<PAGE>   1
================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ----------------

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 2001

                                       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: 000-26789


                            BROADBASE SOFTWARE, INC.
           (Exact name of the Registrant as specified in its charter)


           Delaware                                    77-0417081
(State or other jurisdiction of            (I.R.S. Employee Identification No.)
 incorporation or organization)


                             181 Constitution Drive
                              Menlo Park, CA 94025
           (Address of principal executive offices including zip code)


                                 (650) 614-8300
            (The Registrant's telephone number, including area code)


Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.


                                 YES [X] NO [ ]


Number of shares of the Registrant's common stock outstanding as of April 30,
2001: 82,097,693

================================================================================



<PAGE>   2



                            BROADBASE SOFTWARE, INC.
                                    FORM 10-Q
                                      INDEX


<TABLE>
<CAPTION>
PART I.  FINANCIAL INFORMATION
<S>                                                                             <C>
Item 1.  Financial Statements:
         Condensed Consolidated Balance Sheets at March 31, 2001 and
          December 31, 2000.................................... ..................  3
         Condensed Consolidated Statements of Operations for the three months
          ended March 31, 2001 and March 31, 2000.................................  4
         Condensed Consolidated Statements of Cash Flows for the three months
          ended March 31, 2001 and March 31, 2000.................................  5
         Notes to Condensed Consolidated Financial Statements.....................  6
Item 2.  Management's Discussion and Analysis of Financial Condition and Results
          of Operations............................ .............................. 10
Item 3.  Quantitative and Qualitative Disclosures about Market Risk............... 27

PART II  OTHER INFORMATION

Item 1.  Legal Proceedings........................................................ 28
Item 2.  Changes in Securities and Use of Proceeds................................ 28
Item 3.  Defaults upon Senior Securities.......................................... 28
Item 4.  Submission of Matters to a Vote of Security Holders...................... 28
Item 5.  Other Information........................................................ 28
Item 6.  Exhibits and Reports on Form 8-K......................................... 29
         Signatures............................................................... 30
</TABLE>


                                       2
<PAGE>   3


PART I.   FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                            BROADBASE SOFTWARE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                               MARCH 31,         DECEMBER 31,
                                                                                                 2001              2000 (1)
                                                                                              ------------       ------------
                                                                                               (UNAUDITED)
<S>                                                                                           <C>                <C>
                                            ASSETS
        Current assets:
           Cash and cash equivalents ...................................................      $     70,731       $     51,186
           Short-term investments ......................................................            59,939            101,034
           Accounts receivable, net ....................................................            20,789             27,536
           Prepaid expenses and other current assets ...................................             5,892              8,357
                                                                                              ------------       ------------
             Total current assets ......................................................           157,351            188,113
        Restricted cash ................................................................             2,473              2,473
        Property and equipment, net ....................................................            18,570             17,730
        Long-term investments ..........................................................                --             15,540
        Goodwill and intangible assets, net ............................................            32,771          1,044,287
        Other assets ...................................................................             6,359              7,792
                                                                                              ------------       ------------
             Total assets ..............................................................      $    217,524       $  1,275,935
                                                                                              ============       ============

                            LIABILITIES AND STOCKHOLDERS' EQUITY
        Current liabilities:
           Accounts payable ............................................................      $      7,661       $     16,210
           Accrued compensation ........................................................            10,768              7,961
           Accrued expenses ............................................................            12,336             28,890
           Current portion of bank line of credit, notes payable and capital lease
             obligations ...............................................................               326                346
           Deferred revenue ............................................................            16,671             16,320
                                                                                              ------------       ------------
             Total current liabilities .................................................            47,762             69,727
        Bank line of credit, notes payable and capital lease obligations ...............               610                703
                                                                                              ------------       ------------
             Total liabilities .........................................................            48,372             70,430
        Stockholders' equity:
        Common stock ...................................................................                82                 81
        Additional paid-in capital .....................................................         1,484,835          1,484,130
        Deferred stock compensation ....................................................           (31,686)           (42,899)
        Notes receivable from stockholders .............................................              (963)              (436)
        Accumulated other comprehensive income (loss) ..................................               390               (268)
        Accumulated deficit ............................................................        (1,283,506)          (235,103)
                                                                                              ------------       ------------
             Total stockholders' equity ................................................           169,152          1,205,505
                                                                                              ------------       ------------
             Total liabilities and stockholders' equity ................................      $    217,524       $  1,275,935
                                                                                              ============       ============
</TABLE>

See accompanying notes to the Condensed Consolidated Financial Statements.

(1)  The balance sheet at December 31, 2000 has been derived from the audited
     consolidated financial statements as of that date.


                                       3
<PAGE>   4

                            BROADBASE SOFTWARE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                    THREE MONTHS ENDED
                                                                                          MARCH 31,
                                                                               -------------------------------
                                                                                   2001               2000
                                                                               ------------       ------------
<S>                                                                            <C>                <C>
        Net revenue:
             License ....................................................      $      7,176       $      4,520
             Professional services ......................................             3,210              1,119
             Maintenance ................................................             2,646                662
                                                                               ------------       ------------
                       Total net revenue ................................            13,032              6,301
                                                                               ------------       ------------

        Cost of revenue:
              License ...................................................             1,047                607
              Professional services (1) .................................             6,005              1,531
              Maintenance (2) ...........................................               660                288
              Amortization of acquired core and developed technology ....             1,632                264
                                                                               ------------       ------------
                       Total cost of revenue ............................             9,344              2,690
                                                                               ------------       ------------
        Gross margin ....................................................             3,688              3,611
                                                                               ------------       ------------

        Operating expenses:
             Sales and marketing (3) ....................................            13,979              7,578
             Research and development (4) ...............................             7,512              2,764
             General and administrative (5) .............................             4,299              1,126
             Amortization of deferred stock compensation ................             7,917              3,510
             Amortization of intangible assets and goodwill .............            56,160             11,896
             Acquired in-process research and development ...............                --             10,057
             Merger expenses ............................................             6,208              6,184
             Impairment of intangible assets and goodwill ...............           958,219                 --
                                                                               ------------       ------------
                       Total operating expenses .........................         1,054,294             43,115
                                                                               ------------       ------------
        Loss from operations ............................................        (1,050,606)           (39,504)
        Interest income .................................................             2,217              2,179
        Interest expense ................................................               (14)              (133)
                                                                               ------------       ------------
        Net loss ........................................................      $ (1,048,403)      $    (37,458)
                                                                               ============       ============

        Basic and diluted net loss per share ............................      $     (12.90)      $      (0.92)
                                                                               ============       ============
        Weighted-average shares used in computing
         basic and diluted net loss per share ...........................            81,267             40,532
                                                                               ============       ============
</TABLE>

(1)  Excludes $945 and $842 of amortization of deferred stock compensation for
     the three months ended March 31, 2001 and 2000, respectively.

(2)  Excludes $17 and $26 of amortization of deferred stock compensation for the
     three months ended March 31, 2001 and 2000, respectively.

(3)  Excludes $1,651 and $889 of amortization of deferred stock compensation for
     the three months ended March 31, 2001 and 2000, respectively.

(4)  Excludes $3,713 and $365 of amortization of deferred stock compensation for
     the three months ended March 31, 2001 and 2000, respectively.

(5)  Excludes $1,591 and $1,388 of amortization of deferred stock compensation
     for the three months ended March 31, 2001 and 2000, respectively.

See accompanying notes to the Condensed Consolidated Financial Statements.


                                       4
<PAGE>   5



                            BROADBASE SOFTWARE, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                      THREE MONTHS ENDED
                                                                                                           MARCH 31,
                                                                                                -----------------------------
                                                                                                     2001               2000
                                                                                                ------------       ------------
<S>                                                                                             <C>                <C>
        OPERATING ACTIVITIES:
            Net loss                                                                            $ (1,048,403)      $    (37,458)
            Adjustments to reconcile net loss to net cash used in
              operating activities:
                Depreciation                                                                           1,778                451
                Acquired in-process research and development                                              --             10,057
                Impairment of intangible assets and goodwill                                         958,219                 --
                Amortization of acquired core and developed technology                                 1,632                264
                Amortization of intangible assets and goodwill                                        56,160             11,896
                Amortization of deferred stock compensation                                            7,917              3,510
                Value of common stock issued to non-employees                                             --                276
            Changes in balance sheet items:
                    Accounts receivable                                                                6,747             (4,283)
                    Prepaid expenses and other current assets                                          2,473               (302)
                    Accounts payable                                                                  (8,549)            (5,528)
                    Accrued expenses                                                                 (14,407)             6,067
                    Deferred revenue                                                                     338              1,413
                    Proceeds from sublease deposit                                                        --                103
                                                                                                ------------       ------------
                        Net cash used in operating activities                                        (36,095)           (13,534)
        INVESTING ACTIVITIES:
             Maturity (purchase) of short-term investments, net                                       56,635            (19,428)
             Changes in other assets                                                                       6                 --
             Purchases of property and equipment                                                      (2,618)            (1,813)
                                                                                                ------------       ------------
                        Net cash provided by (used in) investing activities                           54,023            (21,241)
        FINANCING ACTIVITIES:
            Proceeds from issuance of common stock upon exercise of options                              298                167
            Proceeds from issuance of common stock from employee stock purchase program                  853                322
            Proceeds from issuance of common stock in secondary public offering, net                      --            175,204
            Repayment of notes receivable from stockholders                                               --                417
            Payments on notes payable                                                                    (78)               (82)
            Principal payments on capital lease obligations                                             (114)               (17)
            Principal payments on equipment line of credit                                                --               (139)
                                                                                                ------------       ------------
                        Net cash provided by financing activities                                        959            175,872
                                                                                                ------------       ------------
            Effect of foreign exchange rate changes on cash and cash equivalents                         658                (46)
                                                                                                ------------       ------------
            Net increase in cash and cash equivalents                                                 19,545            141,051
        Cash and cash equivalents:
             Beginning of period                                                                      51,186             76,642
                                                                                                ------------       ------------
             End of period                                                                      $     70,731       $    217,693
                                                                                                ============       ============
        Supplemental schedule of non cash investing activities:
             Issuance of common stock in connection with purchase
                business combinations                                                                    $--       $    362,953
</TABLE>

See accompanying notes to the Condensed Consolidated Financial Statements



                                       5
<PAGE>   6

                            BROADBASE SOFTWARE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF FINANCIAL STATEMENT PRESENTATION

    Broadbase Software, Inc. (the "Company" or "Broadbase") was incorporated on
November 28, 1995 and develops and markets customer-focused analytic, marketing
automation and e-service software applications that analyze customer data from
multiple touch points, and use that information to execute targeted marketing
campaigns, improve online merchandizing and content, deliver optimized
Internet-based and traditional customer service, and personalize a wide range of
customer interactions.

    The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principals for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The financial statements included herein reflect all
adjustments, consisting only of normal recurring adjustments, which in the
opinion of management are necessary to fairly state the Company's financial
position, results of operations, and cash flows for the periods presented. These
financial statements should be read in conjunction with the Company's
consolidated financial statements and notes thereto for the year ended December
31, 2000 included in the Company's Form 10-K filed with the Securities and
Exchange Commission ("SEC") on March 23, 2001. Operating results for the three
month period ended March 31, 2001 are not necessarily indicative of results to
be expected for the full fiscal year of 2001 or any future period.

    In January 2000, the Company's Board of Directors approved a two-for-one
stock split of the Company's outstanding shares payable in the form of a
dividend of one additional share of the Company's common stock for every share
owned by stockholders. The stock split became effective on April 7, 2000. All
prior period share and per share data have been adjusted retroactively to
reflect this split.

2. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

    The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. The Company considers
all investments with an original maturity greater than three months and less
than one year to be short-term investments. As of March 31, 2001, all short-term
investments are classified as held-to-maturity as the Company has both the
ability and intent to hold these securities to maturity; therefore, these
securities are recorded on the accompanying balance sheets at amortized cost.
Interest, dividends and realized gains and losses are included in interest
income.

