UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                                   (Mark One)

       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
                 For the fiscal year ended February 29, 2000 OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
             For the transition period from __________ to __________
                         Commission File Number 0-22154

                             MANUGISTICS GROUP, INC.
             (Exact name of Registrant as specified in its charter)

            Delaware                                  52-1469385
 (State or other jurisdiction of                   (I.R.S. Employer
  incorporation or organization)                 Identification Number)

              2115 East Jefferson Street, Rockville, Maryland 20852
               (Address of principal executive offices) (Zip code)

                                 (301) 984-5000
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: None
    Securities registered pursuant to Section 12(g) of the Act: Common Stock,
                            $.002 par value per share

                                (Title of Class)

                 Name of each exchange on which registered: None

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

                                  Yes X No ____


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

As of May 4,  2000,  the  aggregate  market  value of the  voting  stock held by
non-affiliates  of the Registrant was  approximately  $1.06 billion.  As of that
date,  the number of shares  outstanding  of the  Registrant's  common stock was
approximately  28.4 million,  based on information  provided by the Registrant's
transfer agent.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of our definitive  Proxy Statement  relating to the 2000 Annual Meeting
of Stockholders  are  incorporated by reference into Part III of this Form 10-K.
We anticipate  that our Proxy  Statement  will be filed with the  Securities and
Exchange  Commission  within  120 days  after the end of our  fiscal  year ended
February 29, 2000.

<PAGE>

                                     PART I

Item 1. BUSINESS.

Overview:

     Manugistics  Group, Inc. is a leading global provider of intelligent supply
chain  optimization  solutions for  enterprises and evolving  eBusiness  trading
networks.  Our solutions,  which include client  assessment,  software products,
consulting services for implementation and solution support, can be optimized to
the supply chain  requirements of companies.  Our solutions  provide our clients
with the  business  intelligence  to  participate  in  various  forms of trading
relationships,  from  traditional  linear  supply  chains to  eBusiness  trading
networks.  Our broad suite of  solutions  can help  companies  power  profitable
growth,  increase  revenues,  lower overall costs and improve capital allocation
through more effective  operational  decisions.  Other  operational  benefits of
implementing  our  solutions can include  greater speed to market,  strengthened
customer service,  improved  relationships  among trading partners and increased
inventory  turns  within and across our  clients'  supply  chains and  eBusiness
trading networks.

     Building on our supply chain  solution  expertise,  we were an innovator in
trading   partner   collaboration   with  our  first   Internet-ready   products
commercially  available in late 1997. These initial products were focused on the
prediction  of demand  and  sourcing  of supply  between an  enterprise  and its
trading partners  ("one-to-many").  Our expanded solutions currently address new
complexities   and  increased   operational   challenges   as  trading   partner
collaboration  has evolved to include multiple  enterprises and trading partners
("many-to-many").  These solutions are enabled by our WebWORKS-TM-  architecture
with  advanced  integration  to  disparate  systems  through our  WebConnect-TM-
product.   We  believe  that  supply  chain  requirements  for  one-to-many  and
many-to-many trading networks will drive increased demand for our solutions. Our
technology  initiatives  will continue to focus on the changing needs of clients
and evolving market dynamics in order to meet this demand.

     During  fiscal  1999 and the first  half of  fiscal  2000,  we  experienced
operational  difficulties  caused by, among other factors,  problems with direct
sales force execution,  new and stronger  competitive  forces and other external
factors.  Our poor  financial  performance in fiscal 1999 led to our decision to
restructure  our  business.  By  the  end  of  fiscal  2000,  we  completed  our
operational turnaround, including the hiring of a new executive management team,
delivery of enhanced supply chain and eBusiness solutions and an improved market
image,  which we believe  has  positioned  us well for the  future.  Although we
reported a loss for fiscal 2000, in the third and fourth  quarter of the year we
generated  sequential  quarterly license fee revenue growth through  operational
improvements, including improvements in sales force execution.

Industry Background:

     Increased global  competition has forced  organizations to improve customer
service, reduce operating costs and improve capital utilization.  Many companies
are utilizing  supply chain  optimization  to respond to this  increased  global
competition.  In order to  build  and  retain  a  competitive  advantage,  these
organizations  are  no  longer  operating  alone  but  are  collaborating   with
suppliers,  clients  and third  parties  to respond  to these  increased  market
demands.  These companies  understand  that employing an effective  supply chain
optimization strategy can be a competitive  differentiator.  In addition,  these
companies are seeking  solutions  that can help them make  intelligent  business
decisions within their  enterprise and among the  organizations in their trading
networks. Their focus is on the requirements,  demands and satisfaction of their
customers as well as  collaboration  with key suppliers and trading  partners to
ensure customer demands are met.

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     As the Internet has rapidly gained  acceptance for commercial  enterprises,
increased  competition and the need for alternative  methods of distribution are
fueling the growth of new business initiatives.  These new eBusiness initiatives
include business-to-business (B2B) and business-to-consumer (B2C) trading. These
initiatives are forcing  organizations  to formulate  eBusiness  strategies with
requirements  for robust supply chain  optimization  solutions,  integration  of
front and back office systems and  infrastructure  to support trading  networks.
Effective  communication  and  collaboration  among global and domestic  trading
partners are key elements of an eBusiness  strategy  requiring tight integration
with customers,  suppliers and third parties. Once implemented,  these solutions
can provide access to information, channel visibility and a consolidated view of
customer requirements, enabling real-time decision-making.

     Companies  are  utilizing  our  solutions  to share  information  within an
enterprise and among trading  partners in their supply chain to more effectively
coordinate  and  make   decisions  to  meet  or  exceed  the  rapidly   changing
requirements  of customers.  Our solutions  address the business  processes that
enable  responsive and intelligent  decision-making  and are uniquely focused on
managing  decisions,  events  and plans  with the  flexibility  of  adapting  to
different  forms of a trading  network.  These  processes cover the supply chain
needs of both the  enterprise  and  trading  networks  - from the  processes  of
design,  buy and make to the  additional  processes of move,  store,  market and
sell.  In addition,  our solutions  allow  companies to leverage the Internet to
collaborate, monitor, measure and improve these business processes over time.

Strategy:

     Our objective is to continue to be a leading global provider of intelligent
supply chain  solutions for enterprises and eBusiness  trading  networks,  while
returning to sustained  profitability.  Our strategy to achieve these objectives
includes the following elements:

     EXPAND OUR  SUPPLY  CHAIN AND  EBUSINESS  OFFERINGS  - We believe  that the
evolution of the Internet and increasing B2B and B2C commerce will place greater
emphasis on companies' eBusiness strategies, driving demand for our supply chain
optimization solutions and eBusiness solutions.  We will continue to develop our
solutions,  service capabilities and sales and marketing focus to take advantage
of this anticipated  demand. We believe that we have significant  experience and
domain  expertise in developing  and  providing  supply chain  optimization  and
eBusiness solutions. This experience and expertise has been enhanced through our
relationships  with customers,  industry experts and third-party  alliances.  We
intend  to  leverage  our  experience   and  domain   expertise  to  extend  the
capabilities and scope of our solutions to solve a broader range of problems and
improve processes within and among companies in trading networks.

     PROVIDE  ADVANCED  TECHNOLOGICAL  LEADERSHIP  - We  intend  to build on the
significant  technology  initiatives we introduced in fiscal 2000. During fiscal
2000, we introduced two software releases to improve user experience,  providing
a state-of-the-art  "look and feel" and navigation  capabilities to enhance user
productivity and visualization of the network.  Our industry leading integration
technology  helps  enable  seamless  interchange  among  our  applications,  the
extended network and other core systems.  Our applications  incorporate advanced
decision  sciences  known  as  "Web-based   optimization   engines,"   including
constraint-based  optimization,  "meta-heuristics,"  genetic  algorithms,  mixed
integer programming and linear  programming,  to help provide customers with the
most advanced  techniques to help enable decision support  solutions for the new
digital economy.

     During fiscal 2000, we also expanded our strategy for real-time integration
by developing  an alliance with  OnDisplay,  Inc. for our  WebConnect  products.
These B2B integration  products include B2B workflow and business process design
with pre-built or configurable plug-ins that integrate to complementary business
systems,  such as  enterprise  resource  planning  ("ERP"),  legacy  transaction
systems,  warehouse management systems ("WMS"),  manufacturing execution systems
("MES") and external  data sources  such as product  catalogs and  point-of-sale
information,  which  help  reduce  the  time,  cost  and  risk  associated  with
implementing, integrating and maintaining a best-of-breed solution.

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<PAGE>

     POWER  INTELLIGENT  TRADING  NETWORKS  - We intend to expand  our role as a
leading provider of eBusiness  solutions that power one-to-many and many-to-many
intelligent  trading networks.  Our solutions help enable intelligent  decisions
within  trading  networks by  offering  internet-based  optimization,  real-time
integration, global visibility, exception alert capabilities and trading partner
analytics.  These  solutions  are  enabled  by our  WebWORKS  architecture  with
advanced,  third-party  integration to disparate  systems through our WebConnect
products.  These solutions can be integrated  with, and power,  either vertical,
industry  or  process-based   trading   networks.   Our  solutions  help  enable
collaboration  among  trading  partners to share  product  designs,  procurement
plans, demand forecasts,  manufacturing  schedules,  distribution activities and
transportation movements for the trading network.

     BUSINESS  INVESTMENTS  - We plan on making  the  necessary  investments  to
expand  our  research  and  development,   sales  and  marketing  and  strategic
consulting  capabilities.  We believe  that such  investments  are  necessary to
continue  to  expand  our  solution  offerings,  increase  the  number  of sales
personnel  and  increase  the  number of  implementation  consultants  to assist
clients in achieving their desired business results.

     EXPAND CURRENT AND EXPLORE NEW VERTICAL MARKETS - Currently, we are focused
on  vertical  markets  in  sectors  such  as  agriculture,   consumer  durables,
electronics and high technology, pharmaceutical, motor vehicle parts, retail and
services.  With the expansion of our supply chain optimization solutions and our
focus on growth initiatives,  we are continuing to examine  opportunities in our
current vertical markets and are exploring opportunities to enter others.

     DEVELOP STRATEGIC  ALLIANCES AND NEW BUSINESS  RELATIONSHIPS - We intend to
expand and/or enhance our current solutions and integration technologies through
alliances, acquisition or investing in complementary businesses. In addition, we
will  continue to form  relationships  to  complement  our sales and  marketing,
consulting and implementation initiatives. These relationships include alliances
with  leading  technology  providers  such  as  OnDisplay,  Inc.  and  Extricity
Software,   Inc.  We  also  intend  to  continue  to  enter  relationships  with
world-class  consulting  firms  such as  Andersen  Consulting,  Inc.  ("Andersen
Consulting"),  IBM  Consulting  and Ernst & Young LLP ("E&Y").  In addition,  we
intend  to  supplement  our  sales  and  marketing  efforts  through  our use of
strategic alliances with companies such as Siebel Systems, Inc. We believe that,
together  with our  technology  and  consulting  providers,  we will continue to
provide  clients  with a  broad  range  of  supply  chain  expertise  to  assist
businesses in implementing  supply chain optimization and eBusiness solutions to
solve their business problems.

Applications:

     Our newest generation of proven solutions help enable businesses to work in
concert with their  trading  partners via the Internet,  expanding  their supply
chains  to  eBusiness  trading  networks.  Our  solutions  assist  customers  in
anticipating  trading  requirements  in both fixed and dynamic  environments  to
anticipate  and  meet  the  needs  of  customers,   thereby   maximizing  client
satisfaction.  Our solutions are designed to collaborate,  optimize, measure and
analyze  across each of the key supply chain  business  process  areas - design,
buy,  make,  store,  move,  market and sell.  Our solutions are also designed to
facilitate  strategic,  tactical  and  operational  decision-making.   Strategic
decisions  typically consider a time-frame of six months to two years;  tactical
decisions  typically  consider  a  time-frame  of  six  weeks  to one  year  and
operational decisions typically consider a time-frame of one to six weeks, while
supply chain execution is typically focused in a time-frame of minutes to days.

     Manugistics  NetWORKS-TM-   ("NetWORKS")  family  of  products  provides  a
business-to-business,  electronic commerce solutions that helps enable companies
to use the Internet to collaboratively  create joint business plans, monitor the
execution  of those plans and measure  their  success - serving the needs of all
forms of trading networks.  By sharing  information  within their enterprise and
among  their  trading  partners  via the  Internet,  clients  are often  able to
experience  real-time  response  to  dynamic  market  conditions,  resulting  in
potential increased sales and market share growth,  while attempting to minimize
supply chain costs.  NetWORKS  allows the user to tailor  business  processes to
meet  the  needs  of  each  trading  partner,  including  customers,  retailers,
distributors,  carriers or  suppliers.  Detailed  descriptions  of the  NetWORKS
family of products follow:

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<PAGE>

     NetWORKS  Strategy-TM-  - NetWORKS  Strategy  helps  enable  companies  and
extended  trading  networks to more  efficiently  make and  incorporate  optimal
design and policy  decisions into operational and tactical  planning  processes.
These decisions include components such as virtual network capacity, production,
inventory,  transportation  and  distribution.  By modeling  end-to-end  trading
partner  relationships,  this product  helps  determine  and  fine-tune the most
profitable supply chain strategy,  including choice of trading partners, optimal
inventory  levels,  appropriate  product mix,  optimal  production,  storage and
distribution   locations,   optimal  lane  volumes  and   appropriate   seasonal
pre-builds.

     NetWORKS  Master  Planning-TM- - NetWORKS  Master Planning helps enable the
optimal use of constrained  resources to improve  customer  service and increase
profit  margins by reducing  asset  investment  for tactical  manufacturing  and
operations.  Designed to provide key  functionality  for vertically  integrated,
complex  distribution  networks,  this product assists in powering  simultaneous
optimization of materials, capacity, inventory,  transportation and distribution
constraints across multi-site manufacturing, distribution and supplier networks.

     NetWORKS  Demand-TM- - NetWORKS  Demand is designed to predict and forecast
future  customer  demand with a high degree of  accuracy,  alerting a company to
potential  supply  problems  and  finding  patterns  undetected  by  traditional
forecasting  solutions.   By  combining  advanced  forecasting  techniques  with
real-time collaboration via the Internet, NetWORKS Demand helps enable eBusiness
trading  networks to interact and to create demand  fulfillment  strategies with
direct input from the customer.

     NetWORKS   Supply-TM-  -  NetWORKS   Supply  provides  the  tactical  level
functionality  in supply  planning to help  facilitate  effective  management of
production while simultaneously considering direct material flow between trading
partners.  NetWORKS  Supply  takes into  consideration  factors such as resource
capacity,  availability of raw materials,  inflow and outflow  (throughput)  for
facilities,  transportation  and  availability  of  components  and labor.  This
solution  helps  enable  planning   materials   review  for   material-intensive
industries,   manufacturing  and  replenishment  activities  at  all  facilities
throughout the supply chain.  NetWORKS Supply helps provide trading networks the
ability to meet demand and supply  requirements and customer service goals given
aggregate capacity and materials constraints.

     NetWORKS  Fulfillment-TM- - NetWORKS Fulfillment is designed to orchestrate
the time-phased storage and flow of supply to match demand, giving companies the
end-to-end  visibility to minimize  inventory and reduce  logistics  costs while
maximizing  customer  service.  This series of components  helps enable customer
requirements to be met, despite  unanticipated events,  through  user-controlled
allocation strategies. Balancing the needs of inventory strategies, distribution
requirements  and lead-times,  time phased  replenishment  plans are shared with
trading  partners such as distributors or customers on a real-time basis via the
Internet.

     NetWORKS  Commit-TM-  - NetWORKS  Commit  helps drive  accurate,  reliable,
real-time   promises   of  and   commitments   for,   delivery  of  products  by
simultaneously   performing   availability  checks  of  inventory,   production,
materials,  manufacturing  scheduling,  distribution and transportation and then
immediately  allocating  appropriate  resources.   This  real-time  response  to
customer  inquiries  is  important to  conducting  e-commerce  by assessing if a
delivery request can not be satisfied and automatically  evaluating substitution
and configuration alternatives based upon user-defined rules.

     NetWORKS  Transport-TM-  - NetWORKS  Transport  is  designed to provide the
ability  to  simultaneously   optimize  transportation  plans  and  execute  all
transportation  moves,  inbound,  outbound and  intercompany,  including freight
payment,  tracking and reporting.  NetWORKS  Transport is also designed to build
feasible,  cost  effective  consolidated  loads that meet  customer  service and
business  operating  requirements  and minimize  enterprise-wide  transportation
costs. With a competitive advantage in multi-point to multi-point transportation
planning, this solution helps drive optimized  transportation plans to be shared
with carriers and manufacturers via the Internet.

     NetWORKS  Scheduling-TM-  - NetWORKS  Scheduling  helps  enable  single and
multi-site  planning,  detailed scheduling and real-time  communication with the
plant floor to deliver  simultaneous  optimization  of constraints  and

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improved  customer  service.  With easy-to-use  scheduling board  functionality,
optimized schedules can be shared with contract manufacturers via the Internet.

     WebConnect - WebConnect is a foundation solution,  enabling the integration
of our supply  chain  optimization  solutions  both  within the  enterprise  and
"across  fire-walls"  with  third-party  applications,  such as ERP, WMS and MES
legacy systems and data sources,  such as data  warehouses.  This market proven,
packaged  application  for  integration  helps reduce the risk, time and cost of
connecting  dynamic,   responsive  trading  networks  providing  pre-configured,
adaptable  and  certified  integrations  to  third-party  applications  that are
real-time,  business-process based. These capabilities are designed to power the
connection of a client to any external application, enabling clients to assemble
unique  portfolios  of  applications  based on their  specific  business  needs.
Integrations  are  visualized  through a graphical  user interface that can make
integrations  easier  and  faster to create and  customize  without  the need to
develop   custom   interface   programming.   This   application   utilizes   an
industry-leading  enterprise  application  integration  product  as  the  engine
enabling companies to use one tool to support their  corporate-wide  integration
needs.

     STATGRAPHICS -  STATGRAPHICS  contains a  comprehensive  set of statistical
tools to control,  manage and improve the  quality of  production  processes  in
manufacturing companies. STATGRAPHICS utilizes statistical quality control and a
design of experiments to implement  quality  management in individual  locations
throughout an enterprise or plant.

Global Consulting Services:

     A key  element  of  our  business  strategy  is  to  provide  clients  with
comprehensive  solutions for their  enterprise and trading  network supply chain
optimization  problems by combining our products with professional services that
help enable clients to derive the maximum  benefit from our solutions.  In order
to achieve the benefits of our solutions for eBusiness trading networks, clients
will  typically  make many changes to their  processes  and overall  operations,
including their planning functions,  while implementing our products.  To assist
clients  in making  these  changes,  we offer a wide  range of  solution-related
services,  including supply chain development consulting to maximize competitive
advantage,   business  operations  consulting,   change  management  consulting,
end-user and system  administrator  education and training.  These services help
clients  re-engineer  their  operations  to take  advantage  of our products and
effective supply chain optimization in eBusiness.

     These solution-related  services are generally provided separately from our
software products in our software license  agreements and are provided on a time
and  materials  basis.  Our  solution-related  services  group  consisted of 199
employees as of February 29, 2000.

Client Support:

     Another  element  of our  comprehensive  solutions  is  providing  on-going
support to existing clients.  Substantially all of our clients enter into annual
solution  support  agreements   entitling  them  to  receive  solution  support,
including  access to a hotline and an electronic  bulletin  board and to receive
product  revisions and  enhancements.  Our client support function also collects
information  to assist in focusing  future  product  development  efforts and in
identifying  market  demand.  As of February 29, 2000,  our client support group
consisted of 52 employees.

Product Development:

     Our product  development efforts are directed toward the development of new
complementary   products;  the  enhancement  of  the  capabilities  of  existing
products;  expansion of eBusiness capabilities;  enhancements for use in foreign
countries and the development of products tailored to the specific  requirements
of particular industries and foreign language translations. To date, most of our
products,  including product documentation,  have been developed by our internal
staff and occasionally  supplemented by product  acquisitions and  complementary
business relationships.

     In developing  new products or  enhancements,  we work closely with current
and  prospective  clients,  as well


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as with other industry  leaders,  to address client needs and  requirements.  We
believe  that  these  collaborative  efforts  will  lead  to  improved  software
functionality and will result in superior products likely to have greater market
demand.  We maintain  committees of users and developers for our products which,
among other things,  define and rank issues associated with products and discuss
product enhancement priorities and directions.

     We  conduct  a  Product  Launch  Program  for new  applications  and  major
enhancements,   which  allows  clients  to  review  design   specifications  and
prototypes and participate in product testing. We have also established channels
for client  feedback,  which  include  periodic  surveys  and focus  groups.  In
addition, our product development staff works closely with our marketing, sales,
support  and  services  groups to  develop  products  that meet the needs of our
current  and  prospective   clients.  As  of  February  29,  2000,  our  product
development staff consisted of 232 employees.

     Since  our  inception,  we have made  substantial  investments  in  product
development.  We  believe  that  getting  products  to market  quickly,  without
compromising  quality, is critical to the success of these products. We continue
to make the product  development  expenditures that we believe are necessary for
us to rapidly  deliver new product  features and  functions.  See  "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Sales and Marketing:

     Our sales  operation  for North and South America is  headquartered  at our
offices in  Rockville,  Maryland  and  includes  field  sales  personnel  in the
Atlanta,  Philadelphia,  Hartford, Charlotte, Chicago, Columbus, Dallas, Denver,
Detroit, Los Altos, Los Angeles,  Ottawa, San Francisco,  Sao Paulo (Brazil) and
Toronto  metropolitan areas. Our direct sales organization  focuses on licensing
supply  chain  planning  and  eBusiness   solutions  to  large,   multi-national
companies, as well as mid-sized companies with a variety of supply chain issues.

     We market  our  solutions  in regions  outside of North and South  America,
primarily through subsidiaries.  Our British,  German, French, Belgian and Dutch
subsidiaries,  located in Bracknell,  England; Ratingen, Germany; Paris, France;
Brussels,  Belgium; and Utrecht, The Netherlands,  respectively,  provide direct
sales,  services  and support of our supply  chain  optimization  solutions  for
enterprises  and evolving  eBusiness  trading  networks,  primarily to customers
located  in  continental  Europe  and  the  United  Kingdom.  We  established  a
subsidiary  in Tokyo,  Japan to license and support our  solutions in Japan.  We
also have a subsidiary  in  Australia  for sales and support to customers in the
Pacific Rim,  including  Taiwan. We adapt our solutions for use in international
markets by addressing  different  languages,  different standards of weights and
measures and other operational considerations.  We also license our STATGRAPHICS
product in the U.S. and in other  countries  through  independent  distributors,
national resellers and local dealers.  In fiscal 2000,  approximately 36% of our
total  licensing and services  revenues were  attributable  to sales outside the
Americas. See "Note 13 of Notes to Consolidated Financial Statements."

     We also use indirect sales  channels to market our products,  complementary
software vendors,  third-party alliances and distributorships.  See "Alliances."
Using  these  channels,  we seek  to  increase  the  market  penetration  of our
solutions via joint marketing and sales activities.  These relationships enhance
our sales  resources  into  target  markets  and expand our  expertise  to bring
optimum supply chain solutions to prospects and clients.

     We support  our sales  activities  by  conducting  a variety  of  marketing
programs,  including an annual industry supply chain and eBusiness event, client
"steering  committees,"  and appearances at industry  conferences  such as those
organized by the American Production and Inventory Control Specialists ("APICS")
organization,  Supply  Chain  World,  Retail  Systems  and  Auto-Tech.  We  also
participate in solution  demonstration seminars and client conferences hosted by
complementary software vendors. In addition, we conduct lead-generation programs
including advertising,  direct mail, public relations,  seminars,  telemarketing
and ongoing client communication programs.

