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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C.  20549

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

                                    FORM 10-Q


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

                  FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
                                       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: 000-31155

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

                      DELAWARE                         94-3219745
           (State or other jurisdiction of          (I.R.S.  Employer
           incorporation or organization)          Identification No.)

           1400 65TH STREET, SUITE 100, EMERYVILLE, CA        94608
          (Address of principal executive offices)          (Zip Code)

       Registrant's telephone number, including area code: (510) 428-6000

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001
                                    par value


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

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

     The  aggregate  market  value  of  the  voting  common  stock  held  by
non-affiliates of the registrant as of May 13, 2002 was approximately $7,264,316
based  upon the closing sale price reported for that date on the NASDAQ National
Market.  Shares  of  common  stock held by each officer and director and by each
person  who  owns more than 5% or more of the outstanding common stock have been
excluded because such persons may be deemed to be affiliates. This determination
of  affiliate  status  is  not  necessarily  conclusive  for  other  purposes.

     The number of shares outstanding of the registrant's common stock as of May
13,  2002  was  44,836,414.


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                              EVOLVE SOFTWARE, INC.

                                    FORM 10-Q

                                TABLE OF CONTENTS

                                                                         PAGE
                                                                         ----

                         PART I - FINANCIAL INFORMATION

Item 1     Financial Statements
<S>        <C>                                                           <C>

           Condensed Consolidated Balance Sheets  (unaudited)
           As of March 31, 2002 and June 30, 2001. . . . . . . . . . . .  2

           Condensed Consolidated Statements of Operations (unaudited)
           For the Three and Nine Months Ended March 31, 2002 and 2001 .  3

           Consolidated Statements of Cash Flows (unaudited)
           For the Nine Months Ended March 31, 2002 and 2001 . . . . . .  4

           Notes to Condensed Consolidated Financial Statements. . . . .  5

Item 2     Management's Discussion and Analysis of Financial
           Condition and Results of Operations. . . . . . . . . . . . .  15

Item 3     Quantitative and Qualitative Disclosures About Market Risk .  31



                          PART II - OTHER INFORMATION

Item 1     Legal Proceedings. . . . . . . . . . . . . . . . . . . . . .  32

Item 2     Changes in Securities and Use of Proceeds. . . . . . . . . .  32

Item 3     Defaults Upon Senior Securities. . . . . . . . . . . . . . .  32

Item 4     Submissions of Matters to a Vote of Security Holders . . . .  32

Item 5     Other Information. . . . . . . . . . . . . . . . . . . . . .  32

Item 6     Exhibits and Reports on Form 8-K . . . . . . . . . . . . . .  32

Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  32
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                                        1
<PAGE>
<TABLE>
<CAPTION>
                         PART I - FINANCIAL INFORMATION

ITEM  1.  FINANCIAL  STATEMENTS

                                                   EVOLVE SOFTWARE, INC.
                                           CONDENSED CONSOLIDATED BALANCE SHEETS
                                                      (IN THOUSANDS)


                                                                                                      2002         2001
                                                                                                   -----------  ----------
                                                                                                    MARCH 31,    JUNE 30,
                                                                                                   -----------  ----------
ASSETS                                                                                                    (unaudited)
<S>                                                                                                <C>          <C>
Current assets:
    Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $   12,227   $  19,914
    Short-term investments                                                                                  -       2,840
    Accounts receivable, net of allowance for doubtful
       Accounts $455 and $730, respectively. . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,589       6,414
    Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . .      2,280       2,454
    Notes receivable from related party. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .           -         175
                                                                                                   -----------  ----------
       Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     17,096      31,797

Restricted cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,901           -
Property and equipment, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      7,362      10,481
Deposits and other assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        319       1,617
Goodwill and other intangible assets, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,565       3,726
                                                                                                   -----------  ----------
        Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $   30,243   $  47,621
                                                                                                   ===========  ==========

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND PREFERRED STOCK WARRANTS,
AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $    3,498   $   5,670
    Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      3,520       5,852
    Deferred revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      7,157       8,117
    Capital lease obligations, current portion . . . . . . . . . . . . . . . . . . . . . . . . . .        364         646
    Restructuring accrual, current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,953       2,208
    Short-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,376       2,178
                                                                                                   -----------  ----------
        Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     18,868      24,671

Capital lease obligations, less current portion. . . . . . . . . . . . . . . . . . . . . . . . . .          -         194
Restructuring accrual, less current portion. . . . . . . . . . . . . . . . . . . . . . . . . . . .      1,067       4,651
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        792       2,575
Deferred rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        221         187
Common stock warrants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        147           -
                                                                                                   -----------  ----------
        Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     21,095      32,278
                                                                                                   -----------  ----------

Redeemable convertible preferred stock and preferred stock warrants. . . . . . . . . . . . . . . .      1,454           -

Stockholders' equity:
    Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .          1           -
    Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         45          40
    Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    262,008     250,485
    Notes receivable from stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (1,317)     (7,795)
    Unearned stock-based compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     (2,424)    (11,732)
    Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . .         82          95
    Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   (250,701)   (215,750)
                                                                                                   -----------  ----------
        Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       7,694      15,343
                                                                                                   -----------  ----------

Total liabilities, redeemable convertible preferred stock and preferred stock warrants,
  and stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $   30,243   $  47,621
                                                                                                   ===========  ==========

           The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>


                                        2
<PAGE>
<TABLE>
<CAPTION>
                                                    EVOLVE SOFTWARE, INC.
                                       CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                          (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


                                                                              THREE MONTHS ENDED         INE MONTHS ENDED
                                                                                  MARCH 31,                 MARCH 31,
                                                                           ------------------------  -----------------------
                                                                              2002         2001         2002        2001
                                                                           -----------  -----------  ----------  -----------
                                                                                  (unaudited)              (unaudited)
<S>                                                                        <C>          <C>          <C>         <C>
Revenues:
    Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $    1,994   $    8,846   $   5,391   $   20,332
    Subscriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1,470        2,417       4,007        7,145
                                                                           -----------  -----------  ----------  -----------
        Total revenues. . . . . . . . . . . . . . . . . . . . . . . . . .       3,464       11,263       9,398       27,477
                                                                           -----------  -----------  ----------  -----------

Cost of revenues:
    Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         879        3,347       3,243        9,455
    Subscriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . .         286        1,246       1,067        3,616
    Stock-based and related compensation charges. . . . . . . . . . . . .         138          394           -        1,760
                                                                           -----------  -----------  ----------  -----------
        Total cost of revenues. . . . . . . . . . . . . . . . . . . . . .       1,303        4,987       4,310       14,831
                                                                           -----------  -----------  ----------  -----------

        Gross profit. . . . . . . . . . . . . . . . . . . . . . . . . . .       2,161        6,276       5,088       12,646

Operating expenses:
    Sales and marketing:
      Other sales and marketing . . . . . . . . . . . . . . . . . . . . .       3,259       10,444      11,494       32,501
      Stock-based and related compensation charges. . . . . . . . . . . .         547          578       2,403        5,480
    Research and development:
      Other research and development. . . . . . . . . . . . . . . . . . .       2,769        6,971       9,300       14,843
      Stock-based and related compensation charges. . . . . . . . . . . .        (463)         671       1,311        3,627
    General and administrative:
      Other general and administrative. . . . . . . . . . . . . . . . . .       1,753        3,080       5,872        8,283
      Stock-based and related compensation charges. . . . . . . . . . . .       1,897        2,220       7,437        9,638
    Amortization of goodwill and other intangible assets. . . . . . . . .         359        2,660       1,161        8,045
    Restructuring charges, net. . . . . . . . . . . . . . . . . . . . . .         (21)           -         583            -
                                                                           -----------  -----------  ----------  -----------

        Total operating expenses. . . . . . . . . . . . . . . . . . . . .      10,100       26,624      39,561       82,417

Operating loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (7,939)     (20,348)    (34,473)     (69,771)

Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .       1,593          446         101        2,229
                                                                           -----------  -----------  ----------  -----------

Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      (6,346)     (19,902)    (34,372)     (67,542)

Beneficial conversion feature of preferred stock. . . . . . . . . . . . .        (212)           -        (579)      (5,977)

                                                                           -----------  -----------  ----------  -----------
Net loss attributable to common stockholders. . . . . . . . . . . . . . .  $   (6,558)  $  (19,902)  $ (34,951)  $  (73,519)
                                                                           ===========  ===========  ==========  ===========

Net loss per common share -- basic and diluted. . . . . . . . . . . . . .  $    (0.15)  $    (0.59)  $   (0.89)  $    (2.51)
                                                                           ===========  ===========  ==========  ===========

Shares used in net loss per common share calculation -- basic and diluted      43,715       33,976      39,442       29,301
                                                                           ===========  ===========  ==========  ===========

          The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>


                                        3
<PAGE>
<TABLE>
<CAPTION>
                                              EVOLVE SOFTWARE, INC.
                                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                  (IN THOUSANDS)



                                                                                   NINE MONTHS ENDED MARCH 31,
                                                                               ---------------------------------
                                                                                    2002              2001
                                                                               ---------------  ----------------
                                                                                          (unaudited)
<S>                                                                            <C>              <C>
Cash flows from operating activities:
  Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  $        (34,372)  $       (67,542)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Loss on disposal of fixed assets. . . . . . . . . . . . . . . . . . . .                 -                19
    Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . .               885               420
    Depreciation and amortization - fixed assets. . . . . . . . . . . . . .             2,730             2,741
    Amortization of goodwill and other intangible assets. . . . . . . . . .             1,161             8,045
    Non-cash restructuring charges. . . . . . . . . . . . . . . . . . . . .             1,132                 -
    Write-down of stockholders' loans and related interest. . . . . . . . .             7,120                 -
    Accrued interest. . . . . . . . . . . . . . . . . . . . . . . . . . . .                 -               102
    Stock-based charges . . . . . . . . . . . . . . . . . . . . . . . . . .             4,032            20,506
    Revaluation of common stock warrants. . . . . . . . . . . . . . . . . .                15                 -
  Changes in assets and liabilities:
    Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . .             2,976            (6,626)
    Prepaid expenses and other current assets . . . . . . . . . . . . . . .               195              (529)
    Deposits and other assets . . . . . . . . . . . . . . . . . . . . . . .               480              (691)
    Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . .            (2,240)              832
    Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . .            (2,259)            1,149
    Restructuring accrual . . . . . . . . . . . . . . . . . . . . . . . . .            (4,150)                -
    Deferred revenues . . . . . . . . . . . . . . . . . . . . . . . . . . .              (991)            1,195
                                                                               ---------------  ----------------
NET CASH USED IN OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . .           (23,286)          (40,379)
                                                                               ---------------  ----------------

Cash flows from investing activities:
  Purchases of short-term investments . . . . . . . . . . . . . . . . . . .              (532)          (22,035)
  Maturities of short-term investments. . . . . . . . . . . . . . . . . . .             3,373            14,530
  Purchases of property and equipment . . . . . . . . . . . . . . . . . . .              (192)           (8,125)
  Proceeds from sale of property and equipment. . . . . . . . . . . . . . .                 -                13
  Purchases of intangibles. . . . . . . . . . . . . . . . . . . . . . . . .                 -              (700)
  Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . .            (2,901)            2,000
                                                                               ---------------  ----------------
NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . .              (252)          (14,317)
                                                                               ---------------  ----------------

Cash flows from financing activities:
  Payments under capital lease obligations. . . . . . . . . . . . . . . . .              (476)             (539)
  Payments of long-term debt. . . . . . . . . . . . . . . . . . . . . . . .            (1,584)           (4,060)
  Proceeds from initial public offering . . . . . . . . . . . . . . . . . .                 -            46,473
  Proceeds from issuance of preferred stock, net of issuance costs. . . . .            17,899            12,577
  Proceeds from exercise of common stock options. . . . . . . . . . . . . .                 -               864
  Proceeds from exercise of common stock warrants . . . . . . . . . . . . .                 -               500
  Proceeds from issuance of debt. . . . . . . . . . . . . . . . . . . . . .                 -             4,753
  Proceeds from payment on note receivable. . . . . . . . . . . . . . . . .                 -               343
  Proceeds from employee stock purchase plan. . . . . . . . . . . . . . . .               101             1,281
  Payments on repurchase of common stock. . . . . . . . . . . . . . . . . .               (13)             (219)
                                                                               ---------------  ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES . . . . . . . . . . . . . . . . .            15,927            61,973
                                                                               ---------------  ----------------

Effect of exchange rate changes on cash and cash equivalents. . . . . . . .               (76)               62

Increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . .            (7,687)            7,339
Cash and cash equivalents at beginning of period. . . . . . . . . . . . . .            19,914            18,660
                                                                               ---------------  ----------------
Cash and cash equivalents at end of period. . . . . . . . . . . . . . . . .    $       12,227   $        25,999
                                                                               ===============  ================

      The accompanying notes are an integral part of these condensed consolidated financial statements.
</TABLE>


                                        4
<PAGE>
                              EVOLVE SOFTWARE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE  1.  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

THE  COMPANY

Evolve  Software,  Inc.  (the  "Company" or "Evolve") was incorporated under the
laws  of  the  state  of Delaware in February 1995 for the purpose of designing,
developing,  marketing  and supporting enterprise application software products.
The  accompanying  condensed  consolidated  financial  statements  include  the
accounts  of Evolve Software, Inc.  and the Company's wholly-owned subsidiaries,
Evolve  Software  Europe  Ltd.,  Evolve  Software (India) Pvt.  Ltd.  and Evolve
Canada, Inc., which were incorporated in May 2000, December 2000 and April 2001,
respectively.

LIQUIDITY

The  Company  has  sustained  net losses and negative cash flows from operations
since  its  inception.  The  Company's  ability  to  fund its obligations in the
ordinary course of business is dependent on its ability to increase revenues, to
manage  net  operating expenses and to raise additional financing through public
or  private  equity  financing  or  other  sources  of  financing.  There  is no
assurance  that  the  Company  will achieve a sufficient increase in revenues or
maintain  a reduction of net operating expenses or that it will be able to raise
adequate  financing  from  other  sources.

BASIS  OF  PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial  information  and in accordance with the instructions to Form 10-Q and
Article  10  of  Regulation  S-X.  Accordingly,  they  do not include all of the
information  and  footnotes required by generally accepted accounting principles
for  complete financial statements.  All adjustments (including adjustments of a
normal  recurring nature) considered necessary for a fair presentation have been
included.  Operating  results  for the three- and nine-month periods ended March
31, 2002, are not necessarily indicative of the results that may be expected for
the  year ending June 30, 2002.  For further information, refer to the financial
statements  and  notes  thereto  included in the Company's Annual Report on Form
10K/A.

PRINCIPLES  OF  CONSOLIDATION

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

USE  OF  ESTIMATES

The Company has prepared these financial statements in conformity with generally
accepted  accounting  principles  which  require  it  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.

REVENUE  RECOGNITION

The  Company derives revenues from fees for licenses and implementation services
("Solutions  revenue")  and  fees from maintenance, application service provider
("ASP")  and  subscription  agreements  ("Subscriptions  revenue").  The Company
recognizes  revenues  in accordance with the provisions of American Institute of
Certified Public Accountants (AICPA) Statement of Position (SOP) 97-2, "Software
Revenue Recognition."  The Company also follows the provisions of the Securities
Exchange  Commission's  Staff  Accounting  Bulletin  No. 101 (SAB 101), "Revenue
Recognition  in  Financial  Statements."

Under  SOP  97-2  as  amended,  the  Company recognizes revenues when all of the
following  conditions  are  met:

     -    when persuasive evidence of a customer agreement exists;
     -    the delivery of the product or service subject to the agreement has
          occurred;
     -    the associated fees are fixed or determinable; and
     -    the Company believes that collection of these fees is reasonably
          assured.


                                        5
<PAGE>
The Company's customer agreements typically include arrangements for maintenance
services  to  be  provided  by  the  Company.  Generally, the Company has vendor
specific  objective  evidence  of  fair  value  for  the  maintenance element of
software arrangements based on the renewal rates for maintenance in future years
as  specified  in  the  contracts.  In  those cases where first year maintenance
revenue is included in the license fee, the Company defers the fair value of the
first  year  maintenance revenue at the outset of the arrangement and recognizes
it ratably over the period during which the maintenance is to be provided, which
normally  commences  on  the  date  the  software  is  delivered.

The Company has established vendor specific objective evidence of fair value for
certain services.  For these contracts, which involve significant implementation
or  other  services which are essential to the functionality of the software and
which  are  reasonably estimable, the license and services revenue is recognized
over  the  period  of  each  implementation,  primarily  using  the
percentage-of-completion  method.  Labor  hours incurred are used as the measure
of progress towards completion.  Revenue for these arrangements is classified as
Solutions  revenue.  A  provision for estimated losses on engagements is made in
the  period  in which the loss becomes probable and can be reasonably estimated.
In  cases  where  a  sale  of a license does not include implementation services
(e.g.,  a  sale  of additional seats or a sale of product to be implemented by a
third party), revenue is recorded upon delivery with an appropriate deferral for
maintenance  services,  if  applicable,  provided  all  of  the  other  relevant
conditions  have  been  met.