    The following is a summary of cash, cash equivalents and short-term
investments as of March 31, 2001 (in thousands):

<TABLE>
<CAPTION>
<S>                                                             <C>
        Cash and cash equivalents:
                  Cash in bank                                  $      3,302
                  Money market funds                                  42,154
                  Short-term municipals                               14,750
                  U.S. Government agencies                             1,953
                  Commercial paper                                     8,572
                                                                ------------
                           Total cash and cash equivalents      $     70,731

        Short-term investments:
                  Corporate bonds and commercial paper          $     38,846
                  U.S. Government agencies                             7,647
                  Municipal notes and bonds                           13,446
                                                                ------------
                           Total short-term investments         $     59,939
</TABLE>


                                       6
<PAGE>   7



3. ACCUMULATED OTHER COMPREHENSIVE LOSS

    The following are the components of comprehensive loss (in thousands):

<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED MARCH 31,
                                                2001                2000
                                            ------------       ------------
<S>                                         <C>                <C>
        Net loss                            $ (1,048,403)      $    (37,458)
        Unrealized loss on investments                --               (126)
        Foreign currency translation
          income (loss)                              658                (46)
                                            ------------       ------------
                 Comprehensive loss         $ (1,047,745)      $    (37,630)
                                            ============       ============
</TABLE>

    The accumulated other comprehensive income at March 31, 2001 of
approximately $390,000 consisted entirely of the cumulative foreign currency
translation gains.

4. NET LOSS PER SHARE

    Net loss per share is presented in accordance with the requirements of
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" ("FAS
128") which requires dual presentation of basic earnings per share ("EPS") and
diluted EPS.

    Basic earnings per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common shares and potentially
dilutive common shares outstanding during the period. Diluted net loss per
share, as presented, excludes potentially dilutive common shares outstanding for
all periods as the effect of the assumed exercise of stock options, warrants and
contingently issued shares is antidilutive due to the Company's net loss.

The following table sets forth the computation of net loss per share (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED
                                                              MARCH 31,
                                                   -------------------------------
                                                       2001               2000
                                                   ------------       ------------
<S>                                                <C>                <C>
        Basic and diluted net loss per share:

        Net loss                                   $ (1,048,403)      $    (37,458)
                                                   ============       ============
        Weighted-average shares of common
            stock outstanding                            81,631             41,540
        Less weighted-average shares subject
            to repurchase                                  (364)            (1,008)
                                                   ------------       ------------
        Weighted-average shares of common
           stock outstanding used in
           computing basic and diluted net
           loss per share                                81,267             40,532
                                                   ------------       ------------
        Basic and diluted net loss per share       $     (12.90)      $      (0.92)
                                                   ============       ============
</TABLE>

5. RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133"). FAS 133, as amended,
establishes methods of accounting for derivative financial instruments and
hedging activities related to those instruments as well as other hedging
activities. FAS 133, which was adopted by the Company effective January 1, 2001,
did not have an impact on the Company's financial position, results of
operations, or cash flows because the Company does not currently utilize
derivative financial instruments.

     On February 14, 2001, the FASB issued a limited revision of its September
7, 1999 Exposure Draft, "Business Combinations and Intangible Assets", that
proposes to significantly change the accounting for goodwill acquired in a
purchase business combination. Under the revised proposal, goodwill would not be
amortized but would be reviewed for impairment, using a complex methodology
different from the original proposal, when an event occurs indicating the
potential for impairment. Goodwill impairment charges would be presented as a
separate line item within the operating section of the income statement. The
nonamortization approach would apply to previously recorded goodwill as well as
goodwill arising from acquisitions completed after the application of the new


                                       7
<PAGE>   8

standard. Amortization of the remaining book value of goodwill would cease and
the new impairment-only approach would apply. The FASB expects to release the
final statement in June 2001. The provisions of the proposed statement are to be
applied at the beginning of the first fiscal quarter following its issuance for
all entities.

6. ACQUISITIONS

     On February 1, 2000, the Company completed its acquisition of Rubric, Inc.
("Rubric"), a leading provider of e-marketing software applications. In
connection with the acquisition, the Company issued approximately 6.0 million
shares of its common stock in exchange for all outstanding shares of Rubric
capital stock, and converted outstanding options and warrants to acquire Rubric
capital stock into options and warrants to acquire approximately 1.2 million
shares of the Company's common stock. Of the shares issued, approximately
600,000 shares of the Company's common stock are being held in escrow as
collateral for indemnity obligations of Rubric and its shareholders. The total
purchase price for Rubric was $371.7 million, consisting of $301.7 million of
Broadbase common stock, $61.3 million of options to purchase Broadbase common
stock and $8.7 million of acquisition related costs consisting primarily of
direct transactions costs and involuntary termination benefits. As a result, the
Company recorded a charge to operations upon consummation of the transaction
related to acquired in-process research and development of approximately $10.1
million. In addition, the Company recorded approximately $361.8 million of
intangible assets and goodwill on its balance sheet. Goodwill and intangible
assets are being amortized on a straight-line basis over two to five years.

     On September 15, 2000, the Company completed its acquisition of Panopticon,
Inc. ("Panopticon"), developers of a real-time recommendation engine that
produces context-sensitive, personalized recommendations across web, wireless,
e-mail and call center customer interaction points. In connection with this
acquisition, the Company issued approximately 2.7 million shares of common stock
in exchange for all outstanding shares of Panopticon capital stock, and
converted outstanding options and warrants to acquire Panopticon capital stock
into options and warrants to purchase approximately 535,000 shares of Broadbase
common stock. Approximately 266,000 of the shares of Broadbase common stock are
being held in escrow for a period of one year as collateral for indemnity
obligations of Panopticon and its shareholders. The total purchase price for
Panopticon was $102.1 million, consisting of $85.4 million of Broadbase common
stock, $15.9 million of options and warrants to purchase Broadbase common stock
and $800,000 of acquisition related costs. The purchase price of Panopticon was
allocated to the fair value of the specific tangible and intangible assets
acquired and liabilities assumed from Panopticon pursuant to an independent
valuation. As a result the Company recorded a charge to operations upon
consummation of the transaction related to acquired in-process research and
development of approximately $2.8 million. In addition, the Company recorded
approximately $92.8 million of intangible assets and goodwill on its balance
sheet. Goodwill and intangible assets are being amortized on a straight-line
basis over three to five years.

     On December 18, 2000, the Company completed its acquisition of Servicesoft,
Inc. ("Servicesoft"), a leading provider of e-service software applications. In
connection with this acquisition, the Company issued approximately 29.3 million
shares of Broadbase common stock in exchange for all outstanding shares of
Servicesoft capital stock, and converted outstanding options and warrants to
acquire Servicesoft capital stock into options and warrants to purchase
approximately 6.4 million shares of Broadbase common stock. Of the shares
issued, approximately 2.9 million shares of the Company's common stock are being
held in escrow for a period of one year as collateral for indemnity obligations
of Servicesoft and its shareholders. The total purchase price for Servicesoft
was $656.2 million, consisting of $546.8 million of Broadbase common stock,
$96.8 million of options to purchase Broadbase common stock and $12.6 million of
acquisition related costs consisting primarily of direct transactions costs and
involuntary termination benefits. As a result, the Company recorded a charge to
operations upon consummation of the transaction related to acquired in-process
research and development of approximately $13.0 million. In addition, the
Company recorded approximately $630.0 million of intangible assets and goodwill
on its balance sheet. Goodwill and intangible assets are being amortized on a
straight-line basis over one to five years.

     During the first three months of 2001, the Company recorded an impairment
charge for the goodwill and intangible assets recorded as result of the above
acquisitions, as well as the acquisitions of Aperio, Inc. in June 2000 and
Decisionism, Inc in December 2000. See Note 7 "Impairment of Intangible Assets
and Goodwill" for further information.

Pro forma information (unaudited)

     The following unaudited pro forma summarized results of operations have
been prepared assuming that the acquisitions of Rubric, Panopticon and
Servicesoft had occurred on January 1, 2000. The results of operations of
Rubric, Panopticon and Servicesoft are included in the Company's actual results
of operations for the first quarter of 2001. The acquisitions included in the
pro forma results are those acquisitions deemed significant by SEC guidelines.
These results presented below are not necessarily indicative of results of
operations that would have occurred had the acquisitions actually been
consummated as of the beginning of 2000, nor are the results presented below
necessarily indicative of results to be expected in future periods.


                                       8
<PAGE>   9

<TABLE>
<CAPTION>
                                                   THREE MONTHS
                                                  ENDED MARCH 31,
                                                      2000
                                               (IN THOUSANDS, EXCEPT
                                                  PER SHARE DATA)
                                               ---------------------
<S>                                               <C>
        Net revenue                               $     11,503
        Net loss                                  $    (99,447)
        Basic and diluted net loss per share      $      (1.37)
</TABLE>

7.  IMPAIRMENT OF INTANGIBLE ASSETS AND GOODWILL

     In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of" ("FAS 121"), the Company identifies and records impairment
losses, as circumstances dictate, on long-lived assets used in operations when
events and circumstances indicate that the assets might be impaired and the
undiscounted cash flows estimated to be generated by those assets are less than
the carrying amounts of those assets. Goodwill associated with long-lived assets
acquired in a purchase business combination is included in impairment
evaluations when events or circumstances exist that indicate the carrying amount
of those assets may not be recoverable.

     At March 31, 2001, the Company evaluated the long-lived assets and
associated goodwill, recorded as a result of its purchase business combinations,
for impairment because events and circumstances indicated that such assets might
be impaired and the estimated fair value of these assets might be less than
their recorded amounts. The Company performed such an assessment due to (i) the
decrease in the Company's first quarter of 2001 net revenues in comparison to
original forecasts due to the rapid general economic slowdown in the United
States and Europe and resulting curtailment in purchases by corporate
enterprises of software products and services during the first quarter of 2001,
(ii) expectations of a continued slowdown during the remainder of 2001 in
corporate enterprise purchases of software products and services, (iii) the
resulting reassessment by management of the Company's business plan and
operations including projected growth rates, profitability estimates, and
product offerings, all leading to a planned restructuring of operations,
including reductions in force in the second quarter of 2001, (iv) the continuing
and expected sustained decline in the Company's stock price resulting in the net
book value of long-lived assets significantly exceeding the Company's market
capitalization, and (v) the imputed value of the Company, based on the stock
exchange ratio under the merger agreement with Kana Communications, Inc.
("Kana") signed on April 9, being less than the Company's tangible book value.
The results of this assessment, which compared projected enterprise-wide
undiscounted cash flows to the carrying value of long-lived tangible and
intangible assets and associated goodwill, indicated that impairment charge
would have to be recorded. The charge recorded, $958.2 million, was based upon
the estimated enterprise-wide discounted cash flows over the remaining useful
lives of the assets, including goodwill, using a discount rate of 20%. The
assumptions supporting the cash flows and discount rate used in the analyses
were based on the Company's estimates as of that date. The remaining intangible
assets and goodwill of approximately $32.8 million will be amortized over their
remaining useful lives.


8. SUBSEQUENT EVENTS

     Proposed Acquisition by Kana

     On April 9, 2001, Broadbase entered into a definitive agreement to be
acquired by Kana. Under this agreement, upon completion of the acquisition, each
outstanding share of Broadbase common stock will be converted into the right to
acquire 1.05 shares of Kana common stock and all outstanding options and
warrants of Broadbase will be assumed by Kana and will become options and
warrants to purchase Kana common stock in accordance with the exchange ratio.
The acquisition is intended to constitute a reorganization for federal income
tax purposes and will be accounted for as a purchase business combination. The
acquisition is subject to the approval of each of Broadbase's and Kana's
stockholders, and certain other customary closing conditions. In addition, in
connection with the merger agreement, Broadbase entered into a loan agreement
with Kana under which Broadbase agreed to loan up to $20 million to Kana to fund
its operating activities.

