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 June 30, 2001

                                       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 July 31,
2001 was 24,553,636
<PAGE>
                                      INDEX

                          PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements (Unaudited)                1
        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            21

                           PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings                                                     21

ITEM 2. Changes in Securities and Use of Proceeds                             21

ITEM 3. Defaults Upon Senior Securities                                       22

ITEM 4. Submission of Matters to a Vote of Security Holders                   22

ITEM 5. Other Information                                                     22

ITEM 6. Exhibits and Reports on Form 8-K                                      22

SIGNATURES                                                                    23
<PAGE>
                          PART I. FINANCIAL INFORMATION

ITEM 1. Condensed Consolidated Financial Statements (Unaudited)

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

                                     ASSETS

                                                       June 30,    December 31,
                                                         2001          2000
                                                       ---------    ---------
Current assets:
  Cash and cash equivalents                            $  37,945    $  40,695
  Short-term investments                                  21,924       38,925
  Restricted short-term investments                        1,397        1,436
  Accounts receivable, net                                 5,483        8,527
  Prepaids and other current assets                        3,557        3,443
                                                       ---------    ---------
       Total current assets                               70,306       93,026
Property and equipment, net                                6,581        6,279
Other assets                                                 619          457
                                                       ---------    ---------
       Total assets                                    $  77,506    $  99,762
                                                       =========    =========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                     $   6,139    $   6,434
  Accrued liabilities                                      3,930        5,125
  Deferred revenue                                         8,929       16,041
  Notes payable and capital lease obligations                687        1,269
                                                       ---------    ---------
       Total current liabilities                          19,685       28,869
  Capital lease obligations and other                        427          647
                                                       ---------    ---------
       Total liabilities                                  20,112       29,516
                                                       ---------    ---------

Stockholders' equity:
  Common stock                                                24           24
  Additional paid-in capital                             147,531      147,475
  Deferred stock compensation                             (1,358)      (2,679)
  Notes receivable from stockholders                        (380)        (380)
  Cumulative translation adjustment                          298          295
  Accumulated deficit                                    (88,721)     (74,489)
                                                       ---------    ---------
       Total stockholders' equity                         57,394       70,246
                                                       ---------    ---------
       Total liabilities and stockholders' equity      $  77,506    $  99,762
                                                       =========    =========


              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       Six Months Ended
                                                                     June 30,                June 30,
                                                               --------------------    --------------------
                                                                 2001        2000        2001        2000
                                                               --------    --------    --------    --------
<S>                                                            <C>         <C>         <C>         <C>
Revenues:
  License                                                      $  5,651    $  3,034    $ 11,673    $  5,259
  Service and maintenance                                         3,480       2,299       7,260       3,797
                                                               --------    --------    --------    --------
       Total revenues                                             9,131       5,333      18,933       9,056
                                                               --------    --------    --------    --------
Cost of revenues:(*)
  License                                                           263         131         708         215
  Service and maintenance                                         3,444       3,781       7,518       6,870
                                                               --------    --------    --------    --------
       Total cost of revenues                                     3,707       3,912       8,226       7,085
                                                               --------    --------    --------    --------

Gross profit                                                      5,424       1,421      10,707       1,971
                                                               --------    --------    --------    --------
Operating expenses:(*)
  Sales and marketing                                             7,043       6,812      14,957      12,945
  Research and development                                        3,945       3,412       7,737       6,548
  General and administrative                                      1,856       1,487       4,005       3,091
                                                               --------    --------    --------    --------
       Total operating expenses                                  12,844      11,711      26,699      22,584
                                                               --------    --------    --------    --------

Loss from operations                                             (7,420)    (10,290)    (15,992)    (20,613)

Interest income, net                                                687       1,425       1,760       2,411
                                                               --------    --------    --------    --------

Net loss                                                       $ (6,733)   $ (8,865)   $(14,232)   $(18,202)
                                                               ========    ========    ========    ========

Basic and diluted net loss per share                           $  (0.28)   $  (0.39)   $  (0.60)   $  (0.93)
Shares used in computing
  basic and diluted net loss per share                           23,735      22,472      23,562      19,540

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

Cost of revenues:
  Service and maintenance                                      $      9    $    185    $     59    $    424
Operating expenses:
  Sales and marketing                                                18         393         112         901
  Research and development                                           11         243          68         557
  General and administrative                                         17         336         109         769
                                                               --------    --------    --------    --------
                                                               $     55    $  1,157    $    348    $  2,651
                                                               ========    ========    ========    ========
</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>
                                                                     Six Months Ended June 30,
                                                                     -------------------------
                                                                        2001          2000
                                                                      --------      --------
Cash flows from operating activities:
<S>                                                                   <C>           <C>
  Net loss                                                            $(14,232)     $(18,202)
  Adjustments to reconcile net loss to cash
   used in operating activities:
    Depreciation and amortization                                        1,402           731
    Amortization of deferred stock compensation and other                  433         2,651
    Amortization of debt discount and lease line issuance costs             35            50

Changes in operating assets and liabilities:
  (Increase) decrease in accounts receivable                             3,044        (2,335)
  Increase in prepaids and other current assets                           (114)       (1,357)
  Increase in other non current assets                                    (162)           --
  Increase (decrease) in accounts payable                                 (295)        2,131
  Increase (decrease) in accrued liabilities                            (1,195)        2,313
  Increase (decrease) in deferred revenue                               (7,112)        2,954
  Increase in other current liabilitiies                                    --            65
                                                                      --------      --------
       Cash used in operating activities                               (18,196)      (10,999)
                                                                      --------      --------
Cash flows from investing activities:
  Purchases of short-term investments                                  (20,207)      (54,839)
  Sales of short-term investments                                       37,208        17,864
  Capital expenditures                                                  (1,704)       (2,047)
  (Increase) decrease in restricted cash                                    39          (929)
                                                                      --------      --------
       Cash provided by (used in) investing activities                  15,336       (39,951)
                                                                      --------      --------
Cash flows from financing activities:
  Payments on notes payable                                               (614)         (605)
  Payments on capital lease obligations                                   (225)         (224)
  Proceeds from employee stock plans                                       944           675
  Net proceeds from issuance of common stock through IPO                    --        83,348
                                                                      --------      --------
       Cash provided by financing activities                               105        83,194
                                                                      --------      --------

