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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549

                                   FORM 10-K

(Mark One)

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

                   For the fiscal year ended March 31, 1999

                                      OR

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

               For the transition period from        to

                       Commission file number: 000-23997

                               ----------------

                             BRIO TECHNOLOGY, INC.

            (Exact name of registrant as specified in its charter)

               Delaware                                77-0210797
    (State or other jurisdiction of                 (I.R.S. Employer
    incorporation or organization)                 Identification No.)

                            3460 West Bayshore Road
                          Palo Alto, California 94303
         (Address of principal executive offices, including zip code)

      Registrant's telephone number, including area code: (650) 856-8000

       Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:
                        Common Stock, $0.001 par value

                               ----------------

  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 than the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. (1) YES [X] NO [_] ;  (2)
YES [X] NO [_]

  Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

  The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $101,498,526 as of June 28, 1999, based upon the
closing sale price on the Nasdaq National Market reported for such date.
Shares of Common Stock held by each officer and director and by each person
who owns 5% or more of the outstanding Common Stock have been excluded in that
such persons may be deemed to be affiliates. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.

  There were 14,808,927 shares of the registrant's Common Stock issued and
outstanding as of June 28, 1999.

                      DOCUMENTS INCORPORATED BY REFERENCE

  Part III incorporates information by reference from the definitive proxy
statement for the Annual Meeting of Stockholders to be held on July 28, 1999.
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                                    PART I

  Certain statements in this Annual Report on Form 10-K, including certain
statements contained in Item 1, "Business" and Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
constitute "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements
of the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Factors That May Affect Future Operating Results."

Item 1. Business.

Overview

  Brio Technology is a leader in developing, marketing and supporting
enterprise business intelligence software. Enterprise business intelligence
software is software that enables organizations to maximize the value of their
corporate information through intuitive, interactive data access and analysis,
resulting in more informed business decisions. Brio's product suite offers a
comprehensive platform for rapidly implementing and deploying business
intelligence solutions that meet the needs of both information technology-
savvy "information producers" and non-technical "information consumers"
throughout an organization. Brio's products are flexible enough to accomodate
the growth of Brio's customers and to effectively incorporate a wide range of
available corporate data sources, including data marts, data warehouses,
operational data stores, and other computer software applications.

  Brio sells and markets its software and services through a direct sales and
services organization located in North America, the United Kingdom, France and
Australia as well as worldwide through its indirect channel of value-added
resellers and distributors. See Note 4 of Notes to Consolidated Financial
Statements for additional information about geographic revenue.

  Brio currently serves thousands of organizations worldwide with over 4,000
sites and features over one third of the Fortune 500 as customers. Brio
customers include ARCO, Avis Rent a Car Systems, California State University
System, Carrefour, Comcast Cable Communications, Hewlett-Packard, Hoffman
LaRoche, IBM, Motorola, Sun Microsystems, the U.S. Army and Worldcom Network
Services.

  Brio has entered into an agreement to acquire SQRIBE Technologies Corp.,
which acquisition is expected to close in July 1999.

Industry Background

  In today's increasingly competitive markets, organizations in virtually
every industry are seeking to improve the ability of business professionals to
make more timely, fact-based business decisions. To accomplish this objective,
organizations must establish and maintain a computer software infrastructure
that empowers business professionals with the analytical tools and information
to improve their decision making. Brio refers to this software infrastructure
as a business intelligence environment. Over the last decade, many
organizations have spent considerable effort and resources to collect,
organize and distribute data, but have been unable to fully empower business
professionals with the benefits of a business intelligence environment.

  At the same time, the Web has transformed the production and distribution of
information throughout business organizations. The Web has created the
opportunity for new populations of business professionals

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throughout the enterprise to have access to published business information. To
fully capitalize on this opportunity, however, organizations require that:

  .  their business intelligence software products take full advantage of the
     distribution and delivery benefits offered by the Web;

  .  their software integrate with the organization's existing systems; and

  .  their software provides a comprehensive solution to the organization's
     information needs.

  In the absence of a comprehensive platform, organizations have deployed
partial solutions for their reporting and analysis needs. However, many
organizations are realizing that incompatible, and disparate reporting and
anlaysis tools have inhibited the production and distribution of information.
As a result, Brio's believes that organizations need an integrated, end-to-end
business intelligence product suite that unifies access to all business
information, meets the needs of all users throughout the enterprise and is
effective in traditional network as well as email and Web environments.

Brio Solution

  Brio's Enterprise product suite and related services enable organizations to
develop and deploy effective business intelligence solutions across an entire
organization. Brio believes that its solution provides the following benefits
for the enterprise and its information consumers and producers.

Architected for the Enterprise

  Integrated, Comprehensive Product Suite. Brio provides a product suite that
can be used either separately or together in a combined distributed client-
server and/or Web-based implementation. By incorporating the same easy-to-use
interface across all supported platforms and the same underlying core
technologies, Brio products provide simple viewing capabilities, robust
analysis and reporting features and powerful administrative functions for
information producers and consumers.

  Scalable for Enterprise Deployment. Brio's multi-tier architecture utilizes
the computing power of the server and the local computing power of the client,
allowing Brio's solution to accommodate increases in the numbers and location
of users, and in the quantity and types of source data accessed by users.

  Leverages Email and the Web. Brio's product suite economically enables
information producers to broadcast data and reports to information consumers
via email, printers and the Internet.

  Adaptive Reporting. Brio adaptive reporting feature permits information
producers to control, on a report-by-report basis, the functionality available
to information consumers in a report. This feature allows information
producers to control user access while maximizing the usefulness of reports
and data.

Designed for Information Consumers

  Powerful Functionality, Easy to Use. Brio's product suite combines a
consistent and intuitive user interface with powerful functionality that
allows information consumers to easily customize, format and manipulate data,
reports and analyses.

  Robust Solution for Mobile Users. Brio's product suite facilitates mobile,
off-line analysis in both Web browser and PC-based environments and enable
information consumers to work with reports, analyses, and data sets that have
been sent via email, file servers or the Web. As a result, users in a mobile,
off-line environment can view data and can create new analyses and reports to
answer their individual questions.

Engineered for Information Producers

  Simplifies Administration. Brio designs its product suite to be quickly and
easily installed. Brio's technology centralizes and automates the installation
and upgrade of Brio's Web-based client software. Brio's

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server products enable information technology departments to control user
access and security privileges and to audit and manage user activity.

  Leverages Existing Customer Investments in Technology. Brio's products are
designed to be compatible with existing customer database, application,
reporting and analysis software, to take advantage of existing enterprise
hardware environments and to leverage existing desktop and operating system
infrastructure.

Brio Strategy

  Brio's strategy is to be a leading provider of enterprise business
intelligence software solutions. The following are key elements of Brio's
strategy:

  Extend Technology Leadership. Brio has designed its products to satisfy
  customers' desire for rapid implementation, intuitive user interfaces, easy
  integration with existing database and other system software, high
  performance and limited information technology staff support. Brio's
  products incorporate a number of advanced technologies, including a
  proprietary data analysis engine, a distributed architecture, and Web
  access and delivery technology. In addition, Brio shipped its Web-based
  analysis extension to its product suite (Brio.Insight) in November 1996. In
  November 1997, Brio shipped its Java-based server extension to its product
  suite (on Demand Server). Brio intends to devote significant resources to
  research and development efforts and to form strategic relationships that
  will enable Brio to further enhance its products' functionality and ease of
  use.

  Broaden Distribution Channels. To date, Brio has sold its products
  primarily through its direct sales and services organizations located in
  the United States, Canada, the United Kingdom, France and Australia, and
  has sold its products worldwide through value added resellers, resellers
  and distributors. Brio intends to grow its direct sales organization to
  intensify its coverage of large organizations and to augment its telesales
  operation to cover smaller organizations. In addition, Brio will continue
  to both leverage and grow its existing network of value-added resellers,
  resellers and distributors to expand its indirect distribution channel
  worldwide.

  Expand Product Deployments Throughout the Enterprise. Brio's products and
  related services are designed to enable its customers to deploy business
  intelligence throughout their organization. Although most organizations
  initially deploy Brio's products on a departmental or pilot basis, Brio
  believes that initial customer success with this deployment can lead to
  significant opportunities for larger scale adoption of Brio's products
  within the organization. Brio intends to focus its sales and services
  efforts on large organizations seeking large-scale business intelligence
  deployments and on making initial customer pilots or deployments
  successful.

  Leverage Industry Relationships. To accelerate the adoption of Brio's
  products as a standard platform for business intelligence, Brio has formed
  strategic relationships that provide for enhanced compatibility with
  partner technology as well as increased market exposure and sales
  opportunities for Brio's products and services. Brio's partners include
  industry-leading providers of software and hardware, such as Microsoft,
  Oracle and IBM, that complement Brio's product and service offerings, and
  providers of a wide range of training, implementation and application
  development services related to Brio's products. Brio's strategic
  relationships with Microsoft, Oracle and IBM have to date consisted of:

  .  Brio's participation in various sales and marketing initiatives
     sponsored by these companies, including joint presentations at industry
     trade shows and conferences, and

  .  agreements by Brio to support certain technology standards promoted by
     these companies.

  Increase International Presence. Outside of the United States, Brio

  .  has direct sales offices in Canada, the United Kingdom, France and
     Australia,

  .  has established distributor relationships in more than 20 countries,
     including Belgium, Italy, Japan, The Netherlands and South Africa, and

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  .  has localized products in Chinese, French, Italian and Japanese.

  Brio intends to expand its global sales capabilities by increasing the size
of its direct sales and sales support organizations, expanding its
distribution channels in Europe, Latin America, and Asia/Pacific and
continuing localization efforts of its products in selected markets.

  Provide Premium Customer Support and Service. Brio believes that offering
  quality service and support is important to customer satisfaction and
  provides a significant opportunity to build customer loyalty and to
  differentiate itself from its competition. Brio intends to increase its
  focus on customer satisfaction by investing in support services including
  additional staffing, a Web-based help line and systems infrastructure. In
  addition, Brio is committed to providing customer-driven product
  functionality through feedback from user groups, prospects, consultants,
  partners and customer surveys.

Products and Technology

  Brio Enterprise is a business intelligence software product suite providing
powerful query, analysis and reporting functionality across both client-server
and Web-based computing environments. Designed to meet the needs of users
throughout an organization, Brio's products combine powerful functionality
with intuitive, easy-to-use interfaces. Brio's products are designed to enable
an information technology department to maintain centralized control with
auditing, security and simplified deployment while incorporating a system
design that accommodates the needs of growing and diverse user populations and
increasing amounts of data.

  Brio's products use advanced server technology to optimize use of computer
network resources. Brio's system design, built on Brio's proprietary
analytical processing technology, enables analytical processing to take place
on the server or on the client computer. This design enhances the flexibility
of the solution without losing analytical capabilities required for
individuals to answer complex data-related business questions. Brio's
"adaptive reporting" capability further enhances this flexibility by giving
information technology departments the ability to control the analytical
functionality available to an information consumer on a report-by-report
basis.

Brio Enterprise Client Products

  Brio's client products, whether Web-based or client-server based, share the
same user-centric design, functionality and intuitive interface. Brio believes
that the result is an easy-to-navigate suite of products that consistently
guide the user from query and analysis through reporting and charting. Brio's
client products allow users to create queries that are targeted at single or
multiple data sources and that can combine data from local or server-based
data sources without information technology department assistance.

  BrioQuery. All editions of BrioQuery unify query, analysis, reporting and
charting capabilities in one product for client-server connected users. To
meet the differing needs of these users, BrioQuery is available in three
editions:

  BrioQuery Designer extends the core BrioQuery capabilities with database
  administration functionality, security, auditing and setup features to
  enable information technology departments to manage and control the
  business intelligence environment;

  BrioQuery Explorer is designed for power users or independent analysts who
  need direct access to database tables and repositories of pre-defined data
  and reports, and need to be able to create their own queries, analyses and
  reports; and

  BrioQuery Navigator is used by analysts or information consumers who do not
  have the technical ability or need to directly access database tables.
  These users typically only need access to pre-defined data and reports that
  they can use as a basis for independent analyses.

  Web-based Products. Brio's Web-based client products provide users with a
wide range of report, query and analytical capabilities within standard Web
browsers. Together with Brio's server-based products, they enable
organizations to deploy software that facilitates simplified administration
and maintenance.

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  Brio.Insight. Employing the same user-interface as BrioQuery, Brio.Insight
  delivers interactive query, analysis, reporting and charting capabilities
  inside a standard Web browser. Whether connected to the Web, to the Brio
  Enterprise Server, or operating without connection, Brio.Insight enables
  users to go beyond viewing static reports and to perform independent
  analysis and reporting on the delivered information.

  Brio.Quickview. Brio.Quickview enables organizations to deliver a portfolio
  of "view only" reports to users through a Web browser. These portfolios can
  include fully formatted reports with color, highlights, charts and tables.
  When used in conjunction with the Brio Enterprise Server, Brio.Quickview
  provides users with the option to refresh the data that is used to create
  their portfolio, or to limit the view based on a set of criteria.

Brio Enterprise Server Products

  Brio Enterprise Server. The Brio Enterprise Server product includes two
powerful server modules, the Broadcast Server and the OnDemand Server, and a
unified administration tool. The Brio Enterprise Server is designed to meet
the information distribution and data access needs of information consumers,
while providing information technology departments with centralized control,
administration and security management functionality.

  Broadcast Server. The Broadcast Server enables information technology
departments to control the integrity and distribution of business information.
It allows information producers to take queries, analyses and reports created
with BrioQuery, and to schedule automatic processing and delivery of such
reports based on date, time, or event. The Broadcast Server pushes the reports
and documents in a highly compressed format out to Web, client-server and
mobile users via file transfer protocol, email, Web servers, and network file
servers and printers.

  OnDemand Server. The OnDemand Server offers both mobile and desktop users
easy and secure access to a variety of data sources. Users can make queries
over the Web or on the server; the server can then pre-build reports and
transmit them to Brio's Web client products, Brio.Insight and Brio.Quickview.
With the OnDemand Server and Brio's adaptive reporting feature, information
technology departments can determine on a report-by-report basis the level of
Brio.Insight and Brio.Quickview functionality and interactivity that a
particular user is allowed. The OnDemand Server also automates the
installation and maintenance of Brio's Web client software.

Platforms and Pricing

  Brio's server products are designed to operate on most popular server
platforms including Windows NT and UNIX (AIX, HPUX, Sun Solaris). Pricing on
the Brio Enterprise Server product, which includes both the Broadcast Server
and the OnDemand Server, ranges from $30,000 to $45,000. Brio client products
currently operate on a number of operating systems including Windows (95, NT
and 3.1), PowerMac and UNIX (AIX, HPUX, Sun Solaris). Brio's products provide
native and ODBC connectivity to a variety of data sources, including
relational database management systems such as Oracle, DB2, SQL Server and
Adaptive Server; non-relational database management systems such as Arbor
Essbase, Oracle Express and Informix Metacube; and legacy systems such as SAS.
Pricing ranges from approximately $50 for Brio.Quickview to $4,000 for
BrioQuery Designer.

  Brio's success in the future will depend upon its ability to develop new
products and its ability to sell larger, organization-wide sales of its
products.

Sales and Marketing

  Sales. To date, Brio has sold its products primarily through its direct
sales and services organizations located in the United States, Canada, the
United Kingdom, France and Australia, and has sold its products worldwide
through value-added resellers, or "VARs", resellers and distributors. The
direct sales process

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involves the generation of sales leads through direct mail, seminars and
telemarketing, or requests for proposal from prospects. Brio's field sales
force conducts multiple presentations and demonstrations of Brio's products to
management and users at customer sites as part of the direct sales effort.
Sales cycles typically range from three to nine months. The direct sales force
is responsible for local partner support, joint sales efforts and channel
management. The direct sales force is compensated for sales made through
indirect channel partners as well as direct sales to ensure appropriate
cooperation with Brio's VARs, resellers and distributors.

  To date, Brio has generated a majority of its sales from its direct sales
force, and has supplemented its direct sales efforts with the efforts of VARs,
resellers and distributors in a variety of locations throughout the world.
These third parties perform some or all of the following functions: sales and
marketing; systems implementation and integration; software development and
customization; and ongoing consulting, training, service and technical
support. Brio generally offers such parties discounts on products and
training, a cooperative marketing program and field level assistance from
Brio's direct sales force. Brio intends to leverage sales and marketing
through indirect channel partners that will distribute or resell Brio's
products in their respective markets. Indirect channel partners accounted for
approximately 9% of total revenues for fiscal 1996, 7% of total revenues for
fiscal 1997 and 15% of Brio's total revenues in fiscal 1998 and 1999.

  Brio intends to grow its direct sales organization and its telesales
operation to cover smaller organizations. In addition, Brio will continue to
leverage and grow its existing network of VARs, resellers and distributors to
expand its indirect distribution channel worldwide. Brio currently expects
that it will fund such expansion out of its working capital. Brio's agreements
with its VARs generally provide VARs with a right to resell a customized
version of Brio's products in conjunction with sales of the VAR's products or
services. Brio typically offers its VARs a purchase discount to incent the VAR
to sell Brio's products. Brio's agreements with its distributors generally
require that such distributors make certain minimum purchases of Brio's
products, none of which minimum purchases are material in amount either
individually or in the aggregate. Brio recognizes revenue from such minimum
purchases as the distributors sell Brio's products through to end customers.
Brio does not typically grant exclusive sales territories to its distributors.

