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

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

                                   FORM 10-K

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

                   For the fiscal year ended April 30, 2000
                                       OR

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

  For the transition period from           to

                        Commission file number 000-27071

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

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

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

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

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

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

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

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

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

   The aggregate market value of Agile Software Corporation Common stock, $.001
par value, held by non-affiliates as of July 3, 2000 was $1,934,054,082 based
upon the last sales price reported for such date on the Nasdaq National Market
System. For purposes of this disclosure, shares of common stock held by persons
who held more than 5% of the outstanding shares of common stock and shares held
by officers and directors of the registrant, have been excluded in that such
persons may be deemed to be affiliates.


   Number of shares of Common Stock of Agile Software Corporation issued and
outstanding as of July 3, 2000 was 46,544,328

                      DOCUMENTS INCORPORATED BY REFERENCE

   The registrant has incorporated by reference into Part III of this Form 10-K
portions of its proxy statements for the registrant's Annual Meeting of
Stockholders to be held August 30, 2000.

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<PAGE>

                           AGILE SOFTWARE CORPORATION
                                   FORM 10-K
                                 APRIL 30, 2000

                               TABLE OF CONTENTS

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<CAPTION>
                                                                          Page
                                                                          ----

                                     PART I

 <C>      <S>                                                             <C>
 ITEM 1.  BUSINESS......................................................    1
 ITEM 2.  PROPERTIES....................................................   24
 ITEM 3.  LEGAL PROCEEDINGS.............................................   24
 ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........   25
 ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT..........................   25

                                    PART II

 ITEM 5.  MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
           MATTERS......................................................   28
 ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA..........................   29
 ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS....................................   30
 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....   38
 ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA...................   39
 ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
           AND FINANCIAL DISCLOSURE.....................................   59

                                    PART III

 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............   59
 ITEM 11. EXECUTIVE COMPENSATION........................................   59
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT...................................................   59
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................   59

                                    PART IV

 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
           FORM 8-K.....................................................   60
</TABLE>

                                       i
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                                     PART I

ITEM 1. BUSINESS

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


Overview

   We develop and market collaborative manufacturing commerce solutions that
speed the "build" and "buy" process across the virtual manufacturing network.
We believe that our products improve time to volume, customer responsiveness
and cost of goods sold. Our solutions manage product content and critical
communication, collaboration and commerce transactions among original equipment
manufacturers, electronic manufacturing services providers, customers and
suppliers in real-time. Our offerings are well suited for participants
connected in outsourced supply chains, as well as those managing multi-site
engineering, manufacturing, sales and distribution via the Internet. Since June
1996, when we shipped our first product, we have licensed our products to more
than 475 customers in the following markets: computers and peripherals,
components, consumer electronics, data networking and telecommunications
equipment, electronics manufacturing, medical equipment and semiconductor
equipment. Our current customers in these markets include, among others,
Agilent Technologies, Dell Computer, Flextronics International, GE Medical
Systems, Hewlett-Packard, Jabil Circuit, Lucent Technologies, Philips and Texas
Instruments.

Industry Background

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

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

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

 Managing the Outsourced Supply Chain

   A critical aspect of managing the outsourced supply chain across multiple
suppliers is finding effective ways to store, access, and share information
within the company as well as with all supply-chain partners

                                       1
<PAGE>

during each stage of the production process. Procuring direct materials used in
the production process from a multitude of sources across the globe is also a
challenging task. Different stages of the production process generate many
complex types of data that need to be shared across the supply chain. There are
many types of data and a vast number of information flows that can occur in the
production process.

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

   Direct Materials Procurement. Manufacturing companies must eliminate
inefficiency in the procurement process by speeding the communication between
buyers and suppliers, and by performing the tedious aggregation work, such as
compiling and analyzing hundreds of responses to requests for quotations. There
is a need to reduce the average quote turnaround time from weeks to hours.
Companies are also looking at aggregating demand for direct materials across
the enterprise, giving them a powerful tool for negotiating better procurement
contracts. And because requests for quotations can be sent to multiple
suppliers simultaneously, with no more effort than sending to a single
supplier, it fosters a much more competitive pricing environment, helping
companies procure materials at the lowest possible cost.

