attributable
to the effect of a full year of sales of the WebTrends Log Analyzer in the year
ended December 31, 1997. The increase in software license revenue from 1997 to
1998 results from the sales of additional products, including the WebTrends
Professional Suite and WebTrends Enterprise Suite, introduced during late 1997,
and WebTrends for Firewalls and VPNs, introduced in mid-1998.
    
 
   
     Support Services. Support services revenue increased from $7,000 in 1996,
to $218,000 in 1997, and $802,000 in 1998, representing approximately 0.4%,
5.4%, and 10.0% of total revenues, respectively. The increases in support
services revenue are primarily attributable to an increase in the installed base
of customers over the comparable periods and the initiation of WebTrends
subscription program in the fourth quarter of 1996.
    
 
                                       21
<PAGE>   26
 
COST OF REVENUE
 
   
     Cost of revenue includes product packaging, software documentation,
duplication, labor, and other costs associated with handling, packaging, and
shipping product, royalties associated with the sale of WebTrends' products, and
costs associated with providing technical support and consulting services to
customers. The cost of revenue increased from $205,000 in 1996, to $292,000 in
1997, and $633,000 in 1998. As a percentage of total revenue, the cost of
revenue increased from 7.2% for the year ended December 31, 1997 to 7.9% for the
year ended December 31, 1998. The increase in cost of revenue is primarily
attributable to the hiring of additional customer support personnel to handle
the increased demand from a larger installed base. As a percentage of total
revenue, the cost of revenue decreased from 11.0% for the year ended December
31, 1996 to 7.2% for the year ended December 31, 1997. This decrease is
primarily due to leveraging fixed costs across increased license revenue and
greater material and shipping discounts associated with higher sales volume.
    
 
OPERATING EXPENSES
 
   
     Research and Development. Research and development expenses consist
primarily of salaries and related costs associated with the development of new
products, the enhancement of existing products, and the performance of quality
assurance and documentation activities. Research and development expenses
increased from $403,000 in 1996, to $1.1 million in 1997, and $2.2 million in
1998, representing 21.6%, 26.1%, and 27.6% of total revenues, respectively. The
increases in research and development expenses, both in absolute dollars and as
a percent of total revenue, are primarily attributable to the hiring of
additional research and development personnel and, secondarily, costs related to
supporting the development of new products and enhanced versions of existing
products. During the year ended December 31, 1998, WebTrends released three new
products. It continues to believe that significant investment in research and
development is required to remain competitive in its markets, and therefore
anticipates that research and development expenses will increase in absolute
dollars in future periods, but may vary as a percent of total revenue.
    
 
   
     Sales and Marketing. Sales and marketing expenses consist primarily of
salaries, trade shows, commissions, and advertising costs. Sales and marketing
expenses increased from $553,000 in 1996, to $1.5 million in 1997, and $3.6
million in 1998, representing 29.6%, 37.7%, and 45.5% of total revenues,
respectively. The increases in sales and marketing expenses are primarily
attributable to the hiring of additional sales, marketing, and customer support
personnel during the periods presented, including additional personnel required
to support indirect distribution channels, and, to a lesser extent, increased
spending on advertising and tradeshows. WebTrends expects that sales and
marketing expenses will continue to increase in absolute dollars as it continues
to expand its marketing programs and sales force to increase brand awareness,
but they may vary as a percent of total revenue.
    
 
   
     General and Administrative. General and administrative expenses consist
primarily of salaries and other personnel-related costs for executive,
financial, human resource, information services, and other administrative
personnel, as well as legal, accounting, and insurance costs. General and
administrative expenses increased from $307,000 in 1996, to $749,000 in 1997,
and $1.3 million in 1998, representing 16.5%, 18.5%, and 16.2% of total
revenues, respectively. The increase in absolute dollars is primarily
attributable to the hiring of additional accounting, administration, and
information services personnel and, secondarily, increased costs for rent.
WebTrends expects general and administrative
    
 
                                       22
<PAGE>   27
 
   
expenses to increase in absolute dollars to support the anticipated sales and
operations, but they may vary as a percent of total revenue.
    
 
   
INCOME TAXES
    
 
   
     Income taxes decreased from $151,000 for the year ended December 31, 1997
to $31,000 for the year ended December 31, 1998, primarily due to lower income
from operations resulting from WebTrends' increased operating expenses during
1998 and from the utilization of research and development tax credits associated
with its investment in developing new products. WebTrends was an S Corporation,
and therefore paid no corporate income taxes prior to 1997. Income taxes for the
year ended December 31, 1997 reflect an effective tax rate of approximately
34.4% of taxable income and is comprised of federal and state income taxes.
Income taxes for the year ended December 31, 1998 reflect WebTrends' estimated
consolidated tax rate for federal and state taxes of approximately 12.5% of
taxable income.
    
 
                                       23
<PAGE>   28
 
SELECTED QUARTERLY FINANCIAL RESULTS
 
   
     The following table sets forth a summary of WebTrends' unaudited quarterly
operating results for each of the eight quarters in the period ended December
31, 1998, as well as results expressed as a percentage of its total revenue for
the periods indicated. This information has been derived from unaudited interim
financial statements that, in the opinion of management, have been prepared on a
basis consistent with the financial statements contained elsewhere in this
prospectus and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of such information when read in
conjunction with Financial Statements and notes thereto appearing elsewhere in
this prospectus. The operating results for any quarter are not necessarily
indicative of results for any future period.
    
 
   
<TABLE>
<CAPTION>
                                                                              QUARTER ENDED
                                         ---------------------------------------------------------------------------------------
                                         MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                                           1997       1997       1997        1997       1998       1998       1998        1998
                                         --------   --------   ---------   --------   --------   --------   ---------   --------
                                                                             (IN THOUSANDS)
<S>                                      <C>        <C>        <C>         <C>        <C>        <C>        <C>         <C>
STATEMENT OF OPERATIONS DATA
Revenue:
  Software licenses....................   $  785     $  877     $  967      $1,208     $1,496     $1,661     $1,868      $2,181
  Support services.....................       22         42         66          88        125        168        221         288
                                          ------     ------     ------      ------     ------     ------     ------      ------
         Total revenue.................      807        919      1,033       1,296      1,621      1,829      2,089       2,469
 
Cost of revenue........................       76         87         49          80        129        149        167         188
                                          ------     ------     ------      ------     ------     ------     ------      ------
  Gross margin.........................      731        832        984       1,216      1,492      1,680      1,922       2,281
                                          ------     ------     ------      ------     ------     ------     ------      ------
Operating expenses:
  Research and development.............      181        200        238         440        456        512        639         604
  Sales and marketing..................      259        351        449         469        720        800        877       1,245
  General and administrative...........      130        176        196         247        292        329        356         323
                                          ------     ------     ------      ------     ------     ------     ------      ------
         Total operating expenses......      570        727        883       1,156      1,468      1,641      1,872       2,172
                                          ------     ------     ------      ------     ------     ------     ------      ------
Income from operations.................      161        105        101          60         24         39         50         109
Other income, net......................        1          3          3           4          5          8          9           7
                                          ------     ------     ------      ------     ------     ------     ------      ------
Income before income taxes.............      162        108        104          64         29         47         59         116
Income taxes...........................       55         37         35          24          3          6          7          16
                                          ------     ------     ------      ------     ------     ------     ------      ------
Net income.............................   $  107     $   71     $   69      $   40     $   26     $   41     $   52      $  100
                                          ======     ======     ======      ======     ======     ======     ======      ======
AS A PERCENTAGE OF TOTAL REVENUE
Revenue:
  Software licenses....................     97.3%      95.4%      93.6%       93.1%      92.3%      90.8%      89.4%       88.3%
  Support services.....................      2.7        4.6        6.4         6.9        7.7        9.2       10.6        11.7
                                          ------     ------     ------      ------     ------     ------     ------      ------
         Total revenue.................    100.0      100.0      100.0       100.0      100.0      100.0      100.0       100.0
 
Cost of revenue........................      9.4        9.5        4.7         6.2        8.0        8.1        8.0         7.6
                                          ------     ------     ------      ------     ------     ------     ------      ------
  Gross margin.........................     90.6       90.5       95.3        93.8       92.0       91.9       92.0        92.4
                                          ------     ------     ------      ------     ------     ------     ------      ------
Operating expenses:
  Research and development.............     22.4       21.8       23.0        33.9       28.1       28.0       30.6        24.5
  Sales and marketing..................     32.1       38.2       43.5        36.1       44.4       43.7       42.0        50.4
  General and administrative...........     16.1       19.1       19.0        19.1       18.0       18.0       17.0        13.1
                                          ------     ------     ------      ------     ------     ------     ------      ------
         Total operating expenses......     70.6       79.1       85.5        89.1       90.5       89.7       89.6        88.0
                                          ------     ------     ------      ------     ------     ------     ------      ------
Income from operations.................     20.0       11.4        9.8         4.7        1.5        2.2        2.4         4.4
Other income, net......................      0.1        0.3        0.3         0.3        0.3        0.4        0.4         0.3
                                          ------     ------     ------      ------     ------     ------     ------      ------
Income before income taxes.............     20.1       11.7       10.1         5.0        1.8        2.6        2.8         4.7
Income taxes...........................      6.8        4.0        3.4         1.9        0.2        0.3        0.4         0.6
                                          ------     ------     ------      ------     ------     ------     ------      ------
Net income.............................     13.3%       7.7%       6.7%        3.1%       1.6%       2.3%       2.4%        4.1%
                                          ======     ======     ======      ======     ======     ======     ======      ======
</TABLE>
    
 
                                       24
<PAGE>   29
 
   
     During WebTrends' history, its operating results have varied on a quarterly
basis and may fluctuate significantly in the future on a quarterly and annual
basis as a result of a combination of factors. The second and third quarters of
the year have been typically characterized by lower levels of revenue growth.
This seasonal reduction in the rate of growth is due primarily to a general
reduction in the amount and frequency of new sales in the European markets
during the summer months. WebTrends expects this seasonality to continue, and it
may result in lower revenue during those quarters. In addition to these seasonal
fluctuations, factors that could cause WebTrends' quarterly operating results to
fluctuate include:
    
 
   
     - The level of demand for its products;
    
 
   
     - The volume and timing of orders;
    
 
   
     - The level of product and price competition;
    
 
   
     - The ability to expand its domestic and international sales, and marketing
       organizations;
    
 
   
     - The ability to develop new and enhanced products;
    
 
   
     - The ability to attract and retain key technical, sales and managerial
       personnel;
    
 
   
     - The mix of distribution channels through which its products are sold;
    
 
   
     - The growth in the acceptance of, and activity on, the Internet,
       particularly by users within organizations;
    
 
   
     - The level of growth of intranets;
    
 
   
     - Customer budgets;
    
 
   
     - Foreign currency exchange rates; and
    
 
   
     - General economic factors.
    
 
   
     In addition, the amount of revenue associated with particular licenses can
vary significantly based upon the number of products licensed and the number of
devices involved in the installation. WebTrends establishes its expenditure
levels for product development, sales and marketing and other operating expenses
based, in large part, on its expected future revenue. WebTrends' expectations
regarding future revenue may not be accurate. As a result, if revenues fall
below expectations, operating results and net income are likely to be adversely
and disproportionately affected because only a small portion of WebTrends'
expenses vary with its revenue.
    
 
   
     WebTrends is also increasing its sales and marketing efforts focused on
larger purchases by larger customers. Such transactions are generally more
complex and may increase the length of WebTrends' average sales cycle. It
anticipates that an increasing portion of its revenue could be derived from
larger orders, in which case the timing of receipt and fulfillment of any such
orders could cause fluctuations in its operating results, particularly on a
quarterly basis.
    
 
   
     Due to the foregoing factors, WebTrends' operating results are difficult to
forecast. It believes that period-to-period comparisons of its historical
operating results are not meaningful and should not be relied upon as an
indication of future performance. Also, WebTrends' operating results may fall
below its expectations and those of securities analysts, or investors in some
future quarter. In such event, the market price of its common stock would likely
be materially adversely affected.
    
 
                                       25
<PAGE>   30
 
LIQUIDITY AND CAPITAL RESOURCES
 
   
     WebTrends has financed its operations primarily with cash from operations
and loans and capital contributions from shareholders. As of December 31, 1998,
it had working capital of approximately $221,000, compared to working capital of
$260,000 at December 31, 1997.
    
 
   
     Net cash provided by operating activities was approximately $441,000 for
the year ended December 31, 1996, $808,000 for the year ended December 31, 1997,
and $866,000 for the year ended December 31, 1998. Net cash provided by
operating activities resulted primarily from profitable operations, higher
credit card sales volume, and increased accrued liabilities, partially offset by
increased accounts receivable for the periods indicated.
    
 
   
     Net cash used by investing activities was approximately $156,000 for the
year ended December 31, 1996, $270,000 for the year ended December 31, 1997, and
$479,000 for the year ended December 31, 1998. Investing activities for the
periods were primarily purchases of computer equipment and related software. At
December 31, 1998, WebTrends had no material commitments for capital
expenditures.
    
 
   
     Net cash used by financing activities was approximately $142,000 for the
year ended December 31, 1996, $53,000 for the year ended December 31, 1997, and
$95,000 for the year ended December 31, 1998. The use of cash was primarily for
the repayment of loans made to WebTrends by its shareholders and the payment of
shareholder dividends, partially offset by the private sale of stock during
March 1997.
    
 
   
     As of December 31, 1998, WebTrends had approximately $1.1 million in cash
and cash equivalents and a $750,000 bank line of credit with a major financial
institution. The line of credit expires on April 30, 1999. Borrowings under the
line generally are limited to 80% of WebTrends' eligible accounts receivable.
Interest on the unpaid balance accrues at a rate of prime plus 0.25%. Borrowings
under the line of credit are collateralized by WebTrends' accounts receivable,
inventory, and general intangible assets, including its intellectual property
rights. The line of credit agreement contains financial covenants, including the
ratio of current assets to liabilities, and tangible net worth. As of December
31, 1998, WebTrends had a letter of credit for $225,000 outstanding against this
line and was in compliance with all covenants. Since its inception, WebTrends
has significantly increased its operating expenses. It anticipates that it will
continue to experience significant growth in its operating expenses for the
foreseeable future and that its operating expenses and capital expenditures will
constitute a material use of its cash resources. In addition, WebTrends may
utilize cash resources to fund acquisitions or investments in businesses,
technologies, or product lines that are complementary to its business. WebTrends
believes that the net proceeds to it from this offering, together with its
current cash and cash equivalents, and funds expected to be generated from
operations, will satisfy its anticipated working capital and other cash
requirements for at least the next 12 months.
    
 
IMPACT OF THE YEAR 2000 COMPUTER PROBLEM
 
     The Year 2000 computer problem refers to the potential for system and
processing failures of date-related data as a result of computer-controlled
systems using two digits rather than four to define the applicable year. For
example, computer programs that have time-sensitive software may recognize a
date represented as "00" as the year 1900 rather than the year 2000. This could
result in a system failure or miscalculations causing
 
                                       26
<PAGE>   31
 
   
disruptions of operations, including among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities.
    
 
STATE OF READINESS OF THE COMPANY'S PRODUCTS
 
   
     All new products introduced by WebTrends will be Year 2000 compliant. It
has been testing its existing products for use in the year 2000 and beyond. The
results suggest that the following versions of its products, and later versions
of such products, are Year 2000 compliant:
    
 
     - AuditTrack v 3.2
 
     - SmartPass v1.09
 
     - WebTrends Log Analyzer v 4.0a
 
   
     - WebTrends Professional Suite v3.0a
    
 
   
     - WebTrends Enterprise Suite v3.0a
    
 
   
     - WebTrends Suite for Lotus Domino v2.0a
    
 
     - WebTrends for Firewalls and VPNs v1.0
 
   
However, its testing does not cover every possible computing environment.
Accordingly, some customers may have Year 2000 problems with products that
WebTrends believes are Year 2000 compliant.
    
 
   
     Certain of WebTrends' customers may be using older versions of the above
products. Problems encountered by such customers could be quickly remedied
because of the availability of Year 2000 upgrades and updates for such products.
In addition, WebTrends has not tested certain discontinued products that it no
longer markets for Year 2000 compliance, some of which might still be in use.
These discontinued products are not widely deployed. WebTrends expects that any
customers that materially rely on such discontinued products will test them for
Year 2000 compliance and notify WebTrends if there are problems. WebTrends'
experience in developing Year 2000 compliant versions of its existing products,
suggests that if it is required to correct Year 2000 problems in such
discontinued products, it could do so without incurring material expenses.
    
 
STATE OF READINESS OF THE COMPANY'S INTERNAL SYSTEMS
 
   
     WebTrends may be affected by Year 2000 issues related to non-compliant
internal systems developed by WebTrends or by third-party vendors. It has
received assurances from its third-party vendors for all material systems in use
by WebTrends that such systems are Year 2000 compliant. WebTrends is not
currently aware of any Year 2000 problem relating to any of its internal,
material systems. WebTrends plans to test all such systems for Year 2000
compliance by June 30, 1999. It does not believe that it has any material
systems that contain embedded chips that are not Year 2000 compliant.
    
 
   
     WebTrends' internal operations and business are also dependent upon the
computer-controlled systems of third parties such as suppliers, customers and
service providers. It believes that absent a systemic failure outside the
control of WebTrends, such as a prolonged loss of electrical or telephone
service, Year 2000 problems at such third parties will not have a material
impact on WebTrends. WebTrends has no contingency plan for systemic failures.
WebTrends' contingency plan in the event of a non-systemic failure is to
establish relationships with alternative suppliers or vendors to replace failed
suppliers or vendors. Other than the previously described testing, and remedying
problems identified by testing or from external sources, WebTrends has no other
contingency plans or intention to create other contingency plans.
    
 
                                       27
<PAGE>   32
 
COST
 
   
     WebTrends does not separately track expenditures relating to Year 2000
compliance. Such expenditures are primarily absorbed within WebTrends'
development organization. Based on its overall development expenditures and the
amount of time people in the organization are spending on Year 2000 compliance,
WebTrends believes that its spending on compliance to date has not been
material. Furthermore, based on its experiences to date, and its assessment that
all material internal systems and all currently marketed products are Year 2000
compliant, WebTrends does not anticipate that costs associated with remediating
WebTrends' non-compliant products or internal systems will be material.
    
 
RISKS
 
   
     Any failure of WebTrends to make its products Year 2000 compliant could
result in a decrease in sales of its products, an increase in allocation of
resources to address Year 2000 problems of its customers without additional
revenue commensurate with such dedication of resources, or an increase in
litigation costs relating to losses suffered by WebTrends' customers due to such
Year 2000 problems. Failures of the internal systems of WebTrends could
temporarily prevent it from processing orders, issuing invoices, and developing
products, and could require it to devote significant resources to correcting
such problems. Due to the general uncertainty inherent in the Year 2000 computer
problem, resulting from the uncertainty of the Year 2000 readiness of
third-party suppliers and vendors, WebTrends is unable to determine at this time
whether the consequences of Year 2000 failures will have a material impact on
its business, results of operations, and financial condition.
    
 
   
NEW ACCOUNTING PRONOUNCEMENTS
    
 
   
     In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-1, "Software for Internal Use," which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. This statement of position is effective for financial
statements for fiscal years beginning after December 15, 1998. WebTrends does
not expect that it will have a material impact on its consolidated financial
statements.
    
 
   
     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard 133, "Accounting for Derivative Instruments and
Hedging Activities." This standard establishes accounting and reporting
standards requiring that every derivative instrument be recorded in the balance
sheet as either an asset or liability measured at its fair value. The standard
also requires that changes in the derivatives' fair value be recognized
currently in results of operations unless specific hedge accounting criteria are
met. It is effective for fiscal years beginning after June 15, 1999. WebTrends
does not expect it to have a material impact on its consolidated financial
statements.
    
 
   
     In December 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-9, Modification of Statement of Position 97-2,
Software Revenue Recognition, With Respect to Certain Transactions. This
statement of position amends certain paragraphs of Statement of Position 97-2 to
require recognition of revenue using the "residual method" in circumstances
outlined in the statement of position. Under the residual method, revenue is
recognized as follows: (1) the total fair value of undelivered elements, as
indicated by vender specific objective evidence, is deferred and subsequently
recognized in accordance with the relevant sections of Statement of Position
97-2 and (2) the difference between the total arrangement fee and the amount
deferred for the undelivered elements is recognized as revenue related to the
delivered elements.
    
 
                                       28
<PAGE>   33
 
   
     Statement of Position 98-9 is effective for fiscal years beginning after
March 15, 1999. Also, the provisions of Statement of Position 97-2 that were
deferred by Statement of Position 98-4 will continue to be deferred until the
date Statement of Position 98-9 becomes effective. WebTrends is in the process
of evaluating the impact of Statement of Position 98-9.
    
