<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                    FORM 10-Q
(Mark One)

/X/      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities 
         Exchange Act of 1934.

                  For the quarterly period ended December 31, 1998

/ /      Transition Report Pursuant to Section 13 or 15(d) of the Securities 
         Exchange Act of 1934.

                  For the transition period from _____ to_____

                         Commission file number: 0-27838

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

                              FORTE SOFTWARE, INC.
                             ----------------------
             (Exact name of registrant as specified in its charter)

                 Delaware                              94-3131872
               -----------                            ------------
     (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organization)               Identification No.)

                              1800 Harrison Street
                            Oakland, California 94612
                                 (510) 869-3400
             (Address, including zip code, of Registrant's principal
          executive offices and telephone number, including area code)

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

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

                                                           Yes X   No 
                                                              ---     ---

Indicate the number of shares outstanding of each of the issuer's classes of 
common stock, as of the latest practicable date.

<TABLE>
<S>                                    <C>
Common Stock, $0.01 par value                        20,081,089
   (Class of common stock)             (Shares outstanding at February 1, 1999)
</TABLE>

<PAGE>

FORTE SOFTWARE, INC.
FORM 10-Q QUARTERLY REPORT
QUARTER ENDED DECEMBER 31, 1998

Table of Contents

<TABLE>
<CAPTION>
PART I     FINANCIAL INFORMATION
                                                                                  Page
<S>        <C>                                                                  <C>
Item 1.    Financial Statements

           Condensed Consolidated Balance Sheet
           At December 31, 1998 and March 31, 1998                                  3

           Condensed Consolidated Results of Operations
           For the Three and Nine Months Ended December 31, 1998 and 1997           4

           Condensed Consolidated Statement of Cash Flow
           For the Nine Months Ended December 31, 1998 and 1997                     5

           Notes to Condensed Consolidated Financial Statements                     6

Item 2.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations                                     10


Part II    OTHER INFORMATION

Item 1.    Legal Proceedings                                                       28

Item 6.    Exhibits and Reports on Form 8-K                                        28

Signatures                                                                         29
</TABLE>

                                       2
<PAGE>

PART 1.
ITEM 1.  FINANCIAL STATEMENTS

                              FORTE SOFTWARE, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                            (IN THOUSANDS; UNAUDITED)

<TABLE>
<CAPTION>
                                                                -------------------------------------
                                                                   December 31,         March 31,
                                                                       1998                1998
                                                                ------------------  -----------------
<S>                                                             <C>                 <C>    
ASSETS
Current assets:
    Cash and cash equivalents                                            $  8,613           $ 13,358
    Short-term investments                                                 16,352             20,802
    Accounts receivable, net                                               21,241             20,277
    Prepaid expense and other current assets                                3,462              1,635
                                                                ------------------  -----------------
Total current assets                                                       49,668             56,072

Equipment and leasehold improvements, net                                   5,544              7,416
Other assets                                                                  895                250
                                                                ------------------  -----------------
Total assets                                                             $ 56,107           $ 63,738
                                                                ------------------  -----------------
                                                                ------------------  -----------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                                     $  1,917            $ 1,530
    Accrued expenses and other liabilities                                  7,856             11,503
    Deferred revenue                                                        8,353             12,312
    Current portion of capital lease obligations                               92                695
                                                                ------------------  -----------------
Total current liabilities                                                  18,218             26,040

Capital lease obligations, due after one year                                 131                123
Deferred revenue                                                              175                265
Commitments

Stockholders' equity:
    Common stock                                                              200                195
    Additional paid-in capital                                             68,219             66,851
    Accumulated deficit                                                  (31,143)           (29,663)
    Foreign currency translation adjustments                                  307               (73)
                                                                ------------------  -----------------
Total stockholders' equity                                                 37,583             37,310
                                                                ------------------  -----------------
Total liabilities and stockholders' equity                               $ 56,107           $ 63,738
                                                                ------------------  -----------------
                                                                ------------------  -----------------
</TABLE>

See accompanying notes to Condensed Consolidated Financial Statements.

                                       3
<PAGE>

                              FORTE SOFTWARE, INC.
                  CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT PER SHARE DATA; UNAUDITED)
<TABLE>
<CAPTION>
                                                             Three months ended                       Nine months ended
                                                             December 31,                                December 31,
                                                   ----------------------------------          ---------------------------------
                                                        1998              1997                      1998             1997
                                                   ---------------- -----------------          --------------- -----------------
<S>                                                <C>              <C>                        <C>             <C>    
Revenue:
    License fees                                     $      10,741    $        9,575             $     27,804    $       27,459
    Maintenance and services                                 9,625             7,770                   29,230            22,048
                                                   ---------------- -----------------          --------------- -----------------

  Total revenue                                             20,366            17,345                   57,034            49,507
                                                   ---------------- -----------------          --------------- -----------------

Cost of revenue:
    Cost of license fees                                       194               220                      540               460
    Cost of maintenance and services                         5,546             4,874                   15,648            13,512
                                                   ---------------- -----------------          --------------- -----------------
  Total cost of revenue                                      5,740             5,094                   16,188            13,972

    Gross profit                                            14,626            12,251                   40,846            35,535

Operating expenses:
    Sales and marketing                                      9,371            12,365                   27,435            32,374
    Product development and engineering                      3,872             4,074                   11,889            10,787
    General and administrative                               1,152             1,933                    3,841             5,387
                                                   ---------------- -----------------          --------------- -----------------

  Total operating expenses                                  14,395            18,372                   43,165            48,548
                                                   ---------------- -----------------          --------------- -----------------

Operating income (loss)                                        231            (6,121)                  (2,319)          (13,013)

Interest income, net                                           328               462                    1,073             1,530
                                                   ---------------- -----------------          --------------- -----------------

Income (loss) before income taxes                              559            (5,659)                  (1,246)          (11,483)

Provision for income taxes                                      25               630                      234                35
                                                   ---------------- -----------------          --------------- -----------------

Net income (loss)                                    $         534    $       (6,289)            $     (1,480)   $      (11,518)
                                                   ---------------- -----------------          --------------- -----------------
                                                   ---------------- -----------------          --------------- -----------------

Net income (loss) per share---basic                  $        0.03    $        (0.32)            $      (0.07)   $        (0.60)
                                                   ---------------- -----------------          --------------- -----------------
                                                   ---------------- -----------------          --------------- -----------------
Net income (loss) per share---diluted                $        0.03    $        (0.32)            $      (0.07)   $        (0.60)
                                                   ---------------- -----------------          --------------- -----------------
                                                   ---------------- -----------------          --------------- -----------------
Shares used in per share calculation
           Basic                                            19,962            19,424                   19,839            19,275
                                                   ---------------- -----------------          --------------- -----------------
                                                   ---------------- -----------------          --------------- -----------------
           Diluted                                          21,009            19,424                   19,839            19,275
                                                   ---------------- -----------------          --------------- -----------------
                                                   ---------------- -----------------          --------------- -----------------
</TABLE>

See accompanying notes to Condensed Consolidated Financial Statements.

                                       4
<PAGE>

                                               FORTE SOFTWARE, INC.
                                   CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
                                             (IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
                                                                         Nine Months Ended December 31,
                                                                    -----------------------------------------
                                                                         1998                     1997
                                                                    ---------------         -----------------
<S>                                                                 <C>                     <C>    
OPERATING ACTIVITIES
Net loss                                                              $     (1,480)           $      (11,518)
Adjustments to reconcile net loss to net cash used in 
 operating activities:
  Depreciation and amortization                                              3,259                     2,956
  Changes in operating assets and liabilities:
    Accounts receivable                                                       (857)                    1,646
    Prepaid expenses and other assets                                       (2,327)                     (942)
    Accounts payable                                                           494                    (1,159)
    Accrued expenses and other liabilities                                  (3,647)                     (658)
    Deferred revenue                                                        (3,942)                     (492)
                                                                    ---------------         -----------------
Net cash used in operating activities                                       (8,500)                  (10,167)
                                                                    ---------------         -----------------

INVESTING ACTIVITIES
Purchases of equipment and leasehold improvements                           (1,387)                   (3,842)
Purchases of short-term investments                                         (8,891)                  (10,774)
Maturities of short-term investments                                        13,400                    10,850
Loan to officer                                                               (145)                        -
                                                                    ---------------         -----------------
Net cash provided by (used in) investing activities                          2,977                    (3,766)
                                                                    ---------------         -----------------

FINANCING ACTIVITIES
Reduction in capital lease obligations                                        (595)                     (731)
Proceeds from issuance of common stock                                       1,373                     2,652
                                                                    ---------------         -----------------
Net cash provided by financing activities                                      778                     1,921
                                                                    ---------------         -----------------
Decrease in cash and cash equivalents                                       (4,745)                  (12,012)
Cash and cash equivalents at beginning of period                            13,358                    35,103
                                                                    ---------------         -----------------
Cash and cash equivalents at end of period                            $      8,613            $       23,091
                                                                    ---------------         -----------------
                                                                    ---------------         -----------------
</TABLE>

See accompanying notes to Condensed Consolidated Financial Statements.