     Stock Option Repricing

     On April 26, 2001, the Company announced an offer to certain holders of
outstanding options to purchase Broadbase common stock the opportunity to
exchange and cancel any of their outstanding options to purchase shares of
Broadbase common stock for new options to purchase the same number of shares
covered by the options tendered for exchange. This offer is voluntary and must
be


                                       9
<PAGE>   10


accepted by individual option holders in writing no later than May 24, 2001. To
be eligible to participate, an option holder must have been an employee,
officer, director, consultant, independent contractor or advisor of Broadbase or
its subsidiaries as of April 11, 2001. Pursuant to this offer, the Company will
cancel eligible outstanding options tendered for exchange and grant new options
under either the 1999 Equity Incentive Plan or 2000 Stock Incentive Plan. The
per share exercise price of the new options issued in this exchange will be
$0.92, which was the closing price of the Company's common stock as reported by
the Nasdaq National Market on April 11, 2001. Subject to certain exceptions,
options issued in the exchange will vest and become exercisable in 48 equal
monthly increments beginning on April 11, 2001. New options replacing any
existing options that were entirely unvested as of the grant date will begin to
vest on April 11, 2001, but will not be exercisable until the first date that
the corresponding existing option would have become exercisable (at which time,
the new option will be exercisable as to any shares that vested monthly between
April 11, 2001 and the first date of exercisability). New options issued in
exchange for options that were fully vested upon grant will also be fully vested
upon grant. Other than changes to the exercise price and vesting schedule, the
terms and conditions of the new options issued in the exchange will be
substantially similar to those of the corresponding cancelled options.

     This offer to exchange options constitutes an option repricing, requiring
the Company to use variable accounting to measure any compensation expense
arising from all options subject to this offer. Since the exercise price of new
options issued in the exchange is at the fair market value on the date of grant,
there will be no compensation expense as of April 11, 2001. However, in each
reporting period after April 11, 2001, the Company will recognize compensation
expense for any subsequent increases in intrinsic value of the new options
issued (measured by changes in the quoted market price of the Company's common
stock compared to the exercise price). Subsequent declines in the intrinsic
value of these new options will result in reversal of previously recognized
expense. Compensation expense arising from these options will be recognized over
the remaining vesting period as of each reporting period-end. After the options
become fully vested, any additional compensation due to changes in intrinsic
value will be recognized as compensation expense immediately until each new
option is exercised, forfeited, or expires. The Company will not be able to
provide an estimate of any future compensation expense resulting from this
repricing.

     Personnel Reductions and Restructuring

     During the first quarter of 2001, the Company recorded approximately $3.5
million in merger expense for severance costs to eliminate approximately 100
former Servicesoft personnel, representing personnel employed on a transitional
basis and certain newly identified redundant employees. During April 2001, the
Company also initiated a restructuring of its operations and further reduced
personnel by approximately 175 employees in an effort to streamline operations
and reduce costs. These two personnel reductions represented a reduction of
approximately 41% based on the Company's staffing level as of December 31, 2000.
As a result, we will record significant restructuring costs in the second
quarter of 2001, including costs of personnel reductions and the abandonment of
certain facilities, although the amount of these costs have not yet been fully
quantified.

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

     The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the financial
statements and notes included under Item 1 of this report. This discussion
contains forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. We may identify these
statements by the use of words such as "believe," "expect," "anticipate,"
"intend," "plan" and similar expressions. These forward-looking statements
involve many risks and uncertainties. Our actual results could differ materially
from those anticipated in these forward-looking statements, such as those
concerning our expectations regarding operating results, as a result of various
factors, including those we discuss in "Risk Factors That May Affect Future
Results" and elsewhere in this report. These forward-looking statements speak
only as of the date of this report, and we caution you not to rely on these
statements without also considering the risks and uncertainties associated with
these statements and our business that are addressed in this report.

OVERVIEW

     We incorporated in November 1995 and from that date through December 1997
were in the development stage, conducting research and development of our
initial products. In the fourth quarter of 1997, we introduced Foundation,
software enabling organizations to build and manage datamarts for their customer
information. In the third quarter of 1998, we began offering applications, built
on Foundation, which provide analysis for customer relationship management. In
May 1999 we expanded our suite of products by introducing new applications built
on Foundation designed for internet sales channels, internet marketing and other
customer-focused e-business applications, as well as new versions of our
pre-existing applications. In February 2000, we added an operational marketing
automation system through our acquisition of Rubric. In December 2000, we
continued expansion of our product line by acquiring Servicesoft, a leading
provider of e-service software applications. Throughout these periods, we
expanded


                                       10
<PAGE>   11

our organization by hiring personnel in key areas, particularly marketing, sales
and research and development. We have grown from a total of 131 full-time
employees at December 31, 1999 to 678 full-time employees at December 31, 2000.
During the first quarter of 2001, we reduced our workforce to approximately 560
employees in connection with the Servicesoft acquisition by severing personnel
employed on a transitional basis and eliminating further identified redundant
employees. During April 2001, we further reduced our workforce to approximately
400 employees due to significantly lower than expected first quarter revenues,
the overall decline in the U.S. economy and revised projected future operating
results.

     Our revenue comes principally from licenses of our software products, with
the balance coming from software maintenance and professional services. We
account for our software license, maintenance, and professional services revenue
under Statement of Position No. 97-2 "Software Revenue Recognition" ("SOP
97-2"), as amended. Under SOP 97-2 we recognize license revenue when persuasive
evidence of an agreement exists, delivery of the product has occurred, no
significant company obligations with regard to installation or implementation of
the software remain, the fee is fixed or determinable and collectibility is
probable. In a typical license sale to a new customer, our professional services
group installs our product(s) and, in the case of our analytic applications,
connects our product to the customer's systems or data sources. Upon completion
of the initial installation/connection when the software is effectively
operational and no significant obligations remain, we recognize the revenue
related to that license. The actual installation/connection process can vary in
duration, often being completed in a matter of days or in other instances
requiring several weeks. However, the timing of the commencement and completion
of this process is subject to factors that may be beyond our control, as this
process requires access to the customer's facilities and coordination with the
customer's personnel following delivery of the software. Subsequent license
sales to existing customers and license sales where installation/connection is
performed by a third party are recognized upon shipment to the existing
customer. License revenue from the sale of our software to distributors and
other resellers is recognized upon receipt from the reseller of a third party
resale report and, if applicable, our shipment of the licensed software.
Maintenance fees associated with new product licenses and fees for renewed
maintenance contracts are deferred and recognized ratably over the contract
period, typically 12 months. Professional services revenue is recognized as
services are performed.

     Customers generally receive nonexclusive, perpetual licenses to use our
products for a specified number of servers and named users. After the initial
license, they may purchase licenses for additional servers and users as needed.
In addition, customers often purchase professional services from us, including
basic software implementation, post implementation consulting, and training
services, although they may, and do, use other consulting organizations.
Customers that license our products also usually purchase maintenance contracts,
which provide unspecified software enhancements, upgrades and technical support
over a stated term, typically 12 months.

     We sell our products through our direct sales force and through indirect
sales channels. Direct sales are made by our direct sales force in North
America, Europe and Asia Pacific. Our indirect sales channels include software
application vendors, resellers and distributors located in North America, Europe
and Asia Pacific. Sales through indirect sales channels accounted for 8% and 17%
of our total net revenue for the first three months of 2001 and 2000,
respectively. The decrease from 2000 to 2001 resulted primarily from significant
expansion of our direct sales force during 2000 relative to our channel
partners. In addition, near the end of 2000, we shifted our indirect channels
from smaller vertical and regional partners to larger worldwide resellers,
systems integrators and technology partners; these new partnerships have yet to
generate significant revenue.

     Revenue from customers outside the United States represented 30% and 26% of
our total net revenue for the first three months of 2001 and 2000, respectively.
The increase in international sales relative to those in North America was
attributable primarily to the decline in the U.S. economy during the first three
months of 2001. We intend to continue expansion of our international operations
and plan to commit significant management time and financial resources in
developing our direct and indirect international sales channels.

     We have experienced substantial net losses since our inception due
primarily to (i) significant acquisition-related costs, (ii) amortization and
impairment of acquired intangibles, (iii) sales and marketing costs, (iv) costs
incurred to develop our technology and products, and (v) costs related to the
recruitment and training of personnel for our engineering, sales, marketing,
professional services and administrative departments. As of March 31, 2001, we
had an accumulated deficit of approximately $1.3 billion. We expect to continue
to incur substantial losses for the foreseeable future due in large part to
acquisition-related charges and stock compensation expense.

     During the first quarter of 2001, the Company recorded an impairment charge
for the goodwill and intangible assets recorded as a result of the acquisitions
made in 2000. See below for further information.


                                       11
<PAGE>   12


RECENT EVENTS

     Proposed Acquisition by Kana. On April 9, 2001, we entered into a
definitive agreement to be acquired by Kana. Under this agreement, upon
completion of the acquisition, each outstanding share of our common stock will
be converted into the right to acquire 1.05 shares of Kana common stock and all
outstanding options and warrants of Broadbase will be assumed by Kana and will
become options and warrants to purchase Kana common stock in accordance with the
exchange ratio. The acquisition is intended to constitute a reorganization for
federal income tax purposes and will be accounted for as a purchase transaction.
The acquisition is subject to the approval of each of Broadbase's and Kana's
stockholders, and certain other customary closing conditions. In addition, in
connection with the merger agreement, we entered into a loan agreement with Kana
under which we agreed to loan up to $20 million to Kana to fund its operating
activities.

     Stock Option Repricing. On April 26, 2001, we announced an offer to certain
holders of outstanding options to purchase Broadbase common stock the
opportunity to exchange and cancel any of their outstanding options to purchase
shares of our common stock for new options to purchase the same number of shares
covered by the options tendered for exchange. This offer is voluntary and must
be accepted by individual option holders in writing no later than May 24, 2001.
To be eligible to participate, an option holder must have been an employee,
officer, director, consultant, independent contractor or advisor of Broadbase or
its subsidiaries as of April 11, 2001. Pursuant to this offer, we will cancel
eligible outstanding options tendered for exchange and grant new options under
either the 1999 Equity Incentive Plan or 2000 Stock Incentive Plan. The per
share exercise price of the new options issued in this exchange will be $0.92,
which was the closing price of our common stock as reported by the Nasdaq
National Market on April 11, 2001. Subject to certain exceptions, options issued
in the exchange will vest and become exercisable in 48 equal monthly increments
beginning on April 11, 2001. New options replacing any existing options that
were entirely unvested as of the grant date will begin to vest on April 11,
2001, but will not be exercisable until the first date that the corresponding
existing option would have become exercisable (at which time, the new option
will be exercisable as to any shares that vested monthly between April 11, 2001
and the first date of exercisability). New options issued in exchange for
options that were fully vested upon grant will also be fully vested upon grant.
Other than changes to the exercise price and vesting schedule, the terms and
conditions of the new options issued in the exchange will be substantially
similar to those of the corresponding cancelled options.

     This offer to exchange options constitutes an option repricing, requiring
us to use variable accounting to measure any compensation expense arising from
all options subject to this offer. Since the exercise price of new options
issued in the exchange is at the fair market value on the date of grant, there
will be no compensation expense as of April 11, 2001. However, in each reporting
period after April 11, 2001, we will recognize compensation expense for any
subsequent increases in intrinsic value of the new options issued (measured by
changes in the quoted market price of our common stock compared to the exercise
price). Subsequent declines in the intrinsic value of these new options will
result in reversal of previously recognized expense. Compensation expense
arising from these options will be recognized over the remaining vesting period
as of each reporting period-end. After the options become fully vested, any
additional compensation due to changes in intrinsic value will be recognized as
compensation expense immediately until each new option is exercised, forfeited,
or expires. We will not be able to provide an estimate of any future
compensation expense resulting from this repricing.