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

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

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

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

  .changes in the costs or availability of components.

   The communication of information regarding product changes is a dynamic loop
in which members of the supply chain must respond to market-dictated demands
while also reacting to information being shared among supply-chain partners.
Whatever the reason for the change, executing it through the manufacturing
process expeditiously and effectively, while minimizing cost, is a complex
problem. To change a design requires: creating an engineering change order;
developing the specifications required by the engineering change order;
securing the necessary approvals to effect the change; and communicating the
change to the supply chain.

                                       2
<PAGE>

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

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

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

 Impact of the Internet

   The Internet, as a fast growing communications network, is changing the way
businesses communicate and share information and creating new and evolving ways
for conducting commerce. The typical corporate web site is evolving from a mere
repository for information regarding products into a medium for conducting
business. According to Forrester Research, its research indicates that
business-to-business electronic commerce is expected to grow to $1.8 trillion
in 2003, accounting for more than 90% of the dollar value of electronic
commerce in the United States. This market is expected to create substantial
demand for Internet and intranet-based commerce applications. However, we
cannot be certain that this projection will be met.

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

The Agile Solution

   Our collaborative manufacturing commerce solutions consist of product
content management and e-procurement products that enable manufacturers to
collaborate over the Internet with their supply chain

                                       3
<PAGE>

partners about new or changing product content, and then source and procure the
required components. Our solutions are designed for use over the Internet,
reduce dependence upon traditional methods of interaction, and enable supply
chain members to link to each other without requiring substantial investments
in additional technology infrastructure. We have also designed our products to
allow for rapid implementation by the manufacturer with limited consulting
assistance and by supply chain members with minimal technical expertise.

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

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

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

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

   Lower Procurement Costs. The Agile Buyer solution can aggregate demand for
direct materials across the enterprise, giving companies a powerful tool for
negotiating better procurement contracts. And because requests for quotations
can be sent to multiple suppliers simultaneously, with no more effort than
sending to a single supplier, our solutions can foster a much more competitive
pricing environment, helping companies procure materials at the lowest possible
cost.

The Agile Growth Strategy

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

   Provide Superior Customer Satisfaction. We expect to continue to build a
highly referenceable customer base of market leaders in various vertical
markets. We intend to continue to focus significant resources on customer
satisfaction programs. We intend to continue to anticipate customer needs by
introducing new product functionality and new technology platforms. We believe
this focus can help create high levels of customer loyalty, which can provide
follow-on sales opportunities and shorter sales cycles.

   Capitalize on Network Effects to Expand Our Customer Base. As users of Agile
Anywhere and Agile Buyer solutions deploy our software across their supply
chains, additional supply chain members will be exposed to our solutions and
the functionality provided by our products. We believe that this exposure,
which allows non-customer participants in the supply chain to benefit from our
solutions first hand, creates a network

                                       4
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effect that accelerates industry recognition and adoption of our products. As
additional members of a supply chain deploy our solutions, the quality and
timeliness of available information improves, which increases the value to each
participant and helps drive greater usage.

   Pursue a Vertical Market Strategy. Since inception, we have pursued a
vertical market strategy, developing product features tailored for particular
industries. To date, we have focused on the electronics and high technology
markets which encompasses original equipment manufactures, electronic
manufacturing services and component manufacturers, and the medical device
market. We seek to further penetrate our current markets while addressing new
vertical markets characterized by high rates of product change, short product
cycles, and extensive supply chains.

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

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

The Agile Products

Agile Anywhere Product Suite

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

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


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Agile eHub

   The foundation of Agile Anywhere is Agile eHub. The Agile eHub comprises
application servers that enable users to define, store, change and manage
product content information. Agile eHub incorporates new technology for high-
speed performance, storage and secure data, and is designed to scale thus
accommodating the needs of supply chain partners of all sizes. It is also
designed to facilitate fast, direct Internet access, and is easily implemented.
Agile eHub includes one or more of the following server modules:

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

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

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

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

Accessing Agile eHub

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

  .  Agile iCM (Internet Content Manager) is designed for individuals who
     have responsibility for managing a product and its content through its
     entire lifecycle. This functionality is also provided through Agile CM,
     a module designed for Windows-based applications.