  Marketing. Brio is focused on building market awareness and acceptance of
Brio and its products as well as on developing strategic partnerships. Brio
has a marketing strategy with several key components: image and awareness
building, direct marketing to both prospective and existing customers, a
strong Web presence, as well as broad-scale marketing programs in conjunction
with key local and global partners. Brio's corporate marketing strategy
includes extensive public relations activities; a conference and trade show
speakers program, as well as programs to work closely with key analysts and
other influential third parties. Brio's direct marketing activities include
participation in selected trade shows and conferences, targeted advertising,
as well as ongoing direct mail efforts to existing and prospective customers.
Brio has effectively used local, regional and Web-based seminars to assist
prospects in selecting enterprise business intelligence solutions. Brio has
used the Web to further the interest and lead generation process and to
improve the quality of the leads that it provides to the sales organization.
Brio's Web site has become an effective lead generation program. Brio has
invested in building a partner and channel marketing function which helps to
recruit, train, support and conduct cooperative marketing with technology
partners, resellers and VARs. These programs help to foster strong
relationships between Brio and its various partners. The marketing
organization also provides a wide-range of programs, materials and events to
support the sales organization in its efforts.

  Brio's sales and marketing organization consisted of 139 full-time employees
as of March 31, 1999. The sales and marketing staff is based at Brio's
corporate headquarters in Palo Alto, California. Brio also has field sales
offices in the metropolitan areas of Chicago, New York, Los Angeles, Atlanta,
Washington D.C. and Dallas.

Research and Development

  Research and development created the products that have been the basis for
Brio's success, and Brio intends to make substantial investments in research
and development and related activities to maintain and enhance its product
lines. Brio believes that its future success will, in large part, depend on
its ability to maintain and

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improve current products, and to develop new products that meet enterprise
business intelligence needs. Brio's research and development organization is
divided into teams consisting of development engineers, product managers,
quality assurance engineers and technical writers. As of March 31, 1999,
Brio's research and development organization consisted of 52 full-time
employees. Brio has expended $2.4 million in fiscal 1997, $5.2 million in
fiscal 1998 and $7.2 million in fiscal 1999, on research and development. The
research and development organization uses a phase-oriented development
process, which includes constant monitoring of quality, schedule,
functionality, costs and customer satisfaction. Product development is based
upon a consolidation of the requirements from existing customers, technical
support and engineering. The development group infrastructure provides
documentation, quality assurance and delivery and support capabilities (as
well as product design and implementation) for Brio's products.

Customer and Technical Support

  Brio believes that a high level of customer support is important to the
successful marketing and sale of its products. Maintenance and support
contracts, which are typically for twelve months, are offered with the initial
license, may be renewed annually and are typically set at a percentage of the
total license fee. A large portion of Brio's direct sales to customers have
maintenance and support contracts that entitle the customers to patches,
updates and upgrades at no additional cost if and when available, and
technical hotline support. In addition, Brio offers classes and training
programs at Brio's headquarters, local training centers and customer sites.
Customers purchasing maintenance are able to access hotline telephone support
during normal business hours. Incoming customer calls are immediately logged
into the support database at the time of the call. Brio supplements its
standard telephone hotline support with a number of Web-based support
services, including access to frequently asked questions, a patch download
area, and an interface to Brio's technical support department's problem-
tracking database, which allows customers to submit cases and view the status
of any of their current cases on-line. Users of Brio's products can attend
regional user group conferences throughout the year. To improve user access to
explanatory materials, Brio provides on-line documentation with all of its
products. Among other things, such documentation includes detailed
explanations of product features as well as problem-solving tips for
middleware connections.

Competition

  The market in which Brio operates is still developing, and is intensely
competitive, highly fragmented and characterized by rapidly changing
technology and evolving standards. Brio's current and potential competitors
offer a variety of software solutions and generally fall within four
categories:

  .  vendors of business intelligence software such as Cognos, Business
     Objects, Seagate and Hummingbird;

  .  vendors offering alternative approaches to delivering analysis
     capabilities to users, such as MicroStrategy, Information Advantage and
     Actuate;

  .  database vendors that offer products which operate specifically with
     their proprietary database, such as Microsoft, IBM, Oracle and Arbor;
     and

  .  other companies that may in the future announce offerings of an
     enterprise business intelligence solution.

  Brio's competitive position in the market is uncertain, due principally to
the variety of current and potential competitors, and the emerging nature of
the market. Brio has experienced and expects to continue to experience
increased competition from current and potential competitors, many of whom
have significantly greater financial, technical, marketing and other resources
than Brio. Such competitors may be able to respond more quickly to new or
emerging technologies and changes in customer requirements or devote greater
resources to the development, promotion and sales of their products than Brio.
Brio expects additional competition as other established and emerging
companies enter into the business intelligence software market and new
products and technologies are introduced. Increased competition could result
in price reductions, fewer customer orders,

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reduced gross margins, longer sales cycles and loss of market share, any of
which could materially and adversely affect Brio's business, operating results
and financial condition.

  Current and potential competitors may make strategic acquisitions or
establish cooperative relationships among themselves or with third parties,
thereby increasing the ability of their products to address the needs of Brio's
prospective customers. Brio's current or future indirect channel partners may
establish cooperative relationships with current or potential competitors of
Brio, thereby limiting Brio's ability to sell its products through particular
distribution channels. Accordingly, it is possible that new competitors or
alliances among current and new competitors may emerge and rapidly gain
significant market share. Such competition could materially adversely affect
Brio's ability to obtain new licenses, and maintenance and support renewals for
existing licenses, on terms favorable to Brio. Further, competitive pressures
may require Brio to reduce the price of its products, which could have a
material adverse effect on Brio's business, operating results and financial
condition. There can be no assurance that Brio will be able to compete
successfully against current and future competitors, and the failure to do so
could have a material adverse effect upon Brio's business, operating results
and financial condition.

  Brio competes on the basis of the following factors:

    .  product features;

    .  time to market;

    .  ease of use;

    .  product performance;

    .  product quality;

    .  analytical capabilities;

    .  user scalability;

    .  open architecure;

    .  customer support; and

    .  price.

  Brio believes it presently competes favorably with respect to each of these
factors. However, Brio's market is still evolving and there can be no assurance
that Brio will be able to compete successfully against current and future
competitors, and the failure to do so successfully could have a material
adverse effect on Brio's business, operating results and financial condition.

Proprietary Rights

  Brio currently relies primarily on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. Brio also believes that factors such as the
technological and creative skills of its personnel, new product developments,
frequent product enhancements, name recognition and reliable product
maintenance are essential to establishing and maintaining a technology
leadership position.

  Brio seeks to protect its software, documentation and other written materials
under trade secret and copyright laws, which afford only limited protection.
Brio currently has one United States patent application. There can be no
assurance that Brio's patent application will result in the issuance of a
patent, or if issued, will not be invalidated, circumvented or challenged, or
that the rights granted thereunder, if any, will provide competitive advantages
to Brio or that any of Brio's future patent applications, if any, will be
issued with the scope of the claims sought by Brio, if at all.

  Furthermore, there can be no assurance that others will not develop
technologies that are similar or superior to Brio's technology or design around
any patent that may come to be owned by Brio. Despite Brio's efforts to

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protect its proprietary rights, unauthorized parties may attempt to copy
aspects of Brio's products or to obtain and use information that Brio regards
as proprietary. Policing unauthorized use of Brio's products is difficult, and
while Brio is unable to determine the extent to which piracy of its software
products exists, software piracy can be expected to be a persistent problem.
In addition, the laws of some foreign countries do not protect Brio's
proprietary rights as fully as do the laws of the United States. There can be
no assurance that Brio's means of protecting its proprietary rights in the
United States or abroad will be adequate or that competitors will not
independently develop similar technology.

  Brio has entered into source code escrow agreements with a number of
customers and indirect channel partners requiring release of source code. Such
agreements provide that the contracting party will have a limited, non-
exclusive right to use the code subject to the agreement in the event that:

    .  there is a bankruptcy proceeding by or against Brio;

    .  if Brio ceases to do business; or

    .  in some cases, if Brio fails to meet its contractual obligations.

The provision of source code escrows may increase the likelihood of
misappropriation by third parties.

  Brio expects that software product developers will increasingly be subject
to infringement claims as the number of products and competitors in Brio's
industry segment grows and the functionality of products in different industry
segments overlaps. Any claims, with or without merit, could:

    .  be time consuming to defend;

    .  result in costly litigation;

    .  divert management's attention and resources;

    .  cause product shipment delays; or

    .  require Brio to enter into royalty or licensing agreements.

  Such royalty or licensing agreements, if required, may not be available on
acceptable terms, if at all. In the event of a successful claim of product
infringement against Brio and its failure or inability to license the
infringed or similar technology, Brio's business, operating results and
financial condition could be materially adversely affected.

  Finally, in the future Brio may rely upon software that it may license from
third parties, including software that may be integrated with Brio's
internally developed software and used in Brio's products to perform key
functions. There can be no assurance that these third-party software licenses
will be available on commercially reasonable terms. Brio's inability to obtain
or maintain any third party software licenses could result in shipment delays
or reductions until equivalent software could be developed, identified,
licensed and integrated, which could have a material adverse effect on Brio's
business, operating results and financial condition.

Employees

  As of March 31, 1999, Brio had 257 employees, including 139 in sales and
marketing, 30 in services and support, 52 in research and development and 36
in general and administrative functions. Brio believes its employee relations
are good. Brio's success depends to a significant degree upon the continued
contributions of its key management, engineering, sales and marketing
personnel, many of whom would be difficult to replace. Brio has employment
contracts with only three members of its executive management personnel, and
currently maintains "key person" life insurance only on Yorgen Edholm, Brio's
President and Chief Executive Officer, and Katherine Glassey, Brio's Executive
Vice President, Products and Services and Chief Technology Officer. Brio does
not believe such insurance would adequately compensate it for the loss of
either Mr. Edholm or Ms. Glassey.

  Brio believes its future success will also depend in large part upon its
ability to attract and retain highly skilled managerial, engineering, sales
and marketing and finance personnel. Competition for such personnel is

                                      10
<PAGE>

intense, and there can be no assurance that Brio will be successful in
attracting and retaining such personnel. The loss of the services of any of
the key personnel, the inability to attract or retain qualified personnel in
the future or delays in either hiring required personnel, or the rate at which
new people become productive, particularly sales personnel and engineers,
could have a material adverse effect on Brio's business, operating results and
financial condition. In particular, Brio has from time to time experienced and
may continue to experience significant turnover of its sales force, due
principally to the intensely competitive market for such personnel. Such
turnover tends to slow sales efforts until replacement personnel can be
recruited and trained to become productive members of Brio's sales force.

                     EXECUTIVE OFFICERS OF THE REGISTRANT

  The executive officers of the Company and their ages as of March 31, 1999
are as follows:

<TABLE>
<CAPTION>
  Name                               Age                   Position(s)
  ----                               ---                   -----------
<S>                                  <C> <C>
Yorgen H. Edholm....................  43 President, Chief Executive Officer and Chairman
                                         of the Board of Directors
Katherine Glassey...................  41 Executive Vice President, Products and Services,
                                         Chief Technology Officer and Director
Robert W. Currie....................  53 Executive Vice President, Worldwide Operations
Chris M. Grejtak....................  50 Executive Vice President, Marketing
Karen J. Willem.....................  43 Executive Vice President, Finance and Chief
                                         Financial Officer
</TABLE>

  Yorgen H. Edholm is a co-founder of the Company and has been its President,
Chief Executive Officer and Chairman of the Board of Directors since
inception. Prior to founding the Company, Mr. Edholm was a manager with the
Management Consulting Division of Arthur Young & Company in New York (now
Ernst & Young, LLP) where he co-founded the microcomputer-based Decision
Support Systems Group. Before that, Mr. Edholm was a product manager with
Industri Mathematics AB in Stockholm, Sweden. Mr. Edholm holds a M.S. degree
in Computer Science and Applied Mathematics from the School of Physical
Engineering at the Royal Institute of Technology in Stockholm, Sweden and an
M.B.A. degree in Organizational Behavior and International Economics from the
Stockholm School of Economics in Stockholm, Sweden. Mr. Edholm is the spouse
of Katherine Glassey.

  Katherine Glassey is a co-founder of the Company and has been its Executive
Vice President of Products and Services and Chief Technology Officer since
January 1997 and has been a director since inception. Prior to joining the
Company, Ms. Glassey established and managed application development and
consulting organizations for Metaphor Computer Systems, Inc. ("Metaphor"), a
decision support hardware and software company. Before joining Metaphor, Ms.
Glassey was a Senior Consultant with the Management Consulting Division of
Arthur Young & Company in New York. During that time, she co-founded the
microcomputer-based Decision Support Systems Group whose charter was to use
personal computers to enable end-users to make decisions based on corporate
data. Ms. Glassey holds a B.S. degree in Operations Research from Cornell
University with a Minor in English Literature. Ms. Glassey is the spouse of
Yorgen H. Edholm.

  Robert W. Currie joined the Company in September 1996 as Executive Vice
President of Worldwide Operations. Prior to joining the Company, Mr. Currie
was Vice President and General Manager of North American Operations at Sybase,
Inc., a database software and systems company, from July 1995 to July 1996.
From December 1993 to July 1995, Mr. Currie was Vice President and General
Manager of European Operations at Sybase, Inc. Mr. Currie holds a B.S. degree
in Business Administration from the University of Massachusetts.

  Chris M. Grejtak joined the Company in January 1997 as Executive Vice
President, Marketing. Prior to joining the Company, Mr. Grejtak was Vice
President, Marketing at Red Brick Systems, Inc., a data warehousing company,
from December 1995 to December 1996. From July 1995 to December 1995, he was
Vice President,

                                      11
<PAGE>

Sales and Marketing at Avistar Systems, Inc., a video desktop conferencing
software and hardware company. Mr. Grejtak was Vice President, Marketing at
Network General Corporation ("Network General"), a network management software
company, from November 1994 to June 1995. From August 1992 to November 1994,
he was a Vice President and then President and CEO of Metaphor. Mr. Grejtak
holds a B.A. degree in Sociology from Middlebury College.

  Karen J. Willem joined the Company in August 1997 as Executive Vice
President, Finance and Operations and Chief Financial Officer. Prior to
joining the Company, Ms. Willem was Vice President, Worldwide Sales Operations
from April 1995 to January 1997 at Network General. From July 1991 to March
1995, Ms. Willem was Vice President and Corporate Controller at Network
General. Ms. Willem holds a B.S. degree in Biology from Bucknell University
and an M.B.A. degree in Finance from the University of Pittsburgh.

Item 2. Properties.

  Brio's principal executive offices are located in Palo Alto, California
where Brio leases approximately 12,145 square feet under a lease that expires
in October 2003 and approximately 30,000 square feet under a lease that
expires in March 2000. Brio also leases space (typically less than 4,000
square feet) in various geographic locations primarily for sales and support
personnel. Brio believes that its current facilities are adequate to meet its
needs through the end of 1999, at which time Brio may need to lease additional
space.

  Brio was incorporated in California in February 1989 and was reincorporated
in Delaware in April 1998. Its principal executive offices are located at 3460
West Bayshore Road, Palo Alto CA 94303. Its telephone number at that location
is (650) 856-8000.

Item 3. Legal Proceedings.

  On January 20, 1997, Business Objects, S.A. filed a complaint against Brio
in the U.S. District Court for the Northern District of California in San
Jose, California alleging that certain of Brio's products (including at least
the BrioQuery Navigator, BrioQuery Explorer and BrioQuery Designer products)
infringe at least claims 1, 2 and 4 of U.S. Patent No. 5,555,403. In April
1997, Brio filed an answer and affirmative defenses to the complaint, denying
certain of the allegations in the complaint and asserting a counterclaim
requesting declaratory relief that Brio is not infringing the patent and that
the patent is invalid and unenforceable. In December 1997, venue for the case
was changed to the Northern District of California in San Francisco,
California. Based upon the advice of Brio's patent counsel, Blakely, Sokoloff,
Taylor & Zafman, LLP, Brio believes that it has meritorious defenses to the
claims made in the complaint and intends to defend the suit vigorously. A
claims construction hearing was held on April 5, 1999. At the hearing, the
court set the trial date for September 13, 1999. The court also issued its
claims construction ruling on April 6, 1999. Brio and Business Objects, S.A.
are currently conducting discovery.

  The pending litigation could result in substantial expense to Brio and
significant diversion of effort by Brio's technical and management personnel.
The complaint seeks injunctive relief and unspecified monetary damages, and
Business Objects, S.A. is expected to seek lost profits and/or equivalent
royalties. The complaint also alleges willful infringement, and seeks treble
damages, costs and attorneys' fees. Litigation is subject to inherent
uncertainties, especially in cases such as this where complex technical issues
must be decided. Brio's defense of this litigation, regardless of the merits
of the complaint or lack thereof, could be time-consuming or costly, or divert
the attention of technical and management personnel, which could have a
material adverse effect upon Brio's business, operating results and financial
condition.

  There can be no assurance that Brio will prevail in the litigation given the
complex technical issues and inherent uncertainties in patent litigation,
particularly before the claims have been construed by the Court. In the event
Brio is unsuccessful in the litigation, Brio may be required to pay damages to
Business Objects, S.A. and could be prohibited from marketing its BrioQuery
Navigator, BrioQuery Explorer and BrioQuery Designer products without a
license, which license may not be available on acceptable terms. If Brio is
unable to obtain

                                      12
<PAGE>

such a license, Brio may be required to license a substitute technology or
redesign to avoid infringement, in which case Brio's business, operating
results and financial condition could be materially adversely affected.
Collectively, sales of BrioQuery Navigator, BrioQuery Explorer and BrioQuery
Designer represented substantially all of Brio's revenues in fiscal 1996 and
represented a majority of Brio's revenues in fiscal 1997 and fiscal 1998 and a
significant portion of Brio's revenues in fiscal 1999.

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

  Not applicable.

                                    PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

  The Company's Common Stock has been traded on the Nasdaq National Market
under the symbol "BRYO" since the Company's initial public offering on May 1,
1998. The following table sets forth the high and low sales prices of the
Company's Common Stock as reported by the Nasdaq National Market for the
periods indicated.