     Personnel Reductions and Restructuring. During the first quarter of 2001,
we recorded approximately $3.5 million in merger expense for severance costs to
eliminate approximately 100 former Servicesoft personnel, representing personnel
employed on a transitional basis and certain newly identified redundant
employees. During April 2001, we also initiated a restructuring of our
operations and further reduced personnel by approximately 175 employees in an
effort to streamline operations and reduce costs. These two personnel reductions
represented a reduction of approximately 41% based on our staffing level as of
December 31, 2000. As a result, we will record significant restructuring costs
in the second quarter of 2001, including costs of personnel reductions and the
abandonment of certain facilities, although the amount of these costs have not
yet been fully quantified.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                     THREE MONTHS ENDED
                                                                                          MARCH 31,
                                                                               -------------------------------
                                                                                   2001               2000
                                                                               ------------       ------------
<S>                                                                            <C>                <C>
            Net revenue:
                 License ................................................      $      7,176       $      4,520
                 Professional services ..................................             3,210              1,119
                 Maintenance ............................................             2,646                662
                                                                               ------------       ------------
                           Total net revenue ............................            13,032              6,301
                                                                               ------------       ------------
</TABLE>


                                       12
<PAGE>   13

<TABLE>
<S>                                                                            <C>                <C>
        Cost of revenue:
              License ...................................................             1,047                607
              Professional services .....................................             6,005              1,531
              Maintenance ...............................................               660                288
              Amortization of acquired core and developed technology ....             1,632                264
                                                                               ------------       ------------
                       Total cost of revenue ............................             9,344              2,690
                                                                               ------------       ------------
        Gross margin ....................................................             3,688              3,611
                                                                               ------------       ------------

        Operating expenses:
             Sales and marketing ........................................            13,979              7,578
             Research and development ...................................             7,512              2,764
             General and administrative .................................             4,299              1,126
             Amortization of deferred stock compensation ................             7,917              3,510
             Amortization of intangible assets and goodwill .............            56,160             11,896
             Acquired in-process research and development ...............                --             10,057
             Merger expenses ............................................             6,208              6,184
             Impairment of intangible assets and goodwill ...............           958,219                 --
                                                                               ------------       ------------
                       Total operating expenses .........................         1,054,294             43,115
                                                                               ------------       ------------
        Loss from operations ............................................        (1,050,606)           (39,504)
        Interest income .................................................             2,217              2,179
        Interest expense ................................................               (14)              (133)
                                                                               ------------       ------------
        Net loss ........................................................      $ (1,048,403)      $    (37,458)
                                                                               ============       ============

        Basic and diluted net loss per share ............................      $     (12.90)      $      (0.92)
                                                                               ============       ============
        Weighted-average shares used in computing
         basic and diluted net loss per share ...........................            81,267             40,532
                                                                               ============       ============
</TABLE>

Net Revenue

     License. The increase in license revenue comparing the first three months
of 2001 to the corresponding period in 2000 was attributable primarily to
increases in the number of customers licensing our products and increases in the
average revenue per license transaction. The increase in customers is primarily
the result of the expansion of our direct sales force and our acquisitions of
Rubric and Servicesoft, while the increase in the average revenue per license
transaction reflects our expanded line of bundled applications combining various
elements of our analytic, marketing automation, and e-service offerings. Due to
current economic slowdowns in the general economy, there is increased
uncertainty with respect to our revenues in 2001, and we cannot assure you that
the volume and average revenue per license transaction will continue to
increase. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Risk Factors -- We expect our quarterly revenue and
operating results to fluctuate, and it is difficult to predict our future
operating results".

     Professional Services. Professional services include revenues from
consulting and customer training services. The growth in professional services
revenue comparing the first three months of 2001 to the corresponding period in
2000 reflects significant expansion of our installed customer base requiring
services and the increased capacity of our consulting organization, primarily
attributable to our acquisitions of Aperio and Servicesoft.

     Maintenance. Maintenance revenue is recognized on a straight-line basis
over the period customer support is provided, usually one year. The increase in
maintenance revenue during the periods presented reflects significant expansion
of our installed customer base, which resulted in part from our acquisitions of
Rubric and Servicesoft, as well as increased prices for support of bundled
products.

Cost of Revenue

     Cost of Licenses. The cost of licenses consists primarily of royalties
payable to third parties as well as the cost of product manuals, media,
packaging and shipping. The increase in cost of licenses comparing the first
three months of 2001 to 2000 resulted primarily from increased royalty
obligations incurred as a result of an increased volume of license sales. Our
royalty obligations vary significantly by product; accordingly, our cost of
licenses may vary significantly from period to period as a percentage of license
revenue depending on the mix of products licensed in any given quarter.


                                       13
<PAGE>   14

     Cost of Professional Services. The cost of professional services consists
primarily of personnel costs for employees and contractors providing consulting
and training services. The increases in these costs over the periods presented
resulted primarily from expansion of our consulting and training organizations
and increased use of contract consultants as necessary to serve our expanding
customer base. We significantly increased our professional services capacity
since the first three months of 2000 as a result of the Servicesoft and Aperio
acquisitions and we plan to continue expanding our professional services
capacity through partnerships with external consultants and, to a lesser extent,
through internal hiring. The significant decrease in margins on consulting
revenue resulted primarily from reduced demand for our consulting services
during the first quarter of 2001, which we believe is attributable to the
overall economic slow down in North America. Additionally, we made significant
investments during 2000 in our consulting practice in terms of hiring and
training, as well as investments in a project management system and other
infrastructure to support actual growth and projected future growth in our
customer base, all of which created a higher cost infrastructure for our
consulting organization. In both the first and second quarter of 2001, we
reduced our workforce, including some administrative and billable services
personnel, to address the decline in demand for our products and services.

     Cost of Maintenance. The cost of maintenance consists primarily of
personnel costs for employees in our customer support organization. The
increases in these costs over the periods presented resulted primarily from
expansion of our customer support organization as a result of our acquisition of
Servicesoft, as well as increased investments in facilities and computer
equipment necessary to provide support to our expanded customer base. During the
first and second quarters of 2001, we reduced the size of our customer support
organization in an effort to reduce overall expenses. As a result, we expect our
cost of maintenance to decrease in the second quarter of 2001.

     Amortization of Acquired Core and Developed Technology. This cost
represents amortization of the core and developed technology acquired during
2000 from Rubric, Panopticon and Servicesoft. The cost of acquired core
technology is being amortized over a five-year useful life, while the cost of
acquired developed technology is being amortized over a one-year useful life.

Operating Expenses

     Sales and Marketing. Sales and marketing expenses consist primarily of
costs for personnel, sales commissions, travel and entertainment, promotional
activities, advertising, and domestic and international field sales offices.
Increased sales and marketing expenses during the periods presented resulted
primarily from significant expansion of our domestic and international direct
sales force during 2000, both through direct hiring and our acquisition of
Servicesoft. During 2000, we also expanded our marketing organization,
increasing both the number of employees and the level of promotional and
advertising activities. Although sales and marketing expenses increased during
the periods presented, we significantly reduced the size of our sales and
marketing organization during the first and second quarters of 2001 in an effort
to reduce operating expenses. As a result, we expect our sales and marketing
expenses to decrease in the second quarter of 2001.

     Research and Development. Research and development expenses consist
primarily of salaries for development personnel, development facilities and
computer equipment, development software, product localization, product
documentation, and quality assurance testing. Increased research and development
costs during the periods presented are primarily attributable to significant
expansion of our development workforce, including developers employed as a
result of acquisitions during 2000, and increased use of contractors and other
outside service providers to assist in development efforts. Although research
and development expenses increased during the periods presented, we
significantly reduced the size of our research and development organization
during the first and second quarters of 2001 in an effort to reduce operating
expenses. As a result, we expect our research and development expenses to
decrease in the second quarter of 2001.

     General and Administrative. General and administrative expenses consist
primarily of costs of executive, finance, human resources, legal, and
information technology personnel, as well as outside professional fees for
legal, tax, accounting and other services. The increase in general and
administrative costs during the periods presented resulted primarily from
personnel additions required to provide administrative and information
technology support for our expanded employee base. The use of professional
services, such as legal and accounting services, also increased significantly.
Although general and administrative expenses increased during the periods
presented, we reduced the size of our general and administrative organization
during the first and second quarters of 2001 in an effort to reduce operating
expenses. As a result, we expect our general and administrative expenses to
decrease in the second quarter of 2001.

     Amortization of Deferred Stock Compensation. The increase in amortization
of deferred stock compensation comparing the first three months of 2001 to the
corresponding period in 2000 resulted from a combination of (i) option grants
during 2000 to purchase our common stock at an exercise price below the fair
market value on the date of grant, which amounted to $11.3 million in 2000, and
(ii)


                                       14
<PAGE>   15

the post-acquisition amortization of deferred compensation for the estimated
portion of the intrinsic value of unvested stock options assumed by us in
connection with the acquisitions of Panopticon and Servicesoft, which amounted
to $1.3 million in 2000. We granted options to certain employees to purchase an
aggregate of 2.1 million shares of our common stock at below fair market value
during 2000. In addition, in connection with the acquisitions of Panopticon and
Servicesoft, we assumed approximately 5.0 million unvested options with an
estimated intrinsic value of $20.9 million, which will be amortized over the
next four years. For all such options granted or assumed as of March 31, 2001,
quarterly amortization of deferred compensation will be approximately $6.0
million for the remaining quarters of 2001, $2.7 million for 2002, $800,000 for
2003 and $80,000 for 2004.

     Amortization and Impairment of Intangible Assets and Goodwill. The increase
in amortization of intangible assets and goodwill comparing the first three
months of 2001 to 2000 represents amortization of the fair value of acquired
intangible assets and goodwill in connection with the acquisitions of Aperio,
Panopticon, Decisionism and Servicesoft, compared to amortization expenses only
for the acquisition of Rubric during the first three months of 2000. Intangible
assets and goodwill are amortized over a period of three to five years, their
estimated useful lives.

     At March 31, 2001, we evaluated the long-lived assets and associated
goodwill, recorded as a result of our purchase business combinations, for
impairment because events and circumstances indicated that such assets might be
impaired and the estimated fair value of these assets might be less than their
recorded amounts. We performed such an assessment due to (i) the decrease in our
first quarter of 2001 net revenues in comparison to original forecasts due to
the rapid general economic slowdown in the United States and Europe and
resulting curtailment in purchases by corporate enterprises of software products
and services during the first quarter of 2001, (ii) expectations of a continued
slowdown during the remainder of 2001 in corporate enterprise purchases of
software products and services, (iii) the resulting reassessment by management
of our business plan and operations including projected growth rates,
profitability estimates, and product offerings, all leading to a planned
restructuring of operations, including reductions in force in the second quarter
of 2001, (iv) the continuing and expected sustained decline in our stock price
resulting in the net book value of long-lived assets significantly exceeding our
market capitalization, and (v) our imputed value, based on the stock exchange
ratio under the merger agreement with Kana signed on April 9, being less than
our tangible book value. The results of this assessment, which compared
projected enterprise-wide undiscounted cash flows to the carrying value of
long-lived tangible and intangible assets and associated goodwill, indicated
that impairment charge would have to be recorded. The charge recorded, $958.2
million, was based upon the estimated enterprise-wide discounted cash flows over
the remaining useful lives of the assets, including goodwill, using a discount
rate of 20%. The assumptions supporting the cash flows and discount rate used in
the analyses were based on our estimates as of that date. The remaining
intangible assets and goodwill of approximately $32.8 million will be amortized
over their remaining useful lives.


     Acquired In-Process Research and Development. Acquired in-process research
and development in the first three months of 2000 represents the write-off of
the fair value of acquired research and development work obtained in connection
with the acquisition of Rubric. There was no such acquisition activity during
the first three months of 2001. For the Rubric acquisition, the write-off was
necessary because the acquired in-process research and development had not yet
reached technological feasibility and had no future alternative uses, and the
related products under development may not have achieved commercial viability.
The nature of the efforts required to develop the purchased in-process research
and development into commercially viable products principally relate to the
completion of all planning, designing, prototyping, verification and testing
activities that are necessary to establish that the product can be produced to
meet its design specifications, including functions, features and technical
performance requirements.

     We obtained an independent valuation for the Rubric acquisition, and values
were assigned to acquired core and developed technology, in-process research and
development, and other intangibles. The fair value of the acquired in-process
research and development was determined by estimating the projected net cash
flows related to the products, including costs to complete the development of
the technology and the future revenues to be earned upon commercialization of
the products. These cash flows were then discounted back to their net present
value. The projected net cash flows from the project were based on management's
estimates of revenues and operating profits related to the projects.

     The total charge for in-process research and development in the Rubric
acquisition was estimated to be $10.1 million based on the value allocated to
projects identified as in-process research and development on the Rubric eMA
product release versions 3.0 and 4.0. This amount was charged to expense in the
first three months of 2000 immediately following the completion of the
acquisition. At the date of acquisition, the development of the next generation
eMA versions was approximately 60.0% complete. As of March 31, 2001, these
projects were complete; therefore, there will be no future effects on operating
results.


