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

                                    FORM 10-Q

|X|   Quarterly  report  pursuant  to  Section  13 or  15(d)  of the  Securities
      Exchange Act of 1934 for the quarterly period ended September 30, 2002

                                       or

|_|   Transition  report  pursuant  to  Section  13 or 15(d)  of the  Securities
      Exchange Act of 1934

                        Commission file number: 000-28897

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

                                    DELAWARE
         (State or other jurisdiction of incorporation or organization)

                                   68-0368868
                      (IRS Employer Identification Number)

           2200 POWELL STREET, SUITE 300, EMERYVILLE, CALIFORNIA 94608
              (Address of principal executive offices and zip code)

                                 (510) 594-5700
              (Registrant's telephone number, including area code)

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

                                 Yes |X| No |_|

The number of shares of the Registrant's  Common Stock outstanding as of October
31, 2002 was 25,450,193.
<PAGE>

                                      INDEX

                          PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements (Unaudited)
  Condensed Consolidated Balance Sheets                                        1
  Condensed Consolidated Statements of Operations                              2
  Condensed Consolidated Statements of Cash Flows                              3
  Notes to the Condensed Consolidated Financial Statements                     4

ITEM 2. Management's Discussion and Analysis of
  Financial Condition and Results of Operations                                7

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk            24

ITEM 4. Evaluation of Disclosure Controls and Procedures                      24

                           PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings                                                     24

ITEM 2. Changes in Securities and Use of Proceeds                             25

ITEM 3. Defaults Upon Senior Securities                                       25

ITEM 4. Submission of Matters to a Vote of Security Holders                   25

ITEM 5. Other Information                                                     25

ITEM 6. Exhibits and Reports on Form 8-K                                      25

SIGNATURE                                                                     26

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements (Unaudited)

                                 EXTENSITY, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                     ASSETS

                                                                             September 30,           December 31,
                                                                                 2002                   2001
                                                                               ---------              ---------
<S>                                                                            <C>                    <C>
Current assets:
  Cash and cash equivalents                                                    $  16,290              $  19,456
  Short-term investments                                                          18,954                 26,883
  Accounts receivable, net                                                         2,803                  5,393
  Prepaid and other current assets                                                 1,210                  1,835
                                                                               ---------              ---------
         Total current assets                                                     39,257                 53,567
Property and equipment, net                                                        2,662                  3,657
Restricted long-term investments                                                   1,355                  1,397
Other assets                                                                         357                    601
                                                                               ---------              ---------
         Total assets                                                          $  43,631              $  59,222
                                                                               =========              =========

                     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                                             $   3,037              $   3,672
  Accrued liabilities                                                              2,725                  3,977
  Deferred revenue                                                                 2,668                  3,488
  Capital lease obligations                                                          108                    240
  Sublease loss accrual                                                              383                    787
                                                                               ---------              ---------
         Total current liabilities                                                 8,921                 12,164
Capital lease obligations                                                             --                     54
Sublease loss accrual and other noncurrent liabilities                             1,694                    809
                                                                               ---------              ---------
         Total liabilities                                                        10,615                 13,027
                                                                               ---------              ---------

Stockholders' equity:
  Common stock                                                                        25                     25
  Additional paid-in capital                                                     147,341                147,394
  Deferred stock compensation                                                        (54)                  (504)
  Notes receivable from stockholders                                                (471)                  (433)
  Accumulated comprehensive income                                                   218                    155
  Accumulated deficit                                                           (114,043)              (100,442)
                                                                               ---------              ---------
         Total stockholders' equity                                               33,016                 46,195
                                                                               ---------              ---------
         Total liabilities and stockholders' equity                            $  43,631              $  59,222
                                                                               =========              =========
</TABLE>

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


                                       1
<PAGE>

                                 EXTENSITY, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (In thousands, except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                Three Months Ended            Nine Months Ended
                                                                                   September 30,                 September 30,
                                                                              -----------------------       -----------------------
                                                                                2002           2001           2002           2001
                                                                              --------       --------       --------       --------
<S>                                                                           <C>            <C>            <C>            <C>
Revenues:
  License                                                                     $  1,507       $  4,886       $  4,456       $ 16,559
  Service and maintenance                                                        2,931          3,174          9,128         10,434
  Hosted                                                                           319             48            707             48
                                                                              --------       --------       --------       --------
    Total revenues                                                               4,757          8,108         14,291         27,041
                                                                              --------       --------       --------       --------

Cost of revenues: (*)
  Licenses                                                                         151            384            400          1,092
  Service and maintenance                                                        1,750          2,901          5,997         10,419
  Hosted                                                                           257            211            863            211
                                                                              --------       --------       --------       --------
    Total cost of revenues                                                       2,158          3,496          7,260         11,722
                                                                              --------       --------       --------       --------

Gross profit                                                                     2,599          4,612          7,031         15,319
                                                                              --------       --------       --------       --------

Operating expenses: (*)
  Sales and marketing                                                            2,452          4,694          8,862         19,651
  Research and development                                                       1,664          2,244          5,598          9,981
  General and administrative                                                     1,347          1,821          4,312          5,449
  Restructuring and other charges                                                  833          5,797          2,528          6,174
                                                                              --------       --------       --------       --------
    Total operating expenses                                                     6,296         14,556         21,300         41,255
                                                                              --------       --------       --------       --------

Loss from operations                                                            (3,697)        (9,944)       (14,269)       (25,936)
Interest income, net                                                               178            565            668          2,325

                                                                              --------       --------       --------       --------
Net loss                                                                      $ (3,519)      $ (9,379)      $(13,601)      $(23,611)
                                                                              ========       ========       ========       ========

Basic and diluted net loss per share                                          $  (0.14)      $  (0.39)      $  (0.55)      $  (1.00)
Shares used in computing basic and diluted net loss per share                   24,997         23,970         24,783         23,680

(*) Amounts include non-cash stock based compensation as follows:

Cost of revenues:
  Service and maintenance                                                     $      6       $     --       $      9       $     59
Operating expenses:
  Sales and marketing                                                               14             --             21            112
  Research and development                                                           9             --             13             68
  General and administrative                                                        14             --             21            109
                                                                              --------       --------       --------       --------
                                                                              $     43       $     --       $     64       $    348
                                                                              ========       ========       ========       ========
</TABLE>

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


                                       2
<PAGE>

                                 EXTENSITY, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                             Nine Months Ended
                                                                                                               September 30,
                                                                                                          2002               2001
                                                                                                        --------           --------
<S>                                                                                                     <C>                <C>
Cash flows from operating activities:
    Net loss                                                                                            $(13,601)          $(23,611)
    Adjustments to reconcile net loss to cash used in operating activities:
        Depreciation and amortization                                                                      1,238              1,915
        Amortization of deferred stock compensation and other                                                 74                434
        Amortization of debt discount and lease line issuance costs                                            6                 42
        Interest earned on notes from stockholders                                                           (38)               (46)
        Write off of computer equipment and software                                                          --              2,882

    Changes in operating assets and liabilities:
     Accounts receivable                                                                                   2,590              2,304
     Prepaids and other current assets                                                                       625                602
     Other assets                                                                                            244               (138)
     Accounts payable                                                                                       (635)            (2,464)
     Accrued liabilities                                                                                  (1,252)              (845)
     Other liabilities                                                                                       524              1,461
     Deferred revenue                                                                                       (820)           (10,082)
                                                                                                        --------           --------
       Cash used in operating activities                                                                 (11,045)           (27,546)
                                                                                                        --------           --------
Cash flows from investing activities:
   Purchases of short-term investments                                                                   (15,907)           (39,545)
    Maturities of short-term investments                                                                  23,836             47,523
    Capital expenditures                                                                                    (243)            (2,389)
    Restricted long-term investments                                                                          42                 39
                                                                                                        --------           --------
       Cash provided by investing activities                                                               7,728              5,628
                                                                                                        --------           --------
Cash flows from financing activities:
    Payments on notes payable                                                                                 --               (770)
    Payments on capital lease obligation                                                                    (191)              (308)
    Proceeds from employee stock plans                                                                       322              1,028
                                                                                                        --------           --------
       Cash provided by (used in) financing activities                                                       131                (50)
                                                                                                        --------           --------

Effect of exchange rate on cash and cash equivalents                                                          20                 14
Decrease in cash and cash equivalents                                                                     (3,166)           (21,954)
Cash and cash equivalents, beginning of period                                                            19,456             40,695
                                                                                                        --------           --------
Cash and cash equivalents, end of period                                                                $ 16,290           $ 18,741
                                                                                                        ========           ========
</TABLE>

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


                                       3
<PAGE>

                                 EXTENSITY, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

      The accompanying  unaudited condensed  consolidated  financial  statements
reflect all adjustments (consisting only of normal recurring adjustments) which,
in the opinion of  management,  are  necessary  for a fair  presentation  of the
financial  results for the periods  shown.  The balance sheet as of December 31,
2001 was derived from  audited  financial  statements,  but does not include all
necessary disclosures required by generally accepted accounting principles.

      These  condensed  consolidated  financial  statements  should  be  read in
conjunction with the audited financial  statements and notes thereto included in
the  Company's  report  on Form  10-K  (File  No.  000-28897),  filed  with  the
Securities and Exchange Commission (the "SEC") on April 1, 2002.

      The condensed  consolidated  financial  statements include the accounts of
the Company and its wholly-owned  subsidiary,  Extensity  Europe Limited,  which
commenced  operations in September 1999. All significant  intercompany  balances
and transactions have been eliminated in consolidation.

      The  results  of  operations  for  the  current  interim  period  are  not
necessarily indicative of the results to be expected for the entire current year
or other future interim periods.

2. Net Loss Per Share

      Basic  and  diluted  net loss per share are  computed  using the  weighted
average  number of common  shares  outstanding.  Options and  warrants  were not
included in the  computation  of diluted  net loss per share  because the effect
would be antidilutive.