Effect of exchange rate on cash and cash equivalents                         5            10
Increase (decrease) in cash and cash equivalents                        (2,750)       32,254
Cash and cash equivalents, beginning of period                          40,695        10,416
                                                                      --------      --------
       Cash and cash equivalents, end of period                       $ 37,945      $ 42,670
                                                                      ========      ========
</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, 2000 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 March 30, 2001.

The  condensed  consolidated  financial  statements  include the accounts of the
Company and its  wholly-owned  subsidiaries,  Extensity  Europe  Limited,  which
commenced  operations in September  1999,  and Extensity  Australia PTY Limited,
which  commenced  operations in February of 2001. 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.

                                       4
<PAGE>
The following table sets forth the computation of basic and diluted net loss per
share for the periods indicated (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                   Three Months Ended       Six Months Ended
                                                        June 30,                June 30,
                                                  --------------------    --------------------
                                                    2001        2000        2001        2000
                                                  --------    --------    --------    --------
<S>                                               <C>         <C>         <C>         <C>
Numerator:
  Net loss                                        $ (6,733)   $ (8,865)   $(14,232)   $(18,202)
Denominator:
  Weighted average shares                           24,422      23,629      24,309      20,735
  Weighted average unvested common shares             (687)     (1,157)       (747)     (1,195)
                                                  --------    --------    --------    --------
       Total weighted average shares                23,735      22,472      23,562      19,540
                                                  --------    --------    --------    --------
Basic and diluted net loss per share              $  (0.28)   $  (0.39)   $  (0.60)   $  (0.93)
                                                  ========    ========    ========    ========
</TABLE>

Diluted  net loss per  share  does  not  include  the  effect  of the  following
potential common shares at June 30, 2001 and 2000 (in thousands):

                                                                      June 30
                                                                   -------------
                                                                    2001    2000
                                                                   -----   -----
Shares issuable under stock options                                3,737   3,575
Shares of unvested stock subject to repurchase                       388   1,058
Shares issuable pursuant to warrants to purchase common stock         20     160
                                                                   -----   -----
                                                                   4,145   4,793
                                                                   =====   =====

The  weighted-average  exercise price of stock options outstanding was $5.75 and
$4.88  as of  June  30,  2001  and  2000,  respectively.  The  weighted  average
repurchase  price of unvested  stock was $1.64 and $1.91 as of June 30, 2001 and
2000,  respectively.  The weighted average exercise price of warrants was $14.50
and $3.30 as of June 30, 2001 and 2000, respectively.

3. Significant Customers

For the three months ended June 30, 2001, sales to three customers accounted for
21%,  13% and 12% of total  revenues.  For the three months ended June 30, 2000,
sales to two customers accounted for 17% and 14% of total revenues.  For the six
months ended June 30, 2001,  sales to one  customer  accounted  for 12% of total
revenues.  For the six  months  ended  June  30,  2000,  sales  to one  customer
accounted for 17% of total revenues.

4. Stock Option Exchange

Pursuant  to a  Tender  Offer  Statement  filed  with  the  SEC on May 4,  2001,
employees  surrendered for cancellation  1,744,400 options to purchase shares of
the Company's  common stock at exercise prices ranging from $5.44 to $38.81.  In
exchange,  the Company on June 5, 2001  granted  short-term  options to purchase
174,440  shares of the  Company's  common  stock at an  exercise  price of $8.82
covering  ten  percent  (10%) of the number of shares that were  cancelled.  The
short-term  Options  will become 100% vested six months  after the date of grant
and will expire if not  exercised  before March 5, 2002 or earlier if employment
is terminated.

                                       5
<PAGE>
On a date between  December 6, 2001 and December 12, 2001,  subject to continued
employment,  the Company will grant a new option ("New  Option") equal to ninety
percent (90%) of the number of shares that were cancelled. The exercise price of
the New Option will be equal to the closing price of the Company's  Common Stock
on the date of grant.

The grant of  short-term  options will result in  compensation  charges over the
nine-month life of the options as prescribed under the provisions of FIN No. 44,
"Accounting  for  Certain  Transactions   Involving  Stock  Compensation".   The
compensation  expense  associated  with such options  amounted to  approximately
$37,000 during the quarter ended June 30, 2001.