     As of February 29, 2000, we had 120 employees  engaged in sales activities,
33  employees  engaged in  marketing  activities  and 105  employees  engaged in
business development consulting activities.


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Alliances:

     We have established  business  alliances with leading  software  companies,
consulting firms,  affiliate resellers and other complementary  vendors. We have
entered into joint marketing agreements with Siebel Systems,  Inc., as well as a
number of other prominent software  companies,  which generally provide that the
respective  companies  conduct joint marketing  activities.  In support of these
joint  efforts,  our  WebConnect  framework  will  continue  to be  enhanced  to
integrate  our  solutions  with  the  software  applications  of  the  companies
mentioned  above and other ERP,  WMS,  MES,  customer  relationship  management,
configuration and other related application vendors.

     We continue to develop relationships with leading consulting firms in order
to complement our own marketing efforts. We also have formal  relationships with
many national and major regional consulting firms including Andersen Consulting,
E & Y, IBM Consulting and others.  In addition to formal programs,  we cooperate
with other professional services firms informally on a client-by-client basis.

                                        8

<PAGE>

Clients:

         Our supply  chain  products  have been  licensed  by  organizations  in
process manufacturing industries,  such as the consumer packaged goods, food and
beverage,  chemicals,  paper and  pharmaceuticals  industries  and by clients in
discrete and high-volume repetitive industries,  including the apparel, consumer
durables,   electronics  and  high  technology  and  motor  vehicles  and  parts
industries.  We have licensed various  combinations of our software  products to
clients worldwide. During fiscal 2000, all of these clients have either licensed
software  products  from us or our  distributors,  purchased  solution  support,
consulting or other services or both. See "Sales and Marketing."

<TABLE>

<S>                                                         <C>
Consumer Packaged Goods                                 Chemicals, Petrochemicals and Process
Chelsea Building Products                               BASF Corporation
Eveready Battery Co., Inc.                              Dow Chemical Company, Limited
The Great Atlantic & Pacific Tea Company, Inc.          E.I. du Pont de Nemours and Company
The Procter & Gamble Company                            ExxonMobil Corporation
Revlon Consumer Products Corporation                    Shell Italia S.p.A.
Unilever Company                                        The Rohm & Haas Company

Food & Beverage                                         Consumer Electronics/High Technology
AmeriServe Food Distribution, Inc.                      Analog Devices, Inc.
Coca-Cola Bottling Co. Consolidated                     Compaq Computer Corporation
Frito-Lay, Inc.                                         Ericsson Telecom AB
Nabisco, Inc.                                           Hewlett-Packard Company
Ocean Spray Cranberries, Inc.                           IBM Corporation
Perdue Farms Inc.                                       Lexmark International, Inc.
Starbucks Corporation                                   Philips Consumer Electronics Company
Sugar Foods Corporation                                 Trimble Navigation Limited

Retail Drug/Mass Merchandise/Specialty Retail           Motor Vehicles and Parts
CVS, Inc.                                               BMW AG
Rite Aid Corporation                                    Deere & Co.
Dayton Hudson Corporation                               Tenneco Automotive-Monroe Auto Equipment
Kmart Corporation                                       Harley-Davidson, Inc.
OfficeMax, Inc.                                         Masco Corporation
Staples, Inc.                                           Mitsubishi Motor Sales of America
Toys 'R' Us, Inc.                                       PPG Industries, Inc.
Wal-Mart Stores, Inc.
                                                        Paper
Apparel                                                 Fort James Corporation
Kayser-Roth Corporation                                 Mead Corporation
Levi Strauss & Co.                                      Rayonier
Oxford Industries, Inc.                                 Sweetheart Cup Company, Inc.
Ross Stores, Inc.
The Limited, Inc.                                       Grocery
                                                        Food Lion, Inc.
                                                        The Kroger Co.
                                                        Richfood, Inc.
                                                        Safeway Stores, Inc.
                                                        Winn-Dixie Stores, Inc.

</TABLE>

     We generally provide our software products to clients under  non-exclusive,
non-transferable license agreements. To protect our intellectual property rights
we do not sell or  transfer  title of our  products  to our  clients.  Under our
current standard license agreement, licensed software may be used solely for the
client's  internal  operations.  We are  expanding  the use of our  products and
services to provide solutions to emerging  e-commerce markets including engaging
in joint development  efforts and providing  non-exclusive  software licenses to
enable trading exchanges.



                                        9

<PAGE>
Competition:

     The market for supply chain planning software is highly competitive.  Other
application  software  vendors,   including  companies  targeting  mainframe  or
mid-range clients and certain  professional  services  organizations,  including
such vendors as i2 Technologies, Inc. and Logility, Inc. offer products that are
directly competitive with some of the software  applications  marketed by us. In
addition,  certain ERP vendors,  most of which are substantially  larger than we
are,  have  acquired or developed  supply  chain  planning  software  companies,
products  or  functionality  or have  announced  intentions  to develop and sell
supply chain  planning  solutions,  including such vendors as Baan Company N.V.,
PeopleSoft, Inc., Oracle Corporation and SAP AG.

     The principal  competitive  factors in the supply chain  planning  software
market served by us include product functionality and quality, domain expertise,
product suite integration,  ease of use, customer service and satisfaction,  the
ability  to  provide  customer  references,  product  support,   product-related
services,  compliance with industry  standards and requirements,  the ability of
the  solution  to  generate  business   benefits,   vendor  reputation  and,  in
international  markets,  availability in foreign languages.  We believe that our
principal  competitive  advantages are our comprehensive,  integrated solutions,
our significant list of  referenceable  clients,  our substantial  investment in
product  development,  the  strength  of  our  solutions  to  generate  business
benefits,  the speed at which our solutions generate returns or are implemented,
our strong client support  services and our extensive  knowledge of supply chain
optimization and eBusiness requirements.

License Agreements and Pricing:

     License fees consist  principally  of fees  generated  from licenses of our
software products. In consideration of the payment of license fees, we generally
grant  nonexclusive,  nontransferable,  perpetual  licenses  which are primarily
business unit and user specific.  License fee  arrangements  vary depending upon
the type of  software  product  being  licensed  and the  computer  environment.
License  fees are based  primarily  on which  products  are  licensed and on the
number of users  and  locations.  Licensing  dollar  amounts  for  supply  chain
optimization  solutions  may be several  million  dollars  for a large  scope of
supply chain initiatives.

     Clients may obtain  solution  support for an annual fee,  depending  on the
level of support and the size of the license fee.  The  solution  support fee is
generally  billed  annually  and is subject to changes in solution  support list
prices. We also provide  pre-installation  assistance,  systems  administration,
training and other product-related  services,  generally on a time and materials
basis.  This allows our customer to  determine  the level of support or services
appropriate for its needs.

Proprietary Rights and Licenses:

     We regard our software as  proprietary  and rely on a combination  of trade
secret,  copyright  and  trademark  laws;  license  agreements;  confidentiality
agreements  with  our  employees;   and   nondisclosure  and  other  contractual
requirements  imposed on our clients,  consulting partners and others to protect
proprietary  rights in our  products.  We distribute  our supply chain  planning
software  under  software  license  agreements,  which  typically  grant clients
nonexclusive,  nontransferable licenses to our products and have perpetual terms
unless terminated for breach. Under these types of license agreements, we retain
all rights to market our products.

     Use of the  licensed  software  is  usually  restricted  to the  customer's
internal  operations  and for  designated  users.  In sales to  virtual  service
providers,  the  licensed  software is  restricted  to the  customer's  internal
operations of  designated  users and for the  processing  of defined  customer's
client data.  Use is subject to terms and  conditions  prohibiting  unauthorized
reproduction  or  transfer of the  software.  We also seek to protect the source
code of our software as a trade secret and as an unpublished, copyrighted work.



                                       10

<PAGE>
Employees:

     As of February 29, 2000, we had 866 full-time  regular  employees.  None of
our employees are  represented  by a labor union.  We have  experienced  no work
stoppages and believe that our employee relations are generally good.

Item 2. PROPERTIES.

     Our  principal  sales,   marketing,   product   development,   support  and
administrative  facilities  are located in Rockville,  Maryland,  where we lease
approximately  122,000 square feet of office space under a lease agreement which
expires  on  April  30,  2002.  We lease  approximately  52,000  square  feet of
additional  office space under a lease  agreement that expires on July 31, 2002.
This space is located in a building a few miles from our headquarter facilities.
In  addition,  we lease  office  space for our 32  sales,  service  and  product
development  offices  located  in  North  America,  South  America,  Europe  and
Asia/Pacific.

Item 3. LEGAL PROCEEDINGS.

     We have reported that, on March 7, 1997, we, as part of the  acquisition of
certain  assets of Information  Resources,  Inc.  ("IRI"),  entered into several
agreements with IRI, including a Data Marketing and Guaranteed Revenue Agreement
("Agreement")  and an  Asset  Purchase  Agreement  ("Purchase  Agreement").  The
Agreement set forth the obligations of the parties with regard to revenues to be
paid to IRI from the sale by us of specified products provided by IRI. Under the
terms of the Agreement,  we guaranteed revenue to IRI in a total amount of $16.5
million over a period of years  following  execution of the  Agreement by way of
three separate revenue streams.

     We made an initial payment of  approximately  $500,000 to IRI. In addition,
as part of our  commitment,  we agreed to  guarantee  revenues to IRI in a total
amount of $12 million over an initial  three-year  period from  execution of the
agreement ("First Revenue  Stream").  We asserted that our ability to market the
IRI  products  had been  impaired,  which,  under  the  terms of the  Agreement,
obligates the parties to restructure  the payments and/or modify the obligations
with regard to the First Revenue  Stream.  IRI  responded,  disagreeing  that an
impairment existed and in the alternative, that any impairment was corrected.

     The parties  discussed their  disagreement  over the impairment issue until
IRI filed a complaint in the Circuit  Court of Cook County,  Illinois on January
15, 1999.  The complaint  alleged  breach of the Agreement and initially  sought
damages  of  approximately  $12,000,000  for  our  failure  to  make  guaranteed
payments. The complaint also alleged a breach of a separate  Non-Competition and
Non-Solicitation Agreement executed at the same time as the Agreement and sought
damages  in an  amount  in  excess  of  $100,000.  We  filed  a  Motion  to Stay
Proceedings and Compel Arbitration,  which was granted as to the claim under the
Agreement   and  denied  as  to  the  claim   under  the   Non-Competition   and
Non-Solicitation  Agreement.  Arbitration  proceedings  have commenced under the
auspice of the American Arbitration Association.

     In the arbitration, IRI seeks a total of $15,930,563 in damages. The amount
now  sought  by IRI  includes  amounts  which it  claims  are due under a second
revenue stream under the Agreement, triggered by the resolution of IRI's lawsuit
with Think Systems  Corporation.  The second revenue  stream  represents a total
guaranteed  revenue of $1.75 million for the first and second year following the
Think  Systems  settlement  and $2.25  million for the third year  following the
settlement.  We contend that the conditions to these amounts  becoming due under
the second revenue stream have not been satisfied and that no amounts are due to
IRI, because,  among other reasons, of a failure of consideration in the overall
transaction.  Both the Cook County action and the arbitration  proceeding are in
the early stages; coordinated discovery in both proceedings has commenced and is
scheduled to be completed in October 2000.

     As disclosed in our Periodic Report on Form 10-Q for the three months ended
November  30,  1999,  we reached an agreement  for the  settlement  of the class
action federal  securities  litigation in which we, our Chairman of the Board of
Directors  (the"Board")  and our former Chief Financial  Officer were defendants
(the  "Defendants").  A number of  lawsuits  had been filed in  various  Federal
District  Courts  alleging  certain  disclosure  violations  under  the  federal
securities  laws against the  Defendants,  arising from  alleged  omissions  and
misrepresentations  by us  and  the

                                       11

<PAGE>
two individuals regarding our business, operations and financial condition. Each
complaint sought class action status on behalf of purchasers of our common stock
during certain specified periods  (variously from February 13, 1998 through June
9,  1998)  and  sought   unspecified   monetary  damages.   These  actions  were
consolidated  as a class action in the  District of Maryland and a  consolidated
complaint was filed by all plaintiffs.

     As reported by us in our Current  Report on Form 8-K dated August 17, 1999,
the United States  District  Court for the District of Maryland  issued an order
dismissing the consolidated  class action complaint against the Defendants.  The
court  dismissed  the complaint for failure to state a claim on which relief can
be  granted.  The  plaintiffs  then  filed an appeal of the  ruling.  During the
pendency of the appeal, the parties reached a settlement in principle to resolve
the matter. This settlement is reflected in a Memorandum of Understanding and is
contingent upon approval by the District Court. The parties  subsequently  filed
with the  District  Court a joint  motion for relief from the  dismissal  of the
consolidated amended complaint based on the parties' settlement agreement.

     On March 16, 2000,  the District  Court issued an order  indicating  to the
Fourth Circuit Court of Appeals that it was inclined to grant the parties' joint
motion.  The District  Court further  indicated  that it had no objection to the
Fourth  Circuit  remanding  the matter so that the  District  Court may formally
consider the joint motion and the proposed settlement agreement.  The amounts to
be paid by Defendants pursuant to the settlement are being funded by our insurer
and thus settlement, if finally consummated,  on terms substantially the same as
those set forth in the  Memorandum of  Understanding,  would not have a material
adverse effect on us.

     As  reported  by us in our Current  Report on Form 8-K dated  February  25,
2000,  we  entered  into  a  settlement   agreement  and  general  release  (the
"Settlement")  with Level 8 Systems,  Inc., a New York  corporation  ("Level 8")
which provided for the dismissal of both the lawsuit filed by Template Software,
Inc.   ("Template"),   against  Manugistics,   Inc.,  our  principal  subsidiary
("Manugistics") and the counterclaims made by Manugistics, Inc. against Template
in the action.  Template was formerly a Virginia corporation which was merged in
December  1999  into a wholly  owned  subsidiary  of Level 8 (the  successor  in
interest to Template). Pursuant to its terms, the Settlement does not constitute
an admission of wrongdoing by either party to the dispute.

     Template had filed suit against  Manugistics in the United States  District
Court for the Eastern District of Virginia,  Alexandria Division,  alleging that
Manugistics  provided  software  that  did not  satisfy  the  requirements  of a
software  license  agreement  Template entered into with Manugistics in November
1998 (the "Agreement"). Template sought damages of at least $1.25 million, which
represented  the amount of  software  license  fees paid by  Template  under the
Agreement.  Manugistics  responded  to the  complaint  and  filed  counterclaims
against  Template,  including  a  counterclaim  for  recovery  of  approximately
$600,000 for unpaid consulting services provided by Manugistics.  The Settlement
provides  for a cash  payment  that was made by us to Template in an amount that
was covered by our insurance carrier.

     We are involved from time to time in disputes  (including  those  described
below)  and other  litigation  in the  ordinary  course of  business.  We do not
believe  that the outcome of any  pending  disputes  or  litigation  will have a
material adverse effect on our business,  operating results, financial condition
and  cash  flows.  However,  the  ultimate  outcome  of these  matters,  as with
litigation  generally,  is inherently  uncertain and it is possible that some of
these matters may be resolved adversely to us. The adverse resolution of any one
or more of these matters could have a material  adverse  effect on our business,
operating results, financial condition and cash flows.

     One of our clients  submitted to us by letter a claim for damages  based on
alleged  breaches of a software license  agreement  entered into with one of our
foreign  subsidiaries in fiscal 1997. The client claims damages in the amount of
approximately  $6.5  million,  a  significant   portion  of  which  consists  of
consequential  damages. We are in the process of responding to the letter and we
believe  that we have  meritorious  defenses  to these  claims and could  assert
significant counterclaims against the client.

     We have also  received a letter from a foreign  company  asserting,  on the
basis of  information  in our press  releases,  that certain of our supply chain
planning solutions which we sell infringe on that company's patents.  We believe
that our systems and solutions do not infringe on the foreign  company's patents
and intend to respond appropriately.


                                       12

<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

Item 4A. EXECUTIVE OFFICERS OF THE REGISTRANT.

The name, age and position held by each of the executive officers of Manugistics
Group, Inc. and Manugistics,  Inc., its principal operating  subsidiary,  are as
follows:


<TABLE>
<CAPTION>

Name                                      Age           Position
-----                                     ---           --------
<S>                                      <C>           <C>

William M. Gibson..................       55            Chairman of the Board of Directors

Gregory J. Owens...................       40            Chief Executive Officer and President

Terrence A. Austin.................       37            Executive Vice President, Electronics and High Technology

Richard F. Bergmann................       44            Executive Vice President, Global Sales and Services

Raghavan Rajaji....................       53            Executive Vice President and Chief Financial Officer

Jeffrey L. Holmes..................       50            Senior Vice President, Strategic Solutions and Alliances

James J. Jeter.....................       41            Senior Vice President, Global Marketing

Timothy T. Smith...................       36            Senior Vice President, General Counsel and Secretary

Daniel S. Stoks....................       38            Senior Vice President, Americas Sales
</TABLE>

     Mr. Gibson has served as Chairman of the Board of Manugistics  Group,  Inc.
since its formation in 1986.  From 1986 until April 1999, Mr. Gibson also served
as Chief Executive  Officer and President of Manugistics  Group,  Inc. From 1983
until 1986, Mr. Gibson served as Chief Executive Officer, President and Chairman
of the Board of STSC,  Inc. (now  Manugistics,  Inc.).  He joined STSC,  Inc. as
Executive Vice President and Chief Operating Officer in 1982.

     Mr. Owens  became  Chief  Executive  Officer and  President of  Manugistics
Group,  Inc. in April 1999.  From 1993 to 1999,  Mr.  Owens served as the Global
Managing Partner for the Andersen  Consulting Supply Chain Practice,  one of the
world's  largest  supply chain  consulting  practices  with over $1.4 billion in
revenue in 1998. Mr. Owens joined Andersen Consulting in 1990.

     Mr. Austin has served as Executive  Vice  President,  Electronics  and High
Technology  since  June 1999.  From  August  1997 to June  1999,  he was head of
Andersen  Consulting's  Electronics  and High  Technology  Sector of its  Global
Supply Chain Practice. He joined Andersen Consulting in October 1989.

     Mr. Bergmann has served as the Executive Vice  President,  Global Sales and
Services since June 1999.  From September 1990 to June 1999, he was a partner in
the Andersen  Consulting Supply Chain Strategy Group.  Prior to joining Andersen
Consulting,  Mr. Bergmann was Director of Corporate  Logistics for Pepsico Frito
Lay.

     Mr.  Rajaji has served as  Executive  Vice  President  and Chief  Financial
Officer since December 1999.  From September 1995 to December 1999, he served as
Senior Vice President, Chief Financial Officer and Treasurer at BancTec, Inc.


                                       13

<PAGE>

     Mr.  Holmes has served as Senior Vice  President,  Strategic  Solutions and
Alliances  since  September  1999.  From April to September  1999,  he served as
Senior Vice  President,  North American Sales  Operations.  From October 1998 to
April 1999, he served as Vice President,  Industry Solutions.  From January 1997
to October 1998, he served as Vice President,  Consumer  Products  Industry.  He
joined us in October 1996 as Director of Marketing, Consumer Products. From 1995
to 1996,  Mr.  Holmes  served as  Logistics  and  Commercial  Director  for Mars
Incorporated.  From 1993 to 1995,  Mr. Holmes  served as Logistics  Director for
Mars, L.L.C. in Russia.

     Mr.  Jeter has served as Senior  Vice  President,  Global  Marketing  since
August 1999. From April 1997 to August 1999, he held various executive positions
at Iomega  Corporation,  ultimately  rising to the level of Vice  President  and
Managing Director of Iomega's European business. From October 1991 to April 1997
he served as  Director of Product  Marketing  in  Duracell's  new  products  and
technology division.

     Mr.  Smith  has  served as  Senior  Vice  President,  General  Counsel  and
Secretary  since January 2000. He served as Vice  President and General  Counsel
for  automobile  importer  Land  Rover  North  America,  Inc.  from June 1998 to
December 1999. He was Associate  Corporate  Counsel for retail  holding  company
Dart Group  Corporation  from May 1995 to May 1998 and was an associate with the
Baltimore-based  law firm of Niles,  Barton & Wilmer from  September 1988 to May
1995.

     Mr. Stoks has served as Senior Vice President, Americas Sales since January
2000.  From June 1999 to January  2000,  he served as Senior Vice  President  of
Sales for  YouDecide.com.  From July 1992 to June 1999,  he held  various  sales
management positions at Oracle Corporation.

     There are no family  relationships  among any of the executive  officers or
directors of Manugistics  Group, Inc.  Executive  officers of Manugistics Group,
Inc.  are elected by the Board of  Directors on an annual basis and serve at the
discretion of the Board.


                                       14

<PAGE>

                                     PART II

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Our common  stock,  $.002 par value per share,  trades on The Nasdaq  Stock
Market under the symbol "MANU".  The following table sets forth the high and low
closing  prices in dollars per share for the respective  quarterly  periods over
the last two fiscal years,  as reported in published  financial  sources.  These
prices  reflect  inter-dealer  prices,   without  retail  markup,   markdown  or
commission and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>


Fiscal 2000                                            High                      Low
-----------                                            ----                      ----

<S>                                                   <C>                       <C>

First Quarter                                         10 3/4                    6 1/16
(ended May 31, 1999)
Second Quarter                                        15 3/4                    8 7/8
(ended August 31, 1999)
Third Quarter                                        16 15/16                   9 1/2
(ended November 30, 1999)
Fourth Quarter                                       56 13/16                  18 7/16
(ended February 29, 2000)
</TABLE>

<TABLE>
<CAPTION>

Fiscal 1999                                            High                      Low
-----------                                            ----                      ----
<S>                                                   <C>                      <C>
First Quarter                                         66 3/8                    25 1/4
(ended May 31, 1998)
Second Quarter                                        31 1/2                      14
(ended August 31, 1998)
Third Quarter                                         16 1/2                    6 1/8
(ended November 30, 1998)
Fourth Quarter                                        17 3/8                    7 1/2
(ended February 28, 1999)
</TABLE>

     As of April 14, 2000, there were  approximately  320 stockholders of record
and approximately  11,000  beneficial  owners of our common stock,  according to
information provided by our transfer agent.

     We have never  declared or paid any cash  dividends on our common stock and
do not intend to do so in the foreseeable future. It is our present intention to
retain any future  earnings to provide  funds for the operation and expansion of
our business. In addition, we have an unsecured revolving credit facility with a
commercial  bank that will expire on September 30, 2000. We intend to renew this
credit facility upon expiration.  See  "Management's  Discussion and Analysis of
Financial Condition and Results of Operations,  Liquidity and Capital Resources"
and Note 5 of Notes to Consolidated Financial Statements. During the term of the
facility,  we are subject to a covenant not to declare or pay cash  dividends to
holders of our common stock.  Future payment of cash dividends,  if any, will be
at the  discretion  of the  Board  and  will be  dependent  upon  our  financial
condition, results of operations, capital requirements and such other factors as
the Board may deem  relevant and will be subject to the  covenants  contained in
any outstanding credit facility.

Recent Sale of Unregistered Securities:

None.

                                       15

<PAGE>

Item 6. SELECTED FINANCIAL DATA.

     Selected  consolidated  financial  data with  respect to us for each of the
five fiscal years in the period ended February 29, 2000 is set forth below. This
data should be read in conjunction  with our Consolidated  Financial  Statements
and related Notes thereto for the corresponding  periods, which are contained in
Part IV of this Annual Report on Form 10-K.

