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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-KSB

(Mark One)

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

                   For the fiscal year ended December 31, 1999

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

             For the transition period from __________ to __________

                         Commission file number 0-25678

                               MUSTANG.COM, INC.
                 (Name of small business issuer in its charter)

              California                                   77-0204718
    (State or other jurisdiction of                      (IRS employer
    incorporation or organization)                   identification number)

         6200 Lake Ming Road
       Bakersfield, California                               93306
(Address of principal executive offices)                  (Zip Code)

        Issuer's telephone number: (661) 873-2500

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

                           Common Stock, no par value

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 [ ]

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year: $3,710,935

State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days.

$157,980,000 based on the average of the bid and asked prices on March 7, 2000
as reported by The Nasdaq SmallCap Market.

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 6,120,304 at March 7, 2000.

DOCUMENTS INCORPORATED BY REFERENCE:

None


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        This Annual Report on Form 10-KSB contains forward-looking statements.
These statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those anticipated in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in the Section under Item 1 -
Description of Business - Risk Factors.

        Readers should not place undue reliance on forward-looking statements,
which reflect management's view only as of the date of this Report. The Company
undertakes no obligation to revise publicly these forward-looking statements to
reflect subsequent events or circumstances. Readers should also carefully review
the risk factors described in other documents the Company files from time to
time with the Securities and Exchange Commission.

                                   ----------

        FileCenter(TM), ListCaster(TM), Mustang(TM), Mustang.com(TM), Mustang
AgentPro(TM), Mustang Architect(TM), Mustang AutoAgents(TM), Mustang
KnowledgeLink(TM), Mustang Message Center(TM), Mustang Network(TM), Mustang
Notify(TM), Mustang Outlook Agent(TM) and Mustang TeleAgent(TM). are trademarks
of Mustang.com, Inc. "Exchange Server," "Microsoft," "Outlook," "Windows,"
"Windows 95," "Windows 98" and "Windows NT" are trademarks of Microsoft
Corporation. This Report also contains trademarks of other companies.

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

RECENT EVENT

        On February 28, 2000 registrant announced that it entered into an
agreement with Quintus Corporation for Quintus to acquire registrant in a stock
merger valued at approximately $290 million based on the Nasdaq closing price of
Quintus' common stock on February 25, 2000. Under the terms of the agreement,
Quintus will exchange .793 shares of Quintus common stock for each outstanding
share of registrant's common stock. This exchange ratio represents a premium of
48% over the Nasdaq closing price of registrant's common stock on February 25,
2000. All outstanding options and warrants to purchase registrant's common stock
will also be assumed by Quintus, adjusted for the exchange ratio. The
acquisition will be accounted for by Quintus Corporation as a purchase
transaction and has been structured to be tax-free to stockholders. The
acquisition has been approved by the board of directors of both Quintus
Corporation and Mustang.com, Inc. Completion of the acquisition is subject to
customary closing conditions, including regulatory approval and approval of
registrant's shareholders. The acquisition is expected to be completed in the
second calendar quarter of 2000.

        Registrant expects to mail a proxy statement to its shareholders
containing information about the acquisition. Investors and security holders are
urged to read the the proxy statement carefully when it becomes available
because it will contain important information. Investors and security holders
will be able to obtain free copies of proxy statement through the website
maintained by the SEC at http://www.sec.gov.

COMPANY BACKGROUND

        Mustang.com ("Mustang" or the "Company") develops, markets, services and
supports the Mustang Message Center, an e-mail management software solution that
offers companies and other enterprises the ability to manage their inbound
e-mail and Internet-based inquiries timely and accurately. Mustang Message
Center competes in the emerging e-mail management market and has received
several prestigious awards as best product in its class from sources devoted to
monitoring the rapidly growing computer telephony, customer management, e-mail
management and call center markets.

        Mustang also develops, markets and supports other software products that
offer businesses the capability to improve customer service, market products,
enhance sales and increase employee productivity. These products include
ListCaster, a powerful e-mail message server that allows easy mass e-mailings
from maintained lists and



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enables e-mail recipients to correspond with each other through the originating
site on the World Wide Web of the Internet called a "Website"; and FileCenter, a
high performance application that permits operators of Websites known as
"webmasters" to provide their users with an organized, searchable library of
files. Mustang began operations in 1986 as a sole proprietorship, became a
general partnership in 1987 and incorporated in California under the name
Mustang Software, Inc. on December 23, 1988. The Company changed its name to
Mustang.com, Inc. on October 12, 1999. Its executive offices and sales,
marketing and administration facilities are located at 6200 Lake Ming Road,
Bakersfield, California, 93306 and its telephone number is (661) 873-2500. It
completed its initial public offering of Common Stock in April 1995. The Company
maintains a Website on the Web at "http://www.mustang.com." Information
contained on the Website is not part of this Report.

RISK FACTORS

        The Company may from time to time make written or oral forward-looking
statements. Written forward-looking statements may appear in documents filed
with the Securities and Exchange Commission, in press releases, and in reports
to shareholders. The Private Securities Reform Act of 1995 contains a safe
harbor for forward-looking statements on which the Company relies in making such
disclosures. In connection with this "safe harbor" the Company is hereby
identifying important factors that could cause actual results to differ
materially from those contained in any forward-looking statements made by or on
behalf of the Company. Any such statement is qualified by reference to the
following cautionary statements:

        Recent Losses; No Assurance of Profitability. During the years ended
December 31, 1997, 1998 and 1999, the Company reported revenue of approximately
$1,898,000, $2,011,000 and $3,711,000, respectively, and incurred net losses of
approximately $1,341,000, $1,157,000 and $906,000, respectively. There can be no
assurance that the Company will be able to profitably market the Mustang Message
Center, any of its other products or any products it may develop in the future.
Until the Company is able to generate sufficient revenues to offset costs and
expenses, of which there can be no assurance, Mustang will continue to sustain
losses. Moreover, the Company's losses may increase in the future as it tries to
implement announced plans to grow revenues.

        Variability of Operating Results; Lengthy Sales Cycle. Mustang's expense
levels are based, in part, on its expectations as to future revenues and are not
expected to decrease, at least in the short term. Further, Mustang may from time
to time be forced by the competitive environment in which it competes to make
tactical or strategic decisions that disrupt or reduce anticipated revenues.
Moreover, during 1998, which was the first year that the Company achieved
material revenues from Mustang Message Center and its other Internet-directed
products introduced during 1997, and continuing during 1999, the Company
observed a trend that a disproportionate percentage of the Company's net sales
were generated during the last month of a quarter. As a result, a shortfall in
sales in any quarter as compared to expectations may not be identifiable until
the end of a quarter. Mustang may not be able to adjust its spending plan in a
timely manner to compensate for any future revenue shortfall. Any significant
shortfall in sales in relation to the Company's revenue expectations would have
a material adverse impact on the Company's business, results of operations,
financial condition and prospects.

        The purchase of the Enterprise and Service Bureau Editions of the
Mustang Message Center, the Company's core product, involves a significant
commitment of customers' personnel and other resources. Furthermore, the cost of
the software is typically only a small portion of the related hardware,
development, training and integration costs associated with implementing a
complete e-mail management solution. For these and other reasons, the sales
cycle associated with the purchase of Mustang Message Center is typically
complex, lengthy and subject to a number of significant risks. Such risks
include changes in customers' budgetary constraints and approval at senior
levels of customers' organizations, over which the Company has no control. The
Company's sales cycle can range from four to six months or more and varies
substantially from customer to customer. Because of the lengthy sales cycle and
the dependence of the Company's quarterly revenues upon a relatively small
number of orders that represent large dollar amounts, the loss or delay of a
single order could have a material adverse effect on the Company's business,
financial condition and results of operations.


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        Uncertainty of Market for E-mail Management Software and Dependence upon
Mustang Message Center. Prior to 1998, most of the Company's revenues were
derived from its Wildcat! WinServer and BBS software. Beginning in the second
quarter of 1997 and continuing throughout that year, Mustang changed its focus
and launched new products designed to facilitate interaction on the Internet's
World Wide Web. Mustang released the Business Edition of Mustang Message Center
in September 1997 and its core product, the Enterprise Edition, in February
1998. The Company added the Service Bureau Edition of Mustang Message Center in
May 1999. The future of the Company is dependent upon the acceptance by the
market of Mustang Message Center and Mustang's ability to market this e-mail
management solution and related services successfully. Mustang Message Center
accounted for over 50 percent of the Company's net sales during 1998 and 98
percent during 1999, but Mustang has only limited operating history with respect
to this product. As a result, as well as the recent emergence of the commercial
e-mail management market, the Company has neither internal nor industry-based
historical financial data for a significant period upon which to project
revenues or base planned operating expenses. Future operating results will
depend on a variety of factors, including Mustang's ability to maintain or
increase market demand for Mustang Message Center and its other products and
services, usage and acceptance of the Internet the introduction and acceptance
of new, enhanced or alternative products or services by Mustang or its
competitors. Other factors that could affect its operating results include
Mustang's ability to anticipate and effectively adapt to a developing market and
to rapidly changing technologies, general economic conditions, competition by
existing and emerging competitors, software defects and other quality control
problems and the mix of products and services sold.

        Undeveloped and Rapidly Changing Markets. The markets for Mustang's
products and services are at a very early stage of development, are rapidly
changing and are characterized by an increasing number of market entrants that
have introduced or are developing competing products and services for use on the
Internet and the World Wide Web. As is typical for a new and rapidly evolving
industry, demand for and market acceptance of recently introduced products and
services are subject to a high level of uncertainty and risk. Acceptance and
usage of the Mustang Message Center is dependent on continued growth in use of
e-mail as a primary means of communications by businesses and consumers.
Businesses that already have invested substantial resources in traditional or
other methods of conducting business may be reluctant to adopt new commercial
methodologies or strategies that may limit or compete with their existing
businesses. Individuals with established patterns of purchasing goods and
services may be reluctant to alter those patterns. Accordingly, it is not
assured that sufficient demand for Mustang's products and services will develop
to sustain Mustang's business.

        There can be no assurance that use of e-mail as a primary method of
communication or commerce over the Internet will become widespread, that a
substantial market for Mustang's products and services will emerge or that the
Mustang Message Center will be generally adopted. Mustang's business, financial
condition and results of operations will be materially and adversely affected if
the market fails to develop as expected or develops more slowly than expected.
Similarly, Mustang's business, financial condition and results of operations
will be materially and adversely affected if the Internet infrastructure is not
adequately expanded or managed, or if Mustang's products and services do not
achieve market acceptance by a significant number of businesses.

        Competition. The market for e-mail message management products and
services is intensely competitive, and Mustang expects competition to increase
significantly. There are no substantial barriers to entry into Mustang's
business, and it expects established and new entities to enter the market for
e-mail message management products and services in the near future. It is
possible that a single supplier will dominate one or more market segments
including e-mail management, customer service and call center automation.
Furthermore, since there are many potential entrants to the field, it is
extremely difficult to assess which companies are likely to offer competitive
products and services in the future, and in some cases it is difficult to
discern whether an existing product or service is competitive with the Mustang
Message Center.

        Mustang's principal competitors in the e-mail message management market
include Aptex, Brightware, eGain, Exactis.com, Inc., Kana Communications,
MessageMedia and Octane Software, each of which provides software solutions for
e-mail management. Mustang also competes with other firms that provide e-mail
message management services on an outsourcing basis. The Company competes with a
number of independent software



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suppliers who offer Web Server or telecommunications software as or among their
product line(s). Several of Mustang's current and potential competitors have
greater name recognition, larger installed customer bases, more diversified
lines of products and services and significantly greater financial, technical,
marketing and other resources than Mustang. Such competitors may be able to
undertake more extensive marketing campaigns, adopt more aggressive pricing
policies and make more attractive offers to businesses to induce them to use
their products or services.

        Limited Intellectual Property and Proprietary Rights. Mustang relies on
a combination of trade secret, copyright and trademark laws, nondisclosure
agreements and other contractual provisions and technical measures to protect
its proprietary rights. Mustang believes that, due to the rapid pace of
technological innovation for Internet products, Mustang's ability to establish
and maintain a position of technology leadership in the industry depends more on
the skills of its development personnel than upon the legal protections afforded
its existing technology. There can be no assurance that trade secret, copyright
and trademark protections will be adequate to safeguard the proprietary software
underlying Mustang's products and services. Similarly, there can be no assurance
that agreements with employees, consultants and others who participate in the
development of its software will not be breached, that Mustang will have
adequate remedies for any breach or that Mustang's trade secrets will not
otherwise become known. Mustang also faces the risk that notwithstanding
Mustang's efforts to protect its intellectual property, competitors will be able
to develop functionally equivalent e-mail message management technologies
without infringing any of Mustang's intellectual property rights. Despite
Mustang's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy or otherwise obtain and use products or technology that Mustang
considers proprietary, and third parties may attempt to develop similar
technology independently. In addition, effective protection of intellectual
property rights may be unavailable or limited in certain countries. Accordingly,
there can be no assurance that Mustang's means of protecting its proprietary
rights will be adequate or that Mustang's competitors will not independently
develop similar technology.

        As the use of the Internet for commercial activity increases, and the
number of products and service providers that support Internet commerce
increases, Mustang believes that Internet commerce technology providers may
become increasingly subject to infringement claims. There can be no assurance
that plaintiffs will not file infringement claims in the future. Any such
claims, with or without merit, could be time consuming, result in costly
litigation, disrupt or delay the enhancement or shipment of Mustang's products
and services or require Mustang to enter into royalty or licensing agreements.
Such royalty or licensing agreements, if required, may not be available on terms
acceptable or favorable to Mustang, which could have a material adverse effect
on Mustang's business, financial condition and results of operations. In
addition, Mustang may initiate claims or litigation against third parties for
infringement of Mustang's proprietary rights or to establish the validity of
Mustang's proprietary rights.

        Dependence of Key Personnel. The Company is dependent upon James A.
Harrer, its President and Chief Executive Officer and C. Scott Hunter, its Vice
President and Chief Technical Officer. The loss of either of these executives
could have a material adverse effect on the Company. While the Company has
one-year employment agreements with these executives, such agreements are
terminable by each without any reason upon four months notice. Moreover,
unforeseen circumstances could cause either of them to no longer render services
to the Company. Mustang has key-man life insurance on the life of Mr. Harrer for
$1,000,000. There can be no assurance that the proceeds from this policy will be
sufficient to compensate the Company in the event of Mr. Harrer's death, and
this policy does not cover the Company in the event that he becomes disabled or
is otherwise unable to render services to the Company. Mustang's success of the
Company is also dependent upon its ability to attract and retain highly
qualified personnel. There can be no assurance that the Company will be able to
recruit and retain such personnel.

        Dependence on Increased Usage; Stability of the Internet. The demand for
products used on the Internet such as those offered by Mustang will depend in
significant part on continued rapid growth in the number of households and
commercial, educational and government institutions with access to the Internet,
in the level of usage by such entities. Usage of the Internet as a source for
information, products and services is a relatively recent phenomenon.
Accordingly, it is difficult to predict whether the number of users drawn to the
Internet will continue to increase and whether any significant market for usage
of the Internet for such purposes will continue to develop and



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expand. There can be no assurance that Internet usage patterns will not decline
as the novelty of the medium recedes or that the quality of products and
services offered online will improve significantly to continue to support user
interest. In addition, it is uncertain whether the cost of Internet access will
decline. Failure of the Internet to stimulate user interest and be accessible to
a broad audience at moderate costs would jeopardize the markets for Mustang's
products and services.