 
                                       29
<PAGE>   34
 
                                    BUSINESS
 
   
     The following Business Section contains forward-looking statements that
involve risks and uncertainties. WebTrends' actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including, but not limited to, those set forth under
"Risk Factors" and elsewhere in this Prospectus.
    
 
OVERVIEW
 
   
     WebTrends is a leading provider of enterprise management and reporting
solutions for Internet-based systems. WebTrends offers organizations a
comprehensive set of solutions that are integrated, scaleable, modular, and
easy-to-use. Its enterprise management products facilitate analysis and
reporting of:
    
 
   
     - Web site traffic: the number of visitors to a Web site, the timing of
       visits, and other related characteristics;
    
 
   
     - Web site quality: errors that prevent a Web site's content from being
       displayed properly or efficiently;
    
 
   
     - Internet advertising campaigns: the number of visitors drawn to your Web
       site by particular Internet advertisements;
    
 
   
     - Web site content: information specific to particular Web site pages, such
       as the most popular pages on your Web site;
    
 
   
     - usage patterns: the order in which visitors see the pages on your Web
       site, and the Web sites most visited by an organization's employees;
    
 
   
     - e-commerce activities: information relating to the volume of business
       driven by your Web site, such as the number of visitors to a Web site's
       order entry page; and
    
 
   
     - return on investment: information relating to revenues and profits
       generated or costs saved from specific Internet expenditures.
    
 
   
WebTrends' solutions also help organizations manage their Internet
infrastructure by providing valuable information about firewall activity,
virtual private networks, and security vulnerabilities, as well as capacity
requirements for the organization's computers and bandwidth requirements for the
organization's communications lines. Its products have been specifically
designed to enable organizations to centrally manage and administer multiple
Internet-based systems across the enterprise regardless of the quantity or
geographic locations of servers supporting those systems.
    
 
   
INDUSTRY BACKGROUND
    
 
EXPLOSIVE GROWTH OF THE INTERNET
 
   
     The Internet has grown in less than a decade from a limited research tool
to a global network consisting of millions of computers and users. The Internet
is expected to continue to grow rapidly. International Data Corporation
estimates that the number of Internet users worldwide will grow from
approximately 69 million in 1997 to 320 million in 2002. The U.S. Department of
Commerce estimates that Internet traffic doubles every 100 days. The number of
Internet Web sites is also growing rapidly. The number of Web sites detected by
the Netcraft Web Server Survey increased from approximately 526,000 in November
1996 to approximately 1.6 million in November 1997, and to over 3.5 million in
November 1998, reflecting annual growth exceeding 100%. Network Solutions, Inc.,
which
    
 
                                       30
<PAGE>   35
 
   
estimates that it holds a 75% worldwide market share in domain name
registrations, registered over 1.9 million new domains in 1998, nearly double
the previous year.
    
 
   
     The growth of the Internet is primarily attributable to its value as a
low-cost, open, and ubiquitous platform for communications and commerce. As a
result of these attributes, organizations are increasingly embracing the
Internet as a critical platform for communicating with key constituents and
conducting business. Internally, many organizations have adopted Internet-based
systems to facilitate communications among employees and to automate internal
business processes. Many organizations are adding Web-based applications to
increase sales, cut costs, and improve customer service. Customer-centric
applications range from Web sites offering electronic brochures, to electronic
acquisition of goods and services, and automated customer service and support.
Organizations are making large investments in these applications to create
meaningful and attractively presented content that informs, entertains, and
communicates. Emerging applications now enable organizations to attract
customers and build customer loyalty by offering dynamic, personalized content.
Web-based applications for suppliers and distributors have also significantly
improved business-to-business procurement, payment systems, and logistics
planning. Entirely new businesses have emerged that have been developed
specifically to exploit the unique characteristics of the Internet and
e-commerce. Accordingly, International Data Corporation estimates that the
volume of Internet commerce will increase from approximately $12 billion in 1997
to over $400 billion in 2002.
    
 
   
     Advertising revenue has also played an important role in the growth of the
Internet. Attracted by increasing numbers of users, Internet-based businesses
have developed that are supported primarily by advertising revenue. Traditional
businesses have also realized incremental advertising spending from their Web
sites. Jupiter Communications estimates that Internet advertising spending will
grow from $1.9 billion in 1998 to $7.7 billion in 2002.
    
 
   
GROWTH OF INTERNET TECHNOLOGY, CONTENT, AND INFRASTRUCTURE
    
 
   
     Organizations are supporting their Internet-based systems by investing
heavily in technology, content, and infrastructure. Forrester Research estimates
that spending on software and services for e-commerce alone will exceed $5.6
billion in 1998 and $35 billion by 2002. The creation of Internet content
continues to grow rapidly by any measure. For example, as of May 27, 1998, the
AltaVista search engine had indexed more than 140 million Web pages, an increase
of more than 40 million pages in the first five months of 1998. The Internet
uses Web and specialized servers for different tasks and forms of
communications. For example, specialized servers are used for Web browsing,
mail, chat, news groups, file transfers, and audio and video streaming. A
measure of the growth of the Internet infrastructure is the number of Web and
other Internet servers that are installed. These servers are programs that
respond to requests for information and manage data from back-end computing
resources. According to International Data Corporation, the number of Web and
other Internet servers installed will grow from approximately 6.3 million in
1998 to nearly 12 million in the year 2002.
    
 
   
     Two other important components of the Internet infrastructure are proxy
servers and firewalls, which are network computers that are used to improve the
performance of information gathering and to prevent unauthorized access to
network resources, respectively. Firewalls are also used to implement virtual
private networks. Virtual private networks facilitate secure communications
within an organization among geographically dispersed employees by using
encryption and security to provide the attributes of a private network while
transporting information over the public Internet. International Data
    
 
                                       31
<PAGE>   36
 
   
Corporation expects the worldwide firewall market to grow from approximately
$353 million in 1997 to $1.2 billion by the year 2000.
    
 
NEED FOR ENTERPRISE MANAGEMENT AND REPORTING SOLUTIONS FOR INTERNET-BASED
SYSTEMS
 
   
     As organizations have increased their reliance on the Internet, their
fundamental challenge has been to ensure that their investments in Internet
technology, content, and infrastructure are furthering their strategic goals.
These organizations are increasingly looking for management and reporting
solutions that track and control the effectiveness of their Internet-based
systems by optimizing Internet advertising, measuring return on investment,
monitoring performance, and determining usage patterns. Specifically,
organizations need to track and optimize a user's experience on the
organization's Internet sites, whether it be an employee, customer, or business
partner. Organizations also must manage their investments in Internet
advertising.
    
 
     Without effective management and reporting, Internet-based systems are
unlikely to fulfill their strategic missions. A September 1998 Forrester
Research survey of 25 new media executives and Web site design experts found
that most of their Web sites did not provide enough information and suffered
from reliability problems and quality issues, such as broken links and failed
functions. Similarly, a 1997 survey from InfoWeek/Ernst & Young revealed a
significant increase in security threats and insufficient resources to monitor
network security.
 
   
     In order for management to optimize the effectiveness and value of
Internet-based systems, such systems must fulfill the business needs of the
critical functional areas within the organization. Examples include:
    
 
     - EXECUTIVE MANAGEMENT. How successful is the implementation of our
      Internet strategy? What is the return on investment?
 
     - MARKETING AND SALES. Which Web site visitors are purchasing our products
      and services? Is our advertising effective in bringing qualified prospects
      to our Web site?
 
     - INFORMATION TECHNOLOGY. Is our existing Internet infrastructure secure
      and does it have sufficient capacity? Are we providing reports to
      functional managers that enable them to effectively manage our Internet
      investment?
 
   
     - CUSTOMER SERVICE. Has our Web site reduced the volume and duration of
      telephone support calls? What are the most common support issues?
    
 
   
     - FINANCE. Are we allocating Internet-related expenditures correctly? How
      is our Internet strategy affecting employee productivity?
    
 
   
     Despite the widespread need for comprehensive, scaleable, and easy-to-use
management and reporting solutions for Internet-based systems, there have been
no solutions offering all of these capabilities. Several companies offer
reporting and management tools designed for previous generations of computer
networks that are still widely deployed. These traditional network management
tools, however, are not designed specifically for the Internet and do not allow
business managers to analyze Internet-specific activities and content
effectively, increasing the likelihood that Internet investments will be
misallocated. Another approach is to develop a custom application to analyze
Internet data or to port Internet data to a database management system that can
generate reports from user queries. These custom applications and database query
tools, however, are not cost-effective solutions because of the volume and
complexity of the underlying data. The few
    
 
                                       32
<PAGE>   37
 
   
Internet tools available are typically limited to particular needs, such as
traffic analysis, security analysis, or quality analysis. Furthermore, certain
stand-alone tools for traffic analysis are prohibitively expensive, yet do not
scale to high volume Web sites. In addition, piecing together individual tools
from different vendors for traffic analysis, security analysis, quality control,
and other management functions into a complete solution is expensive, difficult
to manage, and results in a confusing array of inconsistent user interfaces and
report formats.
    
 
THE WEBTRENDS SOLUTION
 
   
     WebTrends offers a comprehensive solution of integrated, scaleable, and
modular software products that enable organizations to cost-effectively manage
and report on their Internet-based systems. Its enterprise management products
facilitate analysis and reporting of Web site traffic, quality, content, usage,
and e-commerce activities, as well as returns on investments from Internet-based
systems and Internet advertising campaigns. WebTrends' solutions also help
organizations manage their Internet infrastructure by providing valuable
information about firewall activity, virtual private networks, and security
vulnerabilities, as well as capacity and bandwidth requirements.
    
 
     The WebTrends solution has the following key benefits:
 
   
     Comprehensive Solution. WebTrends' products provide a comprehensive
solution to important Internet management needs. As Internet technology has
evolved and additional management requirements have become apparent, its modular
architecture has enabled WebTrends to rapidly develop additional products and
product enhancements to meet customer needs.
    
 
   
     Centralized Management. The WebTrends solution enables organizations to
centrally manage and administer multiple Internet-based systems across the
enterprise regardless of the quantity or geographic locations of servers
supporting those systems. WebTrends' products analyze data from servers that run
in numerous operating environments, including UNIX, Windows NT, NetWare, and
others. Organizations can also use WebTrends' products to manage Web sites
hosted by third parties such as Internet service providers.
    
 
   
     Scaleability and Performance. The WebTrends solution is capable of managing
and reporting on high-traffic and distributed Internet-based systems. The
WebTrends solution is designed to scale to the following environments:
    
 
     - A single system hosting up to 500 Web sites.
 
   
     - One Internet server spread across a 50-server cluster.
    
 
   
     - One Internet server or firewall generating over 40 million hits per day.
    
 
   
     - One Internet server or firewall generating log files exceeding 10
       gigabytes per day.
    
 
   
     - One Internet server or firewall consisting of tens of thousands of Web
       pages.
    
 
   
     WebTrends products are designed to produce results quickly. For example,
server logs can be analyzed in real time while transactions are being processed.
In addition, results of traffic analyses can be stored using WebTrends'
FastTrends caching technology, allowing customers to perform further analyses or
reorganize results quickly.
    
 
     Comprehensive and Flexible Reporting. Each WebTrends product produces
dozens of reports that can be customized for format and content. Reports can be
generated in HTML for on-line browsing or in Microsoft Word or other formats for
professional looking printed output.
 
                                       33
<PAGE>   38
 
   
     Ease of Use and Installation. WebTrends' solutions have features that make
them easy to use, including fast installation, automatic detection of data
sources such as server logs, and an award-winning user-interface consistent
across all products. These features permit WebTrends' solutions to be used
throughout an organization by marketing, sales, and financial managers, as well
as Webmasters and other IT professionals.
    
 
   
     Open and Flexible. WebTrends solutions are designed to integrate with other
systems. Data can be analyzed from numerous Internet system components developed
by dozens of vendors. Results can be exported to either the Company's FastTrends
cache or most database management systems. Internet service providers can use
the WebTrends Internet service providers application programming interface to
automate configuration for their own customers. Independent software developers
can develop their own applications as cartridges that interface with the
WebTrends framework.
    
 
STRATEGY
 
   
     WebTrends' objectives are to continue to lead and expand the market for
enterprise management and reporting solutions for Internet-based systems. Key
strategies to achieving these objectives include:
    
 
   
     Leverage Market Leadership to Build Brand Awareness. WebTrends believes it
is the leading provider of enterprise management and reporting solutions for
Internet-based systems. WebTrends has been able to accomplish this by being the
first company to market a solution combining Web site traffic analysis -- a
market in which WebTrends is the leader with almost three times the share of its
next closest competitor according to a March 1998 International Data Corporation
report -- with a variety of other products that enable organizations to manage
several critical aspects of their Internet investments, such as firewall
activity and virtual private networks. Fundamental to WebTrends' strategy has
been its belief that enterprise management and reporting solutions for
Internet-based systems require broad, integrated solutions that track not just
Internet traffic, but also quality, performance, and security. Thus, WebTrends
has, and will continue to leverage its market leadership to offer additional
traffic analysis, security, e-commerce management, and other new products that
enable organizations to manage the evolving needs of their Internet-based
systems.
    
 
   
     Offer Comprehensive Internet Management Solutions. WebTrends intends to
reinforce and aggressively market its existing position as the only vendor
offering a comprehensive set of solutions for important Internet management
needs. WebTrends believes that individuals within an organization making
purchase decisions for Internet management and reporting solutions prefer a set
of solutions that offer consistent features for installation, reporting format,
user interface, and scaleability. It introduced its Enterprise and Professional
Suites in 1997, its Server Cluster Add-on and Lotus Domino Suite in 1998, its
Security Analyzer in January 1999, and has additional new products planned for
1999. It intends to continue to develop new features and products to meet the
additional management demands that will arise as Internet usage and technologies
evolve.
    
 
   
     Address Needs of Both IT Professionals and Other Business Managers. In
addition to marketing its products to IT professionals on the basis of
performance and technical capabilities, WebTrends' strategy is to market
directly to the needs of business managers in such departments as sales and
marketing, customer service, finances, and human resources. WebTrends' products
enable these managers to make informed enterprise-wide management decisions. At
the same time, it markets its products as the preferred solution for the IT
professional to not only manage essential Internet issues such as network
bandwidth,
    
 
                                       34
<PAGE>   39
 
   
navigation, capacity, quality assurance, system availability, and security, but
also increasingly to provide vital information to other managers across the
enterprise.
    
 
   
     Exploit Architecture to Expand Product Line for Evolving Internet Systems.
WebTrends' extensible, modular product architecture significantly reduces the
design cycle, allowing it to bring new products and features to market on a
frequent, timely basis. This strategy is critical because WebTrends must
continue to provide management solutions for evolving Internet technologies.
Since the introduction of its original Web site traffic analysis product in
1996, WebTrends has introduced five additional product offerings, with an
additional three scheduled for introduction through June 1999.
    
 
   
     Aggressively Expand Channels and Geographic Scope of Sales. To increase the
distribution and visibility of its products, WebTrends intends to continue to
expand its domestic and international sales capabilities. It anticipates adding
telesales and on-line sales resources and augmenting its field sales staffing
and locations. WebTrends also intends to invest significant efforts in further
developing its indirect channels with key value added resellers, distributors,
resellers, original equipment manufacturers, Internet service providers, and
other channel partners in both domestic and international markets.
    
 
   
     Continue to Offer Scaleable Solutions that Address All Segments of
WebTrends' Market. WebTrends intends to reinforce its image as the leading
provider of enterprise management and reporting solutions of Internet systems by
continuing to offer a wide range of product choices and suite configurations at
price points appropriate to the resources and requirements of a broad spectrum
of business users. The speed, utility, and scaleability of WebTrends' products
make them appropriate for the enterprise management and reporting needs of the
largest Internet systems. Customers include large organizations managing
networks of hundreds of servers as well as Internet service providers providing
hosted Internet resource management to thousands of customers. In addition,
WebTrends has provided its solutions to organizations that require information
management for specific high-traffic Internet events such as NASA's Web site for
the John Glenn shuttle mission that received over seven million hits on its most
active day. All of these customers look to WebTrends' solutions for their
ability to scale to the demands of large volumes of Internet users. At the same
time, the price/performance attributes of WebTrends' products make them
affordable and appropriate solutions for business users with more modest system
requirements.
    
 
   
     Invest in Technology to Maintain Leadership and Product
Performance. WebTrends believes that its customers purchase its solutions
primarily due to their superior performance characteristics. WebTrends' existing
products offer superior reliability, high speed relative to other available
solutions, a broad array of information reporting and analysis choices, and the
ability to scale up to very high traffic requirements. WebTrends believes that
the reputation of its existing products for performance will facilitate
acceptance of additional products into its market. It intends to continue to
devote substantial resources to the enhancement of its existing solutions and
the development of new products as the demands of its market evolve.
    
 
PRODUCTS AND SERVICES
 
     WebTrends markets management suites, as well as stand-alone products for
traffic analysis, security analysis, and firewall management.
 
                                       35
<PAGE>   40
 
MANAGEMENT SUITES AND TRAFFIC ANALYSIS
 
     WebTrends Professional Suite. WebTrends Professional Suite is an integrated
enterprise solution that manages and reports on an organization's important
Internet-related functions. It consists of four functional cartridges:
 
   
     1. Web Site Traffic Analysis: The Web Site Traffic Analysis Cartridge
analyzes log files created by Web servers to provide valuable information
concerning the site and the users that visit it. It is compatible with all
significant Web servers and can analyze server log files that were created by
the same computer running the WebTrends software, or that were created on
remotely located computers. The Web Site Traffic Analysis Cartridge can produce
separate analyses for each of multiple Web sites that share a single Web server.
Traffic analysis reports answer questions such as:
    
 
     - How many qualified prospects are being drawn to the Web site by an
       advertising campaign?
 
     - Which search engines and portals are referring qualified prospects to the
       Web site?
 
     - Which pages are most popular? What changes can be made to the Web site to
       make the most popular pages easy to find?
 
     - How can the appearance of the Web site be improved in light of the most
       frequently used browsers and access speeds of our visitors?
 
   
     2. Proxy Server Traffic Analysis: The Proxy Server Traffic Analysis
Cartridge enables real-time analysis of employee Internet usage. Proxy server
traffic analysis reports answer questions such as:
    
 
     - What Web sites provide useful information to employees?
 
     - Which employees use the most resources?
 
     - How much time do employees spend browsing Web sites that are unrelated to
       their work?
 
   
     3. Link Analysis and Quality Control: The Link Analysis and Quality Control
Cartridge detects broken links and other quality related problems on Web sites.
Link analysis and quality control reports answer questions such as:
    
 
     - Does my Web site contain links to nonexistent Web pages?
 
     - Which Web pages are slow to load in a browser?
 
     - Does the Web site include duplicative images?
 
     4. Monitoring, Alerting, and Recovery: The Monitoring, Alerting, and
Recovery Cartridge monitors devices such as servers, routers and databases, and
both issues alerts by e-mail or pager and runs automatic recovery routines when
failures are detected. Monitoring, alerting, and recovery reports answer
questions such as:
 
     - What is the total downtime of our Internet-based system?
 
     - Which components in our Internet-based system have experienced the
       greatest number of failures?
 
   
     WebTrends Enterprise Suite. The WebTrends Enterprise Suite adds advanced
capabilities to the WebTrends Professional Suite. The WebTrends Enterprise Suite
includes the Company's DBTrends technology. DBTrends allows an IT professional
to integrate Web traffic analysis results with data from the organization's
existing databases
    
 
                                       36
<PAGE>   41
 
   
for custom analysis of e-commerce and other advanced applications. The WebTrends
Enterprise Suite also permits WebTrends analyses to be exported to most database
management systems for archiving and historical analyses.
    
 
   
     WebTrends Log Analyzer. The WebTrends Log Analyzer is a stand-alone product
that provides all of the capabilities of the Web Site Traffic Analysis Cartridge
included in the WebTrends suites. The WebTrends Log Analyzer was the first
product for managing Internet-based systems and is a popular choice for
organizations that require an inexpensive, feature-rich solution for traffic
analysis.
    
 
   
     WebTrends Enterprise Reporting Server for UNIX. The WebTrends Enterprise
Reporting Server for UNIX is a Web site traffic analysis solution that runs on
Sun's Solaris UNIX platform. It is designed to serve the needs of Internet
service providers and enterprise customers by allowing multiple users
concurrent, remote management and access to reports via Web browsers residing on
any Windows, UNIX, or Macintosh client using HTML, Java, and ActiveX
technologies. The WebTrends Enterprise Reporting Server for UNIX is currently
under development. A prototype of the product exists and has been released to
certain third-parties for testing and evaluation. The product is expected to be
publicly released in the first quarter of 1999. WebTrends does not expect the
remaining development to consume a material amount of resources. Aside from
discussions with certain third-parties that are subject to non-disclosure
agreements, this prospectus, and discussions relating to this prospectus,
WebTrends has not publicized this product.
    
