##### Table of Contents



---



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





Form 10-Q



|x  QUARTERLY REPORT UNDER SECTION 13 OR 15
(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|-------------------------------------------------------------------------------------



For the
Quarter Ended March 31, 2003



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



Commission File Number 001-31344





PLUMTREE SOFTWARE, INC.

(Exact name of registrant as specified in its charter)



|Delaware                                                       |  | 52-2303761                          
|-------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer identification no.)



500
Sansome Street, San Francisco, CA 94111

(Address of principal executive offices and zip code)



Registrants telephone number, including area code: (415)
263-8900





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



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).  Yes ̈x  No



The number of shares outstanding of the issuers common stock as of March 31, 2003 was 29,942,164 shares.



---



---

##### Table of Contents



PLUMTREE
SOFTWARE, INC.



FORM 10-Q



March 31, 2003



INDEX



|                                                                                                  |  |                                                                                                        |  | Page Number
|------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | -----------
|PART I.    FINANCIAL INFORMATION                                                                  |  |                                                                                                       
|                                                                                                 
|Item 1.    Financial Statements (unaudited)                                                       |  |                                                                                                       
|                                                                                                 
|a.                                                                                                |  | Condensed Consolidated Balance Sheets  March 31, 2003 and December 31, 2002                           |  | 3          
|                                                                                                 
|b.                                                                                                |  | Condensed Consolidated Statements of Operations  Three months ended March 31, 2003 and March 31, 2002 |  | 4          
|                                                                                                 
|c.                                                                                                |  | Condensed Consolidated Statements of Cash Flows  Three months ended March 31, 2003 and March 31, 2002 |  | 5          
|                                                                                                 
|d.                                                                                                |  | Notes to Condensed Consolidated Financial Statements                                                   |  | 6          
|                                                                                                 
|Item 2.    
Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 13                                                                                                    
|                                                                                                 
|Item 3.    
Quantitative and Qualitative Disclosures About Market Risk                            |  | 30                                                                                                    
|                                                                                                 
|Item 4.    
Controls and Procedures                                                               |  | 30                                                                                                    
|                                                                                                 
|PART II.    OTHER INFORMATION                                                                     |  |                                                                                                       
|                                                                                                 
|Item 1.    
Legal Proceedings                                                                     |  | 31                                                                                                    
|                                                                                                 
|Item 2.    
Changes in Securities and Use of Proceeds                                             |  | 31                                                                                                    
|                                                                                                 
|Item 3.    
Defaults Upon Senior Securities                                                       |  | 31                                                                                                    
|                                                                                                 
|Item 4.    
Submission of Matters to a Vote of Security Holders                                   |  | 31                                                                                                    
|                                                                                                 
|Item 5.    
Other Information                                                                     |  | 31                                                                                                    
|                                                                                                 
|Item 6.    
Exhibits and Reports on Form 8-K                                                      |  | 32                                                                                                    
|                                                                                                 
|Signatures                                                                                        |  | 33                                                                                                    
|                                                                                                 
|Certifications                                                                                    |  | 34                                                                                                    



-2-



---

##### Table of Contents



|PART 1. |  | FINANCIAL INFORMATION
|------- |  | ---------------------



|ITEM 1. |  | FINANCIAL STATEMENTS
|------- |  | --------------------



PLUMTREE SOFTWARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)



|                                                                                            |  | As of March 31, 2003 |         |   | As of December 31, 2002 |  
|------------------------------------------------------------------------------------------- |  | -------------------- | ------- | - | ----------------------- | -
|                                                                                            |  | (Unaudited)          |         |   |                         |  
|ASSETS                                                                                      |  |                      |         |   |                         |  
|Current assets:                                                                             |  |                      |         |   |                         |  
|Cash and cash equivalents                                                                   |  | $                    | 21,985  |   |                         | $
|Short-term investments                                                                      |  |                      | 44,732  |   |                         |  
|Accounts receivable (net of allowance for doubtful accounts of $600 and $754,
respectively) |  |                      | 12,017  |   |                         |  
|Prepaid expenses and other current assets                                                   |  |                      | 2,650   |   |                         |  
|                                                                                            |  |                      |         |   |                         |  
|Total current assets.                                                                       |  |                      | 81,384  |   |                         |  
|Property and equipment, net                                                                 |  |                      | 2,550   |   |                         |  
|Other assets                                                                                |  |                      | 3,439   |   |                         |  
|                                                                                            |  |                      |         |   |                         |  
|Total assets                                                                                |  | $                    | 87,373  |   |                         | $
|                                                                                            |  |                      |         |   |                         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                        |  |                      |         |   |                         |  
|Current liabilities:                                                                        |  |                      |         |   |                         |  
|Accounts payable                                                                            |  |                      | 1,050   |   |                         | $
|Accrued and other current liabilities                                                       |  |                      | 10,785  |   |                         |  
|Deferred revenue                                                                            |  |                      | 17,622  |   |                         |  
|                                                                                            |  |                      |         |   |                         |  
|Total current liabilities                                                                   |  |                      | 29,457  |   |                         |  
|Other long-term liabilities                                                                 |  |                      | 458     |   |                         |  
|                                                                                            |  |                      |         |   |                         |  
|Total liabilities                                                                           |  |                      | 29,915  |   |                         |  
|                                                                                           
|Commitments and contingencies                                                               |  |                      |         |   |                         |  
|                                                                                           
|Stockholders equity:                                                                       |  |                      |         |   |                         |  
|Convertible preferred stock, $0.001 par value:                                              |  |                      |         |   |                         |  
|Authorized  20,000 shares                                                                  |  |                      |         |   |                         |  
|Outstanding  0 shares                                                                      |  |                      |        |   |                         |  
|Common stock, $0.001 par value:                                                             |  |                      |         |   |                         |  
|Authorized  100,000 shares                                                                 |  |                      |         |   |                         |  
|Outstanding  29,942 and 29,439 shares, respectively                                        |  |                      | 30      |   |                         |  
|Additional paid-in capital                                                                  |  |                      | 99,052  |   |                         |  
|Notes receivable from stockholders                                                          |  |                      | (332    | ) |                         |  
|Deferred stock-based compensation                                                           |  |                      | (2,343  | ) |                         |  
|Accumulated other comprehensive income (loss)                                               |  |                      | (18     | ) |                         |  
|Accumulated deficit                                                                         |  |                      | (38,931 | ) |                         |  
|                                                                                            |  |                      |         |   |                         |  
|Total stockholders equity                                                                  |  |                      | 57,458  |   |                         |  
|                                                                                            |  |                      |         |   |                         |  
|Total liabilities and stockholders equity                                                  |  | $                    | 87,373  |   |                         | $
|                                                                                            |  |                      |         |   |                         |  



See
accompanying notes to the condensed consolidated financial statements



-3-



---

##### Table of Contents



PLUMTREE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(Unaudited)



|                                                                 |  | For the Three Months Ended March 31, |       
|---------------------------------------------------------------- |  | ------------------------------------ | ------
|                                                                 |  | 2003                                 |       
|Revenue:                                                         |  |                                      |       
|Licenses                                                         |  | $                                    | 8,451 
|Services and maintenance                                         |  |                                      | 8,718 
|                                                                 |  |                                      |       
|Total revenue                                                    |  |                                      | 17,169
|Cost of revenue:                                                 |  |                                      |       
|Licenses                                                         |  |                                      | 377   
|Services and maintenance                                         |  |                                      | 2,186 
|Amortization of stock-based compensation and acquired technology |  |                                      | 496   
|                                                                 |  |                                      |       
|Total cost of revenue                                            |  |                                      | 3,059 
|                                                                 |  |                                      |       
|Gross margin                                                     |  |                                      | 14,110
|Operating expenses:                                              |  |                                      |       
|Research and development                                         |  |                                      | 4,749 
|Sales and marketing                                              |  |                                      | 6,928 
|General and administrative                                       |  |                                      | 1,623 
|Amortization of stock-based compensation                         |  |                                      | 489   
|                                                                 |  |                                      |       
|Total operating expenses                                         |  |                                      | 13,789
|                                                                 |  |                                      |       
|Income from operations                                           |  |                                      | 321   
|Other income (expense), net:                                     |  |                                      |       
|Interest income (expense), net                                   |  |                                      | 211   
|Other income (expense), net                                      |  |                                      | 115   
|                                                                 |  |                                      |       
|Total other income (expense), net                                |  |                                      | 326   
|                                                                 |  |                                      |       
|Income before income taxes                                       |  |                                      | 647   
|Provision for income taxes                                       |  |                                      | 118   
|                                                                 |  |                                      |       
|Net income                                                       |  | $                                    | 529   
|                                                                 |  |                                      |       
|Net income per common share:                                     |  |                                      |       
|Basic                                                            |  | $                                    | 0.02  
|                                                                 |  |                                      |       
|Diluted                                                          |  | $                                    | 0.02  
|                                                                 |  |                                      |       
|Weighted average common shares outstanding:                      |  |                                      |       
|Basic                                                            |  |                                      | 29,668
|                                                                 |  |                                      |       
|Diluted                                                          |  |                                      | 32,490
|                                                                 |  |                                      |       



See
accompanying notes to the condensed consolidated financial statements



-4-



---

##### Table of Contents



PLUMTREE SOFTWARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)



|                                                                                  |  | For the Three Months Ended March 31, |       
|--------------------------------------------------------------------------------- |  | ------------------------------------ | ------
|                                                                                  |  | 2003                                 |       
|Cash flows from operating activities:                                             |  |                                      |       
|Net income                                                                        |  | $                                    | 529   
|Adjustments to reconcile net income to net cash provided by operating
activities: |  |                                      |       
|Provision for doubtful accounts                                                   |  |                                      | (118  
|Accretion on short-term investments                                               |  |                                      | 82    
|Depreciation and amortization                                                     |  |                                      | 443   
|Loss on disposal of property and equipment                                        |  |                                      |      
|Amortization of stock-based compensation                                          |  |                                      | 591   
|Amortization of acquired technology                                               |  |                                      | 394   
|Amortization of warrants issued for services                                      |  |                                      | 13    
|Changes in assets and liabilities:                                                |  |                                      |       
|Accounts receivable                                                               |  |                                      | 4,720 
|Prepaid expenses and other current assets                                         |  |                                      | (503  
|Other assets                                                                      |  |                                      | 90    
|Accounts payable                                                                  |  |                                      | (580  
|Accrued and other current liabilities                                             |  |                                      | (3,914
|Deferred revenue                                                                  |  |                                      | (917  
|Other long-term liabilities                                                       |  |                                      | 4     
|                                                                                  |  |                                      |       
|Net cash provided by operating activities                                         |  |                                      | 834   
|                                                                                  |  |                                      |       
|Cash flows from investing activities:                                             |  |                                      |       
|Purchases of property and equipment                                               |  |                                      | (296  
|Purchases of short-term investments                                               |  |                                      | (3,617
|Proceeds from sale of short-term investments                                      |  |                                      | 3,550 
|                                                                                  |  |                                      |       
|Net cash used in investing activities                                             |  |                                      | (363  
|                                                                                  |  |                                      |       
|Cash flows from financing activities:                                             |  |                                      |       
|Payments on capital lease obligations                                             |  |                                      | (48   
|Proceeds from short term debt                                                     |  |                                      |      
|Payments on short term debt                                                       |  |                                      |      
|Repayments of employee notes receivable                                           |  |                                      | 342   
|Proceeds from issuance of common stock                                            |  |                                      | 698   
|Repurchases of common stock                                                       |  |                                      | (12   
|                                                                                  |  |                                      |       
|Net cash provided by (used in) financing activities                               |  |                                      | 980   
|                                                                                  |  |                                      |       
|Effect of change in exchange rates on cash and cash equivalents                   |  |                                      | (121  
|                                                                                  |  |                                      |       
|Net increase in cash and cash equivalents                                         |  |                                      | 1,330 
|Cash and cash equivalents at beginning of period                                  |  |                                      | 20,655
|                                                                                  |  |                                      |       
|Cash and cash equivalents at end of period                                        |  | $                                    | 21,985
|                                                                                  |  |                                      |       
|Supplemental disclosure of cash flow information:                                 |  |                                      |       
|Cash paid for income taxes                                                        |  | $                                    | 186   
|                                                                                  |  |                                      |       
|Cash paid for interest                                                            |  | $                                    | 87    
|                                                                                  |  |                                      |       



See
accompanying notes to the condensed consolidated financial statements



-5-



---

##### Table of Contents



PLUMTREE SOFTWARE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(information as of March 31, 2003

and for the three months ended March 31, 2003 and 2002 is unaudited)



Note 1.    BACKGROUND AND BASIS OF PRESENTATION



The Company



Plumtree Software, Inc., (the Company) develops and markets infrastructure software and services that enable businesses to
deploy corporate portals to information applications and Internet-based services.