The  Company generates revenue from its ASP business by hosting the software and
making  the  solution  available to the customer via the Internet, as well as by
providing  maintenance  and other services to the customer.  In such situations,
customers pay a monthly fee for the term of the contract in return for access to
the  Company's  software, maintenance and other services such as implementation,
training,  consulting  and  hosting.  For  certain ASP software arrangements for
which the Company does not have vendor specific objective evidence of fair value
for  the elements of the contract, fees are recognized on a monthly basis as the
hosting  service is provided.  In other circumstances where the customer has the
right  to  take  delivery  of  the  software and the Company has vendor specific
objective  evidence  of fair value for the hosting element of the contract, fees
are  allocated  between  the  elements  based  on  the vendor specific objective
evidence.  Revenue for these hosting arrangements is classified as Subscriptions
revenue.

License  revenue  includes  product licenses to companies from which the Company
has  purchased products and services under separate arrangements executed within
a  short  period  of  time  ("reciprocal  arrangements").  Products and services
purchased in reciprocal arrangements include:  1) software licensed for internal
use;  2)  software  licensed  for  resale  or  incorporation  into the Company's
products;  and  3)  development  or  implementation  services.  For  reciprocal
arrangements,  the  Company  considers Accounting Principles Board (APB No. 29),
"Accounting for Nonmonetary Transactions," and Emerging Issues Task Force (EITF,
Issue No. 86-29), "Nonmonetary Transactions: Magnitude of Boot and Exceptions to
the  Use  of  Fair  Value, Interpretation of Accounting Principles Board No. 29,
Accounting for Nonmonetary Transactions" to determine whether the arrangement is
a  monetary  or  nonmonetary transaction.  In determining these fair values, the
Company  considers  the  recent  history  of  cash sales of the same products or
services  in  similar  sized transactions.  Revenues recognized under reciprocal
arrangements  were $258,000 and $204,000 for the fiscal quarters ended March 31,
2002  and  2001, respectively, and $862,000 and $1.3 million for the nine months
ended  March  31,  2002  and  2001,  respectively.

Deferred  revenue represents fees derived from maintenance, ASP and subscription
agreements  that  are being recognized ratably over the unexpired portion of the
underlying  period  of the agreements.  Deferred revenue also represents amounts
billed  to customers under license and service arrangements in excess of amounts
recognized  as  revenue  to  date  from  those arrangements.  As work progresses
towards completion of these arrangements, a portion of the deferred revenue will
be  recognized.  Certain  revenues  will  also  be  deferred,  if  other revenue
recognition  criteria  have  not  been  met.


                                        6
<PAGE>
COMPREHENSIVE  INCOME  (LOSS)

The  Company  follows  Statement  of Financial Accounting Standards ("SFAS") No.
130,  "Reporting  Comprehensive  Income." SFAS No. 130 establishes standards for
reporting  and  display  of  comprehensive  income  (loss) and its components in
financial  statements.  The  statement  of  comprehensive loss is as follows (in
thousands):

<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED        NINE MONTHS ENDED
                                                 MARCH 31,                MARCH 31,
                                         ------------------------  -----------------------
                                            2002         2001         2002        2001
                                         -----------  -----------  ----------  -----------
<S>                                      <C>          <C>          <C>         <C>
Net loss                                 $   (6,346)  $  (19,902)  $ (34,372)  $  (67,542)
Unrealized loss on investments                    -         (500)          -         (500)
Foreign currency translation adjustment         123          104         (12)          62
                                         -----------  -----------  ----------  -----------
Comprehensive loss                       $   (6,223)  $  (20,298)  $ (34,384)  $  (67,980)
                                         ===========  ===========  ==========  ===========
</TABLE>

SEGMENT  INFORMATION

The Company operates in only one segment, namely workforce optimization software
and,  as  such,  uses  only  one measure of profitability for internal reporting
purposes.  To  date,  substantially  all  of  the  Company's  revenues have been
derived  from  within the United States.  Additionally, substantially all of the
Company's  long-lived  assets  are  located  in  the  United  States.

RECENT  ACCOUNTING  PRONOUNCEMENTS

In  July 2001, the Securities and Exchange Commission ("SEC") issued Staff Topic
No.  D-98, which provides clarification on the classification and measurement of
redeemable  equity  securities.  This  announcement provides clarification about
the balance sheet classification and measurement of securities subject to either
mandatory  redemption features or whose redemption is outside the control of the
issuer.  The Company has determined that, at issuance, the terms of the Series A
Preferred  Stock  that  was  issued  in October 2001, qualified for presentation
outside  of permanent equity, based on the guidance in Topic No. D-98.  In March
2002,  certain  Series  A  Preferred  stockholders agreed to waive the mandatory
redemption  feature  and  other  rights  and, accordingly, in March, the amended
shares  qualified  for  presentation  as  part  of  permanent  equity.

In  July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141,  "Business  Combinations," and SFAS No. 142, "Goodwill and Other Intangible
Assets."  SFAS  No.  141 requires business combinations initiated after June 30,
2001,  to be accounted for using the purchase method of accounting, and broadens
the criteria for recording intangible assets separately from goodwill.  Recorded
goodwill  and  intangibles  will be evaluated against these new criteria and may
result  in  certain  intangibles being subsumed into goodwill, or alternatively,
amounts  initially  recorded  as  goodwill  may  be  separately  identified  and
recognized  apart  from  goodwill.  SFAS  No.  142  requires  the  use  of  a
non-amortization  approach  to  account  for  purchased  goodwill  and  certain
intangibles.  Under  a  non-amortization  approach,  goodwill  and  certain
intangibles  will not be amortized into results of operations, but instead would
be reviewed for impairment and written-down and charged to results of operations
only  in  the  periods  in  which  the  recorded  value  of goodwill and certain
intangibles  is  more  than  its  fair  value.  Evolve will continue to amortize
goodwill  and purchased intangible assets acquired prior to June 30, 2001, until
it  adopts  SFAS  No.  142.  For  business combinations initiated after June 30,
2001, Evolve will follow the non-amortization method under SFAS No. 142.  Evolve
is  required to adopt the provisions of SFAS No. 142 on July 1, 2002.  Evolve is
currently  assessing  SFAS No. 142 and has not determined the impact on Evolve's
condensed  consolidated  financial  statements.

In  August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets."  SFAS No. 144 addresses financial accounting and
reporting  for  the  impairment  or disposal of long-lived assets to be held and
used,  to  be  disposed  of  other  than  by sale and to be disposed of by sale.
Although  SFAS  No.  144  retains  certain  of the requirements of SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be  Disposed  of," it supersedes SFAS No. 121 and APB Opinion No. 30, "Reporting
the  Results  of Operations--Reporting the Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual  and  Infrequently  Occurring Events and
Transactions  for  the  Disposal of a Segment of a Business."  SFAS No. 144 also
amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements,"
to  eliminate  the exception to consolidation for a subsidiary for which control
is  likely to be temporary.  The statement is effective for financial statements
issued  for  fiscal years beginning after December 15, 2001, and interim periods
within  those  fiscal  years,  with  early  adoption encouraged.  The Company is
currently  assessing  the  impact  of  adopting  SFAS  No.  144 on the Company's
financial  position  and  results  of  operations.


                                        7
<PAGE>
NOTE  2.  ACQUISITIONS

On  June  29,  2001,  Evolve  acquired  certain  assets  of  Vivant! Corporation
("Vivant").  The  total  acquisition  cost  was  approximately  $3.1  million,
primarily  comprised  of  $910,000  in  cash,  1,553,254 shares of the Company's
common  stock  valued  at  $1.6  million,  a future stock commitment valued at a
minimum  of  $525,000  and  $137,000 for transaction related expenses.  With the
assistance  of an independent valuation, the Company recorded approximately $2.2
million  in  developed technology, $717,000 in goodwill and $187,000 in acquired
workforce  upon  this  acquisition,  which was accounted for as a purchase.  The
number  of shares issued to Vivant at the closing of the acquisition was subject
to  adjustment by issuance of additional shares or redemption of existing shares
based  on  the  market  value  of  Evolve's  common  stock  as  of  the time the
registration  of  such  shares  became  effective.  As  a  result,  the  Company
subsequently  issued  663,495  shares  to Vivant in September 2001 and 3,899,756
shares in January 2002 pursuant to the terms of the acquisition.  The Company is
still refining its purchase price allocation, which may result in adjustments in
future  periods.  In  addition,  Evolve has agreed to issue to Vivant additional
shares  of its common stock with a value of up to $525,000 within ten days after
the  one-year  anniversary  of the closing of the acquisition (July 9, 2002) and
additional  shares  with  a  value  up to $3,900,000 at specified times based on
receipts  from  the  sale  of  Vivant's  products for the shorter of twenty-four
months  from  the  date  of  the agreement or eighteen months from the Company's
first customer contract that incorporates Vivant technology.  However, the asset
acquisition  agreement  governing  the  purchase of the Vivant assets limits the
aggregate  number  of  shares of common stock to be issued by the Company to not
exceed  7,661,097  shares  or 1,544,592 shares in excess of those issued through
January  31, 2002.  The results of Vivant's operations have been included in the
Company's  condensed  consolidated  financial  statements  since  the  date  of
acquisition.

The  following  unaudited  pro forma consolidated financial information presents
the  combined results of Evolve and Vivant as if the acquisition had occurred on
July  1,  2000,  after  giving  effect  to  certain adjustments, principally the
amortization  of  goodwill and other intangible assets.  The unaudited pro forma
consolidated  financial  information does not necessarily reflect the results of
operations  that  would have occurred had the acquisition been completed on July
1,  2000  (in  thousands,  except  per  share  amounts).

<TABLE>
<CAPTION>
                                                  NINE MONTHS
                                                     ENDED
                                                 MARCH 31, 2001
                                                ----------------
<S>                                             <C>
Pro forma total revenue                         $        27,477
                                                ================

Pro forma net loss                              $       (76,007)
                                                ================

Basic and diluted pro forma net loss per share  $         (2.15)
                                                ================

                                                ----------------
Shares used to compute basic and
    diluted pro forma net loss per share                 35,418
                                                ================
</TABLE>

NOTE  3.  STOCK-BASED  AND  RELATED  COMPENSATION  CHARGES

The  Company  incurred stock-based compensation charges in connection with stock
option  grants  and  sales of restricted stock to employees at exercise or sales
prices  below  the  deemed  fair market value of its common stock for accounting
purposes.  The  cumulative  difference  between  the  deemed  fair  value of the
underlying  stock at the date the options were granted and the exercise price of
the  granted  options  was  $40.3  million as of August 9, 2000, the date of the
Company's  Initial  Public  Offering.  This amount is being amortized, using the
accelerated  method  of  FASB  Interpretation  No.  28,  "Accounting  for  Stock
Appreciation  Rights  and  Other  Variable  or  Award Plans," over the four-year
vesting  period  of  the  granted  options.  Based  on  the unearned stock-based
compensation  balance  at  March 31, 2002, the Company's results from operations
will  include stock-based compensation expense, at a minimum, through 2004.  The
Company  recorded  stock-based charges of $2.1 million and $11.2 million for the
three- and nine- months ended March 31, 2002, respectively, and $3.9 million and
$20.5  million  for  the  three-  and  nine-  months  ended  March  31,  2001,
respectively.  Future  terminations  or  modifications  to  existing awards will
impact  future  stock-based  compensation  expense.


                                        8
<PAGE>
In  connection  with the termination of employment of certain executive officers
in  fiscal  2001,  the  Company  entered  into arrangements with those executive
officers  to  provide  consulting  services.  For  accounting purposes, this was
deemed  to  be  a  change  in  status  of  the  employee  and  resulted in a new
measurement  date  for the amended equity awards in accordance with FIN No.  44,
"Accounting  for  Certain  Transactions  Involving  Stock  Compensation."  In
addition, for other executive officers of Evolve whose employment was terminated
in  fiscal 2001 and who had purchased restricted stock with full recourse notes,
the  Company  agreed, as part of their termination settlements, to allow them to
sell back to the Company their restricted shares in exchange for cancellation of
the  notes.  Accordingly, these notes are accounted for as non-recourse notes on
a  variable  basis  such  that  the  charge/credit arising from these notes will
fluctuate  from  period  to  period  based  on  the  Company's stock price.  The
revaluation  charge  for  the notes subject to remeasurement was not significant
for  the  quarter  ended  March  31,  2002.  The  financial  impact  of  these
arrangements is included within stock-based compensation expense, which has been
allocated  to  the  appropriate  functional  categories  within the Statement of
Operations.

In  October  2001,  the  Board of Directors voted to modify existing stockholder
loans, which were issued to allow board members, officers and selected employees
to  exercise  stock options and purchase restricted stock, from full-recourse to
non-recourse  and  to  extend their due dates, in the event of termination, from
thirty  days  to  fifteen  months  after the date of termination.  The loans are
secured  only  by  the underlying stock, which they were used to purchase.  As a
result,  the  loans  became  subject  to variable accounting and the outstanding
stockholder  loans  and  related  interest were revalued to their net realizable
value of $0.21 per share at March 28, 2002, resulting in charges of $710,000 and
$7.1 million for the three- and nine- months ended March 31, 2002, respectively.
Until  they  are  due  or  repaid,  if  earlier, the loans will be revalued each
quarter  to  their net realizable value as determined by the stock price at that
time.

NOTE  4.  LONG-TERM  DEBT

On  November  13,  2001,  the Company revised an existing credit arrangement and
signed  an  amended Loan and Security Agreement to restructure its excess credit
facilities,  to  obtain  a  waiver of certain defaults under the previous credit
arrangement  and  to reduce the line-of-credit to $2.9 million and the term loan
credit  facility to $4.4 million with interest accruing at the bank's prime rate
plus  0.75%  and 1.00%, respectively.  At March 31, 2002, these rates were 5.50%
and  5.75%,  respectively.  As  of March 31, 2002, the Company had utilized $4.8
million  of the term loan credit facility and had repaid $1.6 million.  The loan
will be fully repaid by July 1, 2003.  Both the line-of-credit and the term loan
credit  facility  are  collateralized  by all of the Company's assets, including
intellectual  property,  except  for previously leased equipment.  In connection
with  the  loan  amendment  the  bank  approved  new financial covenants for the
periods  commencing  October  1,  2001.  Under  these  covenants, the Company is
required  to:  (1)  maintain at all times a minimum bank liquidity ratio of 1.50
to  1.00,  reducing  to  a  ratio of 1.25 to 1.00 on January 31, 2002, (the cash
component  of this ratio is required to be held at the bank); (2) beginning with
the month ending December 31, 2001, maintain, on a monthly basis, the greater of
(a)  a  minimum  company  liquidity  ratio of 1.75 to 1.00 or (b) $14,000,000 in
unrestricted  cash  (unrestricted  cash will include any restricted cash held by
the  bank)  reducing  to  $8,000,000 on January 31, 2002; (3) beginning with the
month  ending  December 31, 2001, not exceed a leverage maximum of 2.25 to 1.00;
and  (4)  meet  a  milestone  covenant  of obtaining at least $10,000,000 in new
equity  from  investors  acceptable  to  the  bank  by  October  15,  2001.

The  Company  was  in violation of the maximum leverage ratio financial covenant
from  December  2001  through  February  2002.  However,  the Company received a
waiver  of  all defaults in March 2002.  On April 19, 2002, the Company signed a
first  amendment  to the amended and restated Loan and Security Agreement, which
amended certain financial covenants.  In connection with the amendment, the bank
approved  new  financial  covenants  commencing  April  1,  2002.  Under the new
covenants,  the  Company  is required to:  (1) maintain, at all times, a minimum
bank  liquidity ratio of not less than 1.25 to 1.00; (2) maintain, at all times,
unrestricted  cash  (unrestricted  cash will include any restricted cash held by
the  bank) of not less then $8,000,000; and (3) maintain minimum revenue targets
which  increase  quarterly.

At  March  31,  2002,  the Company was in compliance with all amended covenants.

NOTE  5.  CONTINGENCIES

From  time  to  time,  the Company may become involved in litigation relating to
claims  arising  from the ordinary course of business.  The Company is defending
against  two claims filed by early customers, one an action filed in the federal
district  court  in  Massachusetts  and the other an action filed in the federal
district  court  in California.  Both cases allege a variety of claims including
that  the  software  and  services  purchased  from  the Company did not satisfy
certain  contractual  obligations and that the Company engaged in practices that
they  allege  were  unfair  or misrepresentative.  Both of these proceedings are
still  in  the  early  stages  of  litigation,  therefore, it is not possible to
estimate  the  outcome  of  these  contingencies.