 
   
     WebTrends Server Cluster Add-on. The WebTrends Server Cluster Add-on
enables the WebTrends Enterprise Suite to analyze multiple log files created by
Web servers in a cluster -- a group of Web servers cooperating to provide high
bandwidth and reliable access to a single Web site -- automatically
reconstructing the correct time of arrival for each and every hit, to produce
accurate Web traffic analysis reports. The WebTrends Server Cluster Add-on also
reports how well the load is balanced across the servers in the cluster and how
well a redirector device is distributing requests to servers that are installed
in different geographic locations.
    
 
     WebTrends Suite for Lotus Domino. The WebTrends Suite for Lotus Domino
contains the functionality of the cartridges of the WebTrends Professional
Suite, with each cartridge customized for the Lotus Domino Web server
environment.
 
   
     WebTrends CommerceTrends Add-on. The WebTrends CommerceTrends Add-on helps
organizations manage their e-commerce and on-line advertising activities. The
WebTrends CommerceTrends Add-on creates a profile of an organization's
Internet-based advertising campaigns and expenditures and assigns a monetary
value for individual Web site visitors by analyzing their activity and their
interest in specific products or services. The Add-on supplements the existing
capabilities of WebTrends Enterprise Suite relating to return on investment
reporting by using the profile and traffic data to calculate the organization's
return on investment from each advertisement, allowing the organization to make
more effective advertising investments.
    
 
   
     The WebTrends CommerceTrends Add-on is currently in development. A
prototype of the product has been developed, but has not been released to
internal testers. It is expected to be released as an add-on product to the
WebTrends Enterprise Suite during the first half of 1999. WebTrends does not
expect the remaining development to consume a material amount of resources.
Aside from this prospectus and discussions relating to this prospectus,
WebTrends has not publicized this product.
    
 
                                       37
<PAGE>   42
 
   
     WebTrends Streaming Media Cartridge. The WebTrends Streaming Media
Cartridge reports on traffic of audio and video servers available from
RealNetworks, Inc. and Microsoft. Reports from this cartridge will identify the
number of streams requested, the connection speeds for browsers, and the most
popular content. This cartridge is currently in development. A prototype of this
cartridge has been developed that is currently being tested internally. It is
expected to be released as part of the WebTrends Enterprise Suite during the
first quarter of 1999. WebTrends does not expect the remaining development to
consume a material amount of resources. Aside from this prospectus and
discussions relating to this prospectus, WebTrends has not publicized this
cartridge.
    
 
SECURITY AND FIREWALL MANAGEMENT
 
   
     WebTrends for Firewalls and VPNs. WebTrends for Firewalls and VPNs is an
enterprise management solution that provides information that enables
organizations to manage bandwidth usage, security, employee usage of Web sites
outside of the firewall, and traffic originating from outside the firewall.
WebTrends for Firewalls and VPNs is compatible with firewall products from all
of the leading firewall vendors including Check Point Software Technologies,
Inc., Cisco Systems, Inc., Lucent Technologies Inc., and Network Associates.
Firewall and VPN reports answer questions such as:
    
 
   
     - Have hackers tried to breach our security?
    
 
   
     - Does my Internet-based system have sufficient memory and disk capacity
       and communications bandwidth to service current traffic volume?
    
 
     - What errors are occurring during user sessions?
 
   
     - Which employees and departments use the most resources?
    
 
   
     WebTrends Security Analyzer. The WebTrends Security Analyzer helps secure
Internet servers and other Internet devices by detecting security
vulnerabilities and recommending fixes that decrease the likelihood of
intrusions by hackers. An AutoSync capability updates the WebTrends Security
Analyzer as system vendors discover new vulnerabilities. WebTrends offers
Professional and Enterprise versions of this product as well as versions
tailored for security consultants.
    
 
AUDITTRACK
 
   
     When WebTrends was founded in 1993, its business plan was to develop
solutions for managing Novell networks. WebTrends continues to sell, support,
and enhance AuditTrack, a solution for auditing activity on Novell network
servers.
    
 
                                       38
<PAGE>   43
 
AWARDS
 
     WebTrends' products have received over 25 industry awards including the
following:
--------------------------------------------------------------------------------
 
   
<TABLE>
<CAPTION>
AWARD                      PRODUCT      DATE AWARDED                    DESCRIPTION
---------------------------------------------------------------------------------------------------
<S>                       <C>          <C>               <C>
 Network World's Blue     WebTrends    December 1998     Received top score (8.45 out of 10.00
   Ribbon Award           Enterprise                     possible) of three Web management tools
                          Suite 3.0                      tested. Score was a weighted average of
                                                         scores in the following categories:
                                                         Monitoring and alerting, Site quality
                                                         analysis; Log file analysis; User
                                                         interface; Installation; and
                                                         Documentation.
---------------------------------------------------------------------------------------------------
 Network Computing        WebTrends    November 1998     Received top score (4.40 out of 5.00
   Editor's Choice Award  Enterprise                     possible) of 5 Web site management suites
                          Suite 2.1                      tested. Score was a weighted average of
                                                         scores in the following categories:
                                                         Analysis; Reporting; Ease of use;
                                                         Performance; and Price.
---------------------------------------------------------------------------------------------------
 Finalist, PC Computing   WebTrends    November 1998     One of two runners up among Internet Site
   1998 MVP Award         Professional                   Management products.
                          Suite 2.1
---------------------------------------------------------------------------------------------------
 Internet Commerce Expo,  WebTrends    September 1998    Awarded for achievement in the product
   Best of Class          Professional                   category of Analysis/Performance,
                          Suite                          Networking and Other Services.
---------------------------------------------------------------------------------------------------
 PC Magazine Editor's     WebTrends    March 1998        Received highest ranking for ease of use
   Choice                 Log                            and second highest ranking for power out
                          Analyzer                       of 11 Web Site Analysis tools considered.
                          4.0                            Evaluation was in the following
                                                         categories: Installation; Importing log
                                                         files; Generating reports; and Analysis
                                                         aids.
---------------------------------------------------------------------------------------------------
 VAR Business Magazine,   WebTrends    January 1998      One of two products to receive top overall
   VAR Business           Professional                   ranking of "A" out of 7 Web site
   Recommends             Suite                          management tools considered. Evaluation
                                                         was in the following categories: Ease of
                                                         installation; Ease of use; Site
                                                         management; Site tracking; Reports; and
                                                         VAR program.
---------------------------------------------------------------------------------------------------
 Software Publisher's     WebTrends    January 1998      One of five runners up in the category of
   Association CODIE      Professional                   Best Enterprise Management Tools and only
   Award Finalist for     Suite                          web site management product to be so
   Best Enterprise                                       recognized.
   Management Tools
---------------------------------------------------------------------------------------------------
 ZDNet Editor's Choice    WebTrends    December 1997     Both products received highest possible
   (Five Star Rating)     Log                            rating.
                          Analyzer
                          4.0 and
                          WebTrends
                          Professional
                          Suite 1.0
---------------------------------------------------------------------------------------------------
</TABLE>
    
 
LICENSING AND PRICING
 
   
     All of WebTrends' products are licensed for use and are priced to be
affordable to both large and small organizations. In general, WebTrends'
products are licensed to be run on a single computer. WebTrends offers customers
who license its products the option to purchase one-year subscriptions that
permit users to download all new versions of the licensed product during the
subscription period. Subscriptions are generally priced at 20% of the license
fee. Changes to its pricing and licensing policies are periodically made as a
    
 
                                       39
<PAGE>   44
 
   
result of competitive conditions and other factors. The following table lists
end-user product prices as of January 1, 1999 (upgrade pricing and shipping and
handling charges not shown). WebTrends offers reseller discounts, volume
discounts, and occasional promotional pricing.
    
 
   
<TABLE>
<S>                                            <C>                       <C>            <C>
-------------------------------------------------------------------------------------------------------
PRODUCTS                                       SCOPE                         U.S.        INTRODUCTION
                                                                          LIST PRICE         DATE
-------------------------------------------------------------------------------------------------------
 MANAGEMENT SUITES AND TRAFFIC ANALYSIS
-------------------------------------------------------------------------------------------------------
 WebTrends Enterprise Suite                    500 virtual domains          $1,499      September 1997
-------------------------------------------------------------------------------------------------------
 WebTrends Professional Suite                  100 virtual domains          $  599      November 1997
-------------------------------------------------------------------------------------------------------
 WebTrends Log Analyzer                        50 virtual domains           $  399      February 1996
-------------------------------------------------------------------------------------------------------
 WebTrends Enterprise Reporting Server for     1 server/5 user             $2,999*      1st Qtr. 1999
   Unix                                        Additional 5 user pack      $  999*
                                               Additional server           $  999*
-------------------------------------------------------------------------------------------------------
 Server Cluster Add-on                         Each additional server       $  999      August 1998
-------------------------------------------------------------------------------------------------------
 WebTrends Suite for Lotus Domino              500 virtual domains          $  999      May 1998
-------------------------------------------------------------------------------------------------------
 CommerceTrends Add-on                         TBD**                        TBD**       2nd Qtr. 1999
-------------------------------------------------------------------------------------------------------
 SECURITY AND FIREWALL MANAGEMENT
-------------------------------------------------------------------------------------------------------
 WebTrends for Firewalls and VPNs              Each firewall                $1,499      June 1998
-------------------------------------------------------------------------------------------------------
 WebTrends Security Analyzer                   255 IP Addresses             $1,499      January 1999
                                               Unlimited IP Addresses       $4,999
-------------------------------------------------------------------------------------------------------
</TABLE>
    
 
-------------------------
   
*  Projected
    
 
   
** To Be Determined
    
 
PRODUCT ARCHITECTURE AND TECHNOLOGY
 
   
     The focus of product development at WebTrends is to bring new products as
well as new versions of existing products to market quickly in order to keep
pace with the rapid evolution of Internet technologies and increasing customer
demands. WebTrends devotes a substantial portion of its resources to developing
new products. Research and development expenses were approximately $403,000 in
1996, $1.1 million in 1997, and $2.2 million in 1998. WebTrends has recruited a
product development team experienced in bringing quality products to market
on-time. As of December 31, 1998, the Company's product development team
consisted of 27 employees with responsibilities that include software
engineering, quality assurance, and technical writing. This team is currently
developing new versions of most of the existing products as well as new add-ons
for analyzing e-commerce and on-line advertising activities and a new cartridge
for managing streaming audio and video Internet servers.
    
 
                                       40
<PAGE>   45
 
[WEBTRENDS ILLUSTRATION]
 
   
     WebTrends' product architecture and technologies, as shown in the above
diagram, provide significant competitive advantages. The architecture consists
of application cartridges atop a shared foundation of base technologies. The
application cartridges request services from the foundation, where most of the
code is located, through a well-defined set of conventions called an application
programming interface. This shared foundation shortens the product development
cycle because the shared components do not have to be redeveloped for each new
application cartridge. In addition, enhancements to the foundation, such as
improving the speed of the report generator, benefit all cartridges.
    
 
     Some of the important base technologies are:
 
     Scheduler. The Scheduler automatically runs analyses and reports at
specified times and intervals, without the presence of an operator.
 
   
     User-Interface Framework. WebTrends improves the usability of its products
by presenting a consistent look and feel to the end-user.
    
 
   
     Reporting Engine. WebTrends' Reporting Engine permits customers to
customize the reports generated by the application cartridges. In addition, many
reports can be generated in HTML, Microsoft Word, Microsoft Excel, and other
standard formats.
    
 
     Language Editor. A language editor is built into the products that
facilitates customizing the product for international use.
 
   
     WebTrends has numerous additional technologies and product features,
including the following:
    
 
   
     Direct Analysis of Server Logs. WebTrends' products can analyze server logs
as they are created or at scheduled times. In either case, the server logs are
read and analyzed in a single pass. WebTrends believes that the alternative
approach of first importing the log data into a database management system and
then analyzing the data is slow and costly.
    
 
   
     FastTrends Cache. The FastTrends technology stores the results of an
analysis allowing customers to quickly perform further analysis or reorganize
the results in meaningful ways. FastTrends contributes to the scaleability of
WebTrends' products by efficiently handling large amounts of data.
    
 
                                       41
<PAGE>   46
 
   
     64-bit Technology. WebTrends has implemented 64-bit technology to permit
its products to analyze log files containing more than four gigabytes of data.
WebTrends' products are compiled to run on 32-bit processors.
    
 
   
     Standard Programming Languages. WebTrends' engineers develop software using
C and C++ programming languages to produce fast, scaleable products. Standard
programming languages also ease porting the technology to new operating
environments.
    
 
   
     Remote Analysis. WebTrends' products need not reside on the server being
analyzed. Server logs can be exported to the system where the product resides or
can be remotely accessed.
    
 
   
     Compatibility with Database Management Systems. WebTrends' products can
obtain data from databases that are compatible with the popular Open DataBase
Connectivity standard. In addition, the results of analyses can be exported to
such databases.
    
 
   
     Information Gathering. The registration engine built into WebTrends'
products collects detailed customer information. The products also have a
customer feedback feature that encourages customers to communicate with
WebTrends. Information from both of these sources is used for sales leads and as
input for the next round of product upgrades and improvements.
    
 
SERVICES AND SUPPORT
 
   
     WebTrends provides technical support to its registered users by telephone,
e-mail, and on its Web site. Products are easy to install and use, and WebTrends
also maintains an extensive database of support information on its Web site, all
of which enables the support organization to operate efficiently and increases
customer loyalty and satisfaction.
    
 
   
     WebTrends intends to continue to enhance its services capabilities. Its
recently-formed professional services organization will provide end-user
implementation and training, certification and training for third-party service
providers and resellers, and management and reporting for high-traffic Internet
events and seminars. WebTrends also relies on value added resellers and Internet
service providers that distribute and promote its products to provide similar
services.
    
 
CUSTOMERS
 
   
     As of December 31, 1998, WebTrends had licensed over 50,000 products to
over 20,000 customers. Some of its customers are Internet-based businesses that
were specifically formed to take advantage of emerging Internet opportunities.
However, the bulk of its customers are traditional companies from all segments
of the economy that are developing new applications and porting existing
applications to the Internet. WebTrends' products are used by over one-third of
the Fortune 500, but are also affordable to small organizations.
    
 
   
     An important customer segment is Internet service providers that sell Web
site hosting services. Several of these Internet service providers use
WebTrends' products to perform WebTrends' analyses on their customers' Web sites
as an added service. Some of the Internet service providers' own customers have
become WebTrends' customers to do more sophisticated analyses in-house or to
analyze other in-house, Internet servers.
    
 
                                       42
<PAGE>   47
 
Representative customers include:
 
TECHNOLOGY
Cisco Systems
Compaq Computer
Dell Computer
EDS
Hewlett-Packard
IBM
Intel
Siemens
 
TELECOMMUNICATIONS
AT&T
Ameritech
Bell Atlantic
British Telecom
GTE
 
PUBLIC SECTOR
City of San Jose
NASA
University of Illinois
   
U.S. Air Force
    
U.S. Dept. of Labor
   
U.S. House of Representatives
    
INTERNET SERVICE PROVIDERS
@Home
Cable and Wireless
DIGEX
NETCOM
Prodigy
PSINet
Verio
 
MEDIA
BBC
Dow Jones & Company
NBC
Playboy Enterprises
Washington Post
 
MANUFACTURING
Boeing
Caterpillar
DaimlerChrysler
Eastman-Kodak
Ford Motor Co.
Pharmacia & Upjohn
INTERNET COMPANIES
InfoSeek
Netscape
Peapod
USWeb
UUNet
 
FINANCIAL SERVICES
American Express
BankAmerica
Chase Manhattan
Dun and Bradstreet
Union Bank
 
TRANSPORTATION
Air New Zealand
Alaska Airlines
American Airlines
Greyhound Lines
KLM Royal Dutch Airlines
 
CASE STUDIES
 
   
DIGEX Incorporated -- Internet Service Provider Managing Web Sites for its
Customers
    
 
   
     DIGEX is a leading national Internet carrier that hosts and manages
hundreds of Web sites and firewalls for companies including America's Health
Network and Nike. DIGEX derives competitive advantage from its sophisticated Web
site management organization that includes 250 employees.
    
 
     In August 1997, DIGEX initiated an engineering effort to evaluate Web site
reporting and analysis solutions to provide management reports to its customers.
After running a full battery of tests and comparing several competing traffic
analysis solutions, DIGEX decided to standardize on a single traffic analysis
software package to avoid the difficulties and expense in providing world-class
support on a variety of different applications.
 
   
     DIGEX selected WebTrends' products because of their industry-leading
functionality, high quality, attractive prices, and ease of use. WebTrends'
support for server clusters and ability to perform with little to no demand on
the Web servers during peak hours were also critical. For example, the WebTrends
Log Analyzer generates reports between 1 a.m. and 2 a.m. daily for one of
DIGEX's largest customers whose site runs on a cluster of nine Web servers each
producing a 200 megabyte log file each day.
    
 
   
     DIGEX cites three key benefits from its use of WebTrends' products:
    
 
   
     - Increased Customer Satisfaction: DIGEX is experiencing improved customer
       retention because customers are more satisfied with their overall hosting
       solution.
    
 
                                       43
<PAGE>   48
 
     - Reduced Cost: DIGEX estimates that it is saving $200,000 per year,
       compared to when it was supporting multiple reporting packages.
 
     - Increased Competitiveness: DIGEX's ability to deliver industry-leading
       reporting functionality provides a competitive advantage over Web-hosting
       competitors.
 
     Since standardizing on WebTrends, DIGEX has installed hundreds of copies of
WebTrends' products.
 
   
Cable & Wireless USA -- Internet Service Provider Keeping Up With Customer
Demands
    
 
     Cable & Wireless owns and operates one of the world's premier Internet
networks. Its Internet Solutions Center manages mission-critical Web sites for
hundreds of global corporations. In May 1998, after extensive testing and
evaluation of off-the-shelf packages, the Internet Solutions Center decided to
replace its internally developed management applications with the WebTrends
Enterprise Suite. WebTrends Enterprise Suite met all of the Internet Solutions
Center's evaluation criteria including maintaining all of the existing
functionality of the internally developed applications and handling its largest
Web sites reliably.
 
   
     The Internet Solutions Center installed WebTrends Enterprise Suite onto
numerous processing servers dedicated to running WebTrends software. Log files
from hundreds of Web Sites are moved to these processing servers each night by 2
a.m. The WebTrends Enterprise Suite automatically detects the type of each log
file, then creates up to 33 reports for each Web site, processing approximately
three gigabytes of data. By morning, daily and month-to-date reports are created
for every customer and are available on a reporting server via a Web browser.
    
 
   
     Cable & Wireless has seen three clear benefits from the WebTrends solution:
    
 
   
     - Increased Customer Satisfaction: Cable & Wireless customers are receiving
       the reports they need, on a timely basis, to manage their businesses.
       Requests to Cable & Wireless from its customers for customized reports
       have significantly decreased.
    
 
   
     - Lowered Operating Cost: Operational support effort has been reduced from
       about 25 hours per week to about 10 hours per week, saving about $30,000
       annually.
    
 
   
     - Eliminated Development Costs: Two software developers who were developing
       enhancements to the Internet Solutions Center's internally-developed
       management software have been redeployed, saving about $200,000 annually.
    
 
   
Pharmacia & Upjohn -- Managing a Global Intranet
    
 
   
     Pharmacia & Upjohn is a pharmaceutical and healthcare company with offices
in 54 countries and over 30,000 employees. Pharmacia & Upjohn used Internet
technology to develop an internal use network for communication of company
information and news that generates over 13 million hits per month to 400,000
Web pages housed on 50 geographically dispersed servers. Using WebTrends
Professional Suite, Pharmacia & Upjohn's Webmaster analyzes and monitors the
entire worldwide network from a single workstation in his office. Analyses are
scheduled for automatic execution and the reports are made available on the
network where they are regularly reviewed by 50 to 100 managers. The WebTrends
solution has benefited Pharmacia & Upjohn in the following ways:
    
 
     - Improved Design: Frequently accessed information has been made easier to
       find. Certain low-traffic pages have been deleted.
 
                                       44
<PAGE>   49
 
     - Increased Availability: E-mail messages or pager messages are
       automatically sent when a server is down, reducing recovery delays.
 
   
     - Facilitates Capacity Planning: Overall usage trends permit Pharmacia &
       Upjohn to anticipate needs and upgrade servers and communications
       facilities before network performance degrades.
    
 
   
     - Reduced Overhead: The WebTrends' scheduler automates many of the
       management activities. Furthermore, functional management is able to
       review and customize their own reports reducing the stress on the IT
       organization.
    