                                       15
<PAGE>   16


     Merger Expenses. In the first three months of 2000, the merger expenses of
approximately $6.2 million resulted from the acquisition of Rubric. This amount
included $1.0 million of payments to fund working capital requirements prior to
the closing of the merger, $2.2 million of employee bonuses paid upon successful
completion of the merger, $800,000 of costs to announce the merger and $2.2
million of costs associated with combining the operations of the two companies,
including $1.4 million for customer integration costs, $400,000 for severance
and related costs and $400,000 for write-off of redundant assets and other
costs.

     Merger related costs in the first three months of 2001 of approximately
$6.2 million resulted from the continued integration of the Decisionism and
Servicesoft acquisitions, both of which were completed in December 2000. These
expenses included $3.5 million for severance and related costs for transitional
and redundant personnel and $2.7 million for the write-off of redundant assets
and other costs. We expect our merger related costs to decline in the second
quarter of 2001 as we complete the integration of the Decisionism and
Servicesoft acquisitions.

Interest Income

     Interest income consists of interest earned on our cash, cash equivalents
and short-term investments. The increase in interest income over the periods
presented resulted from slightly higher average short-term investment balances
as compared to the same period in 2000.

Interest Expense

     The decrease in interest expense comparing the first three months of 2001
to 2000 was attributable to lower debt balances due to regular debt payments, as
well as early extinguishment of certain debt.

Income Taxes

     We had net deferred tax assets of approximately $91.2 million as of
December 31, 2000. Our deferred tax assets primarily relate to net operating
loss carryforwards and compensation related to stock options. Approximately
$58.4 million of the valuation allowance at December 31, 2000 is attributable to
deferred tax assets that if realized, will first reduce unamortized goodwill,
then other non-current intangible assets of acquired subsidiaries, and then
income tax expense. As of December 31, 2000, we had federal net operating loss
carryforwards of approximately $167.2 million, state net operating loss
carryforwards of approximately $98.6 million and foreign net operating loss
carryforwards of approximately $5.1 million. We also had federal and state
research and development tax credit carryforwards of approximately $1.4 million
and $1.0 million, respectively. During the first quarter of 2001, we continued
to generate federal and state net operating loss and tax credit carryforwards
due to continued operating losses and research and development spending.
Realization of these deferred tax assets generated through March 31, 2001 is
dependent on future earnings, if any, the timing and amount of which are
uncertain. Accordingly, a valuation allowance, in an amount equal to our net
deferred tax assets as of March 31, 2001, has been established to reflect these
uncertainties and, correspondingly, there was no tax provision recorded during
the first quarter of 2001. Our net operating loss and tax credit carryforwards
will expire at various dates beginning in 2004, if not utilized. Utilization of
the net operating loss and tax credit carryforwards may be subject to a
substantial annual limitation due to the "change in ownership" provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating loss and tax credit
carryforwards before utilization.

LIQUIDITY AND CAPITAL RESOURCES

     Net cash used in operating activities in the first three months of 2001 was
$36.1 million. This was primarily attributable to our net loss of $1.1 billion
and decreases in accounts payable and accrued expenses, largely offset by net
non-cash charges totaling $1.0 billion primarily related to depreciation,
impairment of intangible assets and goodwill, amortization of deferred stock
compensation, and amortization of intangible assets and goodwill. The decrease
in accounts payable and accrued expenses was primarily the result of payments
made on liabilities incurred with the acquisitions of Servicesoft and
Decisionism, both of which were completed in December 2000. Net cash used in
operating activities in the first three months of 2000 was $13.5 million. This
resulted primarily from our net loss of $37.5 million and increase in accounts
receivable of $4.3 million offset in part by the non cash write-off of acquired
in-process research and development of $10.1 million and the non cash
amortization of intangible assets and goodwill of $11.9 million recorded in
connection with our acquisition of Rubric in February 2000, and to a lesser
extent the amortization of deferred stock compensation of $3.5 million.

     We have commitments under operating leases which are expected to require
quarterly payments in the aggregate of approximately $4.4 million for the
remaining nine months of 2001.



                                       16
<PAGE>   17


     Net cash provided by investing activities was $54.0 million for the first
three months of 2001, resulting primarily from the maturity of short-term
investments of $56.6 million, offset by purchases of property and equipment. For
the first three months of 2000, net cash used in investing activities of $21.2
million consisted primarily of the purchase of short-term investments of $19.4
million, as well as purchases of property and equipment.

     Financing activities during the first three months of 2001 generated $1.0
million, compared to $175.9 million during the same period in 2000. Net cash
provided from financing activities during the first three months of 2001
consisted primarily of proceeds from the issuance of common stock from the
exercise of options and the employee stock purchase program, offset by payments
on notes payable and capital lease obligations. In the first three months of
2000, our financing activities primarily consisted of $175.2 million in net
proceeds from our public offering in February 2000. Since the first three months
of 2001, in connection with our merger agreement with Kana, we entered into a
loan agreement with Kana under which we agreed to loan up to $20 million to Kana
to fund its operating activities.

     As of March 31, 2001, we held $130.7 million of cash, cash equivalents and
short-term investments. We anticipate that our cash and cash equivalents and
short-term investments on hand, combined with cash flows generated from sales,
will be sufficient to fund operating and capital requirements for the next 12
months. However, should additional funding be required for operating
requirements, capital expenditures, acquisitions, or unanticipated events, we
may be required to obtain such additional funding through debt facilities or the
public or private sales of debt or equity securities. There can be no certainty
that such funding will be available in quantities or on terms favorable to us,
or at all. Failure to obtain such funding when needed could seriously harm us
and adversely affect our future results of operations. Furthermore, equity
securities issued to obtain any required funding in the future may substantially
dilute the ownership of common stockholders and have rights, preferences or
privileges to which common stockholders may be subordinate.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

     You should carefully consider the risks described below and the other
information in this report before investing in our common stock. The risks
described below are not the only ones we face. Additional risks that we are
aware of or that we currently believe are immaterial may become important
factors that affect our business. If any of the following risks occur, or if
others occur, our business, operating results and financial condition could be
seriously harmed. The trading price of our common stock could decline due to any
of these risks, and you may lose all or part of your investment.

RISKS RELATED TO OUR BUSINESS

OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE OUR OPERATING HISTORY IS LIMITED
AND WE RECENTLY COMPLETED A MAJOR ACQUISITION.

     Because we are still in the early stages of our development, we are subject
to the risks, expenses and uncertainties frequently encountered by a young
company. For example, because we recently introduced a number of our products,
such as our E-Marketplace application in December 2000 and our E-Service
application (an updated version of the former Servicesoft 2001 product
integrated with certain Broadbase products) in February 2001, it is difficult to
predict whether our products will continue to be accepted by the market, which
is evolving rapidly, and the level of revenues we can expect to derive from
sales of our products. Several members of our management team have been with us
for only a short period of time. Because of our limited operating history and
evolving product offerings, our insights into trends that may emerge and affect
our business are limited. In addition, on December 18, 2000, we completed our
acquisition of Servicesoft, which substantially expanded the scale of our
operations. Because we have limited experience operating as a combined company,
it is even more difficult to evaluate our business.

WE HAVE INCURRED LOSSES SINCE INCEPTION AND WE EXPECT TO INCUR LOSSES FOR THE
FORESEEABLE FUTURE DUE IN PART TO ACQUISITION-RELATED AMORTIZATION CHARGES.

     We incurred net losses and losses from operations for each period from our
inception through the first three months of 2001. As of March 31, 2001, we had
accumulated net losses of approximately $1.3 billion. Servicesoft, which we
acquired on December 18, 2000, had accumulated net losses of approximately
$120.8 million as of that date. We have not achieved profitability to date, and
we expect to continue to incur substantial losses for the foreseeable future.
Although our revenues and Servicesoft's revenues grew significantly in 2000, our
growth has not continued at the same rate. Our revenue growth has been affected
by the challenges we face as a result of the increasingly uncertain economic
conditions both generally and in our market. Although we have reduced our
workforce to


                                       17
<PAGE>   18


decrease operating expenses, we will need to significantly increase our revenue
to achieve profitability. In addition, if our proposed merger with Kana is not
completed, we expect substantial noncash charges from amortization of goodwill,
intangible assets and stock compensation. Even if we do achieve profitability,
we may not be able to sustain or increase profitability on a quarterly or annual
basis in the future.

WE EXPECT OUR QUARTERLY REVENUE AND OPERATING RESULTS TO FLUCTUATE, AND IT IS
DIFFICULT TO PREDICT OUR FUTURE OPERATING RESULTS.

     Our revenue and operating results have varied in the past and are likely to
continue to vary significantly from quarter to quarter in the future. These
fluctuations are due to a number of factors, many of which are outside of our
control, including:

     -  changes in our pricing policies, or changes in the pricing policies of
        our competitors;

     -  the size and timing of customer orders for our products and our
        professional services;

     -  changes in the demand for our products, particularly our e-business
        applications;

     -  uncertainty regarding the timing of the implementation cycle for our
        products;

     -  increased expenses for sales and marketing, product development and
        administration;

     -  changes in the level of sales of professional services as compared to
        product licenses;

     -  our success in developing and introducing new products and the timing of
        the introduction of new product and services by us or our competitors,
        which could affect the demand for our existing products and services;

     -  changes in the purchasing and budgeting cycles of our customers, and the
        discretionary nature of our customers' budgets for software and
        e-business related purchases;

     -  the amount and timing of operating costs and capital expenditures
        relating to the expansion of our business, including acquisitions of
        technology or businesses;

     -  changes in the mix of our domestic and international sales, together
        with fluctuations in foreign currency exchange rates;

     -  changes in general economic and market conditions affecting our
        customers or our industry; and

     -  a trend of continuing consolidation in our industry.

     We have experienced seasonality in our revenues, with the fourth quarter of
the year typically having the highest revenue for the year. We believe that this
seasonality results primarily from the budgeting cycles of our customers. We
expect that this seasonality will continue, and may increase. In addition, our
customers' decisions to purchase our products and services are discretionary and
subject to their internal budgets and purchasing processes. In addition, our
ability to achieve increased revenue and profitability depends on overall demand
for e-business software and related services, and in particular for
customer-focused applications. Due to current slowdowns in the general economy,
we believe that many existing and potential customers are reassessing or
reducing their planned technology and internet-related investments and deferring
purchasing decisions. As a result, there is increased uncertainty with respect
to our expected revenues in 2001, and further delays or reductions in business
spending in the area of information technology, particularly the electronic
customer relationship management or eCRM market and related products and
services, could have a material adverse effect on our revenues and operating
results.

     Our quarterly revenue increased 107% from the first three months of 2000 to
the first three months of 2001. We do not believe that our year-to-year rates of
growth are indicative of the growth in revenues, if any, that we can expect in
the future. Accordingly, we believe that period-to-period comparisons of our
operating results may not be meaningful and you should not rely on these
comparisons as an indication of our future performance. Our operating results
may fall below the expectations of investors. In this event, the market price of
our common stock would likely decrease.


                                       18
<PAGE>   19


OUR OPERATING EXPENSES ARE GENERALLY FIXED, AND IF WE FAIL TO MEET OUR REVENUE
FORECASTS, WE WOULD NOT BE ABLE TO REDUCE THESE EXPENSES QUICKLY.

     During 2001, we reduced our workforce by approximately 41% to significantly
reduce our operating expenses. Despite these cuts, if we do not significantly
increase revenues, we will not achieve profitability. Our operating expenses are
based on our expectations of future revenues and are relatively fixed in the
short term. As a result, we would not be able to reduce spending quickly if our
revenue was lower than we had projected. Therefore, if our revenue falls below
our expectations in any quarter, or if we increase our spending ahead of our
revenue growth, our operating results will be lower than expected.

THE UNPREDICTABLE TIMING OF OUR SALES AND IMPLEMENTATION CYCLE MAKES IT
DIFFICULT TO FORECAST OUR OPERATING RESULTS.