                                        9
<PAGE>
In November 2001, a complaint seeking class action status was filed, against the
Company,  in  the  United States District Court for the Southern District of New
York.  The  complaint  is  purportedly  brought  on  behalf  of  all persons who
purchased  the  Company's  common stock from August 9, 2000, through December 6,
2000.  The  complaint  names  as  defendants  some  of  the Company's former and
current  officers,  and several investment banking firms that served as managing
underwriters  of the Company's initial public offering.  Among other claims, the
complaint  alleges liability under the Securities Act of 1933 and the Securities
Exchange  Act  of  1934,  on the grounds that the registration statement for the
Company's  initial  public offering did not disclose that:  (1) the underwriters
had  allegedly  agreed to allow certain of their customers to purchase shares in
the  offering  in  exchange  for  alleged  excess  commissions  paid  to  the
underwriters;  and  (2)  the  underwriters had allegedly arranged for certain of
their  customers  to  purchase  additional  shares  in  the  aftermarket  at
pre-determined  prices under alleged arrangements to manipulate the price of the
stock  in  aftermarket  trading.  The  Company is aware that similar allegations
have  been  made in numerous other lawsuits challenging initial public offerings
conducted  in  1998, 1999 and 2000.  No specific amount of damages is claimed in
the  complaint  involving  the  initial public offering.  The Company intends to
contest  the  claims  vigorously.  The  Company  is  unable,  at  this  time, to
determine  whether  the outcome of the litigation will have a material impact on
its  results  of  operations  or  financial  condition  in  any  future  period.

The  Company  believes  that  there  are  no  other claims or actions pending or
threatened  against  it, the ultimate disposition of which would have a material
adverse  effect  on  the  Company.

NOTE  6.  RESTRUCTURING  CHARGES

Beginning  in  the  quarter  ending  June  30,  2001  through the quarter ending
December  31,  2001,  the  Company  critically  reviewed its operations and cost
structure,  and  took  actions  to  reduce  costs and strengthen its position in
executing its strategy.  These decisions resulted in the involuntary termination
of  207  employees.  The  terminations  were from all functions of the Company's
operations  and  included  twenty-two  employees  from  the closure of the India
research facility.  As a result of the headcount reduction, the Company recorded
charges  of  $3.4 million in severance and related benefit charges.  The Company
consolidated  its facilities at its Emeryville headquarters, which resulted in a
total  net charge of $4.6 million related to its excess facilities.  These costs
included  a reversal of $2.2 million of previously accrued restructuring charges
for  the  excess space at the Company's headquarters that resulted from amending
the  original  lease to relieve the Company from some future rental obligations.
The  Company  also  recorded charges of $2.3 million consisting of impairment of
certain  assets  including  leasehold  improvements and furniture related to the
excess  facilities,  computer  hardware  and  software,  and  telecommunications
equipment  related  to  the  workforce  reduction.  A  rollforward  of  the
restructuring-related  liabilities  follows.


                                       10
<PAGE>
<TABLE>
<CAPTION>
(in thousands)                                 SEVERANCE                     FIXED
                                              AND RELATED                    ASSET
                                                CHARGES      FACILITIES    WRITE-OFF    TOTALS
                                             -------------  ------------  -----------  --------
<S>                                          <C>            <C>           <C>          <C>
 Restructuring charges                       $      1,597   $     6,433   $    1,694   $ 9,724
 Amount paid                                         (817)         (354)           -    (1,171)
 Non-cash charges                                       -             -       (1,694)   (1,694)
                                             -------------  ------------  -----------  --------
 Accrued liabilities at June 30, 2001        $        780   $     6,079            -   $ 6,859

 Restructuring charges                                590             -          103       693
 Amount paid                                       (1,007)         (405)           -    (1,412)
 Non-cash charges                                       -             -         (103)     (103)
                                             -------------  ------------  -----------  --------
 Accrued liabilities at September 30, 2001   $        363   $     5,674   $        -   $ 6,037

 Restructuring charges (reversals)                  1,224        (1,836)         523       (89)
 Amount paid                                       (1,013)         (529)                (1,542)
 Non-cash charges                                    (191)         (121)        (463)     (775)
                                             -------------  ------------  -----------  --------
 Accrued liabilities at December 31, 2001    $        383   $     3,188   $       60   $ 3,631

 Restructuring charges (reversals)                      -             -          (21)      (21)
 Amount paid                                         (127)         (484)          21      (590)
 Non-cash charges                                       -             -            -         -
                                             -------------  ------------  -----------  --------
 Accrued liabilities at March 31, 2002       $        256   $     2,704   $       60   $ 3,020

 Short-term                                  $        256   $     1,637   $       60   $ 1,953
 Long-term                                   $          -   $     1,067   $        -   $ 1,067
</TABLE>

NOTE  7.  NET  LOSS  PER  SHARE

Basic  and  diluted  net  loss per share are computed using the weighted average
number  of  common shares outstanding during each period.  Since the Company has
had  a net loss for all periods presented, net loss per share on a diluted basis
is equivalent to basic net loss per share.  Common shares issuable upon exercise
of stock options and warrants and upon conversion of convertible preferred stock
are excluded because the effect would be anti-dilutive.  A reconciliation of the
numerator  and denominator used in the calculation of basic and diluted net loss
per  share  follows:

<TABLE>
<CAPTION>
(in thousands)                                      THREE MONTHS ENDED        NINE MONTHS ENDED
                                                         MARCH 31,                MARCH 31,
                                                 ------------------------  -----------------------
                                                    2002         2001         2002        2001
                                                 -----------  -----------  ----------  -----------
<S>                                              <C>          <C>          <C>         <C>
Numerator:
  Net loss                                       $   (6,346)  $  (19,902)  $ (34,372)  $  (67,542)
  Beneficial conversion feature of redeemable
     convertible preferred stock                       (212)           -        (579)      (5,977)

                                                 -----------  -----------  ----------  -----------
  Net loss attributable to common stockholders   $   (6,558)  $  (19,902)  $ (34,951)  $  (73,519)
                                                 ===========  ===========  ==========  ===========

Denominator:
  Weighted average common shares                     44,670       38,621      41,865       34,680
  Weighted average unvested common shares
    subject to repurchase                              (955)      (4,645)     (2,423)      (5,379)

  Shares used in computing basic and diluted
                                                 -----------  -----------  ----------  -----------
    net loss per share                               43,715       33,976      39,442       29,301
                                                 ===========  ===========  ==========  ===========
</TABLE>


                                       11
<PAGE>
At  March 31, 2002 and 2001, options to purchase 14,258,175 and 3,510,205 shares
of common stock were outstanding with a weighted-average exercise price of $0.65
and  $6.50, respectively.  At March 31, 2002, the outstanding Series A Preferred
Stock  was  convertible  into  37.0 million shares of common stock.  Warrants to
purchase  600,000 shares of Series A Preferred Stock at $10.00 per share and 9.4
million  shares  of  common  stock  at  $1.00  per  share,  if  exercised,  were
convertible  into  12  million  and  9.4  million  shares  of  common  stock,
respectively,  as  of  March  31,  2002.  Providing  that the remaining Series A
Preferred Stock warrants are exercised, the Company will issue additional common
stock  warrants  to  purchase  2.9  million  shares of common stock at $1.00 per
share.  These  common  stock equivalents have been excluded from the computation
of  diluted  net  loss  per  share  because  their  effect  would  have  been
anti-dilutive.  The  weighted-average  purchase  prices  of  stock  subject  to
repurchase  were  $2.32  and  $2.14 as of March 31, 2002 and 2001, respectively.

NOTE  8.  SERIES  A  PREFERRED  STOCK  FINANCING

The  Company completed the sale of Series A Convertible Preferred Stock pursuant
to  the  Purchase  Agreement  (the  "Series A Preferred Financing") with Warburg
Pincus  Private Equity VIII L.P. and certain previous stockholders on October 9,
2001.  The  Company  issued the following securities and rights to the investors
participating  in  the  Series  A  Preferred  Financing:

     -    an  aggregate  of  1.3  million  shares of Evolve's Series A Preferred
          Stock  at  a  price  of  $10  per  share;
     -    warrants  to  purchase  up  to  an aggregate of 1.3 million additional
          shares  of  Series  A Preferred Stock at a price of $10 per share (the
          "preferred  stock  warrants");
     -    warrants  to  purchase  up  to 6.5 million shares of common stock at a
          price  of  $1.00  per  share  (the  "common  stock  warrants");  and
     -    the  right  to  receive additional common stock warrants to purchase a
          number  of shares of common stock equal to 25% of the number of shares
          of  common  stock  into  which  the shares of Series A Preferred Stock
          issued  upon exercise of the preferred stock warrants are convertible,
          at  the  time  such  preferred  stock  warrants  are  exercised.

As  this  transaction  resulted  in  significant  changes  to  the  Company's
stockholders'  equity  balances,  the  following  table  has  been  provided  to
summarize  the activity in the statement of stockholders' equity during the nine
months  ended  March  31,  2002.

<TABLE>
<CAPTION>
(in thousands)
                                                              EQUITY                                                UNEARNED
                                                          PREFERRED STOCK    COMMON STOCK                           STOCK -
                                                        ------------------  --------------              N/R FROM     BASED
                                                         SHARES     AMTS    SHARES   AMTS     APIC        S/H         COMP
                                                        --------  --------  ------  ------  ---------  ----------  ----------
<S>                                                     <C>       <C>       <C>     <C>     <C>        <C>         <C>
Balances, June 30, 2001                                        -  $      -  40,052  $   40  $250,485   $  (7,795)  $ (11,732)
Issuance of p/s & p/s warrants, as amended, net            1,100         1       -       -     8,204           -           -
Cancellation of preferred & commons stock warrants             -         -       -       -       209           -           -
Issuance of common stock warrants, as amended                  -         -       -       -     1,296           -           -
Beneficial conversion feature on preferred stock               -         -       -       -     1,158           -           -
Amortization of beneficial conversion feature on p/s           -         -       -       -       523           -           -
Exercise of CEO p/s warrants in March 2002                   550         -       -       -     5,500           -           -
Issuance of common stock under stock purchase plans            -         -     221       -       101           -           -
Issuance of common stock to Vivant! Corporation                -         -   4,563       5        (5)          -           -
Modification of s/h n/r and other stock option awards          -         -       -       -       100       6,478        (275)
Repurchase of common stock                                     -         -       -       -       (12)          -           -
Reversal of unearned stock-based compensation                  -         -       -       -    (5,551)          -       5,551
Amortization of stock-based compensation                       -         -       -       -         -           -       4,032
Foreign currency translation adjustment                        -         -       -       -         -           -           -
Net loss                                                       -         -       -       -         -           -           -
                                                        --------  --------  ------  ------  ---------  ----------  ----------
Balances, March 31, 2002                                   1,650  $      1  44,836  $   45  $262,008   $  (1,317)  $  (2,424)
                                                        ========  ========  ======  ======  =========  ==========  ==========


(in thousands)
                                                         ACCUM
                                                         OTHER                  TOTAL
                                                         COMPRE     ACCUM        S/H
                                                         INCOME    DEFICIT     EQUITY
                                                        --------  ----------  ---------
<S>                                                     <C>       <C>         <C>
Balances, June 30, 2001                                 $    95   $(215,750)  $ 15,343
Issuance of p/s & p/s warrants, as amended, net               -           -      8,205
Cancellation of preferred & commons stock warrants            -           -        209
Issuance of common stock warrants, as amended                 -           -      1,296
Beneficial conversion feature on preferred stock              -           -      1,158
Amortization of beneficial conversion feature on p/s          -        (579)       (56)
Exercise of CEO p/s warrants in March 2002                    -           -      5,500
Issuance of common stock under stock purchase plans           -           -        101
Issuance of common stock to Vivant! Corporation               -           -          -
Modification of s/h n/r and other stock option awards         -           -      6,303
Repurchase of common stock                                    -           -        (12)
Reversal of unearned stock-based compensation                 -           -          -
Amortization of stock-based compensation                      -           -      4,032
Foreign currency translation adjustment                     (13)          -        (13)
Net loss                                                      -     (34,372)   (34,372)
                                                        --------  ----------  ---------
Balances, March 31, 2002                                $    82   $(250,701)  $  7,694
                                                        ========  ==========  =========
<FN>

p/s = preferred stock; s/h = stockholder; n/r = notes receivable; apic = additional paid-in capital
</TABLE>


                                       12
<PAGE>
On  March  29,  2002,  existing investors Warburg Pincus LLC and Sierra Ventures
VII,  L.P, acquired 550,000 shares of Series A Preferred Stock at a price of $10
per  share,  for  total  proceeds of $5.5 million, via the exercise of preferred
stock  warrants.  As of March 31, 2002, the Company had received an aggregate of
$18.5  million,  with  net  proceeds of $17.9 million, for 1.9 million shares of
Series  A  Preferred  Stock.  If  the remaining preferred stock warrants and the
common  stock warrants are exercised, in full for cash, the Company will receive
an  additional $18.3 million in aggregate proceeds.  The Company has no plans to
issue additional shares of Series A Preferred Stock, other than upon exercise of
the  warrants  described  above.  However,  the  Company  has 200,000 additional
shares  of Series A Preferred Stock authorized for issuance in addition to those
already  issued  or  reserved for issuance pursuant to exercise of the warrants.

The  issuance  of  the Series A Preferred Stock and the warrants was exempt from
the  registration requirements of the Securities Act pursuant to Section 4(2) of
the  Securities Act, and regulations promulgated thereunder.  The Company relied
on  the  fact  that  the  securities  were offered to a small group of investors
without  any  public advertisement or solicitation, and on the fact that each of
the  investors  represented  that  it  was  an  "accredited investor" within the
meaning  of  Rule  501  under  the Securities Act and that it was purchasing the
securities  for  investment  purposes and not with any present intent to further
distribute  such  securities.

Conversion  Rights.  Each  share of Series A Preferred Stock is convertible into
common  stock  at  an  initial  conversion  price  of  $0.50,  or  at an initial
conversion  rate  of  20  shares  of  common  stock  for  each share of Series A
Preferred  Stock.  The  conversion  rate  accretes at a rate of 8.00% per annum,
compounded  quarterly.  The  conversion  rate  is  also  subject  to  certain
adjustments as set forth in the Company's Certificate of Designation of Series A
Preferred  Stock,  in the event of dilutive stock issuances and in the event the
Company  incurs  litigation-  or  tax-related  expenses  in  excess  of  certain
limitations.  The  Series  A Preferred Stock may be converted at any time at the
election  of  each  holder.  The Company may cause all of the shares of Series A
Preferred  Stock  to  be  automatically  converted into common stock at any time
after  the  fifth  anniversary  of the date of initial issuance of these shares,
provided that the common stock has been trading at a value of at least $5.00 for
a  specified  period.

Liquidation  Preference.  In  the event of a transaction involving a dissolution
of  the  Company,  the  holders  of Series A Preferred Stock will be entitled to
payment of a liquidation preference equal to the initial purchase price of their
shares  of  Series  A  Preferred  Stock,  plus  an  8.00% annual rate of return,
compounded  quarterly, prior to any payment to holders of common stock and other
junior  securities.  In  the event of certain transactions involving a change of
control  of  the Company, a liquidation preference equal to the initial purchase
price  of the Series A Preferred Stock shares held plus an 8.00% rate of return,
compounded quarterly, computed over a five-year period is payable to the holders
of  Series  A  Preferred  Stock, irrespective of when such a transaction occurs.

Voting  Rights.  Holders  of  Series A Preferred Stock are generally entitled to
one  vote  for  each  share  of common stock into which their Series A Preferred
Stock is convertible.  In addition, the Company may not, without the affirmative
vote  of  the  holders  of  a  majority  of  the  outstanding shares of Series A
Preferred  Stock:

     -    amend  or  repeal  the provisions of the Certificate of Designation of
          Series  A  Preferred  Stock;
     -    enter  into  a  transaction involving a change of control, unless such
          transaction would result in aggregate consideration paid in respect of
          all  Series  A Preferred Stock equal to the original purchase price of
          these  shares,  plus  an  internal  rate  of  return  of at least 50%;
     -    authorize  or  issue  any  securities senior to the Series A Preferred
          Stock;
     -    issue  any  debt  obligations  other  than  trade debt in the ordinary
          course  of  business;
     -    pay  any  dividends on or repurchase any junior securities, subject to
          certain  exceptions;
     -    amend  the  Company's  bylaws  to  increase  the  authorized number of
          directors  to  more  than  eight;  or
     -    authorize  or  issue  any  shares  of  any class or series of stock on
          parity  with the Series A Preferred Stock under certain circumstances.

