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

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

                                   FORM 10-K
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
   OF 1934

  For the fiscal year ended April 30, 2001

                                       OR

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

  For the transition period from      to

                        Commission file number 000-27071

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

                           AGILE SOFTWARE CORPORATION
             (Exact name of registrant as specified in its charter)

             One Almaden Boulevard, San Jose, California 95113-2253
                                 (408) 975-3900
         (Address and telephone number of principal executive offices)

                Delaware                               77-0397905
    (State or other jurisdiction of                 (I.R.S. Employer
     incorporation or organization)               Identification No.)

          Securities registered pursuant to Section 12(b) of the Act:
                                      None

          Securities registered pursuant to Section 12(g) of the Act:
                         Common Stock, $.001 par value
                             (Title of each class)

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

   Indicate by check mark whether the Company (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
Company was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]  No [_]

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

   The aggregate market value of Agile Software Corporation Common stock, $.001
par value, held by non-affiliates as of June 30, 2001 was $636,904,136 based
upon the last sales price reported for such date on the Nasdaq National Market
System. For purposes of this disclosure, shares of common stock held by persons
who held more than 5% of the outstanding shares of common stock and shares held
by officers and directors of the registrant, have been excluded in that such
persons may be deemed to be affiliates. The determination of affiliate status
is not necessarily a conclusive determination for other purposes.

   Number of shares of Common Stock of Agile Software Corporation issued and
outstanding as of June 30, 2001 was 47,795,687

                      DOCUMENTS INCORPORATED BY REFERENCE

   The registrant has incorporated by reference into Part III of this Form 10-K
portions of its proxy statement for the registrant's Annual Meeting of
Stockholders to be held September 26, 2001.

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<PAGE>

                           AGILE SOFTWARE CORPORATION
                                   FORM 10-K
                                 APRIL 30, 2001

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----

                                     PART I

 <C>      <S>                                                             <C>
 ITEM 1.  BUSINESS......................................................    1
 ITEM 2.  PROPERTIES....................................................   26
 ITEM 3.  LEGAL PROCEEDINGS.............................................   26
 ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........   26

                                    PART II

 ITEM 5.  MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
           MATTERS......................................................   26
 ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA..........................   28
 ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS....................................   30
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....   39
 ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................   41
 ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
           AND FINANCIAL DISCLOSURE.....................................   63

                                    PART III

 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............   63
 ITEM 11. EXECUTIVE COMPENSATION........................................   63
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT...................................................   63
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................   63

                                    PART IV

 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
           FORM 8-K.....................................................   64
</TABLE>

                                       i
<PAGE>

                                     PART I

ITEM 1. BUSINESS

   This Annual Report on Form 10-K contains forward-looking statements (within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended). These
statements involve known and unknown risks, uncertainties, and other factors
that may cause our or our industry's actual results to differ materially from
those implied by the forward-looking statements. We use words such as "may,"
"will," "should," "expects," "estimates," "predicts," "potential," "strategy,"
"believes," "anticipates," "plans" and "intends" and similar expressions to
identify these forward looking statements. We have based these statements on
our current expectations and projections about future events. You should not
place undue reliance on these forward-looking statements, which apply only as
of the date of this Annual Report. Our actual results could differ materially
from those anticipated in these forward-looking statements for many reasons
including those discussed in "Risk Factors" and elsewhere in this Annual
Report. Agile Software Corporation, incorporated on March 13, 1995 under the
laws of California and reincorporated on June 22, 1999 under the laws of
Delaware, is hereinafter sometimes referred to as "the Registrant," "the
Company," "Agile," "We," and "Us."

Overview

   We develop and market collaborative manufacturing commerce solutions that
speed the "build" and "buy" process across the virtual manufacturing network.
We believe that our products improve time to volume, customer responsiveness
and cost of goods sold. Our products manage product content and critical
communication, collaboration and commerce transactions among original equipment
manufacturers, electronic manufacturing services providers, customers and
suppliers in real-time. Our products are well suited for participants connected
in outsourced supply chains, as well as those managing multi-site engineering,
manufacturing, sales and distribution via the Internet. Since June 1996, when
we shipped our first product, we have licensed our products to more than 700
customers in the following markets: computers and peripherals, components,
consumer electronics, data networking and telecommunications equipment,
electronics manufacturing, medical equipment and semiconductor equipment. Our
current customers in these markets include, among others, Amkor, Altera, Dell
Computer, Flextronics International, GE Medical Systems, Hewlett-Packard, Jabil
Circuit, Lucent Technologies, Philips, SCI and Texas Instruments.

Industry Background

   The competitive environment for companies engaged in the manufacture and
supply of products has intensified dramatically and expanded globally in recent
years. This trend has been driven principally by productivity improvements
arising from advances in technology and growing customer expectations for
feature-rich products delivered quickly and at competitive prices. To remain
competitive, companies are adopting new strategies to address these challenges.

   Many companies are shifting from traditional manufacturing approaches, where
a manufacturer controls most phases of the manufacturing process from raw
materials to finished goods, to a manufacturing process where much or all of
the manufacturing process is outsourced to multiple companies as part of a
supply chain.

   By outsourcing their production, some companies have created supply chains
that are more efficient, dynamic and flexible than manufacturing operations
that control all phases of the manufacturing process internally. Use of the
outsourced supply chain has afforded companies the flexibility to choose top
suppliers and partners to make each link in the supply chain more competent,
innovative and productive. As companies operate on a global basis, supply
chains can span multiple continents, tying suppliers in one part of the world
with a plant in another to serve customers in a third location. The end result
is that companies can bring their products to market more efficiently while at
the same time achieving higher levels of customer satisfaction.

                                       1
<PAGE>

 Managing the Outsourced Supply Chain

   A critical aspect of managing the outsourced supply chain across multiple
suppliers is finding effective ways to store, access, and share information
within the company as well as with all supply-chain partners during each stage
of the production process. Procuring direct materials used in the production
process from a multitude of sources across the globe is also a challenging
task. Different stages of the production process generate many complex types of
data that need to be shared across the supply chain. There are many types of
data and a vast number of information flows that can occur in the production
process.

   Product Content. During the product design stage, the company must
communicate large amounts of data within the company as well as to supply-chain
partners. The company begins by designating the content of the finished product
with a list of components known as the bill of materials. The components on
this list can be divided into two classes: "buy" or "make." For the "buy"
components, also called off-the-shelf components, specifications for each part
must be determined and information must be collected and analyzed to determine
if the available components meet the required specifications. Once eligible
components have been selected, the manufacturers of the components are
incorporated into the approved-manufacturers list. For customized, or "make"
components, other data are created, including: assembly drawings, detailing
precisely how the component should be fabricated; work instructions, which
guide the manual assembly process; machine instructions, to drive automated
manufacturing and assembly equipment; art work, for processes such as printed
circuit board fabrication; schematics, for describing electronic components and
assemblies; and test instructions, which enable the suppliers and original
equipment manufacturers to test for conformity to the manufacturer's
specifications.

   Direct Materials Sourcing. Manufacturers must eliminate inefficiency in the
sourcing process by speeding the communication between buyers and suppliers,
and by performing the tedious aggregation work, such as compiling and analyzing
hundreds of responses to requests for quotations. Companies desire to remain
competitive by reducing the average quote turnaround time from weeks to hours.
Companies also want to aggregate demand for direct materials across the
enterprise, enabling them to use volume purchasing to negotiate better
procurement contracts. Requests for quotations can be sent to multiple
suppliers simultaneously, with no more effort than sending to a single
supplier, fostering a much more competitive pricing environment, helping
companies procure materials at the lowest possible cost.

   New Product Introduction. Prior to commencing volume production, the data
created during the product design stage must be communicated to each relevant
party in the supply chain. One of the complexities of the outsourced supply
chain model is that supply chain members often have multiple discrete roles,
including sourcing parts, fabrication, assembling components, testing and
delivery. In addition, the manufacture of a product such as a personal computer
can involve procurement from several hundred suppliers. Ensuring that accurate
product information is disseminated promptly and to all of the correct parties
is one of the most difficult challenges facing a company employing the
outsourced supply chain model. Further, suppliers may often discover
constraints and/or opportunities for improvements during the prototyping and
pilot production phases--this often prompts a flurry of product changes
requiring rapid collaboration among supply chain partners to avoid delays and
excessive start-up or inventory costs.

   Volume Production and Product Changes. Product specifications frequently
change even during volume production. Changes can occur due to a number of
reasons, including:

  .  changes in design in response to customer requests or market conditions;

  .  changes required to address a defect in the design or to improve the
     manufacturing process; and

  .  changes in the cost or availability of components.

   The communication of information regarding product changes is a dynamic loop
in which members of the supply chain must respond to market-dictated demands
while also reacting to information shared among supply-chain partners. It is
difficult to execute a design change through the manufacturing process
expeditiously

                                       2
<PAGE>

and effectively, while minimizing cost. A design change requires a company to
create an engineering change order; develop the specifications required by the
engineering change order; secure the necessary approvals to effect the change;
and communicating the change to the supply chain.

   This problem is especially complex for companies operating in a market where
product specifications or volume requirements may be changing continuously. For
example, the requirements of a personal computer manufacturer that builds
products to order may change continuously during each day as information
regarding orders is received from customers or its sales force.

   To address these challenges, many companies have implemented software
systems that govern supply chain management, electronic data interchange,
product data management and enterprise resource planning. However, many of
these products were not designed to interconnect multiple companies in an
outsourced supply chain, and therefore do not fully address the need for supply
chain collaboration. Electronic data interchange, a software system that
facilitates interconnection and exchange of data, is expensive to install and
maintain and therefore is viable only to large organizations that can justify
the cost. Other methods of communication and collaboration within the supply
chain, including phone, paper-based solutions such as courier or fax, or e-mail
or web page sources, are not linked in real-time and are slow, incomplete and
often inaccurate.

   As product changes become more frequent and time-to-market becomes
increasingly important, the ability to manage the manufacturing process
effectively becomes critical to a company's competitiveness. A company that can
disseminate information quickly and accurately to the appropriate supply chain
partners may be in a position to compete effectively. However, a company that
is agile and can effectively collaborate with its supply chain partners in real
time can gain competitive advantage. For example, through collaboration with
its supply chain partners, a company may learn that a component is not readily
available due to lack of supply or that a new component is available which
might substantially reduce costs or improve manufacturing efficiencies. Instead
of continuing to rely on the originally selected component, the company may
incorporate another component in the product design and notify partners before
these components are incorporated into new products. By doing so, the company
has the opportunity to increase revenues by maintaining product availability or
increase profits by taking advantage of lower cost components more quickly.

 Impact of the Internet

   Companies that have successfully implemented strategies to communicate with
their customers over the Internet now face the challenge of utilizing the
Internet and intranets to gain the same level of increased efficiencies in
their supply chain. An Internet-based software solution can offer scalability,
easier implementation, compatibility across diverse information technology
platforms and reduced incremental infrastructure investments. However, many
companies are wary of major software development projects due to their cost,
together with examples of complications encountered by enterprise application
development projects undertaken in recent years. To compete effectively,
companies must implement a solution which will allow them to interactively
communicate information related to product design, development and
manufacturing within the company and collaborate with their supply chain
partners. At the same time, companies want to implement new software systems
without burdening already over-taxed internal information technology personnel,
while avoiding costs of outside consulting and minimizing incremental
infrastructure-related expenses.

The Agile(TM) Solution

   Our collaborative manufacturing commerce solutions consist of product
content management and e-procurement products that enable manufacturers to
collaborate over the Internet with their supply chain partners about new or
changing product content, and then source and procure the required components.
Our solutions are designed for use over the Internet, reduce dependence upon
traditional methods of interaction, and enable supply chain members to link to
each other without requiring substantial investments in additional

                                       3
<PAGE>

technology infrastructure. We have also designed our products to allow for
rapid implementation by the manufacturer with limited consulting assistance and
by supply chain members with minimal technical expertise.

   We believe that our products are well-suited for participants in outsourced
supply chains connected via the Internet, as well as those managing multi-site
engineering, manufacturing and sales and distribution. The Agile solution
delivers the following benefits to companies and their supply chain partners:

   Enhanced Productivity and Response Time. With the help of our solutions,
Agile Anywhere(TM) and Agile Buyer(TM), companies can respond more rapidly to
changes in customer and supplier demands, availability of components, market
conditions and manufacturing capacities arising throughout the production
cycle. This ability to effect change even during volume production enables
Agile Anywhere and Agile Buyer users to adjust production strategies, and
produce what they can sell, rather than sell what they can produce. Agile
Anywhere and Agile Buyer also enhance the ability of companies to increase
their sales productivity by being first to market with the right product.

   More Cost-Effective Production. The Agile Anywhere and Agile Buyer solutions
are designed to help companies increase output, reduce inventory and compress
the time required to complete the production cycle. Through effective
collaboration, both time to market, design effectiveness and supply chain
efficiency can be improved. Companies can benefit by reducing design and
production errors due to miscommunication within the supply chain, and can
decrease operating efficiencies incurred when obsolete parts are specified and
incorrectly built products must be scrapped.

   More Rapid Return on Investment. Because Agile Anywhere and Agile Buyer
solutions are based on existing industry standards and do not require the
implementation of custom data models, Agile Anywhere and Agile Buyer can be
implemented in less time than required to implement traditional enterprise
software applications which require extensive customization.

   Lower Costs of Goods Sold. The Agile Buyer solution can enable companies to
aggregate demand for direct materials across the enterprise, a powerful tool
for negotiating better procurement contracts. Requests for quotations can be
sent to multiple suppliers simultaneously, as easily as sending the request to
a single supplier. Our solutions can foster a much more competitive pricing
environment, helping companies procure materials at the lowest possible cost.

The Agile Growth Strategy

   Our objective is to be the leading provider of collaborative manufacturing
commerce solutions, enabling business-to-business global collaboration among
supply-chain partners. Key elements of our strategy include:

   Provide Superior Customer Satisfaction. We expect to continue to build a
highly referenceable customer base of market leaders in various vertical
markets and we will continue our focus on programs designed to enhance and
maintain customer satisfaction. We will continue to anticipate customer needs
by introducing new product functionality and new technology platforms. We
believe our focus on customer satisfaction will increase customer loyalty and
result in increased follow-on sales opportunities and shorter sales cycles.

   Capitalize on Network Effects to Expand Our Customer Base. As users of Agile
Anywhere and Agile Buyer solutions deploy our software across their supply
chains, additional supply chain members will be exposed to our solutions and
the functionality provided by our products. We believe that this exposure,
which allows non-customer participants in the supply chain to benefit from our
solutions, creates a network effect that accelerates industry recognition and
adoption of our products. As additional members of a supply chain deploy our
solutions, the quality and timeliness of available information relevant to the
production and supply of their products improves, which increases the value to
each participant and helps drive greater usage.

   Pursue a Vertical Market Strategy. Since inception, we have pursued a
vertical market strategy, developing product features targeted to particular
industries. To date, we have focused on the electronics and

                                       4
<PAGE>

high technology markets which encompasses original equipment manufacturers,
electronic manufacturing services and component manufacturers, as well as the
medical device market. We seek to further penetrate our current markets while
addressing new vertical markets characterized by high rates of product change,
short product cycles, and extensive supply chains.

   Leverage Our Technology Platform. We intend to continue to pioneer new
Internet business applications based on emerging standards supporting
electronic commerce. For example, we have used the Java computer programming
language to deliver a robust, powerful and rapidly deployable Internet business
application to our customers. Further, we have taken the initiative to define a
protocol for supply chains, Product Definition exchange, or PDX, based on
eXtensible Mark-up Language, or XML, and have submitted it to industry
standards groups for approval. We intend to lead technological innovation in
the collaborative manufacturing commerce market, offering our customers
solutions designed to provide a rapid and high return on investment.

   Extend Supply Chain Collaboration and Functionality. We believe our solution
provides a robust platform that enables us to extend the functionality and
application of our products to the creation and delivery of new value-added
applications. We will continue to develop enhancements to our products designed
to enable increased collaboration among outsourced supply chain partners. We
will also address new opportunities that result from the creation of new
business processes for Internet-based collaboration and interaction among
supply-chain partners. For example, Agile Buyer extends the functionality of
our solutions to the sourcing and procurement of electronic production
materials. With the combination of Agile Buyer's direct materials sourcing
capabilities and Agile Anywhere's product content management benefits, we
believe that our customers will be able to enhance critical supply chain
processes, including new product introductions and direct materials sourcing.

The Agile Products

Agile Anywhere Product Suite

   Agile Anywhere is a suite of product content management and change
collaboration solutions that automate the management of product information and
engineering change orders across the electronic supply chain. Agile Anywhere
manages product content information that is available through our Agile e-
Hub(TM) Server. Agile Anywhere solutions include the Agile Product Definition
Server, Agile Product Change Server, Agile AML Server, Agile Content Manager
(Agile CM(TM)), Agile Internet Content Manager (Agile iCM(TM)), and Agile
ChangeCAST.

   Agile Anywhere provides a comprehensive business-to-business solution to the
problem of product change collaboration across the manufacturing supply chain.
Utilizing XML technology, Agile Anywhere allows supply chain partners to share
and collaborate on product content and changes in real time via the Internet.
Agile Anywhere is designed to provide the scalability, security and open
standards that are required in an electronic supply chain. At the core of the
Agile Anywhere suite is the Agile eHub Server, which manages product content,
processes and business rules. Users interact with the product content within
the eHub via the My Agile portal. Enterprises that manage and create the
product content interact with the Agile iCM client. Utilizing the Agile
eXpress(TM) Viewer, product content can also be published to users anywhere
throughout the supply chain. To complete the suite, Agile provides several
integration products that import, export, and publish product content from or
to existing design, manufacturing, finance, and supply chain systems. Following
the initial implementation of Agile Anywhere, subscriptions for additional
users and application-specific modules can be added to expand the scope of the
manufacturer's implementations.

Agile eHub

   The foundation of Agile Anywhere is Agile eHub. The Agile eHub comprises
application servers that enable users to define, store, change and manage
product content information. Agile eHub incorporates new technology for high-
speed performance, storage and secure data, and is designed to scale, thus
accommodating

                                       5
<PAGE>

the needs of supply chain partners of all sizes. The Agile eHub is designed to
facilitate fast, direct Internet access, and is easily implemented. Agile eHub
includes one or more of the following server modules:

   Agile Product Definition Server manages parts, documents, bills of materials
and drawings, in a web environment that provides fast, easy access to product
content for all members of the supply chain.

   Agile Product Change Server automates the electronic routing, notification
and sign-off processes that are associated with engineering changes. This
functionality can result in reduced ordering errors and costs and improved
cycle times associated with evaluating, approving and implementing changes.

   Agile AML Server enables companies to collaborate with supply chain partners
on approved parts and manufacturers at the time of new product introduction as
well as tracking changes throughout the manufacturing process.

   Agile Administrator enables companies to easily and rapidly configure and
modify Agile Anywhere components without writing code. Agile Administrator
speeds the implementation of the Agile Anywhere suite and minimizes maintenance
time.

Accessing Agile eHub

   Agile customers and their supply chain partners can gain access to product
content for review or modification by the following:

  .  Access to the e-hub is offered through three options, Agile hCM(TM)
     (HTML-based), Agile iCM (Java-based) and Agile CM (Windows-based). These
     products are designed for individuals who have responsibility for
     managing a product and its content through its entire lifecycle.

  .   Agile includes a manufacturing hub that allows secure, personalized web
     access to product content that is stored in any Agile eHub. It is an
     intuitive, easy-to-use portal allowing users to link to any or all of
     their supply chain information sources in a customizable interface and
     participate in product content-related processes via the Internet.

  .  Agile eXpress Viewer allows supply chain partners to send and receive
     information in the PDX format, a new standard for data exchange that we
     first offered with Agile Anywhere. Agile eXpress Viewer is available for
     downloading free of charge from the Agile web site, to enable supply
     chain partners to share data even if they are not Agile customers.

Agile Integration Products

   Product content information flows throughout the supply chain, and is
published to or from Agile Anywhere and a variety of other design,
manufacturing, finance and supply chain systems. Agile Anywhere integration
products provide data exchange between systems, as follows:

  .  Agile ChangeCAST publishes released engineering change orders, approved
     parts lists, approved manufacturers' lists and bills of materials from
     Agile to separate enterprise resource planning systems.

  .  Agile Integration Server(TM) (AIS) is an XML-based integration solution
     that makes the valuable product content held in Agile Anywhere available
     to a wide variety of business applications and users both internally and
     across the global manufacturing network.

  .  Agile Scan allows customers to scan drawings and documents into the
     Agile e-Hub database.

  .  Agile Import allows customers to import bills of materials produced in
     ASCII format or in Microsoft Excel, providing a consolidated database of
     product information.

  .  Agile Export provides a quick and easy method of exporting information
     to an ASCII file, allowing information in Agile Anywhere to be shared
     with other business applications.

                                       6
<PAGE>

  .  Agile Software Development Kit, available with Agile Anywhere, allows
     customers and partners to develop complementary applications to
     integrate with Agile in Java, Visual Basic and Visual C++.

   Initial implementations of the Agile Anywhere suite typically include the
Agile eHub and one or more server modules such as what we now call the Product
Definition Server, Product Change Server and AML Server, together with user
licenses or subscriptions, and one or more of the integration products,
particularly Agile ChangeCAST. The initial order may also include a third-party
adapter for other existing enterprise systems of the customer. Following the
initial implementation, additional user licenses and additional server modules
may be purchased.

Agile EMSdirect(TM) Service

   Agile EMSdirect is an electronic service available at MyAgile.com(TM) that
allows an original equipment manufacturer to submit file packages directly to
an Agile system at participating electronics manufacturing service providers.
Submitting file packages using Agile EMSdirect provides assured delivery and
enables collaborative interaction between an electronics manufacturing service
provider and its partners.

Agile Buyer Solution

   Agile Buyer is an electronic commerce solution that is designed to enable
companies to efficiently communicate and collaborate with all of their
suppliers, sharing price, inventory, and contract information in order to speed
up and lower the cost of procuring direct materials. Any supplier with access
to the Internet and e-mail can participate. By eliminating tedious and time-
consuming tasks from the procurement process, Agile Buyer enables companies to
focus on the strategic aspects of procurement such as creating and sending
requests for quotes, compiling and analyzing supplier responses, managing the
contract process and tracking supplier performance quickly and easily.

   Agile Buyer manages the procurement process for the entire direct materials
supply chain, including new product introduction, strategic sourcing, product
sourcing, and supplier management. Agile Buyer provides a powerful combination
of process workflow, contract and order management, and transaction support
tools. Further, Agile Buyer lets users accomplish these work processes from
their browser, reducing unproductive telephone calls and misplaced faxes.

   Agile Buyer is a secure Internet-based supplier solution for sourcing and
procurement of direct (production) materials. Agile Buyer encompasses all
direct materials and all members of a supply chain in a single Internet-based
environment. Agile Buyer automates preparation and dissemination of requests
for quotation, enables buying decision support, allows demand aggregation,
issues purchase orders, permits commodity and contract management, and manages
supplier performance.