     Our products can have a long and unpredictable sales cycle. Potential
customers often require time to weigh the costs and benefits of our products
compared to those of in-house development and integration efforts. As a result,
our sales cycle for our products has typically ranged from two to seven months,
although it can take longer. Consequently, we face difficulty predicting the
quarter in which sales to expected customers will occur. This contributes to the
uncertainty of our future operating results.

     Delays and uncertainty in product and service implementations can compound
the difficulty of forecasting our operating results. In most customer sales, we
are involved in the installation of our software products at the customer site,
and we recognize revenue from a customer sale based in part on when our software
products are effectively operational. However, the timing of the commencement
and completion of the installation process is subject to factors that may be
beyond our control, as this process requires access to the customer's facilities
and coordination with the customer's personnel after delivery of the software.
In addition, customers may elect to delay product implementations. Further,
general uncertainty in the economy may cause potential new clients to reduce or
eliminate their immediate need to purchase our products, or lead our existing
clients to decline to purchase additional products from us. These factors make
it difficult to forecast operating results and can result in significant
variability in period-to-period results.

OUR ACQUISITIONS MAY RESULT IN DISRUPTIONS TO OUR BUSINESS DUE TO DIFFICULTIES
IN ASSIMILATING PERSONNEL, TECHNOLOGY AND OPERATIONS.

     We recently acquired several companies, including Servicesoft, Decisionism
and Panopticon. Many of these companies are in the early stages of their
development and have unproven business models. We may not realize the
anticipated benefits of these or other acquisitions or investments. The
integration of acquired companies into our own has been and will continue to be
a complex, time consuming and expensive process and may disrupt our business if
not completed efficiently or in a timely manner. For example, our acquisition of
Servicesoft on December 18, 2000 substantially expanded our scale of operations.
The number of our full-time employees increased from 350 at November 30, 2000 to
678 at December 31, 2000, primarily as a result of this acquisition. We must
demonstrate to customers and suppliers that an acquisition will not result in
adverse changes in client service standards, or dilution of or distraction to
our business focus. We may not be able to successfully retain and assimilate
additional personnel, integrate acquired operations and technology or sell
acquired products. The difficulties of integrating other businesses could be
greater than we anticipate, and could disrupt our ongoing business, disrupt our
management and employees and increase our expenses.

ACCOUNTING CHARGES RELATING TO ACQUISITIONS WILL PREVENT US FROM ACHIEVING
POSITIVE NET INCOME UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AS QUICKLY AS
WE MIGHT OTHERWISE.

     We have accounted for our recent acquisitions using the purchase method of
accounting. Under the purchase method, the purchase price of the acquired
company is allocated based on an independent valuation, to the specific tangible
and intangible assets acquired and liabilities assumed. We recorded
approximately $361.8 million, $28.8 million, $92.8 million, $10.7 million and
$630.0 million of intangible assets and goodwill on our balance sheet in
connection with our acquisitions of Rubric, Aperio, Panopticon, Decisionism and
Servicesoft, respectively. During the first three months of 2001, we recorded a
charge of $958.2 million to reflect the impairment of these intangible assets
and goodwill. If our merger with Kana is not completed, we will amortize the
remaining $32.8 million in intangible assets and goodwill as of March 31, 2001,
over their respective remaining useful lives ranging from two to four years. It
is also possible that we could experience further impairment of remaining
intangible assets requiring future additional charges to expense to reflect such
impairment. Finally, we could record additional intangible assets and goodwill
and merger related costs in connection with potential future acquisitions.
Amortization or impairment of such intangible assets and goodwill would reduce
our net income reported under generally accepted accounting principles.


                                       19
<PAGE>   20


WE NEED TO ATTRACT, TRAIN AND RETAIN ADDITIONAL QUALIFIED PERSONNEL IN A
COMPETITIVE EMPLOYMENT MARKET.

     Our success depends on our ability to attract, train and retain qualified,
experienced employees. During 2001, we reduced our workforce by approximately
41%. Although a number of technology companies have recently implemented
lay-offs, there remains substantial competition for experienced management,
engineering, sales and marketing personnel, particularly in the market segment
in which we compete.

     The market price of our common stock has fluctuated substantially since our
initial public offering in September 1999, and has experienced a significant
decline since the first three months of 2000. We have relied historically on our
ability to attract employees using equity incentives, and any perception by
potential and existing employees that our equity incentives are less attractive
could harm our ability to attract and retain qualified employees. In addition,
our workforce reduction may cause lower morale among the employees who are not
being terminated, which could make it more difficult for us to retain those
employees. If our employees perceive uncertainty as a result of our proposed
merger with Kana, current economic circumstances or any other reason, they could
be vulnerable to the recruiting efforts of our competitors. Further, such
perceived uncertainty could hinder our ability to attract or compete for
experienced management, engineering, sales and marketing personnel. If we are
unable to retain our existing key personnel, or to attract, train and retain
additional qualified personnel, we may experience inadequate levels of staffing
to develop and sell our products and perform services for our customers.

     We believe that our success will depend on the continued services of our
executive officers. These employees serve "at-will" and may elect to pursue
other opportunities at any time. On April 3, 2001, we announced the resignation
of Rusty Thomas, our former Chief Financial Officer. We have appointed an
interim replacement for Mr. Thomas. The loss of the services of one or more of
our executive officers could harm our business.

     Several of our executive officers joined us only recently and have had
limited experience working together. For example, four of our executive officers
commenced employment with us during 2000. We cannot assure you that our new
executive officers will be able to work effectively together to manage our
growth and continuing operations.

OUR REDUCTION IN PERSONNEL MAY SERIOUSLY HARM OUR BUSINESS.

     During the first quarter of 2001, we recorded approximately $3.5 million in
merger expense for severance costs to eliminate approximately 100 former
Servicesoft personnel, representing personnel employed on a transitional basis
and certain newly identified redundant employees. During April 2001, we also
initiated a restructuring of our operations and further reduced personnel by
approximately 175 employees in an effort to streamline operations and reduce
costs. These two personnel reductions represented a reduction of approximately
41% based on our staffing level as of December 31, 2000. As a result, we will
record significant restructuring costs in the second quarter of 2001, including
costs of personnel reductions and the abandonment of certain facilities,
although the amount of these costs have not yet been fully quantified. There
have been and will continue to be significant costs associated with these
personnel reductions related to severance and other employee-related costs. As a
result of these reductions, our ability to respond to unexpected challenges may
be impaired and we may be unable to take advantage of new opportunities. In
addition, many of the employees who were terminated possessed specific knowledge
or expertise and that knowledge or expertise may prove to have been important to
our operations. In that case, their absence may create significant difficulties.
Further, the reduction in force may reduce employee morale and may create
concern among existing employees about job security, which may lead to increased
turnover. This personnel reduction may subject us to the risk of litigation.
Decisions as to which employees were terminated in connection with the April
2001 personnel reduction were made by us on the assumption that our merger with
Kana would occur. If the merger does not occur, we may need to hire additional
employees in some areas or terminate employees in other areas. We may not be
able to hire such additional employees and may be adversely affected by any
further reductions in force.

OUR GROWTH DEPENDS ON MARKET ACCEPTANCE OF OUR APPLICATIONS DESIGNED FOR
INTERNET-BASED SYSTEMS.

     We first introduced our applications designed for Internet-based systems in
May 1999, and our E-Service application in February 2001 (an updated version of
the former Servicesoft 2001 product integrated with certain Broadbase products).
We expect that our future growth will depend significantly on revenue from
licenses of these applications and related services. There are significant risks
inherent in introducing Internet-based systems applications. Market acceptance
of these products will depend on the growth of the market for e-business
solutions. This growth may not occur. Further, we cannot assure you that these
e-business applications or any


                                       20
<PAGE>   21


new ones we may introduce will meet customer performance expectations. If they
do not meet customer expectations or the market for these products fails to
develop or develops more slowly than we expect, our business would be harmed.

OUR BUSINESS WILL SUFFER IF WE ARE UNABLE TO MAINTAIN AND, IF NECESSARY, EXPAND
OUR SALES FORCE.

     We sell our products primarily through our direct sales force. We must
maintain and, if necessary, expand our direct sales operations to increase
market awareness of our products and increase revenue. We cannot be certain that
we will be successful in these efforts. Our products and services require
sophisticated sales efforts. As a result, our ability to maintain or expand our
direct sales operations will depend on our ability to recruit, train and retain
top sales people with advanced sales skills and technical knowledge. There is a
shortage of sales personnel with these qualifications, and competition for
qualified personnel is intense in our industry. If we are unable to retain or
hire qualified sales personnel, or if newly hired personnel fail to develop the
necessary skills or reach productivity more slowly than anticipated, our
business could be harmed.

WE RELY ON MARKETING, TECHNOLOGY AND DISTRIBUTION RELATIONSHIPS THAT MAY
GENERALLY BE TERMINATED AT ANY TIME, AND IF OUR CURRENT AND FUTURE RELATIONSHIPS
ARE NOT SUCCESSFUL, OUR GROWTH MAY BE LIMITED.

     We rely on marketing and technology relationships with a variety of
companies that, in part, generate leads for the sale of our products. These
marketing and technology relationships include relationships with:

     -  system integrators and consulting firms;

     -  vendors of e-commerce and Internet software;

     -  vendors of software designed for customer relationship management or for
        management of organizations' operational information;

     -  vendors of key technology and platforms;

     -  demographic data providers; and

     -  an application service provider and an Internet hoster.

     If we cannot maintain successful marketing and technology relationships or
cannot enter into additional marketing and technology relationships, we may have
difficulty expanding the sales of our products and our growth may be limited.
While these companies do not sell or distribute our products, we believe that
many of our direct sales are the result of leads generated by vendors of
e-business and enterprise applications that work with our products. Our
marketing and technology relationships are generally not documented in writing,
or are governed by agreements that can be terminated by either party with little
or no prior notice. In addition, companies with which we have marketing,
technology or distribution relationships may promote products of several
different companies. If these companies choose not to promote our products or if
they develop, market or recommend software applications that compete with our
products, our business will be harmed.

     In addition, we have distribution relationships with companies located
around the world that distribute or resell our products. Sales through these
indirect sales channels accounted for approximately 35.3% of our total revenues
for 1999, 13.6% for 2000 and 8% for first three months of 2001. These channel
partners may experience reduced sales due to a number of factors, including
general economic uncertainty in our industry, which would cause our revenues to
decline. If we cannot maintain successful relationships with our indirect sales
channel partners, we may have difficulty expanding the sales of our products and
our international growth may be limited.

     In addition, we rely on distributors, value-added resellers, systems
integrators, consultants and other third-party resellers to recommend our
Servicesoft products and to install and support these products. If these
companies fail to implement our Servicesoft products successfully for our
customers, we may be unable to complete implementation on the schedule required
by the customers. We may not be able to maintain these relationships and enter
into additional relationships that will provide timely and cost-effective
customer support and service.


                                       21
<PAGE>   22

CUSTOMER SATISFACTION AND DEMAND FOR OUR PRODUCTS WILL DEPEND ON OUR ABILITY TO
EXPAND OUR PROFESSIONAL SERVICES GROUP, WHICH ASSISTS OUR CUSTOMERS WITH THE
IMPLEMENTATION OF OUR PRODUCTS.

     We believe that growth in our product sales depends on our ability to
provide our customers with professional services to assist with support,
training, consulting and initial implementation of our products and to educate
third-party systems integrators in the use of our products. As a result, we may
need to increase the number of professional services personnel to respond to
customer requirements. New professional services personnel will require training
and take time to reach full productivity. We may not be able to attract or
retain a sufficient number of highly qualified professional services personnel.
Competition for qualified professional services personnel with the appropriate
knowledge is intense. We are in a new market and there are a limited number of
people who have the necessary skills. To meet our customers' needs for
professional services, we may also need to use more costly third-party
consultants to supplement our own professional services group. In addition, we
could experience delays in recognizing revenue if our professional services
group falls behind schedule in connecting our products to customers' systems and
data sources.

WE MAY BE UNABLE TO ATTRACT NEW CUSTOMERS IF WE DO NOT DEVELOP NEW PRODUCTS AND
ENHANCEMENTS.