      Diluted net loss per share does not  include  the effect of the  following
potential common shares at September 30, 2002 and 2001 (in thousands):

                                                                  September 30,
                                                                ----------------
                                                                2002       2001
                                                                ----       -----
Shares issuable under stock options                              821       2,737
Shares of unvested stock subject to repurchase                    --         204
                                                                ----       -----
                                                                 821       2,941
                                                                ====       =====

3. Significant Customers

      No customers  accounted for more than 10% of total  revenues for the three
or nine-month periods ended September 30, 2002 and 2001. No customers  accounted
for more than 10% of accounts  receivable  for the three or  nine-month  periods
ended September 30, 2002 or 2001.


                                       4
<PAGE>

4. Comprehensive Loss

The components of comprehensive loss are as follows (in thousands):

<TABLE>
<CAPTION>
                                                         Three Months Ended                     Nine Months Ended
                                                            September 30,                         September 30,
                                                      -------------------------           ---------------------------
                                                        2002             2001               2002               2001
                                                      -------           -------           --------           --------
<S>                                                   <C>               <C>               <C>                <C>
Net loss                                              $(3,519)          $(9,379)          $(13,601)          $(23,611)
Foreign currency translation adjustment                    26                31                 63                 28
                                                      -------           -------           --------           --------
Total comprehensive loss                              $(3,493)          $(9,348)          $(13,538)          $(23,583)
                                                      =======           =======           ========           ========
</TABLE>

5. Restructuring

      In response to the continuing economic slowdown, the Company implemented a
restructuring  plan  in  the  third  quarter  of  fiscal  2001  and  recorded  a
restructuring  charge of $4.5 million. The goal of the restructuring plan was to
reduce costs and improve  operating  efficiencies  in order to match the current
business  environment.  The  restructuring  charge  consisted of  severance  and
benefits of $729,000  related to the  involuntary  termination  of 70 employees,
which was fully paid as of December 31, 2001. These  terminations  were from all
functions across the Company.  In addition,  the Company accrued for lease costs
of $2.2 million pertaining to the estimated obligations for non-cancelable lease
payments for excess facilities in the United States and Europe. The Company also
wrote off computer  equipment and software with a net book value of $1.6 million
as these assets were taken out of service  because they were deemed  unnecessary
due to the reductions in workforce.

      In April of 2002, the Company took  additional  steps to reduce  expenses,
which included reducing full-time equivalent employees from all functions across
the company by  approximately  18% and  evaluating  the adequacy of its sublease
loss accrual for its lease  commitments for office space. The Company incurred a
restructuring  charge of  approximately  $1.5  million for the nine months ended
September 30, 2002.  The charge  consisted of severance and benefits of $523,000
related to the involuntary termination of 39 employees,  which was fully paid as
of June 30, 2002. In addition,  the Company  accrued for lease costs of $946,000
pertaining to the estimated  obligations for  non-cancelable  lease payments for
excess facilities in the United States.

      The  sublease  loss accrual as of December  31, 2001 was  $1,286,000.  The
Company made payments of $383,000  against the accrual in the nine-month  period
ending September 30, 2002. The sublease loss accrual balance as of September 30,
2002  is  $1,849,000.  The  Company  expects  to pay the  remaining  obligations
relating to the non-cancelable  lease obligations over the remaining lease terms
through 2006.

6. Commitments and Contingencies

      In November  2001,  the Company and certain of its officers and directors,
as well as  certain  of the  underwriters  from  Extensity's  IPO were  named as
defendants in a class action  shareholder  complaint  filed in the United States
District Court for the Southern  District of New York and now captioned as In re
Extensity,  Inc. Initial Public Offering Securities  Litigation.  The plaintiffs
seek unspecified  monetary damages and other relief.  The Company believes these
charges  to be without  merit and  therefore,  has not  accrued  any  amounts in
connection with this matter.

      The  Company is also  subject to various  other  claims and legal  actions
arising in the ordinary  course of business.  The ultimate  disposition of these
various other claims and legal actions is not expected to have a material effect
on the Company's business,  financial  condition,  results of operations or cash
flows.


                                       5
<PAGE>

7. Proposed Merger with Geac Computer Corporation Limited

      On August 26, 2002, Extensity entered into an Agreement and Plan of Merger
(the "Merger  Agreement")  with Geac Computer  Corporation  Limited ("Geac") and
Cage  Acquisition,  Inc., a subsidiary of Geac ("Merger  Sub").  Pursuant to the
Merger Agreement,  Merger Sub will merge with and into Extensity (the "Merger"),
and at the effective  time of the Merger,  each  outstanding  share of Extensity
common stock will be converted into the right to receive, at the election of the
stockholder, cash in the amount of $1.75 or approximately 0.627 of a Geac common
share (the "Exchange  Ratio"),  subject to adjustment in certain  circumstances.
Pursuant to the terms of the Merger Agreement,  certain  outstanding  options to
purchase shares of Extensity  common stock will terminate  immediately  prior to
the  effective  time of the Merger,  and other  outstanding  options to purchase
Extensity  common stock will be assumed by Geac, based on the Exchange Ratio. On
October  11,  2002,  an F-4  Registration  Statement  regarding  the  Merger was
submitted  by  Geac  to  the  SEC on a  confidential  basis.  This  registration
statement,  which  includes  the proxy  statement  for the  special  meeting  of
Extensity  stockholders  to adopt the Merger  Agreement is being reviewed by the
SEC on a  confidential  basis.  Upon  the  completion  of the  SEC  review,  the
registration  statement  will be made  available  for  public  review  and proxy
materials  relating to the special  meeting of  Extensity  stockholders  will be
mailed to Extensity  stockholders.  The Merger is subject to  customary  closing
conditions, including the approval of Extensity stockholders. In connection with
this transaction the Company  incurred  $833,000 of expenses in the three months
ended September 30, 2002.

8. Recent Accounting Pronouncements

      In July 2002,  the  Financial  Accounting  Standards  Board (FASB)  issued
Statement of Financial  Accounting  Standards  (SFAS) No. 146,  "Accounting  for
Costs Associated with Exit or Disposal  Activities".  SFAS No. 146 nullifies the
guidance  of the  Emerging  Issues  Task Force  (EITF) in EITF  Issue No.  94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity  (including  Certain  Costs  Incurred in a  Restructuring)".
Under EITF Issue No. 94-3, an entity  recognized a liability for an exit cost on
the date that the entity committed itself to an exit plan. In SFAS 146, the FASB
acknowledges that an entity's commitment to a plan does not, by itself, create a
present obligation to other parties that meets the definition of a liability and
requires that a liability for a cost that is associated with an exit or disposal
activity be recognized when the liability is incurred.  It also establishes that
fair value is the objective for the initial  measurement of the liability.  SFAS
146 will be effective for exit or disposal  activities  that are initiated after
December  31,  2002.  The  Company  does not  expect a  material  impact  on its
financial position or results of operations from the adoption of SFAS 146.


                                       6
<PAGE>

ITEM 2: Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

      This  report  contains  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933 and  Section  21E of the  Securities
Exchange Act of 1934,  including,  without limitation,  statements regarding the
Company's  expectations,  beliefs,  intentions  or  future  strategies  that are
signified  by the words  "expects,"  "anticipates,"  "intends,"  "believes,"  or
similar language.  All forward-looking  statements included in this document are
based on  information  available  to the  Company  on the date  hereof,  and the
Company  assumes no  obligation to update any such  forward-looking  statements.
Actual   results   could  differ   materially   from  those   projected  in  the
forward-looking  statements.  In evaluating the Company's business,  prospective
investors  should  carefully  consider the information set forth below under the
caption "Risk  Factors" in addition to the other  information  set forth herein.
The Company cautions  investors that its business and financial  performance are
subject to substantial risks and uncertainties.

      The  following  discussion  and analysis of our  financial  condition  and
results  of  operations  should  be read in  conjunction  with  our  Summary  of
Condensed  Consolidated  Financial  Data, our condensed  consolidated  financial
statements  and  related  notes  included  in  this  report,   and  Management's
Discussion  and Analysis of Financial  Condition and Results of  Operations  and
related  financial  information  contained in the Company's  Form 10-K (File No.
000-28897).

Overview

      Extensity was formed in November 1995 and introduced its first  commercial
product  for  general  availability  in March  1998.  During  this  period,  our
operating  activities  consisted  of the design and  development  of our product
architecture  and  our  first   application,   the  building  of  our  corporate
infrastructure,  and the development of our  professional  services and customer
support  organizations.  Our first application,  Extensity Expense Reports,  was
released for general  availability in March 1998. We released  Extensity  Travel
Plans in December 1998 and Extensity  Timesheets and Extensity  Purchase Reqs in
July 1999. Extensity Connect,  our portalized  application front end, role-based
reporting tool, and content and commerce  gateway was released in March 2000. We
introduced the newest  version of our suite of products,  Extensity 6.0, in June
2002.

      We generate  revenue  principally  from  licensing  our  applications  and
providing related  services,  including  product  installation,  maintenance and
support, consulting and training. We license our applications individually or as
an  integrated  suite of  products.  The pricing of our  software  and  services
fluctuates on a per transaction basis depending on various factors,  such as the
number of seats covered by a contract and the degree of customization  requested
by the particular customer. The amount of revenues associated with our contracts
depend on the number of users and  applications  being used and the professional
services  requested.  In the third quarter of 2001, we began recognizing revenue
from our hosted offering. Under this offering, customers pay a monthly usage fee
based on the number of users and a one-time set-up fee to access the application
on our servers.

      We promote and sell our software  products  through our direct sales force
and through indirect  channels,  including Elite  Information Group and Emplaza,
S.A., a joint venture  between Terra Networks and Meta4.  We also have marketing
referral   arrangements   in  place   with   Cisco   Systems,   IBM,   US  Bank,
Amadeus/eTravel, Rosenbluth Travel, WebEx, DigitalThink, Visa, GetThere.com, and
Pro Act Technologies.

      For the nine months ended  September 30, 2002,  revenues  derived from our
international operations represented approximately 11.0 % of total revenues.