Board  Representation.  The holders of the Series A Preferred Stock, voting as a
separate  class,  are  entitled to elect three members to the Company's Board of
Directors.  All  other  directors  will  be elected by the holders of the common
stock  and the Series A Preferred Stock voting as a single class.  The number of
directors  appointed  by  the  holders of Series A Preferred Stock is reduced as
follows:

     -    to  two  if  less  than 75% but at least 50% of the shares of Series A
          Preferred  Stock  remain  outstanding;
     -    to  one  if  less  than 50% but at least 25% of the shares of Series A
          Preferred  Stock  remain  outstanding;  or
     -    to  zero,  if  less than 25% of the shares of Series A Preferred Stock
          remain  outstanding.

Preferred  Stock  Warrants.  The  preferred  stock  warrants  are exercisable to
purchase up to an aggregate of 1.3 million shares of Series A Preferred Stock at
a common stock-equivalent price of $0.50 per share, payable in cash.  50% of the
preferred  stock  warrants  expire  if not exercised by April 3, 2002, which was
thirty  days  after  the appointment of a new permanent Chief Executive Officer.
550,000 of these warrants were exercised by March 31, 2002, 25,000 warrants were
exercised prior to expiration and 150,000 warrants were canceled.  An additional
575,000  warrants may be exercised for up to one year after issuance, or October
9,  2002.


                                       13
<PAGE>
Common  Stock Warrants.  Common stock warrants that were issued to the investors
are  exercisable for up to 6.5 million shares of common stock.  Upon exercise of
the  preferred  stock  warrants  an additional 2.9 million common stock warrants
were  issued.  The  Company  will  issue  warrants to purchase an additional 2.9
million  shares  of  common  stock if the remaining preferred stock warrants are
exercised  in  full.  The  common stock warrants have an exercise price of $1.00
per  share,  which  is subject to adjustment if the Company issues securities at
less  than  fair market value and under certain other circumstances.  The common
stock  warrants  may be exercised for cash, or on a cashless basis by converting
the  common  stock  warrants  into  a number of shares with a value equal to the
spread  between  the  market  value  of  the  shares subject to the common stock
warrants  and  the  exercise  price.  In  addition,  in  the  event  of  certain
transactions  involving  a  change  of control of Evolve, some holders of common
stock  warrants  will have the right to deliver these warrants to us in exchange
for  payments  equal  to  the  market  value of such warrants at the time of the
change  of  control  transaction,  payable  in  cash  or,  subject  to  certain
conditions,  shares of common stock of Evolve.  The common stock warrants have a
term  of  seven  years.

In  accordance  with  EITF  Issue  No.  00-19,  "Determination  of Whether Share
Settlement  is  Within  the Control of the Issuer for Purposes of Applying Issue
No.  96-13,  "Accounting  for  Derivative  Financial Instruments Indexed to, and
Potentially  Settled in, a Company's Own Stock,"" the Company determined, at the
time  of  issuance, that the outstanding warrants to purchase 6.5 million shares
of  its  common  stock  at $1.00 per share, as well as the contingently issuable
warrants  to  purchase  an incremental 6.5 million shares of its common stock at
$1.00  per  share should be accounted for as a liability, as a result of certain
rights  of  the common stock warrant holders to receive cash instead of stock in
the  event  of  a change of control.  Accordingly, the outstanding warrants were
recorded  at  fair  value,  as determined by the Black-Scholes pricing model, at
each  exercise  and  reporting  period  date  with any changes in the fair value
included  in  the  results  of  operations.  On  October  9,  2001,  the Company
calculated  the  fair  value  of  these warrants, using the Black-Scholes option
pricing  model,  at  approximately  $1.5  million  and  recorded a corresponding
liability.  On  December 31, 2001 and March 31, 2002, the warrants were revalued
using  the  Black-Scholes  pricing methodology.  For the quarter ended March 31,
2002,  the  Company  recognized  a  recovery  of  approximately  $1.7 million in
expense, recognized in the previous quarter, related to the decrease in the fair
value  of  the  warrants.  For  the  nine  months  ended March 31, 2002, the net
revaluation  expense was $15,000.  These amounts are included in other income in
the  Company's  consolidated  statement  of  operations for the three- and nine-
months  ended  March  31,  2002.  The assumptions used to value the common stock
warrants  were  a  risk-free rate of 4.7%, a dividend yield of 0%, volatility of
89%  and  a  term  of  seven  years.

On  March  29, 2002, certain common stock warrants were amended to eliminate the
optionholders'  right to demand cash upon a change of control.  As a result, the
$1.4  million  fair value of the affected common stock warrants was reclassified
from  a  liability to additional paid-in capital, leaving a liability balance of
$147,000  at  March  31,  2002  for the fair value of the 1,250,000 common stock
warrants  that were not amended.  These warrants will continue to be revalued at
each reporting period date and any changes in fair value will be included in the
results  of  operations.  Additionally,  certain  preferred  stock and preferred
stock  warrant  holders  waived the mandatory redemption feature of the Series A
Preferred Stock, allowing $8.6 million to be reclassified into permanent equity,
leaving  a balance of $1.5 million of redeemable convertible preferred stock and
preferred  stock  warrants  outside  of  permanent  equity  at  March  31, 2002.

Beneficial  Conversion  Feature
At  issuance on October 9, 2001, the Company allocated the net proceeds from the
issuance  of the Series A Preferred Stock on a pro-rata basis as required by APB
14,  "Accounting  for  Convertible  Debt  and  Debt  Issued  with Stock Purchase
Warrants,"  between  the preferred stock and the preferred stock warrants, after
deduction  of  the  fair  value  of the common stock and contingent common stock
warrants.  The  fair  value of the preferred stock warrants was determined based
on  the  Black-Scholes  option  pricing  model  and  the  following assumptions:
contractual  term  of  one  year,  a risk free interest rate of 4.7%, a dividend
yield  of  0%  and volatility of 89%.  As a result, the preferred stock warrants
were  deemed  to  have  an  embedded beneficial conversion of approximately $1.2
million,  which  was recorded as an increase in additional paid-in capital and a
reduction  in  the carrying value of the preferred stock warrant.  In accordance
with  EITF  00-27,  "Application  of  EITF  Issued  No.  98-5,  "Accounting  for
Convertible  Securities  with  Beneficial  Conversion  Features  or Contingently
Adjustable  Conversion  Ratios,"  to  Certain  Convertible  Instruments,"  the
beneficial  conversion feature is being amortized over the term of the preferred
stock  warrant  of  one  year, resulting in a deemed dividend for the three- and
nine-  months  ended  March  31,  2002  of  $212,000 and $579,000, respectively.


                                       14
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS

You  should  read  the  following  discussion  in  conjunction  with the interim
unaudited condensed consolidated financial statements and related notes included
in  this  report,  and  with  Management's  Discussion and Analysis of Financial
Condition  and Results of Operations and related financial information contained
in  our  Annual  Report  on Form 10-K/A for the fiscal year ended June 30, 2001.

Except  for  historical  information,  this  report  contains  forward-looking
statements  within  the meaning of Section 27A of the Securities Act of 1933 and
Section  21E  of  the  Securities  Exchange  Act of 1934.  These forward-looking
statements  involve  risks  and  uncertainties,  including,  among other things,
statements  regarding  our  future  financing  needs,  our future revenue growth
prospects  and  our  expense projections for future periods.  Our actual results
may differ significantly from those projected in the forward-looking statements.
Factors that might cause or contribute to these differences include, but are not
limited  to,  those  discussed  in  the section below entitled "Factors That May
Affect  Future  Results of Operations."  You should carefully review these risks
as  well  as  the  discussion of risks and uncertainties contained in our Annual
Report on Form 10-K/A under the caption "Business-Factors That May Affect Future
Results."  You  are cautioned not to place undue reliance on the forward-looking
statements,  which  speak  only  as of the date of this Quarterly Report on Form
10-Q.  We  undertake  no  obligation  to  publicly  release any revisions to the
forward-looking  statements  or reflect subsequent events or circumstances after
the  date  of  this  document.

OVERVIEW

Evolve is a leading provider of service delivery solutions that optimize the way
organizations drive revenue and value through people and projects.  Our Evolve 5
software  suite  integrates and streamlines the core processes that are critical
to  services-oriented  organizations,  which  center  around  managing  project
portfolios,  project  opportunities,  professional resources (including contract
workers)  and  service  delivery.  Our solution combines the efficiency gains of
automating  core  business  processes  with the benefits of on-line intercompany
collaboration,  creating  a  service  delivery  platform  for  a  variety  of
project-driven  services  organizations.

We  have  licensed  our  solution  to  over  one  hundred  customers  who  have
collectively  purchased  it  to manage over 96,000 professionals.  Our customers
include  professional  services  firms  such  as EDS and Sogeti (division of Cap
Gemini  SA),  high tech professional services organizations at companies such as
Sun  Microsystems, Novell and Cognos and corporate IT organizations in companies
such as DaimlerChrysler Services, American Electric Power, Pershing Technologies
(a  Credit  Suisse  First  Boston  Company),  Autodesk  and  Fleet  Financial.

Evolve  was founded in February 1995.  From our inception through December 1998,
our  activities, funded by the venture capital we raised, consisted primarily of
building  our  business  infrastructure, recruiting personnel and developing our
software and service offerings.  Our Evolve solution was first made commercially
available  in  early  1999.  We  recognized  our  first revenues from the Evolve
solution  during  the quarter ended March 31, 1999.  We have incurred net losses
and  negative  cash  flows  from  operations  since  inception.  Our accumulated
deficit  at  March  31,  2002,  was  $250.7  million.

RESULTS  OF  OPERATIONS

REVENUES

Total  revenues  were  $3.5  million  for the three months ended March 31, 2002,
compared  with  revenues  of  $11.3  million  for  the  comparable  2001 period,
representing a 69% decrease in total revenues.  Total revenues were $9.4 million
for  the  nine  months  ended  March  31,  2002, compared with revenues of $27.5
million  for  the  comparable  2001 period, representing a 66% decrease in total
revenues.  For  the  quarter  ended  March  31, 2002, revenue from two customers
accounted  for  21%  of  total  revenues.  For the quarter ended March 31, 2001,
revenue  from  two  customers  accounted  for  33%  of  total  revenues.

The  decrease  in revenues is attributable to our effort to diversify our client
base  to  include  global  services  companies, services divisions of technology
companies  and  Corporate  IT  organizations  in  Global  2000  companies  and a
concurrent loss of revenues from our traditional client base of internet-focused
technology-oriented  consultants  and design and integration services providers.
The  more  recently  targeted  types  of companies generally have extended sales
cycles.  Additionally,  sales across all customer segments have been impacted by
the  recent  downturn  in the economy and reductions in corporate capital and IT
spending.


                                       15
<PAGE>
We classify our revenues as either Solutions revenues or Subscriptions revenues.
Solutions  revenues  consist principally of software licenses and implementation
services  while  Subscriptions  revenues  consist  principally  of  maintenance
subscriptions  and  application  service  provider  ("ASP") fees.  For the three
months  ended  March  31,  2002,  Solutions and Subscriptions revenues were $2.0
million  or  58%  of  total revenues and $1.5 million, or 42% of total revenues,
respectively.  For the three months ended March 31, 2001, Solutions revenues and
Subscriptions  revenues  were  $8.8  million, or 79% of total revenues, and $2.4
million,  or  21%  of  total  revenues, respectively.  For the nine months ended
March 31, 2002, Solutions revenues and Subscriptions revenues were $5.4 million,
or  57%  of  total  revenues,  and  $4.0  million,  or  43%  of  total revenues,
respectively.  For  the nine months ended March 31, 2001, Solutions revenues and
Subscriptions  revenues  were  $20.3 million, or 74% of total revenues, and $7.1
million,  or  26%  of total revenues, respectively.  We are actively encouraging
our  ASP  customers  to  convert  to a self-host environment and anticipate that
future  ASP  revenues  will  be  minimal.

COST  OF  REVENUES

Our  cost  of revenues includes the costs directly associated with our Solutions
and Subscriptions revenues, including stock-based compensation.  The cost of our
Solutions  revenues  consists principally of payroll-related costs for employees
and  consultants involved in providing services for implementation, training and
consulting;  royalties  due  to  third-parties  for  integrated  third-party
technology;  and,  to  a lesser extent, printing costs of product documentation,
duplication  costs for software media and shipping costs.  Cost of Subscriptions
revenues  consists primarily of the payroll-related costs for employees involved
in  providing  support services to customers under maintenance contracts as well
as  payroll  costs  for employees and consultants involved in providing services
for  implementation,  training  and  consulting  for our ASP customers.  Cost of
Subscriptions  revenues  also  includes hosting fees required to service our ASP
customers.

Total cost of revenues, excluding stock-based compensation, was $1.2 million for
the  three months ended March 31, 2002, compared with $4.6 million for the three
months  ended  March  31, 2001, representing a 75% decrease.  As a percentage of
total  revenues, total cost of revenues, excluding stock-based compensation, was
34% and 41% for the quarters ended March 31, 2002 and 2001, respectively.  Total
cost  of  revenues, excluding stock-based compensation, was $4.3 million for the
nine  months  ended  March  31,  2002,  compared with $13.1 million for the nine
months  ended  March  31, 2001, representing a 67% decrease in cost of revenues.
As a percentage of total revenues, total cost of revenues, excluding stock-based
compensation, was 46% and 48% for the nine months ended March 31, 2002 and 2001,
respectively.

Cost  of  Solutions revenues was $879,000 and the cost of Subscriptions revenues
was  $286,000  for  the  three  months  ended March 31, 2002.  Cost of Solutions
revenues  was  $3.3  million  and  the  cost  of Subscriptions revenues was $1.2
million  for  the  quarter  ended  March 31, 2001.  As a percentage of Solutions
revenues,  cost  of  Solutions  revenues  was 44% and 38% for the quarters ended
March  31,  2002  and  2001,  respectively.  As  a  percentage  of Subscriptions
revenues,  cost of Subscriptions revenues was 19% and 52% for the quarters ended
March  31,  2002  and  2001,  respectively.  Cost of Solutions revenues was $3.2
million  and cost of Subscriptions revenues was $1.1 million for the nine months
ended  March  31, 2002.  Cost of Solutions revenues was $9.5 million and cost of
Subscriptions  revenues  was  $3.6  million  for the nine months ended March 31,
2001.  As a percentage of Solutions revenues, cost of Solutions revenues was 60%
and  47%  for the nine months ended March 31, 2002 and 2001, respectively.  As a
percentage of Subscriptions revenues, cost of Subscriptions revenues was 27% and
51%  for  the  nine  months  ended  March  31,  2002  and  2001,  respectively.

The  decrease  in  cost  of Solutions revenues, in absolute terms. was primarily
attributable  to  the  decreased costs associated with employees and third-party
consultants  involved  in  providing  implementation,  training  and  consulting
services  to  our  customer  base.  The  number  of  employees  in  our services
organization  decreased  by  85%  from  March  31, 2001, to March 31, 2002.  The
decrease  in  cost  of  Subscriptions  revenues  was  primarily due to decreased
payroll  costs  for  employees and third-party consultants involved in providing
support  services  to  customers  under maintenance and application subscription
contracts.  We  are  seeking  to reduce our cost of Solutions revenues by having
our  customers engage third-parties to provide a substantial portion of services
related  to  our  applications.

OPERATING  EXPENSES

SALES AND MARKETING.  Sales and marketing expenses consist primarily of employee
salaries,  benefits,  commissions  and  stock-based compensation, as well as the
costs  of  advertising,  public  relations,  website  development,  trade shows,
seminars,  promotional  materials  and  other  sales  and  marketing  programs.
Additionally,  sales  and  marketing expenses include costs of service personnel
that  have  not  been  treated as part of cost of revenues.  Sales and marketing
expenses,  excluding  stock-based compensation, decreased by 69% to $3.3 million
for  the  quarter ended March 31, 2002, from $10.4 million for the quarter ended
March  31,  2001.  Sales  and  marketing  expenses,  excluding  stock-based


                                       16
<PAGE>
compensation,  decreased by 65% to $11.5 million for the nine months ended March
31,  2002,  from  $32.5  million  for the nine months ended March 31, 2001.  The
decrease  in  sales  and  marketing expenses resulted primarily from significant
workforce  reductions  beginning  during  the  quarter  ended June 30, 2001, and
continuing  through  the  quarter  ended  December  31,  2001, and a decrease in
advertising and marketing initiatives.  The number of employees in our sales and
marketing  organization decreased by 65% from March 31, 2001, to March 31, 2002.
We  expect  that the level of sales and marketing expenses will remain stable in
the  next  quarter.  However,  management  will  continue  to  focus on managing
expenses  and  will  invest  or  reduce  expenses  as  deemed  appropriate.