5. Comprehensive Loss

The components of comprehensive loss are as follows:

<TABLE>
<CAPTION>
                                              Three Months Ended     Six Months Ended
                                                    June 30,             June 30,
                                               -----------------    ------------------
                                                2001       2000       2001       2000
                                               ------     ------    -------    -------
<S>                                            <C>        <C>       <C>        <C>
Net Loss                                      $(6,733)    $(8,865)  $(14,232)  $(18,202)
Foreign currency translation adjustment             3          16          3         19
                                              -------     -------   --------   --------
Total comprehensive loss                       (6,730)     (8,849)   (14,229)   (18,183)
                                              =======     =======   ========   ========
</TABLE>

6. Recent Accounting Pronouncements

In July of 2001 the Financial  Accounting Standards Board (FASB) issued SFAS No.
141 "Business  Combinations"  and SFAS No. 142  "Goodwill  and Other  Intangible
Assets".  SFAS No. 141 requires business  combinations  initiated after June 30,
2001 to be accounted for using the purchase  method of accounting,  and broadens
the criteria for recording intangible assets separately from goodwill.  Recorded
goodwill and  intangibles  will be evaluated  against these new criteria and may
result in certain  intangibles  being subsumed into goodwill,  or alternatively,
amounts  initially  recorded  as  goodwill  may  be  separately  identified  and
recognized   apart  from   goodwill.   SFAS  No.  142  requires  the  use  of  a
non-amortization   approach  to  account  for  purchased  goodwill  and  certain
intangibles. Under a non-amortization approach, goodwill and certain intangibles
will not be amortized into results of operations,  but instead would be reviewed
for impairment and written down and charged to results of operations only in the
periods in which the recorded value of goodwill and certain  intangibles is more
than its fair value.  The provisions of each statement,  which apply to goodwill
and intangible  assets  acquired prior to June 30, 2001,  will be adopted by the
Company on January 1, 2002.  We do not expect the  adoption of these  accounting
standards to result in a significant impact on our financial position or results
of operations for any historic transactions.

7. Subsequent Event

In July of 2001,  the  Company  took  steps to  reduce  expenses which  included
reducing  full-time  equivalent  employees at the Company by  approximately  23%
through mandatory staff  reductions.  The Company is also evaluating a reduction
in its lease  commitments  for  office  space, as well as write downs of certain
assets.  The Company expects to incur a related pretax charge in the range of $3
- $5 million in the third quarter of 2001.

                                       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  Statements,   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  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 dollar amounts of our contracts  depend on the
number  of users  and  applications  being  used and the  professional  services
requested.

     Our  software  products   typically  require   significant   customization,
installation  and other  services.  Prior to the release in July 1999 of Version
4.0 of our application suite, it was difficult to generate dependable  estimates
of the costs  necessary  to  complete  product  implementations.  Therefore,  we
accounted  for our  software  licenses  and  implementation  revenues  using the
completed  contract  method  of  contract   accounting  as  required  under  the
provisions  of  SOP  97-2,   "Software  Revenue   Recognition,"  and  SOP  81-1,
"Accounting for  Performance of  Construction-Type  and Certain  Production-Type
Contracts."

     Following the release of Version 4.0 in July 1999, we were able to generate
dependable estimates of the costs necessary to complete product implementations.
Consequently, we accounted for our software licenses and implementation revenues
using  the  percentage-of-completion  method  of  contract  accounting.  In  the
intervening  year, we released several new versions of our software  culminating
in  our  most  recent  release  of  version  5.6  which further  simplified  the
implementation   process.  We  have  also  formed   relationships  with  several
implementation   partners   who  have   performed   a   significant   number  of
implementations over the last year. As a result, implementations of our software
have  been  further  streamlined  and  are no  longer  deemed  essential  to the
functionality  of the software.  Further,  an increasing trend of software sales
without accompanying services have allowed us to further develop vendor specific
objective  evidence for the fair value of our software licenses.  Therefore,  in
the third quarter of 2001,  we will  recognize  license  revenue on shipment and
recognize implementation revenue as services are performed.

                                       7
<PAGE>
     We defer amounts billed for  maintenance and recognize such amounts ratably
over the maintenance period.

     In the second  quarter of 2001,  JD  Edwards,  a  reseller  of  Extensity's
products,  and the Company jointly decided to change their  relationship  from a
reseller  to  a  referral  arrangement.  This  event  resulted  in  the  Company
accelerating  recognition  of revenue of  approximately  $1.1 million in prepaid
royalties  that would have been  recognized in the third and fourth  quarters of
2001.

     Payments  received  in advance  of  revenue  recognition  are  recorded  as
deferred  revenues.  All of our customers  enter into one-year  maintenance  and
support  contracts when they purchase their initial  Extensity  applications and
have the option to purchase additional contracts after completion of the initial
contract period.  Although we do not grant any rights to our customers to return
products,  we do provide warranties that our products will function according to
written documentation.

     We promote and sell our  software  products  through our direct sales force
and  through  indirect   channels,   including  Elite   Information   Group  and
Item4you.com,  a joint venture  between  Terra  Network and Meta4.  We also have
marketing referral  arrangements in place with Cisco Systems,  JD Edwards,  IBM,
Commerce One, WebEx, Digital Think,  EventSource,  Visa,  GetThere.com,  Pro Act
Technologies and Elcom.

     In  February  of 2001,  we  opened a sales  office  in  Sydney,  Australia.
However,  in July of 2001,  after close evaluation of our business model and the
current  economic  climate,  we  decided  to close the  Sydney  office.  We have
continued to support our European operations in advance of anticipated revenues,
though  we have  also  significantly  reduced  costs in this  geography.  We do,
however, expect our costs for establishing international sales to exceed related
revenues as we invest in international operations. For the six months ended June
30, 2001, revenues derived from our international sales represented 12.2% of the
total revenues.

