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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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


                                  FORM 10-K/A

                            ------------------------
(MARK ONE)

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

                       FOR THE YEAR ENDED MARCH 31, 2000

                                       OR

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

         FOR THE TRANSITION PERIOD FROM ____________ TO ____________ .

                        COMMISSION FILE NUMBER 000-26437

                             ACCRUE SOFTWARE, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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                  DELAWARE                                      94-3238684
       (STATE OR OTHER JURISDICTION OF             (I.R.S. EMPLOYER IDENTIFICATION NO.)
       INCORPORATION OR ORGANIZATION)
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                              48634 MILMONT DRIVE
                             FREMONT, CA 94538-7353
          (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)

                                 (510) 580-4500
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

                 [FORMER NAME OR FORMER ADDRESS, IF APPLICABLE]
   (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
                                    REPORT)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No [ ]

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

     The approximate aggregate market value of the registrant's common stock
held by nonaffiliates of the registrant (based on the closing sales price of
such stock as reported by the NASDAQ Stock Market) on May 31, 2000 was
$284,359,368. This amount excludes shares of common stock held by directors,
officers and each person who holds 5% or more of the registrant's common stock.
The number of shares of common stock, $0.001 par value per share, outstanding as
of May 31, 2000 was 27,462,634.

                      DOCUMENTS INCORPORATED BY REFERENCE

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                         DOCUMENTS                                    FORM 10-K REFERENCE
                         ---------                                    -------------------
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Portions of the Proxy Statement for the registrant's 2000       Items 11, 12 and 13 of Part III
  Annual Meeting of Stockholders are incorporated by
  reference into Part III of this Form 10-K
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     THIS ANNUAL REPORT ON FORM 10-K/A AMENDS AND RESTATES IN ITS ENTIRETY THE
ANNUAL REPORT ON FORM 10-K FILED BY ACCRUE SOFTWARE, INC. ON JUNE 29, 2000.


     This Annual Report on Form 10-K contains forward-looking statements
reflecting management's current forecast of certain aspects of our future. It is
based on current information which we have assessed but which by its nature is
dynamic and subject to rapid and even abrupt changes. Forward looking statements
include statements regarding future operating results, liquidity, capital
expenditures, product development and enhancements, numbers of personnel,
strategic relationships with third parties, and strategy. The forward-looking
statements are generally accompanied by words such as "plan," "estimate,"
"expect," "believe," "should," "would," "could," "anticipate" or other words
that convey uncertainty of future events or outcomes. Our actual results could
differ materially from those stated or implied by our forward-looking statements
due to risks and uncertainties associated with our business. These risks are
described throughout this Annual Report on Form 10-K, which you should read
carefully. We would particularly refer you to the "Risk Factors" section under
Item 1 of this Report for an extended discussion of the risks confronting our
business. The forward-looking statements in this Annual Report on Form 10-K
should be considered in the context of these risk factors.

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                             ACCRUE SOFTWARE, INC.

                           ANNUAL REPORT ON FORM 10-K
                       FOR THE YEAR ENDED MARCH 31, 2000

                               TABLE OF CONTENTS

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                                   PART I
Item 1.    Business....................................................    4
Item 2.    Properties..................................................   26
Item 3.    Legal Proceedings...........................................   26
Item 4.    Submission of Matters to a Vote of Security Holders.........   26

                                   PART II
Item 5.    Market for Registrant's Common Equity and Related
           Stockholder Matters.........................................   27
Item 6.    Selected Financial Data.....................................   28
Item 7.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations...................................   29
Item 7A.   Quantitative and Qualitative Disclosure About Market
           Risks.......................................................   35
Item 8.    Consolidated Financial Statements...........................   36
Item 9.    Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure....................................   54

                                  PART III
Item 10.   Directors and Executive Officers of the Registrant..........   54
Item 11.   Executive Compensation......................................   56
Item 12.   Security Ownership of Certain Beneficial Owners and
           Management..................................................   56
Item 13.   Certain Relationships and Related Transactions..............   56

                                   PART IV
Item 14.   Exhibits, Financial Statement Schedule, and Reports on Form
           8-K.........................................................   57
SIGNATURES.............................................................   60
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                                     PART I

ITEM 1. BUSINESS

OVERVIEW

     Accrue is a leading provider of Internet data collection and analysis
software which enables business decision makers to address critical marketing
and merchandising questions concerning the effectiveness of their Web sites. Our
products, Accrue Insight, Hit List and Decision Series are comprehensive
solutions that we believe help Internet businesses increase numbers of visitors,
customer loyalty and sales by collecting, storing, analyzing and reporting Web
site activity data at a level of detail and accuracy that distinguishes our
technology from others. Accrue products are highly scalable, meaning they are
detailed and robust enough to meet the needs of successful and rapidly expanding
Web sites as their user volumes greatly expand.

     Merchandising managers traditionally depend on analysis of marketing
metrics like campaign effectiveness, shopping patterns or price elasticity, and
the quantity of that data has increased dramatically as the information age has
extended the number of methods and reach for marketing communications.
Conducting traditional marketing analysis has therefore become more complicated.
In addition, the Internet has now emerged as the fastest growing communication
and commerce medium in history, creating new challenges which further compound
the complexity of collecting and analyzing valuable merchandising information.
As a result, businesses are demanding analysis that provides a measure of return
on investment for their Internet initiatives. Despite the need for a detailed,
flexible, robust and easy-to-use approach to Internet merchandising analysis, we
believe Accrue is the only company available that delivers an integrated
solution addressing all of these requirements.

INDUSTRY BACKGROUND

  Traditional Merchandising and Marketing Analysis

     Analysis of customer behavior and preferences is critical to the success of
all businesses. Analysis helps business managers make informed decisions and
understand the results of those decisions. Historically, retailers knew their
customers personally, enabling them to address the needs and preferences of
customers in their wholesale or distribution ordering practices. Product and
service providers have always tracked sales patterns and inventory turn rates to
determine which types of offerings should be emphasized to manage production
capacity. Sales patterns began to be used in determining marketing strategy as
businesses grew to recognize that similar products and services with
differentiated packaging, or other distinguishing features, could inspire
noticeably different levels of demand.

     As mass media developed and businesses continued to evolve, managers became
increasingly concerned with monitoring the effectiveness of merchandising
methods employed to encourage purchases. Publishers and broadcasters responded
to this concern by providing managers with circulation or audience rankings,
such as Nielson Reports for television, and advertising response tracking
methods, such as code numbered coupons. This marketing reach and effectiveness
data has become so important that today the advertising industry primarily
prices its services based on quantitative analysis of this data. As the types
and accuracy of merchandising information expanded, managers grew to depend on
that information to drive answers to a growing number of questions, such as:
Where did my customers come from? How did my customers shop? Where in the store
should products be placed? How should products or services be packaged? Which
customer segments respond best to different types of products? What is my
customers' sensitivity to various price points? Informed responses to these and
other related questions have become critical to designing and maintaining
successful sales and marketing strategies.

     The quantity, variety and complexity of marketing and merchandising
information continues to grow as the information age has driven an increase in
the number of methods and channels for disseminating marketing messages.
Merchandising managers have begun to turn to robust, or enterprise quality,
decision support software to help transform data gathered in traditional
marketing environments into business intelligence that can be used by various
constituencies within their organizations. In this context of increasing

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complexity for conducting traditional merchandising and marketing analysis, the
Internet has emerged as the fastest growing and most expansive communication and
commerce medium in history.

  Growth of the Internet and e-Commerce

     The Internet is a rapidly growing medium for global communications and
electronic business. International Data Corporation estimates that the number of
Web users will grow from approximately 97 million worldwide in 1998 to
approximately 320 million by the end of 2002. The U.S. Department of Commerce
estimates that Internet traffic doubles every 100 days. The number of Web sites
detected by the Netcraft Web Server Survey increased from approximately 1.0
million in April 1997 to approximately 2.2 million in April 1998, and to over
5.0 million in April 1999, reflecting annual growth exceeding 100%.

     The growth of the Internet is attributable to its value as a low-cost, open
and accessible platform for communications and commerce. As a result of these
attributes, organizations are increasingly embracing the Internet as a critical
platform for communicating with partners, customers and employees, and
conducting business. The Internet allows companies to develop one-to-one
relationships with customers worldwide without making significant incremental
investments in traditional infrastructure, such as retail outlets, distribution
networks and sales personnel. However, organizations must support their
e-business initiatives by investing heavily in Internet technology, content, and
infrastructure software.

     Because Internet interactions are two-way and entirely technology-based,
the Internet creates exponentially expanded quantities and types of customer
interaction data points, compounding the complexity associated with collecting
and analyzing this valuable merchandising and marketing information. This
information drives critical business decisions and the need for e-commerce data
collection and analysis.

  The Need for e-Business Analysis

     As an increasing portion of existing businesses migrate some of their
activity to e-business platforms, advanced technologies are required to enable
the type of sophisticated merchandising and marketing analysis those managers
have grown to depend on in their traditional businesses. So too are entirely new
businesses being formed to focus on e-business alone. Both migrating and new
Web-based businesses are demanding data that provides a measure of the return on
their investment in Internet initiatives. This return is ultimately expressed in
terms of increased customer traffic, visitor loyalty and sales through their Web
sites. With Internet activity rates high and growing rapidly, e-businesses must
collect and analyze large volumes of data for use by various e-business units
within their organizations by finding robust enterprise-class solutions. An
inherent requirement of enterprise class e-business analysis solutions is the
capability to address the following needs:

     - need for decisions based on facts

     - need for scalable, robust solutions

     - need for comprehensive, customer analysis

     To date, e-commerce companies have purchased available network software
tools originally designed for purposes other than Web site effectiveness
analysis. Reporting and management tools originally designed for traditional
network management cannot analyze Internet-specific activity and therefore
cannot provide the level of detail and accuracy required to make strategic
e-business decisions. Further, these traditional tools are generally focused on
monitoring and maintaining network infrastructure areas such as traffic,
security, availability or quality of service. Some companies have internally
developed applications for tracking and evaluating Web traffic, but they are
limited in functionality and expensive to maintain. Web-centric tools that
simply track the Web pages visitors click on by sorting and counting log files,
fail to reflect all of the visitor's interactions during a Web site visit.
Traditional business intelligence tools, known as online analytical processing,
or OLAP, cannot access Web customer data, such as timing, resets and navigation
flows of visitors through the Web site. OLAP products also lack Web modeling
capabilities, such as those required to

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configure global Web networks and define Web sites, including pages and hits.
Comprehensive e-business analysis solutions must be able to:

     - handle large traffic volumes and scale to handle the exponential growth
       expected in Internet usage on successful Web sites;

     - collect accurate and complete customer activity information from complex
       Web environments, comprised of mirrored content, switches, hubs, routers
       and servers in multiple geographical locations;

     - accommodate e-business requirements, such as security requirements or
       business rules, and provide the specific information each business unit
       manager needs;

     - integrate customer activity information with data from multiple sources,
       such as customer profile or demographic information, and transaction
       data;

     - recognize the amount of time a visitor spends on a particular Web site
       activity or content, the paths taken through the site and when a visitor
       resets a page instead of waiting to download the complete page;

     - allow managers to easily drill down into reports and mine the data
       interactively, with data filtering and segmentation capabilities, for a
       more detailed understanding of customer activity; and

     - offer flexible distribution capabilities for reporting and analysis
       throughout the enterprise.

     Despite the critical need for comprehensive, scalable and easy-to-use
e-business analysis solutions, we believe current products other than Accrue
Insight fail to deliver an integrated solution that addresses all of these
competitive requirements.

THE ACCRUE SOLUTION

     Our products provide a comprehensive, scalable, e-business analysis
solution that allows organizations to evaluate the effectiveness of their
e-business initiatives. Accrue Insight provides detailed Web site traffic
information and visitor activity data in a format and with a level of accuracy
that facilitates strategic merchandising and marketing decisions. Web site
managers and marketers can analyze this rich data to make merchandising and
marketing decisions which maximize revenue, new buyers and customer loyalty. We
also provide professional services to assist customers at every stage of Accrue
Insight deployment, from identification of specific business needs through
enterprise integration and customization of e-business analysis reporting, to
delivering a rapid and effective implementation. We believe customers can
utilize Accrue Insight to obtain the following results:

     - Increase number of customers. Our solution provides insight into which
       external Web sites send the more qualified prospects to a customer's Web
       site, allowing our customers to more effectively spend marketing dollars
       and increase the number of customers.

     - Increase customer loyalty. Our solution permits customers to know
       factually which content is important and appropriate, thereby enhancing
       customer satisfaction and encouraging return visits.

     - Increase sales. Our solution allows customers to determine how different
       customer segments interact with their Web sites, enabling them to turn
       more lookers into buyers.

     Our solution provides the following enterprise-class e-business analysis
features:

     Network-Based Measurement Mechanism. The most precise way to analyze Web
traffic is to collect data directly from the network by deciphering the content
of, and indicators embedded in, data packets as they move across the network,
analysis referred to as "packet sniffing." This network-based analysis provides
a factual and complete picture of a visitor's activity at a Web site beyond that
which can be achieved through more common log file based approaches. Our packet
sniffing technology summarizes the details of each interaction to prepare the
data for storage and analysis. The benefits of our packet sniffing analysis
include the ability to collect data pertaining to:

     - Visitors -- understanding who Web site visitors are, where they came
       from, and how long they stayed.

     - Visits -- exploring behavioral (duration and page depth) patterns of
       visitors over repeat visits.

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     - Content -- measuring the effectiveness of content, including the actual
       delivered content, the most popular content, and the stickiness, or
       duration of viewing, of content.

     - Navigation -- determining the flow of visitors through a Web site to
       measure the effectiveness of site layout, and the most common path to
       purchase for each market segment.

     Integrated Data Warehouse for Scalability. Increasing numbers of Web sites
receive millions of hits per day and this traffic is growing exponentially. To
enable effective e-business analysis, companies must collect, process, store and
make available for analysis the data generated from these millions of hits.
Accrue Insight is designed to operate effectively across Web sites with the
following characteristics:

     - 50 million hits per day;

     - hundreds of Web servers supporting over 2,000 Web sites;

     - generation of thousands of unique reports per day;

     - storage of hundreds of gigabytes of historical activity data; and

     - complex, globally distributed content.

     High-Value Navigation Analysis. Integral to today's complex merchandising
decisions is understanding visitors' paths through Web sites, including where
they came from, what they looked at and where they went. Accrue Insight provides
a graphical view of customers' visits illustrating the following:

     - the referring Web site links, such as ad banners, affiliate sites or
       search engines;

     - content viewed and sequence of interaction; and

     - path taken from shopping to buying.

     Open Architecture. Our solution is designed to accommodate enterprise
standards, corporate rules, and dynamically changing businesses. Accrue Insight
easily integrates into companies existing information systems and merges
existing corporate customer and transaction data with Web site visitor data,
thereby extending organizations' e-business analysis capabilities.

     Comprehensive Analysis. Our solution provides powerful, easy to use,
comprehensive analysis capabilities through advanced data mining and flexible
report generation. An interactive Web-based interface allows users to select
pre-defined reports and specify parameters such as a date range and filters. Our
software performs complex queries and substantial post-processing to generate
targeted reports. These reports display the results of quantitative analysis,
showing counters, averages and trends of a wide variety of Web site visitor,
content and navigation activity.

     Enterprise Report Distribution. All reports can be scheduled for daily,
weekly or monthly execution and emailed to a select corporate-wide distribution
list as both an hyper-text machine language, or HTML, page and spreadsheet-ready
format for additional processing.

ACCRUE STRATEGY

     Our objective is to extend our position as a leading provider of
enterprise-class e-business analysis software. To achieve this objective, our
strategy includes the following key elements:

     Extend Leadership in High-End e-Business Analysis. We believe that we are a
leading provider of high-end, e-business analysis products and services as a
result of our advanced technologies for the collection and analysis of
comprehensive Web site activity data, and our broad base of global customers
across multiple industries. We plan to extend this leadership by continuing to
cater to business decision makers through our focus on enhancing analysis
functions for e-commerce, sales, marketing, advertising and Web site design. As
managers of e-business units develop new requirements and confront new
questions, we plan to anticipate and respond to those needs. We intend to do
this through internal product development, corporate partnering, and
acquisitions. We also intend to offer our customers consulting services to help
them analyze collected data in order to make more effective Web marketing and
merchandising decisions.

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     Maintain Technological Leadership in e-Business Analysis Software. Our
solutions are based on advanced proprietary technologies which provide the basis
for our leading high-end e-business analysis software. For example, our solution
utilizes non-intrusive, network-based measurement technology as the primary
mechanism for Web data collection. In combination with our robust data warehouse
architecture, we believe our technology has allowed us to develop the most
detailed, accurate and scalable commercial product currently available in our
market. Our product is capable of successfully tracking, collecting and storing
data generated by complex, multi-server Web sites that serve more than 50
million hits per day. These technologies were developed by our software
engineers who have a significant amount of experience designing enterprise
software applications. To maintain our technological leadership for the high-end
enterprise market, we plan to continue to invest in research and development and
to incorporate additional industry-leading components into our software.

     Leverage Web Data Platform. Through the use of our software, our customers
collect comprehensive Web site visitor information and may leverage that
information by using it in business software applications provided by us now and
in the future as well as by other third party vendors. For example, we intend to
offer our customers expanded capabilities to contribute their Web site activity
data to their existing corporate applications. As a result, our customers will
be able to utilize this information in a variety of sophisticated ways,
including in combination with back office applications such as sales force
automation tools, such as those provided by Siebel Systems, Inc., call center
applications, such as those provided by Clarify, Inc., and e-business
applications, such as those provided by Vignette Corporation and Net
Perceptions, Inc., and traditional business intelligence tools, such as those
provided by MicroStrategy, Inc. We believe attractive incremental product and
service revenue opportunities exist for Accrue in helping our customers realize
this leverage.

     Leverage and Expand Blue Chip Customer Base. We currently provide our
software and services to more than 500 leading companies across numerous
industries, including publishing, entertainment, media, high technology,
financial services and retail. Our customers frequently purchase additional
software and services from us as they experience increases in Web site traffic,
higher levels of complexity in the scope of their e-business activities, and
more sophisticated needs for internal merchandising and marketing analysis. Our
customer base also provides an accessible market for newly developed or acquired
products and services.

     Continue Developing Strategic Alliances. We intend to continue developing
alliances with leading strategic platform providers, e-business application
providers, interactive agencies and Web hosting organizations, solution
providers, and business process applications vendors. We believe that these
partnerships will accelerate market penetration of our software by providing
additional marketing and distribution channels for our applications. We believe
that these alliances could also promote additional revenue opportunities, such
as partnered consulting service fees generated by our cooperation with partners
to help customers analyze collected data to make e-business decisions.

     Expand Sales and Distribution Channels. By increasing the number of direct
sales professionals as well as utilizing systems integrators and resellers to
complement direct selling efforts we will be able to address a broader market
for our products. In addition, as use of the Internet increases internationally,
we believe that international markets will represent a significant market for
our products and services. We plan to establish an early marketing, sales and
support presence in selected international markets, including targeted European
and Asian countries, to enhance our long-term competitive advantage in these
regions. We also intend to utilize international distributors in international
markets generally and to implement localized versions of our applications.

     Pursue Strategic Acquisitions. We intend to pursue acquisitions of
businesses, products, services, technologies, and distribution channels that are
complementary to our existing business to expand our position in the enterprise
e-business analysis software market. Although we have no present commitments or
agreements regarding any acquisitions, we believe that there are many
acquisition candidates that could enhance our position in this market.

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PRODUCTS AND SERVICES

  Accrue Insight 3.1

     Our flagship product, Accrue Insight 3.1, provides our customers with
detailed information about visitors to their Web sites including the frequency
of visits by each visitor, content effectiveness, the external site from which a
visitor reached the Web site, the path taken by visitors within the Web site,
time spent by visitors at the Web site, and specific page resets. Accrue Insight
monitors traffic served from any Web server on all hardware platforms and is
capable of providing information to address the following questions:

     - How many visitors are coming to the Web site?

     - How many new versus repeat visitors are coming to the Web site?

     - What are some of the demographics of visitors to the Web site?

     - Which search engines and portals are referring qualified prospects to the
       Web site?

     - What was the point of reference for a specific visitor to access the Web
       site?

     - How are visitors traveling or progressing through the Web site?

     - Which pages are most popular?

     - What changes can be made to the Web site to make the most popular pages
       easy to find?

     - How can the appearance of the Web site be improved in light of the most
       frequently used browsers and access speeds of visitors?

     - How many visits to the Web site result in sales transactions?

     - What is the revenue generated by a particular page?

     - How many times did visitors reach a particular page and then hit the stop
       button to end the visit?

     Accrue Insight consists of our network collector, analyzer and data
warehouse combined with powerful reporting and access options within an
integrated system architecture:

     Network Collector. Our network collector software sits passively in the
customer's network configuration of Web servers, routers, switches and load
balancing products, and counts and records all click streams comprising visitor
activity to the customer's Web site. The network collector runs on the Sun
Solaris 2.5/2.6 and Microsoft NT 4.0 operating system platforms, and is
installed outside of the customer's firewall to achieve non-invasive
functionality. The network collector scales to handle millions of hits per day
on a 100Mbps Ethernet network while recording all details from each visit.

     Analyzer. Our analyzer software organizes the raw data gathered by the
network collector, analyzes Web site traffic and activity according to the
customer's specifications, filters out unneeded information, and adds a level of
intelligence to the data for optimal loading and storage. The analyzer organizes
and processes data so as to be able to answer questions from customers
concerning the flow of traffic to and from their Web sites.

     Data Warehouse. Data that is processed by our analyzer is optimized for
bulk loading into our high-speed data warehouse. Our data warehouse enables
automated and efficient data management, including storage, consolidation and
archiving, batch reporting and interactive data mining. Our data warehouse runs
on the Sun Solaris 2.5/2.6 operating system platform. We currently employ the
Red Brick database technology licensed to us by Informix Software, Inc. to
maintain data stored in our data warehouse.