RESEARCH  AND  DEVELOPMENT.  Research and development expenses consist primarily
of  personnel  and related costs, including stock-based compensation, associated
with  our  product development efforts, including fees paid to third-parties for
engineering  consulting  services.  Research and development expenses, excluding
stock-based  compensation,  decreased  60%  to $2.8 million for the three months
ended  March  31,  2002,  from $7.0 million for the three months ended March 31,
2001.  Research  and  development  expenses, excluding stock-based compensation,
decreased  37%  to  $9.3  million for the nine months ended March 31, 2002, from
$14.8  million  for  the  nine  months  ended  March  31, 2001.  The decrease in
research  and  development expenses related primarily to a decreased reliance on
third-party  consultants and our workforce reductions.  The number of employees,
in  our  research  and development organization, decreased by 42% from March 31,
2001, to March 31, 2002.  The reduction in headcount includes the closure of our
India  office  and  the discontinuance of our development efforts to support our
ASP  business.  We  expect  that  the  absolute  dollar  amount  of research and
development  expenses  will  remain  stable  in  the  next  quarter.  However,
management will continue to focus on managing expenses and will invest or reduce
expenses  as  deemed  appropriate.

GENERAL  AND  ADMINISTRATIVE.  General  and  administrative  expenses  consist
primarily  of employee salaries and expenses, including stock-based compensation
related  to  executive,  finance and administrative personnel, bad debt expense,
and  professional  service fees.  General and administrative expenses, excluding
stock-based  compensation,  decreased  43%  to $1.8 million for the three months
ended  March  31,  2002,  from $3.1 million for the three months ended March 31,
2001.  General  and administrative expenses, excluding stock-based compensation,
decreased  29%  to  $5.9  million for the nine months ended March 31, 2002, from
$8.3  million  for the nine months ended March 31, 2001. The decrease in general
and administrative expenses resulted primarily from our workforce reductions and
a  decrease  in  bad  debt  expense.  The number of employees in our general and
administrative  organization  decreased by 56% from March 31, 2001, to March 31,
2002.  We  expect that general and administrative expenses will remain stable in
the  next  quarter.  However,  management  will  continue  to  focus on managing
expenses  and  will  invest  or  reduce  expenses  as  deemed  appropriate.

STOCK-BASED  AND  RELATED  COMPENSATION  CHARGES.  We  incurred  stock-based
compensation  in  connection  with  stock  option grants and sales of restricted
stock  to our employees at exercise or sales prices below the deemed fair market
value  of  our  common  stock  for  accounting purposes, as a result of amending
certain  stockholder  loans and accelerated vesting rights granted to terminated
executives and as a result of stock options issued to employees in November 2001
in conjunction with the initiation of a stock exchange program beginning January
2002.  Based  on  the  remaining  balances  at  March 31, 2002, our results from
operations  will include stock-based compensation expense, at a minimum, through
2004.  We  recorded stock-based charges of $2.1 million and $3.9 million for the
three  months  ended  March  31,  2002,  and  March  31, 2001, respectively.  We
recorded  stock-based  charges  of  $11.2 million and $20.5 million for the nine
months  ended  March  31,  2002,  and March 31, 2001, respectively.  Stock-based
charges  are  amortized  on an accelerated basis and the decrease in stock-based
amortization  resulted  primarily  from  the  resulting decline in the cost over
time.  Additionally,  amortization  previously taken on an accelerated basis was
reversed  for  employees  participating  in  the  options  exchange  program and
employee  terminations  in  the  prior quarters reduced current quarter charges.

In  October  2001,  the  Board of Directors voted to modify existing stockholder
loans, which were issued to allow board members, officers and selected employees
to  exercise  stock options and purchase restricted stock, from full-recourse to
non-recourse  and  to  extend their due dates, in the event of termination, from
thirty  days  to  fifteen  months  after the date of termination.  The loans are
secured  only  by  the underlying stock, which they were used to purchase.  As a
result,  outstanding  stockholder  loans  and  related interest were revalued to
their  net  realizable  value of $0.21 per share at March 28, 2002, resulting in
charges  of  $710,000 and $7.1 million for the three and nine months ended March
31,  2002,  respectively.  Until they are repaid the loans will be revalued each
quarter  to  their net realizable value as determined by the stock price at that
time.


                                       17
<PAGE>
Amortization  of  stock-based  compensation and the stockholder loan revaluation
consisted  of  the  following  (in  thousands):

<TABLE>
<CAPTION>
                                       THREE MONTHS ENDED       NINE MONTHS ENDED
                                           MARCH 31,                MARCH 31,
                                    -----------------------  ----------------------
                                       2002         2001        2002        2001
                                    -----------  ----------  ----------  ----------
<S>                                 <C>          <C>         <C>         <C>
Cost of revenues:
  Solutions
    Stock-based charges             $      138   $      394  $       -   $    1,760

Operating expenses
  Sales and marketing
    Stock-based charges                    448          578        423        5,480
    Stockholders' loan revaluation          99            -      1,980            -
  Research and development
    Stock-based charges                   (629)         671       (258)       3,627
    Stockholders' loan revaluation         166            -      1,569            -
  General and administrative
    Stock-based charges                  1,452        2,220      3,866        9,638
    Stockholders' loan revaluation         445            -      3,571            -

                                    -----------  ----------  ----------  ----------
  Totals                            $    2,119   $    3,863  $  11,151   $   20,505
                                    ===========  ==========  ==========  ==========
</TABLE>

AMORTIZATION  OF  GOODWILL  AND OTHER INTANGIBLE ASSETS.  In connection with the
acquisition of certain assets of Vivant! Corporation on June 29, 2001, and, with
the  assistance  of  an  independent  valuation,  we  recorded  $2.2 million for
developed technology, $717,000 for goodwill and $187,000 for acquired workforce.
Additionally, in connection with the acquisition of InfoWide, Inc., on March 31,
2000,  we  recorded  $32.6  million  in goodwill, purchased technology and other
intangible  assets  including in-process technology of $3.1 million.  During the
quarter  ended  June  30,  2001,  our  goodwill  and  other  intangibles  were
substantially  reduced  because of the write-off of $18.1 million resulting from
the  impairment  of  all  the  intangible assets that remained from the InfoWide
acquisition.  As  a  result  of  the  acquisition of Vivant and the write-off of
InfoWide,  charges  for the amortization of goodwill and other intangible assets
declined to $359,000 for the quarter ended March 31, 2002, from $2.7 million for
the  three months ended March 31, 2001.  We recorded charges for amortization of
goodwill  and  other  intangible assets of $1.2 million and $8.0 million for the
nine  months ended March 31, 2002 and March 31, 2001, respectively.  We amortize
goodwill  and  other  intangible  assets  over  periods not exceeding thirty-six
months.

We  will  adopt  SFAS  No.  142 effective July 1, 2002, which will result, among
other items, in no longer amortizing our existing goodwill.  Other than goodwill
and  acquired  workforce  in  place,  which  will  be  subsumed into goodwill on
adoption,  all  identifiable  intangible assets will continue to be amortized in
accordance  with  SFAS  No.  142.  We  are currently reviewing the impact of the
adoption  of  SFAS  No.  142,  including  the  transition impairment tests.  The
impairment,  if  any,  resulting from these transition tests will be recorded in
the period it is determined and will be recognized as the cumulative effect of a
change  in  accounting  principle.

RESTRUCTURING  CHARGES,  NET.  We  incurred  restructuring charges in connection
with  cost reductions implemented in the quarter ended June 30, 2001 through the
quarter  ended December 31, 2001.  For the three months ended March 31, 2002, we
recorded  a  reversal  of  $21,000  as  a  result  of  the  sale of fixed assets
previously  written-off.  For  the nine months ended March 31, 2002, we recorded
net  restructuring  charges  of  $583,000.  These  charges  were  comprised  of
severance and related benefit charges of $1.8 million, the impairment of certain
fixed  assets  of  $605,000  and  a  net  reversal of $1.8 million of facilities
charges  resulting  from  the  reversal  of  previously  accrued charges of $2.2
million  relating  to  excess  headquarters' space, partially offset by $316,000
relating  to  the  closure  of  our  India  research  facility.


                                       18
<PAGE>
OTHER  INCOME  (EXPENSE), NET.  Other income (expense), net was $1.6 million and
$446,000  for  the  quarter  ended  March  31, 2002 and 2001, respectively.  The
increase resulted primarily from the recovery of common stock warrant charges of
$1.7  million recorded in the prior quarter and partially offset by a decline in
interest  income  because  of  our  reduced cash balance and lower bank interest
rates,  which  resulted  in  a $542,000 interest income reduction.  Other income
(expense), net was $101,000 and $2.2 million for the nine months ended March 31,
2002  and  2001,  respectively.  The  decrease  resulted  primarily  from a $2.1
million  reduction  in  interest  income.

BENEFICIAL  CONVERSION  OF  PREFERRED  STOCK.  We  recorded a dividend charge of
$212,000  for  the  quarter  ended  March  31,  2002, in respect of a beneficial
conversion  feature associated with the sale of 1,300,000 shares of our Series A
Preferred  Stock  in  October 2001.  The remaining beneficial conversion feature
balance of $579,000 will be amortized evenly over each of the next two quarters.

LIQUIDITY  AND  CAPITAL  RESOURCES

Net  cash used in operating activities for the nine months ended March 31, 2002,
was  $23.3 million compared with net cash used for operating activities of $40.4
million  for the same prior year period.  Cash used for operating activities for
the  nine  months  ended  March  31, 2002, resulted primarily from a net loss of
$34.4  million  and  a  net  decrease in assets and liabilities of $5.1 million,
partially  offset  by stock-based charges and write-down of stockholder loans of
$11.2  million, amortization and depreciation of $3.9 million, and restructuring
charges of $1.1 million.  Cash used for operating activities for the nine months
ended  March  31,  2001,  resulted  primarily from a net loss of $67.5 and a net
decrease  in  assets and liabilities of $4.3 million, offset by amortization and
depreciation  of  $10.8  million  and  stock-based  charges  of  $20.5  million.

Net  cash used by investing activities for the nine months ended March 31, 2002,
was  $252,000  compared  with  net  cash  used  by investing activities of $14.3
million  for  the same prior year period.  Cash used by investing activities for
the  nine  months  ended March 31, 2002, resulted primarily from the purchase of
short-term  investments of $532,000 and a commitment of restricted cash of  $2.9
million  to  support  our  Emeryville lease, partially offset by the maturity of
$3.4  million  of short-term investments.  Cash used by investing activities for
the  nine  months  ended March 31, 2001, resulted primarily from the purchase of
$22.0  million of short-term investments, the purchase of property and equipment
of $8.1 million and the purchase of intangibles of $700,000, partially offset by
the  maturity  of  $14.5  million  of  short-term investments and the release of
restricted  cash  of  $2.0  million  related  to  our  Emeryville  lease.

Net  cash  provided  by financing activities for the nine months ended March 31,
2002,  was $15.9 million compared with net cash provided by financing activities
of  $62.0  million for the same prior year period.  Cash provided from financing
activities for the nine months ended March 31, 2002, resulted primarily from the
net  proceeds of preferred stock issuances of $17.9 million, partially offset by
principal  payments  on our bank credit facility of $1.6 million and payments of
capital  lease  obligations  of  $476,000.  Net  cash  provided  by  financing
activities  for  the nine months ended March 31, 2001, resulted principally from
the net proceeds of our initial public offering of $46.5 million and to a lesser
extent preferred and common stock issuances of $15.2 million, proceeds from debt
issuance  of  $4.8  million, partially offset by debt repayments of $4.0 million
and  capital  lease  obligations  of  $539,000.

At  March  31,  2002, we had cash and cash equivalents of $12.2 million and $2.9
million in long-term restricted cash. Pursuant to the term loan facility, we are
required  to  meet  certain financial covenants, including maintaining a minimum
balance of $8.0 million in cash and cash equivalents, including restricted cash.

On  November  13,  2001, we revised an existing credit arrangement and signed an
amended Loan and Security Agreement to restructure our excess credit facilities,
to  obtain  a  waiver  of  certain  defaults under the credit arrangement and to
reduce  the  line-of-credit to $2.9 million and the term loan credit facility to
$4.4  million  with  interest accruing at the rate of the bank's prime rate plus
0.75%  and  1.00%,  respectively.  At March 31, 2002, these rates were 5.50% and
5.75%,  respectively.  As of March 31, 2002, we had utilized $4.8 million of the
term  loan  credit facility and had repaid $1.6 million.  The loan will be fully
repaid  by  July  1,  2003.  Both  the  line-of-credit  and the term loan credit
facility  are  collateralized  by  all  of  our  assets,  including intellectual
property,  except  for previously leased equipment.  In connection with the loan
amendment  the  bank approved new financial covenants for the periods commencing
October  1,  2001.  Under  these covenants, we are required to:  (1) maintain at
all times a minimum bank liquidity ratio of 1.50 to 1.00, reducing to a ratio of
1.25  to 1.00 on January 31, 2002, (the cash component of this ratio is required
to  be held at the bank); (2) beginning with the month ending December 31, 2001,
maintain on a monthly basis the greater of (a) a minimum company liquidity ratio
of  1.75 to 1.00 or (b) $14,000,000 in unrestricted cash (unrestricted cash will
include  any restricted cash held by the bank) reducing to $8,000,000 on January
31,  2002;  (3)  beginning with the month ending December 31, 2001, not exceed a
leverage maximum of 2.25 to 1.00; and (4) meet a milestone covenant of obtaining
at  least  $10,000,000  in  new  equity from investors acceptable to the bank by
October  15,  2001.


                                       19
<PAGE>
We  were  in  violation  of  the  maximum leverage ratio financial covenant from
December  2001  through  February  2002.   However,  we received a waiver of all
defaults  in  March 2002.  On April 19, 2002, we signed a first amendment to the
amended  and  restated  Loan  and  Security  Agreement,  which  amended  certain
financial  covenants.  In  connection  with the amendment, the bank approved new
financial  covenants  commencing April 1, 2002.  Under the new covenants, we are
required  to:  (1)  maintain  at all times a minimum bank liquidity ratio of not
less  than  1.25  to  1.00;  (2)  maintain,  at  all  times,  unrestricted  cash
(unrestricted  cash  will  include  any restricted cash held by the bank) of not
less  then  $8,000,000;  and (3) maintain minimum revenue targets which increase
quarterly.

At  March  31, 2002, we were in compliance with all amended covenants.  Based on
our  current  operating  plan,  we  believe we will maintain compliance with the
foregoing  covenants  in  the  foreseeable  future.

We  have  a  facility  lease  agreement  for  our Emeryville headquarters, which
commenced  upon  possession of the facility in July 2000 and has a term of seven
years.  As  part  of  this  agreement,  we  are  required  to  maintain  a
letter-of-credit  in  favor  of  the lessor totaling approximately $2.9 million,
collateralized  by an equal amount of cash deposits, which we have classified as
restricted  cash.

Future  minimum  lease  payments  under our headquarters' lease, including those
previously  accrued  under  restructuring charges, and minimum required payments
under  our  bank  facility  were as follows as of March 31, 2002 (in thousands):

<TABLE>
<CAPTION>
                     HEADQUARTERS'     BANK
YEAR ENDED JUNE 30,      LEASE       FACILITY    TOTAL
-------------------  --------------  ---------  -------
<S>                  <C>             <C>        <C>
2002-Q4              $          621  $     594  $ 1,215
2003                          2,530      2,376    4,906
2004                          1,260        198    1,458
2005                          1,259          -    1,259
2006                          1,295          -    1,295
2007                          1,332          -    1,332
2008                             74          -       74
-------------------  --------------  ---------  -------
TOTAL PAYMENTS       $        8,371  $   3,168  $11,539
===================  ==============  =========  =======
</TABLE>

We  believe  that  cash  from operations and existing cash will be sufficient to
meet  our  current  expectations  for  working  capital and expense requirements
through  the  end  of  the  current  fiscal  year.

CRITICAL  ACCOUNTING  POLICIES  AND  ESTIMATES

The discussion and analysis of our financial condition and results of operations
are  based  upon our consolidated financial statements, which have been prepared
in accordance with generally accepted accounting principles.  The preparation of
these  financial  statements  requires  us  to make estimates and judgments that
affect  the  reported amounts of assets, liabilities, revenues and expenses, and
related  disclosure of contingent assets and liabilities.  On an on-going basis,
we  evaluate  our estimates.  We base our estimates on historical experience and
on  various  other  assumptions  that  we  believe  to  be  reasonable under the
circumstances.  Actual  results  may differ from these estimates under different
assumptions  or  conditions.

We  believe  that  the  following are critical accounting policies and estimates
used  in  the  preparation  of  our condensed consolidated financial statements.