        Issues regarding the stability of the Internet's infrastructure remain
unresolved. The rapid rise in the number of Internet users and increased
transmission of audio, video, graphical and other multimedia content over the
Internet has placed increasing strains on the Internet's communications and
transmission infrastructures. Continuation of such trends could lead to
significant deterioration in transmission speeds and reliability of the Internet
and could reduce the usage of the Internet by businesses and individuals. The
Internet continues to experience significant growth in the number of users and
level of use. Without corresponding increases and improvements in the Internet
infrastructure, there can be no assurance that the Internet will be able to
support the demands placed upon it by such continued growth. Any failure of the
Internet to support such increasing number of users due to inadequate
infrastructure, or otherwise, would seriously limit the development of the
Internet as a viable source of communication or commerce. This could materially
and adversely affect the acceptance of Mustang's products and services that
would, in turn, materially and adversely affect Mustang's business, results of
operations, financial condition and prospects.

        Government Regulation and Legal Uncertainties. Mustang believes it is
not currently subject to direct regulation by any government agency in the U.S.,
other than regulations generally applicable to businesses, and there are
currently few laws or regulations directly applicable to access to, or commerce
on, the Internet. However, there can be no assurance that federal, state or
foreign agencies will not attempt in the near future to begin to regulate the
market for Internet commerce. More generally, due to the increasing popularity
and use of the Internet, it is possible that a number of laws and regulations
will be adopted with respect to the Internet, covering issues such as user
privacy, pricing, taxation and characteristics and quality of products and
services. For example, the Telecommunications Reform Act of 1996 may subject
certain Internet content providers to criminal penalties for the transmission of
certain information and could also result in liability to Internet service
providers, World Wide Web hosting sites and transaction facilitators such as
Mustang. Various foreign jurisdictions have also moved to regulate access to the
Internet and to strictly control World Wide Web content. Even if Mustang's
business is not directly subject to regulation, the adoption of any such laws or
regulations may inhibit the growth of the Internet, or the businesses of the
users of Mustang's products and services, which could in turn adversely affect
Mustang's business, financial condition and results of operations. Moreover, the
applicability to the Internet of existing laws governing issues such as property
ownership, libel, taxation and personal privacy is uncertain. Such uncertainty
creates the risk that such laws could be interpreted in a manner that could
generally inhibit commerce on the Internet and adversely impact Mustang's
business.

        Due to the growth of Internet commerce, Congress has considered
regulating providers of services and transactions in this market, and federal or
state authorities could enact laws, rules or regulations affecting Mustang's
business or operations. Government agencies may promulgate rules and regulations
affecting Mustang's activities or those of the users of its products and
services. Any or all of these potential actions could result in increased
operating costs for Mustang or for the principal users of its products or
services and could also reduce the convenience and functionality of Mustang's
products or services. This could result in reduced market acceptance which would
have a material adverse effect on Mustang's business, financial condition and
results of operations.

        Need to upgrade its systems and the Mustang Hosted Network to
accommodate growth in electronic communications and commerce. In February 2000,
Mustang began offering Mustang Message Center as an application service provider
with its launch of the Mustang Network, a Web-based hosted application service
to provide an alternative for those customers which do not want Mustang Message
Center installed onsite at its location. As a consequence of the new solution,
the Company faces risks related to the ability of the Mustang Network to operate
with higher activity levels while maintaining expected performance. As the
volume and complexity of customer communications and electronic commerce
increases, Mustang will need to expand its systems and



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hosted network infrastructure. The expansion and adaptation of its network
infrastructure will require substantial financial, operational and management
resources. Due to the recent introduction of its hosted Web solution, Mustang's
ability to connect and manage a substantially larger number of customers is
unknown. Customer demand for Mustang's products and services could be greatly
reduced if its fails to maintain high capacity data transmission. In addition,
as it upgrades its network infrastructure, the Company is likely to encounter
equipment or software incompatibility. Mustang may not be able to expand or
adapt its hosted network infrastructure to meet additional demand or its
customers' changing requirements in a timely manner or at all.

        Growth in Demand for its Hosted Network Solution May Adversely Affect
Mustang's Near Term Results of Operations. During 1999, 99% of Mustang's
revenues were derived from sales and related services from the onsite
installation of the Mustang Message Center at customers' locations. An
additional consequence of the Mustang Network solution is the risk that
customers who might have otherwise purchased Mustang Message Center and related
services will prefer the Mustang Network solution. Mustang Message Center over
the Mustang Network offers the same functionality as the onsite installation of
the Mustang Message Center but at a substantially lower up front cost. Mustang
believes that to remain competitive it must offer Mustang Message Center as an
application service provider and that, over time, providing this service will
generate revenues that more than make up for lost sales of onsite installations.
However, in the near term, its results of operations could suffer if onsite
sales are lost due to the popularity of its hosted solution.

        Risks of Unplanned System Interruptions and Capacity Constraints.
Mustang expects that its customers will experience interruptions with its hosted
network from time to time. These interruptions could be due to hardware and
operating system failures. The Company expects a substantial portion of its
revenue to be derived from customers who use its hosted network. If it is
correct (of which there can be no assurance), its business will suffer if
Mustang experiences frequent or long system interruptions that result in the
unavailability or reduced performance of its hosted network or reduce its
ability to provide remote management services. Mustang expects to experience
occasional temporary capacity constraints due to sharply increased traffic or,
as has been the case for other Web-based businesses, the possibility that it
will be targeted by hackers, either of which could cause unanticipated system
disruptions, slower response times, impaired quality and degradation in levels
of customer service. If this were to continue to happen, Mustang's business and
reputation could be seriously harmed. The Company's success largely depends on
the efficient and uninterrupted operation of its computer and communications
hardware and network systems. Substantially all of the Company's computer and
communications systems are located in Bakersfield, Kern County, California.
Mustang's systems and operations are vulnerable to damage or interruption from
fire, earthquake, power loss, telecommunications failure and similar events. Any
unplanned interruption of services may harm Mustang's ability to attract and
retain customers.

        Dependence on relationships with, and the system integrity of, hosting
partners for the Mustang Network. Mustang's hosted network consists of virtual
data centers co-located in the physical data centers of its hosting partners.
Accordingly, it relies on the speed and reliability of the systems and networks
of these hosting partners. If its hosting partners experience system
interruptions or delays, or if the Company does not maintain or develop
relationships with hosting partners, its business could suffer. The lead-time to
add system capacity for Mustang's hosted network at its hosting partner has
increased recently from 90 days to six months and could extend longer in the
future as the use and offerings of application service providers continue to
grow. If Mustang does not anticipate demand for its hosted network accurately
and does not provide sufficient lead-time to its hosted partner for expansion or
timely arrange for alternative hosting partners, if available, to handle growth,
its results of operations and financial condition could be materially adversely
affected.

INDUSTRY OVERVIEW

        The Internet is a worldwide network of private and public computer
networks that link businesses, universities, government agencies and other users
having different computer systems and networks, by means of a common
telecommunications standard. Use of the Internet has grown rapidly since its
commercialization in the early 1990s. International Data Corporation ("IDC")
projects the number of Internet users worldwide to increase from 160



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million in 1998 and to 510 million by 2003 and that over the same period
e-commerce will grow from $50 billion to $1.3 trillion. IDC says that by 2003,
62% of the US population would be online, up from only 26% in 1998.

        The market opportunity for e-mail management software continues to grow
due to the emerging use of the use of the Internet for communication and
innovation. According to IDC, the market for e-mail response solutions is still
in its early growth stage and is expected to increase in the United States from
approximately $27 million in revenue in 1998 to approximately $183 million in
2003, a compound annual growth rate of 46.7%. Worldwide, it is expected to
increase from approximately $29.5 million in revenue in 1998 to approximately
$342 million in 2003, a compound annual growth rate of 63.2%.

CURRENT PRODUCTS

        MUSTANG MESSAGE CENTER.

        The Mustang Message Center is an intelligent e-mail routing and tracking
system, which provides a company or other enterprise with tools to manage
inbound Internet e-mail. Mustang Message Center handles inbound e-mail much like
an automated call distributor handles voice telephone traffic and helps achieve
the same levels of efficiency and customer service through e-mail that companies
strive for in other aspects of its business. Mustang Message Center works with
all of the popular e-mail software applications such as Microsoft Exchange,
Microsoft Outlook, Lotus Notes, cc Mail, Eudora Mail and all other Internet
e-mail applications using the industry-standard Post Office Protocol version 3
("POP3") server accounts, including those running on Windows, Macintosh, OS/2
and Unix.

        The benefits of using Mustang Message Center to manage in-bound e-mail
include:

        - Intelligent Routing. Mustang Message Center automatically routes
incoming e-mail messages to the enterprise personnel or "agents" that the
company predetermines will be best equipped to respond to them quickly and
efficiently. Standard routing is based on the address in the message and
keywords in the message's subject line, body, sender's address or header to a
specific message pool where it queued for response by the agents.

        - Tracking - Mustang Message Center automatically assigns a tracking
number to each incoming message that is addressed to any of a user's defined
Mustang Message Center e-mail pools. At the same time, Mustang Message Center
notifies the customer that his message has been received by sending him an
acknowledgment e-mail that includes the assigned tracking number. The original
message and all replies are tracked so the company has a complete audit trail
for incoming and outgoing corporate e-mail. This provides management with a
quick and easy way to follow up on any complaints or problems a customer might
report.

        - Measurement - Using the detailed reports that Mustang Message Center
creates, businesses can identify which employees, and employee groups are
handling the inbound e-mail, measure their average response time and monitor
overall system and employee efficiency and effectiveness. This helps with the
decision of when to expand or eliminate staffing, by allowing analysis of how
much time is actually being spent answering e-mail and evaluating how effective
agents are at responding.

        - Integration - Mustang Message Center's open, switch-inspired
architecture and intelligent routing environment provide both client-side and
server side Application Programming Interfaces (APIs) enabling enterprises to
tightly integrate Mustang Message Center with existing third-party or custom
developed customer management technologies including but not limited to,
Customer Management, Help Desk, Sales Force Automation, Computer Telephony
integration, workflow applications and telephone systems. To facilitate this
integration by enterprises with available call center technologies, Mustang also
offers Mustang Message Center Architect, a development toolkit that enables
developers of enterprise application software to integrate the Mustang Message
Center agent-client functionality directly into their applications.



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        - Efficiency - Management no longer needs to waste time tracking down
e-mail problems. If customers complain that they have not received a timely
reply, it only takes a few moments to find the original message and identify its
status through Mustang Message Center's reporting and monitoring functions. It
is expected that because they know that their performance is being monitored,
employees will be more motivated to answer e-mail in a timely manner.

        The table below describes the three message center platforms:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
  EDITION        COST                                 DESCRIPTION
--------------------------------------------------------------------------------
<S>            <C>             <C>
Business       $1,500 a        Mustang Message Center Business Edition is an
               server, plus    e-mail management solution designed for small
               $250 per        businesses that process up to 200 messages per
               agent           day. The product stores its data and
                               configurations in Microsoft Access databases and
                               includes all of the tracking and reporting
                               features required to manage e-mail efficiently
                               and effectively. This edition enables potential
                               customers to familiarize themselves with the
                               technology and processes of e-mail management
                               prior to investing in the Enterprise Edition
                               platform.

--------------------------------------------------------------------------------
Enterprise     $10,000 a      Mustang Message Center Enterprise Edition is
               server, plus   designed for companies processing tens of
               $250 per       thousands of e-mails per day. The Enterprise
               agent          Edition provides more extensive routing
                              capabilities, with external routing via the
                              system's ActiveX scripting interface. Also
                              included are client-side and server-side API's to
                              enable integration with existing legacy,
                              e-commerce and eService applications such as
                              workforce management, help desk, sales force
                              automation, customer relationship management
                              ("CRM") and workflow management packages. In
                              addition, this edition stores its data in
                              Microsoft SQL Server or Oracle databases for
                              enhanced performance, dependability and
                              scalability.

--------------------------------------------------------------------------------
Service        $25,000 a      Mustang Message Center Service Bureau Edition is
Bureau         server plus    designed for companies that provide customer
Edition        $250 per       service, customer support, or Internet services
               agent          for multiple clients in an integrated customer
                              service representative ("CSR") environment. By
                              running multiple Mustang Servers on a single
                              server, each with access to its own discrete data
                              stores, this offering directly targets service
                              bureaus, Internet service providers (ISP's) and
                              multi-functional business unit implementations.

--------------------------------------------------------------------------------
</TABLE>

        To supplement the Mustang Message Center, the Company has developed
additional applications to meet the needs of individual customer service
organizations. The table below describes some of the additional products that
complement Mustang Message Center.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
    PRODUCT        PRICE                          FUNCTIONALITY
--------------------------------------------------------------------------------
<S>              <C>           <C>
Mustang          $10,000       Mustang AgentPro is a robust Windows application
AgentPro                       that delivers a fully integrated,
                               rapid-message-response client application for the
                               Mustang Message Center. Mustang AgentPro
                               eliminates the need for third-party e-mail
                               applications on the CSR desktop, enabling full
                               time CSR management of inbound e-mail. Mustang
                               AgentPro is designed specifically for
                               mission-critical, high volume e-mail management
                               operations that require dedicated CSR focus for
                               the processing of inbound e-mail.

--------------------------------------------------------------------------------
</TABLE>


                                       9
<PAGE>   10

<TABLE>
--------------------------------------------------------------------------------
<S>              <C>           <C>
Mustang          $7,500        Mustang Outlook Agent incorporates the entire
Outlook Agent                  feature set of Mustang Message Center into the
                               Microsoft Exchange or Outlook messaging and
                               collaboration environment. Mustang Outlook Agent
                               helps enterprises to leverage existing
                               Exchange/Outlook infrastructure by standardizing
                               all e-mail management functions.

--------------------------------------------------------------------------------
Mustang          $5,000        Mustang TeleAgent provides traditional call
TeleAgent                      center CSR's with the same customer e-mail
                               contact history that is available via any of the
                               standard Mustang Agent applications, using a
                               thin-client, Windows-based application designed
                               for seamless integration with existing CRM
                               solutions.

--------------------------------------------------------------------------------
Mustang Notify   $7,500        Mustang Notify is a real-time alarm and
                               integrated workflow application that eliminates
                               the need for managers and administrators to
                               continuously monitor their Mustang Message Center
                               solution via real-time pager, e-mail or cell
                               phone notification.

--------------------------------------------------------------------------------
Mustang          Individual    Mustang AutoAgents allow the Mustang Services
AutoAgents       Case Basis    team to customize an automated e-mail management
                 Pricing       solution by integrating Mustang Message Center
                               with a company's existing enterprise databases
                               and business applications for fully automated or
                               assisted CSR e-mail response.

--------------------------------------------------------------------------------
Mustang           $7,500       Mustang Architect is the developer's toolkit for
Architect                      the Mustang Message Center platform. Mustang
                               Architect enables integration and customization
                               of the complete Mustang Message Center platform
                               within an existing proprietary or commercial
                               customer management solution that supports the
                               listed modalities.

--------------------------------------------------------------------------------
Mustang          $10,000       Mustang KnowledgeLink enables the selective
KnowledgeLink                  publishing of Mustang Message Center's response
                               library content as HTML. Mustang KnowledgeLink is
                               an intelligent, Web-based, self-help solution
                               that dramatically reduces inbound e-mail volumes
                               to CSR's.

--------------------------------------------------------------------------------
</TABLE>

        MUSTANG NETWORK

        In February 2000, Mustang began offering Mustang Message Center as an
application service provider ("ASP") with its launch of the Mustang Network.
ASPs provide a contractual service offering to deploy, host, manage,and rent
access to an application from a centrally managed facility. ASPs are responsible
for either directly or indirectly providing all the specific activities and
expertise aimed at managing a software application or set of applications.