      On August 26, 2002, Extensity entered into an Agreement and Plan of Merger
(the "Merger  Agreement")  with Geac Computer  Corporation  Limited ("Geac") and
Cage  Acquisition,  Inc., a subsidiary of Geac ("Merger  Sub").  Pursuant to the
Merger Agreement,  Merger Sub will merge with and into Extensity (the "Merger"),
and at the effective  time of the Merger,  each  outstanding  share of Extensity
common stock will be converted into the right to receive, at the election of the
stockholder, cash in the amount of $1.75 or approximately 0.627 of a Geac common
share (the "Exchange  Ratio"),  subject to adjustment in certain  circumstances.
Pursuant to the terms of the Merger Agreement,  certain  outstanding  options to
purchase shares of Extensity  common stock will terminate  immediately  prior to
the  effective  time of the Merger,  and other  outstanding  options to purchase
Extensity common stock will be


                                       7
<PAGE>

assumed by Geac,  based on the  Exchange  Ratio.  On October  11,  2002,  an F-4
Registration  Statement regarding the Merger was submitted by Geac to the SEC on
a confidential  basis.  This  registration  statement,  which includes the proxy
statement for the special meeting of Extensity  stockholders to adopt the Merger
Agreement  is  being  reviewed  by the SEC on a  confidential  basis.  Upon  the
completion of the SEC review, the registration  statement will be made available
for  public  review  and proxy  materials  relating  to the  special  meeting of
Extensity stockholders will be mailed to Extensity  stockholders.  The Merger is
subject to customary  closing  conditions,  including  the approval of Extensity
stockholders.

Critical Accounting Policies

      A summary of the Company's critical accounting policies is included in our
report on Form 10-K for the year ended December 31, 2001.

Results of Operations

      The  following  table sets forth certain  statement of operations  data in
absolute dollars for the periods  indicated.  The data has been derived from the
condensed  consolidated  financial  statements  contained  in this  report.  The
operating  results  discussed below do not include the  amortization of non-cash
stock based  compensation.  These amounts are discussed  separately  within this
discussion.


                                       8
<PAGE>

                  Summary Condensed Consolidated Financial Data
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                      Three Months Ended           Nine Months Ended
                                                                         September 30,                September 30,
                                                                     --------------------        ----------------------
                                                                      2002          2001          2002            2001
                                                                     ------        ------        -------        -------
<S>                                                                  <C>           <C>           <C>            <C>
Revenues:
      License                                                        $1,507        $4,886        $ 4,456        $16,559
      Service and maintenance                                         2,931         3,174          9,128         10,434
      Hosted                                                            319            48            707             48
                                                                     ------        ------        -------        -------
           Total revenues                                            $4,757        $8,108        $14,291        $27,041
                                                                     ======        ======        =======        =======

Cost of revenues:(*)
     License                                                         $  151        $  384        $   400        $ 1,092
     Service and maintenance                                          1,744         2,901          5,988         10,360
     Hosted                                                             257           211            863            211
                                                                     ------        ------        -------        -------
           Total cost of revenues                                    $2,152        $3,496        $ 7,251        $11,663
                                                                     ======        ======        =======        =======

Operating expenses:(*)
     Sales and marketing                                             $2,438        $4,694        $ 8,841        $19,539
      Research and development                                        1,655         2,244          5,585          9,913
     General and administrative                                       1,333         1,821          4,291          5,340
     Restructuring and other charges                                    833         5,797          2,528          6,174

Interest income, net                                                 $  178        $  565        $   668        $ 2,325

(*) Amounts exclude the amortization of non-cash stock based
    compensation as follows:

      Cost of revenues:
        Service and maintenance                                      $    6        $   --        $     9        $    59
      Operating expenses:
        Sales and marketing                                              14            --             21            112
        Research and development                                          9            --             13             68
        General and administrative                                       14            --             21            109
                                                                     ------        ------        -------        -------
                                                                     $   43        $   --        $    64        $   348
                                                                     ======        ======        =======        =======
</TABLE>

Revenues

      Total  revenues  decreased  to $4.8  million  for the three  months  ended
September  30, 2002 from $8.1 million for the three months ended  September  30,
2001, a decrease of 41%. Total revenues  decreased to $14.3 million for the nine
months  ended  September  30, 2002 from $27.0  million for the nine months ended
September 30, 2001, a decrease of 47%. No customers  accounted for more than 10%
of total revenues for the three or nine-month  periods ended  September 30, 2002
and 2001.

      License Revenues. License revenues decreased to $1.5 million for the three
months  ended  September  30, 2002 from $4.9  million for the three months ended
September 30, 2001, a decrease of 69%. License revenue decreased to


                                       9
<PAGE>

$4.5 million for the nine months ended September 30, 2002 from $16.6 million for
the nine months  ended  September  30,  2001, a decrease of 73%. The decrease in
license  revenue for the three and nine-month  periods ended  September 30, 2002
was attributable to a decrease in revenue recognized on shipment from our direct
and indirect  sales channels which have been impacted by the decrease in capital
spending  associated  with the current  global  economic  downturn.  In the nine
months ended  September 30, 2001, $1.9 million of license revenue was recognized
through the Company's  relationship  with a reseller.  In the second  quarter of
2001,  the Company and the reseller  jointly  decided to terminate  the reseller
arrangement.

      Service  and  Maintenance  Revenues.   Service  and  maintenance  revenues
decreased to $2.9 million for the three  months  ended  September  30, 2002 from
$3.2 million for the three months  ended  September  30, 2001, a decrease of 8%.
Service and maintenance  revenues  decreased to $9.1 million for the nine months
ended  September  30, 2002 from $10.4  million for the  nine-month  period ended
September 30, 2001, a decrease of 13%. The decrease in the three and  nine-month
periods ended September 30, 2002 was  attributable to a decrease in professional
services opportunities  resulting from a decrease in capital spending associated
with current global economic conditions.

      Hosted  Revenues.   Hosted  revenues  for  the  three-month  period  ended
September  30, 2002 were $319,000 and $707,000 for the  nine-month  period ended
September 30, 2002.  Hosted  revenues for the three and nine-month  period ended
September 30, 2001 were $48,000.  The third quarter of 2001 was the first period
the Company began recognizing revenue on this offering.

Cost of Revenues

      Total cost of revenues  decreased  to $2.2  million  for the three  months
ended  September 30, 2002 from $3.5 million for the three months ended September
30,  2001, a decrease of 38%.  Total cost of revenues  decreased to $7.3 million
for the nine months  ended  September  30, 2002 from $11.7  million for the nine
months ended September 30, 2001, a decrease of 38%.

      Cost of License Revenues.  Cost of license revenues consists  primarily of
third-party  license  and  support  fees  and,  to a  lesser  extent,  costs  of
duplicating  media and  documentation  and  shipping.  Cost of  license  revenue
decreased  to  $151,000  for the three  months  ended  September  30,  2002 from
$384,000 for the three months ended  September 30, 2001. Cost of license revenue
decreased  to $400,000 for the nine months  ended  September  30, 2002 from $1.1
million for the nine months ended  September 30, 2001.  The decrease in cost for
both the three and nine-month periods ended September 30, 2002 was due primarily
to decreased  sales  activity.  As a  percentage  of license  revenues,  cost of
license revenues  increased to 10% for the three months ended September 30, 2002
from 8% for the three  months ended  September  30,  2001.  As a  percentage  of
license revenues,  cost of license revenues  increased to 9% for the nine months
ended  September 30, 2002 from 7% for the nine months ended  September 30, 2001.
Cost of revenues  as a  percentage  of license  revenue  may  increase  over the
current level in the future if we incorporate  additional  third-party  products
into our offerings.

      Cost of Service and Maintenance Revenues.  Cost of service and maintenance
revenues,  exclusive of non-stock based  compensation,  consists of compensation
and  related  overhead  costs for  personnel  engaged in  consulting,  training,
maintenance  and support  services for our  customers as well as costs for third
parties  contracted  to provide  such  services  to our  customers.  The cost of
service and maintenance  revenue  decreased to $1.7 million for the three months
ended  September 30, 2002 from $2.9 million for the three months ended September
30,  2001,  a decrease  of 40%.  The cost of service  and  maintenance  revenues
decreased  to $6.0  million for the nine months  ended  September  30, 2002 from
$10.4  million for the nine months ended  September 30, 2001, a decrease of 42%.
As a percentage of service revenues,  cost of service revenues  decreased to 60%
for the three  months  ended  September  30, 2002 from 91% for the three  months
ended September 30, 2001. As a percentage of service  revenues,  cost of service
revenues decreased to 66% for the nine months ended September 30, 2002 from 100%
for the nine months ended  September  30,  2001.  The decrease for the three and
nine-month   periods  ended  September  30,  2002  was   attributable  to  lower
compensation  costs associated with our restructuring  plans implemented in July
of 2001 and April 2002 and lower costs for third party consultants.  The Company
does not expect these costs to significantly increase in the near term. Overall,
we are seeking to further reduce our cost of service revenues as a percentage of
total  service  revenue and are also  seeking to keep third  parties  engaged in
providing services related to our applications.


                                       10
<PAGE>

      Cost of Hosted  Revenues.  Cost of hosted revenues  consists  primarily of
compensation and related overhead costs for personnel  engaged in supporting the
hosted customer base,  server costs,  and  telecommunications  charges.  Cost of
hosted  revenues  increased to $257,000 for the three months ended September 30,
2002,  from  $211,000  for the three months ended  September  30, 2001.  Cost of
hosted  revenues for the nine months ended  September  30, 2002,  was  $863,000,
which includes three full quarters of expense.  Cost of hosted  revenues for the
nine months ended September 30, 2001 was $211,000, which includes one quarter of
expense as the Company began recognizing  revenue on it's hosted offering in the
third quarter of 2001.