The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim
financial information, the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not contain all of the information and notes required by accounting principles generally accepted in the United States of America for
complete financial statements. In the opinion of the Companys management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for the fair
presentation of the Companys financial position as of March 31, 2003, the results of operations for the three months ended March 31, 2003 and 2002, and cash flows for the three months ended March 31, 2003 and 2002. The following information
should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto included in the Companys Form 10-K filed on March 24, 2003.



The results of operations for the interim periods presented are not necessarily indicative of the operating
results to be expected for any subsequent interim period or for the full fiscal year ending December 31, 2003.



Revenue Recognition



License revenue consists principally of revenue from the licensing of the Companys software and is generally recognized when a contract is executed, all delivery obligations have been met, the
fee is fixed or determinable, and collectibility is probable. When licenses are sold together with services, in accordance with the provisions of the American Institute of Certified Public Accountants Statement of Position 97-2, Software
Revenue Recognition (SOP 97-2), license fees are recognized upon delivery, provided that (1) the above criteria have been met, (2) payment of the license fees is not dependent upon the performance of the services, (3) the services
do not include significant modifications to the features and functionality of the software, and (4) the services are not essential to the functionality of the software.



The Company has not established vendor specific objective evidence of fair value (VSOE) for
license sales and recognizes revenue from arrangements with multiple elements involving software licenses under the residual method as outlined in SOP 97-2. To the extent that a discount exists on any of the elements, the Company follows the
residual method and attributes that discount entirely to the delivered elements.



Service revenue consists of consulting, training and installation services that the Company provides to its customers. Revenue from such services is generally recognized as the service is performed. If
services are included with a license agreement, amounts related to services are unbundled from the license fee based on VSOE as established by transactions where such services have been sold separately.



Maintenance revenue relates to the technical support and
software updates the Company provides to its customers. Revenue on maintenance contracts is recognized ratably over the term of the contract. If maintenance is bundled with a license agreement, amounts related to maintenance are unbundled from the
license fee based on VSOE as established by the renewals the Company charges in accordance with its contracts and its established pricing.



-6-



---

##### Table of Contents



Stock-Based Compensation



In accordance with Accounting
Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, the Company applies the intrinsic value method in accounting for employee stock options. Accordingly, the Company recognizes no compensation expense with
respect to stock-based awards to employees for which the exercise price equals the fair market value on the date of grant. The Company has determined pro forma information regarding net income (loss) and net income (loss) per common share as if the
Company had accounted for employee stock options under the fair value method as required by Statement of Financial Accounting Standards No. 123 (SFAS 123), Accounting for Stock-Based Compensation, and Statement of Financial Accounting
Standards No. 148 (SFAS 148), Accounting for Stock-Based Compensation Transition and Disclosure. The fair value of these stock-based awards to employees were estimated using the Black-Scholes option pricing model, using the following
weighted average assumptions:



|                            |  | Three Months Ended March 31,
|--------------------------- |  | ----------------------------
|                            |  | 2003                        
|Risk-free interest rate     |  | 2.55%                       
|Expected life of the option |  | 4 years                     
|Dividend yield              |  | 0%                          
|Volatility                  |  | 109%                        



The fair
value of the Employee Stock Purchase Plan (ESPP) for the three months ended March 31, 2003 was estimated using the Black-Scholes option pricing model, using the following weighted average assumptions; risk free interest rate of 1.4%;
expected life of 1.25 years; dividend yield of 0%; and volatility of 109%.



For pro forma purposes, the estimated fair value of the Companys stock-based awards to employees is amortized over the options vesting period (generally four years) and the ESPPs look
back period of up to two years. The weighted-average estimated fair value of stock options issued for the three months ended March 31, 2003 and 2002 were $2.29 and $2.13 per share, respectively. The weighted-average estimated fair value of share
purchase rights under the ESPP for the three months ended March 31, 2003 was $1.65 per share. The Companys pro forma net income (loss) and pro forma net income (loss) per common share data under SFAS No. 123 is as follows (in thousands, except
per share amounts):



|                                                                                                          |  | Three Months Ended March 31, |       
|--------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------
|                                                                                                          |  | 2003                         |       
|Net income as reported                                                                                    |  | $                            | 529   
|Add: Stock-based employee compensation expense included in net income                                     |  |                              | 591   
|Deduct: Stock-based employee compensation expense determined under fair value based
method for all awards |  |                              | (2,083
|                                                                                                          |  |                              |       
|Pro forma net loss under SFAS 123                                                                         |  | $                            | (963  
|                                                                                                          |  |                              |       
|Net income (loss) per common share  basic:                                                               |  |                              |       
|As reported under APB 25                                                                                  |  | $                            | 0.02  
|                                                                                                          |  |                              |       
|As reported under SFAS 123                                                                                |  | $                            | (0.03 
|                                                                                                          |  |                              |       
|Net income (loss) per common share  diluted:                                                             |  |                              |       
|As reported under APB 25                                                                                  |  | $                            | 0.02  
|                                                                                                          |  |                              |       
|As reported under SFAS 123                                                                                |  | $                            | (0.03 
|                                                                                                          |  |                              |       



Amortization of stock-based compensation expense is as follows (in thousands):



|                                                                         |  | Three Months Ended March 31,
|------------------------------------------------------------------------ |  | ----------------------------
|                                                                         |  | 2003                        
|Amortization of stock-based compensation included in cost of revenue     |  | $                           
|Amortization of stock-based compensation included in operating expenses: |  |                             
|Research and development                                                 |  |                             
|Sales and marketing                                                      |  |                             
|General and administrative                                               |  |                             
|                                                                         |  |                             
|Total stock-based compensation included in operating expenses            |  |                             
|                                                                         |  |                             
|Total stock-based compensation                                           |  | $                           
|                                                                         |  |                             



-7-



---

##### Table of Contents



Cash Equivalents and
Short-term Investments



Cash equivalents
consist of highly liquid investments including corporate debt securities and money market funds with maturities of 90 days or less from the date of purchase.



The following is a chart of the principal amounts of short-term investments by expected maturity (in thousands):



|                                |  | Expected Maturity Date for the Year Ending December 31, |        | As of March 31, 2003
|------------------------------- |  | ------------------------------------------------------- | ------ | --------------------
|                                |  | 2003                                                    |        | 2004                
|Taxable auction rate securities |  | $                                                       | 13,750 |                     
|US Government agencies          |  |                                                         | 3,023  |                     
|Corporate notes                 |  |                                                         |       |                     
|                                |  |                                                         |        |                     
|Total                           |  | $                                                       | 16,773 |                     
|                                |  |                                                         |        |                     



With
respect to the above investments we are exposed to market risks for changes in interest rates. We place our investments with high quality credit issuers that have a rating by either Moodys of A-1 or higher, Fitchs of F-1 or higher or
Standard & Poors of P-1 or higher.



The
Companys general policy is to limit the risk of principal loss and ensure the safety of invested funds by limiting market and credit risk. The Company considers all investments to be short-term investments, which are classified in the balance
sheet as current assets, because (1) the investments can be readily converted at any time into cash or into securities with a shorter remaining time to maturity and (2) the investments are selected for yield management purposes only and the Company
is not committed to holding the investments until maturity. The Company determines the appropriate classification of its investments at the time of purchase and re-evaluates such designations as of each balance sheet date. All short-term investments
and cash equivalents in the Companys portfolio are classified as available-for-sale and are stated at fair market value, with the unrealized gains and losses reported as a component of accumulated other comprehensive income (loss).
The amortized cost of debt securities is adjusted for amortization of premiums and accretion of unrealized discounts to maturity. Such amortization and accretion is included in interest income and other, net. The cost of securities sold is based on
the specific identification method.



Intangible Assets



In July 2001, the Company acquired
certain technology for $95,000. In November 2001, the Company acquired certain technology for $85,000 and 60,000 shares of common stock. In November 2001, the Company also acquired a company (the Acquired Company) for 297,594 shares of
common stock. The acquisition of the Acquired Company was accounted for under the purchase method with the results of the Acquired Company included in the consolidated statements of operations for the year ended December 31, 2001 subsequent to the
November 2001 acquisition date. In connection with these acquisitions, the Company incurred approximately $70,000 of transaction related costs. The common stock issued in connection with these transactions was recorded at its estimated fair value
for accounting purposes of $12.60 per share on the date of issuance. The purchase price was allocated to acquired technology and is being amortized over its estimated useful life of three years. Amortization is being recorded as cost of revenue and
was $394,000 and $415,000 for the three months ended March 31, 2003 and 2002.



Accrued Liabilities



Accrued liabilities consist of the following (in thousands):



|                      |  | March 31, 2003 |        | December 31, 2002
|--------------------- |  | -------------- | ------ | -----------------
|Commissions and bonus |  | $              | 1,610  |                  
|Sales taxes           |  |                | 1,247  |                  
|Vacation              |  |                | 1,328  |                  
|Royalties             |  |                | 666    |                  
|Third party software  |  |                | 87     |                  
|ESPP                  |  |                | 300    |                  
|Other                 |  |                | 5,547  |                  
|                      |  |                |        |                  
|                      |  | $              | 10,785 |                  
|                      |  |                |        |                  



-8-



---

##### Table of Contents



Litigation and
Contingencies



On May 17, 2002 Datamize
LLC filed a lawsuit against the Company in the United States District Court for the District of Montana alleging, in general, that by supplying software and systems for the personalization and customization of networked kiosk and computer
screens, the Company infringes U.S. Patent Number 6,014,137 (137 patent) owned by Datamize. Datamize, based in Florence, Montana describes itself in its complaint as engaged in the business of designing, creating and
commercially exploiting software useful in the personalization and customization of networked kiosk and computer screens. Datamize is seeking, among other things, injunctive relief and unspecified damages.



The Company filed a motion (Motion) to dismiss the
action for lack of personal jurisdiction or, in the alternative, have the action transferred to the Northern District of California. In November 2002, a U.S. Magistrate, Judge Erickson, recommended that the motion to dismiss be granted and the
motion to transfer be dismissed as moot. Datamize has filed objections to this recommendation, and the matter is currently before the court.



In December 2002, the Company filed a complaint for declaratory relief against Datamize in U.S. District Court for the Northern District
of California (Civil Action No. 02-5693 VRW). The Company seeks a declaratory judgment that it does not infringe any valid claim of the 137 patent. The parties have stipulated that Datamizes response to the complaint will be due after
the Montana Court rules on the Motion.



Based on
other communications by Datamizes counsel, the Company expects Datamize may take further legal action against the Company with respect to additional intellectual property that Datamize purportedly owns or will own in the future. At this time,
the Company does not believe it is infringing on any valid patent claim of Datamize and intends to defend this lawsuit vigorously and pursue its claim for declaratory relief.



On November 13, 2001, the Company commenced an action in the District Court in The Hague against an
individual, Werner Linssen, to cancel the Benelux trademark registration for Plumtree held by Mr. Linssen. That action is pending. On November 25, 2001, the Company also commenced a proceeding before the Swiss Federal Institute of
Intellectual Property in opposition to Mr. Linssens trademark application for Plumtree. The Swiss Patent Office has dismissed the proceeding; however, the Company has requested a reconsideration of the dismissal and has filed an
appeal of the dismissal with the Swiss Patent Offices Appeals Board. In addition, the Company and Mr. Linssen have each commenced proceedings before the E.U.s Office of Harmonization of the Internal Market in opposition to each
others Community Trade Mark applications. Those proceedings have been suspended pending disposition of the Benelux action in The Hague. In the Netherlands, Plumtree has asked the Hague District Court to (i) annul Mr. Linssens Benelux
trademark registration for Plumtree and to (ii) bar Mr. Linssen, pending the proceedings, from contacting the Companys customers in a threatening or unfair manner.



In connection with the Companys operating lease agreement for their corporate headquarters in San
Francisco, CA, the Company is contractually obligated to complete certain leasehold improvements during the lease term. The Company is currently unable to determine the Companys potential liability related to this matter at this time.
Management does not believe that the outcome of this matter will have a material impact on the Companys financial condition, liquidity or results of operations.



The results of the above issues and proceedings cannot be predicted with certainty; however, in the opinion
of management, the potential liabilities associated with these complaints are not expected to have a material adverse effect on the Companys financial condition, liquidity or results of operations.