                                       5
<PAGE>

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


NOTE 1. BASIS OF PRESENTATION

         The unaudited condensed consolidated financial statements included 
herein reflect all adjustments, consisting only of normal recurring accruals, 
which in the opinion of management are necessary to fairly present the 
Company's consolidated financial position, results of operations, and cash 
flow for the periods presented. These condensed consolidated financial 
statements should be read in conjunction with the Company's audited 
consolidated financial statements as included in the Company's Annual Report 
on Form 10-K for the year ended March 31, 1998. Certain information and 
footnote disclosures normally included in audited financial statements 
prepared in accordance with generally accepted accounting principles have 
been condensed or omitted pursuant to the Securities and Exchange Commission 
rules and regulations. The condensed consolidated results of operations for 
the three and nine month periods ended December 31, 1998 are not necessarily 
indicative of the results that may be expected for entire fiscal year ending 
March 31, 1999. The March 31, 1998 condensed consolidated balance sheet was 
derived from audited consolidated financial statements, but does not include 
all disclosures required by generally accepted accounting principles.

NOTE 2. NET INCOME (LOSS) PER SHARE

         Basic net income (loss) per share is computed using the weighted 
average number of shares outstanding during the period. Diluted net income 
(loss) per share is computed using the weighted average number of common 
shares plus the dilutive effect of outstanding stock options using the 
"treasury stock" method. The following table shows the computation of basic 
and diluted net income (loss) per share.

<TABLE>
<CAPTION>
                                                Three Months Ended                    Nine Months Ended
                                                    December 31,                         December 31,

                                              1998             1997                 1998              1997
                                         ---------------- ---------------      ---------------- -----------------
                                                         (in thousands, except per share data)
<S>                                      <C>              <C>                  <C>              <C>
Net income (loss)                          $         534    $     (6,289)        $      (1,480)   $      (11,518)
                                         ---------------- ---------------      ---------------- -----------------
Shares used in computing basic net       
 income (loss) per share                          19,962          19,424                19,839            19,275
                                                                                               
Effect of diluted securities (If                                                                 
 their inclusion would not be 
 antidilutive)                                     1,047               -                     -                 -
                                         ---------------- ---------------      ---------------- -----------------
Shares used in computing diluted net 
 income (loss) per share                           21,009          19,424                19,839            19,275
                                         ---------------- ---------------      ---------------- -----------------
                                         ---------------- ---------------      ---------------- -----------------
Basic                                      $        0.03    $      (0.32)        $       (0.07)   $        (0.60)
                                         ---------------- ---------------      ---------------- -----------------
                                         ---------------- ---------------      ---------------- -----------------
Diluted                                    $        0.03    $      (0.32)        $       (0.07)   $        (0.60)
                                         ---------------- ---------------      ---------------- -----------------
                                         ---------------- ---------------      ---------------- -----------------
</TABLE>

                                       6
<PAGE>

                              FORTE SOFTWARE, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
                                   (UNAUDITED)

NOTE 3. SHORT-TERM INVESTMENTS

         As of December 31, 1998, all short-term investments were classified 
as available-for-sale securities pursuant to the provisions of Statement of 
Financial Accounting Standards No. 115, "Accounting for Certain Investments 
in Debt and Equity Securities." Available-for-sale securities are stated at 
estimated fair market value. Differences between the estimated fair market 
value and cost were not material.

         The following is a summary of the Company's investments and a 
reconciliation of the Company's investments to the condensed consolidated 
balance sheet at December 31, 1998 (in thousands).

<TABLE>
<CAPTION>
                                              Estimated
                                                 Fair
                                                Value
                                            ---------------
<S>                                         <C>    
Commercial Paper                                   $ 4,648
Treasury Notes                                       2,044
Medium Term Notes                                    7,796
Market Auction Preferreds                            2,005
Corporate Notes                                      3,769
Money Market Funds                                      11
                                            ---------------

Total investments                                  $20,273
                                            ---------------
                                            ---------------
</TABLE>

<TABLE>
<CAPTION>
                                              Estimated
                                                 Fair
                                                Value
                                            ---------------
<S>                                         <C>    
Cash equivalents                                   $ 3,921
Short-term investments                              16,352
                                            ---------------

Total investments                                   20,273

Cash                                                 4,692
                                            ---------------

Total cash, cash equivalents and
 short-term investments                            $24,965
                                            ---------------
                                            ---------------
</TABLE>

                                       7
<PAGE>

                              FORTE SOFTWARE, INC.
         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
                                   (UNAUDITED)

NOTE 4. LOAN TO OFFICER

      In August and September 1998, the Company issued one of its executive 
officers a promissory note in the amount of $1.1 million. This non-recourse 
promissory note is collateralized at 140 percent of the loan value in shares 
of the Company's common stock owned by this individual, and is due and 
payable to the Company in August 2000 at an interest rate of seven and 
one-half percent per annum. In October and December 1998, the Company 
received payments totalling $1.0 million. The outstanding balance at December 
31, 1998 was $145,000 and is included in other assets. In February 1999, an 
additional $0.5 million was loaned to this officer against this agreement.

NOTE 5. REVENUE RECOGNITION

      Effective April 1, 1998, the Company adopted the Accounting Standards 
Executive Committee ("AcSEC") of the American Institute of Certified Public 
Accountants Statement of Position No. 97-2, "Software Revenue Recognition," 
("SOP 97-2") which supercedes Statement of Position No. 91-1 ("SOP 91-1"). 
SOP 97-2 addresses software revenue recognition matters primarily from a 
conceptual level.

      In March 1998, the AcSEC issued Statement of Position No. 98-4, ("SOP 
98-4") "Deferral of the Effective Date of a Provision of SOP 97-2, Software 
Revenue Recognition," which defers for one year the implementation of the 
provisions of SOP 97-2 that defines what constitutes "vendor specific 
objective evidence" ("VSOE") with regard to software revenue recognition. SOP 
98-4 applies to all multiple-element software arrangements and is effective 
as of March 31, 1998.

      In December 1998, the AcSEC issued Statement of Position No. 98-9, 
"Modification of SOP 97-2, Software Revenue Recognition, With Respect to 
Certain Transactions" ("SOP 98-9"). SOP 98-9 amends paragraphs 11 and 12 of 
SOP 97-2 to require recognition of revenue using the "residual method" when 
(1) there is evidence of VSOE of fair value for all undelivered elements in a 
multiple-element arrangement that is not accounted for using long-term 
contract accounting, (2) VSOE of fair value does not exist for one or more of 
the delivered elements in the arrangement, and (3) all revenue recognition 
criteria in SOP 97-2 other than the requirement for VSOE of the fair value of 
each delivered element of the arrangement are satisfied. Under the residual 
method, (1) the fair market value is applied to all the undelivered items 
based on their previously determined VSOE of fair values and is deferred 
until earned based on other sections of SOP 97-2, and (2) the difference 
between the total contract value and the amount deferred for the undelivered 
elements is recognized as revenue related to the delivered elements. The 
provisions of SOP 98-9 will be applied to all transactions in the Company's 
fiscal year ending March 31, 2000.


                                       8
<PAGE>

NOTE 6. COMPREHENSIVE INCOME

         Effective April 1, 1998, the Company adopted Statement of Financial 
Accounting Standards No. 130, "Reporting Comprehensive Income," ("SFAS 130"). 
SFAS 130 requires certain revenues, expenses, gains or losses that, prior to 
adoption, were reported separately in stockholders' equity and excluded from 
net income (loss) to be included in other comprehensive income (loss). The 
Company has evaluated the impact of comprehensive income components on the 
Company's consolidated financial statements and has determined that the 
amounts are immaterial to the financial statements taken as a whole.

NOTE 7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

        In 1997, the Financial Accounting Standards Board ("FASB") issued 
Statement of Financial Accounting Standards No. 131, "Disclosures about 
Segments of an Enterprise and Related Information" ("SFAS 131") which 
establishes standards for the way public business enterprises report 
information about operating segments in annual financial statements and 
requires that those enterprises report selected information about operating 
segments in interim financial reports issued to stockholders. In addition, 
SFAS 131 establishes standards for related disclosures about products and 
services, geographic areas and major customers. The Company will comply with 
the requirements of SFAS 131 in its annual consolidated financial statements 
for the year ending March 31, 1999.

         In June 1998, the FASB issued Statement of Financial Accounting 
Standards No. 133 "Accounting for Derivative Instruments and Hedging 
Activities" ("SFAS 133"). The Company is required to adopt this statement for 
its fiscal year ending March 31, 2001. SFAS 133 establishes methods of 
accounting for derivative financial instruments and hedging activities 
related to those instruments, as well as other hedging activities. The 
Company is not currently able to determine the effect, if any, that adoption 
will have on its consolidated financial position, results of operations or 
cash flow.



                                       9
<PAGE>


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

         THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS FORWARD-LOOKING 
STATEMENTS WHICH REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO FUTURE 
EVENTS AND FINANCIAL PERFORMANCE. IN THIS REPORT, THE WORDS "ANTICIPATE," 
"BELIEVES," "EXPECTS," "INTENDS," "FUTURE," AND OTHER SIMILAR EXPRESSIONS 
IDENTIFY FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE 
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, INCLUDING THOSE DISCUSSED IN 
"BUSINESS RISKS" BELOW AND IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," THAT COULD CAUSE ACTUAL 
RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR THOSE ANTICIPATED.