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

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

Agile Integration Products

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

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

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

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

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

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

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

Agile EMSdirect

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

Agile Buyer Solution

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

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

   Agile Buyer is a secure Internet-based supplier solution for sourcing and
procurement of direct (production) materials. Agile Buyer encompasses all
direct materials and all members of a supply chain in a single Internet-based
environment, automating preparation and dissemination of requests for
quotation, enabling buying decision support, allowing demand aggregation,
issuing of purchase orders, permitting commodity and contract management, and
managing supplier performance.

Customers

   To date, we have licensed our products to over 475 customers, predominantly
within the electronics and medical device manufacturing industries. No customer
accounted for more than ten percent of our total revenues in fiscal 2000,
fiscal 1999 or fiscal 1998.

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

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

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

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

Product Technology and Architecture

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

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

  .  The iCM and MyAgile applications are Java and HTML-based applications
     that can run on versions of Microsoft Internet Explorer and Netscape
     Navigator. There is also a Windows application for users who prefer a
     Windows user interface rather than a web browser interface. Operating
     systems supported include Windows 95, Windows 98, Windows NT, Windows
     2000 and Sun Solaris. We follow the Microsoft standards for the Windows
     95, 98 and 2000 CM clients, and Internet standards for the Java iCM
     application running within Microsoft Internet Explorer and Netscape
     Communicator. Our products can be integrated with more than 15
     enterprise resource planning systems including, among others, Oracle
     Applications, J.D. Edwards and SAP.

  .  The backend includes the database server, which is either Oracle or
     Microsoft SQL Server and the Agile Internet File Server. We connect with
     Microsoft SQL Server through Open Database Connectivity and Oracle's
     database through direct integration.


                                       8
<PAGE>

   We are certified in Windows Back-Office, Oracle CAI, as a Microsoft Solution
Provider, and from Sun Microsystems Inc. in "100% Pure Java." The Agile
Anywhere suite is enabled for both single-byte and double-byte localization,
and has been localized for French and Japanese. We intend to provide
localization for additional languages.

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

Product Development

   Our product development objectives are to:

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

  .  develop products that require no custom code, contain reusable
     components and are easy to use, implement, maintain, and upgrade; and

  .  adopt industry standard technologies.

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

   We introduced our first product, Agile Configurator version 1.3, in June,
1996 and have subsequently released nine revisions, adding over a dozen new
modules. During this time, the product has evolved from a 2-tiered client-
server database application running on Oracle to a multi-tiered application
supporting both Windows and Java clients, and both Oracle and Microsoft SQL
Server databases. Our product development activities are focused on broadening
the scalability and functionality of Agile Anywhere, enhancing scalability, and
including application interfaces that allow customers to more easily integrate
Agile Anywhere with other systems.

   Our research and development expenses were $9.4 million for fiscal 2000,
$4.7 million for fiscal 1999 and $3.8 million for fiscal 1998, and we expect to
continue to invest significantly in research and development in the future.

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

Sales and Marketing

   Our sales and marketing organization is responsible for identifying and
developing vertical markets as well as identifying and notifying our research
and development staff of customer product requirements. We market

                                       9
<PAGE>

and sell our products primarily through our direct sales force located at our
headquarters in San Jose, California, and at regional and local sales offices
in the United States and at offices in France, Germany, Japan, Taiwan and the
United Kingdom. Our direct sales force consists of Major Account Executives who
focus entirely on our major accounts, Senior Account Executives who focus on
specific geographic territories, and Emerging Technology Manufacturers Account
Executives who focus on emerging and smaller-sized companies. We also market
and sell through our direct telesales and telemarketing representatives. Sales
engineers in regional office provide pre-sales technical support. We intend to
expand our domestic and international direct sales force significantly by
expanding into additional geographic locations. We are also in the early stages
of complementing our direct sales force through additional distribution
channels, including non-exclusive distributors, integrators and consulting
partners.