        Mustang Network is a Web-based hosted application service to provide an
alternative for those customers which do not want Mustang Message Center
installed onsite at its location. Through a network of service centers and
hosting partners linked by high-speed Internet connections, the Mustang Network
provides the Company's customers with multiple redundant paths to access their
hosted customer service applications and remotely manage these applications
which reside on server machines co-located at the Company hosting partners'
facilities. The Mustang Network provides a complete e-mail management solution
including intelligent message processing, sophisticated agent workflow,
real-time agent and system metrics and historical reporting applications. The
Mustang Network provides an alternative for companies engaged in electronic
commerce that seek to deploy quickly and efficiently scale their customer
service capabilities. In addition to bandwith and application support, Mustang's
Professional Services team manages all of the administration, workflow, content
and IT services for the customers on a 24-hour-a-day, seven-day-a-week basis.



                                       10
<PAGE>   11

        OTHER PRODUCTS

        LISTCASTER. Mustang's ListCaster is a powerful mailing list server and
SMTP/POP3 server for Windows 95, Windows 98 and Windows NT. A mailing list
server is a software program that automates the administration of mailing lists.
E-mail messages are sent to the server which, in turn, sends the messages to all
subscribers of the list. SMTP or Simple Mail Transfer Protocol is the outgoing
mail server, i.e., the computer contacted to send mail out. POP3 is the incoming
mail server, i.e., the computer to which mail is delivered.

        Webmasters using ListCaster can draw customers to their Websites by
sending e-mail announcing new Web pages, products, services or possibilities
directly to people whose names and e-mail addresses have been compiled on a
mailing list. Once the addressee has received the message, e-mail clients permit
the addressee to link automatically to any URL located in the body of the
message. A URL (Uniform Resource Locator) is a unique identifier for a Web page
or other resource on the Internet that can be embedded into the message sent by
ListCaster. Once the message recipient clicks on the URL contained in the
message, he is immediately taken to the linked Web page and thereby is available
to receive advertising and promotion of offered products and services.

        ListCaster was originally released in May 1997 and updated by Versions
2.0 and 2.1, which were released in June and October 1998, respectively.
ListCaster 2.1 has a suggested retail price of $499.

        FILECENTER. Mustang's FileCenter is a high-performance software program
that automatically manages the process of submitting, posting, and locating
files on Internet and Intranet sites. FileCenter stores file information,
including file name, description, author, and location, in a Microsoft Access
database for quick searches. Taking full advantage of Microsoft's Active Server
technology, FileCenter indexes all the words found in the document, enabling
users to search for the files they need by title, author, description, date,
even the number of downloads. FileCenter eliminates the need to have programmers
manage Websites using File Transfer Protocol ("FTP") to download files to a
remote computer requesting the files.

        FileCenter enables the creators of files to upload them to FileCenter's
library using a Web browser such as Microsoft Internet Explorer 3 or 4 or
Netscape Navigator 3 or 4 by simply clicking on an "upload" icon on a Web page.
The system's Wizard prompts the submitter of the file for all relevant
information. FileCenter automatically catalogs the file and can even optionally
scan the file for viruses using McAfee Virus Scan. FileCenter posts the file,
updates the new submission list, places the file in the proper category and
group, and creates the necessary HTML code to permit viewing the index with an
ordinary browser. System users can then search on any of FileCenter's database
fields including the name of the person uploading the file and the date of
submission. Because the process is completely automated, companies can use
FileCenter to post files on FTP sites rather than waste the disk space and
bandwidth required to distribute them as e-mail attachments. By using FileCenter
along with Mustang's ListCaster interested people, such as those desiring a
product upgrade or software patch can be automatically notified when pertinent
files are posted on the Website. Administrators also have the option of
requiring down-loaders to fill out forms that are automatically e-mailed to the
submitter of the file. This permits authors of financial documents to track
their use, and permits shareware authors to monitor file downloads.

        FileCenter was released in October 1997 and upgraded to the version
currently available in February 1998. It has a suggested retail price of $999.

        SUPPORT SERVICES

        Support services, which include maintenance, implementation, consulting,
installation, training and sales support, are an important element of Mustang's
business. The Company intends to devote substantial additional resources to
supporting its customers and seeking to provide training to indirect channels as
the Company's e-mail management solution becomes more widely adopted. There can
be no assurance the Company will be successful in its efforts to provide
sufficient resources to expand its customer support capabilities or that its
services will be widely sought by customers.


                                       11
<PAGE>   12

        PROFESSIONAL SERVICES

        Mustang provides consulting and systems integration services through its
Professional Services group. Mustang's Professional Services team provides
complete system implementation, integration, training, remote system management,
executive briefings, and other consulting and services necessary for the
implementation of mission-critical e-mail management solutions. The Company
seeks to deploy its Mustang Message Center platform in an average of three to
five business days compared to the three to eight weeks, which, management
believes, is needed by competitors. Mustang believes that the rapid
implementation process coupled with the Company's technology, have led directly
to Mustang's success against competition.

        The Company is expanding its professional services department to support
Mustang's effort to maximize each client relationship to meet the demand for
follow-up service and introduce new products as they are developed. Three
service engineers were recently added to the Professional Services group
bringing the total up to five professional consultants at December 31, 1999. The
Company plans to hire additional professional service representatives as
regional offices are opened and business warrants the support. The Company
believes that its professional services strategy helps maintain strong client
relationships by informing clients of new products, performing peer reviews,
system upgrades, custom developments, and integration to maximize its clients'
customer service capabilities. This strategy creates additional opportunities
for client contact and allows the existing client base to feed the company's
recurring revenue stream. Clients using all levels of Mustang's platforms
purchase peer review and system upgrades with ASP's ranging from $5,000 to
$10,000

        TECHNICAL SUPPORT

        Mustang provides customer support for all its product lines. Support
options consist of direct real-time technical product via telephone with its
support staff as well as electronic support available on the Company's Web site,
via e-mail or through user-to-user public discussion forums, which may or may
not involve Mustang's technical personnel. Fee-based maintenance and support
contracts are offered at the time a product is sold or thereafter and are
renewable periodically. These support agreements are typically priced at 20
percent of the list price of the related software. Maintenance and support
agreements entitle customers to software upgrades and fixes, as well as
technical support via the Web, e-mail and telephone on either a toll-free or
toll call basis.

SALES, MARKETING AND DISTRIBUTION

        The Company has targeted enterprises with substantial influx of e-mail
as its primary direct customers. It has also focused particularly on the call
center market and to a lesser extent the help desk market for its Mustang
Message Center, believing that these markets present practical opportunities for
Mustang Message Center use and integration with other applications or product
suites of OEMs and VARs.

        In 1998, the Company began concentration on building a direct sales
force to sell its Mustang Message Center directly to businesses. At December 31,
1999, Mustang's direct sales force consisted of 14 individuals. This compares to
four individuals engaged in telesales at December 31 1998.

               The Company also uses OEM and VAR distribution channels for
Mustang Message Center and has pursued partnership and integration opportunities
to support the sale and integration of Mustang Message Center. The Company views
OEM and VAR distribution channels as an important channel for the continued
growth and adoption of Mustang Message Center.. These include an OEM arrangement
with Siemens Business Communications, which makes provision for Siemens to
incorporate Mustang's Mustang Message Center Enterprise Edition into Siemens'
ProCenter MX product line initially in North America, and later throughout
Siemens' worldwide operations and channels. They also include the recently
announced integration of Mustang's Mustang Message Center with eContact offered
by Quintus Corporation. Such integration provides an integrated solution
provided by Quintus for email management, web self help, live help through
web-chat and browser-collaboration, voice over the Internet, and traditional
phone calls.



                                       12
<PAGE>   13

        The Company is implementing it's own certification program for the
Mustang Message Center for the purpose of enabling third-party application
developers to certify that their products can be integrated with the Mustang
Message Center platform. Mustang believes the certification program will add
functionality and integration capabilities to Mustang Message Center, as well as
promote the goal of establishing the application as the default e-mail response
management platform in the call center, customer management, help desk and
electronic commerce markets.

        Mustang markets Mustang Message Center through media advertising both
independently, in cooperation with Mustang-certified distributors and VARs, and
to OEMs and other companies that maintain joint market or joint sales agreements
with the Company. The Company uses print media ad campaigns targeted at industry
trade journals designed to invoke direct sales. The Company also plans to
continue to promote Mustang Message Center at industry specific trade shows
centered around customer management, call centers, electronic commerce, computer
telephony and other support products and services.

        Sales of Mustang Message Center products and services accounted for 98%
of total revenues during 1999 as compared to 54% of total revenues in 1998.

         Mustang distributes its other products domestically through
distributors and resellers, through OEMs who bundle the Company's products with
their own products, and through direct sales to end-users. Direct sales by the
Company of products from these lines are made from the Company's Web site, by
mail order to end users who are solicited through Web Server notices and
mailings to Mustang's installed customer base, catalogs and media advertising.
Sales of ListCaster and FileCenter software accounted for 3% and nil,
respectively, of total revenues during 1999 and 4% and 1%, respectively, of
total revenues during 1998.

        International Sales Internationally, the Company sells directly via
in-house telesales operations and through distributors who purchase, warehouse
and sell software. In 1998 and 1999, revenues from international sales (other
than sales of the Wildcat! Line of products, which the Company discontinued in
November 1998) represented approximately 9% and 12%, respectively, of total
revenues.

COMPETITION

        The market for e-mail message management products and services is
intensely competitive, and Mustang expects competition to increase
significantly. There are no substantial barriers to entry into Mustang's
business, and it expects established and new entities to enter the market for
e-mail message management products and services in the near future. It is
possible that a single supplier will dominate one or more market segments.
Furthermore, since there are many potential entrants to the field, it is
extremely difficult to assess which companies are likely to offer competitive
products and services in the future, and in some cases it is difficult to
discern whether an existing product or service is competitive with the Mustang
Message Center.

        Mustang's principal competitors in the e-mail message management market
include Aptex, Brightware, eGain, Exactis.com, Inc., Kana Communications,
MessageMedia and Octane Software, each of which provides software solutions for
e-mail management. Mustang also competes with other firms that provide e-mail
message management services on an outsourcing basis. The Company competes with a
number of independent software suppliers who offer Web Server or
telecommunications software as or among their product line(s). Several of
Mustang's current and potential competitors have greater name recognition,
larger installed customer bases, more diversified lines of products and services
and significantly greater financial, technical, marketing and other resources
than Mustang. Such competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies and make more attractive
offers to businesses to induce them to use their products or services.



                                       13
<PAGE>   14

PRODUCT DEVELOPMENT

        The markets for the Company's products are characterized by rapidly
changing technology and frequent new product introductions. Accordingly, the
Company believes its future prospects depend on its ability not only to enhance
and successfully market its existing products, but also to develop and introduce
new products in a timely fashion which achieve market acceptance. There can be
no assurance that the Company will be able to identify, design, develop, market
or support such products successfully or that the Company will be able to
respond effectively to technological changes or product announcements by
competitors. In particular, if the Company fails to successfully anticipate
customer demand for new products or product enhancements or upgrades or
otherwise makes incorrect product development decisions, the Company could be
adversely affected both by the loss of anticipated revenue and, possibly, its
competitors' increase in their installed base of customers. These adverse
results could be particularly significant if the Company were to make a number
of incorrect product development decisions in succession or within a short
period of time. Mustang has on a number of occasions experienced delays in the
commencement of commercial shipments of new products and enhancements, resulting
in delay or loss of product revenues. From time to time, Mustang and others may
announce new products, capabilities or technologies that have the potential to
replace or shorten the life cycle of Mustang's existing product offerings. There
can be no assurance that announcements of currently planned or other new product
offerings will not cause customers to defer purchasing existing Company products
or cause distributors to return products to Mustang. In addition, programs as
complex as the software products offered by Mustang may contain undetected
errors or "bugs" when they are first introduced or as new versions are released.
Delays or difficulties associated with new product introductions or product
enhancements, or the introduction of unsuccessful products or products
containing undetected "bugs", could have a material adverse effect on Mustang's
business, operating results and financial condition.

         During 1997, 1998 and 1999, Mustang spent approximately $697,000,
$612,000 and $821,000, respectively, for research and development of new
products and enhancements to existing products.

PROPRIETARY RIGHTS

         Mustang relies on a combination of trade secret, copyright and
trademark laws, nondisclosure agreements and other contractual provisions and
technical measures to protect its proprietary rights. Mustang believes that, due
to the rapid pace of technological innovation for Internet products, Mustang's
ability to establish and maintain a position of technology leadership in the
industry depends more on the skills of its development personnel than upon the
legal protections afforded its existing technology. There can be no assurance
that trade secret, copyright and trademark protections will be adequate to
safeguard the proprietary software underlying Mustang's products and services.
Similarly, there can be no assurance that agreements with employees, consultants
and others who participate in the development of its software will not be
breached, that Mustang will have adequate remedies for any breach or that
Mustang's trade secrets will not otherwise become known. Mustang also faces the
risk that notwithstanding Mustang's efforts to protect its intellectual
property, competitors will be able to develop functionally equivalent e-mail
message management technologies without infringing any of Mustang's intellectual
property rights. Despite Mustang's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use products or
technology that Mustang considers proprietary, and third parties may attempt to
develop similar technology independently. In addition, effective protection of
intellectual property rights may be unavailable or limited in certain countries.
Accordingly, there can be no assurance that Mustang's means of protecting its
proprietary rights will be adequate or that Mustang's competitors will not
independently develop similar technology.

        As the use of the Internet for commercial activity increases, and the
number of products and service providers that support Internet commerce
increases, Mustang believes that Internet commerce technology providers may
become increasingly subject to infringement claims. There can be no assurance
that infringement claims will not be filed by plaintiffs in the future. Any such
claims, with or without merit, could be time consuming, result in costly
litigation, disrupt or delay the enhancement or shipment of Mustang's products
and services or require Mustang to enter into royalty or licensing agreements.
Such royalty or licensing agreements, if required, may not be available on



                                       14
<PAGE>   15

terms acceptable or favorable to Mustang, which could have a material adverse
effect on Mustang's business, financial condition and results of operations. In
addition, Mustang may initiate claims or litigation against third parties for
infringement of Mustang's proprietary rights or to establish the validity of
Mustang's proprietary rights.

EMPLOYEES

        On December 31, 1999 the Company employed 58 persons (all of which were
employed full-time), of which 12 were involved in engineering and product
support, six in order processing and shipping/receiving, 20 in sales and
marketing, 13 in technical Support and professional services and seven in
general administration. The Company's employees are not covered by a collective
bargaining agreement. The Company considers its relationship with its employees
to be satisfactory.

ITEM 2. PROPERTIES

        The Company's executive offices and sales, marketing and production
facilities occupy an approximately 12,000 square foot building located in
Bakersfield, California. This building is leased from two individuals, one whom
is James A. Harrer, the Company's Chief Executive Officer and a principal
shareholder. The other is a former officer and director of the Company. See Item
12. Certain Relationships and Related Transactions.

ITEM 3. LEGAL PROCEEDINGS

        Not applicable.

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

        Not applicable.







                                       15
<PAGE>   16


                                     PART II


ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        Shares of the Company's Common Stock have traded on the over-the-counter
market since the Company's initial public offering on April 5, 1995 and are
included in The Nasdaq Stock Market under the symbol "MSTG." The following table
sets forth for the quarters indicated the high and low last reported sale prices
as reported on the Nasdaq National Market through October 14, 1998 and the high
and low bid prices as reported on The Nasdaq SmallCap market from October 15,
1998. Quotations since October 15, 1998 reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions.