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 OF CONDENSED CONSOLIDATED FINANCIAL DATA
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED           SIX MONTHS ENDED
                                                           JUNE 30,                    JUNE 30,
                                                    ---------------------       ---------------------
                                                     2001          2000          2001          2000
                                                    -------       -------       -------       -------
<S>                                                 <C>           <C>           <C>           <C>
Revenues:
  License                                           $ 5,651       $ 3,034       $11,673       $ 5,259
  Service and maintenance                             3,480         2,299         7,260         3,797
                                                    -------       -------       -------       -------
       Total revenues                               $ 9,131       $ 5,333       $18,933       $ 9,056
                                                    =======       =======       =======       =======
Cost of revenues:(*)
  License                                           $   263       $   131       $   708       $   215
  Service and maintenance                             3,435         3,596         7,459         6,446
                                                    -------       -------       -------       -------
       Total cost of revenues                       $ 3,698       $ 3,727       $ 8,167       $ 6,661
                                                    =======       =======       =======       =======
Operating expenses:(*)
  Sales and marketing                               $ 7,025       $ 6,419       $14,845       $12,044
  Research and development                            3,934         3,169         7,669         5,991
  General and administrative                          1,839         1,151         3,519         2,322
  Non-recurring general and administrative               --            --           377            --

(*)  Amounts exclude the  amortization  of non-cash stock based  compensation as
     follows:
Cost of revenues:
  Service and maintenance                           $     9       $   185       $    59       $   424
Operating expenses:
  Sales and marketing                                    18           393           112           901
  Research and development                               11           243            68           557
  General and administrative                             17           336           109           769
                                                    -------       -------       -------       -------
                                                    $    55       $ 1,157       $   348       $ 2,651
                                                    =======       =======       =======       =======
</TABLE>

REVENUES

Total  revenues  increased  to $9.1  million for the three months ended June 30,
2001 from $5.3 million for the three months ended June 30, 2000,  an increase of
71%. Total revenues increased to $18.9 million for the six months ended June 30,
2001 from $9.0 million for the six months  ended June 30,  2000,  an increase of
109%.  For the  three  months  ended  June 30,  2001,  sales to three  customers
accounted  for 21%,  13% and 12% of total  revenues.  For the three months ended
June  30,  2000,  sales  to two  customers  accounted  for 17% and 14% of  total
revenues.  For the six  months  ended  June  30,  2001,  sales  to one  customer
accounted  for 12% of total  revenues.  For the six months  ended June 30, 2000,
sales to one customer accounted for 17% of total revenues.

     License  Revenues.  Our license revenues  increased to $5.7 million for the
three  months  ended June 30, 2001 from $3.0  million for the three months ended
June 30,  2000,  an increase of 86%.  Our license  revenues  increased  to $11.7
million  for the six months  ended June 30,  2001 from $5.3  million for the six
months ended June 30, 2000,  an increase of 122%. In the three months ended June
30, 2001, $1.9 million of license revenues were recognized through the Company's
relationship  with a reseller.  The Company and the reseller  jointly decided to
change  their  relationship  from a  reseller  to a  referral  arrangement.  The
increase in the six months ended June 30, 2001, was  attributable to our growing
customer

                                       9
<PAGE>
base and an increase in the revenue  attributable to our indirect sales channels
and to a lesser extent,  an increase in the average size of the sales  contracts
entered into by our customers.

     Service and  Maintenance  Revenues.  Our service and  maintenance  revenues
increased  to $3.5  million for the three  months  ended June 30, 2001 from $2.3
million for the three  months  ended June 30,  2000,  an  increase  of 51%.  Our
service and  maintenance  revenues  increased to $7.3 million for the six months
ended  June 30,  2001 from  $3.8 for the six  months  ended  June 30,  2000,  an
increase of 91%. This increase was attributable to our growing customer base, an
increase in professional  services  revenues  recognized on a time and materials
basis,  an  increase  in  revenues  recognized  from work  performed  on partner
integration,  and to a lesser  extent,  an increase  in the average  size of the
sales contracts that customers have signed.

COST OF REVENUES

     Total cost of revenues was $3.7 million for the three months ended June 30,
2001 and June 30, 2000. Total cost of revenues increased to $8.2 million for the
six months  ended June 30, 2001 from $6.7  million for the six months ended June
30, 2000, an increase of 23%.

     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.  This cost  increased  to
$263,000 for the three  months  ended June 30, 2001 from  $131,000 for the three
months ended June 30, 2000, due primarily to increased sales activity.  The cost
increased to $708,000  for the six months ended June 30, 2001 from  $215,000 for
the six months ended June 30, 2001 due primarily to increased sales activity. As
a percentage of license revenues,  cost of license revenues  increased to 5% for
the three months ended June 30, 2001 from 4% for the three months ended June 30,
2000. As a percentage of license revenues,  cost of license revenues increase to
6% for the six months  ended June 30, 2001 from 4% for the six months ended June
30, 2000.  Cost of revenues as a percentage of license revenue may increase over
the  current  level  in the  future  as we  incorporate  additional  third-party
products into our offerings.

     Cost of Service and Maintenance  Revenues.  Cost of service and maintenance
revenues  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. This cost decreased to $3.4 million for the three months ended
June 30, 2001 from $3.6  million for the three  months  ended June 30,  2000,  a
decrease of 4%. This cost  increased  to $7.5  million for the six months  ended
June 30,  2001 from $6.4  million  for the six months  ended June 30,  2001,  an
increase of 16%. As a percentage of service  revenues,  cost of service revenues
decreased  to 99% for the three  months  ended  June 30,  2001 from 156% for the
three months ended June 30, 2000. As a percentage of service  revenues,  cost of
service  revenues  decreased to 103% for the six months ended June 30, 2001 from
170% for the six months ended June 30, 2000.  Approximately  56% of the increase
for the six months  ended June 30, 2001 in the cost of service  revenues was due
to our hiring of additional service and maintenance personnel.  These additional
costs were  necessary to support our  expanding  customer  base.  Total costs of
service and  maintenance  revenues for the three months ended June 30, 2001 were
approximately  equal to total service revenues for the same period.  Total costs
exceeded our service and  maintenance  revenues for the six months  period ended
June 30, 2001 as we have built our  consulting  and customer  support  groups in
advance of growing contract volume. We are seeking to further reduce our cost of
service revenues as a percentage of total revenue and are also seeking to engage
third  parties  to provide a  substantial  portion  of  services  related to our
applications.