         The following table sets forth certain unaudited condensed 
consolidated results of operations data as a percentage of total revenue for 
the three and nine months ended December 31, 1998 and 1997.

<TABLE>
<CAPTION>
                                                        Three months ended                   Nine months ended 
                                                            December 31,                        December 31,
                                                      1998             1997                 1998             1997
                                                 ---------------  ----------------     ---------------  ----------------
<S>                                              <C>              <C>                  <C>              <C>    
Revenue:
  License fees                                             52.7%             55.2%               48.7%             55.5%
  Maintenance and services                                 47.3              44.8                51.3              44.5
                                                 ---------------  ----------------     ---------------  ----------------
    Total revenue                                         100.0             100.0               100.0             100.0
                                                 ---------------  ----------------     ---------------  ----------------
                                                 ---------------  ----------------     ---------------  ----------------

Cost of revenue:
  Cost of license fees                                      1.0               1.3                 1.0               0.9
  Cost of maintenance and services                         27.2              28.1                27.4              27.3
                                                 ---------------  ----------------     ---------------  ----------------
    Total cost of revenue                                  28.2              29.4                28.4              28.2
                                                 ---------------  ----------------     ---------------  ----------------

Gross profit                                               71.8              70.6                71.6              71.8

Operating expense:
  Sales and marketing                                      46.0              71.3                48.1              65.4
  Product development and engineering                      19.0              23.5                20.9              21.8
  General and administrative                                5.7              11.1                 6.7              10.9
                                                 ---------------  ----------------     ---------------  ----------------
    Total operating expense                                70.7             105.9                75.7              98.1
                                                 ---------------  ----------------     ---------------  ----------------

Operating income (loss)                                     1.1             (35.3)               (4.1)            (26.3)

Interest income, net                                        1.6               2.7                 1.9               3.1
                                                 ---------------  ----------------     ---------------  ----------------
Income (loss) before income taxes                           2.7             (32.6)               (2.2)            (23.2)

Provision for income taxes                                  0.1               3.6                 0.4               0.1
                                                 ---------------  ----------------     ---------------  ----------------
Net income (loss)                                           2.6%            (36.2)%              (2.6)%           (23.3)%
                                                 ---------------  ----------------     ---------------  ----------------
                                                 ---------------  ----------------     ---------------  ----------------
</TABLE>

                                       10
<PAGE>

REVENUE

         The Company's total revenue consists of license fees for its Forte 
Application Environment and related products, as well as associated 
maintenance and services revenue. The Company licenses software under 
non-cancelable license agreements and provides services including 
maintenance, training and consulting. License fees revenue is recognized when 
a non-cancelable license agreement has been signed, the product has been 
shipped, the fees are fixed and determinable, and collectibility is 
reasonably assured. License fees revenue from distributors is generally 
recognized as sales to end users are reported, the product is shipped and 
collectibility is reasonably assured. Fees for services are charged 
separately from the license of the Company's software products. Maintenance 
revenue consists of fees for ongoing support and product updates and is 
recognized ratably over the term of the contract, which is typically twelve 
months. Revenue from training is recognized upon completion of the related 
training class. Consulting revenue is recognized as the services are 
performed. Allowances for credit risks and for estimated future sales returns 
are provided for upon product shipment. Returns to date have not been 
material. Actual credit losses and returns may differ from the Company's 
estimates and such differences could be material to the consolidated 
financial statements.

         The Company's license agreements typically require the payment of a 
nonrefundable, one-time license fee for a license of perpetual term. 
Customers make separate payments for annual maintenance and other services. 
The Company can terminate the license agreement only upon a material breach 
by the other party, provided that the breach is not cured within a specified 
cure period.

         The Company's total revenue increased 17 percent to $20.4 million 
for the quarter ended December 31, 1998 from $17.3 million for the same prior 
year quarter and increased 15 percent to $57.0 million for the nine months 
ended December 31, 1998 from $49.5 million for the same period in the prior 
year. International revenue increased by 15 percent to $9.8 million for the 
quarter ended December 31, 1998, as compared to $8.5 million for the same 
quarter in the prior year. International revenue increased 20 percent to 
$27.0 million for the nine months ended December 31, 1998 from $22.5 million 
in the same prior year period. The international revenue increase was due to 
increased license, maintenance and services revenue as a result of the 
Company's continued expansion of its international sales organization. 
Further, international revenue contributed 48 percent of total revenue for 
the quarter ended December 31, 1998, as compared to 49 percent of total 
revenue in the same prior year quarter and contributed 47 percent for the 
nine months ended December 31, 1998, as compared to 45 percent for the same 
prior year period. United States revenue increased by 20 percent to $10.6 
million for the quarter ended December 31, 1998 from $8.8 million in the same 
prior year quarter and increased by 11 percent to $30.0 million for the nine 
months ended December 31, 1998 from $27.0 for the same period in the prior 
year. Significant growth in domestic maintenance and service revenue 
contributed to the increase.

         LICENSE FEES REVENUE. The Company's license fees revenue increased 
12 percent to $10.7 million for the quarter ended December 31, 1998 from $9.6 
million for the same quarter in the prior year and increased by 1 percent to 
$27.8 million for the nine months ended December 31, 1998 from $27.5 million 
for the same prior year period. License fees revenue increased sequentially 
by 23 percent from $8.7 million for the second quarter ended September 30, 
1998. 

                                       11
<PAGE>

The growth in license fee revenue was assisted by a strong contribution from 
the Company's VAR channel and by the progress realized in the realignment of 
the Company's North American sales organization. Further, license revenue 
growth was positively impacted by the initial performance of newly opened 
sales offices in Holland and Italy.

         MAINTENANCE AND SERVICES REVENUE. The Company's services revenue 
increased 24 percent to $9.6 million for the quarter ended December 31, 1998 
from $7.8 million for the same quarter in the prior year and increased 33 
percent to $29.2 million for the nine months ended December 31, 1998 from 
$22.0 million for the same period in the prior year. The increase in total 
maintenance and services revenue was primarily a result of the growing 
installed base in the Company's software products and the associated increase 
in demand for maintenance, training and consulting services. Services revenue 
as a percentage of total revenue may vary between periods as a result of 
changes in demand for the Company's services and changes in the rate of 
growth of license fees revenue.

         INTERNATIONAL REVENUE. International revenue includes all revenue 
other than from the United States. International revenue includes sales from 
the Company's direct sales organizations in Europe, Canada and Australia and 
export sales through distributors and resellers in Europe, Asia and other 
areas of the world. Direct sales through the Company's European, Canadian and 
Australian subsidiaries totaled $8.0 million and $20.2 million for the 
quarter and nine months ended December 31, 1998, respectively, as compared to 
$5.7 million and $15.0 million for the quarter and nine months ended December 
31, 1997, respectively. The table below sets forth the Company's export sales 
data from the United States for the quarter and nine months ended December 
31, 1998 and 1997.

<TABLE>
<CAPTION>
                             ---------------------------------------       ----------------------------------------
                                         (in thousands)                                (in thousands)
                                Three months ended December 31,                Nine months ended December 31,
                             ---------------------------------------       ----------------------------------------
                                    1998                1997                      1998                1997
                                    ----                ----                      ----                ----
<S>                                 <C>                <C>                       <C>                 <C>    
Total export revenue                $1,778             $2,766                    $ 6,749             $ 7,510
Total direct revenue                 7,991              5,732                     20,239              15,000
                                     -----              -----                     ------              ------
Total International                 $9,769             $8,498                    $26,988             $22,510
                             ---------------------------------------       ----------------------------------------
</TABLE>

         The increase in international revenue for the nine months ended 
December 31, 1998, as compared to the same period in the prior year, reflects 
growing direct sales presence in Europe through the Company's international 
direct sales organization, partially offset by lower revenue in Asia and 
Canada. The economic crises in Asia has not had a material impact on the 
Company's revenue. Revenue from Asian markets were less then 5 percent of 
total revenue for each of the periods presented. The Company expects that 
international license and related maintenance and services revenue will 
continue to account for a significant portion of its total revenue in the 
future. The Company believes that in order to increase sales opportunities 
and market share, it will be required to continue expanding its international 
sales organization. The Company has committed and continues to commit 
significant management time and financial resources to developing direct and 
indirect international sales and support channels. There can be no assurance, 
however, that the Company will be able to maintain or increase international 
market demand for Forte and related products. To the extent that the Company 
is unable to do so in a timely manner, the Company's international sales will 
be limited, and the Company's business, operating results and financial 
condition would be materially and adversely affected.

                                       12
<PAGE>

COST OF REVENUE

         COST OF LICENSE FEES REVENUE. Cost of license fees revenue consists 
primarily of royalties paid to third-party vendors, product packaging, 
documentation and production. Cost of license fees revenue was $194,000 and 
$540,000 for the quarter and nine months ended December 31, 1998, 
respectively, as compared to $220,000 and $460,000 for the quarter and nine 
months ended December 31, 1997, respectively. The increase for the first nine 
months of fiscal 1998, as compared to the same period in the prior year, was 
primarily due to royalties paid to third-party vendors. Additionally, cost of 
license fees revenue varies as a percentage of license fees revenue because 
costs of media production and product packaging have not been material and 
have been expensed as incurred. Such costs are dependent on the number of new 
releases in a given quarter.