     Report Wizard. Report Wizard is our software tool that allows customers to
design customized reports displaying data extracted from the data warehouse. The
reports can be saved, exported to spreadsheet programs like Microsoft Excel,
scheduled for automatic generation and delivery at a later time via email, or
posted to a restricted-access Web page.

     MyAccrue. MyAccrue is our report personalization software which allows
end-users to design either standard or customized reports which are
automatically updated and distributed as scheduled on a daily, weekly or monthly
basis, via email to the end-user.

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     Application Access. Accrue Insight 3.1 allows customers to provide their
Web site data to third party applications that can take action on it, such as
those provided by Siebel Systems, Inc., Clarify, Inc., and eGain Communications
Corporation, or whose applications will be enhanced by our licensed software,
such as those provided by Vignette Corporation, NetGravity, Inc., and Net
Perceptions, Inc.

     Pricing of Accrue Insight 3.1 is determined by total number of CPUs
contained in the servers of the Web sites a customer wishes to analyze. Annual
maintenance fees (which include product upgrades) are priced as a percentage of
the list license fee. Additional services are billed either on a fixed-fee or
time-and-materials basis.

  Accrue Hit List 4.5

     Our Microsoft Windows NT offering, Accrue Hit List 4.5, provides our
customers with similar functionality to Accrue Insight for sites with smaller
deployments and basic merchandising questions. We acquired this product in
connection with our acquisition of Marketwave Corporation in September 1999.

  Accrue Decision Series 3.2

     Our newest addition, Accrue Decision Series 3.2, provides our customers
with additional data mining and personalization capabilities to identify
profitable customers and to recommend products and content that are useful to
their Web site visitors. We acquired this product in connection with our
acquisition of NeoVista Software, Inc. in January 2000.

  Professional Services and Customer Support.

     Technical Support. We provide technical support to our customers through
telephone, email, our Web site, and on-site training. We offer toll-free
telephone assistance to our customers twenty-four hours a day, seven days a
week. Additionally, we offer monthly training sessions, called Tips &
Techniques, to our customers over the Web using a screen-sharing product called
PictureTalk from Pixion, Inc. We have also established an online bulletin board
using software provided by eShare Technologies, Inc. for our customers to share
ideas and questions with each other and with us. Our Web site also provides
online documentation of historical trouble-shooting cases.

     Training. We offer traditional on-site system administration training and
monthly end-user training over the Web using PictureTalk.

     Consulting. We offer consulting services to customers on either a fixed-fee
or time-and-materials basis. Our current consulting services and applicable fees
include the following:

     - QuickInsight -- installation and configuration of Accrue Insight in the
       customer's network over a two-day period for a fixed fee.

     - Vignette Quick Bridge -- consulting service and application to convert
       Web addresses produced by Vignette StoryServer into descriptive
       information suitable for analysis for a fixed fee per each deployed
       Vignette license.

     - ATG Bridge -- consulting service and application to convert Web addresses
       produced by Art Technology Group, Inc. into descriptive information
       suitable for analysis for a fixed fee per each deployed ATG license.

     - Custom Data Integration and Reporting -- integration of data from a
       separate customer database into the database created by Accrue Insight,
       billed at a daily rate.

     - Accrue Discovery Service -- strategic business consulting and analysis
       based on information derived from data collected and analyzed by Accrue
       Insight, billed at a fixed fee for a one-time evaluation.

     Online Services -- Accrue Site Knowledge (ASK) Service. We offer customers
the opportunity to outsource system administration responsibilities in
connection with their purchase of Accrue Insight by subscribing to our Accrue
Site Knowledge (ASK) Service, a hosting service administered by Accrue in
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cooperation with AboveNet Communications, Inc. ASK Service customers install the
network collectors at their site to collect their Web data, the data is
automatically transferred to a data warehouse hosted by Accrue. Using Accrue
Insight's flexible reporting options, customers receive daily, weekly or monthly
reports through email, or by accessing them through secure, personalized
MyAccrue Web pages on the Internet. By hosting the day-to-day management of
Accrue Insight for the customer, Accrue reduces the initial time and cost of
deployment and provides continuous and dependable application maintenance and
support. For the ASK Service customers pay Accrue's standard license and
maintenance fees for Accrue Insight plus a service fee and equipment leasing
costs.

     We have also established a number of informal alliances with solution
providers to supplement our internal service capacity to customers as required
to meet their deadlines and specifications. These alliances are not subject to
binding agreements, have no specified performance requirements by us or our
alliance partners, and may be terminated at any time. These solution providers
include Viant Corporation (Web site strategies), World Wide Web Associates
(training and consulting services with respect to our products), Cambridge
Technologies, Inc. (computer systems consulting and integration), Organic
Online, Inc.(online business builder) and AboveNet Communications, Inc. (Web
hosting services).

CUSTOMERS

     We have licensed our products to over 500 customers. Our customers
represent a broad spectrum of enterprises within diverse industries, including
publishing, entertainment and media, high technology, financial services, and
retail. The following is a representative list of our licensed customers to date
from which we continue to derive maintenance and service revenue:

<TABLE>
<CAPTION>
PUBLISHING, ENTERTAINMENT AND MEDIA         HIGH TECHNOLOGY                FINANCIAL SERVICES
-----------------------------------         ---------------                ------------------
<S>                                  <C>                             <C>
Bolt Media, Inc.                     Tyco Electronics                Ameritrade Holding
Children's Television                Earthweb                        Corporation
  Workshop                           Ascend Communications, Inc.     Investools, Inc.
Christian Science Monitor            Check Point Software            NationsBank Corporation
DreamWorks L.L.C.                    Technologies                    Standard & Poor's MMS
Family Education Company             Eastman Kodak Company           T. Rowe Price Associations,
Hearst New Media and                 Lucent Technologies, Inc.       Inc.
  Technology                         Gateway Companies, Inc.         Datek Online Holdings LLC
Hollywood Online, Inc.               Hitachi America, Ltd.           TheStreet.com, Inc.
CBS Marketwatch                      Iomega, Inc.                    Toronto Dominion Bank
Voter.com                            Lam Research Corporation        Financial Group
Los Angeles Times                    MathWorks, Inc.
Meredith Corporation                 Merck, Inc.                     E-COMMERCE
Miller Freeman, Inc.                 Motorola, Inc.                  Beyond.com Corporation
News America Digital                 National Semiconductor          Staples, Inc.
  Publishing, Inc.                   Corporation                     Costco Wholesale Corporation
Philadelphia Newspapers, Inc.        NetObjects, Inc.                DHL Worldwide Express
Salon Internet, Inc.                 Network Appliance, Inc.         Federal Express Corporation
San Jose Mercury News                Nokia, Inc.                     Hasbro, Inc.
Seattle Times, Inc.                  Nortel (Northern Telecom        MySimon, Inc.
Spinner Networking, Inc.             Limited)                        Preview Travel, Inc.
  (DBA Spnner.com)                   Oracle Corporation              J.C. Penney Company, Inc.
SportsLine, USA, Inc.                Qualcomm, Inc.                  Wal-Mart Stores, Inc.
Star Tribune                         Seagate Technology, Inc.        Walgreen Co.
Viacom Interactive Media-MTV         Sprint L.P.                     Lands' End, Inc.
Knight-Ridder, Inc.                  Synopsys, Inc.                  ShopNow.com, Inc.
Gannett Co., Inc.                    VeriSign, Inc.                  Sears, Roebuck and Co.
Dow Jones & Company
Quokka Sports, Inc.
</TABLE>

                                       11
<PAGE>   12

TECHNOLOGY AND ARCHITECTURE

     Accrue Insight is designed to provide a robust architecture for customers
to implement flexible, scalable, detailed, and accurate e-business analysis. The
Accrue Insight architecture is compatible with documented application
programming interfaces, APIs, protocols and file formats to enable integration
with external systems such as Web applications (such as commerce servers and ad
servers) and business process applications (such as sales force automation
systems and call center systems). The architecture adheres to numerous standard
programming languages, including hyper-text machine language, or HTML, Java and
C, and network protocols, including hyper-text transfer protocol, or HTTP. In
addition, we believe that our system architecture is flexible and powerful
enough to serve as the foundation for related future products.

     The Accrue Insight system architecture may be viewed as a Series of layers,
each performing specific functions between our customer's Web site and their
visitors.

     Collection Layer. The collection modules consist of our network collector,
server collector and logfile collector, each of which obtains data from
different sources. Our network collector is the most comprehensive collection
module within Accrue Insight and obtains data from the network through packet
sniffing technology. Our server collector is a customized module which plugs
directly into the customer's Web server for use in environments where encryption
of network traffic prevents packet sniffing, such as in credit card processing
and banking applications. Finally, our logfile collector may also be used when
encrypted or secure Web servers are employed or to obtain customer legacy data
that existed prior to installation of packet sniffing technology contained in
our network collector. All of these collection modules may be used in any
combination to gather and consolidate data into our data warehouse.

     Modeling Layer. Our analyzer provides a fast, flexible mechanism for
filtering, segmenting and organizing collected data into a Web site
configuration model that the customer has defined. Our analyzer performs the
following tasks:

     - sews or stitches collector data into a coherent view of the Web site,
       taking into consideration where the Web server resides in the customer's
       system configuration (physical server), the execution of the Web server,
       or logical server, and the specific mirrored set of content, or content
       set obtained from the Web server;

     - discards non-essential details;

     - translates raw hit information into concepts such as page views and the
       time spent viewing a page;

     - transposes raw Web server transaction data into higher-level information,
       such as visitors and visits;

     - tracks visitors across Web servers, time zones and different
       authentication mechanisms;

     - summarizes activity in many dimensions, such as by machine, URL or Web
       site identifier, content set, logical server, or Web site; and

     - creates a set of data to be loaded into the data warehouse.

     Storage Layer. The storage layer consists of a data warehouse for storing
Web customer activity data processed by the analyzer, Web site definition data,
and Web network configuration data, collectively known as meta data or data
about data. The storage layer also consists of an online analytical processing,
or OLAP, database for fast access to summarized data. In addition, the storage
layer includes a database administration subsystem capable of handling high
volumes of data, thereby alleviating the customer's need to dedicate excessive
resources to data administration.

     Data Access Layer. The data access layer consists of an API that provides a
unified view into the various storage facilities that make up the data warehouse
within Accrue Insight. It can also be used to access external databases, such as
those containing customer profile, demographic information and transaction data.

     Application Layer. Accrue and third-party software vendors can write
applications to provide additional, customized functionality in addition to
Accrue Insight's basic functionality. For instance, a rules engine can view the
data for specific business rules, and manipulate the data accordingly.
                                       12
<PAGE>   13

     Presentation Layer. MyAccrue provides enterprise-class service
functionality, such as scheduling, email and printing, that can be executed by
Accrue Insight. Report Wizard provides an easy to use, HTML interface to create
and save data queries in a format that can then be read by MyAccrue.

     Integration Layer. We originally designed Accrue Insight and continue to
enhance its features to allow for maximum integration into existing systems and
the creation of new functionality. Accrue Insight can be integrated into
existing systems through the following APIs:

     - Network Collector API. Our network collector API allows business rules to
       be invoked as data is being collected. For instance, the collector can be
       instructed not to save any hits for graphic images, and to ignore all
       hits from the local domain.

     - Analyzer API. Our analyzer API allows third-party applications to tailor
       how the analyzer executes. For instance, this API may cause the Analyzer
       to rewrite the URL to be more analysis-friendly, such as in the case of
       the Vignette Profile Bridge.

     - Data Access API. Our data warehouse provides a unified view of various
       legacy and third-party databases and data marts.

INDUSTRY STANDARDS

     We use many widely accepted standards in developing our products, including
structured query language, or SQL, and open data base connectivity, or ODBC, for
accessing the data warehouse, Netscape Application Programming Interface, or
NSAPI, for accessing Netscape's Web servers, hyper-text transfer protocol, or
HTTP, for communication between collectors and the central warehouse machine,
and hyper-text machine language, or HTML and Java for user interfaces. In
addition, Accrue Insight contains software that supports the ABC Interactive
digital signature standard, used for auditing log files for tampering. Most of
our software is written in C and Java, two widely accepted standard programming
languages for applications development. Adherence to industry standards provides
compatibility with existing applications, enables ease of modification, and
reduces the need for software to be rewritten, thus protecting the customer's
investment.

SALES AND MARKETING

     We currently market and sell our products primarily through our direct
sales force in North America. We have maintained a ratio of two to one sales
territory manager to sales engineer to support the consulting nature of our
sales process. We also intend to expand our marketing and selling efforts
through partnering with third parties. We have recently expanded into
international markets through informal alliances with Sumisho Electronics
Company, Ltd., a subsidiary of Sumitomo Corporation, and Itochu Techno-Science
Corporation in Japan and Scientific Computers GmbH in Europe and we plan to
leverage our management's experience in international expansion as opportunities
occur.

     Once a new customer lead is qualified, our typical sales process includes a
presentation of our products to the appropriate business executives within the
customer's organization, such as their vice president of sales, vice president
of marketing, or e-commerce director, followed by a product demonstration and
dialogue concerning technical questions. Normally product trials and evaluation
of the software are not required, as existing customer referrals and validation
are sufficient to handle new customer concerns.

     Currently, we have nineteen sales territory mangers located in Boston, New
Jersey, New York, Atlanta, Dallas, Austin, Chicago, Toronto, Seattle, San
Francisco, San Jose, Los Angeles, Europe and Latin America. They are supported
by eight corporate sales representatives, located at our headquarters in
Fremont, California, Seattle, Washington and Europe, and five regional systems
engineers in New York, Dallas, Chicago, and the San Francisco Bay Area. To
ensure maximum yields per sales representative and to facilitate ramp-up and
training for new sales personnel we utilize the Vantive Corporation Sales
Automation System which tracks customer and contract information, as well as new
sales prospects and sales call history. Our internal Web site also contains
extensive competitive information, case histories and sales presentation and
training materials that are used as resources for our sales organization.

                                       13
<PAGE>   14

     Building brand awareness and commanding recognition of our leadership in
the marketplace is key to our success. We employ a number of marketing vehicles
to promote our brand in the e-business analysis market and to generate leads for
our sales organization. Traditional methods include press releases, speaking
engagements, product reviews, and discussions with industry analysts and
attendance at tradeshows and seminars. We have also found, however, that
emerging means of communication, such as email and Web seminars, provide us with
even greater reach at less cost. Continued investment into our own Web site is
critical to maintain our image in the e-business community and to generate sales
leads. We also post important information about our products, technology and
organization on our Web site for potential customers' ease of access. Finally we
publish data sheets, white papers and articles concerning our products and
services.

STRATEGIC ALLIANCES

     A critical element of our sales and marketing strategy is to establish
alliances and partnerships to provide integrated solutions to our customers,
extend our sales reach, assist in implementation and customization of our
solutions, and broaden our brand awareness. Some examples of our current
partners include the following:

     - Vignette Corporation. Our co-marketing and sales partnership includes
       joint seminars and sales calls, joint development of the Vignette
       QuickBridge for integration of Accrue Insight with Vignette StoryServer.

     - MicroStrategy, Inc. Our joint-development partnership provides Accrue
       access to MicroStrategy's OLAP technology for the development of
       e-commerce analysis applications.

     - ABC Interactive. Our joint-development partnership provides Accrue access
       to ABC Interactive's encryption technology for the development of audited
       traffic results for advertisers.

     - DoubleClick -- Our co-marketing and sales partnership includes joint
       seminars, sales calls and development of the Accrue AdVisor product,
       which measures the marketing return on investment of online advertising
       campaigns processed through DoubleClick's DART network.

     - Art Technology Group -- Our co-marketing and sales partnership includes
       joint seminars and sales calls, and joint development of the QuickBridge
       for ATG Dynamo, which measures effectiveness of sites deployed using
       Dynamo.

     - Broadvision -- Our co-marketing and sales partnership includes joint
       seminars and sales calls, and joint development of the QuickBridge for
       BroadVision One to One product for measuring effectiveness of sites using
       One to One.

     - IBM -- Our co-marketing and sales partnership includes joint seminars,
       sales calls and development of the Accrue WholeSale for Net.Commerce
       product, which provides e-commerce return on investment analysis.

     We have alliances with strategic platform partners, e-business application
partners, interactive agencies/hosters and solution providers. By partnering
with the leading vendors in each of these categories, we are better able to
provide the technical integration expertise and sales and marketing resources,
which result in the most valuable integrated solutions to our customers and
prospects.

     Strategic Platform Providers. To ensure that our products are based on
current technologies and standards, we have partnered with companies whose
products represent the best-of-breed in their respective categories. These
companies include Cisco Systems, Inc., Informix Software, Inc., Oracle
Corporation, Microsoft Corporation, Netscape Corporation, Sun Microsystems,
Inc., Veritas Software Corporation, IBM Corporation, and Intel Corporation.

     E-Business Application Partners. These partners sell complimentary
technologies to similar high-end clientele. These technologies include
personalization, ad serving, content management, customer relationship
management, load balancing, e-commerce and application serving. Our alliances
range from strong sales and co-marketing relationships to alliances with
companies with whom we have built integrated technology.

                                       14
<PAGE>   15

Representative companies include Vignette Corporation, Art Technology Group,
Inc., DoubleClick, Inc., Broadvision, Inc., and IBM Corporation.

     Interactive Agencies and Web-Hosting Organizations. Our relationships with
these firms ensure that our product is the recommended solution of choice when
customers and prospects are seeking e-business analysis solutions while
implementing or upgrading their Web sites. We have worked with and have joint
customers with the following interactive agencies: Organic Online, Inc.,
USWeb/CKS Corporation, and Modem Media.Poppe Tyson, Inc. We share customers with
the following Web-Hosting firms: AboveNet Communications, Inc., Exodus
Communications, Inc., NaviSite, Inc. and Frontier Corporation.

     Solution Providers. To supplement our internal service capacity, we have
established relationships with firms, such as Cambridge Technology Partners,
Viant Corporation, Scient Corporation, Ogilivy & Mather, Andersen Consulting,
and Worldwide Web Associates, which provide implementation and customization
services. We have also partnered with firms that provide strategic
web-merchandising, web-marketing and online advertisement analysis services to
our clients, such as Viant Corporation.

     Most of our strategic relationships are not subject to binding agreements,
have no specified performance requirements by us or by our alliance partners,
and may be terminated by either party at any time.

COMPETITION

     We believe that the principal competitive factors affecting our market are:

     - product features;

     - product performance, including scalability and integrity;

     - ease of integration with customers' existing enterprise systems;

     - quality of support and service; and

     - company reputation.

     Although we believe that our products currently compete favorably with
respect to such factors, our market is relatively new and is rapidly evolving.
We may not be able to maintain our competitive position against current and
potential competitors, especially those with significantly greater financial,
marketing, service, support, technical and other resources. A description of our
principal competitors and the risks associated with the competitive nature of
our market are discussed in greater detail in "Risk Factors -- We face intense
competition which could make it difficult for us to acquire and retain customers
now and in the future."

     We may not be able to compete successfully against current and future
competitors. If we fail to compete successfully against current and future
competitors, our business could suffer.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

     We are a technology company. Our success depends on protecting our
intellectual property assets. If we do not adequately protect our intellectual
property, our business, financial condition and results of operations would be
seriously harmed.

     We license our software and require our customers to enter into license
agreements, which impose restrictions on our customers' ability to utilize the
software. In addition, we seek to avoid disclosure of our trade secrets,
including but not limited to requiring those persons with access to our
proprietary information to execute confidentiality agreements with us and
restricting access to our source code. We seek to protect our software,
documentation and other written materials under trade secret and copyright laws,
which afford only limited protection.

     We currently have no issued U.S. or foreign patents, we have applied for
one U.S. patent and we have no pending foreign patent applications. It is
possible that no patents will issue from our currently pending patent
application and that our potential future patents may be found invalid or
unenforceable, or otherwise be
                                       15
<PAGE>   16

successfully challenged. It is also possible that any patent issued to us may
not provide us with any competitive advantages, that we may not develop future
proprietary products or technologies that are patentable, and that the patents
of others may seriously limit our ability to do business. In this regard, we
generally have not performed any comprehensive analysis of patents of others
that may limit our ability to do business.

     Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our products is
difficult, and while we are unable to determine the extent to which piracy of
our software products exists, software piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect our
proprietary rights to as great an extent as do the laws of the United States. A
discussion of risks associated with the protection of our patents and
intellectual property rights and potential infringement by us of the patents and
intellectual property rights and potential infringement by us of the patents and
intellectual property rights of others is presented in "Risk Factors -- Accrue
Insight, our most important product, is not protected by a patent. If another
party were to use this technology, our business would suffer." and "-- Others
may bring infringement claims against us which could harm our business, results
of operations and financial condition."

EMPLOYEES

     As of March 31, 2000, Accrue had 133 full-time employees, including 58 in
product development, 54 in sales and support, 8 in marketing, and 13 in general
and administrative functions. From time to time, we also employ independent
contractors to support our engineering, marketing, sales and support and
administrative organizations. We believe that our relations with our employees
are good.

RISK FACTORS

     You should carefully consider the following risks before making an
investment in our company. In addition, you should keep in mind that the risks
described below are not the only risks that we face. The risks described below
are all the risks that we currently believe are material to our business.
However, additional risks not presently known to us, or risks that we currently
believe are immaterial, may also impair our business operations. You should also
refer to the other information set forth in this prospectus, including the
discussions set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business," as well as our financial
statements and the related notes.

     Our business, financial condition, or results of operations could be
adversely affected by any of the following risks. If we are adversely affected
by such risks, then the trading of our common stock could decline, and you could
lose all or part of your investment.