OPERATING EXPENSES

     Sales and  Marketing.  Sales and marketing  expenses  consist  primarily of
compensation  and related  costs for sales and  marketing  personnel,  including
commissions and marketing program costs.  Sales and marketing expenses increased
to $7.0  million for the three  months ended June 30, 2001 from $6.4 million for
the three  months ended June 30,  2000,  an increase of 9%. Sales and  marketing
expenses  increased to $14.8 million for the six months ended June 30, 2001 from
$12.0  million for the six months ended June 30, 2000,  an increase of 23%. As a
percentage of total revenues,  sales and marketing expenses decreased to 77% for
the three  months  ended June 30, 2001 from 120% for the three months ended June
30, 2000.  As a  percentage  of total  revenues,  sales and  marketing  expenses
decreased  to 78% for the six months  ended June 30,  2001 from 133% for the six
months ended June 30, 2000.  The  increase in sales and  marketing  expenses for
                                       10
<PAGE>
both periods was attributable to increased  compensation,  commissions and other
related  costs  associated  with  hiring   additional   sales   representatives,
management and marketing  personnel.  We expect sales and marketing  expenses to
decrease in the near term. Sales and marketing expenses may increase in the long
term as we expand our  domestic and  international  sales force and increase our
marketing efforts to capitalize on the growth of our market.

     Research  and  Development.   Research  and  development  expenses  consist
primarily of compensation and related  personnel costs, and fees associated with
contractors. Research and development expenses increased to $3.9 million for the
three  months  ended June 30, 2001 from $3.2  million for the three months ended
June 30, 2000, an increase of 24%.  Research and development  costs increased to
$7.7  million for the six months  ended June 30, 2001 from $6.0  million for the
six months  ended June 30, 2000,  an increase of 28%. As a  percentage  of total
revenues,  research  and  development  expenses  decreased  to 43% for the three
months ended June 30, 2001 from 59% for the three months ended June 30, 2000. As
a percentage of total revenues,  research and development  expenses decreased to
41% for the six  months  ended June 30,  2001 from 66% for the six months  ended
June 30, 2000. Approximately 60% of the cost increase for the three months ended
June 30,  2001  and six  months  ended  June 30,  2001 was  attributable  to the
addition of personnel and costs related to contractors, and approximately 40% of
the  increase  was  attributable  to expenses  associated  with  localizing  our
products.   These  increases   resulted  from  our  continuing  efforts  to  add
enhancements  to our  existing  software  applications  and to develop  software
applications  that incorporate new  functionality  into our integrated suite. We
expect research and development  expenses to decrease in the near term. Research
and  development  expenses may  increase in the long term as we make  additional
investments in our technology and products.

     General and  Administrative.  General and  administrative  expenses consist
primarily  of  compensation  and related  costs for our  executive,  finance and
administrative personnel and other related expenses.  General and administrative
expenses increased to $1.8 million for the three months ended June 30, 2001 from
$1.2  million  for the three  months  ended June 30,  2000,  an increase of 60%.
General  and  administrative  expenses,   excluding  the  non-recurring  charge,
increased  to $3.5  million  for the six months  ended  June 30,  2001 from $2.3
million for the six months ended June 30, 2000,  an increase of 52%. For the six
months ended June 30, 2001  non-recurring  general and  administrative  expenses
were  $377,000.  These  expenses  were  incurred in  connection  with  exploring
potential merger and acquisition transactions. The entire charge was expensed in
the three months ended March 31, 2001 as these discussions were terminated. As a
percentage of total revenues,  general and administrative  expenses decreased to
20% for the three months ended June 30, 2001 from 22% for the three months ended
June 30, 2000. As a percentage  of total  revenues,  general and  administrative
expenses,  excluding  the  non-recurring  charge,  decreased  to 19% for the six
months  ended  June 30,  2001 from 26% for the six months  ended June 30,  2001.
Approximately 40% of the increase in general and administrative  expenses in the
three-month  period  ended June 30, 2001 and the six month period ended June 30,
2001 was  attributable  to hiring  additional  financial,  human  resources  and
internal information technology personnel.  We expect general and administrative
expenses to decrease in the near term. General and  administrative  expenses may
increase in the long term as we expand our operations.

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
will include deferred  compensation expense at least through 2003. We recognized
$55,000  of this  expense  for the three  months  ended  June 30,  2001 and $1.2
million for the three months ended June 30, 2000. We recognized $348,000 for the
six months  ended June 30, 2001 and $2.7  million for the six months  ended June
30, 2000.

INTEREST INCOME, NET

     Interest income,  net was $687,000 for the three months ended June 30, 2001
and $1.4 million for the three months ended June 30, 2000.  Interest income, net
was $1.8 million for the six months ended June 30, 2001 and $2.4 million for the
six months ended June 30, 2000. Interest income is attributed to interest earned
on the proceeds from the Company's IPO. Interest income will fluctuate depending
upon the  overall  interest  rate  environment  and our  cash,  cash  equivalent
balances and short-term investments.

                                       11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     Since  inception,  we have financed our  operations  and funded our capital
expenditures  through funds raised from our initial public offering completed in
January 2000 and the private  sale of equity  securities,  supplemented  by loan
facilities  and equipment  leases.  Aggregate  net proceeds from private  equity
financings  totaled $42.3 million and proceeds from the Company's IPO were $83.3
million,  net of offering costs of  approximately  $2.2 million.  As of June 30,
2001 we had $59.9 million in cash, cash  equivalents and short-term  investments
and $50.6 million in working capital.

