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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



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

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

OR



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

FOR THE TRANSITION PERIOD FROM _______________ TO _______________ .

COMMISSION FILE NUMBER: 000-29059
ELOQUENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|DELAWARE                                                       |  | 94-3221868                       
|(STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) |  | (IRS EMPLOYER
IDENTIFICATION NO.)

2000 ALAMEDA DE LAS PULGAS, SUITE 100
SAN MATEO, CALIFORNIA 94403
(650) 294-6500

(Address, Including Zip Code, and Telephone Number, Including Area Code, of the
Registrants Principal Executive Offices)

Indicate by check mark whether the registrant (1) has filed all reports
required 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. [X] Yes  [   ] No

The number of outstanding shares of the registrants Common Stock, $0.001 par
value, was 19,342,112 at April 30, 2002.

1



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TABLE OF CONTENTS



|                              |                                                                                               |                                                      |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ---------------------------------------------------- |  |  |  |  |  | 
|PART I: FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONDENSED CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS                           
|PART II: OTHER INFORMATION   
|                              | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                              | ITEM 5. OTHER INFORMATION                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.                                                    



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ELOQUENT, INC.

INDEX

|                              |  |                                                                                                    |      |   
|----------------------------- |  | -------------------------------------------------------------------------------------------------- | ---- | --
|                              |  |                                                                                                    | PAGE
|                              |  |                                                                                                    |     
|PART I: FINANCIAL INFORMATION |  |                                                                                                   
|                             
|                             
|                             
|                             
|Item 1.                       |  | Financial Statements (Unaudited)                                                                   |      | 3 
|                             
|                             
|                             
|                             
|                              |  | Condensed Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001                   |      | 3 
|                             
|                             
|                             
|                             
|                              |  | Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2002 and 2001 |      | 4 
|                             
|                             
|                             
|                             
|                              |  | Condensed Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2002 and 2001 |      | 5 
|                             
|                             
|                             
|                             
|                              |  | Notes to Condensed Consolidated Financial Statements                                               |      | 6 
|                             
|                             
|                             
|                             
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations              |      | 12
|                             
|                             
|                             
|                             
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                         |      | 23
|                             
|                             
|                             
|                             
|PART II: OTHER INFORMATION    |  |                                                                                                   
|                             
|                             
|                             
|                             
|Item 2.                       |  | Changes in Securities and Use of Proceeds                                                          |      | 24
|                             
|                             
|                             
|                             
|Item 5.                       |  | Other Information                                                                                  |      | 24
|                             
|                             
|                             
|                             
|Item 6.                       |  | Exhibits and Reports on Form 8-K                                                                   |      | 24
|                             
|                             
|                             
|                             
|                             
|Signature                     |  | 25                                                                                                

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PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ELOQUENT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)

|                                                                                    |                                                                                            |                                            |          |        |           |  |              |        |        |  | 
|----------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------------------ | -------- | ------ | --------- |  | ------------ | ------ | ------ |  | 
|                                                                                    |                                                                                            |                                            |          |        | March 31, |  | December 31,
|                                                                                    |                                                                                            |                                            |          |        | 2002      |  | 2001        
|                                                                                    |                                                                                            |                                            |          |        |           |  |             
|ASSETS                                                                              |                                                                                            |                                            |          |        |           |  |              |       
|Current assets:                                                                     |                                                                                            |                                            |          |        |           |  |              |       
|                                                                                    | Cash and cash equivalents                                                                  |                                            | $        | 3,423  |           |  | $            | 5,744  |       
|                                                                                    | Short-term investments                                                                     |                                            |          | 13,317 |           |  |              | 14,686 |       
|                                                                                    | Restricted short-term investments                                                          |                                            |          | 975    |           |  |              | 975    |       
|                                                                                    | Accounts receivable, net of allowances for doubtful accounts
of $85 and $121, respectively |                                            |          | 164    |           |  |              | 184    |       
|                                                                                    | Prepaid expenses and deferred production costs                                             |                                            |          | 1,031  |           |  |              | 316    |       
|                                                                                    |                                                                                            |                                            |          |        |           |  |              |       
|                                                                                    |                                                                                            | Total current assets                       |          |        | 18,910    |  |              |        | 21,905 | 
|Property and equipment, net                                                         |                                                                                            |                                            | 1,609    |        |           |  | 1,944        |       
|Acquired technology, net of accumulated amortization of $373 and $249, respectively |                                                                                            |                                            | 1,119    |        |           |  | 1,243        |       
|Acquired patents, net of accumulated amortization of $31 and $21, respectively      |                                                                                            |                                            | 176      |        |           |  | 186          |       
|Goodwill                                                                            |                                                                                            |                                            | 3,230    |        |           |  | 3,230        |       
|Other assets                                                                        |                                                                                            |                                            | 661      |        |           |  | 667          |       
|                                                                                    |                                                                                            |                                            |          |        |           |  |              |       
|                                                                                    |                                                                                            | Total assets                               |          | $      | 25,705    |  |              | $      | 29,175 | 
|                                                                                    |                                                                                            |                                            |          |        |           |  |              |       
|LIABILITIES AND STOCKHOLDERS EQUITY                                                |                                                                                            |                                            |          |        |           |  |              |       
|Current liabilities:                                                                |                                                                                            |                                            |          |        |           |  |              |       
|                                                                                    | Accounts payable and other liabilities                                                     |                                            | $        | 4,105  |           |  | $            | 4,041  |       
|                                                                                    | Capital lease obligation                                                                   |                                            |          | 148    |           |  |              | 230    |       
|                                                                                    | Deferred revenue                                                                           |                                            |          | 897    |           |  |              | 640    |       
|                                                                                    |                                                                                            |                                            |          |        |           |  |              |       
|                                                                                    |                                                                                            | Total current liabilities                  |          |        | 5,150     |  |              |        | 4,911  | 
|Long-term liabilities                                                               |                                                                                            |                                            | 1,800    |        |           |  | 1,980        |       
|Stockholders equity:                                                               |                                                                                            |                                            |          |        |           |  |              |       
|Common stock, 19,346 and 19,345 shares outstanding, respectively                    |                                                                                            |                                            | 19       |        |           |  | 19           |       
|Additional paid-in capital                                                          |                                                                                            |                                            | 129,699  |        |           |  | 129,700      |       
|Treasury stock                                                                      |                                                                                            |                                            | (273     | )      |           |  | (273         | )     
|Notes receivable from employees                                                     |                                                                                            |                                            | (25      | )      |           |  | (100         | )     
|Unearned stock-based compensation                                                   |                                                                                            |                                            | (440     | )      |           |  | (641         | )     
|Other comprehensive income: unrealized gain (loss) on investments                   |                                                                                            |                                            | (10      | )      |           |  | 94           |       
|Accumulated deficit                                                                 |                                                                                            |                                            | (110,215 | )      |           |  | (106,515     | )     
|                                                                                    |                                                                                            |                                            |          |        |           |  |              |       
|                                                                                    |                                                                                            | Total stockholders equity                 |          |        | 18,755    |  |              |        | 22,284 | 
|                                                                                    |                                                                                            |                                            |          |        |           |  |              |       
|                                                                                    |                                                                                            | Total liabilities and stockholders equity |          | $      | 25,705    |  |              | $      | 29,175 | 
|                                                                                    |                                                                                            |                                            |          |        |           |  |              |       

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

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ELOQUENT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

|                                                              |                                                 |                                  |                          |      |                              |       |        |       |       |       | 
|------------------------------------------------------------- | ----------------------------------------------- | -------------------------------- | ------------------------ | ---- | ---------------------------- | ----- | ------ | ----- | ----- | ----- | 
|                                                              |                                                 |                                  |                          |      | Three Months Ended March 31,
|                                                              |                                                 |                                  |                          |      |                             
|                                                              |                                                 |                                  |                          |      | 2002                         |       | 2001  
|                                                              |                                                 |                                  |                          |      |                              |       |       
|Revenue:                                                      |                                                 |                                  |                          |      |                              |       |        |      
|                                                              | Software
licenses and hosting services          |                                  | $                        | 99   |                              |       | $      | 330   |      
|                                                              | Maintenance services                            |                                  |                          | 87   |                              |       |        | 197   |      
|                                                              | Professional services                           |                                  |                          | 217  |                              |       |        | 1,478 |      
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|                                                              |                                                 |                                  | Total revenue            |      |                              | 403   |        |       |       | 2,005 | 
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|Cost of revenue:                                              |                                                 |                                  |                          |      |                              |       |        |      
|                                                              | Software
licenses and hosting services          |                                  |                          | 29   |                              |       |        | 183   |      
|                                                              | Maintenance services                            |                                  |                          | 189  |                              |       |        | 184   |      
|                                                              | Professional services                           |                                  |                          | 535  |                              |       |        | 945   |      
|                                                              | Amortization of acquired technology and patents |                                  |                          | 134  |                              |       |        |      |      
|                                                              | Stock-based compensation                        |                                  |                          | (12  | )                            |       |        | (21   | )    
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|                                                              |                                                 |                                  | Total cost of revenue    |      |                              | 875   |        |       |       | 1,291 | 
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|                                                              | Gross margin                                    |                                  |                          | (472 | )                            |       |        | 714   |      
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|Operating expenses:                                           |                                                 |                                  |                          |      |                              |       |        |      
|                                                              | Research and development:                       |                                  |                          |      |                              |       |        |       |      
|                                                              |                                                 | Other research and development   |                          |      | 808                          |       |        |       | 1,559 |      
|                                                              |                                                 | Stock-based compensation         |                          |      | 21                           |       |        |       | 65    |      
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|                                                              |                                                 |                                  | 829                      |      |                              |       | 1,624  |      
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|                                                              | Sales and marketing:                            |                                  |                          |      |                              |       |        |       |      
|                                                              |                                                 | Other sales and marketing        |                          |      | 1,493                        |       |        |       | 2,287 |      
|                                                              |                                                 | Stock-based compensation         |                          |      | 16                           |       |        |       | 25    |      
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|                                                              |                                                 |                                  | 1,509                    |      |                              |       | 2,312  |      
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|                                                              | General and administrative:                     |                                  |                          |      |                              |       |        |       |      
|                                                              |                                                 | Other general and administrative |                          |      | 893                          |       |        |       | 1,094 |      
|                                                              |                                                 | Stock-based compensation         |                          |      | 174                          |       |        |       | 433   |      
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|                                                              |                                                 |                                  | 1,067                    |      |                              |       | 1,527  |      
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|                                                              |                                                 |                                  | Total operating expenses |      |                              | 3,405 |        |       |       | 5,463 | 
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|Loss from operations                                          |                                                 |                                  | (3,877                   | )    |                              |       | (4,749 | )    
|Interest expense                                              |                                                 |                                  | (5                       | )    |                              |       | (60    | )    
|Interest and other income                                     |                                                 |                                  | 182                      |      |                              |       | 603    |      
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|Net loss                                                      |                                                 | $                                | (3,700                   | )    |                              | $     | (4,206 | )    
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|Basic and diluted net loss per share                          |                                                 | $                                | (0.19                    | )    |                              | $     | (0.24  | )    
|                                                              |                                                 |                                  |                          |      |                              |       |        |      
|Shares used in computing basic and diluted net loss per share |                                                 |                                  | 19,263                   |      |                              |       | 17,793 |      
|                                                              |                                                 |                                  |                          |      |                              |       |        |      