<TABLE>
<CAPTION>
                                                          HIGH            LOW
                                                          ----            ---
<S>                                                      <C>             <C>
          1998                                           $ 4.06          $1.25
          ----
          First Quarter                                    3.25           1.25
          Second Quarter                                   2.28           1.50
          Third Quarter                                    3.00           1.00
          Fourth Quarter

          1999
          ----
          First Quarter                                  $ 5.94          $2.25
          Second Quarter                                  12.00           3.94
          Third Quarter                                    9.00           4.75
          Fourth Quarter                                  18.25           6.13
</TABLE>

        The 6,120,304 shares of Common Stock of the Company outstanding as of
March 7, 2000 were held by 109 shareholders of record, who, the Company
believes, held for in excess of 400 beneficial holders.

        Prior to its initial public offering, the Company had paid cash
dividends on its Common Stock, but has not done so since then and anticipates
that it will not pay cash dividends in the foreseeable future.




                                       16
<PAGE>   17


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

        Please read the following discussion in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Form 10-KSB.

GENERAL

        Mustang develops, markets, services and supports the Mustang Message
Center ("Mustang Message Center"), an e-mail management software solution that
offers companies and other enterprises the ability to manage their inbound
e-mail and Internet-based inquiries timely and accurately. Mustang Message
Center competes in the emerging e-mail response management market and has
received several prestigious awards as best product in its class from sources
devoted to monitoring the rapidly growing computer telephony, customer
management, e-mail management and call center markets.

        Mustang also develops, markets and supports other software products that
offer businesses the capability to improve customer service, market products,
enhance sales and increase employee productivity. These products include
ListCaster, a powerful e-mail message server that allows easy mass e-mailings
from maintained lists and enables e-mail recipients to correspond with each
other through the originating site on the World Wide Web of the Internet called
a "Website"; and FileCenter, a high performance application that permits
operators of Websites known as "webmasters" to provide their users with an
organized, searchable library of files. The Company's other product line
includes the QmodemPro line of telecommunications software.

        During the years ended December 31, 1997, 1998 and 1999, the Company
reported revenue of approximately $1,898,000, $2,011,000 and $3,711,000,
respectively, and incurred net losses of approximately $1,341,000, $1,157,000
and $906,000, respectively. There can be no assurance that the Company will be
able to profitably market Mustang Message Center, any of its other products or
any products it may develop in the future. Until the Company is able to generate
sufficient revenues to offset costs and expenses, of which there can be no
assurance, Mustang will continue to sustain losses.

        Before 1998, most of the Company's revenues were derived from its
Wildcat! WinServer and BBS software. Beginning in the second quarter of 1997 and
continuing throughout the year, Mustang changed its focus and launched new
products designed to facilitate interaction on the Internet's World Wide Web.
Mustang released the Business Edition of Mustang Message Center in September
1997, the Enterprise Edition, in February 1998 and the Service Bureau Edition in
May 1999. The future of the Company is dependent upon the acceptance by the
market place of Mustang Message Center and Mustang's ability to market this
e-mail management solution successfully. Mustang Message Center accounted for
over 50 percent of the Company's net sales during 1998 and 98 percent of the
Company's net sales during 1999, but Mustang has only a limited operating
history with respect to this product. As a result of this, as well as the recent
emergence of the commercial e-mail management market, the Company has neither
internal nor industry-based historical financial data for a significant period
upon which to project revenues or base planned operating expenses. Future
operating results will depend on a variety of factors, including Mustang's
ability to maintain or increase market demand for Mustang Message Center and its
other products and services, usage and acceptance of the Internet, the
introduction and acceptance of new, enhanced or alternative products or services
by Mustang or its competitors. Other factors that could affect its operating
results include Mustang's ability to anticipate and effectively adapt to a
developing market and to rapidly changing technologies, general economic
conditions, competition by existing and emerging competitors, software defects
and other quality control problems and the mix of products and services sold.

        The purchase of the Enterprise and Service Bureau Editions of Mustang
Message Center, the Company's core product, involves a significant commitment of
customers' personnel and other resources. Furthermore, the cost of the software
is typically only a small portion of the related hardware, development, training
and integration costs associated with implementing a complete e-mail management
solution. For these and other reasons, the sales cycle associated with the
purchase of Mustang Message Center is typically complex, lengthy and subject to
a number of



                                       17
<PAGE>   18

significant risks. Such risks include changes in customers' budgetary
constraints and approval at senior levels of customers' organizations, over
which the Company has no control. The Company's sales cycle can range from four
to six months or more and varies substantially from customer to customer.
Because of the lengthy sales cycle and the dependence of the Company's quarterly
revenues upon a relatively small number of orders that represent large dollar
amounts, the loss or delay of a single order could have a material adverse
effect on the Company's business, financial condition and results of operations.

        Mustang's expense levels are based, in part, on its expectations as to
future revenues and are not expected to decrease, at least in the short term.
Further, Mustang may from time to time be forced by the competitive environment
in which it competes to make tactical or strategic decisions that disrupt or
reduce anticipated revenues. Moreover, during 1998, which was the first year
that the Company achieved material revenues from Mustang Message Center and its
other Internet-directed products introduced during 1997, the Company observed a
trend that a disproportionate percentage of the Company's net sales were
generated during the last month of a quarter. As a result, a shortfall in sales
in any quarter as compared to expectations may not be identifiable until the end
of a quarter. Mustang may not be able to adjust its spending plan in a timely
manner to compensate for any future revenue shortfall. Any significant shortfall
in sales in relation to the Company's revenue expectations would have a material
adverse impact on the Company's business, results of operations, financial
condition and prospects.

        The following table presents unaudited selected financial data for each
of the eight quarters in the period ended December 31, 1999.

<TABLE>
<CAPTION>
                                                    Year ended December 31,
                          -----------------------------------------------------------------------------
                                          1998                                   1999
                          -----------------------------------------------------------------------------
                           First    Second     Third    Fourth    First     Second     Third     Fourth
                          Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter   Quarter
                          -------   -------   -------   -------   -------   -------   -------   -------
                                              (In thousands, except per share data)
<S>                        <C>       <C>       <C>       <C>       <C>      <C>       <C>       <C>
Summary of Operations:
Revenue                    $ 398     $ 404     $ 502     $ 707     $ 773    $  803    $1,029    $1,106
Gross profit                 332       371       460       670       724       697       892       956
Operating expenses           782       677       726       832       728       846     1,140     1,599
Loss from operations        (450)     (307)     (266)     (161)       (4)     (149)     (247)     (643)
Net Income (Loss)           (444)     (303)     (263)     (147)       10      (113)     (229)     (574)
Net (Income) Loss per
  common share (basic
  and diluted)             (0.13)    (0.09)    (0.07)    (0.04)      0.0     (0.02)    (0.05)    (0.10)
</TABLE>




                                       18
<PAGE>   19


RESULTS OF OPERATIONS:


        The following table sets forth, for the years ended December 31, 1997,
1998 and 1999, income statement data of the Company expressed in dollars and as
a percentage of revenues and the percentage increase or decrease in the dollar
amounts of such data in 1998 from 1997 and 1999 from 1998.

<TABLE>
<CAPTION>
                                                                                                                       Percentage
                                                                    Year ended December 31,                            Increase
                                         --------------------------------------------------------------------------  (Decrease) in
                                                                                                                        Dollar
                                                   1997                     1998                      1999              Amounts
                                         -------------------------------------------------------------------------------------------
                                                                                                                     1998     1999
                                                      Percent of               Percent of                Percent of  from     from
                                           Amount      Revenue      Amount      Revenue      Amount       Revenue    1997     1998
                                         -------------------------------------------------------------------------------------------
<S>                                      <C>          <C>         <C>          <C>         <C>           <C>         <C>      <C>
Revenue                                  $ 1,898,402    100.0%    $ 2,010,721    100.0%    $ 3,710,935     100.0%      5.9%    84.6%
Cost of Revenue                              330,828     17.4%        177,928      8.8%        441,386      11.9%    (46.2%)  148.1%
                                         --------------------------------------------------------------------------
Gross profit                               1,567,574     82.6%      1,832,793     91.2%      3,269,549      88.1%     16.9%    78.4%
Operating expenses:
   Research and development                  696,819     36.7%        611,990     30.4%        820,554      22.1%    (12.2%)   34.1%
   Selling and marketing                     930,426     49.0%        974,525     48.5%      1,638,298      44.1%      4.7%    68.1%
   General and administrative              1,353,486     71.3%      1,430,335     71.1%      1,853,730      50.0%      5.7%    29.6%
                                         --------------------------------------------------------------------------
   Loss from operations                   (1,413,157)   (74.4%)    (1,184,057)   (58.9%)    (1,043,033)    (28.1%)    16.2%    11.9%
Other income, net                             73,284      3.9%         28,342      1.4%        137,556       3.7%    (61.3%)  385.3%
                                         --------------------------------------------------------------------------
Loss before provision for income taxes    (1,339,873)   (70.6%)    (1,155,715)   (57.5%)      (905,477)    (24.4%)    13.7%    21.7%
Benefit (provision) for income taxes            (800)     0.0%           (800)     0.0%           (800)      0.0%      0.0%     0.0%
                                         --------------------------------------------------------------------------
Net Loss                                 $(1,340,673)   (70.6%)   $(1,156,515)   (57.5%)     $(906,277)    (24.4%)    13.7%    21.6%
                                         ==========================================================================
</TABLE>

COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998

        Revenues for the year ended December 31, 1999 were $3,710,935, an
increase of $1,700,214 or 84.6% more than revenues for the year ended December
31, 1998. As a percentage of revenues by product category for the year 1999
versus 1998 showed the QmodemPro line at 2% and 5%, the Wildcat! line at nil and
23%, the Internet directed product line consisting of Mustang Message Center,
Listcaster and FileCenter at 98% and 68%, and other products at nil and 4%,
respectively. Because of its decision to focus on products that are designed to
facilitate interaction on the Internet, Mustang sold its Wildcat! WinServer,
Wildcat! BBS and Off-line Xpress BBS mail reader product lines to Santronics
Software, Inc. of Homestead, Florida in November 1998. That accounts for nil
sales of products from this line in 1999. The increase in revenues in 1999 over
1998 was primarily the result of greater market acceptance of Mustang Message
Center.

        Gross profit for the year increased from $1,832,793 in 1998 to
$3,269,549 in 1999, but decreased as a percentage of revenues from 91.2% in 1998
to 88.1% in 1999. While the increase in revenues accounted for the increase in
gross profit absolute dollars, gross profit declined as a percentage of revenues
because costs of revenue increased at a rate faster than revenues. Costs of
revenue increased principally because of expansion in Professional Services and
its associated costs. The Company does not expect the gross profit percentage to
remain at the current level. As more turnkey solutions are sold through
Mustang's Professional Services division, the Company expects the gross profit
percentage to decrease.

        Research and development expenses increased $208,564 in 1999 from 1998
and decreased as a percentage of revenues from 30.4% in 1998 to 22.1% in 1999.
The increase in dollars spent is primarily attributable to the increased
headcount in this department from 11 in 1998 to 12 in 1999. In an effort to
improve its competitive position, the Company expects to invest a significant
amount of its resources for the development of new products and product
enhancements.

        Selling and marketing expenses for 1999 were $1,638,298, an increase of
$663,773 over 1998, and decreased as a percentage of revenues from 48.5% in 1998
to 44.2% in 1999. The primary reason for the increase in dollars was the focus
on increasing the sales staff and strategically placing sales offices throughout
the U.S. The headcount increased from 6 in 1998 to 20 in 1999.



                                       19
<PAGE>   20

        General and administrative expenses increased in 1999 over the previous
year, from $1,430,335 in 1998 to $1,853,730 in 1999, but decreased as a
percentage of revenue from 71.1% in 1998 to 50.0% in 1999. The items primarily
accounting for the increase in dollars were insurance, legal expenses and
travel.

        Other income increased $109,214 from $28,342 in 1998 to $137,556 in 1999
due to higher cash balances and therefore more interest income.

COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997

        Revenues for the year ended December 31, 1998 were $2,010,721, an
increase of $112,319 or 5.9% more than revenues for the year ended December 31,
1997. As a percentage of revenues by product category for the year 1998 vs. 1997
showed the QmodemPro line at 5% and 15%, the Wildcat! line at 23% and 77%, the
Internet directed product line at 68% and 5%, and other products at 4% and 3%,
respectively. The increase in revenues from the Internet directed product line
was directly related to market acceptance of the Mustang Message Center
Enterprise Edition, which was released in February 1998.

        Gross profit for the year increased from $1,567,574 in 1997 to
$1,832,793 in 1998, an increase as a percentage of revenues from 82.6% in 1997
to 91.2% in 1998.

        Research and development expenses decreased $84,829 in 1998 from 1997
and also decreased as a percentage of revenues from 36.7% in 1997 to 30.4% in
1998. The decrease in actual dollars spent is attributable to the headcount
reduction in this department from 12 in 1997 to 11 in 1998. The increase in
revenues accounted for the decrease as a percentage of revenues. In an effort to
improve its competitive position, the Company expects to invest a significant
amount of its resources for the development of new products and product
enhancements.

        Selling and marketing expenses for 1998 were $974,525, an increase of
$44,099 over 1997, and decreased as a percentage of revenues from 49.0% in 1997
to 48.5% in 1998. The items primarily accounting for the increase in dollars
were promotional costs and selling expenses. Promotional cost were mainly due to
the increase in trade show attended in 1998 compared to 1997 and the selling
expenses were larger because the Mustang Message Center products typical
customer and sales warrants more face to face meeting to complete a sale.

        General and administrative expenses increased for 1998 over the previous
year, from $1,353,486 in 1997 to $1,430,335 in 1998, but decreased as a
percentage of revenue from 71.3% in 1997 to 71.1% in 1998. The items primarily
accounting for the increase in dollars were insurance, legal expenses and
travel. The minimal decrease as a percentage of revenues is attributable to the
increase in revenues.

        Other income decreased $44,942 from $73,284 in 1997 to $28,342 in 1998
due to lower cash balances therefore less interest income.

        There was no change in 1997 and 1998 in benefit (provision) for income
taxes.

LIQUIDITY AND CAPITAL RESOURCES

        The Company has financed its operations from the proceeds from the sale
of its equity securities and cash flows from operations. Cash and short-term
investment balances at December 31, 1999 were approximately $8,848,000, an
increase of approximately $7,000,000 from December 31, 1998. On March 31, 1999,
the Company sold for gross proceeds of $250,000 an aggregate of 64,820 shares of
its common stock and Warrants to purchase an aggregate of 64,820 shares of its
common stock under Regulation S of the Securities Act of 1933. In October 1999,
Mustang completed a private placement of its securities to accredited investors
receiving proceeds, before offering expenses, of approximately $5,600,000. In
the financing, Mustang issued 765,908 shares of its common stock at $7.3125 per
share and warrants to purchase up to 574,431 shares of its Common Stock. The
principal reasons for the increase in cash was the receipt of net proceeds
aggregating approximately $7,600,000 from these 1999 equity financings, the



                                       20
<PAGE>   21

exercise of outstanding warrants and the decrease in the Company's net loss from
operations during the period. Accounts receivable increased approximately
$285,000 in 1999, from $409,077 at December 31, 1998 to $693,739 at December 31,
1999. Accounts receivable average days to collect were 52 and 46 days for the
years ended December 31, 1998 and 1999, respectively.