WE HAVE A LIMITED OPERATING HISTORY, MAKING IT DIFFICULT FOR YOU TO EVALUATE OUR
BUSINESS AND YOUR INVESTMENT

     Accrue was formed in February 1996, and we introduced Accrue Insight 1.0,
our first software product, in January 1997. For the fiscal years ended March
31, 1998, 1999 and 2000, we generated $2.1 million, $4.7 million and $18.9
million in revenue, respectively. Thus, we have a limited operating history upon
which you can evaluate our business and prospects. Due to our limited operating
history, it is difficult or impossible for us to predict future results of
operations. For example, we cannot forecast operating expenses based on our
historical results because they are limited, and we are required to forecast
expenses in part on future revenue projections. Most of our expenses are fixed
in the short term and we may not be able to quickly reduce spending if our
revenue is lower than we had projected, therefore net losses in a given quarter
would be greater than expected. In addition, our ability to forecast accurately
our quarterly revenue is limited due to a number of factors described in detail
below, making it difficult to predict the quarter in which sales will occur.
Moreover, due to our limited operating history, any evaluation of our business
and prospects must be made in light of the risks and uncertainties often
encountered by early-stage companies in Internet-related products and services
markets, which is new and rapidly evolving. Many of these risks are discussed
under the sub-headings below. We may not be able to successfully address any or
all of these risks and our business strategy

                                       16
<PAGE>   17

may not be successful. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for more detailed information on
our historical results of operations.

WE INCURRED NET LOSSES OF $4.2 MILLION, $7.6 MILLION AND $21.1 MILLION FOR EACH
OF THE RESPECTIVE FISCAL YEARS ENDED MARCH 31, 1998, 1999 AND 2000

     We have not achieved profitability. We incurred net losses of $4.2 million
for the fiscal year ended March 31, 1998, $7.6 million for the fiscal year ended
March 31, 1999, and $21.1 million for the fiscal year ended March 31, 2000. As
of March 31, 2000, we had an accumulated deficit of $34.9 million. If we do
achieve profitability, we cannot be certain that we can sustain or increase
profitability on a quarterly or annual basis in the future, or at all. Please
see "Selected Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for more detailed information on
our historical results of operations.

WE EXPECT OPERATING EXPENSES TO INCREASE SIGNIFICANTLY, WHICH MAY IMPEDE OUR
ABILITY TO ACHIEVE PROFITABILITY

     As we grow our business we expect operating expenses to increase
significantly, and as a result, we will need to generate increased quarterly
revenue to achieve and maintain profitability. In particular, we expect to incur
additional costs and expenses related to:

     - the expansion of our sales force and distribution channels;

     - the expansion of our product and services offerings;

     - development of relationships with strategic business partners;

     - the expansion of management and infrastructure; and

     - brand development, marketing and other promotional activities.

     Please see "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for more information on our operating expenses.

IF WE CANNOT FUND OPERATIONS FROM CASH GENERATED BY OUR BUSINESS, WE MAY BE
REQUIRED TO SELL ADDITIONAL COMMON STOCK, WHICH COULD DEPRESS OUR COMMON STOCK
PRICE

     To date, we have been unable to fund our operations from cash generated by
our business and have funded operations primarily by selling securities. If our
revenue fails to offset operating expenses, we may be required to fund future
operations through the sale of additional common stock, which could cause our
common stock price to decline. Please see "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

FLUCTUATIONS IN OUR OPERATING RESULTS MAKE IT DIFFICULT TO PREDICT OUR FUTURE
PERFORMANCE AND MAY RESULT IN VOLATILITY IN THE MARKET PRICE OF OUR COMMON STOCK

     Our annual operating results have fluctuated in the past and may fluctuate
significantly in the future due to a variety of factors, particularly as a
result of the risks we describe in this section. Because our operating results
are volatile and difficult to predict, you should not rely on the results of one
quarter as an indication of future performance. It is likely that in some future
quarter our operating results will fall below the expectations of securities
analysts and investors. In this event, the trading price of our common stock may
fall significantly. Please see "Management's Discussion and Analysis of
Financial Condition and Results of Operations".

THE LOSS OF KEY MANAGEMENT PERSONNEL COULD HARM OUR BUSINESS AND DECREASE THE
VALUE OF YOUR INVESTMENT

     Our success depends largely upon the continued services of our key
management and technical personnel, the loss of which could seriously harm our
business. In particular, we rely on Richard Kreysar, President, Chief Executive
Officer and a director, and Bob Page, Vice President of Product Development and
Chief Technology Officer. Messrs. Kreysar and Page do not have employment or
non-competition agreements and

                                       17
<PAGE>   18

could therefore terminate their employment with us at any time without penalty.
We do not maintain key person life insurance policies on any of our employees.

WE FACE INTENSE COMPETITION WHICH COULD MAKE IT DIFFICULT FOR US TO ACQUIRE AND
RETAIN CUSTOMERS NOW AND IN THE FUTURE

     The market for e-business analysis solutions is intensely competitive,
evolving and subject to rapid technological change. We expect the intensity of
competition to increase in the future. Competitors vary in size and in the scope
and breadth of the products and services they offer. Our principal competitors
today include:

     - vendors of software that target e-business customer data collection and
       analysis markets such as Andromedia, Inc., net.Genesis Corporation,
       WebTrends Corporation, Broadbase Software, Inc. and E.piphany, Inc.;

     - developers of software that address only certain technology components of
       our products; and

     - in-house development efforts by potential customers or partners.

     We expect that if we are successful in our strategy to expand the scope of
our products and services, we may encounter many additional, market-specific
competitors. In addition, because there are relatively low barriers to entry in
the software market, we expect additional competition from traditional business
intelligence and enterprise software vendors as the Internet software market
continues to develop and expand. Some of these companies, as well as some other
competitors, have longer operating histories, significantly greater financial,
technical, marketing and other resources, significantly greater name recognition
and a larger installed base of customers than we have. In addition, many of our
competitors have well-established relationships with current and potential
customers of ours, have extensive knowledge of our industry and are capable of
offering a single-vendor solution. As a result, our competitors may be able to
respond more quickly to new or emerging technologies and changes in customer
requirements, devote greater resources to the development, promotion and sale of
their products, or adopt more aggressive pricing policies to gain market share.
In addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their products to address customer needs. Accordingly, it is possible
that new competitors or alliances among competitors may emerge and rapidly
acquire significant market share. We also expect that competition will increase
as a result of software industry consolidations.

     Increased competition is likely to result in price reductions, reduced
gross margins and loss of market share, any of which could seriously harm our
business, financial condition and results of operations. We may not be able to
compete successfully against current and future competitors, in which case our
business could suffer. See "Business -- Competition."

IF WE ARE UNABLE TO MEET THE RAPID CHANGES IN E-COMMERCE TECHNOLOGY, OUR PRODUCT
REVENUE COULD DECLINE

     The market for our products is marked by rapid technological change,
frequent new product introductions, Internet-related technology enhancements,
uncertain product life cycles, changes in client demands and evolving industry
standards. We cannot be certain that we will successfully develop and market new
products, new product enhancements or new products compliant with present or
emerging Internet technology standards. In developing our products, we have
made, and will continue to make, assumptions with respect to which standards
will be adopted by the industry, our customers and competitors. If the standards
adopted are different from those which we have chosen to support, market
acceptance of our products may be significantly reduced or delayed and our
business will be seriously harmed. In addition, we may be required to make
significant expenditures to adapt our products to changing or emerging
technologies. New products based on new technologies or new industry standards
can render existing products obsolete and unmarketable. To succeed, we will need
to enhance our current products and develop new products on a timely basis to
keep pace with developments related to Internet technology and to satisfy the
increasingly sophisticated requirements of our clients. E-business analysis
technology is complex and new products and product enhancements

                                       18
<PAGE>   19

can require long development and testing periods. Any delays in developing and
releasing enhanced or new products could harm our business, operating results
and financial condition.

THE FAILURE TO RETAIN AND ATTRACT KEY TECHNICAL PERSONNEL COULD HARM OUR
BUSINESS AND DECREASE THE VALUE OF YOUR INVESTMENT

     Because of the complexity of our products and technologies, we are
substantially dependent upon the continued service of our existing product
development personnel. In addition, we intend to hire a number of engineers with
high levels of experience in designing and developing software and
Internet-related products in time-pressured environments. The competition in
Silicon Valley for qualified engineers in the computer software and Internet
markets is intense. New personnel will require training and education and take
time to reach full productivity. Our future success depends on our ability to
attract, train and retain these key personnel.

FAILURE TO EXPAND OUR SALES OPERATIONS AND CHANNELS OF DISTRIBUTION WOULD LIMIT
OUR GROWTH

     In order to maintain and increase our market share and revenue, we will
need to expand our direct and indirect sales operations and channels of
distribution. We have recently expanded our direct sales force and plan to hire
additional sales personnel. As of March 31, 2000, our direct sales and support
organization consisted of 54 employees. Competition for qualified sales
personnel is intense, and we might not be able to hire the kind and number of
sales personnel we are targeting. New hires will require extensive training and
typically take several months to achieve productivity. In addition, we need to
expand our relationships with domestic and international channel partners,
distributors, value-added resellers, systems integrators, online and other
resellers, Internet service providers, original equipment manufacturers, and
other partners to build our indirect sales channel.

WE MAY BE UNABLE TO ADEQUATELY DEVELOP A PROFITABLE PROFESSIONAL SERVICES
ORGANIZATION, WHICH COULD NEGATIVELY AFFECT BOTH OUR OPERATING RESULTS AND OUR
ABILITY TO ASSIST OUR CUSTOMERS WITH THE IMPLEMENTATION OF OUR PRODUCTS

     Customers that license our software typically engage our professional
services organization to assist with support, training, consulting and
implementation of their e-business analysis solutions. We believe that growth in
our product sales depends on our ability to provide our customers with these
services and to educate third-party resellers on how to use our products. We
expect our services revenue to increase in absolute dollars as we continue to
provide consulting and training services that complement our products and as our
installed base of customers grows. We generally bill our clients for our
services on a fixed-price basis; however, from time to time we bill our clients
on a time-and-materials basis. Failure to estimate accurately the resources and
time required for an engagement, to manage our customers' expectations
effectively regarding the scope of services to be delivered for an estimated
price or to complete fixed-price engagements within budget, on time and to the
customer's satisfaction could expose us to risks associated with cost overruns,
and in some cases, penalties, and may harm our business. Although we plan to
expand our services in order to address our customers' needs, we cannot be
certain that this organization will ever achieve profitability.

OUR GROWTH COULD BE LIMITED IF WE FAIL TO EXECUTE OUR PLAN TO EXPAND
INTERNATIONALLY

     Licenses and services sold to clients located outside of the United States
were less than 5% of our total revenue in fiscal year 1999, and less than 15% of
our total revenue in fiscal year 2000. We expect international revenue to
account for an increasing percentage of total revenue in the future. We believe
that we must continue to expand our international sales activities in order to
be successful. We initiated operations in selected international markets in the
third quarter of our fiscal year ending March 31, 2000. Continued expansion into
international markets will require management attention and resources. We also
intend to enter into a number of international alliances as part of our
international strategy and rely extensively on these business partners to
conduct operations, coordinate sales and marketing efforts, and provide software
localization services. To date, we have non-exclusive alliances with Sumisho
Electronics Company, Ltd., a subsidiary of Sumitomo Corporation, and Itochu
Techno-Science Corporation for distribution of our products
                                       19
<PAGE>   20

in Japan, and a small number of value added resellers and distributors for
distribution of our products in Europe. These alliances are not subject to
binding agreements, have no specified performance requirements by us or our
alliance partners, and may be terminated by either party at any time. Our
success in international markets will depend on the success of our business
partners and their willingness to dedicate sufficient resources to our
relationships. We cannot assure you that we will be successful in expanding
internationally. International operations are subject to other inherent risks,
including:

     - protectionist laws and business practices that favor local competition;

     - difficulties and costs of staffing and managing foreign operations;

     - dependence on local vendors;

     - multiple, conflicting and changing governmental laws and regulations;

     - longer sales and collection cycles;

     - foreign currency exchange rate fluctuations;

     - political and economic instability;

     - reduced protection for intellectual property rights in some countries;

     - seasonal reductions in business activity; and

     - expenses associated with localizing products for foreign countries.

     If we fail to address these risks adequately our business may be seriously
harmed.

OUR GROWTH COULD BE LIMITED IF WE FAIL TO SUCCESSFULLY IDENTIFY AND INTEGRATE
POTENTIAL ACQUISITIONS AND INVESTMENTS

     Due to the intensely competitive nature of the e-business analysis market,
we believe that our success will depend on our ability to attain significant
market share, which will depend in part on our ability to successfully identify
and acquire businesses, products and technologies from third parties that are
complementary to our existing products and services. We do not have any present
understanding, nor are we having any discussions relating to any acquisition or
investment. We cannot be certain that we will be able to rapidly expand our
product and services offerings through these acquisitions or investments. Some
of the risks we may encounter include:

     - complementary products and services may not be available on commercially
       reasonable terms;

     - we may be unable to compete for acquisitions of products and services
       with many of our competitors who have greater financial resources than we
       do;

     - acquired products and services may not meet the needs of our customers;

     - we may incur difficulties associated with the integration of the
       personnel and operations of an acquired company with our personnel and
       operations;

     - we may incur difficulties in assimilating acquired products, services or
       technologies, with our existing products, services and technologies; and

     - integration of acquired and existing products and services may result in
       decreases in revenue from existing products and services.

     These difficulties could disrupt our ongoing business, distract our
management and employees and increase our expenses. Furthermore, we may have to
issue equity securities to pay for any future acquisition which could be
dilutive to our existing stockholders. We may also have to incur debt which
could contain covenants that restrict our operations. In addition, acquisitions
and investments may have negative effect on our reported results of operations
from acquisition-related charges and amortization of acquired technology and
other intangibles. Any of these acquisition-related risks could harm our
business.

                                       20
<PAGE>   21

OUR VARIED SALES CYCLES MAKE IT DIFFICULT TO BUDGET AND FORECAST OUR OPERATING
RESULTS

     We have varied sales cycles because we generally need to educate potential
clients regarding the use and benefits of our product applications. The
stability of our sales cycle continues to evolve as our products mature. Our
sales cycles make it difficult to predict the quarter in which sales may fall
and to budget and forecast operating results. In addition, a significant portion
of our sales fall within the last month of a quarter, making it difficult to
predict revenue until late in the quarter and to adjust expenses accordingly.

OUR OPERATING RESULTS MAY BE ADVERSELY AFFECTED BY SMALL DELAYS IN CUSTOMER
ORDERS OR PRODUCT INSTALLATIONS

     Small delays in customer orders can cause significant variability in our
license revenue and operating results for any particular period. We derive a
substantial portion of our revenue from the sale of software products and
related services. Our revenue recognition policy requires us to deliver the
software prior to recognizing any revenue for the product and to substantially
complete the implementation of our product before we can recognize service
revenue. Any end of quarter delays in orders for delivery or product
installation schedules could harm operating results for that quarter.

IF WE FAIL TO GENERATE REPEAT OR EXPANDED BUSINESS FROM OUR CURRENT AND FUTURE
CUSTOMERS, OUR BUSINESS WILL BE SERIOUSLY HARMED

     Our success is dependent on the continued growth of our customer base and
the retention of our customers. For the fiscal year ended March 31, 1999 and
2000, approximately 15 - 20% and 25 - 30% of our revenue, respectively, was
derived from sales of products and services to existing customers. We expect to
continue to derive a significant amount of revenue from our existing customers.
If we fail to generate repeat and expanded business from our current and future
customers, particularly from maintenance contract renewals, our operating
results would be seriously harmed. Our ability to attract new customers will
depend on a variety of factors, including the accuracy, scalability, reliability
and cost-effectiveness of our products and services and our ability to
effectively market our products and services. In the past, we have lost
potential customers to competitors for various reasons, including lower prices
and other incentives not matched by us. Many of our current customers initially
purchase a license for our products and services for installation on a limited
number of servers. If an installation is successful, the customer may purchase
additional licenses to expand the use of our products in its organization,
license additional products and services from us, or renew maintenance fees.

IF WE FAIL TO SUCCESSFULLY PROMOTE OUR ACCRUE BRAND NAME OR IF WE INCUR
SIGNIFICANT EXPENSES PROMOTING AND MAINTAINING OUR ACCRUE BRAND NAME, OUR
BUSINESS COULD BE HARMED

     Due in part to the emerging nature of the market for e-business analysis
solutions and the substantial resources available to many of our competitors,
there may be a time-limited opportunity for us to achieve and maintain a
significant market share. Developing and maintaining awareness of the Accrue
brand name is critical to achieving widespread acceptance of our e-business
analysis solutions. Furthermore, the importance of brand recognition will
increase as competition in the market for our products increases. Successfully
promoting and positioning the Accrue brand will depend largely on the
effectiveness of our marketing efforts and our ability to develop reliable and
useful products at competitive prices. Therefore, we may need to increase our
financial commitment to creating and maintaining brand awareness among potential
customers.

THE STRAIN THAT OUR GROWTH RATE PLACES UPON OUR SYSTEMS AND MANAGEMENT RESOURCES
MAY ADVERSELY AFFECT OUR BUSINESS AND DECREASE THE VALUE OF YOUR INVESTMENT

     We have recently experienced a period of significant expansion of our
operations that has placed a significant strain on our management,
administrative and operational resources. In addition, we have recently hired a
significant number of employees and plan to further increase our total
headcount. Our headcount has increased from 22 at March 31, 1997, to 38 at March
31, 1998, to 59 at March 31, 1999, and to 133 at March 31, 2000. In addition, we
intend to further expand our finance, administrative and operations staff. Any
failure to properly manage our growth could have a material adverse effect on
our business, results of

                                       21
<PAGE>   22

operations, and financial condition. To properly manage this growth, we must,
among other things, implement and improve additional and existing
administrative, financial, and operational systems, procedures, and controls on
a timely basis. We may not be able to complete the necessary improvements to our
systems, procedures, and controls necessary to support our future operations in
a timely manner. Management may not be able to hire, train, retain, motivate,
and manage required personnel and may not be able to successfully identify,
manage, and exploit existing and potential market opportunities. In connection
with our expansion, we plan to increase our operating expenses to expand our
sales and marketing operations, develop new distribution channels, fund greater
levels of research and development, broaden professional services and support,
and improve operational and financial systems. Failure of our revenue to
increase along with these expenses during any fiscal period could have a
materially adverse impact on our financial results for that period.

ACCRUE INSIGHT, OUR MOST IMPORTANT PRODUCT, IS NOT PROTECTED BY A PATENT. IF
ANOTHER PARTY WERE TO USE THIS TECHNOLOGY, OUR BUSINESS WOULD SUFFER

     We regard substantial elements of our e-business analysis solutions as
proprietary and attempt to protect them by relying on patent, trademark, service
mark, trade dress, copyright, and trade secret laws and restrictions, as well as
confidentiality procedures and contractual provisions. However, Accrue Insight,
our most important product, is not protected by a patent. Any steps we take to
protect our intellectual property may be inadequate, time consuming, and
expensive. In addition, despite our efforts, we may be unable to prevent third
parties from infringing upon or misappropriating our intellectual property,
which could have a material adverse effect on our business. Furthermore, legal
standards relating to the validity, enforceability, and scope of protection of
intellectual property rights in Internet-related industries are uncertain and
still evolving, and the future viability or value of any of our intellectual
property rights is uncertain. Effective trademark, copyright, and trade secret
protection may not be available in every country in which our products are
distributed or made available through the Internet. Furthermore, our competitors
may independently develop similar technology that substantially limits the value
of our intellectual property or design around patents issued to us. See
"Business -- Intellectual Property and Other Proprietary Rights."

OTHERS MAY BRING INFRINGEMENT CLAIMS AGAINST US WHICH COULD HARM OUR BUSINESS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     In addition to the technology we have developed internally, we also use
code libraries developed and maintained by third parties and have acquired or
licensed technologies from other companies. Our internally developed technology,
the code libraries, or the technology we acquired or licensed may infringe a
third party's intellectual property rights who may bring claims against us
alleging infringement of their intellectual property rights. In recent years,
there has been significant litigation in the United States involving patents and
other intellectual property rights. We are not currently involved in any
intellectual property litigation. However, as the number of entrants into our
market increases, the possibility of an intellectual property claim against us
grows and we may be a party to litigation in the future to protect our
intellectual property or as a result of an alleged infringement of others'
intellectual property. These claims and any resulting litigation could subject
us to significant liability for damages and invalidation of our proprietary
rights, would likely be time-consuming and expensive to defend and would divert
management time and attention. Any potential intellectual property litigation
could also force us to do one or more of the following:

     - cease selling, incorporating, or using products or services that
       incorporate the challenged intellectual property;

     - obtain from the holder of the infringed intellectual property right a
       license to sell or use the relevant technology, which license may not be
       available on reasonable terms, or at all; and/or

     - redesign those products or services that incorporate infringing
       technology.

     Any of these results could seriously harm our business.

                                       22
<PAGE>   23

PRODUCT DEFECTS COULD LEAD TO LOSS OF CUSTOMERS WHICH COULD HARM OUR BUSINESS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     Despite internal testing and testing by current and potential customers,
our current and future products may contain serious defects, including Year 2000
errors, the occurrence of which could result in adverse publicity, loss of or
delay in market acceptance, or claims by customers against us, any of which
could harm our business, results of operations, and financial condition. In
addition, our products and product enhancements are very complex and may from
time to time contain errors or result in failures that we did not detect or
anticipate when introducing our products or enhancements to the market. The
computer hardware environment is characterized by a wide variety of non-standard
configurations that make pre-release testing for programming or compatibility
errors very difficult and time consuming. Despite our testing, errors may still
be discovered in some new products or enhancements after the products or
enhancements are delivered to customers. See "Business -- Products and
Services."