REVENUE  RECOGNITION

We  derive  revenues  from  fees  for  licenses  and  implementation  services
("Solutions  revenue")  and  fees from maintenance, application service provider
("ASP")  and  subscription  agreements  ("Subscriptions revenue").  We recognize
revenues  in  accordance  with the provisions of American Institute of Certified
Public  Accountants  (AICPA) Statement of Position (SOP) 97-2, "Software Revenue
Recognition."  We  also  follow  the  provisions  of  the  Securities  Exchange
Commission's  Staff  Accounting Bulletin No. 101 (SAB 101), "Revenue Recognition
in  Financial  Statements."


                                       20
<PAGE>
Under  SOP  97-2  as  amended,  we  recognize revenues when all of the following
conditions  are  met:

     -    when persuasive evidence of a customer agreement exists;
     -    the  delivery  of  the product or service subject to the agreement has
          occurred;
     -    the  associated  fees  are  fixed  or  determinable;  and
     -    we  believe  that  collection  of  these  fees  is reasonably assured.

We have established vendor specific objective evidence of fair value for certain
services.  Our  implementation  services  are  considered  essential  to  the
functionality  of  our software because we do not have significant experience of
third  party  consultants  implementing  our software at customer sites.  We are
investing  in  our  partner strategy and expect, in the near future, to have our
customers  to  have the ability to purchase implementation services from trained
and  certified  partners.  In  the  meantime,  our  implementation  services are
essential  to  the  functionality of the software and, for those contracts where
the  services  are  reasonably  estimable,  the  license and services revenue is
recognized  over  the  period  of  each  implementation,  primarily  using  the
percentage-of-completion  method.  Labor  hours incurred are used as the measure
of progress towards completion.  A provision for estimated losses on engagements
is  made  in the period in which the loss becomes probable and can be reasonably
estimated.  In  the  future,  if  our  implementation  services  are  no  longer
considered  essential  to  the  functionality  of  the  license,  our  revenue
recognition  will  be  accelerated under these arrangements with license revenue
being  recorded  upon  delivery  assuming  all other criteria are met.  In cases
where a sale of a license does not include implementation services (e.g., a sale
of  additional  seats  or a sale of product to be implemented by a third party),
revenue  is  recorded upon delivery with an appropriate deferral for maintenance
services, if applicable, provided all of the other relevant conditions have been
met.

We  do not recognize revenue for refundable fees or agreements with cancellation
rights  until  such  rights  to  refund  or  cancellation  have  expired.

Our  customer agreements typically include arrangements for maintenance services
to  be provided by us.  Generally, we have vendor specific objective evidence of
fair  value  for  the  maintenance element of software arrangements based on the
renewal rates for maintenance in future years as specified in the contracts.  In
those cases where first year maintenance revenue is included in the license fee,
we  defer  the fair value of the first year maintenance revenue at the outset of
the  arrangement  and  recognize  it  ratably  over  the period during which the
maintenance  is  to  be  provided,  which  is  generally  twelve  months.

ALLOWANCE  FOR  DOUBTFUL  ACCOUNTS

We  make  estimates  as to the overall collectibility of accounts receivable and
provide  an  allowance for amounts deemed to be uncollectible.  Specifically, we
analyze  our  accounts  receivable  and  historical  bad  debt pattern, customer
concentrations, customer credit-worthiness, current economic and industry trends
and  changes  in  our customer payment terms when evaluating the adequacy of our
allowance  for  doubtful  accounts.  We  will continue to monitor our customers'
ability  to  pay  throughout  the  term  of the applicable arrangements and will
adjust  the  provision  for  bad debt allowance or defer revenue recognition, as
appropriate.  These  estimates  could change if actual results differ materially
from  those  estimates  based  on  more  accurate  information  in  the  future.

CONTINGENCIES

Because of the uncertainties related to both the amount and range of loss on the
remaining  pending  litigation we are unable, at this time, to determine whether
the  outcome  of  the  litigation  will have a material impact on our results of
operations  or  financial  condition  in  any  future  period.  As  additional
information becomes available, we will assess the potential liability related to
our  pending  litigation.

GOODWILL  AND  OTHER  INTANGIBLE  ASSETS

We  are  required  to  regularly  review all of our long-lived assets, including
goodwill  and other intangible assets, for impairment whenever events or changes
in  circumstances  indicate  that  the  carrying  value  may not be recoverable.
Factors  we consider important which could trigger an impairment review include,
but  are  not limited to, significant underperformance relative to 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 and our market capitalization relative to net book value.
When  we  determine  that  an  impairment  review  is  necessary  based upon the
existence  of  one or more of the above indicators of impairment, we measure any
impairment  based  on  a  projected discounted cash flow method using a discount
rate  commensurate  with  the  risk  inherent  in  its  current  business model.


                                       21
<PAGE>
Significant  judgment is required in the development of projected cash flows for
these  purposes  including  assumptions  regarding  the  appropriate  level  of
aggregation  of  cash  flows,  their  term  and  discount  rate  as  well as the
underlying  forecasts  of expected future revenue and expense.  We have recorded
significant  impairment  charges  for goodwill and intangible assets in the past
and  to the extent that events or circumstances cause our assumptions to change,
additional  charges  may  be  required which could be material.  As of March 31,
2002,  we  are  carrying balances of $538,000 relating to goodwill, $2.0 million
relating  to  acquired  technologies,  and  $47,000 relating to other intangible
assets.

We  will  adopt  SFAS  No.  142 effective July 1, 2002, which will result, among
other items, in no longer amortizing our existing goodwill.  Other than goodwill
and  acquired  workforce  in  place,  which  will  be  subsumed into goodwill on
adoption,  all  identifiable  intangible assets will continue to be amortized in
accordance  with  SFAS  No.  142.  We  are currently reviewing the impact of the
adoption  of  SFAS  No.  142,  including  the  transition impairment tests.  The
impairment,  if  any,  resulting from these transition tests will be recorded in
the period it is determined and will be recognized as the cumulative effect of a
change  in  accounting  principle.

ACCOUNTING  FOR  INCOME  TAXES

Significant  management  judgment  is  required in determining our provision for
income  taxes,  deferred  tax assets and liabilities and any valuation allowance
recorded  against  net  deferred  tax  assets.  We  have  recorded  a  valuation
allowance  due  to  uncertainties related to our ability to utilize our deferred
tax  assets,  primarily  consisting  of  certain  net  operating  losses carried
forward,  before  they expire.  The valuation allowance is based on estimates of
taxable  income  by  jurisdiction  in which we operate and the period over which
these  deferred  tax  assets  will  be recoverable.  Should we determine that we
would  be  able  to realize our deferred tax asset in the foreseeable future, an
adjustment  to  the  deferred tax asset would increase income in the period such
determination  was  made.


                                       22
<PAGE>
FACTORS  THAT  MAY  AFFECT  FUTURE  RESULTS  OF  OPERATIONS

OUR  FUTURE  OPERATING RESULTS MAY NOT MEET OUR CURRENT EXPECTATIONS DUE TO MANY
FACTORS,  AND  ANY  OF  THESE  COULD  CAUSE  OUR  STOCK  PRICE  TO  FALL.

We  believe  that  year-over-year comparisons of our operating results are not a
good  indication  of future performance.  It is likely that in some future years
our  operating  results  may be below the expectations of public market analysts
and  investors because of factors beyond our control and, as a result, the price
of  our  common  stock  may  fall.

Factors that may cause our future operating results to be below expectations and
cause  our  stock  price  to  fall  include:

     -    the  lack  of  demand  for  and  acceptance  of  our products, product
          enhancements  and  services;  for  instance,  as  we expand our target
          customer focus beyond the information technology service consultancies
          and  into  internal  information  technology of corporate customers as
          well  as  into overseas markets, we may encounter increased resistance
          to  adoption  of  our  business  process  automation  solutions;
     -    unexpected  changes  in  the  development,  introduction,  timing  and
          competitive  pricing  of  our  products  and  services or those of our
          competitors;
     -    any  inability to expand our direct sales force and indirect marketing
          channels  both  domestically  and  internationally;
     -    difficulties  in  recruiting  and  retaining  key  personnel;
     -    lengthening  of  our  sales  cycles;
     -    unforeseen  reductions  or reallocations of our customers' information
          technology  infrastructure  budgets;  and
     -    any  delays  or  unforeseen costs incurred in integrating technologies
          and  businesses  we  may  acquire.

We plan to aggressively and prudently manage our operating expenses with a focus
on  our  research  and development organization and our direct sales group.  Our
operating  expenses  are  based  on  our expectations of future revenues and are
relatively  fixed in the short-term.  If revenues fall below our expectations in
any quarter, and we are not able to quickly reduce our spending in response, our
operating  results  for that quarter would be lower than expected, and our stock
price  may  fall.

WE  MAY  NEED  ADDITIONAL CAPITAL TO FUND CONTINUED BUSINESS OPERATIONS AT THEIR
CURRENT  LEVELS  IN  FISCAL  2003  AND  SUCH  FINANCING  MAY NOT BE AVAILABLE ON
FAVORABLE  TERMS,  IF  AT  ALL.

We  may require additional capital to fund our business operations.  The rate at
which  our  capital  is  utilized is affected by the level of our fixed expenses
(including  employee  related expenses and expenses relating to real estate) and
variable  expenses.  Substantial  capital  has  been  used to fund our operating
losses.  Since  inception,  we  have  experienced  negative  cash  flows  from
operations  and  expect to experience negative cash flows from operations in the
near  term.  As  a  result,  we  may  require  additional  financing to meet our
operating  requirements.  Of  our  cash  and  cash  equivalents balance of $12.2
million,  $3.2  million  is  held  under  a  term  loan facility.  The term loan
facility  could  be  called  by  the lender, if we do not meet certain financial
covenants,  including  a  minimum  cash  balance  covenant.  If  we  must  seek
additional  capital  investment,  we  cannot  assure  that  such capital will be
available on acceptable terms, if at all.  Additional capital may be required if
one  or  more  of  the  following  occur:

     -    our  revenues from the sale of our products may fall below our current
          expectations  because  of  the current economic slowdown or otherwise.
     -    forecasted  cash collections from customers may decline if some of our
          customers  become  insolvent  or  encounter  financial  difficulties.
     -    we  may  be  unable  to  comply with the financial and other covenants
          required  under  our  existing  credit  facilities,  and  these credit
          facilities  may  be  withdrawn  as  a  result.
     -    we may encounter opportunities that we wish to pursue to acquire other
          businesses  or  technologies  for  cash  consideration.

Any  additional  shares of our capital stock that we may issue in any financings
may  result  in  additional  dilution,  which  may  be  substantial.  If we need
additional  funds  and cannot raise them on acceptable terms, we may not be able
to  continue  our  operations  at  the  current  level  or  at  all.


                                       23
<PAGE>
WE  HAVE  INCURRED  LOSSES  SINCE  INCEPTION,  AND WE MAY NOT BE ABLE TO ACHIEVE
PROFITABILITY.

We  have  incurred  net losses and losses from operations since our inception in
1995,  and  we  may  not  be able to achieve profitability in the future.  As of
March  31,  2002, we had an accumulated deficit of approximately $250.7 million.
Since  inception,  we  have  funded  our business primarily from the sale of our
stock  and by borrowing funds, not from cash generated by our business.  Despite
recent  cost  reductions,  we  expect to continue to incur significant sales and
marketing,  research  and  development, and general and administrative expenses.
As  is the case with many enterprise software companies, we experienced a severe
decline  in revenues during the 2001 calendar year and we may experience further
declines  or  insufficient  revenue  growth  in future periods.  As a result, we
expect  to  experience continued losses and negative cash flows from operations.
If  we  do  achieve  profitability,  we  may  not be able to sustain or increase
profitability  on  a  quarterly  or  annual  basis  in  the  future.

REDUCTIONS  IN  CAPITAL  SPENDING  BY  CORPORATIONS  COULD REDUCE DEMAND FOR OUR
PRODUCTS.

Historically,  corporations  and  other  organizations  have tended to reduce or
defer  major  capital  expenditures  in  response  to  slower economic growth or
recession.  Market  analysts have observed a significant reduction in the growth
of  corporate spending on information technology projects, which may be due to a
growing  reluctance  by  prospective  customers to commit to large-scale capital
expenditures  for information technology projects or which may be in response to
the  current  economic  slowdown.  To  the  extent that such reduction is due to
customer  wariness  of investing in large-scale information technology projects,
we  may  experience further constraints on our ability to price our offerings at
forecasted  levels, or we may have to offer payment terms, which would delay our
ability  to  recognize revenue.  To the extent that current economic uncertainty
persists,  some of the prospective customers in our current sales pipeline could
choose  to postpone or reduce orders for our products, or may delay implementing
our  solutions  within  their  organizations.  In  addition,  existing customers
seeking  to  reduce  capital expenditures may cancel or postpone plans to expand
use  of  our  products  in additional operating divisions, or may defer plans to
purchase  additional  modules of our solutions.  Any of the foregoing would have
an adverse impact on our revenues and our operating results, particularly if the
current  period  of  volatility  in  the stock market and the general economy is
prolonged.

IF  THE  MARKET  FOR  PROCESS  AUTOMATION  SOLUTIONS  FOR  PROFESSIONAL SERVICES
ORGANIZATIONS  AND  OTHER  STRATEGIC  WORKFORCES  DOES NOT CONTINUE TO GROW, THE
GROWTH  OF  OUR  BUSINESS  WILL  NOT  BE  SUSTAINABLE.

The  future  growth  and  success  of  our  business  is  contingent  on growing
acceptance  of,  and  demand  for,  business  process  automation  solutions for
professional  services  organizations  and  other  strategic  workforces.
Substantially  all of our historical revenues have been attributable to the sale
of  automation  solutions  for  professional  services organizations.  This is a
relatively  new  enterprise  application  solution category, and it is uncertain
whether major services organizations as well as service departments and internal
departments  of  major  corporations  will  choose  to  adopt process automation
systems.  While  we  have  devoted  significant  resources  to  promoting market
awareness  of our products and the problems our products address, we do not know
whether  these  efforts  will be sufficient to support significant growth in the
market  for  process  automation  products.  Accordingly,  the  market  for  our
products  may  not  continue  to  grow  or,  even if the market does grow in the
immediate  term,  that  growth  may  not  be  sustainable.

OUR  MARKETS  ARE  HIGHLY COMPETITIVE, AND COMPETITION COULD HARM OUR ABILITY TO
SELL  PRODUCTS  AND  SERVICES  AND  REDUCE  OUR  MARKET  SHARE.

Competition  could  seriously  harm  our  ability  to  sell  additional software
solutions  and  subscriptions  on prices and terms favorable to us.  The markets
for  our  products  are  intensely  competitive  and subject to rapidly changing
technology.  We  currently compete against providers of automation solutions for
professional  services  organizations,  such as Novient, Changepoint and Niku as
well  as providers of enterprise application software such as Peoplesoft, Siebel
and  Oracle.  Companies  in each of these areas may expand their technologies or
acquire  companies  to  support  greater  professional  services  automation
functionality  and capabilities.  In addition, "in-house" information technology
departments  of  potential  customers have developed or may develop systems that
substitute  for  some  of  the  functionality  of  our  product  line.

Some  of  our  competitors'  products may be more effective than our products at
performing  particular  functions  or be more customized for particular customer
needs.  Even  if  these  functions  are  more limited than those provided by our
products,  our  competitors'  software  products  could  discourage  potential
customers  from  purchasing our products.  A software product that provides some
of the functions of our software solutions, but also performs other tasks may be
appealing  to  these  vendors'  customers  because it would reduce the number of
different  types  of  software  necessary  to  effectively run their businesses.
Further, many of our competitors may be able to respond more quickly than we can
to  changes  in  customer  requirements.


                                       24
<PAGE>
Some  of  our competitors have longer operating histories, significantly greater
financial,  technical, marketing or other resources, or greater name recognition
than  we do.  This may cause potential customers to purchase their products even
if  they  provide  inferior features or functionality.  In addition, given their
greater  resources,  our competitors may be able to respond more quickly than we
can  to  new or emerging technologies and changes in customer requirements.  Our
competitors  have  made  and may also continue to make strategic acquisitions or
establish  cooperative  relationships  among  themselves  or with other software
vendors.  They  may  also establish or strengthen cooperative relationships with
our  current  or  future  partners, limiting our ability to promote our products
through  these  partners  and  limiting  the  number of consultants available to
implement  our  software.

OUR  REVENUES  DEPEND ON ORDERS FROM OUR TOP CUSTOMERS, AND IF WE FAIL TO SECURE
ONE  OR  MORE  ORDERS,  OUR  REVENUES  WILL  BE  REDUCED.