Operating Expenses

      Sales and Marketing.  Sales and marketing expenses,  exclusive of non-cash
stock based  compensation,  consist  primarily of compensation and related costs
for sales and marketing personnel,  including  commissions and marketing program
costs.  Sales and  marketing  expenses  decreased  to $2.4 million for the three
months  ended  September  30, 2002 from $4.7  million for the three months ended
September 30, 2001, a decrease of 48%. Sales and marketing expenses decreased to
$8.8 million for the nine months ended September 30, 2002 from $19.5 million for
the nine months ended  September 30, 2001, a decrease of 55%. As a percentage of
total  revenues,  sales and  marketing  expenses  decreased to 51% for the three
months ended  September  30, 2002 from 58% for the three months ended  September
30, 2001.  As a  percentage  of total  revenues,  sales and  marketing  expenses
decreased to 62% for the nine months ended  September  30, 2002 from 72% for the
nine months  ended  September  30,  2001.  The  decrease in sales and  marketing
expenses  for the three and  nine-month  periods  ended  September  30, 2002 was
attributed to reduced commission expense associated with the decrease in license
revenue and reduced  compensation  costs and lower program costs associated with
our  restructuring  plans  implemented  in July 2001 and April  2002.  We do not
expect sales and marketing expenses,  excluding  commission charges, to increase
significantly in the near term.  Commission charges will vary depending upon the
sales activity. Sales and marketing expenses may increase in the long term if we
expand our domestic  and  international  sales force and increase our  marketing
efforts.

      Research and Development.  Research and development expenses, exclusive of
non-cash stock based compensation, consist primarily of compensation and related
personnel costs, and fees associated with contractors.  Research and development
expenses decreased to $1.7 million for the three months ended September 30, 2002
from $2.2 million for the three months ended  September  30, 2001, a decrease of
26%.  Research and development  expenses  decreased to $5.6 million for the nine
months  ended  September  30, 2002 from $9.9  million for the nine months  ended
September  30,  2001,  a decrease of 44%.  As a  percentage  of total  revenues,
research and  development  expenses  increased to 35% for the three months ended
September 30, 2002 from 28% for the three months ended  September 30, 2001. As a
percentage of total revenues, research and development expenses were 39% and 37%
for the nine-month periods ended September 30, 2002 and 2001, respectively.  The
decrease in research and development  cost for the three and nine- month periods
ended  September  30,  2002  was  attributable  to  reduced  compensation  costs
associated with our  restructuring  plans  implemented in July of 2001 and April
2002. We do not expect research and development costs to significantly  increase
in the near term.  Research  and  development  expenses may increase in the long
term if we make additional investments in our technology and products.

      General and Administrative. General and administrative expenses, exclusive
of non-cash stock based  compensation,  consist  primarily of  compensation  and
related costs for our executive,  finance and administrative personnel and other
related expenses.  General and administrative expenses decreased to $1.3 million
for the three  months ended  September  30, 2002 from $1.8 million for the three
months ended September 30, 2001, a decrease of 27%.  General and  administrative
expenses  decreased to $4.3 million for the nine months ended September 30, 2002
from $5.3  million for the nine months ended  September  30, 2001, a decrease of
20%. As a percentage  of total  revenues,  general and  administrative  expenses
increased to 28% for the three months ended  September 30, 2002 from 22% for the
three months ended September 30, 2001. As a percentage of total revenues general
and administrative expenses increased to 30% for the nine months ended September
30, 2002 from 20% for the nine months ended  September 30, 2001. The decrease in
general and  administrative  expenses in the three and nine-month  periods ended
September 30, 2002 was primarily attributable to the impact of our restructuring
plans  implemented  in July of 2001 and April 2002.  General and  administrative
expenses  tend to be  relatively  fixed in the short term because the  Company's
discretionary  general  and  administrative  expenses  are limited and there are
significant costs associated with being a public company. As a result, declining
revenues  have caused an increase  in general and  administrative  expenses as a
percentage  of total  revenues.  We do not  expect  general  and  administrative
expenses to significantly increase in the short term. General and administrative
costs may increase in the long term if we expand our operations.


                                       11
<PAGE>

      Restructuring and other charges.  Other charges for the three months ended
September 30, 2002 were $833,000. These charges were incurred in connection with
exploring merger and acquisition  transactions primarily related to the proposed
merger with the Geac Corporation.  For the nine months ended September 30, 2002,
restructuring  and other charges were  approximately  $2.5 million  comprised of
$523,000 of severance  and benefits,  $946,000 of accrued lease costs,  and $1.1
million of merger  expenses.  For the three  months  ended  September  30, 2001,
restructuring and other charges were $5.8 million. Approximately $4.5 million of
these expenses were incurred in connection with our July 2001 restructuring plan
and $1.3  million  was  incurred in  connection  with the  write-down  of assets
associated  with our hosted  offering.  For the nine months ended  September 30,
2001,  restructuring  and other charges were $6.2 million  comprised of the $4.5
million in  restructuring,  $1.3 million in write-down of assets and $377,000 of
other charges associated with exploring merger and acquisition opportunities.

Interest Income, Net

      Interest income, net was $178,000 for the three months ended September 30,
2002 and $565,000 for the three months ended  September  30, 2001, a decrease of
68%.  Interest income,  net was $668,000 for the nine months ended September 30,
2002 and $2.3 million for the nine months ended  September  30, 2001, a decrease
of 71%.  Interest  income is attributed to interest  earned on the proceeds from
the Company's initial public offering ("IPO") and working capital.  The decrease
in interest income for both the three and nine-month periods ended September 30,
2002 is attributed to lower interest rates and lower cash,  cash  equivalent and
short-term  investments balances.  Interest income will fluctuate depending upon
the  overall  interest  rate  environment  and our  cash,  cash  equivalent  and
short-term investments balances.

Amortization of Non-Cash Stock Based Compensation

      Prior to our IPO, we granted  certain  stock  options to our  officers and
employees at prices deemed to be below the fair value of the  underlying  stock.
The cumulative  difference between the fair value of the underlying stock at the
date the options were granted and the exercise price of the granted  options was
$12.1  million  as of the IPO date.  This  amount is being  amortized  using the
accelerated  method  of  FASB  Interpretation  No.  28,  "Accounting  for  Stock
Appreciation  Rights and Other  Variable  or Award  Plans",  over the  four-year
vesting period of the granted  options.  Accordingly,  our results of operations
include and will  continue  to include  deferred  compensation  expense at least
through 2003.  For the three months ended  September 30, 2002,  amortization  of
non-cash based  compensation  was $43,000.  For the three months ended September
30, 2001, there was no compensation expense. For the nine months ended September
30, 2002,  amortization of non-cash based  compensation  was $64,000 and for the
nine  months  ended   September  30,  2001,   amortization   of  non-cash  based
compensation  was  $348,000.  The lower expense in the  nine-month  period ended
September 30, 2002 is primarily  attributable  to the impact of forfeitures  and
the use of an  accelerated  method of  amortization.  We  estimate  that we will
recognize  approximately $25,000 for the remainder of 2002; however, this amount
may change as employee terminations impact the amortization schedule.

Liquidity and Capital Resources

      Since  inception,  we have financed our  operations and funded our capital
expenditures  through  proceeds  from our IPO  completed in January 2000 and the
private sale of equity securities, supplemented by loan facilities and equipment
leases. As of September 30, 2002, we had $35.2 million in cash, cash equivalents
and short-term investments, $1.4 million in restricted long-term investments and
$30.3 million in working capital.

      Net cash  used in  operating  activities  was $11.0  million  for the nine
months  ended  September  30, 2002 and $27.5  million for the nine months  ended
September  30, 2001.  For the nine months ended  September 30, 2002 cash used in
operating  activities  was primarily  attributed to a net loss of $13.6 million,
adjusted  for  depreciation  and  amortization  of $1.2  million,  a decrease in
accrued  liabilities  of $1.3 million and a decrease in accounts  receivable  of
$2.6  million.  For the nine months  ended  September  30, 2001 net cash used in
operating activities was primarily  attributable to a net loss of $23.6 million,
adjusted  for a  non-cash  charge  associated  with the  write-off  of  computer
equipment and software of $2.9 million,  depreciation  and  amortization of $1.9
million,  a decrease in  deferred  revenue of $10.1  million,  and a decrease in
accrued  liabilities  of  $845,000  million  offset by a  decrease  in  accounts
receivable of $2.3 million and an increase in other liabilities of $1.4 million.


                                       12
<PAGE>

      Net cash  provided by investing  activities  was $7.7 million for the nine
months ended  September 30, 2002 and net cash  provided by investing  activities
was $5.6 million for the nine months ended September 30, 2001. Net cash provided
by investing  activities for the nine month periods ended September 30, 2002 and
2001 were primarily attributable to the maturities of short-term investments.

      Net cash provided by financing activities was $131,000 for the nine months
ended  September  30,  2002 due to  payments  on capital  lease  obligations  of
$191,000 offset by proceeds from employee stock plans of $322,000. Net cash used
in  financing  activities  was $50,000 for the nine months ended  September  30,
2001,  primarily due to payments on notes payable and capital lease  obligations
of $1.1 million, offset by proceeds from employee stock plans of $1.0 million.

      Presently, we anticipate that our existing capital resources will meet our
operating  and  investing  needs  for  at  least  the  next  twelve  months.  In
particular, we believe that our current cash balances are sufficient to fund any
existing cash  obligations or commercial  commitments as well as any cash needed
for planned operating activities.  Furthermore,  should our operating results be
worse  than  expected,  we could use more cash in funding  operating  activities
which would diminish our capital resources. While we do not presently anticipate
a need for additional  capital, if we do require additional capital resources to
grow our  business,  execute  our  operating  plans,  or  acquire  complementary
technologies  or  businesses,  at any  time in the  future,  we may seek to sell
additional equity or debt securities or secure additional lines of credit, which
may result in additional dilution to our stockholders. Additional funding may or
may not be available on acceptable terms or at all.


                                       13
<PAGE>

                                  RISK FACTORS

The following is a discussion of certain  factors that  currently  impact or may
impact  our  business,   operating  results  and/or  financial  condition.   Any
investment  in our  common  stock  involves  a high  degree of risk.  You should
consider carefully the following information about these risks in evaluating our
business.  The market price of our common stock could decline,  and you may lose
all or part of the money you paid to buy our common stock.

                          RISKS RELATED TO OUR BUSINESS

The Company faces  numerous  risks in connection  with the proposed  transaction
with Geac, which may adversely  affect our results of operations  whether or not
the merger is  completed,  and the merger may not be completed on a timely basis
or at all.