<TABLE>
<CAPTION>
                                                                   High   Low
                                                                  ------ ------
   <S>                                                            <C>    <C>
   Fiscal year ended March 31, 1999
   First Quarter (ending June 30, 1998).......................... $19.06 $11.00
   Second Quarter (ending September 30, 1998).................... $13.88 $ 7.38
   Third Quarter (ending December 31, 1998)...................... $18.25 $ 7.00
   Fourth Quarter (ending March 31, 1999)........................ $26.50 $14.38
</TABLE>

  The Company has never declared or paid cash dividends on its capital stock.
The Company currently intends to retain all available funds and any future
earnings for use in the operation of its business and does not anticipate
paying any cash dividends in the foreseeable future. In addition, the terms of
the Company's primary credit facility prohibit the paying of dividends without
the lender's consent.

Item 6. Selected Financial Data.

  The selected consolidated financial data set forth below should be read in
conjunction with Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Consolidated Financial Statements
and the Notes thereto and the other information contained in this Report. The
selected consolidated statements of operations data for the years ended March
31, 1999, 1998 and 1997, and the selected consolidated balance sheet data as
of March 31, 1999 and 1998, are derived from, and are qualified by reference
to, the audited Consolidated Financial Statements of Brio appearing elsewhere
in this Report. The selected consolidated statement of operations data for the
years ended March 31, 1996 and 1995, and the selected consolidated balance
sheet data as of March 31, 1997, 1996 and 1995, are derived from audited
Consolidated Financial Statements of Brio not included herein. The historical
results of operations presented are not necessarily indicative of results to
be expected for any subsequent period.

                                      13
<PAGE>

<TABLE>
<CAPTION>
                                             Year Ended March 31,
                                    ------------------------------------------
                                     1999     1998     1997     1996     1995
                                    -------  -------  -------  -------  ------
                                    (In thousands, except per share data)
<S>                                 <C>      <C>      <C>      <C>      <C>
Consolidated Statements of
 Operations Data:
Revenues:
  License fees....................  $34,247  $19,795  $10,328  $ 3,212  $2,487
  Services........................   12,277    6,977    3,058    1,315   1,025
                                    -------  -------  -------  -------  ------
    Total revenues................   46,524   26,772   13,386    4,527   3,512
                                    -------  -------  -------  -------  ------
Cost of revenues:
  License fees....................    1,517    1,008      839      340     192
  Services........................    5,425    2,595      817      371     205
                                    -------  -------  -------  -------  ------
    Total cost of revenues........    6,942    3,603    1,656      711     397
                                    -------  -------  -------  -------  ------
Gross profit......................   39,582   23,169   11,730    3,816   3,115
                                    -------  -------  -------  -------  ------
Operating expenses:
  Research and development........    7,180    5,218    2,447    1,555     934
  Sales and marketing.............   27,598   22,728   13,588    4,476   1,662
  General and administrative......    4,825    2,954    1,685    1,014     849
  In-process research and
   development....................    1,653      --       --       --      --
                                    -------  -------  -------  -------  ------
    Total operating expenses......   41,256   30,900   17,720    7,045   3,445
                                    -------  -------  -------  -------  ------
Loss from operations..............   (1,674)  (7,731)  (5,990)  (3,229)   (330)
Interest and other income
 (expense), net...................    1,084     (341)      25       33     (40)
                                    -------  -------  -------  -------  ------
Net loss before income taxes......     (590)  (8,072)  (5,965)  (3,196)   (370)
Income taxes......................      297      --       --       --      --
                                    -------  -------  -------  -------  ------
Net loss..........................  $  (887) $(8,072) $(5,965) $(3,196) $ (370)
                                    =======  =======  =======  =======  ======
Basic net loss per share..........  $ (0.06) $ (1.41) $ (1.14) $ (0.64) $(0.07)
                                    =======  =======  =======  =======  ======
Shares used in computing basic net
 loss per share...................   13,709    5,724    5,218    5,018   5,000
                                    =======  =======  =======  =======  ======
<CAPTION>
                                             Year Ended March 31,
                                    ------------------------------------------
                                     1999     1998     1997     1996     1995
                                    -------  -------  -------  -------  ------
                                                (In thousands)
<S>                                 <C>      <C>      <C>      <C>      <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-
 term investments.................  $32,449  $ 2,647  $   890  $   546  $3,091
Total current assets..............   41,987   10,474    6,516    3,002   4,284
Total current liabilities.........   16,662   14,384    8,295    3,371   1,221
Noncurrent liabilities............    1,237    1,556      457      --      --
Stockholders' equity (deficit)....   29,155   (1,854)     133      100   3,236
</TABLE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

  The following discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto and the other information included
elsewhere in this Report. Certain statements in this "Management's Discussion
and Analysis of Financial Condition and Results of Operations" are forward-
looking statements. The forward-looking statements contained herein are based
on current expectations and entail various risks and uncertainties that could
cause actual results to differ materially from those expressed in such forward-
looking statements. For a more detailed discussion of these and other business
risks, see "Factors That May Affect Future Operating Results" below.

                                       14
<PAGE>

Overview

  Brio designs, develops, markets and supports enterprise business
intelligence software, which is software that enables organizations to
maximize the value of their corporate information through intuitive,
interactive data access and analysis. Brio had net losses of $6.0 million in
fiscal 1997, $8.1 million in fiscal 1998 and $887,000 in fiscal 1999. Brio had
an accumulated deficit of approximately $18.8 million as of March 31, 1999.
See "Risk Factors That May Affect Future Operating Results" for a description
of the risks related to Brio's operating results fluctuating in future
periods.

  In February 1999, Brio entered into a definitive merger agreement with
SQRIBE Technologies Corp., a Delaware corporation (SQRIBE). SQRIBE designs,
develops, markets and supports a family of information retrieval and
dissemination software products for relational databases. Brio will acquire
SQRIBE in a tax-free, stock-for-stock transaction. Under the terms of the
agreement, upon closing of the transaction, Brio stockholders will hold
approximately 55% of Brio, with former SQRIBE stockholders holding
approximately 45%. In addition, Brio will assume outstanding stock options of
SQRIBE. The merger is expected to close in July 1999 and to be accounted for
as a pooling of interest.

  Brio's revenues consist of license fees for software products and fees for
services, including software maintenance and support, training and system
implementation consulting. Revenues in current periods are generally
attributable to the sale of the most recent version of Brio's products. Brio
generally discontinues marketing older product versions when a new product
version is introduced. The products are typically licensed on a per user basis
with the price per user varying based on the selection of products licensed.
Additionally, Brio also sells larger enterprise-wide implementations of their
products through site licenses with the price per site varying based on the
selection of

  .  products licensed;

  .  the number of authorized users for each product at each site; and

  .  the number of licensed sites.

  Revenues from license fees are recognized upon shipment of the software if:

  .  collection of the resulting receivable is probable;

  .  the fee is fixed or determinable; and

  .  vendor-specific objective evidence exists to allocate the total fee to
     all delivered and undelivered elements of the arrangement. If vendor-
     specific objective evidence does not exist to allocate the total fee to
     all delivered and undelivered elements of the arrangement, revenue is
     deferred until such evidence does exist, or until all elements are
     delivered, whichever is earlier.

  If payments are subject to extended payment terms and are not deemed fixed
or determinable, Brio defers revenue until payments become due. If an
acceptance period is required, Brio recognizes revenue upon the earlier of
customer acceptance or the expiration of the acceptance period. Brio
establishes allowances for potential product returns and credit losses, which
have been insignificant to date. Brio charges fees for services separately
from license fees. Brio recognizes revenues from maintenance and support
services, including ongoing product support and periodic product updates,
ratably over the term of each contract, which is typically twelve months.
Payments for maintenance and support services are generally made in advance
and are non-refundable. Brio recognizes revenues from training and consulting
services when the services are performed.

  To date, Brio has derived revenues from license fees principally from direct
sales of software products to end users through Brio's direct sales force.
Although Brio believes that such direct sales will continue to account for a
significant portion of revenues from license fees in the foreseeable future,
Brio has recently developed and intends to continue to develop reselling
relationships with value added resellers, resellers and distributors. Brio
expects that revenues from sales through value added resellers, resellers and
distributors will increase in the future as a percentage of revenues from
license fees. Revenues from value added resellers, resellers and distributors,
were 7% of total revenues for fiscal 1997 and 15% of total revenues for fiscal
1998 and 1999. Brio's

                                      15
<PAGE>

ability to achieve revenue growth and improved operating margins, as well as
increased worldwide sales, in the future will depend in large part upon its
success in expanding and maintaining relationships with value added resellers,
resellers and distributors. See "Factors That May Affect Future Operating
Results" for a description of the risks related to Brio's sales strategy.

  Brio is also increasing its efforts to sell customers licenses to larger,
enterprise-wide implementations of Brio's products, rather than departmental
or local network sales, which may increase the complexity and length of the
sales cycle. Brio has in the past and may in the future choose to grant
greater pricing and other concessions, such as discounted training and
consulting, for sales of site licenses. See "Factors That May Affect Future
Operating Results" for a description of the risks related to the sales cycle
of Brio's products.

  Brio has, to date, sold its products internationally through direct sales
offices in the United Kingdom, France and Australia, and indirectly through
established distribution relationships in more than 20 countries, including
Belgium, Italy, Japan, The Netherlands and South Africa. Brio's direct sales
offices in the United Kingdom and Australia were formed through the
acquisition of distributors in those countries. Sales to customers outside of
the United States and Canada, including sales generated by Brio's foreign
subsidiaries, represented 14% of total revenues for fiscal 1997, 19% of total
revenues for fiscal 1998, and 17% of total revenues for fiscal 1999. A
substantial portion of Brio's international sales in the past have been
denominated and collected in foreign currencies and Brio believes that a
portion of Brio's cost of revenues and operating expenses will continue to be
incurred in foreign currencies. To date, there have been no material effects
of changes in foreign currency exchange rates on revenues or operating
expenses. During fiscal 1999, Brio incurred foreign currency transaction
losses of $127,000 resulting from intercompany receivables from its foreign
subsidiaries. Although it is impossible to predict future exchange rate
movements between the U.S. dollar and other currencies, to the extent the U.S.
dollar strengthens or weakens against other currencies, a substantial portion
of Brio's revenues, cost of revenues and operating expenses will be
commensurately lower or higher than would be the case in a more stable foreign
currency environment. Although Brio has not historically undertaken foreign
exchange hedging transactions to cover its potential foreign currency
exposure, it may do so in the future. See "Risk Factors--Brio's plans to
expand internationally expose the combined company to financial and
operational risks" for a description of the risks related to Brio's
international sales strategy.

  Although Brio has experienced significant quarter-to-quarter revenue growth
in fiscal 1997, 1998 and 1999, the same rate of sequential quarterly revenue
growth may not be sustainable and profitability may not be attained in the
future. Brio currently intends to commit substantial financial resources to

  .  research and development,

  .  customer support,

  .  sales and marketing, including the expansion of its direct sales force,
     third-party partnering relationships and its indirect channel sales
     organization, and

  .  increased staffing and systems infrastructure to support Brio's
     expanding operations

  .  merger-related expenses and integration costs associated with the
     proposed merger with Sqribe

  Brio also expects that expenses relating to its litigation with Business
Objects, S.A. will increase in future periods. As a result, Brio expects that
its operating expenses will increase significantly in fiscal 2000. See "Risk
Factors--The combined company's quarterly operating results will likely
fluctuate" and "--The outcome of Brio's litigation with Business Objects, S.A.
may be unfavorable" for a description of Brio's litigation and its impact on
Brio's financials.

                                      16
<PAGE>

Results of Operations

  The following table includes consolidated statements of operations data as a
percentage of total revenues for the periods indicated:

<TABLE>
<CAPTION>
                                                   Year Ended March 31,
                                                   --------------------------
                                                    1999      1998      1997
                                                   ------    ------    ------
   <S>                                             <C>       <C>       <C>
   Consolidated Statements of Operations Data:
   Revenues:
     License fees.................................     74%       74%       77%
     Services.....................................     26        26        23
                                                   ------    ------    ------
       Total revenues.............................    100       100       100
   Cost of revenues:
     License fees.................................      3         4         6
     Services.....................................     12        10         6
                                                   ------    ------    ------
       Total cost of revenues.....................     15        14        12
                                                   ------    ------    ------
   Gross profit...................................     85        86        88
   Operating expenses:
     Research and development.....................     15        19        18
     Sales and marketing..........................     59        85       102
     General and administrative...................     10        11        13
     In-process research and development..........      4       --        --
                                                   ------    ------    ------
       Total operating expenses...................     88       115       133
                                                   ------    ------    ------
   Loss from operations...........................     (3)      (29)      (45)
   Interest and other income (expense), net.......      2        (1)      --
                                                   ------    ------    ------
   Net loss before income taxes...................     (1)      (30)      (45)
   Income taxes...................................     (1)      --        --
                                                   ------    ------    ------
   Net loss.......................................     (2)%     (30)%     (45)%
</TABLE>

Fiscal Years Ended March 31, 1999, 1998 and 1997

Revenues

  Brio derives revenues from license fees and services, which include software
maintenance and support, training and system implementation consulting. Total
revenues increased by 100% from $13.4 million in fiscal 1997 to $26.8 million
in fiscal 1998 and by 74% to $46.5 million in fiscal 1999.

  Revenues by geographic location were as follows for fiscal 1999, 1998 and
1997:

<TABLE>
<CAPTION>
                                                          1999    1998    1997
                                                         ------- ------- -------
   <S>                                                   <C>     <C>     <C>
   Revenues by Geography:
   Domestic............................................. $38,426 $21,593 $11,454
   International........................................   8,098   5,179   1,932
                                                         ------- ------- -------
     Total revenues..................................... $46,524 $26,772 $13,386
                                                         ======= ======= =======
</TABLE>

  Revenue from international sources increased by 168% from $1.9 million in
fiscal 1997 to $5.2 million in fiscal 1998 and by 56% to $8.1 million in
fiscal 1999. The increase in fiscal 1998 was due to Brio establishing direct
sales offices in Australia, the United Kingdom and France, which resulted in
increases in both license fees and services revenue in Europe and Asia. The
increase in fiscal 1999 was due to increased demand for Brio products in
Europe and Asia as Brio continued to expand direct and indirect sales efforts
in these areas. See Note 4 of Notes to Consolidated Financial Statements for
additional information about revenues in geographic areas.

                                      17
<PAGE>

  License Fees. Revenues from license fees increased by 92% from $10.3 million
in fiscal 1997 to $19.8 million in fiscal 1998 and by 73% to $34.2 million in
fiscal 1999. The increases in fiscal 1998 and 1999 were due to growing sales
to new customers--approximately $4.8 million of the increase in fiscal 1998
and approximately $9.2 million of the increase in fiscal 1999--and increased
follow-on sales to existing customers--approximately $4.7 million of the
increase in fiscal 1998 and approximately $5.2 million of the increase in
fiscal 1999.

  Services. Service revenues increased by 128% from $3.1 million in fiscal
1997 to $7.0 million in fiscal 1998 and by 76% to $12.3 million in fiscal
1999. The increases in fiscal 1998 and 1999 were due to an increase in
maintenance and support revenues--approximately $2.2 million of the increase
in fiscal 1998 and approximately $4.7 million of the increase in fiscal 1999--
and an increase in training and consulting revenues--approximately $1.7
million of the increase in fiscal 1998 and approximately $600,000 of the
increase in fiscal 1999--related to increases in Brio's installed customer
base.

Cost of Revenues

  License Fees. Cost of revenues from license fees consists primarily of
product packaging, shipping, media, documentation, and related personnel and
overhead allocations. Cost of revenues from license fees increased by 20% from
$839,000 in fiscal 1997 to $1.0 million in fiscal 1998 and by 50% to $1.5
million in fiscal 1999. The increase in absolute dollars was due to the
increase in the number of licenses sold. The decrease as a percentage of total
revenues was primarily due to an increase in the number of customers
purchasing master disks, which are less expensive to produce and ship, as
compared to "shrinkwrapped" product, and economies of scale associated with
absorbing fixed costs over a larger revenue base. Cost of revenues from
license fees may vary between periods due to the mix of customers purchasing
master disks relative to customers purchasing "shrinkwrapped" product.

  Services. Cost of revenues from services consists primarily of personnel
costs and third-party consulting fees associated with providing software
maintenance and support, training and consulting services. Cost of revenues
from services increased by 218% from $817,000 in fiscal 1997 to $2.6 million
in fiscal 1998 and by 109% to $5.4 million in fiscal 1999. The increases in
fiscal 1998 and 1999 were due principally to increases in personnel and
related costs resulting from Brio's expansion of its support services in
response to increased demand for maintenance and support, training and
consulting services--approximately $1.7 million of the increase in fiscal 1998
and approximately $2.3 million of the increase in fiscal 1999--and increases
in the use of outside consultants for training and consulting services--
approximately $900,000 of the increase in fiscal 1998 and approximately
$500,000 of the increase in fiscal 1999. Cost of revenues from services may
vary between periods due to the mix of services provided by Brio's personnel
relative to services provided by outside consultants and to varying levels of
expenditures required to build the services organization.

Operating Expenses

  Research and Development. Research and development expenses consist
primarily of personnel and related costs associated with the development of
new products, the enhancement and localization of existing products, quality
assurance and testing. Research and development expenses increased by 113%
from $2.4 million in fiscal 1997 to $5.2 million in fiscal 1998 and by 38% to
$7.2 million in fiscal 1999. The increases from year to year were primarily
due to increased personnel and related costs required to continue to develop
new products and enhance existing products. Brio believes that significant
investment for research and development is essential to product and technical
leadership and anticipates that it will continue to commit substantial
resources to research and development in the future. Brio anticipates that
research and development expenditures will continue to increase in absolute
dollars, although such expenses may vary as a percentage of total revenues.