WE ARE SUBJECT TO POTENTIAL PRODUCT LIABILITY CLAIMS THAT COULD REQUIRE
CONSIDERABLE EFFORT AND EXPENSE TO DEFEND AND WHICH COULD HARM OUR BUSINESS

     Our products are used to monitor the traffic data of our customers' Web
sites, and to segment, analyze and report this data. These and other functions
that our products provide are often critical to our customers, especially in
light of the considerable resources many organizations spend on the development
and maintenance of their Web sites. Our end-user licenses contain provisions
that limit our exposure to product liability claims, but these provisions may
not be enforceable in all jurisdictions. Additionally, we maintain limited
product liability insurance. To the extent our contractual limitations are
unenforceable or these claims are not covered by insurance, a successful product
liability claim could harm our business.

WE MAY BE UNABLE TO INTEGRATE SUCCESSFULLY MARKETWAVE CORPORATION AND/OR
NEOVISTA SOFTWARE, INC. INTO OUR BUSINESS OR ACHIEVE THE EXPECTED BENEFITS OF
THE ACQUISITIONS

     Our acquisition of Marketwave Corporation, which was completed in
September, 1999, and our acquisition of NeoVista Software, Inc., which was
completed in January 2000, will require integrating the businesses and
operations of those two companies with our company. We may not be able to
successfully assimilate the personnel, technology, operations and customers of
Marketwave and/or NeoVista into our business. Additionally, we may fail to
achieve the anticipated synergies from either or both acquisitions, including
marketing, product development, distribution and other operational synergies.
The integration process may further strain our existing financial and managerial
controls and reporting systems and procedures. This may result in the diversion
of management and financial resources from our core business objectives. In
addition, we are not experienced in managing significant facilities or
operations in geographically distant areas. Finally, we cannot be certain that
we will be able to retain Marketwave and/or NeoVista employees.

WE MAY ACQUIRE TECHNOLOGIES OR COMPANIES IN THE FUTURE, AND THESE ACQUISITIONS
COULD RESULT IN THE DILUTION OF OUR STOCKHOLDERS AND DISRUPTION OF OUR BUSINESS

     We may acquire technologies or companies in the future. Entering into an
acquisition entails many risks of any which could materially harm our business,
including:

     - diversion of management's attention from other business concerns;

     - failure to assimilate the acquired company with our pre-existing
       business;

     - potential loss of key employees from either our pre-existing business or
       the acquired business;

     - dilution of our existing stockholders as a result of issuing equity
       securities; and

     - assumption of liabilities of the acquired company.

                                       23
<PAGE>   24

EVOLVING REGULATION OF THE INTERNET MAY HARM OUR BUSINESS

     As e-commerce continues to evolve, increasing regulation by federal, state,
or foreign agencies becomes more likely. This regulation is likely in the areas
of user privacy, pricing, content, quality of products and services, taxation,
advertising, intellectual property rights, and information security. In
particular, laws and regulations applying to the solicitation, collection, or
processing of personal or consumer information could negatively affect our
activities. Typically, our products capture traffic data when consumers,
business customers or employees visit a Web site. The perception of security and
privacy concerns, whether or not valid, may indirectly inhibit market acceptance
of our products. In addition, legislative or regulatory requirements may
heighten these concerns if businesses must notify Web site users that the data
captured after visiting Web sites may be used by marketing entities to
unilaterally direct product promotion and advertising to that user. We are not
aware of any similar legislation or regulatory requirements currently in effect
in the United States. Other countries and political entities, such as the
European Economic Community, have adopted legislation or regulatory
requirements. The United States may adopt similar legislation or regulatory
requirements. If consumer privacy concerns are not adequately addressed, our
business could be harmed. Moreover, the applicability to the Internet of
existing laws governing issues such as intellectual property ownership and
infringement, copyright, trademark, trade secret, obscenity and libel is
uncertain and developing. Furthermore, any regulation imposing fees or assessing
taxes for Internet use could result in a decline in the use of the Internet and
the viability of e-commerce. Any new legislation or regulation, or the
application or interpretation of existing laws or regulations, may decrease the
growth in the use of the Internet, may impose additional burdens on e-commerce
or may require us to alter how we conduct our business. This could decrease the
demand for our products and services, increase our cost of doing business,
increase the costs of products sold through the Internet or otherwise have a
negative effect on our business, results of operations and financial condition.

OUR SUCCESS DEPENDS ON CONTINUED USE AND EXPANSION OF THE INTERNET

     Continued expansion in the sales of our e-business analysis solutions will
depend upon the continued growth of the Internet as a widely used medium for
commerce and communication. Rapid growth in the use of the Internet is a recent
phenomenon. Acceptance and use may not continue to develop at historical rates
and a sufficiently broad base of customers may not adopt or continue to use the
Internet and online services as a medium of commerce and communication. Demand
and market acceptance for recently introduced products and services relating to
the Internet are subject to a high level of uncertainty and few proven products
and services exist. If the Internet does not continue to grow as a widespread
communications medium and commercial marketplace, the demand for our e-business
analysis solutions could be significantly reduced. The Internet may not prove to
be a viable commercial marketplace because of inadequate development of the
necessary infrastructure, such as a reliable network backbone, or timely
development of complementary products, such as high speed modems. The Internet
infrastructure may not be able to support the demands placed on it by continued
growth. Additionally, the Internet could lose its viability due to delays in the
development or adoption of new standards and protocols to handle increased
levels of Internet activity, security, reliability, cost, ease of use,
accessibility, and quality of service.


BECAUSE ACCRUE'S OFFICERS AND DIRECTORS OWN APPROXIMATELY 15.1% OF THE
OUTSTANDING COMMON STOCK, YOU AND OTHER INVESTORS WILL HAVE MINIMAL INFLUENCE ON
STOCKHOLDER DECISIONS



     As of May 31, 2000, our officers and directors beneficially own
approximately 15.1% of the outstanding common stock. As a result, they will be
able to exercise significant influence over all matters requiring stockholder
approval, and you and other investors will have minimal influence over the
election of directors or other stockholder actions. As a result, these
stockholders could approve or cause Accrue to take actions which you disapprove
or that are contrary to your interests and those of other investors. Our
certificate of incorporation and bylaws do not provide for cumulative voting;
therefore, our controlling stockholders will have the ability to elect all of
our directors. The controlling stockholders will also have the ability to
approve or disapprove significant corporate transactions without further vote by
the investors who purchase common stock pursuant to this offering. This ability
to exercise influence over all matters requiring stockholder approval


                                       24
<PAGE>   25

could prevent or significantly delay another company or person from acquiring or
merging with us. See "Directors and Executive Officers of the Registrant" and
"Security Ownership of Certain Beneficial Owners and Management."

THE EFFECTS OF ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND IN DELAWARE
LAW COULD PREVENT A CHANGE IN CONTROL OF ACCRUE WHICH MAY REDUCE THE MARKET
PRICE OF OUR COMMON STOCK

     Provisions of our certificate of incorporation and bylaws may have the
effect of delaying or preventing a merger or sale of Accrue, or making a merger
or acquisition less desirable to a potential acquirer, even where stockholders
may consider the acquisition or merger favorable. These provisions could also
have the effect of making it more difficult for a third party to effect a change
of control of the board of directors. See "Description of Capital
Stock -- Delaware Law and the Effect of Certain Certificate of Incorporation and
Bylaw Provisions." The issuance of preferred stock may have the effect of
delaying, deferring, or preventing a change in control without further action by
the stockholders. Any issuance of preferred stock may harm the market price of
the common stock. The issuance of preferred stock may also result in the loss of
the voting control of holders of common stock to the holders of the preferred
stock.

THE MARKET PRICE FOR OUR COMMON STOCK, LIKE OTHER TECHNOLOGY STOCKS, MAY BE
VOLATILE

     The stock markets have, in general, and with respect to Internet companies
in particular, recently experienced extreme stock price and volume volatility
that has affected companies' stock prices. The stock markets may continue to
experience volatility that may adversely affect the market price of our common
stock. Stock prices for many companies in the technology and emerging growth
sector have experienced wide fluctuations that have often been unrelated to the
operating performance of these companies. Fluctuations such as these may affect
the market price of our common stock. In addition, if we fail to address any of
the risks described in this section, the market price for our common stock, and
consequently, the value of your investment, could decline.

SIGNIFICANT FLUCTUATIONS IN THE MARKET PRICE OF OUR COMMON STOCK COULD RESULT IN
SECURITIES CLASS ACTION CLAIMS AGAINST US, WHICH COULD SERIOUSLY HARM OUR
BUSINESS

     Securities class action claims have been brought against companies in the
past where volatility in the market price of that company's securities has taken
place. This kind of litigation could be very costly and divert our management's
attention and resources, and any adverse determination in this litigation could
also subject us to significant liabilities, any or all of which could seriously
harm our business.

IF WE CANNOT RAISE FUNDS, IF NEEDED, ON ACCEPTABLE TERMS, WE MAY NOT BE ABLE TO
DEVELOP OR ENHANCE OUR PRODUCTS AND SERVICES, TAKE ADVANTAGE OF FUTURE
OPPORTUNITIES OR RESPOND TO COMPETITIVE PRESSURES OR UNANTICIPATED CAPITAL
REQUIREMENTS WHICH COULD HARM OUR BUSINESS

     We expect the net proceeds from our public offering in July 1999, cash on
hand, cash equivalents and commercial credit facilities to meet our working
capital and capital expenditure needs for at least the next 12 months.
Accordingly, we may need to raise additional funds and we cannot be certain that
we would be able to obtain additional financing on favorable terms, if at all.
Further, if we issue equity securities, stockholders may experience additional
dilution or the new equity securities may have rights, preferences or privileges
senior to those of existing holders of common stock. If we incur indebtedness to
help us meet our future capital requirements, this debt could contain covenants
which restrict our operations. If we cannot raise funds, if needed, on
acceptable terms, we may not be able to develop or enhance our products and
services, take advantage of future opportunities or respond to competitive
pressures or unanticipated capital requirements, which could harm our business,
operating results and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" for more information on our capital needs.

                                       25
<PAGE>   26

SUBSTANTIAL SALES OF OUR COMMON STOCK COULD CAUSE OUR STOCK PRICE TO DECLINE

     Sales of a substantial number of shares of common stock in the public
market, or the perception that these sales may occur, could adversely affect the
market price of the common stock by potentially introducing a large number of
sellers of our common stock into a market in which the common stock price is
already volatile, thus driving the common stock price down. In addition, the
sale of these shares could impair our ability to raise capital through the sale
of additional equity securities. As of May 31, 2000, we have 27,462,634 shares
of common stock outstanding. 4,485,000 shares of our common stock, including the
underwriter's option to purchase additional shares which was exercised in full,
were registered in connection with the initial public offering of our common
stock. 3,225,261 shares of our common stock were issued to the stockholders of
Marketwave Corporation in connection with our acquisition of that company, and
such shares were subsequently registered with the Securities and Exchange
Commission in March 2000 and may be sold without restriction or further
registration under the Federal securities laws unless held by our "affiliates"
as that term is defined in Rule 144 while the registration statement remains
effective. The remaining 19,752,373 shares of common stock outstanding are
"restricted securities" as that term is defined in Rule 144; however, virtually
all of these shares are eligible for sale, in some cases only subject to the
volume, manner of sale and notice requirements of Rule 144. In addition, we have
registered a total of 11,274,407 shares of our common stock under our existing
stock option and employee stock purchase plans, including options originally
granted under stock option plans of Marketwave Corporation and NeoVista
Software, Inc., which options are now exercisable for shares of our common
stock.

ITEM 2. PROPERTIES

     We are headquartered in Fremont, California, where we lease approximately
30,000 square feet of office space under a lease expiring on March 31, 2002. We
lease additional facilities in Seattle, Washington, Plano, Texas and England for
sales and services personnel. We believe that our existing facilities are
adequate to meet our current and future requirements or that suitable additional
or substitute space will be available as needed.

ITEM 3. LEGAL PROCEEDINGS

     We are not currently subject to any material legal proceedings. We may from
time to time become a party to various legal proceedings arising in the ordinary
course of the business.

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

     No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.

                                    PART II

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

     (a) MARKET INFORMATION; RECENT SALES OF UNREGISTERED SECURITIES. Our common
stock has been trading on the NASDAQ Stock Market ("NASDAQ") under the symbol
"ACRU" since July 30, 1999, the date of our initial public offering. The
following table sets forth, for the periods indicated, the high and low sales
prices per share of our common stock as reported on NASDAQ:

<TABLE>
<CAPTION>
                     YEAR ENDED 2000                        HIGH        LOW
                     ---------------                       -------    -------
<S>                                                        <C>        <C>
2nd Quarter (from July 30, 1999).........................  23.0000    10.4531
3rd Quarter..............................................  63.2500    21.8125
4th Quarter..............................................  62.8750    37.3750
</TABLE>

     On May 31, 2000, the closing sale price for our common stock was $24.00 per
share. On this date, there were approximately 789 holders of record of our
common stock. This figure does not reflect more than 6,000

                                       26
<PAGE>   27

beneficial stockholders whose shares are held in nominee names. During the
fiscal year we did not pay any dividends. We presently intend to retain future
earnings to finance the growth and development of our business, and as such, we
do not anticipate paying cash dividends on our common stock in the foreseeable
future.

     The market price of our common stock has experienced large fluctuations and
may continue to be volatile in the future. Factors such as future announcements
concerning us or our competitors, quarterly variations in operating results,
announcements of technological innovations, the introduction of new products or
changes in product pricing policies by us or our competitors, proprietary rights
or other litigation, changes in earnings estimates by analysts or other factors
could cause the market price of our common stock to fluctuate substantially.
Further, the stock market has from time to time experienced extreme price and
volume fluctuations which have affected the market price for many high
technology companies and which, on occasion, have been unrelated to the
operating performance of those companies. These fluctuations, as well as the
general economic, market and political conditions both domestically and
internationally, including recessions or military conflicts, may materially and
adversely affect the market price of our common stock.

     On September 30, 1999, in connection with our acquisition of Marketwave
Corporation, we issued in exchange for all outstanding shares of capital stock
of Marketwave 2,880,000 unregistered shares of common stock. Because these
shares were issued to a limited number of Marketwave shareholders, we relied on
the exemption provided by Section 4(2) of the Securities Act in issuing these
shares. These shares were subsequently registered on a Registration Statement on
Form S-1 (Reg. No. 333-32066) that was declared effective by the SEC on or about
March 22, 2000. We also assumed Marketwave options that were outstanding for
566,000 shares of our common stock, which option shares were subsequently
registered on a Registration Statement on Form S-8 on February 1, 2000.

     On January 14, 2000, in connection with our acquisition of NeoVista
Software, Inc., we issued in exchange for all outstanding shares of capital
stock and warrants of NeoVista approximately 1,779,000 unregistered shares of
our common stock. We also assumed NeoVista options and warrants that were
exercisable for 550,000 shares of our common stock, which option shares were
subsequently registered on a Registration Statement on Form S-8 on February 1,
2000. The shares issued by us in this transaction were issued pursuant to the
exemption provided by Section 3(a)(10) of the Securities Act and in connection
with a hearing conducted by the California Commission of Corporations which
found the offering to be fair to NeoVista security holders.


     During the fiscal year ended March 31, 2000, we issued 1,330,298
unregistered shares of common stock pursuant to the exercise of stock options
that were granted under Accrue's stock option plans for a total purchase price
of approximately $294,345. The sales of such securities were deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2) of the
Securities Act or Rule 701 promulgated under section 3(b) of the Securities Act
as transactions by an issuer not involving a public offering or transactions
pursuant to compensatory benefit plans and contracts relating to compensation as
provided under such rule 701. The recipients of securities in each such
transaction represented their intention to acquire the securities for investment
only and not with a view to or for sale in connection with any distribution
thereof and appropriate legends were affixed to the share certificates issued in
such transactions. All recipients had adequate access, through their
relationships with the Company, to information about the Company.


     (b) USE OF PROCEEDS FROM SALE OF REGISTERED SECURITIES

     On August 4, 1999, we completed an initial public offering of our Common
Stock, $0.001 par value. The managing underwriters in the offering were
BancBoston Robertson Stephens and Thomas Weisel Partners, LLC, (the
"Underwriters"). The shares of Common Stock sold in the offering were registered
under the Securities Act of 1933, as amended, on a Registration Statement on
Form S-1 (the "Registration Statement") (Reg. No. 333-79491) that was declared
effective by the SEC on July 29, 1999. The offering commenced on July 30, 1999,
on which date 3,900,000 shares of Common Stock registered under the Registration
Statement were sold at a price of $10.00 per share. The aggregate price of the
offering amount registered and sold was $39,000,000. In connection with the
offering, we paid an aggregate of $2,730,000 in
                                       27
<PAGE>   28

underwriting discounts and commissions to the Underwriters and the aggregate
proceeds to us were approximately $35.6 million after deducting estimated
offering expenses of $700,000. The Underwriters also had an overallotment option
to purchase 585,000 shares, which closed on August 26, 1999. The aggregate price
of the offering was $44,850,000. The aggregate underwriting discounts and
commissions to the Underwriters was $3,139,500 and the aggregate net proceeds to
us was approximately $40.8 million after deducting offering expenses of
$856,000.


     We currently expect to use the net proceeds primarily for working capital
and general corporate purposes, including funding product development and
expanding the sales and marketing organization. We have not yet determined the
actual expected expenditures and thus cannot estimate the amounts to be used for
each of these purposes. The amounts and timing of these expenditures will vary
depending on a number of factors, including the amount of cash generated by our
operations, competitive and technological developments and the rate of growth,
if any, of our business. In addition, we have used a portion and may continue to
use a portion of the net proceeds for further development of our product lines
through acquisitions of products, technologies and businesses. On September 30,
1999, we acquired Marketwave Corporation. Approximately $3.3 million of cash was
used to pay for the acquisition related expenses. On January 14, 2000, we
acquired NeoVista Software, Inc. and approximately $5.0 million of cash was used
to pay for the acquisition related expenses.


     None of our net proceeds of the offering were paid directly or indirectly
to any director, officer, general partner or their associates, persons owning
10% or more of any class of our equity securities, or an affiliate.

ITEM 6. SELECTED FINANCIAL DATA

FINANCIAL SUMMARY

<TABLE>
<CAPTION>
                                                        AS OF OR FOR THE YEAR ENDED MARCH 31,
                                                       ---------------------------------------
                                                          1998           1999          2000
                                                       -----------    ----------    ----------
                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                    <C>            <C>           <C>
Revenue..............................................   $  2,057       $ 4,684       $18,864
Cost of revenue......................................        228           469         2,768
Gross profit.........................................      1,829         4,215        16,096
Stock-based compensation expense.....................         --         1,325         4,344
Loss from operations.................................     (4,280)       (7,651)      (22,270)
Other income and (expense)...........................         79            50         1,151
Net loss.............................................     (4,201)       (7,601)      (21,119)
Net loss per share
  Basic and diluted..................................      (0.99)        (1.63)        (1.33)
Cash and cash equivalents............................        570         2,862        31,754
Working capital......................................        232         2,529        30,192
Total assets.........................................      2,112         6,109       160,899
Long-term debt, net of current portion...............        312           169            39
Total stockholders' equity...........................        557         3,414       151,987
</TABLE>

                                       28
<PAGE>   29

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

OVERVIEW

     Our products, Accrue Insight, Hit List and Decision Series are
comprehensive solutions that we believe help Internet businesses increase the
number of visitors to their respective Web sites, customer loyalty and online
sales by collecting, storing, analyzing and reporting Web site activity data at
a level of detail and accuracy that distinguishes our technology from others. We
offer our products to customers for a license fee and also provide related
maintenance services. In addition, we provide professional services to assist
customers at every stage in their deployment of Accrue products, from
identification of their specific business needs through enterprise integration
and customization of e-business analysis reporting, to delivery of a rapid and
effective implementation. We also offer an application hosting service, Accrue
Site Knowledge (ASK) Service, that enables customers to outsource system
administration responsibilities in connection with their purchase of Accrue
Insight.

     From our inception through March 31, 1997, our operations consisted
primarily of start-up activities, such as raising capital, recruiting personnel,
conducting research and development, developing our initial product,
establishing the market for our initial product and purchasing operating assets.
During fiscal years 1998 and 1999, we continued to invest in research and
development, building sales channels, expanding marketing activities and
developing administrative operations. In January 1997 we began shipping our
initial product, Accrue Insight 1.0 for analysis of Web site traffic. In
February 1998 we released Accrue Insight 2.0, which added scalability and
functionality to provide e-business analysis capabilities. In August 1998 we
released Accrue Insight 2.5, which added personalized Web pages and push
technology enabling distribution of reports via email. From October 1998 through
March 1999 we continued to expand the functional capabilities of Accrue Insight
through a series of releases including an easy-to-use interface, a customized
integration bridge with Vignette StoryServer, and enhanced network collection
technology. In April 1999, we released Accrue Insight 3.1, which added new
features to enhance Web data collection, analysis, storage and reporting, expand
the amount and types of information captured, provide new information access and
report distribution options, increase scalability, and improve manageability.
The Accrue Site Knowledge (ASK) Service, also introduced in April 1999, provides
a new application hosting service that enables customers to outsource system
administration responsibilities in connection with their purchase of Accrue
Insight. In September 1999, we acquired the Hit List family of products in
connection with our merger with Marketwave Corporation. In November 1999, we
released Accrue Hit List 4.5, offering increased functionality, improved
performance, broader database and platform support.

     Substantially all of our product revenues through March 31, 2000 were
attributable to licensing Accrue Insight, Accrue Hit List and related products
and support services. We anticipate that these products will continue to account
for a substantial portion of our revenues for the foreseeable future.
Consequently, a decline in the price of or demand for Accrue Insight, Accrue Hit
List, or related products and services, or their failure to achieve broad market
acceptance, would seriously harm our business, financial condition and results
of operations.