 
   
SALES, MARKETING, AND DISTRIBUTION
    
 
   
     WebTrends conducts a number of marketing programs to promote its brand and
to support the sale and distribution of its products. These programs are
designed to inform existing and potential resellers and end-user customers about
the capabilities and benefits of its products. Marketing activities include:
press relations; publication of technical and educational articles in its
on-line magazine, WebTrends Corporation Alert; participation in industry trade
shows; product/technology conferences and seminars; Web-based and traditional
advertising; development and distribution of literature; and maintenance of the
WebTrends Web site. It also conducts joint marketing and distribution with
strategic partners, including:
    
 
     - Oracle: Distributes trial versions of Web site management products with
       Oracle's Internet Application Server.
 
     - Netscape: Sells WebTrends' products through its Software-Depot Store
       e-commerce Web site.
 
   
     - Microsoft: WebTrends promotes its products at the microsoft.com Web site
       and at the Microsoft Partners' Pavilion at selected trade conferences.
    
 
     - Check Point Software: Distributes trial versions of WebTrends' products
       from its Web site and partner for marketing, advertising, and trade show
       activities.
 
   
     - Hewlett-Packard: Promotes WebTrends' products on the HP Covision Web site
       as a strategic part of an integrated solution for electronic business.
    
 
   
     Many of WebTrends' sales leads are generated from its own Web site, which
is often a customer's first contact with WebTrends. The Web site contains
extensive product information and sales literature. The Web site also has an
on-line purchasing capability. Many visitors download free trial versions of
WebTrends' products from the Web site. Customers can purchase the product during
the trial period. For 1998, on-line sales accounted for approximately 18% of
WebTrends' revenue.
    
 
   
     In addition to on-line sales, the sales force consists of a telesales
organization and a direct field sales organization. The telesales organization
responds to incoming inquiries generated by advertising and marketing
activities. Telesales representatives also initiate calls to contact customers
who download trial software from the Web site, and offer new products to
existing customers. Data from software downloads and license registrations are
used to identify volume licensing opportunities that are generally referred to a
direct field sales representative or a value added reseller. As of December 31,
1998, the telesales organization consisted of one manager and ten sales
representatives.
    
 
   
     The direct field sales organization is focused on large enterprises and
strategic sales. Strategic sales efforts are targeted at Internet service
providers, Internet-based companies,
    
 
                                       45
<PAGE>   50
 
   
and other organizations with significant on-line presences. By selling its
solutions to the perceived Internet technology leaders, WebTrends believes it
enhances its own brand image. As of December 31, 1998, the direct field sales
organization consisted of five sales representatives. WebTrends plans to grow
its direct field sales force and base more of its direct field sales
representatives in their respective geographic territories in 1999. In 1998,
direct sales, excluding on-line sales, accounted for approximately 51% of
WebTrends' revenue.
    
 
   
     WebTrends' domestic, indirect distribution channel consists of numerous
resellers and a value added reseller program. WebTrends relies on the value
added reseller program not only to expand sales but also to meet the demand for
value-added services related to the installation and use of its products.
Recently it established national distribution relationships with Merisel and
Ingram. WebTrends expects that its resellers and value added resellers will
acquire product through Merisel, Ingram, or other distributors in the future. As
of December 31, 1998, WebTrends employed three value added reseller partner
managers to establish new value added resellers and manage relationships with
existing value added resellers and one reseller manager to manage relationships
with new and existing resellers. In 1998, indirect sales, both domestic and
international, accounted for approximately 31% of WebTrends' revenue.
    
 
   
     WebTrends has a nonexclusive relationship with a third-party export
management company to establish indirect distribution channels outside of the
United States. The export management company is responsible for shipment of
products to the international distributor, reseller, or value added reseller and
for all documentation of such export shipments. International resellers and
value added resellers are responsible for the localization of reports, marketing
materials and packaging in the countries where they distribute WebTrends'
products. In 1998, international sales, both direct and indirect and primarily
from European markets, accounted for approximately 28% of WebTrends' revenues.
    
 
COMPETITION
 
   
     See "Risk Factors -- WebTrends' Market is Highly Competitive."
    
 
   
PROPRIETARY RIGHTS
    
 
   
     WebTrends relies on a combination of copyright, trade secret, patent,
trademark, confidentiality procedures, and contractual provisions to protect its
proprietary rights. WebTrends' software, documentation and other written
materials are provided limited protection by international and United States
copyright laws. WebTrends licenses its products in object code format for
limited use by customers. It treats the source code for its products as a trade
secret and requires all employees and third-parties who require access to the
source code to sign non-disclosure agreements.
    
 
   
     WebTrends currently has two pending United States patents that seek to
protect inventions underlying the FastTrends cache and server cluster analysis
technology, respectively. WebTrends is in the process of preparing an additional
United States patent application. WebTrends does not have any issued patents.
    
 
   
     WebTrends has developed and published a log format for firewall data that
it hopes to establish as a standard. WebTrends may develop additional formats to
facilitate the standardization process for enterprise management of Internet and
intranet servers. It permits such formats to be implemented by vendors of
servers and other Internet products, and by competing enterprise management
software companies.
    
 
                                       46
<PAGE>   51
 
   
     WebTrends has registered the trademark AuditTrack in the United States. It
has applied for United States trademark registrations for the following:
AlertTrack, ClusterTrends, CommerceTrends, DBTrends, FastTrends, FireTrends,
Manage Your WWWorld, SmartPass, WebTrends, and WWWorld. Certain of these marks
are also protected in other jurisdictions. See "Risk Factors -- We May be Unable
to Protect Our Intellectual Property Rights" and "-- Others May Bring
Infringement Claims Against Us."
    
 
EMPLOYEES
 
   
     As of December 31, 1998, WebTrends had 78 employees, including 37 in sales,
marketing, and customer support, 27 in research and development, and 14 in
finance and administration. All of the employees were located at its
headquarters in Portland, Oregon, except for three sales representatives. None
of the employees is represented by a labor union. WebTrends has experienced no
work stoppages and believes its relationships with its employees are good.
    
 
FACILITIES
 
   
     WebTrends is headquartered in Portland, Oregon, where it leases
approximately 22,000 square feet pursuant to a recently executed five-year
lease. Pursuant to the new lease, WebTrends will occupy an additional 15,000
square feet by July 1999. WebTrends has sales offices in Boston, Massachusetts
and Houston, Texas.
    
 
LEGAL PROCEEDINGS
 
   
     WebTrends is not currently a party to any material legal proceedings.
    
 
                                       47
<PAGE>   52
 
                                   MANAGEMENT
 
EXECUTIVE OFFICERS, DIRECTORS, AND KEY PERSONNEL
 
   
     The executive officers, directors, and key personnel of WebTrends, and
their ages and positions, are as follows:
    
 
   
<TABLE>
<CAPTION>
              NAME                AGE                    POSITION
              ----                ---                    --------
<S>                               <C>    <C>
Elijahu Shapira.................  33     Chairman of the Board and Chief
                                         Executive Officer
W. Glen Boyd....................  31     President, Chief Technical Officer, and
                                         Director
James T. Richardson.............  51     Vice President, Chief Financial Officer,
                                         and Secretary
Gregory D. Applegate............  38     Vice President of Sales
Daniel J. Meub..................  45     Vice President of Marketing
Michael Burmeister-Brown........  40     Director
John W. Ryan....................  37     Director
Srivats Sampath.................  39     Director
John D. Teddy...................  34     Vice President of Research & Development
</TABLE>
    
 
   
     There are no family relationships among any of the directors, executive
officers, or key personnel of WebTrends.
    
 
   
     Elijahu Shapira is a co-founder of WebTrends and has served as its Chief
Executive Officer since December 1997 and as a director since September 1993.
From September 1994 to November 1995 and from November 1996 to December 1998, he
served as its Vice President and Secretary. Mr. Shapira has 14 years of
experience in the software industry. From June 1991 to September 1994, Mr.
Shapira was the Product Development Manager for the AntiVirus product line of
Central Point Software, an anti-virus software development company that was
acquired by Symantec Corporation in 1994. From March 1987 to October 1990, Mr.
Shapira was the Vice President of International Business Development for Carmel
Software Engineering, a company specializing in network security and encryption
products.
    
 
   
     W. Glen Boyd is a co-founder of WebTrends and has served as its President
since December 1996, as its Chief Technical Officer since December 1997, and as
a director since September 1993. Mr. Boyd served as the President of WebTrends
from September 1993 to November 1995 and as its Vice President and Secretary
from November 1995 to December 1996. Mr. Boyd has more than 12 years of
experience in the software industry. Prior to co-founding WebTrends in 1993,
from October 1990 to January 1993, Mr. Boyd was a Section Manager for the
AntiVirus, Commute, and PCTools product lines of Central Point Software.
    
 
   
     James T. Richardson has served as WebTrends' Vice President and Chief
Financial Officer since July 1998 and as Secretary since December 1998. From
April 1994 to December 1997, Mr. Richardson served as the Senior Vice President
of Corporate Operations and Chief Financial Officer of Network General, a
producer of networking software that merged with McAfee Associates in December
1997 to form Network Associates. From July 1992 to April 1994, Mr. Richardson
served as the Vice President of Finance and Chief Financial Officer of Logic
Modeling Corporation, an electronic design automation software company that
merged with Synopsys, Inc. in February 1994. From
    
 
                                       48
<PAGE>   53
 
November 1989 to June 1992, Mr. Richardson served as the Vice President of
Finance and Administration and as Chief Financial Officer of Advanced Logic
Research, a manufacturer of personal computers. Mr. Richardson has served in
various management positions in the high-technology industry since 1977.
 
   
     Gregory D. Applegate has served as WebTrends' Vice President of Sales since
April 1998. From December 1996 to April 1998, Mr. Applegate served as the Vice
President of Sales of OrCAD Inc., an electronic design automation software
company. From October 1993 to November 1996, Mr. Applegate served in a variety
of other management roles at OrCAD. Prior to his employment with OrCad, Mr.
Applegate served in sales and management positions at INTERSOLV, Inc., an
enterprise solution and software management company.
    
 
   
     Daniel J. Meub has served as WebTrends' Vice President of Marketing since
December 1998. From December 1996 to October 1998, Mr. Meub served as the
President and Chief Executive Officer of Adaptive Solutions Inc., a supplier of
forms processing software and imaging solutions for the health care and
governmental markets that filed a voluntary petition under Chapter 7 of the
United States Bankruptcy Code due to insolvency. From January 1995 to November
1996, Mr. Meub served as the Executive Vice President of Marketing and Product
Development of Now Software Inc., a supplier of time management and utility
software. From February 1993 to June 1994, Mr. Meub served as the Vice
President/General Manager of the Desktop Product Group of Central Point
Software. From November 1991 to February 1993, Mr. Meub served as the Vice
President of Marketing and Development of Calera Recognition Systems, a
character recognition software development company. Mr. Meub has served in a
variety of sales and marketing roles since 1976.
    
 
   
     Srivats Sampath has served as a director of WebTrends since January 1998.
Since July 1998, Mr. Sampath has served as the Vice President of Worldwide
Marketing of Network Associates, a provider of security and management solutions
for enterprise networks. From June 1996 to December 1997, Mr. Sampath served as
the Vice President of Product Marketing for Netscape Communications, a provider
of Internet software and services. From June 1993 to June 1996, Mr. Sampath
served as the President and Chief Executive Officer of Discussions Corporation,
a company that he founded to develop e-mail based groupware solutions. From 1984
to 1991, Mr. Sampath managed the LAN Enhancement Operations and Microcomputer
Communications Division of Intel Corporation. Mr. Sampath has over 15 years of
experience serving in management and executive roles in the computer industry.
    
 
   
     John W. Ryan has served as a director of WebTrends since January 1998.
Since January 1997, Mr. Ryan has served as the President of J Ryan & Associates,
a provider of high technology marketing and sales consulting services. From
September 1995 to January 1997, Mr. Ryan served as the Vice President of
Marketing Strategy and Programs for Tivoli Systems, a systems management
division of IBM. From April 1994 to September 1995, Mr. Ryan served as the Vice
President of Marketing for Mergent International, a producer of security
software. From December 1990 to April 1994, he served as the director of a
business unit for Central Point Software. Mr. Ryan has 15 years of experience in
executive level and senior management roles in the computer industry.
    
 
   
     Michael Burmeister-Brown has served as a director of WebTrends since
October 1996. Since July 1997, Mr. Burmeister-Brown has served as a software
engineer at Yahoo!, Inc., a company that provides services as a Web portal.
Since May 1992, Mr. Burmeister-Brown has also served as the President of Second
Nature Software, a software development
    
 
                                       49
<PAGE>   54
 
   
company. From 1981 to 1991, Mr. Burmeister-Brown served in various executive
management roles, including President, Chief Executive Officer, and Chief
Technology Officer, for Central Point Software, a company he founded in 1981.
Mr. Burmeister-Brown has 16 years of experience in senior management roles in
the computer industry.
    
 
   
     John D. Teddy has served as WebTrends' Vice President of Research &
Development since November 1998. From April 1997 to November 1998, Mr. Teddy
served as the Vice President of Engineering and Director of Engineering for
Cybermedia, Inc., a software development company. From April 1994 to April 1997,
Mr. Teddy served as the Chief Architect and Senior Development Manager for
Symantec, where he helped create software such as PCTools, Norton Navigator, and
CrashGuard. From October 1991 to April 1994, Mr. Teddy served as a Senior
Development Manager of Central Point Software.
    
 
CLASSIFIED BOARD; REMOVAL OF DIRECTORS
 
   
     WebTrends' bylaws provide that if the number of directors is increased to
six or more, the board of directors will, at the next annual meeting of
shareholders, be divided into three classes, each of which will serve for a
staggered three-year term. Currently, the board is comprised of five directors,
each serving a one-year term. The articles of incorporation provide that a
director may be removed only for cause. The bylaws provide that a director may
be removed at a special meeting of the shareholders specifically called for that
purpose, and the meeting notice must state that the purpose, or one of the
purposes, of the meeting is removal of the director by a vote of the holders of
a majority of the shares then entitled to vote on the election of directors.
    
 
BOARD COMMITTEES
 
     WebTrends maintains two standing committees, an Audit Committee and a
Compensation Committee.
 
   
     Audit Committee. In December 1998, the board of directors formed the audit
committee for the purpose of reviewing WebTrends' internal accounting procedures
and consulting with and reviewing the services provided by WebTrends'
independent public accountants. Messrs. Sampath and Burmeister-Brown constitute
the audit committee.
    
 
   
     Compensation Committee. In December 1997, the board of directors formed the
compensation committee. The compensation committee reviews and recommends to the
board the compensation and benefits of all WebTrends' officers and reviews
general policy relating to compensation and benefits of employees. The
compensation committee also administers WebTrends' stock option plans and will
administer its stock purchase plan upon completion of this offering. Messrs.
Shapira, Burmeister-Brown, and Ryan constitute the compensation committee.
    
 
COMPENSATION OF DIRECTORS
 
   
     Directors do not currently receive cash compensation for services rendered
as members of the board of directors. WebTrends does, however, reimburse the
directors for certain reasonable expenses incurred in connection with their
attendance at board and committee meetings.
    
 
   
     In August 1998, WebTrends entered into a consulting agreement with J Ryan &
Associates, a company founded by Mr. Ryan. Consulting services pursuant to the
agreement include assistance related to WebTrends' North American distribution
channels
    
 
                                       50
<PAGE>   55
 
   
and its overall market positioning and planning. WebTrends has paid Mr. Ryan
$45,000, and in August 1998, granted Mr. Ryan an option to purchase 7,500 shares
of common stock at an exercise price of $1.82 per share. The shares vest yearly
over a four-year period. See "Certain Transactions."
    
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
   
     Prior to December 1997, WebTrends board of directors did not maintain a
standing compensation committee, and the entire board, including Messrs. Boyd
and Shapira, participated in all decisions regarding compensation of its
executive officers. In December 1997, the board formed the compensation
committee and appointed Messrs. Burmeister-Brown, Ryan, and Shapira as committee
members. Mr. Shapira serves as the Chairman of the Board and Chief Executive
Officer of WebTrends. Messrs. Burmeister-Brown and Ryan are not employees or
officers or former employees or officers of WebTrends. No executive officer of
WebTrends serves as a member of the board of directors or compensation committee
of any entity that has one or more executive officers serving as a member of
WebTrends' board of directors or compensation committee.
    
 
   
     In November 1996, Messrs. Boyd and Shapira each extended a $300,000 line of
credit to WebTrends to provide working capital. In March 1997, WebTrends
borrowed $125,000 from each of Messrs. Boyd and Shapira under the line of credit
and issued them promissory notes. The notes bear interest at 5% per annum and
mature in December 1997. In August 1998, the payment terms of these notes were
amended to provide that payments in amounts not less than $25,000 per quarter
would be made on each promissory note until the entire principal and accrued
interest is paid in full. WebTrends has made two quarterly payments totalling
$60,858 to each of Messrs. Boyd and Shapira as of December 31, 1998.
    
 
EXECUTIVE COMPENSATION
 
   
     The following table summarizes the compensation paid to WebTrends' Chief
Executive Officer and its other executive officers whose salary and bonus
exceeded $100,000 for services rendered to WebTrends in all capacities during
fiscal 1998 (collectively, the "Named Executive Officers").
    
 
                           SUMMARY COMPENSATION TABLE
 
   
<TABLE>
<CAPTION>
                                                            ANNUAL COMPENSATION
                                                            -------------------
               NAME AND PRINCIPAL POSITION                   SALARY      BONUS
               ---------------------------                  --------    -------
<S>                                                         <C>         <C>
Elijahu Shapira, Chairman of the Board and
  Chief Executive Officer.................................  $150,000    $20,000
W. Glen Boyd, President and Chief Technical Officer.......   150,000     20,000
</TABLE>
    
 
   
OPTION GRANTS IN LAST FISCAL YEAR
    
 
   
     No stock options were granted to the Named Executive Officers during the
year ended December 31, 1998.
    
 
   
EMPLOYEE BENEFIT PLANS
    
 
   
401(K) PLAN
    
 
   
     WebTrends maintains a 401(k) tax-qualified employee savings and retirement
plan covering all employees who satisfy certain eligibility requirements
relating to minimum age and length of service. Pursuant to the 401(k) plan,
eligible employees may elect to reduce
    
 
                                       51
<PAGE>   56
 
   
their current compensation by up to the lesser of 15% of their annual
compensation or the statutorily prescribed annual limit and have the amount of
such reduction contributed to the 401(k) plan. The 401(k) Plan is intended to
qualify under applicable law, so that contributions to the 401(k) plan, and
income earned on the 401(k) plan contributions are not taxable until withdrawn.
The 401(k) plan is available to WebTrends' executive officers on terms not more
favorable than those offered to other employees.
    
 
   
1999 EMPLOYEE STOCK PURCHASE PLAN
    
 
   
     WebTrends adopted the 1999 purchase plan in December 1998. The 1999
purchase plan will be implemented upon the effectiveness of this offering.
WebTrends intends for the 1999 purchase plan to qualify under Section 423 of the
Internal Revenue Code of 1986, as amended. The 1999 purchase plan permits
eligible employees of WebTrends and its subsidiaries to purchase common stock
through payroll deductions of up to 15% of their cash compensation. WebTrends
will implement the 1999 purchase plan with six-month offering periods, except
that the first offering period will begin on the effectiveness of this offering
and end on June 30, 1999. Subsequent offering periods will begin on each January
1 and July 1. Under the 1999 purchase plan, no employee may purchase common
stock worth more than $25,000 in any offering period or in any calendar year,
valued as of the first day of each offering period. In addition, owners of 5% or
more of the combined voting power or value of all classes of stock of WebTrends
or its subsidiary may not participate in the 1999 purchase plan. WebTrends
authorized the issuance of a total of 350,000 shares of common stock under the
1999 purchase plan, plus an automatic increase on January 1, 2000 and each
anniversary thereafter that will be equal to the lesser of (a) 16,250 shares;
(b) 0.125% of the average common shares outstanding as used to calculate fully
diluted earnings per share as reported in the annual report to shareholders for
the preceding year; or (c) a lesser amount determined by its board of directors.
Any unissued shares resulting from increases in previous years will be added to
the aggregate number of shares available for issuance under the 1999 purchase
plan.
    
 
   
     The price of the common stock purchased under the 1999 purchase plan will
be the lesser of 85% of the fair market value on the first day of an offering
period and 85% of the fair market value on the last day of an offering period,
except that the purchase price for the first offering period will be equal to
the lesser of 100% of the initial public offering price for the common stock and
85% of the fair market value on June 30, 1999. The 1999 purchase plan will
terminate in December 2008, but the board of directors may terminate it at any
earlier time. WebTrends has not issued any shares of common stock under the 1999
purchase plan.
    