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

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

|                                             |                                                                               |                                               |                                               |                                            |     |                    |        |        |     |        |        |  
|-------------------------------------------- | ----------------------------------------------------------------------------- | --------------------------------------------- | --------------------------------------------- | ------------------------------------------ | --- | ------------------ | ------ | ------ | --- | ------ | ------ | -
|                                             |                                                                               |                                               |                                               |                                            |     | Three Months Ended
|                                             |                                                                               |                                               |                                               |                                            |     | March 31,         
|                                             |                                                                               |                                               |                                               |                                            |     |                   
|                                             |                                                                               |                                               |                                               |                                            |     | 2002               |        | 2001  
|                                             |                                                                               |                                               |                                               |                                            |     |                    |        |       
|Cash flows from operating activities:        |                                                                               |                                               |                                               |                                            |     |                    |        |       
|                                             | Net loss                                                                      |                                               | $                                             | (3,700                                     | )   |                    | $      | (4,206 | )  
|                                             | Adjustments to reconcile net loss to net cash used in operating activities:   |                                               |                                               |                                            |     |                    |        |        |    
|                                             |                                                                               | Depreciation and amortization                 |                                               |                                            | 561 |                    |        |        | 457 |       
|                                             |                                                                               | Loss on equity investment  Rebop Media, Inc. |                                               |                                            |    |                    |        |        | 486 |       
|                                             |                                                                               | Amortization of stock-based compensation      |                                               |                                            | 199 |                    |        |        | 502 |       
|                                             |                                                                               | Changes in operating assets and liabilities:  |                                               |                                            |     |                    |        |        |     |       
|                                             |                                                                               |                                               | Accounts receivable, net                      |                                            |     | 20                 |        |        |     | 1,390  |       
|                                             |                                                                               |                                               | Prepaid expenses and deferred production cost |                                            |     | (715               | )      |        |     | (355   | )     
|                                             |                                                                               |                                               | Other assets                                  |                                            |     | 6                  |        |        |     | 4      |       
|                                             |                                                                               |                                               | Accounts payable and other liabilities        |                                            |     | 292                |        |        |     | (1,686 | )     
|                                             |                                                                               |                                               | Deferred revenue                              |                                            |     | 257                |        |        |     | (243   | )     
|                                             |                                                                               |                                               |                                               |                                            |     |                    |        |       
|                                             |                                                                               |                                               |                                               | Net cash used in operating activities      |     |                    | (3,080 | )      |     |        | (3,651 | )
|                                             |                                                                               |                                               |                                               |                                            |     |                    |        |       
|Cash flows from investing activities:        |                                                                               |                                               |                                               |                                            |     |                    |        |       
|                                             | Proceeds from sales and maturities of short-term investments                  |                                               |                                               | 1,265                                      |     |                    |        | 2,771  |    
|                                             | Acquisition of property and equipment                                         |                                               |                                               | (92                                        | )   |                    |        | (150   | )  
|                                             | Acquisition of Rebop, Inc., net of cash acquired                              |                                               |                                               | (408                                       | )   |                    |        |       |    
|                                             |                                                                               |                                               |                                               |                                            |     |                    |        |       
|                                             |                                                                               |                                               |                                               | Net cash provided by investment activities |     |                    | 765    |        |     |        | 2,621  |  
|                                             |                                                                               |                                               |                                               |                                            |     |                    |        |       
|Cash flows from financing activities:        |                                                                               |                                               |                                               |                                            |     |                    |        |       
|                                             | Proceeds from issuance of common stock, net of repurchases and offering costs |                                               |                                               | 1                                          |     |                    |        | (70    | )  
|                                             | Proceeds from repayment of notes receivable from employees                    |                                               |                                               | 75                                         |     |                    |        |       |    
|                                             | Payment of principal on capital lease financing                               |                                               |                                               | (82                                        | )   |                    |        | (268   | )  
|                                             |                                                                               |                                               |                                               |                                            |     |                    |        |       
|                                             |                                                                               |                                               |                                               | Net cash used in financing activities      |     |                    | (6     | )      |     |        | (338   | )
|                                             |                                                                               |                                               |                                               |                                            |     |                    |        |       
|Net decrease in cash and cash equivalents    |                                                                               |                                               | (2,321                                        | )                                          |     |                    | (1,368 | )     
|Cash and cash equivalents, beginning of year |                                                                               |                                               | 5,744                                         |                                            |     |                    | 4,519  |       
|                                             |                                                                               |                                               |                                               |                                            |     |                    |        |       
|Cash and cash equivalents, end of year       |                                                                               | $                                             | 3,423                                         |                                            |     | $                  | 3,151  |       
|                                             |                                                                               |                                               |                                               |                                            |     |                    |        |       

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

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ELOQUENT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

Note 1  The Company and Basis of Presentation

Eloquent, Inc. (Eloquent or the Company) provides sales effectiveness
solutions that enable our customers to increase the productivity of their sales
and marketing organizations, accelerate new product revenue and reduce product
launch expenses. Eloquents LaunchForce application enables production and
hosting of rich media product and sales content, personalized delivery of the
content and detailed measurement of the results. Rich media content involves
the combination of video, audio, graphics and text in a synchronized,
searchable and navigable format. LaunchForce delivers rich media content on
the Web via intranets or extranets or CD-ROMs. Eloquent LaunchForce services
include software development and system integration, video and rich media
content production and hosting. With LaunchForce, our customers, which are
primarily Fortune 1000 companies, roll out new product information to field
sales organizations and channel partners, monitor their audiences
understanding and adjust content when necessary to improve knowledge transfer.
Since our inception in March 1995, we have utilized our patented, rich media
technology to help companies improve their ability to deliver critical product
and sales information to globally dispersed audiences in a cost-effective and
timely manner and have produced content for more than 250 customers.

In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting only of normal
recurring items, necessary for their fair presentation in conformity with
accounting principles generally accepted in the United States. The results of
operations for the interim periods presented are not necessarily indicative of
the results for any future interim period or for the entire year. The
information included in this Form 10-Q should be read in conjunction with
Managements Discussion and Analysis and consolidated financial statements and
notes thereto included in our Annual Report on Form 10-K/A for the year ended
December 31, 2001.

The condensed consolidated financial statements include the accounts of the Company and its
subsidiary. All significant intercompany accounts and transactions have been
eliminated.

Certain amounts reported in the previous year have been reclassified to conform
to the current year presentation.

The preparation of unaudited condensed consolidated financial statements
requires management to make estimates and assumptions that affect the recorded
amounts reported in the unaudited condensed consolidated financial statements
and accompanying notes. A change in the facts and circumstances surrounding
these estimates could result in a change to the estimates and impact future
operating results.

The Company has incurred substantial losses and negative cash flows from operations in
every fiscal period since inception. For the quarter ended March 31, 2002, we
incurred a loss from operations of approximately $3.9 million and negative cash flows from
operations of $3.1 million. For the year ended December 31,
2001, we incurred a loss from operations of approximately $21.3 million and
negative cash flows from operations of $14.7 million. For the year ended
December 31, 2000, we incurred a loss from operations of approximately $35.5
million and negative cash flows from operations of $20.1 million. As of March
31, 2002 and December 31, 2001, we had accumulated deficits of approximately
$110.2 and $106.5 million, respectively. Management expects operating losses and
negative cash flows to continue for the foreseeable future. Failure to generate
sufficient revenues, raise additional funds through public or private
financings, or other arrangements, or reduce certain discretionary spending
could have a material adverse effect on our ability to achieve our intended
business objectives. There can be no assurance that such additional financings,
if needed, will be available on terms attractive to us, if at all. Our failure
to raise capital when needed could have a material adverse effect on our
business, financial condition and operating results. If additional funds are
raised through the issuance of equity securities, the percentage ownership of
our then-current, stockholders would be reduced. Furthermore, such equity
securities may have rights, preferences or privileges senior to those of our currently outstanding common
stock.

Recent Accounting Pronouncements

On January 1, 2002, the Company adopted Statement of Financial Accounting
Standards No. 144 (SFAS No. 144), Accounting for the Impairment or Disposal of Long-Lived Assets. This statement addresses financial accounting and reporting for the impairment
of long-lived assets. The adoption of SFAS No. 144 did not have an impact on the Companys consolidated results of operations
and financial position this quarter.

Note 2  Equity Transactions

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In May 2001, Eloquents Board of Directors authorized the repurchase of up to
250,000 shares of the Companys outstanding common stock. At March 31, 2002,
the Company had purchased 246,000 shares at an average price of $1.17 per
share. Shares repurchased under the program are being re-issued to satisfy
exercises of warrants, purchases under the employee stock purchase plan and exercises of
options issued under employee equity incentive plans.

Note 3  Net Loss per Share

Basic net loss per share is computed by dividing the net loss for the period by
the weighted average number of vested common shares outstanding during the
period. Diluted net loss per share is computed by dividing the net loss for the
period by the weighted average number of common and potential common shares
outstanding during the period. Potential common shares are composed of common
shares issuable upon conversion of convertible preferred stock (using the
if-converted method) and shares issuable upon the exercise of stock options and
warrants and are included in the diluted net loss per share to the extent that
they are dilutive.

The following table sets forth the computation of basic and diluted net loss
per share for the periods indicated (in thousands, except per share data):

|                                                                             |                                                     |   |                    |        |      |   |        |        |  
|---------------------------------------------------------------------------- | --------------------------------------------------- | - | ------------------ | ------ | ---- | - | ------ | ------ | -
|                                                                             |                                                     |   | Three Months Ended
|                                                                             |                                                     |   | March 31,         
|                                                                             |                                                     |   |                   
|                                                                             |                                                     |   | 2002               |        | 2001
|                                                                             |                                                     |   |                    |        |     
|Net loss                                                                     |                                                     | $ | (3,700             | )      |      | $ | (4,206 | )     
|                                                                             |                                                     |   |                    |        |      |   |        |       
|Weighted average common stock outstanding for basic and diluted
calculation: |                                                     |   |                    |        |      |   |        |       
|                                                                             | Weighted average common stock outstanding           |   |                    | 19,274 |      |   |        | 17,837 |  
|                                                                             | Weighted average common stock subject to repurchase |   |                    | (11    | )    |   |        | (44    | )
|                                                                             |                                                     |   |                    |        |      |   |        |       
|Weighted average common stock outstanding                                    |                                                     |   | 19,263             |        |      |   | 17,793 |       
|                                                                             |                                                     |   |                    |        |      |   |        |       
|Basic and diluted net loss per share                                         |                                                     | $ | (0.19              | )      |      | $ | (0.24  | )     
|                                                                             |                                                     |   |                    |        |      |   |        |       
|Antidilutive securities:                                                     |                                                     |   |                    |        |      |   |        |       
|                                                                             | Options to purchase common stock                    |   |                    | 3,960  |      |   |        | 4,494  |  
|                                                                             | Warrants                                            |   |                    | 159    |      |   |        | 309    |  
|                                                                             |                                                     |   |                    |        |      |   |        |       
|                                                                             |                                                     |   | 4,119              |        |      |   | 4,803  |       
|                                                                             |                                                     |   |                    |        |      |   |        |       

Note 4  Acquisition of Rebop Media, Inc.