         COST OF MAINTENANCE AND SERVICES REVENUE. Cost of maintenance and 
services revenue consists primarily of personnel-related and facilities costs 
incurred in providing customer support, training and consulting services, as 
well as third-party costs incurred in providing training and consulting 
services. Cost of maintenance and services revenue was $5.5 million and $15.6 
million for the quarter and nine months ended December 31, 1998, 
respectively, representing 58 percent and 54 percent of maintenance and 
services revenue, respectively. Cost of maintenance and services revenue was 
$4.9 million and $13.5 million for the quarter and nine months ended December 
31, 1997, respectively, representing 63 percent and 61 percent of maintenance 
and services revenue, respectively. The decrease in cost of maintenance and 
services revenue for the quarter and nine months ended December 31, 1998 as a 
percentage of maintenance and services revenue was primarily attributable to 
improved economies of scale of the technical support center and increased 
productivity from training, support and consulting personnel. The Company 
does not expect its cost of maintenance and services revenue to continue to 
materially decrease as a percentage of maintenance and services revenue. The 
cost of services as a percentage of services revenue may vary between periods 
due to the mix of services provided by the Company and the extent to which 
external contractors are used to provide those services.

OPERATING EXPENSES

         SALES AND MARKETING. Sales and marketing expense consists primarily 
of salaries, commissions and bonuses earned by sales and marketing personnel, 
field office expenses, travel and entertainment, promotional expenses and 
advertising. Sales and marketing expense decreased to $9.4 million for the 
quarter ended December 31, 1998 from $12.4 million for the same quarter in 
the prior year. Sales and marketing expenses also decreased to $27.4 million 
for the nine months ended December 31, 1998 from $32.4 million for the same 
period in the prior year. These decreases were the result of a 
re-organization of the Company's US sales organization. The direct sales 
organization was reduced to reflect the Company's anticipated medium-term 
revenue opportunities, and the partner channel organization is being 
emphasized to leverage this distribution channel. The re-organization did not 
result in a significant charge to expense for severance and other costs 
associated with the re-organization. Sales and marketing expense represented 
46 percent and 48 percent of total revenue for the quarter and nine months 
ended December 31, 1998, respectively, and represented 71 percent and 65 
percent of total revenue for the quarter and nine months ended December 31, 
1997, respectively. The Company anticipates that sales and marketing expense 
will decrease as a percentage of revenue over the next several 

                                       13
<PAGE>

quarters.

         PRODUCT DEVELOPMENT. Product development expense consists primarily 
of salaries and other personnel-related expense, and depreciation of 
development equipment. The Company believes that a significant level of 
investment for product development is required to remain competitive. Product 
development expense amounted to $3.9 million and $11.9 million for the 
quarter and nine months ended December 31, 1998, respectively, as compared to 
$4.1 million and $10.8 million for the quarter and nine months ended December 
31, 1997, respectively. The increase in the current fiscal year's nine-month 
period was primarily attributable to additional hiring of product development 
personnel. Product development expense represented 19 percent and 21 percent 
of total revenue for the quarter and nine months ended December 31, 1998, 
respectively, as compared to 23 percent and 22 percent for the quarter and 
nine months ended December 31, 1997, respectively. The Company anticipates 
that it will continue to devote substantial resources to product development 
activities. All costs incurred in the research and development of software 
products, and enhancements to existing software products have been expensed 
as incurred; accordingly, cost of license fees revenue includes no 
amortization of capitalized software development costs.

          GENERAL AND ADMINISTRATIVE. General and administrative expense 
consists of costs for the Company's human resources, finance, information 
technology and general management functions. General and administrative 
expense decreased to $1.2 million and $3.8 million for the quarter and nine 
months ended December 31, 1998, respectively, from $1.9 million and $5.4 
million for the quarter and nine months ended December 31, 1997, 
respectively. General and administrative expense represented 6 percent and 7 
percent of total revenue for the quarter and nine months ended December 31, 
1998, respectively, as compared to 11 percent for both the quarter and nine 
months ended December 31, 1997, respectively. The reduction in general and 
administrative expense from prior year was primarily the result of the sublet 
of excess office space and the reduction in the number of employees in this 
functional area. The Company believes that its general and administrative 
expense will increase in dollar amount in the future as a result of the 
expansion of the Company's administrative staff to support its growing 
operations.

         PROVISION FOR INCOME TAXES. There was no provision for federal or 
state income taxes for the quarter and nine months ended December 31, 1998 
and December 31, 1997, respectively, as the Company incurred net operating 
losses, and there can be no assurance that the Company will realize the 
benefit of the net operating loss carryforwards. The Company's provision for 
income taxes in fiscal 1999 represents foreign income tax withholdings on 
certain license fees paid to the Company by foreign licensees.

         RISKS ASSOCIATED WITH THE YEAR 2000 ISSUE. The Year 2000 Issue is 
the result of computer programs being written using two digits rather than 
four to define the applicable year. Any of the Company's computer programs or 
hardware that have date-sensitive software or embedded chips may recognize a 
date using "00" as the year 1900 rather than the year 2000. This could result 
in a system failure or miscalculations causing disruptions of operations, 
including, among other things, a temporary inability to process transactions, 
send invoices, or engage in similar normal business activities.

         The Company's plan to resolve the Year 2000 Issue involves the 
following four phases: 

                                       14
<PAGE>

assessment, remediation, testing, and implementation. At present, the Company 
is nearly complete with regards to the assessment of all systems that could 
be significantly affected by the Year 2000, including the Company's products, 
its internal Information Technology, supplier and service provider compliance 
and operating equipment with embedded chips or software (e.g. laptop 
computers). The Company has substantially completed the remediation phase and 
expects to complete this phase of the process by its fiscal first quarter 
beginning April 1, 1999. Further, the Company plans to begin the testing 
phase during this same quarter and will begin any required implementations 
subsequent to the completion of the testing phase. A Year 2000 Team 
representing key operations management has been formed and has taken action 
to catalogue the environment issues and their solutions, implement a Year 
2000 laboratory for testing key environments, and communicate through 
designated e-mail and intranet accounts the current status of research and 
progress.

         The costs incurred in addressing the Year 2000 Issue are being 
expensed as incurred in compliance with generally accepted accounting 
principles. None of these costs are expected to materially impact the results 
of operations in any one period. Funding of these costs will come from the 
Company's normal working capital.

         The Company believes that its products are fully Year 2000 
compliant. All Forte products use four digit years for all internal 
manipulations and representations. In addition, for customers who require the 
storage and manipulation of two digit years, the Company's current products 
provide the ability to specify a range of years for comparison and 
calculation. For example, the customer may specify that the years 0-39 are 
interpreted as 2000-2039 and the years 40-99 are interpreted as 1940-1999. 
Using this feature, a customer can save on the amount of data stored and 
manipulated by the Company. The Company regularly runs regression tests on 
its software, including tests for the above functionality at the rollover to 
the Year 2000. Based on the above, it is not expected that the Company's 
products will be adversely affected by date changes in the year 2000. 
However, there can be no assurance that the Company's products contain, or 
will contain, all features and functionality considered necessary by 
customers, distributors, resellers and system integrators to be Year 2000 
compliant.

         The Company believes that the purchasing patterns of customers and 
potential customers may be affected by Year 2000 issues in a variety of ways. 
Many companies are expending significant resources to correct or patch their 
current software systems for Year 2000 compliance. These expenditures may 
result in reduced funds available to purchase enterprise application software 
products such as those offered by the Company. Conversely, Year 2000 issues 
may cause other companies to accelerate purchases of application development 
and deployment software to replace non-Year 2000 compliant applications, 
causing a short-term increase in demand for the Company's products. There is 
no assurance that such an increase in demand will be realized, or that 
companies will resume application development if and when they resolve their 
Year 2000 issues. Either of the foregoing could have a material adverse 
effect upon the Company's business, operating results and financial 
condition. Further, the Company believes that, as the second half of calendar 
year 1999 approaches, some of its current and potential customers may reduce 
or suspend a significant amount of their development, deployment and 
integration projects in favor of an intense focus and increased efforts on 
their Year 2000 Issue compliance projects. This would have a material adverse 
effect on the Company's business, financial performance and cash resources.


                                       15
<PAGE>

         The Company has queried its significant suppliers and service 
providers that do not share information systems with the Company. To date, 
the Company is not aware of any supplier or service provider with a Year 2000 
Issue that would materially impact the Company's business, operating results 
or financial condition. However, the Company has no means of ensuring that 
suppliers and service providers will be Year 2000 ready. The inability of 
suppliers and service providers to complete their Year 2000 resolution 
process in a timely fashion could materially impact the Company. The effect 
of non-compliance by any of the Company's suppliers or service providers is 
not determinable.

         The Company has prepared a draft contingency plan for certain 
critical applications and expects to have a finalized draft in the near 
future. This business recovery plan discusses classified disasters and 
provides a list of priorities including, for example, customer service, 
billing and invoicing, and engineering.