Customers

   To date, we have licensed our products to over 700 customers, predominantly
within the electronics and medical device manufacturing industries. No customer
accounted for more than ten percent of our total revenues in fiscal 2001,
fiscal 2000 or fiscal 1999.

                                       7
<PAGE>

   The following is a representative list of current customers in our targeted
industry markets that to date have purchased Agile products and services:

<TABLE>
<CAPTION>
Datacom/Telecom
Equipment                 Computers and Peripherals     Medical Equipment
---------------           -------------------------     -----------------
<S>                       <C>                           <C>
Alcatel                   S3/Diamond Multimedia Systems EndoSonics
Aspect                    Fujitsu Computer Products     GE Medical
 Telecommunications
Brocade Communications    Gateway                       Guidant
 Systems
Lucent Technologies       Hitachi                       Hologic
Nortel Networks           Iomega                        Humphrey Instruments
ADC                       NEC                           Visx
Xircom                    Dell Computer                 AVE Medtronic
                          Compaq Computer               Johnson & Johnson/Depuy
                          VeriFone/Hewlett-Packard

<CAPTION>
Electronics
  Manufacturing
  Service Providers       Components                    Semiconductor Equipment
-----------------         ----------                    -----------------------
<S>                       <C>                           <C>
C-MAC Industries          Advanced Micro Devices        Credence Systems
Flextronics               Micron Technology             Electro-Scientific Industries
 International
Pemstar                   Reltec Communications         FSI International
Solectron                 Texas Instruments             Johnson Matthey Electronics
SCI Systems               VLSI Technology               Strasbaugh
Jabil Circuits            Altera
SMTC                      Amkor
APW                       Nvidia

<CAPTION>
Consumer Electronics
--------------------
<S>                       <C>                           <C>
Palm Computing
Dolby Laboratories
Handspring
Microsoft
Nintendo
Philips Mobile Computing
Scientific Atlanta
TiVo
</TABLE>

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<PAGE>

Product Technology and Architecture

   The Agile Anywhere product suite is designed upon open systems based on
software industry standards for scalable Internet applications. The result is a
low cost, low maintenance end-user business application that eliminates the
need for complex custom or in-house development. Agile Anywhere is built on an
Internet-based architecture:

  .  The core of our architecture is the Agile eHub, the application server,
     which currently runs on Microsoft NT. The application server is the
     intermediary between the iCM/hCM and My Agile applications and the
     database, providing the necessary security for validation of the data,
     and the web server, which hosts the Internet access to Agile Anywhere.
     We use encryption technology licensed from RSA Security Inc. to maintain
     secure data when transported over the Internet.

  .  The iCM/hCM and MyAgile applications are Java and HTML-based
     applications that can run on versions of Microsoft Internet Explorer and
     Netscape Navigator. There is also a Windows application for users who
     prefer a Windows user interface rather than a web browser interface.
     Operating systems supported include Windows 98, Windows NT, Windows 2000
     and Sun Solaris. We follow the Microsoft standards for the Windows 98
     and 2000 CM clients, and Internet standards for the Java iCM application
     running within Microsoft Internet Explorer and Netscape Communicator.
     Our products can be integrated with more than 15 enterprise resource
     planning systems including, among others, Oracle Applications, J.D.
     Edwards and SAP.

  .  The backend includes the Oracle database server and the Agile Internet
     File Server.

   The Agile Anywhere suite is enabled for both single-byte and double-byte
localization, and has been localized for French and Japanese. We intend to
provide localization for additional languages.

   We have entered into platform alliances to ensure that our products are
based on industry standards and to enable us to take advantage of current and
emerging technologies, including alliances with Sun Microsystems, Oracle and
Microsoft. To promote development, definition, adoption, promotion and
implementation of open standards that can be leveraged by Agile Anywhere, we
work with several industry standards organizations such as the National
Institute of Standards and Technology, National Electronics Manufacturing
Initiative, Institute for Interconnecting and Packaging Electronic Circuits,
RosettaNet, and World Wide Web Consortium. We are involved with Solectron,
Intel, HP, SCI, and other industry participants in an initiative to define an
XML-based protocol called Product Definition Exchange (PDX).

Product Development

   Our product development objectives are to:

  .  be innovative in developing solutions to remove complexity from supply
     chain collaboration;

  .  develop solutions that require little custom code, contain reusable
     components and are easy to use, implement, maintain, and upgrade; and

  .  adopt industry standard technologies.

   Our software development staff is divided into teams consisting of
development engineers, project managers, quality assurance engineers, and
technical writers. Working closely with our marketing department, we determine
product functionality based upon market requirements, customer feedback,
available technical support and customer engineering. We also try to
incorporate emerging technologies that will allow us to develop additional
features.

   We introduced our first product, Agile Configurator version 1.3, in June,
1996 and have subsequently released nine revisions, adding over a dozen new
modules. During this time, the product has evolved from a 2-tiered client-
server database application running on Oracle to a multi-tiered application
supporting both Windows and Java clients. Our product development activities
are focused on broadening the scalability and

                                       9
<PAGE>

functionality of Agile Anywhere. We are also developing application interfaces
to allow customers to more easily integrate Agile Anywhere with other systems.

   Our research and development expenses, excluding stock compensation expense,
were $26.5 million, $9.4 million and $4.7 million for fiscal 2001, 2000 and
1999, respectively, and we expect to continue to invest significantly in
research and development in the future.

   We cannot be sure that we will complete our existing and future development
efforts within our anticipated schedule or that our new and enhanced products
will have the features to make them successful. We may experience difficulties
that could delay or prevent the successful development, introduction or
marketing of new or enhanced products. In addition, these new and enhanced
products may not meet the requirements of the marketplace and achieve market
acceptance. Furthermore, despite testing by us, our implementation partners and
our customers, errors might be found in new products or in releases after
shipment, resulting in loss of revenue or delay in market acceptance and sales,
diversion of development resources, injury to our reputation or increased
service and warranty costs.

Sales and Marketing

   Our sales and marketing organization is responsible for identifying and
developing vertical markets on which we intend to focus, as well as for
identifying and notifying our research and development staff of product
requirements communicated to us by our customers. We market and sell our
products primarily through our direct sales force located at our headquarters
in San Jose, California, and at regional and local sales offices in the United
States and at offices in France, Germany, Japan, Taiwan and the United Kingdom.
Our direct sales force consists of Major Account Executives who focus entirely
on our major accounts, Senior Account Executives who focus on specific
geographic territories, and Emerging Technology Manufacturers Account
Executives who focus on emerging and smaller-sized companies. We also market
and sell through our direct telesales and telemarketing representatives. Sales
engineers in regional office provide pre-sales technical support. We are also
in the early stages of complementing our direct sales force through additional
distribution channels, including non-exclusive distributors, integrators and
consulting partners.

   To support our direct sales efforts and to actively promote our Agile brand,
we engage in a variety of marketing activities. These include co-marketing
strategies with our existing business partners, targeting additional strategic
relationships, managing and maintaining our web site content, advertising in
industry and other publications, conducting public relations campaigns and
establishing and maintaining relationships with recognized industry analysts.
We also actively participate in manufacturing-related trade shows.

   A critical element of our sales strategy is to establish marketing alliances
to promote sales and marketing of our products, as well as to increase product
interoperability. We also pursue services alliances with consulting and
integration firms to implement our software, provide customer support services,
create customized customer presentations and demonstrations and endorse our
products during the evaluation stage of the sales cycle. We believe that our
relationships with these service providers may shorten our sales cycle because
these service providers have generated and qualified sales leads, made initial
customer contacts and assessed needs prior to our introduction. We currently
have relationships with Accenture, TSC and Siemens for the implementation of
our solutions, and a reselling agreement with Manugistics.

Customer Service and Support

   Consulting and Implementation. We offer services, on a fixed-price or time
and materials basis, to assist in implementation planning, product
installation, implementation assistance, legacy data loading and effectiveness
audits. To facilitate and enhance the integration of our products, we have
entered into alliances to enable integration of our products with existing
design, manufacturing, finance and supply chain systems. This approach allows
us to focus on our core competencies and leverage our partners' domain
knowledge, which helps reduce time to market both for our customers and us.

                                       10
<PAGE>

   Customer Support. We believe that responsive technical support is a
requirement for our continued growth. We provide technical support and
unspecified product upgrades on a when-and-if available basis through our
annual maintenance program. Our customers are not entitled to new products
under our annual maintenance program. Customers generally purchase the first
year of support at the time they initially license one of our products. After
the initial term of the license is complete, the customer may renew support on
an annual or multi-year basis. Customer support is offered by telephone, email
and fax and we also offer an Internet-based support that features frequently
asked questions, technical alerts, product upgrades and updates, problem
reporting and analysis, and self-help through our on-line knowledge base. In
addition, our consulting and implementation partners provide customer support
and maintenance in some instances. Revenues associated with maintenance
contracts are recognized ratably over the term of the maintenance contract,
which is generally 12 months.

   Training. We offer a variety of classes and related materials to train our
customers on system administration, upgrades and new releases. These classes
are also available as part of our Train the Trainer program. Training classes
are offered at our headquarters in San Jose, California, at customer sites, and
at other locations. To improve access to our explanatory materials, we offer
on-line documentation contained on the compact discs for our products and from
our web site for all our products. We also offer on-line help for the majority
of our products. Customers can purchase additional documentation via our web
site.

Competition

   The market for collaborative manufacturing commerce and direct materials e-
procurement solutions is highly fragmented, rapidly changing and increasingly
competitive. We expect competition to persist and intensify, which could result
in price reductions, reduced gross margins and loss of market share, any one of
which could seriously harm our business. Competitors vary in size and in the
scope and breadth of the products and services offered.

   We believe that our ability to compete depends on many factors both within
and beyond our control, including:

  .  the performance, functionality, price, reliability and speed of
     implementation of our solutions;

  .  the timing and market acceptance of new products and product
     enhancements to our Agile Anywhere suite of products;

  .  the quality of our customer service; and

  .  the effectiveness of our sales and marketing efforts.

   Although we believe that we currently compete favorably as to each of these
factors, our market is relatively new and our collaborative manufacturing
commerce and e-procurement solutions for direct production materials is a new
category of products. In particular, we believe that we offer a suite of
software that offers collaborative and interactive capabilities that many of
our competitors do not effectively provide. However, we encounter competition
with respect to different aspects of our solution from a variety of vendors. We
currently face three primary sources of competition:

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

  .  vendors of engineering information management software, such as
     Parametric Technology Corporation, Dassault Systemes S.A., MatrixOne,
     Inc, Structural Dynamics Research Corporation and Unigraphics Solutions,
     Inc.; and

  .  Potential competition from providers of enterprise software who seek to
     extend the functionality of their products, such as Oracle Corporation,
     SAP A.G., and i2 Technologies, Inc.

   We may not be able to maintain our competitive position against current and
potential competition, particularly competitors that have longer operating
histories and significantly greater financial, technical,

                                       11
<PAGE>

marketing and other resources than we do and therefore may be able to respond
more quickly to new or changing opportunities, technologies and customer
requirements. Also, many current and potential competitors have greater name
recognition and more extensive customer bases that could be leveraged to gain
market share to our detriment. These competitors may be able to undertake more
extensive promotional activities, adopt more aggressive pricing policies, and
offer more attractive terms to purchasers than we can. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to enhance their products.
Accordingly it is possible that new competitors or alliances among competitors
may emerge and rapidly acquire significant market share. We also expect that
competition may increase as a result of industry consolidation. We may not be
able to maintain our competitive position against current and potential
competitors, especially those with significantly greater financial, marketing,
service, support, technical and other resources.

Proprietary Rights

   Our success and ability to compete depend upon our proprietary technology.
We rely on patent, copyright, trade secret and trademark law to protect our
proprietary information. We also typically enter into agreements with our
employees, consultants and customers to control their access to and
distribution of our software, documentation and other proprietary information.
Nevertheless, a third party could copy or otherwise obtain our software or
other proprietary information without authorization, or could develop software
competitive to ours. 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 patents that may be issued to us or our
other intellectual property. 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, and we expect that it will become more difficult to monitor the
use of our products if we increase our international presence.

   We utilize database management software from Oracle for our database server.
Our customers can purchase this software directly from Oracle or from us. In
addition, we integrate third-party software into our products from RSA Security
Inc. for security and encryption technology, from Actuate for reporting
capability and from Cimmetry Systems for our viewers. This third-party software
may not continue to be available on commercially reasonable terms. If we cannot
maintain licenses to this third-party software at an acceptable cost, shipments
of our products could be delayed until equivalent software could be developed
or licensed and integrated into our products. We do not believe that our
business could be considered to be substantially dependent on any one of these
license agreements, and none of these licenses are responsible for a
significant amount of our revenues.

   There has been a substantial amount of litigation in the software and
Internet industries 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 their intellectual property rights. We
expect that software product developers and providers of electronic commerce
solutions 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 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. If our
products were found to infringe a third party's proprietary rights, we could be
required to enter into royalty or licensing agreements in order to continue to
be able to sell our products. Royalty or licensing agreements, if required, may
not be available on terms acceptable to us or at all, which could seriously
harm our business.

Employees

   As of April 30, 2001, we had a total of 460 employees. Of this total, 125
were in engineering, 148 were in sales and marketing, 138 were in professional
services, including technical support and customer training, and 49 were in
finance and administration. We also retain independent contractors to support
activities such as our professional services and product development. Our
success depends on our ability to attract and retain

                                       12
<PAGE>

qualified, experienced employees. None of our employees are represented by a
collective bargaining unit, and we have never experienced a work stoppage. We
consider our relations with our employees to be good.

                                  RISK FACTORS

   Our future performance is subject to a variety of risks. If any of the
following risks occur, our business could be harmed and the trading price of
our common stock could decline. In addition to other information in this
report, the following risk factors should be carefully considered in evaluating
Agile and its business.

Risks Related to Our Operations

 We Have a History of Losses, We Expect to Incur Losses in the Future and We
 May Not Achieve or Maintain Profitability

   Since inception, we have funded our business primarily through selling our
stock, not from cash generated from our business. We have incurred quarterly
and annual losses in each of the years since we were formed and we expect to
continue to incur quarterly and annual losses in the near term. We incurred
losses of $125.3 million, $35.2 million and $11.4 million for the fiscal years
ended April 30, 2001, 2000 and 1999. As of April 30, 2001, we had an
accumulated deficit of approximately $187.1 million. We expect to continue to
incur significant sales and marketing, research and development and general and
administrative expenses. We have incurred and expect to continue to incur
substantial non-cash costs relating to the amortization of intangible assets
and stock compensation which will contribute to our net losses. We expect to
incur losses for the foreseeable future. We will need to generate significant
increases in revenues to achieve and maintain profitability, and we may not be
able to do so. Even if we do achieve profitability, we may not be able to
sustain or increase profitability on a quarterly or annual basis in the future.

 Because We Have a Limited Operating History, It Is Difficult to Evaluate Our
 Business and Prospects

   We are still in the early stages of development, so evaluating our business
operations and our prospects is difficult. We incorporated in 1995 and began
shipping our first product in June 1996. The revenues and income potential of
our business and market are unproven. We will encounter risks and difficulties
frequently encountered by early-stage companies in new and rapidly evolving
markets. These risks include the following:

  .  we need to increase sales to achieve profitability, requiring us to sell
     additional licenses and software products to our existing customers and
     expand our customer base outside of the electronics and medical device
     industries;

  .  we need to expand our sales and marketing, customer support and
     professional services organizations, build strategic relationships and
     expand our international operations in order to increase sales; and

  .  we need to effectively manage our anticipated growth which could lead to
     management distractions and increased operating expenses, and will
     require us to attract and retain key personnel.

   Our business strategy may not be successful and we may not be able to
successfully address these risks. In addition, because of our limited operating
history, we have limited insight into trends that may emerge and affect our
business.

                                       13
<PAGE>

 Our Quarterly Operating Results Fluctuate and Are Difficult to Predict and, if
 Our Future Results Are Below the Expectations of Public Market Analysts or
 Investors, the Price of Our Common Stock May Decline

   Our quarterly operating results have varied significantly in the past and
are likely to vary significantly in the future, which makes it difficult for us
to predict our future operating results. This quarter-to-quarter fluctuation is
due to a number of factors, including the following:

  .  fluctuations in demand for Internet collaborative manufacturing commerce
     software;

  .  size and timing of sales and installations of our products;

  .  entry of new competitors into our market, or the announcement of new
     products or product enhancements by competitors;

  .  our ability to successfully expand our direct sales force and our
     international sales organization;

  .  changes in our sales force incentives;

  .  unexpected delays in developing or introducing new and enhanced
     products;

  .  unexpected decline in purchases by our existing customers, including
     purchases of additional licenses and maintenance contracts;

  .  delays in our customers' orders due to their priorities;

  .  variability in the mix of our license and professional services
     revenues;

  .  our ability to accurately price fixed-priced professional services
     projects;

  .  variability in the mix of professional services that we perform versus
     those performed for our customers by others; and

  .  our ability to establish and maintain relationships with our third-party
     implementation partners.

   Furthermore, we typically receive and fulfill most of our orders within the
same quarter, with the substantial majority of our orders typically received in
the last month of each fiscal quarter. Recently, declining economic conditions
have caused our customers to delay and reduce spending on information
technology, our sales cycle has lengthened and orders are being pushed to the
last day of the quarter. As a result, we may not learn of revenue shortfalls
until late in a fiscal quarter, after it is too late to adjust expenses for
that quarter. Moreover, recent adverse economic conditions in the United
States, particularly those related to the technology industry, may increase the
likelihood that customers will unexpectedly delay or cancel orders causing us
to fail to achieve anticipated revenues for the quarter. A number of technology
companies, particularly software companies that, like Agile, sell enterprise-
wide software solutions, have recently announced that adverse economic
conditions have negatively affected their business and results of operations.
Any revenue shortfall below our expectations could have an immediate and
significant adverse effect on our results of operations.

   If, in response to market pressures or other demands, we introduce new
pricing structures for our existing products, we could experience customer
dissatisfaction and loss of sales. In addition, we could introduce products
that are sold in a manner different from how we currently market our products,
or we could recognize revenue differently than under our current accounting
policies. Depending on the manner in which we sell existing or future products,
this could have the effect of extending the length of time over which we
recognize revenues. Furthermore, our quarterly revenues could be significantly
affected based on how applicable accounting standards are amended or
interpreted over time.

   In addition, we have accounted for options to purchase common stock granted
to consultants under variable plan accounting. The expense associated with
these options may fluctuate significantly from quarter to quarter through
fiscal 2006 if the price of our stock fluctuates and could cause our operating
results to vary significantly from quarter to quarter.

                                       14
<PAGE>

   Due to these and other factors, we believe that period-to-period
comparisons of our results of operations are not meaningful and should not be
relied upon as indicators of our future performance. It is possible that in
some future periods our results of operations may be below the expectations of
public market analysts and investors. If this occurs, the price of our common
stock may decline.

 The Impact of Changes in Global Economic Conditions on Our Customers May
 Cause Us to Fail to Meet Expectations, Which Would Negatively Impact the
 Price of Our Stock

   Our operating results can vary significantly based upon the impact of
changes in global economic conditions on our customers. More specifically, the
macro-economic environment that we are facing in fiscal 2002 is more uncertain
than in recent periods and has the potentially to materially and adversely
affect us and our operating results. The revenue growth and profitability of
our business depends on the overall demand for enterprise-level software
services, particularly in the areas in which we compete. Because our sales are
primarily to major corporate customers whose business fluctuate with general
economic and business conditions, a softening of demand for computer software
caused by a weakening economy may result in decreased revenues and lower
growth rates. We may be especially prone to this as a result of the relatively
large license transactions we have historically relied upon. Customers may
defer or reconsider purchasing products if they experience a downturn in the
general economy.

 We May Not Achieve Anticipated Revenues if the Introduction and Customer
 Acceptance of Agile Anywhere or Any Upgrades or Enhancements to Our Products
 Is Unsuccessful

   Our future financial performance will depend on customer acceptance of
Agile Anywhere products and any upgrades or enhancements that we may make to
our products in the future. We have generated substantially all of our
revenues from licenses and services related to current and prior versions of
our product suite. We believe that revenues from Agile Anywhere, together with
revenues from maintenance and support contracts from Agile Anywhere and prior
versions of our suite, will account for a substantial portion of our revenues
for the foreseeable future. If we are unable to ship or implement any upgrades
or enhancements when planned, or if the introduction of upgrades or
enhancements causes customers to defer orders for our existing products, we
may not achieve anticipated revenues.

 We May Need to Make Additional Future Acquisitions to Remain Competitive. Our
 Business Could be Adversely Affected as a Result of These Acquisitions

   We may encounter risks to our business during our integration of
acquisitions including:

  .  difficulties in assimilation of acquired personnel, operations,
     technologies or products;

  .  unanticipated costs associated with acquisitions. For example, in fiscal
     2001 we recorded a $55.2 million impairment charge relating to goodwill
     and other intangible assets as a result of management's decision in
     February 2001 to discontinue the further development of the products
     acquired in the DMI acquisition;

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

  .  adverse effects on our existing business relationships with our
     customers or the customers of any acquisitions we make; and

  .  inability to retain employees of acquisitions we make.

   As part of our business strategy, we may in the future seek to acquire or
invest in additional businesses, joint venture arrangements, products or
technologies that we believe could complement or expand our business, augment
our market coverage, enhance our technical capabilities or that may otherwise
offer growth opportunities. Management's negotiations of potential
acquisitions or joint ventures and management's integration of acquired
businesses, products or technologies could divert their time and resources.
Future

                                      15
<PAGE>

acquisitions could cause us to issue dilutive equity securities, incur debt or
contingent liabilities, amortize goodwill and other intangibles, write off in-
process research and development and other acquisition-related expenses that
could seriously harm our financial condition and operating results. Further, we
may not be able to properly integrate acquired businesses, products or
technology with our existing operations or train, retain and motivate personnel
from the acquired business. If we are unable to fully integrate an acquired
business, product or technology or train, retain and motivate personnel from
the acquired business, we may not receive the intended benefits of that
acquisition.

   Recent volatility in the stock markets has made it more difficult to value
acquired businesses where the consideration payable as the purchase price is
stock. We may reach agreement to buy another company using our stock as
consideration. Thereafter, prior to closing the acquisition the relative values
of the capital stock of the acquired company could change, causing the purchase
price to increase. As a result, in periods of market volatility as we are
experiencing, acquisitions are difficult to complete, and we may be unable to
complete beneficial acquisitions of complementary businesses or technologies at
an acceptable price.

 Implementation of Our Products By Large Customers May Be Complex and Customers
 Could Become Dissatisfied if Implementation of Our Products Proves Difficult,
 Costly or Time-Consuming

   Our products must integrate with many existing computer systems and software
programs used by our customers. Integrating with many other computer systems
and software programs can be complex, time consuming and expensive, causing
delays in the deployment of our products. Because we are one of the first
companies to offer products designed for collaborative manufacturing commerce
solutions, many customers will be facing these integration issues for the first
time in the context of collaborating with supply chain partners. Customers
could become dissatisfied with our products if implementations prove to be
difficult, costly or time-consuming.