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

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

Customer Service and Support

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

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

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

                                       10
<PAGE>

Competition

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

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

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

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

  .  the quality of our customer service; and

  .  the effectiveness of our sales and marketing efforts.

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

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

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

  .  developers of general purpose groupware software addressing only limited
     technology components of engineering change management, including
     companies such as Novell, Inc. and Lotus Development Corporation.

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

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

Proprietary Rights

   Our success and ability to compete depend upon our proprietary technology.
We rely on patent, copyright, trade secret and trademark law to protect our
proprietary information. We also typically enter into agreements

                                      11
<PAGE>

with our employees, consultants and customers to control their access to and
distribution of our software, documentation and other proprietary information.
Nevertheless, a third party could copy or otherwise obtain our software or
other proprietary information without authorization, or could develop software
competitive to ours. Our means of protecting our proprietary rights may not be
adequate and our competitors may independently develop similar technology,
duplicate our products or design around patents that may be issued to us or our
other intellectual property. In addition, the laws of some foreign countries do
not protect our proprietary rights to as great an extent as do the laws of the
United States, and we expect that it will become more difficult to monitor the
use of our products if we increase our international presence.


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

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

Acquisitions

   We may make acquisitions of companies, products or products lines from time
to time as determined by management to be appropriate and suitable for our
business and for extending supply chain collaboration and the functionality of
our products. In November 1999 we acquired Digital Market, Inc., a California
corporation, providing Internet-based solutions for the sourcing and
procurement of production materials used by manufacturing companies. This
acquisition is an example of our strategy of extending supply chain
collaboration and the functionality of our products.

Employees

   As of April 30, 2000, we had a total of 289 employees. Of this total, 72
were in engineering, 122 were in sales and marketing, 64 were in professional
services, including technical support and customer training, and 31 were in
finance and administration. We also retain independent contractors to support
activities such as our professional services and product development. Our
success depends on our ability to attract and retain qualified, experienced
employees. None of our employees are represented by a collective bargaining
unit, and we have ever experienced a work stoppage. We consider our relations
with our employees to be good.

Risk Factors

   In addition to other information in this report, the following risk factors
should be carefully considered in evaluating Agile and its business.

                                       12
<PAGE>

Risks Related to Our Operations

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

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

  .  until our acquisition of Digital Market, we have had only one product
     suite, and will need to successfully introduce new products such as
     Agile Buyer, released as a result of our acquisition of Digital Market,
     and enhance existing products to this suite;

  .  we need to successfully market the Agile Buyer product which has only
     been sold to a limited number of customers;

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

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

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

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

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

   We incurred net losses of approximately $35.2 million for fiscal 2000,
$11.4 million for fiscal 1999 and $8.9 million for fiscal 1998. As of April
30, 2000, we had an accumulated deficit of approximately $61.7 million.
Moreover, we expect to continue to incur significant sales and marketing,
research and development and general and administrative expenses. We have
incurred and expect to continue to incur substantial non-cash costs relating
to the amortization of intangible assets and stock compensation which will
contribute to our net losses. We expect to incur losses for the foreseeable
future. We will need to generate significant increases in revenues to achieve
and maintain profitability, and we may not be able to do so. Even if we do
achieve profitability, we may not be able to sustain or increase profitability
on a quarterly or annual basis in the future.

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

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

  .  our success with the Agile Buyer product;

  .  fluctuations in demand for Internet collaborative manufacturing commerce
     software;

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

                                      13
<PAGE>

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

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

  .  changes in our sales force incentives;

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

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

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

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

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

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

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

   License revenues in any quarter can be difficult to forecast because they
depend on orders shipped or installed in that quarter. A high percentage of our
operating expenses are essentially fixed in the short term and we may be unable
to adjust spending to compensate for an unexpected shortfall in our revenues.
In addition, we expect our operating expenses to increase as we expand our
engineering and sales and marketing operations, broaden our customer support
capabilities, develop new distribution channels and strategic alliances, fund
increased levels of research and development and build our operational
infrastructure. As a result, if we experience delays in recognizing revenue, or
if our revenues do not grow faster than the increase in these expenses, we
could experience significant variations in operating results from quarter to
quarter.