         Although the Company is not aware of any material operational issues 
or costs associated with preparing its internal systems for the Year 2000, 
there can be no assurance that the Company will not experience serious 
unanticipated negative consequences and/or material costs caused by 
undetected errors or defects in the technology used in its internal systems, 
which include third-party software and hardware technology. Management of the 
Company believes it has an effective program in place to resolve the Year 
2000 Issue in a timely manner. However, disruptions in the economy generally 
resulting from Year 2000 issues could also materially adversely affect the 
Company. The Company could be subject to litigation for computer systems 
product failure, for example, equipment shutdown or failure to properly date 
business records. The amount of potential liability and lost revenue cannot 
be reasonably estimated.

LIQUIDITY AND CAPITAL RESOURCES

         The Company has funded its operations and investments in equipment 
and leasehold improvements through an initial public offering of common stock 
on March 11, 1996 with net proceeds of $34.3 million. The Company used cash 
of $8.5 million in operating activities for the nine months ended December 
31, 1998, as compared to cash used in operating activities of $10.2 million 
for the same prior year period. The net cash used in operating activities 
during the nine months ended December 31, 1998 resulted primarily from the 
net loss for the period, an increase in prepaid expenses and other assets, 
and decreases in accrued expenses and other liabilities, and deferred 
revenue, partially offset by an increase in accounts payable.

         The Company's investing activities consisted primarily of the 
purchases of interest-bearing securities representing a shift from cash 
equivalents to short-term investments, as well as purchases of property and 
equipment. Capital expenditures were $1.4 million for the nine months ended 
December 31, 1998 compared to $3.8 million for the nine months ended December 
31, 1997. Capital expenditures consisted of purchases of computer equipment 
and office furniture. For the nine months ended December 31, 1997, the 
Company was in the process of expanding its headquarter offices, and thus 
incurred significant equipment and leasehold improvement addition 
expenditures compared to the nine months ended December 31, 1998. At December 
31, 1998, the Company did not have any material commitments for capital 
expenditures.

         At December 31, 1998, the Company had $25.0 million in cash, cash 
equivalents, and short-term investments and $31.5 million in working capital. 
The Company believes that its 

                                       16
<PAGE>

existing cash, cash equivalents, and short-term investments will be adequate 
to meet its cash needs for at least the next 12 months. The Company, however, 
may require additional funds to support its working capital requirements or 
for other purposes and may seek to raise such additional funds through public 
or private equity financings or from other sources. There can be no assurance 
that additional financing will be available at all or that, if available, 
such financing will be obtainable on terms favorable to the Company and would 
not be dilutive. Further, the Company believes that, as the second half of 
calendar year 1999 approaches, some of its current and potential customers 
may reduce or suspend a significant amount of their development, deployment 
and integration projects in favor of an intense focus and increased efforts 
on their Year 2000 Issue compliance projects. This would have a material 
adverse effect on the Company's business, financial performance and cash 
resources.

BUSINESS RISKS

         IN EVALUATING THE COMPANY'S BUSINESS, READERS SHOULD CAREFULLY CONSIDER
THE BUSINESS RISKS DISCUSSED IN THIS SECTION IN ADDITION TO THE OTHER
INFORMATION PRESENTED IN THIS QUARTERLY REPORT ON FORM 10-Q. THIS REPORT ON FORM
10-Q CONTAINS FORWARD-LOOKING STATEMENTS WHICH REFLECT THE COMPANY'S CURRENT
VIEWS WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE. IN THIS REPORT,
THE WORDS "ANTICIPATE," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE," AND OTHER
SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING
STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, INCLUDING THOSE
DISCUSSED BELOW, THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
HISTORICAL RESULTS OR THOSE ANTICIPATED.

         LIMITED OPERATING HISTORY; HISTORY OF OPERATING LOSSES. The Company 
was founded in February 1991 and first shipped product in August 1994. After 
achieving profitability from December 1995 through March 31, 1997, the 
Company incurred net losses for each subsequent quarter through the quarter 
ended June 30, 1998. The Company has shown a modest profit for each of the 
two quarters ended September 30, 1998 and December 31, 1998, respectively. At 
December 31, 1998, the Company had an accumulated deficit of $31.1 million. A 
substantial portion of the accumulated deficit is due to the deployment of 
significant resources to the Company's product development, sales and 
marketing organizations. The Company expects to continue to devote 
substantial resources in these areas and as a result will need to 
significantly increase revenue to return to profitability. There can be no 
assurance that any of the Company's business strategies will be successful or 
that the Company will be profitable in any future quarter or period.

         POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS; UNCERTAINTY 
OF FUTURE OPERATING RESULTS; SEASONALITY. The Company's quarterly operating 
results have varied significantly in the past and are likely to vary 
significantly in the future, depending on factors such as the size and timing 
of significant orders and their fulfillment, demand for the Company's 
products, changes in pricing policies by the Company or its competitors, the 
number, timing and significance of product enhancements and new product 
announcements by the Company and its competitors, the ability of the Company 
to develop, introduce and market new and enhanced versions of the Company's 
products on a timely basis, the rate of adoption and use of the Company's 
products by third-party system integrators and value added resellers, changes 
in the level of operating expenses, changes in the Company's sales incentive 
plans, budgeting cycles of its customers, customer order deferrals 

                                       17
<PAGE>

due to intervening information technology projects of a higher priority such 
as, the Year 2000 Issue, or in anticipation of enhancements or new products 
offered by the Company or its competitors or other causes, the cancellation 
of licenses during the warranty period or non-renewal of maintenance 
agreements, product life cycles, software bugs and other product quality 
problems, personnel changes, changes in the Company's strategy, the level of 
international expansion, seasonal trends, and general domestic and 
international economic and political conditions, among others. A significant 
portion of the Company's total revenue has been, and the Company believes 
will continue to be, derived from a limited number of orders placed by large 
organizations, and the timing of such orders and their fulfillment has caused 
and could continue to cause material fluctuations in the Company's operating 
results, particularly on a quarterly basis. In addition, competition for 
sales personnel is intense, and there can be no assurance that the Company 
can retain its existing sales personnel or that it can attract, assimilate 
and retain highly qualified sales personnel in the future. The timing of the 
Company's hiring of new sales personnel and the rate at which new sales 
people become productive could also cause material fluctuations in the 
Company's quarterly operating results. Due to the foregoing factors, 
quarterly revenue and operating results are difficult to forecast. Revenue is 
also difficult to forecast because the market for distributed enterprise 
application development software is rapidly evolving, and the Company's sales 
cycle, from initial evaluation to purchase and the provision of support 
services, is lengthy and varies substantially from customer to customer. 
Product orders are typically shipped shortly after receipt of the order, and 
consequently, order backlog at the beginning of any quarter has in the past 
represented only a small portion of that quarter's total revenue. As a 
result, license fees revenue in any quarter is substantially dependent on 
orders booked and shipped in that quarter. Due to all of the foregoing, 
revenue for any future quarter is not predictable with any significant degree 
of accuracy. Accordingly, the Company believes that period-to-period 
comparisons of its operating results are not necessarily meaningful and 
should not be relied upon as indications of future performance. The prior 
revenue growth experienced by the Company should not be considered indicative 
of future revenue growth, if any, or of future operating results. Failure by 
the Company, for any reason, to increase total revenue would have a material 
adverse effect on the Company's business, operating results and financial 
condition.

         To achieve its quarterly revenue objectives, the Company is 
dependent upon obtaining orders in any given quarter for shipment in that 
quarter. Furthermore, the Company has often recognized a substantial portion 
of its revenue in the last month, or even weeks or days, of a quarter. The 
Company's expense levels are based, in significant part, on the Company's 
expectations as to future revenue and are therefore relatively fixed in the 
short term. If revenue levels fall below expectations, net income or loss is 
likely to be disproportionately adversely affected because a proportionately 
smaller amount of the Company's expense varies with its revenue. There can be 
no assurance that the Company will be able to maintain profitability on a 
quarterly or annual basis in the future. Due to all the foregoing factors, it 
is likely that in some future quarter the Company's operating results will be 
below the expectations of public market analysts and investors. In such 
event, the price of the Company's Common Stock would likely be materially and 
adversely affected.

         The operating results of many software companies reflect seasonal 
trends, and the Company expects to be affected by such trends in the future.

         RISKS ASSOCIATED WITH THE YEAR 2000 ISSUE. The Year 2000 Issue is 
the result of computer programs being written using two digits rather than 
four to define the applicable year. Any of the 

                                       18
<PAGE>

Company's computer programs or hardware that have date-sensitive software or 
embedded chips may recognize a date using "00" as the year 1900 rather than 
the year 2000. This could result in a system failure or miscalculations 
causing disruptions of operations, including, among other things, a temporary 
inability to process transactions, send invoices, or engage in similar normal 
business activities.