        At December 31, 1999, Mustang had net operating loss carryforwards
available of approximately $6,200,000 and $3,600,000 of Federal and State,
respectively, which will expire at the end of 2014. Section 382 of the Internal
Revenue Code provides that when a company undergoes an "ownership change," the
corporation's use of its net operating losses is limited in each subsequent
year. An "ownership change" occurs when, as of any testing date, the sum of the
increases in ownership of each shareholder that owns five percent or more of the
value of a company's stock as compared to that shareholder's lowest percentage
ownership during the preceding three-year period exceeds fifty percentage
points. Mustang has issued a substantial number of shares of common stock since
January 1, 1998 and this may result in an "ownership change" for income tax
purposes. As a consequence, Mustang estimates that it may not be able to use a
substantial amount of its available federal net operating loss carryforwards to
reduce its taxable income, if any, in the future. It is expected that the
completion of the merger with Quintus Corporation will result in an "ownership
changes" for tax purposes.

        Longer term cash requirements, other than normal operating expenses, are
anticipated for development of new software products and enhancements of
existing products, launching new products and enhancements and the possible
acquisition of businesses, software products or technologies complementary to
the Company's business. The Company intends to meet its long-term liquidity
needs through available cash and cash flow as well as through financing from
outside sources. The Company believes that its existing cash, cash equivalents,
marketable securities and cash generated from operations will be sufficient to
meet the Company's working capital and capital expenditure requirements for at
least the next 12 months.

YEAR 2000 ISSUE.

        Many currently installed computer systems and software products are
coded to accept only two-digit entries in date code fields. Beginning in the
year 2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. The Company does not
believe that the Year 2000 problem will have a material adverse effect on the
Company's business or results of operations.








                                       21
<PAGE>   22


ITEM 7. FINANCIAL STATEMENTS

        The following financial statements are filed as part of this Report:


<TABLE>
<CAPTION>
                                                                                                PAGE
                                                                                                ----
<S>                                                                                             <C>
Report of Independent Public Accountants                                                         23

Balance Sheets as of December 31, 1998 and  1999                                                 24

Statements of Operations for the Years Ended December 31, 1997, 1998 and  1999                   25

Statements of Shareholders' Equity for the Years Ended December 31, 1997, 1998 and 1999          26

Statements of Cash Flows for the Years Ended December 31, 1997, 1998 and 1999                    27

Notes to Financial Statements                                                                    28
</TABLE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

        Not applicable.









                                       22
<PAGE>   23


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Mustang.com, Inc.:

We have audited the accompanying balance sheets of Mustang.com, Inc. (formerly
Mustang Software, Inc. and a California corporation) as of December 31, 1998 and
1999, and the related statements of operations, shareholders' equity and cash
flows for the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mustang.com, Inc. as of
December 31, 1998 and 1999, and the results of its operations and its cash flows
for the three years in the period ended December 31, 1999 in conformity with
accounting principles generally accepted in the United States.



ARTHUR ANDERSEN LLP



Los Angeles, California

February 9, 2000








                                       23
<PAGE>   24


                                MUSTANG.COM, INC.

                                 BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                           DECEMBER 31,
                                                                                           ------------
                                                                                      1998              1999
                                                                                      ----              ----
<S>                                                                               <C>               <C>
CURRENT ASSETS:
 Cash and cash equivalents                                                        $  1,849,700      $  8,847,602
 Accounts receivable, net of allowance for doubtful accounts
   of $168,200 and $170,000 at December 31, 1998 and 1999, respectively                409,077           693,739
 Inventories                                                                             9,196            13,373
 Prepaid expenses                                                                       19,660             3,750
                                                                                  ------------      ------------
        Total current assets                                                         2,287,633         9,558,464
                                                                                  ------------      ------------
PROPERTY AND EQUIPMENT:
  Property and equipment                                                             1,239,882         1,278,371
  Accumulated depreciation                                                            (647,027)         (650,293)
                                                                                  ------------      ------------
        Net property and equipment                                                     592,855           628,078
                                                                                  ------------      ------------

OTHER ASSETS                                                                            11,183             2,485
                                                                                  ------------      ------------
                                                                                  $  2,891,671      $ 10,189,027
                                                                                  ============      ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                $    233,854      $    492,942
  Current portion of capital lease                                                       8,259             9,111
  Accrued payroll                                                                       62,000           150,000
  Accrued liabilities                                                                   52,381           175,005
  Income taxes payable                                                                  99,776            99,776
  Deferred revenue                                                                     125,000           250,000
                                                                                  ------------      ------------
        Total current liabilities                                                      581,270         1,176,834
                                                                                  ------------      ------------

CAPITAL LEASE OBLIGATION, net of current portion                                       260,747           251,636
                                                                                  ------------      ------------

COMMITMENTS AND CONTINGENCIES (Note 8)

SHAREHOLDERS' EQUITY:
  Preferred stock, no par value:
    Authorized--10,000,000 shares
       8,081 issued and outstanding as of December 31, 1998                            730,229                --
  Common stock, no par value:
    Authorized--30,000,000 shares
      Issued and outstanding-- 4,098,845 and 5,969,384 shares at December 31,
        1998 and 1999, respectively                                                  7,618,954        15,966,363
    Accumulated  deficit                                                            (6,299,529)       (7,205,806)
                                                                                  ------------      ------------
        Total shareholders' equity                                                   2,049,654         8,760,557
                                                                                  ------------      ------------
                                                                                  $  2,891,671      $ 10,189,027
                                                                                  ============      ============
</TABLE>

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




                                       24
<PAGE>   25


                                MUSTANG.COM, INC.

                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                             YEAR ENDED DECEMBER 31,
                                                             -----------------------
                                                     1997             1998             1999
                                                     ----             ----             ----
<S>                                               <C>              <C>              <C>
REVENUE                                           $ 1,898,402      $ 2,010,721      $ 3,710,935
COST OF REVENUE
                                                      330,828          177,928          441,386
                                                  -----------      -----------      -----------
        Gross profit
                                                    1,567,574        1,832,793        3,269,549
                                                  -----------      -----------      -----------
OPERATING EXPENSES:
  Research and development                            696,819          611,990          820,554
  Selling and marketing                               930,426          974,525        1,638,298
  General and administrative
                                                    1,353,486        1,430,335        1,853,730
                                                  -----------      -----------      -----------
        Total operating expenses
                                                    2,980,731        3,016,850        4,312,582
                                                  -----------      -----------      -----------
        Loss from operations
                                                   (1,413,157)      (1,184,057)      (1,043,033)
                                                  -----------      -----------      -----------
OTHER INCOME (EXPENSE):
  Interest expense                                    (36,585)         (30,294)         (28,156)
  Interest income                                     104,234           61,048          141,100
  Other
                                                        5,635           (2,412)          24,612
                                                  -----------      -----------      -----------
        Total other income (expense)
                                                       73,284           28,342          137,556
                                                  -----------      -----------      -----------
Loss before provision for income taxes             (1,339,873)      (1,155,715)        (905,477)
Provision for income taxes
                                                          800              800              800
                                                  -----------      -----------      -----------
Net Loss                                          $(1,340,673)     $(1,156,515)     $  (906,277)
                                                  ===========      ===========      ===========

NET LOSS PER COMMON SHARE - BASIC AND DILUTED     $      (.40)     $      (.31)     $      (.19)
                                                  ===========      ===========      ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING - BASIC AND DILUTED                     3,383,771        3,707,334        4,821,680
                                                  ===========      ===========      ===========
</TABLE>


   The accompanying notes are an integral part of these financial statements



                                       25
<PAGE>   26


                                MUSTANG.COM, INC.

                       STATEMENTS OF SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                               PREFERRED STOCK             COMMON STOCK
                                               ---------------             ------------           ACCUMULATED
                                             SHARES      AMOUNT        SHARES        AMOUNT         DEFICIT          TOTAL
                                             ------      ------        ------        ------         -------          -----
<S>                                          <C>        <C>           <C>          <C>            <C>             <C>
BALANCE, December 31, 1996                       --     $      --     3,374,967    $ 6,628,722    $(3,802,341)    $ 2,826,381
  Issuance of stock, ESPP                        --            --        17,761         11,323             --          11,323
  Net loss                                       --            --            --             --             --      (1,340,673)
                                                        ---------     ---------    -----------    -----------     -----------

BALANCE,  December 31, 1997                      --            --     3,392,728      6,640,045     (5,143,014)      1,497,031
  Exercise of stock options                      --            --        57,716         69,424             --          69,424
  Issuance of stock, ESPP                        --            --         6,921          7,354             --           7,354
  Issuance of stock, net of offering
    cost of approximately $73,000                --            --       641,480        902,131             --         902,131
  Issuance of stock, net of offering
    cost of  approximately $44,000            8,081       730,229            --             --             --         730,229
  Net loss                                                     --            --             --             --      (1,156,515)
                                                        ---------     ---------    -----------    -----------     -----------

BALANCE,  December 31, 1998                   8,081       730,229     4,098,845      7,618,954     (6,299,529)      2,049,654

  Exercise of stock options                      --            --       211,376        325,946             --         325,946
  Exercise of warrants                           --            --       431,820      1,844,407             --       1,844,407
  Issuance of stock, ESPP                        --            --         4,900         14,212             --          14,212
  Issuance of stock, net of offering cost
    of approximately $417,000                    --            --       830,728      5,432,615             --       5,432,615
  Conversion of preferred stock              (8,081)     (730,229)      391,715        730,229             --              --
  Net loss                                                     --            --             --             --        (906,277)
                                                        ---------     ---------    -----------    -----------     -----------

BALANCE,  December 31, 1999                      --     $      --     5,969,384    $15,966,363    $(7,205,806)    $ 8,760,557
                                             ======     =========     =========    ===========    ===========     ===========
</TABLE>

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


                                       26
<PAGE>   27


                                MUSTANG.COM, INC.

                            STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31,
                                                                         -----------------------
                                                                  1997            1998            1999
                                                                  ----            ----            ----
<S>                                                            <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                     $(1,340,673)    $(1,156,515)    $  (906,277)
  Adjustments to reconcile net loss to net cash used by
    operating activities:
    Depreciation and amortization                                  150,485         141,732         186,139
    Loss (gain) on sale of property and equipment                   (5,635)          2,412           4,379
    Provision for losses on accounts receivable                         --           8,200           1,800
    Changes in assets and liabilities:
      Accounts receivable                                           57,152        (410,899)       (286,462)
      Inventories                                                  128,220          90,719          (4,177)
      Prepaid expenses                                              27,285           8,555          15,910
      Other assets                                                   1,300            (100)          8,698
      Accounts payable                                            (554,600)         (8,597)        259,088
      Accrued payroll                                              (40,000)          7,000          88,000
      Accrued liabilities                                          (35,717)        (41,721)        122,624
      Income taxes payable                                         138,136         196,780              --
      Accrued warranty and support                                      --         (45,000)             --
      Deferred revenue                                                  --          45,000         125,000
                                                               -----------     -----------     -----------
        Net cash used by operating activities                   (1,474,047)     (1,162,434)       (385,278)
                                                               -----------     -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from sale of property and equipment                     8,107              --           3,000
    Purchases of property and equipment                                 --         (32,565)       (228,741)
                                                               -----------     -----------     -----------
        Net cash provided by (used in) investing activities          8,107         (32,565)       (225,741)
                                                               -----------     -----------     -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net proceeds from issuance of stock                             11,323       1,709,138       7,617,180
    Payments on capital lease obligation                           (61,838)        (68,215)         (8,259)
                                                               -----------     -----------     -----------
        Net cash provided by (used in) financing activities        (50,515)      1,640,923       7,608,921)
                                                               -----------     -----------     -----------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS            (1,516,455)        445,924       6,997,902

CASH AND CASH EQUIVALENTS, beginning of year                     2,920,231       1,403,776       1,849,700
                                                               -----------     -----------     -----------

CASH AND CASH EQUIVALENTS, end of year                         $ 1,403,776     $ 1,849,700     $ 8,847,602
                                                               ===========     ===========     ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash paid for interest                                       $    36,585     $    30,294     $    28,156
  Cash paid for taxes                                          $       800     $       800     $       800
</TABLE>


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



                                       27
<PAGE>   28


                                MUSTANG.COM, INC.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 1999


1.  LINE OF BUSINESS

        Mustang.com, Inc. (the Company) is an internet enterprise solutions
provider that enhances customer relationships through the design, development
and support of Internet and e-mail based customer management software
application. Similar to most companies in this line of business, the Company's
products are subject to rapid technological changes. Because of technological
changes, the Company continuously needs to expend resources to develop new
products. The Company has incurred losses from operations and, for the last 5
years, operations have not generated cash. In 1998 and 1999, the Company
completed private placements resulting in net proceeds of approximately $1.6
million and $5.4 million, respectively. On October 12, 1999, the Company
changed its name from Mustang Software, Inc. to Mustang.com, Inc.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

a.  Revenue Recognition

        The Company recognizes license revenue from the Company's standard
products upon shipment of the source code if no significant modification or
customization of the software is required and collection of the resulting
receivable is probable. If modification or customization is essential to the
functionality of the software, revenue is deferred until the modification is
complete.

        The Company also enters into engineering services contracts with OEMs to
adapt the Company's software and supporting electronics to specific OEM
requirements. Since these contracts are of relatively short duration, revenue on
such contracts is recognized when the work is completed. Maintenance revenues
are recognized ratably over the term of the contracts.

b. Cash and cash equivalents

        Cash consists of demand deposits with financial institutions. The
Company considers all highly liquid short-term investments with original
maturities of three months or less to be cash equivalents for the purposes of
the balance sheets and statements of cash flows.

c.  Inventories

        Inventories are stated at the lower of cost (first-in, first-out) or
market and consist primarily of manuals, computer disks, and shipping
containers.

d.  Software Development Costs

        Under the provisions of Statement of Financial Accounting Standards No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed," the Company is required to capitalize software development
costs when "technological feasibility" of the product has been established and
anticipated future revenues assure recovery of the capitalized amounts. Because
of the relatively short time



                                       28
<PAGE>   29

period between "technological feasibility" and product release, relatively small
amounts of software development costs have been capitalized and are included in
other assets in the accompanying balance sheets.









                                       29
<PAGE>   30

e.  Warranties

        The Company provides a warranty of 30 days. A provision for warranty
expense is recorded at the time of shipment. The Company has not experienced any
significant warranty claims.


f.  Property and Equipment

        Property and equipment are stated at cost. Maintenance and repairs are
charged to expense as incurred and the costs of betterments that increase the
useful lives of the assets are capitalized. Property and equipment consists of
the following:

<TABLE>
<CAPTION>
                                                                           DECEMBER 31,
                                                                           ------------
                                                                       1998         1999
                                                                       ----         ----
<S>                                                                 <C>          <C>
          Building                                                  $  552,000   $  552,000
          Vehicles                                                      11,149      11,149
          Office Equipment                                             121,174      170,624
          Show Displays                                                 99,585       99,585
          Leasehold Improvements                                        18,945       18,946
          Computer Equipment                                           437,029      426,067
                                                                    ----------   ----------
                                                                     1,239,882    1,278,371
          Less--Accumulated depreciation and amortization             (647,027)    (650,293)
                                                                    ----------   ----------
             Net Property and Equipment                             $  592,855   $  628,078
                                                                    ==========   ==========
</TABLE>

        Depreciation and amortization of property and equipment are computed
using the straight-line method over the following estimated useful lives:

<TABLE>
<S>                                                              <C>
             Building                                            20 years
             Vehicles                                             5 years
             Office Equipment                                     5 to 7 years
             Show Displays                                        5 to 7 years
             Leasehold Improvements                               7 years
             Computer Equipment                                   3 to 5 years
</TABLE>

g.  Statement of Cash Flows

        The Company prepares its statement of cash flows using the indirect
method as defined under Statement of Financial Accounting Standards (SFAS) No.
95, "Statement of Cash Flows." During 1999 all the holders of Series A Preferred
Stock converted their shares into 391,715 shares of common stock.

h.  Net Loss Per Common Share

        Net loss per common share - basic for the years ended December 31, 1997,
1998 and 1999 is based on the weighted average number of common shares
outstanding. Net loss per common shares - dilutive also include the effect of
common shares contingently issuable from preferred stock, options and warrants
(in periods which they have a dilutive effect) using the Treasury Stock method.
Stock options and warrants are excluded in the computation of loss per share -
dilutive in fiscal year 1997, 1998 and 1999 because they are anti-dilutive.

i.  Income Taxes

        The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109), under which deferred assets and liabilities are provided on differences
between financial reporting and taxable income using enacted tax rates.

j. Use of Estimates in the Preparation of Financial Statements



                                       30
<PAGE>   31

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

3.  RELATED PARTY TRANSACTIONS

        In December 1993, the Company entered into a five-year lease agreement
with two principal shareholders for its facility. During 1999 the Company was on
a month to month lease requiring monthly rental payments of $13,458. In February
2000 the Company entered into a lease agreement to extend their current lease
through January 2005.