      On August 26, 2002,  the Company  entered into an agreement to combine its
business  with Geac.  The  planned  merger  could have an adverse  effect on the
Company's  revenues  in the  near-term  if  customers  delay,  defer,  or cancel
purchases  due to  uncertainty  about the  direction  of our  product  offerings
following  the  merger  and our  willingness  to support  and  service  existing
products.  To the extent a prolonged  delay in  completing  the  planned  merger
creates   uncertainty  among  those  persons  and  organizations   contemplating
purchases  of products or  services  such that  several  large  customers,  or a
significant  group  of  small  customers,   delay  purchase   decisions  pending
resolution  of the  planned  merger,  this could  have an adverse  effect on the
Company's results of operations,  and quarterly  revenues could be substantially
below the  expectations  of market analysts and could cause a reduction in stock
price. Additionally,  speculation regarding the likelihood of the closing of the
merger could increase the volatility of the Company's stock price.

      In  addition,  the market  values of the  Company's  common stock and Geac
common stock will continue to vary prior to completion of the merger transaction
due to changes in the business,  operations or prospects of the Company or Geac,
market assessments of the merger, regulatory considerations, market and economic
considerations,  fluctuations  in exchange rates between the Canadian dollar and
the United States dollar, or other factors.  The merger agreement provides for a
downward  or upward  adjustment  to the  purchase  price based on changes in the
Company's  working  capital  relative to a standard set forth in the  agreement,
unless the  working  capital  balance  is within  three  percent of the  working
capital  balance  standard  as  calculated  the day  prior  to the  close of the
transaction.  There is no  guarantee  that at the close of the  transaction  the
working  capital  balance  will be within three  percent of the working  capital
standard  at that time.  There will be no  adjustment  for changes in the market
price of either the Company's common stock or Geac common stock.

      Completion   of  the  merger  also  is  subject  to  numerous   risks  and
uncertainties.  The merger agreement contains  conditions that must be fulfilled
or waived in order that one or both of the parties be  obligated to complete the
merger, and the merger agreement may be terminated by either Geac or the Company
under specified circumstances.  In addition, the Company may be unable to obtain
stockholder  approval,  which is required to complete the merger.  Under certain
circumstances,  the merger may be subject to governmental  reporting obligations
and statutory  waiting periods,  which could result in a delay of the completion
of the merger or result in the merger not being  completed at all. If the merger
is not  completed,  the  Company  could be subject to a number of risks that may
adversely affect its business and stock price, including:

      - the Company would not realize the benefits it expects by being part of a
combined  company with Geac, as well as the potentially  enhanced  financial and
competitive position as a result of being part of the combined company;

      - the diversion of  management  attention  from the  Company's  day-to-day
business and the unavoidable  disruption to its employees and its  relationships
with  customers  as a  result  of  efforts  and  uncertainties  relating  to the
Company's  anticipated  merger  with Geac may  detract  from its ability to grow
revenues  and  minimize  costs,  which,  in turn  may  lead to a loss of  market
position  that the  Company  could be unable to  regain if the  merger  does not
occur;


                                       14
<PAGE>

      - the market price of shares of the Company's  common stock may decline to
the extent  that the  current  market  price of those  shares  reflects a market
assumption that the merger will be completed;

      - the Company  must pay the costs  related to the  merger,  such as legal,
accounting and financial advisory fees, whether or not the merger is completed;

      - under specified circumstances, the Company may be required to pay Geac a
termination  fee of $1.5 million,  plus Geac's fees and expenses,  in connection
with the termination of the merger agreement; and

      - the Company may not be able to continue its present level of operations,
may need to scale back its business,  may have to consider additional reductions
in force, may have to consider alternative sources of funding, may be subject to
delisting from the Nasdaq  National Market and may not be able to take advantage
of future opportunities or effectively respond to competitive pressures,  any of
which  could have a  material  adverse  effect on its  business  and  results of
operations.

      Covenants  in  the  merger  agreement  may  impede  our  ability  to  make
acquisitions or complete other  transactions that are not in the ordinary course
of business pending  completion of the merger. As a result, if the merger is not
completed,  we may be at a disadvantage to our competitors.  In addition,  while
the  merger  agreement  is in  effect  and  subject  to  very  narrowly  defined
exceptions,  we are  prohibited  from  soliciting,  initiating,  encouraging  or
entering  into certain  extraordinary  transactions,  such as a merger,  sale of
assets or other business  combination  outside the ordinary  course of business,
with  any  third  party.  Any  such  transactions  could  be  favorable  to  our
stockholders.

      As a result of the proposed merger with Geac, the Company may be unable to
retain key employees,  which could result in the merger not being completed.  It
is a  condition  of Geac's  obligation  to  complete  the  merger  that  certain
specified  executives  of the Company  remain  employed by the  Company.  If the
Company is unable to retain these executives,  Geac would have the option to not
complete the merger. If the merger is not completed and the Company is unable to
retain key employees, the Company could face disruptions in its operations, loss
of existing  customers,  loss of key  information,  expertise or  know-how,  and
unanticipated additional recruitment and training costs.

      If the merger is completed, we will continue to face risks associated with
integration of the businesses and operations of the Company and Geac, and we may
not realize the  anticipated  benefits or synergies of the merger to the extent,
or in the  timeframe,  anticipated.  The combined  company will need to overcome
significant  challenges  in order to realize any benefits or synergies  from the
merger, including execution of a number of post-merger events such as:

      - integrating the operations and technologies of the two companies;

      - retaining and assimilating the key personnel of each company;

      - retaining existing customers of both companies and attracting additional
customers;

      -  retaining  strategic  partners  of  each  company  and  attracting  new
strategic partners; and

      -  creating  uniform  standards,   controls,   procedures,   policies  and
information systems.

      In addition to the integration risks previously discussed,  our ability to
realize these benefits and synergies could be impacted adversely by practical or
legal constraints on combining operations or implementing  workforce reductions.
The execution of these post-merger  events will involve  considerable  risks and
may not be successful. These risks include:

      - the potential  disruption of the combined company's ongoing business and
distraction of its management;

      - the potential strain on the combined company's  financial and managerial
controls and reporting systems and procedures;


                                       15
<PAGE>

      -  unanticipated  expenses and potential  delays related to integration of
the operations, technology and other resources of the two companies;

      - the impairment of relationships with employees,  suppliers and customers
as a result of any integration of new management personnel; and

      -  potential  unknown  liabilities  associated  with  the  merger  and the
combined operations.

      The  combined  company  may not succeed in  addressing  these risks or any
other  problems  encountered  in  connection  with the merger.  The inability to
successfully  integrate  operations,  technology and personnel with Geac, or any
significant delay in achieving integration, could have a material adverse effect
on the combined  company after the merger and, as a result,  on the market price
of Geac's common stock.

Our limited  operating  history  and the fact that we operate in a new  industry
make our business prospects difficult to evaluate.

      We were  incorporated  in November  1995 and  commenced  licensing  of our
software  applications  in March  1998.  An  investor  in our common  stock must
consider  the  risks,   uncertainties,   expenses  and  difficulties  frequently
encountered  by  companies in their early  stages of  development,  particularly
companies  in new and rapidly  evolving  markets such as the market for employee
relationship  management software  applications.  Risks and difficulties include
our ability to:

      -     expand our base of  customers  with  fully  installed  and  deployed
            systems that can serve as reference  accounts for our ongoing  sales
            efforts;

      -     expand our pipeline of sales  prospects in order to promote  greater
            predictability in our period-to-period sales levels;

      -     continue to offer new products that complement our existing  product
            line, in order to make our suite of applications  more attractive to
            customers;

      -     continue to develop and upgrade  our  technology  to add  additional
            features and functionality;

      -     continue to attract and retain qualified personnel;

      -     expand  direct  sales   channels  and  indirect   channels  such  as
            relationships with OEM customers and distributors;

      -     increase awareness of our brand; and

      -     maintain  our current  relationships  and  develop  new  third-party
            relationships.

      The  Company  may not be able  to  successfully  address  these  risks  or
difficulties  and our  business  strategy may not be  successful.  If we fail to
address these risks or difficulties adequately, our business will likely suffer.

We have a history of losses and negative cash flow and expect this to continue.

      Our  business is new; we have  offered  products  for a  relatively  short
period of time;  and our base of customers  and  prospective  customers is still
relatively small. We have spent significant funds to date to develop our current
products  and to  develop  our  sales and  market  resources.  We have  incurred
significant  operating  losses  and  have  not  achieved  profitability.  As  of
September 30, 2002, we had an accumulated  deficit of $114.0 million.  We expect
to continue to invest in research and  development to enhance  current  products
and develop future products and support our current sales and marketing  efforts
that promote our company and our products in the  marketplace.  As a result,  we
will need to increase our revenues  significantly to achieve  profitability.  In
addition,  because  we expect to  continue  to invest in our  business  ahead of
anticipated future revenues,  we expect that we will continue to incur operating
losses.


                                       16
<PAGE>

Our  business is changing  rapidly,  which could cause our  quarterly  operating
results to vary and our stock price to fluctuate.

      Our revenues and operating results may vary  significantly from quarter to
quarter due to a number of  factors,  many of which are beyond our  control.  We
expect to continue to make expenditures in all areas of our business in order to
promote  future  revenue  growth.  Because the  expenses  associated  with these
activities are relatively  fixed in the short-term,  we will be unable to adjust
spending  quickly  enough in any  particular  quarter to offset  any  unexpected
shortfall in revenue.  As a result, we expect our quarterly operating results to
fluctuate.  Our  financial  results may, as a consequence  of quarterly  revenue
fluctuations,  fall  short of the  expectations  of public  market  analysts  or
investors. If this occurs, the price of our common stock may drop.

      We also seek to develop and maintain a  significant  pipeline of potential
sales prospects,  but it is difficult to predict when individual customer orders
will be closed.  Our base of  customers  and the number of  additional  customer
licenses we enter into each quarter are still relatively small. Accordingly, the
loss or deferral of a small number of anticipated  large customer  orders in any
quarter could result in a significant shortfall in revenues for that quarter and
future quarters, which could result in a drop in the price of our stock.