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

   In addition, we have accounted for options to purchase common stock granted
to consultants under variable plan accounting. The expense associated with
these options may fluctuate significantly from quarter to quarter through
fiscal 2005 if the price of our stock fluctuates and could cause our operating
results to vary significantly from quarter to quarter. During fiscal 2000 the
expense associated with these options totaled $948,000. Unearned stock
compensation for these options was $6 million at April 30, 2000.

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

                                       14
<PAGE>

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

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

 Our Acquisition of Digital Market, and any Future Acquisitions, May Be
 Difficult to Integrate, Disrupt Our Business, Dilute Stockholder Value or
 Divert Management Attention

   We acquired Digital Market in November 1999. We may encounter risks to our
business during our integration of acquisitions such as Digital Market,
including:

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

  .  unanticipated costs associated with the acquisition;

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

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

  .  inability to retain employees of acquisitions we make.

   As part of our business strategy, we may in the future seek to acquire or
invest in additional businesses, products or technologies that we believe
could complement or expand our business, augment our market coverage, enhance
our technical capabilities or that may otherwise offer growth opportunities.
These future acquisitions could pose risks to our business posed at the time
by our acquisition of Digital Market. In addition, with future acquisitions,
we could use substantial portions of our available cash, including the
proceeds of this offering, as all or a portion of the purchase price. We could
also issue additional securities as consideration for these acquisitions,
which could cause our stockholders to suffer significant dilution. Any future
acquisitions may not generate any additional revenue or provide any benefit to
our business.

 We May Not Achieve Anticipated Additional Revenues or Benefits or Broaden our
 Product Offerings As a Result of Our Acquisition of Digital Market

   With the acquisition of Digital Market, we extended the functionality of
Agile Anywhere with Digital Market's direct materials sourcing, quoting and
ordering applications to introduce the Agile Buyer solution. If we are unable
to successfully market our products with the Agile Buyer product, or create
new or enhanced products combining the functionality provided by both, or
otherwise broaden our product offerings, we may not achieve enhanced sales or
other anticipated benefits from our acquisition of Digital Market. This is
particularly difficult because Digital Market has had limited product sales as
of and subsequent to the date of acquisition. If we fail to achieve further
anticipated benefits from the acquisition, we may incur increased expenses,
experience a shortfall in our anticipated revenues and may not obtain a
satisfactory return on our investment.

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

   Our products must integrate with many existing computer systems and
software programs used by our customers. Integrating with many other computer
systems and software programs can be complex, time consuming and expensive and
cause delays in the deployment of our products. Because we are one of the
first companies to

                                      15
<PAGE>

offer products designed for collaborative manufacturing commerce solutions,
many customers will be facing these integration issues for the first time in
the context of collaborating with supply chain partners. Customers could become
dissatisfied with our products if implementations prove to be difficult, costly
or time-consuming.

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

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

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

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

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

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

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

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

                                       16
<PAGE>

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

   Our strategy requires that our software be highly scalable, or able to
accommodate substantial increases in the number of users concurrently using the
product. To date, however, only a limited number of our customers have deployed
our software to manage the manufacturing process across their entire
organization. While we have performed product testing on the scalability of our
products, these products have not been tested in the context of a customer
implementation. If our customers cannot successfully implement large-scale
deployments, or if they determine that our products cannot accommodate large-
scale deployments, we could experience customer dissatisfaction and find it
more difficult to obtain new customers or to sell additional products to our
existing customers.