Royalties



The Company entered into an arrangement in 1998 with a
software provider to license that companys software and include it in the Companys software. This arrangement was amended in May 2000. The Company is required to pay a royalty fee computed as a percentage of net revenue, as defined in
the agreement, generated from sales of its product. This agreement expires on May 18, 2003. For the three months ended March 31, 2003 the Company did not incur any royalty expense related to this software provider. For the three months ended March
31, 2002 the Company incurred approximately $1.3 million of royalty expense related to this software provider.



-9-



---

##### Table of Contents



The Company
has entered into various license arrangements with other software providers to incorporate the software providers software in the Companys product. In return for these licenses, the Company is required to pay certain fees upon signing of
the arrangements plus a certain percentage of the Companys net revenue, as defined in these agreements, generated from the sales of its product. Royalty expense is recognized in the period in which liability is incurred. Up-front fees are
amortized over the period benefited or as the incorporated software is sublicensed, as applicable. For the three months ended March 31, 2003 and 2002 the Company incurred royalty expense of approximately $375,000 and $369,000, respectively, related
to these arrangements. The Company classifies all royalty expenses as cost of revenues.



Net Income Per Share



Basic and diluted net loss per common share are presented in conformity with SFAS No. 128, Earnings Per Share, for all periods presented. In accordance with SFAS No. 128, basic net loss per share is calculated by dividing
net loss by the weighted average common shares outstanding during the period, less shares subject to repurchase. Diluted income per share is calculated by dividing net income by the weighted average common shares outstanding adjusted for all
potential dilutive common shares, which includes shares issuable upon the exercise of outstanding common stock options, warrants, and common stock subject to repurchase, using the treasury stock method, and from convertible preferred stock, using
the if-converted method.



The
following table presents the calculation of basic and diluted net income per share applicable to common stockholders (in thousands, except per share amounts):



|                                                                                                                |  | For the Three Months Ended March 31, |       
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------------------ | ------
|                                                                                                                |  | 2003                                 |       
|Net income                                                                                                      |  | $                                    | 529   
|Basic:                                                                                                          |  |                                      |       
|Weighted average shares of common stock                                                                         |  |                                      | 29,778
|Less: Weighted average shares subject to repurchase                                                             |  |                                      | (110  
|                                                                                                                |  |                                      |       
|Weighted average shares used in computing basic net income per common
share                                     |  |                                      | 29,668
|                                                                                                                |  |                                      |       
|Basic net income per common share                                                                               |  | $                                    | 0.02  
|                                                                                                                |  |                                      |       
|Diluted:                                                                                                        |  |                                      |       
|Weighted average shares used above                                                                              |  |                                      | 29,668
|Add: Weighted average shares subject to repurchase                                                              |  |                                      | 110   
|Add: Net additional shares related to assumed option and warrant exercises under the
treasury stock method      |  |                                      | 2,712 
|Add: Weighted average adjustment to reflect the effect of the assumed conversion of
convertible preferred stock |  |                                      |      
|                                                                                                                |  |                                      |       
|Weighted average shares used in computing diluted net income per common
Share                                   |  |                                      | 32,490
|                                                                                                                |  |                                      |       
|Diluted net income per common share                                                                             |  | $                                    | 0.02  
|                                                                                                                |  |                                      |       



The
following potential shares of common stock have been excluded from the computation of diluted net income per share because the effect of including these shares would have been anti-dilutive (in thousands):



|                                 |  | For the Three Months Ended March 31,
|-------------------------------- |  | ------------------------------------
|                                 |  | 2003                                
|Options to purchase common stock |  | 5,213                               
|Warrants                         |  | 41                                  
|                                 |  |                                     
|Total                            |  | 5,254                               
|                                 |  |                                     



-10-



---

##### Table of Contents



Recent Accounting
Pronouncements



In June 2001, the FASB
issued Statement of Financial Accounting Standards Nos. 143, Accounting for Asset Retirement Obligations(SFAS 143). Under SFAS 143, the fair value of a liability for an asset retirement obligation must be recognized in the period
in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS 143 is effective for fiscal years beginning after June 15,
2002. SFAS 143 was adopted in the quarter ended March 31, 2003 and did not have a material impact on the financial position or results of the Companys operations.



In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting for Costs
Associated with Exit or Disposal Activities(SFAS 146), which addresses financial accounting and reporting for costs associated with exit or disposal activities. This statement requires that a liability be recognized at fair value
for costs associated with exit or disposal activities only when the liability is incurred as opposed to at the time the Company commits to an exit plan as permitted under EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit and Activity. SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002. SFAS 146 was adopted in the quarter ended March 31, 2003 and did not have a material impact on the
financial position or results of the Companys operations.



In November 2002, the EITF reached a consensus on Issue No. 00-21 Revenue Arrangements with Multiple Deliverables (EITF 00-21). EITF 00-21 addresses certain aspects of accounting by a vendor for arrangements under
which the vendor will perform multiple revenue generating activities. EITF 00-21 will be effective for fiscal years beginning after June 15, 2003. The Company does not expect the adoption of EITF 00-21 to have a material impact on its financial
position and results of operations.



Note
2.    Segment Reporting



SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, established standards for reporting information about operating segments. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.



The Company has organized its operations based on a single
operating segment: the development and delivery of corporate portal, collaboration, content management and search software as well as related maintenance and services for enterprises.



The disaggregated information reviewed on a product basis by the CEO is as follows (in thousands):



|                                    |  | For the Three Months Ended March 31,
|----------------------------------- |  | ------------------------------------
|                                    |  | 2003                                
|Revenues:                           |  |                                     
|License                             |  | $                                   
|Maintenance                         |  |                                     
|Professional services and education |  |                                     
|                                    |  |                                     
|Total                               |  | $                                   
|                                    |  |                                     



-11-



---

##### Table of Contents



The Company
markets its products primarily from its operations in the United States. International sales are made primarily to customers in Canada, Europe, Japan and Asia Pacific. Substantially all of the Companys assets are located within the Americas.
Information regarding the Companys revenues in different geographic regions is as follows (in thousands):



|                         |  | For the Three Months Ended March 31,
|------------------------ |  | ------------------------------------
|                         |  | 2003                                
|Revenues:                |  |                                     
|United States of America |  | $                                   
|Other                    |  |                                     
|                         |  |                                     
|Total                    |  | $                                   
|                         |  |                                     



For the
three months ended March 31, 2003 no customer represented more than 10% of the Companys total revenues. For the three months ended March 31, 2002 one customer represented 19% of the Companys total revenues. As of March 31, 2003, one
customer accounted for 11% of accounts receivable. At March 31, 2002, one customer accounted for 15% of accounts receivable.



Note 3.    Other Comprehensive Income



Other comprehensive income includes net income, unrealized gains on available-for-sale securities and foreign
currency translation adjustments.



Other
comprehensive income is comprised of the following (in thousands):



|                                                                       |  | For the Three Months Ended March 31,
|---------------------------------------------------------------------- |  | ------------------------------------
|                                                                       |  | 2003                                
|Net income                                                             |  | $                                   
|Other comprehensive income:                                            |  |                                     
|Change in accumulated foreign currency translation adjustments         |  |                                     
|Change in accumulated unrealized gain on available-for-sale securities |  |                                     
|                                                                       |  |                                     
|Total comprehensive income                                             |  | $                                   
|                                                                       |  |                                     



-12-



---

##### Table of Contents



|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------



This Managements Discussion and Analysis of
Financial Condition and Results of Operations should be read in conjunction with the accompanying condensed consolidated financial statements and notes included in this report. This Form 10-Q contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934 that involve risks and uncertainties identified in our form 10K filed with the Securities and Exchange Commission) on March 24, 2003, as well as other reports that we will file from time to time
with the Securities and Exchange Commission. Any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. In many cases, you can identify forward-looking statements by terms such
as may, will, should, expect, plan, anticipate, believe, estimate, predict, potential, intend or
continue, the negative of these terms or other comparable terminology. These statements are only predictions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of
factors, including, but not limited to, those presented in Risk Factors that May Affect Our Future Results and the Market Price of Our Stock and elsewhere in this report. We undertake no obligation to update publicly any forward-looking
statements for any reason, except as required by law, even if new information becomes available or other events occur in the future.



Overview



General



We develop, market and sell corporate portal, collaboration, content management and search software as well as related services for enterprises. These technologies work together to in an online work environment that we call the
Enterprise Web. The Enterprise Web offers customers a foundation for building Web applications more quickly, at lower cost. Our Enterprise Web solution allows an enterprises employees, customers and partners to interact with different types of
information and applications in one Web site and empowers users to create new information and services. Our software also supports a wide range of online business processes, so users can complete tasks more efficiently. For example, using our
solution, a companys employees can send e-mail, read competitive news or update a sales database, accessing multiple systems in one experience. Supervisors can also use our solution to assign projects and approve expenses. Similarly, a
companys customers can use our portal to search for support articles, participate in online discussions or access billing information.



We believe that the range of resources that our software can integrate and our proprietary Internet technology for performing this
integration for hundreds of thousands of users differentiate our solution and create significant value for our customers. We also provide professional services and training, maintenance and support services to our customers. Since 1997, we have
licensed our software to more than 450 customers from a broad range of industries and government.



Sources of Revenue



We derive our revenue from software licenses, services and maintenance. To generate revenue, we utilize both a direct sales force and an indirect sales channel consisting primarily of systems
integrators and independent software vendors. Our services include installation, consulting and training. We typically work in tandem with third-party consulting organizations to deliver these services. Maintenance services include technical support
and software updates. Our maintenance contracts are typically one year in duration and can be renewed annually.



Critical Accounting Policies



Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). These accounting principles require us to make
certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made.
These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenues and expenses during the periods presented. To the extent
there are material differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The significant accounting policies that we believe are the most critical to aid in fully understanding
and evaluating our reported financial results include the following:



| |  |  | software revenue recognition;
| | - |  | -----------------------------



| |  |  | allowance for doubtful accounts;
| | - |  | --------------------------------



| |  |  | valuation allowance against deferred tax assets;
| | - |  | ------------------------------------------------



| |  |  | assessing the realizability of capitalized acquired technology; and
| | - |  | -------------------------------------------------------------------



| |  |  | determination of the fair value of options granted to employees.
| | - |  | ----------------------------------------------------------------



-13-



---

##### Table of Contents



Software Revenue
Recognition



Our software arrangements
typically include: (i) an end user license that provides for an initial fee in exchange for a customers use of our products in perpetuity based on a specified number of users; (ii) a maintenance arrangement that provides for technical support
and product updates over a period of 12 months; and (iii) a professional service arrangement on a time and materials basis. We recognize software revenue using the residual method pursuant to the requirements of Statement of Position No. 97-2
Software Revenue Recognition, as amended by Statement of Position No. 98-9, Software Revenue Recognition with Respect to Certain Arrangements. Under the residual method, revenue is recognized when Plumtree-specific objective
evidence of fair value exists for all of the undelivered elements in the arrangement (i.e., professional services and maintenance), but does not exist for one or more of the delivered elements in the arrangement (i.e., the software product). We
allocate revenue to each undelivered element based on its respective fair value, with the fair value determined by the price charged when that element is sold separately. We determine the fair value of the maintenance portion of the arrangement
based on consistent pricing of maintenance and maintenance renewals as a percentage of net license fees. If evidence of fair value cannot be established for the undelivered elements of a license agreement, the entire amount of revenue from the
arrangement is deferred and recognized over the period that these elements are delivered. For substantially all of our software arrangements, we defer revenue for the fair value of the maintenance and professional services to be provided to the
customer and recognize revenue for the software license when persuasive evidence of an arrangement exists and delivery has occurred, provided the fee is fixed or determinable, and collection is deemed probable. We evaluate each of these criteria as
follows:



| |  |  | Evidence of an arrangement:  We consider a non-cancelable agreement signed by us and the customer to be evidence of an arrangement.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  |  | Delivery:  Delivery is considered to occur when media containing the licensed programs is provided to a common carrier or, in the case of electronic
delivery, the customer is given access to the licensed programs.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Acceptance:  Our typical end user license agreement does not include customer acceptance provisions. If the arrangement specifies acceptance provisions, we
defer the revenue until the earlier of written acceptance is received from the customer or the customers acceptance rights expire.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Fixed or determinable fee:  We consider the fee to be fixed or determinable if the fee is not subject to refund or adjustment and is on standard payment
terms. If the arrangement fee is not fixed or determinable, we recognize the revenue as amounts become due and payable.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Collection is deemed probable:  We conduct credit reviews for all significant transactions at the time of the arrangement to determine the credit
worthiness of the customer. Collection is deemed probable if we expect that the customer will be able to pay amounts under the arrangement as payments become due. If we determine that collection is not probable, we defer the revenue and recognizes
the revenue upon cash collection.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Allowance for
Doubtful Accounts



We have provided an
allowance for doubtful accounts of $600,000 as of March 31, 2003 for estimated losses resulting from the inability of our customers to make their required payments.