  Sales and Marketing. Sales and marketing expenses consist primarily of
salaries and other personnel related costs, commissions, bonuses and sales
incentives, travel, marketing programs such as trade shows and

                                      18
<PAGE>

seminars, and promotion costs. Sales and marketing expenses increased by 67%
from $13.6 million in fiscal 1997 to $22.7 million in fiscal 1998 and by 21%
to $27.6 million in fiscal 1999. The increases were attributable to the costs
associated with the expansion of Brio's sales and marketing organization,
including domestically through the growth of the telesales organization,
internationally through the establishment of subsidiary offices in the United
Kingdom, Australia, and France and through the expansion of the worldwide
field sales organization--approximately $5.7 million of the increase in fiscal
1998 and approximately $1.5 million of the increase in fiscal 1999--higher
sales commissions, bonuses and sales incentives associated with increased
revenues--approximately $1.9 million of the increase in fiscal 1998 and
approximately $2.1 million of the increase in fiscal 1999--and increased
domestic and international marketing expenses, including marketing activities,
personnel and related costs--approximately $1.5 million of the increase in
fiscal 1998 and approximately $1.3 million of the increase in fiscal 1999. The
decrease as a percentage of total revenues was generally attributable to
increases in revenues for the periods. Brio believes that as it continues to
expand its direct sales and pre-sales support organization and its third-party
partnering relationships and its indirect channel sales organization on a
worldwide basis, sales and marketing expenses will continue to increase in
absolute dollars. These expenses are currently intended to be funded by Brio's
working capital. In particular, Brio expects that sales compensation, travel
and related expenses will increase significantly as Brio continues to increase
the number of its direct sales personnel and its emphasis on direct field
sales efforts. Nonetheless, Brio expects sales and marketing expenses will
continue to vary as a percentage of total revenues.

  General and Administrative. General and administrative expenses consist
primarily of personnel costs for finance, human resources, information
systems, and general management, as well as legal, accounting and unallocated
overhead expenses. General and administrative expenses increased by 75% from
$1.7 million in fiscal 1997 to $3.0 million in fiscal 1998 and by 63% to $4.8
million in fiscal 1999. Substantially all of the increases were due to
increased personnel and related costs--approximately $1.1 million of the
increase in fiscal 1998 and 1999--and professional fees--approximately
$200,000 of the increase in fiscal 1998 and approximately $700,000 of the
increase in fiscal 1999--necessary to manage and support Brio's growth and
facilities expansion. The decrease in general and administrative expenses as a
percentage of total revenues is primarily attributable to increased
efficiencies in Brio's administrative operations and increased revenues. Brio
expects that its general and administrative expenses will increase in absolute
dollars as Brio expands its staffing to support expanded operations, incurs
expenses in its litigation with Business Objects, S.A., and continues its
responsibilities as a public company. Brio expects that such expenses will
continue to vary as a percentage of total revenues.

  Deferred Compensation. In connection with the granting of 1,369,368 stock
options to employees during fiscal 1998, with a weighted average exercise
price of $1.49 per share and a weighted average deemed fair market value of
$1.91 per share, Brio recorded deferred compensation of $580,000, representing
the difference between the deemed value of the common stock for accounting
purposes and the option exercise price of such options at the date of grant.
Such amount is presented as a reduction of stockholders' equity and amortized
ratably over the vesting period of the applicable options. Approximately
$105,000 was expensed during fiscal 1998 and approximately $129,000 was
expensed during fiscal 1999, and the balance will be expensed ratably over the
next three years as the options vest. See Note 7 of Notes to Consolidated
Financial Statements for additional information regarding deferred
compensation.

Purchased In-Process Research and Development

  In connection with the acquisition of MerlinSoft, Inc. (Merlinsoft), Brio
allocated $1.7 million of the purchase price to in-process research and
development projects. This allocation represented the estimated fair value
based on future cash flows that have been adjusted by the projects' completion
percentage. While Brio relied upon an independent appraisal of the acquired
intangible assets, management was primarily responsible for estimating their
fair values.

  At the acquisition date, the development of these projects had not yet
reached technological feasibility and the research and development in progress
had no alternative future uses. Accordingly, these costs were expensed

                                      19
<PAGE>

as of the acquisition date. The excess of the purchase price over identified
intangible assets was approximately $600,000.

  Brio used a third-party appraiser to assess and value the in-process
research and development. The value assigned to this asset was determined by
identifying significant research projects for which technological feasibility
had not been established. This included the development, programming and
testing activities associated with the creation of software components which
enable delivery of analytical applications. Valuation of development efforts
in the future was excluded from the research and development appraisal.

  The purchased in-process research and development consisted of two projects.
Both of these projects are aimed at the delivery of timely, in-depth,
sophisticated analytical applications. The first product will provide data
models for analysis in specific industries and functional areas, metric
libraries, a web-based client and the ability for business users to manage
application components ("Analysis Product"). The second product will include
in-depth modeling features for margin analysis and what-if scenarios to
determine the impact of various decisions and parameters ("Modeling Product").
The research and development costs incurred by MerlinSoft in the development
of the Analysis Product were approximately $4,000 in 1997 and approximately
$298,000 in 1998. The research and development costs incurred by MerlinSoft in
the development of the Modeling Product were approximately $34,000 in 1998. At
the date of acquisition, the research and development costs to complete the
Analysis Product were estimated by MerlinSoft to be approximately $855,000 in
fiscal 1999 and 2000. At the date of acquisition, the research and development
costs to complete the Modeling Product project were estimated by Merlinsoft to
be approximately $933,000 in fiscal 1999 and 2000. Management believes it is
on schedule with the Analysis and Modeling Products and expects successful
completion of the projects.

  The developmental technologies were evaluated in the context of
Interpretation 4 of SFAS No. 2 and SFAS No. 86, where appropriate. In
accordance with these provisions, research and development projects were
evaluated individually to determine if technological feasibility had been
achieved and if there was any alternative future use. Such evaluation
consisted of a specific review of the efforts, including the overall
objectives of the project, progress toward the objectives, and uniqueness of
developments to these objectives. The issue of alternative future use was
addressed in discussions with the management of Brio. This process included
on-site management interviews and review of technical data. These projects had
not reached technological feasibility due to issues involving the completion
of scability, performance and security functions.

  Once completed, the technologies under development could only be
economically used for the specific and intended purpose. The architecture,
design, software code, interfaces, features, and functions of the technologies
being developed are for specific purposes, and if Brio fails in its efforts,
no alternative economic value will result from its efforts. If the projects
fail, the economic contribution expected to be made by the research and
development will not materialize.

  The value assigned to purchased in-process research and development was
determined by estimating the contribution of the purchased in-process
technology in developing a commercially viable product, estimating the
resulting net cash flows from the expected sales of such a product, and
discounting the net cash flows to their present value using an appropriate
discount rate.

  Revenue growth rates for MerlinSoft were estimated based on a detailed
forecast prepared by management, which took into account input from finance,
marketing, and engineering representatives of Brio and MerlinSoft. Revenue
growth rates beyond 2000 were based on industry growth expectations. The
projections utilized in the transaction pricing and purchase price allocation
analysis exclude the potential synergistic benefits related specifically to
Brio's ownership.

  Selling, general and administrative expenses and profitability estimates
were determined based on management forecasts as well as an analysis of
comparable company's margin expectations.

  Due to the relatively early stage of the development and reliance on future,
unproven products and technologies, the cost of capital (discount rate) for
MerlinSoft was estimated using venture capital rates of return.

                                      20
<PAGE>

Due to the nature of the forecast and the risks associated with the projected
growth and profitability of the development projects, a discount rate of 25 to
30 percent was used to discount cash flows from the in-process projects.

  Brio believes that the foregoing assumptions used in the forecasts were
reasonable at the time of the acquisition. No assurance can be given, however,
that the underlying assumptions used to estimate sales, development costs or
profitability, or the events associated with such projects, will transpire as
estimated. For these reasons, actual results may vary from projected results.

  Remaining development efforts for MerlinSoft's research and development
include various phases of development, programming and testing. Funding for
such projects is expected to be obtained from internally generated sources.

  As evidenced by the continued support of the development of the in-process
technology, and derivative products, management believes Brio has a reasonable
chance of successfully completing the research and development programs.
However, as with all of Brio's software development efforts, there is risk
associated with the completion of the MerlinSoft research and development
projects, and there is no assurance that technological or commercial success
will be achieved.

  If the development of the in-process technology, and derivative products, is
unsuccessful, the sales and profitability of Brio may be adversely affected in
future periods. Commercial results are also subject to uncertain market
events, and risks, which are beyond Brio's control, such as trends in
technology, changes in government regulation, market size and growth, and
product introduction or other actions by competitors.

Interest and Other Income (Expense), Net

  Interest and other income (expense), net, is comprised primarily of interest
income and foreign currency transaction gains or losses, and realized gains or
losses from the sale of investments, net of interest expense. Interest expense
is comprised of interest incurred on Brio's bank line of credit. Interest and
other income (expense), net, increased from a net expense of $341,000 in
fiscal 1998 to interest income, net, of $1,084,000 in fiscal 1999. The
increase in interest and other income, net, is attributable to a decrease in
the amount of borrowings on Brio's line of credit as a result of Brio's
initial public offering and an increase in interest income due to larger cash
balances associated with the closing of Brio's initial public offering in May
1998, offset by foreign currency transaction losses of approximately $127,000.
See Note 2 of Notes to Consolidated Financial Statements for a description of
foreign currency transactions, and Brio's policy related to accounting for
short-term investments.

Provision for Income Taxes

  The provision for income taxes of $297,000 in fiscal 1999, consisted of
Federal and State alternative minimum taxes, as the Company utilized net
operating loss carryforwards to offset income taxes generated from domestic
operations.

  As of March 31, 1999, Brio had federal net operating loss carryforwards of
approximately $800,000 and state net operating loss carryforwards of
approximately $400,000 available to offset future taxable income, and expiring
at various dates through 2018 if not utilized. Further, as of March 31, 1999,
Brio had tax credit carryforwards of approximately $644,000 which expire at
various dates through 2018. In addition, the Internal Revenue Code of 1986, as
amended, contains certain provisions that may limit the net operating loss
carryforwards available for use in any given period upon the occurrence of
certain events, including a significant change in ownership interests. Brio
has net deferred tax assets, including its net operating loss carryforwards,
totaling approximately $5.6 million as of March 31, 1999. Brio has recorded a
valuation allowance for its net deferred tax assets, to the extent the net
deferred tax assets exceed current and prior year's regular tax, as a result
of significant uncertainties regarding the realization of most of its assets,
including the limited operating history of Brio, a recent history of losses
and the variability of operating results. See Note 9 of Notes to Consolidated
Financial Statements for additional information about Brio's income taxes.

                                      21
<PAGE>

Recent Accounting Pronouncements

  In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." SFAS No. 130 was adopted by Brio in its fiscal year
beginning April 1, 1998. The adoption of SFAS No. 130 did not have a material
effect on Brio's consolidated financial statements.

  In June 1997, the FASB also issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information." SFAS No. 131 was adopted by Brio in
its fiscal year beginning on April 1, 1998. SFAS No. 131 establishes standards
for disclosures about operating segments, products and services, geographic
areas and major customers. The adoption of SFAS No. 131 did not have a
material effect on Brio's consolidated financial statements.

  In December 1997, the American Institute of Certified Public Accountants
issued Statement of Position (SOP) 97-2 which superseded SOP 91-1, "Software
Revenue Recognition." SOP 97-2 was effective for transactions entered into in
Brio's fiscal years beginning April 1, 1998. Brio adopted SOP 97-2 for all
transactions entered into beginning April 1, 1998. The adoption of SOP 97-2
did not have a material effect on Brio's consolidated financial position or
the timing of Brio's revenue recognition, or cause changes to its revenue
recognition policies.

  In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999.
Management believes the adoption of SFAS No. 133 will not have a material
effect on Brio's financial statements.

Liquidity and Capital Resources

  As of March 31, 1999, Brio had cash, cash equivalents and short-term
investments of $32.4 million. In addition, Brio maintains a bank line of
credit which provides for up to $10.0 million in borrowings, with interest at
the bank's prime rate. Brio can borrow up to 80% of eligible accounts
receivable against this line, with an additional $1.5 million in non-formula
availability. Borrowings are secured by substantially all of Brio's assets,
including Brio's copyrights and trademarks to the extent required to secure
the Bank's interest in the accounts receivables. The line of credit requires
Brio to comply with various financial covenants, including quarterly
requirements to maintain a minimum quick ratio of 2.0:1.0 and a minimum
tangible net worth covenant. The line expires on December 1, 1999, when any
amounts outstanding thereunder would be due and payable. As of March 31, 1999,
there were no outstanding bank borrowings.

  Net cash used in operating activities was $4.7 million in fiscal 1997 and
$3.8 million in fiscal 1998. Net cash generated by operating activities was
$6.0 million in fiscal 1999. The decrease in fiscal 1998 was due primarily to
favorable changes in the balances of operating assets and liabilities.
Approximately $7.2 million of the increase in fiscal 1999 was due to decreases
in net losses and approximately $2.7 million of the increase in fiscal 1999
was due to favorable changes in operating assets and liabilities.

  Net cash used in investing activities was $2.0 million in fiscal 1997,
consisting of approximately $1.9 million for the purchase of property and
equipment and approximately $95,000 for a one-time payment in connection with
the acquisition of Brio's Australian subsidiary. Net cash used in investing
activities was $1.7 million in fiscal 1998, consisting of purchases of
property and equipment. Net cash used in investing activities

                                      22
<PAGE>

was $18.3 million in fiscal 1999, consisting primarily of $13.9 million for
the purchase of short-term investments, net, approximately $2.2 million for
the purchase of property and equipment and approximately $2.2 million for the
purchase of MerlinSoft, net of cash acquired.

  Net cash provided by financing activities was $7.1 million in fiscal 1997,
$7.2 million in fiscal 1998 and $28.1 million in fiscal 1999, consisting
primarily of proceeds from private sales of Preferred Stock--approximately
$6.0 million in fiscal 1997 and approximately $5.8 million in fiscal 1998--
periodic borrowings, net of repayments, on the bank line of credit--
approximately $1.1 million in fiscal 1997 and approximately $1.3 million in
fiscal 1998--and the net proceeds from Brio's initial public offering--
approximately $31.5 million in 1999.

Year 2000 Readiness

 Background

  Computer systems have traditionally used a two-digit field to designate a
year. This format will not recognize the century date change that will take
place at the end of 1999. Such systems will recognize the year 2000 as 1900,
not at all, or some year other than 2000. The inability to recognize the
proper date can and will cause systems to process information incorrectly,
resulting in system failures or other serious business problems.

 Risks

  Although Brio has been committed to ensuring all our systems are year 2000
compliant prior to December 1999, we may experience some operational
interruptions due to the year 2000 problem. We may also experience operational
difficulties caused by undetected errors or defects in the technology we use
in our internal systems. Brio's year 2000 readiness team has developed and is
implementing a four phase approach in order to prepare the organization for
any interruption which may occur on the advent of the year 2000.

 Assessment Plan

  Brio's year 2000 readiness team developed a plan which consisted of four
phases.

  .  In phase one, Brio identified and contacted the vendors of all of Brio's
     internal information systems and non-informational technology systems to
     determine whether these systems could potentially present a year 2000
     problem. Brio requires that all vendors who provide material hardware or
     software for Brio's information technology systems, or upgrades or
     replacements of those products, provide assurances of their year 2000
     compliance. Brio completed phase one in December 1998.

  .  In phase two, Brio will identify mission critical technology systems and
     proceed to test these systems for their year 2000 compliance. Testing
     will include automated polling of networked client and server computers,
     compilation of relevant data regarding the software used by Brio, and a
     manual review of the compiled data to locate systems which may be
     vulnerable to year 2000 problems. This phase will also include the
     establishment of replica systems for critical software and hardware
     systems, rolling forward the replica date to December 31, 1999, allowing
     the system to roll over into the year 2000 and observing the results.
     End users and Brio's year 2000 readiness team will then conduct
     simulations, and verify and evaluate compliance and test integrated
     systems for potential failure which might occur. Phase two is scheduled
     to be completed in September 1999.

  .  In phase three, Brio's year 2000 readiness team, working with end users
     and management, will develop contingency plans for mission-critical
     technology systems. Phase three is scheduled to be completed in October
     1999.

  .  In phase four, Brio's year 2000 readiness team, information technology
     department staff and end users will perform tests and evaluate readiness
     of mission critical technology systems on December 31, 1999. In order to
     circumvent system failures resulting from any unanticipated year 2000
     failures, all mission critical technology systems must be judged ready
     for the start of the next business day or the steps outlined in Brio's
     contingency plans will be initiated.

                                      23
<PAGE>

 Cost

  Brio anticipates that the total cost of the year 2000 program, including the
cost of material upgrades, purchase of replica servers, software modifications
and related consulting fees, will be approximately $150,000.

 Contingency Plans

  Brio has not yet finalized any contingency plans as a result of its year
2000 readiness program, but will prepare contingency plans upon the conclusion
of its assessment of the results of our year 2000 simulation testing and
third-party vendor and service provider responses.

               FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS

Because our plans to achieve profitability in the future require us to grow
our work force, improve our infrastructure and acquire and develop new
technologies, failure to successfully do so could lower our operating results
and cause our stock price to decrease. If we cannot execute our growth
strategy, our stock price could decrease. Successfully achieving our growth
strategy depends upon the combined company's ability to:

    .  expand, train and manage our work force;

    .  continue to attract, retain and motivate qualified personnel; and

    .  develop or acquire new businesses, products and technologies.

  In addition, if we cannot manage an expanding work force, improve our
reporting systems and customer service infrastructure and manage the
integration of acquired businesses, products or technologies, we will be
unable to continue manage the growth of our operations, which could harm our
business and financial results.

Brio has a history of net losses, and may not be profitable in the
future. Brio has a history of net losses, and cannot provide any assurance
that we will experience revenue growth or profitability on a quarterly or
annual basis in the future. In particular, Brio incurred net losses of $6.0
million in fiscal 1997, $8.1 million in fiscal 1998 and $887,000 in fiscal
1999. As of March 31, 1999, Brio had stockholders' equity of approximately
$29.2 million.