<TABLE>
<CAPTION>

                                                                     Fiscal Year Ended February 29 or 28

                                                     2000          1999             1998           1997           1996
                                                     ----          ----             ----           ----           ----
<S>                                                <C>           <C>               <C>            <C>            <C>
                                                                    (in thousands, except per share data)
Statement of Operations Data:
   Revenues:

     License fees                                   $ 60,421     $ 73,802         $ 107,547       $ 54,342      $ 33,111
     Consulting, solution support and other
       services                                       92,012      103,762            72,716         45,865        33,865
                                                    --------      -------         ---------       --------      --------
       Total revenues                                152,433      177,564           180,263        100,207        66,976
                                                    --------      -------         ---------       --------      --------
   Operating expenses:
     Cost of license fees                             13,685       13,415            11,102          5,011         3,070
     Cost of consulting, solution support
       and other services                             44,346       50,585            33,213         19,618        15,181
     Sales and marketing                              61,439      103,006            66,228         34,961        22,933
     Product development                              29,150       49,389            32,794         18,889        12,133
     General and administrative                       15,837       19,828            14,639          9,344         6,664
     Acquisition-related expenses (1)                     --        3,095                --             --            --
     Restructuring costs (1)                          (1,506)      33,775                --             --            --
     Purchased research and development (2)               --           --            47,340          3,697            --
                                                    --------      -------         ---------       --------      --------
       Total operating expenses                      162,951      273,093           205,316         91,520        59,981

   (Loss) income from operations                     (10,518)     (95,529)          (25,053)         8,687         6,995
   Other income - net                                  1,389        2,362             2,863          1,047         1,144
                                                     --------     -------           --------      --------      --------

   (Loss) income before income taxes                  (9,129)     (93,167)          (22,190)         9,734         8,139
   Provision (benefit) for income taxes                 (184)       2,945            (9,025)         5,077         3,064
                                                     --------     -------           --------      --------      --------

   Net (loss) income                                 $(8,945)    $(96,112)        $ (13,165)       $ 4,657       $ 5,075
                                                     ========     =======           ========      ========       =======

   Basic (loss) income per share                     $ (0.33)     $ (3.64)        $   (0.56)       $  0.22       $  0.24
                                                     ========     =======           ========      ========       =======

   Shares used in basic share computation             27,486       26,402            23,484         21,657        20,909
                                                     ========     =======           ========      ========       =======

   Diluted (loss) income per share                  $  (0.33)     $ (3.64)          $ (0.56)      $   0.20       $  0.23
                                                     ========     =======           ========      ========       =======

   Shares used in diluted share computation           27,486       26,402            23,484         23,159        21,935
                                                     ========     =======           ========      ========       =======
</TABLE>

(1) During fiscal 1999, we incurred charges to operations totaling $33.8 million
for certain restructuring costs related to management's plan to reduce costs and
improve  operating  efficiencies.   Also  during  fiscal  1999,  we  incurred  a
non-recurring   charge  to   operations   totaling   $3.1  million  for  certain
acquisition-related   expenses  in  connection  with  the  business  combination
involving TYECIN Systems,  Inc. The impact of these charges on basic and diluted
loss per share was $1.59 per share for  fiscal  1999.  Excluding  the  effect of
these charges, basic and diluted loss per share would have been $2.05.

(2) During fiscal 1998 and 1997, we incurred non-recurring,  non-cash charges to
operations  totaling $47.3 million (or $28.6  million,  net of $18.7 million tax
benefit) and $3.7 million,  respectively,  in  connection  with the write-off of
purchased  research  and  development  which had not yet  reached  technological
feasibility  and had no  alternative  future use. The impact of these charges on
basic and diluted (loss) income per share was ($1.22) and ($1.15), respectively,
in fiscal 1998 and ($.17) and ($.16) respectively, in fiscal 1997. Excluding the
effect of these  non-recurring,  non-cash charges,  basic and diluted income per
share would have been $.66 and $.59,  respectively,  in fiscal 1998 and $.39 and
$.36, respectively, in fiscal 1997.

                                       16

<PAGE>

Item 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

Overview:

     Manugistics  Group, Inc. is a leading global provider of intelligent supply
chain  optimization  solutions for  enterprises and evolving  eBusiness  trading
networks.  Our solutions,  which include client  assessment,  software products,
consulting services for implementation and solution support, can be optimized to
the supply chain  requirements of companies.  Our solutions  provide our clients
with the  business  intelligence  to  participate  in  various  forms of trading
relationships,  from  traditional  linear  supply  chains to  eBusiness  trading
networks.  Our broad suite of  solutions  can help  companies  power  profitable
growth,  increase  revenues,  lower overall costs and improve capital allocation
through more effective  operational  decisions.  Other  operational  benefits of
implementing  our  solutions can include  greater speed to market,  strengthened
customer service,  improved  relationships  among trading partners and increased
inventory  turns  within and across our  clients'  supply  chains and  eBusiness
trading networks.

     Building on our supply chain  solution  expertise,  we were an innovator in
trading   partner   collaboration   with  our  first   Internet-ready   products
commercially  available in late 1997. These initial products were focused on the
prediction  of demand  and  sourcing  of supply  between an  enterprise  and its
trading partners  ("one-to-many").  Our expanded solutions currently address new
complexities   and  increased   operational   challenges   as  trading   partner
collaboration  has evolved to include multiple  enterprises and trading partners
("many-to-many").  These solutions are enabled by our WebWORKS architecture with
advanced  integration to disparate  systems through our WebConnect  product.  We
believe that supply chain requirements for one-to-many and many-to-many  trading
networks  will  drive  increased  demand  for  our  solutions.   Our  technology
initiatives will continue to focus on the changing needs of clients and evolving
market dynamics in order to meet this demand.

     During  fiscal  1999 and the first  half of  fiscal  2000,  we  experienced
operational  difficulties  caused by, among other factors,  problems with direct
sales force execution,  new and stronger  competitive  forces and other external
factors.  Our poor  financial  performance in fiscal 1999 led to our decision to
restructure  our  business.  By  the  end  of  fiscal  2000,  we  completed  our
operational turnaround, including the hiring of a new executive management team,
delivery of enhanced supply chain and eBusiness solutions and an improved market
image,  which we believe  has  positioned  us well for the  future.  Although we
reported a loss for fiscal 2000, in the third and fourth  quarter of the year we
generated  sequential  quarterly license fee revenue growth through  operational
improvements, including improvements in sales force execution.

                                       17

<PAGE>

Results of Operations:

Revenues:

     Our revenues  consist of software  license  fees,  consulting  revenues and
solution  support  revenues.  Software  license  revenues  are  recognized  upon
execution of a software  license  agreement,  provided that the software product
has been shipped, there are no uncertainties surrounding product acceptance, the
license fees are fixed and determinable,  collection is considered  probable and
no significant  production,  modification  or  customization  of the software is
required,  in  accordance  with  the  American  Institute  of  Certified  Public
Accountants'  ("AICPA")  Statement of Position ("SOP") 97-2,  "Software  Revenue
Recognition,"  and  SOP  98-9,  "Modification  of  SOP  97-2,  Software  Revenue
Recognition with respect to Certain Transactions," for fiscal periods subsequent
to December 31,  1997.  Fees are  allocated to the various  elements of software
license  agreements  based on our historical fair value  experience.  Consulting
revenues are recognized as the services are performed. Solution support revenues
are recognized  ratably over the support period defined in the software  license
agreement.  For the fiscal  year  ended  February  28,  1998,  software  license
revenues were recognized upon the execution of a software license  agreement and
shipment of the software provided that the license fee was fixed, collection was
considered probable and no significant vendor obligations remained  outstanding,
in accordance with the AICPA's SOP 91-1,  "Software  Revenue  Recognition."  The
following  table sets forth  software,  consulting,  solution  support and other
services  revenues  for the three fiscal  years ended  February  29,  2000,  and
February 28, 1999 and 1998 (dollar amounts in thousands):


<TABLE>
<CAPTION>

                                                            Fiscal Year Ended February 29 or 28
                                           2000          Change            1999           Change           1998
                                        ------------    ----------     -------------     ----------    --------------
<S>                                    <C>             <C>            <C>               <C>           <C>
License fees                               $ 60,421        (18.1%)        $  73,802          (31.4%)        $ 107,547
 Percentage of total revenues                  39.6%                           41.6%                             59.7%
Consulting, solution support
 and other services                          92,012        (11.3%)          103,762           42.7%            72,716
 Percentage of total revenues                  60.4%                           58.4%                             40.3%
Total revenue                               152,433        (14.2%)          177,564           (1.5%)          180,263
 Percentage of total revenues                   100%                            100%                              100%

</TABLE>

     License  fees.  Our license  fees  consist  primarily  of software  license
revenues from direct sales. We also earn license fees through indirect channels,
primarily through complementary software vendors, consulting firms, distributors
and systems integrators.

     License fees decreased for the year ended February 29, 2000 compared to the
year ended February 28, 1999 primarily because we fielded a smaller direct sales
organization  during  fiscal 2000 which  resulted in a decrease in the number of
licenses  sold to customers and a decrease in the average deal size in the first
half of fiscal 2000 when compared to fiscal 1999. License fees decreased for the
year ended  February 28, 1999 compared to the prior fiscal year primarily due to
sales execution issues and other external factors described below.

     Our direct  sales  force  execution  suffered  from (1) delays in new sales
employees becoming productive;  (2) the major sales territory  re-alignment that
resulted from the rapid sales force  expansion and changing to a vertical market
organization  of the sales force;  and (3) certain  difficulties  involving  the
integration of the products and operations of ProMIRA Software, Inc. ("ProMIRA")
and TYECIN  Systems,  Inc.  ("TYECIN").  See  "Factors  that May  Affect  Future
Results."

     External factors  compounded our sales execution  problems and affected our
ability to generate license fee revenues, including new and stronger competitive
forces, issues impacting clients and prospects such as the Year 2000 problem and
concerns with global economic  conditions.  These factors lengthened or deferred
sales cycles as clients  diverted  budgets and other  resources  to  accommodate
testing  and  preparation  for the Year 2000  problem  and  postponed  licensing
decisions. In addition, our operating results during fiscal 1999 raised concerns
with  clients and  prospects  about our  financial  viability,  which  tended to
lengthen  sales cycles.  We believe that these concerns  adversely  affected our
ability to generate license fee revenues.

                                       18

<PAGE>


     Although  there has been variation in license fees as a percentage of total
revenues over the past several  quarters,  we  anticipate  that license fees are
likely to represent  approximately  50% of total  revenues for fiscal 2001.  See
"Forward Looking Statements" and "Factors That May Affect Future Results."

     Consulting,  solution  support  and other  services.  Consulting,  solution
support and other services  ("Services")  revenues  decreased for the year ended
February 29, 2000 compared to the year ended  February 28, 1999 primarily due to
a decrease in implementation services provided, resulting from a lower number of
software  licenses closed during the year.  Services  revenue  increased for the
year ended  February 28, 1999  compared to the prior year  primarily  due to the
continuation  of customer  implementations  from license  revenues in the fourth
quarter of fiscal 1998 and the first three  quarters of fiscal 1999, in addition
to an increase in the number of clients being actively  supported under solution
support agreements.

     Solution support revenues increased following the increase in the number of
clients  that have  licensed  our  software  products  and  entered  into annual
solution  support  contracts.  Solution  support revenues tend to track software
license fee  transactions  in prior  periods.  In the past three  fiscal  years,
approximately  95% of customers  with solution  support  contracts  have renewed
these contracts.

Operating Expenses:

     General.  In the  second  half of fiscal  1999,  we  executed  company-wide
restructuring  activities that included overall cost containment  initiatives as
we pursued our business  strategies  of returning  to  profitability,  expanding
product  innovation  to enable  companies to take  advantage of  e-commerce  and
include  interface  and  integration   technology  and  expanding  our  indirect
distribution channels through alliances with complementary  software vendors and
consulting and implementation organizations.

     Due to our  cost  containment  actions,  such as  headcount  and  occupancy
reductions,  total  operating  expenses  decreased  for the  fiscal  year  ended
February 29, 2000 compared to fiscal years ended  February 28, 1999 and February
28, 1998.

     The  following  table sets forth  operating  expenses  for the three fiscal
years ended February 29, 2000 and February 28, 1999 and 1998 (dollar  amounts in
thousands):

<TABLE>
<CAPTION>

                                                            Fiscal Year Ended February 29 or 28

Operating expenses                         2000          Change            1999           Change           1998
                                        ------------    ----------     -------------     ----------    --------------
<S>                                    <C>             <C>            <C>               <C>           <C>
Cost of license fees                       $ 13,685        2.0%           $  13,415          20.8%         $  11,102
 Percentage of total revenues                   9.0%                            7.6%                             6.2%
Cost of consulting, solution support
 and other services                          44,346      (12.3%)             50,585          52.3%            33,213
 Percentage of total revenues                  29.1%                           28.5%                            18.4%
Sales and marketing                          61,439      (40.4%)            103,006          55.5%            66,228
 Percentage of total revenues                  40.3%                           58.0%                            36.7%
Product development                          29,150      (41.0%)             49,389          50.6%            32,794
 Percentage of total revenues                  19.1%                           27.8%                            18.2%
General and administrative                   15,837      (20.1%)             19,828          35.4%            14,639
 Percentage of total revenues                  10.4%                           11.2%                             8.1%
Restructuring costs                          (1,506)    (104.5%)             33,775           100%                --
 Percentage of total revenues                  (1.0%)                          19.0%                              N/M
Acquisition-related expenses                     --       (100%)              3,095           100%                --
 Percentage of total revenues                   N/M                             1.7%                              N/M
Purchased research and development               --          0%                  --          (100%)           47,340
 Percentage of total revenues                   N/M                             N/M                             26.3%
                                        ------------                   -------------                   --------------

Total operating expenses                  $ 162,951      (40.3%)          $ 273,093          33.0%         $ 205,316
 Percentage of total revenues                 106.9%                          153.8%                           113.9%
</TABLE>

                                       19

<PAGE>

     Cost of license  fees.  Cost of license  fees  consist of  amortization  of
capitalized software development costs, cost of goods and other expenses,  which
include  royalty fees  associated with  third-party  software  included with our
licensed   software  and  amortization  of  goodwill   associated  with  certain
acquisitions.  Capitalized  software development costs and acquired research and
development  costs are  amortized  at the greater of the amount  computed  using
either (a) the  straight-line  method over the  estimated  economic  life of the
product,  commencing  with the date the product is first  available  for general
release or (b) the ratio that current  gross  revenues from the product bears to
the total current and anticipated future gross revenues.  Generally, an economic
life of two  years  is  assigned  to  capitalized  software  development  costs.
Goodwill is amortized over five years.

     The following table sets forth amortization of capitalized  software,  cost
of goods and other  expenses and cost of license fees for the three fiscal years
ended  February  29,  2000 and  February  28, 1999 and 1998  (dollar  amounts in
thousands):

<TABLE>
<CAPTION>

                                                            Fiscal Year Ended February 29 or 28
                                           2000          Change            1999           Change           1998
                                        ------------    ----------     -------------     ----------    --------------
<S>                                    <C>             <C>            <C>               <C>           <C>
Amortization of capitalized software        $ 9,006       3.5%             $  8,704          15.1%          $  7,560
 Percentage of license fees                    14.9%                           11.8%                             7.0%
Cost of goods and other expenses              4,679      (0.7%)               4,711          33.0%             3,542
 Percentage of license fees                     7.7%                            6.4%                             3.3%
                                        ------------                   -------------                   --------------
Cost of license fees                         13,685       2.0%               13,415          20.8%            11,102
 Percentage of license fees                   22.6%                           18.2%                            10.3%
</TABLE>


     Cost of license fees  increased for the fiscal year ended February 29, 2000
compared to fiscal years ending  February 28, 1999 and 1998  primarily due to an
increase  in the  amortization  of  previously  capitalized  software  costs for
products that became  available for general release during the fiscal year ended
February 29, 2000. In addition,  cost of license fees  increased as a percentage
of total  license fees due to a decrease in license fee revenues  generated  for
the fiscal year ended February 29, 2000 compared to fiscal years ending February
28, 1999 and 1998.

     Cost  of  consulting,   solution  support  and  other  services.   Cost  of
consulting,  solution support and other services consist  primarily of personnel
costs. Cost of consulting, solution support and other services decreased for the
fiscal  year  ending  February  29,  2000,  compared  to the fiscal  year ending
February 28, 1999 primarily due to the reduction of expenses in connection  with
the company-wide restructuring activities, which included reducing headcount, in
the second half of fiscal 1999.  Cost of services  increased for the fiscal year
ended  February  28,  1999  compared  to fiscal  year ended  February  28,  1998
primarily due to hiring additional  consultants  during the first part of fiscal
1999 and increasing  product support and training personnel in both domestic and
foreign locations.

     Sales and  marketing.  Sales and marketing  expenses  consist  primarily of
personnel costs,  commissions,  promotional  events and  advertising.  Sales and
marketing  expenses  decreased  for the fiscal  year  ended  February  29,  2000
compared to fiscal years ending  February 28, 1999 and 1998 primarily due to the
reduction of sales and marketing  headcount  implemented  under the company-wide
restructuring  activities  during  the  second  half of fiscal  1999.  Sales and
marketing  expenses  increased  for the fiscal  year  ended  February  28,  1999
compared to fiscal year ended February 28, 1998  primarily  because we added new
personnel in both our domestic and foreign  locations  throughout the first half
of fiscal 1999. In fiscal 1999, we also incurred  promotional costs to establish
new offices and enhance our presence in foreign locations.

     Product development. We record product development costs net of capitalized
software  development  costs  for  products  that  have  reached   technological
feasibility in accordance with Statement of Financial  Accounting  Standards No.
86,  "Accounting  for the  Costs of  Computer  Software  to be Sold,  Leased  or
Otherwise  Marketed." Software development costs are amortized at the greater of
the amount computed using either (a) the straight-line method over the estimated
economic  life of the  product,  commencing  with the date the  product is first
available for general release or (b) the ratio that current gross revenues bears
to the total  current and  anticipated  future  gross  revenues.  Generally,  an
economic  life of two years is  assigned  to  capitalized  software  development
costs.


                                       20

<PAGE>

     The  following  table sets forth  product  development  costs for the three
fiscal  years ended  February  29, 2000 and  February  28, 1999 and 1998 (dollar
amounts in thousands):

<TABLE>
<CAPTION>

                                                            Fiscal Year Ended February 29 or 28
                                           2000          Change            1999           Change           1998
                                        ------------    ----------     -------------     ----------    --------------
<S>                                    <C>             <C>            <C>               <C>            <C>
Gross product development costs            $ 34,585      (41.8%)          $  59,464          37.7%         $  43,068
 Percentage of total revenues                  22.7%                           33.5%                            24.0%
Less: Capitalized product
development costs                             5,435      (46.1%)             10,075         (1.9%)            10,274
 Percentage of gross product
         development costs                    15.7%                           17.0%                            24.1%
                                        ------------                   -------------                   --------------
Product development costs                    29,150      (40.9%)             49,389          50.6%            32,794
 Percentage of total revenues                  19.2%                           27.8%                            18.2%
</TABLE>

     Gross product development costs and net product development costs decreased
for the fiscal year ended  February 29, 2000  compared to the fiscal years ended
February  28,  1999  and  1998,  primarily  due to the  reduction  of  headcount
implemented under our restructuring  plan during the second half of fiscal 1999.
In addition, we have consolidated our research and development efforts.

     General and  administrative.  General and  administrative  expenses consist
primarily  of  personnel,  infrastructure  expenses  and the fees  and  expenses
associated   with   legal,   accounting   and  other   functions.   General  and
administrative  expenses  decreased for the fiscal year ended  February 29, 2000
compared to the fiscal years ended February 28, 1999 and 1998,  primarily due to
the reduction of headcount  implemented under our restructuring  plan during the
second half of fiscal 1999 and increased controls on discretionary spending.

     Acquisition-related expenses. We acquired TYECIN in June 1998. We accounted
for the  acquisition  as a pooling of  interests  and  recorded a  non-recurring
charge during the second  quarter of fiscal 1999 of  approximately  $3.1 million
for certain expenses related to this transaction,  including, among other items,
accounting, legal and severance expenses.

     Restructuring costs. In the third and fourth quarters of 1999, we announced
and implemented a restructuring plan aimed at reducing costs and returning us to
profitability. The restructuring plan was necessitated due to our poor financial
performance   throughout  fiscal  1999,  which  resulted  from  various  factors
including but not limited to poor sales execution,  new and stronger competitive
factors, lengthening of sales cycles and prospects' concerns about the Year 2000
and global economic conditions.  We reorganized to focus on our core business of
providing  supply  chain  solutions to companies  with  dynamic  supply  chains,
specifically  those  in the  customer-driven  industries.  We  also  planned  on
expanding  product  innovation  to support  transforming  the supply chain to an
e-chain  and  include  interface  and  integration  technologies  in addition to
expanding  our  distribution  channels.  As a result  of the  restructuring,  we
recorded charges of $700,000 and $33.1 million in the third and fourth quarters,
respectively,  in  fiscal  1999.  The  components  of the  charge  included  (in
thousands):

<TABLE>
<S>                                                                           <C>
Severance and related benefits                                                    $4,094
Lease obligations and terminations                                                20,200
Write-down of property, equipment and leasehold improvements                       6,418
Write-down capitalized software development costs                                  1,343
Write-down goodwill                                                                1,354
Other                                                                                366
                                                                                ---------
Total restructuring charge                                                       $33,775
                                                                                =========
</TABLE>

     Due to the  redirection  of the core business  strategy,  we eliminated 412
positions,   across  all  divisions,   primarily  located  throughout  our  U.S.
operations  of  which  330  were  terminated  prior to  year-end.  We have  paid
approximately  $1.8 million and $2.9 million in severance  related costs for the
years ending  February 29, 2000 and  February 28, 1999,  respectively,  with the
remaining to be paid out during fiscal 2001.

                                       21

<PAGE>

     The provision for lease  obligations and terminations  related primarily to
future lease  commitments on office  facilities  that were closed as part of the
restructuring. The charge represented future lease obligations, net of projected
sublease income, on such leases past the dates the offices were closed by us. At
the time of the  restructuring,  some of these subleases were in negotiation but
had not been finalized and therefore the charge included management's  estimates
of the likely  outcome of these  negotiations.  Sublessors  were located  during
fiscal 2000 for many of the locations and the original  estimates were adjusted,
as necessary. Cash payments on the leases and lease terminations will occur over
the remaining lease terms, the majority of which expire prior to 2009.

     The $6.4 million write-down of operating assets and $1.3 million write-down
of  capitalized  software  development  costs  relates to a charge to reduce the
carrying  amount  of  certain  equipment,   furniture  and  fixtures,  leasehold
improvements and capitalized  software  development costs to their estimated net
realizable value, in accordance with Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of."
We also  recorded a charge of $1.4  million to  write-down  goodwill,  which was
deemed to have a carrying value in excess of the estimated net realizable value.
The net  realizable  value of these assets was  determined  based on  management
estimates,  which considered such factors as the nature and age of the assets to
be disposed of, the timing of the write-down and the method and potential  costs
of the disposal.  Such  estimates will be monitored each quarter and adjusted if
necessary.