The total allowance for doubtful accounts is comprised of a specific reserve and a general reserve. We
regularly review the adequacy of our allowance for doubtful accounts after considering the size of the accounts receivable aging, the age of each invoice, each customers expected ability to pay and our collection history with each customer.
Unless specific indications arise earlier, we review any invoice greater than 120 days past due to determine if an allowance is appropriate based on the risk category. In addition, we maintain a general reserve for all invoices billed, and not
included in the specific reserve, by applying a percentage based on each 30-day age category. For unbilled invoices we generally apply a percentage to the entire balance. In determining these percentages, we analyze our historical collection
experience and current economic trends.



In
calculating the specific reserve, we identify specific high-risk accounts where collection is deemed unlikely. In calculating the general reserve, we reduce the gross accounts receivable balance by any specific reserves. The remaining balance is
segregated into 30-day aged categories and a reserve percentage is applied to each category. If the historical data we use to calculate the allowance provided for doubtful accounts does not reflect the future ability to collect outstanding
receivables, additional provisions for doubtful accounts may be needed and the future results of operations could be materially affected. However, historically the reserve has proven to be adequate.



-14-



---

##### Table of Contents



Valuation Allowance Against
Deferred Tax Assets



We provided a valuation
allowance of $7.2 million against the entire net deferred tax asset as of December 31, 2002. The valuation allowance was recorded given the accumulated losses we have incurred and uncertainties regarding our future operating profitability and
taxable income.



Assessing the Realizability of Capitalized
Acquired Technology



We have capitalized the
costs of certain purchased technology. We periodically review these costs to ensure they are being recorded at the lower of unamortized cost or net realizable value. Net realizable value is determined using assumed future cash flows related to sales
of the underlying technology. Had different assumed cash flows been used, materially different amounts of the carrying amount of these costs could have been reported. At March 31, 2003, the unamortized costs related to the purchased software were
approximately $2.7 million and are included within other assets in the accompanying consolidated balance sheets.



Determination of Fair Value of Options Granted to Employees



In connection with the granting of certain stock options, we recorded deferred stock-based compensation charges in the periods before our
initial public offering representing the difference between the deemed fair value of our common stock for accounting purposes and the option exercise price. We determined the deemed fair value based upon several factors including our operating
performance, issuances of our convertible preferred stock and valuations of comparable publicly traded software companies. For the three months ended March 31, 2003 and 2002 we recognized $591,000 and $1.3 million of stock-based compensation
expense, respectively. We apply the intrinsic value method in accounting for employee stock options apply in accordance with Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees.
Accordingly, we recognize no compensation expense with respect to stock-based awards to employees with exercise prices equal to the fair market value of the award on the date of grant. Had different assumptions or criteria been used to determine the
deemed fair value of the stock, materially different amounts of stock-based compensation could have been reported. Had we applied fair value accounting for our stock options as outlined in Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensation, our operating results would have been affected as follows:



|                                                                                                          |  | Three Months Ended March 31, |       
|--------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------
|                                                                                                          |  | 2003                         |       
|Net income as reported                                                                                    |  | $                            | 529   
|Add: Stock-based employee compensation expense included in net income                                     |  |                              | 591   
|Deduct: Stock-based employee compensation expense determined under fair value based
method for all awards |  |                              | (2,083
|                                                                                                          |  |                              |       
|Pro forma net loss under SFAS 123                                                                         |  | $                            | (963  
|                                                                                                          |  |                              |       
|Net income (loss) per common share  basic:                                                               |  |                              |       
|As reported under APB 25                                                                                  |  | $                            | 0.02  
|                                                                                                          |  |                              |       
|As reported under SFAS 123                                                                                |  | $                            | (0.03 
|                                                                                                          |  |                              |       
|Net income (loss) per common share  diluted:                                                             |  |                              |       
|As reported under APB 25                                                                                  |  | $                            | 0.02  
|                                                                                                          |  |                              |       
|As reported under SFAS 123                                                                                |  | $                            | (0.03 
|                                                                                                          |  |                              |       



-15-



---

##### Table of Contents



Results of Operations



Three Months Ended March 31, 2003 and 2002



Revenue



Revenue decreased to $17.2 million in the three months ended
March 31, 2003 from $23.2 million in the three months ended March 31, 2002. Between these periods, license revenue decreased 47% and services and maintenance revenue grew 22%.



Licenses.  License revenue decreased to $8.5 million in the three months ended March 31,
2003 from $16.1 million in the three months ended March 31, 2002. The decrease in license revenue for the three months ended March 31, 2003 over results for the comparable period in 2002 was due primarily to customers delaying purchasing decisions
or failing to make purchases due to the current downturn in the overall software market, offset by the decrease in our deferred license revenue from prior quarter. At December 31, 2002 the Company had deferred revenue in the amount of $798,000
related to a reseller arrangement. During the three months ended March 31, 2003 this resellers rights to resell our products expired. The remaining deferred revenue balance was recognized in January 2003.



Services and Maintenance.  Services and
maintenance revenue increased to $8.7 million in the three months ended March 31, 2003 from $7.1 million in the three months ended March 31, 2002, primarily due to increased maintenance we provided to our new and existing customers. Services revenue
increased to $3.3 million for the three months ended March 31, 2003 as compared to $3.2 million for the three months ended March 31, 2002. Maintenance revenue increased to $5.4 million in the three months ended March 31, 2003 from $3.9 million in
the three months ended March 31, 2002.



Cost of Revenue



Licenses.  Our cost of
licenses consists primarily of royalty expenses paid to third-party technology vendors and the amortization of acquired technology. Cost of licenses decreased to $771,000 in the three months ended March 31, 2003 from $2.1 million in the three months
ended March 31, 2003. Our cost of license revenue decreased in the three months ended March 31, 2003 as compared to the comparable quarter in 2002 primarily due to decreased royalty payments due to the shipment of version 4.5WS of our portal
product. Version 4.5WS (and later versions of our portal product) incorporate proprietary technology not subject to royalty payments in replacement of certain functionality previously provided by third-party vendors. Royalty expense for the three
months ended March 31, 2003 was $375,000 as compared to $1.7 million in the comparable period in 2002.



Services and Maintenance.  Our cost of services and maintenance includes salaries and related expenses for our
professional services and technical support organization and third-party consultants. Cost of services and maintenance decreased to $2.2 million in the three months ended March 31, 2003 from $3.3 million in the three months ended March 31, 2002.
This decrease was attributable primarily to the decrease in headcount in our professional services and technical support departments, a reduction in the use of independent contractors as well as to a $327,000 credit to expense from the expiration of
a software contract purchased but never placed into service and a reduction in the use of third-party consultants. As of March 31, 2003, we had 50 professional services and technical support personnel as compared to 69 at March 31, 2002.



Amortization of Stock-Based
Compensation.  In connection with options granted to employees in 2001 and 2000, we recorded deferred stock-based compensation related to our cost of services and maintenance representing the difference between the exercise price of
options granted and the deemed fair market value of our common stock at the date of grant. Compensation expense is decreased in the period of forfeiture for any accrued but unvested compensation arising from the surrender of unvested options upon
the termination of an option holder. Amortization of this stock-based compensation related to cost of services for the three months ended March 31, 2003 and 2002 were $102,000 and $278,000, respectively.



Operating Expenses



Research and Development.  Research and
development expenses consist of costs associated with new software development and enhancement of our existing software products, including our in-house engineering staff and third-party contractors. The costs associated with our in-house
development staff consist primarily of salaries and benefit costs. From time to time our in-house development staff is supported by outside developers on an independent contractor basis. Research and development expenses increased to $4.7 million in
the three months ended March 31, 2003 from $4.6 million in the three months ended March 31, 2002, due to an increase in the number of our research and development staff resulting from our efforts to enhance our core portal product offering and to
expand our product line. As of March 31, 2003, we had 113 employees in research and development as compared to 101 employees as of March 31, 2002.



-16-



---

##### Table of Contents



Sales and
Marketing.  Sales and marketing expenses consist of payroll expenses, including salaries and commissions and related costs for sales and marketing personnel and promotion expenditures, including public relations, advertising and trade
shows. Sales and marketing expenses decreased to $6.9 million in the three months ended March 31, 2003 from $9.3 million in the three months ended March 31, 2002, primarily as a result of lower commissions for our sales personnel resulting from
reduced license invoicing, and reduced marketing expenditures resulting from our increased efforts to control our costs. Sales expenses decreased to $5.9 million in the three months ended March 31, 2003 from $8.0 million in the three months ended
March 31, 2002 due primarily to reduced salaries as a result of lower headcount and a $801,000 decrease in sales commissions due to reduced license invoicing. Marketing expenses decreased to $1.0 million in the three months ended March 31, 2003 from
$1.3 million in the three months ended March 31, 2002 due primarily to reduced salaries as a result of lower headcount. As of March 31, 2003, we had 106 employees in sales and marketing as compared to 121 employees as of March 31, 2002.



General and
Administrative.  General and administrative costs consist primarily of salaries and related expenses for our administrative, executive and finance personnel, information services costs and costs associated with being a public company.
General and administrative expenses decreased to $1.6 million in the three months ended March 31, 2003 from $2.2 million in the three months ended March 31, 2002, primarily as a result of a reduction in bad debt expense due to a decrease in accounts
receivable. As of March 31, 2003, we had 25 general and administrative personnel as compared to 26 as of March 31, 2002. We expect this expense to increase in future periods as we incur additional costs associated with being a public company
including compliance with the Sarbanes-Oxley Act, securities exchange listing rules and other related rules and regulations. Many of the requirements of the Sarbanes-Oxley Act and NASDAQ listing rules are not yet fully enacted. Our compliance
obligations will likely require us to hire additional full time employees or hire third party consultants.



Amortization of Stock-Based Compensation.  Amortization of stock-based compensation related to operating expenses for the
three months ended March 31, 2003 and 2002 were $489,000 and $1.0 million, respectively.



Certain of our expense items are subject to inherent estimates. From time to time these estimates are changed and refined and these changes and refinements can cause increases or decreases in our
expenses for any particular period. See Critical Accounting Policies.



Other Income (Expense), Net



Other income (expense), net primarily consists of foreign currency gains and losses on transactions denominated in foreign currencies, interest income earned on cash and cash equivalents and interest expense incurred on our financing
obligations. The net balance of other income increased to $326,000 in the three months ended March 31, 2003 as compared to a net balance of other expense of $(102,000) in the three months ended March 31, 2002, primarily as a result of increased
interest income and a favorable result of foreign currency transactions. Interest income, net of expenses, increased to $211,000 for the three months ended March 31, 2003 from $70,000 for the comparable period in 2002 primarily from interest income
from short-term investments. The effect of foreign currency transactions was a gain of $115,000 for the three months ended March 31, 2003 as compared to a loss of $(128,000) for the comparable period in 2002.



Provision for Income Taxes



We recorded an income tax provision of $118,000 and $161,000
for the three months ended March 31, 2003 and 2002 primarily related to income taxes currently payable on income generated in non-U.S. and domestic state tax jurisdictions for which no U.S. benefit is currently recognizable.



Liquidity and Capital Resources



From inception through 2000, we primarily financed our
operations and capital expenditures through private sales of convertible preferred stock, with net proceeds of $36.5 million, as well as through bank loans and equipment leases. In 2001, we primarily financed our operations and capital expenditures
through cash flow from our operations as well as through bank borrowings. In June 2002, we successfully completed our initial public offering resulting in net proceeds of $37.9 million. As of March 31, 2003, we had $66.7 million of cash and cash
equivalents and short-term investments and $51.9 million in working capital.



Our net cash provided by operating activities was $834,000 and $1.3 million for the three months ended March 31, 2003 and 2002, respectively. The increase in our net income between these periods was
offset primarily by the decrease in deferred revenue and certain other working capital balances. Our change in deferred revenue decreased to $917,000 and $834,000 for the three months ended March 31, 2003 and 2002. Our change in accounts receivable
increased to $4.7 million for the three months ended March 31, 2003, from a decrease of $1.5 million for the comparable period in 2002. Our change in prepaid expenses and other current assets decreased to $503,000 for the three months ended March
31, 2003, from a decrease of $1.4 million for the comparable period in 2002. Prepaid expenses are primarily related to advance payments made to technology vendors and insurance.