During the summer of 2000, Eloquents management and Board of Directors
determined the need to either develop or acquire technology that would allow
Eloquent to offer live video-based Web conferencing as part of its business
communications solution. Eloquents management and Board of Directors evaluated
several potential companies with live technology as potential acquisitions
and also considered investing in a new company to be founded by Cliff Reid, an
officer, director and holder of more than 5% of Eloquents common stock. Given
the anticipated acquisition price of these companies and the Companys desire
to have a product designed to integrate seamlessly with its on-demand software,
the management and the Board determined that it was in the best interests of
Eloquent to invest in a new company rather than acquire an existing company.

In October 2000, Eloquent and Rebop Media, Inc. (Rebop), a recently-formed
live video-based Web conferencing company, entered into a strategic
relationship whereby Eloquent invested approximately $1.5 million in Rebop.
The investment was for Series A preferred stock and represented approximately
18% of Rebops capital stock, on an as-if converted basis. The investment was
accounted for using the equity method. However, because Eloquent bore
substantially all the economic risk of Rebops operations, Eloquent recorded
100% of Rebops operating losses of approximately $692,000, including
stock-based compensation charges of $206,000, as research and development
expense in the quarter ended March 31, 2001.

As part of this investment in Rebop, Eloquent obtained the right, subject to
Eloquents Board of Directors approval, to acquire Rebop at a later date if
Rebop successfully installed its product in three customer sites. The
acquisition of Rebop was to be by means of the issuance of a number of shares
of Eloquents common stock, the number to be determined through a formula based
on the market

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price of Eloquents common stock at the time of the acquisition.
Alternatively, at Eloquents option, Rebop could be acquired for $13.6 million
in cash.

Members of Eloquents Board of Directors believed that the formula would result
in a reasonable purchase price for Rebop in comparison to the anticipated
potential acquisition price for other companies with live technology. The
formula established an acquisition price that Eloquents Board of Directors
believed would yield a satisfactory return on investment. Further, as the value
of the transaction was limited to a maximum of $13.6 million, Eloquent
determined that the cost of hiring an outside advisor was disproportionately
large as compared to the size of the transaction.

Rebops Web conferencing solution, LaunchForce Live, is designed to integrate
with Eloquents LaunchForce on-demand software. As a result of the acquisition,
Eloquents customers are expected to benefit from a fully integrated live-to-on
demand sales effectiveness solution. Cliff Reid, Eloquents Chief Executive
Officer and a director and major stockholder, served as President and Chief
Executive Officer of Rebop.

In April 2001, following Rebops successful installation of its product in
three customer sites and with the unanimous approval of Eloquents Board (Dr.
Reid abstaining), Eloquent exercised its right to acquire Rebop. Given general
economic and stock market conditions existing at the time, including the market
price of Eloquents common stock, Eloquents Board of Directors determined that
the number of shares of Eloquent common stock to be issued in the acquisition
would have resulted in significant dilution to Eloquents existing
stockholders. Therefore, Eloquents Board of Directors, with Dr. Reid
abstaining, unanimously determined that it was in the best interests of
Eloquent to renegotiate the terms of the purchase agreement to reflect the
general decrease in the value of internet based companies between the time of
the initial investment and the time Eloquent exercised its right to acquire
Rebop. Because the purchase price had already been established in the original
acquisition agreement, the Board determined that it was in the best interests
of Eloquent and its stockholders to limit the dilution caused by the
acquisition by capping the number of shares of common stock to be issued in the
acquisition and to pay the remainder of the acquisition price in cash. The
maximum number of shares of common stock to be issued was based in part on the
market value of Rebop established by an analysis performed by the Companys
management. In performing its analysis regarding the fair value of Rebop, the
Companys management considered, among other things, the current high-tech
market, synergies arising from incorporation of Rebops technology into
existing Eloquent products and the future cash flows of those products.

On June 22, 2001, Eloquent agreed to acquire Rebop pursuant to a First Amended
and Restated Agreement and Plan of Merger by and among Rebop Acquisition Corp.,
a California corporation, Eloquent and Rebop.

In July 2001, Eloquent completed its acquisition of all the outstanding shares
of Rebop common stock and common stock options for approximately $3.8 million
in cash and 849,995 shares of common stock (including shares issuable on
exercise of stock options) valued at approximately $1.2 million and acquisition
costs of approximately $310,000. The source of the funds for the acquisition
was available cash reserves. The value of the common stock and options was
determined based on the average market price of Eloquents common stock over
the 5-day period before and after the terms of the acquisition were announced
in June 2001. The shares of Rebops series A preferred stock owned by Eloquent
were canceled as part of the transaction. At the closing of the acquisition on
July 5, 2001, 10% of the stock to be issued and cash to be paid to the former
shareholders of Rebop (including Dr. Reid) was placed in escrow to secure
certain indemnification obligations contained in the merger agreement. The
escrow terminated in January 2002 without Eloquent making any claims against
the escrow, resulting in the release of all cash and stock held.

The acquisition has been accounted for in accordance with SFAS No. 141,
Business Combinations. SFAS 141 requires the purchase method of accounting
for business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. Pro forma information reflecting the results of
Rebops operations for the periods prior to the acquisition of Rebop have not
been presented as Rebops operating results have historically been recognized
since the Companys original investment in Rebop.

The allocation of the purchase price to the assets acquired and liabilities
assumed based on the fair value of Rebop is as follows (in thousands):

|                                    |  |   |       |  
|----------------------------------- |  | - | ----- | -
|Tangible assets acquired            |  | $ | 238   |  
|Acquired technology                 |  |   | 1,492 |  
|Patents                             |  |   | 207   |  
|Goodwill                            |  |   | 3,230 |  
|In-process research and development |  |   | 283   |  
|Liabilities assumed                 |  |   | (77   | )
|                                    |  |   |       |  
|Total                               |  | $ | 5,373 |  
|                                    |  |   |       |  

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The excess of the purchase price of Rebop over the fair market value of the net
assets acquired resulted in the recognition of approximately $3.2 million of
goodwill.

Acquired technology of approximately $1.5 million is being amortized over a
three-year useful life. Patents of $207,000 are being amortized over a
five-year useful life. Amortization of intangible assets charged to operations
in the quarter ended March 31, 2002 and 2001 amounted to $134,000 and none,
respectively. The amortization of intangible assets charged to operations is
expected to be as follows: nine months remaining in 2002  $406,000, 2003 -
$540,000, 2004  $290,000, 2005  $40,000 and 2006  $19,000. Goodwill of $3.2
million is not expected to be tax deductible. The $283,000 attributable to
in-process research and development was expensed on the acquisition date in
accordance with FASB Interpretation No. 4, Applicability of FASB Statement No.
2 to Business Combinations Accounted for by the Purchase Method.

The Company adopted the provisions of SFAS
No. 142, Goodwill and Other Intangible Assets,
effective January 1, 2002. The provisions of SFAS
No. 142 (1) prohibit the amortization of goodwill and
indefinite-lived intangible assets, (2) require that goodwill
and indefinite-lived intangibles assets be tested at least annually
for impairment, and (3) require that reporting units be
identified for the purpose of assessing potential future impairments
of goodwill. The Company has determined it is one reporting unit for
the purpose of assessing potential future impairments of goodwill.
SFAS No. 142 requires that goodwill be tested for impairment
using a two-step process. The first step is to identify a potential
impairment and, in transition, this step must be measured as of the
beginning of the fiscal year. However, a company has six months from
the date of adoption to complete the first step. The Company expects
to complete that first step of the goodwill impairment test during
the second quarter of 2002. The second step of the goodwill
impairment test measures the amount of the impairment loss (measured
as of the beginning of the year of adoption), if any, and must be
completed by the end of the Company's fiscal year. Any impairment
loss resulting from the transitional impairment tests will be
reflected as the cumulative effect of a change in accounting principle
in the first quarter 2002. The Company has not yet determined what
effect these impairment tests will have on the Company's earnings and
financial position.

Note 5  Restructuring Activities

In December 2000, Eloquent announced a plan to restructure operations that
resulted in a charge totaling $4.0 million. The restructuring is intended to
better align Eloquent with future market opportunities brought about by its new
product introductions and to reduce cash expenditures prior to revenue growth.
Under the plan, Eloquent gave notice of termination in December 2000 to 80
employees and recorded approximately $1.4 million related to salary and
termination benefits and approximately $473,000 of stock-based compensation
expense for the amortization of the stock-based compensation charge over the
termination notice period related to stock options granted prior to Eloquents
initial public offering.

Eloquent is actively pursuing opportunities to reduce expenditures for office
space. The restructuring charge recorded in 2000 includes $1.8 million for
lease expense. This charge reflected payments required during lease termination
notice periods, estimates of lease payments prior to sub-letting space and
estimates of any rent differential between the contractual liability of
Eloquent and current market rates. In 2001, Eloquent recorded an additional
$2.3 million restructuring charge for lease expense as a result of
deteriorating real estate market conditions resulting in lower facility lease
rates than estimated for the initial restructuring charge. Leases included in
the restructuring charge have terms that expire through July 31, 2005.

In December 2000, Eloquent recorded a $2.5 million impairment charge to
write-off the carrying value of excess equipment and furniture, abandoned
leasehold improvements and certain software and technology assets. The excess
equipment and furniture and abandoned leasehold improvements are a result of
the termination of over 80 employees and consultants and consolidation of the
remaining employees in fewer leased facilities. Further, with its reduced
employee base, Eloquent re-evaluated its investments in various productivity
and market initiatives that relied on purchased software and technology and
concluded that it could not support these investments. Accordingly, Eloquent
abandoned these initiatives. The restructuring charge recorded in December 2000
includes $356,000 for the buy-out of capital leases related to impaired
equipment and elimination of maintenance contracts for impaired software.

Components of the accrued restructuring charges and changes in accrued amounts
related to the restructuring are as follows (in thousands):

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|                            |                              |   |              |        |              |   |               |      |                |   |                |     |   |   |       |        |   |   |       |        |  
|--------------------------- | ---------------------------- | - | ------------ | ------ | ------------ | - | ------------- | ---- | -------------- | - | -------------- | --- | - | - | ----- | ------ | - | - | ----- | ------ | -
|                            |                              |   |              |        |              |   | Non-cash      |      | Other Non-cash |   | Facilities and |     |   |   |      
|                            |                              |   | Reduction in |        | Stock-based  |   | Restructuring |      | Other Lease    |   |                |     |  
|                            |                              |   | Workforce    |        | Compensation |   | Costs         |      | Obligations    |   | Total         
|                            |                              |   |              |        |              |   |               |      |                |   |               
|                            | Initial charges              |   | $            | 1,425  |              |   | $             | 473  |                |   | $              | 79  |   |   | $     | 2,038  |   |   | $     | 4,015  |  
|                            | Cash payments and deductions |   |              | (143   | )            |   |               | (473 | )              |   |                | (79 | ) |   |       | (147   | ) |   |       | (842   | )
|                            |                              |   |              |        |              |   |               |      |                |   |                |     |   |   |       |        |   |   |       |       
|Balances, December 31, 2000 |                              | $ | 1,282        |        |              | $ |              |      |                | $ |               |     |   | $ | 1,891 |        |   | $ | 3,173 |       
|                            | Charges                      |   |              |       |              |   |               |     |                |   |                |    |   |   |       | 2,250  |   |   |       | 2,250  |  
|                            | Cash payments                |   |              | (1,282 | )            |   |               |     |                |   |                |    |   |   |       | (1,306 | ) |   |       | (2,588 | )
|                            |                              |   |              |        |              |   |               |      |                |   |                |     |   |   |       |        |   |   |       |       
|Balances, December 31, 2001 |                              | $ |              |        |              | $ |              |      |                | $ |               |     |   | $ | 2,835 |        |   | $ | 2,835 |       
|                            | Cash payments                |   |              |       |              |   |               |     |                |   |                |    |   |   |       | (246   | ) |   |       | (246   | )
|                            |                              |   |              |        |              |   |               |      |                |   |                |     |   |   |       |        |   |   |       |       
|Balances, March 31, 2002    |                              | $ |             |        |              | $ |              |      |                | $ |               |     |   | $ | 2,589 |        |   | $ | 2,589 |       
|                            |                              |   |              |        |              |   |               |      |                |   |                |     |   |   |       |        |   |   |       |       

At March 31, 2002, $789,000 or the restructuring accrual was recorded in
Accounts payable and other liabilities and $1.8 million was recorded in
Long-term liabilities.