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

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

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

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

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

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

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

   Our success depends on our ability to attract and retain qualified,
experienced employees. There is substantial competition for experienced
engineering, sales and marketing personnel in our industry. The

                                       17
<PAGE>

volatility and current market price of our common stock may make it more
difficult for us to recruit, hire and retain qualified personnel, or cause us
to incur higher salary costs. In addition, there is currently a very low
unemployment rate, particularly for technical personnel, in the Silicon Valley
where we are located, increasing our difficulty in hiring and retaining
personnel. If we are unable to retain our existing key personnel, or attract
and retain additional qualified personnel, we may from time to time experience
inadequate levels of staffing to perform services for our customers. As a
result, our growth could be limited due to our lack of capacity to develop and
market our products to our customers, or we could experience deterioration in
service levels or decreased customer satisfaction.

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

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

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

   The market for software products that allow companies to collaborate with
suppliers on product information and change is newly emerging. Companies have
not traditionally automated collaborative manufacturing commerce solutions
like we offer throughout the supply chain. We cannot be certain that this
market will continue to develop and grow or that companies will elect to
utilize our products rather than attempt to develop applications internally or
through other sources. In addition, the use of the Internet, as well as
corporate intranets, has not been widely adopted for sharing product
information as well as for collaboration among supply chain participants.
Companies that have already invested substantial resources in other methods of
sharing product information during the manufacturing and supply process may be
reluctant to adopt a new approach that may replace, limit or compete with
their existing systems or methods. We expect that we will continue to need to
pursue intensive marketing and sales efforts to educate prospective customers
about the uses and benefits of our products. Therefore, demand for and market
acceptance of our products will be subject to a high level of uncertainty.

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

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

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

  .  longer operating histories;

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

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

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

                                      18
<PAGE>

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

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

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

   We expect to add new products to our supply chain applications by
acquisition or internal development and by developing enhancements to our
existing products. We have in the past experienced delays in the planned
release dates of our software products and upgrades, and we have discovered
software defects in new products after their introduction. New products or
upgrades may not be released according to schedule, or may contain defects when
released. Either situation could result in negative publicity, loss of sales,
delay in market acceptance of our products or customer claims against us.

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

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

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


                                       19
<PAGE>

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

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

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

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

  .  need to develop our software in multiple foreign languages;

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

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

  .  political and economic instability, particularly in Asia;

  .  difficulties in enforcing agreements through foreign legal systems; or

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

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

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

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

 Defects in Our Software Products Could Diminish Demand For Our Products

   Our software products are complex and may contain errors, including year
2000 related errors, that may be detected at any point in the life of the
product. We have in the past discovered software errors in certain of our

                                       20
<PAGE>

products and as a result have experienced delays in shipment of products
during the period required to correct these errors. We cannot assure you that,
despite testing by us, our implementation partners and our current and
potential customers, errors will not be found in new products or releases
after shipment, resulting in loss of revenue, delay in market acceptance and
sales, diversion of development resources, injury to our reputation or
increased service and warranty costs.

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

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

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

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

   We have recently experienced a period of rapid growth and expansion that
has placed a significant strain on our management information systems and our
administrative, operational and financial resources. For example, we have
grown from 65 employees at April 30, 1997 to 289 employees at April 30, 2000.
If we are unable to manage our growth and expansion in an efficient or timely
manner, our business will be seriously harmed. In addition, we have recently
hired a significant number of employees and plan to further increase our total
headcount. We also plan to expand the geographic scope of our operations. This
expansion has resulted and will continue to result in substantial demands on
our management resources. To accommodate continued anticipated growth and
expansion, we will be required to:

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

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

  .  enter into relationships with strategic partners.

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

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

   Our success and ability to compete depend upon our proprietary technology,
including our brand and logo and the technology underlying our products. We
rely on patent, trademark, trade secret and copyright laws to protect our
intellectual property. Despite our efforts to protect our intellectual
property, a third party could copy or otherwise obtain our software or other
proprietary information without authorization, or could develop software
competitive to ours. Our means of protecting our proprietary rights may not be
adequate and our competitors may independently develop similar technology,
duplicate our products or design around patents that may be issued to us or
our other intellectual property. In addition, the laws of some foreign
countries do not protect our proprietary rights to as great an extent as do
the laws of the United States, and we expect that it will become more
difficult to monitor the use of our products if we increase our international
presence.