The following table depicts the restructuring activity through February 29, 2000
(in thousands):

<TABLE>
<CAPTION>

                                         FY           Balance                         Utilization of   Accrual         Balance
                        Initial         1999        February 28,     Adjustment                                      February 29,
                        Charge        Activity          1999          To Charge          Cash          Non-Cash          2000
                       ----------    ----------    -------------    ------------     -----------     -----------    ------------
<S>                   <C>            <C>           <C>              <C>              <C>            <C>

Severance costs        $  4,094       $ (2,942)         $  1,152        $  1,590       $ (1,822)      $       --        $    920
Lease obligation costs   20,200         (1,286)           18,914          (2,750)        (9,200)              --           6,964
Impairment of
long-lived assets         9,115         (7,406)            1,709            (220)          (443)          (1,046)              0
Other                       366           (214)              152            (126)           (26)              --               0
                       ----------     ----------    -------------    ------------     -----------     -----------    ------------

Total                  $ 33,775       $(11,848)        $  21,927       $ (1,506)       $(11,491)       $ (1,046)         $ 7,884
                       ==========     ==========    =============    ============     ===========     ===========    ============
</TABLE>

     During the year ended February 29, 2000, we reduced our previously recorded
restructuring  charge by approximately $1.5 million.  These adjustments  related
primarily to the sub-lease of property that management had believed, at the time
of the restructuring, would not be sublet, which were offset by increases in the
accrual  for  severance  costs  due to the  finalization  of  several  executive
employee terminations previously identified by management.

     Purchased  research and development.  In February 1998, we acquired all the
outstanding  shares of ProMIRA in exchange for  approximately  $64.5  million of
consideration  composed of cash,  shares of  Manugistics,  Inc. common stock and
options to purchase shares of Manugistics common stock.

     This acquisition was consistent with our strategy of rapidly expanding into
new markets.  ProMIRA  competed in  industries  and market  segments that we had
targeted for entry and it had developed  complementary product capabilities.  We
intended this  acquisition to accelerate our delivery of a solution in these new
industries  and  market  segments.   The  technology  acquired  in  the  ProMIRA
acquisition  consisted of existing and in-process  technologies.  These projects
were  intended  to  address  specific  supply  chain  planning  needs of certain
industry  and  market  segments;   i.e.,  high-tech,   industrial  and  discrete
manufacturers.

     We utilized an  independent  appraiser of recognized  standing to value the
assets of ProMIRA,  identify the existing technology and the in-process research
and development  ("R&D"),  and allocate the purchase price among the assets. The
in-process  R&D  had  not  reached  technological  feasibility,  had  no  future
alternative  use and successful  development  of the projects was uncertain.  We
accounted for the  acquisition  as a purchase and, in accordance  with generally
accepted accounting principles,  charged the value of acquired in-process R&D of
$47.3 million to expense in the fiscal quarter and year ended February 28, 1998.

                                       22

<PAGE>

     ProMIRA's  existing  technology was a commercially  viable product offering
that assists users in developing optimized  manufacturing and supply chain plans
and enables rapid,  intelligent responses to changes in demand,  supply, product
design or other business  objectives.  During the first three quarters of fiscal
1999,  this  product  generated  total  revenues  consistent  with  management's
expectations.

     The  in-process  technology  consisted of two  projects.  The first project
consisted of three releases  planned for commercial  availability in fiscal 1999
and fiscal 2000.  These  releases  represented  major R&D  efforts,  including a
general re-architecture of the offering to enable integration to the Manugistics
solution  architecture,  incorporation  of a new  architecture  to enable robust
simultaneous  constraint of materials and capacity, a port to the UNIX platform,
incorporation of four-digit import,  display and export functionality to achieve
Year 2000 compliance and a re-write of the entire ProMIRA  solution to utilize a
single industry-standard  relational database and a consolidated object model to
enable a persistent  store.  We estimated  that it would incur $6 million to $10
million in R&D costs over the two years  following  the  acquisition  to develop
this project on a successful and timely basis.

     The  second  in-process  project  entailed   developing  a  completely  new
configuration  product  that was aimed at the  intelligent  creation  of complex
bills of material and planned for  introduction  by the end of fiscal 2000. This
technology  would  also  help meet the needs of the  high-tech,  industrial  and
discrete  manufacturers in the markets that we were entering.  We estimated that
it would  incur $1  million  to $3  million  in  costs,  over a two year  period
following the  transaction,  to develop this project on a successful  and timely
basis.

     The  preparation of  consolidated  financial  statements in conformity with
generally accepted  accounting  principles requires management to make estimates
and assumptions in financial  statements.  Such estimates and  assumptions  were
used in the  determination  of the  value of the  acquired  ProMIRA  assets.  In
addition,  we employed an  independent  appraiser to determine the allocation of
the purchase  price to the acquired  intangible  assets.  The value  assigned to
purchased  in-process  technology was determined by estimating the  contribution
the purchased in-process technology will make to developing  commercially viable
products,  estimating  the  resulting  net  cash  flows  from  revenues  of  the
successfully  developed  products  and  discounting  the net cash flows to their
present value using a risk-adjusted discount rate.

     Total  revenues  resulting from the ProMIRA  acquisition  were projected to
exceed $500 million within five years,  assuming the  successful  completion and
market  acceptance  of the major  R&D-stage  products.  Estimated  revenue  from
ProMIRA's  existing  technologies  was expected to nearly double in fiscal 1999,
grow  approximately  30% in fiscal 2000,  then rapidly decline as the in-process
R&D  projects  were  completed  and  existing   technology   rapidly  approached
obsolescence  as a  result  of new  product  innovations  developed  by us.  The
estimated  revenues for the in-process  projects were expected to peak in fiscal
2004 and then decline as other new products and  technologies  were  expected to
enter the market.  These revenue levels reflected the benefits expected from the
continued  rapid  growth of the supply  chain  planning  market as  forecast  by
industry and market analysts,  access to new markets and industries,  leveraging
of our anticipated  growth of sales and marketing  resources and our anticipated
global expansion.

     Cost of sales and  operating  expenses were  estimated  based upon industry
levels  and  management's  expectations,  in  conjunction  with our then  normal
operating  history.  We expected that the ProMIRA  products  would  generate net
profit  margins  of 15% to 16% by  fiscal  2000.  This  margin  improvement  was
expected  to  derive  from the  improved  attractiveness  of  ProMIRA's  planned
products as well as economies of scale derived from our sales force and markets.

     The rates  utilized to discount the net cash flows to their  present  value
are based on cost of capital  calculations.  We adjusted the  discount  rates to
address the risks inherent in developing the acquired technologies. Accordingly,
we used the following  ranges of discount rates to address the various levels of
risk: 25 percent for the existing  products and  technology and 40 to 45 percent
for the in-process  technologies.  These risk-adjusted  discount rates are based
upon the uncertainties in the economic  estimates  described above, the inherent
uncertainty  surrounding the successful  development of the purchased in-process
technology,  the useful life of such technology, the stage of completion of such
technology,  the profitability  levels of such technology and the uncertainty of
technological advances.

                                       23

<PAGE>

     As we experienced  execution and performance  problems during the course of
fiscal  1999,  management  decided to bypass the second  planned  release of the
first in-process  technology project and incorporate these planned  capabilities
directly  into the  subsequent  third  planned  release of the first  in-process
technology project. This decision was made in the second quarter of fiscal 1999.
We believed  that this strategy  would enable us to  accelerate  the delivery of
this  release  of  the  in-process  technology  incorporating  the  simultaneous
constraint-based  capabilities and would yield greater net economic  benefits to
us.

     Because  the  second  planned  release of the first  in-process  technology
project was  bypassed,  it generated no revenues or expenses.  The third planned
release of the first in-process project was originally planned and, subsequently
released in fiscal 1999. We also decided in January 1999 not to further  develop
the new configuration  product  (originally  scheduled for release at the end of
fiscal 2000). This project  generated no revenues and it incurred  approximately
$540,000 in costs during fiscal 1999.

     Although we believe that the  foregoing  assumptions  used in the forecasts
are  reasonable,  no assurance can be given that actual results will reflect the
underlying  assumptions  used to estimate  expected  project sales,  development
costs or  profitability,  the events  associated  with such  projects or used to
value the in-process  technologies.  For these reasons,  actual results may vary
from the projected results.

Other Income - Net:

<TABLE>
<CAPTION>

                                                            Fiscal Year Ended February 29 or 28
                                           2000          Change            1999           Change           1998
                                        ------------    ----------     -------------     ----------    --------------
<S>                                    <C>             <C>            <C>               <C>           <C>
Other income                                $ 1,389      (41.2%)           $  2,362        (17.5%)          $  2,863
 Percentage of total revenues                   1.0%                            1.3%                             1.6%
</TABLE>


     Other income includes interest income from short-term investments, interest
expense from short-term  borrowings,  foreign currency  exchange gains or losses
and other  gains or losses.  Other  income  decreased  for the fiscal year ended
February  29, 2000  compared  with the fiscal year ended  February  28, 1999 and
February 28, 1998 primarily  because we sold  investments in the current year to
assist in funding operations and the restructuring,  thereby decreasing interest
income from investments.

Provision for Income Taxes:

     As a result of the loss in fiscal 2000,  we recorded a valuation  allowance
against a portion of the net  deferred  tax asset.  The net  deferred  tax asset
relates to certain domestic net operating  losses.  Although  realization is not
assured for the remaining  deferred tax assets,  management  believes it is more
likely than not that they will be realized through future taxable  earnings.  In
fiscal  1998,  we  recorded  a loss as a result of the  write-off  of  purchased
research and development associated with the acquisition of ProMIRA.

Liquidity and Capital Resources:

<TABLE>
<CAPTION>

                                                           Fiscal Year Ended February 29 or 28

                                        2000            Change             1999            Change             1998
                                        ----            ------             ----            ------             ----
<S>                                   <C>              <C>              <C>              <C>                 <C>

Working capital                       $ 36,831           18.3%           $31,138          (67.7%)           $96,394
</TABLE>

     We have  historically  financed our growth  through  funds  generated  from
operations,  proceeds from  offerings of capital  stock and to a lesser  extent,
short-term borrowings under a revolving credit facility. The increase in working
capital for fiscal 2000 as compared to fiscal 1999, resulted principally from an
increase in cash and cash  equivalents  and  decreases  in accounts  payable and
restructuring  accruals,  partially offset by a decrease in accounts receivable.
The  decrease in working  capital  for fiscal  1999 as compared to fiscal  1998,
resulted  principally  from decreases in cash and cash  equivalents,  marketable
securities  and  accounts  receivable  and  increases  in accrued  expenses  and
deferred revenue.

                                       24

<PAGE>

     Our operating  activities provided net cash of $12.3 million for the fiscal
year ended February 29, 2000 primarily because the non-cash  operating  expenses
and the changes in assets and liabilities exceeded the net loss for the period.

     Our investing  activities used cash of  approximately  $3.9 million for the
fiscal year ended February 29, 2000,  primarily because of the capitalization of
software  development  costs  and the  purchase  of fixed  assets  and  software
licenses, which were partially offset by the sale of marketable securities.

     Financing  activities  provided net cash of approximately  $5.0 million for
fiscal year ended February 29, 2000,  consisting  primarily of proceeds from the
exercise of employee  stock  options and purchases of stock through our employee
stock  purchase  plan which were  partially  offset by a reduction in short-term
borrowings under a revolving credit facility.

     We have an unsecured  revolving  credit  facility  with a commercial  bank.
Under the terms of the facility, we may request cash advances, letters of credit
or both in the  aggregate  amount of up to $20 million.  We may make  borrowings
under the facility for short-term  working capital  purposes or for acquisitions
(acquisition-related  borrowings  are limited to $7.5 million per  acquisition).
The facility contains certain financial  covenants that we believe are generally
typical for a facility of this nature and amount.  This  facility will expire in
September  2000,  unless  renewed.  As of  February  29,  2000,  $6 million  was
outstanding  on the  revolving  credit  facility,  including  letters of credit.
Subsequent to year-end,  we repaid the $6 million  outstanding  on the revolving
credit facility.

     For the  fiscal  year  ended  February  28,  1999,  we  incurred  a loss of
approximately  $96  million.  As noted  above,  we  restructured  certain of our
business  operations  during the second half of fiscal 1999 to reduce  operating
expenses,  continue our efforts to improve  execution and  efficiencies,  better
align  expenses with revenues and enhance our sales and marketing  activities to
meet the  challenges  of the  marketplace.  We believe  that our  existing  cash
balances and marketable securities,  anticipated funds generated from operations
and amounts  available  under our revolving  credit  facility and other possible
sources of funding will be  sufficient  to meet our  anticipated  liquidity  and
working capital  requirements in the near term. We anticipate  that, in light of
our operating results for fiscal 2000, the cost of any additional funds which we
might  obtain,  might be greater  than funds  available to us under our existing
revolving credit facility or otherwise.  In the event that we require additional
financing  and  are  unable  to  obtain  it on  terms  satisfactory  to us,  our
liquidity,  results of operations  and financial  condition  would be materially
adversely affected.  We believe that inflation did not have a material effect on
our results of operations in fiscal 2000.

Litigation:

     We are  involved  from  time to  time in  disputes  and  litigation  in the
ordinary  course of business.  We do not believe that the outcome of any pending
disputes or  litigation  will have a material  adverse  effect on our  business,
operating results,  financial condition and cash flows.  However, an unfavorable
outcome of one or more of these matters could have a material  adverse effect on
our business,  operating  results,  financial  condition and cash flows. We have
established  accruals  related to such matters that are probable and  reasonably
estimable.

Factors that May Affect Future Results:

     In  addition  to the other  information  in this Form 10-K,  the  following
factors should be considered in evaluating us and our business.

     Our operating results have varied in the past and might vary  significantly
in the future  because of factors  such as domestic and  international  business
conditions or the general economy, the timely availability and acceptance of our
products,  technological change, the effect of competitive products and pricing,
the effects of marketing  announcements by competitors or potential competitors,
changes  in our  strategy,  the mix of direct  and  indirect  sales,  changes in
operating  expenses,  personnel  changes  and  foreign  currency  exchange  rate
fluctuations.  Furthermore,  clients may defer or cancel their  purchases of our
products  if they  experience  a  downturn  in their  business  or if there is a
downturn in the general economy.


                                       25

<PAGE>

Potential for Significant Fluctuations in Quarterly Results; Seasonality

     We typically ship software  products  shortly after license  agreements are
signed  and,  therefore,  we do not  maintain  any  material  contract  backlog.
Furthermore,  we have typically recognized a substantial portion of our revenues
in the last month of a quarter. As a result, license fee revenues in any quarter
are substantially  dependent on orders booked and shipped in that quarter and we
cannot predict  license fee revenues for any future quarter with any significant
degree of certainty.  We have  experienced and might continue to experience from
time to time very large,  individual  license  sales that can cause  significant
variations in quarterly license revenues.

     Our license fee revenues are also difficult to forecast  because the market
for business  application  software  products is evolving  rapidly and our sales
cycles vary  substantially  from client to client.  The sales cycles depend,  in
part, on the nature of the  transactions,  including the breadth of the solution
to be licensed and the  organizational  and  geographic  scope of the  licenses.
Because the licensing of our products generally  involves a significant  capital
expenditure  by the  client,  our sales  process  is  subject  to the delays and
lengthy approval processes that are typically involved in such expenditures.  In
addition,  we expect that sales derived through indirect channels will be harder
to predict in timing and size than for direct sales because there is less direct
contact and influence with the prospective  client. For these and other reasons,
the  sales  cycle   associated   with  the  licensing  of  our  products  varies
substantially  from client to client and typically  lasts between six and twelve
months,  during which time we might devote  significant  time and resources to a
prospective  client,  including  costs  associated  with  multiple  site visits,
product  demonstrations and feasibility studies and might experience a number of
significant delays over which we have no control.

     We base our expense levels upon anticipated future revenues.  A substantial
portion of our  revenues  in any  quarter is  typically  derived  from a limited
number  of  large  contracts.  Therefore,  if  revenues  in a period  are  below
expectations,  operating  results  are likely to be  adversely  affected,  which
occurred   throughout   fiscal  1999  and  fiscal  2000.  Net  income  might  be
disproportionately affected by a reduction in revenues because a proportionately
smaller amount of our expenses varies directly with revenues.  We have generally
realized lower revenues in our first fiscal quarter  (ending in May) than in the
immediately  preceding  quarter.  We believe that these  fluctuations are caused
primarily  by  client  budgeting  and  purchasing  patterns  and  by  our  sales
commission policies,  which compensate personnel for meeting or exceeding annual
and other performance quotas.

Competition

     The market for  business  application  software is  intensely  competitive,
evolving and subject to rapid technological change. The intensity of competition
has  increased and is expected to further  increase in the future,  particularly
within the B2B  electronic  commerce  industry.  This  increased  competition is
likely to result in price reductions, reduced gross margins, longer sales cycle,
lower  average  sales  prices and loss of market  share,  any one of which could
seriously  harm our  products.  Competitors  vary in size and in the  scope  and
breadth of the products and services offered.  Many application software vendors
offer products that are directly competitive with the software products marketed
by us. In  addition,  because of the  relatively  low  barriers  to entry in the
application  software  market,  we  expect  additional  competition  from  other
established and emerging companies, as the application software market continues
to develop and expand.  Also, our customers and partners may become  competitors
in the future.

     Some of our current and potential  competitors have  significantly  greater
financial, marketing, technical and other competitive resources than us, as well
as  greater  name  recognition  and a larger  installed  base of  customers.  In
addition,  many of our competitors have well-established  relationships with our
current and potential customers and have extensive knowledge of our industry. As
a result, they may be able to adapt more quickly to new or emerging technologies
and changes in  customer  requirements  or to devote  greater  resources  to the
development,  promotion  and  sale  of  their  products  than  can  we.  Certain
competitors have also attempted to raise concerns  regarding our viability given
our recent losses.

     Certain ERP system  vendors have acquired  supply chain  planning  software
companies,  products or  functionality  or have  announced  plans to develop new
products or to incorporate additional  functionality into their current products
that, if  successfully  developed and marketed,  could compete with the products
offered by us.

                                       26

<PAGE>

Furthermore,  current and potential  competitors may make  acquisitions of other
competitors or may establish cooperative  relationships among themselves or with
third  parties to increase  the ability of their  products to address the supply
chain planning needs of our  prospective  clients.  Accordingly,  it is possible
that new competitors may emerge and rapidly acquire significant market share. If
this were to occur our business, operating results, financial condition and cash
flows could be materially adversely affected.

Risks of a Developing Market

     We currently derive a significant  portion of our revenue from licenses for
supply chain planning software and related services.  However,  we are investing
significant  resources in developing and marketing  broader  functionality  with
e-commerce technology. The market for this broader functionality may not develop
as significantly as expected or competitors might develop superior technologies,
products or both,  each of which could have a material  adverse  effect upon our
business, operating results, financial condition and cash flows.

Dependence  on New  Products  and Rapid  Technological  Change;  Risk of Product
Defects

     The  market  for  our  products  is   characterized   by  rapidly  changing
technologies,  frequent  new product  introductions,  rapid  changes in customer
requirements  and  evolving  industry  standards.  We  believe  that our  future
financial  performance  will depend in large part on our ability to maintain and
enhance our  products,  develop new  products  that achieve  market  acceptance,
maintain technological  competitiveness and meet an expanding and evolving range
of client  requirements.  There can be no  assurance,  however,  that we will be
successful in developing and marketing new products or product enhancements that
respond to technological change or evolving industry standards, that we will not
experience  difficulties that could delay or prevent the successful development,
introduction  and  marketing  of these  products  or that our new  products  and
product  enhancements  will  adequately  meet the  requirements  of  prospective
clients and achieve market  acceptance.  If we are unable,  for technological or
other  reasons,  to  successfully  develop and introduce new products or product
enhancements,  our business,  operating  results,  financial  condition and cash
flows could be materially adversely affected.

     Our  software  suite  incorporates  some  software  code  from  third-party
affiliates.  There can be no  assurance  that we will be able to continue to use
these third-party  software codes nor that we will be able to identify,  license
and integrate replacement products.

     In  addition,  software  products  as complex as those  offered by us might
contain undetected errors or failures when first introduced or when new versions
are released.  There can be no assurance,  despite  testing by us and by current
and  prospective  clients,  that  errors  will not be found in new  products  or
product enhancements after commercial release,  resulting in loss of or delay in
market acceptance, which could have a material adverse effect upon our business,
operating results, financial condition and cash flows.

Lack of Product Diversification

     Our future  results depend on continued  market  acceptance of supply chain
planning  software  and services as well as our ability to continue to adapt and
modify this  software to meet the evolving  needs of our  prospects and clients.
Any  reduction  in demand or  increase in  competition  in the market for supply
chain planning  software  products  could have a material  adverse effect on our
business, operating results, financial condition and cash flows.

Intellectual Property and Proprietary Rights

     We regard our software as  proprietary  and rely on a combination  of trade
secret,  copyright  and  trademark  laws,  license  agreements,  confidentiality
agreements  with employees,  nondisclosure  and other  contractual  requirements
imposed on our  clients,  consulting  partners  and others and other  methods to
protect proprietary rights in our products. There can be no assurance that these
protections  will  adequately   protect  our  proprietary  rights  or  that  our
competitors  will not  independently  develop  products  that are  substantially
equivalent  or  superior  to our  products.  In  addition,  the laws of  certain
countries  in which our  products  are or may be  licensed  do not  protect  our
products and intellectual  property rights to the same extent as the laws of the
United States.


                                       27

<PAGE>

     There has also been a  substantial  amount of  litigation  in the  software
industry and the Internet industry regarding intellectual property rights. It is
possible  that in the future,  third parties may claim that we or our current or
potential future products,  infringe their intellectual property. We expect that
software product developers and providers of electronic  commerce solutions will
increasingly  be subject to  infringement  claims as the number of products  and
competitors in our industry  segment grows and the  functionality of products in
different industry segments overlaps.  Any claims,  with or without merit, could
be time-consuming, result in costly litigation, cause product shipment delays or
require us to enter into royalty or licensing  agreements.  Royalty or licensing
agreements,  if required,  may not be available on terms  acceptable to us or at
all, which could  seriously harm our business and could have a material  adverse
effect on our operating results, financial condition and cash flows.

     Although we believe that our  products,  trademarks  and other  proprietary
rights do not infringe upon the proprietary  rights of third parties,  there can
be no assurance that third parties will not assert  infringement  claims against
us.

Expansion of Indirect Channels

     We are developing and maintaining  significant  working  relationships with
complementary  vendors,  such as  consulting  firms that we believe  can play an
important role in marketing our products.  We are currently investing and intend
to continue to invest,  significant  resources to develop  these  relationships,
which could adversely  affect our operating  margins.  There can be no assurance
that we will be able to  attract  organizations  that will be able to market our
products  effectively,  that  they  will be  qualified  to  provide  timely  and
cost-effective  client  support  and  services  or that  current  partners  will
continue to promote  and/or  license our  solutions.  In addition,  difficulties
experienced by these complementary  vendors in selling our products and services
may adversely  affect our results of operations.  Furthermore,  our arrangements
with these organizations are not exclusive and, in many cases, may be terminated
by either party without cause and many of these  organizations are also involved
with competing  products.  Certain ERP system vendors have acquired supply chain
planning software  companies,  products or functionality or have announced plans
to develop new products or to incorporate  additional  functionality  into their
current products that would compete with our products.  Therefore,  there can be
no assurance that any organization will continue its involvement with us and our
products.   The  loss  of  relationships  with  important   organizations  could
materially  adversely affect our results of operations.  In addition,  if we are
successful in selling products as a result of these relationships,  any material
increase in our indirect sales as a percentage of total revenues would be likely
to adversely affect our average selling prices and operating  margins because of
the lower unit prices that we receive when selling through indirect channels.