Historically,  we  have  received  a significant portion of our revenues in each
fiscal  period  from  a  small  number of customers.  Accordingly, the loss of a
single customer or customer prospect may have an impact on our operating results
if  we  depended  on  the  sale  of  our  products  to that customer to meet our
financial performance targets during a given fiscal period.  Our agreements with
existing  customers often do not include long-term commitments from customers to
continue  to  purchase  our products.  Moreover, a substantial percentage of new
customer  contracts  are  typically  signed in the last few weeks of each fiscal
quarter,  and  prospects  we  are  pursuing  have  often  made a decision not to
purchase  our products in the final stages of the sales cycle.  Accordingly, our
ability  to  meet  our financial targets during each fiscal period is subject to
substantial  variation and uncertainty, and the loss of one or more customers or
customer  prospects  can  cause  our  operating  results  to  fall  below  the
expectations  of  investors  and  analysts and adversely affect our stock price.

THE  LENGTHY  AND  UNPREDICTABLE SALES CYCLES FOR OUR PRODUCTS AND RESISTANCE TO
ADOPTION  OF  OUR  SOFTWARE  COULD  CAUSE  OUR  OPERATING  RESULTS TO FALL BELOW
EXPECTATIONS.

Our  operating results for future periods could be adversely affected because of
unpredictable  increases  in  our  sales cycles.  Our products and services have
lengthy and unpredictable sales cycles varying from as little as three months to
as  much as nine months, which could cause our operating results to be below the
expectations  of analysts and investors.  Since we are unable to control many of
the factors that will influence our customers' buying decisions, it is difficult
for  us  to  forecast  the  timing and recognition of revenues from sales of our
solutions.

Customers  in  our  target  market  often  take  an extended time evaluating our
products  before  purchasing  them.  Our  products may have an even longer sales
cycle  in  international  markets.  During  the  evaluation period, a variety of
factors, including the introduction of new products or aggressive discounting by
competitors and changes in our customers' budgets and purchasing priorities, may
lead  customers  to  not  purchase  or  to  scale  down orders for our products.

As  we target industry sectors and types of organizations beyond our core market
of  IT  services  consultancies, we may encounter increased resistance to use of
business  process automation solutions, which may further increase the length of
our sales cycles, increase our marketing costs and reduce our revenues.  Because
we are pioneering a new solution category, we often must educate our prospective
customers  on  the  use and benefit of our solutions, which may cause additional
delays  during  the  evaluation  process.  These  companies  may be reluctant to
abandon  investments  they  have made in other systems in favor of our solution.
In  addition,  IT  departments  of potential customers may resist purchasing our
solutions  for  a  variety  of  other  reasons,  particularly  the  potential
displacement  of  their  historical  role  in creating and running software, and
concerns  that  packaged software products are not sufficiently customizable for
their  enterprises.

WE MUST DIVERSIFY OUR CUSTOMER BASE IN ORDER TO ENHANCE OUR REVENUE AND MEET OUR
GROWTH  TARGETS.

We have historically derived a substantial percentage of our revenues from sales
of  our  products  and  services  to  firms  that  provide  technology-oriented
consulting,  design  and  integration  services,  including  a  number  of firms
specializing  in  Website design and e-commerce application development.  Growth
among  these  "e-business"  consultancies has slowed dramatically, and many such
firms  have  ceased  operations  or have encountered substantial difficulties in
raising  capital  to  fund  their  operations.  In  anticipation  of  these
developments,  we commenced a program to aggressively diversify our client base,
targeting  both  established  consulting services companies and in-house service
departments  of  large  corporations.  While  we  have  recorded  a  number  of
significant  customer  wins  in  these  areas,  we may, in the future, encounter


                                       25
<PAGE>
significant challenges in further expanding our customer base.  More established
corporations  are  often  more  reluctant  to  implement  innovative  enterprise
technologies  such  as  ours,  in  part because they often have made substantial
investments  in  legacy  applications  and  information  systems.  We  may  also
encounter  extended  sales  cycles  with  such prospective customers, and slower
rates  of  adoption  of  our solutions within their organizations.  All of these
factors  may  adversely  affect  our  ability  to sustain our revenue growth and
attain  profitable  operations.

FINANCIAL  DIFFICULTIES  OF  SOME  OF  OUR  CUSTOMERS  MAY  ADVERSELY AFFECT OUR
OPERATING  RESULTS.

Some  of  our  customers  may  encounter  difficulties  in  securing  additional
financing  to  meet  their  obligations,  or  may  seek to limit expenditures to
conserve  their  cash  resources.  As a result, we may encounter difficulties in
securing payment of certain customer obligations, when due, and may be compelled
to  increase our bad debt reserves.  Any difficulties encountered in collections
from  customers  would  also adversely affect our cash flow, and would adversely
impact  our  operating  results.

WE  MAY LOSE EXISTING CUSTOMERS, OR BE UNABLE TO ATTRACT NEW CUSTOMERS, IF WE DO
NOT  DEVELOP  NEW  PRODUCTS  OR  ENHANCE  OUR  EXISTING  PRODUCTS.

If  we  are  not  able  to maintain and improve our product-line and develop new
products,  we may lose existing customers or be unable to attract new customers.
We may not be successful in developing and marketing product enhancements or new
products on a timely or cost-effective basis.  These products, if developed, may
not  achieve  market  acceptance.

A limited number of our customers expect us to develop product enhancements that
may  address their specific needs.   If we fail to deliver these enhancements on
a timely basis, we risk damaging our relationship with these customers.  We have
experienced  delays  in  the  past  in  releasing  new  products  and  product
enhancements  and  may experience similar delays in the future.  These delays or
problems  in  the  installation  or implementation of our new releases may cause
some  of  these  customers  to forego additional purchases of our products or to
purchase  those  of  our  competitors.

WE MAY NOT BE ABLE TO INCREASE OUR REVENUES OR MANAGE OUR OPERATING EXPENDITURES
AND  WE  MAY  NEED  TO  IMPLEMENT  ADDITIONAL  RESTRUCTURING  ACTIVITIES.

We are attempting to increase our revenues through marketing initiatives as well
as  increasing  the  scope of our customer base to include Global 2000 companies
and  internal  IT  organizations.  We  will need this revenue growth to meet our
cash  flow  breakeven  targets.  Because  of  market  uncertainties and a highly
competitive  environment,  we  cannot  be certain we will achieve these targets.

In  response to the current uncertain economic environment and volatility in the
public  equity  markets,  we implemented significant measures designed to reduce
our  operating  expenses  and  enhance  our  ability  to  attain  operating
profitability.  For example, from the quarter ended March 31, 2001 compared with
the  quarter  ended  March  31,  2002,  we reduced our non stock-based recurring
departmental  expenses  64%  from  $25.1  million  to  $8.9  million.

In order to achieve operating profitability, we will need to achieve our revenue
growth  targets  and maintain the foregoing cost savings in future quarters.  If
our  revenue  growth  targets  cannot  be  achieved,  we would be forced to seek
expense  reductions,  which  may  not  be achievable.  Any of these developments
could  impede  our  ability  to  achieve  profitable  operations.

WE  REDUCED  OUR  WORKFORCE DURING CALENDAR YEAR 2001, AND, IF WE FAIL TO MANAGE
THIS  REDUCTION  IN  WORKFORCE,  OUR  ABILITY  TO  GENERATE NEW REVENUE, ACHIEVE
PROFITABILITY  AND  SATISFY  OUR  CUSTOMERS  COULD  BE  HARMED.

We  reduced  our workforce during calendar year 2001 after growing significantly
the first half of fiscal year 2001 and in previous years.  Any failure to manage
this  reduction  in  workforce could impede our ability to increase revenues and
achieve  profitability.  We reduced our number of employees from 326 at June 30,
2000,  to  131  as  of  March  31,  2002.

Since  we  reduced  our  sales  force headcount in order to reduce expenses, our
sales capacity is reduced which may impact our revenue growth and our ability to
attract  qualified  sales  professionals for future expansion.  Since we reduced
our  service employee headcount, including our consulting services, training and
technical  support  personnel,  we  may not be able to provide the same level of
customer  responsiveness or expertise, and customer satisfaction may be impacted
as  a  result.


                                       26
<PAGE>
In  order  to  manage  our  reduced  workforce,  we  must:

     -    hire,  train  and  integrate  new  personnel in response to attrition;
     -    continue  to  augment  our  management  information  systems;
     -    manage  our  sales  and  services  operations,  which  are  in several
          locations;  and
     -    expand  and  improve  our  systems  and  facilities.

ANY INABILITY TO RETAIN SENIOR EXECUTIVE OFFICERS AND ADDITIONAL PERSONNEL COULD
AFFECT  OUR  ABILITY  TO  SUCCESSFULLY  GROW  OUR  BUSINESS.

Our  future  performance  will depend, in significant measure, on the ability of
our recently appointed executive officers to work effectively with other members
of  our  management  team  as well as key employees, customers and partners.  In
addition,  if  we are unable to hire and retain a sufficient number of qualified
personnel,  particularly in sales, marketing, research and development, services
and  support,  our  ability to grow our business could be affected.  The loss of
the  services  of  our  key  engineering, sales, services or marketing personnel
would  harm  our  operations.  For  instance, loss of sales and customer service
representatives  could harm our relationship with the customers they serve, loss
of  engineers  and development personnel could impede the development of product
releases  and  enhancements  and  decrease our competitiveness, and departure of
senior  management personnel could result in a loss of confidence in our company
by  customers, suppliers and partners.  None of our key personnel is bound by an
employment  agreement, and we do not maintain key person insurance on any of our
employees.  Because  we,  like  many  other  technology companies, rely on stock
options  as a component of our employee compensation, if the market price of our
common  stock  decreases  or  increases substantially, some current or potential
employees  may perceive our equity incentives as less attractive.  In that case,
our  ability  to  attract  and  retain  employees  may  be  adversely  affected.

IF  WE  FAIL  TO  EXPAND  OUR  RELATIONSHIPS  WITH  THIRD-PARTY  RESELLERS  AND
INTEGRATORS,  OUR  ABILITY  TO  GROW  REVENUES  COULD  BE  HARMED.

In  order  to  grow  our  business,  we  must establish, maintain and strengthen
relationships  with  third-parties,  such  as  information  technology  ("IT")
consultants  and  systems integrators as implementation and resell partners, and
hardware  and  software  vendors as marketing partners.  If these parties do not
provide  sufficient,  high-quality service or integrate and support our software
correctly,  our  revenues  may  be harmed.  In addition, these parties may offer
products  of other companies, including products that compete with our products.
Our  contracts  with third-parties may not require these third-parties to devote
resources to promoting, selling and supporting our solutions.  Therefore, we may
have  little control over these third-parties.  We cannot assure you that we can
generate  and maintain relationships that offset the significant time and effort
that  are necessary to develop these relationships, or that, even if we are able
to  develop  such  relationships,  these  third-parties will perform adequately.

OUR  SERVICES  REVENUES  HAVE  A  SUBSTANTIALLY  LOWER  MARGIN THAN OUR SOFTWARE
LICENSE  REVENUES,  AND  AN  INCREASE  IN  SERVICES REVENUES RELATIVE TO LICENSE
REVENUES  COULD  HARM  OUR  GROSS  MARGINS.

A  significant  shift  in  our revenue mix away from license revenues to service
revenues  would  adversely  affect our gross margins.  Revenues derived from the
services  we  provide  have  substantially  lower gross margins than revenues we
derive  from  licensing  our software.  The relative contribution of services we
provide to our overall revenues is subject to significant variation based on the
structure  and  pricing  of  arrangements  we  enter  into with customers in the
future,  and  the  extent  to  which  our  partners  provide  implementation,
integration,  training  and  maintenance services required by our customers.  An
increase  in  the  percentage  of  total  revenues  generated by the services we
provide  could  adversely  affect  our  overall  gross  margins.

IF OUR PRODUCTS CONTAIN SIGNIFICANT DEFECTS OR OUR SERVICES ARE NOT PERCEIVED AS
HIGH  QUALITY,  WE  COULD  LOSE  POTENTIAL  CUSTOMERS  OR BE SUBJECT TO DAMAGES.

Our  products  are  complex  and  may contain currently unknown errors, defects,
integration problems or other types of failures, particularly since new versions
are frequently released.  In the past we have discovered software errors in some
of  our  products  after introduction.  We may not be able to detect and correct
errors  before  releasing our products commercially.  If our commercial products
contain  errors,  we  may:

     -    need to expend significant resources to locate and correct the errors;
     -    be  required  to  delay  introduction  of  new  products or commercial
          shipment  of  products;  or
     -    experience  reduced sales and harm to our reputation from dissatisfied
          customers.


                                       27
<PAGE>
Our  customers  also may encounter system configuration problems that require us
to  spend  additional consulting or support resources to resolve these problems.

Some  of  our  customers  have  indicated  to  us  that  they  want a completely
integrated  solution,  including  a  single  user  interface and single database
platform.  While  our product roadmap calls for such an integrated solution, any
delays  in  delivering  such  a  solution  to  our  customers  may cause them to
downgrade  their  opinion  of  our  software  or  to  abandon  our  software.

Because  our  customers  use  our software products for critical operational and
decision-making  processes,  product  defects  may  also  give  rise  to product
liability  claims.  Although  our  license  agreements  with customers typically
contain  provisions  designed to limit our exposure, some courts may not enforce
all  or part of these limitations.  Although we have not experienced any product
liability  claims to date, we may encounter these claims in the future.  Product
liability  claims,  whether  or  not  they  have  merit,  could:

     -    divert  the  attention  of  our  management and key personnel from our
          business;
     -    be  expensive  to  defend;  and
     -    result  in  large  damage  awards.

We  do  not  have  product  liability  insurance,  and even if we obtain product
liability  insurance,  it  may  not  be  adequate  to  cover all of the expenses
resulting  from  such  a  claim.

THE  COST AND DIFFICULTIES OF IMPLEMENTING OUR PRODUCTS COULD SIGNIFICANTLY HARM
OUR  REPUTATION  WITH  CUSTOMERS  AND  HARM  OUR  FUTURE  SALES.

If  our  customers  encounter unforeseen difficulties or delays in deploying our
products  and  integrating them with their other systems, they may reverse their
decision  to  use  our  solutions, which would reduce our future revenues, could
impact  the  collection  of  outstanding receivables, and potentially damage our
reputation.  Factors that could delay or complicate the process of deploying our
solutions  include:

     -    customers may need to modify significant elements of their existing IT
          systems  in  order  to  effectively integrate them with our solutions;
     -    customers  may  need  to  establish  and  implement  internal business
          processes  within  their  organizations before they can make effective
          use  of  our  software;
     -    customers  may  need  to  purchase  and  deploy significant additional
          hardware  and  software  resources  and  may  need to make significant
          investments  in  consulting  and  training  services;  and
     -    customers  may  rely on third-party systems integrators to perform all
          or a portion of the deployment and integration work, which reduces the
          control  we  have  over  the implementation process and the quality of
          customer  service  provided  to  the  customer.

IF  OUR  PRODUCTS DO NOT STAY COMPATIBLE WITH WIDELY USED SOFTWARE PROGRAMS, OUR
REVENUES  MAY  BE  ADVERSELY  AFFECTED.

Our  software  products  must work with widely used software programs.  If these
software programs and operating environments do not remain widely used, or we do
not  update  our software to be compatible with newer versions of these programs
and  systems,  we  may  lose  customers.

Our  software  operates  only  on  a  computer server running both the Microsoft
Windows  NT or Sun Solaris operating system and database software from Microsoft
or  Oracle.  In order to increase the flexibility of our solution and expand our
client  base,  we  must  be  able  to  successfully  adapt it to work with other
applications  and  operating  systems.

Our software connects to and uses data from a variety of our customers' existing
software  systems, including systems from Oracle and SAP.  If we fail to enhance
our  software  to connect to and use data from new systems of these products, we
may  lose  potential  customers.

OUR BUSINESS MAY SUFFER IF WE ARE NOT ABLE TO PROTECT OUR INTELLECTUAL PROPERTY.

Our  success  is dependent on our ability to develop and protect our proprietary
technology  and  intellectual property rights.  We seek to protect our software,
documentation  and  other  written  materials primarily through a combination of
patent,  trade  secret, trademark and copyright laws, confidentiality procedures
and  contractual  provisions.  While we have attempted to safeguard and maintain
our  proprietary  rights,  we  do  not  know  whether  we  have  been or will be
completely  successful  in doing so.  Further, our competitors may independently
develop  or  patent  technologies  that  are  equivalent  or  superior  to ours.