Brio anticipates increased operating expenses and a reduced rate of revenue
growth in the future. Brio currently expects to increase its expenses, and our
operating results will be harmed if these increased expenses are not
accompanied by increased revenues. Brio does not expect to sustain in future
periods the same rate of sequential quarterly revenue growth it has
experienced in the past. In addition, Brio will likely increase its operating
expenses significantly in fiscal 2000. Brio currently intends to commit
substantial financial resources to research and development, customer support
and sales and marketing, including the continued expansion of its domestic and
international direct sales force, third-party partnering relationships and
Brio's domestic and international indirect channel sales organization, and
expects that expenses relating to Brio's litigation with Business Objects,
S.A. will increase in future periods. Brio also expects to increase staffing
and systems infrastructure in order to support expanding operations.

  Our prospects for increased future revenues must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in
their early stage of development, particularly companies in rapidly evolving
markets. To address these risks, the combined company must:

    .  successfully increase the scope of its operations;

    .  respond to competitive developments;

    .  continue to attract, retain and motivate qualified personnel; and

                                      24
<PAGE>

    .  continue to commercialize products incorporating advanced
       technologies.

  Brio may not be able to achieve these goals.

Brio's quarterly operating results will likely fluctuate based on factors
beyond our control. Brio has experienced and expects to continue to experience
significant fluctuations in quarterly operating results based on a number of
factors, many of which are not within its control. Among other things, Brio's
operating results have fluctuated in the past due to:

    .  the timing of product enhancements and new product announcements;

    .  the lengthy sales cycle of its products;

    .  market acceptance of and demand for its products;

    .  capital spending patterns of its customers;

    .  customer order deferrals in anticipation of enhancements or new
       products;

    .  its ability to attract and retain key personnel;

    .  the mix of domestic and international sales;

    .  the mix of license and service revenues;

    .  personnel changes; and

    .  changes in the timing and level of operating expenses.

  In addition, the announcement or introduction of new products by Brio or its
competitors or any change in industry standards may cause customers to defer
or cancel purchases of existing products. Furthermore, the introduction of
products with reliability, quality or compatibility problems could result in
reduced orders, delays in collecting accounts receivable and additional
service costs. Accordingly, Brio's results of operations may also fluctuate in
the future due to a number of additional factors, including but not limited to
those discussed above, as well as:

    .  the number and significance of product enhancements and new product
       announcements by competitors;

    .  changes in customer buying patterns related to the year 2000 issue;

    .  changes in pricing policies by Brio and its competitors;

    .  Brio's ability to develop, introduce and market new and enhanced
       versions of its products on a timely basis;

    .  customer order deferrals in anticipation of enhancements or new
       products offered by competitors;

    .  nonrenewal of service agreements, software defects and other product
       quality problems;

    .  the mix of direct and indirect sales;

    .  currency fluctuations;

    .  costs or damage awards associated with the current litigation
       between Brio and Business Objects, S.A.; and

    .  general economic conditions.

  Due to these factors, quarterly revenue and operating results are difficult
to forecast and may not meet expectations.

Seasonality may affect Brio's results. Brio has experienced seasonality due to
customer capital spending patterns and the general summer slowdown in sales.
Brio expects to continue to experience seasonality as a result of these
factors. This seasonality could materially hurt results of operations,
particularly for the quarters ending June 30 or September 30.


                                      25
<PAGE>

If Brio's operating results do not meeting financial analysts' expectations,
our stock price may decline. In the future, our reported or anticipated
operating results may fail to meet or exceed the expectations of securities
analysts or investors. In that event, Brio's common stock price could be
materially reduced.


Because Brio depends on a direct sales force, any failure by Brio to attract
and retain adequate sales personnel could slow its sales and increase its
expenses, causing significant financial and operational risks. Brio may not be
able to attract and retain adequate sales personnel, despite the expenditure
of significant resources to do so, and the failure to do so could materially
harm its ability to sell its products at expected levels. Because turnover
tends to slow sales efforts until replacement personnel can be recruited and
trained, failure to retain sales personnel could seriously hamper its
business, operating results and financial condition. Competition for personnel
with a sufficient level of expertise and experience for direct sales positions
is intense, particularly among competitors who may have substantially greater
resources than the combined company or greater resources dedicated to hiring
direct sales personnel. In addition, Brio has experienced significant turnover
of its sales force.


Brio's success depends on key personnel who may not continue to work for
it. The loss of the services of any of the key personnel or the inability to
attract or retain qualified personnel in the future could harm Brio's
business, operating results and financial condition. The success of Brio will
depend to a significant degree upon the continued contributions of key
management, engineering, sales and marketing personnel, many of whom would be
difficult to retain or replace if they leave Brio. Because competition for
qualified personnel is intense, Brio may not be successful in attracting and
retaining the personnel it seeks.


  Brio has recently experienced difficulties in hiring highly qualified sales
and engineering personnel, and may continue to have difficulty in attracting
employees in those categories. Brio has employment contracts with only three
members of its executive management personnel. Brio currently maintains "key
person" life insurance only on Yorgen Edholm, its President and Chief
Executive Officer, and Katherine Glassey, its Executive Vice President,
Products and Services and Chief Technology Officer. Brio does not believe its
current insurance would adequately compensate it for the loss of either Mr.
Edholm or Ms. Glassey.

Because the sales cycle for Brio's products is long, the timing of sales is
difficult to predict and Brio's quarterly revenues and earnings may fluctuate
significantly.  Based in part on the lengthy sales cycle for Brio's products,
quarterly revenues and operating results could vary significantly in the
future. The sales cycle associated with the purchase of Brio's products is
typically three to nine months in length and subject to a number of
significant risks over which Brio has little or no control, including
customers' budgeting constraints and internal acceptance review procedures.
Sales transactions may be delayed during the customer acceptance process
because Brio must provide a significant level of education to prospective
customers regarding the use and benefits of its products. Further, to the
extent that potential customers divert resources and attention to issues
associated with the year 2000 issue, Brio's sales cycle could be further
lengthened. Additionally, the sales cycle for Brio's products in international
markets has historically been, and is expected to continue to be, longer than
the sales cycle in the United States and Canada. Accordingly, if Brio's
international operations expand, the average sales cycle for its products is
expected to lengthen. In addition, Brio anticipates that an increasing portion
of its revenue could be derived from larger orders, in which case the timing
of receipt and fulfillment of those orders could cause material fluctuations
in operating results, particularly on a quarterly basis.

Because Brio expects to achieve revenue growth and increased margins through
indirect sales channels, Brio's failure to develop and manage indirect sales
channels could limit its sales growth and financial performance.  Brio may not
be able to continue to attract and retain additional indirect channel partners
that will be able to market its products effectively and provide timely and
cost-effective customer support and services. Brio may not be able to manage
conflicts within its indirect channel or that its focus on increasing sales
through the indirect channels will not divert management resources and
attention from direct sales. In addition, Brio's agreements with indirect
channel partners do not restrict the channel partners from distributing
competing

                                      26
<PAGE>

products, and in many cases may be terminated by either party without cause.
The ability of Brio to achieve revenue growth and improved operating margins
on product sales in the future will depend in large part upon its success in
expanding and maintaining indirect channels worldwide. Indirect channels
include value added resellers, resellers and distributors.

  To date, Brio has sold its products principally through its direct sales and
service organizations and, to a lesser extent, through the indirect channel.
Revenues from Brio's indirect channel were 7% of total revenues for fiscal
1997 and 15% of total revenues for fiscal 1998 and 1999.

  Brio's strategy of acquiring new businesses and technologies involves
integration and transaction completion risks. As part of our business
strategy, we expect to enter into business combinations and acquisitions. We
recently signed an agreement to acquire SQRIBE Technologies Corp., which
acquisition is expected to be completed in July 1999. The consummation of this
acquisition is subject to certain conditions and approval by SQRIBE
stockholders. We expect to record a one-time charge in the second fiscal
quarter relating to expenses for such acquisition. Acquisition transactions
are accompanied by a number of risks, including:

    .  the difficulty of assimilating the operations and personnel of the
       acquired companies;

    .  the potential disruption of our ongoing business and distraction of
       management;

    .  the difficulty of incorporating acquired technology or content and
       rights into our products;

    .  the correct assessment of the relative percentages of in-process
       research and development expense which can be immediately written
       off as compared to the amount which must be amortized over the
       appropriate life of the asset;

    .  the failure to successfully develop an acquired in-process
       technology could result in the impairment of amounts currently
       capitalized as intangible assets;

    .  unanticipated expenses related to technology integration;

    .  the maintenance of uniform standards, controls, procedures and
       policies;

    .  the impairment of relationships with employees and customers as a
       result of any integration of new management personnel; and

    .  the potential unknown liabilities associated with acquired
       businesses.

We may not be successful in addressing these risks or any other problems
encountered in connection with such acquisitions.

Brio is in a highly competitive industry and some of its competitors may be
more successful in attracting and retaining customers.  The market in which
Brio operates is highly competitive. Brio expects that competition will
continue to intensify. Increased competition could result in:

    .  price reductions;

    .  fewer customer orders;

    .  reduced gross margins;

    .  longer sales cycles; and
    .  loss of market share.

  Brio or its competitors may announce enhancements to existing products, or
new products embodying new technologies, industry standards or customer
requirements that have the potential to supplant or provide lower-cost
alternatives to Brio's existing products.

                                      27
<PAGE>

  Current and potential competitors offer a variety of software solutions and
generally fall within four categories:

    .  vendors of business intelligence software, including Cognos,
       Business Objects, Hummingbird and Seagate Software;

    .  vendors offering alternative approaches to delivering analysis
       capabilities to users, including Information Advantage and
       MicroStrategy;

    .  database vendors that offer products which operate specifically with
       their proprietary database, including Microsoft, IBM, and Oracle;
       and

    .  other companies that may in the future announce offerings of
       enterprise business intelligence solutions.

  These competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements or devote greater resources
to the development, promotion and sales of their products than Brio. Brio
expects additional competition as other established and emerging companies
enter into the business intelligence software market and new products and
technologies are introduced. Brio will compete on the basis of the following
factors:

    .  product features;

    .  time to market;

    .  ease of use;

    .  product performance;

    .  product quality;

    .  analytical capabilities;

    .  user scalability;

    .  open architecture;

    .  customer support; and

    .  price.

  Brio's failure to compete favorably in these areas could limit its ability
to attract and retain customers, which could have a material adverse affect on
our results of operations.

  Market consolidation may create more formidable competitors. Alliances among
current and new competitors may emerge and rapidly gain significant market
share. The failure of Brio to compete successfully against current and future
competitors could materially harm its business, operating results and
financial condition by driving down prices and reducing revenue growth.
Current and potential competitors may make strategic acquisitions or establish
cooperative relationships among themselves or with third parties, thereby
increasing the ability of their products to address the needs of Brio's
prospective customers. Current or future indirect channel partners of Brio may
establish cooperative relationships with current or potential competitors,
thereby limiting Brio's ability to sell its products through particular
distribution channels. Such competition could have a material adverse effect
on Brio's ability to obtain new licenses, and maintenance and support renewals
for existing licenses, on favorable terms. Further, competitive pressures may
require Brio to reduce the price of its products, which could have a material
adverse effect on its revenues, profitability and business condition.


  Brio's litigation with Business Objects, S.A. could result in substantial
expense to Brio and a significant diversion of effort by its management and
technical personnel. In addition, if the outcome of this litigation is
unfavorable, Brio may be required to pay damages and be enjoined from selling
its products or required to

                                      28
<PAGE>

obtain a license or modify its products to continue to sell them. Brio's
pending litigation with Business Objects, S.A. could result in substantial
expense to Brio and significant diversion of effort by its technical and
management personnel.


  Business Object, S.A.'s complaint seeks injunctive relief and unspecified
monetary damages, and Business Objects, S.A. is expected to seek lost profits
and/or equivalent royalties. The complaint also alleges willful infringement,
and seeks treble damages, costs and attorneys' fees.

  Litigation is subject to inherent uncertainties, especially in cases like
this where complex technical issues must be decided. Brio's defense of this
litigation, regardless of the merits or lack of merit of the complaint, could
be time-consuming or costly, or divert the attention of technical and
management personnel, which could have a material adverse effect upon Brio's
business, operating results and financial condition. Brio may not prevail in
the litigation given the complex technical issues and inherent uncertainties
in patent litigation, particularly before the claims have been construed by
the court.

  In the event Brio is unsuccessful in the litigation, it may be required to
pay damages to Business Objects and could be prohibited from marketing its
BrioQuery Navigator, BrioQuery Explorer and BrioQuery Designer products
without a license, which may not be available on acceptable terms. If Brio is
unable to obtain a license, it may be required to license a substitute
technology or redesign to its products to avoid infringement, in which case
its business, operating results and financial condition could be materially
adversely affected. Collectively, sales of BrioQuery Navigator, BrioQuery
Explorer and BrioQuery Designer represented substantially all of Brio's
revenues in fiscal 1996 and a majority of its revenues in fiscal 1997 and
fiscal 1998. For more information regarding Brio's litigation with Business
Objects S.A., see "Information Regarding Brio--Business of Brio; Legal
Proceedings."

  Brio's plans to expand internationally expose Brio to risks related to
managing international operations, currency exchange rates, tariffs and other
difficulties related to foreign operations. A key component of Brio's strategy
is its planned expansion into additional international markets. If the
international revenues generated by these expanded operations are not adequate
to offset the expense of establishing and maintaining these foreign
operations, Brio's business, operating results and financial condition could
be materially harmed. In addition to the uncertainty as to Brio's ability to
expand its international presence, there are risks inherent in doing business
on an international level, including:


    .  technical difficulties associated with product localization in
       foreign countries;

    .  increased difficulty in controlling operating expenses;

    .  unexpected changes in regulatory requirements;

    .  tariffs and other trade barriers;

    .  difficulties in staffing and managing foreign operations;

    .  longer payment cycles;

    .  problems in collecting accounts receivable;

    .  political instability;

    .  fluctuations in currency exchange rates;

    .  seasonal reductions in business activity during the summer months in
       Europe; and

    .  potentially adverse tax consequences.

  Each of these factors could adversely impact the success of Brio's
international operations and, consequently, on Brio's business, operating
results and financial condition. In particular, Brio's international sales are
generally denominated and collected in foreign currencies, and Brio has not
historically undertaken foreign exchange hedging transactions to cover
potential foreign currency exposure. Brio incurred losses on

                                      29
<PAGE>

foreign currency translations resulting from intercompany receivables from
foreign subsidiaries in an amount of approximately $131,000 in fiscal 1998 and
approximately $127,000 in fiscal 1999.

  Brio's future success will depend upon successful product development in the
face of changing customer requirements and rapid technological change. Brio's
failure to develop and introduce new products and product enhancements on a
timely basis that meet changing customer requirements and technological
changes could result in reduced demand for or market acceptance of Brio's
products, which could hurt Brio's business, operating results and financial
condition. Brio's products incorporate a number of advanced technologies,
including proprietary data analysis engines, a distributed architecture, as
well as Web access and delivery technology. Brio may be required to change and
improve its products in response to changes in operating systems,
applications, networking and connectivity software, computer and
communications hardware, programming tools and computer language technology.

  Brio may not successfully respond to changing technology, identify new
product opportunities or develop and bring new products to market in a timely
and cost-effective manner. In the past Brio has experienced delays in software
development. In particular, development efforts in the UNIX server environment
are complex, and in the past Brio has encountered delays in developing
products for this environment. Brio may experience delays in connection with
current or future product development activities.

  Because Brio's future success will depend upon successful product
development in the face of evolving industry standards, failure to introduce
new products could hurt its growth and profitability. Brio's failure to
introduce new products or product enhancements on a timely basis that are
compatible with industry standards could delay or hinder demand for or market
acceptance of its products, which could hurt Brio's growth and profitability.

  The market may not accept Brio's products, which would reduce revenues,
growth and profitability. Brio is focusing its selling efforts increasingly on
larger, enterprise-wide implementations of its products, and Brio expects
these sales to constitute an increasing portion of any of its future revenue
growth. Failure of a significant market for enterprise business intelligence
products to develop, or failure of enterprise-wide implementations of Brio's
products to achieve broad market acceptance, could materially harm Brio's
business, operating results and financial condition. To date, Brio's selling
efforts have resulted in limited enterprise-wide implementations of its
products. Brio believes that most companies currently are not yet aware of the
benefits of enterprise-wide business intelligence solutions or of its products
and capabilities, nor have most companies deployed business intelligence
solutions on an enterprise-wide basis. Brio's efforts to promote market
awareness of its products and the problems its products address may not be
sufficient to build market awareness of the need for enterprise business
intelligence or acceptance of Brio's products.

  The year 2000 problem could cause Brio's software products to malfunction
and Brio's customers to cease their purchasing of Brio's products. Brio's
computer systems and applications could fail or create erroneous results
unless corrected so that they can process data related to the year 2000 and
beyond. Brio relies on its systems, applications and devices in operating and
monitoring all major aspects of its business, including financial systems,
customer services, infrastructure, networks and telecommunications equipment.
Brio also relies, directly and indirectly, on external systems of business
enterprises including customers, suppliers, creditors, financial
organizations, and governmental entities, both domestic and international, for
accurate exchange of data. Brio has not fully identified the impact of the
year 2000 issue on its internal systems or whether it can resolve these issues
without disruption of its business and without incurring significant expense.

  In addition, even if Brio's internal systems are not materially affected by
the year 2000 issue, Brio could be affected through disruption in the
operation of the enterprises with which it interacts. Furthermore, Brio
believes that the purchasing patterns of customers and potential customers may
be affected by year 2000 issues as companies expend significant resources to
correct or patch their current software systems to comply with year 2000
requirements. These expenditures may result in reduced funds available to
purchase software products like those offered by Brio, which could have a
material adverse effect on Brio's business, operating results and financial
condition.