 We Currently Perform Most of Our Implementations on a Fixed-Price Basis, Which
 Could Cause Us to Incur More Costs Than We Expect

   When we install our products or when we have a third party install them, we
typically charge customers a fixed fee for these services. At the time of a
product sale and prior to agreeing to an installation price, we estimate the
amount of work involved for a particular installation project. We have at times
in the past underestimated and may in the future underestimate the amount of
time or resources required to install our products. If we do not correctly
estimate the amount of time or resources required for a large number of
installations, our gross margins could decline.

 If We Do Not Sell Additional Licenses or Enhanced Versions or Upgrades of Our
 Products to Existing Customers, We May Not Achieve Revenue Growth

   The size of a new customer's initial order is relatively small and may
include a limited number of user licenses. In subsequent orders, customers
often add user licenses or additional products designed for specific functions,
such as the AML Server targeted at manufacturers. In order to grow revenues, we
depend on sales of additional user licenses to our existing customers as well
as sales of new licenses to new customers. Therefore, it is important that our
customers are satisfied with their initial product implementations and that
they believe that expanded use of the product they purchased will provide them
with additional benefits. Customers could choose not to purchase any new
products or expand the use of our products. If we do not increase sales to
existing customers, we may not be able to achieve revenue growth.

 If We Do Not Establish and Maintain Relationships With Key Partners, We May
 Encounter Difficulty in Providing Implementation and Customer Support of Our
 Products

   We rely heavily on our relationships with consulting and integration
partners to implement our software, provide customer support services and
endorse our products during the evaluation stage of the sales cycle.

                                       16
<PAGE>

Currently, a limited number of companies provide implementation services for
our products. We expect to increasingly rely on these types of partners in the
future. These companies are not contractually obligated to continue to provide
implementation services for us or to otherwise promote our products. Although
we seek to develop and maintain relationships with these types of service
providers, they may have similar or more established relationships with our
competitors. If these service providers do not increase this segment of their
business, or reduce or discontinue their relationships with us or their support
of our products, our business could be harmed. We will need to develop new
third party relationships if sales of our products increase and our current
partners cannot fulfill all of our needs for implementation and customer
support services. Without these third parties, we would have to expand our
services organization to increase the consulting and professional services that
we provide to our customers and divert resources from other areas of our
business. If we are required to expand our professional services capabilities,
we may not be able to do so on a timely basis.

   We are beginning to implement larger deployments of our products together
with third parties such as Accenture. If we are not successful with these joint
deployments, we may incur increased costs and customer dissatisfaction and may
not achieve increased sales and market acceptance of our products.

   To meet customer demand, we might have to outsource services to more costly
independent contractors and other third parties. In addition, if our
implementation partners do not adequately perform implementation services, our
customers could become dissatisfied with our products. In order to avoid
dissatisfaction, we may need to provide supplemental implementation services at
no additional cost to customers. Although we could experience an increase in
services revenues if our service partners are not successful, services revenues
have lower gross margins than license revenues. We could also experience delays
in recognition of license revenue if customer implementation projects fall
behind schedule.

 We May Experience Customer Dissatisfaction and Lost Sales if Our Products Do
 Not Scale to Accommodate Substantial Increases in the Number of Users

   Our strategy requires that our software be highly scalable, or able to
accommodate substantial increases in the number of users. If our customers
cannot successfully implement large-scale deployments, or if they determine
that our products cannot accommodate large-scale deployments, we could
experience customer dissatisfaction and find it more difficult to obtain new
customers or to sell additional products to our existing customers.

 We May Not Be Able to Increase Sales of Our Products if We Do Not Expand Our
 Direct Sales Organization

   We sell our products primarily through our direct sales force. Our ability
to increase our sales will depend on our ability to recruit, train and retain
top quality sales people with the advanced sales skills and technical knowledge
we need. Competition for qualified personnel remains intense in our industry.
In addition, it takes time for our new sales personnel to become productive,
particularly our senior sales and services personnel, who could take up to nine
months to become fully productive. Recent volatility in our stock price could
decrease our ability to hire and retain qualified personnel. If we are unable
to hire or retain qualified sales personnel, or if newly hired personnel fail
to develop the necessary skills or reach productivity more slowly than
anticipated, it would be more difficult for us to sell our products, and we may
experience a shortfall in revenues.

 Our Variable Sales Cycle Makes it Difficult For Us to Predict When or if Sales
 Will Be Made

   Our products have an unpredictable sales cycle that contributes to the
uncertainty of our future operating results. With the recent economic
uncertainties facing our customers, and the decline in the business that they
face, our sales cycle has lengthened. Customers are taking longer to evaluate
our product, and orders may be delayed or postponed. Our collaborative
manufacturing commerce software is a new category of products, and

                                       17
<PAGE>

customers often view the purchase of our products as a significant and
strategic decision. As a result, intensive marketing and sales efforts may be
necessary to educate prospective customers regarding the uses and benefits of
our products. Customers may take time to evaluate our products. The sale of our
products may be subject to delays due to the lengthy internal budgeting,
approval and evaluation processes of our customers. We may expend significant
sales and marketing expenses during this evaluation period before the customer
places an order with us. Customers may initially purchase a smaller number of
user licenses before expanding the order to allow a greater number of users to
benefit from the application. Larger customers may purchase our products as
part of multiple simultaneous purchasing decisions, which may result in
additional unplanned administrative processing and other delays in our product
sales. If sales forecasted from a specific customer for a particular quarter
are not realized, we may experience an unplanned shortfall in revenues. As a
result, we have only a limited ability to forecast the timing and size of sales
of our products.

 The Success of Our Business Depends on Our Key Personnel, Whose Knowledge of
 Our Business and Technical Expertise Would Be Difficult to Replace

   Our success depends largely on the continued contributions of our key senior
management, particularly Bryan D. Stolle, our Chief Executive Officer, who is
not bound by an employment agreement, as well as of our key engineering and
sales and marketing personnel. We do not have key-man life insurance on Mr.
Stolle. If one or more members of our senior management or any of our key
employees were to resign, the loss of personnel could result in delays to
product development, loss of sales, and diversion of management resources.

 Because of Competition For Additional Qualified Personnel, We May Not Be Able
 to Recruit or Retain Necessary Personnel, Which Could Impact Development or
 Sales of Our Products

   Our success depends on our ability to attract and retain qualified,
experienced employees. There is substantial competition for experienced
engineering, sales and marketing personnel in our industry. The volatility and
current market price of our common stock may make it more difficult for us to
recruit, hire and retain qualified personnel, or cause us to incur higher
salary costs. If we are unable to retain our existing key personnel, or attract
and retain additional qualified personnel, we may from time to time experience
inadequate levels of staffing to perform services for our customers. As a
result, our growth could be limited due to our lack of capacity to develop and
market our products to our customers, or we could experience deterioration in
service levels or decreased customer satisfaction.

 Our Efforts to Expand Sales of Our Products to Other Industries May Not
 Succeed

   We have historically sold our products primarily to companies in the
electronics and medical device manufacturing industries. We intend to market
products to customers in additional industries. Although we have targeted
enterprises in other markets as potential customers, these potential customers
may not be as willing to purchase products like ours as have the electronics
and medical device industries.

 The Market For Our Products Is Newly Emerging and Customers May Not Accept Our
 Products

   The market for software products that allow companies to collaborate with
suppliers on product information and change is newly emerging. Companies have
not traditionally automated collaborative manufacturing commerce solutions like
we offer throughout the supply chain. We cannot be certain that this market
will continue to develop and grow or that companies will elect to utilize our
products rather than attempt to develop applications internally or through
other sources. In addition, the use of the Internet, as well as corporate
intranets, has not been widely adopted for sharing product information as well
as for collaboration among supply chain participants. Companies that have
already invested substantial resources in other methods of sharing product
information during the manufacturing and supply process may be reluctant to
adopt a new

                                       18
<PAGE>

approach that may replace, limit or compete with their existing systems or
methods. We expect that we will continue to need to pursue intensive marketing
and sales efforts to educate prospective customers about the uses and benefits
of our products. Therefore, demand for and market acceptance of our products
will be subject to a high level of uncertainty.

 Competition Among Providers of Software Enabling Collaboration in a
 Manufacturing Supply Chain May Increase, Which Could Cause Us to Reduce
 Prices, and Resulting in Reduced Gross Margins or Loss of Market Share

   The market for products that enable companies to interactively manage and
share information relating to the manufacture and supply of products is highly
fragmented, rapidly changing and increasingly competitive. We expect
competition to continue to intensify, which could result in price reductions
for our products, reduced margins and loss of market share. Competitors vary
in size and in the scope and breadth of the products and services offered. We
face potential competition from in-house development efforts by potential
customers or partners, vendors of software designed for management of
engineering information, and developers of general purpose groupware software
addressing only limited technology components involved in managing data
generated by changes to the engineering process. We also face potential
competition from providers of enterprise resource planning software and
supply-chain software.

   Many of our actual or potential competitors have a number of significant
advantages over us, including:

  .  longer operating histories;

  .  significantly greater financial, technical, marketing and other
     resources;

  .  significantly greater name recognition and a larger installed base of
     customers; and

  .  well-established relationships with our actual and potential customers
     as well as with systems integrators and other vendors and service
     providers.

   These competitors may also be able to respond more quickly to new or
emerging technologies and changes in customer requirements, or to devote
greater resources to the development, promotion and sale of their products,
than we can. Some of our actual or potential competitors may also bundle their
products in a manner that may discourage potential customers from purchasing
our products. Accordingly, we may not be able to maintain or expand our sales
if competition increases and we are unable to respond effectively.

 We May Experience Difficulties in Introducing New Products and Upgrades Which
 Could Result in Negative Publicity, Loss of Sales, Delay in Market Acceptance
 or Customer Dissatisfaction


   Our future financial performance depends on our successful and timely
development, introduction and market acceptance of new and enhanced products.
The life cycles of our products are difficult to predict because the market
for our products is new and emerging, and is characterized by rapid
technological change, changing customer needs and evolving industry standards.
The introduction of products or computer systems employing new technologies
and emerging industry standards could render our existing products obsolete
and unmarketable. For example, portions of our software are written in the
Java computer programming language. If a new software language becomes
standard in our industry or is considered more robust, we may need to rewrite
portions of our products in another computer language in order to remain
competitive. The introduction of enhancements to our suite of products may
also cause customers to defer orders for our existing products. We may
experience difficulties that could delay or prevent the successful
development, introduction or marketing of new or enhanced products in the
future. In addition, those products may not meet the requirements of the
marketplace and achieve market acceptance.

   We expect to add new products to our supply chain applications by
acquisition or internal development and by developing enhancements to our
existing products. We have in the past experienced delays in the

                                      19
<PAGE>

planned release dates of our software products and upgrades, and we have
discovered software defects in new products after their introduction. New
products or upgrades may not be released according to schedule, or may contain
defects when released. Either situation could result in negative publicity,
loss of sales, delay in market acceptance of our products or customer claims
against us.

 Our Products Might Not Be Compatible With All Platforms, Which Could Inhibit
 Sales

   We must continually modify and enhance our products to keep pace with
changes in computer hardware and software and database technology, as well as
emerging technical standards in the software industry. For example, we have
designed our products to work with databases such as Oracle. Any changes to
these platforms could require us to modify our products, and could cause us to
delay releasing product enhancements until the updated version of that platform
has been released. Furthermore, third parties develop adapters to integrate our
products with other design, manufacture, finance and supply chain systems used
by our customers. We rely on these third parties to update the adapters to
reflect changes to our products as well as to the targeted platform in order to
maintain the functionality provided by our products. As a result, uncertainties
related to the timing and nature of new product announcements, introductions or
modifications by vendors of operating systems, back-office applications and
browsers and other Internet- related applications could hurt our business, as
customers may not be certain as to how our products will operate with their
existing systems.

   In addition, portions of our products are based upon a programming language
that does not offer all of the features available in Windows. Accordingly,
certain features available to products that run on Windows may not be available
in the non-Windows version of our products, and this could result in reduced
customer demand. Furthermore, some of our products do not run on certain types
of popular server computers, such as those that utilize the UNIX operating
system. If another platform becomes more widely used or offers greater
scalability, we could be required to convert, or "port," our product to that
platform. We may not succeed in these efforts, and even if we do, potential
customers may not choose our product. As we extend the functionality of our
products to run on additional platforms, we may incur increased development
costs and increased development lifecycles.

 If We Are Unable to Timely Expand Our International Operations, We May Not
 Achieve Anticipated Revenue Growth

   We believe that expansion of our international operations will be necessary
for our future success, and a key aspect to our business strategy has been and
is to expand our sales and support organizations internationally. Therefore, we
believe that we will need to commit additional significant resources to expand
our international operations. We employ sales professionals in Europe and the
Asia-Pacific market. If we are unable to successfully expand further in these
international markets on a timely basis, we may not be able to achieve
anticipated revenue growth. This expansion may be more difficult or take longer
than we anticipate, and we may not be able to successfully market, sell,
deliver and support our products internationally.

   Our international expansion will subject us to a number of risks associated
with international business activities. These risks include:

  .  difficulty in providing customer support for our software in multiple
     time zones;

  .  the need to develop our software in multiple foreign languages;

  .  longer sales cycles associated with educating foreign customers on the
     benefits of using our products;

  .  greater difficulty and longer time in collecting accounts receivable
     from customers located abroad;

  .  political and economic instability, particularly in Asia;

  .  difficulties in enforcing agreements through foreign legal systems; and

  .  unexpected changes in regulatory requirements that may limit our ability
     to export our software or sell into particular jurisdictions or impose
     multiple conflicting tax laws and regulations.

                                       20
<PAGE>

   To date, most of our revenues have been denominated in United States
dollars. If we experience an increase in the portion of our revenues
denominated in foreign currencies, we may incur greater risks in currency
fluctuations, particularly since we translate our foreign currency revenues
once at the end of each quarter. In the future, our international revenues
could be denominated in the Euro, the currency of the European Union. The Euro
is an untested currency and may be subject to economic risks that are not
currently contemplated. We currently do not engage in foreign exchange hedging
activities, and therefore our international revenues and expenses are
currently subject to the risks of foreign currency fluctuations.

 We Depend on Licensed Technology and the Loss or Inability to Maintain These
 Technology Licenses Could Result in Increased Cost or Delays in Sales of Our
 Products

   We license technology on a non-exclusive basis from several businesses for
use with our products, including licenses from RSA Security Inc. for security
and encryption technology software, Actuate Corporation for reporting
capability and from Cimmetry Systems Inc. for our viewers. We anticipate that
we will continue to license technology from third parties in the future. Some
of the software we license from third parties would be difficult to replace.
This software may not continue to be available on commercially reasonable
terms, if at all. The loss or inability to maintain any of these technology
licenses could result in delays in the licensing of our products until
equivalent technology, if available, is identified, licensed and integrated.
In addition, the effective implementation of our products depends upon the
successful operation of third-party licensed products in conjunction with our
products, and therefore any undetected errors in these licensed products may
prevent the implementation or impair the functionality of products, delay new
product introductions and/or injure our reputation. The increased use of
third-party software could require us to enter into license agreements with
third parties, which could result in higher royalty payments and a loss of
product differentiation and lower product gross margins.

 Defects in Our Software Products Could Diminish Demand For Our Products

   Our software products are complex and may contain errors that may be
detected at any point in the life of the product. We have in the past
discovered software errors in certain of our products and as a result have
experienced delays in shipment of products during the period required to
correct these errors. We cannot be sure that, despite testing by us, our
implementation partners and our current and potential customers, errors will
not be found in new products or releases after shipment, resulting in loss of
revenue, delay in market acceptance and sales, diversion of development
resources, injury to our reputation or increased service and warranty costs.

   Further, our products are generally used in systems with other vendors'
products, and as a result, our products must integrate successfully with these
existing systems. System errors, whether caused by our products or those of
another vendor, could adversely affect the market acceptance of our products,
and any necessary revisions could cause us to incur significant expenses.

 If We Become Subject to Product Liability Litigation, It Could Be Time
 Consuming and Costly to Defend

   Since our products are used for mission critical applications in the supply
chain, errors, defects or other performance problems could result in financial
or other damages to our customers. For example, our products are designed to
communicate information relating to changes in product specifications during
the manufacturing process. If a supplier or other participant receives
inaccurate or erroneous data, it is possible that it could claim it incurred
damages based on its reliance on that data. Although our license agreements
generally contain provisions designed to limit our exposure to product
liability litigation, existing or future laws or unfavorable judicial
decisions could negate such limitation of liability provisions. Product
liability litigation, even if unsuccessful, would be time-consuming and costly
to defend and could harm our business.

                                      21
<PAGE>

 In Order to Manage Our Growth and Expansion, We Will Need to Improve and
 Implement New Systems, Procedures and Controls

   We have recently experienced a period of rapid growth and expansion that
has placed a significant strain on our management information systems and our
administrative, operational and financial resources. For example, we have
grown from 289 employees at April 30, 2000 to 460 employees at April 30, 2001.
If we are unable to manage our growth and expansion in an efficient or timely
manner, our business will be seriously harmed. In addition, we have recently
hired a significant number of employees and plan to further increase our total
headcount. We also plan to expand the geographic scope of our operations. This
expansion has resulted and continues to result in substantial demands on our
management resources. To accommodate continued anticipated growth and
expansion, we will be required to:

  .  improve existing and implement new operational and financial systems,
     procedures and controls;

  .  hire, train, manage, retain and motivate qualified personnel; and

  .  enter into relationships with strategic partners.

   These measures may place additional burdens on our management and our
internal resources.

 If We Are Unable to Protect Our Intellectual Property We May Lose a Valuable
 Asset, Experience Reduced Market Share or Incur Costly Litigation to Protect
 Our Rights

   Our success and ability to compete depend upon our proprietary technology,
including our brand and logo and the technology underlying our products. We
rely on patent, trademark, trade secret and copyright laws to protect our
intellectual property. Despite our efforts to protect our intellectual
property, a third party could copy or otherwise obtain our software or other
proprietary information without authorization, or could develop software
competitive to ours. 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 patents that may be issued to us or
our other intellectual property. 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, and we expect that it will become more
difficult to monitor the use of our products if we increase our international
presence.

   We may have to resort to litigation to enforce our intellectual property
rights, to protect our patents, trade secrets or know-how or to determine
their scope, validity or enforceability. Enforcing or defending our
proprietary technology is expensive, could cause the diversion of our
resources, and may not prove successful. Our protective measures may prove
inadequate to protect our proprietary rights, and any failure to enforce or
protect our rights could cause us to lose a valuable asset.

 We May Be Subject to Intellectual Property Infringement Claims That, With or
 Without Merit, Could Be Costly to Defend or Settle

   We may from time to time be subject to claims of infringement of other
parties' proprietary rights or claims that our own intellectual property
rights are invalid. There has been a substantial amount of litigation in the
software and Internet industries 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 their intellectual property. We expect
that software product developers and providers of electronic commerce
solutions 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 industry segments overlaps. Any infringement claims made
against us, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or negative publicity. In addition,
if our products were found to infringe a third party's proprietary rights, we
could be required to enter into royalty or licensing agreements in order to
continue to be able to sell our products. Royalty or licensing agreements, if
required, may not be available on terms acceptable to us or at all.

                                      22
<PAGE>

 We Will Rely on Third Parties to Manage System and Network Environments for
 Hosted Customers

   We will rely on third parties to manage system and network environments
running the Agile Anywhere and Agile Buyer solutions and related solutions for
customers requiring hosting. Services provided by these third parties will
include managing the hosted servers, maintaining communications lines and
managing network data centers, which are the locations where the Agile
solutions reside. Since the hosting of the Agile solutions for certain
customers will depend on these third parties, it is possible that these third
parties may not be able to meet our and our customers' service level
requirements. Dissatisfaction or problems with our service or the service of
the third parties that host our solutions or delays or interruptions or other
problems with service due to mechanical failure, human error, security
breaches, power loss and other facility failures, natural disasters, sabotage,
vandalism, or other similar events could result in a reduction of business
generated by the hosted environment. In the event that we choose to use
alternative hosting sources, this may result in a temporary degradation of the
service level for hosting services that may be unacceptable to our customers.

 We Are Subject to Employer Payroll Taxes When Our Employees Exercise Their
 Stock Options That Could Adversely Affect Our Results of Operations

   Employer payroll taxes are assessed on each employee's gain on the sale of
stock received upon exercise of options, which is the difference between the
price of our common stock on the date of exercise and the exercise price.
During a particular period, these payroll taxes could be material. These
employer payroll taxes would be recorded as an expense and are assessed at tax
rates that varies depending upon the employee's taxing jurisdiction in the
period such options are exercised based on actual gains realized by employees.
However, because we are unable to predict how many stock options will be
exercised, at what price and in which country during any particular period, we
cannot predict the amount, if any, of employer payroll expense will be recorded
in a future period or the impact on our future financial results.

 Power Outages In California May Adversely Affect Us

   We have significant operations, including our headquarters, in the state of
California and are dependent on a continuous power supply. California's current
energy crisis could substantially disrupt our operations and increase our
expenses. California has recently implemented, and may in the future continue
to implement, rolling blackouts throughout the state. If blackouts interrupt
our power supply, we may be temporarily unable to continue operations at our
California facilities. Any such interruption in our ability to continue
operations at our facilities could delay the development and delivery of our
products and services and otherwise disrupt communications with our customers
or other third parties on whom we rely. Furthermore, shortages in wholesale
electricity supplies have caused power prices to increase. If energy prices
continue to increase, our operating expenses will likely increase which could
have a negative effect on our operating results.

 Some of Our Customers are Small Emerging Growth Companies that May Represent
 Credit Risks

   We have expanded our customer base to include licenses to small emerging
growth companies. Many of these companies have limited operating histories, are
operating at a loss and have limited access to capital. With the significant
slowdown in U.S. economic growth in the past several months and uncertainty
relating to the prospects for near-term U.S. economic growth, some of these
customers may represent a credit risk. If our customers experience financial
difficulties or fail to experience commercial success, we may have difficulty
collecting on our accounts.

                                       23
<PAGE>

Risks Related to the Internet on Our Business and Prospects

 If Use of the Internet Does Not Continue to Develop and Reliably Support the
 Demands Placed on It by Electronic Commerce, We May Experience Loss of Sales

   Our success depends upon continued growth in the use of the Internet as a
medium of collaboration and commerce. Although the Internet is experiencing
rapid growth in the number of users, this growth is a recent phenomenon and may
not continue. Furthermore, despite this growth in usage, the use of the
Internet for commerce is relatively new. As a result, a sufficiently broad base
of companies and their supply chain partners may not adopt or continue to use
the Internet as a medium for collaboration for product content information. Our
business would be seriously harmed if:

  .  use of the Internet does not continue to increase or increases more
     slowly than expected;

  .  the infrastructure for the Internet does not effectively support
     enterprises and their supply chain partners;

  .  the Internet does not create a viable commercial marketplace, inhibiting
     the development of electronic collaborative manufacturing commerce and
     reducing the demand for our products;

  .  concerns over the secure transmission of confidential information over
     public networks and general disruption could inhibit the growth of the
     Internet as a means of conducting commercial transactions; or

  .  concerns about third parties using the Internet to create interference
     with the use of our products over the Internet.