Note 6  Commitments and Contingencies

Eloquent leases certain office facilities under non-cancelable operating lease
arrangements expiring between 2002 and 2005. These commitments primarily
represent office facilities vacated as part of our December 2000 restructuring
activities. However, as a result of our current restructuring activities
announced in April 2002, the Company now expects to utilize less office space.
Accordingly, we will relocate from our current corporate headquarters upon
expiration of its lease term in May 2002 to space that was deemed excess in
December 2000 but which the Company has been unable to sublet. At March 31,
2002, future minimum lease commitments under non-cancelable operating leases
are: nine months remaining in 2002  $823,000; 2003  $1.1 million; 2004  $1.1 million and 2005 
$582,000. We sublease one facility to a third party tenant. The future sublease
income under non-cancelable operating leases are: 2002  $128,000; 2003 
$192,000; 2004  $192,000 and 2005  $16,000.

Eloquent has entered into various technology
licensing agreements that allow it to
incorporate the licensed technology into its software products. Certain of the
agreements require royalty payments ranging from 1.5% to 2.5% of revenue
generated from products incorporating the licensed technology. Another
agreement requires royalty payments of less than $1,000 per license, after
payment of an initial licensing fee of $16,000. The remaining agreement
requires payment of fees ranging from approximately $2,000 to $13,000, per
central processing unit, depending on the version of the technology that is
incorporated in our product. The Company is not required to pay any
future minimum royalties under these agreements.

Beginning in July 2001, the Company and certain of our officers and directors
were named as defendants in several class action shareholder complaints filed
in the United States District Court for the Southern District of New York,
consolidated under the caption In re Eloquent, Inc. Initial Public Offering
Securities Litigation, Case No. 01-CV-6775. In these complaints, the plaintiffs
allege that the Company, certain of our officers and directors and the
underwriters of our initial public offering (IPO) violated the federal
securities laws because the our IPO registration statement and prospectus
contained untrue statements of material fact or omitted material facts
regarding the compensation to be received by, and the stock allocation
practices of, the IPO underwriters. The plaintiffs seek unspecified monetary
damages and other relief. Similar complaints were filed in the same Court
against hundreds of other public companies that conducted IPOs of their common
stock in the late 1990s (the IPO Lawsuits).

On August 8, 2001, the IPO Lawsuits were consolidated for pretrial purposes
before United States Judge Shira Scheindlin of the Southern District of New
York. Judge Scheindlin held an initial case management conference on September
7, 2001, at which time she ordered, among other things, that the time for all
defendants in the IPO Lawsuits to respond to any complaint be postponed until
further order of the Court. Thus, we have not been required to answer any of
the complaints, and no discovery has been served on us.

In accordance with Judge Scheindlins orders at further status conferences in
March and April 2002, the appointed lead plaintiffs counsel filed amended,
consolidated complaints in the IPO Lawsuits on April 19, 2002. However, Judge
Scheindlin does not expect any of the defendants to file motions to dismiss the
amended, consolidated complaints until at least summer of 2002. We believe
that this lawsuit is without merit and intend to defend against it vigorously.
In accordance with the ABA Statement, we express no opinion as to the ultimate
outcome of this matter

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Note 7  Subsequent Event

In April 2002, the Company announced that in response to continuing weak
economic conditions for software manufacturers it had implemented certain
restructuring activities and reduced the number of employees from approximately
80 to approximately 40. As a result of these activities the Company expects to
utilize less office space and furniture and equipment. Accordingly, the
Company will relocate from its current corporate headquarters upon expiration
of the lease term in May 2002 to space that was deemed excess in December 2000,
but which the Company has been unable to sublet. As a result of these
activities, Eloquent expects to record restructuring costs in the second
quarter of 2002 of approximately $600,000 related to employee termination
benefits. Additionally, a portion of the previously recorded restructuring
accrual related to the unused leased space that the Company now intends to
occupy is expected to be reversed. The amount is estimated to be approximately
$1.5 million. Further, the Company will record an impairment charge for any
furniture and equipment in excess of current needs as a result of the office
relocation and the employee terminations. The Company has not yet determined
the amount of the impairment charge.

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

This report on Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, which are subject to the safe harbor created by those
sections. These forward-looking statements involve risks and uncertainties and
relate to our future plans, objectives, beliefs, expectations and intentions.
These statements include, but are not limited to: statements related to
industry trends and future growth in the markets for rich media solutions for
sales effectiveness; our strategies for reducing the cost of our products; our
product development efforts; our future research and development; the timing of
our introduction of new products; the timing and extent of deployment of our
products by our customers; and future profitability. These statements may be
identified by the use of words such as expects, anticipates, believes,
intends, plans and similar expressions. Our actual results may differ
significantly from those projected in the forward-looking statements. Factors
that may cause future results to differ materially from those projected in the
forward-looking statements include, but are not limited to, those discussed in
Risk Factors and elsewhere in this report.

The following should be read in conjunction with
the audited consolidated financial
statements and the notes thereto and Managements Discussion and Analysis of
Financial Condition and Results of Operations included in our Annual Report on
Form 10-K/A for the year ended December 31, 2001.

OVERVIEW

We were incorporated in Delaware in March 1995. We provide sales effectiveness
solutions that enable customers to increase the productivity of their sales and
marketing organizations, accelerate new product revenues and reduce product
launch expenses. The LaunchForce application enables production and hosting of
rich media product and sales content, personalized delivery of the content and
detailed measurement of the results. Rich media content involves the
combination of video, audio, graphics and text in a synchronized, searchable
and navigable format. LaunchForce delivers rich media content on the Web via
intranets or extranets or CD-ROMs. LaunchForce services include software
development and system integration, video and rich media content production and
hosting.

EVOLUTION OF OUR PRODUCT OFFERINGS

In February 1996, we introduced the first version of our solutions platform,
which included the essential elements of content production and navigation,
including synchronized video, audio, graphics and text as well as searchable
transcripts, for delivery on CD-ROM. In following years, we enhanced our
content production to include such features as searchable slides, variable
speed playback and high-resolution video. In April 1998 we introduced hosting
services for content delivery and in January 1999, we launched our professional
services organization to provide professional media development services.

In July 1996, we introduced our application server software, which expanded
delivery of content production from CD-ROM to intranets. In November 1997 we
enhanced our server software by expanding delivery options to include Web-based
transmissions at 28.8 Kbps and tracking and reporting capabilities. In
following years, we further enhanced our application software enabling
customers to organize manage, secure, personalize and enrich all forms of
streaming content.

In May 2001, we introduced LaunchForce, a scalable enterprise software solution
designed to manage, measure and improve sales and field readiness to globally
distributed audiences. To support our enterprise software solution we offer
software development and system integration, video and rich media content
production and hosting services.

In November 2001, we announced FirstLaunch, a new offering of prepackaged
hardware, software and services aimed at those companies that have recurring
product launch needs. The FirstLaunch program consists of those components
required to ensure sales and field readiness, including LaunchForce software,
cameras and hardware for self-publishing, optional hosting services for the
software, and LaunchForce consulting services including training and sharing of
best practices. The FirstLaunch program enables companies to adopt LaunchForce
on a rental basis, with an option to purchase or to continue renting in the
future. As of March 31, 2002, we had not recorded any revenue related to our
FirstLaunch program.

Most of our revenue to date has been from
professional content production services. We
intend to increase sales of our enterprise software so that software license
revenue constitutes an increasing percentage of our revenue. The gross margin
attributable to software license

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revenue is higher than that of our professional services. We cannot
assure you that we will be able to increase the proportion of software license
revenue and, therefore, we cannot assure you that we will be able to
proportionally improve our gross margin.

ACQUISITION OF REBOP

On July 5, 2001, we acquired Rebop Media, Inc. (Rebop), a recently formed
live video-based Web conferencing company. Rebops live Web conferencing
solution is designed to integrate with our LaunchForce software. As a result of
the acquisition, our customers are expected to benefit from a fully integrated
live to on-demand sales effectiveness solution.

As consideration for the acquisition of Rebop, the former shareholders of
Rebop, including Clifford A. Reid, an officer, director and major stockholder
of Eloquent and Rebop, received an aggregate of 802,481 shares of Eloquent
common stock valued at approximately $1.1 million at the announcement date and
approximately $3.8 million in cash. In addition, the former Rebop option
holders received options to purchase an aggregate of 47,514 shares of Eloquent
common stock valued at approximately $100,000 at the announcement date.

The acquisition has been accounted for in accordance with Statement of
Financial Accounting Standards (SFAS) No. 141, Business Combinations which
requires the purchase method of accounting for business combinations initiated
after June 30, 2001. Approximately $1.5 million of the aggregate purchase price
was allocated to acquired technology and $207,000 was allocated to patents.
Approximately $283,000 of the aggregate purchase price represented in-process
technology that had not yet reached technological feasibility and had no
alternative future use, and accordingly, was charged to operations in the third
quarter of fiscal 2001. Goodwill of $3.2 million, which represents the excess
of the aggregate purchase price over the fair value of the tangible and
identifiable intangible assets acquired by Eloquent, has been accounted for in
accordance with the provisions of SFAS No. 142 Goodwill and Other Intangible Assets which
requires that goodwill acquired after June 30, 2001 not be amortized but be
tested at least annually for impairment.

USE OF ESTIMATES

The discussion and analysis of our financial condition and results of
operations is based upon our condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of condensed consolidated financial
statements in conformity with generally accepted accounting principles requires
us to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the condensed consolidated financial statements and the reported amounts of
revenue and expenses during the reporting period. A change in the facts and
circumstances surrounding these estimates could result in a change to the
estimates, including those related to uncollectible receivables, intangible
assets, income taxes, restructuring and other accrued liabilities, and
contingencies and litigation, and impact future operating results.

RECENT ACCOUNTING PRONOUNCEMENTS

On January 1, 2002, the Company adopted
SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. This statement addresses financial
accounting and reporting for the impairment of long-lived assets. The
adoption of SFAS No. 144 did not have an impact on the
Company's consolidated results of operations and financial position
this quarter.