                                      30
<PAGE>

  See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" for a discussion of the impact of the year 2000 problem on
Brio's operations.

  Product defects could adversely affect Brio's operating results. As a result
of their complexity, Brio's software products may contain undetected errors,
failures or viruses. Brio or its customers may discover errors in new products
or enhancements after commencement of commercial shipments, resulting in loss
of revenues, delay in market acceptance or damage to Brio's reputation, which
could have a material adverse effect upon Brio's business, operating results
and financial condition. Further, Brio's license agreements with customers
typically contain provisions designed to limit Brio's exposure for potential
claims based on errors or malfunctions of Brio's products.

  The limitation of liability provisions contained in Brio's license
agreements may not be effective under the laws of all jurisdictions. Brio's
sale and support of its products entails the risk of warranty claims, and
Brio's insurance against product liability risks may not be adequate to cover
a potential claim. A product liability claim brought against Brio could have a
material adverse effect on its business, operating results and financial
condition.

  Brio has no issued patents, and its intellectual property protection may not
be adequate to prevent competitors from entering its markets or developing
competing products. Brio's failure to protect its proprietary rights may allow
competitors to enter its market or develop competing products, resulting in
competitive harm to Brio. The methods used by Brio to protect its proprietary
rights afford only limited protection. Brio currently relies primarily on a
combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect its proprietary rights. Brio
currently has one U.S. patent application. This patent application may not
result in the issuance of a patent. Even if a patent is issued, it may be
invalidated, circumvented or challenged, and the rights granted under the
patent, if any, may not provide Brio competitive advantages. Brio may not
obtain any more patents. Others may develop technologies that are similar or
superior to Brio's technology or design around any patent that Brio may come
to own.

  Despite Brio's efforts to protect its proprietary rights, unauthorized
parties may attempt to copy aspects of Brio's products or to obtain and use
information that Brio regards as proprietary. Policing unauthorized use of
Brio's products is difficult, and while Brio is unable to determine the extent
to which piracy of its software products exists, Brio expect software piracy
to be a persistent problem. In addition, the laws of some foreign countries do
not protect proprietary rights as fully as do the laws of the U.S. Brio's
means of protecting its proprietary rights in the U.S. or abroad may not be
adequate, and competitors may independently develop similar technology.

Investment Risks

  Brio's common stock has a limited trading history and a volatile
price. There has only been a public market for Brio's common stock since April
30, 1998, and an active public market may not continue. The market price of
the shares of Brio's common stock is likely to be highly volatile and may be
significantly affected by a number of factors, including:


    .  actual or anticipated fluctuations in our operating results;
       announcement of business partnerships;

    .  technological innovations or new product introductions by us or our
       competitors;

    .  changes of estimates of our future operating results by securities
       analysts;

    .  developments with respect to copyrights or proprietary rights; or

    .  general market conditions.

  In addition, the stock market has, from time to time, experienced
significant price and volume fluctuations that have particularly affected the
market prices of equity securities of many technology companies. Broad

                                      31
<PAGE>

market fluctuations, as well as economic conditions generally and in the
software industry specifically, may result in material adverse effects on the
market price of Brio's common stock. In the past, following periods of
volatility in the market price of a particular company's securities,
securities class action litigation has often been brought against that
company. Such litigation may occur in the future with respect to Brio, and
could result in substantial costs and a diversion of management's attention
and resources, which could have a material adverse effect upon Brio's
business, operating results and financial condition.

  Anti-takeover provisions may adversely effect Brio's stock price and make it
more difficult for a third party to acquire Brio. Provisions of Brio's charter
documents may have the effect of delaying or preventing a change in control of
Brio or its management, which could have a material adverse effect on the
market price of Brio common stock. These include provisions:


    .  relating to a classified board of directors and provisions
       eliminating cumulative voting;

    .  eliminating the ability of stockholders to take actions by written
       consent; and

    .  limiting the ability of stockholders to raise matters at a meeting
       of stockholders without giving advance notice.

  In addition, the Brio board of directors has authority to issue up to
2,000,000 shares of preferred stock and to fix the rights, preferences,
privileges and restrictions, including voting rights, of these shares without
any further vote or action by the stockholders. The rights of the holders of
Brio common stock will be subject to, and may be adversely affected by, the
rights of the holders of any preferred stock that Brio may issue in the
future. The issuance of preferred stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of Brio's outstanding voting stock, thereby delaying, deferring or
preventing a change in control of Brio. Brio has no present plan to issue
shares of preferred stock.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

  Brio's exposure to market risk for changes in interest rates relates
primarily to Brio's investment portfolio. Brio maintains an investment policy
which ensures the safety and preservation of its invested funds by limiting
default risk, market risk, and reinvestment risk. As of March 31, 1999, Brio
had $18.6 million of cash and cash equivalents with a weighted average
variable rate of 4.2% and $13.9 million of short-term investments with a
weighted average variable rate of 5.1%.

  Brio mitigates default risk by attempting to invest in high credit quality
securities and by constantly positioning its portfolio to respond
appropriately to a significant reduction in a credit rating of any investment
issuer or guarantor. The portfolio includes only marketable securities with
active secondary or resale markets to ensure portfolio liquidity and maintains
a prudent amount of diversification.

  Brio has no cash flow exposure due to rate changes for long-term debt
obligations. Brio has entered into borrowing agreements to support general
corporate purposes including capital expenditures and working capital needs,
should the need arise. Brio currently has not short-term or long-term debt
outstanding.

  Brio conducts business on a global basis in international currencies. As
such, it is exposed to adverse or beneficial movements in foreign currency
exchange rates. Brio may enter into foreign currency forward contracts to
minimize the impact of exchange rate fluctuations on certain foreign currency
commitments and balance sheet positions. The realized gains and losses on
these contracts are deferred and offset against realized and unrealized gains
and losses when the transaction occurs. At March 31, 1999 there were no
outstanding foreign currency exchange contracts.

                                      32
<PAGE>

Item 8. Financial Statements and Supplementary Data

                             BRIO TECHNOLOGY, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                                                          <C>
Report of Independent Public Accountants....................................  35
Consolidated Balance Sheets.................................................  36
Consolidated Statements of Operations.......................................  37
Consolidated Statements of Stockholders' Equity (Deficit)...................  38
Consolidated Statements of Cash Flows.......................................  40
Notes to Consolidated Financial Statements..................................  41
</TABLE>

                                       33
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders of Brio Technology, Inc.:

  We have audited the accompanying consolidated balance sheets of Brio
Technology, Inc. (a Delaware corporation) and subsidiaries as of March 31,
1999 and 1998, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended March 31, 1999. These financial statements and the schedule
referred to below are the responsibility of Brio's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Brio Technology, Inc. and
subsidiaries as of March 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period
ended March 31, 1999, in conformity with generally accepted accounting
principles.

  Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of
financial statements is presented for purposes of complying with the
Securities and Exchange Commissions rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.

                                          Arthur Andersen LLP

San Jose, California
April 19, 1999

                                      34
<PAGE>

                             BRIO TECHNOLOGY, INC.

                          CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                March 31,
                                                            ------------------
                                                              1999      1998
                                                            --------  --------
<S>                                                         <C>       <C>
                          ASSETS
Current Assets:
  Cash and cash equivalents................................ $ 18,587  $  2,647
  Short-term investments...................................   13,862       --
  Accounts receivable, net of allowance of $682 and $551...    7,875     6,508
  Inventories..............................................      376       361
  Prepaid expenses and other current assets................    1,287       958
                                                            --------  --------
      Total current assets.................................   41,987    10,474
Property and Equipment, net................................    4,130     3,127
Other Assets...............................................      937       485
                                                            --------  --------
                                                            $ 47,054   $14,086
                                                            ========  ========
      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
  Current maturities of notes payable...................... $    --   $  3,248
  Accounts payable.........................................    1,778     2,140
  Accrued liabilities--
    Payroll and related benefits...........................    3,353     1,422
    Other..................................................    2,460       918
  Deferred revenue, current................................    9,071     6,656
                                                            --------  --------
      Total current liabilities............................   16,662    14,384
Notes Payable, net of current maturities...................      --        189
Noncurrent Deferred Revenue................................    1,200     1,321
Other Noncurrent Liabilities...............................       37        46
                                                            --------  --------
      Total liabilities....................................   17,899    15,940
                                                            --------  --------
Commitments and Contingencies (Notes 5 and 8)
Stockholders' Equity (Deficit):
  Convertible preferred stock, no par value, aggregate
   liquidation
   preference of $15,850 at March 31, 1998:
   Authorized--None at March 31, 1999 and 5,625,000 shares
   at March 31, 1998
   Issued and outstanding--5,466,172 at March 31, 1998.....      --        --
  Preferred stock, $0.001 par value:
   2,000,000 shares authorized at March 31, 1999, none
   issued and outstanding..................................      --        --
  Common stock, $0.001 par value:
   Authorized--60,000,000 shares at March 31, 1999
   Issued and outstanding--14,600,425 at March 31, 1999,
   and 5,762,725 at March 31, 1998.........................       15         6
  Additional paid-in capital...............................   48,348    16,780
  Notes receivable from stockholders.......................     (217)     (292)
  Deferred compensation....................................     (268)     (459)
  Accumulated components of comprehensive loss.............       33       (20)
  Accumulated deficit......................................  (18,756)  (17,869)
                                                            --------  --------
      Total stockholders' equity (deficit).................   29,155    (1,854)
                                                            --------  --------
                                                            $ 47,054  $ 14,086
                                                            ========  ========
</TABLE>

   The accompanying notes are an integral part of these consolidated balance
                                    sheets.

                                       35
<PAGE>

                             BRIO TECHNOLOGY, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                      Years Ended March 31,
                                                     -------------------------
                                                      1999     1998     1997
                                                     -------  -------  -------
<S>                                                  <C>      <C>      <C>
Revenues:
  License fees...................................... $34,247  $19,795  $10,328
  Services..........................................  12,277    6,977    3,058
                                                     -------  -------  -------
    Total revenues..................................  46,524   26,772   13,386
                                                     -------  -------  -------
Cost of revenues:
  License fees......................................   1,517    1,008      839
  Services..........................................   5,425    2,595      817
                                                     -------  -------  -------
    Total cost of revenues..........................   6,942    3,603    1,656
                                                     -------  -------  -------
Gross profit........................................  39,582   23,169   11,730
                                                     -------  -------  -------
Operating expenses:
  Research and development..........................   7,180    5,218    2,447
  Sales and marketing...............................  27,598   22,728   13,588
  General and administrative........................   4,825    2,954    1,685
  In-process research and development...............   1,653      --       --
                                                     -------  -------  -------
    Total operating expenses........................  41,256   30,900   17,720
                                                     -------  -------  -------
Loss from operations................................  (1,674)  (7,731)  (5,990)
Interest and other income (expense), net............   1,084     (341)      25
                                                     -------  -------  -------
Net loss before income taxes........................    (590)  (8,072)  (5,965)
Income taxes........................................    (297)     --       --
                                                     -------  -------  -------
Net loss............................................ $  (887) $(8,072) $(5,965)
                                                     =======  =======  =======
Basic net loss per share............................ $ (0.06) $ (1.41) $ (1.14)
                                                     =======  =======  =======
Shares used in computing basic net loss per share...  13,709    5,724    5,218
                                                     =======  =======  =======
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       36
<PAGE>

                             BRIO TECHNOLOGY, INC.

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                      (In thousands, except share amounts)

<TABLE>
<CAPTION>
                                      Convertible
                          Compre-   Preferred Stock     Common Stock     Additional
                          hensive  ------------------ ------------------  Paid-in
                           Loss      Shares    Amount   Shares    Amount  Capital
                          -------  ----------  ------ ----------  ------ ----------
<S>                       <C>      <C>         <C>    <C>         <C>    <C>
BALANCE, MARCH 31,
 1996...................            2,496,756   $--    5,021,392   $ 5    $ 3,927
 Issuance of Series B
  preferred stock, net..            2,117,147    --          --    --       5,993
 Exercise of common
  stock options for
  cash..................                  --     --      112,435   --          67
 Exercise of common
  stock options for
  notes receivable......                  --     --      553,500     1        331
 Repurchase of
  restricted shares.....                  --     --      (30,417)  --         (18)
 Net loss...............  $(5,965)        --     --          --    --         --
 Cumulative translation
  adjustment............      (62)        --     --          --    --         --
                          -------  ----------   ----  ----------   ---    -------
                          $(6,027)
                          =======
BALANCE, MARCH 31,
 1997...................            4,613,903    --    5,656,910     6     10,300
 Issuance of Series C
  preferred stock, net..              852,269    --          --    --       5,844
 Exercise of common
  stock options for
  cash..................                  --     --       47,594   --          37
 Exercise of common
  stock options for
  notes receivable......                  --     --       57,701   --          35
 Exercise of common
  stock warrant for
  cash..................                  --     --       10,000   --           6
 Repurchase of
  restricted shares.....                  --     --       (9,480)  --          (6)
 Repayment of notes
  receivable from
  stockholders..........                  --     --          --    --         --
 Deferred compensation..                  --     --          --    --         580
 Amortization of
  deferred
  compensation..........                  --     --          --    --         --
 Termination of shares
  granted under
  incentive stock
  plans.................                  --     --          --    --         (16)
 Net loss...............  $(8,072)        --     --          --    --         --
 Cumulative translation
  adjustment............       42         --     --          --    --         --
                          -------  ----------   ----  ----------   ---    -------
                          $(8,030)
                          =======
BALANCE, MARCH 31,
 1998...................            5,466,172    --    5,762,725     6     16,780
 Conversion of preferred
  stock to common
  stock.................           (5,466,172)   --    5,466,172     6         (6)
 Exercise of common
  stock options for
  cash..................                  --     --      201,936   --         352
 Issuance of common
  stock pursuant to
  Employee Stock
  Purchase Plan.........                  --     --      105,137   --         737
 Issuance of common
  stock during initial
  public offering, net..                  --     --    3,085,000     3     30,421
 Repurchase of
  restricted shares.....                  --     --      (20,545)  --         (16)
 Repayment of notes
  receivable from
  stockholders..........                  --     --          --    --         --
 Amortization of
  deferred
  compensation..........                  --     --          --    --         --
 Termination of shares
  granted under
  incentive stock
  plans.................                  --     --          --    --         (62)
 Income tax benefit from
  stock options
  exercised.............                  --     --          --    --         142
 Net loss...............     (887)        --     --          --    --         --
 Cumulative translation
  adjustment............       52         --     --          --    --         --
 Unrealized gain on
  investments...........        1         --     --          --    --         --
                          -------  ----------         ----------          -------
                          $  (834)
                          =======
BALANCE, MARCH 31,
 1999...................                  --    $--   14,600,425   $15    $48,348
                                   ==========         ==========          =======
</TABLE>

                                       37
<PAGE>

                             BRIO TECHNOLOGY, INC.

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                      (In thousands, except share amounts)

<TABLE>
<CAPTION>
                            Notes
                          Receivable           Accumulated                Total
                             From    Deferred Components of Accumu-   Stockholders'
                            Stock-   Compen-  Comprehensive  lated       Equity
                           holders    sation      Loss      Deficit     (Deficit)
                          ---------- -------- ------------- --------  -------------
<S>                       <C>        <C>      <C>           <C>       <C>
BALANCE, MARCH 31,
 1996...................    $ --      $ --         $--      $ (3,832)    $   100
 Issuance of Series B
  preferred stock, net..      --        --         --            --        5,993
 Exercise of common
  stock options for
  cash..................      --        --         --            --           67
 Exercise of common
  stock options for
  notes receivable......     (332)      --         --            --          --
 Repurchase of
  restricted shares.....       18       --         --            --          --
 Net loss...............      --        --         --         (5,965)     (5,965)
 Cumulative translation
  adjustment............      --        --         (62)          --          (62)
                            -----     -----        ---      --------     -------

BALANCE, MARCH 31,
 1997...................     (314)      --         (62)       (9,797)        133
 Issuance of Series C
  preferred stock, net..      --        --         --            --        5,844
 Exercise of common
  stock options for
  cash..................      --        --         --            "97          37
 Exercise of common
  stock options for
  notes receivable......      (35)      --         --            --          --
 Exercise of common
  stock warrant for
  cash..................      --        --         --              7           6
 Repurchase of
  restricted shares.....      --        --         --            --           (6)
 Repayment of notes
  receivable from
  stockholders..........       57       --         --            --           57
 Deferred compensation..      --       (580)       --            --          --
 Amortization of
  deferred
  compensation..........      --        105        --            --          105
 Termination of shares
  granted under
  incentive stock
  plans.................      --         16        --            --          --
 Net loss...............      --        --         --         (8,072)     (8,072)
 Cumulative translation
  adjustment............      --        --          42           --           42
                            -----     -----        ---      --------     -------

BALANCE, MARCH 31,
 1998...................     (292)     (459)       (20)      (17,869)     (1,854)
 Conversion of preferred
  stock to common
  stock.................      --        --         --            --          --
 Exercise of common
  stock options for
  cash..................      --        --         --            --          352
 Issuance of common
  stock pursuant to
  Employee Stock
  Purchase Plan.........      --        --         --            --          737
 Issuance of common
  stock during initial
  public offering, net..      --        --         --            --       30,424
 Repurchase of
  restricted shares.....       16       --         --            --          --
 Repayment of notes
  receivable from
  stockholders..........       59       --         --            --           59
 Amortization of
  deferred
  compensation..........      --        129        --            --          129
 Termination of shares
  granted under
  incentive stock
  plans.................      --         62        --            --          --
 Income tax benefit from
  stock options
  exercised.............      --        --         --            --          142
 Net loss...............      --        --         --           (887)       (887)
 Cumulative translation
  adjustment............      --        --          52           --           52
 Unrealized gain on
  investments...........      --        --           1           --            1
                                      -----        ---      --------     -------