 Capacity Restraints May Restrict the Use of the Internet as a Commercial
 Marketplace, Resulting in Decreased Demand For Our Products

   The Internet infrastructure may not be able to support the demands placed on
it by increased usage or the limited capacity of networks to transmit large
amounts of data. Other risks associated with commercial use of the Internet
could slow its growth, including:

  .  outages and other delays resulting from the inadequate reliability of
     the network infrastructure;

  .  slow development of enabling technologies and complementary products;
     and

  .  limited availability of cost-effective, high-speed access.

   Delays in the development or adoption of new equipment standards or
protocols required to handle increased levels of Internet activity, or
increased governmental regulation, could cause the Internet to lose its
viability as a means of communication between manufacturers and their supply
chain partners. If these or any other factors cause use of the Internet for
commerce to slow or decline, the Internet may not prove viable as a commercial
marketplace, resulting in decreased demand for our products.

 Increasing Governmental Regulation of the Internet Could Limit the Market for
 Our Products

   As Internet commerce continues to evolve, we expect that federal, state and
foreign governments will adopt laws and regulations covering issues such as
user privacy, taxation of goods and services provided over the Internet,
pricing, content and quality of products and services. It is possible that
legislation could expose companies involved in electronic commerce to
liability, taxation or other increased costs, any of 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 and regulations could limit the market for our
products.

                                       24
<PAGE>

Risks Related to Control

 Our Executive Officers, Directors and Major Stockholders Will Retain
 Significant Control, Which May Lead to Conflicts With Other Stockholders Over
 Corporate Governance Matters

   Currently executive officers, directors and holders of 5% or more of our
outstanding common stock own, in the aggregate, approximately 17% of our
outstanding common stock. These stockholders would be able to significantly
influence all matters requiring approval by our stockholders, including the
election of directors and the approval of significant corporate transactions.
This concentration of ownership may also delay, deter or prevent a change in
our control and may make some transactions more difficult or impossible to
complete without the support of these stockholders.

 Our Stock Price Has Been and May Continue to Be Extremely Volatile, Which May
 Lead to Losses By Investors and to Securities Litigation

   The stock market has experienced significant price and volume fluctuations
and the market prices of securities of technology companies, particularly
Internet- related companies including us, have been highly volatile. Investors
may not be able to resell their shares purchased in this offering at or above
the offering price. The market price of our common stock may decrease
significantly in response to a number of factors, some of which are beyond our
control, including the following:

  .  variations in our quarterly operating results;

  .  announcements that our revenues or income are below securities analysts'
     expectations;

  .  changes in securities analysts' estimates of our performance or industry
     performance;

  .  changes in market valuations of similar companies;

  .  sales of large blocks of our common stock;

  .  fluctuations in stock market price and volume, which are particularly
     common among highly volatile securities of software and Internet-based
     companies.

   In the past, securities class action litigation has often been instituted
against a company following periods of volatility in the company's stock
price. This type of litigation, if filed against us, could result in
substantial costs and could divert our management's attention and resources.

 Provisions Contained in Our Charter Documents May Delay or Prevent a Change
 in Our Control

   Provisions of our Delaware certificate of incorporation and bylaws and of
Delaware law could make it more difficult for a third party to acquire us,
even if a change in control would be beneficial to our stockholders. These
provisions also may prevent changes in our management. We are subject to the
provision of Section 203 of the Delaware General Corporation Law, which
restricts certain business combinations with interested stockholders. The
combination of these provisions may inhibit a non-negotiated merger or other
business combination.

 We Have Adopted Certain Anti-Takeover Measures That May Make it More
 Difficult For a Third Party to Acquire Us

   Our board of directors has the authority to issue up to 10,000,000 shares
of preferred stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the
stockholders. The rights of the holders of common stock will be subject to,
and may be adversely affected by, the rights of the holders of any preferred
stock that may be issued in the future. The issuance of shares of preferred
stock, while potentially providing desirable flexibility in connection with
possible acquisitions and for other corporate purposes, could have the effect
of making it more difficult for a third party to acquire a

                                      25
<PAGE>

majority of our outstanding voting stock. We have no present intentions to
issue shares of preferred stock. Further, on March 2001, our board of directors
adopted a preferred stock purchase rights plan intended to guard against
certain takeover tactics. The adoption of this plan was not in response to any
proposal to acquire us, and the board is not aware of any such effort. The
existence of this plan could also have the effect of making it more difficult
for a third party to acquire a majority of our outstanding voting stock. In
addition, certain provisions of our certificate of incorporation may have the
effect of delaying or preventing a change of control, which could adversely
affect the market price of our common stock.

ITEM 2. PROPERTIES

   Our headquarters are currently located in four leased facilities in San
Jose, California, consisting of approximately 142,000 square feet under leases
expiring in 2005 with expansion and renewal options, of which approximately
18,000 square feet is currently sublet to tenants on short-term subleases. In
March 2000, we entered into a lease expiring in 2005 for an additional
approximately 5,000 square feet of office space located in Scotts Valley,
California. We also lease offices for sales and service personnel in eight
locations in the United States as well as in Paris, France, Stuttgart, Germany,
London, United Kingdom, Tokyo, Japan and Taipei, Taiwan. We believe our current
facilities will be adequate to meet our needs for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

   None

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

   None

                                    PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

   Our common stock is traded on the Nasdaq National Market under the symbol
"Agil." The price range per share reflected in the table below represents the
highest and lowest sale prices for our stock as reported by the Nasdaq National
Market during each quarter the stock has been publicly traded since August 20,
1999, the date of our initial public offering.

<TABLE>
<CAPTION>
                                                                  High    Low
                                                                 ------- ------
      <S>                                                        <C>     <C>
      Fiscal 2001:
      Quarter Ended April 30, 2001.............................. $ 49.94 $ 9.00
      Quarter Ended January 31, 2001............................ $ 88.25 $24.00
      Quarter Ended October 31, 2000............................ $ 98.00 $46.56
      Quarter Ended July 31, 2000............................... $ 75.50 $33.88

      Fiscal 2000:
      Quarter Ended April 30, 2000.............................. $ 91.19 $18.31
      Quarter Ended January 31, 2000............................ $112.50 $46.59
      Quarter Ended October 31, 1999............................ $ 51.80 $17.13
</TABLE>

   All information in this Item 5 has been restated to reflect a two-for-one
stock split, effected in the form of a stock dividend to each stockholder of
record as of March 17, 2000.

   Our present policy is to retain earnings, if any, to finance future growth.
We have never paid cash dividends and have no present intention to pay cash
dividends. At June 30, 2001, there were 424 stockholders of record (there were
a substantially greater number of Agile Software beneficial owners) and the
price per share of our common stock was $16.03.

                                       26
<PAGE>

   During fiscal 2001 we issued an aggregate of 8,615,000 shares of our common
stock upon the exercise of outstanding options to purchase our common stock. A
portion of those shares was issued pursuant to an exemption by reason of Rule
701 under the Securities Act of 1933.

   In August 2000, we issued a warrant to purchase 50,000 shares of our common
stock in connection with the establishment of a marketing alliance with a
business partner. The warrant was vested and immediately exercisable upon the
date of grant. The warrant expires upon the termination of the agreement. The
offer and sale of the warrant was exempt from the registration requirements of
the Securities Act of 1933, as amended, pursuant to Section 4(2) thereof. We
relied on the following criteria to make such exemption available: the number
of offerees, the size and manner of the offering, the sophistication of the
offerees and the availability of material information.

   In September 2000, we issued an aggregate of 82,222 shares of our common
stock upon the exercise of an outstanding warrant on a net exercise basis, at
an exercise price of $74.92 per share. The offer and sale of the warrant and
the common stock issuable upon exercise thereof, was exempt from the
registration requirements of the Securities Act of 1933, as amended, pursuant
to Section 4(2) thereof. We relied on the following criteria to make such
exemption available: the number of offerees, the size and manner of the
offering, the sophistication of the offerees and the availability of material
information.

   On January 29, 2001, we issued an option to acquire up to 9,396,941 shares
of our common stock at an exercise price per share of $54.00, to Ariba, Inc.,
under the terms of the Agreement and Plan of Merger and Reorganization between
Agile and Ariba in connection with Ariba's proposed acquisition of Agile. The
option was cancelled on April 4, 2001 when the proposed acquisition was
cancelled.


                                       27
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

   The selected consolidated statement of operations data set forth below for
the fiscal years ended April 30, 2001, 2000 and 1999 and the consolidated
balance sheet data as of April 30, 2001 and 2000 are derived from our
consolidated financial statements, which have been audited by
PricewaterhouseCoopers LLP, independent public accountants, and are included
elsewhere in this Annual Report on Form 10-K. The selected consolidated
statement of operations data for the fiscal years ended April 30, 1998 and 1997
and the consolidated balance sheet data as of April 30, 1999, 1998 and 1997 are
derived from our audited consolidated financial statements that are not
included in this Annual Report on Form 10-K. The following selected
consolidated financial data should be read in conjunction with, and are
qualified by reference to, our consolidated financial statements and related
notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

<TABLE>
<CAPTION>
                                     Fiscal Years Ended April 30,
                              -----------------------------------------------
                                2001       2000      1999     1998     1997
                              ---------  --------  --------  -------  -------
                                (in thousands, except per share amounts)
<S>                           <C>        <C>       <C>       <C>      <C>
Consolidated Statement of
 Operations Data (1):
Revenues:
 License..................... $  64,978  $ 21,463  $ 10,859  $ 6,102  $ 1,143
 Professional services.......     9,182     4,787     3,665    1,385      187
 Maintenance.................    12,899     5,948     2,283      516       22
                              ---------  --------  --------  -------  -------
   Total revenues............    87,059    32,198    16,807    8,003    1,352
                              ---------  --------  --------  -------  -------
Cost of revenues:
 License.....................     3,830     1,451       819      543      113
 Professional services.......     6,986     3,718     3,823    1,347       88
 Maintenance.................     4,875     2,510     1,343      278       65
 Stock compensation..........       663       562       162       61      --
                              ---------  --------  --------  -------  -------
   Total cost of revenues....    16,354     8,241     6,147    2,229      266
                              ---------  --------  --------  -------  -------
Gross profit.................    70,705    23,957    10,660    5,774    1,086
                              ---------  --------  --------  -------  -------
Operating expenses:
 Sales and marketing:
 Other sales and marketing...    61,951    26,657    13,495    8,070    2,149
 Stock compensation..........     7,294     5,820       457      416      --
 Research and development:
 Other research and
  development................    26,451     9,411     4,742    3,788    2,510
 Stock compensation..........     4,346     3,281       858      185      --
 General and administrative:
 Other general and
  administration.............     6,255     3,411     1,938    1,995    1,333
 Stock compensation..........     3,749     2,182       776      194      --
Amortization of goodwill and
 other intangible assets.....    35,974    14,911       --       --       --
Acquired in-process
 technology..................       --      1,300       --       --       --
Impairment of goodwill and
 other intangible assets.....    55,224       --        --       --       --
Merger related expenses......     4,985       --        --       --       --
                              ---------  --------  --------  -------  -------
   Total operating expenses..   206,229    66,973    22,266   14,648    5,992
                              ---------  --------  --------  -------  -------
Loss from operations.........  (135,524)  (43,016)  (11,606)  (8,874)  (4,906)
Impairment of equity
 investments.................    (8,561)      --        --       --       --
Interest income (expense)....    18,749     7,823       178      (68)      70
                              ---------  --------  --------  -------  -------
Net loss..................... $(125,336) $(35,193) $(11,428) $(8,942) $(4,836)
                              =========  ========  ========  =======  =======
Net loss per share:
 Basic and diluted........... $   (2.74) $  (1.14) $  (1.94) $ (2.10) $ (1.86)
                              =========  ========  ========  =======  =======
 Weighted average shares
  (2)........................    45,703    30,967     5,904    4,258    2,600
                              =========  ========  ========  =======  =======

<CAPTION>
                                            As of April 30,
                              -----------------------------------------------
                                2001       2000      1999     1998     1997
                              ---------  --------  --------  -------  -------
<S>                           <C>        <C>       <C>       <C>      <C>
Consolidated Balance Sheet
 Data:
Cash, cash equivalents and
 short-term investments...... $ 300,525  $299,875  $ 10,003  $ 2,160  $ 3,292
Working capital (deficit)....   293,839   294,251     4,174     (930)   2,617
Total assets.................   355,191    43,801    17,948    7,531    5,366
Long-term obligations........       134     1,015     3,224      782      626
Stockholders' equity.........   313,640   412,646     3,291      177    3,154
</TABLE>

                                       28
<PAGE>

--------
(1) The consolidated statement of operations data reflects reclassifications to
    allocate the non-cash stock compensation related to the issuance of stock
    options from a single-line item presentation within operating expenses to
    the individual amounts related to cost of revenues, sales and marketing,
    research and development, and general administration expenses.

(2) Reflects the two-for-one stock split effective March 2000.

                                       29
<PAGE>

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

Overview

   We develop and market collaborative manufacturing commerce solutions that
speed the "build" and "buy" process across the virtual manufacturing network.
We believe that our products improve time-to-volume, customer responsiveness
and cost of goods sold. Our solutions manage product content and critical
communication, collaboration and commerce transactions among original equipment
manufacturers, electronic manufacturing services providers, customers and
suppliers in real-time. We were founded in March 1995 and in June 1996 we began
selling our first products and delivering related services. We currently
license our products in the United States through our direct sales force, and
in Europe and Asia through our direct sales force and distributors. To date,
revenues from international sales have not been material. We have derived our
revenues principally from the licenses of our products, the delivery of
professional services and from maintenance contracts.

   Customers who license our software products receive a license for our
application servers, one or more user licenses, and adapters provided by third
parties to connect with the customer's other existing enterprise systems. Our
customers generally purchase a limited number of user licenses at the time of
the initial license of the software products and may purchase additional user
licenses as needed. Customers may purchase implementation services from us.
These professional services are generally provided on a fixed-price basis and
are often provided by third-party consulting organizations. We also offer fee-
based training services to our customers. As of April 30, 2001, over 98% of our
customers who licensed our products had purchased maintenance contracts, which
provide unspecified software upgrades on a when-and-if available basis, and
technical support over a stated term, which is generally a twelve-month period.
Over 95% of our customers had renewed their maintenance contracts as of April
30, 2001. We may not be able to maintain or continue these rates of purchases
or renewals of maintenance agreements.

   We recognize revenue under Statement of Position, or SOP, 97-2, "Software
Revenue Recognition," and SOP 98-9, "Modification of SOP 97-2, Software Revenue
Recognition, with Respect to Certain Transactions." When contracts contain
multiple elements and vendor-specific objective evidence of fair-value exists
for all undelivered elements, we account for the delivered elements in
accordance with the "Residual Method" prescribed by SOP 98-9. Multiple element
arrangements generally include post-contract support (PCS or support), software
products, and in some cases, service. Vendor-specific objective evidence of
fair value is generally determined by sales of the same element or service to
third parties or through a renewal rate specified in the related arrangement.
In most cases, the bundled multiple elements include PCS and the software
product. In such cases, when vendor-specific objective evidence of fair value
exists for all of the undelivered elements (most commonly PCS), the residual
amount is recognized as revenue and the PCS is recognized ratably over the PCS
term as described below.

   License revenues are recognized when persuasive evidence of an arrangement
exists, the fee is fixed or determinable, collectibility is probable, and
delivery and customer acceptance (including the expiration of an acceptance
period), if required under the terms of the contract, of the software products
has occurred. In the event that we grant a customer the right to specified
upgrades, license revenue is deferred until delivery of the specified upgrade.
If vendor-specific objective evidence of fair value exists for the specified
upgrade, an amount equal to this fair value is deferred. If vendor-specific
objective evidence of fair value does not exist, then recognition of the entire
license fee is deferred until the delivery of the specified upgrade. Allowances
for estimated returns are provided upon product delivery. In instances where
vendor obligations remain, recognition of revenues is deferred until the
obligation has been satisfied.

   Revenues from professional services consist of implementation and training
services. Training revenues are recognized as the services are performed.
Implementation services are typically performed under fixed-price contracts and
accordingly, revenues are recognized upon customer acceptance. A provision for
estimated losses on fixed-price professional services contracts is recognized
in the period in which the loss becomes known.

                                       30
<PAGE>

   Maintenance revenues are recognized ratably monthly over the term of the
maintenance contract, which is generally twelve months. Maintenance contracts
include the right to unspecified upgrades on a when-and-if available basis, and
ongoing support.

   Our cost of license revenues include royalties due to third parties for
integrated technology, the cost of manuals and product documentation,
production media used to deliver our products and packaging costs. Our cost of
professional services revenues include salaries and related expenses for the
implementation and training services organizations, costs of third parties
contracted to provide implementation services to customers and an allocation of
our overhead expenses. Our cost of maintenance revenues include salaries and
related expenses for the customer support organization and an allocation of our
overhead expenses. The cost of professional services can fluctuate depending
upon whether more or less of the professional services are provided to our
customers by us rather than by third-party service providers. We generally
provide implementation services to our customers on a fixed-price basis. If we
have to engage independent contractors or third parties to provide these
services on our behalf, it is generally at higher cost resulting in a lower
gross margin than if we had provided the services to our customers ourselves.
Therefore, our gross margin from professional services may fluctuate based on
who performs the services and the actual cost to provide these services.
Although services revenues may increase in absolute dollars if we increase the
professional services we provide, services revenues have lower gross margins
than license revenues. Our overall gross profit can therefore fluctuate based
on the mix of license revenues compared to professional services revenues and
maintenance revenues.

   Our operating expenses are classified as sales and marketing, research and
development and general and administrative. We classify all charges to these
operating expense categories based on the nature of the expenditures. Although
each category includes expenses that are unique to the category type, there are
common recurring expenditures that are typically included in all operating
expenses categories, such as salaries, employee benefits, incentive
compensation, bonuses, travel costs, telephone, communication, rent and
allocated facilities costs and professional fees. The sales and marketing
category of operating expenses includes additional expenditures specific to the
marketing group, such as public relations and advertising, trade shows,
marketing collateral materials, and customer user group meetings and
expenditures specific to the sales group, such as commissions. To date, all
software development costs in research and development have been expensed as
incurred. Also included in our operating expenses is the amortization of stock
compensation described below.

   On November 23, 1999, we acquired Digital Market, Inc. ("DMI") in a
transaction accounted for as a purchase business combination. We paid $20.0
million in cash and issued 1,202,018 shares of our Common Stock valued at $75.7
million or $62.95 per share based upon the average price of our Common Stock
two days before, day of and two days after the transaction measurement date. In
addition, we also assumed all unvested outstanding stock options granted by
DMI. The estimated fair value of the assumed options was $5.6 million, and was
included as a component of the purchase price. The fair value of the options
was estimated using the Black-Scholes option pricing model with the following
weighted-average assumptions: risk-free rate of 5.96%, expected life of 2.0 to
4.0 years, expected dividend rate of 0%, and volatility of 85%. We incurred
$1.2 million in acquisition expenses, including financial advisory and legal
fees and other direct transaction costs resulting in an adjusted aggregate
purchase price of $102.5 million.


                                       31
<PAGE>

   The total acquisition price of $102.5 million was allocated to the assets
acquired, including tangible and intangible assets, and liabilities assumed
based upon the fair value of such assets and liabilities on the date of the
acquisition. The total acquisition price of the acquisition was allocated to
assets and liabilities based on management's estimates of their fair value and
an independent appraisal of certain intangible assets, with the excess costs
over the net assets acquired allocated to goodwill. The aggregate purchase
price was allocated as follows (in thousands):

<TABLE>
       <S>                                                           <C>
       Net tangible liabilities..................................... $   (6,659)
       In-process technology........................................      1,300
       Existing technology..........................................      1,850
       Trademark....................................................        150
       Assembled workforce..........................................      2,100
       Goodwill.....................................................    103,776
                                                                     ----------
                                                                       $102,517
                                                                     ==========
</TABLE>

   The net tangible liabilities consisted primarily of cash and cash
equivalents, accounts receivable, property and equipment, accounts payable and
other liabilities and notes payable. Because the in-process technology had not
reached the stage of technological feasibility at the acquisition date and had
no alternative future use, the amount was immediately charged to operations.
The amount allocated to existing technology, trademark and assembled workforce
was being amortized over the estimated useful lives of three years. The
purchase price in excess of identified tangible and intangible assets was
allocated as goodwill. As a result of the rapid technological changes occurring
in the software and Internet industries, goodwill was being amortized over the
estimated useful life of three years. The valuation of the intangible assets
was been determined using management's assumptions and a valuation report from
an independent appraiser.

   Management assesses the impairment of identifiable intangibles and related
goodwill periodically in accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of. Impairment of
enterprise level goodwill is also assessed periodically in accordance with the
provision of Accounting Principles Board (APB) Opinion No. 17, Intangible
Assets. An impairment review is performed whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Factors
considered important which could trigger an impairment review include, but are
not limited to, significant underperformance relative to expected historical or
projected future operating results, significant changes in the manner of use of
the acquired assets or the strategy for our overall business, significant
negative industry or economic trends, a significant decline in our stock price
for a sustained period, or a significant decline in our market capitalization
relative to net book value. When it is determined that the carrying value of
goodwill may not be recoverable based upon the existence of one or more of the
above indicators of impairment, any impairment is measured based on a projected
discounted cash flow method using a discount rate commensurate with the risk
inherent in our current business model.

   During the fourth quarter of 2001, management performed an impairment
assessment of the identifiable intangibles and goodwill recorded upon the
acquisition of DMI. This assessment was performed primarily as a result of the
decision by management in February 2001 to discontinue the further development
of the products acquired in the DMI acquisition. As a result of the assessment,
an impairment charge of $55.2 million was recorded to reduce the carrying value
of developed technology and goodwill. The charge was determined based upon our
estimated discounted cash flows using a discount rate of 25%. The assumptions
supporting such cash flows including the discount rate were determined using
management's best estimates. The remaining identifiable intangibles balance of
approximately $1.2 million, consisting principally of workforce in place, will
continue to be amortized over its remaining useful life of 1.5 years which
management considers appropriate.

   We granted options below market price to purchase 269,144 shares of our
common stock to certain DMI employees who remained our employees after the
acquisition. We recorded additional deferred stock

                                       32
<PAGE>

compensation of approximately $11.7 million associated with these stock option
grants, which was amortized over their expected term of 18 months.

   In connection with the granting of stock options to our employees (including
the DMI employees who remained our employees after the acquisition) and non-
employee consultants, we have recorded unearned stock compensation totaling
approximately $40.4 million through April 30, 2001, of which $9.4 million
remains to be amortized. This amount is included as a component of
stockholders' equity and is being amortized by charges to operations over the
applicable vesting period of the options, consistent with the accelerated
amortization method described in Financial Accounting Standards Board, or FASB,
Interpretation No. 28. We recognized amortization of unearned stock
compensation of $16.1 million in fiscal 2001 and $11.8 million in fiscal 2000.
The amortization of the remaining unearned stock compensation at April 30, 2001
will result in additional charges to operations through fiscal 2005. We
calculated the fair value of options to purchase 130,000 shares of our common
stock granted to non-employee consultants, which totals $1.5 million as of
April 30, 2001, using the Black-Scholes option pricing model as prescribed by
SFAS No. 123 with the following underlying assumptions: expected volatility of
100%, risk-free interest rate of 4.6% and option terms of two to four years. We
are accounting for these options under variable plan accounting and therefore
the expense associated with these options may fluctuate significantly from
quarter to quarter through fiscal 2005.