-17-



---

##### Table of Contents



Capital
expenditures were $296,000 and $554,000 for the three months ended March 31, 2003 and 2002. Our capital expenditures in the first quarter of 2003 consisted of purchases of items to manage our operations, including computer hardware and software,
office furniture and equipment and leasehold improvements.



We have a $3.1 million revolving line of credit with Silicon Valley Bank with a maturity date of August 2003. To secure any outstanding loans, we have granted Silicon Valley Bank a security interest in our assets, including our
accounts receivable. Interest on the loans is payable monthly and accrues at one percentage point above the prime rate as announced by Silicon Valley Bank. As of March 31, 2003, no amounts were outstanding under this facility. We have issued a
letter of credit for $2.5 million, which is enforceable against the facility. We have limitations on declaring and paying dividends, incurring any non-permitted indebtedness and acquiring the capital stock of any other company under our loan
agreements with Silicon Valley Bank. We are also required to maintain a minimum cash balance with Silicon Valley Bank, with which requirement we were in compliance at March 31, 2003.



We expect to maintain our current operating expenses for the foreseeable future in order to execute our
business plan. As a result, we anticipate that these operating expenses, as well as planned capital expenditures, will constitute a material use of our cash resources. In addition, we may utilize cash resources to fund acquisitions of complementary
businesses, technologies or product lines. We believe that our cash and cash equivalents and short-term investments on hand will be sufficient to meet our cash requirements for at least the next 18 months, including working capital requirements and
planned capital expenditures.



Recent Accounting
Pronouncements



In June 2001, the FASB
issued Statement of Financial Accounting Standards Nos. 143, Accounting for Asset Retirement Obligations(SFAS 143). Under SFAS 143, the fair value of a liability for an asset retirement obligation must be recognized in the period
in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS 143 is effective for fiscal years beginning after June 15,
2002. SFAS 143 was adopted in the quarter ended March 31, 2003 and did not have a material impact on the financial position or results of our operations.



In July 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or
Disposal Activities(SFAS 146), which addresses financial accounting and reporting for costs associated with exit or disposal activities. This statement requires that a liability be recognized at fair value for costs associated with
exit or disposal activities only when the liability is incurred as opposed to at the time the Company commits to an exit plan as permitted under EITF Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit and Activity. Statement No. 146 is effective for exit or disposal activities that are initiated after December 31, 2002. SFAS 146 was adopted in the quarter ended March 31, 2003 and did not have a material impact on the financial
position or results of our operations.



In
November 2002, the EITF reached a consensus on Issue No. 00-21 Revenue Arrangements with Multiple Deliverables (EITF 00-21). EITF 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which the
vendor will perform multiple revenue generating activities. EITF 00-21 will be effective for fiscal years beginning after June 15, 2003. We do not expect the adoption of EITF 00-21 to have a material impact on its financial position and results of
operations.



-18-



---

##### Table of Contents



Risk Factors
that May Affect Our Future Results and the Market Price of Our Stock



Risks Relating to Our Business



Our efforts to establish and maintain the Plumtree Corporate Portal and related products as an enterprise-wide platform may fail and, as a result, our revenue may not increase and our ability to compete successfully may be
impaired.



We have expended, and plan to
continue to expend, significant resources to establish our portal as an enterprise-wide platform for integrating an organizations diverse systems and applications and for building new applications. To succeed, we must develop and market both
enhancements to our Plumtree Corporate Portal and new products and services that expand its functionality. Plumtree Collaboration Server and Plumtree Studio Server, each released commercially in the first quarter of 2002 and our Content Server
released in November 2002, are our most significant new product developments since the introduction of the Plumtree Corporate Portal. These and other new products and subsequent versions of our products may not achieve widespread market acceptance.



Even if we are successful in
establishing our products as an enterprise-wide platform, we face, among others, the following risks:



| |  |  | We will likely face new and in many cases larger competitors, and some of our current system integrators and technology partners with whom we work closely may come
to view our new products and services as competitive with their own products and services.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In order to remain competitive, we must increase the number of systems and applications that can be integrated into and built with our portal platform as Web
services, which will increasingly strain our development and support infrastructure and may require us to add significant additional personnel.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The industry may develop and adopt technology standards different from the standards presently incorporated in our products resulting in our products becoming less
competitive.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We have a short operating history,
which limits your ability to evaluate our business and operating results and may increase the risk of your investment.



Our short operating history makes the evaluation of our business operations and our prospects difficult. We were founded in 1996 and began
offering version 1.0 of our corporate portal product in March 1998. Version 4.5 of our portal was released in September 2001 and version 4.51 of our portal was released in May 2002 as version 4.5WS. We cannot predict whether this version of our
portal will be successful. We have derived all of our revenue from licensing our Plumtree Corporate Portal and related products and services. You should consider the risks and difficulties frequently encountered by early stage companies such as ours
in new and rapidly evolving markets, particularly those companies whose businesses depend on the Internet. These risks and difficulties include:



| |  |  | potential fluctuations in operating results and uncertain growth rates;
| | - |  | -----------------------------------------------------------------------



| |  |  | limited market acceptance of our products;
| | - |  | ------------------------------------------



| |  |  | concentration of our revenue in a single product;
| | - |  | -------------------------------------------------



| |  |  | our need to expand our direct sales forces and indirect sales channels, particularly for international markets;
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | our need to manage rapidly expanding operations; and
| | - |  | ----------------------------------------------------



| |  |  | our need to attract, train and retain qualified personnel.
| | - |  | ----------------------------------------------------------



We have a history of losses, and we may never sustain annual profitability, which would have a harmful effect on our business and the value of our
common stock.



We have incurred substantial
net losses in each year from our inception in July 1996 through 2001. For the years ended December 31, 2000 and 2001, we incurred net losses of approximately $21.7 million and $7.8 million, respectively. In 2002 we achieved annual profitability for
the first time in our history and recorded net income of $2.4 million. As of March 31, 2003, we had an accumulated deficit of approximately $38.9 million.



Given the level of our planned operating and capital expenditures, for the foreseeable future we expect our results of operations to
fluctuate, and during this period we may incur losses and negative cash flows. If our revenue does not increase or if our expenses increase at a greater pace than our revenue, we will not be able to sustain operating profitability on an annual
basis. Our ability to increase revenue and achieve and sustain operating profitability also will be affected by other risks and uncertainties described in this section and in Managements Discussion and Analysis of Financial Condition and
Results of Operations. Our failure to continue to operate profitably on a quarterly or annual basis would have a harmful effect on our business and the value of our common stock.



-19-



---

##### Table of Contents



Because our quarterly
operating results are volatile and difficult to predict, our operating results in one or more future periods are likely to fluctuate significantly, and if we fail to meet the expectations of securities analysts or investors, our stock price could
decline significantly.



As a result of our
limited operating history and the emerging and evolving nature of the market in which we compete, our quarterly operating results have varied significantly in the past and are likely to continue to vary significantly in the future. Our success
depends upon our ability to continue to increase sales of our products and services to our new and existing customers. Our license revenue is comprised substantially of one-time license fees. As a result, we will be required to regularly and
increasingly attract and contract with additional customers with substantial license fees on a timely basis to realize comparable or increased license revenue. Our services and maintenance revenue historically has been comprised almost entirely of
installation, modification and consulting fees and support and maintenance fees. Our services revenue has lower gross margin than our license revenue. If the percentage of our services revenue increases compared to the percentage of license revenue,
our profitability would be impaired. Our maintenance contracts are generally renewable for 12-month periods. If our customers elect not to renew their maintenance contracts or seek to renegotiate price each year, our revenue could decline.



We expect to continue to experience significant
fluctuations in our results of operations due to a variety of factors, some of which are outside of our control, including:



| |  |  | introduction of products and services and enhancements by us and our competitors;
| | - |  | ---------------------------------------------------------------------------------



| |  |  | competitive factors that affect our pricing;
| | - |  | --------------------------------------------



| |  |  | the timing and magnitude of our capital expenditures, including costs relating to the expansion of our operations within the United States and internationally; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the size and timing of customer orders and deployments, particularly large orders and deployments, some of which may represent more than 10% of total revenue during
a particular quarter.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As a result
of these factors, we believe that quarter-to-quarter comparisons of our revenue and operating results are not necessarily meaningful, and that these comparisons are not accurate indicators of future performance. Because our staffing and operating
expenses are based on anticipated revenue levels, and because a high percentage of our costs are fixed, small variations in the timing of the recognition of specific revenue could cause significant variations in operating results from quarter to
quarter. If we are unable to adjust spending in a timely manner to compensate for any revenue shortfall, any significant revenue shortfall would likely have an immediate negative effect on our operating results. If our operating results in one or
more future quarters fail to meet the expectations of securities analysts or investors, we would expect to experience an immediate and significant decline in the trading price of our stock.



If we do not expand our customer base, we may be unable to increase our
revenue and our stock price will likely decline.



The market for corporate portal software is newly emerging and there can be no assurance that additional customers will adopt our products. Accordingly, we cannot accurately estimate the potential demand for our products and
services. We believe that market acceptance of our products and services depends principally on our ability to:



| |  |  | withstand downturns in general economic conditions or conditions that slow corporate spending on software products, such as the downturn we are currently
experiencing in the overall software market.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | enhance our portal solution to meet changing customer demand;
| | - |  | -------------------------------------------------------------



| |  |  | effectively market the Plumtree Corporate Portal and related products and services;
| | - |  | -----------------------------------------------------------------------------------



| |  |  | hire, train and retain a sufficient number of qualified sales and marketing personnel;
| | - |  | --------------------------------------------------------------------------------------



| |  |  | provide high-quality and reliable customer support for our products;
| | - |  | --------------------------------------------------------------------



| |  |  | distribute and price our products and services to be more appealing to customers than those of our competitors or of our customers internally-developed
solutions; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | develop a favorable reputation among our customers, potential customers and participants in the software industry who can serve as reference accounts for our
products and services.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Some of
these factors are beyond our control. If our customer base does not expand, we may never become profitable on an annual basis.



-20-



---

##### Table of Contents



Because our quarterly
results often depend on a small number of large orders, if we were unable to complete one or more of these orders during any future period, our quarterly operating results and the trading price of our stock could be harmed.



We derive a significant portion of our software license
revenue in each quarter from a small number of relatively large orders. For example, in the quarter ended March 31, 2003, our top 10 customers accounted for approximately 32% of our total revenue. Similarly, for each quarter over the last two years,
generally a different customer has represented at least 10% of our total quarterly revenue. Our operating results and stock price could be harmed if we were unable to complete one or more substantial license sales during any future quarterly period.



Our business currently depends on revenue related to our
flagship product, the Plumtree Corporate Portal, and if the market does not increasingly accept this product and related products and services, our revenue may decline.



We generate our revenue from licenses of the Plumtree Corporate Portal and related products and services,
including Plumtree Portlet Web Services (formerly known as gadgets), the building blocks from which users assemble a personalized Web page as well as our Server Products, which provide significant ancillary functionality to our Portal
Platform. We expect that our portal product, and future upgraded versions of this product, including the anticipated release of version 5.0 of our portal product, will continue to account for a large portion of our revenue in the foreseeable future.
Our future financial performance will depend on increasing acceptance of our current product and on the successful development, introduction and customer acceptance of new and enhanced versions of our product. For example, our future success depends
in part on the widespread market acceptance of version 4.51 of our portal product, released in mid-year 2002 as version 4.5WS. If new and future versions of our products and services, including the upcoming release of version 5.0 of the Plumtree
Corporate Portal as well as upcoming releases of our Collaboration Server and Content Server, do not gain market acceptance when released commercially, or if we fail to deliver the product enhancements that customers want, demand for our products
and services, and our revenue, may decline.



Our sales and
implementation cycles are long, unpredictable and subject to seasonal fluctuations, making it difficult to accurately forecast our revenue and causing it to fluctuate, which could harm our operating results.



As a result of our limited operating history, the nature of
our products, and the emerging and rapidly evolving nature of the market in which we compete, the typical sales cycle of our portal product is long and unpredictable. A successful sales cycle may last six to nine months or longer, and typically
includes presentations to both business and technical decision makers, often requiring us to expend substantial resources educating prospective customers about the benefits of our software to their business. The implementation of our product can be
time-consuming and often involves a significant commitment of resources by prospective customers. Our sales cycle is also affected by a number of other factors, some of which we have little or no control over, including the volatility of the overall
software market, the business conditions of each prospective customer, seasonal fluctuations as a result of customers fiscal year budgeting and purchasing cycles and the selection and performance of our technology and of our technology
partners, systems integrators and resellers, any of which could harm our operating results. As an example, in the first quarter of 2003 we experienced a decline in license revenues from our core portal product resulting from delayed purchasing
decisions from our customers due to the current downturn in the software market.