BALANCE, MARCH 31,
 1999...................    $(217)    $(268)       $33      $(18,756)    $29,155
                                      =====        ===      ========     =======
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       38
<PAGE>

                             BRIO TECHNOLOGY, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                    Years Ended March 31,
                                                   --------------------------
                                                     1999     1998     1997
                                                   --------  -------  -------
<S>                                                <C>       <C>      <C>
Cash Flows from Operating Activities:
Net loss.......................................... $   (887) $(8,072) $(5,965)
Adjustments to reconcile net loss to cash (used
 in) provided by operating activities--
  Depreciation and amortization...................    1,299      673      298
  In-process research and development.............    1,653      --       --
  Loss on disposal of property and equipment......       48      --       --
  Provision for returns and doubtful accounts.....      390      469      346
  Deferred compensation amortization..............      129      105      --
Changes in operating assets and liabilities, net
 of acquired business--
  Accounts receivable.............................   (1,757)  (1,833)  (3,213)
  Inventories.....................................      (15)    (257)      48
  Prepaid expenses and other assets...............     (303)    (794)    (571)
  Accounts payable and accrued liabilities........    3,198      997    2,790
  Deferred revenue................................    2,294    4,916    1,533
                                                   --------  -------  -------
    Cash (used in) provided by operating
     activities...................................    6,049   (3,796)  (4,734)
                                                   --------  -------  -------
Cash Flows from Investing Activities:
Purchases of property and equipment...............   (2,232)  (1,702)  (1,883)
Purchases of short-term investments...............  (15,494)     --       --
Sales of short-term investments...................    1,633      --       --
Acquisition of business, net of cash acquired.....   (2,203)     --       --
Cash payment for DataBasics acquisition...........      --       --       (95)
                                                   --------  -------  -------
    Cash used in investing activities.............  (18,296)  (1,702)  (1,978)
                                                   --------  -------  -------
Cash Flows from Financing Activities:
Proceeds from notes payable.......................      --     4,950    2,093
Repayments under notes payable....................   (3,437)  (3,675)  (1,035)
Proceeds from issuance of preferred stock, net....      --     5,844    5,993
Proceeds from issuance of common stock, net.......   31,513       37       67
Proceeds from repayment of notes receivable from
 stockholders.....................................       59      457      --
Issuance of note to stockholder...................      --      (400)     --
                                                   --------  -------  -------
    Net cash provided by financing activities.....   28,135    7,213    7,118
                                                   --------  -------  -------
Net increase in cash and cash equivalents.........   15,888    1,715      406
Effect of exchange rate changes on cash...........       52       42      (62)
Cash and cash equivalents, beginning of period....    2,647      890      546
                                                   --------  -------  -------
Cash and cash equivalents, end of period.......... $ 18,587  $ 2,647  $   890
                                                   ========  =======  =======
Supplemental disclosure of cash flow information:
    Cash paid for interest........................ $     16  $   144  $    54
                                                   ========  =======  =======
    Cash paid for income taxes.................... $    297      --       --
                                                   ========  =======  =======
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       39
<PAGE>

                             BRIO TECHNOLOGY, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                MARCH 31, 1999

1. ORGANIZATION AND OPERATIONS:

  Brio Technology, Inc. (Brio), was incorporated in California in 1989 and
reincorporated in Delaware in April 1998 (see Note 7). Brio designs, develops,
markets and supports software products that enable organizations to rapidly
implement enterprise business intelligence solutions. Brio's products and
services are designed to allow organizations to quickly deploy and effectively
manage business intelligence solutions incorporating the wide range of
available corporate data sources, including data marts, data warehouses,
operational data stores, enterprise applications and legacy applications.

  Brio is subject to a number of risks associated with companies in a similar
stage of development, including rapid technological growth, dependence on key
personnel and the sales force, litigation (see Note 8), potential competition
from larger, more established companies, dependence on product development,
the ability to penetrate the market with its products and the ability to
obtain adequate financing to support its growth.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

 Principles of Consolidation

  The consolidated financial statements include the accounts of Brio and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.

 Use of Estimates in the Preparation of Financial Statements

  The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the period.
Actual results could differ from those estimates.

 Foreign Currency Translation

  The functional currency of Brio's subsidiaries is the local currency.
Accordingly, Brio applies the current rate method to translate the
subsidiaries' financial statements into U.S. dollars. Translation adjustments
are included in accumulated components of comprehensive loss in stockholders'
equity (deficit) in the accompanying consolidated financial statements.
Transaction gains and losses, which have not been material to date, are
included in interest and other income (expense), net, in the accompanying
consolidated statements of operations.

 Cash and Cash Equivalents

  Brio considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. At March 31, 1998 and 1999, Brio
held its cash in checking and money market accounts.

 Short-Term Investments

  Management determines the appropriate classifications of investments in debt
and equity securities at the time of purchase. All of Brio's investments are
classified as available-for-sale. Available-for-sale securities are carried at
fair value, with the unrealized gains and losses reported in accumulated
components of comprehensive loss in stockholders' equity (deficit) in the
accompanying consolidated financial statements. The fair value of Brio's
available-for-sale securities is based on quoted market prices at the balance
sheet dates. Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included

                                      40
<PAGE>

                             BRIO TECHNOLOGY, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

in interest and other income (expense), net, in the accompanying consolidated
statements of operations. The cost of securities sold is based on the specific
identification method. Interest on securities classified as available-for-sale
is included in interest and other income (expense), net, in the accompanying
consolidated statements of operations.

  A summary of the fair value of Brio's available-for-sale investment
portfolio follows (in thousands):

<TABLE>
<CAPTION>
                                                                  March 31, 1999
                                                                  --------------
      <S>                                                         <C>
      Corporate debt securities and commercial paper.............    $14,040
      Government debt securities.................................      8,631
                                                                     -------
        Total....................................................     22,671
      Less: Cash equivalents.....................................      8,809
                                                                     -------
        Total short-term investments.............................    $13,862
                                                                     =======
</TABLE>

  There were no investments in debt and equity securities at March 31, 1998.

 Inventories

  Brio's inventories are carried at the lower of cost or market on a first-in,
first-out basis. Inventory consists principally of completed software packages
including media and documentation.

 Property and Equipment

  Property and equipment are stated at cost and are depreciated using the
straight-line method over the estimated useful lives (three to seven years) of
the assets. Leasehold improvements are amortized over the shorter of the term
of the related lease or the estimated useful life of the asset.

  Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                                  March 31,
                                                               ----------------
                                                                1999     1998
                                                               -------  -------
      <S>                                                      <C>      <C>
      Computer equipment and software......................... $ 4,287  $ 2,999
      Furniture and fixtures..................................   1,880    1,156
      Leasehold improvements..................................     240      175
                                                               -------  -------
                                                                 6,407    4,330
      Less: Accumulated depreciation and amortization.........  (2,277)  (1,203)
                                                               -------  -------
                                                               $ 4,130  $ 3,127
                                                               =======  =======
</TABLE>

 Revenue Recognition

  Effective April 1, 1998, Brio adopted Statement of Position (SOP) 97-2,
"Software Revenue Recognition." SOP 97-2 provides guidance on applying
generally accepted accounting principles in recognizing revenue on software
transactions. The adoption of SOP 97-2 did not have a material impact on
Brio's consolidated financial position or the timing of Brio's revenue
recognition, or cause changes to its revenue recognition policy.

  Brio's revenues are derived from two sources, license fees and services.
Services include software maintenance and support, training and system
implementation consulting.


                                      41
<PAGE>

                             BRIO TECHNOLOGY, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

  Revenues from license fees are recognized upon shipment of the software if
collection of the resulting receivable is probable, the fee is fixed or
determinable and vendor-specific objective evidence exists to allocate the
total fee to all delivered and undelivered elements of the arrangement. Such
undelivered elements in these arrangements typically consist of services. If
vendor-specific objective evidence does not exist to allocate the total fee to
all delivered and undelivered elements of the arrangement, revenue is deferred
until such evidence does exist, or until all elements are delivered, whichever
is earlier. Allowances are established for potential product returns and
credit losses. In instances where payments are subject to extended payment
terms, and the fee is not fixed or determinable, revenue is deferred until
payments become due. If an acceptance period is required, revenue is
recognized upon the earlier of customer acceptance or the expiration of the
acceptance period.

  Maintenance revenue is recognized ratably over the term of the maintenance
contract, which is typically twelve months. If maintenance is included in an
arrangement which includes a license agreement, amounts related to maintenance
are unbundled from the license fee based on vendor specific objective
evidence. Consulting and training revenue is recognized when the services are
performed.

  Cost of revenues consists primarily of third-party fees, related personnel
and overhead allocations and overhead costs, the cost of media, documentation,
packaging and shipping related to products sold.

 Deferred Revenue

  Deferred revenue represents amounts received from customers under certain
license, maintenance and service agreements for which the revenue earnings
process has not been completed. In situations where the services are not
expected to be provided and revenue recognized within twelve months of the
balance sheet date, such amounts are classified as noncurrent deferred
revenue.

 Software Development Costs

  Under Statement of Financial Accounting Standards (SFAS) No. 86 "Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,"
costs incurred in the research and development of software products are
expensed as incurred until technological feasibility has been established.
Once established, these costs would be capitalized. Amounts that could have
been capitalized under this Statement were insignificant and, therefore, no
costs have been capitalized to date.

 Comprehensive Loss

  In 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
130, "Reporting Comprehensive Income," which was adopted by Brio in the
quarter ended June 30, 1998. SFAS No. 130 requires companies to report a new,
additional measure of income on the statement of operations or to create a new
financial statement that has the new measure of income on it. "Comprehensive
income (loss)" includes foreign currency translation gains and losses and
other unrealized gains and losses that have been previously excluded from net
income (loss) and reflected in equity instead. Brio has reported the
components of comprehensive loss on its consolidated statements of
stockholders' equity (deficit).

 Computation of Basic Net Loss Per Share

  Basic net loss per share is computed using the weighted average number of
shares of common stock outstanding. No diluted net loss per share information
is presented as Brio has incurred net losses in all periods presented.
Potential common shares from conversion of preferred stock, stock options and
warrants and contingently issuable shares have been excluded from the
calculation of diluted net loss per share as they are

                                      42
<PAGE>

                             BRIO TECHNOLOGY, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

antidilutive. Potential common shares of 1,688,919, using the treasury stock
method, were not included in the computation of diluted net loss per share for
the year ended March 31, 1999, because Brio incurred a loss in this period
and, therefore, the effect would be antidilutive.

 Recent Accounting Pronouncements

  In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information." SFAS
No. 131 is effective for Brio's fiscal year beginning April 1, 1998. SFAS No.
131 establishes standards for disclosures about operating segments, products
and services, geographic areas and major customers. Brio is organized and
operates as one operating segment: the design, development, marketing and
support of a suite of business intelligence software solutions. Brio sells its
products domestically and internationally. See Note 4 regarding international
sales.

  In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999.
Management believes the adoption of SFAS No. 133 will not have a material
effect on Brio's financial statements.

3. ACQUISITIONS:

  On February 23, 1999, Brio entered into a definitive merger agreement with
SQRIBE Technologies Corp. Under the terms of the agreement, upon closing of
the transaction, Brio stockholders will hold approximately 55% of Brio, with
former SQRIBE stockholders holding approximately 45%. The transaction will be
accounted for as a pooling of interests.

  In October 1998, Brio acquired all of the outstanding stock of MerlinSoft,
Inc. (MerlinSoft), a California corporation, for cash. The total purchase
price was $2.2 million, and the acquisition was accounted for as a purchase.
In connection with the acquisition, net intangibles of $2.3 million were
acquired. The results of operations of MerlinSoft and the estimated fair value
of the assets acquired and liabilities assumed are included in Brio's
financial statements from the date of acquisition. Intangibles arising from
the acquisition are being amortized on a straight-line basis over three years.
While Brio relied upon an third party appraisal of the acquired intangible
assets, management was primarily responsible for estimating their fair values.
Management estimates that $1.7 million of the purchased intangibles
represented purchased in-process research and development that had not yet
reached technological feasibility and had no alternative future use. The
excess of the purchase price over identified assets was approximately
$600,000.

  The purchased in-process research and development consisted of two projects.
Both of these projects are aimed at the delivery of timely, in-depth,
sophisticated analytical applications. The first product will provide data
models for analyses in specific industries and functional areas, metric
libraries, a web-based client, and the ability for business users to manage
application components ("Analysis Product"). The second product will include
in-depth modeling features for margin analysis, what-if scenarios to determine
the impact of various decisions and parameters ("Modeling Product"). The
research and development costs incurred by MerlinSoft in the development of
the Analysis Product were approximately $4,000 in 1997 and approximately
$298,000 in 1998. The research and development costs incurred by MerlinSoft in
the development of the Modeling Product were approximately $34,000 in 1998. At
the date of acquisition, the research and development costs to complete the
Analysis Product were estimated by MerlinSoft to be approximately $855,000 in
fiscal 1999 and 2000. At the date of acquisition, the research and development
costs to complete the Modeling Product project were estimated

                                      43
<PAGE>

                             BRIO TECHNOLOGY, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

by MerlinSoft to be approximately $933,000 in fiscal 1999 and 2000. Management
believes it is on schedule with the analysis and Modeling Products and expects
successful completion of the projects.

  If these projects are not successfully developed, business, operating
results, and financial condition of Brio may be adversely affected.
Additionally, the value of other intangible assets acquired may become
impaired. Comparative pro forma information has not been presented as the
operations of MerlinSoft were not material to Brio's consolidated financial
statements.

  On July 1, 1996, Brio purchased DataBasics, one of Brio's distributors in
Australia, for $95,000 in cash. The acquisition was accounted for as a
purchase and resulted in goodwill of $60,000 that is being amortized over a
five year period. DataBasics was renamed Brio Technology Pty. Ltd., and is now
a wholly-owned subsidiary of Brio. Sales to DataBasics for the year ended
March 31, 1996 were $121,000. Comparative pro forma information related to
this acquisition has not been presented as the prior operations of the
acquired company were immaterial.

  On April 1, 1996, Brio purchased Brio Technology Ltd. from Management
Decisions (MD), one of Brio's distributors in the United Kingdom. Brio paid a
nominal value for the outstanding stock and operations of Brio Technology
Ltd., and the acquisition was accounted for as a purchase. No goodwill
resulted from this acquisition. Brio Technology Ltd. is now a wholly-owned
subsidiary of Brio. Sales to MD for the year ended March 31, 1996 were
$39,100. Comparative pro forma information related to this acquisition has not
been presented as the prior operations of the acquired company were
immaterial.

4. SIGNIFICANT CONCENTRATIONS:

  Financial instruments that potentially subject Brio to concentrations of
credit risk consist principally of accounts receivable. Brio performs periodic
credit evaluations of its customers' financial condition and generally does
not require collateral.

  Brio markets its products in the United States and Canada and in other
foreign countries through its domestic sales personnel and its foreign
subsidiaries. Revenues by geographic area were as follows:

<TABLE>
<CAPTION>
                                                                  1999 1998 1997
                                                                  ---- ---- ----
      <S>                                                         <C>  <C>  <C>
      United States and Canada................................... 82%  81%  86%
      Europe, the Middle East and Africa......................... 10%  13%   9%
      Asia Pacific and the rest of the world.....................  7%   6%   5%
</TABLE>

  No one country in either of these areas comprised more than 10% of total
revenues for fiscal 1999, 1998 and 1997. None of Brio's international
operations have material items of long-lived assets.

                                      44
<PAGE>

                             BRIO TECHNOLOGY, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


5. COMMITMENTS:

  Brio leases various facilities under operating leases which expire on
various dates through October 2003. Brio also leases office equipment under
various non-cancelable operating leases with terms which expire through March
2003. Future minimum lease payments relating to these agreements as of March
31, 1999, are as follows (in thousands):

<TABLE>
<CAPTION>
           Fiscal Year
           -----------
           <S>                                         <C>
           2000....................................... $1,733
           2001.......................................    632
           2002.......................................    548
           2003.......................................    447
           2004.......................................    256
                                                       ------
                                                       $3,616
                                                       ======
</TABLE>

  Rent expense for the years ending March 31, 1999, 1998 and 1997 was
$2,288,000, $1,533,000 and $798,000, respectively.

6. NOTES PAYABLE:

  At March 31, 1999, Brio had a $10,000,000 accounts receivable-based line of
credit agreement. Interest on borrowings under the accounts receivable line
accrues at the bank's prime rate (7.75% at March 31, 1999). At March 31, 1999,
no amounts were outstanding under these arrangements. Borrowings under the
accounts receivable line of credit were limited to 80% of eligible accounts
receivable, in addition to up to $1.5 million in non-formula availability. The
line of credit is collateralized by substantially all of Brio's assets,
including Brio's intellectual property, accounts receivable and property and
equipment. This line of credit requires Brio to comply with various financial
covenants, including quarterly requirements to maintain a minimum quick ratio,
and minimum tangible net worth. The line expires on December 1, 1999.

7. COMMON STOCK:

  In February 1998, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with a proposed Initial Public
Offering (IPO). On May 1, 1998, the offering was consummated and all of the
currently outstanding convertible preferred stock converted to 5,466,172
shares of common stock upon the closing of the IPO.

  In April 1998, Brio's board of directors approved a one-for-two reverse
stock split of its preferred and common stock. All preferred stock, common
stock and per share amounts have been adjusted retroactively to give effect to
the reverse stock split.

  In April 1998, Brio's board of directors approved the reincorporation of
Brio in Delaware in connection with Brio's IPO which was consummated May 1,
1998. Upon reincorporation, Brio issued new shares with a par value of $0.001
per share to all preferred and common stockholders.