OTHER MATTERS:

We have not achieved profitability on a quarterly or annual basis to date and
we may continue to incur net losses for the foreseeable future. As of March 31,
2002, we had an accumulated deficit of $110.2 million. In December 2000, we
announced a plan to restructure operations and gave notice of termination to 80
employees and consultants. In April 2002, we further announced that in response
to continuing weak economic conditions for software manufacturers we had
reduced the number of employees from approximately 80 to approximately 40.
This restructuring is intended to reduce cash expenditures prior to market
acceptance of our products and to continue to align us with future market
opportunities as we enhance our sales effectiveness solution. We expect to
increase our operating expenses commensurate with increases in revenue. If we
are not able to increase revenue, our business, financial condition, cash flows
and operating results would suffer.

RESULTS OF OPERATIONS

The following table sets forth certain statement of operations data for the
periods indicated as a percentage of total revenue.

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|                          |  |                                                 |                                  |                          |      |                              |      |      |    |     |     | 
|------------------------- |  | ----------------------------------------------- | -------------------------------- | ------------------------ | ---- | ---------------------------- | ---- | ---- | -- | --- | --- | 
|                          |  |                                                 |                                  |                          |      | Three Months Ended March 31,
|                          |  |                                                 |                                  |                          |      |                             
|                          |  |                                                 |                                  |                          |      | 2002                         |      | 2001
|                          |  |                                                 |                                  |                          |      |                              |      |     
|Revenue:                  |  |                                                 |                                  |                          |      |                              |      |     
|                          |  | Software
licenses and hosting services          |                                  |                          | 24   | %                            |      |      | 16 | %  
|                          |  | Maintenance services                            |                                  |                          | 22   |                              |      |      | 10 |    
|                          |  | Professional services                           |                                  |                          | 54   |                              |      |      | 74 |    
|                          |  |                                                 |                                  |                          |      |                              |      |     
|                          |  |                                                 |                                  | Total revenue            |      |                              | 100  |      |    |     | 100 | 
|                          |  |                                                 |                                  |                          |      |                              |      |     
|Cost of revenue:          |  |                                                 |                                  |                          |      |                              |      |     
|                          |  | Software
licenses and hosting services          |                                  |                          | 7    |                              |      |      | 9  |    
|                          |  | Maintenance services                            |                                  |                          | 47   |                              |      |      | 9  |    
|                          |  | Professional services                           |                                  |                          | 133  |                              |      |      | 47 |    
|                          |  | Amortization of acquired technology and
patents |                                  |                          | 33   |                              |      |      |   |    
|                          |  | Stock-based compensation                        |                                  |                          | (3   | )                            |      |      | (1 | )  
|                          |  |                                                 |                                  |                          |      |                              |      |     
|                          |  |                                                 |                                  | Total cost of revenue    |      |                              | 217  |      |    |     | 64  | 
|                          |  |                                                 |                                  |                          |      |                              |      |     
|                          |  | Gross margin                                    |                                  |                          | (117 | )                            |      |      | 36 |    
|                          |  |                                                 |                                  |                          |      |                              |      |     
|Operating expenses:       |  |                                                 |                                  |                          |      |                              |      |     
|                          |  | Research and development:                       |                                  |                          |      |                              |      |      |    |    
|                          |  |                                                 | Other research and development   |                          |      | 201                          |      |      |    | 78  |    
|                          |  |                                                 | Stock-based compensation         |                          |      | 5                            |      |      |    | 3   |    
|                          |  |                                                 |                                  |                          |      |                              |      |     
|                          |  |                                                 | 206                              |                          |      |                              | 81   |     
|                          |  |                                                 |                                  |                          |      |                              |      |     
|                          |  | Sales and marketing:                            |                                  |                          |      |                              |      |      |    |    
|                          |  |                                                 | Other sales and marketing        |                          |      | 370                          |      |      |    | 114 |    
|                          |  |                                                 | Stock-based compensation         |                          |      | 4                            |      |      |    | 1   |    
|                          |  |                                                 |                                  |                          |      |                              |      |     
|                          |  |                                                 | 374                              |                          |      |                              | 115  |     
|                          |  |                                                 |                                  |                          |      |                              |      |     
|                          |  | General and administrative:                     |                                  |                          |      |                              |      |      |    |    
|                          |  |                                                 | Other general and administrative |                          |      | 222                          |      |      |    | 55  |    
|                          |  |                                                 | Stock-based compensation         |                          |      | 43                           |      |      |    | 22  |    
|                          |  |                                                 |                                  |                          |      |                              |      |     
|                          |  |                                                 | 265                              |                          |      |                              | 77   |     
|                          |  |                                                 |                                  |                          |      |                              |      |     
|                          |  |                                                 |                                  | Total operating expenses |      |                              | 845  |      |    |     | 273 | 
|                          |  |                                                 |                                  |                          |      |                              |      |     
|Loss from operations      |  |                                                 | (962                             | )                        |      |                              | (237 | )   
|Interest expense          |  |                                                 | (1                               | )                        |      |                              | (3   | )   
|Interest and other income |  |                                                 | 45                               |                          |      |                              | 30   |     
|                          |  |                                                 |                                  |                          |      |                              |      |     
|
|Net loss                  |  |                                                 | (918                             | )%                       |      |                              | (210 | )%  
|                          |  |                                                 |                                  |                          |      |                              |      |     

THREE MONTHS ENDED MARCH 31, 2002 AND 2001

Revenue. Total revenue decreased to $403,000 for the three months ended March
31, 2002 from $2.0 million for the same period in 2001. The decrease in revenue
is attributable to a decrease in the number and average size of sales of our
products and services. The decline in revenue is reflective of difficult
global economic conditions and the transition of our product focus to
LaunchForce, an enterprise software, sales effectiveness solution, from the
production of rich media events. We believe that cost-cutting efforts by
customers is resulting in reduced capital expenditure budgets thereby delaying
purchasing decisions. Assuming no improvement in the current economic climate,
we anticipate that customers will continue to review their expenditures and may
eliminate or defer those projects and purchases determined to be non-critical.
We believe that while the impact of the slowing economy has reduced our
customers capital expenditure budgets, it has also increased the need for
effective global product launches that do not rely on travel. LaunchForce is
designed to meet this need. Therefore, to encourage companies to adopt
LaunchForce, we introduced a program called

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FirstLaunch, which is tailored to fit into existing marketing budgets. This
will enable companies with limited capital budgets to adopt Eloquent
LaunchForce on a rental basis, with an option to purchase or to continue
renting in the future.

A limited number of large customers have accounted for a majority of our
revenue, and will continue to do so for the foreseeable future. Four customers,
Compaq Computer Corporation, BTGN Company LLC, FileNET Corporation, and
KLA-Tencor Corporation, each accounted for more than 10% of our total revenue
for the three months ended March 31, 2002 and one customer, Compaq Computer
Corporation, accounted for more than 10% of our total revenue for the same
period in 2001. To date, most of our customers have been in the
telecommunications, software, high-technology manufacturing, financial services
and pharmaceuticals industries.

Software licenses and hosting services. Revenue
from software licenses and hosting services decreased to $99,000 for
the three months ended March 31, 2002 from $330,000 for the same
period in 2001. The decrease reflects fewer sales of our software and
reduced hosting revenue as we transition from hosting content to
hosting our enterprise software.

Maintenance services. Revenue from maintenance
services decreased to $87,000 for the three months ended
March 31, 2002 from $197,000 for the same period in 2001. The
decrease was due to fewer maintenance renewals from our customers.

Professional services. Professional services revenue
decreased to $217,000 for the three months ended March 31, 2002
from $1.5 million for the same period in 2001. The number of
professional services engagements, including the production of rich
media events, decreased to 8 from 72 for the comparable periods in
2002 and 2001 due to the shift in our focus to software license
revenue and away from the production of rich media events.

Cost of revenue. Cost of revenue consists primarily
of software licenses and hosting costs, maintenance costs and
professional services costs, including content production costs. Cost
of software licenses and hosting consists of personnel and related
expenses, royalty payments due to the owners of licensed third-party
software and costs associated with utilizing AT&T Hosting
Services facilities. Cost of maintenance services consists of
customer support personnel and related expenses. Cost of professional
services consists of direct labor costs associated with providing
professional services and related expenses, which are deferred until
revenue is recognized, at which time they are expensed as cost of
revenue. The amortization of acquired technology and patents in the
current period reflects the amortization of assets recorded upon
acquisition of Rebop in July 2001.

Software licenses and hosting services. Cost of
software licenses and hosting services was $29,000 in the three
months ended March 31, 2002 compared with $183,000 for the same
period in 2001. The decrease in expense was primarily due to reduced
personnel expenses and related facilities and infrastructure and
support charges.

Maintenance services. Cost of maintenance services
was $189,000 in the three months ended March 31, 2002 compared
to $184,000 for the same period in 2001 reflecting consistent
headcount.

Professional services. Cost of professional
services was $535,000 for the three months ended March 31, 2002
compared to $945,000 for the three months ended March 31, 2001.
The decrease in expense was primarily due to reduced personnel
expenses and related facilities and infrastructure and support
charges.

Operating expenses. For the three months ended March 31, 2002, operating
expenses were $3.4 million compared to $5.5 million for the three months ended
March 31, 2001. Without the effect of stock-based compensation charges,
operating expenses for the three months ended March 31, 2002 and 2001 would
have been $3.2 million and $4.9 million, respectively.

Other research and development. Research and development expenses consist
primarily of personnel expenses associated with software development. Research
and development expenses were $808,000 for the three months ended March 31,
2002 compared to $1.6 million for the three months ended March 31, 2001.
Approximately 65% of the reduction in expenses reflected the expenses

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incurred by Rebop in the first quarter of 2001, which due to certain accounting
requirements, were required to be included in our operating results prior to
the acquisition.

Other sales and marketing. Sales and marketing expenses consist primarily of
personnel expenses associated with the sale of our products and services and
personnel and marketing materials and expenses associated with the marketing of
our products and services. Sales and marketing expenses were $1.5 million for
the three months ended March 31, 2002 compared to $2.3 million for the three
months ended March 31, 2001. The decrease in expense was primarily due to
reduced incentive expenses related to reduced revenue and reduced temporary
employee expenses and related facilities and infrastructure and support
charges.

Other general and administrative. General and administrative expenses consist
primarily of administrative personnel expenses, professional fees and
facilities costs. General and administrative expenses were $893,000 for the
three months ended March 31, 2002 compared to $1.1 million for the three months
ended March 31, 2001. The decrease was primarily due to reduced temporary
employee expenses and recruiting and other professional services fees.

Stock-based compensation expense. Stock-based compensation expense consists
primarily of charges related to the difference between employee option exercise
prices and deemed fair market values on the date of grant amortized over the
vesting period of the options. Stock-based compensation expense was $199,000
for the three months ended March 31, 2002 compared to $502,000 for the three
months ended March 31, 2001. The decrease in expense was due to the reversal of
amortized stock-based compensation expense related to cancellations, due to
employee terminations, of unvested stock options previously granted.
Stock-based compensation charges are presented within the relevant functional
expenses and are being amortized using an accelerated method of amortization as
described in Financial Accounting Standards Board Interpretation No. 28, over
the vesting periods of the options, generally four to five years.

Interest expense. Interest expense was $5,000 for the three
months ended March 31, 2002 and $60,000 for the three months ended March 31,
2001. Interest expense for both periods consists primarily of interest paid for capital leases.