     We recognize product revenues upon shipment if a signed contract exists,
the fee is fixed and determinable, collection of resulting receivables is
probable and product returns are reasonably estimable. We generally do not allow
product returns; however, in the past, upon request by a customer and approval
of management, certain returns have been allowed. Therefore, provision for
estimated product returns are recorded at the time the products are shipped.

     For contracts with multiple obligations (e.g. deliverable and undeliverable
products, maintenance, installation and other services), revenue is allocated to
each component of the contract based on objective evidence of its fair value,
which is specific to Accrue, or for products not being sold separately, the
price established by management. We recognize revenue allocated to undelivered
products when the criteria for product revenue set forth above are met. We
recognize revenue allocated to maintenance fees, including amounts allocated
from product revenue, for ongoing customer support and product updates ratably
over the period of the maintenance contract. Payments for maintenance fees are
generally made in advance and are

                                       29
<PAGE>   30

non-refundable. For revenue allocated to consulting services, such as
installation and training, we recognize revenue as the related services are
performed.

     We market our products, both domestically and internationally, through our
direct sales force. Sales derived through indirect channels, which consist
primarily of international resellers and system integrators, accounted for less
than 15% of our total revenue to date. We expect that sales through indirect
channels will increase as a percentage of total revenue as we expand our
international efforts. We license our products to our customers primarily on a
perpetual basis. We offer multiple pricing models, including usage-based,
server-based and CPU-based, allowing for additional revenue as a customer's
e-business expands. License fees for our products have typically ranged from ten
to several hundred thousand dollars. Annual support and maintenance contracts,
which are purchased with initial product licenses, entitle customers to
telephone support and upgrades, when and if available. The price for our support
and maintenance program is based on a percentage of list price and is paid in
advance. Consulting fees for implementation services and training are charged on
a time-and-materials basis or a fixed-fee basis for package services.

     We have recorded stock-based compensation related to stock options granted
below fair market value through March 31, 1999 and March 31, 2000 of
approximately $6.3 million and $9.9 million, respectively. Of this amount, we
amortized approximately $1.3 million in fiscal year 1999 and $4.3 million in
fiscal year 2000. This amount represents the difference between the exercise
price of these stock option grants and the deemed fair value of the common stock
at the time of grant. The remaining balance of stock-based compensation will be
amortized over the remaining vesting period of the options, generally four years
or less. As a result, the amortization of stock-based compensation will impact
our reported results of operations through fiscal 2003.

     We have sustained losses on a quarterly and annual basis since inception.
As of our fiscal year ended March 31, 1999, we had an accumulated deficit of
approximately $13.8 million, and as of March 31, 2000, we have an accumulated
deficit of approximately $34.9 million. Our net loss was approximately $4.2
million in fiscal year 1998, $7.6 million in fiscal year 1999, and $21.1 million
in fiscal year 2000. These losses resulted from significant costs incurred in
the development and sale of our products and services and merger related costs.
We expect to experience significant growth in our operating expenses in order to
execute our business plan, particularly in the areas of research and
development, sales and marketing, and increased international distribution. As a
result, we anticipate that these operating expenses, as well as planned capital
expenditures, will constitute a material use of our cash resources. If we do
achieve profitability, we cannot be certain that we can sustain or increase
profitability on a quarterly or annual basis in the future, or at all.

     You should not rely upon our past operating results as an indication of
future performance. While we have experienced significant percentage growth in
revenues in recent periods, we have a limited operating history and we do not
believe that prior growth rates are sustainable or indicative of future growth
rates.

                                       30
<PAGE>   31

RESULTS OF OPERATIONS

     The following tables set forth our historical operating information, as
well as the information as a percentage of our total revenue represented by each
item, for the periods indicated:

<TABLE>
<CAPTION>
                                                                       YEAR ENDED MARCH 31,
                                                              ---------------------------------------
                                                                 1998          1999          2000
                                                              ----------    ----------    -----------
                                                               (IN THOUSANDS, EXCEPT AS A PERCENTAGE
                                                                         OF TOTAL REVENUE)
<S>                                                           <C>           <C>           <C>
STATEMENT OF OPERATIONS DATA:
Net revenue:
  Software license..........................................   $ 1,857       $ 3,640       $ 14,681
  Maintenance and service...................................       200         1,044          4,183
                                                               -------       -------       --------
          Total revenue.....................................     2,057         4,684         18,864
Cost of revenue.............................................       228           469          2,768
                                                               -------       -------       --------
Gross profit................................................     1,829         4,215         16,096
                                                               -------       -------       --------
Operating expenses:
  Research and development..................................     2,403         3,166          4,410
  Sales and marketing.......................................     2,744         5,448         12,106
  General and administrative................................       962         1,927          2,437
  Merger costs..............................................        --            --          3,560
  In-process research and development.......................        --            --            650
  Amortization of intangibles...............................        --            --         10,859
  Stock-based compensation expense..........................        --         1,325          4,344
                                                               -------       -------       --------
          Total operating expenses..........................     6,109        11,866         38,366
                                                               -------       -------       --------
Loss from operations........................................    (4,280)       (7,651)       (22,270)
Other income (expense), net.................................        79            50          1,151
                                                               -------       -------       --------
Net loss....................................................   $(4,201)      $(7,601)      $(21,119)
                                                               =======       =======       ========
AS A PERCENTAGE OF TOTAL REVENUE:
Net revenue:
  Software license..........................................      90.3%         77.7%          77.8%
  Maintenance and service...................................       9.7          22.3           22.2
                                                               -------       -------       --------
          Total revenue.....................................     100.0         100.0          100.0
Cost of revenue.............................................      11.1          10.0           14.7
                                                               -------       -------       --------
Gross profit................................................      88.9          90.0           85.3
                                                               -------       -------       --------
Operating expenses:
  Research and development..................................     116.8          67.6           23.4
  Sales and marketing.......................................     133.4         116.3           64.2
  General and administrative................................      46.8          41.1           12.9
  Merger costs..............................................        --            --           18.9
  In-process research and development.......................        --            --            3.4
  Amortization of intangibles...............................        --            --           57.6
  Stock-based compensation expense..........................        --          28.3           23.0
                                                               -------       -------       --------
          Total operating expenses..........................     297.0         253.3          203.4
                                                               -------       -------       --------
Loss from operations........................................    (208.1)       (163.3)        (118.1)
Other income (expense), net.................................       3.9           1.0            6.1
                                                               -------       -------       --------
Net loss....................................................    (204.2)%      (162.3)%       (112.0)%
                                                               =======       =======       ========
</TABLE>

                                       31
<PAGE>   32

FISCAL YEARS ENDED MARCH 31, 1998, 1999 AND 2000

     Revenue. Total revenue increased from $2.1 million in fiscal year 1998 to
$4.7 million in fiscal year 1999 and $18.9 million in fiscal year 2000. These
increases reflect year-to-year revenue growth of 128% and 303%, respectively. No
customer accounted for more than 10% of our revenue in fiscal year 1998, 1999 or
2000.

     Software license revenue. Revenue from software licenses was $1.9 million
in fiscal year 1998, $3.6 million in fiscal year 1999 and $14.7 million in
fiscal year 2000 representing increases of $1.5 million, or 371%, from fiscal
year 1997 to fiscal year 1998, $1.8 million, or 96% from fiscal year 1998 to
fiscal year 1999 and $11.0 million, or 303%, from fiscal year 1999 to fiscal
year 2000. The majority of the growth in product revenue for the three fiscal
years was due to higher unit sales volumes of Accrue Insight and Accrue Hit List
as a result of increased market awareness of our products, introductions of new
features, increases in both the size and productivity of our sales force, and
increased average dollar size of licenses. We anticipate that revenue from
product licenses will continue to represent a substantial majority of our
revenues in the future. We expect that the growth rate of our revenue base will
decrease in the future and therefore our historical percentage growth rates of
our product revenue will not be sustainable in the future.

     Maintenance and service revenue. Maintenance and service revenue was $0.2
million in fiscal year 1998, $1.0 million in fiscal year 1999 and $4.2 million
in fiscal year 2000 representing increases of 456% from fiscal year 1997 to
fiscal year 1998, 422% from fiscal year 1998 to fiscal year 1999, and 301% from
fiscal year 1999 to fiscal year 2000. This growth was primarily due to expanded
service offerings, more proactive sales of these offerings, and a higher
proportion of renewals of maintenance contracts by existing customers. We expect
that our historical percentage growth rates of our maintenance and service
revenue will not be sustainable in the future.

     Cost of revenue. Cost of revenue consists primarily of royalties paid to
third parties for technology used in our products and cost of maintenance and
services. These costs were $0.2 million, or 11.1% of revenue, in fiscal year
1998, $0.5 million, or 10% of revenue, in fiscal year 1999, and $2.8 million, or
14.7% of revenue, in fiscal year 2000 representing increases of 660% from fiscal
year 1997 to fiscal year 1998, 106% from fiscal year 1998 to fiscal year 1999,
and 490% from fiscal year 1999 to fiscal year 2000. The dollar increases in the
cost of revenue reflect increased third-party royalties incurred in connection
with higher volumes of related product shipments and higher cost of maintenance
and services associated with our increased maintenance and service revenue.
Because all development costs incurred in the research and development of our
software products and enhancements to our existing software products have been
expensed as incurred, cost of revenue includes no amortization of capitalized
software development costs.

     Gross profit. Gross profit was 89% in fiscal year 1998, 90% in fiscal year
1999, and 85% in fiscal year 2000. In the future, we expect that royalties paid
to third parties will increase in absolute dollars. In addition, we expect that
sales derived through indirect channels will increase as a percentage of total
revenue. We also expect that maintenance and service revenue will increase as a
percentage of total revenue as we expand our service offerings and maintain our
maintenance contract renewal rates with customers. Maintenance and service
revenue has lower gross profit than product revenue. For all of these reasons,
we expect that our gross profit will decline.

     Operating expenses. Total operating expenses increased from $6.1 million in
fiscal year 1998 to $11.9 million in fiscal year 1999, and $38.4 million in
fiscal year 2000. The increases reflect year-to-year growth of 94% and 223%
respectively. The significant increase from fiscal year 1999 to fiscal year 2000
was largely due to increased salaries, related expenses associated with newly
hired employees, merger related costs and amortization of intangibles as a
result of the acquisition of NeoVista Software, Inc.

     Research and development expenses. Research and development expenses
consist primarily of salaries and related costs associated with the development
of new products, the enhancement of existing products, and the performance of
quality assurance and documentation activities. Research and development
expenses were $2.4 million in fiscal year 1998, $3.2 million in fiscal year
1999, and $4.4 million in fiscal year 2000. The increases were primarily
attributable to increased staffing and associated support for software engineers
required to expand and enhance our product and services offerings. We believe
that research and development

                                       32
<PAGE>   33

expenses will increase in dollar amount but decrease as a percentage of total
revenue in the future, as our focus shifts from development to marketing,
distribution, service and maintenance of existing product offering. Research and
development expenditures are charged to operations as incurred.

     Sales and marketing expenses. Sales and marketing expenses consist
primarily of salaries, commissions and bonuses of sales and marketing personnel,
and promotional expenses. Sales and marketing expenses were $2.7 million in
fiscal year 1998, $5.4 million in fiscal year 1999, and $12.1 million in fiscal
year 2000. The increases were primarily due to increased headcount in our sales
and marketing departments, and increased marketing communications expenditures
associated with our products and services. We believe that sales and marketing
expenses will increase in dollar amount but decrease as a percentage of total
revenue in the future.

     General and administrative expenses. General and administrative expenses
consist primarily of salaries and other personnel-related costs for executive,
financial, human resource, information services, and other administrative
functions, as well as legal and accounting costs. General and administrative
expenses were $1.0 million in fiscal year 1998, $1.9 million in fiscal year
1999, and $2.4 million in fiscal year 2000. These increases were primarily the
result of increased staffing and associated expenses necessary to manage and
support our growth. We believe that general and administrative expenses will
increase in dollar amount as we continue to increase staffing to manage
expanding operations and facilities, and incur additional expenses associated
with operating as a public company. However, we believe that general and
administrative expenses will decrease as a percentage of total revenue in the
future.

     Merger costs. As a result of the merger with Marketwave Corporation, we
incurred merger-related costs of $3.6 million in fiscal year 2000. These
expenses related to transaction costs, employee termination and transaction
costs, legal and accounting costs, write-off of equipment and other assets, and
redundant facility and other costs.

     In-Process Research and Development. We recorded a one-time charge of $0.7
million in fiscal year 2000 for in-process research and development associated
with our acquisition of NeoVista Software, Inc. At the date of the acquisition,
the associated research and development projects had not yet reached
technological feasibility and had no alternative future uses. The value of the
purchased in-process research and development was determined by estimating the
projected net cash flows related to the products, including costs to complete
the development of the technology and the future revenues to be earned upon
commercialization of the products. These cash flows were then discounted back to
their net present value. The projected net cash flows from the projects were
based on management's estimates of revenues and operating profits related to the
projects.

     Amortization of Intangibles. In January 2000, we acquired NeoVista
Software, Inc. Purchased goodwill, representing purchase price in excess of
identified tangible and intangible assets, of approximately $127.9 million was
recorded and is being amortized on a straight-line basis over a useful life of
three years. Amortization expense of approximately $10.9 million was recorded
for fiscal 2000.

     Stock-based compensation. Total stock-based compensation as of March 31,
1999 and March 31, 2000 amounted to $6.3 million and $9.9 million respectively,
of which approximately $1.3 million and $4.3 million was amortized in fiscal
year 1999 and fiscal year 2000, respectively.

     Other income (expense), net. Other income (expense), net consists of
interest income, interest expense, other income and other expense. Other income
(expense), net was less than $0.1 million in each of fiscal years 1998 and 1999,
and $1.2 million in fiscal year 2000.

     As of March 31, 2000 we had federal and state net operating loss
carryforwards of approximately $64.7 million and $21.2 million, respectively,
for tax purposes. In addition, as of March 31, 2000, we had $2.6 million and
$1.2 million of federal and state tax credit carryforwards, respectively. These
operating loss carryforwards and credits will begin to expire in 2001. Under the
provisions of the Internal Revenue Code, certain substantial changes in our
ownership occurring in the past or future may limit the amount of net operating
loss and tax credit carryforwards that we could utilize annually to offset
future taxable income. We have recorded a valuation allowance for the full
amount of our net deferred tax assets, as the future realization of the tax
benefit is not currently likely.

                                       33
<PAGE>   34

     We establish our expenditure levels for product development, sales and
marketing and other operating expenses based, in large part, on our expected
future revenue. Our expectations regarding future revenue may not be accurate.
As a result, if revenue falls below expectations, our operating results are
likely to be adversely and disproportionately affected because only a small
portion of our expenses vary with revenue. Due to these factors, our operating
results are difficult to forecast. We believe that period-to-period comparisons
of our historical operating results are not meaningful and should not be relied
upon as an indication of future performance.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have financed our operations principally through
private sales of preferred stock, with net proceeds of $15.5 million, bank
loans, and with the net proceeds of $40.8 million from our initial public
offering completed in August 1999. We used cash primarily to fund our net losses
from operations and to pay for acquisition related expenses. Cash used in
operating activities totaled $4.4 million in fiscal year 1998, $5.5 million in
fiscal year 1999, and $9.2 million in fiscal year 2000. In fiscal year 1998,
cash used for operating activities was primarily attributable to our net losses
from operations. In fiscal year 1999, cash used for operating activities was
primarily attributable to a net loss of $7.6 million and an increase in accounts
receivable of $1.4 million offset in part by an increase in deferred revenue of
$0.9 million, provision for sales returns and doubtful accounts of $0.2 million,
increase in accrued liabilities of $0.5 million and stock-based compensation
expense of $1.3 million. The increases in accounts receivable, provision for
sales returns and doubtful accounts and deferred revenue were a result of higher
unit sales of Accrue Insight. In fiscal year 2000, cash used for operating
activities was primarily attributable to our net loss of $21.1 million, an
increase in accounts receivable of $4.1 million, and an increase in accrued
costs related to mergers and acquisitions of $3.3 million, offset in part by an
increase in deferred revenue of $1.7 million, an increase in accrued liabilities
of $1.7 million, amortization of intangibles of $10.9 million, and stock-based
compensation expense of $4.3 million. The increases in accounts receivable and
deferred revenue were a result of higher unit sales. The increases in accrued
costs related to mergers and acquisitions and amortization of intangibles were a
result of the acquisitions during fiscal 2000.

     Cash used in investing activities totaled $0.3 million in fiscal year 1998,
$0.5 million in fiscal year 1999, and $1.2 million in fiscal year 2000. The
increase resulted primarily from the purchase of property and equipment,
including computer equipment and software. We expect that our capital
expenditures will continue to increase in the future.

     Cash provided by financing activities was $1.8 million in fiscal year 1998,
$8.4 million in fiscal year 1999 and $39.3 million in fiscal year 2000. The
activity in fiscal year 1998 and 1999 include proceeds from the issuance of
preferred stock and notes payable. The 2000 activity includes net proceeds of
$40.1 million from the issuance of common stock in our initial public offering.

     We had $2.5 million and $30.2 million in working capital at March 31, 1999
and 2000, respectively. We have a $2.0 million working capital line with Silicon
Valley Bank which expires in June 2000. Interest is payable monthly. There were
no amounts outstanding under the line as of March 31, 2000.

     We expect to experience significant growth in our operating expenses in the
future in order to execute our business plan, particularly research and
development and sales and marketing expenses. As a result, we anticipate that
our operating expenses, as well as planned capital expenditures, will constitute
a material use of our cash resources. In addition, we may utilize cash resources
to fund acquisitions or investments in complementary businesses, technologies or
product lines. We believe that our cash and cash equivalents, investments in
marketable securities, available borrowings under the bank line of credit and
funds generated from operations will provide adequate liquidity to meet our
normal operating requirements for at least the next twelve months. Thereafter,
we may find it necessary to obtain additional equity or debt financing. In the
event additional financing is required, we may not be able to raise it on
acceptable terms or at all.

YEAR 2000 READINESS

     "Year 2000 Issues" refer generally to the problems that some software may
have in determining the correct century for the year. For example, software with
date-sensitive functions that is not Year 2000

                                       34
<PAGE>   35

compliant may not be able to distinguish whether "00" means 1900 or 2000, which
may result in failures or the creation of erroneous results.

     We have defined Year 2000 compliance as the ability to:

     - Correctly handle date information needed for the December 31, 1999 to
       January 1, 2000 date change;

     - Function according to the product documentation provided for this date
       change, without changes in operation resulting from the advent of a new
       century, assuming correct configuration;

     - Respond to two-digit date input in a way that resolves the ambiguity as
       to century in a disclosed, defined and predetermined manner; store and
       provide output of date information in ways that are unambiguous as to
       century if the date elements in interfaces and data storage specify the
       century; and

     - Recognize the Year 2000 as a leap year.

     We designed our current products to be Year 2000 compliant when configured
and used in accordance with the related documentation, and provided that the
underlying operating system of the host machine and any other software used with
or in the host machine or our products are Year 2000 compliant. We have tested
our products for Year 2000 compliance.

     As of May 19, 2000, we have not experienced any significant issues as a
result of Year 2000 problems and do not anticipate incurring material
incremental costs in future periods due to such issues.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board on FASB, issued
Statement of Financial Accounting Standard No. 133, or SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging activities.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. We do not expect SFAS No. 133 to have a significant effect
on our financial condition or results of operations.

     In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. We have reviewed the bulletin and
believe that our current revenue recognition policy is consistent with the
guidance of SAB No. 101.

     In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation -- an interpretation of APB Opinion No. 25" ("FIN 44"). This
interpretation clarifies the definition of employee for purposes of applying
Accounting Practice Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"), the criteria for determining whether a plan qualifies as
a noncompensatory plan, the accounting consequence of various modifications to
the terms of a previously fixed stock option or award, and the accounting for an
exchange of stock compensation awards in a business combination. This
Interpretation is effective July 1, 2000, but certain conclusions in this
Interpretation cover specific events that occur after either December 15, 1998,
or January 12, 2000. Accrue believes that the impact of FIN 44 will not have a
material effect on the financial position or results of Accrue's operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

INTEREST RATE RISK

     Our exposure to market risk for changes in interest rates is limited to the
exposure related to credit facilities which are tied to market rates. We do not
plan to use derivative financial instruments in our investment portfolio. If
market rates were to increase immediately and uniformly by 10% from levels as of
March 31, 1999 and March 31, 2000, the decline in fair value of the portfolio
would not be material. We plan to ensure the safety and preservation of our
invested principal funds by limiting default risks, market risk and reinvestment
risk. We plan to mitigate default risk by investing in high-credit quality
securities.

                                       35
<PAGE>   36

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Accrue Software, Inc.

     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
Accrue Software, Inc. as of March 31, 1999 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
March 31, 2000, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of Accrue's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.


/s/ PricewaterhouseCoopers LLP


San Jose, California
April 11, 2000

                                       36
<PAGE>   37

                             ACCRUE SOFTWARE, INC.