We depend on technology licensed from third-party software developers and our ability to develop and sell our products and services could be delayed or impaired if we fail to maintain these license arrangements.



We incorporate into our products third-party software that
enables aspects of their functionality. This third-party software may not continue to be available on commercially reasonable terms or with acceptable levels of support, or at all. Some of these third-party software developers offer products that
compete with the Plumtree Corporate Portal and our other products. Our loss of or inability to maintain these software licenses on current terms could delay or impair the sale of our products and services until equivalent software, if available, is
identified, licensed or developed, and integrated, which could adversely affect our business and impair our future growth.



-21-



---

##### Table of Contents



We depend on our direct
sales force to sell our products, and if we fail to hire and train new sales personnel, our future growth will be impaired.



We sell our products primarily through our direct sales force and we expect to continue to do so in the future. Our ability to achieve
revenue growth in the future will depend on our ability to recruit, train and retain qualified direct sales personnel. We have in the past and may in the future experience difficulty in recruiting qualified sales personnel. The complexity of our
product and the length of our sales cycle typically results in a lead time of six months or more before newly-hired direct sales people become productive and can generate revenue. Our inability to rapidly and effectively expand and train our direct
sales force could impair our growth and cause our stock price to fall.



If we are unable to establish and maintain relationships with systems integrators and resellers, our ability to market, sell and deploy our products and services will be harmed.



We have relationships with a large number of systems
integrators and resellers, such as Cap Gemini Ernst & Young, Computer Sciences Corporation, Lexis Nexis and Project Performance Corporation. We rely significantly on these parties to market and sell our products and to provide rapid and
comprehensive deployment of our products. These relationships are a key factor in our overall business strategy and involve a number of risks, including:



| |  |  | Systems integrators and resellers may not view their relationships with us as valuable or significant to their own businesses. The related arrangements typically may
be terminated by either party with limited notice and in some cases are not covered by a formal agreement.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Systems integrators may attempt to market their own products and services rather than ours.
| | - |  | -------------------------------------------------------------------------------------------



| |  |  | Our competitors may have stronger relationships with these parties and, as a result, these system integrators and resellers may recommend a competitors
products and services over ours.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Under our co-deployment model, we often rely on our system integrators and resellers employees to perform implementations. If we fail to work together
effectively, or if these parties perform poorly, our reputation may be harmed and deployment of our products may be delayed or performed inadequately.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | If we lose our relationships with our systems integrators and resellers, we will not have the personnel necessary to deploy our products effectively, and we will
need to commit significant additional sales and marketing resources in an effort to reach the markets and customers served by these parties.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



If our alliances with technology and content providers are discontinued, our future growth will be impaired.



We have relationships with technology providers, such as
Project Performance Corporation, Stellant, Inxight, Pinnacor (formerly Screaming Media), Oblix, BEA and Documentum, to provide our customers with support of many applications and services. Although these relationships are a key factor in our overall
business strategy, our alliance members may not view their relationships with us as significant to their own businesses. A number of our competitors may have stronger relationships with these technology and content vendors and, as a result, these
alliance members may be more likely to support our competitors products and services over ours. In addition, our technology providers may offer products and services that are competitive to ours. Our arrangements generally do not establish
minimum performance requirements but instead rely on voluntary efforts. In addition, most of our agreements with these entities may be terminated by either party with limited notice. In some cases these arrangements are not covered by a formal
agreement. We currently invest significant resources to develop these alliances and plan to continue to do so. If we are unable to maintain our existing relationships or fail to enter into additional relationships, our ability to increase our sales
could be harmed, and we could also lose anticipated customer introductions and co-marketing benefits. Even if we succeed in establishing and maintaining these relationships, they may not result in additional customers or revenue.



If our software or software we furnish contains errors, we may lose
customers or experience reduced market acceptance of our products.



Our software products are inherently complex and may contain defects and errors that are detected only when the product is in use. We periodically release updated versions of our products, which increases the risk of
undetected defects or errors. It is also possible that our products released commercially in the first quarter of 2002, the Plumtree Collaboration Server, the Plumtree Studio Server, as well as version 4.5WS of our corporate portal product (released
in May 2002), upcoming portal product version releases and our server products, may contain undetected defects or errors that are discovered after release. In addition, third-party software that we bundle with, resell or incorporate into our
products, or with which we integrate to deploy our solution, has contained, and may in the future contain, defects or



-22-



---

##### Table of Contents

errors. Some of our customers require, or may require, enhanced modifications of our software for their specific needs. Modifications may
increase the likelihood of undetected defects or errors. Further, we often render implementation, consulting and other technical services, the performance of which typically involves working with sophisticated software, computing and networking
systems. As a result of product defects or our failure to meet project milestones for services, we may lose customers, customers may not implement our products more broadly within their organization, we may experience reduced market acceptance of
our products, and we may be subject to product liability claims by our customers.



If we are unable to develop products that are compatible and can be integrated with a large variety of hardware, software, database and networking systems, our ability to attract and retain customers will be harmed.



The Plumtree Corporate Portal is designed
to support a broad set of software applications and online services through Plumtree Portlet Web Services. To gain broad market acceptance, we believe that we must support an increased number of operating environments, applications and services in
the future. If the underlying applications and services are upgraded or changed, maintaining this support may be difficult or impossible. If we are unable to support an increased number of applications and services in the future or if we are unable
to maintain compatibility with these systems, our ability to attract and retain customers will be harmed. Furthermore, providers of competitive products and services may cease cooperating with our development efforts to integrate our corporate
portal product with products in their portfolio.



Some of our
customers are in the preliminary phase of implementing our portal product and this implementation may not proceed on a timely basis or at all.



Some of our customers, such as ConAgra, Cox Enterprises, CSG Systems, ProBusiness, Tennessee Valley Authority, Tokyo Electric, Unilever
and others are currently in a pre-deployment or preliminary stage of implementing our portal product and may encounter delays or other problems in introducing it. These delays or other problems may result from matters specific to the customer and
unrelated to us or our products. A customers decision not to implement our product, or a delay in implementation, could result in a delay or loss in related service revenue or otherwise harm our business or prospects. We cannot predict when or
if any customer currently in a pilot or preliminary phase will choose to implement broader use of our product.



Security breaches with our software may lead to unexpected capital expenditures and cause a loss in revenue and reputation.



Our portal product is designed to facilitate the secure transmission of sensitive business information to
specified parties outside the business over the Internet. This includes product information, competitive intelligence, sales and inventory data, sales reports and corporate e-mail. As a result, the reputation of our software for providing security
is vital to its acceptance by customers. Problems caused by security breaches could result in loss of or delay in revenue, loss of market share, failure to achieve market acceptance, diversion of research and development resources, harm to our
reputation, customer claims against us, increased insurance costs or increased service and warranty costs. Because the techniques used by computer hackers to access or sabotage networks change frequently and generally are not recognized until
launched against a target, we may be unable to anticipate these techniques. Moreover, our products may be even more susceptible to security breaches, since portals require the aggregation of many different Web applications on many different servers,
with different security standards and protocols.



Capacity
restrictions of our software could reduce the demand for and use of our products, which may limit our ability to generate license revenue.



Our products are designed to support enterprise-wide deployments with hundreds of thousands of users. However, the maximum amount of
information and the maximum number of concurrent users that our products can support in any particular deployment is uncertain. If the capacity boundaries of our products are reached, our customers may be dissatisfied, and we may lose customers or
fail to gain new customers.



-23-



---

##### Table of Contents



If we are unable to retain
key personnel, our growth will be limited.



We are highly dependent on certain members of our management staff, including, without limitation, our chief executive officer, John Kunze and our vice president of engineering, John Hogan. Our Vice President of World Wide Operations
recently left the Company in April 2003 and has not yet been replaced. Our ability to continue to deliver products and services that are responsive to customer needs, which is critical to our success, also depends on our ability to retain several
members of our management and engineering team. The loss of one or more of these officers or engineers may impede the achievement of our business objectives. None of our officers or key employees are bound by an employment agreement for any specific
term, and no one is constrained from terminating his or her employment relationship with us at any time. In addition, since a number of our long-standing employees have most of their stock options or restricted stock vested, their economic incentive
to remain in our employ may be diminished.



If we are unable
to recruit and train new personnel, our operations will be disrupted and our growth impaired.



Recruiting and retaining qualified technical personnel is critical to our success. If our business grows, we will also need to recruit a
significant number of management, technical and other personnel for our business. Competition for specialized employees in our industry can be intense. If we are not able to continue to attract and retain skilled and experienced personnel on
acceptable terms, our growth may be limited due to our limited capacity to develop and market our product. We are currently recruiting for a Vice President of Sales and skilled technical personnel for our professional services group. It may take an
extended period of time to hire a new Vice President of Sales and a sufficient number of new technical professionals. Without a senior sales executive in place the Companys sales force may lack direction and our sales process and productivity
may suffer. Similarly, we may not be able to meet customer or internal demand for professional services. Once hired, these new personnel will need time to familiarize themselves with Plumtree and our business practices. We anticipate a need to
continue to hire additional employees in order to grow our business. The integration of new personnel has resulted and will continue to result in some disruption to our ongoing operations. Our failure to complete this integration in an efficient
manner could harm our business and prospects.



Managing the
growth of our operations will continue to strain managerial, operational and financial resources, and if we are unable to do so our business and operating results could be harmed.



The planned expansion of our operations without a corresponding increase in headcount will place a
significant strain on our management, financial controls, operations systems, personnel and other resources. Our ability to manage our future growth, should it occur, will depend in large part upon a number of factors, including our ability to
rapidly:



| |  |  | build and train our sales and marketing staff to create an expanding presence in the evolving corporate portal market, and keep them fully informed over time
regarding the technical features, issues and key selling points of our product;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | attract and retain qualified technical personnel in order to continue to develop reliable and scalable products and services that address evolving customer needs;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | develop our customer support capacity as sales of our products increase, so that we can provide customer support without diverting resources from product development
efforts; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expand our internal management and financial controls significantly, so that we can maintain control over our operations and provide support to other functional
areas within Plumtree as the number of our personnel and size of our organization increases.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our inability to achieve any of these objectives could harm our business and operating results.



We may be unable to grow our international operations, which could impair
our overall growth.



We have invested
capital and management resources in expanding our international operations, and we are seeking to increase the portion of our revenue that is derived from sources outside the United States. Our revenue from sales outside the United States
constituted approximately 18.9%, 8.6% and 7.2% of our total revenue during the years ended December 31, 2002, 2001 and 2000, respectively. If we are unable to continue to grow our international operations, we may not generate sufficient revenue to
offset the expenditures required to establish and maintain the international sales and marketing operations, which could slow or undermine our overall growth.



-24-



---

##### Table of Contents



We have
committed substantial resources to modify our products for selected international markets, including the United Kingdom, France, Germany, South Korea, Australia, Italy, Spain, Brazil, Portugal, Sweden, Taiwan, the Netherlands, Japan and others. We
expect to continue to commit additional resources to modify our products for other select international markets and to develop our international sales and support organization. However, even if we successfully expand our international operations and
successfully modify our products, there can be no assurance that we will be able to maintain or increase international market demand for our products.



Our international operations are subject to a number of risks, including:



| |  |  | costs of modifying our products for foreign countries;
| | - |  | ------------------------------------------------------



| |  |  | compliance with multiple, conflicting and changing foreign governmental laws and regulations, including intellectual property, securities and employment laws;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | increased reliance on systems integrators and resellers abroad;
| | - |  | ---------------------------------------------------------------



| |  |  | longer sales cycles;
| | - |  | --------------------



| |  |  | import and export restrictions and tariffs;
| | - |  | -------------------------------------------



| |  |  | fluctuations in foreign currency exchange rates;
| | - |  | ------------------------------------------------



| |  |  | difficulties in staffing and managing international operations;
| | - |  | ---------------------------------------------------------------



| |  |  | greater difficulty in enforcing our intellectual property rights; and
| | - |  | ---------------------------------------------------------------------



| |  |  | greater difficulty or delay in accounts receivable collection.
| | - |  | --------------------------------------------------------------



Product liability claims could divert managements attention and be costly to defend.



Our license agreements with customers and arrangements with
our systems integrators and technology vendors typically contain provisions designed to limit our exposure to potential product liability claims. Not all domestic and international jurisdictions may enforce these limitations. Although we have not
experienced any product liability claims to date, we may encounter this type of claim in the future. Product liability claims brought against us, whether or not successful, could divert the attention and resources of our management and key
personnel, could be costly to defend and could require us to pay significant monetary damages.