 
   
     In the event of a merger or proposed sale of all or substantially all of
WebTrends' assets, the 1999 purchase plan provides that each outstanding option
to purchase shares under the 1999 purchase plan will be assumed or an equivalent
option substituted by the successor corporation. If the successor corporation
refuses to assume or provide an equivalent substitute for the option, the
offering period during which a participant may purchase stock will be shortened
to a specified date before the merger or proposed sale. In the event of a
proposed liquidation or dissolution of WebTrends, the offering period during
which a participant may purchase stock will be shortened to a specified date
before the date of the proposed liquidation or dissolution.
    
 
1998 STOCK INCENTIVE COMPENSATION PLAN
 
   
     In December 1998, WebTrends adopted the 1998 option plan. The purpose of
the 1998 option plan is to enhance the long-term shareholder value of WebTrends
by offering
    
 
                                       52
<PAGE>   57
 
   
opportunities to its selected employees, directors, officers, consultants,
agents, advisors, and independent contractors to participate in its growth and
success, to encourage them to remain in its service, and to own its stock. The
1998 option plan permits both option and stock grants. The board has reserved a
total of 1,465,475 shares of common stock for the 1998 option plan, plus (a) any
shares returned to the 1997 option plan upon termination of certain option and
stock grants (other than terminations due to exercise or settlement of such
awards); and (b) an automatic annual increase, to be added on the first day of
the fiscal year beginning in 2001, equal to the lesser of 500,000 shares or 5%
of the average common shares outstanding as used to calculate fully diluted
earnings per share as reported in WebTrends' annual report to shareholders for
the preceding year.
    
 
   
     Stock Option Grants. The compensation committee will serve as the plan
administrator of the 1998 option plan. The plan administrator will have the
authority to select individuals to receive options under the 1998 option plan
and to specify the following:
    
 
   
     - the terms and conditions of each option granted (incentive or
       nonqualified);
    
 
   
     - the exercise price;
    
 
   
     - the vesting provisions; and
    
 
   
     - the option term.
    
 
   
For incentive stock options, the exercise price must be at least equal to the
fair market value of the common stock on the date of grant and for nonqualified
options must be at least 85% of the fair market value of the common stock on the
date of grant. For purposes of the 1998 option plan, fair market value means the
average of the high and low per share sales price as reported on the Nasdaq
National Market on the date of grant. Unless otherwise provided by the plan
administrator, and to the extent required for incentive stock options by
applicable law, an option granted under the 1998 option plan generally will
expire ten years from the date of grant or, if earlier, one year after the
optionee's retirement, early retirement, death, or disability and three months
after other terminations (other than termination for cause in which case such
option shall automatically expire upon first notification to the optionee of
such termination).
    
 
   
     Stock Awards. The plan administrator is authorized under the 1998 option
plan to issue shares of common stock to eligible participants with terms,
conditions, and restrictions established by the plan administrator in its sole
discretion. Restrictions may be based on continuous service with WebTrends or
the achievement of performance goals. Holders of restricted stock are
shareholders of WebTrends and have, subject to certain restrictions, all the
rights of shareholders with respect to such shares.
    
 
   
     Termination of the 1998 Option Plan. Unless terminated sooner by the board
of directors, the 1998 option plan will terminate in December 2008.
    
 
   
     Adjustments. The plan administrator will make proportional adjustments to
the aggregate number of shares issuable under the 1998 option plan and to
outstanding awards in the event of stock splits or other capital adjustments.
    
 
   
     Corporate Transactions. In the event of certain corporate transactions,
such as a merger or sale, each outstanding option to purchase shares under the
1998 option plan will be assumed or an equivalent option substituted by the
successor corporation or a parent thereof. If the successor corporation refuses
to assume or provide an equivalent substitute for the option, unless otherwise
provided in an individual's option letter agreement, the option shall terminate,
but the holder of such option shall have the right to exercise the option
immediately before the corporation transaction. In the event of a proposed
dissolution or liquidation of WebTrends, the plan administrator, in its
discretion, may
    
 
                                       53
<PAGE>   58
 
accelerate options and cancel any forfeiture provisions or repurchase options
applicable to stock awards.
 
1997 STOCK INCENTIVE COMPENSATION PLAN
 
   
     WebTrends' 1997 option plan provides for the grant of incentive and
nonqualified stock options and stock awards to its employees, directors and
consultants. An aggregate of 1,534,524 shares of common stock has been
authorized for issuance under the 1997 option plan. As of December 31, 1998,
options to purchase an aggregate of 1,471,149 shares of common stock were
outstanding under the 1997 option plan, with exercise prices ranging from $0.61
to $8.00 per share. As of December 31, 1998, options to purchase 8,437 shares of
common stock had been exercised under the 1997 option plan. No additional
options will be granted under the 1997 option plan, as future option grants will
be made under the 1998 option plan. Any shares that are returned to the 1997
option plan upon termination of certain options and stock grants (other than
terminations due to exercise or settlement of such awards) will be added to the
number of shares reserved for issuance under the 1998 option plan. Options
outstanding under the 1997 option plan will continue to be governed by the terms
of the 1997 option plan. In the event of a merger of WebTrends with or into
another corporation, the options may be assumed or an equivalent option
substituted by the successor corporation or a parent or subsidiary of such
corporation. If the successor corporation refuses to assume or provide an
equivalent substitute for the option, unless otherwise provided in an
individual's option letter agreement, the option will terminate, but the holder
of the option shall have the right to exercise the vested portion of the option
immediately before the corporate transaction.
    
 
   
LIMITATION OF LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS
    
 
   
     As permitted by Oregon law, WebTrends' articles of incorporation require
indemnification against certain liabilities and expenses of a director, and the
articles and bylaws permit such indemnification of an officer, where either is
made or threatened to be made a party to a proceeding (other than a proceeding
by or in the right of WebTrends to procure a judgment in its favor) because such
person is or was its director or officer. Indemnification is provided if the
director or officer acted in good faith and in a manner he or she reasonably
believed was in or not opposed to WebTrends' best interests, and, with respect
to any criminal action or proceeding, the director or officer, in addition, had
no reasonable cause to believe his or her conduct was unlawful. In the case of
any proceeding by or in the right of WebTrends, a director or officer is
entitled to indemnification of certain expenses if he or she acted in good faith
and in a manner he or she reasonably believed was in or not opposed to
WebTrends' best interests. However, pursuant to Oregon law, no indemnification
would be made if the director's or officer's errors or omissions (or alleged
errors or omissions) were shown to have involved any:
    
 
   
     - breach of the director's or officer's duty of loyalty to WebTrends;
    
 
   
     - act or omission not in good faith or that involved intentional misconduct
       or a knowing violation of law;
    
 
   
     - distribution that was unlawful under Oregon law;
    
 
   
     - transaction from which the director or officer received an improper
       personal benefit; or
    
 
                                       54
<PAGE>   59
 
   
     -  profits made from the purchase and sale by the director or officer of
        securities of WebTrends within the meaning of Section 16(b) of the
        Securities Exchange Act of 1934 or similar provision of any state
        statutory law or common law.
    
 
   
     The articles also provide that no director will be liable to WebTrends or
its shareholders for monetary damages for conduct as a director, except that a
director may be personally liable in the instances set forth in the list above.
Indemnification may also be provided to persons other than directors or officers
under certain circumstances.
    
 
   
     WebTrends understands that the current position of the Securities and
Exchange Commission is that any indemnification of liabilities arising under the
Securities Act of 1933, is against public policy and is, therefore,
unenforceable.
    
 
                                       55
<PAGE>   60
 
                              CERTAIN TRANSACTIONS
 
   
     On August 24, 1998, WebTrends entered into a Consulting Agreement with J
Ryan & Associates, a consulting company formed by John W. Ryan, a director of
WebTrends, pursuant to which WebTrends is required to pay a fee of $45,000,
grant Mr. Ryan an option to purchase 7,500 shares of common stock and reimburse
him for reasonable out-of-pocket expenses incurred in connection with his
providing services as a consultant. The consulting services include assistance
related WebTrends' North American distribution channels and assisting with
company positioning and overall market planning. The Consulting Agreement has a
term of six months, ending on February 28, 1999. As of December 31, 1998,
WebTrends has made payments totaling $45,000 and has granted Mr. Ryan an option
to purchase 7,500 shares of Common Stock under the 1997 option plan. See
"Management -- Compensation of Directors."
    
 
   
     In November 1996, W. Glen Boyd and Elijahu Shapira, executive officers and
directors of WebTrends, each extended a $300,000 line of credit to WebTrends to
provide working capital. In March 1997, WebTrends borrowed $125,000 from each of
Messrs. Boyd and Shapira under the line of credit, and issued them promissory
notes. The Notes bear interest at 5% per annum and mature in December 1997. In
August 1998, the payment terms of these notes were amended to provide that
payments in amounts not less than $25,000 per quarter would be made on each
promissory note until the entire principal and accrued interest is paid in full.
WebTrends has made two quarterly payments totalling $60,858 to each of Messrs.
Boyd and Shapira as of December 31, 1998.
    
 
   
     WebTrends believes that all of the transactions set forth above were made
on terms no less favorable to it than could have been obtained from unaffiliated
third parties. Any future transactions between WebTrends and its officers,
directors, and principal shareholders and their affiliates will be approved by a
majority of the Board of Directors, including a majority of the independent and
disinterested directors, and will be on terms no less favorable to WebTrends
than could be obtained from unaffiliated third parties.
    
 
                                       56
<PAGE>   61
 
                       PRINCIPAL AND SELLING SHAREHOLDERS
 
   
     The following table sets forth certain information with respect to the
beneficial ownership of WebTrends common stock as of December 31, 1998 by the
following:
    
 
   
     - Each person or group of affiliated persons known by WebTrends to
       beneficially own more than a number of shares equal to 5% of the common
       stock;
    
 
   
     - Each director and Named Executive Officer;
    
 
   
     - The selling shareholders;
    
 
   
     - All of the directors and executive officers as a group.
    
 
   
     Beneficial ownership of shares includes any shares over which a person
exercises sole or shared voting or investment power, or of which a person has
the right to acquire ownership at any time within 60 days (for example, through
the exercise of an option that has vested as to all or a portion of the
underlying shares). Shares of common stock subject to options currently
exercisable or exercisable within 60 days are deemed outstanding for purposes of
computing the percentage ownership of the person holding the options, but are
not deemed outstanding for computing the percentage ownership of any other
person. Except as otherwise indicated, WebTrends believes that the beneficial
owners of the common stock listed below, based on information furnished by such
owners, have sole voting and investment power with respect to such shares.
    
 
   
<TABLE>
<CAPTION>
                                                                   PERCENT OWNERSHIP
                                                                -----------------------
                                           NUMBER OF SHARES      BEFORE        AFTER
          NAME AND ADDRESS(1)             BENEFICIALLY OWNED    OFFERING    OFFERING(2)
          -------------------             ------------------    --------    -----------
<S>                                       <C>                   <C>         <C>
Elijahu Shapira.........................      3,900,000(3)        47.5%        34.8%
Anne Lim Shapira
  as trustee of The Shapira Group Trust,
  U/A/D 9/29/98.........................        500,000              6          4.5
W. Glen Boyd............................      3,900,000(4)        47.5         34.8
Alice Ferguson Boyd
  as trustee of The Boyd Group Trust,
  U/A/D 9/29/98.........................        500,000              6          4.5
James T. Richardson.....................         27,366(5)           *            *
Gregory D. Applegate....................             --             --           --
Daniel J. Meub..........................             --             --           --
Michael Burmeister-Brown................        410,527            5.0          3.7
John W. Ryan............................         20,526(5)           *            *
Srivats Sampath.........................         20,526(5)           *            *
All directors and executive officers as
  a group (eight persons)...............      8,278,945(5)        99.9         73.3
</TABLE>
    
 
-------------------------
 *  Less than 1%.
 
   
(1) The address of Messrs. Shapira, Boyd, Richardson, Applegate, and Meub; The
    Shapira Group Trust; and The Boyd Group Trust is c/o WebTrends Corporation,
    851 SW Sixth Avenue, Suite 1200, Portland, Oregon 97204. The address of Mr.
    Burmeister-Brown is c/o Second Nature Software, 1325 Officers' Row,
    Vancouver, Washington 98661. The address of Mr. Ryan is c/o J Ryan &
    Associates, 2903 Mill Reef Cove, Austin, Texas 78746. The address of Mr.
    Sampath is c/o Network Associates, Inc., 3965 Freedom Circle, Santa Clara,
    California 95054.
    
 
                                       57
<PAGE>   62
 
   
(2) Assumes no exercise of the underwriters' over-allotment option. If the
    over-allotment option is exercised in full, the selling shareholders will
    sell an aggregate of 450,000 shares of common stock. Specifically, Elijahu
    Shapira and W. Glen Boyd will each sell 225,000 shares and will each
    beneficially own 3,675,000 shares, or 32.8% of the outstanding common stock
    after completion of this offering.
    
 
   
(3) Includes 500,000 shares of common stock held by Anne Lim Shapira as trustee
    of The Shapira Group Trust, U/A/D 9/29/98. Mr. Shapira disclaims beneficial
    ownership of such shares.
    
 
   
(4) Includes 500,000 shares of common stock held by Alice Ferguson Boyd as
    trustee of The Boyd Group Trust, U/A/D 9/29/98. Mr. Boyd disclaims
    beneficial ownership of such shares.
    
 
   
(5) Includes shares subject to options exercisable within 60 days after December
    31, 1998, as follows: James T. Richardson, 27,366 shares; John W. Ryan,
    20,526 shares; and Srivats Sampath, 20,526 shares; for all officers and
    directors as a group, 68,418 shares.
    
 
                          DESCRIPTION OF CAPITAL STOCK
 
   
     The authorized capital stock of WebTrends consists of 60 million shares of
common stock, no par value per share, and 15 million shares of preferred stock,
no par value per share.
    
 
COMMON STOCK
 
   
     As of December 31, 1998, there were 8,218,964 shares of common stock
outstanding, held of record by seven shareholders. Following this offering,
11,218,964 shares of common stock will be issued and outstanding (assuming no
exercise of stock options subsequent to December 31, 1998). Holders of common
stock are entitled to one vote per share on all matters to be voted upon by the
shareholders. Because holders of common stock do not have cumulative voting
rights, the holders of a majority of the shares of common stock can elect all of
the members of the board of directors standing for election. Subject to
preferences of any preferred stock that may be issued in the future, the holders
of common stock are entitled to receive such dividends as may be declared by the
board of directors. If WebTrends is liquidated, dissolved, or wound up, the
holders of common stock are entitled to receive pro rata all of its assets
available for distribution to its shareholders after payment of liquidation
preferences of any outstanding shares of preferred stock. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and non-assessable.
    
 
PREFERRED STOCK
 
   
     Subject to the provisions of the articles of incorporation and limitations
prescribed by law, the board of directors has the authority to issue, without
further vote or action by the shareholders, up to 15 million shares of preferred
stock in one or more series. The board has the power and authority to fix the
rights, preferences, privileges, and restrictions thereof, including dividend
rights, dividend rates, conversion rates, voting rights, terms of redemption,
redemption prices, liquidation preferences, and the number of shares
constituting any series or the designation of such series. Any series of
preferred stock may have rights and privileges superior to those of the common
stock. There will be no shares of preferred stock outstanding upon the
consummation of this offering, and WebTrends has no present plans to issue any
preferred stock.
    
 
                                       58
<PAGE>   63
 
   
     One of the effects of undesignated preferred stock may be to enable the
board of directors to render more difficult or to discourage a third-party's
attempt to obtain control of WebTrends by means of a tender offer, proxy
contest, merger, or otherwise, which thereby protects the continuity of its
management. The issuance of shares of the preferred stock may also discourage a
party from making a bid for the common stock because such issuance may adversely
affect the rights of the holders of common stock. For example, preferred stock
may rank prior to the common stock as to dividend rights, liquidation
preference, or both, may have full or limited voting rights and may be
convertible into shares of common stock. Accordingly, the issuance of shares of
preferred stock may discourage bids for the common stock or may otherwise
adversely affect the market price of the common stock. See "Risk Factors -- Our
Anti-Takeover Provisions and Preferred Stock May Reduce the Market Price of Our
Common Stock."
    
 
   
ANTI-TAKEOVER MEASURES
    
 
   
ARTICLES AND BYLAWS
    
 
   
     WebTrends' articles and bylaws contain certain provisions that may have the
effect of delaying, deferring or preventing a change in control. Such provisions
include:
    
 
   
     - The ability of the board of directors, without further shareholder
       approval, to issue up to 15 million shares of preferred stock;
    
 
   
     - Requiring a classified board whenever there are six or more directors,
       with each class containing as nearly as possible one-third of the total
       number of directors and the members of each class serving for staggered
       three-year terms;
    
 
   
     - Prohibiting cumulative voting for the election of directors;
    
 
   
     - Requiring supermajority approval of the directors then in office to
       change the total number of directors;
    
 
   
     - Requiring supermajority approval of the shareholders to effect certain
       amendments to the articles or bylaws; and
    
 
   
     - Requiring no less than 60 days' advance notice with respect to
       nominations of directors or other matters to be voted on by shareholders
       other than by or at the direction of the board of directors.
    
 
   
See "Risk Factors -- Our Anti-Takeover Provisions and Preferred Stock May Reduce
the Market Price of Our Common Stock," "Management -- Classified Board; Removal
of Directors."
    
 
OREGON CONTROL SHARE AND BUSINESS COMBINATION STATUTES
 
   
     In certain circumstances, Oregon law may restrict the ability of
significant shareholders of WebTrends to exercise voting rights. The law
generally applies to a person who acquires voting stock of an Oregon corporation
in a transaction that results in such person holding more than 20%, 33 1/3% or
50% of the total voting power of the corporation. If such a transaction occurs,
the person cannot vote the shares unless voting rights are restored to those
shares by (1) a majority of the outstanding voting shares, including the
acquired shares, and (2) the holders of a majority of the outstanding voting
shares, excluding the acquired shares and shares held by the corporation's
officers and inside directors. This law is construed broadly and may apply to
persons acting as a group.
    
 
   
     A person to whom the restrictions set forth above apply may, but is not
required to, submit to the corporation a statement setting forth certain
information about itself and its
    
 
                                       59
<PAGE>   64
 
   
plans with respect to the corporation. The statement may request that the
corporation call a special meeting of shareholders to determine whether voting
rights will be granted to the shares acquired. If a special meeting of
shareholders is not requested, the issue of voting rights of the acquired shares
will be considered at the next annual or special meeting of shareholders. If the
acquired shares are granted voting rights and they represent a majority of all
voting power, shareholders who do not vote in favor of granting such voting
rights will have the right to receive the appraised fair value of their shares.
The appraised fair value will, at a minimum, be equal to the highest price paid
per share by the person for the shares acquired in a transaction subject to this
law.
    
 
   
     WebTrends is also subject to certain provisions of Oregon law that govern
business combinations between corporations and interested shareholders. These
provisions generally prohibit a corporation from entering into a business
combination transaction with a person, or affiliate of such person, for a period
of three years from the date such person acquires 15% or more of the voting
stock of the corporation. For the purpose of this law, the prohibition generally
applies to the following:
    
 
   
     - A merger or plan of share exchange;
    
 
   
     - Any sale, lease, mortgage or other disposition of 10% or more of the
       assets of the corporation; and
    
 
   
     - Certain transactions that result in the issuance of capital stock of the
       corporation to the 15% shareholder.
    
 
   
However, the general prohibition does not apply if:
    
 
   
     - The 15% shareholder, as a result of the transaction in which such person
       acquired 15% of the shares, owns at least 85% of the outstanding voting
       stock of the corporation, excluding shares owned by directors who are
       also officers, and certain employee benefit plans;
    
 
   
     - The board of directors approves the share acquisition or business
       combination before the shareholder acquired 15% or more of the
       corporation's outstanding voting stock; or
    
 
   
     - The board of directors and the holders of at least two-thirds of the
       outstanding voting stock of the corporation, excluding shares owned by
       the 15% shareholder, approve the transaction after the shareholder
       acquires 15% or more of the corporation's voting stock.
    
 
   
TRANSFER AGENT AND REGISTRAR
    
 
   
     The transfer agent and registrar for the common stock is BankBoston, N.A.,
located in Canton, Massachusetts.
    
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
   
     Prior to this offering, there has not been a public market for WebTrends'
common stock, and a significant public market for the common stock may not be
developed or sustained after this offering. Future sales of substantial amounts
of the common stock in the public market, or even the prospect of such sales,
could adversely affect the prevailing market prices of the common stock or
WebTrends' future ability to raise capital through an offering of equity
securities.
    