                          CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                                              --------------------
                                                                1999        2000
                                                              --------    --------
<S>                                                           <C>         <C>
Current assets:
  Cash and cash equivalents.................................  $  2,862    $ 31,754
  Accounts receivable, net..................................     2,005       6,279
  Prepaid expenses and other current assets.................       188       1,032
                                                              --------    --------
          Total current assets..............................     5,055      39,065
Property and equipment, net.................................       894       2,253
Goodwill and intangibles, net...............................        --     119,450
Other assets................................................       160         131
                                                              --------    --------
          Total assets......................................  $  6,109    $160,899
                                                              ========    ========

                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $    472    $    429
  Accrued liabilities.......................................       791       2,781
  Accrued liabilities, merger...............................        --       2,421
  Deferred revenue..........................................     1,127       3,095
  Current portion long term debt............................       136         147
                                                              --------    --------
          Total current liabilities.........................     2,526       8,873
Long term debt, net of current portion......................       169          39
                                                              --------    --------
          Total liabilities.................................     2,695       8,912
                                                              --------    --------
Commitments (Note 5)
Convertible preferred stock, $0.001 par value:
  Authorized: 10,944 and 5,000 shares in 1999 and 2000......
  Issued and outstanding: 10,353 and no shares in 1999 and
     2000...................................................    15,517          --
Stockholders' Equity:
Common stock, $0.001 par value:
  Authorized: 20,000 and 75,000 shares in 1999 and 2000.....
  Issued and outstanding: 6,883 and 27,277 shares in 1999
     and 2000...............................................         7          27
Additional paid-in capital..................................     6,803     191,300
Notes receivable from stockholders..........................      (213)       (213)
Unearned compensation.......................................    (4,929)     (4,237)
Accumulated deficit.........................................   (13,771)    (34,890)
                                                              --------    --------
          Total stockholders' equity........................     3,414     151,987
                                                              --------    --------
          Total liabilities and stockholders' equity........  $  6,109    $160,899
                                                              ========    ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       37
<PAGE>   38

                             ACCRUE SOFTWARE, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                   YEAR ENDED MARCH 31,
                                                              ------------------------------
                                                                2000       1999       1998
                                                              --------    -------    -------
<S>                                                           <C>         <C>        <C>
Net revenue:
  Software license..........................................  $ 14,681    $ 3,640    $ 1,857
  Maintenance and service...................................     4,183      1,044        200
                                                              --------    -------    -------
          Total revenue.....................................    18,864      4,684      2,057
Cost of revenue:
  Software license..........................................       602        287        163
  Maintenance and service...................................     2,166        182         65
                                                              --------    -------    -------
          Total cost of revenue.............................     2,768        469        228
                                                              --------    -------    -------
Gross profit................................................    16,096      4,215      1,829
Operating expenses:
  Research and development..................................     4,410      3,166      2,403
  Sales and marketing.......................................    12,106      5,448      2,744
  General and administrative................................     2,437      1,927        962
  Merger costs..............................................     3,560         --         --
  In-process research and development.......................       650         --         --
  Amortization of intangibles...............................    10,859         --         --
  Stock-based compensation expense..........................     4,344      1,325         --
                                                              --------    -------    -------
          Total operating expenses..........................    38,366     11,866      6,109
                                                              --------    -------    -------
Loss from operations........................................   (22,270)    (7,651)    (4,280)
Other income................................................     1,247         96         97
Interest expense............................................       (96)       (46)       (18)
                                                              --------    -------    -------
Net loss....................................................  $(21,119)   $(7,601)   $(4,201)
                                                              ========    =======    =======
Net loss per share, basic and diluted.......................  $  (1.33)   $ (1.63)   $ (0.99)
                                                              ========    =======    =======
Shares used in computing net loss per share, basic and
  diluted...................................................    15,822      4,670      4,264
                                                              ========    =======    =======
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       38
<PAGE>   39

                             ACCRUE SOFTWARE, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                            CONVERTIBLE                                        NOTES
                                          PREFERRED STOCK     COMMON STOCK     ADDITIONAL    RECEIVABLE
                                         -----------------   ---------------    PAID-IN         FROM         UNEARNED
                                         SHARES    AMOUNT    SHARES   AMOUNT    CAPITAL     STOCKHOLDERS   COMPENSATION
                                         ------   --------   ------   ------   ----------   ------------   ------------
<S>                                      <C>      <C>        <C>      <C>      <C>          <C>            <C>
Balances, March 31, 1997...............   3,078   $  5,830    4,080    $ 4      $     49       $   --        $    --
Issuance of Series C preferred stock,
  net..................................      23         63       --     --            --           --             --
Issuance of Series C.1 preferred stock,
  net..................................     293        750       --     --            --           --             --
Exercise of stock options..............      --         --      463      1            30           --             --
Net loss...............................      --         --       --     --            --           --             --
                                         ------   --------   ------    ---      --------       ------        -------
Balances, March 31, 1998...............   3,394      6,643    4,543      5            79           --             --
Issuance of restricted common stock in
  exchange for services................      --         --       53     --           167           --             --
Issuance of common shares for cash.....      --         --        7     --             3           --             --
Issuance of common stock in exchange
  for notes receivable.................      --         --    1,755      2           211         (213)            --
Issuance of Series C.1 preferred stock,
  net..................................     144        370       --     --            --           --             --
Issuance of Series C.2 preferred stock,
  net..................................     883      1,521       --     --            --           --             --
Issuance of Series D preferred stock
  and conversion of notes payable,
  net..................................     929      2,003       --     --            --           --             --
Issuance of Series E preferred stock,
  net..................................   5,003      4,980       --     --            --           --             --
Unearned compensation related to grants
  of stock options.....................      --         --       --     --         6,254           --         (6,254)
Amortization of unearned stock
  compensation.........................      --         --       --     --            --           --          1,325
Exercise of stock options..............      --         --      610     --            99           --             --
Repurchase of common stock.............      --         --      (85)    --           (10)          --             --
Net loss...............................      --         --       --     --            --           --             --
                                         ------   --------   ------    ---      --------       ------        -------
Balances, March 31, 1999...............  10,353     15,517    6,883      7         6,803         (213)        (4,929)
Exercise of stock options..............      --         --    2,130      2           872           --             --
Issuance of common stock in connection
  with the Company's IPO, net..........      --         --    4,485      5        40,810           --             --
Issuance of common stock for cash......      --         --       61     --           519           --             --
Repurchase of stock options............      --         --      (11)    --            (5)          --             --
Unearned compensation related to grants
  of stock options.....................      --         --       --     --         3,652           --         (3,652)
Conversion of preferred stock into
  common stock in connection with the
  Company's IPO........................  (9,033)   (12,876)  10,280     10        12,866           --             --
Conversion of preferred stock into
  common stock in connection with the
  Marketwave acquisition...............  (1,320)    (2,641)   1,320      1         2,640           --             --
Issuance of common stock in connection
  with the NeoVista acquisition........      --         --    1,779      2       122,898           --             --
Exercise of warrants for shares of
  common stock.........................      --         --      350     --           245           --             --
Amortization of unearned stock
  compensation.........................      --         --       --     --            --           --          4,344
Net loss...............................      --         --       --     --            --           --             --
                                         ------   --------   ------    ---      --------       ------        -------
Balances, March 31, 2000...............      --   $     --   27,277    $27      $191,300       $ (213)       $(4,237)
                                         ======   ========   ======    ===      ========       ======        =======

<CAPTION>

                                         ACCUMULATED
                                           DEFICIT      TOTAL
                                         -----------   --------
<S>                                      <C>           <C>
Balances, March 31, 1997...............   $ (1,969)    $  3,914
Issuance of Series C preferred stock,
  net..................................         --           63
Issuance of Series C.1 preferred stock,
  net..................................         --          750
Exercise of stock options..............         --           31
Net loss...............................     (4,201)      (4,201)
                                          --------     --------
Balances, March 31, 1998...............     (6,170)         557
Issuance of restricted common stock in
  exchange for services................         --          167
Issuance of common shares for cash.....         --            3
Issuance of common stock in exchange
  for notes receivable.................         --           --
Issuance of Series C.1 preferred stock,
  net..................................         --          370
Issuance of Series C.2 preferred stock,
  net..................................         --        1,521
Issuance of Series D preferred stock
  and conversion of notes payable,
  net..................................         --        2,003
Issuance of Series E preferred stock,
  net..................................         --        4,980
Unearned compensation related to grants
  of stock options.....................         --           --
Amortization of unearned stock
  compensation.........................         --        1,325
Exercise of stock options..............         --           99
Repurchase of common stock.............         --          (10)
Net loss...............................     (7,601)      (7,601)
                                          --------     --------
Balances, March 31, 1999...............    (13,771)       3,414
Exercise of stock options..............         --          874
Issuance of common stock in connection
  with the Company's IPO, net..........         --       40,815
Issuance of common stock for cash......         --          519
Repurchase of stock options............         --           (5)
Unearned compensation related to grants
  of stock options.....................         --           --
Conversion of preferred stock into
  common stock in connection with the
  Company's IPO........................         --           --
Conversion of preferred stock into
  common stock in connection with the
  Marketwave acquisition...............         --           --
Issuance of common stock in connection
  with the NeoVista acquisition........         --      122,900
Exercise of warrants for shares of
  common stock.........................         --          245
Amortization of unearned stock
  compensation.........................         --        4,344
Net loss...............................    (21,119)     (21,119)
                                          --------     --------
Balances, March 31, 2000...............   $(34,890)    $151,987
                                          ========     ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       39
<PAGE>   40

                             ACCRUE SOFTWARE, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                   YEAR ENDED MARCH 31,
                                                              ------------------------------
                                                               1998       1999        2000
                                                              -------    -------    --------
<S>                                                           <C>        <C>        <C>
Cash flows from operating activities:
  Net loss..................................................  $(4,201)   $(7,601)   $(21,119)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Write-off of purchased in-process research and
      development...........................................       --         --         650
    Common stock issued for services........................       --        167          --
    Depreciation and amortization...........................      151        240      11,460
    Provision for sales returns and doubtful accounts.......       23        237         191
    Amortization of discount on line of credit..............       --         --           7
    Stock-based compensation expense........................       --      1,325       4,344
    Changes in operating assets and liabilities:
      Accounts receivable...................................     (818)    (1,394)     (4,084)
      Prepaid expenses and other current assets.............      (20)      (131)     (1,477)
      Other assets..........................................        3       (127)         76
      Accounts payable......................................      137        333         (69)
      Accrued liabilities...................................      106        486       1,654
      Accrued costs related to merger and acquisition.......       --         --      (2,578)
      Deferred revenue......................................      180        922       1,731
                                                              -------    -------    --------
         Net cash used in operating activities..............   (4,439)    (5,543)     (9,214)
                                                              -------    -------    --------
Cash flows from investing activities:
  Acquisition of property and equipment.....................     (291)      (531)     (1,651)
  Cash acquired in NeoVista acquisition.....................       --         --         436
  Purchase of software license..............................      (50)        --          --
                                                              -------    -------    --------
         Net cash used in investing activities..............     (341)      (531)     (1,215)
                                                              -------    -------    --------
Cash flows from financing activities:
  Proceeds from issuance of preferred stock, net of issuance
    costs...................................................      813      7,874          --
  Proceeds from initial public offering, net of issuance
    costs...................................................       --         --      40,815
  Proceeds from equipment loan..............................      406         --         584
  Proceeds from notes payable...............................      500        500          --
  Proceeds from stock options and warrants exercised........       31         99       1,119
  Proceeds from issuance of common stock....................       --          3         519
  Repurchase of common stock................................       --        (10)         (5)
  Repayment of equipment loan...............................       --       (100)     (3,711)
                                                              -------    -------    --------
         Net cash provided by financing activities..........    1,750      8,366      39,321
                                                              -------    -------    --------
Net increase (decrease) in cash and cash equivalents........   (3,030)     2,292      28,892
Cash and cash equivalents at beginning of period............    3,600        570       2,862
                                                              -------    -------    --------
Cash and cash equivalents at end of period..................  $   570    $ 2,862    $ 31,754
                                                              =======    =======    ========
Supplemental disclosure of cash flow information:
  Notes payable converted to preferred stock................  $    --    $ 1,000    $     --
                                                              =======    =======    ========
  Interest paid.............................................  $    18    $    47    $     49
                                                              =======    =======    ========
  Unearned compensation related to grants of stock
    options.................................................  $    --    $ 6,254    $  3,652
                                                              =======    =======    ========
  Non-cash investment in NeoVista...........................  $    --    $    --    $122,900
                                                              =======    =======    ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       40
<PAGE>   41

                             ACCRUE SOFTWARE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

NOTE 1 -- FORMATION AND BUSINESS OF ACCRUE:

     Accrue Software, Inc. ("Accrue") was formed in February 1996 and is a
provider of enterprise e-business analysis solutions. Accrue's principal
products, Accrue Insight, Accrue Hit List and Accrue Decision Series are an
e-business analysis software that allows organizations to evaluate the
effectiveness of their e-business initiatives by providing data in a format that
facilitates strategic merchandising and marketing decisions. Accrue products
offer users detailed Web-site traffic information, visitor data, and content
effectiveness metrics. Web site managers and marketers can analyze this data to
make merchandising and marketing decisions which maximize revenue, profit and
customer retention. Accrue also provides professional services to assist
customers in Accrue product deployment.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

  Principles of consolidation

     The financial statements include the accounts of Accrue and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

  Certain risks and concentrations

     Accrue's cash and cash equivalents as of March 31, 2000 are on deposit with
three U.S. financial institutions.

     Accrue performs ongoing credit evaluations of its customers and collateral
is not required. Accrue maintains allowances for potential returns and credit
losses.

     At March 31, 1999, one customer individually accounted for 11% of accounts
receivable. At March 31, 2000 no customers individually accounted for more than
10% of accounts receivable.

     The market in which Accrue competes is characterized by rapid technological
change, frequent new product introductions, changes in customer requirements and
emerging industry standards. Significant technological change could adversely
affect Accrue's operating results and subject Accrue to returns of products.
While Accrue has ongoing programs to minimize the adverse effect of such changes
and considers technological change in estimating its allowance, such estimates
could change in the future.

     Accrue licenses technology that is incorporated into its products from
certain third parties. Any significant interruption in the supply or support of
any licensed software could adversely affect Accrue's sales, unless and until
Accrue can replace the functionality provided by this licensed software. Because
Accrue's products incorporate software developed and maintained by third
parties, Accrue depends on such third parties to deliver and support reliable
products, enhance their current products, develop new products on a timely and
cost-effective basis and respond to emerging industry standards and other
technological changes. The failure of these third parties to meet these criteria
could adversely impact Accrue's business.

  Use of estimates

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

                                       41
<PAGE>   42
                             ACCRUE SOFTWARE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

  Financial instruments

     Financial instruments that potentially subject Accrue to concentrations of
credit risks principally comprise cash and cash equivalents. Cash equivalents
are highly liquid investments with original or remaining maturities of three
months or less as of the date of purchase. Cash equivalents present
insignificant risk of changes in value because of interest rate changes. Accrue
has not experienced significant losses relating to any investment instruments.

     The amounts reported for cash equivalents, receivables, notes payable and
long-term debt are considered to approximate fair values based upon comparable
market information available at the balance sheet date.

  Property and equipment

     Property and equipment are stated at cost. Depreciation expense is provided
using the straight-line method over the estimated useful lives of the respective
assets, generally three to seven years. Leasehold improvements are amortized on
a straight line basis over the estimated life of the lease, or the useful life
of the asset, whichever is shorter.

     Maintenance and repairs are charged to expense as incurred. When assets are
sold or retired, the cost and related accumulated depreciation are removed from
the accounts and any resulting gain or loss is included in operations.

  Goodwill and intangibles

     Goodwill and intangible assets consist of goodwill, assembled workforce and
developed technology and are amortized on a straight line basis over three
years. See Note 3 -- Business Combinations.

  Long-lived assets

     Accrue accounts for long-lived assets under Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which requires
Accrue to review for impairment of long-lived assets, whenever events or changes
in circumstances indicate that the carrying amount of an asset might not be
recoverable. When such an event occurs, Accrue estimates the future cash flows
expected to result from the use of the asset and its eventual disposition. If
the undiscounted expected future cash flows are less than the carrying amount of
the asset, an impairment loss is recognized. To date, no impairment loss has
been recognized.

  Revenue recognition

     Accrue adopted the provisions of Statement of Position 97-2 ("SOP 97-2"),
"Software Revenue Recognition", as amended by Statement of Position 98-4,
Deferral of the Effective Date of Certain Provisions of SOP 97-2, effective
April 1, 1998 and Statement of Position 98-9 ("SOP 98-9"), modification of SOP
97-2, "Software Revenue Recognition," effective March 15, 1999. SOP 97-2
supersedes Statement of Position 91-1, Software Revenue Recognition, and
delineates the accounting for software product, products including software that
is not incidental to the product, and maintenance revenues. Under SOP 97-2,
Accrue recognizes product revenues upon shipment if a signed contract exists,
the fee is fixed and determinable, collection of resulting receivables is
probable and product returns are reasonably estimable. Accrue generally does not
allow product returns; however, in the past, upon request by a customer and
approval of management, certain returns have been allowed. Therefore, provision
for estimated product returns are recorded at the time the products are shipped.

                                       42
<PAGE>   43
                             ACCRUE SOFTWARE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

     For contracts with multiple obligations (e.g. deliverable and undeliverable
products, maintenance, installation and other services), revenue is allocated to
each component of the contract based on objective evidence of its fair value,
which is specific to Accrue, or for products not being sold separately, the
price established by management. Accrue recognizes revenue allocated to
undelivered products when the criteria for product revenue set forth above are
met. Accrue recognizes revenue allocated to maintenance fees, including amounts
allocated from product revenue, for ongoing customer support and product updates
ratably over the period of the maintenance contract. Payments for maintenance
fees are generally made in advance and are non-refundable. For revenue allocated
to consulting services, such as installation and training, Accrue recognizes
revenue as the related services are performed.

     Prior to the adoption of SOP 97-2, effective April 1, 1998, Accrue
recognized revenue from the sale of products upon shipment if remaining
obligations were insignificant and collection of the resulting accounts
receivable was probable. Provisions for the estimated product returns were
accrued upon shipment. Revenue from software maintenance contracts, including
amounts unbundled from product sales, were deferred and recognized ratably over
the period of the contract. Consulting services revenue was recognized as the
related services were performed.

  Research and development costs

     Research and development costs are charged to operations as incurred.
Software development costs are capitalized beginning when a product's
technological feasibility has been established and ending when a product is
available for general release to customers. Amounts that could have been
capitalized under Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," have been insignificant and therefore no costs have been capitalized
to date.

  Advertising expense

     Accrue accounts for advertising costs as expense in the period in which
they are incurred. Advertising expense for the years ended March 31, 1998, 1999
and 2000 was $41, $52 and $203, respectively.

  Income taxes

     Deferred tax assets and liabilities are determined based on differences
between financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Valuation allowances are established when
necessary to reduce deferred tax assets to the amounts expected to be realized.
The provision for income tax expense is comprised of income taxes payable for
the current period, plus the net change in deferred tax amounts during the
period.

                                       43
<PAGE>   44
                             ACCRUE SOFTWARE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

  Net loss per share

     Basic and diluted net loss per share are computed using the weighted
average number of common shares outstanding. Options, warrant, shares subject to
repurchase and preferred stock were not included in the computation of diluted
net loss per share because the effect would be antidilutive.

     A reconciliation of shares used in the calculation of net loss per share
follows:

<TABLE>
<CAPTION>
                                                           YEARS ENDED MARCH 31,
                                                       ------------------------------
                                                        1998       1999        2000
                                                       -------    -------    --------
<S>                                                    <C>        <C>        <C>
NET LOSS PER SHARE, BASIC AND DILUTED:
  Net loss...........................................  $(4,201)   $(7,601)   $(21,119)
                                                       =======    =======    ========
  Weighted average shares of common stock
     outstanding.....................................    4,331      5,800      17,784
  Less: Weighted average shares subject to
     repurchase......................................      (67)    (1,130)     (1,962)
                                                       -------    -------    --------
  Shares used in computing net loss per share, basic
     and diluted.....................................    4,264      4,670      15,822
                                                       =======    =======    ========
  Net loss per share, basic and diluted..............  $ (0.99)   $ (1.63)   $  (1.33)
                                                       =======    =======    ========
  Antidilutive options, warrant, shares subject to
     repurchase and preferred stock not included in
     loss per share calculations.....................    5,606     14,319       5,229
                                                       =======    =======    ========
</TABLE>

  Stock-based compensation

     Accrue accounts for its stock-based compensation in accordance with the
provision of Accounting Principles Board Opinion No. 25 ("APB No. 25"),
"Accounting for Stock Issued to Employees" and presents disclosures required by
Statement of Financial Accounting Standard No. 123 ("SFAS No. 123").

  Comprehensive income

     Accrue has adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," ("SFAS 130"). SFAS 130 establishes standards
for reporting and display of comprehensive income and its components in a full
set of general-purpose financial statements. There was no difference between
Accrue's net loss and its total comprehensive loss for the years ended March 31,
1998, 1999, and 2000.

  Recent accounting pronouncements

     In June 1998, the FASB issued Statement of Financial Accounting Standard
No. 133, ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes accounting and reporting standards for
derivative instruments, including derivative instruments embedded in other
contracts, and hedging activities. SFAS No. 133, as amended, is effective for
the Company's fiscal year ending March 31, 2002. Accrue does not expect SFAS No.
133 to have a significant effect on its financial condition or results of
operations.

     In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. Accrue has reviewed the bulletin
and believes that its current revenue recognition policy is consistent with the
guidance of SAB No. 101.

     In March 2000, the Financial Accounting Standards Board issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation -- an interpretation of APB Opinion No. 25" ("FIN 44"). This
interpretation clarifies the definition of employee for purposes of applying
Accounting

                                       44
<PAGE>   45
                             ACCRUE SOFTWARE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

Practice Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
25"), the criteria for determining whether a plan qualifies as a noncompensatory
plan, the accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and the accounting for an exchange of
stock compensation awards in a business combination. This Interpretation is
effective July 1, 2000, but certain conclusions in this Interpretation cover
specific events that occur after either December 15, 1998, or January 12, 2000.
Accrue believes that the impact of FIN 44 will not have a material effect on the
financial position or results of operations.

NOTE 3 -- BUSINESS COMBINATIONS:

  Pooling-of-interests combination

     On September 30, 1999, Accrue completed a merger with Marketwave
Corporation ("Marketwave") in which Marketwave became a wholly-owned subsidiary
of Accrue. Approximately 2,880 shares of common stock were issued in exchange
for all the outstanding common stock of Marketwave based on a conversion ratio
of .1858 shares of Accrue common stock for each share of Marketwave.