If we are unable to effectively protect our proprietary rights, our competitors may be able to copy important aspects of our products or product presentations, which would undermine the relative
appeal of our products to customers and reduce our sales.



We believe that proprietary rights are important to our business. We have no issued patents. We have filed ten non-provisional patent applications with the U.S. Patent and Trademark Office and two international patent applications
with the World Intellectual Property Organization. However, current or future patent applications may not be granted, and it is possible that any patents issued to us may be circumvented by our competitors or otherwise may not provide significant
protection or commercial advantage to us. Similarly, our trademark, service mark and copyright rights may not provide significant protection or commercial advantage to us, and the measures we take to maintain the confidentiality of our trade secrets
may not be effective.



On November 13, 2001, we
commenced an action in the District Court in The Hague against an individual, Werner Linssen, to cancel the Benelux trademark registration for Plumtree held by Mr. Linssen. That action is pending. On November 25, 2001, we also commenced
a proceeding before the Swiss Federal Institute of Intellectual Property in opposition to Mr. Linssens trademark application for Plumtree. In addition, we and Mr. Linssen have each commenced proceedings before the E.U.s
Office of Harmonisation of the Internal Market in opposition to each others Community Trade Mark applications. Those proceedings have been suspended pending disposition of the Benelux action in The Hague. In the Netherlands, Plumtree has asked
the Hague District Court to (i) annul Mr. Linssens Benelux trademark registration for Plumtree; and (ii) bar Mr. Linssen, pending the proceedings, from contacting the Companys customers in a threatening or unfair manner.



-25-



---

##### Table of Contents



Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our software product or technology without authorization. Policing unauthorized use of our products is difficult, and we cannot be
certain that the steps we have taken will prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as those in the United States.



We generally enter into confidentiality or license agreements
with our employees, consultants and alliance members, control access to our source code and other proprietary technology and limit distribution of our software, documentation and other proprietary information. These measures afford only limited
protection and may be inadequate. Others may develop noninfringing technologies that are similar or superior to our own.



If our products employ technology that infringes the proprietary rights of others, we may be subject to infringement claims, forced to pay high prices
to license technology or required to stop selling our products.



We expect that software products, including ours, may be increasingly subject to third-party infringement claims as the number of competitors in our industry segment grows and the functionality of products in different
industry segments expands and overlaps. Third parties may claim our products infringe their intellectual property rights. Regardless of whether these claims have any merit, they could:



| |  |  | be time-consuming to defend;
| | - |  | ----------------------------



| |  |  | result in costly litigation;
| | - |  | ----------------------------



| |  |  | divert our managements attention and resources;
| | - |  | ------------------------------------------------



| |  |  | require us to indemnify technology vendors, system integrators or customers;
| | - |  | ----------------------------------------------------------------------------



| |  |  | require us to refund license fees;
| | - |  | ----------------------------------



| |  |  | cause product shipment delays; or
| | - |  | ---------------------------------



| |  |  | require us to enter into royalty or licensing agreements, which may not be available on terms acceptable to us, if at all.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



On May 17, 2002, Datamize, LLC filed a lawsuit against us in
the United States District Court for the District of Montana alleging that we infringe U.S. Patent Number 6,014,137 owned by Datamize. Datamize is seeking, among other things, injunctive relief and unspecified damages. Based on other communications
by Datamizes counsel, we expect Datamize may take further legal action against us with respect to additional intellectual property that Datamize purportedly owns or will own in the future. At this time, we do not believe we are infringing any
valid patent claim of Datamize and we intend to defend this lawsuit and pursue our claim for declaratory relief vigorously. Since the outcome of any litigation is uncertain, we may not prevail in the lawsuit brought by Datamize. If our portal were
found to infringe U.S. Patent Number 6,014,137 and we are unable to obtain a license on satisfactory terms, or if an injunction were issued, we could be required to modify our portal, cease licensing our portal product, and/or pay substantial
damages. Any of these outcomes would likely have a material adverse effect on our business. Even if we prevail, the defense of this litigation could be expensive and could consume substantial amounts of management time and attention.



A successful claim of infringement against us or our failure
or inability to license the infringed or similar technology could damage our business to the extent that we are required to pay substantial monetary damages or if, as result of a successful claim, we became unable to sell our products without
redeveloping them or otherwise were forced to incur significant additional expenses.



-26-



---

##### Table of Contents



We may be subject to
misappropriation claims by former employers of our personnel, which could be costly and disruptive to our business.



From time to time, we hire or retain employees or consultants who have worked for independent software vendors or other companies
developing products similar to those offered by us. Those prior employers may claim that our products are based on their products and that we have misappropriated their intellectual property. Any claims of that variety, with or without merit, could
cause a significant diversion of management attention, result in costly and protracted litigation, cause product shipment delays, require us to indemnify our alliance members and customers, require us to refund license fees or require us to enter
into royalty or licensing agreements. Those royalty or licensing agreements, if required, may not be available on terms acceptable to us or at all, which could harm our business.



Acquisitions of companies or technologies may result in disruptions to our business and management due to difficulties in
assimilating personnel, acquired products and technology and operations and may dilute stockholder value.



We have made, and in the future may make acquisitions or investments in other companies or technologies. We may not realize the
anticipated benefits of any acquisitions or investments we undertake. For instance, we made three small acquisitions in late 2001. Acquisitions such as these require us to assimilate the operations, products, technology and personnel of the acquired
businesses and train, retain and motivate key personnel from the acquired businesses. We may be unable to maintain uniform standards, controls, procedures and policies if we fail in these efforts. Similarly, acquisitions may cause disruptions in our
operations and divert managements attention from day-to-day operations, which could impair our relationships with our current employees, customers and strategic partners. If we consummate acquisitions through an exchange of our securities, our
existing stockholders could suffer significant dilution. In addition, our profitability may suffer because of acquisition-related costs or impairment costs for acquired goodwill and other intangible assets, or undisclosed liabilities of the acquired
business. Finally, the terms of our existing contractual obligations may restrict or prohibit acquisitions that we may seek to consummate.



If we are required to raise additional funds, we may be unable to obtain these funds on terms acceptable to us or at all.



The expansion and development of our business will require
significant capital to fund our operating expenses, working capital needs and capital expenditures. During the next 18 months, we expect to meet our cash requirements with existing cash and cash equivalents and short-term investments, the net
proceeds from this offering, cash flow from sales of our product and services and proceeds from existing and future working capital lines of credit and other borrowings. Our failure to generate sufficient cash flows from sales of products and
services or to raise sufficient funds may require us to delay or abandon some or all of our development and expansion plans or otherwise forego market opportunities.



Future equity or debt financing may not be available to us on favorable terms or at all. The terms of our
existing loan agreement with Silicon Valley Bank limit our ability, among other things, to incur additional indebtedness. Future borrowing instruments, such as credit facilities and lease agreements, are also likely to contain restrictive covenants
and will likely require us to pledge assets as security for borrowings under those future arrangements. If we raise additional funds through the issuance of equity securities, the issuance could result in substantial dilution to existing
stockholders. Our inability to obtain additional capital on satisfactory terms may result in a delay or failure to develop and enhance our products, acquire new technologies or businesses, expand operations and hire and train employees.



-27-



---

##### Table of Contents



Risks
Relating to Our Industry



Intense competition and
consolidation in our industry could limit our ability to attract and retain customers.



The market for our products is intensely competitive and highly fragmented, characterized by rapid technological change, evolving industry standards, changes in customer needs, and new product
introductions and improvements. Our current competitors include established software vendors that are Web-enabling their applications or are building infrastructure software, emerging companies offering competitive products and companies choosing to
build their own solutions. Some of our large competitors may expand their competitive product offerings through acquisitions. For example, SAP expanded its competitive offerings through its acquisition of TopTier in March 2001; Vignette completed
its acquisition of Epicentric, Inc. in December 2002; and Open Text Corporation announced its acquisition of Corechange, Inc. in February 2003. Many of our competitors have longer operating histories, significantly greater financial, technical,
marketing and other resources, greater name recognition, a broader range of products and a larger installed customer base, any of which could provide them with a significant competitive advantage. In addition, new competitors, or alliances among
existing and future competitors may emerge and rapidly gain significant market share. Some of our competitors, particularly established software vendors, may also be able to provide customers with products and services comparable to ours at lower or
at aggressively reduced prices in an effort to increase market share or as part of a broader software package they are selling to a customer. We may be unable to match competitors prices or price reductions, and we may fail to win customers
that choose to purchase a portal solution as part of a broader software and services package. If we cannot compete successfully against current and future competitors, we may be unable to attract and retain customers. Increased competition could
also result in price reductions for our products and lower profit margins and reduced market share, any of which could harm our business, results of operations and financial condition.



Downturns in the software market may decrease our revenue and margins.



The market for our products is affected by economic
conditions of the broader software market. Downturns in the economy such as the downturn we are currently experiencing may cause businesses and governments to delay or cancel corporate portal projects, reduce their overall information technology
budgets or reduce or cancel orders for our products. In this environment, customers may experience financial difficulty, fail to or defer the budget for the purchase of our products or cease operations. This, in turn, may lead to longer sales
cycles, delays or failures in payment and collection, and price pressures, causing us to realize lower revenues and margins. In particular, capital spending in the information technology sector generally has decreased in the past 36 months, and many
of our customers and potential customers have experienced severe declines in their revenues and operations. We believe that, in light of these events, some businesses and governments may curtail or eliminate capital spending on information
technology. If capital spending in our markets declines, it may be necessary for us to gain significant market share from our competitors in order to achieve our financial goals or to sustain annual or quarterly profitability.



Terrorist activities and resulting military and other actions could harm
our business



Terrorist attacks in New York
and Washington, D.C. in September of 2001 disrupted commerce throughout the world. The continued threat of terrorism and the potential for military action and heightened security measures in response to this threat have caused and may continue to
cause significant disruption to commerce throughout the world. To the extent that these continued disruptions result in a general decrease in corporate spending on information technology, our business and results of operations could be harmed. We
are unable to predict whether the threat of terrorism or the responses thereto will result in any long-term commercial disruptions or if such activities or responses will have a long-term adverse effect on our business, results of operations or
financial condition. Additionally, if any attacks were to affect the operation of the Internet or key data centers, our business could be harmed.



Since the U.S. and other countries have gone to war with Iraq, the U.S. and global economies may be negatively impacted.



Since the U.S. and other countries have gone to war with
Iraq, the U.S. and global economies may be negatively impacted. The worsening of our economy has caused and may continue to cause U.S. businesses to slow spending on products and services and delay sales cycles. Additionally, a worsening of the
global economy may cause foreign businesses to slow or otherwise cease spending on products and services. The economic uncertainty resulting from the unpredictability of future military action and other responses associated with a war with Iraq may
continue to negatively impact consumer as well as business confidence in the near term. This economic uncertainty may make it more difficult to implement our business strategy and negatively impact our revenues in the future.



-28-



---

##### Table of Contents



Our failure to introduce
new products and enhancements in a timely manner will make market acceptance of our products less likely.



New products, platforms and language support can require long development and testing periods. Any delays in developing and releasing new
products could harm our business. New products or enhancements may not be released according to schedule or may contain defects when released. For example, version 4.5WS of the Plumtree Corporate Portal, an updated UNIX version of the Plumtree
Corporate Portal, the Plumtree Collaboration Server, Plumtree Studio Server and Plumtree Content Server have been recently released commercially, increasing the risk of undetected defects or errors. Product release delays or product defects,
including defects in version 4.5WS of the Plumtree Corporate Portal, released in May 2002, release delays or defects in the anticipated release of versions of our portal products could result in adverse publicity, loss of sales, delay in market
acceptance of our products or customer claims against us, any of which could harm our business. We may be unable to successfully develop and market product enhancements or new products that respond to these technological changes, shifting customer
tastes or evolving industry standards, and may experience difficulties that could delay or prevent the successful development, introduction and marketing of these products. If we are unable to develop and introduce new products or enhancements of
existing products in a timely manner or if we experience delays in the commencement of commercial shipments of new products and enhancements, our ability to attract and retain customers will be harmed.



If we fail to manage technological change, demand for our products and
services will drop and our revenue will decline.