Certain Risks Associated with Acquisitions

     From  time  to  time,  we  have  investigated   potential   candidates  for
acquisition,  joint  venture  opportunities,   business  combinations  or  other
relationships  on an ongoing  basis and have  engaged in the  evaluation  of and
discussions  with,  one  or  more  such  candidates.  Acquisitions  involve  the
integration  of companies that have  previously  operated  independently.  If we
should effect any  acquisitions,  there can be no assurance  that the we will be
able to integrate  these or any future  employees or operations  effectively  or
that we will realize the expected  benefits of any such transactions or business
combinations. In addition, there can be no assurance that we will not experience
the loss of key  employees  of any future  acquired  operations.  Our process of
integrating  acquired  employees and  operations  might result in  unanticipated
operational difficulties and expenditures. As discussed under the section titled
"Purchased  Research and Development" of this document,  in 1998, we experienced
difficulties  with the integration of the respective  products and operations of
ProMIRA and TYECIN.  These difficulties  included  difficulty in integrating the
prior ProMIRA sales forces and delayed  releases for the  in-process  technology
acquired  as part of the  acquisition.  In  addition,  as a  result  of the poor
financial  performance we experienced in fiscal 1999, the technology acquired in
conjunction  with the TYECIN  acquisition  was not integrated into our solutions
and therefore, revenues generated from this technology have been nominal.

International Operations

     We  currently  conduct  operations  in a number  of  countries  in  Europe,
Asia/Pacific,  Japan and  South  America  that  require  significant  management
attention and financial resources. If these operations are unable

                                       28

<PAGE>

to generate,  maintain or increase  demand for our products,  then our operating
results could be adversely affected. Certain risks are inherent in international
operations.  Although  the majority of our  contracts  are  denominated  in U.S.
currency,  most of the revenues  from sales  outside the United States have been
denominated in foreign  currencies,  typically the local currency of our selling
business unit. We anticipate that the proportion of our revenues  denominated in
foreign currencies will increase.  A decrease in the value of foreign currencies
relative  to the U.S.  dollar  could  result in  losses  from  foreign  currency
fluctuations.  In connection with transactions  denominated in foreign currency,
we have taken steps to minimize the risks  associated with such foreign currency
in the past and might take such steps in similar  circumstances  in the  future.
With  respect  to our  international  sales  that are  U.S.  dollar-denominated,
currency   fluctuations   could  make  our  products  and  services  less  price
competitive.  Our international sales and operations might be adversely affected
by the imposition of government controls,  changes in financial currencies (such
as the unified  currency  known as the European  Monetary  Unit),  political and
economic  instability,  difficulties  in  staffing  and  managing  international
operations and general economic and currency exchange rate conditions in foreign
countries.

Risks Associated With the European Monetary Union ("EMU")

     Our  foreign  exchange  exposure  to  legacy  sovereign  currencies  of the
participating  countries in the EMU will include foreign  exchange  exposures to
the Euro.  Although  we are not aware of any  material  adverse  financial  risk
consequences  of the change from legacy  sovereign  currencies to the Euro,  the
conversion  may  result in  problems,  which may have an  adverse  impact on our
business  since we may be  required  to incur  unanticipated  expenses to remedy
these problems.

Limited Management History; Recent Senior Management Changes

     We have experienced  recent  significant  changes in our senior  management
team. The majority of our senior  management  team has worked  together for less
than one year. Gregory J. Owens, our Chief Executive Officer, joined us in April
2000. With one exception,  all of our other present executive officers joined us
after Mr. Owens.  Our success  depends on the ability of our management  team to
work together effectively.  Our business,  revenues and financial condition will
be  materially  adversely  effected if our new senior  management  team does not
manage us effectively or if we are unable to retain our senior management.

Dependence Upon Key Personnel

     The loss of the  services of one or more of our  executive  officers  could
have a material  adverse effect on our business,  operating  results,  financial
condition and cash flows. We do not have long term employment contracts with any
of our executive officers. We do not maintain key person insurance on any of our
executive officers. There can be no assurance that we will be able to retain our
key personnel.

     Our future  success  also  depends on our  continuing  ability to  attract,
assimilate  and  retain  highly  qualified   sales,   technical  and  managerial
personnel.  Competition  for such  personnel  is  intense  and  there  can be no
assurance  that we can  attract,  assimilate  or retain  such  personnel  in the
future. If we lose talented personnel in key positions and are unable to replace
such personnel in a timely manner, our business, operating results and financial
condition could be adversely affected.

Stock Option Repricing

     In  response  to the poor  performance  of our stock  price,  we offered to
reprice employee stock options,  other than those held by our executive officers
or directors,  effective  January 29, 1999, to bolster employee  retention.  The
effect of this  repricing  resulted in  approximately  1.52 million shares being
repriced and the four-year  vesting period starting over. The repricing may have
a material adverse impact on future financial performance based on the amendment
to the Accounting  Principals Board Opinion No. 25, "Accounting for Stock Issued
to Employees," which requires us to record compensation  expense associated with
the change in the price of these options.


                                       29

<PAGE>

Possible Volatility of Stock Price

     Factors such as announcements of new products or technological  innovations
by us or our  competitors,  as well as  quarterly  variations  in our  operating
results,  have  caused  and may cause the market  price of our  common  stock to
fluctuate  significantly.  In  addition,  the stock  market in recent  years has
experienced price and volume  fluctuations  that have particularly  affected the
market  prices of many high  technology  stock  issues and which have often been
unrelated or  disproportionate  to the operating  performance of such companies.
These broad market fluctuations, as well as general economic conditions, have at
certain  times  adversely  affected the market price of our common stock and are
likely to do so in the future.

Forward-Looking Statements:

     This  "Management's  Discussion  and  Analysis of Financial  Condition  and
Results of  Operations"  section  of this  Annual  Report on Form 10-K  ("Annual
Report")  contains  certain  forward-looking  statements  that are  subject to a
number of risks and uncertainties.  In addition, we may publish  forward-looking
statements  from time to time relating to such matters as anticipated  financial
performance,  business  prospects and strategies,  sales and marketing  efforts,
technological  developments,  new products, research and development activities,
consulting  services  and similar  matters.  The Private  Securities  Litigation
Reform Act of 1995  provides a safe harbor for  forward-looking  statements.  In
order to comply  with the terms of the safe  harbor,  we note that a variety  of
factors could cause our actual results and experience to differ  materially from
the anticipated  results or other expectations  expressed in our forward-looking
statements in this Annual Report or elsewhere.  The risks and uncertainties that
may affect our business,  operating results or financial condition include those
set  forth  above  under  "Factors  that  May  Affect  Future  Results"  and the
following:

     Revenues  for any period  depend on the number,  size and timing of license
agreements. The number, size and timing of license agreements depends in part on
our ability to hire and  thereafter,  to train,  integrate  and deploy our sales
force  effectively.  The size and timing of license  agreements  is difficult to
forecast  because  software  sales  cycles  are  affected  by the  nature of the
transactions,  including  the breadth of the  solution  to be  licensed  and the
organizational  and geographic scope of the licenses.  In addition,  the number,
size and timing of license  agreements also may be affected by certain  external
factors  such  as  general  domestic  and  international  business  or  economic
conditions,  including  the  effects of such  conditions  on our  customers  and
prospects or competitors'  actions.  A small variation in the timing of software
licensing  transactions,  particularly  near the end of any quarter or year, can
cause significant variations in software license revenues in any period.

     We believe that the market for supply chain planning software  continues to
expand,  although more slowly than in prior periods.  However,  if market demand
for our products does not grow as rapidly as we expect,  revenue growth, margins
or both could be adversely  affected.  If competitors make acquisitions of other
competitors  or establish  cooperative  relationships  among  themselves or with
third  parties to enhance  the  ability of their  products to address the supply
chain planning  needs of prospects and customers or other software  vendors that
have announced plans to develop or incorporate  functionality that could compete
with our products  successfully  develop and market such functionality,  revenue
growth could be adversely affected.

     There can be no  assurance  that we will be able to  attract  complementary
software vendors,  consulting firms or other  organizations that will be able to
market our products  effectively or that will be qualified to provide timely and
cost-effective  customer  support and  services.  In  addition,  there can be no
assurance  that  a  sufficient  number  of  organizations  will  continue  their
involvement with us and our products and the loss of current  relationships with
important  organizations  could  materially  adversely  affect  our  results  of
operations.


                                       30

<PAGE>

Item7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.

     Foreign  Currency.  In the year  ended  February  29,  2000,  we  generated
approximately 36% of our revenues outside of the Americas.  International  sales
are usually made by our foreign  subsidiaries in their local  currencies and the
expenses incurred by the foreign subsidiaries are also typically  denominated in
their local currencies.

     In certain  circumstances,  we enter into foreign  currency  contracts with
banking  institutions  to protect large  foreign  currency  receivables  against
currency  fluctuations.  When the foreign currency receivable is collected,  the
contract is liquidated and the foreign currency  receivable is converted to U.S.
dollars.

     Interest  rates.  We  manage  our  interest  rate  risk by  maintaining  an
investment portfolio of available-for-sale  instruments with high credit quality
and relatively short average maturities.  These instruments include, but are not
limited  to,  money-market  instruments,  bank time  deposits  and  taxable  and
tax-advantaged  variable  rate  and  fixed  rate  obligations  of  corporations,
municipalities and national,  state and local government agencies, in accordance
with an investment policy approved by our Board of Directors.  These instruments
are denominated in U.S.  dollars.  The fair value of securities held at February
29, 2000 was approximately $17.5 million.

     We also hold cash balances in accounts with commercial  banks in the United
States and foreign countries.  These cash balances represent  operating balances
only and are invested in short-term  time deposits of the local bank.  Operating
cash balances held at banks  outside the United  States are  denominated  in the
local currency.

     Many of our investments carry a degree of interest rate risk. When interest
rates fall, our income from  investments in variable-rate  securities  declines.
When interest rates rise, the fair market value of our investments in fixed-rate
securities  declines.   We  attempt  to  mitigate  risk  by  holding  fixed-rate
securities  to  maturity,  but  should  our  liquidity  needs  force  us to sell
fixed-rate securities prior to maturity, we may experience a loss of principal.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     Our consolidated financial statements and supplementary data, together with
the   reports   of   Deloitte   &   Touche   LLP,   independent   auditors   and
PricewaterhouseCoopers LLP, independent accountants,  are included in Part IV of
this Annual Report on Form 10-K.

Item  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE.

     None.

                                       31

<PAGE>

                                    PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Reference  is made to the  information  to be set  forth in the  definitive
Proxy Statement  relating to the 2000 Annual Meeting of  Stockholders  (which we
anticipate will be filed with the Securities and Exchange  Commission within 120
days  after the end of our fiscal  year ended  February  29,  2000) (the  "Proxy
Statement") under the caption "Election of Directors" and to the information set
forth in Part I of this Annual Report on Form 10-K regarding  executive officers
under the caption "Item 4A. Executive Officers of the Registrant."

Item 11. EXECUTIVE COMPENSATION.

     Reference is made to the information to be set forth in the Proxy Statement
under the caption "Executive Compensation."

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Reference is made to the information to be set forth in the Proxy Statement
under the caption "Ownership of Manugistics Group, Inc. Stock."

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Reference is made to the information to be set forth in the Proxy Statement
under the caption "Certain Business Relationships."

                                       32

<PAGE>

                                     PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)  Documents filed as a part of this Report:

<TABLE>
<CAPTION>

     (1)  Financial Statements:                                                    Page Number
                                                                                   In This Report

                                                                                   --------------
<S>                                                                               <C>
                  Report of Independent Auditors                                         F-1

                  Report of Independent Accountants                                      F-2

                  Consolidated Balance Sheets                                            F-3

                  Consolidated Statements of Operations                                  F-4

                  Consolidated Statements of Stockholders' Equity                        F-5

                  Consolidated Statements of Cash Flows                                  F-6

                  Notes to Consolidated Financial Statements                             F-7
</TABLE>

     The financial statements listed above and the financial statement schedules
     listed below are filed as part of this Annual Report on Form 10-K.

<TABLE>

     (2)  Financial Statement Schedules:

<S>                                                                               <C>
                  (A)   Independent Auditors' Report on Schedule                         S-1
                  (B)   Schedule II - Valuation and Qualifying Accounts                  S-2
</TABLE>


     Schedules other than the ones listed above are omitted because they are not
     required or are not applicable or the required  information is shown in the
     consolidated financial statements or notes thereto contained in this Annual
     Report on Form 10-K.

     (3) Exhibits

     The exhibits  required by Item 601 of  Regulation  S-K are listed below and
     are filed or  incorporated  by reference  as part of this Annual  Report on
     Form 10-K.  Exhibits 10.1, 10.2, 10.11,  10.12, 10.13, 10.15, 10.28 through
     10.32 and 10.35  through  10.45 are  management  contracts or  compensatory
     plans or  arrangements  required to be filed as  exhibits  pursuant to Item
     14(c) of this report.


<TABLE>
<CAPTION>

     Number          Notes         Description
     ------          -----         -----------
<S>                 <C>           <C>

     2.1             (S)           Agreement and Plan of Merger dated June 1, 1998,  among the Company,  TYECIN
                                   Acquisition, Inc., TYECIN Systems, Inc. and certain other persons

     3.1(a)          (A)           Amended and Restated Certificate of Incorporation of the Company

     3.1(b)          (B)           Certificate of Retirement and Elimination (relating to the Series A and
                                   Series B preferred stock of the Company)
</TABLE>

                                       33

<PAGE>

<TABLE>
<CAPTION>

     Number          Notes         Description
     ------          -----         -----------
<S>                 <C>           <C>
       3.2             (A)         Amended and Restated By-Laws of the Company

      10.1             (I)         Employee Incentive Stock Option Plan of the Company, as amended

      10.2             (I)          Fifth Amended and Restated Stock Option Plan of the Company

      10.3             (A)          Form of Notice of Grant of Option  pursuant  to the  Director  Stock  Option
                                    Plan (previously identified as Exhibit 10.4)

      10.7             (A)          Lease  Agreement  dated May 1,  1992  between  the  Company  and  GTE Realty
                                   Corporation

      10.7(a)          (E)          First  Amendment to Lease  Agreement dated July 19, 1993 between the Company
                                    and GTE Realty Corporation

      10.7(b)          (E)          Second  Amendment  to Lease  Agreement  dated  April 13,  1994  between  the
                                    Company and East Jefferson Associates

      10.7(c)          (E)          Third  Amendment  to Lease  Agreement  dated May 1, 1994 between the Company
                                    and East Jefferson Associates

      10.7(d)          (E)          Fourth  Amendment  to Lease  Agreement  dated  February 27, 1995 between the
                                    Company and East Jefferson Associates

      10.7(e)          (K)          Fifth  Amendment  to Lease  Agreement  dated  September  6, 1996 between the
                                    State of Maryland and the Company

      10.7(f)          (K)          Sixth  Amendment to Lease Agreement dated October 10, 1996 between the State
                                    of Maryland and the Company

      10.7(g)          (K)          Seventh  Amendment to Lease Agreement dated April 25, 1997 between the State
                                    of Maryland and the Company

      10.8             (N)          Lease  Agreement  date March 26, 1998  Manugistics,  Inc. and  Washingtonian
                                    North Associates Limited Partnership

      10.11            (D)          Outside Directors Non-Qualified Stock Option Plan

      10.12            (D)          Executive Incentive Stock Option Plan

      10.13                         Amended and Restated 1998 Stock Option Plan of the Company

      10.15            (F)          Employee Stock Purchase Plan of the Company

      10.17            (G)          Sublease dated May 5, 1995 between the Company,  as amended and  NationsBank,
                                    N.A.

      10.18            (H)          Agreement  and  Plan of  Merger  dated  May 24,  1996  between  Avyx,  Inc.,
                                    Manugistics Acquisition, Inc. and the Company

</TABLE>

                                       34

<PAGE>

<TABLE>
<CAPTION>

     Number          Notes         Description
     ------          -----         -----------
<S>                 <C>           <C>
      10.19           (H)           Consulting  Agreement dated May 24, 1996 between The Kendall Group, Inc. and
                                   the Company

      10.20           (H)           Confidentiality,  Non-Competition and  Non-Solicitation  Agreement dated May 24,
                                    1996 between the Company and John K. Willougby and JoAnne Gardner

      10.21           (J)           Financing  Agreement dated as of September 30, 1996 by and among the Company
                                    and NationsBank, N.A.

      10.22           (J)           Form of Revolving  Promissory  Note dated  September 30, 1996 by the Company
                                    in favor of NationsBank, N.A.

      10.23           (K)           Sublease  Agreement  between CTA  Incorporated and the Company dated May 23,
                                      1996

      10.24           (K)(i)        Data Marketing and Guaranteed  Revenue Agreement dated March 7, 1997 between
                                    the Company and Information Resources, Inc.

      10.25           (K)(i)        Asset  Purchase  Agreement  dated March 7, 1997 between  Manugistics,  Inc.,
                                    Manugistics Services, Inc., IRI Logistics, Inc. and Information Resources, Inc.

      10.26           (L)           Sale and Purchase Agreement dated 7th June 1997 between M.C. Harrison,  J.E.
                                    Harrison, Manugistics U.K. Limited and the Company

      10.27           (M)           Stock Purchase  Agreement dated February 13, 1998 between  Manugistics  Nova
                                    Scotia Company and ProMIRA Software Incorporated, et al.

      10.28           (O)           Employment Agreement dated April 25, 1999 among the Company, Manugistics, Inc.
                                    and with Gregory J. Owens, Chief Executive Officer and President

      10.29           (O)           Termination of  Employment Agreement dated November 18, 1998, between Manugistics, Inc.
                                    and David Roth

      10.30           (O)           Termination of Employment Agreement dated January 27, 1999, between
                                    Manugistics, Inc. and Keith Enstice

      10.31           (O)           Termination of Employment Agreement dated February 10, 1999, between
                                    Manugistics, Inc. and Joseph Broderick

      10.32           (P)           Termination of Employment Agreement dated May 26, 1999, between
                                    Manugistics, Inc. and Kenneth S. Thompson

      10.33           (P)           Termination Agreement dated June 16, 1999 by and among Manugistics,
                                    Inc. Boston Properties Limited Partnership and certain other parties

      10.34           (P)           Letter Agreement dated June 16, 1999 between Manugistics, Inc. and
                                    Himes Associates, Ltd.
</TABLE>

                                       35

<PAGE>

<TABLE>
<CAPTION>

     Number          Notes         Description
     ------          -----         -----------
<S>                 <C>           <C>

      10.35          (Q)           Employment Agreement dated June 3, 1999 between Manugistics, Inc. and
                                   Richard F. Bergmann, as amended.

      10.36          (Q)           Employment Agreement dated June 7, 1999 between Manugistics, Inc. and
                                   Terrance A. Austin, as amended.

      10.37          (Q)           Employment Agreement dated August 25, 1999 between Manugistics, Inc.
                                   and James J. Jeter, as amended.

      10.38          (Q)           Termination of Employment Agreement dated July 23, 1999 between
                                   Manugistics, Inc. and Peter Q. Repetti.

      10.39          (Q)           Termination of Employment Agreement dated August 25, 1999 between
                                   Manugistics, Inc. and Mary Lou Fox.

      10.40          (R)           Employment Agreement dated December 6, 1999 between Manugistics, Inc.
                                   and Raghavan Rajaji.

      10.41                        Employment Agreement dated December 6, 1999 Manugistics, Inc.
                                   and Timothy T. Smith

      10.42                        Employment Agreement dated January 19, 1999 between Manugistics, Inc.
                                   and Daniel Stoks.

      10.43(a)                     Stock Option Agreement dated April 27, 1999, between the Company and
                                   Gregory J. Owens

      10.43(b)                     Stock Option Agreement dated December 1, 1999, between the Company
                                   and Gregory J. Owens.

      10.43(c)                     Stock Option Agreement dated December 17, 1999, between the Company
                                   and Gregory J. Owens.

      10.44(a)                     Stock Option Agreement dated December 6, 1999, between the Company
                                   and Richard F. Bergmann.

      10.44(b)                     Stock Option Agreement dated June 16, 1999 between the Company and
                                   Richard F. Bergmann.

      10.45                        Stock Option Agreement dated June 7, 1999, between the Company and
                                   Terrence A. Austin

      21                           Subsidiaries of the Company

      23.1                         Independent Auditors' Consent

      23.2                         Consent of Independent Accountants

      27                           Financial Data Schedule

</TABLE>

                                       36

<PAGE>

(A)  Incorporated  by reference from the exhibits to the Company's  registration
     statement on form S-1 (NO. 33-65312).

(B)  Incorporated by reference to 4.1(A) to the Company's registration statement
     on form S-3 (REG. NO. 333-31949).

(C)  Incorporated by reference to exhibit 4.1 (b) to the Company's  registration
     statement on form S-3 (REG. NO. 333-31949).

(D)  Incorporated  by  reference  from the exhibits to the  Company's  quarterly
     report on form 10-Q for the quarter ended August 31, 1994.

(E)  Incorporated by reference from the exhibits to the Company's  annual report
     on form 10-K for the fiscal year ended February 28, 1995.

(F)  Incorporated  by  reference  from the exhibits to the  Company's  quarterly
     report on form 10-Q for the quarter ended August 31, 1995.

(G)  Incorporated by reference from the exhibits to the Company's  annual report
     on form 10-K for the fiscal year ended February 29, 1996.

(H)  Incorporated  by  reference  from the exhibits to the  Company's  quarterly
     report on form 10-Q for the quarter ended May 31, 1996.

(I)  [Incorporated  by reference  from the exhibits to the Company's  definitive
     proxy statement  relating to the 1996 annual meeting of shareholders  dated
     June 20, 1996.]

(J)  Incorporated  by  reference  from the exhibits to the  Company's  quarterly
     report on form 10-Q for the quarter ended November 30, 1996.

(K)  Incorporated by reference from the exhibits to the Company's  annual report
     on form 10-K for the fiscal year ended February 28, 1997.

(L)  Incorporated  by  reference  from the exhibits to the  Company's  quarterly
     report on form 10-Q for the quarter ended May 31, 1997.

(M)  Incorporated by reference from the exhibits to the Company's current report
     on form 8-K dated March 2, 1998

(N)  Incorporated by reference from the exhibits to the Company's  annual report
     on form 10-K for the fiscal year ended February 28, 1998.

(O)  Incorporated by reference from the exhibits to the Company's  annual report
     on Form 10-K for fiscal year ended February 28, 1999.

(P)  Incorporated  by  reference  from the exhibits to the  Company's  quarterly
     report on Form 10-Q for the quarter ended May 31, 1999.

(Q)  Incorporated  by  reference  from the exhibits to the  Company's  quarterly
     report on Form 10-Q for the quarter ended August 31, 1999.

(R)  Incorporated  by  reference  from the exhibits to the  Company's  quarterly
     report on Form 10-Q for the quarter ended November 30, 1999.

(S)  Incorporated  by  reference  from the exhibits to the  Company's  quarterly
     report on Form 10-Q for the quarter ended August 31, 1998.

(i)  Confidential  treatment  previously  granted for  certain  portions of this
     exhibit.


                                       37

<PAGE>

(b)  Reports on Form 8-K

1.   On  February  25,  2000,  the  Company  filed a Current  Report on Form 8-K
     announcing  that it had entered  into a  settlement  agreement  and release
     relating to a lawsuit filed by Template Software, Inc. against Manugistics,
     Inc., to be covered by the Company's insurance carrier.

(c)  Exhibits

See the response to Item 14(a)(3) above.

(d)   Financial Statement Schedules

The financial  statement schedule required to be filed is listed in the response
to Item 14(a)(2) above and appears on page S-2 of this report.

                                       38

<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on May 12, 2000.

MANUGISTICS GROUP, INC.
(Registrant)

/s/ Gregory J. Owens
--------------------
Gregory J. Owens

President and Chief Executive Officer

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
     report  has been  signed  below by the  following  persons on behalf of the
     Registrant and in the capacities indicated on May 12, 2000.