  As of March 31, 1999, Brio had reserved shares of its common stock for
future issuance as follows:

<TABLE>
      <S>                                                              <C>
      Employee stock purchase plan....................................   619,441
      Exercise of stock options....................................... 4,032,542
                                                                       ---------
        Total shares reserved......................................... 4,651,983
                                                                       =========
</TABLE>

                                      45
<PAGE>

                             BRIO TECHNOLOGY, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  During fiscal 1997, certain employees funded the purchase of common stock
under the 1992 Stock Option Plan with fully secured notes payable to Brio.

 Stock Options

  Through March 31, 1999, Brio had reserved 1,158,467 shares of common stock
for issuance under the 1992 Stock Option Plan (the "Plan"). Under the Plan,
the Board of Directors may grant options to purchase Brio's common stock to
employees, directors, or consultants at an exercise price of not less than
100% of the fair value of Brio's common stock. Any options granted must be
granted by the tenth anniversary of the effective date of the Plan. Options
issued under the Plan generally have a term of five years from the date of
grant and generally vest ratably over four years.

  Brio's 1998 Stock Option Plan (the "1998 Plan") was adopted by Brio's Board
of Directors in February 1998. A total of 2,250,000 shares of common stock
have been reserved for issuance under the 1998 Plan. The shares reserved for
issuance under the 1998 Plan increase annually on the first day of Brio's
fiscal year through April 1, 2003, by the lesser of 600,000 or three percent
of the shares outstanding on the last day of the immediately preceding fiscal
year. Under the 1998 Plan, the Board of Directors may grant options to
purchase Brio's common stock to employees, directors or consultants at an
exercise price of not less than 100% of the fair value of Brio's common stock
on the date of grant, in the case of incentive stock options, and not less
than 85% of the fair value of Brio's common stock on the date of grant, in the
case of nonqualified stock options. Options must all be granted by the tenth
anniversary of the effective date of the 1998 Plan. Options issued under the
1998 Plan will generally have a term of 10 years from the date of grant and
will generally vest ratably over four years.

  Brio's 1998 Directors' Stock Option Plan (the "Directors' Plan") was adopted
by Brio's Board of Directors in February 1998. A total of 300,000 shares of
common stock has been reserved for issuance under the Directors' Plan. Through
March 31, 1999, 35,000 options were granted under the Directors' Stock Option
Plan. The Directors' Plan provides for the initial grant of nonqualified stock
options to purchase 20,000 shares of common stock on the date on which the
optionee first becomes a non-employee director of Brio subsequent to the
initial public offering (the "First Option"), and an additional option to
purchase 5,000 shares of common stock on the next anniversary to existing and
future non-employee directors of Brio if, on such date, the director has
served on the board for at least six months (the "Subsequent Option"). The
exercise price per share of all options granted under the Directors' Plan will
equal the fair market value of a share of Brio's common stock on the date of
grant of the option. Options issued under the Directors' Plan will have a term
of 10 years from the date of grant; the First Option shall become exercisable
in installments of 25% of the total number of shares subject to the First
Option on each of the first, second, third and fourth anniversaries of the
date of grant of the First Option; each Subsequent Option shall become
exercisable in full on the day before the first anniversary of the date of
grant of that Subsequent Option.

                                      46
<PAGE>

                             BRIO TECHNOLOGY, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Option activity under the Plans is as follows:

<TABLE>
<CAPTION>
                                                                        Weighted
                                                  Shares                Average
                                                Available     Options   Exercise
                                                for Grant   Outstanding  Price
                                                ----------  ----------- --------
<S>                                             <C>         <C>         <C>
Outstanding--March 31, 1996                        991,352     667,047   $ 0.60
  Authorized...................................    400,000         --       --
  Restricted shares repurchased................     30,417         --       --
  Options granted..............................   (939,521)    939,521     0.72
  Options exercised............................        --     (665,935)    0.60
  Options canceled.............................     93,594     (93,594)    0.62
                                                ----------   ---------
Outstanding--March 31, 1997....................    575,842     847,039     0.74
  Restricted shares repurchased................      9,480         --       --
  Options granted..............................   (723,847)    723,847     3.08
  Options exercised............................        --     (105,295)    0.67
  Options canceled.............................    263,317    (263,317)    1.28
                                                ----------   ---------
Outstanding--March 31, 1998....................    124,792   1,202,274     2.03
  Authorized...................................  2,886,867         --       --
  Restricted shares repurchased................     20,545         --       --
  Options granted.............................. (1,504,035)  1,504,035    10.73
  Options exercised............................        --     (201,936)    1.77
  Options canceled.............................    241,246    (241,246)    5.60
                                                ----------   ---------
Outstanding--March 31, 1999....................  1,769,415   2,263,127   $ 7.46
                                                ==========   =========   ======
</TABLE>

  Certain unvested options have been exercised and are subject to repurchase
by Brio until such shares vest. As of March 31, 1999, 60,051 shares were
subject to the right of repurchase at an exercise price of $0.60 per share.

  A summary of options outstanding and exercisable as of March 31, 1999, is as
follows:

<TABLE>
<CAPTION>
                                             As of March 31, 1999
                             ----------------------------------------------------
                                   Options Outstanding       Options Exercisable
                             ------------------------------- --------------------
                                                    Weighted             Weighted
  Range of                               Average    Average              Average
 Cntractualo                  Number   Contractual  Exercise   Number    Exercise
   Prices                     Options  Life (years)  Price   Exercisable  Price
-----------                  --------- ------------ -------- ----------- --------
  <S>                        <C>       <C>          <C>      <C>         <C>
  $ 0.60-$ 1.20.............   602,347     2.79      $ 0.91    305,805    $ 0.87
  $ 2.00-$ 6.00.............   225,420     3.54        3.78     72,950      3.59
  $ 7.38-$ 8.00.............   668,838     4.35        7.99     83,316      8.00
  $ 8.06-$12.38.............   393,100     4.77        9.95      2,401      9.19
  $12.56-$24.50.............   358,422     4.59       16.31     24,706     12.91
         $25.56.............    15,000     4.80       25.56        --        --
                             ---------     ----      ------    -------    ------
  $ 0.60-$25.56............. 2,263,127     3.97      $ 7.46    489,178    $ 3.14
                             =========                         =======
</TABLE>

  Brio's 1998 Employee Stock Purchase Plan (the "Purchase Plan") was adopted
by Brio's Board of Directors in February 1998. A total of 500,000 shares of
common stock has been reserved for issuance under the Purchase Plan. The
shares reserved for issuance under the Purchase Plan increase annually on the
first day of Brio's fiscal year through April 1, 2000, by the lesser of
300,000 or two percent of the shares outstanding on the last day of the
immediately preceding fiscal year. The Purchase Plan permits eligible
employees to purchase common stock at 85% of the lower of the fair market
value of Brio's common stock on the first day or the last day of each six-
month offering period.

                                      47
<PAGE>

                             BRIO TECHNOLOGY, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Brio accounts for its stock option and employee stock purchase plans (the
"Plans") under APB Opinion No. 25, "Accounting for Stock Issued to Employees."
Had compensation expense for these Plans been determined consistent with SFAS
No. 123, "Accounting for Stock Based Compensation," Brio's net loss would have
increased to the following pro forma amounts (in thousands, except per share
information):

<TABLE>
<CAPTION>
                                                       Years Ended March 31,
                                                      -------------------------
                                                       1999     1998     1997
                                                      -------  -------  -------
      <S>                                             <C>      <C>      <C>
      Net loss:
        As reported.................................. $  (887) $(8,072) $(5,965)
        Pro forma.................................... $(2,570) $(8,154) $(5,988)
      Basic net loss per share:
        As reported.................................. $ (0.06) $ (1.41) $ (1.14)
        Pro forma.................................... $ (0.19) $ (1.42) $ (1.15)
</TABLE>

  The weighted average grant date fair value of options granted during fiscal
1999, 1998 and 1997, was $7.13, $0.64 and $0.12, respectively. The fair value
of each option grant is estimated on the date of grant using the Black-Scholes
option pricing model with the following assumptions used for grants in 1998
and 1997: risk-free interest rates ranging from 5.2 to 6.7 percent; expected
dividend yields of zero percent; expected lives of 3 to 4 years from the grant
date; and expected volatility of 0.01 percent. In 1999, the assumptions were:
risk-free interest rates ranging from 4.33 to 5.73 percent; expected dividend
yield of zero percent; expected lives of 3.24 years from the grant date; and
expected volatility of 100.9%.

  During fiscal 1999, Brio issued 105,137 shares under the Purchase Plan. The
weighted average grant date fair value of each purchase right issued under the
Purchase Plan during fiscal 1999 was $4.76. The fair value of the purchase
rights granted in fiscal 1999 was estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: risk-free
interest rate of 4.24%; expected dividend yield of zero percent; expected life
of one-half year; and expected volatility of 100.9%.

 Deferred Compensation

  In connection with the granting of 1,369,368 stock options to employees
during the fiscal year ended March 31, 1998, with a weighted average exercise
price of $1.49 per share and a weighted average deemed fair market value of
$1.91 per share, Brio recorded deferred compensation of $580,000, representing
the difference between the deemed value of the common stock for accounting
purposes and the option exercise price of such options at the date of grant.
Such amount is presented as a reduction of stockholder's equity (deficit) and
amortized ratably over the vesting period of the applicable options.
Approximately $129,000 and $105,000 was expensed during the fiscal year ended
March 31, 1999 and 1998, respectively, and the balance will be expensed
ratably over the next three years as the options vest.

8. CONTINGENCIES:

  On January 20, 1997, Business Objects, S.A. filed a complaint (the
"Complaint") against Brio in the U.S. District Court for the Northern District
of California in San Jose, California alleging that certain of Brio's products
infringe U.S. Patent No. 5,555,403. The Complaint seeks injunctive relief and
unspecified monetary damages. In April 1997, Brio filed an answer and
affirmative defenses to the Complaint, denying certain of the allegations in
the Complaint, and asserting a counterclaim requesting declaratory relief that
Brio is not infringing the patent and that the patent is invalid and
unenforceable. In December 1997, venue for the case was changed to the
Northern District of California in San Francisco, California. Based on the
advice of Brio's patent counsel, Brio believes that it has meritorious
defenses to the claims made in the Complaint on both invalidity and non-

                                      48
<PAGE>

                             BRIO TECHNOLOGY, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

infringement grounds, and intends to defend the suit vigorously. A claims
construction hearing was held on April 5, 1999. At the hearing, the court set
the trial date for September 13, 1999. The court also issued its claims
construction ruling on April 6, 1999. Brio and Business Objects, S.A. are
currently conducting discovery. The pending litigation could result in
substantial expense to Brio and significant diversion of effort by Brio's
technical and management personnel. Litigation is subject to inherent
uncertainties, especially in cases such as this where complex technical issues
must be decided. Brio's defense of this litigation, regardless of the merits
of the Complaint or lack thereof, could be time-consuming or costly, or divert
the attention of technical and management personnel, which could have a
material adverse effect upon Brio's business, operating results and financial
condition. There can be no assurance that Brio will prevail in the litigation
given the complex technical issues and inherent uncertainties in patent
litigation. In the event Brio is unsuccessful in the litigation, Brio may be
required to pay damages to Business Objects, S.A. and could be prohibited from
marketing certain of its products without a license, which license may not be
available on acceptable terms. If Brio is unable to obtain such a license,
Brio may be required to license a substitute technology or redesign to avoid
infringement, in which case Brio's business, operating results and financial
condition could be materially adversely affected. Collectively, sales of
BrioQuery Navigator, BrioQuery Explorer and BrioQuery Designer represented a
majority of Brio's revenues in fiscal 1997 and fiscal 1998 and a significant
portion of Brio's revenues in fiscal 1999. Given the early stages of discovery
in this matter, Brio is unable to estimate the likelihood that they will
prevail in this matter or amount of loss, if any, which may be incurred as a
result of the Complaint.

9. INCOME TAXES:

  Brio accounts for income taxes using an asset and liability approach which
requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events which have been recognized in
Brio's financial statements. Deferred tax assets and liabilities are
determined using the current applicable enacted tax rate and provisions of the
enacted tax law.

  The provision for income taxes of $297,000 in fiscal 1999 consisted of
Federal and state alternative minimum taxes, as the Company utilized net
operating loss carryforwards to offset current income taxes generated from
domestic operations.

  The provision for income taxes differs from the statutory U.S. Federal
income tax rate primarily due to state taxes, the utilization of net operating
loss carryforwards, alternative minimum taxes, net change in the valuation
allowance and foreign losses for which no tax benefit has been provided.

  Brio had a net deferred tax asset at March 31, 1999 and 1998 as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                1999     1998
                                                               -------  -------
      <S>                                                      <C>      <C>
      Allowance for sales returns and doubtful accounts....... $   255  $   220
      Accumulated depreciation................................    (157)    (143)
      Accrued expenses and other..............................   3,844    1,415
      Intangible assets amortized for tax.....................     673      --
      Federal and state credits...............................     367      307
      Capitalized research and development....................     277      246
      Net operating losses....................................     316    3,211
                                                               -------  -------
                                                                 5,575    5,256
      Valuation allowance.....................................  (5,470)  (5,256)
                                                               -------  -------
      Net deferred income tax asset........................... $   105  $   --
                                                               =======  =======
</TABLE>

                                      49
<PAGE>

                             BRIO TECHNOLOGY, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  At March 31, 1999, Brio had Federal and state net operating loss
carryforwards of $800,000 and $400,000, respectively, which expire at various
dates through 2018. Brio believes that, based on a number of factors, there is
sufficient uncertainty regarding the realizability of carryforwards and
credits that a full valuation allowance has been recorded against the net
deferred tax asset to the extent the net deferred asset exceeds current and
prior year's regular tax. These factors include a history of operating losses,
recent increases in expense levels to support Brio's growth, the competitive
nature of Brio's market and the lack of predictability of revenue. Management
will continue to assess the realizability of the tax benefits available to
Brio based on actual and forecasted operating results. The Internal Revenue
Code contains provisions which may limit the net operating loss and research
and development credit carryforwards to be used in any given year upon the
occurrence of certain events, including a significant change in ownership.

                SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                    Balance at Charged to             Balance
                                    Beginning  Costs and              at End
Description                         of Period   Expenses  Deductions of Period
-----------                         ---------- ---------- ---------- ---------
                                                  (In thousands)
<S>                                 <C>        <C>        <C>        <C>
Year ended March 31, 1997:
Allowance for returns and doubtful
 accounts..........................  $249,000   $346,000   $224,000  $371,000
Year ended March 31, 1998:
Allowance for returns and doubtful
 accounts..........................  $371,000   $469,000   $289,000  $551,000
Year ended March 31, 1999:
Allowance for returns and doubtful
 accounts..........................  $551,000   $390,000   $259,000  $682,000
</TABLE>

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

  None.

                                   PART III

  Certain information required by Part III is omitted from this report because
Brio will file a definitive proxy statement within 120 days after the end of
its fiscal year pursuant to Regulation 14A (the "Proxy Statement") for its
Annual Meeting of Stockholders to be held July 28, 1999, and the information
included in the Proxy Statement is incorporated herein by reference.

Item 10. Directors and Executive Officers of the Registrant.

  (a) Executive Officers--See the section entitled "Executive Officers of the
Registrant" in Part I, Item 1 hereof.

  (b) Directors--the information required by this Item is incorporated by
reference to the section entitled "Election of Directors" in the Registrant's
Proxy Statement.

Item 11. Executive Compensation.

  The information required by this Item is incorporated by reference to the
sections entitled "Executive Compensation" in the Registrant's Proxy
statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

  The information required by this Item is incorporated by reference to the
sections entitled "Share Ownership of Directors, Executive Officers and
Certain Beneficial Owners" of the Registrant's Proxy Statement.

                                      50
<PAGE>

                             BRIO TECHNOLOGY, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Item 13. Certain Relationships and Related Transactions.

  The information required by this Item is incorporated by reference to the
section entitled "Employment Agreements and Certain Relationships and Related
Transactions" in the Registrant's Proxy Statement.

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.

  (a) The following documents are filed as part of this report:

    (1) Financial Statements and Report of Arthur Andersen LLP, Independent
  Auditors

    (2) Financial Statement Schedule

    (3) Exhibits (numbered in accordance with Item 601 of Regulation S-K)

  (b) Reports on Form 8-K.

    None

  (c) Exhibits.

    23.01 Consent of Independent Public Accountants

    27.1 Financial Data Schedule

                                      51
<PAGE>

                                  SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) 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.

                                          BRIO TECHNOLOGY, INC.

                                                    /s/ Yorgen H. Edholm
                                          By: _________________________________
                                                      Yorgen H. Edholm
                                                 President, Chief Executive
                                             Officer and Chairman of the Board
                                             of Directors (Principal Executive
                                                          Officer)

Date: June 28, 1999

                               POWER OF ATTORNEY

  KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Yorgen H. Edholm and Karen J. Willem, jointly
and severally, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Report on Form 10-K, and to file the same, with exhibits thereto and
other documents in connection therewith with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-
in-fact, or his or her substitute or substitutes may do or cause to be done by
virtue hereof.

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
              Signature                          Title                   Date

<S>                                    <C>                        <C>
         /s/ Yorgen H. Edholm          President, Chief Executive    June 28, 1999
______________________________________ Officer and Chairman of
           Yorgen H. Edholm            the Board of Directors
                                       (Principal Executive
                                       Officer)

         /s/ Karen J. Willem           Chief Financial Officer       June 28, 1999
______________________________________ (Principal Financial and
           Karen J. Willem             Accounting Officer)

        /s/ Katherine Glassey          Director                      June 28, 1999
______________________________________
          Katherine Glassey

         /s/ E. Floyd Kvamme           Director                      June 28, 1999
______________________________________
           E. Floyd Kvamme

       /s/ Bernard J. Lacroute         Director                      June 28, 1999
______________________________________
         Bernard J. Lacroute

          /s/ Norman Vincent           Director                      June 28, 1999
______________________________________
            Norman Vincent

          /s/ Mark B. Weeks            Director                      June 28, 1999
______________________________________
            Mark B. Weeks
</TABLE>

                                      52