     If we do not continue to improve our products and develop new products that
keep pace with competitive product introductions and technological developments,
satisfy diverse and rapidly evolving customer requirements and achieve market
acceptance, we may be unable to attract new customers. For example, we have
recently released new versions of a number of our existing analytic applications
and our E-Service (formerly Servicesoft 2001) application. We may not be
successful in marketing and supporting these new versions, or developing and
marketing other product enhancements and new products that respond to
technological advances and market changes, on a timely or cost-effective basis.
In addition, even if these products are developed and released, they may not
achieve market acceptance. We have in the past experienced delays in releasing
new products and product enhancements and may experience similar delays in the
future. These delays or problems in the installation or implementation of our
new releases may cause customers to forego purchases of our products.

WE DEPEND ON INCREASED BUSINESS FROM OUR NEW CUSTOMERS, AND IF WE FAIL TO GROW
OUR CUSTOMER BASE OR GENERATE REPEAT BUSINESS, OUR OPERATING RESULTS COULD BE
HARMED.

     If we fail to grow our customer base, generate repeat and expanded business
from our current and future customers, our business and operating results will
be seriously harmed. In some cases, our customers initially make a limited
purchase of our products and services for pilot programs. These customers may
not choose to purchase additional licenses to expand their use of our products.
These customers have not yet developed or deployed initial applications based on
our products. If these customers do not successfully develop and deploy these
initial applications, they may choose not to purchase deployment licenses or
additional development licenses.

     The effectiveness of our Servicesoft products depends in part on the
widespread adoption and use of these products by customer support personnel.
Some of our customers who have made initial purchases of this software have
deferred or suspended implementation of our products due to slower than expected
rates of internal adoption by customer support personnel. If more customers
decide to defer or suspend implementation of these products in the future, our
ability to increase our revenue from these customers through additional licenses
or maintenance agreements will also be impaired, and our financial position may
be seriously harmed. Our business model generally depends on the expanded use of
our products within our clients' organizations.

     In addition, as we introduce new versions of our products or new products,
our current customers may not require the functionality of our new products and
may not ultimately license these products. Because the total amount of
maintenance and support fees we receive in any period depends in large part on
the size and number of licenses that we have previously sold, any downturn in
our software license revenue would negatively affect our future services
revenue. In addition, if customers elect not to renew their maintenance
agreements, our services revenue could decline significantly. Further, some of
our customers are Internet-based companies, which have been forced to
significantly reduce their operations in light of limited access to sources of
financing and the current economic slowdown. If customers are unable to pay for
their current products or are unwilling to purchase additional products, our
revenues would decline.

MARKET ACCEPTANCE OF OUR PRODUCTS MAY SUFFER IF WE ARE UNABLE TO KEEP PACE WITH
RAPID TECHNOLOGICAL CHANGES AND INDUSTRY STANDARDS.


                                       22
<PAGE>   23


     Rapidly changing technology and operating system standards, changes in
customer requirements and evolving industry standards may impede market
acceptance of our products. Our new applications have been designed based upon
currently prevailing Internet technology. If new Internet technologies emerge
that are incompatible with our applications, or if competing products emerge
which are based on new technologies or new industry standards which perform
better or cost less than our products, our key products may become obsolete and
our existing and potential customers may seek alternatives to our products. We
may not be able to quickly adapt our products to any new Internet technology,
customer requirements or industry standards.

     We have designed our products to work with databases such as Oracle and
Microsoft SQL Server. Any changes to those databases, or increasing popularity
of other databases, could require us to modify our products, and could cause us
to delay releasing future products and enhancements. Furthermore, software
adapters are necessary to integrate our products with other systems and data
sources used by our customers. We must develop and update these adapters to
reflect changes to these systems and data sources in order to maintain the
functionality provided by our products. As a result, uncertainties related to
the timing and nature of new product announcements, introductions or
modifications by vendors of operating systems, databases, customer relationship
management software, web servers and other enterprise and Internet-based
applications could delay our product development, increase our product
development expense or cause customers to delay evaluation, purchase and
deployment of our products.

OUR BUSINESS DEPENDS ON THE ACCEPTANCE AND USE OF THE WINDOWS NT OPERATING
SYSTEM.

     Most of our products run only on the Windows NT operating system. Any
change to this operating system could require us to modify our products and
could cause us to delay product releases. Any decline in the market acceptance
of the Windows NT operating system for any reason, including as a result of
errors or delayed introduction of enhancement or upgrades, could seriously harm
our business. If potential customers do not want to use the Windows NT operating
system, we will need to develop products that run on other operating systems
such as Windows 2000, the successor to Windows NT, or any of the UNIX based
systems. The development of new products in response to these risks would
require us to commit a substantial investment of resources, and we may not be
able to successfully develop or introduce such products on a timely or
cost-effective basis, or at all, which could lead potential customers to choose
alternative products.

FAILURE TO LICENSE NECESSARY THIRD PARTY SOFTWARE INCORPORATED IN OUR PRODUCTS
MAY CAUSE DELAYS OR REDUCTIONS IN OUR SALES.

     We license third party software that we incorporate into our products.
These licenses may not continue to be available on commercially reasonable terms
or at all. Some of this technology would be difficult to replace. The loss of
any such license could result in delays or reductions of our applications until
we identify, license and integrate or develop equivalent software. If we are
required to enter into license agreements with third parties for replacement
technology, we could be subject to higher royalty payments and a loss of product
differentiation. In the future, we may need to license other software to enhance
our products and meet evolving customer needs. If we are unable to do this, we
may experience reduced demand for our products.

WE FACE INTENSE COMPETITION WHICH COULD MAKE IT DIFFICULT TO ACQUIRE AND RETAIN
CUSTOMERS.

     Our market is intensely competitive, and we expect competition to intensify
in the future. In recent periods, some of our competitors reduced the prices of
their products and services (substantially in certain cases) in order to obtain
new customers. Competitive pressures may make it difficult for us to acquire and
retain customers and may require us to reduce the price of our products. Failure
to maintain and enhance our competitive position could seriously harm our
business. Our customers' requirements and the technology available to satisfy
those requirements are continually changing. Therefore, we must be able to
respond to these changes in order to remain competitive.

     Our competitors vary in size and in the scope and breadth of products and
services offered. We currently face competition from providers of
consulting-based analytic solutions, providers of e-service software products
similar to our Servicesoft products, vendors of point technologies that provide
website analysis, in-house development efforts by potential customers, and from
other software providers. We may also face competition from providers of
customer relationship management, e-commerce and communications solutions. In
addition, we face competition from vendors of other enterprise applications as
they expand the functionality of their product offerings, including companies
that design software for decision support, management of customer relationships
or of organizations operational information or for providing customer service,
as well as vendors of database applications. In addition, we expect that
competition may increase as a result of software industry consolidations and
formations of alliances among industry participants or with third parties. For
example, eGain Communications Corp. recently acquired Inference Corporation,
Siebel Systems, Inc. recently acquired Onlink Technologies, Inc., and E.piphany,
Inc. recently acquired Octane Software, Inc. Finally, it is possible that new
competitors may emerge.


                                       23
<PAGE>   24


     Some of our current and potential competitors have longer operating
histories and significantly greater financial, technical, marketing and other
resources than we do, and thus may be able to respond more quickly to new or
changing opportunities, technologies and customer requirements. Also, many
current and potential competitors have wider name recognition and more extensive
customer bases that they could leverage, thereby gaining market share to our
detriment. They may be able to undertake more extensive promotional activities,
adopt more aggressive pricing strategies, and offer purchasers more attractive
terms than we can. Our competitors may develop products that are superior to
ours or that achieve greater market acceptance.

WE DEPEND ON OUR INTELLECTUAL PROPERTY, AND LITIGATION REGARDING OUR
INTELLECTUAL PROPERTY COULD HARM OUR BUSINESS.

     The success of our business is largely dependent on our ability to protect
our intellectual property. Our intellectual property includes our proprietary
technology, trade secrets, trademarks and copyrights in our software products.
We have no issued patents, although patents may become increasingly important in
software and e-business applications. Existing copyright, trademark and trade
secret laws afford only limited protection, and the laws of some foreign
countries do not protect our proprietary rights to the same extent as do the
laws of the United States. Third parties may infringe upon our intellectual
property rights, and we may be unable to detect this unauthorized use or
effectively enforce our rights. In addition, any legal action that we may bring
to protect our intellectual property rights could be expensive and distract
management from day-to-day operations. Unauthorized use or misappropriation of
our intellectual property could seriously harm our business.

     Our business activities may infringe upon the proprietary rights of others,
and other parties may assert infringement claims against us. If we become liable
to any other third party for infringing its intellectual property rights, we
could be required to pay substantial damage awards and to develop non-infringing
technology, obtain licenses or cease selling the applications that contain the
infringing intellectual property. We could have to redesign our products, which
could be costly and time-consuming and could substantially delay product
shipments, assuming that a redesign is even feasible. We may be unable to
develop non-infringing technology or obtain licenses on commercially reasonable
terms, if at all. Litigation is subject to inherent uncertainties and any of
these results in connection with a lawsuit could seriously harm our business.
Furthermore, we could incur substantial costs in defending against any
intellectual property litigation, and these costs could increase significantly
if any dispute were to go to trial. Our defense of any litigation, regardless of
the merits of the complaint, will likely be time-consuming, costly and a
distraction for our management personnel. Publicity related to any intellectual
property litigation could also harm the sale of our products and disrupt our
relationships with existing clients.

SOFTWARE DEFECTS COULD LEAD TO LOSS OF REVENUE OR DELAY IN MARKET ACCEPTANCE FOR
OUR PRODUCTS OR MAY EXPOSE US TO LIABILITIES.

     Our software products are internally complex and may contain defects,
especially when they are first introduced or when new versions are released. In
the past, we have discovered software errors in some of our products after their
introduction. We recently released new versions of a number of our analytic
software applications and our E-Service (formerly Servicesoft 2001) application.
As a result, these products may be particularly susceptible to errors. Although
we continue to evaluate our products for errors following the commencement of
commercial shipments and receive information from customers regarding errors
they detect, if we are not able to detect and correct errors in products or
releases before commencing commercial shipments, we may experience loss of or
delay in revenues, loss of market share or failure to achieve market acceptance
for our products, diversion of development resources or injury to our
reputation.

     We may encounter product liability claims in the future as a result of any
product defects. Our license agreements with our customers typically contain
provisions designed to limit our exposure to potential product liability claims.
However, all domestic and international jurisdictions may not enforce these
limitations. Product liability claims brought against us could divert the
attention of management and key personnel, could be expensive to defend and may
result in adverse settlements and judgments.

BARRIERS TO INTERNATIONAL EXPANSION COULD LIMIT OUR FUTURE GROWTH.

     We have only a limited history of marketing, selling and supporting our
products and services internationally. We conduct our international sales
primarily through direct sales offices in Europe and Asia, through a Servicesoft
subsidiary in Canada and through distributors in Japan. Revenue from customers
outside the United States represented 23.2%, 20.3% and 30.1% of our total net
revenue for 1999, 2000, and the first three months of 2001, respectively. We
intend to expand our international operations, but we may face significant
barriers to this expansion. Our failure to manage our international operations
effectively could limit the future growth of


                                       24
<PAGE>   25

our business. The expansion of our existing international operations and entry
into additional international markets will require significant management
attention and financial resources. Expenses incurred in expanding international
operations might never result in increased revenue.

     Our products must be localized, or customized to meet local user needs, in
order to be sold in particular foreign countries. Developing localized versions
of our products for foreign markets is difficult and can take longer than we
anticipate. We currently have limited experience in localizing products and in
testing whether these localized products will be accepted in the targeted
countries. We cannot assure you that our localization efforts will be
successful.

     We also face certain other risks inherent in conducting business
internationally, such as:

     -  difficulties and costs of staffing and managing international
        operations;

     -  difficulties in recruiting and training an international staff;

     -  difficulties in entering into strategic relationships with companies in
        international markets, particularly in Japan where the majority of our
        sales have been made through distributors;

     -  language and cultural differences;

     -  difficulties in collecting accounts receivable and longer collection
        periods;

     -  seasonal business activity in certain parts of the world;

     -  fluctuations in currency exchange rates;

     -  legal and governmental regulatory requirements;

     -  tariffs, duties, price controls and other trade barriers; and

     -  potentially adverse tax consequences.