                                       28
<PAGE>
We  have  been  issued  a patent in the United States covering the enablement of
dynamically  configurable  software  systems  by our Evolve software server.  We
also  have  two patent applications pending in the United States with respect to
the "Team Builder" functionality in our Resource Manager module and the time and
expense functionality of our Time and Expense module.  There can be no assurance
that  either  of  these  two applications would survive a legal challenge to its
validity  or  provide  significant  protection  to  us.  Despite  our efforts to
protect our proprietary rights, unauthorized parties may attempt to copy aspects
of  our  products  or  obtain and use information that we regard as proprietary.
Policing  unauthorized use of our products is difficult.  While we are unable to
determine  the  extent to which piracy of our software products exists, software
piracy  can  be  expected  to  be  a persistent problem, particularly in foreign
countries  where  the laws may not protect proprietary rights as fully as in the
United  States.  We  can  offer  no  assurance  that our means of protecting its
proprietary  rights  will  be  adequate or that our competitors will not reverse
engineer  or  independently  develop  similar  technology.

IF  OTHERS  CLAIM  THAT  WE ARE INFRINGING THEIR INTELLECTUAL PROPERTY, WE COULD
INCUR  SIGNIFICANT  EXPENSES  OR  BE  PREVENTED  FROM  SELLING  OUR  PRODUCTS.

We  cannot  provide  assurance that others will not claim that we are infringing
their  intellectual  property  rights  or  that we do not in fact infringe those
intellectual  property  rights.  We  have  not  conducted  a search for existing
intellectual  property  registrations,  and  we  may  be unaware of intellectual
property  rights  of  others  that  may  cover  some  of  our  technology.

Any  litigation  regarding  intellectual  property  rights  could  be costly and
time-consuming and divert the attention of our management and key personnel from
our  business  operations.  The  complexity  of  the technology involved and the
uncertainty of intellectual property litigation increase these risks.  Claims of
intellectual  property  infringement  might also require us to enter into costly
royalty  or  license  agreements.

We  may  not be able to obtain royalty or license agreements on terms acceptable
to  us,  or  at  all.  We  also  may  be  subject  to  significant damages or an
injunction  against  use of our products.  A successful claim of patent or other
intellectual  property  infringement against us would have an immediate material
adverse  effect  on  our  business  and  financial  condition.

WE  CONTINUE  TO  OPERATE  INTERNATIONALLY,  BUT  WE  MAY  ENCOUNTER A NUMBER OF
PROBLEMS  IN  DOING  SO  WHICH  COULD  LIMIT  OUR  FUTURE  GROWTH.

We  may  not  be  able  to  successfully  market,  sell, deliver and support our
products  and  services  internationally.  Any  failure  to  build  and  manage
effective  international  operations  could  limit  the  future  growth  of  our
business.  Expansion  into  international  markets  will  require  significant
management  attention  and  financial resources to open additional international
offices  and  hire  international  sales  and support personnel.  Localizing our
products  is  difficult  and  may  take  longer  than  we  anticipate because of
difficulties  in  translation  and  delays  we  may experience in recruiting and
training international staff.  We are in the process of enhancing local versions
of  our  products,  and  we  have  limited  experience in marketing, selling and
supporting  our  products and services overseas.  Doing business internationally
involves  greater  expense  and  many  additional  risks,  particularly:

     -    differences  and unexpected changes in regulatory requirements, taxes,
          trade  laws,  tariffs,  intellectual  property  rights  and  labor
          regulations;
     -    changes  in  a  specific  country's  or region's political or economic
          conditions;
     -    greater  difficulty  in  establishing,  staffing  and managing foreign
          operations;  and
     -    fluctuating  exchange  rates.

SECURITY  CONCERNS,  PARTICULARLY  RELATED  TO  THE  USE  OF OUR SOFTWARE ON THE
INTERNET, MAY LIMIT THE EFFECTIVENESS OF AND REDUCE THE DEMAND FOR OUR PRODUCTS.

Despite  our  efforts to protect the confidential and proprietary information of
our customers stored on our Evolve ASP solution via virtual private networks and
other  security devices, there is a risk that this information will be disclosed
to  unintended  third-party  recipients.  To the extent our ability to implement
secure  private  networks,  on  our Evolve ASP service, is impaired by technical
problems,  or by improper or incomplete procedural diligence by either ourselves
or  our  customers,  sensitive  information  could  be  exposed to inappropriate
third-parties  such as competitors of our customers, which may in turn expose us
to  liability  and  detrimentally  impact  our  customers' confidence in our ASP
service.


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DIFFICULTIES  WITH  THIRD-PARTY  SERVICES  AND  TECHNOLOGIES,  AS  WELL AS POWER
INTERRUPTIONS,  COULD  DISRUPT  OUR  BUSINESS, AND MANY OF OUR COMMUNICATION AND
HOSTING  SYSTEMS  DO  NOT  HAVE  BACKUP  SYSTEMS.

Many  of  our  communications  and  hosting  systems  do not have backup systems
capable  of mitigating the effect of service disruptions.  This requires that we
provide  continuous  and  error-free  access  to  our  systems  and  network
infrastructure.  We  rely  on  third-parties  to  provide  key components of our
networks  and  systems.  For  instance,  we rely on third-party Internet service
providers  to host applications for our customers who purchased our solutions on
an ASP basis.  We also rely on third-party communications services providers for
the  high-speed  connections that link our Web servers and office systems to the
Internet.  Any  Internet or communications systems failure or interruption could
result in disruption of our service or loss or compromise of customer orders and
data.  These  failures, especially if they are prolonged or repeated, would make
our  services  less  attractive  to  customers  and  tarnish  our  reputation.

RESISTANCE  TO  ONLINE  USE  OF  PERSONAL  INFORMATION  REGARDING  EMPLOYEES AND
CONSULTANTS  MAY  HINDER THE EFFECTIVENESS OF AND REDUCE DEMAND FOR OUR PRODUCTS
AND  SERVICES.

Companies  store  information on our ASP offering and on online networks created
by  our  customers,  which  may include personal information of their employees,
including  employee backgrounds, skills, and other details.  These employees may
object  to online compilation, transmission and storage of such information.  To
the  extent  that European companies and customers will have access to it (given
the  global  nature  of  the  Internet), and to the extent that our services are
utilized  by  Europeans,  legal  action  grounded in European privacy laws could
prevent  our  solution  from  succeeding  in  the  European  market.

RISKS  RELATED  TO  OUR  STOCK

OUR OFFICERS, DIRECTORS AND AFFILIATED ENTITIES HAVE SIGNIFICANT CONTROL OVER US
AND  MAY  APPROVE  OR  REJECT  MATTERS  CONTRARY  TO  YOUR  VOTE  OR  INTERESTS.

As  of  April 30, 2002, our executive officers and directors together with their
affiliates  beneficially  own,  or  have  rights  to  acquire,  an  aggregate of
approximately  67.3%  of  our outstanding capital stock.  These stockholders, if
acting  together,  will be able to significantly influence all matters requiring
approval  by  our  stockholders,  including  the  election  of directors and the
approval  of  mergers  or  similar  transactions,  even  if  other  stockholders
disagree.  In  particular, Warburg Pincus Private Equity VIII, L.P.  ("Warburg")
owns  or  has  the  right  to acquire securities with voting power equivalent to
52.7%  of  our  outstanding capital stock.  Furthermore, certain actions that we
may  wish  to  undertake  require  the  consent  of holders of a majority of our
outstanding  shares  of  Series  A  Preferred Stock, voting as a separate class.
These  actions  include  authorization  and  sale  of certain senior securities,
certain  transactions involving a change of control of Evolve, the incurrence of
significant  indebtedness  and  the payment of dividends.  With respect to these
and  other matters, the interests of the holders of our Series A Preferred Stock
will  not necessarily be identical to those of holders of our common stock.  For
instance, in the event of certain change of control transactions, the holders of
Series  A  Preferred  Stock  are entitled to payment of a liquidation preference
prior  to payment of any consideration to the holders of our common stock.  This
may  cause  the  holders  of  Series A Preferred Stock generally, and Warburg in
particular,  to favor or oppose a merger or sale of the Company or its assets in
circumstances  where  many  holders  of common stock have a contrary desire.  In
such  an  instance,  we  may  not  be able to pursue a transaction even if it is
supported  by  many  or most holders of our common stock.  Alternatively, we may
pursue  a  transaction  that  is not supported by, or may be detrimental to, the
holders  of  our  common  stock.

THE  SALE  OF  A  SUBSTANTIAL  NUMBER  OF SHARES OF COMMON STOCK COULD CAUSE THE
MARKET  PRICE  OF  OUR  COMMON  STOCK  TO  DECLINE.

Sales  of  a  substantial  number  of  shares  of our common stock in the public
market,  or  the  appearance  that  such  shares  are  available for sale, could
adversely affect the market price for our common stock.  The market price of our
stock  could also decline if one or more of our significant stockholders decided
for  any  reason  to sell substantial amounts of our stock in the public market.
As  of April 30, 2002, we had 44,836,414 shares of common stock outstanding.  Of
these  shares,  44,174,546  were  freely  tradable  in the public market, either
without restriction or subject, in some cases, only to S-3 or S-8/S-3 prospectus
delivery  requirements,  and,  in  some  cases,  only  to either manner of sale,
volume,  or notice requirements of Rule 144 under the Securities Act of 1933, as
amended.  An  additional  661,868  shares will become eligible for sale, subject
only  to the manner of sale requirements of Rule 144, as our right to repurchase
these  shares  lapses over time with the continued employment by Evolve of these
stockholders.  As  of  April  30, 2002, we also had 16,533,939 shares subject to
outstanding  options  under  our  stock option plans (plus 15,000 options issued
outside  of  any  plan),  and 3,869,864 shares are available for future issuance
under  these  plans.  We have registered a portion of the shares of common stock
subject  to outstanding options and reserved for issuance under our stock option
plans  and  1,778,793 remaining shares of common stock are reserved for issuance
under  our  2000  Employee  Stock Purchase Plan.  Accordingly, shares underlying
vested  options will be eligible for resale in the public market as soon as they
are  purchased.  We  also  have  1,875,000  shares  of  Series A Preferred Stock
outstanding, which are convertible into a maximum of 41,771,372 shares of common
stock,  inclusive of all known anti-dilutive adjustments.  As of April 30, 2002,


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<PAGE>
we  also had warrants outstanding to purchase a total of 9,379,167 shares of our
common  stock  and  warrants  to  purchase  up  to  575,000  shares  of Series A
Convertible  Preferred  Stock,  which in turn is convertible to up to 12,809,887
shares  of  common  stock, inclusive of all known anti-dilutive adjustments.  If
all the warrants for the Series A Convertible Stock are exercised, an additional
common  stock  warrant  for  up  to 3,202,472 shares of our common stock will be
issued,  inclusive  of  all  known  anti-dilutive  adjustments.

NASDAQ  LISTING  MAY  BE  AT  RISK.

Since  January  2,  2002, we failed to maintain the minimum closing bid price of
$1.00  over  30  consecutive  trading  days  as  required by the Nasdaq National
Market.  In  order  to maintain compliance with the Nasdaq listing requirements,
we may be required to take various measures including raising additional capital
and  effecting  a  reverse split of our common stock.  Certain of such measures,
including  any  reverse  stock split, would require stockholder approval.  If we
are  unable  to  demonstrate  compliance with any Nasdaq requirement, the Nasdaq
staff  may  take  further  action  with  respect to a potential delisting of our
stock.  We  may  appeal  any  such  decision  by  the Nasdaq staff to the Nasdaq
Listing  Qualifications  Panel.

ITEM  3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

The  following  discusses  our  exposure  to  market  risk related to changes in
foreign  currency  exchange  rates,  interest  rates,  and  equity prices.  This
discussion  contains  forward-looking  statements  that are subject to risks and
uncertainties.  Actual  results could vary materially as a result of a number of
factors  including those set forth in the risk factors section of this document.

FOREIGN  CURRENCY  EXCHANGE  RATE  RISK

To  date, all our product sales have been made in North America and to a smaller
extent,  Europe.  To  the  extent  that  our  international  operations  become
meaningful,  our  financial  results  could be affected by a variety of factors,
including changes in foreign currency exchange rates or weak economic conditions
in  foreign  markets.  The  strengthening  of  the  U.S.  dollar  could make our
products less competitive in foreign markets given that sales are currently made
in  U.S.  dollars.

INTEREST  RATE  RISK

At  March  31,  2002,  we  had  cash,  cash  equivalents,  restricted  cash, and
investments  of  $15.1  million.  Included  in  this  balance is $2.9 million in
long-term  restricted  cash.  Declines  in interest rates over time would reduce
our interest income.  Interest rate fluctuations would also affect interest paid
on  our  line-of-credit  and  term  loan  credit  facility.

Funds  in  excess of current operating requirements are invested in money-market
accounts.  Because  of  the  nature  of  our investments, we have concluded that
there  is  no  material  market  risk exposure at March 31, 2002.  Therefore, no
quantitative  tabular  disclosures  are  presented.

The  basic  objectives  of  our  investment  program  are  to  ensure:

     -    safety  and  preservation  of  capital;
     -    sufficient  liquidity  to  meet  cash  flow  requirements;
     -    attainment  of  a  consistent market rate of return on invested funds;
          and
     -    avoiding  inappropriate  concentrations  of  investments.

EQUITY  RISK

We  do  not own any marketable equity securities.  Therefore, we are not subject
to  any  direct  equity  price  risk.


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<PAGE>
PART  II  -  OTHER  INFORMATION

ITEM  1.  LEGAL  PROCEEDINGS

From  time  to  time,  we  may  become involved in litigation relating to claims
arising from the ordinary course of business.  We are defending two claims filed
by  early  customers;  one  an  action  filed  in  the federal district court in
Massachusetts  and  the  other  an  action  filed  in  federal district court in
California.  Both  cases  allege a variety of claims including that the software
and  services  purchased from us did not satisfy certain contractual obligations
and  that  we  engaged  in  practices  that  they  allege  were  unfair  or
misrepresentative.  Both  of  these proceedings are still in the early stages of
litigation;  therefore,  it  is  not  possible  to estimate the outcome of these
contingencies.

In November 2001, a complaint seeking class action status was filed, against us,
in  the United States District Court for the Southern District of New York.  The
complaint  is  purportedly  brought  on  behalf of all persons who purchased our
common stock from August 9, 2000, through December 6, 2000.  The complaint names
as  defendants  some  of our former and current officers, and several investment
banking  firms  that  served  as  managing  underwriters  of  our initial public
offering.  Among  other  claims,  the  complaint  alleges  liability  under  the
Securities  Act  of 1933 and the Securities Exchange Act of 1934, on the grounds
that the registration statement for our initial public offering did not disclose
that:  (1)  the  underwriters  had  allegedly  agreed  to allow certain of their
customers  to  purchase  shares  in  the offering in exchange for alleged excess
commissions  paid  to  the  underwriters; and (2) the underwriters had allegedly
arranged  for  certain  of  their customers to purchase additional shares in the
aftermarket  at  pre-determined  prices under alleged arrangements to manipulate
the  price  of  the  stock  in  aftermarket  trading.  We are aware that similar
allegations have been made in numerous other lawsuits challenging initial public
offerings  conducted  in  1998, 1999 and 2000.  No specific amount of damages is
claimed  in  the  complaint involving our initial public offering.  We intend to
contest  the  claims  vigorously.  We  are  unable,  at  this time, to determine
whether the outcome of the litigation will have a material impact on our results
of  operations  or  financial  condition  in  any  future  period.

We  believe  that  there  are  no  other claims or actions pending or threatened
against  us,  the  ultimate  disposition  of which would have a material adverse
effect  on  us.

ITEM  2.  CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS

SERIES  A  PREFERRED  STOCK  FINANCING

On  March 29, 2002 Warburg Pincus LLC and Sierra Ventures VII, L.P. and/or their
affiliates acquired 550,000 shares of Series A Preferred Stock at a price of $10
per  share,  for  total  proceeds  of $5.5 million via the exercise of preferred
stock  warrants.

ITEM  3.  DEFAULTS  UPON  SENIOR  SECURITIES

None.

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

Not  Applicable.

ITEM  5.  OTHER  INFORMATION

None.

ITEM  6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)  Index  to  Exhibits

EXHIBIT
-------
  NO.
  ---

10.20    Employment  Offer  Letter  for  Robert  Gillette

10.21    Employment  Offer  Letter  for  Linda  Zecher


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<PAGE>
10.22    Employment  Offer  Letter  for  Tim  Cannon

10.23    Employment  Offer  Letter  for  Lisa  Campbell

10.24    Employment  Offer  Letter  for  Dale  Royal

10.25    First Amendment to the Amended and Restated Loan and Security Agreement

(b)  Reports on Form 8-K

No  reports  were  filed on Form 8-K or Form 8K/A during the quarter ended March
31,  2002.

     SIGNATURE

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



Date:  May 14, 2002               /s/          Kenneth J. Bozzini
                                  ----------------------------------------------
                                               Kenneth J. Bozzini
                                  Chief Financial Officer and Vice President of
                                  Finance (Duly Authorized Officer and Principal
                                  Financial and Accounting Officer)


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