 
                                       60
<PAGE>   65
 
   
     Upon the closing of this offering, and assuming no exercise of outstanding
stock options subsequent to December 31, 1998, WebTrends will have 11,218,964
shares of common stock outstanding. The 3,000,000 shares sold in this offering
will be freely tradable without restriction or limitation under the Securities
Act, except for any such shares purchased by "affiliates" of WebTrends, as such
term is defined under Rule 144 of the Securities Act, which will be subject to
the resale limitations of Rule 144. The remaining 8,218,964 shares of WebTrends
common stock issued and outstanding are "restricted securities" within the
meaning of Rule 144 and were issued and sold by WebTrends in private
transactions. Such restricted securities may be publicly sold only if registered
under the Securities Act or sold in accordance with an applicable exemption from
registration, such as Rule 144. WebTrends and the holders of all such remaining
shares will agree that, without the prior written consent of Dain Rauscher
Wessels, a division of Dain Rauscher Incorporated, they will not, directly or
indirectly, issue, sell, offer or agree to sell, grant any option for the sale
of, pledge, make any short sale, or otherwise dispose of shares of common stock
or any securities convertible or exchangeable therefor, for a period of 180 days
after the date of this prospectus. Upon expiration of the lock-up agreements,
all of these restricted securities will be eligible for immediate resale in the
public market subject to the limitations of Rule 144.
    
 
   
     In general, under Rule 144, as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least one year, including an affiliate of WebTrends the Company, would be
entitled to sell, within any three-month period, that number of shares that does
not exceed the greater of (a) 1% of the then-outstanding shares of common stock
(approximately 112,000 shares upon the closing of this offering), and (b) the
average weekly trading volume in the common stock during the four calendar weeks
immediately preceding the date on which a notice of sale is filed with the
Securities and Exchange Commission, provided certain manner of sale and notice
requirements and requirements as to the availability of current public
information about WebTrends are satisfied. In addition, in order to sell shares
of common stock that are not restricted securities, affiliates of WebTrends must
comply with all restrictions and requirements of Rule 144 other than the
one-year holding period requirement. As defined in Rule 144, an "affiliate" of
an issuer is a person who directly or indirectly through the use of one or more
intermediaries controls, or is controlled by, or is under common control with,
such issuer. Under Rule 144(k), a holder of "restricted securities" who is not
deemed an affiliate of the issuer and who has beneficially owned shares for at
least two years would be entitled to sell shares under Rule 144(k) without
regard to the limitations described above.
    
 
   
     WebTrends intends to file a registration statement under the Securities Act
following the date of this prospectus to register the future issuance of up to
3,341,562 shares of common stock under the 1997 option plan, the 1998 option
plan and the 1999 purchase plan. The registration statement will become
effective immediately upon filing, whereupon, subject to the satisfaction of
applicable exercisability periods, Rule 144 volume limitations applicable to
affiliates and, in certain cases, the lock-up agreements with the underwriters
(described above), the shares of common stock to be issued pursuant to the 1999
purchase plan or upon exercise of outstanding options granted pursuant to the
1998 option plan will be available for immediate resale in the open market. As
of December 31, 1998, no options were outstanding under the 1998 option plan and
no shares had been issued under the 1999 purchase plan.
    
 
                                       61
<PAGE>   66
 
                                  UNDERWRITING
 
   
     The Underwriters named below, acting through their representatives, Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated, and SoundView
Technology Group, Inc., have severally agreed, subject to the terms and
conditions of the underwriting agreement, to purchase from WebTrends and the
selling shareholders the number of shares of common stock set forth opposite
their respective names below. The underwriters are committed to purchase and pay
for all such shares if any are purchased, subject to certain conditions
precedent.
    
 
   
<TABLE>
<CAPTION>
                                                              NUMBER OF
                    NAME OF UNDERWRITER                        SHARES
                    -------------------                       ---------
<S>                                                           <C>
Dain Rauscher Wessels.......................................
SoundView Technology Group, Inc.............................
 
                                                              ---------
          Total.............................................  3,000,000
                                                              =========
</TABLE>
    
 
   
     The representatives have advised WebTrends and the selling shareholders
that the underwriters propose to offer the shares of common stock to the public
at the initial public offering price set forth on the cover page of this
prospectus and to certain dealers at such price less a concession of not in
excess of $       per share, of which $       may be reallowed to other dealers.
After the public offering, the public offering price, concession and reallowance
to dealers may be reduced by the representatives. No such reduction shall change
the amount of proceeds to be received by WebTrends as set forth on the cover
page of the prospectus.
    
 
   
     The underwriting agreement contains covenants of indemnity among the
underwriters, WebTrends, and the selling shareholders against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
underwriting agreement.
    
 
   
     The selling shareholders have granted to the underwriters an option to
purchase up to 450,000 additional shares of common stock. This option may be
exercised at any time up to 30 days after the date of this prospectus. The
option entitles the underwriters to purchase the additional shares of common
stock at the same price per share as the 3,000,000 shares being sold in this
offering. If the underwriters exercise the option, each of the underwriters
must, subject to certain conditions, purchase approximately the same percentage
of additional shares from the selling shareholders that they purchased from
WebTrends. If purchased, the additional shares will be sold by the underwriters
on the same terms as those on which the 3,000,000 shares are being sold.
    
 
   
     The price of the shares of common stock purchased by the underwriters will
be the public offering price set forth on the cover page of the prospectus less
the following underwriting discounts and commissions, to be provided by
WebTrends and the selling shareholders:
    
 
   
<TABLE>
<CAPTION>
                                                          TOTAL WITHOUT      TOTAL WITH
                                             PER SHARE   OVER-ALLOTMENT    OVER-ALLOTMENT
                                             ---------   ---------------   ---------------
<S>                                          <C>         <C>               <C>
By WebTrends...............................
By selling shareholders....................
</TABLE>
    
 
                                       62
<PAGE>   67
 
   
     WebTrends will also pay certain offering expenses estimated to total $1
million.
    
 
   
     Without the prior written consent of the underwriters, WebTrends'
shareholders and option holders have agreed, for a period of 180 days after the
date of this prospectus, not to sell, transfer, grant any third party the right
to purchase, or otherwise dispose of any shares of common stock or other
securities that they own or acquire. This 180-day period is known as the lock-up
period. The representatives may, without notice and in their sole discretion,
allow any shareholder or option holder to dispose of common stock or other
securities prior to the expiration of the lock-up period. There are, however, no
agreements between the underwriters and any of WebTrends' shareholders or option
holders that would allow them to do so.
    
 
   
     In addition, WebTrends has agreed that it will not issue, sell, offer to
sell, or otherwise dispose of any shares of its common stock or other securities
during the lock-up period without the prior consent of the underwriters. This
agreement does not include shares of common stock or other securities issued
pursuant to employee stock option plans, employee stock purchase plans, or
common stock or other securities issued pursuant to options or other securities
outstanding on the date of this prospectus. However, WebTrends has agreed that
employee stock options issued during the lock-up period may not be exercised
prior to the expiration of the lock-up period. Any shares of common stock issued
during the lock-up period pursuant to the exercise of stock options or other
securities outstanding on the date of this prospectus shall bear a restrictive
legend restricting the transfer of such shares during the lock-up period.
    
 
   
     The underwriters have advised WebTrends that in connection with this
offering, certain persons participating in this offering may engage in
transactions that may have the effect of stabilizing or maintaining the market
price of the common stock at a level above that which might otherwise prevail in
the open market. These transactions may include stabilizing bids, syndicate
covering transactions and the imposition of penalty bids. A "stabilizing bid" is
a bid for or the purchase of common stock on behalf of the underwriters for the
purpose of preventing or retarding a decline in the market price of the common
stock. A "syndicate covering transaction" is the bid for or the purchase of the
common stock on behalf of the underwriters to reduce a short position incurred
by the underwriters in connection with this offering. A "penalty bid" is an
arrangement permitting the representatives to reclaim the selling concession
otherwise accruing to an Underwriter or syndicate member in connection with the
offering if the common stock originally sold by such underwriter or syndicate
member is purchased by the representatives in a syndicate covering transaction
and has therefore not been effectively placed by such underwriter or syndicate
member. The representatives have advised WebTrends that such transactions may be
effected on the Nasdaq National Market or otherwise and, if commence, may be
discontinued at any time.
    
 
   
Prior to this offering, there was no public market for the common stock. The
initial public offering price for the common stock will be determined by
negotiation between WebTrends, the selling shareholders and the underwriters.
Among other factors to be considered in determining the initial public offering
price are prevailing market and economic conditions, revenues and earnings of
WebTrends, the state of its business operation, an assessment of its management
and consideration of the above factors in relation to market valuation of
companies in related businesses and other factors deemed relevant. There can be
no assurance, however, that the prices at which the common stock will sell in
the public market after this offering will be equal to or greater than the
initial public offering price.
    
 
                                       63
<PAGE>   68
 
                                 LEGAL MATTERS
 
   
     The validity of the common stock offered hereby and certain other legal
matters will be passed upon for WebTrends by Perkins Coie LLP, Portland, Oregon.
Certain legal matters will be passed upon for the Underwriters by Wilson Sonsini
Goodrich & Rosati, P.C., Palo Alto, California.
    
 
                                    EXPERTS
 
   
     WebTrends' financial statements as of December 31, 1997 and 1998, and for
each of the years in the three-year period ended December 31, 1998, have been
included in this prospectus and elsewhere in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein and upon the authority of said firm as
experts in accounting and auditing.
    
 
                             ADDITIONAL INFORMATION
 
   
     WebTrends has filed with the Securities and Exchange Commission a
registration statement on Form S-1 under the Securities Act with respect to the
common stock offered hereby. This prospectus, which constitutes part of the
registration statement, omits certain information contained in the registration
statement, together with exhibits and schedules, on file with the Securities and
Exchange Commission pursuant to the Securities Act and the rules and regulations
of the Securities and Exchange Commission. The registration statement, including
the exhibits and schedules, may be inspected and copied at the public reference
facilities maintained by the Securities and Exchange Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, and at the Securities and
Exchange Commission's Regional Offices at 7 World Trade Center, Suite 1300, New
York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661, and copies may be obtained at the prescribed rates from the Public
Reference Section of the Securities and Exchange Commission at its principal
office in Washington, D.C. The Securities and Exchange Commission also maintains
a Web site on the Internet that contains reports, proxy and information
statements, and other information regarding registrants, including WebTrends,
that file electronically with the Securities and Exchange Commission at
http://www.sec.gov.
    
 
   
     Statements contained in this prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete, and in
each instance reference is made to the copy of such contract, agreement, or
other document filed as an exhibit to the registration statement, each such
statement being qualified by such reference.
    
 
   
     WebTrends intends to furnish its shareholders with annual reports
containing audited financial statements and an opinion thereon expressed by
independent auditors and may furnish its shareholders with quarterly reports for
the first three quarters of each fiscal year containing unaudited summary
financial information.
    
 
                                       64
<PAGE>   69
 
                             WEBTRENDS CORPORATION
 
                         INDEX TO FINANCIAL STATEMENTS
 
   
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of KPMG Peat Marwick LLP.............................  F-2
Balance Sheets..............................................  F-3
Statements of Operations....................................  F-4
Statements of Shareholders' Equity..........................  F-5
Statements of Cash Flows....................................  F-6
Notes to Financial Statements...............................  F-7
</TABLE>
    
 
                                       F-1
<PAGE>   70
 
   
                          INDEPENDENT AUDITORS' REPORT
    
 
   
The Board of Directors
    
   
WebTrends Corporation:
    
 
   
     We have audited the accompanying balance sheets of WebTrends Corporation as
of December 31, 1997 and 1998, and the related statements of operations,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
    
 
   
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
    
 
   
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WebTrends Corporation as of
December 31, 1997 and 1998, and the results of its operations, and its cash
flows for each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
    
 
   
                                          KPMG PEAT MARWICK LLP
    
 
   
Portland, Oregon
    
   
January 11, 1999, except for note 10
    
   
  which is as of January 19, 1999
    
 
                                       F-2
<PAGE>   71
 
   
                             WEBTRENDS CORPORATION
    
 
   
                                 BALANCE SHEETS
    
 
   
                                     ASSETS
    
 
   
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                         -----------------------
                                                            1997         1998
                                                         ----------    ---------
<S>                                                      <C>           <C>
Current assets:
  Cash and cash equivalents............................  $  806,916    1,098,847
  Accounts receivable, net.............................     526,641      977,577
  Inventories..........................................      89,135       62,115
  Prepaid expenses.....................................      41,999      190,530
  Deferred offering costs..............................          --      255,394
  Deferred taxes.......................................      90,500      157,500
                                                         ----------    ---------
          Total current assets.........................   1,555,191    2,741,963
Property and equipment, net............................     325,966      598,407
Other assets...........................................       5,032        5,016
Deferred taxes, net....................................          --       17,000
                                                         ----------    ---------
          Total assets.................................  $1,886,189    3,362,386
                                                         ==========    =========
 
                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable.....................................     243,830      383,187
  Accrued liabilities..................................      59,311      385,233
  Accrued compensation and employment taxes............     165,805      508,422
  Accrued sales taxes..................................     155,137      268,533
  Accrued income taxes.................................      24,548           --
  Deferred revenue.....................................     387,074      824,013
  Notes and interest payable to shareholders...........     259,709      151,103
                                                         ----------    ---------
          Total current liabilities....................   1,295,414    2,520,491
Deferred taxes.........................................       6,500           --
                                                         ----------    ---------
          Total liabilities............................   1,301,914    2,520,491
                                                         ----------    ---------
Commitments and contingencies (note 9)
Shareholders' equity:
  Preferred stock, no par value. Authorized 15,000,000
     shares; no shares outstanding.....................          --           --
  Common stock, Class A voting, no par value.
     Authorized 30,000,000 shares; issued and
     outstanding 8,210,527 at December 31, 1997 and
     1998..............................................     260,000      260,000
  Common stock, Class B non-voting, no par value.
     Authorized 30,000,000 shares; none and 8,437
     shares issued and outstanding at December 31, 1997
     and 1998..........................................          --      320,387
Deferred compensation, net.............................          --     (282,227)
Retained earnings......................................     324,275      543,735
                                                         ----------    ---------
          Total shareholders' equity...................     584,275      841,895
                                                         ----------    ---------
          Total liabilities and shareholders' equity...  $1,886,189    3,362,386
                                                         ==========    =========
</TABLE>
    
 
   
                See accompanying notes to financial statements.
    
                                       F-3
<PAGE>   72
 
   
                             WEBTRENDS CORPORATION
    
 
   
                            STATEMENTS OF OPERATIONS
    
 
   
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                            -------------------------------------
                                               1996          1997         1998
                                            ----------    ----------    ---------
<S>                                         <C>           <C>           <C>
Revenue:
  Software licenses.......................  $1,858,014     3,836,657    7,206,461
  Support services........................       6,824       218,233      801,963
                                            ----------    ----------    ---------
          Total revenue...................   1,864,838     4,054,890    8,008,424
Cost of revenue...........................     204,546       292,268      632,925
                                            ----------    ----------    ---------
          Gross margin....................   1,660,292     3,762,622    7,375,499
                                            ----------    ----------    ---------
Operating expenses:
  Research and development................     402,583     1,059,439    2,211,029
  Sales and marketing.....................     552,634     1,526,889    3,641,965
  General and administrative..............     307,318       748,832    1,300,626
                                            ----------    ----------    ---------
          Total operating expenses........   1,262,535     3,335,160    7,153,620
                                            ----------    ----------    ---------
          Income from operations..........     397,757       427,462      221,879
                                            ----------    ----------    ---------
Other income (expense):
  Interest income.........................       9,042        21,769       41,997
  Interest expense........................      (2,097)      (11,358)     (13,111)
                                            ----------    ----------    ---------
          Other income, net...............       6,945        10,411       28,886
                                            ----------    ----------    ---------
          Income before income taxes......     404,702       437,873      250,765
Income taxes..............................          --       150,500       31,305
                                            ----------    ----------    ---------
          Net income......................  $  404,702       287,373      219,460
                                            ==========    ==========    =========
Basic net income per share................                $      .04          .03
                                                          ==========    =========
Diluted net income per share..............                $      .04          .02
                                                          ==========    =========
Shares used in basic net income per share
  calculation.............................                 8,126,173    8,210,651
                                                          ==========    =========
Shares used in diluted net income per
  share calculation.......................                 8,126,173    9,003,209
                                                          ==========    =========
Pro forma net income data:
  Income before income taxes as
     reported.............................     404,702
  Pro forma income taxes..................     140,027
                                            ----------
  Pro forma net income....................  $  264,675
                                            ==========
</TABLE>
    
 
   
                See accompanying notes to financial statements.
    
                                       F-4
<PAGE>   73
 
   
                             WEBTRENDS CORPORATION
    
 
   
                       STATEMENTS OF SHAREHOLDERS' EQUITY
    
 
   
<TABLE>
<CAPTION>
                                                         CLASS A,             CLASS B,
                              PREFERRED STOCK          COMMON STOCK         COMMON STOCK
                            --------------------   --------------------   -----------------     DEFERRED     RETAINED
                             SHARES      AMOUNT     SHARES      AMOUNT    SHARES    AMOUNT    COMPENSATION   EARNINGS    TOTAL
                            ---------   --------   ---------   --------   ------   --------   ------------   --------   --------
<S>                         <C>         <C>        <C>         <C>        <C>      <C>        <C>            <C>        <C>
Balance, December 31,
  1995....................         --   $     --   6,300,300   $ 10,000      --    $     --           --      257,150    267,150
Conversion of S
  Corporation shares to C
  Corporation shares......         --         --   1,499,700         --      --          --           --           --         --
Dividend distribution.....         --         --          --         --      --          --           --     (624,950)  (624,950)
Net income................         --         --          --         --      --          --           --      404,702    404,702
                            ---------   --------   ---------   --------   -----    --------     --------     --------   --------
Balance, December 31,
  1996....................         --         --   7,800,000     10,000      --          --           --       36,902     46,902
Sale of common stock......         --         --     410,527    250,000      --          --           --           --    250,000
Net income................         --         --          --         --      --          --           --      287,373    287,373
                            ---------   --------   ---------   --------   -----    --------     --------     --------   --------
Balance, December 31,
  1997....................         --         --   8,210,527    260,000      --          --           --      324,275    584,275
Deferred compensation.....         --         --          --         --      --     315,268     (315,268)          --         --
Amortization of deferred
  compensation............         --         --          --         --      --          --       33,041           --     33,041
Exercise of stock
  options.................         --         --          --         --   8,437       5,119           --           --      5,119
Net income................         --         --          --         --      --          --           --      219,460    219,460
                            ---------   --------   ---------   --------   -----    --------     --------     --------   --------
Balance, December 31,
  1998....................         --   $     --   8,210,527   $260,000   8,437    $320,387     (282,227)     543,735    841,895
                            =========   ========   =========   ========   =====    ========     ========     ========   ========
</TABLE>
    
 
   
                See accompanying notes to financial statements.
    
                                       F-5
<PAGE>   74
 
   
                             WEBTRENDS CORPORATION
    
 
   
                            STATEMENTS OF CASH FLOWS
    
 
   
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                              ----------------------------------
                                                1996         1997        1998
                                              ---------    --------    ---------
<S>                                           <C>          <C>         <C>
Cash flows from operating activities:
  Net income................................  $ 404,702     287,373      219,460
  Adjustments to reconcile net income to net
     cash provided by operating activities:
       Depreciation and amortization........     29,447      88,375      206,417
       Provision for doubtful accounts......     12,423      32,705       43,548
       Loss on marketable securities........      1,323          --           --
       Loss on sale of assets...............         --          --          293
       Amortization of deferred stock
          compensation......................         --          --       33,041
     Changes in assets and liabilities:
       Accounts receivable..................   (261,525)   (149,443)    (494,484)
       Inventories..........................     (9,728)    (76,027)      27,020
       Prepaid expenses.....................    (14,216)    (26,209)    (403,925)
       Deferred taxes, net..................         --     (84,000)     (90,500)
       Other assets.........................     (4,101)        407           16
       Accounts payable.....................     78,561     165,269      139,357
       Accrued liabilities..................     12,409      31,273      325,922
       Accrued compensation and employment
          taxes.............................     57,809      97,719      342,617
       Accrued sales taxes..................         --     155,137      113,396
       Accrued income taxes.................         --      24,548      (24,548)
       Accrued interest.....................      2,097       5,503       (8,606)
       Deferred revenues....................    131,592     255,481      436,939
                                              ---------    --------    ---------
          Net cash provided by operating
             activities.....................    440,793     808,111      865,963
                                              ---------    --------    ---------
Cash flows from investing activities:
  Acquisition of property and equipment.....   (156,422)   (269,533)    (479,151)
                                              ---------    --------    ---------
          Net cash used by investing
             activities.....................   (156,422)   (269,533)    (479,151)
                                              ---------    --------    ---------
Cash flows from financing activities:
  Proceeds from issuance of common stock....         --     250,000        5,119
  Dividend payments to shareholders.........   (142,068)   (482,882)          --
  Principal payments on borrowings from
     shareholders...........................         --     (70,000)    (100,000)
  Borrowings from shareholders..............         --     250,000           --
                                              ---------    --------    ---------
          Net cash used by financing
             activities.....................   (142,068)    (52,882)     (94,881)
                                              ---------    --------    ---------
Increase in cash and cash equivalents.......    142,303     485,696      291,931
Cash and cash equivalents, beginning of
  year......................................    178,917     321,220      806,916
                                              ---------    --------    ---------
Cash and cash equivalents, end of year......  $ 321,220     806,916    1,098,847
                                              =========    ========    =========
Supplemental disclosure of cash flow
  information:
  Cash paid during the year for:
     Interest...............................  $      --       5,855       21,717
     Income taxes...........................         --     208,000      155,500
</TABLE>
    
 
   
                See accompanying notes to financial statements.
    