<TABLE>

<S>                                                    <C>
/s/ Gregory J. Owens                                      /s/ Raghavan Rajaji
--------------------                                      -------------------
Gregory J. Owens                                          Raghavan Rajaji
President, Chief Executive Officer and Director           Executive Vice President and Chief
(Principal executive officer)                             Financial Officer
                                                          (Principal financial officer and
                                                          principal accounting officer)
/s/ William M. Gibson
---------------------
William M. Gibson

Chairman of the Board and Director                        /s/ Jack A. Arnow
                                                          -----------------
                                                          Jack A. Arnow
                                                          Director
/s/ J. Michael Cline
--------------------
J. Michael Cline
Director                                                   /s/ Lynn C. Fritz
                                                           -----------------
                                                           Lynn C. Fritz
                                                           Director
/s/ Joseph H. Jacovini
----------------------
Joseph H. Jacovini
Director                                                    /s/ William G. Nelson
                                                            ---------------------
                                                            William G. Nelson
                                                            Director
/s/ Thomas A. Skelton
---------------------
Thomas A. Skelton                                           /s/ Hau L. Lee
Director                                                    --------------
                                                            Hau L. Lee
                                                            Director
</TABLE>

                                       39

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors of Manugistics Group, Inc.:

We have audited the  accompanying  consolidated  balance  sheets of  Manugistics
Group,  Inc.  (the  Company)  and its  subsidiaries  as of February 29, 2000 and
February  28,  1999  and the  related  consolidated  statements  of  operations,
stockholders'  equity and cash  flows for each of the three  years in the period
ended February 29, 2000. 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. The consolidated  financial statements
give  retroactive  effect to the merger of the Company and TYECIN Systems,  Inc.
("TYECIN"),  which has been accounted for as a pooling of interests as described
in Note 11 to the  consolidated  financial  statements.  We did  not  audit  the
statements of income, stockholders' equity and cash flows of TYECIN for the year
ended December 31, 1997, which consolidated statements reflect total revenues of
$4,597,200 for the year ended December 31, 1997. Those  consolidated  statements
were audited by other  auditors  whose  report has been  furnished to us and our
opinion,  insofar as it relates to the amounts  included  for TYECIN for 1997 is
based solely on the report of such other auditors.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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 and the report of
the other auditors provide a reasonable basis for our opinion.

In our opinion,  based on our audits and the report of the other  auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material respects, the financial position of the Company and its subsidiaries at
February 29, 2000 and February 28, 1999 and the results of their  operations and
their cash flows for each of the three years in the period  ended  February  29,
2000 in conformity with accounting  principles  generally accepted in the United
States of America.

DELOITTE & TOUCHE LLP

McLean, VA
March 23, 2000

                                       F-1

<PAGE>

                        REPORT OF INDEPENDENT ACCOUNTANTS

                            FOR TYECIN SYSTEMS, INC.

To the Board of Directors and Shareholders of TYECIN Systems, Inc.:

In our opinion,  the consolidated  statements of income, of shareholders' equity
and of cash flows of TYECIN  Systems,  Inc. and its  subsidiary  (not  presented
separately  herein) present fairly, in all material  respects,  their results of
their  operation  and their cash flows for the year ended  December  31, 1997 in
conformity with generally  accepted  accounting  principles.  These consolidated
financial  statements are the  responsibility of the Company's  management;  our
responsibility  is to express an opinion on these financial  statements based on
our  audit.  We  conducted  our audit of these  statements  in  accordance  with
generally accepted auditing standards which 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,
assessing the  accounting  principles  used and  significant  estimates  made by
management and  evaluating  the overall  financial  statement  presentation.  We
believe  that our audit  provides a reasonable  basis for the opinion  expressed
above.

Price Waterhouse LLP
San Jose, California

March 6, 1998, except as to Note 11, which is as of June 1, 1998



                                       F-2

<PAGE>

                    MANUGISTICS GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                        (in thousands, except share data)

<TABLE>
<CAPTION>

                                                                                        February 29 or 28
                                                                                   2000                     1999
                                                                                   ----                     ----
<S>                                                                            <C>                        <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                                    $ 34,051                  $ 20,725
   Marketable securities                                                          17,496                    22,637
   Accounts receivable, net of allowance for doubtful accounts of
     $1,875 and $6,299 at February 29, 2000 and February 28, 1999,
     respectively                                                                 38,705                    51,143
   Current portion of deferred tax asset                                           2,306                     4,907
   Other current assets                                                            6,946                     9,742
                                                                                -----------               ---------
         Total current assets                                                     99,504                   109,154

PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION                           14,157                    21,832
NONCURRENT ASSETS:
   Software development costs, net of accumulated amortization                    16,514                    20,540
   Intangible assets, net of accumulated amortization                              7,317                     9,382
   Deferred tax asset                                                             12,776                     9,240
   Other non-current assets                                                        2,160                     2,182
                                                                                -----------               ---------
TOTAL ASSETS                                                                    $152,428                  $172,330
                                                                                ===========               =========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable                                                              $ 5,792                   $ 8,142
   Accrued compensation                                                            8,345                     7,815
   Line of credit                                                                  6,000                     9,500
   Deferred revenue                                                               26,727                    24,710
   Current portion of long-term liabilities                                          260                     1,028
   Current portion of restructuring accrual                                        5,130                    13,789
   Other current liabilities                                                      10,419                    13,032
                                                                                -----------               ---------
         Total current liabilities                                                62,673                    78,016

LONG-TERM LIABILITIES                                                                283                       454
LONG-TERM RESTRUCTURING ACCRUAL                                                    2,754                     8,138
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY:
   Preferred stock                                                                    --                        --
   Common  stock,  $.002 par value per  share;  100,000,000  shares  authorized;
     29,047,162  and  27,705,382  shares issued and  28,294,652  and  26,952,872
     shares outstanding at February 29, 2000 and February 28, 1999,
     respectively                                                                     58                        55
   Additional paid-in capital                                                    189,480                   179,996
   Treasury stock - 752,510 shares, at cost                                         (717)                     (717)
   Accumulated other comprehensive income (loss)                                     100                      (354)

   Accumulated deficit                                                          (102,203)                  (93,258)
                                                                                -----------               ---------

         Total stockholders' equity                                               86,718                    85,722
                                                                                -----------               ---------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                      $152,428                  $172,330
                                                                                ===========               =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-3

<PAGE>

                    MANUGISTICS GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                      (in thousands, except per share data)

<TABLE>
<CAPTION>

                                                                              February 29 or 28

                                                              2000                  1999                  1998
                                                              ----                  ----                  ----
<S>                                                        <C>                   <C>                     <C>
REVENUES:
   License fees                                             $ 60,421              $ 73,802             $ 107,547
   Consulting, solution support and other services            92,012               103,762                72,716
                                                            ----------            ---------            -----------

         Total revenues                                      152,433               177,564               180,263
                                                            ----------            ---------            -----------

OPERATING EXPENSES:
   Cost of license fees                                       13,685                13,415                11,102
   Cost of consulting, solution support and other services    44,346                50,585                33,213
   Sales and marketing                                        61,439               103,006                66,228
   Product development                                        29,150                49,389                32,794
   General and administrative                                 15,837                19,828                14,639
   Acquisition-related expenses                                   --                 3,095                   --
   Restructuring expenses                                     (1,506)               33,775                   --
   Purchased research and development                             --                    --                47,340
                                                            ----------            ---------            -----------

         Total operating expenses                            162,951               273,093               205,316
                                                            ----------            ---------            -----------

LOSS FROM OPERATIONS                                         (10,518)              (95,529)              (25,053)
                                                            ----------            ---------            -----------

OTHER INCOME - NET                                             1,389                 2,362                 2,863
                                                            ----------            ---------            -----------

LOSS BEFORE INCOME TAXES                                      (9,129)              (93,167)              (22,190)

(BENEFIT) PROVISION FOR INCOME TAXES                            (184)                2,945                (9,025)
                                                            ----------            ---------            -----------

NET LOSS                                                    $ (8,945)             $(96,112)            $ (13,165)
                                                            ==========            =========            ===========

BASIC LOSS PER SHARE                                        $  (0.33)              $ (3.64)            $   (0.56)
                                                            ==========            =========            ===========

SHARES USED IN BASIC SHARE COMPUTATION                        27,486                26,402                23,484
                                                            ==========            =========            ===========

DILUTED LOSS PER SHARE                                      $  (0.33)              $ (3.64)             $  (0.56)
                                                            ==========            =========            ===========

SHARES USED IN DILUTED SHARE COMPUTATION                      27,486                26,402                23,484
                                                            ==========            =========            ===========

COMPREHENSIVE LOSS:
   Net loss                                                 $ (8,945)             $ (96,112)           $ (13,165)
                                                            ----------            ---------            -----------

Other comprehensive income (loss), net of tax:
   Foreign currency translation adjustments                      487                   (701)                 (94)
   Unrealized (losses) gains on securities                       (33)                   114                 (132)
                                                            ----------            ---------            -----------

   Total other comprehensive income (loss)                       454                   (587)                (226)
                                                            ----------            ---------            -----------

TOTAL COMPREHENSIVE LOSS                                    $ (8,491)             $ (96,699)           $ (13,391)
                                                            ==========            =========            ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-4

<PAGE>

                    MANUGISTICS GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>

                                                COMMON STOCK
                                              -----------------
                                                                                           OTHER           ACCUMULATED
                                                   PAR       PAID-IN      TREASURY     COMPREHENSIVE         EARNINGS
                                      SHARES      VALUE      CAPITAL        STOCK        INCOME(LOSS)        (DEFICIT)       TOTAL
                                     --------    -------    ---------     ---------     -------------       ----------      -------
<S>                                 <C>         <C>        <C>           <C>           <C>                  <C>             <C>
BALANCE, FEBRUARY 28, 1997            22,725       $ 45      $ 38,819      $ (717)           $    459        $  16,267      $54,873
   Issuance of common stock, net of
     issuance costs of $652            3,137          6       120,110           --                 --               --      120,116
   Issuance of stock options in
     connection with acquisitions         --         --         1,081           --                 --               --        1,081
   Exercise of stock options             858          2         3,334           --                 --               --        3,336
   Tax benefit of options exercised       --         --         7,731           --                 --               --        7,731
   Translation adjustment                 --         --            --           --                (94)              --          (94)
   Unrealized loss on
     marketable securities                --         --            --           --               (132)              --         (132)
   Net loss                               --         --            --           --                 --          (13,165)     (13,165)
                                      -------     ------     ---------     --------     --------------    -------------     --------

BALANCE, FEBRUARY 28, 1998            26,720         53       171,075        (717)                233            3,102      173,746
   TYECIN conforming year end
     adjustments                          --         --            --           --                 --             (248)        (248)
   Issuance of common stock              194         --         2,745           --                 --               --        2,745
   Exercise of stock options             791          2         4,248           --                 --               --        4,250
   Tax benefit of options exercised       --         --         1,928           --                 --               --        1,928
   Translation adjustment                 --         --            --           --               (701)              --         (701)
   Unrealized gain on
     marketable securities                --         --            --           --                114               --          114
   Net loss                               --         --            --           --                 --          (96,112)     (96,112)
                                      -------     ------     ---------     --------     --------------    -------------     --------

BALANCE, FEBRUARY 28, 1999            27,705         55       179,996        (717)               (354)         (93,258)      85,722
   Issuance of common stock              124          1         1,419           --                 --               --        1,420
   Exercise of stock options           1,218          2         8,065           --                 --               --        8,067
   Translation adjustment                 --         --            --           --                487               --          487
   Unrealized loss on marketable
     securities                           --         --            --           --                (33)              --          (33)
   Net loss                               --         --            --           --                 --           (8,945)      (8,945)
                                      -------     ------     ---------     --------     --------------    -------------     --------

BALANCE, FEBRUARY 29, 2000            29,047       $ 58      $189,480      $ (717)          $     100      $  (102,203)     $86,718
                                      =======     ======     =========     ========     ==============    =============     ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-5

<PAGE>

                    MANUGISTICS GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (in thousands)

<TABLE>
<CAPTION>

                                                                             February 29 or 28

                                                              2000                  1999                 1998
                                                              ----                  ----                 ----
<S>                                                        <C>                   <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                 $ (8,945)             $ (96,112)           $ (13,165)
   Adjustments to reconcile net loss to net cash
     provided by (used in)  operating activities:
   Depreciation and amortization                              21,850                 24,321               16,150
   Write-off of purchased research and development                --                    --                47,340
   Restructuring provision                                    (1,506)                33,775                   --
   Allowances for doubtful accounts                           (4,424)                 4,200                1,510
   Deferred income tax assets                                   (936)                 5,140              (19,326)
   Tax benefit of stock options exercised                         --                  1,928                7,731
   Loss on disposal of property and intangibles                  632                    488                   --
   Other                                                        (189)                   993                 (261)
   Changes in assets and liabilities:
         Accounts receivable                                  16,862                  4,397              (20,908)
         Other current assets                                  2,796                 (5,379)              (2,739)
         Other non-current assets                                 22                   (287)                (503)
         Accounts payable and accrued expenses                (4,966)                 1,623                5,777
         Accrued compensation                                    530                 (4,604)               6,016
         Deferred revenue                                      2,017                  6,164                2,470
         Restructuring accrual                               (11,491)                (4,442)                  --
                                                            ----------            ---------            ---------

              Net cash provided by (used in) operating
                activities                                    12,252                (27,795)              30,092

CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisitions                                                   --                    --                (9,637)
   Sales of marketable securities                             21,054                 48,436               46,865
   Purchases of marketable securities                        (15,912)                (8,827)             (96,347)
   Purchase of property and equipment                         (3,242)               (16,402)             (16,011)
   Capitalization of software developed for internal use        (101)                  (193)                  --
   Capitalization of software development costs               (5,435)               (10,075)             (10,274)
   Purchase of software licenses                                (228)                  (582)                (816)
   Net change in cash due to conforming year-ends                 --                   (450)                  --
                                                            ----------            ---------            ---------

         Net cash (used in) provided by investing
           activities                                         (3,864)                11,907              (86,220)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Line of credit borrowings                                  (3,500)                 9,500                   --
   Payments of long-term liabilities                            (939)                  (246)                  58
   Proceeds from sale of common stock,
     net of issuance costs                                     1,420                  2,745               63,768
   Proceeds from exercise of stock options                     8,067                  4,474                3,336
                                                            ----------            ---------            ---------
         Net cash provided by financing activities             5,048                 16,473               67,162
                                                            ----------            ---------            ---------

EFFECTS OF EXCHANGE RATES ON CASH BALANCES                      (110)                   249                   23
                                                            ----------            ---------            ---------

NET INCREASE IN CASH                                          13,326                    834               11,057

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                20,725                 19,891                8,834
                                                            ----------            ---------            ---------

CASH AND CASH EQUIVALENTS, END OF PERIOD                    $ 34,051               $ 20,725            $  19,891
                                                            ==========            =========            =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-6

<PAGE>

                    MANUGISTICS GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                       THREE YEARS ENDED FEBRUARY 29, 2000

1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

The Company

     Manugistics Group, Inc. ("the Company") is a global provider of intelligent
supply chain  optimization  solutions  for  enterprises  and evolving  eBusiness
trading  networks.  The Company's  solutions,  which include client  assessment,
software products,  consulting services for implementation and solution support,
can be optimized to the supply chain  requirements  of companies.  The Company's
solutions  provide the  Company's  clients  with the  business  intelligence  to
participate in various forms of trading  relationships,  from traditional linear
supply  chains to  eBusiness  trading  networks.  The  Company's  broad suite of
solutions can help companies power profitable growth,  increase revenues,  lower
overall costs and improve capital allocation through more effective  operational
decisions.  Other operational  benefits of implementing the Company's  solutions
can include greater speed to market,  strengthened  customer  service,  improved
relationships  among trading  partners and increased  inventory turns within and
across the Company's clients' supply chains and eBusiness trading networks.

     The Company was  incorporated  in Delaware in 1986 to acquire  Manugistics,
Inc. (then known as STSC, Inc.),  which was a subsidiary of Continental  Telecom
of Atlanta,  Georgia and which is now the principal operating  subsidiary of the
Company.  The Company  completed its initial public  offering of common stock in
August 1993 and completed another  underwritten  offering of its common stock in
August 1997.

Basis of Presentation

     The consolidated  financial  statements include the accounts of Manugistics
Group,  Inc.,  its wholly  and  majority  owned  subsidiaries.  All  significant
intercompany transactions and balances have been eliminated.  Certain prior year
amounts  have  been  reclassified  for  comparability  with the  current  year's
financial statement presentation.

     Effective  June  1,  1998,  the  Company  acquired  TYECIN  Systems,   Inc.
("TYECIN")  by  merger  and  accounted  for  the  transaction  as a  pooling  of
interests.  Accordingly,  all financial  information included in these financial
statements give retroactive effect to the combination for all periods presented.
Previously,  TYECIN's  year-end was December 31, 1997.  Effective March 1, 1998,
TYECIN's  year-end was changed to February 28 or 29. During the two-month period
January and February 1998,  TYECIN recorded  revenues of approximately  $609,000
and expenses of approximately  $857,000. The resulting net loss of approximately
$248,000 is  directly  reflected  in the  accumulated  deficit in the  Company's
consolidated financial statements.

Use of Estimates

     The preparation of consolidated  financial  statements,  in conformity with
accounting  principles  generally  accepted  in the  United  States  of  America
("GAAP"), requires management to make estimates and assumptions. These estimates
and  assumptions  affect the reported  amounts of assets and liabilities and the
disclosure of contingent  assets and liabilities at the date of the consolidated
financial  statements and the reported  amounts of revenues and expenses  during
the reporting period. Actual results may differ from these estimates.

Cash and Cash Equivalents

     Cash and cash equivalents are comprised principally of amounts in operating
accounts,   cash  on  hand,  money  market   investments  and  other  short-term
instruments,  stated at cost,  which  approximates  market value,  with original
maturities of three months or less.

                                       F-7

<PAGE>

Marketable Securities

     The  Company's   short-term   marketable   securities   are  classified  as
"available-for-sale."   These   securities  are  recorded  at  fair  value  with
unrealized gains and losses reported as a component of stockholders'  equity and
comprehensive loss. Realized gains and losses on  available-for-sale  securities
are computed using the specific  identification method. On February 29, 2000 and
February 28, 1999,  marketable  securities consisted of investments in corporate
debt, municipal bonds and other short-term  investments which generally mature
in one year or less.

Concentration of Credit Risk

     Financial   instruments   that   potentially   subject   the   Company   to
concentrations  of credit risk consist  primarily of cash and cash  equivalents,
investments in marketable securities and accounts receivable.  The Company has
policies that limit  investments  to  investment  grade  securities  and the
amount of credit exposure to any one issuer. The Company performs ongoing credit
evaluations  of its customers  and maintains an allowance for potential  losses,
but  does  not  require   collateral  or  other  security  to  support  clients'
receivables.  The Company's  credit risk is also further  mitigated  because its
customer base is diversified both by geography and by industry.

Property and Equipment

     Property  and  equipment  is stated at cost.  Furniture  and  fixtures  are
depreciated on a straight-line basis over three to ten years. Computer equipment
and software are depreciated on a straight-line basis over two years.  Leasehold
improvements are amortized over the shorter of the lease term or the useful life
of the improvements.

Capitalized Software

     In  accordance  with  Statement of Financial  Accounting  Standards  No. 86
("SFAS 86"),  "Accounting for the Costs of Computer  Software to be Sold, Leased
or  Otherwise  Marketed,"  software  development  costs are expensed as incurred
until technological  feasibility has been established,  at which time such costs
are  capitalized  until the product is available for general release to clients.
These costs are then amortized using the  straight-line  method over a period of
two years.

Intangibles

     Intangibles  include goodwill,  customer lists,  intellectual  property and
other items.  Goodwill,  equal to the fair value of consideration paid in excess
of the fair value of the net assets purchased,  has been recorded in conjunction
with  several of the  Company's  purchased  business  combinations  and is being
amortized on a straight-line  basis over a period of five years.  Customer lists
acquired  in  conjunction  with  certain  of the  Company's  purchased  business
combinations are amortized using the straight-line  method over a period of five
years (see Note 11).  Intellectual  property and other intangibles are amortized
on a straight-line basis over a period of two to five years.

Internally Developed Software

     Effective  fiscal  1999,  certain  costs to develop or obtain  internal use
software are  capitalized  in accordance  with  American  Institute of Certified
Public  Accountants  ("AICPA")  Statement  of Position  No.  98-1 ("SOP  98-1"),
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal Use." These  capitalized  costs are amortized on a straight-line  basis
over a period  of two to five  years  after  completion  or  acquisition  of the
software.

Impairment of Long-Lived Assets

     The Company reviews its long-lived assets, including property and equipment
and  intangibles,  for impairment  whenever  events or changes in  circumstances
indicate that the carrying amount of the assets may not be fully recoverable. In
performing an evaluation of  recoverability,  the estimated future  undiscounted
net cash flows of the assets are  compared  to the  assets'  carrying  amount to
determine if a write-down is required.

                                       F-8

<PAGE>

Fair Values of Financial Instruments

     The carrying values of cash and cash  equivalents,  marketable  securities,
accounts  receivable,  accounts payable and the line of credit  approximate fair
value due to the short  maturities of such  instruments.  The carrying  value of
long-term  debt  approximates  fair value based on current  rates offered to the
Company for debt with similar collateral and guarantees, if any, and maturities.

Foreign Currency Translation and Operations

     Assets and  liabilities  of the Company's  international  subsidiaries  are
translated at the exchange rate in effect on the balance sheet date. The related
revenues and expenses are translated  using the average  exchange rate in effect
during the  reporting  period.  Foreign  currency  translation  adjustments  are
disclosed as a separate  component  of  stockholders'  equity and  comprehensive
loss.

     The Company  generates  revenues from sales outside the United States which
are  denominated  in foreign  currencies,  typically  the local  currency of the
selling business unit. There are certain economic, political,  technological and
regulatory risks associated with operating in foreign  countries.  International
sales and operations may be adversely affected by the imposition of governmental
controls, foreign currency exchange rate fluctuations and economic instability.

Revenue Recognition

     Prior to March 1, 1998, the Company  recognized  revenue in accordance with
the  provisions  of the AICPA  Statement  of  Position  No.  91-1 ("SOP  91-1"),
"Software  Revenue  Recognition."  Software  license  revenues from supply chain
planning products were recognized upon the execution of a noncancellable license
agreement and shipment of the  software,  provided  that no  significant  vendor
obligations remained outstanding, the license fee was fixed and amounts were due
within one year and  collection  was  considered  probable  by  management.  For
transactions  entered  into after  February  28,  1998,  the Company  recognized
revenue in accordance  with the  provisions  of AICPA  Statement of Position No.
97-2 ("SOP 97-2"), "Software Revenue Recognition" and SOP 98-9, "Modification of
SOP 97-2,  Software Revenue  Recognition with respect to Certain  Transactions,"
which  provide  guidance in applying  GAAP in  recognizing  revenues on software
transactions  and supersede SOP 91-1. SOP 97-2 requires that the Company have an
executed software license  agreement,  the license fee be fixed and determinable
and  collection be deemed  probable by  management  in order to record  software
license revenue. SOP 97-2 also requires revenues earned on software arrangements
involving  multiple  elements to be allocated  to each  element  based on vendor
specific  objective  evidence of the relative fair values of the elements.  If a
vendor  does  not  have  evidence  of the  fair  value  for  all  elements  in a
multiple-element arrangement, all revenue from the arrangement is deferred until
such evidence exists or until all elements are delivered.

     Consulting  service revenues are recognized when the services are provided,
generally on a time and materials  basis.  Consulting  service  revenues consist
primarily of implementation and training services related to the installation of
the Company's products and typically do not include significant customization to
or development of the underlying  software code.  Solution  support revenues are
deferred and recognized  ratably over the term of the solution support contract,
typically twelve months.

Income Taxes

     The provision for income taxes is based on income  recognized for financial
reporting  purposes and includes  the effects of temporary  differences  between
such income and income recognized for income tax purposes. Deferred income taxes
reflect the net tax effects of temporary differences between carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes.  Valuation  allowances are recorded to reduce  deferred tax
assets when it is more likely than not that a tax benefit will not be realized.