     Net cash used in operating  activities was $18.2 million for the six months
ended June 30, 2001 and $11.0  million for the six months  ended June 30,  2000.
For the six months ended June 30, 2001,  cash used in operating  activities  was
primarily attributable to a net loss of $14.2 million, adjusted for depreciation
and amortization of $1.4 million and amortization of deferred stock compensation
and other of  $433,000,  a decrease  in deferred  revenue of $7.1  million and a
decrease in accrued liabilities of $1.2 million offset by a decrease in accounts
receivable of $3.0 million. For the six months ended June 30, 2000, cash used in
operating  activities  was primarily  attributed to a net loss of $18.2 million,
adjusted for the amortization of deferred stock compensation of $2.7 million and
offset by an  increase  in  accounts  payable of $2.1  million,  an  increase in
accrued  liabilities of $2.3 million and an increase in deferred revenue of $3.0
million

     Net cash  provided by investing  activities  was $15.3  million for the six
months ended June 30, 2001 and net cash used in investing  activities  was $40.0
million for the six months  ended June 30,  2000.  For the six months ended June
30, 2001,  investing  activities consisted primarily of a decrease in short-term
investments of $17.0 million offset by capital expenditures of $1.7 million. For
the six months ended June 30, 2000,  investing activities consisted primarily of
an increase in short-term investments and capital expenditures.

     Net cash provided by financing  activities  was $105,000 for the six months
ended  June 30,  2001  due to  payments  on  notes  payable  and  capital  lease
obligations  of  $839,000,  offset by  proceeds  from  employee  stock  plans of
$944,000.  Net cash provided by financing  activities  was $83.2 million for the
six months  ended June 30,  2000,  primarily  due to the net  proceeds  of $83.3
million from the Company's IPO.

     Presently,  we anticipate that our existing capital resources will meet our
operating and investing needs for at least the next 12 months.  After that time,
we cannot be certain that  additional  funding  will be available on  acceptable
terms or at all.  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.

                                  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,  together with
the risks and other information contained in the Company's annual filing on Form
10-K (File No.000-28897) and its periodic reports filed pursuant to the Exchange
Act 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

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

                                       12
<PAGE>
encountered  by  companies in their early  stages of  development,  particularly
companies  in  new  and  rapidly   evolving  markets  such  as  the  market  for
Internet-based 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 sales channels through geographic expansion and the development
          of indirect  channels  such as  relationships  with OEM  customers and
          distributors;

     -    increase awareness of our brand; and

     -    maintain  our  current  and  develop  new  third-party  relationships,
          including but not limited to third-party implementers.

     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
FOR THE CURRENT FISCAL YEAR.

     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 June 30, 2001, we
had an accumulated  deficit of $88.7 million. We expect to continue to invest in
research  and  development  to  enhance  current  products  and  develop  future
products. We also plan to continue to grow our sales force and to spend funds in
marketing to promote our company and our products.  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
through the current fiscal year.

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 expend  significant  sums in all areas of our  business,
particularly in our sales and marketing  operations,  in order to promote future
growth.  Because the expenses  associated  with these  activities are relatively
fixed in the short-term,  we may be unable to adjust spending  quickly enough to
offset any  unexpected  shortfall  in revenue  growth or any decrease in revenue
levels.  As a result,  we expect our quarterly  operating  results to fluctuate.
Moreover,  because  we  use  the  percentage-of-completion  method  of  contract
accounting on all new contracts with a service  component,  if our  professional
service  organization  is  unable  to  implement  our  applications  for  use by
customers  within our  anticipated  time frames,  our recognition of revenue for
those  customers could be deferred,  which could cause our quarterly  revenue 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

                                       13
<PAGE>
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; and

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

     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.

OUR  BUSINESS  WILL  SUFFER  IF  WE  DO  NOT  SIGNIFICANTLY   EXPAND  OUR  SALES
CAPABILITIES.

     We sell our  workforce  optimization  applications  primarily  through  our
direct sales force. We must significantly  expand our direct sales operations to
increase our revenues.  We cannot be certain that we will be successful in these
efforts.  Our products and services require  sophisticated sales efforts and our
ability to increase  our direct  sales  operation  will depend on our ability to
recruit,  train and retain top sales  people  with  effective  sales  skills and
advanced technical knowledge.  Competition for qualified personnel is intense in
our industry.  Moreover,  new sales personnel  require training and take time to
achieve full  productivity.  If we are unable to hire or retain  qualified sales
personnel,  if newly hired personnel fail to develop the necessary skills, or if
they reach  productivity more slowly than anticipated,  we may be unable to grow
our revenues as rapidly as planned, if at all, and our business could be harmed.

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  workforce  optimization  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,   Captura   Software,   Concur
Technologies, IBM, PeopleSoft Corporation and Oracle Corporation. As a result of
the large market opportunity for workforce  optimization  applications,  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.

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, AND OUR PRODUCT SALES WILL SUFFER.

                                       14
<PAGE>
     To  successfully  implement  our  business  strategy,  we have  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  significant  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  workforce  optimization  software  products and related  services have
accounted  for 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
workforce optimization 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  workforce
optimization  applications  or that any new  products  or  services  that we may
develop or acquire will achieve market acceptance.

EVOLVING TECHNOLOGICAL DEVELOPMENTS AND EMERGING INDUSTRY STANDARDS WILL REQUIRE
US TO ENHANCE THE FUNCTIONALITY OF OUR WORKFORCE OPTIMIZATION APPLICATIONS,  AND
ANY INABILITY TO ENHANCE FUNCTIONALITY COULD CAUSE OUR SALES TO DECLINE.