         The Company's plan to resolve the Year 2000 Issue involves the 
following four phases: assessment, remediation, testing, and implementation. 
At present, the Company is nearly complete with regards to the assessment of 
all systems that could be significantly affected by the Year 2000, including 
the Company's products, its internal Information Technology, supplier and 
service provider compliance and operating equipment with embedded chips or 
software (e.g. laptop computers). The Company has substantially completed the 
remediation phase and expects to complete this phase of the process by its 
fiscal first quarter beginning April 1, 1999. Further, the Company plans to 
begin the testing phase during this same quarter and will begin any required 
implementations subsequent to the completion of the testing phase. A Year 
2000 Team representing key operations management has been formed and has 
taken action to catalogue the environment issues and their solutions, 
implement a Year 2000 laboratory for testing key environments, and 
communicate through designated e-mail and intranet accounts the current 
status of research and progress.

         The costs incurred in addressing the Year 2000 Issue are being 
expensed as incurred in compliance with generally accepted accounting 
principles. None of these costs are expected to materially impact the results 
of operations in any one period. Funding of these costs will come from the 
Company's normal working capital.

         The Company believes that its products are fully Year 2000 
compliant. All Forte products use four digit years for all internal 
manipulations and representations. In addition, for customers who require the 
storage and manipulation of two digit years, the Company's current products 
provide the ability to specify a range of years for comparison and 
calculation. For example, the customer may specify that the years 0-39 are 
interpreted as 2000-2039 and the years 40-99 are interpreted as 1940-1999. 
Using this feature, a customer can save on the amount of data stored and 
manipulated by the Company. The Company regularly runs regression tests on 
its software, including tests for the above functionality at the rollover to 
the Year 2000. Based on the above, it is not expected that the Company's 
products will be adversely affected by date changes in the Year 2000. 
However, there can be no assurance that the Company's products contain, or 
will contain, all features and functionality considered necessary by 
customers, distributors, resellers and system integrators to be Year 2000 
compliant.

         The Company believes that the purchasing patterns of customers and 
potential customers may be affected by Year 2000 issues in a variety of ways. 
Many companies are expending significant resources to correct or patch their 
current software systems for Year 2000 compliance. These expenditures may 
result in reduced funds available to purchase enterprise application software 
products such as those offered by the Company. Conversely, Year 2000 issues 
may cause other companies to accelerate purchases of application development 
and deployment software to replace non-Year 2000 compliant applications, 
causing a short-term increase in demand for the Company's products. There is 
no assurance that such an increase in demand will be realized, or that 
companies will resume application development if and when they resolve their 
Year 2000 issues. Either of the foregoing could have a material adverse 
effect upon the Company's business, 

                                       19
<PAGE>

operating results and financial condition. Further, the Company believes 
that, as the second half of calendar year 1999 approaches, some of its 
current and potential customers may reduce or suspend a significant amount of 
their development, deployment and integration projects in favor of an intense 
focus and increased efforts on their Year 2000 Issue compliance projects. 
This would have a material adverse effect on the Company's business, 
financial performance and cash resources.

         The Company has queried its significant suppliers and service 
providers that do not share information systems with the Company. To date, 
the Company is not aware of any supplier or service provider with a Year 2000 
Issue that would materially impact the Company's business, operating results 
or financial condition. However, the Company has no means of ensuring that 
suppliers and service providers will be Year 2000 ready. The inability of 
suppliers and service providers to complete their Year 2000 resolution 
process in a timely fashion could materially impact the Company. The effect 
of non-compliance by any of the Company's suppliers or service providers is 
not determinable.

         The Company has prepared a draft contingency plan for certain 
critical applications and expects to have a finalized draft in the near 
future. This business recovery plan discusses classified disasters and 
provides a list of priorities including, for example, customer service, 
billing and invoicing, and engineering.

         Although the Company is not aware of any material operational issues 
or costs associated with preparing its internal systems for the Year 2000, 
there can be no assurance that the Company will not experience serious 
unanticipated negative consequences and/or material costs caused by 
undetected errors or defects in the technology used in its internal systems, 
which include third-party software and hardware technology. Management of the 
Company believes it has an effective program in place to resolve the Year 
2000 Issue in a timely manner. However, disruptions in the economy generally 
resulting from Year 2000 issues could also materially adversely affect the 
Company. The Company could be subject to litigation for computer systems 
product failure, for example, equipment shutdown or failure to properly date 
business records. The amount of potential liability and lost revenue cannot 
be reasonably estimated.

         PRODUCT CONCENTRATION; IMPACT OF MARKET FACTORS. All of the 
Company's revenue has been attributable to sales of Forte and related 
products and services. The Company currently expects Forte and related 
products and services to account for all or substantially all of the 
Company's future revenue. As a result, factors adversely affecting the 
pricing of or demand for Forte and related products, such as competition or 
technological change, could have a material adverse effect on the Company's 
business, operating results and financial condition. The Company's future 
financial performance will depend, in significant part, on the successful 
development, introduction and customer acceptance of new and enhanced 
versions of Forte and related products. There can be no assurance that the 
Company will continue to be successful in marketing the Forte product, 
related products or other products. The Company's prior revenue growth should 
not be considered indicative of future revenue growth, as there can be no 
assurance that the market for Forte and related products, or the market for 
products used in the development, deployment and management of distributed 
applications, will continue to grow. Recently, industry analysts and 
competitors have noted that market demand in the enterprise application 
development sector appears to be slowing, and predicted that the prior 
success achieved by that sector may not continue in future periods, due to a 
variety of factors including but not limited to (1) a diversion of customer 
resources from enterprise application development 

                                       20
<PAGE>

to the Year 2000 Issue and other higher priority information technology 
projects, (2) a general shortage of qualified programmers and a shift of 
available programming resources from corporate users to systems integrators, 
(3) market confusion caused by the complex and rapidly changing mix of 
alternative technologies for enterprise application development, and (4) the 
increased availability and popularity of packaged software applications. 
Additionally, recent instability in the economies and financial markets in 
the Asia-Pacific region, which had previously been regarded as a potentially 
strong source of revenue growth for enterprise software vendors, has 
introduced additional uncertainty concerning the sector. If the market for 
Forte and related products or enterprise application development products 
used in the development, deployment and management of distributed 
applications fails to grow, or grows more slowly than the Company currently 
anticipates, the Company's business, operating results and financial 
condition would be materially and adversely affected.

         DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a 
significant degree upon the continuing contributions of its key management, 
sales, marketing, software development and customer support personnel, and 
its ability to attract and retain such highly-skilled personnel. The loss of 
key personnel could materially and adversely affect the Company. Competition 
for qualified personnel is intense, particularly in the sales and software 
development areas, and there can be no assurance that the Company can retain 
its existing personnel or that it can attract, assimilate and retain 
additional highly qualified personnel in the future. The timing of the 
Company's hiring of new sales personnel and the rate at which new sales 
people become productive could also cause material fluctuations in the 
Company's quarterly operating results. The Company has at times experienced 
and continues to experience difficulty in recruiting and retaining qualified 
personnel. The Company has experienced significant turnover in its North 
America sales organization during fiscal year 1998 and the first three 
quarters of fiscal 1999. Competitors and others have in the past and may in 
the future attempt to recruit the Company's employees. Failure to attract and 
retain key personnel could have a material adverse effect on the Company's 
business, operating results and financial condition.

         RISKS ASSOCIATED WITH EXPANDING DISTRIBUTION. To date, the Company 
has sold its products through its direct and indirect sales force, systems 
integrators, distributors and value added resellers. The Company's customers 
and potential customers often rely on third-party system integrators and 
value added resellers to develop and deploy distributed applications. The 
Company's ability to achieve significant revenue growth in the future will 
depend in large part on its success in recruiting, training and retaining 
sufficient sales personnel and establishing and maintaining relationships 
with distributors, resellers and systems integrators. Although the Company is 
currently investing, and plans to continue to invest significant resources to 
maintain and selectively expand its sales force and to develop relationships 
with third-party distributors, resellers and systems integrators, the Company 
has at times experienced and continues to experience difficulty in recruiting 
and retaining qualified sales personnel and in establishing necessary 
third-party relationships. There can be no assurance that the Company will be 
able to successfully hire, train and retain needed sales personnel or develop 
and maintain sufficient third-party relationships, or that such efforts will 
result in an increase in revenue. Any failure by the Company to maintain a 
sufficiently large and trained sales force and continue to establish other 
distribution channels would materially and adversely affect the Company's 
business, operating results and financial condition.

         COMPETITION. The market for distributed software used in the 
development, deployment 

                                       21
<PAGE>

and management of distributed applications is intensely competitive and 
characterized by rapidly changing technology, evolving industry standards, 
frequent new product introductions and rapidly changing customer 
requirements. Distributed applications that can be developed and deployed 
using the Company's Forte environment can also be implemented by integrating 
a combination of application development tools and more powerful server 
programming techniques such as stored procedures in relational databases and 
C or C++ programming, along with networking and database middleware to 
connect the various components. As such, the Company effectively experiences 
its primary competition from potential customers' decisions to pursue this 
type of approach as opposed to utilizing an application environment such as 
Forte. As a result, the Company must continuously educate existing and 
prospective customers, and third-party systems integrators on whom 
prospective customers are increasingly relying for expertise, on the 
advantages of the Company's products over the approach of integrating a 
combination of products. There can be no assurance that these customers, 
potential customers or systems integrators will perceive sufficient value in 
the Company's products to justify purchasing or recommending them.