        The shareholders incurred debt of approximately $822,000 to purchase the
facility. The Company has guaranteed all of this debt. In the event of default
by the shareholders under the loan agreement covering $372,000 of this debt, the
lender thereunder may exercise an assignment of the shareholders' interest as
landlord in a contingent 20-year lease previously signed by the Company as
tenant for the facility. This contingent lease provides for a monthly rent of
$6,200 and supersedes the current lease in the event of any such assignment. The
lease has been accounted for as a capital lease (see Note 8). During 1997, 1998
and 1999 the Company recorded $36,000, $30,000 and $28,000, respectively of
interest expense related to the lease obligation.

4.  INCOME TAXES

        Deferred tax assets or liabilities are computed based on the temporary
differences between financial statement and income tax bases of assets and
liabilities using the enacted marginal income tax rate in effect for the year in
which the differences are expected to reverse. Deferred income tax expenses or
credits are based on the changes in the deferred income tax assets or
liabilities from period to period. The income tax expense for 1999, 1998 and
1997, is limited to minimum state tax amounts due for each year due to the
Company's operating losses. At December 31, 1999, the Company has net operating
loss carryforwards available of approximately $6,200,000 and $3,600,000 for
Federal and State, respectively, which will expire through the fiscal year 2014.
The use of net operating loss carryforward would be restricted if Company has
significant change in ownership as defined by the Internal Revenue Code.

        The provision for income taxes is comprised of the following components:

<TABLE>
<CAPTION>
                                                     YEAR ENDED DECEMBER 31,
                                                     -----------------------
                                                    1997      1998      1999
                                                    ----      ----      ----
<S>                                                 <C>       <C>       <C>
Current:
  Federal                                           $ --      $ --      $ --
  State                                              800       800       800
Deferred:
  Federal                                             --        --        --
  State                                               --        --        --
                                                    ----      ----      ----
Provision  for income taxes                         $800      $800      $800
                                                    ====      ====      ====
</TABLE>

The approximate tax effect of temporary differences which gave rise to
significant deferred tax liabilities and assets are as follows:



                                       31
<PAGE>   32

<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31,
                                                 -----------------------
                                                1998               1999
                                                ----               ----
<S>                                          <C>                <C>
Depreciation and amortization                $   (42,700)       $   (14,000)
Research and development credits                 351,000            395,000
Reserves                                          71,500             68,000
Accrued liabilities                               62,600            130,000
NOL carryforward                               1,900,000          2,400,000
Other                                              2,600             21,000
                                             -----------        -----------
Deferred tax asset                             2,345,000          3,000,000
Valuation allowance                           (2,345,000)        (3,000,000)
                                             -----------        -----------
Net deferred tax asset                       $        --        $        --
                                             ===========        ===========
</TABLE>

Due to a limited history of earnings, a valuation reserve was recorded in 1998
and 1999.

5.  COMMON AND PREFERRED STOCK PRIVATE PLACEMENTS

        In September 1998, the Company sold for gross proceeds of $1,500,000 an
aggregate of 612,000 shares of its common stock, 5,246 shares of its Series A
Convertible Preferred Stock (the Series A Preferred Stock) and Warrants to
purchase an aggregate of 180,000 shares of its common stock (the Warrants). In
the December 1998, the Company sold for gross proceeds of $250,000 an aggregate
of 2,500 shares of its Series A Preferred Stock and Warrants to purchase of
75,000 shares of its Common Stock.

        During 1999 all the holders of Series A Preferred Stock converted
their shares into 391,715 shares of common stock.

        For its services in the two transactions, the Company paid to the
placement agent fees consisting of $65,000 cash, 29,480 shares of its common
stock, 335 shares of its Series A Preferred Stock and Warrants to purchase an
aggregate of 67,000 shares of common stock.

        In March 1999, the Company sold for proceeds of $250,000 an aggregate of
61,820 shares of common stock and warrants to purchase an additional 61,820
shares of its common stock at exercise price of $4.04 per share. For its
services in the transaction, the Company paid to the placement agent fees
consisting of 3,000 shares of its common stock and warrants to purchase
additional 3,000 shares of common stock.

        In October 1999, the Company sold for net proceeds of $5,182,615,an
aggregate of 765,908 shares of common stock and warrants to purchase an
additional 574,431 shares of its common stock at an exercise price of $8.78 per
share.

6.  STOCK WARRANTS AND STOCK OPTIONS

        In 1995, the Company sold to the representatives of the underwriters
warrants, to purchase 125,000 shares of common stock for $125. The warrants are
exercisable for a period of four years commencing April 5, 1996 at an exercise
price of $7.80.

        The Company adopted a stock option plan in 1994 (the 1994 Stock Option
Plan). Incentive and nonqualified options under this plan may be granted to
employees, officers and consultants of the Company. There are 1,100,000 shares
of common stock reserved for issuance under this plan. The exercise prices of
the options are determined by the Board of Directors, but may not be less than
100% of the fair market value on the date of grant. Options generally become
exercisable over three years.


                                       32
<PAGE>   33

        In October 1995, the FASB issued Statement No. 123, "Accounting for
Stock-Based Compensation." Had the company applied the fair-value based method
of accounting which is not required, under statement 123, compensation expense
from its plans would have had the effects of increasing the 1997, 1998 and 1999
net loss to the pro forma amounts of $1,682,000, $1,501,000 and $1,355,000
respectively, with corresponding pro forma loss per share of $0.50, $0.40 and
$0.28, respectively. These pro forma amounts were determined by estimating the
fair value of each option on its grant date using the Black-Scholes
option-pricing model. Assumptions of no dividend yield, 4.61% - 6.50% for risk
free interest rates, 5 to 6 years expected lives and expected rate of volatility
of 100%, 100% and 110% in 1997, 1998 and 1999, respectively, were applied to all
grants for each year presented. The weighted average fair value at grant date
for the options granted during 1997, 1998, and 1999 was, $0.64, $1.35 and $3.99
per option, respectively.

        Stock option informed with respect to the Company's stock option plan is
as follows:

<TABLE>
<CAPTION>
                                                       OUTSTANDING STOCK OPTIONS
                                                       -------------------------
                                                    NUMBER OF           WEIGHTED AVG.
                                                     SHARES            EXERCISE PRICE
                                                     ------            --------------
<S>                                                 <C>                <C>
Balance, December 31, 1996                           359,430               $3.74
  Options revalued - canceled                       (300,550)               4.06
  Options revalued - granted                         300,550                1.31
  Options granted                                    235,900                1.34
  Options canceled                                   (65,300)               1.32
  Options exercised                                       --                  --
                                                    --------               -----
Balance, December 31, 1997                           530,030                1.41
  Options granted                                    264,000                1.75
  Options canceled                                  (113,950)               1.40
  Options exercised                                  (57,716)               1.20
                                                    --------               -----
Balance, December 31, 1998                           622,364                1.58
  Options granted                                    445,000                6.15
  Options canceled                                   (61,659)               4.55
  Options exercised                                 (211,376)               1.61
                                                    --------               -----
Balance, December 31, 1999                           794,329               $3.90
                                                    ========               =====
</TABLE>






                                       33
<PAGE>   34


        At December 31, 1997, 1998 and 1999, 24,690, 294,907 and 270,941 options
were exercisable, respectively. The following table summarizes information about
options outstanding at December 31, 1999:

<TABLE>
<CAPTION>
                        Options Outstanding                              Options Exercisable
                        -------------------                              -------------------
                      Number        Weighted Avg.    Weighted Avg.      Number      Weighted Avg.
   Range of       Outstanding at     Remaining        Exercise      Exercisable at    Exercise
Exercise Price       12/31/99     Contractual Life      Price          12/31/99         Price
--------------       --------     ----------------      -----          --------         -----
<S>       <C>         <C>             <C>                <C>             <C>             <C>
$1.13 -  1.50        153,133         7.2 years          $ 1.33          115,669         $1.32
$1.75 -  2.11        235,821         7.4 years          $ 1.81          113,238         $1.84
        $2.75         35,000         9.0 years          $ 2.75            8,751         $2.75
$5.00 -  7.47        332,375         9.6 years          $ 5.90           33,283         $6.62
$8.78 - 13.00         32,000         9.8 years          $ 8.98               --            --
       $15.69          6,000         9.9 years          $15.69               --            --
-------------        -------         ---------          ------          -------         -----
$1.13 - 15.69        794,329         8.3 years          $ 3.90          270,941         $2.07
=============        =======         =========          ======          =======         =====
</TABLE>

7.  EMPLOYEE STOCK PURCHASE PLAN

        The Board of Directors approved 100,000 shares of the Company's Common
Stock to be included in the Employee Stock Purchase Plan (ESPP). The ESPP allows
eligible employees to purchase common stock of the Company, through payroll
deductions at 85 percent of the lower of the market price on the first day or
the last day of the semi-annual purchase period. During 1997, 1998 and 1999
shares of common stock issued under this plan were 17,761, 6,921 and 4,900,
respectively.

8.  COMMITMENTS AND CONTINGENCIES

        The Company leases an office facility under a capital lease from a
partnership consisting of an officer/shareholders (see Note 3) and a former
officer and certain equipment under operating leases. The partnership purchased
the facility primarily through the issuance of debt that the Company guaranteed.
In addition (as discussed in Note 3), one of the lenders obtained, as additional
security, an assignment of the partnerships' interest as landlord in a
contingent 20-year lease previously signed by the Company. This contingent lease
provides for a monthly rent of $6,200 and supersedes the current lease in the
event of a default. The lease has been accounted for as a capital lease, because
the Company guarantee was required to obtain the debt, the Company has
guaranteed all of the debt related to the facility and over ninety percent of
the purchase price was financed. The Company's future minimum rental commitments
under these leases and the discounted present value of the capital lease
obligation (at 10 percent) at December 31, 1999 are summarized as follows:


                                       34
<PAGE>   35

<TABLE>
<CAPTION>
                                           CAPITAL LEASE
                                    OFFICE FACILITY (SEE NOTE 3)    OPERATING LEASES
                                    ----------------------------    ----------------
                                      BUILDING          LAND
                                      ---------       --------
<S>                                   <C>             <C>               <C>
2000                                  $  34,000       $ 40,000          $120,000
2001                                     34,000         40,000            99,000
2002                                     34,000         40,000           107,000
2003                                     34,000         40,000           115,000
2004                                     34,000         40,000           122,000
Thereafter                              317,000        360,000            10,000
                                      ---------       --------          --------
                                        487,000       $560,000          $573,000
                                                      ========          ========
Less--Portion representing interest    (226,300)
                                      ---------
                                        260,700
Less--Current portion                    (9,100)
                                      ---------
                                      $ 251,600
                                      =========
</TABLE>

        In calculating the discounted present value of the capital lease
obligation, the following assumptions were used:

        -  Monthly payments of $11,535 from December 1993 to November 1998, as
           adjusted (see Note 3),

        -  Monthly payments of $6,200 from December 1998 to 2013,

        -  $3,333 of each monthly payment relates to land.

        From time to time, the Company is involved in various legal actions
which arise in the ordinary course of business. The Company does not believe
that losses, if any, incurred will have a significant impact on the Company's
financial position or results of operations.

9.  PROFIT-SHARING PLAN

        The Company has a Profit-Sharing Plan (the Plan) which covers most
full-time employees. Contributions to the Plan are made at the discretion of the
Board of Directors. The Company did not make any contributions for the years
ended December 31, 1997 and 1998. During the year ended December 31, 1999, the
Company contributed approximately $3,000.

10.  SALE OF PRODUCT LINES

        In November 1998, the Company sold its Wildcat! Interactive Net Server,
Wildcat! BBS and off-line Xpress BBS mail reader product lines (the product
lines) and any associated inventory and intangible assets (the assets) to
Santronics Software, Inc. (Santronics). Under the terms of the agreement,
Santronics has assumed ownership and responsibility for the sale and support of
the product lines.

11.  EVENTS SUBSEQUENT TO THE DATE OF THE AUDITOR'S REPORT

        On February 28, 2000, the Company entered into a merger agreement with
Quintus Corporation in a stock-for-stock transaction valued at approximately
$290 million (based on the closing price of the stock of Quintus Corporation on
February 25, 2000).

                                       35
<PAGE>   36


                                    PART III


ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

        Executive Officers and Directors. The directors and executive officers
of the Company are as follows:

<TABLE>
<CAPTION>
                                                                                       Director
Name                                 Age       Position                                Since
---------------------------          ---       ---------------------------------       --------
<S>                                  <C>       <C>                                     <C>
James A. Harrer                      41        President and Chief Executive           1988
                                               Officer
Christopher B. Rechtsteiner          29        Executive Vice President
C. Scott Hunter                      32        Vice President Engineering, Chief
                                               Technical Officer
Donald M. Leonard                    37        Vice President Finance,
                                               Chief Financial Officer
Daniel Cooper                        42        Vice President, Marketing
David Richter                        42        Vice President, Sales
Stanley A. Hirschman                 53        Chairman of the Board                   1995
Michael S. Noling(1)                 61        Director                                1995
Anthony P. Mazzarella(1)             43        Director                                1999
Phillip E. Pearce(1)                 70        Director                                1999
</TABLE>

-----------
(1) Member of Audit Committee.

        James A. Harrer founded the Company's business in January 1986 and has
served the Company in various positions and currently serves as its President
and Chief Executive Officer. His early work and vision for the Mustang Message
Center platform led to what has come to be recognized as the eService
infrastructure market. He has guided several company divisions during his
tenure, developing 15 years of expertise in product development, user interface
design, and software sales and marketing. Jim is widely sought as an eService
business speaker, and finds time to mentor the local high-tech industry and the
community at large through generous volunteer efforts.

        Christopher B. Rechtsteiner, joined the company in November 1997 as VP
of Business Development & Strategic Planning. Mr. Rechtsteiner is responsible
for strategic planning and development of the Mustang Message Center product
line. In November 1998, Mr. Rechtsteiner was promoted to Executive VP and made
responsible for overseeing the company's sales, strategic planning and business
development efforts. From January to October of 1997, Mr. Rechtsteiner served as
Senior Manager, Market Research & Business Development for the Electronic
Commerce Division of Rockwell International. From October 1993 to January 1997,
Mr. Rechtsteiner served as Manager, Market Research for Network Services, and
Manager, Business Analysis for Product Management, at Ameritech.