     Any of these factors could seriously harm our international operations and,
consequently, our business.

     To date, a majority of our international revenue and costs have been
denominated in foreign currencies. We have not engaged in any foreign exchange
hedging transactions to mitigate exchange rate risk. Accordingly, our results of
operations could be harmed by foreign currency exchange rate fluctuations.

WE GREW RAPIDLY IN 2000, AND THE FAILURE TO MANAGE CHANGE COULD HARM OUR
BUSINESS.

     We grew rapidly in 2000, increasing our total number of full-time employees
from 131 at December 31, 1999 to 678 at December 31, 2000. During the first and
second quarters of 2001, we reduced our personnel to approximately 560 and 400
employees, respectively. Our net growth over this period has placed significant
demands on management as well as on our administrative, operational and
financial resources and controls.

     We recently completed the implementation of several new operational
information systems, and began an extensive upgrade of our finance, accounting,
and product distribution systems. In addition, we deployed certain of these
systems in our European operations during the first three months of 2001. We
plan to continue deployment of various modules of these systems throughout
Europe and Japan in the second quarter of 2001. Failure to successfully complete
these systems implementations, upgrades, and deployments in a timely and
effective manner may result in the disruption of our operations, which could
adversely affect our operating results. Any future growth in our operations
could cause similar, and perhaps increased, strain on our systems and controls.

OUR PROSPECTS FOR OBTAINING ADDITIONAL FINANCING, IF REQUIRED, ARE UNCERTAIN AND
FAILURE TO OBTAIN NEEDED FINANCING COULD AFFECT OUR ABILITY TO PURSUE FUTURE
GROWTH.


                                       25
<PAGE>   26

     We expect that our cash and cash equivalents and short-term investments on
hand will be sufficient to meet our working capital and capital expenditure
needs for the next 12 months. However, if our merger with Kana is not completed,
we may need to raise additional funds for expansion, to respond to competitive
pressures or to acquire complementary products, businesses or technologies. We
might not be able to obtain additional financing on favorable terms, if at all,
especially in light of the currently uncertain market climate. If we issue
additional equity securities, stockholders may experience additional dilution or
the new equity securities may have rights, preferences or privileges senior to
those of existing holders of common stock. If we cannot raise necessary
additional funds on acceptable terms, we may not be able to fund expansion, take
advantage of future opportunities or respond to competitive pressures or
unanticipated requirements.

OUR STOCK PRICE HAS BEEN VOLATILE, WHICH COULD LEAD TO LOSSES BY INVESTORS AND
TO SECURITIES LITIGATION.

     The market price of our common stock has experienced a significant decline
in recent months. The price has been and is likely to continue to be highly
volatile due to several factors, such as:

     -  variations in our actual and anticipated operating results;

     -  changes in our earnings estimates by analysts;

     -  the volatility inherent in stocks within the emerging sector within
        which we conduct business; and

     -  the volume of trading in our common stock.

     In addition, stock markets, particularly the Nasdaq National Market, have
experienced extreme price and volume fluctuations, and the market prices of
securities of technology companies, especially Internet-related companies, have
declined significantly in recent months. Some of these declines have been
unrelated to the operating performance of such companies. Fluctuations or
declines such as these may continue to affect the market price of our common
stock in the future. Substantial sales of our common stock could also cause the
stock price to decline.

     In the past, securities class action litigation has often been instituted
against companies following periods of volatility in their stock price. This
type of litigation could result in substantial costs and could divert our
management's attention and resources.



RISKS RELATING TO OUR PROPOSED MERGER WITH KANA

WE MAY NOT ACHIEVE THE BENEFITS WE EXPECT FROM OUR PROPOSED MERGER WITH KANA

     On April 9, 2001, we entered into the merger agreement with Kana. We expect
that our merger with Kana will result in significant benefits. Achieving the
benefits of the merger depends on the timely, efficient and successful execution
of a number of post-merger events. Key events include:

        -   integrating the operations and personnel and eliminating
            redundancies of the two companies;

        -   integrating the products and technologies of the two companies;

        -   offering the existing products and services of each company to the
            other company's customers; and

        -   developing new products and services that utilize the assets of both
            companies.

     We will need to overcome significant issues, however, in order to realize
any benefits or synergies from the merger. The successful execution of these
post-merger events will involve considerable risk and may not be successful. In
general, we cannot assure you that we can successfully integrate or realize the
anticipated benefits of the merger.


                                       26
<PAGE>   27

FAILURE TO COMPLETE THE MERGER COULD NEGATIVELY IMPACT OUR STOCK PRICE AND OUR
FUTURE BUSINESS AND OPERATIONS.

     If the merger is not completed for any reason, we may be subject to a
number of material risks, including the following:

        -   we may be required under certain circumstances to pay to Kana a
            termination fee of $2.5 million and reimburse Kana for expenses
            incurred to collect that fee;

        -   the price of our common stock may decline to the extent that the
            current market price of our common stock reflects a market
            assumption that the merger will be completed; and

        -   costs incurred by us related to the merger, such as legal,
            accounting and a portion of financial advisor fees, must be paid
            even if the merger is not completed.

ANNOUNCEMENT OF THE MERGER MAY DELAY OR DEFER CUSTOMER AND SUPPLIER DECISIONS
CONCERNING US, WHICH MAY NEGATIVELY AFFECT OUR BUSINESS

     Our customers and suppliers, in response to the announcement of the merger,
may delay or defer decisions concerning us. In addition, our customers or
channel partners may seek to change existing agreements they have with us as a
result of the merger. Any delay or deferral in those decisions or changes in
contracts by our customers or suppliers could have a material adverse effect on
our business, regardless of whether the merger is ultimately completed.
Similarly, current and prospective employees may experience uncertainty about
their future roles with us until the strategies of the combined company are
announced or executed. This may adversely affect our ability to attract and
retain key management, sales, marketing and technical personnel.

WE HAVE ENTERED INTO AGREEMENTS WITH KANA THAT WOULD SEVERELY LIMIT OUR ABILITY
TO COMBINE WITH A THIRD PARTY IF THE MERGER IS NOT COMPLETED

     If the merger is terminated and our board of directors determines to seek
another merger or business combination, there can be no assurance that we will
be able to find a partner willing to enter into an equivalent or more attractive
agreement than the merger agreement. In addition, while the merger agreement is
in effect and subject to very narrowly defined exceptions, we are prohibited
from soliciting, initiating or encouraging or entering into certain
extraordinary transactions, such as a merger, sale of assets or other business
combination, with any party other than Kana. These factors could also adversely
affect our stock price.

     The stock option we have granted to Kana under the stock option agreement
gives Kana the right to purchase up to 19.9% of our common stock at a favorable
price. The stock option is exercisable by Kana upon certain events associated
with a competing transaction between us and a third party. The distribution and
license agreement between us and Kana gives Kana a worldwide license to all of
our intellectual property at a favorable royalty, including the right under
certain circumstances to receive our source code, currently being held in
escrow. This agreement does not terminate upon the termination of the merger
agreement. The terms of the stock option and the distribution and license
agreement, either alone or in combination with the other, will make it
substantially more difficult for us to pursue a competing transaction with a
third party because of the obstacles posed by these agreements to a potential
third party suitor. For example, a third party who proposed to merge with us in
an alternate transaction might have to negotiate with a 19.9% stockholder
opposed to the alternate transaction who holds a license to all of our
intellectual property.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

     Our exposure to market risk for changes in interest rates relates primarily
to our investment portfolio. The primary objective of our investment activities
is to preserve principal while at the same time maximizing yields without
significantly increasing risk. At March 31, 2001, our portfolio included money
market funds, commercial paper, municipal bonds, government agency bonds, and
corporate bonds. The diversity of the portfolio helps us to achieve our
investment objective. At March 31, 2001, the weighted average maturity of our
portfolio was 60 days.

     Our debt obligations consist primarily of capital leases assumed in
connection with the acquisitions of Rubric and Aperio. These debt facilities
were used primarily to purchase capital items such as computers and office
equipment. Currently, all such capital spending is funded using working capital.
The interest rates on our assumed capital lease obligations are fixed.


                                       27
<PAGE>   28


     We are exposed to market risk from fluctuations in foreign currency
exchange rates. We manage exposure to variability in foreign currency exchange
rates primarily through the use of natural hedges, as both liabilities and
assets are denominated in the local currency. However, different durations in
our funding obligations and assets may expose us to the risk of foreign exchange
rate fluctuations. We have not entered into any derivative instrument
transactions to manage this risk. Based on our overall foreign currency rate
exposure at March 31, 2001, we do not believe that a hypothetical 10% change in
foreign currency rates would materially adversely affect our financial position.

PART II  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

None.

Use of Proceeds from Sale of Registered Securities

     Our registration statement on Form S-1 (File No. 333-82251) was declared
effective by the SEC on September 21, 1999. A total of 9,200,000 shares of our
common stock were registered with the SEC with an aggregate offering price of
$64.4 million. The offering commenced on September 21, 1999, and a total of
9,200,000 shares of common stock were sold for an aggregate offering price of
$64.4 million through a syndicate of underwriters managed by Deutsche Banc Alex.
Brown, Dain Rauscher Wessels, Thomas Weisel Partners LLC and E*Offering. We sold
8,000,000 shares on September 27, 1999 and 1,200,000 shares on October 18, 1999.

     We paid the underwriters underwriting discounts and commissions totaling
$4.5 million in connection with the offering. In addition, we incurred
additional expenses of approximately $2.1 million in connection with the
offering, which when added to underwriting discounts and commissions paid by us
amounts to total expenses of $6.6 million. Therefore the net offering proceeds
to Broadbase, after deducting underwriting discounts and commissions and
estimated offering expenses, were approximately $57.8 million. No offering
expenses were made directly or indirectly to any directors or officers of
Broadbase or their associates, persons owning 10% or more of any class of equity
securities of Broadbase, or to any other of our affiliates.

     As of March 31, 2001, we had used the aggregate net proceeds of $57.8
million that we received from our initial public offering as follows (in
millions):

<TABLE>
<CAPTION>
<S>                                                        <C>
Construction of plant, building and facilities:            $   1.7
Purchase and installation of machinery and equipment:      $  24.7
Repayment of indebtedness:                                 $   0.4
Working capital:                                           $  31.0
</TABLE>

     The foregoing amounts represent our best estimate of the use of proceeds
for the period indicated. No such payments were made to directors or officers of
Broadbase or their associates, holders of 10% or more of any class of equity
securities of ours or to affiliates of ours.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

    Not applicable.

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

    None

ITEM 5. OTHER INFORMATION

    None.


                                       28
<PAGE>   29


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     a. Exhibits

     2.01 Agreement and Plan of Merger, dated April 9, 2001, among Kana
Communications, Inc., Arrow Acquisition Corp. and Broadbase Software, Inc.
(incorporated herein by reference to Exhibit 1 to Schedule 13D (File No.
005-56923) filed with the Securities and Exchange Commission by Broadbase
Software, Inc. with respect to Kana Communications, Inc., on April 19, 2001).

     b. Reports on Form 8-K.

     On February 8, 2001, we filed an amended current report on Form 8-K to file
historical and pro forma financial information required under Item 7 in
connection with our acquisition of Servicesoft.


                                       29
<PAGE>   30


                                   SIGNATURES

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

                                          BROADBASE SOFTWARE, INC.

Dated:  May 10, 2001                      By:  /s/     Sam Henry
                                               ---------------------------------
                                               Interim Chief Financial Officer



                                       30
<PAGE>   31


                                  EXHIBIT INDEX

<TABLE>
<CAPTION>

 EXHIBIT                                                                          INCORPORATED BY REFERENCE                 FILED
  NUMBER                       EXHIBIT DESCRIPTION                         FORM       FILE NO.   EXHIBIT      FILING DATE  HEREWITH
 -------                       -------------------                         ----       --------   -------      -----------  --------
<S>         <C>                                                        <C>            <C>        <C>          <C>          <C>
   2.01     Agreement and Plan of Merger, dated April 9, 2001, among   Schedule 13D   005-56923     1           4/19/01
            Kana Communications, Inc., Arrow Acquisition Corp. and
            Broadbase Software, Inc.
</TABLE>




                                       31