     Accrue also assumed the remaining outstanding Marketwave stock options that
were converted to options to purchase approximately 566 shares of Accrue's
common stock. The transaction was accounted for as a pooling of interests in
fiscal year 2000; therefore, Accrue's financial statements have been restated
for all periods prior to the business combination to include the combined
financial results of Accrue and Marketwave.

     The following table shows the historical results of Accrue and Marketwave
for the periods prior to the consummation of the merger of the two entities:

<TABLE>
<CAPTION>
                                                YEARS ENDED MARCH 31,      SIX MONTHS ENDED
                                             ---------------------------    SEPTEMBER 30,
                                              1997      1998      1999           1999
                                             -------   -------   -------   ----------------
<S>                                          <C>       <C>       <C>       <C>
Revenues
  Accrue...................................  $   182   $ 1,120   $ 2,952       $ 4,498
  Marketwave...............................      248       937     1,732         2,238
                                             -------   -------   -------       -------
          Total............................  $   430   $ 2,057   $ 4,684       $ 6,736
                                             =======   =======   =======       =======
Net loss
  Accrue as previously reported............  $(1,927)  $(3,921)  $(6,643)      $(7,250)
  Marketwave as previously reported........      (42)     (280)     (958)         (938)
                                             -------   -------   -------       -------
          Total............................  $(1,969)  $(4,201)  $(7,601)      $(8,188)
                                             =======   =======   =======       =======
</TABLE>

  Purchase combination

     On January 14, 2000, Accrue acquired privately-held, NeoVista Software,
Inc. ("NeoVista"). In exchange for the acquisition of all of NeoVista's
outstanding capital stock, Accrue issued NeoVista shareholders approximately
1,779 shares of its common stock and reserved approximately 550 additional
shares for issuance upon the exercise of stock options and warrants of NeoVista
which will be assumed by Accrue. The transaction was accounted for using the
purchase method of accounting and the results of operations of NeoVista have
been included in the consolidated financial statements from the date of
acquisition. The total purchase price including acquisition related expenses was
approximately $127.9 million, of which $0.7 million was allocated to in-process
research and development and expensed upon closing of the acquisition as it had
not reached technological feasibility and, in management's opinion, had no
alternative future use. The value of the purchased in-process research and
development was determined by estimating the

                                       45
<PAGE>   46
                             ACCRUE SOFTWARE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

projected net cash flows related to the products, including costs to complete
the development of the technology and the future revenues to be earned upon
commercialization of the products. These cash flows were then discounted back to
their net present value. The projected net cash flows from the projects were
based on management's estimates of revenues and operating profits related to the
projects.

     Intangibles of $2.4 million acquired included developed technology,
assembled workforce, sales channel/ customer relationships and trademarks.
Purchased goodwill, representing purchase price in excess of identified tangible
and intangible assets, of approximately $127.9 million was recorded and is being
amortized on a straight-line basis over a useful life of three years.
Amortization expense of approximately $10.9 million was recorded for fiscal
2000.

     The following unaudited pro forma financial information reflects the
results of operations for the year ended March 31, 1999 and 2000, as if the
acquisition of NeoVista had occurred on April 1, 1998. The pro forma results
exclude the $0.7 million nonrecurring write-off of in-process research and
development. The historical results of NeoVista are based on its results of
operations for the year ended December 31, 1998 and 1999.

<TABLE>
<CAPTION>
                                                                     MARCH 31,
                                                                --------------------
                                                                  1999        2000
                                                                --------    --------
<S>                                                             <C>         <C>
Revenue.....................................................    $  9,016    $ 21,428
Net loss....................................................    $(54,805)   $(63,239)
Net loss per share, basic and diluted.......................    $  (8.50)   $  (4.00)
</TABLE>

NOTE 4 -- BALANCE SHEET COMPONENTS:

  Accounts receivable

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                                                ----------------
                                                                 1999      2000
                                                                ------    ------
<S>                                                             <C>       <C>
Accounts receivable.........................................    $2,126    $6,696
Less: Allowance for sales returns and doubtful accounts.....      (121)     (417)
                                                                ------    ------
                                                                $2,005    $6,279
                                                                ======    ======
</TABLE>

  Property and equipment

<TABLE>
<CAPTION>
                                                                    MARCH 31,
                                                                -----------------
                                                                 1999      2000
                                                                ------    -------
<S>                                                             <C>       <C>
Computer equipment..........................................    $  910    $ 4,162
Software....................................................       167        411
Furniture and fixtures......................................       215        539
Leasehold improvements......................................         7        211
                                                                ------    -------
                                                                 1,299      5,323
Less: Accumulated depreciation..............................      (405)    (3,070)
                                                                ------    -------
                                                                $  894    $ 2,253
                                                                ======    =======
</TABLE>

                                       46
<PAGE>   47
                             ACCRUE SOFTWARE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

  Goodwill and intangibles

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                                                ----------------
                                                                1999      2000
                                                                ----    --------
<S>                                                             <C>     <C>
Goodwill and intangibles....................................    $ --    $130,309
Less: Accumulated amortization..............................      --      10,859
                                                                ----    --------
Goodwill and intangibles, net...............................      --     119,450
                                                                ====    ========
</TABLE>

  Accrued liabilities

<TABLE>
<CAPTION>
                                                                  MARCH 31,
                                                                --------------
                                                                1999     2000
                                                                ----    ------
<S>                                                             <C>     <C>
Compensation................................................    $259    $  732
Accrued royalties...........................................     206       374
Sales tax...................................................     150       116
Commission payable..........................................     147     1,075
Accrued travel expenses.....................................      --       150
Other.......................................................      29       334
                                                                ----    ------
                                                                $791    $2,781
                                                                ====    ======
</TABLE>

NOTE 5 -- COMMITMENTS:

     On April 1, 1999, Accrue entered into a noncancelable operating lease for
its office facility for the three year period April 1, 1999 to March 31, 2002.
Minimum future lease payments under this agreement are as follows:

<TABLE>
<CAPTION>
                                     OPERATING
       YEAR ENDED MARCH 31,            LEASE
       --------------------          ---------
<S>                                  <C>
2001...............................    $403
2002...............................     324
                                       ----
                                       $727
                                       ====
</TABLE>

     Rent expense was $227, $293 and $436 for the years ended March 31, 1998,
1999 and 2000, respectively.

NOTE 6 -- LONG-TERM DEBT:

     On May 25, 1999, Accrue entered into an irrevocable commitment with a
financial institution for a working capital line of credit under which Accrue
can borrow up to an aggregate of $2,000. This line of credit expires in June
2000. This line of credit has a borrowing base of the lessor of 80% of eligible
accounts receivable or $2,000. Advances against the line of credit bear interest
at prime plus 1% to prime plus 5%, depending upon certain conditions. In
connection with the line of credit agreement, Accrue has a commitment fee of $15
and has granted the financial institution a warrant to purchase 14 shares of
common stock. The warrant expires on May 25, 2004. Accrue valued the warrant
using the Black-Scholes method and is amortizing the value as interest expense
over the term of the agreement. The balance of the equipment line was paid off
in August 1999.

     As part of the NeoVista acquisition, Accrue assumed subordinated promissory
notes of NeoVista. The outstanding borrowings are collateralized by the capital
equipment purchases made under the promissory notes. The notes bear interest at
effective rates ranging from 13.7% to 14.7% per annum.

                                       47
<PAGE>   48
                             ACCRUE SOFTWARE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

     At March 31, 2000, future minimum payments under the subordinated
promissory notes are as follows:

<TABLE>
<CAPTION>
                    YEAR ENDED MARCH 31,
                    --------------------
<S>                                                           <C>
2001........................................................  $ 162
2002........................................................     24
                                                              -----
Total principal amounts due.................................    186
Less current portion........................................   (147)
                                                              -----
Long-term portion...........................................  $  39
                                                              =====
</TABLE>

NOTE 7 -- STOCKHOLDERS' EQUITY:

  Convertible preferred stock

     The following is a summary of Series A - E ("Preferred Stock") convertible
preferred stock authorized, issued and outstanding at March 31, 1999:

<TABLE>
<CAPTION>
                                                                  SHARES ISSUED AND
                                                                   OUTSTANDING AT
                                                      SHARES          MARCH 31,
                      SERIES                        AUTHORIZED          1999
                      ------                        ----------    -----------------
<S>                                                 <C>           <C>
 A................................................       750              743
 B................................................     2,000            1,845
 C................................................       550              513
 C.1..............................................       465              437
 C.2..............................................       929              883
 D................................................     1,000              929
 E................................................     5,250            5,003
                                                      ------           ------
                                                      10,944           10,353
                                                      ======           ======
</TABLE>

     As of March 31, 2000, all of the issued and outstanding shares of Accrue's
convertible preferred stock have been converted into common stock. 9,033 shares
were converted into common stock in connection with Accrue's initial public
offering and the remaining 1,320 shares were converted into common stock in
connection with the Marketwave acquisition. Each share of Series A, Series B,
Series C.1, Series C.2 and Series E preferred stock was converted into shares of
common stock at the conversion rate of 1:1. Each share of Series C and Series D
stock was converted into shares of common stock at the conversion rate of
1.314:1 and 2.17:1, respectively.

  Dividends

     The holders of shares of Series A, Series B, Series C, Series D and Series
E Preferred Stock are entitled to receive noncumulative dividends at the per
share rate equal to $0.07, $0.22, $0.28, $0.22 and $0.10, respectively per
annum, payable when and as declared by the Board of Directors. The holders of
shares of Series C.1 and Series C.2 preferred stock are entitled to receive a
noncumulative cash dividend, if and when declared by the Board of Directors in
its discretion. For any other dividends or distributions, the outstanding shares
of Preferred Stock shall participate with common stock on an as-converted basis.
No dividends have been declared or paid from inception through March 31, 2000.

                                       48
<PAGE>   49
                             ACCRUE SOFTWARE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

  Common stock

     Holders of common stock are entitled to dividends as and when declared by
the Board of Directors subject to the prior rights of the preferred
stockholders. Each share of common stock has the right to one vote. No dividends
have been declared or paid as of March 31, 1999 and March 31, 2000.

  Common stock warrants

     In May 1996, Accrue issued a warrant to purchase 350 shares of common stock
of Accrue at an exercise price of $0.70 per share for $4 in cash to a
stockholder. The cash proceeds were recorded in additional paid-in capital. The
warrant was exercised at the time of the initial public offering.

     On May 23, 1999, Accrue issued an option to purchase 20 shares of common
stock to a director and investment partnership affiliate. The option vests over
4 years and has a life of 10 years. Accrue valued the option using the
Black-Scholes method and is amortizing the value as general and administrative
expense over the term of the option.

  Initial public offering

     On May 23, 1999, the Board of Directors authorized Accrue to undertake an
initial public offering ("IPO") of Accrue's common stock. In addition, the
articles of incorporation were amended and restated to provide for (i) the
automatic conversion of Preferred Stock into common stock at an IPO price of at
least $7.00 per share and net proceeds of $15,000 and (ii) concurrently with the
closing of the IPO, the authorization of 75,000 shares of common stock and 5,000
shares of Preferred Stock.

     On August 4, 1999, the Company closed its initial public offering of common
stock, in which it sold 4,485 shares of its common stock at a price of $10 per
share, raising $44,852 in gross proceeds. Offering proceeds to Accrue, net of
approximately $4,040 in aggregate underwriters discounts, commissions and
related offering expenses, were approximately $40,810. Upon closing of the
initial public offering, the outstanding shares of Series A, Series B, Series C,
Series D and Series E convertible preferred stock were converted into 10,280
shares of common stock.

  Stock option plans

     Under Accrue's 1996 Stock Option Plan (the "Plan"), as amended, Accrue is
authorized to issue up to 6,130 shares of common stock. Under the Plan,
incentive options to purchase Accrue's common stock may be granted to employees
at prices not lower than fair market value at the date of grant, as determined
by the Board of Directors. Non-qualified stock options may be granted to
employees, directors and consultants, at prices not lower than 85% of fair
market value at the date of grant, as determined by the Board of Directors. The
Board also has the authority to set the term of the options (no longer than ten
years from date of grant). Options granted generally vest over four years.
Unexercised options expire 30 days after termination of employment with Accrue.

     In May 1999, the Board of Directors and stockholders approved the 1999
Directors' Option Plan ("Directors' Plan"). The Directors' Plan provides for
automatic grant of an option to purchase 50 shares of common stock upon election
of each non-employee director and an additional option to purchase 5 shares of
common stock annually thereafter. The Directors' Plan provides that initial
options shall become exercisable in installments as to 1/48 of the number of
shares subject to the option each month after the date of grant. The exercise
price of all stock options granted under the Directors' Plan shall be equal to
the fair market value of Accrue's common stock on the date of grant of the
option. Options granted under the Directors' Plan have a term of ten years.
Accrue reserved 250 shares of common stock for issuance under the Directors'
Plan.

                                       49
<PAGE>   50
                             ACCRUE SOFTWARE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

     Accrue has, in connection with the purchase of Marketwave, assumed the
stock option plan of Marketwave. A total of 566 shares of Accrue's common stock
have been reserved for issuance under the assumed plan.

     Accrue has, in connection with the purchase of NeoVista, assumed the stock
option plan of NeoVista, and issued approximately 550 options and warrants to
purchase shares of its common stock in exchange for all options and warrants to
purchase shares of NeoVista common stock.

     During fiscal year 1999, Accrue issued 53 shares of restricted common stock
to non-employees for consulting services provided. Accrue valued these shares
using the Black-Scholes method. The total estimated fair value was $167 and is
included in general and administrative expense.

     Activity under the Plans is as follows:

<TABLE>
<CAPTION>
                                                             OUTSTANDING OPTIONS
                                              -------------------------------------------------
                                   SHARES                                              WEIGHTED
                                  AVAILABLE                                            AVERAGE
                                     FOR       NUMBER        EXERCISE      AGGREGATE   EXERCISE
                                    GRANT     OF SHARES       PRICE          PRICE      PRICE
                                  ---------   ---------   --------------   ---------   --------
<S>                               <C>         <C>         <C>              <C>         <C>
Balances, March 31, 1997........      891       1,416     $0.01 - $ 0.28    $    79     $ 0.06
Shares reserved.................      400
Options granted.................   (1,123)      1,123     $0.28 - $ 0.35        342     $ 0.30
Options exercised...............       --        (463)    $0.01 - $ 0.35        (30)    $ 0.06
Options canceled................      304        (304)    $0.01 - $ 0.35        (51)    $ 0.17
                                   ------      ------                       -------
Balances, March 31, 1998........      472       1,772     $0.01 - $ 0.35        340     $ 0.19
Shares reserved.................    4,352
Options granted.................   (3,686)      3,686     $0.12 - $ 0.75        747     $ 0.20
Options exercised...............       --      (2,365)    $0.01 - $ 0.35       (312)    $ 0.14
Options canceled................      533        (533)    $0.01 - $ 0.35       (112)    $ 0.21
                                   ------      ------                       -------
Balances, March 31, 1999........    1,671       2,560     $0.01 - $ 0.75        663     $ 0.26
Shares reserved.................    1,948                       --               --         --
Options granted.................   (3,206)      3,206     $0.44 - $50.81     48,018     $14.98
Options exercised...............       --      (2,130)    $0.01 - $12.92       (874)    $ 0.48
Options canceled................      399        (399)    $0.12 - $50.38     (4,956)    $12.33
                                   ------      ------                       -------
Balances, March 31, 2000........      812       3,237     $0.01 - $50.81    $42,851     $13.07
                                   ======      ======                       =======
</TABLE>

     The following table summarizes information with respect to stock options
outstanding at March 31, 2000:

<TABLE>
<CAPTION>
                      OPTIONS OUTSTANDING                             OPTIONS CURRENTLY
---------------------------------------------------------------          EXERCISABLE
                                         WEIGHTED                  -----------------------
                                          AVERAGE      WEIGHTED                   WEIGHTED
                                         REMAINING     AVERAGE                    AVERAGE
                           NUMBER       CONTRACTUAL    EXERCISE      OPTIONS      EXERCISE
   EXERCISE PRICE        OUTSTANDING       LIFE         PRICE      EXERCISABLE     PRICE
   --------------        -----------    -----------    --------    -----------    --------
<S>                      <C>            <C>            <C>         <C>            <C>
       $ 0.01                 455          8.05         $ 0.01         222         $ 0.01
   $ 0.12 - $ 1.00            887          8.81         $ 0.66          83         $ 0.45
   $ 4.14 - $ 9.00            917          9.08         $ 6.12         212         $ 4.34
   $12.92 - $19.44            389          9.50         $19.35           5         $12.92
   $42.00 - $50.81            619          9.84         $47.55           3         $50.81
                            -----                                      ---
                            3,267                                      525
                            =====                                      ===
</TABLE>

                                       50
<PAGE>   51
                             ACCRUE SOFTWARE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

     At March 31, 1998, 1999 and 2000 vested options to purchase 196, 124 and
3,023 shares of common stock respectively, were unexercised.

  Employee Stock Purchase Plan

     In May 1999, the Board of Directors and stockholders approved the 1999
Employee Stock Purchase Plan ("Purchase Plan").

     Accrue intends for the Purchase Plan to qualify under Section 423 of the
Internal Revenue Code of 1986, as amended. The Purchase Plan permits eligible
employees to purchase common stock through payroll deductions, which may not
exceed 20% of an employee's compensation, at a price equal to the lower of 85%
of the fair market value of Accrue's common stock at the beginning or end of the
offering period. Accrue has reserved 500 shares of common stock for issuance
under the Purchase Plan.

  Stock-based compensation

     During 1999, Accrue issued stock purchase rights and options to certain
employees under the Plan with exercise prices below the deemed fair market value
of Accrue's common stock at the date of grant. In accordance with the
requirements of APB 25, Accrue has recorded unearned compensation for the
differences between the purchase price of stock issued to employees under stock
purchase rights or the exercise price of the stock options and the deemed fair
market value of Accrue's stock at the date of grant. This unearned compensation
is amortized to expense over the period during which Accrue's right to
repurchase the stock lapses or options become exercisable, generally four years.
At March 31, 2000, Accrue has recorded unearned compensation related to these
options in the total amount of $9,906, of which $4,344 had been amortized to
expense during the year ended March 31, 2000.

     If the stock-based compensation for the periods had been allocated across
the relevant functional expense categories within operating expenses, the
allocation would be as follows:

<TABLE>
<CAPTION>
                                                           MARCH 31,
                                                   --------------------------
                                                    1998      1999      2000
                                                   ------    ------    ------
<S>                                                <C>       <C>       <C>
Research and development.........................  $   --    $  486    $1,492
Sales and marketing..............................      --       384     1,263
General and administrative.......................      --       455     1,589
                                                   ------    ------    ------
                                                   $   --    $1,325    $4,344
                                                   ======    ======    ======
</TABLE>

     The following information is presented in accordance with the disclosure
requirements of SFAS 123. The fair value of each option grant to employees has
been estimated on the date of grant using the minimum value method with the
following weighted average assumptions used for grants:

<TABLE>
<CAPTION>
                                                               1998      1999      2000
                                                              -------   -------   -------
<S>                                                           <C>       <C>       <C>
Risk-free interest rates....................................     6.19%     4.91%     6.75%
Expected life...............................................  5 years   5 years   5 years
Expected dividends..........................................       --        --        --
Volatility..................................................       --        --       120%
</TABLE>

     The weighted average fair value of the options granted was $0.08, $0.14 and
$14.32 per share for the years ended March 31, 1998, 1999 and 2000,
respectively.

                                       51
<PAGE>   52
                             ACCRUE SOFTWARE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

     Had compensation expense for the stock plans been determined based on the
fair value at the grant date for options granted in 1998, 1999 and 2000,
consistent with the provisions of SFAS 123, the pro forma net loss would have
been reported as follows:

<TABLE>
<CAPTION>
                                                        1998       1999        2000
                                                       -------    -------    --------
<S>                                                    <C>        <C>        <C>
Net loss -- as reported..............................  $(4,201)   $(7,601)   $(21,119)
Net loss -- pro forma................................  $(4,236)   $(7,710)   $(24,546)
Net loss per share -- as reported....................  $ (0.99)   $ (1.63)   $  (1.33)
Net loss per share -- pro forma......................  $ (0.99)   $ (1.65)   $  (1.55)
</TABLE>

     Such pro forma disclosures may not be representative of future compensation
cost because options generally vest over several years and additional grants are
made each year.

NOTE 8 -- PROFIT SHARING PLAN:

     Accrue sponsors a 401(k) Profit Sharing Plan covering all of its domestic
employees. Under this plan, participating employees may elect to contribute up
to 20% of their cash compensation, subject to certain limitations. Accrue may
elect to make contributions to the plan at the discretion of the Board of
Directors. No contributions have been made by Accrue as of March 31, 2000. All
employee contributions are 100% vested.

NOTE 9 -- INCOME TAXES:

     There is no provision for income taxes for the years ended March 31, 1998,
1999, and 2000.

     At March 31, 2000, Accrue has federal and state net operating loss
carryforwards of approximately $64,739 and $21,208, respectively, available to
offset future regular and alternative minimum taxable income, if any. If not
utilized, the federal net operating loss carryforwards will begin to expire in
2002 and the state net operating loss carryforwards will begin to expire in
2001. Approximately $52.7 million and $10.0 million of federal and state net
operating loss carryforwards, respectively, related to acquired entities will
expire beginning in 2002.

     In addition, Accrue has federal and state tax credits of approximately
$2,594 and $1,230, respectively, to offset future tax liabilities, if any. These
credits will begin to expire in 2002.

     For federal and state tax purposes, a portion of Accrue's net operating
loss carryforwards may be subject to certain limitations on utilization in case
of a change in ownership, as defined by federal and state tax law.