Interest income and other income. Interest income and other income consists
primarily of interest earnings on our cash, cash equivalents and short-term
investments. Interest income and other income was $182,000 for the three months
ended March 31, 2002 compared to $603,000 for the three months ended March 31,
2001. This decrease was due to lower average cash balances and declining
interest rates.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have financed our operations through private sales of
preferred stock, our initial public offering of common stock and, to a lesser
extent, borrowings under lines of credit. Net proceeds from our initial public
offering of common stock were approximately $75.4 million. At March 31, 2002,
we had approximately $17.7 million of cash equivalents and short-term
investments, including restricted amounts.

Net cash used in operating activities was $3.1 million for the three months
ended March 31, 2002 and $3.7 million for the three months ended March 31,
2001. Net cash used in operating activities in 2002 was primarily attributable
to net losses and a reduction in deferred production costs. Net cash used in
operating activities in 2001 was primarily attributable to net losses and a
reduction in accounts payable and accrued liabilities as compensation expense
and benefits that were accrued in the fourth quarter of 2000 as a result of the
restructuring, were paid. This was partially offset by a reduction in accounts
receivable as we actively pursued collections of accounts receivable.

Net cash provided by investing activities was $765,000 in the three months
ended March 31, 2002 and
$2.6 million for the three months ended March 31, 2001. Net cash provided by
investing activities during 2002 was primarily generated by the maturities of
short-term marketable securities and partially offset by payment of funds held
in escrow related to the acquisition of Rebop. Net cash provided by investing
activities in 2001 was primarily related to maturities of short-term marketable
securities.

Net cash used in financing activities was $6,000 for the three months ended
March 31, 2002 and
$338,000 for the three months ended March 31, 2001. Net cash used in financing
activities in 2002 and 2001 resulted primarily from principal payments on our
capital leases.

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We have incurred substantial losses and negative cash flows from operations in
every fiscal period since inception. For the quarter ended March 31, 2002, we
incurred a loss from operations of approximately $3.9 million and negative cash flows from
operations of $3.1 million. For the year ended December 31,
2001, we incurred a loss from operations of approximately $21.3 million and
negative cash flows from operations of $14.7 million. For the year ended
December 31, 2000, we incurred a loss from operations of approximately $35.5
million and negative cash flows from operations of $20.1 million. As of March
31, 2002 and December 31, 2001, we had accumulated deficits of approximately
$110.2 and $106.5 million, respectively. We expect operating losses and
negative cash flows to continue for the foreseeable future. Failure to generate
sufficient revenues, raise additional funds through public or private
financings, or other arrangements, or reduce certain discretionary spending
could have a material adverse effect on our ability to achieve our intended
business objectives. There can be no assurance that such additional financings,
if needed, will be available on terms attractive to us, if at all. Our failure
to raise capital when needed could have a material adverse effect on our
business, financial condition and operating results. If additional funds are
raised through the issuance of equity securities, the percentage ownership in
the Company of our then-current, stockholders would be reduced. Furthermore,
such equity securities may have rights, preferences or privileges senior to
those of our currently outstanding common stock.

We lease certain office facilities under non-cancelable operating lease
arrangements expiring between 2002 and 2005. These commitments primarily
represent office facilities vacated as part of our December 2000 restructuring
activities. However, as a result of our current restructuring activities
announced in April 2002, we now expect to utilize less office space.
Accordingly, we will relocate from our current corporate headquarters upon
expiration of its lease term in May 2002 to space that was deemed excess in
December 2000 but which the Company has been unable to sublet. At March 31,
2002, future minimum lease commitments under non-cancelable operating leases
are: nine months remaining in 2002  $823,000; 2003  $1.1 million; 2004  $1.1 million and 2005 
$582,000. We sublease one facility to a third party tenant. The future sublease
income under non-cancelable operating leases are: 2002  $128,000; 2003 
$192,000; 2004  $192,000 and 2005  $16,000.

We have entered into various technology licensing agreements that allow us to
incorporate the licensed technology into our software products. Certain of the
agreements require royalty payments ranging from 1.5% to 2.5% of revenue
generated from products incorporating the licensed technology. Another
agreement requires royalty payments of less than $1,000 per license, after
payment of an initial licensing fee of $16,000. The remaining agreement
requires payment of fees ranging from approximately $2,000 to $13,000, per
central processing unit, depending on the version of the technology that is
incorporated in our product.

Beginning in July 2001, the Company and certain of our officers and directors
were named as defendants in several class action shareholder complaints filed
in the United States District Court for the Southern District of New York. In
each of these complaints, the plaintiffs allege that the Company, certain of
our officers and directors and our IPO underwriters violated the federal
securities laws because our IPO registration statement and prospectus contained
untrue statements of material fact or omitted material facts regarding the
compensation to be received by, and the stock allocation practices of, the IPO
underwriters. The plaintiffs seek unspecified monetary damages and other
relief. We believe that these lawsuits are without merit and intend to defend
against them vigorously. However, an adverse decision could have a material
adverse effect on our business, results of operations, cash flows or
consolidated financial position.

RISK FACTORS

Our business, financial condition or operating results could be seriously
harmed by any of the following risks. In addition, the trading price of our
common stock could decline due to any of the following risks, and you may lose
all or part of your investment.

RISKS RELATED TO OUR BUSINESS

We compete in new and rapidly evolving technology and Web-related markets, we
need to manage product transitions and to develop new product features in order
to succeed.

Our future success depends in part on our ability to manage the product
transition from focusing on providing rich media content production services to
providing our sales readiness enabling solution, LaunchForce. Managing this
transition and marketing LaunchForce requires us to present a compelling value
proposition to our potential customers. Therefore, we must do the following:



| |  |  | identify new applications for our existing products;
| | - |  | ----------------------------------------------------

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| |  |  | anticipate the features and functionality that will reduce out
customers costs as well the time from customer product introduction to
first revenue;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | incorporate those features and functionality into products that can be easily deployed;                                                              
|
| |  |  | communicate and demonstrate the operational impact of the features and functionality; and                                                            
|
| |  |  | price our products competitively and offer flexible licensing models.                                                                                

If we are not successful in achieving these objectives on a long-term basis,
our business, financial condition and operating results will suffer.

We expect to continue to incur losses, and as a result we may not achieve
profitability.

We have not achieved profitability on a quarterly or annual basis to date and
we anticipate that we will continue to incur net losses for the foreseeable
future. Our failure to achieve profitability could deplete our current capital
resources and reduce our ability to raise additional capital. We incurred a net
loss of approximately $3.7 million in the quarter ended March 31, 2002 compared
to $4.2 million in the quarter ended March 31, 2001. We incurred a net loss of
approximately $20.4 million in the year ended December 31, 2001. As of March
31, 2002, we had an accumulated deficit of approximately $110.2 million. In
December 2000, we announced a plan to restructure operations. The plan is
intended to better align us with future market opportunities brought about by
our new product introductions and to reduce cash expenditures prior to revenue
growth. In 2001, we recorded additional restructuring expense relating to
various office leases as part of our December 2000 restructuring plan. In April
2002, we announced that in response to continuing weak economic conditions for
software manufacturers, we had reduced the number of employees from
approximately 80 to approximately 40. As a result we expect to utilize less
office space and will relocate from our current corporate headquarters, upon
expiration of its lease term in May 2002, to space that was deemed excess in
December 2000 but which we have been unable to sublet. Although we have
initiated actions to reduce cash expenditures and expenses, there can be no
assurance that the reduction in our cash expenditures will cause our existing
cash balance to last until we are successful in generating additional revenue
or achieving profitability, if we are able to do so at all.

Our quarterly operating results are subject to significant fluctuations, and an
unanticipated decline in revenue may cause our stock price to fall.

In some future quarter, our operating results may be below the expectations of
public market analysts and investors, which may cause the price of our common
stock to fall. The factors that may cause our quarterly operating results to
fall short of expectations include:



| |  |  | delays of customer orders, which could prevent us from recognizing revenue until later quarters;                                                                                                              
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | seasonal trends in sales of our solutions, which could result in lower quarterly revenue in the fourth quarter;                                                                                               
|
| |  |  | downward pressure on prices paid by our customers, as a result of
competition or other factors, which could reduce our quarterly revenue
even if we maintain or increase the number of sales;                 
|
| |  |  | new product and service introductions by our competitors, which could
cause our competitors to capture revenue that we otherwise could have
received;                                                         
|
| |  |  | increased costs incurred as we expand operations, increase our
marketing efforts or undertake other initiatives, which could reduce our
profit margin if not matched by a corresponding growth in revenue; and
|
| |  |  | technical difficulties or system downtime affecting the Web generally
or the operation of our network or servers, which could cause customer
dissatisfaction and reduce our revenue.                          

We have experienced and expect to continue to experience seasonality in our
business. Due to the marketing cycles of our customers, sales of our content
production services generally tend to be lower in the fourth calendar quarter
of each year. Because the market for

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enterprise software designed to improve sales and field readiness using the Web
is still new, additional seasonal and other patterns in the usage of our
products and services may emerge as the market matures.

Our quarterly operating results may fluctuate significantly in the future
because of a variety of factors, many of which are outside our control. As a
result, operating results for any particular quarter may not be indicative of
future operating results.

We depend on a limited number of large customers for a majority of our revenue,
so the loss of or delay in payment from one or a small number of customers
could have a large impact on our revenue and operating results.

If we were to lose a key customer, our business, financial condition and
operating results would suffer. In addition, if a key customer fails to pay
amounts it owes us, or does not pay those amounts on time, our revenue and
operating results would suffer. A limited number of large customers have
accounted for a majority of our revenue and will continue to do so for the
foreseeable future. For example, four customers, Compaq Computer Corporation,
BTGN Company LLC, FileNET Corporation, and KLA-Tencor Corporation, each
accounted for more than 10% of our total revenue for the three months ended
March 31, 2002. Due to our limited number of large customers, the cancellation
or delay of a customer order during a given quarter is likely to significantly
reduce revenue for the quarter.

The length of our sales cycle is uncertain and therefore could cause
significant variations in our operating results.

Because we are transitioning of our product focus to LaunchForce from the
production of rich media events, the length of our sales cycle  the time
between an initial customer contact and completing a sale  can be
unpredictable. The time between the date of our initial contact with a
potential new customer and the execution of a sales contract with that customer
generally ranges from less than two months to more than nine months, depending
on the significance of the financial terms of the arrangement, the relative
size of the customers installation of our solution, and other factors. Our
sales cycle is also subject to delays as a result of customer-specific factors
over which we have little or no control, including budgetary constraints and
internal acceptance procedures. During the sales cycle, we may expend
substantial sales and management resources without generating corresponding
revenue. Our expense levels are relatively fixed in the short term and are
based in part on our expectations of our future revenue. As a result, any delay
in our sales cycle could cause significant variations in our operating results,
particularly because a relatively small number of customer orders represents a
large portion of our revenue. The current slowdown, and potential recession, in
the US and international economies may cause our sales cycle to lengthen even
further. If this occurs, our orders and revenue may be adversely impacted.

We may not be able to build an effective sales organization, which would
prevent us from achieving the increased sales volume necessary for us to
achieve profitability.