     Because  the market  for our  products  is  emerging  and  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, the market for
Java-based  software  is  still  relatively  new  and  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.

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 REVENUES OR OPERATING RESULTS.

     We licensed our first workforce optimization  application in March 1998 and
have fully  implemented our  applications for only a limited number of customers
to date due to the time required to implement. Moreover, as of June 30, 2001, we
had not completed an implementation  of our Extensity  Purchase Reqs application
for any  customer.  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 revenues and operating results in any period.

                                       15
<PAGE>
IF WE FAIL TO MAINTAIN  POSITIVE  MARGINS ON SERVICE REVENUES IN THE FORESEEABLE
FUTURE, OUR RESULTS OF OPERATIONS COULD SUFFER.

     For the  three  months  ended  June 30,  2001,  our  service  margins  were
positive.  While we anticipate  that our margins will continue to be positive in
the current year, we cannot guarantee that they will remain positive. Failure to
achieve positive margins on service revenues could 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."

WE HAVE LIMITED EXPERIENCE WITH LARGE-SCALE IMPLEMENTATIONS, WHICH ARE IMPORTANT
TO OUR FUTURE SUCCESS.

     We have limited  experience in  implementing  our  applications  on a large
scale. As of June 30, 2001, our largest  implementation  included  approximately
13,400  employee  users.  We  believe  that the  ability of large  customers  to
roll-out  our products  across large  numbers of users is critical to our future
success. If our customers cannot successfully deploy our applications on a large
scale, or if they determine for any reason that our products cannot  accommodate
large-scale deployments, our business could be harmed.

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 workforce optimization  applications by new
customers.  To date, we have  established  relationships  with a few 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.

CUSTOMER  SATISFACTION AND DEMAND FOR OUR PRODUCTS WILL DEPEND ON OUR ABILITY TO
EXPAND OUR PROFESSIONAL SERVICES ORGANIZATION.

     We believe  that  growth in our  product  sales  depends on our  ability to
provide  our  customers  with  professional  services  to assist  with  support,
training,  consulting and initial  implementation and deployment of our products
and to educate third-party systems integrators in the use of our products.  As a
result, we may need to increase the number of professional services personnel to
meet these needs. New professional  services personnel will require training and
take time to reach full productivity.  We may not be able to attract or retain a
sufficient  number  of  highly  qualified   professional   services   personnel.
Competition for qualified  professional services personnel is intense due to the
limited  number of people who have the requisite  knowledge and skills.  To meet
our customers'  needs for  professional  services,  we may also need to use more
costly  third-party  consultants  to supplement  our own  professional  services
group. In addition,  we could  experience  delays in recognizing  revenue if our
professional  services  group  fails  to  complete  implementations  in a timely
manner.

                                       16
<PAGE>

OUR   EXPECTATIONS   OF  FUTURE   GROWTH   DEPEND  ON  OUR   ABILITY  TO  EXPAND
INTERNATIONALLY, 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 our  products is a complex  process  and often  requires
assistance  from third  parties.  We have limited  experience in localizing  our
products  and 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 work with third  parties to develop  localized  products.  To date, we
have localized our product for the markets where English  language is the native
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  and  established  a  relationship  with  an  international
reseller.  In 2000, we expanded our European Operations through opening a second
office  in  Frankfurt,  Germany.  As of June  30,  2001,  we had a  total  of 30
employees  in our  international  operations.  For the six months ended June 30,
2001,  we derived 12% 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.

WE ARE GROWING  RAPIDLY,  AND OUR  FAILURE TO MANAGE THIS GROWTH  COULD HARM OUR
BUSINESS.

     We have experienced a period of significant growth. Our full-time employees
increased  from 83 at December  31,  1998 to 175 at December  31, 1999 to 289 at
December 31, 2000 to 297 at June 30, 2001.  Our revenues have grown 265% between
fiscal 1999 and 2000.  We expect that any future  growth  would cause  increased
strains on our  resources.  As part of this growth,  we will have to continually
enhance our operational and financial systems,  procedures and controls; expand,
train and manage our employee base; and maintain  close  coordination  among our

                                       17
<PAGE>
technical,  accounting, finance, marketing and sales staffs. As discussed in the
Notes to  Consolidated  Financial  Statements in July of 2001,  the Company took
steps to reduce expenses which included reducing full time equivalent  employees
at the Company by approximately 23% through staff  reductions.  If we are unable
to manage our growth  effectively,  our  business,  results  of  operations  and
financial condition could be adversely affected.

WE MAY BE UNABLE  TO  ATTRACT  AND  RETAIN  HIGHLY  SKILLED  EMPLOYEES  THAT ARE
NECESSARY FOR THE SUCCESS OF OUR GROWTH PLAN.

     In  addition  to our  dependence  on our  sales and  professional  services
personnel as previously discussed, our ability to execute our growth 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,  particularly  Robert A. Spinner,  our Chief Executive Officer. As we
continue to grow, we will need to hire  additional  personnel in all operational
areas. Competition for personnel in our industry is 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.

OUR  SALES  CYCLES  ARE LONG AND  UNPREDICTABLE,  WHICH  MAKES  PERIOD-TO-PERIOD
REVENUES DIFFICULT TO PREDICT.

     Because the market for our  workforce  optimization  software  products and
related services is new, we experience long and unpredictable  sales cycles. The
sales cycle for our workforce  optimization  applications  typically ranges from
two to nine  months.  In the early  stages of this market,  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 the time of individual
orders is uncertain, our period-to-period revenues are difficult to predict.