      Other important  factors that could cause our quarterly  results and stock
price to fluctuate materially include:

      -     our ability to grow our  customer  base and our base of  referencing
            customers, in light of our relatively limited number of customers to
            date;

      -     our ability to successfully  develop  alternative sales channels for
            our products, such as sales through OEM customers or distributors;

      -     our ability to expand our  implementation  and consulting  resources
            through third-party relationships, in light of the fact that we have
            limited  third-party  implementation  and  consulting  relationships
            currently in place;

      -     technical  difficulties  or "bugs"  affecting  the  operation of our
            software; and

      -     delays  in  the  introduction  of new or  enhanced  versions  of our
            products.

      Due to our limited  operating  history,  the early stage of our market and
the  factors  discussed  above,  you  should  not  rely  on   quarter-to-quarter
comparisons   of  our  results  of   operations  as  indicators  of  our  future
performance.

We face intense competition, which could affect our ability to increase revenue,
maintain our margins and increase market share.

      The  market  for  our  internet-based   employee  relationship  management
software  applications  is intensely  competitive  and we expect  competition to
increase in the future. Competitors vary in size and in the scope and breadth of
the products and services  they offer.  Companies  offering one or more products
directly competitive with our products include Ariba, Concur Technologies,  IBM,
PeopleSoft and Oracle. As a result of the large market  opportunity for employee
relationship  management  solutions,  we  also  expect  competition  from  other
established and emerging companies.

      Many of our  current  and  potential  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 us. In addition, many of our competitors have well-established
relationships  with our  current  and  potential  customers  and have  extensive
knowledge of our industry. 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  industry  consolidation.  Increased
competition may result in price  reductions,  reduced margins and loss of market
share, any one of which could seriously harm our business.


                                       17
<PAGE>

If we do not provide  software  applications  and related services that meet the
changing demands of our customers,  the market for our products will not grow or
may decline.

      To successfully  implement our business strategy,  we will need to provide
software  applications  and  related  services  that  meet  the  demands  of our
customers  and  prospective  customers as the market and  customer  requirements
evolve. We expect that competitive  factors will create a continuing need for us
to improve and add to our suite of software applications.  Not only will we have
to expend  additional  funds and other  resources  to  continue  to improve  our
existing suite of applications,  but we must also properly  anticipate,  address
and respond to customer  preferences and demands. As organizations' needs change
with respect to their  enterprise  applications,  our existing suite of software
applications  may become  obsolete or inefficient  relative to our  competitors'
offerings and may require  modifications  or  improvements.  The addition of new
products  and  services  will also  require  that we  continue  to  improve  the
technology underlying our applications. These requirements could be significant,
and we may fail to fulfill  them quickly and  efficiently.  If we fail to expand
the breadth of our  applications  quickly in  response  to customer  needs or if
these offerings fail to achieve market  acceptance,  the market for our products
will not grow or may decline, and our business may suffer significantly.

      Our  employee  relationship   management  software  products  and  related
services  have  accounted  for  substantially  all of our  revenues to date.  We
anticipate that revenues from these products and related  services will continue
to  constitute  substantially  all of our revenues for the  foreseeable  future.
Consequently, our future financial performance will depend, in significant part,
upon  the  successful  development,  introduction  and  customer  acceptance  of
enhanced versions of our employee relationship  management software applications
and any new  products  or services  that we may  develop or  acquire.  We cannot
assure you that we will be successful  in enhancing,  upgrading or continuing to
effectively market our employee relationship management software applications or
that any new  products or services  that we may develop or acquire  will achieve
market acceptance.

In any given  quarter,  our revenues  have been derived from a relatively  small
number  of  customers,  and the loss of a small  number  of major  customers  or
potential  customers could adversely impact our quarterly  revenues or operating
results.

      We expect  that we will  continue to derive a  significant  portion of our
revenues from a relatively small number of customers in the future. Accordingly,
the loss of a small number of major  customers  could  materially  and adversely
affect our business, and the deferral or loss of anticipated orders from a small
number of  prospective  customers  could  materially  and  adversely  impact our
quarterly revenues and operating results in any period.

If we are unable to maintain our Nasdaq National  Market listing,  the liquidity
of our common stock would be seriously limited.

      In the past the  closing  price of our stock has been less than  $1.00 per
share, which is the minimum bid price requirement for continued listing with the
Nasdaq  National  Market.  If we fail to  comply  with  the  minimum  bid  price
requirement  for 30 straight  trading days, we will likely  receive a deficiency
notice from Nasdaq. We will then have 90 calendar days to reestablish compliance
with that requirement.  To reestablish compliance, our minimum closing bid price
must be more than $1.00 per share for 10 consecutive  trading days. If we do not
reestablish  compliance with this requirement  during the 90-day period,  Nasdaq
will  commence  delisting  proceedings  and we may be  delisted  from the Nasdaq
National Market. Our shares will continue to trade on the Nasdaq National Market
unless and until the delisting proceedings have commenced and been completed and
Nasdaq  has made a  determination  to delist  us. In the  event our  shares  are
delisted  from the Nasdaq  National  Market,  we will attempt to have our common
stock traded on the Nasdaq SmallCap Market. If our common stock is delisted,  it
could  seriously  limit the  liquidity  of our common  stock and would limit our
ability to raise  future  capital  through the sale of our common  stock,  which
could seriously harm our business.

If we fail to maintain  positive  margins on service revenues in the foreseeable
future, our results of operations could suffer.


                                       18
<PAGE>

      For the three and nine-month periods ended September 30, 2002, our service
margins were positive.  While we anticipate that our margins will continue to be
positive  in the future,  we cannot  guarantee  that they will remain  positive.
Failure  to  maintain  positive  margins  on service  revenues  would  cause our
business to suffer.  For more  information  related to our costs associated with
our service  revenues,  see  "Management's  Discussion and Analysis of Financial
Condition and Results of Operations."

Evolving technological developments and emerging industry standards will require
us to enhance the functionality of our employee relationship management software
applications,  and any inability to enhance  functionality could cause our sales
to decline.

      Because  the market  for our  products  is subject to rapid  technological
change and  evolving  industry  standards,  the life cycles of our  products are
difficult to predict.  Competitors may introduce new products or enhancements to
existing products  employing new  technologies,  which could render our existing
products and services  obsolete and  unmarketable.  For example,  our  currently
available  software  applications  are  written  entirely  in the Java  computer
language.  While we believe that this  provides our  solution  with  significant
advantages in terms of functionality  and  flexibility,  it is not clear whether
Java-based systems will continue to maintain commercial acceptance.

      To  be  successful,   our  products  and  services  must  keep  pace  with
technological   developments  and  emerging  industry  standards,   address  the
ever-changing and increasingly  sophisticated needs of our customers and achieve
market acceptance. Our results of operations would be seriously harmed if we are
unable to develop,  release and market new software  product  enhancements  on a
timely and  cost-effective  basis,  or if new  products or  enhancements  do not
achieve market  acceptance or fail to respond to evolving industry or technology
standards.

      In developing  new products and services,  we may also fail to develop and
market  products  that  respond to  technological  changes or evolving  industry
standards in a timely or cost-effective manner, or experience  difficulties that
could delay or prevent the successful development, introduction and marketing of
these new products and services.

If we fail to expand our  relationships  with  third  parties  that can  provide
implementation  and consulting  services to our  customers,  we may be unable to
grow our revenues and our business could be harmed.

      In  order  for us to  focus  more  effectively  on our  core  business  of
developing  and  licensing  software  solutions,  we must  continue to establish
relationships with third parties that can provide  implementation and consulting
services to our customers.  Third-party  implementation and consulting firms can
also be influential in the choice of employee  relationship  management software
applications by new customers.  To date, we have established  relationships with
several third-party implementation and consulting firms. In general, however, if
we are unable to establish and maintain effective,  long-term relationships with
implementation and consulting  providers,  or if these providers do not meet the
needs or  expectations  of our customers,  we may be unable to grow our revenues
and our business could be seriously harmed. As a result of the limited resources
and capacities of many third-party implementation providers, we may be unable to
attain sufficient focus and resources from the third-party providers to meet all
of our customers'  needs,  even if we establish  relationships  with these third
parties. If sufficient resources are unavailable, we will be required to provide
these services  internally,  which could limit our ability to expand our base of
customers.  A number of our  competitors  have  significantly  more  established
relationships with these third parties and, as a result, these third parties may
be more likely to recommend  competitors'  products and services rather than our
own.  Even if we are  successful  in developing  additional  relationships  with
third-party  implementation  and  consulting  providers,  we will be  subject to
significant risk, as we cannot control the level and quality of service provided
by third-party implementation and consulting partners.

Our expectations of future growth depend on our ability to expand  international
sales of our products,  and factors specific to our international  expansion may
prevent us from achieving our anticipated growth.

      Over time, we intend to expand our international operations to achieve our
anticipated growth, but we may face significant  challenges to our international
expansion. The expansion of our existing international operations and entry into
additional  international markets will require significant  management attention
and financial resources.  To achieve broad acceptance in international  markets,
our products  must be localized to handle a variety of factors  specific to each
international market, such as tax laws and local regulations.  The incorporation
of these factors into


                                       19
<PAGE>

our  products is a complex  process  and often  requires  assistance  from third
parties.  We may not adequately  address all of the factors necessary to achieve
broad acceptance in our target international markets.  Further, to achieve broad
usage by employees  across  international  organizations,  our products  must be
localized to handle native languages and cultures in each international  market.
Localizing  our  products  is also a complex  process  and we intend to continue
working  with third  parties to develop  localized  products.  To date,  we have
localized  our product for the markets  where the English  language is the local
language and completed  translations for the German, French, Italian and Spanish
languages.