In order to increase our revenue, we must build an effective sales
organization. If we do not do so, we will not be able to increase our sales
sufficiently to achieve profitability. In connection with our restructuring
activities, we have reduced the size of our sales organization. Our future
success will depend in part on our ability to recruit and retain, qualified
sales personnel and to train and motivate such personnel. In the past, we have
had difficulty recruiting, retaining and managing qualified sales personnel. We
cannot guarantee that we will not encounter similar difficulties in the future.
Competition for personnel, particularly in the San Francisco Bay Area, where we
are located, is intense. Many of the companies competing with us for qualified
sales personnel are larger and more established than we are and have greater
financial resources than we do. This may make it even more difficult for us to
recruit and retain such personnel.

Our operational history suggests that the level of sales we achieve is
generally determined by the number of sales personnel we employ. In 1998 and
early 1999, we suffered a significant decline in sales to customers in the
western United States primarily due to attrition in our West Coast sales force.
If we experience turnover in our sales force in the future, our business,
financial condition and operating results may suffer. Newly hired sales
personnel generally do not become fully productive until they have worked for
at least two quarters. Because of the time required to recruit new sales
personnel and for them to become fully productive, an unanticipated loss of
sales personnel could result in an under productive sales organization and
reduced sales for a significant period of time.

We depend on technology licensed from other companies. We may not be able to
renew these licenses as they expire from time to time, and we may not be able
to replace the licensed technology without significant expense or engineering
efforts, if at all.

Our desktop player software, which runs on an end users personal computer to
allow the user to view an event, and LaunchForce, include technologies that
other companies have licensed to us. If we are unable to maintain or renew
these licenses when they expire, we would be forced to remove these
technologies from our products and develop or license comparable technologies.
This could

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require additional license fees or extensive engineering efforts, or
significantly decrease our products functionality, either of which could harm
our business, financial condition and operating results.

In addition, we have developed our products to integrate well with the
Microsoft Windows NT operating system, the operating system used by most of our
customers to run our software. If the Windows NT operating system is changed by
Microsoft so that it no longer integrates well with our products, or if Windows
NT experiences technical problems, the operation of our software could be
impaired. In that event, our business, financial condition and operating
results could be harmed. Microsoft is not obligated to ensure that Windows NT
integrates well with our products.

We may be required to obtain licenses from third parties to refine, develop,
market and deliver new products. We may be unable to obtain any needed license
on commercially reasonable terms or at all and rights granted under any
licenses may not be valid and enforceable.

We operate in markets that will become increasingly competitive, which could
lead to decreasing prices and reduced profitability.

The market for sales effectiveness solutions is new and rapidly evolving. We
expect that competition will intensify. Increased competition could lead to
decreasing prices and profitability. We compete with companies that offer
components of a rich media business-to-business communications solution,
including:



| |  |  | providers of customer and partner relationship management software;                                              
| | - |  | -----------------------------------------------------------------------------------------------------------------
|
| |  |  | companies who help deliver product information to potential customers via personalized web sites;                
|
| |  |  | companies who help deliver product information to a sales force via groupware or a portal;                       
|
| |  |  | providers of rich media software tools;                                                                          
|
| |  |  | multimedia content production and delivery companies;                                                            
|
| |  |  | digital asset management and
similar companies which provide content management for objects including media;     
|
| |  |  | companies that provide web-based systems for live collaboration among a small audience; and                      
|
| |  |  | traditional business communications and learning solution companies that offer live meeting and seminar services.

In addition, our customers and potential customers represent a source of
competition to the extent they decide to develop in-house sales effectiveness
and field readiness solutions.

Many of our current and potential competitors have longer operating histories,
significantly greater financial, technical and marketing resources, greater
name recognition and larger existing customer bases than we do. These
competitors may also be able to undertake more extensive marketing campaigns
for their brands and services, adopt more aggressive pricing policies and make
more attractive offers to potential employees and partners. We may be unable to
compete successfully against current or future competitors, and competitive
pressures may cause our business to suffer.

We may not be able to adequately manage our anticipated growth, which could
impair our efficiency and negatively impact our operations.

We may not be able to manage our growth effectively, which could impair our
efficiency, reduce the quality of our solutions, impair further growth and harm
our business, financial condition and operating results. If we do not
effectively manage this growth, we will not be able to operate efficiently or
maintain the quality of our products. Either outcome would harm our operating
results. In the past, we have experienced rapid growth, and we plan to continue
to expand our operations. This expansion is expensive and places a significant
strain on our personnel and other resources. To manage our expanded operations
effectively, we will need to further improve our operational, financial and
management systems and successfully hire, train, motivate and manage our
employees.

We will depend on revenue from our hosting business, which will suffer if our
hosting equipment and software experience system failures.

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Our future success depends in part on our ability to successfully host our
software on behalf of our customers on our servers. Our ability to host our
software will depend on the efficient and uninterrupted operation of our
computer and communications hardware and software systems. We do not have fully
redundant hosting systems, a formal disaster recovery plan or alternative
providers of hosting services. We also may not have business interruption
insurance sufficient to compensate us for losses that may occur. All of our
hosting servers are located at AT&T Hosting Services (AT&T) facilities in
Redwood City, California. These systems and operations are vulnerable to damage
or interruption from earthquakes, floods, fires, power loss, telecommunication
failures or similar events. They are also subject to computer viruses,
break-ins, sabotage, intentional acts of vandalism and similar misconduct.
Despite any precautions we may take, the occurrence of a natural disaster or
other unanticipated problems at the AT&T facility could result in interruptions
in our hosting service. In addition, the failure by AT&T to provide the data
communications capacity that we require could result in interruptions in our
hosting service. Any damage to or failure of our hosting systems could result
in interruptions in our hosting service. System interruptions will reduce our
revenue and profits, and our future revenue and profits will be harmed if our
customers believe that our hosting system is unreliable.

Potential errors in our software could harm our reputation and reduce our sales
and profitability.

Software defects discovered after we release our software could result in loss
of revenue, delays in market acceptance and harm to our reputation. Any product
liability claim against us, if successful and of sufficient magnitude, could
harm our profitability and future sales. Our software has in the past
contained, and may in the future contain, bugs or errors. Although we
typically design our customer license agreements to contain provisions that
limit our exposure to potential product liability claims, we cannot guarantee
that contractual limitations of liability would be enforceable or would
otherwise protect us from liability for damages to a customer resulting from a
defect in our software. Even though we maintain insurance that covers damages
arising from the implementation and use of our software, we cannot assure you
that our insurance would cover or be sufficient to cover any product liability
claims against us.

We have in the past experienced returns of our products, and as our business
grows we may experience increased returns, which could harm our reputation and
negatively impact our operating results.

In the past, some of our customers have returned our rich media events to us
because they felt that modifications were required for the product to meet
project specifications and the customers requirements. It is likely that we
will experience some level of returns in the future and the amount of returns
may increase despite our efforts to minimize returns. Also, returns may
adversely affect our relationship with affected customers and may harm our
reputation. This could cause us to lose potential customers and business in the
future.

The failure to protect our intellectual property may impair our competitive
position.

Our copyrights, service marks, trademarks, trade secrets, proprietary
technology and similar intellectual property are critical to our success. If we
are unable to adequately protect our rights from infringement by competitors or
others, or from misuse by our licensees, the competitive advantage that our
rights provide will be weakened.

We rely on trademark and copyright law, trade secret protection and
confidentiality and license agreements with our employees and independent
contractors to protect our proprietary rights. We strategically pursue the
registration of trademarks and service marks in the United States and abroad.
Effective trademark, service mark, copyright and trade secret protection may
not be available in every country in which our products and services are made
available.

We have licensed in the past, and expect to license in the future, certain of
our proprietary rights to third parties. The steps taken by us to protect our
proprietary rights may not be adequate. Although we attempt to ensure that the
quality of our brand is maintained by these licensees, licensees may take
actions that may harm the value of our proprietary rights or reputation.

We may become subject to intellectual property litigation in the future that
could cause us to incur significant expense and could require us to alter our
products.

We may be subject to legal proceedings and claims associated with our
intellectual property from time to time in the future. These claims, even if
without merit, could cause us to expend significant financial and managerial
resources. Further, if these claims are successful, we may be required to
change our trademarks, alter our copyrighted material or pay financial damages,
any of which could harm our business. Third parties may infringe or
misappropriate our copyrights, trademarks or similar proprietary rights in the
future.

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In such event, we may be forced to pursue infringement claims against such
third parties. These claims also could cause us to expend significant financial
and managerial resources.

RISKS RELATED TO THE INTERNET

Our future success depends on continued growth in use of the worldwide web for
business communications.

Our business could suffer if Web usage does not continue to grow. Web usage may
be inhibited for a number of reasons, including:



| |  |  | inadequate network infrastructure;                                
| | - |  | ------------------------------------------------------------------
|
| |  |  | security concerns;                                                
|
| |  |  | inconsistent quality of service;                                  
|
| |  |  | lack of availability of cost-effective and high-speed service; and
|
| |  |  | changes in government regulation of the Web.                      

If Web usage grows, the Web infrastructure may not be able to support the
demands placed on it by this growth, or its performance and reliability may
decline. In addition, future outages and other interruptions occurring
throughout the Web could lead to decreased use of our products and would
therefore harm our business.

If we are unable to keep up with the rapid technological changes that
characterize the web, our business would suffer.

Our future success will depend on our ability to continually improve our
solutions. To do so, we will need to continually enhance our solutions in
response to the rapid technological developments, evolving industry standards
and user demands, and frequent new product introductions and enhancements that
characterize the market for Web products and services. In the event new
multimedia enabling technologies are developed and widely adopted, we may be
required to make fundamental and costly changes in our technology. We may not
be able to make these enhancements or changes in a cost-effective manner fast
enough to keep up with our competitors or at all. In this event, our business
would suffer.

RISKS RELATED TO OUR COMMON STOCK

Our stock price has been extremely volatile in the past and is likely to be
extremely volatile in the future, which could cause you to lose all or a part
of your investment and may result in costly and distracting securities
litigation.

The market price of our common stock has been volatile in the past and is
likely to be extremely volatile in the future. In the past, following periods
of volatility in the market price of a companys securities, securities class
action litigation has often been instituted against such a company. Securities
litigation could result in substantial costs and a diversion of our
managements attention and resources. The stocks of Web-related and technology
companies like ours have experienced extreme price and volume fluctuations in
recent months, many of which appear unrelated to the companies business,
financial condition or operating results. Although the market price of our
stock will in part be based on our business, financial condition and operating
results, we expect that it will also be affected to a significant degree by
these market-wide and industry-wide price and volume fluctuations.

Our common stock will likely be delisted from the Nasdaq National Market. Our
stock may be listed on the Nasdaq SmallCap Market or, if we fail to meet or
maintain the listing requirements of that market, may be traded on the OTC
Bulletin Board. In either event, as a result, trading in our common stock may
become more difficult, fewer investors may be willing to purchase our common
stock and our stock price may decline.