                                       F-6
<PAGE>   75
 
   
                             WEBTRENDS CORPORATION
    
 
   
                         NOTES TO FINANCIAL STATEMENTS
    
 
   
(1) NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    
 
   
THE COMPANY
    
 
   
     WebTrends Corporation (the Company) was incorporated as an S Corporation on
August 31, 1993 in Delaware and was reorganized into a C Corporation effective
January 1, 1997 in Oregon. WebTrends Corporation is a leading provider of
enterprise management solutions for Internet-based systems.
    
 
   
USE OF ESTIMATES
    
 
   
     The presentation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
    
 
   
CASH AND CASH EQUIVALENTS
    
 
   
     For the purpose of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
    
 
   
ACCOUNTS RECEIVABLE
    
 
   
     Accounts receivable are shown net of allowance for doubtful accounts of
$20,000 and $40,000 at December 31, 1997 and 1998, respectively.
    
 
   
NEED FOR NEW PRODUCT DEVELOPMENT
    
 
   
     A substantial portion of the Company's revenues each year are generated
from the development and rapid release to market of computer software products
newly introduced during the year. In the extremely competitive industry
environment in which the Company operates, such product generation, development
and marketing processes are uncertain and complex, requiring accurate prediction
of market trends and demand as well as successful management of various
development risks inherent in such products. In light of these requirements, it
is reasonably possible that failure to successfully manage a significant product
introduction could have a severe near-term impact on the Company's growth and
results of operations.
    
 
   
INVENTORIES
    
 
   
     Inventory is valued at the lower of estimated cost or market determined
using the "first-in, first-out" ("FIFO") method. Inventories consist of CDs,
printing, packaging and receiving costs.
    
 
   
PROPERTY AND EQUIPMENT
    
 
   
     Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful lives of individual assets of
three to five years. Expenditures for renewals and improvements that
significantly add to the useful life of an
    
 
                                       F-7
<PAGE>   76
   
                             WEBTRENDS CORPORATION
    
 
   
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
    
 
   
asset are capitalized. Expenditures for repairs and maintenance are charged to
income. When depreciable properties are retired or otherwise disposed of, the
cost and related accumulated depreciation are removed from the accounts and the
resulting gain or loss is reflected in operations.
    
 
   
REVENUE RECOGNITION
    
 
   
     In October 1997, The American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") No. 97-2, Software Revenue
Recognition. Subsequently, in March 1998, the Financial Accounting Standards
Board ("FASB") approved SOP 98-4, Deferral of the Effective Date of a Provision
of 97-2, Software Revenue Recognition. SOP 98-4 defers for one year, the
application of several paragraphs and examples in SOP 97-2 that limit the
definition of vendor specific objective evidence ("VSOE") of the fair value of
various elements in a multiple element arrangement. The provisions of SOP's 97-2
and 98-4 have been applied to transactions entered into beginning January 1,
1998. Prior to 1997, the Company's revenue policy was in accordance with the
preceding authoritative guidance provided by SOP No. 91-1, Software Revenue
Recognition.
    
 
   
     SOP 97-2 generally requires revenue earned on software arrangements
involving multiple elements to be allocated to each element based on VSOE of the
relative fair values of each element in the arrangement.
    
 
   
     Software license revenue consists of fees for licenses of WebTrends'
software products. Revenue allocated to software licenses is recognized upon
delivery of software, assuming no significant obligations or customer acceptance
rights exist. WebTrends generally provides a thirty-day right of return for each
product sold. Estimated sales returns and allowances are recorded upon shipment
of the product.
    
 
   
     WebTrends sells a portion of its products domestically and internationally
through resellers. Revenue from sales to domestic resellers is managed directly
by WebTrends, and it recognizes revenue from sales primarily at the time of
shipment, net of estimated returns and allowances. Revenue from sales to
international resellers is managed by a third party export management company
and revenue is recognized upon sales from the reseller to a third party or end
user.
    
 
   
     Support services revenue consists of annual subscriptions for upgrades,
post customer support services. and professional services. Revenue allocated to
subscriptions, which allow the subscriber to purchase the right to obtain
upgrades, when and if available, are paid in advance and revenues are recognized
ratably over the term of the subscription. Revenue allocated to professional
services is recognized as the services are performed.
    
 
   
     In December 1998, the AICPA issued SOP 98-9, Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions. This SOP
amends certain paragraphs of SOP 97-2 to require recognition of revenue using
the "residual method" in circumstances outlined in the SOP. Under the residual
method, revenue is recognized as follows: (1) the total fair value of
undelivered elements, as indicated by VSOE, is deferred and subsequently
recognized in accordance with the relevant sections of SOP 97-2 and (2) the
difference between the total arrangement fee and the amount deferred for the
undelivered elements is recognized as revenue related to the delivered elements.
    
 
                                       F-8
<PAGE>   77
   
                             WEBTRENDS CORPORATION
    
 
   
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
    
 
   
     SOP 98-9 is effective for fiscal years beginning after March 15, 1999.
Also, the provisions of SOP 97-2 that were deferred by SOP 98-4 will continue to
be deferred until the date SOP 98-9 becomes effective.
    
 
   
CONCENTRATION OF CREDIT RISK
    
 
   
     Sales outside of the United States were approximately $336,000, $893,000
and $2.2 million for the years ended December 31, 1996, 1997 and 1998,
respectively. During these same periods, no individual customer or reseller
accounted for 10% or more of total revenue. However, sales managed by a third
party export management company were 8.1%, 11.8%, and 16.7% for the years ended
December 31, 1998, 1997, and 1996, respectively. Accounts receivable at December
31, 1997 and 1998 includes balances due from a third-party export management
company that manages most of the Company's international sales through invoicing
and initiating collection procedures. This account comprised 21% and 28%,
respectively, of the total outstanding accounts receivable balance at those
respective dates of which 81% and 94%, respectively, was due less than thirty
days from billing. For 1997 and 1998, except for the one third-party export
management company, no customer comprised greater than 10% of the total accounts
receivable balance.
    
 
   
FAIR VALUE OF FINANCIAL INSTRUMENTS
    
 
   
     The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable and notes payable to shareholders approximate fair value due to
the short-term nature of these instruments. Fair value estimates are made at a
specific point in time, based on relevant market information about the financial
instrument when available. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment and, therefore, cannot be
determined with precision. Changes in assumptions could significantly affect the
estimates.
    
 
   
ADVERTISING COSTS
    
 
   
     Advertising costs are generally expensed when incurred. Total advertising
costs were approximately $266,000, $553,000 and $957,000 for the years ended
December 31, 1996, 1997 and 1998, respectively.
    
 
   
RESEARCH AND DEVELOPMENT
    
 
   
     Software development costs have been accounted for in accordance with
Statement of Financial Accounting Standards No. 86, Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed. Under the standard,
capitalization of software development costs begins upon the establishment of
technological feasibility, subject to net realizable value considerations. To
date, the period between achieving technological feasibility and the general
availability of such software has been short; therefore, software development
costs qualifying for capitalization have been immaterial. Accordingly, the
Company has not capitalized any software development costs and charged all such
costs to research and development expense.
    
 
                                       F-9
<PAGE>   78
   
                             WEBTRENDS CORPORATION
    
 
   
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
    
 
   
INCOME TAXES
    
 
   
     Prior to January 1, 1997, the Company was taxed under the S Corporation
provisions of the Internal Revenue Code. Under those provisions, the Company did
not pay federal or state corporate income taxes on its taxable income. Instead,
the shareholders were liable for federal and state income taxes on the Company's
taxable income. Supplemental pro forma net income data for the year ended
December 31, 1996, as if the Company was a C Corporation, are presented for
comparison purposes only.
    
 
   
     Effective January 1, 1997, the S Corporation election was terminated. The
Company's income taxes since that date are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
    
 
   
STOCK-BASED EMPLOYEE COMPENSATION
    
 
   
     The Company adopted Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation, ("SFAS No. 123") which permits entities
to recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123 also allows
entities to continue to apply provisions of APB Opinion No. 25 and provide pro
forma net income and pro forma earnings per share disclosures as if the
fair-value-based method defined in SFAS No. 123 had been applied. The Company
has elected to apply the provisions of APB Opinion No. 25 and provide the pro
forma disclosure provisions of SFAS No. 123.
    
 
   
NET INCOME PER SHARE
    
 
   
     Basic and diluted net income per share were computed using the weighted
average number of common shares outstanding during each year, with diluted net
income per share including the effect of potentially dilutive common stock
equivalents. The weighted average number of common shares outstanding for basic
net income per share computations for the years ended December 31, 1997 and 1998
were 8,126,173 and 8,210,651, respectively. For diluted net income per share,
-0- and 792,558 shares were added to the weighted average number of common
shares outstanding for the same periods, respectively, representing potential
dilution for stock options outstanding, calculated using the treasury stock
method. Basic and diluted net income per share have been calculated in
accordance with SEC Staff Accounting Bulletin No. 98. Net income per share data
is not presented for any period prior to 1997 as the Company was an S
Corporation and the capital structure is not comparable to that existing in
1997.
    
 
                                      F-10
<PAGE>   79
   
                             WEBTRENDS CORPORATION
    
 
   
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
    
 
   
(2) PROPERTY AND EQUIPMENT
    
 
   
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                          ---------------------
                                                            1997         1998
                                                          ---------    --------
<S>                                                       <C>          <C>
Computer hardware and equipment.........................  $ 416,166     813,255
Furniture and fixtures..................................      4,383       4,383
Computer software.......................................     32,061     113,830
                                                          ---------    --------
          Total.........................................    452,610     931,468
Less accumulated depreciation and amortization..........   (126,644)   (333,061)
                                                          ---------    --------
          Total assets, net.............................  $ 325,966     598,407
                                                          =========    ========
</TABLE>
    
 
   
(3) INCOME TAXES
    
 
   
     Components of the 1997 provision for income taxes include:
    
 
   
<TABLE>
<CAPTION>
                                                                   CHANGE IN    TOTAL TAX
                                   CURRENT    DEFERRED    TOTAL    TAX STATUS    EXPENSE
                                   --------   --------   -------   ----------   ---------
<S>                                <C>        <C>        <C>       <C>          <C>
Federal..........................  $187,000   (75,000)   112,000     7,000       119,000
State and local..................    47,500   (18,000)    29,500     2,000        31,500
                                   --------   -------    -------     -----       -------
          Total..................  $234,500   (93,000)   141,500     9,000       150,500
                                   ========   =======    =======     =====       =======
</TABLE>
    
 
   
     Components of the 1998 provision for income taxes include:
    
 
   
<TABLE>
<CAPTION>
                                                                         TOTAL TAX
                                                 CURRENT     DEFERRED     EXPENSE
                                                 --------    --------    ---------
<S>                                              <C>         <C>         <C>
Federal........................................  $102,000    (75,000)     27,000
State and local................................    19,805    (15,500)      4,305
                                                 --------    -------      ------
          Total................................  $121,805    (90,500)     31,305
                                                 ========    =======      ======
</TABLE>
    
 
   
     The 1997 and 1998 provision for income taxes varies from the amounts
computed by applying the federal statutory rate to income before taxes:
    
 
   
<TABLE>
<CAPTION>
                                                              1997     1998
                                                              -----    -----
<S>                                                           <C>      <C>
Federal income tax computed at statutory rates..............   34.0%    34.0%
State and local taxes, net of federal benefits..............    8.5      8.0
Research and development credits............................  (14.2)   (37.3)
Foreign sales corporation benefit...........................     --     (1.2)
Deferred stock compensation.................................     --      4.3
Change in tax status........................................    2.0       --
Other.......................................................    4.1      4.7
                                                              -----    -----
          Total.............................................   34.4%    12.5%
                                                              =====    =====
</TABLE>
    
 
                                      F-11
<PAGE>   80
   
                             WEBTRENDS CORPORATION
    
 
   
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
    
 
   
     The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1997 and 1998 are as follows:
    
 
   
<TABLE>
<CAPTION>
                                                              1997       1998
                                                             -------    -------
<S>                                                          <C>        <C>
Deferred tax assets:
  Deferred incentive compensation..........................  $16,600         --
  Allowance for doubtful accounts..........................    7,800     15,700
  Accrued sales tax........................................   54,600     94,800
  Research and development credits.........................       --     23,600
  Accrued vacation and bonus...............................    2,600     34,000
  Other....................................................    8,900     13,000
                                                             -------    -------
          Deferred tax assets..............................   90,500    181,100
Deferred tax liabilities:
  Depreciation of equipment................................   (6,500)    (6,600)
                                                             -------    -------
          Net deferred tax assets..........................  $84,000    174,500
                                                             =======    =======
</TABLE>
    
 
   
     The Company has not recorded a valuation allowance against its deferred tax
assets existing at December 31, 1997 or 1998, as it believes it is more likely
than not that the results of future operations will generate sufficient taxable
income to realize the deferred tax assets for which no valuation allowance has
been assigned.
    
 
   
     At December 31, 1998, the Company had approximately $24,000 of federal and
state tax credit carryforwards to offset future taxable income which will expire
in the year 2013.
    
 
   
(4) DEFERRED REVENUE
    
 
   
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                            -------------------
                                                              1997       1998
                                                            --------    -------
<S>                                                         <C>         <C>
Deferred customer support.................................  $     --    107,055
Deferred product revenues.................................   115,308     68,166
Deferred subscription revenues............................   218,277    533,893
Other.....................................................    53,489    114,899
                                                            --------    -------
                                                            $387,074    824,013
                                                            ========    =======
</TABLE>
    
 
   
(5) NOTES PAYABLE TO SHAREHOLDERS
    
 
   
<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                            -------------------
                                                              1997       1998
                                                            --------    -------
<S>                                                         <C>         <C>
Notes payable to officer/shareholders, unsecured, due on
  demand with interest at 5%..............................  $250,000    150,000
Accrued interest on notes.................................     9,709      1,103
                                                            --------    -------
                                                            $259,709    151,103
                                                            ========    =======
</TABLE>
    
 
                                      F-12
<PAGE>   81
   
                             WEBTRENDS CORPORATION
    
 
   
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
    
 
   
(6) LINE OF CREDIT
    
 
   
     As of December 31, 1998, the Company had a $750,000 bank line of credit
with a major financial institution. The line of credit expires on April 30,
1999. Borrowings under the line generally are limited to 80% of the Company's
eligible accounts receivable. Interest on the unpaid balance accrues at a rate
of prime plus 0.25%. Borrowings under the line of credit are collateralized by
the Company's accounts receivable, inventory and general intangible assets,
including its intellectual property rights. The line of credit agreement
contains financial covenants, including tangible net worth and the ratio of
current assets to liabilities. As of December 31, 1998, the Company had a letter
of credit for $225,000 outstanding against its line of credit.
    
 
   
(7) EMPLOYEE BENEFIT PLAN
    
 
   
     The Company established an employee benefit plan, effective January 1,
1997, that features a 401(k) salary reduction provision, covering all employees
who meet certain eligibility requirements. Eligible employees can elect to defer
up to 15% of compensation or the statutorily prescribed annual limit. The
Company, at its discretion, may make contributions to the plan. To date, the
Company has made no contributions to the plan and has incurred administrative
costs of $1,775 and $3,328 for the years ended December 31, 1997 and 1998,
respectively.
    
 
   
(8) SHAREHOLDERS' EQUITY
    
 
   
PREFERRED STOCK
    
 
   
     The Company is authorized to issue 15,000,000 shares of preferred stock, no
par value. The Board of Directors of the Company has the authority to divide the
preferred stock into as many series as it shall from time to time determine.
Each series of preferred stock shall have the powers, preferences and rights as
determined by the Board at its discretion.
    
 
   
COMMON STOCK
    
 
   
     Effective December 31, 1996, the shareholders exchanged 300 shares, no par
value, of the S Corporation for 1,500,000 shares, no par value, of the C
Corporation as part of its restructuring into a C Corporation which became
effective January 1, 1997. At the same time, the Company authorized 30,000,000
shares of Class A voting common stock, no par value, to be made available for
issuance. Effective March 17, 1997, the Company authorized a stock for stock
exchange of the then outstanding 1,500,000 shares for 7,800,000 shares. This
stock for stock exchange has been retroactively reflected for all periods
presented. Also on March 17, 1997, the Company authorized the sale of 410,527
shares to one of its Board members.
    
 
   
     In May 1998, the Company approved a 3-for-1 stock split. Accordingly, share
and per share amounts for common stock have been retroactively restated to
reflect the stock split for all periods presented. See note 10 for additional
discussion.
    
 
   
     In December of 1998, the Company approved a recapitalization of its common
stock to be effected upon the closing of its initial public offering. Under the
terms of the recapitalization, the Class A common stock will be redesignated
common stock, no par
    
 
                                      F-13
<PAGE>   82
   
                             WEBTRENDS CORPORATION
    
 
   
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
    
 
   
value per share, and will be the only authorized class of common stock. Each
share of Class B common stock will automatically be converted into one share of
such common stock, and the recorded value of the Class B common stock will be
transferred to common stock.
    
 
   
     Deferred compensation cost recognized for 1998 totaled $315,268 for stock
option awards that were granted with exercise prices that were less than the
estimated value of the stock at the date of grant. Amortization of $33,041 of
deferred compensation was recorded for the year ended December 31, 1998.
    
 
   
STOCK OPTIONS
    
 
   
     Effective March 28, 1997, the Company established the 1997 Key Employees'
Incentive Stock Option Plan and subsequently authorized 1,500,000 shares of
Class B non-voting common stock, no par value, to be reserved for grants under
the plan. Effective December 5, 1997, the Board approved the 1997 Stock
Incentive Compensation Plan (the "Plan") which replaced the Key Employee
Incentive Stock Option Plan. Options granted under the Plan may be designated as
incentive or nonqualified at the discretion of the plan administrator. On
October 30, 1998, the Company increased the number of shares authorized under
the plan to 2,000,000. In December 1998, the Company reduced the number of
shares authorized in the Plan to 1,534,524 and the Company determined that no
additional options will be granted under the Plan.
    
 
   
     In December 1998, the Company adopted the 1998 Stock Incentive Compensation
Plan (the "1998 Plan"). The 1998 Plan permits both option and stock grants. The
Board has reserved a total of 1,465,475 shares of common stock for the 1998
Plan, plus (a) any shares returned to the 1997 Plan upon termination of certain
option and stock grants (other than terminations due to exercise or settlement
of such awards); and (b) an automatic annual increase, to be added on the first
day of the Company's fiscal year beginning in 2001, equal to the lesser of
500,000 shares or 5% of the average common shares outstanding as used to
calculate fully diluted earnings per share as reported in the Company's Annual
Report for the preceding year.
    
 
   
     The option price for incentive stock options are set at not less than the
market value of the Company's common stock (market value plus 10% for
shareholders who possess more than 10% of the combined voting power of all
classes of shares of the Company) at the date of the grant. Employee options
generally vest 25% after the first year of employment and in equal amounts on a
monthly or annual basis thereafter over the term of the option. Options are
contingent on continued employment with the Company and expire ten years (five
years for 10% shareholders as defined above) from the date of grant. Certain
options are subject to acceleration upon a change in control of the Company as
defined in the option agreements.
    
 
   
     The Company applies APB Opinion No. 25 in accounting for its stock options
plans. Accordingly, compensation cost is generally not recognized for stock
option grants.
    
 
                                      F-14
<PAGE>   83
   
                             WEBTRENDS CORPORATION
    
 
   
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
    
 
   
     A summary of stock options follows:
    
 
   
<TABLE>
<CAPTION>
                                                                        WEIGHTED
                                                                        AVERAGE
                                                            NUMBER      EXERCISE
                                                           OF SHARES     PRICE
                                                           ---------    --------
<S>                                                        <C>          <C>
Options outstanding at December 31, 1996.................         --    $    --
Granted..................................................    666,708     0.6067
Canceled.................................................         --         --
Forfeited................................................    (37,500)    0.6067
                                                           ---------    -------
Options outstanding at December 31, 1997.................    629,208     0.6067
Granted..................................................  1,000,567     3.3488
Canceled.................................................    (35,000)    0.7800
Forfeited................................................   (115,187)    0.6566
Exercised................................................     (8,437)    0.6067
                                                           ---------    -------
Options outstanding at December 31, 1998.................  1,471,149    $2.4630
                                                           =========    =======
</TABLE>
    
 
   
     At December 31, 1998, the range of exercise prices and weighted average
remaining contractual life of the outstanding options were $0.6067 to $8 and
9.22 years, respectively. At December 31, 1998, 134,802 options were exercisable
with a weighted average exercise price of $0.6067.
    