      We have only a limited  history of marketing,  selling and  supporting our
products and services  internationally.  In 1999, we opened a regional office in
the United Kingdom. In 2000, we expanded our European Operations through opening
a second office in Frankfurt,  Germany;  however,  as part of our  restructuring
plan  implemented  in April of 2002,  we  closed  the  Frankfurt  office.  As of
September  30,  2002,  we had a  total  of 10  employees  in  our  international
operations.   For  the  nine  months  ended   September  30,  2002,  we  derived
approximately  11.0% of our  revenues  from  our  international  operations.  To
succeed  internationally,  we must react quickly to the business  environment in
which we operate  overseas.  Thus, we must  effectively  monitor the size of our
international  workforce and make  adjustments  as necessary.  During periods of
growth we must hire and train  experienced  international  personnel  as well as
recruit  and  retain  qualified  domestic  personnel  to staff  and  manage  our
international operations.  However, we may experience difficulties in recruiting
and training additional  international staff. We must also be able to enter into
strategic  relationships with companies in international  markets. If we are not
able to maintain successful strategic  relationships  internationally or recruit
additional  companies to enter into strategic  relationships,  our future growth
could be limited.  We also face other  risks  inherent  in  conducting  business
internationally, such as:

      -     difficulties in collecting accounts receivable and longer collection
            periods;

      -     seasonal business activity in certain parts of the world;

      -     fluctuations in currency exchange rates; and

      -     trade barriers.

      Any of these factors could  seriously  harm our  international  operations
and, consequently, our business.

Our  sales  cycles  are long and  unpredictable,  which  makes  period-to-period
revenues difficult to predict.

      Because  the  market for our  employee  relationship  management  software
products  and  related  services  is  relatively  new,  we  experience  long and
unpredictable  sales  cycles.  The  sales  cycle for our  employee  relationship
management software applications  typically ranges from three to ten months. Our
customers  have  frequently  viewed the  purchase  of our  products as part of a
long-term strategic decision regarding the management of their workforce-related
operations and  expenditures.  This decision  process has sometimes  resulted in
customers  taking a long period of time to assess  alternative  solutions by our
competitors  or deferring a purchase  decision until the market  evolves.  Sales
cycles  continue to be long and the timing of purchase  decisions by  individual
customers  remain at times  uncertain.  We must  continue  to educate  potential
customers on the use and benefits of our products and  services,  as well as the
integration of our products and services with additional  software  applications
utilized by the individual customers. Because the sales cycle is long and timing
of individual orders is uncertain,  our period-to-period  revenues are difficult
to predict.

We may be unable  to  attract  and  retain  highly  skilled  employees  that are
necessary for the success of our business plan.

      Our ability to execute our business plan and be successful also depends on
our continued ability to attract and retain highly skilled employees.  We depend
on the services of senior  management  and other  personnel.  None of our senior
management  is  obligated to continue to provide  services to the Company.  Over
time,  we will  need to hire  additional  personnel  in all  operational  areas.
Competition  for  personnel in our industry can be intense.  We have in the past
experienced,  and we expect to continue to experience in the future,  difficulty
in  hiring   and   retaining   highly   skilled   employees   with   appropriate
qualifications.  If we do not succeed in attracting or retaining personnel,  our
business could be adversely affected.


                                       20
<PAGE>

Software defects could lead to loss of revenue or delay the market acceptance of
our applications.

      Our  enterprise  applications  software is complex and,  accordingly,  may
contain  undetected  errors or failures when first introduced or as new versions
are released.  This may result in loss of, or delay in, market acceptance of our
products. We have in the past discovered software errors in our new releases and
new  products  after  their  introduction.  In  the  event  that  we  experience
significant  software errors in future releases,  we could experience  delays in
the release,  customer  dissatisfaction  and lower revenues and service  margins
during  the  period  required  to  correct  these  errors.  We may in the future
discover errors, and additional scalability limitations,  in new releases or new
products after the commencement of commercial shipments.  Any of these errors or
defects could cause our business to be materially harmed.

We may become increasingly dependent on third-party software incorporated in our
products and, if so,  impaired  relations  with these third  parties,  errors in
third-party  software or inability to enhance the software  over time could harm
our business.

      We  incorporate  third-party  software into our products.  Currently,  the
third-party software we use includes application server software that we license
from BEA Systems,  off-line  database  software from Pointbase,  off-line client
server  software from Pumatech,  synchronization  software from Aether  Systems,
reporting   software  from  Business   Objects  and  Java  Web  Start  from  Sun
Microsystems.  We may  incorporate  additional  third-party  software  into  our
products  as we expand our product  line and  broaden  the content and  services
accessible through our gateway.  The operation of our products would be impaired
if errors  occur in the  third-party  software  that we license.  It may be more
difficult  for us to correct  any errors in  third-party  software  because  the
software is not within our control. Accordingly, our business would be adversely
affected  in the event of any errors in this  software.  Furthermore,  it may be
difficult  for us to  replace  any  third-party  software  if a vendor  seeks to
terminate our license to the software.

Our  success  depends  in part upon our  ability  to  protect  our  intellectual
property and we may not be able to do so adequately.

      Our success depends in large part upon our proprietary technology. We rely
on  a  combination  of  copyright,   trademark  and  trade  secret   protection,
confidentiality  and  nondisclosure  agreements  and licensing  arrangements  to
establish and protect our intellectual  property rights.  We license rather than
sell our solutions  and require our customers to enter into license  agreements,
which impose restrictions on their ability to utilize the software. In addition,
we seek to avoid  disclosure  of our  trade  secrets  through a number of means,
including requiring those persons with access to our proprietary  information to
execute  nondisclosure  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.

      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 of America. Our means of protecting our proprietary rights may not
be adequate and our competitors may  independently  develop similar  technology,
duplicate our products, or design around our proprietary intellectual property.

Security and other concerns may discourage  customers from purchasing our hosted
product.

      If customers determine that our hosted product is not scaleable,  does not
provide  adequate  security  for  the  dissemination  of  information  over  the
Internet, or is otherwise inadequate for Internet-based use, or if for any other
reason  customers fail to accept our hosted  products for use on the Internet or
on a subscription  basis, our business will be harmed. As a hosted provider,  we
expect  to  receive  confidential  information  including  credit  card,  travel
booking,  employee,  purchasing,  supplier,  and other  financial and accounting
data, through the Internet. There can be no assurance that this information will
not be subject to computer  break-ins,  theft, and other improper  activity that
could jeopardize the security of information for which we are  responsible.  Any
such lapse in security could expose


                                       21
<PAGE>

us to  litigation,  loss of  customers,  or  otherwise  harm  our  business.  In
addition,  any person who is able to  circumvent  our  security  measures  could
misappropriate   proprietary  or  confidential  customer  information  or  cause
interruptions in our operations.  We may be required to incur  significant costs
to  protect  against  security  breaches  or to  alleviate  problems  caused  by
breaches. Additionally, in the past, computer viruses and software programs that
disable or impair  computers have been  distributed and have rapidly spread over
the Internet.  Computer viruses could be introduced into our systems or those of
our customers or suppliers,  which could disrupt our software  solutions or make
them  inaccessible  to  customers  or  suppliers.   Further,  a  well-publicized
compromise  of security  could deter  people from using the  Internet to conduct
transactions that involve transmitting confidential information.  Our failure to
prevent security breaches,  or  well-publicized  security breaches affecting the
Internet in general,  could  significantly harm our business,  operating results
and financial condition.

We may face costly  damages or litigation  costs if a third party claims that we
infringe its intellectual property.

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

We are the target of a  securities  class  action  complaint  and are at risk of
securities class action  litigation,  which may result in substantial  costs and
divert management attention and resources.

      In November  2001,  the Company and certain of its officers and  directors
were named as defendants in a class action  shareholder  complaint  filed in the
United States District Court for the Southern District of New York now captioned
In re Extensity,  Inc.  Initial Public Offering  Securities  Litigation.  In the
complaint,  the plaintiffs allege that the Company,  certain of its officers and
directors and the  underwriters of its IPO violated the federal  securities laws
because the Company's IPO registration statement and prospectus contained untrue
statements of material fact or omitted material facts regarding the compensation
to be received by, and the stock allocation  practices of, the IPO underwriters.
The plaintiffs seek unspecified  monetary damages and other relief.  This action
may divert the efforts and attention of management and, if determined  adversely
to the  Company,  could  have a  material  impact  on  our  business,  financial
position, results of operations and cash flows.

Any future  acquisitions of companies or technologies  may result in distraction
of our management and disruptions to our business.

      We  may  acquire  or  make   investments  in   complementary   businesses,
technologies, services or products if appropriate opportunities arise. From time
to time we may engage in discussions and negotiations  with companies  regarding
our acquiring or investing in such companies' businesses,  products, services or
technologies.  We cannot make assurances that we will be able to identify future
suitable  acquisition or investment  candidates,  or if we do identify  suitable
candidates,  that we will be able to make such  acquisitions  or  investments on
commercially  acceptable  terms or at all.  If we  acquire  or invest in another
company,  we  could  have  difficulty  assimilating  that  company's  personnel,
operations,  technology or products and service offerings.  In addition, the key
personnel  of the  acquired  company  may  decide  not to  work  for  us.  These
difficulties  could disrupt our ongoing  business,  distract our  management and
employees, increase our expenses and adversely affect our results of operations.
Furthermore, we may incur indebtedness or issue equity securities to pay for any
future acquisitions.  The issuance of equity securities could be dilutive to our
existing stockholders.

We have anti-takeover  provisions in our charter and in our contracts that could
delay or prevent an  acquisition  of our  company,  even if such an  acquisition
would be beneficial to our stockholders.


                                       22
<PAGE>

      Provisions of our certificate of incorporation,  our bylaws,  Delaware law
and  certain  agreements  entered  into by or for the benefit of some of our key
officers  could make it more  difficult for a third party to acquire us, even if
doing so might be beneficial to our stockholders.

Our business may face additional risks and  uncertainties not presently known to
us, which would cause our business to suffer.

      In  addition to the risks  specifically  identified  in this Risk  Factors
section  or  elsewhere  in  this  report,  we  may  face  additional  risks  and
uncertainties  not presently  known to us or that we currently  deem  immaterial
which  ultimately  may impair our business,  results of operations and financial
condition.