        C. Scott Hunter joined the Company in June 1988 and has served as the
Company's Vice President Engineering since August 1991 and became Chief
Technical Officer in April 1996. He is responsible for the coordination of new
products under development as well as normal software maintenance. Mr. Hunter is
the lead architect of the Mustang Message Center, overseeing all platform
architecture design and development efforts. Mr. Hunter has more than 12 years
of experience in Internet technologies including real-time and threaded
messaging, TCP/IP client/server development, HTTP server design and development
and database architecture design. Mr. Hunter obtained a B.S. in Computer Science
with a minor in Economics from California State University at Bakersfield in
1996.

        Donald M. Leonard has served as the Company's Vice President of Finance
and Chief Financial Officer since June 1993. Mr. Leonard is responsible for the
Company's financial matters and tax strategies, and was instrumental in the
Company's successful initial public offering. Mr. Leonard is responsible for the
SEC filings, litigation matters and internal database systems of the Company.
Prior to Mustang, Mr. Leonard had 9 years experience in public accounting
working in audit and tax departments and also supervised the firm's computer



                                       36
<PAGE>   37

operations. Mr. Leonard obtained a BS in Accounting at California State
University in Bakersfield in 1987 and is a Certified Public Accountant.

        Daniel C. Cooper joined the Company in 1997 and has served the Company
in various capacities. He currently serves as Vice President Marketing. In June
1998, Mr. Cooper left Mustang.com and worked as the Marketing Director for
Equinox Systems. While there, he implemented its new national advertising
campaign and marketing collateral material. He returned to Mustang.com in
January of 2000 and is currently in charge of building the Company's new
strategic marketing team. Mr. Cooper has a creative marketing and advertising
communications background and has successfully built several in-house creative
teams for companies such as TechLink, American Hydro-Surgical and Interim
Services. Mr. Cooper is responsible for promoting the new brand and corporate
identity awareness through national and local advertising, including radio,
billboards, print and promotional collateral materials. From November of 1994
until joining Mustang, Mr Cooper was employed by TechLink, a remote access
solutions provider, web hosting, paging and design company. He was responsible
for creating their entire corporate identity package and built the creative
marketing and advertising teams for both product distribution and Internet
Service divisions.

        David Richter has served as the Company's Vice President, Sales since
June 1999. Mr. Richter has more than 20 years of high-end solutions-based sales
experience and is responsible for worldwide strategic sales operations. From
September 1996 until joining Mustang, Mr. Richter served as head of the
Litigation Services Division for Engineering Animation Inc., a leading
engineering consulting firm specializing in 3D multimedia visualization and
software tools for a variety of markets. While at EAI, Mr. Richter was
responsible for the development and growth of EAI's worldwide technical solution
sales and services organization. [Trace back employment his to at least January
1, 1995] Mr. Richter has also held senior management positions at AT&T,
including Sales Director, where he managed a segment of their electronic
commerce and data networking businesses. His experience also includes more than
a decade of senior management, sales and consulting experience with LEXIS-NEXIS.

        Stanley A. Hirschman, became a director of the Company upon completion
of the Company's initial public offering in April 1995 and became Chairman of
the Board in April 1999. He is also a director of Datametrics Corporation and
Retail Highway.com. Mr. Hirschman is President of Cpointe Associates, Inc., an
executive management and consulting firm specializing in solutions for emerging
companies with technology-based products. Mr. Hirschman was Vice President
Operations, Software Etc., Inc. from 1989 until 1996. Prior to that he held
senior management positions with T.J. Maxx, Gap Stores and Banana Republic. He
is active in community affairs and serves on the Dallas Advisory Board of the
Salvation Army Adult Rehabilitation Centers.

        Michael S. Noling became a director of the Company in May 1995, is the
Chairman of the Audit Committee and became the Company's Secretary in November
1996. In October 1998, Mr. Noling joined the Board and was elected Board Chair
of Motion Engineering, Inc., a privately held Santa Barbara company. MEI is a
leading supplier of PC-based motion control software and circuit boards that
control electric motors in precision machinery. Mr. Noling has served as Chair
of the Board of Centric Software, Inc., a privately held Los Gatos company since
December 1995. CSI designs and markets virtual product development management
software for driving product innovation. He also chairs the CSI Compensation and
Audit Committees. Since December 1996, Mr. Noling has served on the board of
directors of Transoft Technologies Corporation, a privately held Santa Barbara
company and leading supplier of Fibre Channel Storage Area Network (SAN)
software and systems for the visual computing and enterprise networking markets.
Mr. Noling chairs the Audit Committee and is Secretary of the company. Mr.
Noling joined Wavefront Technologies as President and Chief Executive Officer in
September 1993 and was a member of the Board of Directors. During the next two
years Wavefront acquired a French software company, TDI, and completed an IPO
and subsequent secondary stock offering, trading on Nasdaq as WAVE. In June
1995, Silicon Graphics completed the acquisition of Wavefront Technologies and
Alias Research to form a combined software company, Alias/Wavefront. Mr. Noling
served as a consultant to the new company until December 1996. Previously, Mr.
Noling was Executive Vice President and Chief Financial Officer for Applied
Magnetics Corporation, a global high technology computer component supplier
listed on the New York Stock Exchange. Prior to joining Applied Magnetics
Corporation in March 1991, Mr. Noling was a managing partner with Andersen
Consulting, where he had extensive experience in key operating and financial
positions. Andersen Consulting is one of the world's leading systems integration
and software firms, and is a business unit of Arthur Andersen Worldwide. Mr.
Noling served as



                                       37
<PAGE>   38

a White House Fellow for one year in the U.S. Office of Management and Budget
(OMB). He received a BS in Engineering and an MBA from the University of
Wisconsin, Madison. Mr. Noling holds a CPA certificate. He is a founding member
and a past President and Board member of the Santa Barbara Region Economic
Community Project. The ECP is focused on resolving South Coast regional issues
and on increasing the economic vitality and quality of life in Santa Barbara
through retention and growth of core high technology businesses. Mr. Noling is a
Board member and is the past President of the Santa Barbara Region Chamber of
Commerce and a member of the United Way Board.

        Anthony P. Mazzarella, a director of the Company since April 1999, has
served as an Executive Vice President, Chief Financial Officer and a director of
iMALL, Inc. since January 1998. Mr. Mazzarella was formerly Managing Director of
Geller & Friend Capital Partners, Inc., a merchant-banking firm. From 1991 to
1995, he was Executive Vice President of Drake Capital Securities, Inc., a
California-based investment-banking firm. From 1987 to 1991, Mr. Mazzarella
served as vice president of The Davis Companies, Marvin Davis' private holding
company, and was responsible for corporate finance and acquisition activities.
Mr. Mazzarella has also held management positions at Twentieth Century Fox Film
Corporation, United Airlines and Deloitte & Touche, and worked as a
flight-controls engineer with The Boeing Company. Mr. Mazzarella holds a BA in
Physics from Pomona College and an MBA from the Harvard Business School.

        Phillip E. Pearce has been a director of the Company since April 1999.
Prior to 1988,Mr. Pearce was Senior Vice President and a director of E .F.
Hutton, Chairman of the Board of Governors of the National Association of
Securities Dealers, a Governor of the New York Stock Exchange and a member of
the Advisory Council to the United States Securities and Exchange Commission on
the Institutional Study of the Stock Markets. Mr. Pearce also is a director of
Xybernaut Corporation, a publicly held developer and marketer of mobile computer
systems and StarBase Corporation, a publicly held software development company.
Mr. Pearce is a graduate of the University of South Carolina (B.A. 1953) and
attended the Wharton School of Investment Banking at the University of
Pennsylvania.

        No family relationships exist between any of the executive officers or
directors of the Company.

        Key Employee. In addition to its executive officers, the Company also
considers Greg Hewgill key to its operations. Mr. Hewgill has served as a Senior
Engineer of the Company since June 1992. Mr. Hewgill is a member of Mustang's
product development team and leads the Company's development team for Internet
products. From January 1990 to January 1992, Mr. Hewgill was employed by
Technique Computer Systems, a software development company, and was a principal
force in the co-development of many of the Company's early products. Mr. Hewgill
obtained a BS in Mathematics and Computer Science in 1992 from the University of
Victoria in British Columbia, Canada.

        Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the Securities
and Exchange Commission ("SEC") initial reports of ownership and reports of
changes in ownership of Common Stock and other equity securities of the Company.
Directors, executive officers and 10% or greater shareholders are required by
the SEC regulations to furnish the Company with copies of all Section 16(a)
forms they file.

        The Company believes, based solely on a review of the copies of such
reports furnished to the Company, that each report required of the Company's
executive officers, directors and 10% or greater shareholders was duly and
timely filed during the year ended December 31, 1999.



                                       38
<PAGE>   39


ITEM 10. EXECUTIVE COMPENSATION

        The following table sets forth all compensation paid by the Company
during 1997, 1998 and 1999 to its Chief Executive Officer and its other
executive officers whose annual salary and bonus were in excess of $100,000
during 1999 (the "Named Executives"):

<TABLE>
<CAPTION>
                                         Annual Compensation                Long term Compensation
                                 -----------------------------------    -------------------------------
                                                                        Securities
                                                                        Underlying        All Other
Name and Principal Positions     Year    Salary    Bonus(1)   Other     Options(#)(2)   Compensation(3)
----------------------------     ----   --------   --------   -----     -------------   ---------------
<S>                              <C>    <C>        <C>        <C>       <C>             <C>
James A. Harrer                  1999   $185,650     (4)        $0         100,000          $9,475
President and CEO                1998   $158,100     $0         $0         100,000          $8,388
                                 1997   $144,550     $0         $0               0          $9,416

Christopher B. Rechtsteiner      1999   $120,933     $0         $0          50,000          $4,344
Executive Vice President         1998   $ 97,050     $0         $0               0          $1,305
                                 1997   $  9,871     $0         $0          75,000          $    0

C. Scott Hunter                  1999   $127,396     (5)        $0          40,000          $1,899
Vice President of Engineering    1998   $112,500     $0         $0          40,000          $1,612
                                 1997   $108,450     $0         $0          66,500(6)       $1,630
</TABLE>

----------

(1)  Includes a cash contribution by the Company to a 401(k) profit sharing plan
     paid in 1997, 1998 and 1999 on behalf of such officer for 1996, 1997 and
     1998, respectively.

(2)  Consists of shares of Common Stock issuable upon exercise of options
     granted under Mustang's 1994 Incentive and Nonstatutory Stock Option Plan
     (the "Stock Option Plan"). Options vest over 36 months, commencing from the
     date of grant, subject to the provisions of the employment agreement with
     the named executive officer.

(3)  Consists of life and health insurance premiums paid by the Company.

(4)  Excludes an extraordinary bonus of $50,000 paid to Mr. Harrer in January
     2000 for services in 1999.

(5)  Excludes an extraordinary bonus of $20,000 paid to Mr. Hunter in January
     2000 for services in 1999.

(6)  Consists of repriced options granted under Mustang's Stock Option Plan that
     were issued in replacement of all earlier options granted to Mr. Hunter
     under the Stock Option Plan. The Options vest at their original vesting
     schedules, except that no options (including vested options) were
     exercisable earlier than one year from the date of the grant of the
     repriced options.

        Effective December 1, 1999, the Company entered into employment
agreements with Messrs. Harrer, Rechtsteiner and Hunter and one other executive
officer. Each of the agreements is for a one-year term and automatically renews
for succeeding one year terms unless either the Company or the employee provides
the other with a notice of non-renewal at least 30 days prior to the expiration
of the then current term. The agreements are terminable by either party with or
without cause upon the expiration of 30 days' notice of termination. Upon a
termination by the Company without cause or by the employee for good reason
(which includes because of a change of control of the Company), the employee is
entitled to compensation equal to nine months' salary and continued health
benefits for nine months and to immediately exercise any outstanding options to
purchase the common stock of the Company (whether or not such options would
otherwise be exercisable). These severance rights upon a change in control of
the Company are limited to an aggregate amount of up to an amount that would not
result in an "Excess Parachute Payment" to such employee within the meaning of
the Internal Revenue Code. Upon a termination by the employee without good
reason or by the Company with cause, the employee is entitled to compensation
equal to four months' salary and continued health benefits for four months.

        The following table provides certain information regarding stock option
grants made the Named Executives during 1999:


                                       39
<PAGE>   40


                        OPTION GRANTS IN LAST FISCAL YEAR


<TABLE>
<CAPTION>
                                 Number of    Percent of
                                Securities   Total Options
                                Underlying    Granted to
                                 Options     Employees in   Exercise Price   Expiration
           Name                 Granted(#)       1999           ($/Sh)          Date
           ----                 ----------       ----           ------          ----
<S>                             <C>          <C>            <C>              <C>
James A. Harrer                  100,000         22.5%          5.438         8/12/09

Christopher B. Rechtsteiner       50,000         11.2%          5.438         8/12/09

C. Scott Hunter                   40,000          9.0%          5.438         8/12/09
</TABLE>

        The following table provides certain information concerning options
exercised by the Named Executives during 1999 and the Named Executives'
unexercised options at December 31, 1999:

            AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
                              FY-END OPTION VALUES

<TABLE>
<CAPTION>
                                                              Number of Shares Underlying          Value of Unexercised
                                                                 Unexercised Options at           In-the-Money Options at
                                  Shares                           December 31, 1999               December 31, 1999(1)
                                acquired on     Value              -----------------               --------------------
Name                            exercise(#)   realized(2)     Exercisable    Unexercisable     Exercisable    Unexercisable
----                            -----------   -----------     -----------    -------------     -----------    -------------
<S>                             <C>           <C>             <C>            <C>               <C>            <C>
James A. Harrer                        0              0         58,333          141,667         $768,399       $1,637,861

Christopher B. Rechtsteiner       20,000       $107,000         35,556           69,444         $484,102       $  809,023

C. Scott Hunter                   55,000       $167,187         24,400           56,667         $332,630       $  655,142
</TABLE>

----------

(1)  Based on the difference between $15.625 (the closing price of the Common
     Stock on December 31, 1999 as reported on The Nasdaq SmallCap Market) and
     the applicable exercise prices.

(2)  Based on the difference between the closing price of the Common Stock on
     date of exercise as reported on The Nasdaq SmallCap Market and the
     applicable exercise price.

Compensation of Directors

        The Company pays its outside directors $1,500 for each board meeting
attended and reimburses them for reasonable expenses incurred in attending
meetings. Non-employee directors are granted stock options to purchase 15,000
shares when they join the board and annually thereafter. Except for directors
with less than a year of service, such options vest quarterly over two years,
are exercisable for 10 years from the date of grant and the exercise price of
such options is to be equal to the fair market value of the Common Stock on the
date of the grant. The terms of stock options granted to new directors are the
same except that such options vest quarterly beginning on the first anniversary
of the respective date of joining the board. In the event of a change in control
of the Company, options granted to the board to purchase the common stock of the
Company become immediately exercisable (whether or not such options would
otherwise be exercisable).

        In January 1999, the Board granted to each of Messrs. Hirschman and
Noling 10-year options to purchase 15,000 shares of Common Stock. The options
vest quarterly over two years from their respective anniversary dates of joining
the board of directors and the exercise price is $2.75 per share, the market
price of the Common Stock on the date of grant. Effective on April 6, 1999, the
date they joined the Board, the Board granted to each of Messrs. Greenbaum,
Mazzarella and Pearce 10-year options to purchase 15,000 shares of Common Stock.
The options vest quarterly over two years beginning on April 6, 2000 and the
exercise price is $7.46875 per share, the market price of the Common Stock on
the date of grant. In January 2000, each outside director was granted options to
purchase 15,000 shares of Common Stock. These options are exercisable in equal
quarterly installments over two years from the directors' respective anniversary
dates of becoming a director and the exercise price is $13.00 per share, the
market price on the date of grant.