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
release,  customer  dissatisfaction  and  potentially  lost revenues  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 DEPENDANT 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 and synchronization  software from AETHER Systems.
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

                                       18
<PAGE>
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, 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.
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.

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.

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.

     Provisions of our certificate of  incorporation,  our bylaws,  Delaware law
and the  employment  agreements  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.

                                       19
<PAGE>
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 Quarterly  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 SOLUTIONS.

     The market for our workforce  optimization  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 workforce optimization  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 workforce  optimization
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.

CUSTOMERS  MAY  NOT  ACCEPT  THE  INTERNET  AS  A  MEANS  TO  ACCESS  ENTERPRISE
APPLICATIONS, AND THIS WOULD LIKELY CAUSE OUR BUSINESS MODEL TO BE UNSUCCESSFUL.

     To date,  enterprises have generally managed operational  functions through
internal computer or manual systems rather than over the Internet.  Our business
model assumes that enterprises and their employees will  increasingly  adopt the
Internet  or  corporate  intranets  as a means of  managing  important  business
functions.  This  business  model is not yet  proven,  and if we are  unable  to
successfully  implement  our business  model,  our business  will be  materially
adversely affected.

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  especially  this past year,  and the market  prices of  technology
companies generally, and Internet-related software companies particularly,  have
been  extremely   volatile.   Recent  initial  public  offerings  by  technology
companies,  including ours, have been accompanied by exceptional share price and
trading volume changes.  Technology companies that have been publicly traded for
a long period of time have also experienced extreme fluctuations in the price of
their common stock. 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 the company.  Such litigation could
result  in  substantial  costs  and  diversion  of  management's  attention  and
resources.

SECURITY  RISKS AND CONCERNS  MAY DETER THE USE OF THE  INTERNET FOR  CONDUCTING
ELECTRONIC COMMERCE.

     A significant  barrier to  electronic  commerce and  communications  is the
secure transmission of confidential  information over public networks.  Advances
in computer capabilities,  new discoveries in the field of cryptography or other
events or  developments  could result in compromises or breaches of our security
systems or those of other websites that protect proprietary information.  If any
well-publicized  compromises of security were to occur, it could have the effect
of   substantially   reducing   the  use  of  the   Internet  for  commerce  and
communications.   Anyone   who   circumvents   our   security   measures   could
misappropriate proprietary information or cause interruptions in our services or
operations. The Internet is a public network, and data is sent over this network
from many  sources.  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.  We may be  required to expend

                                       20
<PAGE>
significant  capital  and other  resources  to  protect  against  the  threat of
security  breaches or to alleviate  problems  caused by breaches.  To the extent
that our  activities  may involve the storage and  transmission  of  proprietary
information, such as credit card numbers, security breaches could expose us to a
risk of loss or litigation and possible liability.  Our security measures may be
inadequate to prevent security breaches,  and our business would be harmed if we
do not prevent them.

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.

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 June 30, 2001.

                           PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

The Company is not  involved in any legal  proceedings  that are material to its
business or financial condition.

ITEM 2. Changes in Securities and Use of Proceeds

a.   Not applicable

b.   Not applicable

c.   Not applicable

d.   Use of proceeds from sale of Registered Securities.

On January 27,  2000,  the SEC declared  effective  the  Company's  Registration
Statement on Form S-1/A.  Pursuant to this Registration  Statement,  the Company
completed an initial  public  offering of  4,600,000  shares of its common stock
(including  600,000  shares sold  pursuant to the exercise of the  Underwriters'
over-allotment  option) at an initial public  offering price of $20.00 per share
("the Offering").  Proceeds to the Company, after deduction of the underwriters'
discount and commission,  from the Offering totaled approximately $83.3 million,
net of offering costs of approximately $2.2 million.

                                       21
<PAGE>
To date we have used  $76.7  million  to fund  working  capital.  All  remaining
proceeds are  invested in cash,  cash  equivalents,  or  short-term  investments
consisting   of  highly   liquid   money   market   funds,   commercial   paper,
government/federal  notes and bonds,  certificates of deposit,  and auction rate
preferred  stock. The use of these proceeds does not represent a material change
in the use of proceeds described in the prospectus.

Upon  completion of the Offering,  the Company's  preferred  stock was converted
into 14,594,549  shares of common stock. Upon conversion of the preferred stock,
all rights to accrued and unpaid dividends were terminated.

ITEM 3. Defaults Upon Senior Securities

None.

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

The  Company's  annual  meeting  of  stockholders  was held on June 1, 2001 (the
"Annual Meeting"). The following matters were voted upon at the Annual Meeting:

Proposal I - To elect  directors to hold office until the 2002 Annual Meeting of
Stockholders and until their successors are elected.

                                          FOR           WITHHELD AUTHORITY
                                       ----------       ------------------
Robert A. Spinner                      18,047,223            757,725
Sharam I. Sasson                       18,734,880             70,068
Christopher D. Brennan                 18,734,884             70,064
John R. Hummer                         18,734,837             70,111
David A. Reed                          18,734,884             70,064
Ted E. Schlein                         18,734,880             70,068
Maynard G. Webb                        18,734,880             70,068

Proposal II - To ratify selection of  PricewaterhouseCoopers  LLP as independent
auditors of the Company for its fiscal year ending December 31, 2001.

               FOR                   AGAINST                 ABSTAIN
            ----------               -------                 -------
            18,778,951                15,992                  10,005

ITEM 5. Other Information

None.

ITEM 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

None

(b)  Reports on Form 8-K:

None

                                       22
<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.


August 14, 2001                         EXTENSITY, INC.


                                    By /s/ Kenneth R. Hahn
                                           Chief Financial Officer (Principle
                                           Financial and Accounting Officer)

                                       23