   In September 2000, in connection with a marketing alliance with a third
party, we issued a warrant to purchase 50,000 shares of our common stock at an
exercise price of $67.05 per share, the fair value of our common stock on the
date of the agreement. We recorded a charge of $2.0 million representing the
fair value of the warrant, estimated using the Black-Scholes option pricing
model with the following weighted-average assumptions: risk-free rate of 5.75%,
expected life of 3.0 years, expected dividend rate of 0%, and volatility of
80%. Such amount is presented as a reduction of stockholders' equity and is
being amortized to sales and marketing expense over the three-year life of the
marketing alliance.

   The warrant was granted on a non-contingent basis and vests immediately. The
warrant is not subject to repurchase, nor does it require substantial
performance for the third party to exercise. The marketing alliance is a three-
year non-exclusive cooperative agreement, which is designed to enhance our and
the third party's potential revenues in their respective areas, and credibility
in collaborative manufacturing commerce without constraining each other's
business. We will each be responsible for our own cost and expenses in
performing joint marketing sales activities.

   Although our total revenues have increased from year to year, we have
incurred significant costs to develop our products and to recruit and train
personnel for our engineering, sales, marketing, professional services and
administration departments. As a result, we have incurred significant losses
since inception, and, as of April 30, 2001, had an accumulated deficit of
$187.1 million.

   We intend to continue to incur significant sales and marketing, research and
development, general and administrative expenses and stock compensation
expenses. For example, we had 460 full-time employees at April 30, 2001,
compared to 289 at April 30, 2000 and 156 at April 30, 1999. We will seek to
hire additional employees in the future. We expect to continue to incur
operating losses for the foreseeable future. In order to achieve profitability,
we will need to increase our revenues significantly. Therefore, we cannot be
sure that we will ever attain or maintain profitability. Our expansion will
also place significant demands on our management and operational resources. To
manage this rapid growth and increased demands, we must improve existing and
implement new operational and financial systems, procedures and controls. We
must also hire, train, manage, retain and motivate qualified personnel. We
expect future expansion to continue to challenge our ability to hire, train,
manage, retain and motivate our employees.

   In view of the rapidly changing nature of our market and our limited
operating history, we believe that period-to-period comparisons of our revenues
and other operating results are not necessarily meaningful and should not be
relied upon as indications of future performance. Our historic revenue growth
rates are not necessarily sustainable or indicative of our future growth.

                                       33
<PAGE>

   On March 17, 2000, the Board of Directors authorized a two-for-one stock
split of our common stock, in the form of a stock dividend. The financial
information included in this report has been restated to give effect to the
stock split.

Results of Operations

   The following table sets forth selected consolidated financial data for the
periods indicated, expressed as a percentage of total revenues:

<TABLE>
<CAPTION>
                                             Fiscal Year Ended April 30,
                                            ---------------------------------
                                              2001        2000        1999
                                            ---------   ---------   ---------
   <S>                                      <C>         <C>         <C>
   Revenues:
     License...............................        75 %        67 %       65 %
     Professional services.................        10          15         22
     Maintenance...........................        15          18         13
                                            ---------   ---------   --------
       Total revenues......................       100         100        100
                                            ---------   ---------   --------
   Cost of revenues:
     License...............................         4           5          5
     Professional services.................         8          12         23
     Maintenance...........................         6           8          8
     Stock compensation....................         1           2          1
                                            ---------   ---------   --------
       Total cost of revenues..............        19          26         37
                                            ---------   ---------   --------
   Gross profit............................        81          74         63
                                            ---------   ---------   --------
   Operating expenses:
     Sales and marketing:
      Other sales and marketing............        71          83         80
      Stock compensation...................         8          18          3
     Research and development:
      Other research and development.......        31          29         28
      Stock compensation...................         5          10          5
     General and administrative:
      Other general and administration.....         7          11         12
      Stock compensation...................         4           7          5
     Amortization of goodwill and other
      intangible assets....................        41          46        --
     Acquired in-process technology........       --            4        --
     Impairment of goodwill and other
      intangible assets....................        64         --         --
     Merger related expenses...............         6         --         --
                                            ---------   ---------   --------
       Total operating expenses............       237         208        132
                                            ---------   ---------   --------
   Loss from operations....................      (156)       (134)       (69)
   Impairment of equity investments........       (10)        --         --
   Interest and other income...............        22          27          3
   Interest expense........................       --           (2)        (2)
                                            ---------   ---------   --------
   Net loss................................      (144)%      (109)%      (68)%
                                            =========   =========   ========
</TABLE>

Fiscal Years Ended April 30, 2001 2000 and 1999

Revenues

   Our total revenues were $87.1 million in fiscal 2001, $32.2 million in
fiscal 2000 and $16.8 million in fiscal 1999, representing increases of $54.9
million, or 170%, in fiscal 2001 compared to fiscal 2000 and $15.4 million, or
92%, in fiscal 2000 compared to fiscal 1999. We had no customer that accounted
for more than 10% of our total revenues in fiscal 2001, fiscal 2000 or fiscal
1999.

                                       34
<PAGE>

   License Revenues.  Our license revenues were $65.0 million in fiscal 2001,
$21.5 million in fiscal 2000 and $10.9 million in fiscal 1999, representing
increases of $43.5 million, or 203%, in fiscal 2001 compared to fiscal 2000 and
$10.6 million, or 98%, in fiscal 2000 compared to fiscal 1999. License revenues
as a percentage of total revenues were 75% in fiscal 2001, 67% in fiscal 2000
and 65% in fiscal 1999. The increase in absolute dollars in fiscal 2001
compared to 2000 and in fiscal 2000 compared to fiscal 1999 was due to software
licensed to new customers and additional software licensed to existing
customers resulting from increased market acceptance of our suite of products.

   Professional Services Revenues.  Our professional services revenues were
$9.2 million in fiscal 2001, $4.8 million in fiscal 2000 and $3.7 million in
fiscal 1999, representing increases of $4.4 million, or 92%, in fiscal 2001
compared to fiscal 2000 and $1.1 million, or 31%, in fiscal 2000 compared to
fiscal 1999. Professional services revenues as a percentage of total revenues
were 10% in fiscal 2001, 15% in fiscal 2000 and 22% in fiscal 1999. The
increase in professional services revenues in absolute dollars in fiscal 2001
compared to fiscal 2000 and in fiscal 2000 compared to fiscal 1999 reflects
increased license revenues and an increased range of services, consisting of
additional data migration and integration services. The decrease in
professional services revenues as a percentage of total revenues is due to the
increased percentage of professional services that were provided by third party
implementers who invoiced the customer directly.

   Maintenance Revenues.  Our maintenance revenues were $12.9 million in fiscal
2001, $5.9 million in fiscal 2000 and $2.3 in fiscal 1999, representing
increases of $7.0 million, or 117%, in fiscal 2001 compared to fiscal 2000 and
$3.7 million, or 161%, in fiscal 2000 compared to fiscal 1999. Maintenance
revenues as a percentage of total revenues were 15% in fiscal 2001, 18% in
fiscal 2000 and 13% in fiscal 1999. The increase in maintenance revenues in
absolute dollars in fiscal 2001 compared to fiscal 2000 and in fiscal 2000
compared to fiscal 1999 reflects increased sales of licenses of our products.
The decrease in maintenance revenues as a percentage of total revenues in
fiscal 2001 compared to fiscal 2000 was due to a higher proportion of license
revenues to total revenues resulting from increased market acceptance of our
products.

Cost of Revenues

   Cost of License Revenues. Cost of license revenues, excluding stock
compensation, were $3.8 million in fiscal 2001, $1.5 million in fiscal 2000 and
$819,000 in fiscal 1999, representing increases of $2.4 million, or 164%, in
fiscal 2001 compared to fiscal 2000 and $632,000, or 77%, and in fiscal 2000
compared to fiscal 1999. Cost of license revenues as a percentage of license
revenues were 6% in fiscal 2001, 7% in fiscal 2000 and 8% in fiscal 1999. The
increase in the cost of license revenue in absolute dollars in fiscal 2001
compared to fiscal 2000 and in fiscal 2000 compared to fiscal 1999 reflects
increased expenses associated with royalties due to third parties for software
used in our products. Cost of license revenues as a percentage of total license
revenues decreased in fiscal 2001 compared to fiscal 2000 and in fiscal 2000
compared to fiscal 1999 as add-on licenses, which have a higher gross margin
than initial customer licenses, have increased as a percentage of total license
revenues.

   Cost of Professional Services Revenues. Cost of professional services
revenues, excluding stock compensation, were $7.0 million in fiscal 2001, $3.7
million in fiscal 2000 and $3.8 million in fiscal 1999, representing an
increase of $3.3 million, or 88% in fiscal 2001 compared to 2000 and a decrease
of $105,000, or 3%, in fiscal 2000 compared to 1999. Cost of services revenues
as a percentage of services revenues were 76% in fiscal 2001, 78% in fiscal
2000 and 104% in fiscal 1999. The increase in cost of professional services
revenues in absolute dollars in fiscal 2001 compared to fiscal 2000 was due to
increased professional services personnel necessary to support our increased
customer base. The decrease in cost of professional services revenues as a
percentage of professional services revenues in fiscal 2001 compared to fiscal
2000 and fiscal 2000 compared to fiscal 1999 was due to economies of scale
realized as a result of increased management personnel and experienced
maintenance personnel. In certain periods in the past, and potentially in the
future, our cost of professional services revenues exceeded or may exceed our
professional services revenues, primarily because the actual cost of providing
the services, whether provided internally or through third parties,

                                       35
<PAGE>

exceeded or may exceed the fixed price payment received from some of our
customers. In addition, as we increase the size of our professional services
staff, costs will be incurred for new personnel before they become fully
productive.

   Cost of Maintenance Revenues. Cost of maintenance revenues, excluding stock
compensation, were $4.9 million for fiscal 2001, $2.5 million for fiscal 2000
and $1.3 million for fiscal 1999, representing increases of $2.4 million, or
94%, in fiscal 2001 compared to fiscal 2000 and $1.2 million, or 87%, in fiscal
2000 compared to fiscal 1999. Cost of maintenance revenues as a percentage of
maintenance revenues were 38% in fiscal 2001, 42% in fiscal 2000 and 59% in
fiscal 1999. The increase in cost of maintenance revenues in absolute dollars
in fiscal 2001 compared to fiscal 2000 and in fiscal 2000 compared to fiscal
1999 was due to hiring and training a support organization needed in connection
with our increased customer base during these periods. The decrease in cost of
maintenance revenues as a percentage of maintenance revenues in fiscal 2001
compared to fiscal 2000 and fiscal 2000 compared to fiscal 1999 was due to
economies of scale realized as a result of increased management personnel and
experienced maintenance personnel.

Operating Expenses

   Sales and Marketing. Sales and marketing expenses, excluding stock
compensation, were $62.0 million in fiscal 2001, $26.7 million in fiscal 2000
and $13.5 million in fiscal 1999, representing increases of $35.3 million, or
132%, in fiscal 2001 compared to 2000 and $13.2 million, or 98%, in fiscal 2000
compared to fiscal 1999. Sales and marketing expenses, excluding stock
compensation, as a percentage of total revenues were 71% in fiscal 2001, 83% in
fiscal 2000 and 80% in fiscal 1999. The increase in sales and marketing
expenses in fiscal 2001 compared to fiscal 2000 and in fiscal 2000 compared to
fiscal 1999 reflects significant personnel-related expenses such as salaries,
benefits and commissions, recruiting fees, travel expenses and related costs of
hiring sales management, sales representatives, sales engineers and marketing
personnel. We anticipate that our sales and marketing expenses will increase in
absolute dollars for the foreseeable future as we expand our domestic and
international sales force.

   Research and Development. Research and development expenses, excluding stock
compensation, were $26.5 million in fiscal 2001, $9.4 million in fiscal 2000
and $4.7 million in fiscal 1999, representing increases of $17.0 million, or
181%, in fiscal 2001 compared to fiscal 2000 and $4.7 million, or 98%, in
fiscal 2000 compared to fiscal 1999. Research and development expenses,
excluding stock compensation, as a percentage of total revenues were 31% in
fiscal 2001, 29% in fiscal 2000 and 28% in fiscal 1999. The absolute dollar
increases in research and development expenses in fiscal 2001 compared to
fiscal 2000 and in fiscal 2000 compared to fiscal 1999 were due to the increase
in the number of our software developers, quality assurance personnel and
outside contractors to support our product development, documentation and
testing activities related to the development and release of the latest
versions of our products. We anticipate that research and development expenses
will continue to increase in absolute dollars for the foreseeable future as we
continue to add to our research and development staff.

   General and Administrative. General and administrative expenses, excluding
stock compensation, were $6.3 million in fiscal 2001, $3.4 million in fiscal
2000 and $1.9 million in fiscal 1999, representing an increase of $2.8 million,
or 83%, in fiscal 2001 compared to fiscal 2000 and an increase of $1.5 million,
or 76%, in fiscal 2000 compared to fiscal 1999. General and administrative
expenses, excluding stock compensation, as a percentage of total revenues were
7% in fiscal 2001, 11% in fiscal 2000 and 12% in fiscal 1999. The absolute
dollar increase in costs in fiscal 2001 compared to fiscal 2000 and in fiscal
2000 compared to fiscal 1999 was due to hiring additional finance, executive
and administrative personnel to support the growth of our business during that
period. We expect that general and administrative expenses will increase in
absolute dollars for the foreseeable future as we expand our operations.


                                       36
<PAGE>

   Amortization of Stock Compensation. During fiscal 2001, fiscal 2000 and
fiscal 1999 we recorded a total of approximately $37.3 million of unearned
stock compensation. We recognized amortization of stock compensation of $16.1
million in fiscal 2001, $11.8 million in fiscal 2000 and $2.3 million in fiscal
1999. Amortization of stock compensation consists of the following (in
thousands):


<TABLE>
<CAPTION>
                                                      Fiscal Year Ended April
                                                                30,
                                                     --------------------------
                                                       2001     2000     1999
                                                     -------- -------- --------
   <S>                                               <C>      <C>      <C>
   Cost of revenues................................. $    663 $    562 $    162
   Sales and marketing..............................    7,294    5,820      457
   Research and development.........................    4,346    3,281      858
   General and administrative.......................    3,749    2,182      776
                                                     -------- -------- --------
     Total.......................................... $ 16,052 $ 11,845 $ 22,253
                                                     ======== ======== ========
</TABLE>

   Amortization of Intangible Assets. Of the $102.5 million purchase price for
Digital Market, Inc., $103.8 million was allocated to goodwill and $4.1 million
was allocated to intangible assets, both of which were being amortized over a
period of 3 years. We amortized $36.0 million of goodwill and intangibles in
fiscal 2001.

   Acquired In-process Technology. Of the $102.5 million purchase price for
Digital Market, Inc., $1.3 million was allocated to in-process research and
development, which was expensed in full upon completion of the acquisition in
November 2000. Please see Note 5 in the Notes to the Consolidated Financial
Statements for a more detailed discussion of the charge for in-process research
and development.

   Impairment of Goodwill and Other Intangibles. During the fourth quarter of
fiscal 2001, we performed an impairment assessment of the identifiable
intangibles and goodwill recorded upon the acquisition of DMI. This assessment
was performed primarily as a result of management's decision in February 2001
to discontinue the further development of the products acquired in the DMI
acquisition. As a result of the assessment, we recorded a $55.2 million
impairment charge to reduce the carrying value of developed technology and
goodwill. The charge was determined based upon our estimated discounted cash
flows using a discount rate of 25%. The assumptions supporting such cash flows
including the discount rate were determined using management's best estimates.
The remaining identifiable intangibles balance of approximately $1.2 million,
consisting principally of workforce in place, will be amortized over its
remaining useful life of 1.5 years which management considers appropriate.

   Impairment of Equity Investments. During fiscal 2001, we determined that
certain equity investments of privately held companies had incurred a decline
in value that was considered other than temporary. We recorded a charge of $8.6
million in our results of operations to write down the investments to their
estimated fair values. See Note 4 of Notes to Consolidated Financial Statements
for more detailed information

   There were no impairment charges related to goodwill and other intangible
assets or equity investments recorded in fiscal 2000 or fiscal 1999.

   Merger related expenses. On January 29, 2001, we signed a definitive
agreement to be acquired by Ariba, Inc., ("Ariba") a leading business-to-
business eCommerce solutions provider. However, on April 4, 2001, Ariba and
Agile mutually agreed to terminate the proposed merger without payment of any
termination fees due to the recent challenging economic and market conditions.
We have incurred merger related costs totaling $5.0 million related to
financial advisors and other professional fees which were all expensed during
fiscal 2001.

   Interest and Other Income (Expense), Net. Interest and other income
(expense), net was $18.7 million for fiscal 2001, $7.8 million for fiscal 2000
and $178,000 for fiscal 1999. The increase in fiscal 2001 compared to fiscal
2000 and fiscal 2000 to fiscal 1999 was due primarily to higher interest income
generated from the increase in cash and cash equivalents and investments as a
result of our initial and follow-on public offerings in fiscal 2000.

                                       37
<PAGE>

   Income Taxes. No provision for income taxes has been recorded since our
inception because we have incurred net losses in all periods. As of April 30,
2001, we had net operating loss carryforwards for federal income tax reporting
purposes of approximately $85.6 million that expire in various amounts
beginning in fiscal 2011. We also had net operating loss carryforwards for
state income tax reporting purposes of approximately $42.9 million that expire
in various amounts beginning in fiscal 2004. The U.S. tax laws contain
provisions that limit the use in any future period of net operating loss and
credit carryforwards upon the occurrence of certain events, including a
significant change in ownership interests. We had deferred tax assets,
including our net operating loss carryforwards and tax credits of approximately
$42.8 million as of April 30, 2001. A valuation allowance has been recorded for
the entire deferred tax asset as a result of uncertainties regarding the
realization of the asset balance. See note 6 in the notes to consolidated
financial statements.

Liquidity and Capital Resources

   We have historically satisfied our cash requirements primarily through
issuances of equity securities and lease and debt financing. In August 1999, we
completed our initial public offering and concurrent private placement of our
common stock, which resulted in net proceeds to the Company of approximately
$80.4 million, before offering expenses. We used $21.2 million of the proceeds
from our initial public offering to pay the cash portion of the consideration
payable by us in our acquisition of Digital Market and the related acquisition
costs.

   In December 1999, we completed a follow-on public offering, which resulted
in net proceeds to the Company, before offering expenses, of $272.6 million.
Prior to the offerings we had financed our operations through private sales of
preferred stock, with net proceeds of $26.2 million, and through bank loans and
equipment leases.

   We had a $5.0 million senior line of credit facility with a bank, borrowings
thereunder bearing interest at 8.5%, which expired on August 31, 2000 and was
not renewed by the Company. Accounts receivable and certain other assets
secured this line of credit. At April 30, 2001, no balance was outstanding
under this line of credit. Capital lease obligations, including both short-term
and long-term portions, were $454,000, excluding the amount payable for
interest, at April 30, 2001, and are payable through fiscal 2003.

   We also have noncancelable operating leases for office space of
approximately $20.2 million at April 30, 2001 which are payable through fiscal
2006.

   As of April 30, 2001, we had cash and cash equivalents and short-term
investments totaling $300.5 million, an increase of $650,000 from cash and cash
equivalents and short-term investments held as of April 30, 2000. Our working
capital at April 30, 2001 was $293.8 million.

   Our operating activities resulted in net cash outflows of $3.4 million for
fiscal 2001, $11.4 million for fiscal 2000 and $5.1 million for fiscal 1999.
Net cash used in operating activities in fiscal 2001 was primarily attributable
to net loss for the year (less non-cash expenses) and increases in accounts
receivables, and to a lesser extent, by increases in other assets. These cash
flows used in operating activities were partially offset by increases in
accounts payable, accrued expenses and other liabilities and deferred revenue.
Net cash used in operating activities in fiscal 2000 was primarily the result
of net loss for the year (less non-cash expenses), increases in accounts
receivables and other assets, and a decrease in accrued expenses and other
liabilities. These cash flows used in operating activities were partially
offset by increases in deferred revenue. Net cash used in operating activities
in fiscal 1999 was primarily attributable to net loss for the year (less non-
cash expenses) and increases in accounts receivables and other assets,
partially offset by increases in accrued expenses and other liabilities and
deferred revenue.

   Investing activities used cash of $8.9 million in fiscal 2001, $206.3
million in fiscal 2000 and $459,000 in fiscal 1999. Net cash used in investing
activities in fiscal 2001 consisted of purchases of privately-held equity
investments and purchases of property and equipment, partially offset by net
maturities of marketable

                                       38
<PAGE>

investments. Purchases of property and equipment in fiscal 2001 were
approximately $12.4 million. These expenditures were primarily for computer
hardware and software and furniture and fixtures. Net cash used in investing
activities for fiscal 2000 consisted of purchases of marketable securities, the
acquisition of Digital Market, Inc., and to a lesser extent an equity
investment in a privately held company, and purchases of property and
equipment. Net cash used in investing activities for fiscal 1999 consisted
primarily of cash used to acquire property and equipment. We expect that
capital expenditures will continue to increase to the extent we continue to
increase our headcount or expand our operations.

   Financing activities provided cash of $9.4 million in fiscal 2001, $350.4
million in fiscal 2000 and $13.4 million in fiscal 1999. In fiscal 2001, cash
was provided primarily through exercises of employee stock options. In fiscal
2000, cash was provided from our initial public offering and follow-on stock
offering, offset by repayments of our debt obligations. In fiscal 1999, cash
was provided from the issuance of preferred stock, notes payable and other
borrowings. This was partially offset by repayments of our debts.

   We currently anticipate that we will continue to experience significant
growth in our operating expenses for the foreseeable future as we:

  .  enter new markets for our products;

  .  increase research and development spending;

  .  increase our sales and marketing activities; and

  .  enhance our operational and financial systems.

   We currently anticipate that our current cash, cash equivalents will be
sufficient to meet our anticipated cash needs for working capital and capital
expenditures for at least the next 12 months. However, we may need to raise
additional funds in future periods through public or private financings, or
other sources, to fund our operations and potential acquisitions, if any, until
we achieve profitability, if ever. We may not be able to obtain adequate or
favorable financing at that time. Failure to raise capital when needed could
harm our business. If we raise additional funds through the issuance of equity
securities, the percentage of ownership of our stockholders would be reduced.
Furthermore, these equity securities might have rights, preferences or
privileges senior to our common stock.