                                       40
<PAGE>   41


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

        The following table sets forth as of March 13, 2000 information
regarding the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to be the beneficial owner of more than five percent
of the outstanding shares of Common Stock, (ii) each of the directors of the
Company beneficially owning Common Stock, (iii) each of the Named Executives
listed in the Summary Compensation Table in Item 10, and (iv) the executive
officers and directors of the Company as a group.

<TABLE>
<CAPTION>
                                                           COMMON STOCK
                                                       BENEFICIALLY OWNED(1)
                                                      ----------------------
NAME OF BENEFICIAL OWNER OR IDENTITY OF GROUP         NUMBER         PERCENT
---------------------------------------------         ------         -------
<S>                                                   <C>            <C>
James A. Harrer                                       725,778         11.7%
Christopher B. Rechtsteiner                            39,721             *
C. Scott Hunter                                        34,811             *
Stanley A. Hirschman                                   53,250             *
Michael S. Noling                                      33,334             *
Anthony P. Mazzarella                                   9,375             *
Phillip E. Pearce                                       9,375             *
Austin W. Marxe and David M. Greenhouse(2)            500,427          7.9%
All executive officers and directors
 as a group (10) persons                              956,358         14.9%
</TABLE>

----------
* Less than 1%.

(1) Includes any shares purchasable upon exercise of options or warrants
exercisable within 60 days of March 13, 2000, but does not give effect to any
change of control provisions in options that may become applicable as a result
of the successful consummation of the merger with Quintus Corporation.

(2) Information concerning beneficial ownership by Messrs. Marxe and Greenhouse
is based on an Amendment No. 1 to Schedule 13G dated March 1, 2000 filed on
their behalf (among others) with the Securities and Exchange Commission on March
2, 2000.




                                       41
<PAGE>   42


ITEM 12.  RELATIONSHIPS AND  RELATED TRANSACTIONS

        The Company leased its executive offices and sales, marketing and
production facilities from James A. Harrer, and the Company's President and
Chief Executive Officer and a former officer and director of the Company
pursuant to a lease that commenced on December 1, 1993 and expired on November
30, 1998. From December 1998 through January 2000, the Company occupied the
premises on a month-to-month basis, paying monthly rent of $13,458. In February
2000 the Company entered into an Addendum to the original lease agreement to
extend that lease through January 2005 on the same terms except for a 4% cost of
living adjustment. The Company believes that this lease is on terms no less
favorable than those that could have been obtained from an unaffiliated third
party are, and that the rent is comparable to that for similar facilities in the
area. Messrs. Harrer and the third party incurred debt in the aggregate amount
of $822,000, following two loans in the respective original principal amounts of
$450,000 and $372,000, to purchase said facilities. Monthly payments of Messrs.
Harrer and the third party under these two loans equal approximately $4,500 and
$2,900, respectively. The Company has guaranteed all of this debt and has
subordinated its leasehold interest in the facilities to the lenders. In
addition, in the event of a default by Mr. Harrer and the third party under the
loan agreement covering $372,000 of this debt, the lender thereunder may
exercise an assignment from Mr. Harrer and the third party of their interest as
landlord in a contingent 20-year lease, previously signed by the Company as
tenant, for such facilities. In that event, this contingent lease provides for a
monthly rent of $6,200, would supersede the current lease, and would obligate
the Company to pay such rent through November 2013.












                                       42
<PAGE>   43


ITEM 13.  EXHIBITS, LIST AND REPORTS ON FORM 8-K

        (a) Exhibits

<TABLE>
<CAPTION>
Exhibit No.      Description
-----------      -----------
<S>              <C>
3.1.1            Amended and Restated Articles of Incorporation of the Company
                 (incorporated by reference to Exhibit 2.1 of the Company's
                 Registration Statement on Form SB-2 (file no. 89900-LA)).

3.1.2            Certificate of Determination of Mustang Software, Inc. relating
                 to the authorization and determination of the Series A
                 Convertible Preferred Stock (incorporated by reference to
                 Exhibit 4.3 of the Company's Registration Statement of Form S-3
                 (file no. 333-66663) filed November 2, 1998).

3.2              Certificate of Ownership of Mustang.com, Inc. into Mustang
                 Software, Inc. (incorporated by reference to Exhibit 4 of the
                 Company's Current Report on Form 8-K filed October 12, 1999).

3.3              Amended and Restated Bylaws of the Company (incorporated by
                 reference to Exhibit 2.2 of the Company's Registration
                 Statement on Form SB-2 (file no. 89900-LA)).

4.1              Form of Common Stock Certificate (incorporated by reference to
                 Exhibit 4 .1 of the Company's Registration Statement on Form
                 SB-2 (file no. 89900-LA)).

10.2             Form of Indemnification Agreement (incorporated by reference to
                 corresponding Exhibit of the Company's Registration Statement
                 on Form SB-2 (file no. 89900-LA).

10.3             Office Lease, dated December 1, 1993, regarding the Company's
                 offices in Bakersfield, California, between the Company and
                 James A. Harrer and Richard J. Heming (incorporated by
                 reference to corresponding Exhibit of the Company's
                 Registration Statement on Form SB-2 (file no. 89900-LA).

10.3.1           Lease Addendum

10.4             Commercial Guaranty, dated October 29, 1993, by and between the
                 Company and Zions First National Bank (incorporated by
                 reference to Exhibit 10.9 of the Company's Registration
                 Statement on Form SB-2 (file no. 89900-LA).

10.5             Loan Agreement, dated October 29, 1993, by and among Zions
                 First National Bank, James A. Harrer and Richard J. Heming
                 (incorporated by reference to Exhibit 10.10 of the Company's
                 Registration Statement on Form SB-2 (file no. 89900-LA).

10.6             Promissory Note dated October 29, 1993, by Messrs. Harrer and
                 Heming in favor of Zions First National Bank (incorporated by
                 reference to Exhibit 10.11 of the Company's Registration
                 Statement on Form SB-2 (file no. 89900-LA).

10.7             "504" Note, dated October 6, 1993, by Messrs. Harrer and Heming
                 in favor of Mid State Development Corporation (incorporated by
                 reference to Exhibit 10.12 of the Company's Registration
                 Statement on Form SB-2 (file no. 89900-LA).

10.8             Small Business Administration Guaranty dated October 6, 1993,
                 by the Company in favor of Mid State Development Corporation
                 (incorporated by reference to Exhibit 10.13 of the Company's
                 Registration Statement on Form SB-2 (file no. 89900-LA).

10.9             Lease Agreement, dated October 6, 1993, by and between the
                 Company and Messrs. Harrer and Heming (incorporated by
                 reference to Exhibit 10.14 of the Company's Registration
                 Statement on Form SB-2 (file no. 89900-LA).

10.10            Assignment of Lessor's Interest in Lease to CDC, dated October
                 6, 1993, by Messrs. Harrer and Heming in favor of Mid State
                 Development Corporation (incorporated by reference to Exhibit
                 10.15 of the Company's Registration Statement on Form SB-2
                 (file no. 89900-LA).
</TABLE>


                                       43
<PAGE>   44

<TABLE>
<CAPTION>
Exhibit No.      Description
-----------      -----------
<S>              <C>
10.11            Underwriting Agreement dated April 5, 1995 by and between the
                 Company and Cruttenden Roth Incorporated, as Representative of
                 the several Underwriters (incorporated by reference to Exhibit
                 10.18 of the Company's Form 10-KSB for the year ended December
                 31, 1995).

10.12            Representative's Warrant Agreement dated April 12, 1995 by and
                 between the Company and Cruttenden Roth Incorporated
                 (incorporated by reference to Exhibit 10.19 of the Company's
                 Form 10-KSB for the year ended December 31, 1995).

10.13            Representative's Warrant (see Exhibit A to Exhibit 10.15)

10.14            Securities Purchase Agreement dated as of September 14, 1998
                 between the Company and Settondown Capital International
                 Limited and the other investors named therein (incorporated by
                 reference to Exhibit 4.2 of the Company's Registration
                 Statement of Form S-3 (file no. 333-66663) filed November 2,
                 1998).

10.15            Escrow Agreement dated as of September 14, 1998 between the
                 Company and Settondown Capital International Limited and the
                 other investors named therein (incorporated by reference to
                 Exhibit 4.4 of the Company's Registration Statement of Form S-3
                 (file no. 333-66663) filed November 2, 1998).

10.16            Registration Rights Agreement dated as of September 14, 1998
                 between the Company and Settondown Capital International
                 Limited and the other investors named therein (incorporated by
                 reference to Exhibit 4.5 of the Company's Registration
                 Statement of Form S-3 (file no. 333-66663) filed November 2,
                 1998).

10.17            Form of Stock Purchase Warrant A(incorporated by reference to
                 Exhibit 4.6 of the Company's Registration Statement of Form S-3
                 (file no. 333-66663) filed November 2, 1998).

10.18            Form of Stock Purchase Warrant B (incorporated by reference to
                 Exhibit 4.7 of the Company's Registration Statement of Form S-3
                 (file no. 333-66663) filed November 2, 1998).

10.19            Securities Purchase Agreement dated as of December 31, 1998
                 between the Company and Settondown Capital International
                 Limited and the other investors named therein (incorporated by
                 reference to Exhibit 99.1 of the Company's Current Report on
                 Form 8-K filed January 15, 1999).

10.20            Escrow Agreement dated as of December 31, 1998 between the
                 Company and Settondown Capital International Limited and the
                 other investors named therein (incorporated by reference to
                 Exhibit 99.3 of the Company's Current Report on Form 8-K filed
                 January 15, 1999).

10.21            Registration Rights Agreement dated as of December 31, 1998
                 between the Company and Settondown Capital International
                 Limited and the other investors named therein (incorporated by
                 reference to Exhibit 99.4 of the Company's Current Report on
                 Form 8-K filed January 15, 1999).

10.22            Form of Warrants issued on December 31, 1998 to Investors and
                 Placement Agent (incorporated by reference to Exhibit 99.5 of
                 the Company's Current Report on Form 8-K filed January 15,
                 1999).

10.23            Securities Purchase Agreement dated as of March 31, 1999
                 between the Company and Settondown Capital International
                 Limited and the other investors named therein (incorporated by
                 reference to Exhibit 10.1 of the Company's Current Report on
                 10-Q filed May 17, 1999).
</TABLE>



                                       44
<PAGE>   45

<TABLE>
<CAPTION>
Exhibit No.      Description
-----------      -----------
<S>              <C>
10.24            Registration Rights Agreement dated as of March 31, 1999
                 between the Company and Settondown Capital International
                 Limited and the other investors named therein(incorporated by
                 reference to Exhibit 10.2 of the Company's Current Report on
                 10-Q filed May 17, 1999).

10.25            Form of Stock Purchase Warrant issued in the March 31, 1999
                 financing (incorporated by reference to Exhibit 10.3 of the
                 Company's Current Report on 10-Q filed May 17, 1999).

10.26            1994 Incentive Stock Option Plan and Nonstatutory Stock Option
                 Plan, as amended (incorporated by reference to Exhibit A
                 included with Registrant's Definitive Proxy Statement filed
                 with the Commission on May 11, 1999).

10.27            Form of Stock Option Agreement under the 1994 Incentive Stock
                 Option Plan and Nonstatutory Stock Option Plan (incorporated by
                 reference to Exhibit 4.2 included with Registrant's
                 Registration Statement on Form S-8 (file No. 333-07269) filed
                 with the Commission on June 28, 1996).

10.28            Securities Purchase Agreement dated as of October 11, 1999
                 between the Company and the purchasers set forth on the
                 execution pages thereof (incorporated by reference to Exhibit
                 4.2 included with Registrant's Registration Statement on Form
                 S-3 filed with the Commission on November 12, 1999).

10.29            Registration Rights Agreement dated as of October 14, 1999
                 between the Company and the investors named therein
                 (incorporated by reference to Exhibit 4.3 included in
                 Registrant's Registration Statement on Form S-3 filed with
                 Commission on November 12, 1999).

10.30            Form of Common Stock Purchase Warrant issued to the investors
                 named in Exhibit 10.28 (incorporated by reference to Exhibit
                 4.4 included with Registrant's Registration Statement on Form
                 S-3 filed with the Commission on November 12, 1999).

10.31            Form of Warrant #1 issued to First Security Van Kasper
                 (incorporated by reference to Exhibit 4.5 included with
                 Registrant's Registration Statement on Form S-3 filed with the
                 Commission on November 12, 1999).

10.32            Form of Warrant #2 issued to First Security Van Kasper
                 (incorporated by reference to Exhibit 4.6 included with
                 Registrant's Registration Statement on Form S-3 filed with the
                 Commission on November 12, 1999).

10.33            Employment Agreement dated December 1, 1999 between the Company
                 and James A. Harrer.

10.34            Employment Agreement dated December 1, 1999 between the Company
                 and Christopher B. Rechtsteiner.

10.35            Employment Agreement dated December 1, 1999 between the Company
                 and C. Scott Hunter.

10.36            Employment Agreement dated December 1, 1999 between the Company
                 and Donald M. Leonard.

10.37            Agreement and Plan Of Merger Dated as of February 25, 2000,
                 between Mustang.Com, Inc. and Quintus Corporation (incorporated
                 by reference to Annex A of the Company's Preliminary Proxy
                 Statement filed as part of the Registration Statement on Form
                 S-4 of Quintus Corporation on March 28, 2000).

22               Consent of Arthur Andersen to incorporation by reference of
                 their report on 1999 Financial Statements into the Company's
                 Registration Statements.

24.1             Power of Attorney (contained on Signature Page)

27.              Financial Data Schedule
</TABLE>

        (b) Reports on Form 8-K. No report on Form 8-K was filed during the last
quarter of the period covered by this Report.



                                       45
<PAGE>   46


                                   SIGNATURES

        In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934 (the "Exchange Act"), the Registrant caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Bakersfield, State of California, on March 29, 2000


                                        MUSTANG SOFTWARE, INC.



                                        By  /s/ James A. Harrer
                                          --------------------------------------
                                            James A. Harrer, President and
                                               Chief Executive Officer


                                POWER OF ATTORNEY

        KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints James A. Harrer and Donald M.
Leonard, acting individually, as his attorney-in-fact, each with full power of
substitution, for him in any and all capacities, to sign any and all amendments
to this Report and to file the same, with exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by said attorney
to any and all amendments to said Report.


        In accordance with the Exchange Act, this Report has been signed by the
following persons on behalf on the Registrant in the capacities and on the dates
stated.

<TABLE>
<CAPTION>
Signature                                           Title                       Date
---------                                           -----                       ----
<S>                                       <C>                               <C>
        /s/ James A. Harrer               President and Chief               March 29, 2000
        -------------------------         Executive Officer (Principal
        James A. Harrer                   Executive Officer) and a
                                          Director

        /s/ Donald M. Leonard             Vice President Finance,           March 29, 2000
        -------------------------         Chief Financial Officer
        Donald M. Leonard                 (Principal Financial and
                                          Accounting Officer)

        /s/ Stanley A. Hirschman          Chairman of the Board of          March 29, 2000
        -------------------------         Directors
        Stanley A. Hirschman

        /s/ Michael S. Noling             Director                          March 29, 2000
        -------------------------
        Michael S. Noling

        /s/ Anthony P. Mazzarella         Director                          March 29, 2000
        -------------------------
        Anthony P. Mazzarella

        /s/ Phillip E. Pearce             Director                          March 29, 2000
        -------------------------
        Phillip E. Pearce

</TABLE>



                                       46