     Temporary differences which give rise to significant portions of deferred
tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                                              -------------------
                                                               1999        2000
                                                              -------    --------
<S>                                                           <C>        <C>
Deferred tax assets and liabilities:
  Net operating loss carryforwards..........................  $ 4,685    $ 23,886
  Capitalized start up costs................................      155       3,122
  Research and development credit...........................      622       3,823
  Other.....................................................      200       3,243
                                                              -------    --------
                                                                5,662      34,074
Valuation allowance.........................................   (5,662)    (34,074)
                                                              -------    --------
                                                              $    --    $     --
                                                              =======    ========
</TABLE>

                                       52
<PAGE>   53
                             ACCRUE SOFTWARE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

     Accrue has recorded a full valuation allowance due to uncertainties
concerning the recovery of the deferred tax assets. The valuation allowance
increased by $1,782, $2,808 and $28,412 in 1998, 1999 and 2000, respectively.

     The items accounting for the difference between income taxes computed at
the federal statutory rate and the provision for income taxes are as follows:

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                                              -------------------
                                                               1999        2000
                                                              -------    --------
<S>                                                           <C>        <C>
Tax provision at statutory rates............................  $(2,584)   $ (7,180)
Permanent differences.......................................      497       6,614
Research and development credit.............................     (150)         --
Increase in federal valuation...............................    2,237      25,150
Benefit assumed by acquisition of NeoVista..................       --     (24,584)
                                                              -------    --------
          Total provision for income taxes..................  $    --    $     --
                                                              =======    ========
</TABLE>

NOTE 10 -- SIGNIFICANT CUSTOMER AND GEOGRAPHIC INFORMATION:

     Accrue has adopted the Financial Accounting Standards Board's Statements of
Financial Accounting Standards No. 131, ("SFAS 131"), "Disclosure about Segments
of an Enterprise and Related Information," effective for fiscal years beginning
after December 31, 1997.

     Accrue has one reportable segment. Management uses one measurement of
profitability for its business. Accrue markets its products and related services
to customers in many industries in the United States and Europe. Revenue by
geographic region is as follows:

<TABLE>
<CAPTION>
                                                             YEAR ENDED MARCH 31,
                                                          ---------------------------
                                                           1998      1999      2000
                                                          ------    ------    -------
<S>                                                       <C>       <C>       <C>
United States...........................................  $2,044    $4,564    $16,693
Foreign.................................................      13       120      2,171
                                                          ------    ------    -------
                                                          $2,057    $4,684    $18,864
                                                          ======    ======    =======
</TABLE>

     No customer individually accounted for more than 10% of revenues in 1998,
1999 and 2000.

                                       53
<PAGE>   54

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

     None.

                                    PART III

     Certain information required by Part III is omitted from this Form 10-K, as
we intend to file our Proxy Statement pursuant to Regulation 14A not later than
120 days after the end of the fiscal year covered by this Form 10-K, and certain
information included therein is incorporated herein by reference.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Our directors and executive officers and their ages as of May 31, 2000 are
as follows:

<TABLE>
<CAPTION>
         NAME            AGE                       POSITION
         ----            ---                       --------
<S>                      <C>    <C>
Richard D. Kreysar       44     President, Chief Executive Officer and Director
Gregory C. Walker        46     Vice President of Finance and Chief Financial
                                Officer
Bob Page                 38     Chief Technology Officer
Brett Kilpatrick         41     Vice President of Sales
Vito Salvaggio           37     Vice President of Marketing
Jonathan D. Becher       35     Vice President of Product Strategy
Robert Wyman             46     Vice President of Product Development
David Folkman(1)         65     Director
Max D. Hopper(2)         65     Director
A. Brooke Seawell(1)     52     Director
Robert Smelick(1)(2)     58     Chairman of the Board of Directors
</TABLE>

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

(2) Member of Compensation Committee

     Richard D. Kreysar, President and Chief Executive Officer, joined Accrue
and became a director in June 1998. From January 1997 to May 1998, Mr. Kreysar
taught high school mathematics and coached soccer and baseball. From January
1995 to January 1997, Mr. Kreysar was the General Manager and Vice President of
Operations at Network Associates, Inc., an enterprise security software company,
where he was responsible for marketing, sales, product line development,
consulting and MIS operations. From January 1994 to January 1995, Mr. Kreysar
was Executive Vice President of Marketing and Sales of Open Vision, a UNIX
systems management software company. From June 1985 to December 1993, Mr.
Kreysar was Vice President of Marketing and Sales at Computer Associates
International, Inc. (CA), an enterprise software company, where he was
responsible for integrating acquired companies and products into CA's
applications and personal computer products divisions. Mr. Kreysar holds a B.S.
degree in mathematics from Rockhurst College.

     Gregory C. Walker, Vice President of Finance and Chief Financial Officer,
joined Accrue in April 1999. From October 1997 to March 1999, Mr. Walker was
Chief Financial Officer at Duet Technologies, Inc., a provider of semiconductor
design services and software. From January 1997 through September 1997, Mr.
Walker served as Chief Financial Officer of NeTpower, Inc., a manufacturer of
work stations and servers. From December 1990 to January 1997, Mr. Walker served
as Vice President of Finance and acting Chief Financial Officer at Synopsys,
Inc., a supplier of electronic design automation solutions for the global
electronic market. Prior to working at Synopsys, Mr. Walker held various
positions in financial operations at Xerox Corporation and IBM Corporation. Mr.
Walker holds a B.A. degree in economics from Union College and an M.B.A. from
the University of Rochester.

     Bob Page, Chief Technology Officer, joined Accrue in February 1996. From
March 1989 to February 1996, Mr. Page worked at Sun Microsystems, Inc., a
leading manufacturer of UNIX operating platforms, where he served as Chief
Scientist with the Network Management group and Principal Investigator with the

                                       54
<PAGE>   55

Advanced Network Applications group. While at Sun Microsystems, Mr. Page served
as the Technical Chair of the Desktop Management Task Force, a cross-industry
consortium of vendors formed to address issues in connection with personal
computers. From 1986 to 1989, Mr. Page was Senior Network Engineer and
Operations Manager at the University of Massachusetts, Lowell. Mr. Page received
his B.S. degree in computer science from Fitchburg State College.

     Brett Kilpatrick, Vice President of Sales, joined Accrue in November 1998.
From January 1998 to July 1998, Mr. Kilpatrick was Vice President of Sales and
Business Development at AvantGo, Inc., a mobile computing software company. From
April 1997 to January 1998, Mr. Kilpatrick was Vice President of Sales and
Operations, Americas for IONA Technologies PLC, a producer of network
integration software. From February 1992 to March 1997, Mr. Kilpatrick was North
American Director of Sales at Versant Object Technology Corporation, a provider
of high performance object database management systems. Mr. Kilpatrick has also
held positions as Andersen Consulting's Midwest Sales Director and as Oracle
Corporation's Chicago Branch Manager. Mr. Kilpatrick holds a B.S. degree in
biology from Purdue University.

     Vito Salvaggio, Vice President of Marketing, joined Accrue in September
1997. From August 1990 to September 1997, Mr. Salvaggio worked at Apple
Computer, Inc., where he served in various positions, including Director of
Product Marketing for System Software, Product Line Manager for Operating
Systems and Product Manager for High End Systems. From January 1986 until
September 1988, Mr. Salvaggio served as Design Engineer at Matrox Electronic
Systems, Ltd., a manufacturer of computer peripherals. Mr. Salvaggio holds a
B.S. degree in electrical engineering from Concordia University and an M.B.A.
from the Sloan School of Management at the Massachusetts Institute of
Technology.

     Jonathan D. Becher, Vice President of Product Strategy, joined Accrue in
January 2000. Prior to this, from March 1996 to January 2000 and from July 1999
to January 2000, he served as Chief Technology Officer and Chief Executive
Officer and President respectively of NeoVista Software, Inc., which was
acquired by Accrue in January 2000. From March 1995 to March 1996, Mr. Becher
served as Director of Applications at MasPar Computer Corporation, a producer of
parallel computing products. Mr. Becher holds a B.S. degree in computer
engineering from University of Virginia and an M.S. degree in computer science
from Duke University.

     Robert Wyman, Vice President of Product Development, joined Accrue in
September 1999. From March 1999 to September 1999, Mr. Wyman served as Vice
President of Product Development at Marketwave Corporation, which merged with
Accrue in September 1999. From 1997 to 1999, he served as a consultant to a
variety of financial institutions. During 1996, he served as Director of Product
Development for HealthGate Data Corporation. From 1993 to 1995, he served as
Vice President of Emerging Technologies for Medio Multimedia, Inc., a producer
of CD-ROM software. From 1991 to 1993, he served as Senior Product Manager for
Applications Programmability at Microsoft Corporation.

     David Folkman has served as a director of Accrue since December 1999. Mr.
Folkman currently serves as Chief Executive Officer, President and a director of
On-Site Dental Care, Inc., a private early stage start-up company and he also
has served as a principal and director of Regent Pacific Management Corp., a
consulting firm whose engagements primarily comprise management and advisory
services for a wide range of businesses, as well as consumer product firms,
since January 1991. During his tenure at Regent Pacific Management, Mr. Folkman
devoted one year, from April 1998 to April 1999, as full-time president of
Natural Wonders, Inc., a chain of stores in the nature and science gift niche.
In addition, he served from February 1993 to July 1995, as full-time Chief
Executive Officer and President of Esprit de Corp, an apparel manufacturer,
wholesaler and retailer. Previously, from April 1987 to December 1990, Mr.
Folkman was a general partner of U.S. Venture Partners, managing a venture fund
with investments in technology, biomedical and retail start-ups, and from April
1982 to April 1987, he served as Chief Executive Officer and President of The
Emporium, a division of Carter Hawley Hale Stores, Inc. (now owned by Federated
Department Stores, Inc.). Mr. Folkman holds an A.B. degree in social relations
from Harvard College and an M.B.A. from Harvard Business School. Mr. Folkman
also currently serves as a director of Natural Wonders, Inc. and Shoe Pavilion,
Inc.

     Max D. Hopper has served as a director of Accrue since March 1999. Mr.
Hopper has been the Chief Executive Officer of Max D. Hopper Associates, Inc.,
an IS management consulting firm, since January 1995.
                                       55
<PAGE>   56

From 1985 to January 1995, he served in various positions at American Airlines,
a subsidiary of AMR Corporation, most recently as Senior Vice President,
Information Systems and Chairman of the SABRE Group, a provider of information
technology services to the travel and transportation industry. Mr. Hopper is
also a director of Exodus Communications, Inc., a Web hosting company, Gartner
Group, Inc., a provider of information technology research and recommendations,
USDATA Corporation, a provider of development tools and management software,
Metrocall, Inc., a provider of local and regional paging service, Payless
Cashways, Inc., a building materials specialty retailer, and United Stationers,
Inc., a wholesaler of office supplies and equipment. Mr. Hopper received a B.S.
degree in mathematics from the University of Houston.

     A. Brooke Seawell has served as a director of Accrue since May 1999. He
currently serves as a general partner of Technology Crossover Ventures. From
January 1997 to August 1998, Mr. Seawell was Executive Vice President of
NetDynamics, Inc., an Internet applications server company. From March 1991 to
April 1997, Mr. Seawell was Senior Vice President and Chief Financial Officer of
Synopsys, Inc. Mr. Seawell holds a B.A. degree in economics and an M.B.A. degree
in finance and accounting from Stanford University. Mr. Seawell serves on the
board of directors of Informatica Corporation, a software company, NVIDIA
Corporation, a three-dimensional graphics processor company, Mediaplex, Inc., a
provider of e-business advertising technology and services, and several
privately held companies.

     Robert Smelick has served as a director of Accrue since May 1996. Mr.
Smelick is the managing director of Sterling Payot Management, Inc., the general
partner of Sterling Payot Capital, L.P., an investment partnership specializing
in technology based start-up companies and he is also a managing principal and
founding director of Sterling Payot Company, a private investment banking firm.
Before founding Sterling Payot Company in 1989, Mr. Smelick was a Managing
Director of First Boston Corporation. Prior to that, Mr. Smelick was an
investment banking partner of Kidder, Peabody & Co. Mr. Smelick received a B.A.
degree from Stanford University and an M.B.A. from the Harvard Business School.
He also attended the University of Melbourne in Melbourne, Australia. Mr.
Smelick currently serves as a director of Willamette Industries, a producer of
paper products, building materials and related specialty products and services.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this Item is incorporated by reference to the
Proxy Statement under the captions "Executive Compensation," "Summary
Compensation Table," "Option Grants in Last Fiscal Year," and "Aggregate Option
Exercises in Last Fiscal Year and Fiscal Year End Option Values."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information relating to ownership of our equity securities by certain
beneficial owners and management is incorporated by reference to the Proxy
Statement as set forth under the caption "Stock Ownership of Certain Beneficial
Owners and Management."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information relating to certain relationships and related transactions
is incorporated by reference to the Proxy Statement under the captions "Certain
Transactions" and "Compensation Committee Interlocks and Insider Participation."

                                       56
<PAGE>   57

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K

a. The following documents are filed as part of this Report:

     1. FINANCIAL STATEMENTS

     Report of Independent Accountants

     Consolidated Balance Sheets -- March 31, 2000 and 1999

     Consolidated Statements of Operations -- Three Years Ended March 31, 2000

     Consolidated Statements of Stockholders' Equity -- Three Years Ended March
31, 2000

     Consolidated Statements of Cash Flows -- Three Years Ended March 31, 2000

     Notes to Consolidated Financial Statements -- Three Years Ended March 31,
2000

     2. EXHIBITS

     See Exhibit Index.

     3. FINANCIAL STATEMENT SCHEDULE

     Schedule II -- Valuation and Qualifying Accounts is filed on page 59 of
this report

b. Reports on Form 8-K.

     We filed a Form 8-K on January 31, 2000 and a Form 8-K/A on March 28, 2000
with the Securities and Exchange Commission to announce the signing of a
definitive agreement to acquire NeoVista Software, Inc., a leading provider of
business intelligence applications, services and technology for retail,
financial services and insurance enterprises with large numbers of customers.
The acquisition was accounted for as a purchase, and accordingly, the operating
results of NeoVista was included in our consolidated financial statements from
the date of closing.

     We filed a Form 8-K on October 12, 1999 and a Form 8-K/A on November 15,
1999 with the Securities and Exchange Commission to announce the signing of a
definitive agreement to merge with Marketwave Corporation, a provider of
scalable solutions for analyzing Web traffic on Internet and intranet sites. The
acquisition was accounted for as a pooling of interests.

                                       57
<PAGE>   58

       REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Stockholders of Accrue Software, Inc.

     In connection with our audits of the financial statements of Accrue
Software, Inc. as of March 31, 1999 and 2000, and for each of the three years in
the period ended March 31, 2000, which financial statements are included in this
Form 10-K, we have also audited the financial statement schedule listed in Item
14 herein. In our opinion, this financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.


/s/ PricewaterhouseCoopers LLP


San Jose, California
April 11, 2000

                                       58
<PAGE>   59

                                                                     SCHEDULE II

                             ACCRUE SOFTWARE, INC.

                       VALUATION AND QUALIFYING ACCOUNTS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                      BALANCE AT                                BALANCE AT
                                                   BEGINNING OF YEAR   ADDITIONS   WRITE-OFFS   END OF YEAR
                                                   -----------------   ---------   ----------   -----------
<S>                                                <C>                 <C>         <C>          <C>
Allowance for sales returns and doubtful
  accounts:
  Year end March 31, 1998........................           --              25          --            25
  Year end March 31, 1999........................           25             251        (155)          121
  Year end March 31, 2000........................          121             296          --           417
Valuation allowance for deferred tax assets:
  Year end March 31, 1998........................          957           1,782          --         2,739
  Year end March 31, 1999........................        2,739           2,808          --         5,547
  Year end March 31, 2000........................        5,547          28,527          --        34,074
</TABLE>

                                       59
<PAGE>   60

                                   SIGNATURES

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

                                          ACCRUE SOFTWARE, INC.

                                          By:    /s/ RICHARD D. KREYSAR
                                            ------------------------------------
                                                    Richard D. Kreysar
                                          President and Chief Executive Officer
                                              (Principal Executive Officer)

                                          By:     /s/ GREGORY C. WALKER
                                            ------------------------------------
                                                    Gregory C. Walker
                                                  Chief Financial Offer
                                           (Principal Financial and Accounting
                                                          Offer)

Date: July 11, 2000



     Pursuant to the requirements of the Securities Exchange Act of 1934, this
amendment to the Annual Report on Form 10-K has been signed by the following
persons in the capacities and on the dates indicated.



<TABLE>
<CAPTION>
                     SIGNATURE                                      TITLE                     DATE
                     ---------                                      -----                     ----
<C>                                                    <S>                                <C>

              /s/ RICHARD D. KREYSAR                   President and Chief Executive      July 11, 2000
---------------------------------------------------    Officer (Principal Executive
                Richard D. Kreysar                     Officer)

               /s/ GREGORY C. WALKER                   Chief Financial Officer            July 11, 2000
---------------------------------------------------    (Principal Financial and
                 Gregory C. Walker                     Accounting Officer)

                         *                             Director                           July 11, 2000
---------------------------------------------------
                   David Folkman

                         *                             Director                           July 11, 2000
---------------------------------------------------
                   Max D. Hopper

                         *                             Director                           July 11, 2000
---------------------------------------------------
                 A. Brooke Seawell

                                                       Chairman of the Board of
---------------------------------------------------    Directors
                  Robert Smelick

            *By: /s/ RICHARD D. KREYSAR
 ------------------------------------------------
                Richard D. Kreysar
                 Attorney-in-Fact
</TABLE>


                                       60
<PAGE>   61

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<S>        <C>
 1.1+      Underwriting Agreement dated July 29, 1999 from our initial
           public offering.
 2.1++     Form of Agreement and Plan of Merger and Reorganization
           dated as of September 14, 1999, among Accrue, Marketwave
           Acquisition Corp., Marketwave Corporation and Shareholders
           of Marketwave Corporation.
 2.2+++    Form of Agreement and Plan of Merger and Reorganization
           dated as of November 17, 1999, among Accrue, NeoVista
           Acquisition Corp. and NeoVista Software, Inc.
 3.1+      Amended and Restated Certificate of Incorporation of Accrue.
 3.2+      Amended and Restated Certificate of Incorporation of Accrue
           (proposed).
 3.3+      Amended and Restated Bylaws of Accrue.
 4.1+      Specimen Stock Certificate.
 4.2++     Form of Investor Rights Agreement, dated September 30, 1999,
           among Accrue and the Shareholders of Marketwave Corporation.
 4.3++++   Marketwave Corporation 1997 Stock Option Plan.
 4.4++++   NeoVista Software, Inc. 1991 Incentive Stock Option Plan.
 4.5++++   NeoVista Software, Inc. 1991 Non-Qualified Stock Option
           Plan.
10.1+      Form of Indemnification Agreement between Accrue and each of
           its officers and directors.
10.2+      Common Stock Purchase Warrant issued to Sterling Payot
           Company on May 3, 1996, exercisable for 350,000 shares of
           Common Stock and letter amendment dated May 23, 1999 between
           Accrue and Sterling Payot Company.
10.3+      1996 Stock Plan, as amended August 13, 1998 and May 23,
           1999, and form of agreement thereunder.
10.4+      Employment letter agreement effective February 1996 between
           Accrue and Bob Page.
10.5+**    Software License Agreement dated July 1, 1997 between Accrue
           and VI/Visualize, Inc.
10.6+      Loan and Security Agreement dated September 19, 1997 between
           Accrue and Silicon Valley Bank, as amended by the Loan
           Modification Agreement dated April 9, 1999.
10.7+      Settlement Agreement dated March 3, 1998 between Accrue and
           Simon Roy, as amended by Amendment No. 1 dated April 29,
           1998.
10.8+      Settlement Agreement and Mutual Release dated May 13, 1998
           between Accrue and William R. Stein.
10.9+      Employment letter agreement dated June 16, 1998 between
           Accrue and Richard D. Kreysar.
10.10+     Second Amended and Restated Investor Rights Agreement dated
           August 13, 1998.
10.11+     Employment letter agreement dated November 5, 1998 between
           Accrue and Brett Kilpatrick.
10.12+     Standard Sublease dated February 25, 1999 between Accrue and
           Premisys Communications, Inc., as sublessor, and Lease
           Agreement dated June 4, 1998 between Premisys
           Communications, Inc. and Aetna Life Insurance Company, as
           master landlord, for 48634 Milmont Drive, Fremont, CA 94538.
10.13+**   OEM Agreement dated March 29, 1999 between Accrue and
           Informix Software, Inc.
10.14+     1999 Employee Stock Purchase Plan dated May 23, 1999 and
           form of agreement thereunder.
10.15+     1999 Directors' Stock Option Plan dated May 23, 1999 and
           form of agreement thereunder.
10.16+     Loan Modification Agreement with Silicon Valley Bank dated
           June 22, 1999.
10.17+     Warrant Purchase Agreement with Silicon Valley Bank dated
           May 25, 1999.
</TABLE>

                                       61
<PAGE>   62


<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<S>        <C>
10.18+     Employment letter agreement dated March 3, 1999 between
           Accrue and Gregory C. Walker.
23.1       Consent of Independent Accountants
27.1       Financial Data Schedule
</TABLE>


---------------
+    Previously filed with our Registration Statement on Form S-1 (#333-79491)
     and incorporated herein by reference.

++   Previously filed with our Current Report on Form 8-K dated September 30,
     1999, and incorporated herein by reference.

+++  Previously filed with our Current Report on Form 8-K dated January 14,
     2000, and incorporated herein by reference.

++++ Previously filed with our Registration Statement on Form S-8 (#333-95903)
     and incorporated herein by reference.

**   Confidential treatment has been granted with respect to certain portions of
     this Exhibit which has been filed separately with the Commission.

                                       63