 
   
     The Company adopted the 1999 Employee Stock Purchase Plan (the "ESPP") in
December 1998. The Company intends for the ESPP to qualify under Section 423 of
the Internal Revenue Code of 1986, as amended. The Company authorized the
issuance of a total of 350,000 shares of common stock plus an automatic annual
increase as defined in the ESPP.
    
 
   
SFAS NO. 123 DISCLOSURE
    
 
   
     The Company applies APB No. 25 and related interpretations in accounting
for its plans. However, pro forma information regarding net income is required
by SFAS No. 123, which also requires that the information be determined as if
the Company had accounted for its employee stock options granted under the fair
value method prescribed by that statement. In accordance with SFAS No. 123 pro
forma disclosures as if the Company adopted the cost recognition requirements
under SFAS No. 123 in 1997 are presented below.
    
 
   
     The per share weighted average fair value of stock options granted during
1997 and 1998 was $.44 and $3.08, respectively. For SFAS No. 123 purposes, the
fair value of each option has been estimated as of the date of grant using the
Black-Scholes option pricing model with the following assumptions for grants in
1997 and 1998:
    
 
   
<TABLE>
<CAPTION>
                                                              1997    1998
                                                              ----    ----
<S>                                                           <C>     <C>
Average dividend yield......................................  $ --%    --%
Expected life in years......................................     4      4
Risk free interest rate.....................................   7.0%   6.0%
Expected volatility.........................................   100%   100%
</TABLE>
    
 
                                      F-15
<PAGE>   84
   
                             WEBTRENDS CORPORATION
    
 
   
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
    
 
   
     Had the Company used the fair value methodology for determining
compensation expense, the Company's net income net of related tax effects would
have approximated the pro forma amounts below:
    
 
   
<TABLE>
<CAPTION>
                                                                1997      1998
                                                              --------   -------
<S>                                                           <C>        <C>
Net income:
  As reported...............................................  $287,373   219,460
  Pro forma.................................................   240,947    20,033
Net income per share, basic and diluted:
  As reported...............................................  $    .04       .03
  Pro forma.................................................       .03        --
</TABLE>
    
 
   
     The effect of applying SFAS No. 123 in this pro forma disclosure are not
indicative of future amounts.
    
 
   
(9) COMMITMENTS AND CONTINGENCIES
    
 
   
     The Company leases its office facilities under a six-year operating lease
which commenced October 1, 1997. This lease was amended in September 1998 to
terminate on January 31, 1999. As consideration for the early termination, the
Company paid the landlord $20,548.
    
 
   
     In November 1998, the Company negotiated a new five-year lease for office
facilities in a new premises with the option to extend for an additional five
years. The lease term begins on January 15, 1999. The new lease provides for a
base rent of $34,208 per month for the first six months. Beginning July 1999,
the Company will lease additional space in the same building. At that time, the
base rent will increase to $57,467 for all space occupied, with annual
adjustments thereafter. For the years ended December 31, 1996, 1997 and 1998,
rent expense was approximately $31,000, $84,000 and $204,000, respectively.
    
 
   
     Future minimum lease payments under this lease are as follows:
    
 
   
<TABLE>
<CAPTION>
             YEAR ENDING DECEMBER 31:
             ------------------------
<S>                                                  <C>
  1999.............................................  $  532,946
  2000.............................................     689,599
  2001.............................................     712,696
  2002.............................................     735,794
  2003.............................................     735,794
  Thereafter.......................................      61,316
                                                     ----------
                                                     $3,468,145
                                                     ==========
</TABLE>
    
 
   
(10) SUBSEQUENT EVENTS
    
 
   
     In January 1999, the Company approved a 1-for-2 reverse stock split.
Accordingly, share and per share amounts for common stock have been
retroactively restated to reflect the reverse stock split for all periods
presented.
    
 
                                      F-16
<PAGE>   85

                            DESCRIPTION OF GRAPHICS

                               INSIDE FRONT COVER

Top Center:

Text:
Enterprise Management Solutions for Internet Systems

Center:

Graphic:
A large WebTrends logo centered on the page with the text "Manage Your 
WWWorld-TM" centered below the logo. The logo and text are in the middle of a 
ring of eight circles. Each of the eight circles contains text. Starting with 
the circle directly above the logo and proceeding clockwise, the texts in the 
circles state: "Web Site Traffic Analysis," "Proxy Server Traffic Analysis," 
"Site Content & QA Management," "E-Commerce and ROI Reports," "Alerting, 
Monitoring & Recovery," "Streaming Media Server Management," Firewall and VPNs 
Management," and "Server & Network Security Analysis."

Bottom:

Text:
Awards for the WebTrends product family:

Graphic:
Nine graphics appear below the text representing awards that have been given to 
WebTrends' products. The awards depicted from left to right are: (1) PC 
Magazine Editors' Choice, (2) ICE Best of Class, (3) PC Computing MVP Finalist, 
(4) Network Computing Editors' Choice, (5) iw Labs Best of Test, (6) The Best 
of LANTIMES, (7) Network Computing Best Value, (8) CODIE Awards Finalist, and 
(9) ZDNET Editors' Pick.

                              GATEFOLD (LEFT SIDE)

Top Right:


Graphic:
The WebTrends logo.

Top Left:

Text:
WebTrends Enterprise Suite

Graphics:
There are three graphics under the text. From left to right they are: (1) 
product packaging for the WebTrends Enterprise Suite, (2) screen shot of the
site manager feature, and (3) screen shot of a traffic analysis report.

Middle:

Test:
WebTrends Professional Suite

Graphics:
There are three graphics under the text. From left to right they are: (1) 
product packaging for the WebTrends Professional Suite, (2) screen shot of an 
alerting, monitoring, and recovery report, and (3) screen shot of the main 
console.

Bottom:

Text:
WebTrends for Firewalls and VPNs

Graphics:
There are four graphics under the text. From left to right they are (1) 
product packaging for WebTrends for Firewalls and VPNs, (2) screen shot of the 
general options feature, (3) screen shot of the scheduler feature, and (4) 
screen shot of a firewall report.


                              GATEFOLD (RIGHT SIDE)
Top:

Text:
WebTrends Enterprise Reporting Server*; * Scheduled for release first quarter,
1999

Graphics:
There are four graphics under the text. From left to right they are: (1) product
packaging for the WebTrends Enterprise Reporting Server, (2) screen shot of a
user profile report, (3) screen shot of the content editor feature, and (4)
screen shot of the status feature.

Middle:

Text:
WebTrends Security Analyzer

Graphics:
There are three graphics under the text. From left to right they are: (1)
product packaging for the WebTrends Security Analyzer, (2) screen shot of the 
main viewer, and (3) screen shot of a security analysis report.

Bottom:

Text:
WebTrends Log Analyzer

Graphics:
There are four graphics under the text. From left to right they are: (1) product
packaging for the WebTrends Log Analyzer, (2) screen shot of the scheduler
feature, (3) screen shot of the options feature, and (4) screen shot of a 
traffic analysis report.

Bottom Right:

Text:
Manage Your WWWorld-TM

                                INSIDE BACK COVER
Top Left:

Text:
www.webtrends.com

Top:

Graphics:
There are two screen shots inside a box. The first screen shot is the
Professional Suite product page from the WebTrends Web site. The second screen
shot is the "contact us" page from the Web Trends Web site.

Center:

Graphics:
There are two screen shots inside a box. The first screen shot is the products
page from the WebTrends Web site. The second screen shot is the ordering page
from the WebTrends Web site.

Bottom:

Graphics:
There are two screen shots inside a box. The first screen shot is the knowledge
base page from the WebTrends Web site. The second screen shot is the technical
support page from the WebTrends Web site.
<PAGE>   86
 
--------------------------------------------------------------------------------
 
     WE HAVE NOT AUTHORIZED ANY DEALER, SALESPERSON OR OTHER PERSON TO GIVE ANY
INFORMATION OR REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT
RELY ON ANY UNAUTHORIZED INFORMATION. THIS PROSPECTUS DOES NOT OFFER TO SELL NOR
IS IT SEEKING AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION WHERE IT IS
UNLAWFUL TO DO SUCH. THE INFORMATION IN THIS PROSPECTUS IS CURRENT AND CORRECT
ONLY AS OF              , 1999, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR ANY SALE OF SECURITIES.
 
   
     UNTIL              , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
    
 
--------------------------------------------------------------------------------
 
   
                        3,000,000 SHARES OF COMMON STOCK
    
 
   
                           $9.00 TO $11.00 PER SHARE
    
 
                                      LOGO
 
   
DAIN RAUSCHER WESSELS                                 SOUNDVIEW TECHNOLOGY GROUP
    
   
  a division of Dain Rauscher Incorporated
    
 
                                                                          , 1999
 
--------------------------------------------------------------------------------
<PAGE>   87
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The following table sets forth the costs and expenses, other than the
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of Common Stock being registered hereby. All amounts are estimates
except the SEC registration fee, the NASD filing fee and the Nasdaq National
Market listing fee.
 
   
<TABLE>
<CAPTION>
                                                              AMOUNT TO
                                                               BE PAID
                                                              ----------
<S>                                                           <C>
SEC registration fee........................................  $    8,340
NASD filing fee.............................................       3,500
Nasdaq National Market listing fee..........................      81,625
Printing and engraving expenses.............................     120,000
Legal fees and expenses.....................................     250,000
Accounting fees and expenses................................     135,000
Directors' and Officers' Liability Insurance................     250,000
Transfer agent and registrar fees...........................       6,500
Miscellaneous expenses......................................     145,035
                                                              ----------
          Total.............................................  $1,000,000
                                                              ==========
</TABLE>
    
 
-------------------------
* To be completed by amendment.
 
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     As an Oregon corporation, the Registrant is subject to the laws of the
State of Oregon governing private corporations and the exculpation from
liability and indemnification provisions contained therein. Pursuant to Section
60.047(2)(d) of the Oregon Revised Statutes ("ORS"), the Registrant's Second
Restated Articles of Incorporation (the "Articles") eliminates the liability of
the Registrant's directors to the Registrant or its shareholders except for any
liability related to (i) breach of the duty of loyalty; (ii) acts or omissions
not in good faith or that involve intentional misconduct or a knowing violation
of law; (iii) any unlawful distribution under ORS 60.367; or (iv) any
transaction from which the director derived an improper personal benefit.
 
     ORS Section 60.391 allows corporations to indemnify their directors and
officers against liability where the director or officer has acted in good faith
and with a reasonable belief that actions taken were in the best interests of
the corporation or at least not opposed to the corporation's best interests and,
if in a criminal proceeding, the individual had no reasonable cause to believe
the conduct in question was unlawful. Under ORS Sections 60.387 to 60.414,
corporations may not indemnify a director or officer against liability in
connection with a claim by or in the right of the corporation or for any
improper personal benefit in which the director or officer was adjudged liable
to the corporation. ORS Section 60.394 mandates indemnification for all
reasonable expenses incurred in the successful defense of any claim made or
threatened whether or not such claim was by or in the right of the corporation.
Finally, pursuant to the ORS Section 60.401, a court may order indemnification
in view of all the relevant circumstances, whether or not the director or
officer met the good-faith and reasonable belief standards of conduct set out in
ORS Section 60.391.
 
                                      II-1
<PAGE>   88
 
     ORS Section 60.414 also provides that the statutory indemnification
provisions are not deemed exclusive of any other rights to which directors or
officers may be entitled under a corporation's articles of incorporation or
bylaws, any agreement, general or specific action of the board of directors,
vote of shareholders or otherwise.
 
     The Articles provide that the Registrant is required to indemnify to the
fullest extent not prohibited by law any current or former director who is made,
or threatened to be made, a party to an action or proceeding by reason of the
fact that such person serves or served as a director of the Registrant. The
Articles also provide that the Registrant is permitted to indemnify to the
fullest extent not prohibited by law any current or former officer who is made,
or threatened to be made, a party to an action or proceeding by reason of the
fact that such person is or was an officer of the Registrant.
 
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
 
     The following is a summary of transactions by the Registrant since December
31, 1996 involving sales of the Registrant's securities that were not registered
under the Securities Act:
 
   
     1. On March 17, 1997, the Registrant issued an aggregate of 410,527 shares
        of Class A Common Stock to Michael Burmeister-Brown, a director of the
        Registrant, at a price per share of $0.6067. In issuing these
        securities, the Company relied on an exemption from registration under
        Section 4(2) of the Securities Act.
    
 
   
     2. Since December 1997, the Registrant has granted incentive stock options
        and non-qualified stock options to purchase shares of Common Stock under
        individual stock option agreements, its 1997 Stock Incentive
        Compensation Plan and its 1998 Stock Incentive Compensation Plan to
        eligible officers, directors, employees and consultants of the
        Registrant. As of January 29, 1999, 1,441,408 shares were subject to
        outstanding stock options under the 1997 Stock Incentive Compensation
        Plan, 25,000 shares were subject to outstanding stock options under the
        1998 Stock Incentive Compensation Plan, and options to purchase 37,678
        shares of Common Stock had been exercised. The options were granted in
        consideration of these individuals' services to the Registrant, and in
        issuing these securities the Registrant relied on an exemption from
        registration pursuant to Rule 701 under Section 3(b) or Section 4(2) of
        the Securities Act.
    
 
ITEM 16. EXHIBITS
 
     (a) EXHIBITS
 
   
<TABLE>
<CAPTION>
EXHIBIT NO.                           DESCRIPTION
-----------                           -----------
<S>           <C>
   1.1*       Form of Underwriting Agreement
   3.1+       Registrant's Second Restated Articles of Incorporation
   3.2+       Registrant's Second Restated Bylaws
   4.1+       See Articles 4 and 9 of Exhibit 3.1 and Sections 2 and 6 of
              Exhibit 3.2
   4.2        Form of Common Stock Certificate
   5.1*       Opinion of Perkins Coie LLP as to legality of the securities
              being registered, including consent
  10.1        Registrant's 1998 Stock Incentive Compensation Plan
  10.2        Registrant's 1999 Employee Stock Purchase Plan
  10.3        Registrant's 1997 Stock Incentive Compensation Plan
</TABLE>
    
 
                                      II-2
<PAGE>   89
 
   
<TABLE>
<CAPTION>
EXHIBIT NO.                           DESCRIPTION
-----------                           -----------
<S>           <C>
  10.4        Office Lease dated November 20, 1998, by and between the
              Prudential Insurance Company of America and WebTrends
              Corporation
  10.5        Office Lease dated September 15, 1998, by and between City
              Center Retail Trust and WebTrends Corporation
  10.6        Office Lease dated May 22, 1997, by and between Pioneer
              Square Associates, L.L.C. and e.g. Software, Inc., including
              the amendment thereto dated September 8, 1998
  10.7        Note dated December 19, 1997, by WebTrends Corporation in
              favor of U.S. Bank National Association
  21.1        List of subsidiaries
  23.1*       Consent of Perkins Coie LLP (included in Exhibit 5.1)
  23.2        Consent of KPMG Peat Marwick LLP, Independent Accountants
  24.1+       Power of Attorney (see page II-4)
  27.1+       Financial Data Schedule
  27.2+       Financial Data Schedule
</TABLE>
    
 
-------------------------
* To be filed by amendment.
 
   
+ Previously filed.
    
 
ITEM 17. UNDERTAKINGS
 
     The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing, as specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery of such to each purchaser.
 
   
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
    
 
     The undersigned Registrant hereby undertakes that:
 
     (1) For purposes of determining any liability under the Securities Act of
         1933, the information omitted from the form of prospectus filed as part
         of this Registration Statement in reliance upon Rule 430A and contained
         in a form of prospectus filed by the Registrant pursuant to Rule
         424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
         be part of this Registration Statement as of the time it was declared
         effective.
 
     (2) For the purpose of determining any liability under the Securities Act
         of 1933, each post-effective amendment that contains a form of
         prospectus shall be deemed to be a new registration statement relating
         to the securities offered therein, and the offering of such securities
         at that time shall be deemed to be the initial bona fide offering
         thereof.
 
                                      II-3
<PAGE>   90
 
                                   SIGNATURES
 
   
     Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Portland,
State of Oregon, on January 29, 1999.
    
 
                                          WEBTRENDS CORPORATION
 
   
                                          By:       /s/ W. GLEN BOYD
    
                                            ------------------------------------
   
                                              W. Glen Boyd
    
                                              Chief Executive Officer
 
   
     Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
    
 
   
<TABLE>
<CAPTION>
                      SIGNATURE                                CAPACITIES                DATE
                      ---------                                ----------                ----
<S>                                                    <C>                         <C>
 
*ELIJAHU SHAPIRA                                        Chief Executive Officer    January 29, 1999
-----------------------------------------------------         and Director
Elijahu Shapira
 
*W. GLEN BOYD                                          President, Chief Technical  January 29, 1999
-----------------------------------------------------    Officer, and Director
W. Glen Boyd
 
*JAMES T. RICHARDSON                                   Vice President, Secretary,  January 29, 1999
-----------------------------------------------------   Chief Financial Officer,
James T. Richardson                                               and
                                                        Chief Accounting Officer
 
*MICHAEL BURMEISTER-BROWN                                       Director           January 29, 1999
-----------------------------------------------------
Michael Burmeister-Brown
 
*JOHN W. RYAN                                                   Director           January 29, 1999
-----------------------------------------------------
John W. Ryan
 
*SRIVATS SAMPATH                                                Director           January 29, 1999
-----------------------------------------------------
Srivats Sampath
</TABLE>
    
 
   
*By: /s/ W. GLEN BOYD
    
     -----------------------------------------------------
   
     W. Glen Boyd
    
   
     as Attorney-in-Fact
    
 
                                      II-4
<PAGE>   91
 
                             WEBTRENDS CORPORATION
 
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
 
   
<TABLE>
<CAPTION>
                                                     ADDITIONS
                                        BALANCE AT   CHARGED TO                BALANCE AT
                                        BEGINNING    COSTS AND                   END OF
                                        OF PERIOD     EXPENSES    DEDUCTIONS     PERIOD
                                        ----------   ----------   ----------   ----------
<S>                                     <C>          <C>          <C>          <C>
Year ended December 31, 1996:
  Allowance for doubtful accounts.....   $    --      $12,423      $ 2,423      $10,000
Year ended December 31, 1997:
  Allowance for doubtful accounts.....    10,000       32,705       22,705       20,000
Year ended December 31, 1998:
  Allowance for doubtful accounts.....    20,000       43,548       23,548       40,000
</TABLE>
    
<PAGE>   92
 
                                    EXHIBITS
 
   
<TABLE>
<CAPTION>
EXHIBIT NO.                          DESCRIPTION
-----------                          -----------
<S>          <C>
   1.1*      Form of Underwriting Agreement
   3.1+      Registrant's Second Restated Articles of Incorporation
   3.2+      Registrant's Second Restated Bylaws
   4.1+      See Articles 4 and 9 of Exhibit 3.1 and Sections 2 and 6 of
             Exhibit 3.2
   4.2       Form of Common Stock Certificate
   5.1*      Opinion of Perkins Coie LLP as to legality of the securities
             being registered, including consent
  10.1       Registrant's 1998 Stock Incentive Compensation Plan
  10.2       Registrant's 1999 Employee Stock Purchase Plan
  10.3       Registrant's 1997 Stock Incentive Compensation Plan
  10.4       Office Lease dated November 20, 1998, by and between the
             Prudential Insurance Company of America and WebTrends
             Corporation
  10.5       Office Lease dated September 15, 1998, by and between City
             Center Retail Trust and WebTrends Corporation
  10.6       Office Lease dated May 22, 1997, by and between Pioneer
             Square Associates, L.L.C. and e.g. Software, Inc., including
             the amendment thereto dated September 8, 1998
  10.7       Note dated December 19, 1997, by WebTrends Corporation in
             favor of U.S. Bank National Association
  21.1       List of subsidiaries
  23.1*      Consent of Perkins Coie LLP (included in Exhibit 5.1)
  23.2       Consent of KPMG Peat Marwick LLP, Independent Accountants
  24.1+      Power of Attorney (see page II-4)
  27.1+      Financial Data Schedule
  27.2+      Financial Data Schedule
</TABLE>
    
 
-------------------------
* To be filed by amendment.
 
   
+ Previously filed.