The market for corporate portals is still in an early stage of development and is characterized by rapidly changing technology, evolving industry standards, frequent new service and product introductions and changes in customer
demands. Our future success will depend to a substantial degree on our ability to offer products and services that incorporate leading technologies and respond to technological advances and emerging industry standards and practices on a timely and
cost-effective basis. You should be aware that:



| |  |  | our technology or systems may become obsolete upon the introduction of alternative technologies;
| | - |  | ------------------------------------------------------------------------------------------------



| |  |  | the technological life cycles of our products may end abruptly and, in any event, are difficult to estimate;
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | we may not have sufficient resources to develop or acquire new technologies or to introduce new services capable of competing with future technologies or service
offerings; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the price of the products and services we provide may decline as rapidly as, or more rapidly than, the price of any competitive alternatives, particularly if the
unique features of our products become widely adopted through new technologies.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We may not be able to effectively respond to the technological requirements of the changing market for corporate portals. To the extent we determine that new technologies and equipment are required to
remain competitive, the development, acquisition and implementation of those technologies and equipment are likely to continue to require significant capital investment by us. We may not have sufficient capital for these purposes in the future. Even
if we successfully raise capital to develop new technologies, investments in these technologies may not result in commercially viable technological processes, or there may not be commercial applications for those technologies. If we do not develop
and introduce new products and services, and achieve market acceptance in a timely manner, demand for our products and services will drop and our revenue will decline.



If we fail to adequately address our customer support demands, our ability to attract and retain customers will suffer.



We expect that our customers increasingly
will demand additional information and reports with respect to the services we provide. To meet these demands, we must develop and implement expanded customer support services to enable future sales growth. In addition, if we are successful in
implementing our marketing strategy, we expect the demands on our technical support resources to grow rapidly, and we may experience difficulties in responding to customer demand for our services and providing technical support in accordance with
our customers expectations. We expect that these demands will require not only the addition of new management personnel, but also the development of additional expertise by existing management personnel and the establishment of long-term
relationships with third-party service vendors. If we are unable to address these customer demands, our ability to attract and retain customers will suffer.



-29-



---

##### Table of Contents



|ITEM 3. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|------- |  | ----------------------------------------------------------



As of March 31, 2003, we had cash, cash equivalents and short-term investments totaling $66.7 million. Our
investment portfolio consists of money market funds, corporate-backed debt obligations, municipal bonds and U.S. government discount notes, generally due within two years. We place investments with high quality issuers and limit the amount of credit
exposure to any one issuer. These securities are subject to interest rate risks. Based on our portfolio content and our ability to hold investments to maturity, we believe that, if a significant change in interest rates were to occur, it would not
have a material effect on our financial condition, although there can be no assurance of this.



For the three months ended March 31, 2003, we earned approximately 29% of our revenue from international markets, most of which are denominated in various foreign currencies. As a result, our operating
results are and may become subject to more significant fluctuations based upon changes in the exchange rates of some currencies in relation to the U.S. dollar and diverging economic conditions in foreign markets. Although we will continue to monitor
our exposure to currency fluctuations, we cannot assure you that exchange rate fluctuations will not affect adversely our financial results in the future.



|ITEM 4. |  | CONTROLS AND PROCEDURES
|------- |  | -----------------------



During the 90 day period prior to the filing of this quarterly report, an evaluation was performed under the supervision and with
the participation of our management, including our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in
Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended). Our CEO and CFO believe based on the evaluation that the design and operation of our disclosure controls and procedures are effective to ensure that material
information relating to Plumtree is made known to them by others within our company during the period in which this Report of Form 10-Q was being prepared. There have been no significant changes in our internal controls or, to our knowledge, in
other factors that could significantly affect internal controls subsequent to that evaluation.



-30-



---

##### Table of Contents



|PART II. |  | OTHER INFORMATION
|-------- |  | -----------------



|ITEM 1. |  | LEGAL PROCEEDINGS
|------- |  | -----------------



On May 17, 2002 Datamize LLC filed a lawsuit against the Company in the United States District Court for the District of Montana alleging,
in general, that by supplying software and systems for the personalization and customization of networked kiosk and computer screens, the Company infringes U.S. Patent Number 6,014,137 owned by Datamize. Datamize, based in Florence,
Montana describes itself in its complaint as engaged in the business of designing, creating and commercially exploiting software useful in the personalization and customization of networked kiosk and computer screens. Datamize is
seeking, among other things, injunctive relief and unspecified damages. Based on other communications by Datamizes counsel, the Company expects Datamize may take further legal action against the Company with respect to additional intellectual
property that Datamize purportedly owns or will own in the future. At this time, the Company does not believe it is infringing any valid patent claim of Datamize and intends to defend this lawsuit and pursue its claim for declaratory relief
vigorously.



On November 13, 2001, the Company
commenced an action in the District Court in The Hague against an individual, Werner Linssen, to cancel the Benelux trademark registration for Plumtree held by Mr. Linssen. That action is pending. On November 25, 2001, the Company also
commenced a proceeding before the Swiss Federal Institute of Intellectual Property in opposition to Mr. Linssens trademark application for Plumtree. The Swiss Patent Office has dismissed the proceeding; however, Plumtree has
appealed the decision. In addition, the Company and Mr. Linssen have each commenced proceedings before the E.U.s Office of Harmonisation of the Internal Market in opposition to each others Community Trade Mark applications. Those
proceedings have been suspended pending disposition of the Benelux action in The Hague. In the Netherlands, Plumtree has asked the Hague District Court to (i) annul Mr. Linssens Benelux trademark registration for Plumtree; and (ii) bar Mr.
Linssen, pending the proceedings, from contacting the Companys customers in a threatening or unfair manner.



The results of the above proceedings cannot be predicted with certainty; however, in the opinion of management, the potential liabilities
associated with these complaints are not expected to have a material adverse effect on the Companys financial condition, liquidity or results of operations.



|ITEM 2. |  | CHANGES IN SECURITIES AND USE OF PROCEEDS
|------- |  | -----------------------------------------



None.



|ITEM 3. |  | DEFAULTS UPON SENIOR SECURITIES
|------- |  | -------------------------------



None.



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



None.



|ITEM 5. |  | OTHER INFORMATION
|------- |  | -----------------



Our Insider Trading Policy allows directors, officers and other employees covered under the policy to establish, under the limited
circumstances contemplated by Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, written programs that permit automatic trading of the Companys stock or trading of the Companys stock by an independent person (such as an
investment bank) who is not aware of material inside information at the time of the trade. As of March 31, 2003, several officers had adopted Rule 10b5-1 trading plans and have commenced trading pursuant to those plans.



-31-



---

##### Table of Contents



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



(a)  Exhibits.



EXHIBIT INDEX



|Exhibit |  | Description                                                                                                                      
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------
|       
|3.1     |  | Amended and Restated Certificate of Incorporation of the Registrant (1)                                                          
|       
|3.2     |  | Bylaws of the Registrant (1)                                                                                                     
|       
|4.1     |  | Specimen common stock certificate (1)                                                                                            
|       
|4.2     |  | Warrant to purchase Common Stock, dated May 31, 2000, issued to WXI/SAN Realty, L.L.C. (1)                                       
|       
|4.3     |  | Warrant to purchase Common Stock, dated Sept. 20, 2000, issued to WXI/SAN Realty, L.L.C. (1)                                     
|       
|10.1*   |  | Form of Indemnification Agreement between the Registrant and each of its directors and officers
(1)                              
|       
|10.2*   |  | 1997 Equity Incentive Plan, as amended, and form of agreements thereunder (1)                                                    
|       
|10.3*   |  | 2002 Stock Plan, as amended, and form of agreements thereunder (1)                                                               
|       
|10.4*   |  | 2002 Employee Stock Purchase Plan, and form of agreements thereunder (3)                                                         
|       
|10.5*   |  | 2002 Director Option Plan, and form of agreements thereunder (1)                                                                 
|       
|10.6    |  | Loan and Security Agreement, dated March 14, 2001, between the Registrant and Silicon Valley Bank
(1)                            
|       
|10.7    |  | Office Lease for 500 Sansome Street, dated April 7, 1999, between the Registrant and BPG Sansome, L.L.C.
(1)                     
|       
|10.8    |  | First Amendment to Lease for 500 Sansome Street, dated May 3, 2000, between the Registrant and WXI/SAN Realty, L.L.C.
(1)        
|       
|10.9*   |  | Offer letter between the Registrant and John H. Kunze (1)                                                                        
|       
|10.10*  |  | Offer letter between the Registrant and Eric Borrmann (1)                                                                        
|       
|10.11*  |  | Offer letter between the Registrant and John Hogan (1)                                                                           
|       
|10.12*  |  | Offer letter between the Registrant and Jim Flatley (1)                                                                          
|       
|10.13   |  | Second Amendment to Lease for 500 Sansome Street, dated September 20, 2000, between the Registrant and WXI/SAN Realty,
L.L.C. (1)
|       
|10.14   |  | Third Amendment to Lease for 500 Sansome Street, dated November 22, 2000, between the Registrant and WXI/SAN Realty,
L.L.C. (1)  
|       
|10.16   |  | Secured Promissory Note dated August 14, 2000 between the Company and Eric Borrmann (2)                                          
|       
|10.17   |  | Security and Pledge Agreement dated August 14, 2000 between the Company and Eric Borrmann (2)                                    
|       
|99.1    |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes Oxley Act of 2002 (S-O
Act)                   
|       
|99.2    |  | Certification of Chief Financial Officer pursuant to Section 906 of the S-O Act                                                  

---

|* |  | Management contract or compensatory plan or arrangement.
|- |  | --------------------------------------------------------



| |  | We obtained confidential treatment from the Securities and Exchange Commission for selected portions of this exhibit. The omitted portions were filed separately with
the Commission.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(1) |  | Incorporated by reference to Exhibits filed with Registration Statement No. 333-45950, as amended, which became effective on June 3, 2002.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------



|(2) |  | Incorporated by reference to Exhibits filed with the Registrants 10Q for the quarter ended June 30, 2002 and filed with the SEC on August 14, 2002 (File No.
001-31344).
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) |  | Incorporated by reference to Exhibits filed with the Registrants 10Q for the quarter ended September 30, 2002 and filed with the SEC on November 12, 2002 (File No.
001-31344).
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(b)  Reports on Form 8-K.



On January 17,
2003, we filed a current report on Form 8-K to file our press release announcing the election of Jim Richardson to the Companys Board of Directors and to acknowledge that John Kunze, Eric Borrmann and certain other officers intended to adopt
prearranged trading plans in accordance with the Securities and Exchange Commission Rule 10b5-1.



On April 10, 2003 we filed a current report on Form 8-K filing to file our press release announcing the Companys results for the fiscal quarter
ended March 31, 2003. As part of the same 8-K we separately announced that the Company had adopted its 2003 Independent Director Compensation Plan, to provide cash compensation for independent directors who serve on the Companys board of
directors (the Board) and the Audit Committee thereof. The Company also announced in this filing that it had been informed Pierre Lamond would not stand for re-election to the Board.



On April 17, 2003, we filed a
current report on Form 8-K announcing that Jim Flatley, Vice President of Worldwide Field Operations, would be leaving the Company effective on or before April 30, 2003.



-32-



---

##### Table of Contents



SIGNATURES



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



PLUMTREE SOFTWARE, INC.

(Registrant)





|Dated: May 9, 2003 |  | /s/    John H. Kunze                           
|------------------ |  | -----------------------------------------------
|                   |  | John H. Kunze                                  
|                   |  | President, Chief Executive Officer and Director
|                   |  | (Duly Authorized Officer)                      
|                  
|Dated: May 9, 2003 |  | /s/    Eric Borrmann                           
|                   |  | Eric Borrmann                                  
|                   |  | Chief Financial Officer                        
|                   |  | (Principal Financial Officer)                  



-33-



---

##### Table of Contents



CERTIFICATIONS



CERTIFICATION OF CHIEF EXECUTIVE OFFICER

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



I, John Kunze, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Plumtree Software, Inc.
| | -- |  | -----------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report
(the Evaluation Date)
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants ability to record, process,
summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize
and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Date:    May 9, 2003



By:

/s/    John KunzeName:

John KunzeTitle:

Chief Executive Officer




-34-



---

##### Table of Contents



CERTIFICATION
OF CHIEF FINANCIAL OFFICER

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002



I, Eric Borrmann, certify that:



| | 1. |  | I have reviewed this quarterly report on Form 10-Q of Plumtree Software, Inc.
| | -- |  | -----------------------------------------------------------------------------



| | 2. |  | Based on my knowledge, this quarterly report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3. |  | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4. |  | The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
| | -- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. |  | evaluated the effectiveness of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report
(the Evaluation Date)
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | c. |  | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation
Date;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 5. |  | The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants ability to record, process,
summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrants ability to record, process, summarize
and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | b. |  | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------



| | 6. |  | The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Date:    May 9, 2003



By:

/s/    Eric BorrmannName:

Eric BorrmannTitle:

Chief Financial Officer






-35-