Recent Accounting Pronouncements

   In June 1998, the Financial Accounting Standards Board, or FASB, issued
Statement of Financial Accounting Standards No. 133, or SFAS 133, "Accounting
for Derivative Instruments and Hedging Activities." SFAS 133 establishes new
standards of accounting and reporting for derivative instruments and hedging
activities. SFAS 133 requires that all derivatives be recognized at fair value
in the statement of financial position, and that the corresponding gains or
losses be reported either in the statement of operations or as a component of
comprehensive loss, depending on the type of hedging relationship that exists.
In July 1999, the Financial Accounting Standard Boards issued SFAS No. 137, or
"SFAS 137," "Accounting for Derivative Instruments and Hedging Activities --
Deferral of the Effective Date of SFAS No. 133." SFAS 137 deferred the
effective date of SFAS 133 until the first fiscal year beginning after June 15,
2000. The Company does not currently hold derivative instruments or engage in
hedging activities. The Company is currently evaluating the impact SFAS 133
will have on its financial position and results of operations.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

   We develop products in the United States and market our products in North
America, and to a lesser extent in Europe and Asia. As a result, our financial
results could be affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in foreign markets. Because nearly
all of our

                                       39
<PAGE>

revenue is currently denominated in U.S. dollars, an increase in the value of
the U.S. dollar relative to foreign currencies could make our products less
competitive in foreign markets. Although we will continue to monitor our
exposure to currency fluctuations, and, where appropriate, may use financial
hedging techniques in the future to minimize the effect of these fluctuations,
we cannot assure you that exchange rate fluctuations will not harm our business
in the future.

Interest Rate Risk

   Our interest income is sensitive to changes in the general level of U.S.
interest rates, particularly since the majority of our investments are in
short-term instruments. The primary objective of our investment activities is
to preserve principal while at the same time maximizing the income we receive
from our investments without significantly increasing risk. Some of the
securities that we have invested in may be subject to market risk. This means
that a change in prevailing interest rates may cause the principal amount of
the investment to fluctuate. For example, if we hold a security that was issued
with a fixed interest rate at the then-prevailing rate and the prevailing
interest rate later rises, the principal amount of our investment will probably
decline. To minimize this risk, we maintain the majority of our portfolio of
cash in money market funds and short-term investments classified as "available
for sale." In general, money market funds and short-term investments are not
subject to market risk because the interest paid on such funds fluctuates with
the prevailing interest rate. Because some of our debt arrangements are based
on variable rates of interest, our interest expense is sensitive to changes in
the general level of U.S. interest rates. Since these obligations represent a
small percentage of our total capitalization, we believe that there is not a
material risk exposure.

   The table below represents principal (or notional) amounts and related
weighted-average interest rates by year of maturity of our investment
portfolio.


<TABLE>
<CAPTION>
                                                 Year Ended
                                                 30-Apr-02  Thereafter  Total
                                                 ---------- ---------- --------
                                                 (in thousands, except interest
                                                             rates)
   <S>                                           <C>        <C>        <C>
   Cash equivalents.............................  $ 85,758     --      $ 85,758
   Average interest rate........................      4.79%    --          4.79%
   Investments..................................  $160,608     --      $160,608
   Average interest rate........................      5.32%    --          5.32%
   Total investment securities..................  $246,366     --      $246,366
</TABLE>

Other Investments

   We invest in equity instruments of privately-held companies for business and
strategic purposes. These investments are included in other long-term assets
and are accounted for under the cost method when ownership is less than 20% and
we do not have the ability to exercise significant influence over operations.
As of April 30, 2001, we had $4.6 million invested in privately-held companies,
some of which are business partners. For these investments, our policy is to
regularly review the assumptions underlying the operating performance and cash
flow forecasts in assessing the carrying values. We identify and record
impairment losses when events and circumstances indicate that such assets might
be impaired.

   During fiscal 2001, we determined that these investments had incurred a
decline in value that was other-than-temporary and reduced their carrying
amounts to estimated fair value by a charge of $8.6 million to results of
operations.

                                       40
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                           AGILE SOFTWARE CORPORATION

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Agile Software Corporation

Report of Independent Accountants..........................................  42

Consolidated Balance Sheets................................................  43

Consolidated Statements of Operations......................................  44

Consolidated Statements of Stockholders' Equity............................  45

Consolidated Statements of Cash Flows......................................  46

Notes to Consolidated Financial Statements.................................  47
</TABLE>

                                       41
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
 of Agile Software Corporation

   In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash
flows present fairly, in all material respects, the financial position of Agile
Software Corporation and its subsidiaries (the "Company") at April 30, 2001 and
2000, and the results of their operations and their cash flows for each of the
three years in the period ended April 30, 2001, in conformity with accounting
principles generally accepted in the United States of America. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

San Jose, California
May 21, 2001

                                       42
<PAGE>

                           AGILE SOFTWARE CORPORATION

                          CONSOLIDATED BALANCE SHEETS
                    (In thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                               April 30,
                                                           -------------------
                                                             2001       2000
                                                           ---------  --------
<S>                                                        <C>        <C>
                          ASSETS
                          ------
Current assets:
  Cash and cash equivalents............................... $ 139,917  $142,721
  Short-term investments..................................   160,608   157,154
  Accounts receivable, net of allowance for doubtful
   accounts of $1,250 and $603 as of April 30, 2001 and
   2000, respectively.....................................    22,626     6,537
  Other current assets....................................    12,105     4,979
                                                           ---------  --------
    Total current assets..................................   335,256   311,391
Long-term investments.....................................       --     12,550
Property and equipment, net...............................    12,975     6,519
Intangible assets, net....................................     1,198    92,965
Other assets..............................................     5,762     7,376
                                                           ---------  --------
                                                           $ 355,191  $430,801
                                                           =========  ========
           LIABILITIES AND STOCKHOLDERS' EQUITY
           ------------------------------------

Current liabilities:
  Accounts payable........................................ $  10,972  $  1,434
  Accrued expenses and other liabilities..................    11,544     6,391
  Deferred revenue........................................    18,542     8,634
  Current portion of capital lease obligations............       359       681
                                                           ---------  --------
    Total current liabilities.............................    41,417    17,140
Capital lease obligations, noncurrent.....................        95       518
Notes payable, noncurrent.................................        39        39
Other liabilities.........................................       --        458
                                                           ---------  --------
                                                              41,551    18,155
                                                           ---------  --------

Commitments and contingencies (Note 9)

Stockholders' equity:
  Common Stock, $.001 par value; 100,000 shares
   authorized; 47,508 and 46,475 shares issued and
   outstanding as of April 30, 2001 and 2000,
   respectively...........................................        48        46
  Additional paid-in capital..............................   510,433   500,155
  Notes receivable from stockholders......................      (628)   (1,461)
  Unearned stock compensation.............................    (9,368)  (23,838)
  Accumulated other comprehensive income (loss)...........       217      (530)
  Accumulated deficit.....................................  (187,062)  (61,726)
                                                           ---------  --------
    Total stockholders' equity............................   313,640   412,646
                                                           ---------  --------
                                                           $ 355,191  $430,801
                                                           =========  ========
</TABLE>

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

                                       43
<PAGE>

                           AGILE SOFTWARE CORPORATION

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                 Fiscal Year Ended April 30,
                                                 -----------------------------
                                                   2001       2000      1999
                                                 ---------  --------  --------
<S>                                              <C>        <C>       <C>
Revenues:
  License....................................... $  64,978  $ 21,463  $ 10,859
  Professional services.........................     9,182     4,787     3,665
  Maintenance...................................    12,899     5,948     2,283
                                                 ---------  --------  --------
      Total revenues............................    87,059    32,198    16,807
                                                 ---------  --------  --------

Cost of revenues:
  License.......................................     3,830     1,451       819
  Professional services.........................     6,986     3,718     3,823
  Maintenance...................................     4,875     2,510     1,343
  Stock compensation............................       663       562       162
                                                 ---------  --------  --------
      Total cost of revenues....................    16,354     8,241     6,147
                                                 ---------  --------  --------
Gross profit....................................    70,705    23,957    10,660
                                                 ---------  --------  --------

Operating expenses:
  Sales and marketing:
    Other sales and marketing...................    61,951    26,657    13,495
    Stock compensation..........................     7,294     5,820       457
  Research and development:
    Other research and development..............    26,451     9,411     4,742
    Stock compensation..........................     4,346     3,281       858
  General and administrative:
    Other general and administration............     6,255     3,411     1,938
    Stock compensation..........................     3,749     2,182       776
  Amortization of goodwill and other intangible
   assets.......................................    35,974    14,911       --
  Acquired in-process technology................       --      1,300       --
  Impairment of goodwill and other intangible
   assets.......................................    55,224       --        --
  Merger related expenses.......................     4,985       --        --
                                                 ---------  --------  --------
      Total operating expenses..................   206,229    66,973    22,266
                                                 ---------  --------  --------
Loss from operations............................  (135,524)  (43,016)  (11,606)
Interest and other income.......................    18,938     8,554       447
Impairment of equity investments................    (8,561)      --        --
Interest expense................................      (189)     (731)     (269)
                                                 ---------  --------  --------
Net loss........................................ $(125,336) $(35,193) $(11,428)
                                                 =========  ========  ========
Net loss per share:
  Basic and diluted............................. $   (2.74) $  (1.14) $  (1.94)
                                                 =========  ========  ========
  Weighted average shares.......................    45,703    30,967     5,904
                                                 =========  ========  ========
</TABLE>

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

                                       44
<PAGE>

                           AGILE SOFTWARE CORPORATION

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                    (In thousands, except per share amounts)

<TABLE>
<CAPTION>
                    Convertible                                   Notes                   Accumulated
                  Preferred Stock    Common Stock   Additional  Receivable    Unearned       Other
                  -----------------  --------------  Paid-In       From        Stock     Comprehensive Accumulated
                   Shares   Amount   Shares  Amount  Capital   Stockholders Compensation     Loss        Deficit     Total
                  --------  -------  ------  ------ ---------- ------------ ------------ ------------- ----------- ---------
<S>               <C>       <C>      <C>     <C>    <C>        <C>          <C>          <C>           <C>         <C>
Balance at April
30, 1998........    10,096      10    7,996     8      17,864       (363)       (2,237)        --         (15,105)       177
Repurchase of
unvested Common
Stock...........       --      --      (240)  --          (38)        32           --          --             --          (6)
Issuance of
Common Stock on
exercise of
options.........       --      --       630   --          447       (419)          --          --             --          28
Issuance of
restricted
Common Stock in
exchange for
notes
receivable......       --      --        14   --           19        (19)          --          --             --         --
Repayment of
notes receivable
from
stockholders....       --      --       --    --          --          21           --          --             --          21
Issuance of
Series F
Convertible
Preferred Stock
at $6.75 per
share, net of
issuance costs..     1,778       2      --    --       11,970        --            --          --             --      11,972
Issuance of
warrants........       --      --       --    --          274        --            --          --             --         274
Unearned stock
compensation....       --      --       --    --        4,963        --         (4,963)        --             --         --
Amortization of
unearned
compensation....       --      --       --    --          --         --          2,253         --              --      2,253
Net loss........       --      --       --    --          --         --             --         --         (11,428)   (11,428)
                  --------  ------   ------   ---    --------    -------      --------       -----      ---------  ---------
Balance at April
30, 1999........    11,874      12    8,400     8      35,499       (748)       (4,947)        --         (26,533)     3,291
Repurchase of
unvested Common
Stock...........       --      --       (56)  --          (12)       --            --          --             --         (12)
Issuance of
Common Stock
under Employee
Stock Purchase
Plan............       --      --        87   --          774        --            --          --             --         774
Issuance of
Common Stock on
exercise of
options.........       --      --     1,339     1       2,283     (1,378)          --          --             --         906
Conversion of
Convertible
Preferred to....   (11,874)    (12)  23,748    24         (12)       --            --          --             --         --
Common Stock in
initial public
offering
Issuance of
Common Stock in
public
offerings.......       --      --    11,521    12     351,325        --            --          --             --     351,337
Issuance of
Common Stock for
acquisition of
DMI.............       --      --     1,202     1      79,051        --            --          --             --      79,052
Unrealized gain
on investments..       --      --       --    --          --         --            --         (530)           --        (530)
Repayment of
notes receivable
from
stockholders....       --      --       --    --          --         665           --          --             --         665
Issuance of
Common Stock on
exercise of
warrants........       --      --       234   --          511        --            --          --             --         511
Unearned stock
compensation....       --      --       --    --       30,736        --        (30,736)        --             --         --
Amortization of
unearned stock
compensation....       --      --       --    --          --         --         11,845         --             --      11,845
Net loss........       --      --       --    --          --         --            --          --         (35,193)   (35,193)
                  --------  ------   ------   ---    --------    -------      --------       -----      ---------  ---------
Balance at April
30, 2000........       --   $  --    46,475   $46    $500,155    $(1,461)     $(23,838)      $(530)     $ (61,726) $ 412,646
Repurchase of
unvested Common
Stock...........       --      --       (91)  --          (46)        20           --          --             --         (26)
Issuance of
Common Stock on
exercise of
options.........       --      --       870     1       6,512        (48)          --          --             --       6,465
Issuance of
Common Stock
under Employee
Stock Purchase
Plan............       --      --       250     1       2,892        --            --          --             --       2,893
DMI escrow
shares
retained........                        (78)             (662)                                                          (662)
Unrealized gain
on investments..       --      --       --    --          --         --            --          747            --         747
Repayment of
notes receivable
from
stockholders....       --      --       --    --          --         861           --          --             --         861
Issuance of
Common Stock on
exercise of
warrants........       --      --        82   --          --         --            --          --             --         --
Unearned stock
compensation....       --      --       --    --        1,582        --         (1,582)        --             --         --
Amortization of
unearned stock
compensation....       --      --       --    --          --         --         16,052         --             --      16,052
Net loss........       --      --       --    --          --         --            --          --        (125,336)  (125,336)
                  --------  ------   ------   ---    --------    -------      --------       -----      ---------  ---------
Balance at April
30, 2001........       --   $  --    47,508   $48    $510,433    $  (628)     $ (9,368)      $ 217      $(187,062) $ 313,640
                  ========  ======   ======   ===    ========    =======      ========       =====      =========  =========
<CAPTION>
                  Comprehensive
                      Loss
                  -------------
<S>               <C>
Balance at April
30, 1998........    $  (8,942)
                  =============
Repurchase of
unvested Common
Stock...........
Issuance of
Common Stock on
exercise of
options.........
Issuance of
restricted
Common Stock in
exchange for
notes
receivable......
Repayment of
notes receivable
from
stockholders....
Issuance of
Series F
Convertible
Preferred Stock
at $6.75 per
share, net of
issuance costs..
Issuance of
warrants........
Unearned stock
compensation....
Amortization of
unearned
compensation....
Net loss........    $ (11,428)
                  -------------
Balance at April
30, 1999........    $ (11,428)
                  =============
Repurchase of
unvested Common
Stock...........
Issuance of
Common Stock
under Employee
Stock Purchase
Plan............
Issuance of
Common Stock on
exercise of
options.........
Conversion of
Convertible
Preferred to....
Common Stock in
initial public
offering
Issuance of
Common Stock in
public
offerings.......
Issuance of
Common Stock for
acquisition of
DMI.............
Unrealized gain
on investments..    $    (530)
Repayment of
notes receivable
from
stockholders....
Issuance of
Common Stock on
exercise of
warrants........
Unearned stock
compensation....
Amortization of
unearned stock
compensation....
Net loss........      (35,193)
                  -------------
Balance at April
30, 2000........    $ (35,723)
                  =============
Repurchase of
unvested Common
Stock...........
Issuance of
Common Stock on
exercise of
options.........
Issuance of
Common Stock
under Employee
Stock Purchase
Plan............
DMI escrow
shares
retained........
Unrealized gain
on investments..    $     747
Repayment of
notes receivable
from
stockholders....
Issuance of
Common Stock on
exercise of
warrants........
Unearned stock
compensation....
Amortization of
unearned stock
compensation....
Net loss........     (125,336)
                  -------------
Balance at April
30, 2001........    $(124,589)
                  =============
</TABLE>

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

                                       45
<PAGE>

                           AGILE SOFTWARE CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                  Fiscal Year Ended April 30,
                                                  -----------------------------
                                                    2001       2000      1999
                                                  ---------  --------  --------
<S>                                               <C>        <C>       <C>
Cash flows from operating activities:
  Net loss......................................  $(125,336) $(35,193) $(11,428)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Acquired in-process technology..............        --      1,300       --
    Provision for doubtful accounts.............        647       108       155
    Depreciation and amortization...............     41,791    16,922     1,180
    Amortization of stock compensation..........     16,052    11,845     2,253
    Warrant expense.............................        --        253        21
    Impairment of goodwill, intangible assets
     and equity investments.....................     63,785       --        --
    Changes in operating assets and liabilities,
     net of acquisition:
      Accounts receivable.......................    (16,736)   (1,490)   (1,751)
      Other assets, current and non-current.....     (7,723)   (4,608)     (446)
      Accounts payable..........................      9,538       140       589
      Accrued expenses and other liabilities....      4,695    (4,076)    2,391
      Deferred revenue..........................      9,908     3,424     1,961
                                                  ---------  --------  --------
        Net cash used in operating activities...     (3,379)  (11,375)   (5,075)
                                                  ---------  --------  --------
Cash flows from investing activities:
  Purchases of investments......................   (219,080) (176,672)      --
  Proceeds from maturities and sales of
   investments..................................    228,923     6,438       --
  Purchases of privately-held investments.......     (6,350)   (7,000)
  Cash paid in business combination, net........        --    (23,462)      --
  Acquisition of property and equipment.........    (12,366)   (5,570)     (459)
                                                  ---------  --------  --------
        Net cash used in investing activities...     (8,873) (206,266)     (459)
                                                  ---------  --------  --------
Cash flows from financing activities:
  Proceeds from bank line of credit.............        --        --      1,900
  Repayment of bank line of credit..............        --        --     (2,900)
  Repayment of capital lease obligations........       (745)     (822)     (638)
  Proceeds from notes payable...................        --        --      3,000
  Repayment of notes payable....................        --     (3,000)      --
  Proceeds from issuance of Common Stock, net of
   repurchases..................................      9,332   353,516        22
  Repayment of notes receivable from
   stockholders.................................        861       665        21
  Proceeds from issuance of Convertible
   Preferred Stock, net.........................        --        --     11,972
                                                  ---------  --------  --------
        Net cash provided by financing
         activities.............................      9,448   350,359    13,377
                                                  ---------  --------  --------
Net increase (decrease) in cash and cash
 equivalents....................................     (2,804)  132,718     7,843
Cash and cash equivalents at beginning of year..    142,721    10,003     2,160
                                                  ---------  --------  --------
Cash and cash equivalents at end of year........  $ 139,917  $142,721  $ 10,003
                                                  =========  ========  ========
Supplemental disclosure:
  Cash paid during the period for interest......  $     189  $    326  $    168
                                                  =========  ========  ========
Non-cash investing and financing activities:
  Common Stock issued in exchange for notes
   receivable...................................  $      48  $  1,378  $    438
                                                  =========  ========  ========
  Property and equipment acquired under capital
   lease........................................  $      --  $    415  $  1,000
                                                  =========  ========  ========
  Additional stock compensation, net............  $   1,582  $ 30,736  $  4,961
                                                  =========  ========  ========
  DMI escrow shares retained....................  $     662       --        --
                                                  =========  ========  ========
</TABLE>
  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       46
<PAGE>

                           AGILE SOFTWARE CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

The Company

   Agile Software Corporation (the "Company") was incorporated in California on
March 13, 1995 and is headquartered in San Jose, California. The Company
reincorporated in Delaware in June 1999. The Company develops and markets
collaborative manufacturing commerce solutions that speed the "build" and "buy"
process across the virtual manufacturing network. The Company believes that its
products improve time to volume, customer responsiveness and cost of goods
sold. The Company's solutions manage product content and critical
communication, collaboration and commerce transactions among original equipment
manufacturers, electronic manufacturing services providers, customers and
suppliers.

Principles of consolidation and basis of presentation

   The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.

   The consolidated statements of operations reflect certain reclassifications
to allocate the non-cash stock compensation expense related to the issuance of
stock options from a single-line item presentation to the individual amounts
related to cost of revenues, sales and marketing, research and development, and
general and administration expenses.

Use of estimates

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

Cash and cash equivalents

   The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. The majority
of the Company's cash equivalents consist of commercial paper and money market
funds.

Investments

   Management determines the appropriate classification of the Company's
investments in marketable debt and equity securities at the time of purchase,
and re-evaluates this designation at each balance sheet date. The Company
classifies all securities as "available-for-sale" and carries them at fair
value with unrealized gains or losses related to these securities included as a
component of stockholders' equity in the consolidated balance sheet. The
Company's investment objectives include the safety and preservation of invested
funds and liquidity of investments that is sufficient to meet cash flow
requirements. Cash, cash equivalents, and investments in debt and equity
securities are placed with high credit quality financial institutions and
commercial companies and government agencies in order to limit the amount of
credit exposure. Realized gains and losses are determined using the specific
identification method.


                                       47
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Impairment of investments

   Impairment of investments in non-publicly traded companies is assessed
quarterly based upon the investee company's business prospects, financial
condition, subsequent financings, liquidity and comparable public company
market values. If the Company determines an impairment is necessary, the cost
basis of the investment is written down and the amount of the write down is
reflected as a charge to earnings.

Concentrations of credit risk

   Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist of cash and cash equivalents, investments
and accounts receivable. Cash and cash equivalents are deposited with financial
institutions that management believes are credit worthy.

   The Company performs ongoing credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers. The
Company maintains an allowance for doubtful accounts receivable based on the
expected collectibility of accounts receivable. To date, the Company has not
experienced any material losses with respect to its accounts receivable.

   At April 30, 2001 no customers comprised of more than 10% of the total
accounts receivable balance.

Fair value of financial instruments

   The Company's financial instruments, including cash, cash equivalents,
investments, accounts receivable, accounts payable, notes payable and capital
lease obligations are carried at cost, which approximates their fair value
because of the short-term maturity of these instruments.

Property and equipment

   Property and equipment are recorded at cost. Depreciation is computed using
the straight-line method based upon the useful lives of the assets, which range
from two to five years, or the lease term of the respective assets, if shorter.

Software development costs

   Effective May 1, 1999, the Company adopted Statement of Position ("SOP") 98-
1, "Accounting for the Cost of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 provides guidance on accounting for computer software
developed or obtained for internal use including the requirement to capitalize
specified costs and amortization of such costs. The adoption of SOP 98-1 did
not have a material effect on the Company's results of operations, financial
position or cash flows.

   Software development costs are included in research and development and are
expensed as incurred. After technological feasibility is established, material
software development costs are capitalized. The capitalized cost is then
amortized on a straight-line basis over the estimated product life, or in the
ratio of current revenues to total projected product revenues, whichever is
greater. To date, the period between achieving technological feasibility, which
the Company has defined as the establishment of a working model which typically
occurs when the beta testing commences, and the general availability of such
software has been short and software development costs qualifying for
capitalization have been insignificant. Accordingly, the Company has not
capitalized any software development costs.