Comprehensive Loss

     In fiscal 1999,  the Company  adopted  Statement  of  Financial  Accounting
Standards  No. 130 ("SFAS No.  130"),  "Reporting  Comprehensive  Income."  This
statement establishes the rules for the reporting of comprehensive (loss) income
and its components.  The Company's comprehensive loss includes net loss, foreign

                                       F-9

<PAGE>

currency  translation  adjustments  and unrealized  (losses) gains on short-term
investments and is presented in the Consolidated  Statements of Operations.  The
adoption  of SFAS No. 130 had no impact on total  stockholders'  equity.  Fiscal
1998 financial  statements have been reclassified to conform to the SFAS No. 130
requirements.

Net Loss Per Share

     Basic  loss per share is  computed  using the  weighted  average  number of
shares of common stock outstanding. Diluted loss per share is computed using the
weighted  average  number of shares of common stock and, when  dilutive,  common
equivalent shares from options to purchase common stock using the treasury stock
method.

Stock-Based Compensation Plans

     The Company accounts for its stock-based  compensation  plans in accordance
with Accounting  Principles Board ("APB") Opinion No. 25,  "Accounting for Stock
Issued to Employees" using the intrinsic  value-based method of accounting.  The
Company has made the pro-forma net income and earnings per share  disclosures in
Note 7, calculated as if the Company accounted for its stock-based  compensation
plan using the fair  value-based  method of accounting  in  accordance  with the
provisions  as required by Statement of Financial  Accounting  Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation."

New Accounting Pronouncements

     In June 1998,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement  of  Financial   Accounting   Standards  No.  133  ("SFAS  No.  133"),
"Accounting for Derivatives and Hedging Activities." In May 1999, the FASB voted
to  defer  the  implementation  of SFAS  No.  133 for one  year.  SFAS  No.  133
establishes  accounting  and  reporting  standards for  derivative  instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively  referred  to as  derivatives)  and  for  hedging  activities.  It
requires  that  an  entity   recognize  all  derivatives  as  either  assets  or
liabilities in the balance sheet and measure those instruments at fair value. If
certain  conditions  are met, a derivative  may be  specifically  designated and
accounted  for as: (a) a hedge of the exposure to changes in the fair value of a
recognized asset or liability or an unrecognized firm commitment; (b) a hedge of
the exposure to variable cash flows of a forecasted transaction;  or (c) a hedge
of the foreign currency exposure of a net investment in a foreign operation,  an
unrecognized   firm   commitment,   an   available-for-sale    security   or   a
foreign-currency-denominated   forecasted  transaction.  For  a  derivative  not
designated as a hedging instrument,  changes in the fair value of the derivative
are  recognized  in earnings in the period of change.  This  statement  is to be
effective  for all annual and interim  periods  beginning  after June 15,  2000.
Management  does not presently  believe the adoption of SFAS No. 133 will have a
material effect on the Company's  consolidated  financial position or results of
operations in fiscal 2001.

     In  April  2000,  the  FASB  issued  a  final   interpretation  to  address
significant  outstanding  practice  issues related to accounting for stock-based
compensation  under  APB  Opinion  No.  25,  "Accounting  for  Stock  Issued  to
Employees." The effective date of the issuance of the final interpretation, FASB
Interpretation  No. 44 ("FIN 44"), is July 1, 2000. The  interpretation  will be
applied  prospectively  but will also cover events that occurred  after December
15,  1998.  There  will be no  effect  resultant  from  FIN 44 on the  financial
statements  issued prior to July 1, 2000. The Company will be required to record
compensation  expense  associated with the change in the exercise price of stock
options granted to employees which were repriced,  which could cause a material,
adverse impact on the Company's  financial  condition.  As of February 29, 2000,
the Company had approximately 927,272 repriced options outstanding.


                                      F-10

<PAGE>

2. PROPERTY AND EQUIPMENT

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

<TABLE>
<CAPTION>

                                                               February 29 or 28
                                                         2000                     1999
                                                         ----                     ----
<S>                                                   <C>                      <C>
Computer equipment and software                        $ 26,118                 $ 26,913
Office furniture and equipment                            6,526                    6,921
Leasehold improvements                                    7,959                    9,740
                                                       ----------               ---------
         Total                                           40,603                   43,574
Less:  accumulated depreciation                         (26,446)                 (21,742)
                                                       ----------               ---------
Total property and equipment                           $ 14,157                 $ 21,832
                                                       ==========               =========
</TABLE>

3.   SOFTWARE DEVELOPMENT COSTS

     The Company  capitalizes  costs incurred in the development of its software
products for commercial availability. Software development costs include certain
internal  development  costs,  software  costs  purchased  from third parties in
connection with  acquisitions (if the related software product under development
has reached  technological  feasibility or if there are alternative  future uses
for the purchased  software,  provided the capitalized  amounts will be realized
over a period not exceeding five years) and purchased software license costs for
products used in the development of the Company's products. Costs incurred prior
to establishing  technological  feasibility  are charged to product  development
expense as incurred.  Software development costs are amortized at the greater of
the  amount  computed  using  either:  (a) the  straight-line  method  over  the
estimated economic life of the product,  commencing with the date the product is
first  available  for  general  release;  or (b) the ratio  that  current  gross
revenues  bears to the total  current and  anticipated  future  gross  revenues.
Generally,  an economic  life of two years is assigned to  capitalized  software
development costs.

     The Company capitalized  software  development costs and purchased licensed
software to be resold of $5,663,000,  $10,657,000  and  $11,090,000 and recorded
amortization expense of $9,689,000,  $11,014,000 and $8,277,000 for fiscal 2000,
1999 and 1998,  respectively.  In addition, an additional $9,940,000 is recorded
in the fiscal 1998 balance for purchased software  development costs capitalized
in connection with the acquisition of ProMIRA Software Inc. (see Note 11).

     The  amortization  expense  amounts for fiscal 2000,  1999 and 1998 include
write-offs   totaling   approximately   $366,000,   $1,432,000  and  $1,897,000,
respectively,  of  previously  capitalized  software  development  costs.  These
capitalized  costs were deemed to exceed their future net realizable  value as a
result of new  technologies  developed by the Company and acquired in connection
with acquisitions.

                                      F-11

<PAGE>

4.   INTANGIBLES

Intangibles consists of the following (in thousands):

<TABLE>
<CAPTION>

                                                               February 29 or 28
                                                         2000                     1999
                                                         ----                     ----
<S>                                                   <C>                     <C>
Goodwill                                               $ 12,135                 $ 12,135
Customer lists                                              214                      214
Intellectual property                                       750                      750
Non-compete agreements                                      217                      217
Software developed for internal use                         294                      193
Other                                                        56                       46
                                                       ----------               ---------
Total                                                    13,666                   13,555
Less:  accumulated amortization                          (6,349)                  (4,173)
                                                       ----------               ---------
Total intangibles                                       $ 7,317                  $ 9,382
                                                       ==========               =========
</TABLE>

In January 1999,  the Company wrote off  $1,354,000 of goodwill  representing  a
gross balance of $3,872,000 and accumulated  amortization of $2,518,000  related
to the acquisitions of certain assets of Information Resources, Inc. ("IRI") and
Marketing  Systems,  Inc. The Company  determined  that  goodwill  balances were
impaired such that  undiscounted cash flows pertaining to the goodwill could not
support the goodwill balance recorded.

5.   LONG-TERM LIABILITIES

Long-term liabilities consisted of the following (in thousands):

<TABLE>
<CAPTION>

                                                               February 29 or 28
                                                         2000                     1999
                                                         ----                     ----
<S>                                                     <C>                     <C>
Notes payable                                             $ 102                    $ 987
Capital lease obligations (see Note 6)                       31                       64
Deferred rent                                               410                      431
                                                       ----------               ---------

Total                                                     $ 543                  $ 1,482
Less - current portion                                     (260)                  (1,028)
                                                       ----------               ---------

Total long-term liabilities                               $ 283                    $ 454
                                                       ==========               =========
</TABLE>

Notes  Payable - The Company has some  outstanding  notes  payable  which accrue
interest at rates ranging from 1.93% to 6.25% as of February 29, 2000. Principal
repayment  requirements  for each of the four succeeding  fiscal years beginning
March 1, 2000 are as follows:  $43,000 for 2001,  $24,000 for 2002,  $24,000 for
2003 and $11,000 for 2005.

Line of Credit - The Company has an unsecured  revolving  credit facility with a
commercial  bank.  As of February 29, 2000,  $6 million was  outstanding  on the
revolving credit facility.  This $6 million was repaid in March 2000. During the
third quarter,  the Company renewed its revolving credit  facility.  The current
agreement, which the Company intends to renew, will expire in September of 2000.
Under its terms,  the Company may request  cash  advances,  letters of credit or
both  in an  aggregate  amount  of up to  $20  million.  The  Company  may  make
borrowings  under the facility for short-term  working  capital  purposes or for
acquisitions  (acquisition-related  borrowings  are limited to $7.5  million per
acquisition). The facility contains certain financial covenants that the Company
believes are typical for a facility of this nature and amount.


                                      F-12

<PAGE>

6. COMMITMENTS AND CONTINGENCIES

     COMMITMENTS  - The Company  leases  office  space,  office  equipment and
automobiles  under  operating  leases and various  computers and other equipment
under capital  leases.  Property  acquired  through  capital leases  amounted to
$828,000 and  $881,000 at February 29, 2000 and February 28, 1999,  respectively
and has been  included  in  computer  equipment  and  software  (Note 2).  Total
accumulated  amortization  relating to these leases was $806,000 and $850,000 as
of February 29, 2000 and February 28, 1999, respectively.

     Rent  expense  for  operating  leases  for fiscal  2000,  1999 and 1998 was
approximately $9,712,000,  $16,020,000 and $7,754,000,  respectively. The future
minimum lease payments under these capital and operating  leases for each of the
succeeding fiscal years beginning March 1, 2000 are as follows (in thousands):

<TABLE>
<CAPTION>

                                                              Capital                   Operating
                                                               Leases                     Leases
                                                            -----------               -------------
<S>                                                        <C>                       <C>
2001                                                          $    17                      $ 17,500
2002                                                                9                        15,024
2003                                                                9                         9,841
2004                                                               --                         6,495
2005                                                               --                         5,449
Thereafter                                                         --                        36,984
                                                              ----------               -------------

Total minimum lease payments                                       35                        91,293

Less sublease income                                               --                        (2,733)
Less amount representing interest                                  (4)                           --
                                                              ----------               -------------

Present value of net minimum lease payments                   $    31                      $ 88,560
                                                              ==========               =============
</TABLE>


     Contingencies  - The Company is involved in disputes and  litigation in the
normal course of business.  The Company does not believe that the outcome of any
of these  disputes or  litigation  will have a material  effect on the Company's
financial condition or results of operations. However, an unfavorable outcome of
some or all of these  matters  could  have a  material  effect on the  Company's
business, operating results, financial condition and cash flows.

     The Company has previously disclosed in its periodic reports filed with the
Securities and Exchange  Commission that, on March 7, 1997, the Company, as part
of the  acquisition  of certain assets of IRI,  entered into several  agreements
with  IRI,   including  a  Data  Marketing  and  Guaranteed   Revenue  Agreement
("Agreement")  and an  Asset  Purchase  Agreement  ("Purchase  Agreement").  The
Agreement set forth the obligations of the parties with regard to revenues to be
paid to IRI from the sale by the Company of specified  products provided by IRI.
Under the terms of the  Agreement,  the Company  guaranteed  revenue to IRI in a
total amount of $16.5 million over a period of years following  execution of the
Agreement by way of three separate revenue streams.

     The Company made an initial  payment of  approximately  $500,000 to IRI. In
addition, as part of its commitment,  the Company agreed to guarantee revenues
to IRI in a total amount of $12 million over an initial  three-year  period from
execution of the agreement ("First Revenue  Stream").  The Company asserted that
its ability to market the IRI products had been impaired, which, under the terms
of the  Agreement,  obligates  the parties to  restructure  the payments  and/or
modify the obligations  with regard to the First Revenue Stream.  IRI responded,
disagreeing  that  an  impairment  existed  and in  the  alternative,  that  any
impairment was corrected.

     The parties  discussed their  disagreement  over the impairment issue until
IRI filed a complaint in the Circuit  Court of Cook County,  Illinois on January
15, 1999.  The complaint  alleged  breach of the Agreement and initially  sought
damages  of  approximately   $12,000,000  for  the  Company's  failure  to  make
guaranteed  payments.  The  complaint  also  alleged  a  breach  of  a  separate
Non-Competition and Non-Solicitation  Agreement executed at the

                                      F-13

<PAGE>

same  time as the  Agreement  and  sought  damages  in an  amount  in  excess of
$100,000. The Company filed a Motion to Stay Proceedings and Compel Arbitration,
which was granted as to the claim under the Agreement and denied as to the claim
under  the   Non-Competition   and   Non-Solicitation   Agreement.   Arbitration
proceedings  have  commenced  under  the  auspice  of the  American  Arbitration
Association.

     In the arbitration, IRI seeks a total of $15,930,563 in damages. The amount
now  sought  by IRI  includes  amounts  which it  claims  are due under a second
revenue stream under the Agreement, triggered by the resolution of IRI's lawsuit
with Think Systems  Corporation.  The second revenue  stream  represents a total
guaranteed  revenue of $1.75 million for the first and second year following the
Think  Systems  settlement  and $2.25  million for the third year  following the
settlement.  The Company  contends that the conditions to these amounts becoming
due under the second  revenue stream have not been satisfied and that no amounts
are due to IRI, because,  among other reasons,  of a failure of consideration in
the  overall  transaction.  Both  the Cook  County  action  and the  arbitration
proceeding are in the early stages;  coordinated  discovery in both  proceedings
has commenced and is scheduled to be completed in October 2000.

     One of the Company's clients submitted to the Company by letter a claim for
damages based on alleged breaches of a software license  agreement  entered into
with one of the Company's foreign subsidiaries in fiscal 1997. The client claims
damages in the amount of approximately  $6.5 million,  a significant  portion of
which  consists  of  consequential  damages.  The  Company is in the  process of
responding  to the  letter  and the  Company  believes  that it has  meritorious
defenses to these claims and could assert a significant counterclaim against the
client.

     The Company has also received a letter from a foreign company asserting, on
the basis of information in the Company's  press  releases,  that certain of the
Company's  supply chain planning  solutions  which the Company sells infringe on
that company's  patents.  The Company believes that its systems and solutions do
not infringe on the foreign company's patents and the Company intends to respond
appropriately.

     The ultimate outcome of these proceedings, as with litigation generally, is
inherently  uncertain  and it is  possible  that these  matters  may be resolved
adversely to the Company. The adverse resolution of these proceedings could have
a  material  adverse  effect  on  the  Company's  business,  operating  results,
financial condition and cash flows.

7. STOCKHOLDERS' EQUITY

Preferred Stock

     The Company has  authorized  4,620,253  shares of $.01 par value  preferred
stock. As of February 29, 2000, no preferred shares were outstanding.

Common Stock

     The Company has  authorized  100,000,000  shares of $.002 par value  common
stock.  No cash  dividends on common stock have been  declared or paid in any of
the fiscal  years  presented.  On August 18,  1997,  the  Company  completed  an
underwritten  offering of 1,600,000  newly issued  shares of common  stock.  The
proceeds to the Company were approximately $61,985,000,  net of related offering
expenses.

Stock Split

     On  May  9,  1997,  the  Board  of  Directors  of the  Company  declared  a
two-for-one  stock split on the Company's  common  stock,  which was paid in the
form of a 100% stock dividend on June 11, 1997 to  shareholders  of record as of
May 23, 1997. The shares outstanding, weighted average shares, amounts per share
and all other  references to shares of common stock  reported have been restated
to give effect to the stock split.

                                      F-14

<PAGE>

Net Loss per Share

     The following is a reconciliation of the number of shares used in the basic
and  diluted  earnings  per share  computation  for the  periods  presented  (in
thousands):

<TABLE>
<CAPTION>

                                                                             February 29 or 28

                                                                2000                1999               1998
                                                                ----                ----               ----
<S>                                                          <C>                 <C>                <C>
Weighted average common shares                                  27,486              26,402             23,484
Dilutive potential common shares                                    --                  --                 --
                                                              ----------          ---------          ---------

Shares used in diluted share computation                        27,486              26,402             23,484
                                                              ----------          ---------          ---------

Net loss                                                      $ (8,945)           $(96,112)          $(13,165)
                                                              ==========          =========          =========

Basic loss per share                                          $  (0.33)             $(3.64)            $(0.56)
                                                              ==========          =========          =========

Diluted loss per share                                        $  (0.33)             $(3.64)            $(0.56)
                                                              ==========          =========          =========
</TABLE>

     The dilutive effect of options of  approximately  1.9 million,  1.3 million
and 3.8 million  shares has not been  considered in the  computation  of diluted
loss per share in fiscal 2000, 1999 and 1998,  respectively,  because  including
these shares would be anti-dilutive.

Employee Stock Purchase Plan

     In October  1994,  the Company  adopted an  employee  stock  purchase  plan
("ESPP") that  authorizes  the Company to sell up to 1,500,000  shares of common
stock to employees through voluntary payroll withholdings. The stock price to be
paid by  employees is equal to 85% or 95% of the lower  average  market price as
reported on the National  Association of Securities Dealers Automated  Quotation
system from either the first or last day of each six-month  withholding  period.
Payroll  deductions  may  not  exceed  the  lesser  of  10%  of a  participant's
compensation or $25,000 per year. The number of shares purchased under this plan
by employees totaled 123,493 shares,  194,013 shares and 69,113 shares in fiscal
2000,  1999 and 1998,  respectively.  The weighted  average fair value of shares
purchased  in  fiscal  2000,  1999 and  1998  was  $13.34,  $16.62  and  $44.88,
respectively.

                                      F-15

<PAGE>

Stock Options

     Effective  July 24,  1998,  the Company  adopted the 1998 Stock Option Plan
("1998  Plan") under which  incentive  and  non-qualified  stock  options may be
granted  to  officers,  directors  and  employees  to  purchase a total of up to
5,237,900  new shares of common  stock at prices  not less than the fair  market
value at the time of grant.  Prior to the adoption of the 1998 Plan, the Company
had  additional  plans under which it granted stock  options  including the 1994
Employee   Stock  Option  Plan  ("1994  Plan"),   the  1994  Outside   Directors
Non-qualified  Stock  Option Plan ("1994  Director  Plan"),  the 1994  Executive
Incentive  Stock  Option  Plan  ("1994  Executive  Plan") and the 1996  Employee
Incentive Stock Option Plan ("1996 Plan").  No new options will be granted under
these additional stock option plans, which will remain in effect with respect to
options   outstanding  under  such  plans  until  such  options  are  exercised,
terminated  or expire.  As of February  29, 2000,  the Company has  cumulatively
granted options on 1,972,418 shares under the 1998 plan,  4,961,895 shares under
the 1994 plan, 381,500 shares under the 1994 Director Plan, 120,190 shares under
the 1994 Executive Plan and 1,570,000 shares under the 1996 Plan.

     Under the 1998  Plan,  the  vesting  period  for new  options  issued is in
accordance with the Incentive and Non-Qualified  Stock Option Policy approved by
the  compensation  committee of the Board of Directors.  The majority of options
outstanding under the plan vest and become exercisable  ratably over a four-year
period from the date of grant.  The right to exercise the vested options expires
upon the  earlier of either  ten years (or for  options  granted  prior to 1994,
eleven  years) from the date of grant or within  thirty days of  termination  of
employment.

     During  fiscal  2000,  the  Company  also  granted  a  total  of  3,670,000
non-qualified  stock  options to several of the  Company's  executive  officers.
These stock option grants were approved by the company's  Board of Directors and
were not granted  under any of the above  mentioned  stock option  plans.  These
shares vest and become  exercisable over periods ranging from immediate  vesting
to monthly vesting over a period of five years from the date of grant.

     Effective  January 29, 1999, the Company completed a stock option repricing
program in which  options  to  purchase a total of  approximately  1.52  million
shares of the Company's common stock were repriced. Under the repricing program,
which was  approved by the  shareholders  of the  Company,  outstanding  options
(other than those held by executive  officers  and  directors)  surrendered  for
repricing  were  exchanged for an  equivalent  number of repriced  options.  The
exercise price of the repriced options is $8.75 per share (the fair market value
of the common  stock at that date) and the  four-year  vesting  schedule of each
option  restarted  on  February  1,  1999.  In  conjunction  with the  Company's
restructuring, the Compensation Committee of the Board of Directors, pursuant to
authority  granted to it under the related  option  plans,  modified  the annual
vesting  provisions of the repriced  options to provide that the vesting for the
first two years would be accelerated if certain  earnings  milestones are met in
fiscal 2000 and 2001.

     Under FASB Interpretation No. 44 ("FIN 44"), which is retroactive to option
repricings  effected  after  December 15, 1998,  companies are required to treat
repriced options as compensatory options accounted for using variable accounting
treatment.  As a result,  companies  will need to record  non-cash  compensation
expense,  over the term of the option,  based upon increases in the market price
of the companies' common stock over the market price at July 1, 2000. The impact
of FIN 44 could  cause a material,  adverse  impact on the  Company's  financial
condition.  As of February  29,  2000,  the Company  had  approximately  927,272
repriced options outstanding.


                                      F-16

<PAGE>

     A summary of the status of the  Company's  stock  option  plans and changes
during the fiscal years is presented below with share amounts in thousands:

<TABLE>
<CAPTION>

                                                                    FEBRUARY 29 OR 28
                                            2000                           1999                              1998
                                           -----                          ------                             -----
                                  OPTIONS TO                     OPTIONS TO                      OPTIONS TO
                                   PURCHASE      WTD. AVG.        PURCHASE       WTD. AVG.        PURCHASE       WTD. AVG.
                                    SHARES       EX. PRICE         SHARES        EX. PRICE         SHARES        EX. PRICE
                                  ----------    -----------      -----------    -----------      ----------      ---------
<S>                              <C>           <C>              <C>            <C>               <C>             <C>
Outstanding at beginning of year      4,423       $ 11.90            4,421         $16.77            3,824         $6.78
Options granted at market value       4,880         11.83            3,091          15.84            1,503         36.64
Options granted greater than
  market value                        1,100         23.36               15          37.73               45         22.47
Exercised                            (1,204)         6.68             (751)          5.94             (777)         4.34
Cancelled                            (1,214)        15.77           (2,353)         28.79             (174)        16.85
                                  ----------                      ---------                      ----------

Outstanding at end of year            7,985       $ 13.65            4,423         $11.90            4,421        $16.77
                                  ----------                      ---------                      ----------

Exercisable at end of year            1,426                          1,303                           1,357
                                  ==========                      =========                      ==========
</TABLE>

     The weighted average fair value of options granted in fiscal 2000, 1999 and
1998 was  $13.95,  $15.93 and $16.48 per share,  respectively.  A summary of the
weighted  average  remaining  contractual life and the weighted average exercise
price of options  outstanding  as of February 29, 2000 is  presented  below with
share amounts in thousands:

<TABLE>
<CAPTION>

   Range of               Number          Weighted Avg.                                Number
   Exercise            Outstanding         Remaining           Weighted Avg.        Exercisable       Weighted Avg.
    Prices              at 2/29/00      Contractual Life      Exercise Price          at 2/29/00     Exercise Price
-------------          -----------      ----------------      --------------        ------------    ---------------
<S>                   <C>              <C>                   <C>                   <C>             <C>
$0.92-$7.56                  409                5.44                $5.83                 331               $5.51
  7.64-7.81                2,004                9.15                 7.81                 337                7.81
  7.84-9.72                1,922                6.46                 9.04                 321                9.02
 9.75-18.63                1,994                6.68                13.01                 221               11.76
18.72-64.13                1,656                5.18                28.78                 216               36.23
-------------          -----------      ----------------      --------------        ------------    ---------------
$0.92-$64.13               7,985                6.87               $13.65               1,426              $12.45
                       ===========                                                  ============
</TABLE>

Stock-Based Compensation

     As  permitted  under SFAS No.  123,  the Company  continues  to account for
stock-based  compensation  to employees in  accordance  with APB Opinion No. 25,
under which no compensation  expense is recognized,  since the exercise price of
options  granted  is equal to or  greater  than  the  fair  market  value of the
underlying  security  on the grant date.  Pro forma  information  regarding  net
income and income per share is  required  by SFAS No.  123,  which uses the fair
value method.  The fair value of the Company's  stock-based  awards to employees
was  estimated as of the date of grant using the  Black-Scholes  option  pricing
model.  Limitations on the  effectiveness  of the  Black-Scholes  option pricing
model  include that it was  developed  for use in  estimating  the fair value of
traded options which have no vesting restrictions and are fully transferable and
that the model  requires  the use of  highly  subjective  assumptions  including
expected stock price  volatility.  Because the Company's  stock-based  awards to
employees  have  characteristics  significantly  different  from those of traded
options and because changes in the subjective  input  assumptions can materially
affect the fair value estimate,  in management's opinion, the existing models do
not  necessarily  provide a  reliable  single  measure  of the fair value of its
stock-based awards.