                          RISKS RELATED TO OUR INDUSTRY

Our success will depend upon the growth and  acceptance of the market we address
and  our  ability  to  meet  the  needs  of the  emerging  market  for  employee
relationship management software applications.

      The market for our employee relationship  management software applications
and services is at an early stage of  development.  Our success will depend upon
the  continued  development  of this  market and the  increasing  acceptance  by
customers  of the  benefits to be provided by employee  relationship  management
applications  and services.  In addition,  as the market evolves,  it is unclear
whether the market will accept our suite of applications as a preferred solution
for  employee  relationship  management  needs.  Accordingly,  our  products and
services may not achieve  significant  market acceptance or realize  significant
revenue growth.  Unless a critical mass of organizations and their suppliers use
our solutions and recommend them to new customers, our solutions may not achieve
widespread market acceptance, which may cause our business to suffer.

Market prices of technology companies have been highly volatile,  and the market
for our stock may continue to be volatile as well.

      The stock  market has  experienced  significant  price and trading  volume
fluctuations  and the  market  prices of  technology  companies  generally,  and
Internet-related software companies particularly,  have been extremely volatile.
Investors may not be able to resell their shares at or above the price they paid
for the stock. In the past,  following periods of volatility in the market price
of a public company's  securities,  securities class action litigation has often
been instituted  against that company.  Such  litigation  would likely result in
substantial costs and diversion of management's attention and resources.

Increasing government regulation could limit the market for, or impose sales and
other taxes on the sale of, our products and services.

      As Internet  commerce  evolves,  we expect that federal,  state or foreign
agencies will adopt regulations  covering issues such as user privacy,  pricing,
taxation  of goods and  services  provided  over the  Internet,  and content and
quality of products and services.  It is possible that legislation  could expose
companies  involved in electronic  commerce to liability,  which could limit the
growth of electronic commerce generally.  Legislation could dampen the growth in
Internet  usage and decrease its acceptance as a  communications  and commercial
medium. If enacted,  these laws, rules or regulations could limit the market for
our products and services.


                                       23
<PAGE>

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

      We develop  products in the United States and market our products in North
America  and,  to a lesser  extent,  in Europe and the rest of the  world.  As a
result,  our  financial  results could be affected by factors such as changes in
foreign currency rates or weak economic  conditions in foreign markets.  Because
the  majority of our revenues  are  currently  denominated  in U.S.  dollars,  a
strengthening  of the dollar could make our products less competitive in foreign
markets.

INTEREST RATE RISK

      We have an  investment  portfolio  of money  market funds and fixed income
certificates  of deposit.  The fixed income  certificates  of deposit,  like all
fixed  income  securities,  are subject to  interest  rate risk and will fall in
value if market  interest rates  increase.  We attempt to limit this exposure by
investing primarily in short-term  securities.  In view of the nature and mix of
our total  portfolio,  a 10% movement in market  interest rates would not have a
significant impact on the total value of our portfolio as of September 30, 2002.

ITEM 4. Evaluation of Disclosure Controls and Procedures.

(a)  Evaluation  of  disclosure  controls and  procedures.  Our chief  executive
officer  and  our  acting  chief  financial   officer,   after   evaluating  the
effectiveness  of our  "disclosure  controls and  procedures" (as defined in the
Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)) as of a date (the
"Evaluation  Date")  within 90 days  before  the filing  date of this  quarterly
report,  have concluded that as of the Evaluation Date, our disclosure  controls
and  procedures  were adequate and designed to ensure that material  information
relating to us and our  consolidated  subsidiary  would be made known to them by
others within those entities.

(b)  Changes in  internal  controls.  There were no  significant  changes in our
internal   controls  or,  to  our   knowledge,   in  other  factors  that  could
significantly  affect our disclosure  controls and procedures  subsequent to the
Evaluation Date.

                           PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

      In November  2001,  the Company and certain of its officers and  directors
were named as defendants in a class action  shareholder  complaint  filed in the
United  States  District  Court  for the  Southern  District  of New  York,  now
captioned, In re Extensity,  Inc. Initial Public Offering Securities Litigation.
In the  complaint,  the  plaintiffs  allege  that the  Company,  certain  of its
officers and  directors  and the  underwriters  of its initial  public  offering
("IPO")  violated  the  federal   securities  laws  because  the  Company's  IPO
registration  statement and prospectus  contained untrue  statements of material
fact or omitted material facts regarding the compensation to be received by, and
the stock  allocation  practices of, the IPO  underwriters.  The plaintiffs seek
unspecified monetary damages and other relief.  Similar complaints were filed in
the same court against hundreds of other public companies that conducted IPOs of
their common stock since the mid-1990s (collectively, the "IPO Lawsuits").

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


                                       24
<PAGE>

      In accordance with Judge Scheindlin's orders at further status conferences
in March and April,  the  appointed  lead  plaintiffs'  counsel  filed  amended,
consolidated  complaints in the IPO Lawsuits on April 19, 2002.  Defendants then
filed a global  motion to dismiss the IPO Lawsuits on July 15, 2002, as to which
the Company does not expect a decision  until late 2002. On October 9, 2002, the
Court entered an order  dismissing  the Company's  named  officers and directors
from the IPO Lawsuits without  prejudice,  pursuant to an agreement  tolling the
statute of  limitations  with  respect to these  officers  and  directors  until
September 30, 2003. The Company  believes that this  litigation is without merit
and intends to defend against it vigorously.  This litigation,  however, as well
as any other  litigation  that might be instituted,  could result in substantial
costs and a diversion of management's attention and resources.

      We are  subject  to legal  proceedings  and  claims,  either  asserted  or
unasserted,  that arise in the ordinary course of business. While the outcome of
these proceedings and claims cannot be predicted with certainty, management does
not believe that the outcome of any of these legal  matters will have a material
adverse effect on our consolidated financial position,  results of operations or
cash flows.

ITEM 2. Changes in Securities and Use of Proceeds

a.    Not applicable.

b.    Not applicable.

c.    Not applicable.

d.    Not applicable.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. Submission of Matters to a Vote of Security Holders

None.

ITEM 5. Other Information

      In accordance  with Section  10A(i)(2) of the  Securities  Exchange Act of
1934, as added by Section 202 of the  Sarbanes-Oxley Act of 2002 (the "Act"), we
are required to disclose the non-audit  services approved by our Audit Committee
to be performed by PricewaterhouseCoopers  LLP, our external auditor.  Non-audit
services  are  defined  in the Act as  services  other than  those  provided  in
connection  with an audit or a review of the financial  statements of a company.
The Audit  Committee has not approved the  engagement of  PricewaterhouseCoopers
LLP for any non-audit services.

ITEM 6. Exhibits and Reports on Form 8-K

      (a) Exhibits

Exhibit  99.1 is  filed  as an  update  to the  exhibit  index  included  in the
Company's Form 10-K filed with the SEC on April 1, 2002 (File No. 000-28897).

Exhibit 99.1 -  Certification  by Chief  Executive  Officer and Chief  Financial
                Officer.

(b) Reports on Form 8-K:

On August 26, 2002, the Company filed a Form 8-K under Item 5 announcing that on
August 26, 2002 the Company  entered into an  Agreement  and Plan of Merger with
Geac Computer  Corporation  Limited and Cage  Acquisition,  Inc., a wholly-owned
subsidiary of Geac Computer Corporation Limited.


                                       25
<PAGE>

                                    SIGNATURE

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

November 8, 2002                                                 EXTENSITY, INC.

                             By /s/ Benjamin Netick
                             Vice President Finance and
                             Acting Chief Financial Officer (Principal Financial
                             and Accounting Officer)


                                       26
<PAGE>

                                 CERTIFICATIONS

I, Robert A. Spinner, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Extensity, Inc.;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

            a) designed such  disclosure  controls and procedures to ensure that
      material   information   relating  to  the   registrant,   including   its
      consolidated  subsidiaries,  is made  known to us by others  within  those
      entities, particularly during the period in which this quarterly report is
      being prepared;

            b)  evaluated  the  effectiveness  of  the  registrant's  disclosure
      controls  and  procedures  as of a date within 90 days prior to the filing
      date of this quarterly report (the "Evaluation Date"); and

            c)  presented in this  quarterly  report our  conclusions  about the
      effectiveness  of the  disclosure  controls  and  procedures  based on our
      evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

            a) all  significant  deficiencies  in the  design  or  operation  of
      internal controls which could adversely affect the registrant's ability to
      record,  process,  summarize and report financial data and have identified
      for  the  registrant's   auditors  any  material  weaknesses  in  internal
      controls; and

            b) any fraud,  whether or not material,  that involves management or
      other employees who have a significant role in the  registrant's  internal
      controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 8, 2002

/s/ Robert A. Spinner
-----------------------------
Robert A. Spinner
Chief Executive Officer
(Principal Executive Officer)


                                       27
<PAGE>

                                 CERTIFICATIONS

I, Benjamin Netick, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Extensity, Inc.;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

            a) designed such  disclosure  controls and procedures to ensure that
      material   information   relating  to  the   registrant,   including   its
      consolidated  subsidiaries,  is made  known to us by others  within  those
      entities, particularly during the period in which this quarterly report is
      being prepared;

            b)  evaluated  the  effectiveness  of  the  registrant's  disclosure
      controls  and  procedures  as of a date within 90 days prior to the filing
      date of this quarterly report (the "Evaluation Date"); and

            c)  presented in this  quarterly  report our  conclusions  about the
      effectiveness  of the  disclosure  controls  and  procedures  based on our
      evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

            a) all  significant  deficiencies  in the  design  or  operation  of
      internal controls which could adversely affect the registrant's ability to
      record,  process,  summarize and report financial data and have identified
      for  the  registrant's   auditors  any  material  weaknesses  in  internal
      controls; and

            b) any fraud,  whether or not material,  that involves management or
      other employees who have a significant role in the  registrant's  internal
      controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: November 8, 2002

/s/  Benjamin Netick
-----------------------------
Benjamin Netick
Vice President of Finance and Acting Chief Financial Officer
(Principal Financial Officer)


                                       28