                                       48
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Goodwill and Other Intangibles

   Goodwill and other intangibles are carried at cost less accumulated
amortization. Goodwill and other identifiable intangibles, including assembled
workforce, trademarks, and developed technology are amortized on a straight-
line basis over their estimated useful lives, generally three years.

   Amortization expense related to goodwill and other intangibles was $36.0
million, $14.9 million and $0 in 2001, 2000 and 1999, respectively.

   Management assesses the impairment of identifiable intangibles and related
goodwill periodically in accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of. The Company also
assesses the impairment of enterprise level goodwill periodically in accordance
with the provision of Accounting Principles Board (APB) Opinion No. 17,
Intangible Assets. An impairment review is performed whenever events or changes
in circumstances indicate that the carrying value may not be recoverable.
Factors considered important which could trigger an impairment review include,
but are not limited to, significant underperformance relative to expected
historical or projected future operating results, significant changes in the
manner of use of the acquired assets or the strategy for the Company's overall
business, significant negative industry or economic trends, a significant
decline in the Company's stock price for a sustained period, and the Company's
market capitalization relative to net book value. When the Company determines
that the carrying value of goodwill may not be recoverable based upon the
existence of one or more of the above indicators of impairment, the Company
measures any impairment based on a projected discounted cash flow method using
a discount rate commensurate with the risk inherent in the Company's current
business model.

Revenue recognition

   The Company recognizes revenues in accordance with SOP 97-2, "Software
Revenue Recognition," and SOP 98-9, "Modification of SOP 97-2, Software Revenue
Recognition, with Respect to Certain Transactions."

   The Company derives revenues from the license of software products under
software license agreements and from the delivery of professional services and
maintenance services. When contracts contain multiple elements, and vendor-
specific objective evidence of fair value exists for all undelivered elements,
the Company accounts for the delivered elements in accordance with the
"Residual Method" prescribed by SOP 98-9. Multiple element arrangements
generally include post-contract customer support (PCS or maintenance), software
products, and in some cases, service. Vendor-specific objective evidence of
fair value is generally determined by sales of the same element or service to
other customers, or with respect to PCS, through a renewal rate specified in
the related arrangement.

   License revenues are recognized when persuasive evidence of an arrangement
exists, the fee is fixed or determinable, collectibility is probable, and
delivery and customer acceptance (including the expiration of an acceptance
period), if required under the terms of the contract, of the software products
have occurred. In the event the Company grants its customers the right to
specified upgrades, license revenue is deferred until delivery of the specified
upgrade. If vendor-specific objective evidence of fair value exists for the
specified upgrade, then an amount equal to this fair value is deferred. If
vendor-specific objective evidence of fair value does not exist, then the
entire license fee is deferred until the delivery of the specified upgrade.
Allowances for estimated returns are provided upon product delivery. In
instances where vendor obligations remain, revenues are deferred until the
obligation has been satisfied.

   Revenues from professional services consist of implementation and training
services. Training revenues are recognized as the services are performed.
Implementation services are typically performed under fixed-price

                                       49
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

contracts and accordingly, revenues are recognized upon customer acceptance. A
provision for estimated losses on fixed-price professional services contracts
is recognized in the period in which the loss becomes known.

   Maintenance revenues are recognized ratably over the term of the maintenance
contract, which is generally twelve months. Maintenance contracts include the
right to unspecified upgrades on a when-and-if available basis, and ongoing
support.

Income taxes

   The Company accounts for income taxes under the asset and liability approach
which recognizes deferred tax assets and liabilities for the expected future
tax consequences of temporary differences between the tax basis of assets and
liabilities and their financial statement reported amounts. The Company records
a valuation allowance against deferred tax assets when it is more likely than
not that such assets will not be realized.

Comprehensive income

   Unrealized gains on investments for fiscal 2001 represent the Company's only
component of comprehensive loss, which is excluded from net loss.

Net loss per share

   Basic net loss per share is computed by dividing the net loss available to
holders of Common Stock for the period by the weighted average number of shares
of Common Stock outstanding during the period. Diluted net loss per share is
the same as basic net loss per share because the calculation of diluted net
loss per share excludes potential shares of Common Stock since their effect is
antidilutive. Potential shares of Common Stock consist of unvested restricted
Common Stock, incremental common shares issuable upon the exercise of stock
options and warrants and, for periods prior to our initial public offering,
shares issuable upon conversion of Convertible Preferred Stock.

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

<TABLE>
<CAPTION>
                                                 Fiscal Year Ended April 30,
                                                 -----------------------------
                                                   2001       2000      1999
                                                 ---------  --------  --------
   <S>                                           <C>        <C>       <C>
   Numerator:
     Net loss..................................  $(125,336) $(35,193) $(11,428)
                                                 =========  ========  ========
   Denominator:
     Weighted average shares...................     46,943    33,007     8,280
     Weighted average unvested shares of Common
      Stock subject to repurchase..............     (1,240)   (2,040)   (2,376)
                                                 ---------  --------  --------
     Denominator for basic and diluted
      calculation..............................     45,703    30,967     5,904
                                                 =========  ========  ========
   Net loss per share:
     Basic and diluted.........................  $   (2.74) $  (1.14) $  (1.94)
                                                 =========  ========  ========
</TABLE>

                                       50
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The following table sets forth potential shares of Common Stock that are not
included in the diluted net loss per share calculation above because to do so
would be anti-dilutive as of the dates indicated below (in thousands):

<TABLE>
<CAPTION>
                                                              As of April 30,
                                                            --------------------
                                                             2001   2000   1999
                                                            ------ ------ ------
   <S>                                                      <C>    <C>    <C>
   Preferred Stock.........................................    --     --  23,748
   Preferred Stock warrants................................     50     82    316
   Unvested Common Stock subject to repurchase.............    916  1,763  1,928
   Common Stock options.................................... 15,919  9,335  2,320
                                                            ------ ------ ------
                                                            16,885 11,180 28,312
                                                            ====== ====== ======
</TABLE>

Stock compensation

   The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of APB Opinion No. 25, "Accounting for Stock Issued
to Employees" and complies with the disclosure provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Under APB Opinion No. 25, unearned
compensation is based on the difference, if any, on the date of the grant,
between the fair value of the Company's common stock and the exercise price.
Unearned compensation is amortized and expensed in accordance with Financial
Accounting Standards Board ("FASB") Interpretation No. 28 using the multiple
option approach.

   The Company accounts for stock issued to non-employees in accordance with
the provisions of SFAS No. 123 and Emerging Issues Task Force No. 96-18.
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services."

Foreign currency translation

   For foreign operations with the local currency as the functional currency,
assets and liabilities are translated into U.S. dollars at the exchange rate on
the balance sheet date. Income and expense items are translated at average
rates of exchange prevailing during each period. Translation adjustments are
accumulated in a separate component of stockholders' equity.

   For foreign operations with the U.S. dollar as the functional currency,
monetary assets and liabilities are translated into U.S. dollars at the
exchange rate on the balance sheet date. Nonmonetary assets and liabilities are
remeasured into U.S. dollars at historical exchange rates. Income and expense
items are translated at average rates of exchange prevailing during each
period. Translation adjustments are recognized currently as a component of
foreign currency gain of loss included in the consolidated statement of
operations. Translation adjustments were not significant during any of the
periods presented.

Segment information

   The Company identifies its operating segments based on business activities,
management responsibility and geographical location. During each of the three
years in the period ended April 30, 2001, the Company operated in a single
business segment, primarily in the United States. Through April 30, 2001,
foreign operations have not been significant in either revenue or investment in
long-lived assets.

Recent accounting pronouncements

   In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes new standards of
accounting and reporting for derivative instruments

                                       51
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

and hedging activities. SFAS No. 133 requires that all derivatives be
recognized at fair value in the statement of financial position, and that the
corresponding gains or losses be reported either in the statement of operations
or as a component of comprehensive loss, depending on the type of hedging
relationship that exists. In July 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of
the Effective Date of SFAS No. 133." SFAS No. 137 deferred the effective date
of SFAS No. 133 until the first fiscal year beginning after June 15, 2000. The
Company does not currently hold derivative instruments or engage in hedging
activities. The Company is currently evaluating the impact SFAS No. 133 will
have on its financial position and results of operations.

Reclassifications

   Certain reclassifications have been made to the prior year consolidated
financial statements to conform to the current year presentation.

NOTE 2--BALANCE SHEET COMPONENTS (IN THOUSANDS):

   Property and equipment comprise the following:

<TABLE>
<CAPTION>
                                                              As of April 30,
                                                             ------------------
                                                               2001      2000
                                                             --------  --------
   <S>                                                       <C>       <C>
   Computer hardware and software........................... $ 18,274  $  7,753
   Furniture and equipment..................................    3,513     2,100
   Leasehold improvements...................................    1,224       792
                                                             --------  --------
                                                               23,011    10,645
   Less: Accumulated depreciation and amortization..........  (10,036)   (4,126)
                                                             --------  --------
                                                             $ 12,975  $  6,519
                                                             ========  ========

   Accrued expenses and other liabilities comprise the following:

<CAPTION>
                                                              As of April 30,
                                                             ------------------
                                                               2001      2000
                                                             --------  --------
   <S>                                                       <C>       <C>
   Accrued employee costs................................... $  5,591  $  2,903
   Taxes payable............................................      492       158
   Accrued professional fees................................    1,647     1,156
   Merger related expenses..................................    1,033       --
   Other....................................................    2,781     2,174
                                                             --------  --------
                                                             $ 11,544  $  6,391
                                                             ========  ========

   Intangible assets comprise the following:

<CAPTION>
                                                              As of April 30,
                                                             ------------------
                                                               2001      2000
                                                             --------  --------
   <S>                                                       <C>       <C>
   Technology............................................... $     90  $  1,850
   Trademark................................................      --        150
   Assembled workforce......................................    2,100     2,100
   Goodwill.................................................      --    103,776
                                                             --------  --------
                                                                2,190   107,876
   Less: Accumulated amortization...........................     (992)  (14,911)
                                                             --------  --------
                                                             $  1,198  $ 92,965
                                                             ========  ========
</TABLE>


                                       52
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 3--MARKETABLE INVESTMENTS:

   The following is a summary of available-for-sale securities (in thousands):

<TABLE>
<CAPTION>
                                                   April 30, 2001
                                      ----------------------------------------
                                      Amortized Unrealized Unrealized   Fair
                                        Cost      Gains      Losses    Value
                                      --------- ---------- ---------- --------
   <S>                                <C>       <C>        <C>        <C>
   Commercial paper.................. $ 123,467   $  36      $  (6)   $123,497
   Corporate debt securities.........    92,757     187        (33)     92,911
   Government debt securities........    26,913      28         (2)     26,939
   Foreign debt securities...........     3,012       7        --        3,019
                                      ---------   -----      -----    --------
                                      $ 246,149   $ 258      $ (41)   $246,366
                                      =========   =====      =====    ========
   Included in cash and cash
    equivalents...................... $  85,755   $   8      $  (5)   $ 85,758
   Included in short-term
    investments......................   160,394     250        (36)    160,608
                                      ---------   -----      -----    --------
                                      $ 246,149   $ 258      $ (41)   $246,366
                                      =========   =====      =====    ========

<CAPTION>
                                                   April 30, 2000
                                      ----------------------------------------
                                      Amortized Unrealized Unrealized   Fair
                                        Cost      Gains      Losses    Value
                                      --------- ---------- ---------- --------
   <S>                                <C>       <C>        <C>        <C>
   Commercial paper.................. $ 120,441   $ --       $ (63)   $120,378
   Corporate debt securities.........    91,230     --        (345)     90,885
   Government debt securities........    58,426     --         (72)     58,354
   Foreign debt securities...........    17,121     --         (50)     17,071
                                      ---------   -----      -----    --------
                                      $ 287,218   $ --       $(530)   $286,688
                                      =========   =====      =====    ========
   Included in cash and cash
    equivalents...................... $ 117,045   $ --       $ (61)   $116,984
   Included in short-term
    investments......................   157,529     --        (375)    157,154
   Included in long-term
    investments......................    12,644     --         (94)     12,550
                                      ---------   -----      -----    --------
                                      $ 287,218   $ --       $(530)   $286,688
                                      =========   =====      =====    ========
</TABLE>

   At April 30, 2001 and 2000, all marketable debt securities had scheduled
maturities of less than one year. At April 30, 2001 and 2000, marketable debt
securities totaling $85.8 million and $117.0 million, respectively had
maturities less than three months from date of purchase and are classified as
cash equivalents.

NOTE 4--OTHER ASSETS:

   Other assets include investments in equity instruments of privately held
companies which amounted to $4.8 million and $7.0 million as of April 30, 2001
and 2000, respectively. These equity investments held in private companies have
been reclassified from long-term investments to other assets as of April 30,
2000 to conform to the current presentation. During fiscal 2001, the company
purchased an additional $6.4 million of equity investments in privately held
companies. These investments, accounted for using the cost method and
consisting primarily of investments in preferred stock in privately-held
companies, are reviewed each reporting period for declines considered other-
than-temporary, and, if appropriate, written down to their estimated fair
value.

   During the fourth quarter of 2001, the Company determined that certain of
these investments had incurred a decline in value that was other-than-temporary
primarily due to the limited liquidity and poor prospects for additional
funding and reduced their carrying amounts to their estimated fair value by a
charge of $8.6 million to results of operations.

                                       53
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


NOTE 5--ACQUISITION:

   On November 23, 1999, the Company acquired Digital Markets, Inc. (DMI) in a
transaction accounted for as a purchase business combination. Agile paid $20.0
million in cash and issued 1,202,018 shares of its common stock, valued at
$75.7 million or $62.95 per share based upon the average price of its common
stock two days before, the day of and two days after the transaction
measurement date. In addition, the Company also assumed all outstanding stock
options granted by Digital Market. The estimated fair value of the assumed
options was $5.6 million, and was included as a component of the purchase
price. The fair value of the assumed options was estimated using the Black-
Scholes option-pricing model with the following assumptions: expected dividend
yield: 0%; volatility: 85%; expected terms: two to four years; and a risk-free
interest rate of 5.96%. The Company incurred $1.2 million in acquisition
expenses, including financial advisory and legal fees and other direct
transaction costs resulting in an adjusted aggregate purchase price of $102.5
million.

   The total acquisition price of $102.5 million was allocated to the assets
acquired, including tangible and intangible assets, and liabilities assumed
based upon the fair value of such assets and liabilities on the date of the
acquisition. The total purchase cost of the acquisition was allocated to assets
and liabilities based on management's estimates of their fair value and an
independent appraisal of certain intangible assets, with the excess costs over
the net assets acquired allocated to goodwill. The aggregate purchase price was
allocated as follows (in thousands):

<TABLE>
       <S>                                                            <C>
       Net tangible liabilities...................................... $ (6,659)
       In-process technology.........................................    1,300
       Existing technology...........................................    1,850
       Trademark.....................................................      150
       Assembled workforce...........................................    2,100
       Goodwill......................................................  103,776
                                                                      --------
                                                                      $102,517
                                                                      ========
</TABLE>

   The net tangible liabilities consisted primarily of cash and cash
equivalents, accounts receivable, property and equipment, accounts payable and
other liabilities and notes payable. Because the in-process technology had not
reached the stage of technological feasibility at the acquisition date and had
no alternative future use, the amount was immediately charged to operations.
The amount allocated to existing technology, trademark and assembled workforce
are being amortized over the estimated useful lives of three years. The
purchase price in excess of identified tangible and intangible assets was
allocated as goodwill. As a result of the rapid technological changes occurring
in the software and Internet industries, goodwill is being amortized over the
estimated useful life of three years. The valuation of the intangible assets
was determined using management's assumptions and a valuation report from an
independent appraiser.

Acquired in-process technology

   In connection with the acquisition of DMI, the Company recorded a $1.3
million charge in fiscal 2000 for acquired in-process technology since the in-
process technology had not yet reached the stage of technological feasibility
at the acquisition date and had no alternative future use. The Company acquired
one existing product called Digital Buyer and in-process technology primarily
consisting of projects to add substantial functionality to the Digital Buyer
product. The value of the in-process technology was determined by an
independent third party appraiser using the income approach.


                                       54
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Impairment

   During the fourth quarter ended April 30, 2001, the Company performed an
impairment assessment of the identifiable intangibles and goodwill recorded
upon the acquisition of DMI. This assessment was performed primarily as a
result of the decision by management in February 2001 to discontinue the
further development of the products acquired in the DMI acquisition. As a
result of the assessment, the Company recorded a $55.2 million impairment
charge reflecting the amount by which the carrying amount of the assets
exceeded the estimated future discounted cash flows. The charge was determined
based upon the estimated discounted future cash flows relating to the future
cash flows from the specific products acquired using a discount rate of 25%.
The assumptions supporting such cash flows including the discount rate were
determined using management's best estimates. The remaining identifiable
intangibles balance of approximately $1.2 million, consisting principally of
workforce in place, will continue to be amortized over its remaining useful
life of 1.5 years which management considers appropriate. No write down of
goodwill or other intangibles assets occurred during fiscal 2000 or fiscal
1999.

NOTE 6--INCOME TAXES:

   The Company's operating losses are generated domestically, and amounts
attributable to its foreign operations have been insignificant for all periods
presented. For each of the three years in the period ended April 30, 2001, the
Company incurred net operating losses and accordingly no provision for income
taxes has been recorded. In addition, no benefit for income taxes has been
recorded due to the uncertainty of the realization of any tax assets. At April
30, 2001, the Company had approximately $85.6 million of federal and $42.9
million of state net operating loss, respectively. The net operating loss
carryforwards will begin to expire in 2011 and 2004 for federal and California
purposes if not utilized. Included in the net operating loss is $40.8 million
and $20.4 million of federal and state net operating loss carryforwards
relating to employee stock options, the benefit of which will be credited to
equity when realized. The Tax Reform Act of 1986 limits the use of net
operating loss and tax credit carryforwards in certain situations where changes
occur in the stock ownership of a company. In the event the Company has a
change in ownership, utilization of the carryforwards could be restricted.

   The components of the Company's deferred tax assets/liabilities are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                              As of April 30,
                                                             ------------------
                                                               2001      2000
                                                             --------  --------
   <S>                                                       <C>       <C>
   Deferred tax assets:
     Depreciation and amortization.......................... $  1,865  $    692
     Reserves and accruals..................................    4,198     1,717
     Credit carryforwards...................................    4,482     2,517
     Net operating loss carryforwards.......................   32,206    18,004
                                                             --------  --------
   Total deferred tax asset.................................   42,751    22,930
   Less: Valuation allowance................................  (42,751)  (22,930)
                                                             --------  --------
   Net deferred tax assets.................................. $    --   $    --
                                                             ========  ========
</TABLE>

   For financial reporting purposes, the Company has incurred a loss in each
period since its inception. Based on the available objective evidence,
including the Company's history of losses, management believes it is more
likely than not that the net deferred tax assets will not be fully realizable.
Accordingly, the Company provided for a full valuation allowance against its
net deferred tax assets at April 30, 2001 and 2000.

                                       55
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   A reconciliation between the amount of income tax benefit determined by
applying the applicable U.S. statutory income tax rate to pre-tax loss is as
follows:

<TABLE>
<CAPTION>
                                                             Fiscal Year
                                                                Ended
                                                              April 30,
                                                            ------------------
                                                            2001   2000   1999
                                                            ----   ----   ----
   <S>                                                      <C>    <C>    <C>
   Federal statutory rate.................................. (34)%  (34)%  (34)%
   State tax, net of federal impact........................  (1)    (2)    (6)
   Acquisition and related amortization....................   9      2    --
   Nondeductible stock compensation........................   4      6    --
   Tax credit carryforwards generated......................  (1)    (5)   --
   Write-off of acquisition related assets.................  18    --     --
   Change in valuation allowance on deferred tax assets....   5     33     40
                                                            ---    ---    ---
                                                            -- %   -- %   -- %
                                                            ===    ===    ===
</TABLE>

NOTE 7--STOCKHOLDERS' EQUITY:

   In June 1999, the Company's Board of Directors authorized the
reincorporation of the Company in the State of Delaware. As a result of the
reincorporation, the Company is authorized to issue 100,000,000 shares of $.001
par value Common Stock and 10,000,000 shares of $.001 par value Preferred
Stock. The Board of Directors has the authority to issue the undesignated
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof. All share and per share amounts as of and
for each period presented have been adjusted to reflect the reincorporation.

Initial public offering and concurrent private placement of common stock

   In August 1999, the Company completed its initial public offering of
6,900,000 shares of Common Stock, including the exercise of the underwriter's
overallotment option, at $10.50 per share. Net proceeds to the Company, before
offering expenses, were $67.4 million or $9.77 per share. Offering expenses
were $1.6 million. Simultaneous with the closing of the initial public
offering, the Company sold an aggregate of 1,331,282 shares of Common Stock at
$9.77 share in private placements to three corporate investors. Upon the
closing of the initial public offering, the outstanding 11,874,000 shares of
Preferred Stock were converted into 23,748,000 shares of Common Stock and a
warrant to purchase 120,000 shares of Common Stock at $3.38 per share was
exercised.

Follow-on stock offering

   In December 1999, the Company completed its follow-on public offering of
5,290,000 shares of Common Stock, including the exercise of the underwriters'
overallotment option, at $87.00 per share. The Company sold 3,290,000 in this
offering and selling stockholders sold 2,000,000 shares. Net proceeds to the
Company, before offering expenses, were $272.6 million. Upon the closing of the
follow-on public offering, warrants to purchase 114,380 shares of Common Stock
at prices ranging from $0.58 to $1.48 per share were exercised.

Stock split

   On March 17, 2000, the Board of Directors authorized a two-for-one stock
split of the Company's common stock, in the form of a stock dividend. All
information presented in these financial statements has been retroactively
adjusted to reflect the stock split.

                                       56
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Restricted stock

   The Company has granted stock to certain founders and employees under a
restricted stock plan. This plan was terminated in June 1999. Through June
1999, the Company had sold 4,496,550 shares of Common Stock to such founders
and employees that were subject to certain repurchase rights by the Company.
The Company has a right of first offer in connection with any proposed sale or
transfer of these shares and has the right to repurchase these shares at the
original issue price. The Company's right to repurchase such shares declines on
a percentage basis, usually over four years, based on the length of the
employees' continual employment with the Company. At April 30, 2001, there were
no shares of founders restricted stock outstanding and 231,000 shares granted
under the Company's restricted stock plan were subject to repurchase at a
weighted average price of $0.35 per share.

   Certain of these and other shares were issued in exchange for notes
receivable, which are full recourse and additionally collateralized by the
underlying shares of Common Stock. These notes receivable are payable on
various dates through March 2004 and bear interest at rates ranging from 4.5%
to 7.4%. These notes receivable have been included as a component of
stockholders' equity.

Rights Agreement

   During fiscal 2001, the Company adopted a Stockholder Rights Plan (Rights
Agreement). Pursuant to the Rights Agreement, rights were distributed at the
rate of one right for each share of Common Stock owned by the Company's
stockholders of record on April 26, 2001. The rights expire on April 2, 2011
unless extended or earlier redeemed or exchanged by the Company.