                                      F-17

<PAGE>

Had compensation cost for these plans been recorded,  the Company's net loss and
loss per basic  and  diluted  share  amounts  would  have  been as  follows,  in
thousands except per share amounts:

<TABLE>
<CAPTION>

                                                                    February 29 or 28

                                                    2000                   1999                   1998
                                                    ----                   ----                   ----
<S>                                               <C>                    <C>                   <C>
Net  loss                                         $(24,211)              $(105,188)             $(23,314)
Basic  loss per share                               $(0.88)                 $(3.98)                $(.99)
Diluted loss per share                              $(0.88)                 $(3.98)                $(.99)
</TABLE>

     The decrease in the fair value of stock  options  granted in 1999  resulted
primarily from a significant decrease in the price of the Company's common stock
during  fiscal  1999  from  fiscal  1998.  Because  the SFAS No.  123  method of
accounting  has not been applied to options  granted prior to March 1, 1995, the
resulting pro forma  compensation  cost may not be  representative of that to be
expected in future years. Additionally, the fiscal 2000, 1999 and 1998 pro forma
amounts  include  $567,000,  $964,000  and  $435,000,  respectively,  related to
purchases under the employee stock purchase plan.

The fair value of options granted was estimated  assuming no dividends and using
the  following  weighted-average  assumptions  for  each  of  the  fiscal  years
presented:

<TABLE>
<CAPTION>

                                               OPTIONS                                           ESPP
                                               -------                                           ----
                              2000             1999               1998             2000          1999          1998
                              ----             ----               ----             ----          ----          ----
<S>                        <C>             <C>               <C>                <C>           <C>            <C>
Risk-free interest  rates     5.63%          5.15-5.52%        6.20-6.59%          4.87%         5.17%         5.65%
Expected term               3.83 yrs.         3.09 yrs.       2.62-7.69 yrs.      6 mos.        6 mos.        6 mos.
Volatility                    .7216         .6051-.6800            0.6038          .7000        0.6259        0.6044
</TABLE>

8. RETIREMENT PLANS

     The Company has two defined  contribution  retirement savings plans (one in
the U.S. and another in the U.K.) under the terms of which the Company matches a
percentage of the employees' qualified contributions. New employees are eligible
to participate in the plans upon completing one month of service.  The Company's
contribution  to the plans totaled  $1,595,000,  $1,669,000  and  $1,045,000 for
fiscal 2000, 1999 and 1998, respectively.

9. INCOME TAXES

Income Tax  Provision - The  components  of the  (benefit)  provision for income
taxes are as follows in thousands:

<TABLE>
<CAPTION>

                                                                          February 29 or 28

                                                           2000                 1999                 1998
                                                           ----                 ----                 ----
<S>                                                    <C>                 <C>                     <C>
Current:
   Federal                                               $     69             $(2,392)               $7,522
   State                                                        9                (231)                2,069
   Foreign                                                    674                 428                   710
                                                         ---------            ----------           ----------

     Total current provision (benefit)                        752              (2,195)               10,301

Deferred:
   Federal                                                   (936)              3,976               (18,891)
   State                                                       --                  --                    18
   Foreign                                                     --               1,164                  (453)
                                                         ---------            ----------           ----------

     Total deferred (benefit) provision                      (936)              5,140               (19,326)
                                                         ---------            ----------           ----------
Total (benefit) provision for income taxes               $   (184)             $2,945              $ (9,025)
                                                         =========            ==========           ==========
</TABLE>

                                      F-18

<PAGE>

The net income  tax  benefits  related to the  exercise  of stock  options  were
allocated to additional  paid-in capital.  Such amounts were  approximately  $0,
$1,928,000 and $7,731,000, for fiscal 2000, 1999 and 1998, respectively.

Deferred Income Taxes - The components of the Company's  deferred tax assets and
liabilities are as follows in thousands:

<TABLE>
<CAPTION>

                                                                               February 29 or 28

                                                                        2000                       1999
                                                                        ----                       ----
<S>                                                                   <C>                        <C>
Deferred tax assets:
Uncollectable receivables and sales returns                                $594                     $2,429
     Accrued rents and other expenses                                     2,508                      2,549
     Operating loss carryforwards:
         Domestic                                                        24,505                     15,854
         Foreign                                                         13,928                      8,452
     Restructuring charge                                                 5,166                     13,344
     Tax credit carryforwards                                             2,592                      1,937
     Software revenue recognition                                           274                        117
     Depreciation and amortization                                       22,261                     21,312
     Accrued commissions                                                     --                        188
     Other temporary differences                                             40                          8
                                                                     ------------               -----------

         Total deferred tax assets                                       71,868                     66,190
         Less:  valuation allowance                                     (52,933)                   (47,039)
                                                                     ------------               -----------

              Total deferred tax assets                                  18,935                     19,151

Deferred tax liabilities:
     Software developments costs                                         (2,743)                    (4,619)
     Deferred revenue                                                    (1,036)                      (385)
     Accrued commissions                                                    (74)                        --
                                                                     ------------               -----------

         Total deferred tax liabilities                                  (3,853)                    (5,004)
                                                                     ------------               -----------

         Net deferred tax assets                                        $15,082                    $14,147
                                                                     ============               ===========
</TABLE>

     Based  upon the  Company's  historic  taxable  income,  when  adjusted  for
non-recurring  items,  net operating loss  carryback  potential and estimates of
future  profitability,  management has concluded that operating income will more
likely  than  not be  insufficient  to cover  all of the  deferred  tax  assets,
therefore,  the valuation  allowance  has been  increased in the current year to
$52,932,759 resulting in a net deferred tax asset of $15,081,945.

     At February 29, 2000, the Company had a total of $61,756,000 of federal and
$37,486,000 of foreign net operating loss  carry-forwards  ("NOLs") available to
offset future  taxable  income in those  respective  taxing  jurisdictions.  The
federal NOLs expire in the years 2011 through 2020. Approximately $15,214,000 of
the foreign NOLs expire during the fiscal years 2000 to 2005 while the remaining
NOLs are available in perpetuity.  The Company considers the earnings of foreign
subsidiaries   to  be   permanently   reinvested   outside  the  United  States.
Accordingly, no United States income tax on these earnings has been provided.

                                      F-19

<PAGE>

Effective and Statutory Rate  Reconciliation - The difference between the income
tax provision and the amount computed by applying the federal  statutory  income
tax rate to pretax accounting income is summarized as follows in thousands:

<TABLE>
<CAPTION>

                                                                             February 29 or 28

                                                                2000                1999               1998
                                                                ----                ----               ----
<S>                                                         <C>                  <C>                <C>
(Benefit) provision computed at federal statutory rate        $ (3,193)           $(32,608)          $(7,767)
Increase (reduction) in taxes resulting from:
   State and foreign taxes, net of federal benefit                (388)               (998)           (1,450)
   Change in valuation allowance                                 3,256              40,864             1,052
   Benefit of net operating loss carrybacks and tax credits         --              (4,052)           (1,255)
   Foreign items                                                    --                 953               529
   Meals, entertainment and other non-deductible expenses          545                  --                --
   Tax exempt income                                               (85)               (417)             (349)
   Other                                                          (319)               (797)              215
                                                              ----------          ---------          ---------

(Benefit) provision for income taxes                           $  (184)             $2,945           $(9,025)
                                                              ==========          =========          =========
</TABLE>

10.  OTHER INCOME

Other Income - Other income consists of the following (in thousands):

<TABLE>
<CAPTION>

                                                               February 29 or 28

                                                  2000               1999                1998
                                                  ----               ----                ----
<S>                                            <C>               <C>                  <C>
Interest income                                  $ 1,989           $  3,294             $ 2,774
Interest expense                                    (104)              (225)               (110)
Other                                               (496)              (707)                199
                                                ----------         ----------          ---------

Total other income                               $ 1,389           $  2,362             $ 2,863
                                                ==========         ==========          =========
</TABLE>

11.  ACQUISITIONS

Fiscal 1999 Business Combinations

     Effective June 1, 1998, the Company acquired TYECIN by merger and accounted
for the  transaction  as a pooling  of  interests.  Accordingly,  all  financial
information  included in these financial  statements gives retroactive effect to
the combination for all periods  presented.  Under the terms of the merger,  the
Company issued  approximately  333,000 shares of common stock. In addition,  the
Company assumed the  outstanding  TYECIN common stock options and converted them
to options to purchase a total of  approximately  25,000 shares of the Company's
common stock.  During the second quarter of fiscal 1999, the Company  recorded a
non-recurring  charge of approximately $3.1 million for certain expenses related
to this  transaction,  including,  among  other  items,  accounting,  legal  and
severance fees.

     Previously,  TYECIN's  year-end was December 31, 1997.  Effective  March 1,
1998,  TYECIN's year-end was changed to February 28. During the two-month period
January and February 1998,  TYECIN recorded  revenues of approximately  $609,000
and expenses of approximately  $857,000. The resulting net loss of approximately
$248,000  is  directly  reflected  in  accumulated   deficit  in  the  Company's
consolidated financial statements.

Fiscal 1998 Business Combinations

     During  fiscal  1998,  the Company made three  acquisitions  that have been
accounted for under the purchase method.  Accordingly,  the purchase prices were
allocated  to certain  assets and  liabilities  based on their  respective  fair
market  values.  The excess of the purchase price over the estimated fair market
value of the net assets  acquired  under each  transaction  was accounted for as
goodwill. Amounts allocated to certain intangibles, including goodwill,

                                      F-20

<PAGE>

are being amortized on a straight-line  basis over five years.  The consolidated
financial  statements include the operating results of each acquisition from the
date of the acquisition.

     In February 1998, the Company acquired ProMIRA Software,  Inc. ("ProMIRA"),
a provider  of supply  chain  planning  software  for  manufacturers  of complex
products in industries such as high  technology,  electronics and motor vehicles
and parts. The total purchase price was approximately $64,500,000,  comprised of
cash,  1,550,000 shares of common stock and options to purchase 78,379 shares of
common stock valued at $57.8 million and acquisition  costs.  The purchase price
was  allocated  based  on a fair  value  appraisal  obtained  from a  nationally
recognized  independent  appraisal  firm and  included  allocations  to  certain
intangible  assets,  such  as  existing  software  products  which  had  reached
technological  feasibility and in-process software development efforts which had
not reached  technological  feasibility  ("purchased research and development").
The write-off of purchased research and development  resulted in a non-recurring
charge to the Company's operating results and reduced net income for fiscal 1998
by $28,653,000 ($47,340,000, inclusive of income tax benefits of $18,687,000) or
$1.22 basic and $1.15 diluted income per share.

     In  June  1997,  the  Company  acquired   Synchronology  Group  Limited,  a
closely-held  company  that  provides   manufacturing  planning  and  scheduling
consulting  services.  In March 1997,  the  Company  entered  into a  definitive
agreement to acquire certain assets of IRI. (See Note 6 for certain  information
regarding  litigation  commenced by IRI against the Company.) The total purchase
prices of these  acquisitions  were  approximately  $3,200,000  and  $1,900,000,
respectively  and  consisted   primarily  of  cash,   assumed   liabilities  and
acquisition costs.

                                      F-21

<PAGE>

12. RESTRUCTURING OF OPERATIONS

     In the third  and  fourth  quarters  of 1999,  the  Company  announced  and
implemented  a  restructuring  plan aimed at reducing  costs and  returning  the
Company to  profitability.  The  restructuring  plan was necessitated due to the
Companys' poor financial performance throughout fiscal 1999, which resulted from
various  factors  including  but not  limited to poor sales  execution,  new and
stronger  competitive  factors,  lengthening  of  sales  cycles  and  prospects'
concerns  about  the Year  2000 and  global  economic  conditions.  The  Company
reorganized to focus on the core business of providing supply chain solutions to
companies with dynamic supply chains,  specifically those in the customer-driven
industries.  The Company also planned on expanding product innovation to support
transforming  the  supply  chain  to  an  e-chain  and  include   interface  and
integration  technologies  in addition to expanding the  Companys'  distribution
channels.  As a result of the  restructuring,  the Company  recorded  charges of
$700,000 and $33.1 million in the third and fourth  quarters,  respectively,  in
fiscal 1999. The components of the charge included (in thousands):

<TABLE>

<S>                                                                           <C>
Severance and related benefits                                                    $4,094
Lease obligations and terminations                                                20,200
Write-down of property, equipment and leasehold improvements                       6,418
Write-down capitalized software development costs                                  1,343
Write-down goodwill                                                                1,354
Other                                                                                366
                                                                                ---------
Total restructuring charge                                                       $33,775
                                                                                =========
</TABLE>

     Due  to  the  redirection  of  the  core  business  strategy,  the  Company
eliminated 412 positions, across all divisions, primarily located throughout its
U.S. operations of which 330 were terminated prior to year-end.  The Company has
paid  approximately $1.8 million and $2.9 million in severance related costs for
the years ending February 29, 2000 and February 28, 1999, respectively, with the
remaining to be paid out during fiscal 2001.

     The provision for lease  obligations and terminations  related primarily to
future lease  commitments on office facilities that were closed as part of the
restructuring. The charge represented future lease obligations, net of projected
sublease  income,  on such leases past the dates the offices  were closed by the
Company.  At the  time of the  restructuring,  some of these  subleases  were in
negotiation  but had not  been  finalized  and  therefore  the  charge  included
management's  estimates of the likely outcome of these negotiations.  Sublessors
were  located  during  fiscal 2000 for many of the  locations  and the  original
estimates  were  adjusted,  as necessary.  Cash payments on the leases and lease
terminations  will occur over the remaining  lease terms,  the majority of which
expire prior to 2009.

     The $6.4 million write-down of operating assets and $1.3 million write-down
of  capitalized  software  development  costs  relates to a charge to reduce the
carrying  amount  of  certain  equipment,   furniture  and  fixtures,  leasehold
improvements and capitalized  software  development costs to their estimated net
realizable value, in accordance with Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets to be Disposed Of."
The Company also recorded a charge of $1.4 million to write-down goodwill, which
was deemed to have a carrying  value in excess of the estimated  net  realizable
value.  The net  realizable  value  of  these  assets  was  determined  based on
management estimates, which considered such factors as the nature and age of the
assets to be  disposed  of,  the  timing of the  write-down  and the  method and
potential  costs of the disposal.  Such estimates will be monitored each quarter
and adjusted if necessary.

                                      F-22

<PAGE>

The following table depicts the restructuring activity through February 29, 2000
(in thousands):

<TABLE>
<CAPTION>

                                         FY           Balance                                                         Balance
                        Initial         1999        February 28,     Adjustment    Utilization of      Accrual        February
                        Charge        Activity          1999          To Charge          Cash          Non-Cash       29, 2000
                       ----------     ----------    -------------    ------------     -----------     -----------    ------------
<S>                   <C>            <C>           <C>              <C>            <C>                <C>            <C>
Severance costs        $  4,094       $ (2,942)         $  1,152        $  1,590       $ (1,822)          $   --        $    920
Lease obligation costs   20,200         (1,286)           18,914          (2,750)        (9,200)              --           6,964
Impairment of
 long-lived assets        9,115         (7,406)            1,709           (220)           (443)         (1,046)               0
Other                       366           (214)              152           (126)            (26)              --               0
                       ----------     ----------    -------------    ------------     -----------     -----------    ------------
Total                  $ 33,775       $(11,848)        $  21,927       $ (1,506)       $(11,491)       $ (1,046)       $   7,884
                       ==========     ==========    =============    ============     ===========     ===========    ============
</TABLE>

During the year ended  February 29,  2000,  the Company  reduced its  previously
recorded  restructuring charge by approximately $1.5 million.  These adjustments
related primarily to the sub-lease of property that management had believed,  at
the time of the  restructuring,  would  not be  sublet,  which  were  offset  by
increases in the accrual for severance costs due to the  finalization of several
executive employee terminations previously identified by management.

13. SEGMENT INFORMATION

     The Company and its  subsidiaries  are  principally  engaged in the design,
development,   marketing,   licensing  and  support  and  implementation  of  an
integrated suite of supply chain planning software  products.  Substantially all
revenues  result from the  licensing  of the  Company's  software  products  and
related consulting and solution support services.  The Company's chief operating
decision makers review financial information, presented on a consolidated basis,
accompanied by desegregated  information about revenues by geographic region for
purposes of making  operating  decisions  and assessing  financial  performance.
Accordingly,  the Company  considers itself to be in a single industry  segment,
specifically the license, consulting and support of its software applications.

<TABLE>
<CAPTION>

                                                                       February 29 or 28

Geographic Areas                                        2000                  1999                   1998
                                                        ----                  ----                   ----
<S>                                                <C>                    <C>                     <C>
                                                                         (in thousands)
Revenues:
     Americas                                          $ 112,033             $ 138,734              $ 152,572
     Europe                                               39,645                45,356                 35,708
     Asia/Pacific                                         15,027                 7,509                  5,890
     Eliminations                                        (14,272)              (14,035)               (13,907)
                                                    -------------         --------------         -------------
                                                       $ 152,433             $ 177,564              $ 180,263
                                                    =============         ==============         =============

Loss from operations:
     Americas                                               (497)            $ (75,795)             $ (23,148)
     Europe                                                1,435                   499                  9,595
     Asia/Pacific                                          2,937                (6,198)                 2,407
     Eliminations                                        (14,393)              (14,035)               (13,907)
                                                    -------------         --------------         -------------

                                                      $  (10,518)            $ (95,529)             $ (25,053)
                                                    =============         ==============         =============

Identifiable assets:
     Americas                                          $ 165,336             $ 222,352              $ 289,701
     Europe                                               39,163                34,587                 22,932
     Asia/Pacific                                          4,632                (1,375)                 3,195
     Eliminations                                        (56,703)              (83,234)               (90,613)
                                                    -------------         --------------         -------------
                                                       $ 152,428             $ 172,330              $ 225,215
                                                    =============         ==============         =============
</TABLE>

No  single  customer  accounted  for 10% or more of the  Company's  net sales in
fiscal 2000, 1999 or 1998.

                                      F-23

<PAGE>

14. SUPPLEMENTAL CASH FLOW INFORMATION

     Cash paid for interest  amounted to  approximately  $104,000,  $227,000 and
$110,000 in fiscal 2000, 1999 and 1998, respectively. Cash paid for income taxes
amounted to  approximately  $96,000,  $1,400,000  and $3,478,000 in fiscal 2000,
1999 and 1998, respectively.

Supplemental  information of non-cash  investing and financing  activities is as
follows:

     During fiscal 2000, 1999 and 1998, the Company received income tax benefits
of $0,  $1,928,000  and  $7,731,000,  respectively,  relating to the exercise of
stock options.  The benefits were recorded as an increase to additional  paid-in
capital.

15. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly consolidated financial information for fiscal 2000 and 1999
follows:

<TABLE>
<CAPTION>

                                                  1st Quarter       2nd Quarter       3rd Quarter           4th Quarter
                                                  -----------       -----------       ------------          -----------
<S>                                              <C>               <C>               <C>                   <C>
2000                                                             (in thousands, except per share data)
----
Total revenues                                      $ 39,193           $ 33,795            $ 35,794           $ 43,651
Operating (loss) income                                 (138)            (4,455)             (5,150)              (775)
Net income (loss)                                        389             (3,435)             (4,805)            (1,094)
Basic income (loss) per share                         $ 0.01           $  (0.13)            $ (0.17)           $ (0.04)
Shares used in basic share computation                27,011             27,291              27,590             28,051
Dilutive income (loss) per share                      $ 0.01           $  (0.13)            $ (0.17)           $ (0.04)
Shares used in diluted share computation              27,279             27,291              27,590             28,051

1999
----
Total revenues                                      $ 41,123           $ 52,940            $ 43,044           $ 40,457
Restructuring costs                                       --                 --                 701             33,074
Acquisition-related expenses                              --              3,095                  --                 --
Operating loss                                       (14,425)           (10,340)            (15,885)           (54,879)
Net loss                                              (8,539)            (5,966)            (10,407)           (71,200)
Basic loss per share                                $  (0.33)           $ (0.23)            $ (0.39)           $ (2.66)
Shares used in basic share computation                26,253             26,415              26,520             26,755
Dilutive loss per share                             $  (0.33)           $ (0.23)            $ (0.39)           $ (2.66)
Shares used in diluted share computation              26,253             26,415              26,520             26,755
</TABLE>

Included in the second quarter of fiscal 1999 are non-recurring  charges related
to the TYECIN  acquisition  (Note 11). Included in the third and fourth quarters
of fiscal 1999 are charges  related to the  corporate-wide  restructuring  (Note
12).

                                    * * * * *

                                      F-24

<PAGE>

                    INDEPENDENT AUDITORS' REPORT ON SCHEDULE

To the Stockholders and Board of Directors of Manugistics Group, Inc.:

     We have audited the consolidated financial statements of Manugistics Group,
Inc. (the Company) and its subsidiaries as of February 29, 2000 and February 28,
1999, and for each of the three years in the period ended February 29, 2000, and
have issued our report  thereon  dated March 23,  2000;  such report is included
elsewhere in this Form 10-K. Our audit also included the consolidated  financial
statement  schedule  of  Manugistics  Group,  Inc.,  listed  in  Item  14.  This
consolidated financial statement schedule is the responsibility of the Company's
management.  Our responsibility is to express an opinion based on our audits. In
our opinion, such consolidated financial statement schedule,  when considered in
relation  to the  basic  consolidated  financial  statements  taken  as a whole,
presents fairly in all material respects the information set forth herein.

DELOITTE & TOUCHE LLP
McLean,VA
March 23, 2000


                                       S-1

<PAGE>

                    MANUGISTICS GROUP, INC. AND SUBSIDIARIES
                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                             (amounts in thousands)

<TABLE>
<CAPTION>

                                            Balance at         Charged to                           Balance at
                                             Beginning         Costs and                                End
                                             of Period          Expenses          Write-offs         of Period
                                          ----------------    -------------     ---------------    --------------
<S>                                       <C>                 <C>               <C>                <C>
Allowance for doubtful accounts
and sales returns
Year ended February 29,2000                    6,299             1,251             (5,675)             1,875
Year ended February 28,1999                    2,099             6,940             (2,740)             6,299
Year ended February 28,1998                    1,235             1,517              (653)              2,099
</TABLE>

                                       S-2