The Nasdaq National Market has notified us of its intention to delist our
common stock on or after May 15, 2002 due to the fact our common stock has
traded below $1.00 since January 2, 2002, which is below the minimum bid price
requirement of the Nasdaq National Market. As a result, we have applied to have
our common stock listed on the Nasdaq SmallCap Market. If our application is
granted, Nasdaq has informed us that we must maintain a minimum closing bid
price of $1.00 for 10 consecutive trading days before August 13, 2002 and meet other minimum continued listing
requirements. If we are unable to maintain the minimum closing bid price by
that date but are able to

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maintain a minimum market value of our public float of $5 million and a
stockholders equity minimum of $10 million, we will have until February 10,
2003 to meet the minimum bid price requirement. As of March 31, 2002, the
market value of our public float was approximately $5.7 million and our
stockholders equity was $18.8 million. There can be no assurance that we will
be able to meet these requirements as of August 13, 2002. If we fail to comply
with these requirements within the required period of time or if our
application to have our common stock listed on the Nasdaq SmallCap Market is
denied, our common stock will be traded on the OTC Bulletin Board.

Our common stock price may decline as a result of he listing of our common
stock on the Nasdaq SmallCap Market or the OTC Bulletin Board. Both markets
are seen as less prestigious and less efficient, making it more difficult to
trade in our common stock. The liquidity of our common stock may then be
adversely impacted. Certain analysts may no longer provide research coverage
of Eloquent, making it more difficult for investors to keep apprised of our
corporate developments. In addition, our stock could potentially be subject to
what are known as the penny stock rules, which place additional requirements
on broker-dealers who sell or make a market in such securities. Consequently,
the ability or willingness of broker-dealers to sell or make a market in our
common stock may decline. Further, our ability to raise additional capital
through the issuance of stock could be seriously impaired because investors,
including many institutional investors, may be unwilling or unable to purchase
shares of our common stock.

Our directors and executive officers own a significant portion of our common
stock, which enables them to control matters decided by the stockholder.

Our directors and executive officers and their affiliates beneficially own a
significant portion of our common stock. As a result of their beneficial
ownership, our directors and executive officers, acting alone or with others,
are able to control most matters requiring stockholder approval, including the
election of directors and approval of significant transactions. This
concentration of ownership may also have the effect of delaying or preventing a
change in control of Eloquent. This could prevent our stockholders from
realizing a premium over the market price for their shares or from bringing
about a change in management.

ADDITIONAL DISCUSSION OF THESE AND OTHER RISK FACTORS IS DISCLOSED IN OUR
ANNUAL REPORT ON FORM 10-K/A FOR THE YEAR ENDED DECEMBER 31, 2001, FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

The primary objective of our investment activities is to preserve principal
while at the same time maximizing yields without significantly increasing risk.
To achieve this objective, we maintain our portfolio of cash equivalents and
short-term investments in a variety of securities, including, certificates of
deposit, government securities and corporate and asset-backed bonds. The
majority of our investments are in short-term debt securities issued by
corporations. These securities are generally classified as short-term
investments.

We place our investments in high-quality issues with minimum quality ratings of
A1/P1 or A/A, depending on the rating organization. We limit the amount of
credit exposure to 10% at time of purchase for any one issuer, excluding U.S.
treasury securities or institutional money market funds.

Our exposure to market risk is thereby limited to interest income sensitivity,
which is affected by changes in the general level of U.S. interest rates. Our
investments are subject to interest rate risk, which will decline in value if
interest rates increase. Investments in both fixed rate and floating rate
interest earning instruments carry varying degrees of interest rate risk.
Fixed rate securities may have their fair market value adversely impacted due
to a rise in interest rates. In general, securities with longer maturities are
subject to greater interest rate risk than those with shorter maturities. While
floating rate securities generally are subject to less interest rate risk than
fixed rate securities, floating rate securities may produce less income than
expected if interest rates decrease. Due in part to these factors, our
investment income may fall short of expectations or we may suffer losses in
principal if securities are sold that have declined in market value due to
changes in interest rates.

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PART II: OTHER INFORMATION




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.




ITEM 5. OTHER INFORMATION




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

(a)  Exhibits

|         |  |                                                                                                                                                                                        
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit  |  |                                                                                                                                                                                        
|Number   |  | Description of Document                                                                                                                                                                
|         |  |                                                                                                                                                                                        
|3.03(1)  |  | Amended and Restated Certificate of Incorporation, as currently in effect.                                                                                                             
|        
|        
|        
|        
|3.04(1)  |  | Amended and Restated Bylaws, as currently in effect.                                                                                                                                   
|        
|        
|        
|        
|4.01(1)  |  | Form of Specimen Stock Certificate.                                                                                                                                                    
|        
|        
|        
|        
|4.02(1)  |  | Fourth Amended and Restated Investors Rights Agreement, dated October 20, 1999, among Eloquent and
certain investors named therein.                                                   
|        
|        
|        
|        
|4.03(1)  |  | Securities Purchase Agreement, dated October 20, 1999, by and among Eloquent and certain investors
named therein.                                                                      
|        
|        
|        
|        
|5.01(1)  |  | Opinion of Cooley Godward LLP regarding legality of the
securities being registered.                                                                                                   
|        
|        
|        
|        
|10.01(1) |  | Form of Indemnity Agreement entered into by Eloquent with each of its directors and executive officers.                                                                                
|        
|        
|        
|        
|10.02(1) |  | Equity Incentive Plan.                                                                                                                                                                 
|        
|        
|        
|        
|10.03(1) |  | Form of Stock Option Agreement under the Equity Incentive Plan.                                                                                                                        
|        
|        
|        
|        
|10.04(1) |  | 1997 Equity Incentive Plan.                                                                                                                                                            
|        
|        
|        
|        
|10.05(1) |  | Form of Stock Option Agreement under the 1997 Equity Incentive Plan.                                                                                                                   
|        
|        
|        
|        
|10.06(7) |  | 1999 Equity Incentive Plan, as amended.                                                                                                                                                
|        
|        
|        
|        
|10.07(1) |  | Form of Stock Option Agreement under the 1999 Equity Incentive Plan.                                                                                                                   
|        
|        
|        
|        
|10.08(1) |  | Form of Nonstatutory Stock Option Agreement for Non-Employee Director Grants under the 1999 Equity
Incentive Plan.                                                                     
|        
|        
|        
|        
|10.09(1) |  | 1999 Employee Stock Purchase Plan.                                                                                                                                                     
|        
|        
|        
|        
|10.10(1) |  | Form of 1999 Employee Stock Purchase Plan Offering.                                                                                                                                    
|        
|        
|        
|        
|10.11(1) |  | Employment Agreement, dated December 23, 1998, between Eloquent and Abraham Kleinfeld.                                                                                                 
|        
|        
|        
|        
|10.12(1) |  | Office Lease, dated November 19, 1996, between Eloquent and California Casualty Indemnity Exchange, as
amended.                                                                        
|        
|        
|        
|        
|10.13(1) |  | OEM Agreement, dated May 30, 1997, between Eloquent and Verity, Inc.                                                                                                                   
|        
|        
|        
|        
|10.14(1) |  | Software License Agreement, dated June 30, 1997, between Eloquent and Voxware, Inc.                                                                                                    
|        
|        
|        
|        
|10.15(8) |  | Master Agreement, dated June 22, 2001, between Eloquent and AT&T Corp.                                                                                                                 
|        
|        
|        
|        
|10.16(1) |  | Sublease Agreement, dated June 1, 1999, between Eloquent and California Casualty Indemnity Exchange.                                                                                   
|        
|        
|        
|        
|10.17(1) |  | ISV Software License Agreement, dated August 1, 1999, between Eloquent and WebXpress, Inc.                                                                                             
|        
|        
|        
|        
|10.18(1) |  | Assignment of Sublease, dated November 24, 1999, between Eloquent and California Casualty.                                                                                             
|        
|        
|        
|        
|10.19(2) |  | 2000 Non-Qualified Stock Plan.                                                                                                                                                         
|        
|        
|        
|        
|10.20(3) |  | Agreement and Plan of Merger and Reorganization, dated October 31, 2000 among Eloquent, Inc., Rebop
Acquisition Corp., Rebop Media, Inc., and Certain Shareholders of Rebop Media, Inc.
|        
|        
|        
|        
|10.21(4) |  | Employment Agreement, dated as of December 1, 2000, between Eloquent and John Curson.                                                                                                  

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|         |  |                                                                                                            
|-------- |  | -----------------------------------------------------------------------------------------------------------
|Exhibit  |  |                                                                                                            
|Number   |  | Description of Document                                                                                    
|         |  |                                                                                                            
|        
|        
|        
|        
|10.22(4) |  | Confidential Severance Agreement, dated November 1, 2000, between Eloquent and Abraham Kleinfeld.          
|        
|        
|        
|        
|10.23(5) |  | First Amended and Restated Agreement and Plan of Merger, dated June 22, 2001, by and between Eloquent,     
|        
|        
|        
|        
|         |  | Rebop Media, Inc., Rebop Acquisition Corp. and Certain Shareholders of Rebop Media, Inc.                   
|        
|        
|        
|        
|10.24(6) |  | Employment Offer Letter, dated June 6, 2001 between Eloquent and M. Edward Molkenbuhr                      
|        
|        
|        
|        
|10.25(6) |  | Employment Offer Letter, dated June 28, 2001 between Eloquent and Joseph Cortale                           
|        
|        
|        
|        
|10.26(8) |  | Addendum to Master Agreement, dated June 22, 2001, between Eloquent and AT&T Corp.                         
|        
|        
|        
|        
|10.27(8) |  | Dedicated Hosting Service  Service Order Attachment, dated April 28, 2001, between Eloquent and AT&T
Corp.
|        
|        
|        
|        
|10.28(8) |  | AT&T Dedicated Hosting Service Upgrade Addendum, dated September 25, 2001, between Eloquent and AT&T
Corp. 



---

|(1) |  | Incorporated by reference to the same numbered exhibit previously filed
with the Companys Registration Statement on Form S-1 (SEC File No.
333-89537).                             
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|   
|   
|   
|(2) |  | Incorporated by reference to exhibit 99.1 previously filed with the
Companys Registration Statement on Form S-8 (SEC File No. 333-34182).                                          
|   
|   
|   
|   
|(3) |  | Incorporated by reference to exhibit 99.2 previously filed with the
Companys Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2000.                      
|   
|   
|   
|   
|(4) |  | Incorporated by reference to the same numbered exhibit previously filed
with the Companys Annual Report on Form 10-K for the year ended December
31, 2000 (SEC File No. 000-29059).
|   
|   
|   
|   
|(5) |  | Incorporated by reference to the exhibit 2.1 previously filed with the
Companys Current Report on Form 8-K filed on July 6, 2001.                                                  
|   
|   
|   
|   
|(6) |  | Incorporated by reference to the same numbered exhibit previously filed
with the Companys Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2001.              
|   
|   
|   
|   
|(7) |  | Incorporated by reference to exhibit 99.2 previously filed with the
Companys Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2001.                      
|   
|   
|   
|   
|(8) |  | Incorporated by reference to the same numbered exhibit previously filed
with the Companys Annual Report on Form 10-K for the year ended December
31, 2001 (SEC File No. 000-29059).

(b)  Reports on Form 8-K

The Company did not file any reports on Form 8-K during the three months
ended March 31, 2002.

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

Date: May 15, 2002

| |                                                                                                              |                   
| | ------------------------------------------------------------------------------------------------------------ | ------------------
| | ELOQUENT, INC.                                                                                              
|
| | By:                                                                                                          | /s/ R. John Curson
| |                                                                                                             
| | R. John Curson
Chief Financial Officer, Secretary and Treasurer
(Principal Accounting and Financial Officer)

25