   Under the Rights Agreement, each right entitles the registered holder to
purchase one one-thousandth of a Series A Preferred share of the Company at a
price of $120.00. The rights will become exercisable only if a person or group
acquires beneficial ownership of 15% or more of the Company's common stock or
commences a tender offer or exchange offer upon consummation of which such
person or group would beneficially own 15% or more of the Company's common
stock.

Warrant

   In September 2000, in connection with a marketing alliance with a business
partner, the Company issued a warrant to purchase 50,000 shares of the
Company's common stock at an exercise price of $67.05 per share, the fair value
of the Company's common stock on the date of the agreement. The Company
recorded a charge of $2.0 million representing the fair value of the warrant,
estimated using the Black-Scholes option pricing model with the following
weighted-average assumptions: risk-free rate of 5.75%, expected life of 3.0
years, expected dividend rate of 0%, and volatility of 80%. Such amount is
presented as a reduction of stockholders' equity and is being amortized to
expense over the three-year life of the marketing alliance.

   The warrant was granted on a non-contingent basis and vests immediately. The
warrant is not subject to repurchase, nor does it require substantial
performance for the third party to exercise. The marketing alliance is a three-
year non-exclusive cooperative agreement, which is designed to enhance the
company's and the third party's potential revenues in their respective areas,
and credibility in collaborative manufacturing commerce without constraining
each other's business. The Company and third party will be responsible for
their own cost and expenses in performing joint marketing and sales activities.

   Upon the Company's merger or consolidation with or sale or conveyance of all
of its assets to any other corporation or entity, to the extent that the
warrant has not been exercised in full by the effective date of such
transaction, this warrant shall terminate.

                                       57
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


NOTE 8--EMPLOYEE BENEFIT PLANS:

401(k) plan

   The Company's employee savings and retirement plan is qualified under
Section 401 of the Internal Revenue Code. Employees may elect to reduce their
current compensation by up to the statutory prescribed annual limit and have
the amount of such reduction contributed to the 401(k) Plan. The Company
provides a 50% match to employee contributions up to $1,500. Employees of the
Company may elect to participate in the Company's 401(k) plan. The Company has
not made any contributions to the 401(k) plan.

Employee stock purchase plan

   In June 1999, the Board adopted the 1999 Employee Stock Purchase Plan (the
"Purchase Plan") which became effective on the date of the Company's initial
public offering, and reserved 1,000,000 shares of Common Stock for issuance
thereunder. This reserve was automatically increased to 2,000,000 shares on May
1, 2000 and will increase each May 1 thereafter until and including May 1,
2009, by an amount equal to the lesser of 1,000,000 shares per year, 2% of the
number of shares of Common Stock which are issued and outstanding on the last
day of the preceding fiscal year or a number of shares determined by the
Company's Board of Directors. Employees generally will be eligible to
participate in the Purchase Plan if they are employed by the Company for more
than 20 hours per week and more than five months in a fiscal year end. In
general, the price at which the Common Stock is purchased under the Purchase
Plan is 85% of the lesser of the fair market value of the Company's Common
Stock on the first day of the applicable offering period or on the purchase
date. Employees generally may not purchase more than 2,000 shares in a six-
month period or stock having a value greater than $25,000 in any calendar year
as measured at the beginning of the offering period.

   During fiscal 2001, 250,000 shares were issued under the Purchase Plan at an
average price of $11.57 per share.

 1995 Stock option plan

   In May 1995, the Company adopted the 1995 Stock Option Plan (the "1995
Plan") which, as amended, provides for the issuance of incentive and
nonqualified stock options to employees, directors and consultants of the
Company. Under the 1995 Plan, 11,750,000 shares have been authorized for
issuance as of April 30, 2001. This reserve will be automatically increased on
the first day of each fiscal year by the lesser of 1,000,000 shares per year,
5% of the number of shares of the Company's Common Stock which were issued and
outstanding on the last day of the preceding fiscal year or a number of shares
determined by the Company's board of directors. Options granted under the 1995
Plan are for periods not to exceed ten years and options must be issued at
prices not less than 100% and 85%, for incentive and nonqualified stock
options, respectively, of the estimated fair value of the stock on the date of
grant as determined by the Board of Directors. Options granted to stockholders
who own greater than 10% of the outstanding stock are for periods not to exceed
five years, and must be issued at prices not less than 110% of the estimated
fair value of the stock on the date of grant. Options are exercisable upon
grant and generally vest 25% or 20% at the end of the first year and at a rate
of 1/36 or 1/48 per month thereafter such that they vest over four or five
years, respectively.

 2000 Nonstatutory stock option plan

   In February 2000, the Company adopted the 2000 Nonstatutory Stock Option
Plan (the "2000 Plan") which provides for the issuance of nonqualified stock
options to employees and consultants of the Company. Under the 2000 Plan,
14,500,000 shares have been authorized for issuance. Options granted under the
2000

                                       58
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Plan must be issued at prices not less than 85% of the estimated fair value of
the stock on the date of grant as determined by the Board of Directors, or a
committee designated by the Board. The Company's Board of Directors, or a
committee designated Board, determines the vesting schedule and term of each
grant.

   The following table summarizes activity under all stock option plans (shares
in thousands):

<TABLE>
<CAPTION>
                                                                        Weighted
                                                   Shares               Average
                                                  Available   Number    Exercise
                                                  for Grant Outstanding  Price
                                                  --------- ----------- --------
   <S>                                            <C>       <C>         <C>
   Balance at April 30, 1998.....................     156      1,054     $ 0.42
     Options authorized..........................   2,000        --         --
     Options granted.............................  (1,956)     1,956       1.28
     Options exercised...........................     --        (630)      0.71
     Options canceled............................      60        (60)      0.85
     Unvested shares repurchased.................     230        --         --
                                                   ------     ------
   Balance at April 30, 1999.....................     490      2,320       1.06
     Options authorized..........................  10,000        --         --
     Options granted.............................  (8,864)     8,864      24.86
     Options exercised...........................     --      (1,339)      1.70
     Options canceled............................     510       (510)     12.18
     Unvested shares repurchased.................      56        --         --
                                                   ------     ------
   Balance at April 30, 2000.....................   2,192      9,335      22.95
     Options authorized..........................   9,500        --         --
     Options granted.............................  (8,615)     8,615      27.86
     Options exercised...........................     --        (870)      7.48
     Options canceled............................   1,161     (1,161)     26.23
     Unvested shares repurchased.................      91        --         --
                                                   ------     ------
   Balance at April 30, 2001.....................   4,329     15,919     $26.13
                                                   ======     ======
</TABLE>

   At April 30, 2001, approximately 916,000 outstanding shares of Common Stock
purchased under the stock option plans were subject to repurchase at a weighted
average purchase price of $1.33 per share. Upon termination of employment,
unvested shares previously purchased under the plans are subject to repurchase
by the Company at a price equal to the exercise price.

                                       59
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The following table summarizes the information about stock options
outstanding and exercisable as of April 30, 2001 (shares in thousands, except
per share data):

<TABLE>
<CAPTION>
                                                        Options Vested and
                            Options Outstanding            Exercisable
                      -------------------------------- --------------------
                                   Weighted
                                    Average
                                   Remaining  Weighted             Weighted
                                  Contractual Average              Average
       Range of         Number       Life     Exercise   Number    Exercise
    Exercise Prices   Outstanding   (Years)    Price   Outstanding  Price
    ---------------   ----------- ----------- -------- ----------- --------
   <S>                <C>         <C>         <C>      <C>         <C>
   $ 0.075 - $  5.00     2,237       8.02     $  3.26       635    $  3.21
       9.5 -   10.31     3,476       9.86       10.28        63       9.95
     10.52 -   15.52       388       9.71       12.24        36      14.74
     17.25 -   20.69     3,578       9.00       20.61       615      20.69
     21.81 -   35.25     2,328       9.39       30.90       133      29.85
     36.63 -   55.25     1,623       9.33       46.34        33      51.26
     55.75 -   64.50     1,650       8.77       61.12       357      60.95
     65.31 -   78.50       610       8.64       71.42       122      71.84
    100.06 -  100.50        29       8.69      100.06         7     100.28
                        ------                            -----
   $ 0.075 - $100.50    15,919       9.12     $ 26.13     2,001    $ 28.03
                        ======                            =====
</TABLE>

 Fair value disclosures

   The Company calculated the fair value of each option grant under the Plan on
the date of grant using the Black-Scholes option pricing model as prescribed by
SFAS No. 123 with the following underlying assumptions:

<TABLE>
<CAPTION>
                                                           Fiscal Year Ended
                                                               April 30,
                                                          ---------------------
                                                           2001    2000   1999
                                                          ------  ------  -----
   <S>                                                    <C>     <C>     <C>
   Dividend yield........................................    --      --     --
   Expected volatility...................................    100%    100%   --
   Average risk-free interest rate.......................    4.6%    6.5%   5.7%
   Expected life (in years)..............................      5       5      5
   Weighted average fair value of options granted........ $24.20  $22.16  $0.64
</TABLE>

   The minimum value method was used in fiscal 1999.

   Had compensation cost for options granted under the Plan been determined
based on the fair value at the grant dates for the awards under a method
prescribed by SFAS No. 123, the Company's net loss would have been increased to
the pro forma amounts below for the fiscal years ended April 30, 2001, 2000 and
1999, respectively (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                 Fiscal Year Ended April 30,
                                                 -----------------------------
                                                   2001       2000      1999
                                                 ---------  --------  --------
   <S>                                           <C>        <C>       <C>
   Net loss as reported......................... $(125,336) $(35,193) $(11,428)
   Pro forma net loss...........................  (243,729)  (50,881)  (11,529)
   Net loss per share as reported...............     (2.74)    (1.14)    (1.94)
   Pro forma net loss per share................. $   (5.33) $  (1.64)    (1.95)
</TABLE>

   Because the determination of the fair value of all options granted after the
Company became a public entity includes an expected volatility factor and
because additional option grants are expected to be made each year, the
compensation expense for options granted during each of the three years in the
period ended April 30, 2001 are not representative of the pro forma effects of
options grants on reported net income (loss) for future years.

                                       60
<PAGE>

 Unearned stock compensation

   In connection with certain stock option grants during the fiscal years ended
April 30, 2001, 2000 and 1999, the Company recorded unearned stock compensation
cost totaling $1.6 million, $30.7 million and $5.0 million, respectively, which
is being amortized over the vesting period of the related options, generally
five years, using the multiple option approach. Amortization of unearned stock
compensation totaled $16.1 million, $11.9 million and $2.3 million for the
years ended April 30, 2001, 2000 and 1999, respectively.

NOTE 9--COMMITMENTS AND CONTINGENCIES:

   The Company has entered into noncancelable operating leases for office space
and capital leases for equipment with original terms ranging from 12 to 60
months. The terms of certain operating leases provide for rental payments on a
graduated scale. The Company recognizes expense on a straight-line basis over
the lease period and has accrued for rent expense incurred but not paid. The
future minimum lease payments under these leases at April 30, 2001 are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                Operating Leases
                                          ----------------------------
                                           Future           Net Future
                                          Minimum    Less    Minimum
                                           Lease   Sublease   Lease    Capital
   Fiscal Year Ended April 30,            Payments  Income   Payments  Leases
   ---------------------------            -------- -------- ---------- -------
   <S>                                    <C>      <C>      <C>        <C>
   2002.................................. $ 4,437    $432    $ 4,005    $ 385
   2003..................................   4,602     347      4,255       96
   2004..................................   4,548      49      4,499      --
   2005..................................   4,590     --       4,590      --
   2006..................................   1,984     --       1,984      --
                                          -------    ----    -------    -----
   Total minimum lease payments.......... $20,161    $828    $19,333      481
                                          =======    ====    =======
   Less: Amount representing interest....                                 (27)
                                                                        -----
   Present value of capital lease
    obligations..........................                                 454
   Less: Current portion.................                                (359)
                                                                        -----
   Capital lease obligations,
    noncurrent...........................                               $  95
                                                                        -----
</TABLE>

   Property and equipment under capital leases were as follows (in thousands):

<TABLE>
<CAPTION>
                                                               As of April 30,
                                                               ----------------
                                                                2001     2000
                                                               -------  -------
   <S>                                                         <C>      <C>
   Computer hardware and software............................. $ 2,589  $ 2,702
   Furniture and equipment....................................     470      520
                                                               -------  -------
                                                                 3,059    3,222
   Less: Accumulated depreciation.............................  (2,808)  (2,466)
                                                               -------  -------
                                                               $   251  $   756
                                                               =======  =======
</TABLE>

   Rent expense under noncancelable operating leases was approximately
$3,569,000, net of sublease rental income of $349,000, for the year ended April
30, 2001, $1,261,000, net of sublease rental income of $184,000, for the year
ended April 30, 2000, and $568,000, net of sublease rental income of $208,000,
for the year ended April 30, 1999.

 Bank line-of-credit

   The Company had a line-of-credit agreement with a bank that provided for
borrowings of up to $5,000,000, including $500,000 available for the issuance
of letters of credit and foreign currency exchange

                                       61
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

activity. Borrowings under the line-of-credit agreement bore interest at an
annual rate of 8.5%, subject to adjustment by the bank. Borrowings under the
line of credit were collateralized by the assets of the Company. The line-of-
credit agreement expired in August 2000 and was not renewed by the Company.

NOTE 10--UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
                                          Quarters
                             --------------------------------------   Fiscal
                              First     Second    Third     Fourth     Year
                             --------  --------  --------  --------  ---------
   <S>                       <C>       <C>       <C>       <C>       <C>
   Fiscal 2001:
     Total revenues........  $ 15,768  $ 20,246  $ 25,025  $ 26,020  $  87,059
     Gross profit..........    12,524    16,437    20,576    21,168     70,705
     Net loss (1)..........   (14,947)  (14,064)  (12,593)  (83,732)  (125,336)
     Net loss per basic and
      diluted share........      (.33)     (.31)     (.27)    (1.80)     (2.74)
   Fiscal 2000:
     Total revenues........  $  5,890  $  6,935  $  8,563  $ 10,810  $  32,198
     Gross profit..........     4,190     5,283     6,316     8,168     23,957
     Net loss..............    (4,076)   (4,283)  (12,932)  (13,902)   (35,193)
     Net loss per basic and
      diluted share........      (.61)     (.14)     (.31)     (.31)     (1.14)
</TABLE>
--------
(1) Net loss in the fourth quarter of fiscal 2001 includes a $55.2 impairment
    charge related to the write-off of goodwill and other intangible assets
    resulting from the DMI acquisition in November 1999, an $8.6 million charge
    related to the writedown of the Company's equity investments in privately
    held companies, and $5.0 million in financial advisory expenses and
    professional fees relating to the termination of the merger with Ariba,
    Inc. on April 4, 2001.


                                       62
<PAGE>

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

   None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   See the information set forth in the section entitled "Proposal No. 1--
Election of Directors" in Agile's Proxy Statement for the 2001 Annual Meeting
of Stockholders to be filed with the Securities and Exchange Commission within
120 days after the end of Agile's fiscal year ended April 30, 2001 (the "2001
Proxy Statement"), which is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

   See the information set forth in the section entitled "Executive
Compensation and Related Information" in the 2001 Proxy Statement, which is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   See the information set forth in the section entitled "Stock Ownership of
Certain Beneficial Owners and Management" in the 2001 Proxy Statement, which is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS

   See the information set forth in the section entitled "Certain Relationships
and Related Transactions" in the 2001 Proxy Statement, which is incorporated
herein by reference.

                                       63
<PAGE>

                                    PART IV

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

   (a) 1. Financial Statements

     See Item 8 of this Form 10-K.

    2. Financial Statement Schedules

     None

    3. Exhibits

       The exhibits listed on the accompanying index to exhibits
    immediately following the financial statement schedule are filed as
    part of, or incorporated by reference into, this Form 10-K.

<TABLE>
<CAPTION>
 Exhibit
 Number                          Description of Document
 -------                         -----------------------
 <C>     <S>
  2.1    Agreement and Plan of Merger dated as of August 17, 1999 by and
          between Agile Software Corporation and Delaware Agile Software
          Corporation.(2)

  2.2    Agreement and Plan of Reorganization dated as of October 10, 1999, by
          and between Agile Software Corporation, Alaska Acquisition
          Corporation and Digital Market, Inc.(3)

  3.1    Certificate of Incorporation of Agile Software Corporation, as amended
          to date.(1)

  3.2    Certificate of Elimination and Certificate of Amendment.(1)

  3.3    Amended and Restated Bylaws of Agile Software Corporation.(9)

  4.1    Specimen Common Stock Certificate.(1)

 10.1    Amended and Restated 1995 Stock Option Plan.(1)

 10.2    1999 Employee Stock Purchase Plan.(1)

 10.3    Form of Indemnity Agreement between Agile Software Corporation and its
          directors and officers.(1)

 10.4    Almaden Financial Plaza Office Lease dated May 30, 1996 between North
          Block Partnership and Agile Software Corporation, as amended.(1)

 10.5    Subordinated Loan and Security Agreement dated February 8, 1999
          between Comdisco, Inc. and Agile Software Corporation.(1)

 10.6    Revolving Credit Loan and Security Agreement (Accounts and Inventory)
          dated December 11, 1996 between Comerica Bank-- California and Agile
          Software Corporation as modified.(1)

 10.7    Master Lease Agreement dated September 18, 1995 between Comdisco, Inc.
          and Agile Software Corporation, and associated equipment
          schedules.(1)

 10.8    Fifth Amended and Restated Investors' Rights Agreement dated June 4,
          1998 by and among Agile Software Corporation and the investors listed
          on Schedule A thereto.(1)

 10.9    Series A Preferred Stock Purchase Agreement.(1)

 10.10   Series B Preferred Stock Purchase Agreement.(1)

 10.11   Series C Preferred Stock Purchase Agreement.(1)

 10.12   Series D Preferred Stock Purchase Agreement.(1)

 10.13   Series E Preferred Stock Purchase Agreement.(1)

 10.14   Series F Preferred Stock Purchase Agreement.(1)
</TABLE>


                                       64
<PAGE>

<TABLE>
<CAPTION>
 Exhibit
 Number                          Description of Document
 -------                         -----------------------
 <C>     <S>
 10.15   Sixth Amended and Restated Investor Rights Agreement dated as August
          16, 1999 by and among Agile Software Corporation and the investors
          listed on Schedule A thereto.(2)

 10.16   Office Lease dated as of November 5, 1999 by and between 55 Almaden
          Boulevard Limited Partnership and Agile Software Corporation.(4)

 10.17   2000 Nonstatutory Stock Option Plan.(5)

 10.18   First Amendment to Office Lease dated as of October 18,2000 by and
          between 55 Almaden Boulevard Limited Partnership and Agile Software
          Corporation.(6)

 10.19   Fifth Amendment to Office Lease dated as of October 10, 2000 by and
          between North Block Partnership and Agile Software Corporation.(6)

 10.20   Agreement and Plan of Reorganization among Ariba, Inc., Silver Merger
          Corporation and Agile Software Corporation dated January 29, 2001.(7)

 10.21   Mutual Termination Agreement and Release by and among Ariba, Inc.,
          Sliver Merger Corporation, and Agile Software Corporation, dated
          April 2, 2001.(8)

 10.22   Form of Rights Agreement between the Company and Fleet National Bank,
          as Rights Agent(including as Exhibit A the form of Certificate of
          Designation, Preferences and Rights of the Terms of the Series A
          Preferred Stock, as Exhibit B the form of Right Certificate, and as
          Exhibit C the Summary of Terms of Rights Agreement).(9)

 21.1    Subsidiaries of Agile Software Corporation.

 23.1    Consent of PricewaterhouseCoopers LLP, Independent Accountants.

 24.1    Power of Attorney (included on page 66).
</TABLE>

--------
(1) Incorporated by reference to Agile's Registration Statement on Form S-1
    (File No. 333-81387), declared effective on August 19, 1999.
(2) Incorporated by reference to Agile's Quarterly Report on Form 10-Q (file
    No. 000-27071), filed on July 14, 1999.
(3) Incorporated by reference to Agile's current report on Form 8-K (file No.
    000-27071), filed on December 8, 1999.
(4) Incorporated by reference to Agile's Registration Statement on Form S-1
    (File No. 333-91243), declared effective on December 13, 1999.
(5) Incorporated by reference to Agile's Registration Statement on Form S-8
    (file No. 333-35416), filed on April 21, 2000.
(6) Incorporated by reference to Agile's Quarterly Report on Form 10-Q (file
    No. 000-27071), filed on December 12, 2000.
(7) Incorporated by reference to Agile's Quarterly Report on Form 10-Q (file
    No. 000-27071), filed on March 12, 2001.
(8) Incorporated by reference to Agile's Current Report on Form 8-K (file No.
    000-27071), filed on April 4, 2001.
(9) Incorporated by reference to Agile's Current Report on Form 8-K (file No.
    000-27071), filed on April 26, 2001.

   (b) Reports On Form 8-K

   A current report on Form 8-K was filed with the Securities and Exchange
Commission by Agile on April 4, 2001 to report the termination of our merger
with Ariba, Inc. and the Termination Agreement and Release entered in
connection with the termination.

   A current report on Form 8-K was filed with the Securities and Exchange
Commission by Agile on April 26, 2001 to report the Company's adoption of a
Preferred Stock Purchase Right Agreement.

   (c) Exhibits

     See Item 14(a)(3), above.

   (d) Financial Statement Schedules

     See Item 8, above.

                                       65
<PAGE>

                                   SIGNATURES

   Pursuant to the requirement of Section 13 or 15 (d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                          AGILE SOFTWARE CORPORATION

                                                  /s/ Thomas P. Shanahan
                                          By: _________________________________
                                                    Thomas P. Shanahan
                                            Executive Vice President and Chief
                                                     Financial Officer

                                          Date: July 25, 2001

                               POWER OF ATTORNEY

   KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Bryan D. Stolle and Thomas P. Shanahan, and each
of them, his true and lawful attorneys-in-fact, watch with the power of
substitution, for him in any and all capacities, to sign any amendments to thus
Report on Form 10-K, and to file the same, with Exhibits thereto and other
documents in connection therewith with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or
substitute or substitutes, may do or cause to be done by virtue hereof.

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
Form 10-K has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
              Signature                          Title                   Date
              ---------                          -----                   ----

<S>                                    <C>                        <C>
       /s/ Bryan D. Stolle             Chairman of the Board,        July 25, 2001
______________________________________  Chief Executive Officer,
           Bryan D. Stolle              President and Director
                                        (Principal Executive
                                        Officer)

      /s/ Thomas P. Shanahan           Executive Vice President,     July 25, 2001
______________________________________  Chief Financial Officer,
          Thomas P. Shanahan            Secretary and Director
                                        (Principal and Director
                                        (Principal Financial and
                                        Accounting Officer)

     /s/ Klaus-Dieter Laidig           Director                      July 25, 2001
______________________________________
         Klaus-Dieter Laidig

      /s/ James L. Patterson           Director                      July 25, 2001
______________________________________
          James L. Patterson

     /s/ Nancy J. Schoendorf           Director                      July 25, 2001
______________________________________
         Nancy J. Schoendorf
</TABLE>

                                       66