         The Company has also experienced and expects to continue to 
experience increased competition from a number of vendors that market 
software products specifically targeted for building distributed 
applications. Actual and potential competitors include: providers of 
application development software, such as Compuware/Uniface, Dynasty 
Technologies, Inc., International Business Machines Corporation, Microsoft 
Corporation, NAT Systems, Inc., Oracle Corporation, Seer Technologies, Inc., 
Sterling Software, Inc., and the Powersoft unit of Sybase, Inc.; web-based 
development tools targeting production enterprise Internet applications; 
middleware companies advocating a middleware-centric approach to building 
enterprise applications; developers of packaged applications and application 
components, templates and frameworks; and integration software vendors.

         Many of these competing vendors have or will have significantly 
greater financial, technical, marketing and other resources than the Company, 
and may be able to respond more quickly to new or emerging technologies. 
Also, many current and potential competitors have greater name recognition 
and more extensive customer bases that could be leveraged, thereby gaining 
market share to the Company's detriment. The Company expects to face 
additional competition as other established and emerging companies enter the 
distributed application development market and new products and technologies 
are introduced. Increased competition could result in price reductions, fewer 
customer orders, reduced gross margins and loss of market share, any of which 
could materially and adversely affect the Company's business, operating 
results and financial condition. In addition, current and potential 
competitors may make strategic acquisitions or establish cooperative 
relationships among themselves or with third-parties, thereby increasing the 
ability of their products to address the needs of the Company's prospective 
customers. Accordingly, it is possible that new competitors or alliances 
among current and new competitors may emerge and rapidly gain significant 
market share. Such competition could materially and adversely affect the 
Company's ability to sell additional licenses and maintenance and support 
renewals on terms favorable to the Company. Further, competitive pressures 
could require the Company to reduce the price of Forte licenses and related 
products and services, which could materially and adversely affect the 
Company's business, operating results and financial condition. There can be 
no assurance that the Company will be able to compete successfully against 
current and future competitors, and the failure to do so would have a 
material adverse effect upon the Company's business, operating results and 
financial condition.

                                       22
<PAGE>

         The principal competitive factors affecting the market for Forte are 
ease of application development, deployment and management functionality and 
features, product architecture, product performance, reliability and 
scaleability, product quality, price and customer support. The Company 
believes it presently competes favorably with respect to each of these 
factors. However, the Company's market is still evolving and there can be no 
assurance that the Company will be able to compete successfully against 
current and future competitors and the failure to do so successfully will 
have a material adverse effect upon the Company's business, operating results 
and financial condition.

         NEW ACCOUNTING STANDARDS. Statement of Position ("SOP") 97-2, 
"Software Revenue Recognition," as amended by Statements of Position 98-4 and 
98-9, was issued in October 1997 and addresses software revenue recognition 
matters. The SOP supersedes SOP 91-1 and is effective for transactions 
entered into for fiscal years beginning after December 15, 1997. The Company 
was required to adopt this SOP in its first quarter of fiscal year 1999 and 
restatement of prior financial statements was prohibited. Based upon 
interpretation of SOP 97-2, the Company believes its current revenue 
recognition policies and practices are materially consistent with the SOP. 
However, implementation guidelines for this standard have not yet been issued 
and a wide range of potential interpretations are being discussed by the 
accounting profession. Once available, such implementation guidance could 
lead to unanticipated changes in the Company's current revenue accounting 
practices, and such changes could materially and adversely affect the 
Company's future revenue and operating results.

         Such implementation guidance may necessitate substantial changes in 
the Company's business practices in order for the Company to continue to 
recognize a substantial portion of its license fees revenue upon delivery of 
its software products. Such changes may reduce demand, extend sales cycles, 
increase administrative costs and otherwise adversely affect operations. In 
addition, the Company may be put at a competitive disadvantage relative to 
foreign based competitors not subject to U.S. generally accepted accounting 
principles.

         LENGTHY SALES CYCLE. The Company's products are typically used to 
develop applications that are critical to a customer's business, and the 
purchase of the Company's products is often part of a customer's larger 
business process reengineering initiative or implementation of distributed 
computing. As a result, the license and implementation of the Company's 
software products generally involves a significant commitment of management 
attention and resources by prospective customers. Accordingly, the Company's 
sales process is often subject to delays associated with a long approval 
process that typically accompanies significant initiatives or capital 
expenditures. In addition, there are a large number of alternative methods or 
technologies to develop applications which can require significant time for 
potential customers to evaluate, and implementation of a favorable decision 
to license the Company's products may be subject to delay due to higher 
priority projects such as Year 2000 compliance. For these and other reasons, 
the sales cycle associated with the license of the Company's products is 
often lengthy and subject to a number of significant delays over which the 
Company has little or no control. There can be no assurance that the Company 
will not experience these and additional delays in the future. Therefore, the 
Company believes that its quarterly operating results are likely to vary 
significantly in the future.

         RISK ASSOCIATED WITH NEW VERSIONS AND NEW PRODUCTS; RAPID 
TECHNOLOGICAL CHANGE. The software market in which the Company competes is 
characterized by rapid technological change, 

                                       23
<PAGE>

frequent introductions of new products, changes in customer demands and 
evolving industry standards. The introduction of products embodying new 
technologies and the emergence of new industry standards can render existing 
products obsolete and unmarketable. For example, the Company's customers have 
adopted a wide variety of hardware, software, database, networking and 
Internet-based platforms, and as a result, to gain broad market acceptance, 
the Company has had to support Forte on many of such platforms. The Company's 
customers use the Company's proprietary development language to develop 
applications using the Company's products, and customers may desire to 
utilize other widely-used programming languages to develop Internet-based and 
other distributed applications. The Company's future success will depend upon 
its ability to address the increasingly sophisticated needs of its customers 
by supporting existing and emerging hardware, software, programming language, 
database, networking and Internet-based platforms and by developing and 
introducing enhancements to Forte, related products and new products on a 
timely basis that keep pace with such technological developments and emerging 
industry standards and changing customer requirements. There can be no 
assurance that the Company will be successful in developing and marketing 
enhancements to Forte and related products that respond to technological 
change, evolving industry standards or changing customer requirements, that 
the Company will not experience difficulties that could delay or prevent the 
successful development, introduction and sale of such enhancements or that 
such enhancements will adequately meet the requirements of the marketplace 
and achieve any significant degree of market acceptance. The Company has in 
the past experienced delays in the release dates of enhancements to Forte. If 
release dates of any future Forte enhancements or new products are delayed or 
if when released they fail to achieve market acceptance, the Company's 
business, operating results and financial condition would be materially and 
adversely affected. In addition, the introduction or announcement of new 
product offerings or enhancements by the Company or the Company's competitors 
may cause customers to defer or forgo purchases of current versions of Forte 
and related products, which could have a material adverse effect on the 
Company's business, operating results and financial condition.

         LIMITED DEPLOYMENT; DEPENDENCE ON SYSTEM INTEGRATORS AND VALUE ADDED 
RESELLERS. The Company first shipped Forte in August 1994. To date, only a 
limited number of the Company's customers have completed the development and 
deployment of distributed applications using Forte and related products. If 
any of the Company's customers are not able to successfully develop and 
deploy distributed applications with Forte and related products, the 
Company's reputation could be damaged, which could have a material adverse 
effect on the Company's business, operating results and financial condition. 
In addition, the Company expects that a significant percentage of its future 
revenue will be derived from sales to existing customers. If existing 
customers have difficulty deploying applications built with Forte and related 
products or for any other reason are not satisfied with Forte products, the 
Company's business, operating results and financial condition would be 
materially and adversely affected. The Company's customers and potential 
customers often rely on third-party system integrators and value added 
resellers to develop and deploy distributed applications. If the Company is 
unable to adequately train a sufficient number of system integrators and 
value added resellers or if, for any reason, a large number of such 
integrators and value added resellers adopt a product or technology other 
than Forte, the Company's business, operating results and financial condition 
would be materially and adversely affected.

         RISK OF SOFTWARE DEFECTS. Software products as internally complex as 
Forte and related products frequently contain errors or defects, especially 
when first introduced or when new versions or enhancements are released. The 
Company introduced Release 2.0 of Forte in November 1995, 

                                       24
<PAGE>

Release 3.0 of Forte in August in 1997 and the initial release of Forte 
Conductor in September 1997. Despite extensive product testing by the 
Company, the Company has discovered software errors in its releases after 
their introduction. Although the Company has not experienced material adverse 
effects resulting from any such defects or errors to date, there can be no 
assurance that, despite testing by the Company and by current and potential 
customers, defects and errors will not be found in current versions, new 
versions, new product or enhancements to existing products after commencement 
of commercial shipments, resulting in loss of revenue or delay in market 
acceptance, which could have a material adverse effect upon the Company's 
business, operating results and financial condition.

          PRODUCT LIABILITY. The Company markets Forte to customers for the 
development, deployment and management of distributed applications. The 
Company's license agreements with its customers typically contain provisions 
designed to limit the Company's exposure to potential product liability 
claims. It is possible, however, that the limitation of liability provisions 
contained in the Company's license agreements may not be effective as a 
result of existing or future federal, state or local laws or ordinances, or 
unfavorable judicial decisions. Although the Company has not experienced any 
product liability claims to date, the sale and support of Forte by the 
Company may entail the risk of such claims, which are likely to be 
substantial in light of the use of Forte in business-critical applications. A 
successful product liability claim brought against the Company could have a 
material adverse effect upon the Company's business, operating results and 
financial condition.

         RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS. Revenue from foreign 
subsidiaries and export sales accounted for 48 percent and 49 percent of the 
Company's total revenue for the quarters ended December 31, 1998 and 1997, 
respectively. The Company currently has international sales offices located 
in Australia, Belgium, Canada, France, Germany, Holland, Switzerland, Italy 
and the United Kingdom which have generated substantially all direct 
international revenue recognized by the Company to date. The Company believes 
that in order to increase sales opportunities and regain profitability, it 
will be required to continue to expand its international operations. The 
Company has committed, and continues to commit, significant management time 
and financial resources to developing direct and indirect international sales 
and support channels. There can be no assurance, however, that the Company 
will be able to maintain or increase international market demand for Forte 
and related products. To the extent that the Company is unable to do so in a 
timely manner, the Company's international sales will be limited, and the 
Company's business, operating results and financial condition would be 
materially and adversely affected.

         International operations are subject to inherent risks, including 
the impact of possible recessionary environments in economies outside the 
United States, costs of localizing products for foreign markets, longer 
accounts receivable collection periods and greater difficulty in accounts 
receivable collection, unexpected changes in regulatory requirements, 
difficulties and costs of staffing and managing foreign operations, reduced 
protection for intellectual property rights in some countries, potentially 
adverse tax consequences, and political and economic instability. There can 
be no assurance that the Company or its distributors or resellers will be 
able to sustain or increase international revenue from licenses or from 
maintenance and service, or that the foregoing factors will not have a 
material adverse effect on the Company's future international revenue and, 
consequently, on the Company's business, operating results and financial 
condition. The Company's direct international revenue is generally 
denominated in local currencies. The Company does not 

                                       25
<PAGE>

currently engage in hedging activities. Revenue generated by the Company's 
distributors and resellers are generally paid to the Company in United States 
dollars. Although exposure to currency fluctuations to date has been 
insignificant, there can be no assurance that fluctuations in currency 
exchange rates in the future will not have a material adverse impact on 
revenue from international sales and thus the Company's business, operating 
results and financial condition.

         PROPRIETARY RIGHTS, RISKS OF INFRINGEMENT AND SOURCE CODE RELEASE. 
The Company relies primarily on a combination of patent, copyright and 
trademark laws, trade secrets, confidentiality procedures and contractual 
provisions to protect its proprietary rights. The Company also believes that 
factors such as the technological and creative skills of its personnel, new 
product developments, frequent product enhancements, name recognition and 
reliable product maintenance are essential to establishing and maintaining a 
technology leadership position. The Company seeks to protect its software 
documentation and other written materials under trade secret and copyright 
laws, which afford only limited protection. The Company currently has one 
issued United States patent that expires in 2012 and corresponding patent 
applications pending in Canada, Australia, Japan and several member countries 
within the European Patent Organization. There can be no assurance that the 
Company's patent will not be invalidated, circumvented or challenged, that 
the rights granted thereunder will provide competitive advantages to the 
Company or that any of the Company's pending or future patent applications, 
whether or not being currently challenged by applicable governmental patent 
examiners, will be issued with the scope of the claims sought by the Company, 
if at all. Furthermore, there can be no assurance that others will not 
develop technologies that are similar or superior to the Company's technology 
or design around the patents owned by the Company. The Company has obtained 
registration of the FORTE trademark in six countries and has trademark 
registration applications pending in numerous additional countries. Despite 
the Company's efforts to protect its proprietary rights, unauthorized parties 
may attempt to copy aspects of the Company's products or to obtain and use 
information that the Company regards as proprietary. Policing unauthorized 
use of the Company's products is difficult, and while the Company is unable 
to determine the extent to which piracy of its software products exists, 
software piracy can be expected to be a persistent problem. In addition, the 
laws of some foreign countries do not protect the Company's proprietary 
rights as fully as do the laws of the United States. There can be no 
assurance that the Company's means of protecting its proprietary rights in 
the United States or abroad will be adequate or that competition will not 
independently develop similar technology. The Company has entered into source 
code escrow agreements with a limited number of its customers and resellers 
requiring release of source code in certain circumstances. Such agreements 
generally provide that such parties will have a limited, non-exclusive right 
to use such code in the event that there is a bankruptcy proceeding by or 
against the Company, if the Company ceases to do business or if the Company 
fails to meet its support obligations. In addition, Digital Equipment 
Corporation ("Digital") and Mitsubishi Corporation ("Mitsubishi") each 
currently possess copies of Forte source code for certain limited purposes, 
subject to the terms of separate written agreements each company has entered 
into with the Company. Digital has an option to purchase a non-exclusive, 
fully-paid license of the Forte source code. Digital's option becomes 
exercisable if the Company is acquired and the acquiror fails to agree to 
assume the Company's contractual obligations to Digital. The provision of 
source code may increase the likelihood of misappropriation by third parties.

         The Company is not aware that it is infringing any proprietary 
rights of third-parties. There can be no assurance, however, that 
third-parties will not claim infringement by the Company of their 
intellectual property rights. The Company expects that software product 
developers will 

                                       26
<PAGE>

increasingly be subject to infringement claims as the number of products and 
competitors in the Company's industry segment grows and the functionality of 
products in different industry segments overlaps. Any such claims, with or 
without merit, could be time consuming to defend, result in costly 
litigation, divert management's attention and resources, cause product 
shipment delays or require the Company to enter into royalty or licensing 
agreements. Such royalty or licensing agreements, if required, may not be 
available on terms acceptable to the Company, if at all. In the event of a 
successful claim of product infringement against the Company and failure or 
inability of the Company to license the infringed or similar technology, the 
Company's business, operating results and financial condition would be 
materially and adversely affected.

         The Company relies upon certain software that it licenses from 
third-parties, including software that is integrated with the Company's 
internally developed software and used in Forte to perform key functions. 
There can be no assurance that these third-party software licenses will 
continue to be available to the Company on commercially reasonable terms. The 
loss of, or inability to maintain, any such software licenses could result in 
shipment delays or reductions until equivalent software could be developed, 
identified, licensed and integrated which would materially and adversely 
affect the Company's business, operating results and financial condition.

         VOLATILITY OF STOCK PRICE. The Company's Common Stock has 
experienced significant price volatility and such volatility may occur in the 
future. Factors, such as announcements of the introduction of new products by 
the Company or its competitors and quarter-to-quarter variations in the 
Company's operating results, as well as market conditions in the technology 
and emerging growth company sectors, may have a significant impact on the 
market price of the Company's Common Stock. Further, the stock market has 
experienced extreme volatility that has particularly affected the market 
prices of equity securities of many high technology companies and that often 
has been unrelated or disproportionate to the operating performance of such 
companies. These market fluctuations may adversely affect the price of the 
Common Stock.

         EFFECT OF CERTAIN CHARTER PROVISIONS; ANTI-TAKEOVER EFFECTS OF 
RIGHTS PLAN, CERTIFICATE OF INCORPORATION, DELAWARE LAW AND CERTAIN 
AGREEMENTS. The Company's Board of Directors has the authority to issue up to 
5,000,000 shares of Preferred Stock and to determine the price, rights, 
preferences, privileges and restrictions, including voting and conversion 
rights of such shares, without any further vote or action by the Company's 
stockholders. The rights of the holders of Common Stock will be subject to, 
and may be adversely affected by, the rights of the holders of any Preferred 
Stock that may be issued in the future. The issuance of Preferred Stock could 
have the effect of making it more difficult for a third-party to acquire a 
majority of the outstanding voting stock of the Company. The Company has no 
current plans to issue shares of Preferred stock. Further, the Company has 
adopted a stockholder rights plan that, in conjunction with certain 
provisions of the Company's Certificate of Incorporation and of Delaware law, 
could delay or make more difficult a merger, tender offer, or proxy contest 
involving the Company.

                                       27
<PAGE>

PART II

ITEM 1.  LEGAL PROCEEDINGS

         The Company is not aware of any pending or threatened litigation that
could have a material adverse effect upon the Company's business, operating
results or financial condition.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)   Exhibits

               27.1     Financial data schedule.

         (b)   REPORTS ON FORM 8-K 

               No reports on Form 8-K have been filed during the quarter 
               ended December 31, 1998.




                                       28
<PAGE>

SIGNATURES

         Pursuant to the requirements of the Securities Act of 1934, as 
amended, the Registrant has duly caused this Report on Form 10-Q to be signed 
on its behalf by the undersigned, thereunto duly authorized, in the City of 
Oakland, State of California, on this 12th day of February, 1999.

                              FORTE SOFTWARE, INC.

                              By:



                              Bob L. Corey

                              SENIOR VICE PRESIDENT, FINANCE AND
                              ADMINISTRATION, CHIEF FINANCIAL OFFICER
                              AND SECRETARY





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