                                      21
<PAGE>

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

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

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

 Year 2000 Compliance Costs and Risks Are Difficult to Assess and Could Result
 in Delay or Loss of Revenue, Diversion of Development Resources, Damage to
 Our Reputation or Increased Service, Warranty or Litigation Costs

   Our products are generally integrated into computer systems involving
sophisticated hardware and complex software products, which may not be year
2000 compliant. The failure of our customers' systems to be year 2000
compliant could impede the success of applications that we have developed for
them. Accordingly, known or unknown defects that affect the operation of our
software, including any defects or errors in applications that include our
products, could result in delay or loss of revenue, diversion of development
resources, damage to our reputation or increased service, warranty or
litigation costs, any of which could harm our business.

   In addition, earlier versions of our products may not be year 2000
compliant, and we do not intend to make them year 2000 compliant. We also need
to ensure year 2000 compliance of our own internal computer and other systems,
to continue testing our software products, and to audit the year 2000
compliance status of our suppliers and business partners. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations, Year
2000 Readiness Disclosure" on page    for a discussion of the status of our
year 2000 readiness.

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

   We will rely on third parties to manage system and network environments
running the Agile Anywhere and Agile Buyer solutions and related solutions for
customers requiring hosting. Services provided by these third parties will
include managing the hosted servers, maintaining communications lines and
managing network data centers, which are the locations where the Agile
solutions reside. Since the hosting of the Agile solutions for certain
customers will depend on these third parties, it is possible that these third
parties may not be able to meet our and our customer's service level
requirements. In the event that we choose to use alternative hosting sources,
this may result in a temporary degradation of the service level for hosting
services that may be unacceptable to our customers.

                                      22
<PAGE>

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

   Provisions of our Delaware certificate of incorporation and bylaws and of
Delaware law could make it more difficult for a third party to acquire us, even
if a change in control would be beneficial to our stockholders. These
provisions also may prevent changes in our management.

Risks Related to the Internet on Our Business and Prospects

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

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

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

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

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

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

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

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

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

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

  .  slow development of enabling technologies and complementary products;
     and

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

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

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

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

                                       23
<PAGE>

Risks Related to Control

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

   Currently executive officers, directors and holders of 5% or more of our
outstanding common stock own, in the aggregate, approximately 36.6% of our
outstanding common stock. These stockholders would be able to significantly
influence all matters requiring approval by our stockholders, including the
election of directors and the approval of significant corporate transactions.
This concentration of ownership may also delay, deter or prevent a change in
our control and may make some transactions more difficult or impossible to
complete without the support of these stockholders.

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

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

  .  variations in our quarterly operating results;

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

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

  .  changes in market valuations of similar companies;

  .  sales of large blocks of our common stock;

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

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

ITEM 2. PROPERTIES

   Our headquarters are currently located in two adjoining leased facilities in
San Jose, California, consisting of approximately 80,000 square feet under
leases expiring in 2004 with expansion and renewal options, of which
approximately 17,000 square feet is currently sublet to a tenant on short-term
sublease. In March 2000, we entered into a lease expiring in 2005 for an
additional approximately 5,000 square feet of office space located
Scotts Valley, California. We also lease offices for sales and service
personnel in eight locations in the United States as well as in Paris, France,
Stuttgart, Germany, London, United Kingdom, Tokyo, Japan and Taipei, Taiwan. We
believe our current facilities will be adequate to meet our needs for the
foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

Facilities Management International Proceedings

   In December 1999, we settled the complaint filed on February 19, 1999
against us by Facilities Management International, a Southern California based
systems integration company, in the Superior Court for the State of California,
County of Orange, alleging interference with prospective economic advantage and
unfair business practices in connection with our quote for services to one of
our customers, for the sum of $21,500.

                                       24
<PAGE>

PolyDyne Proceedings

   PolyDyne originally filed a Bill of Discovery on January 2, 1999, and filed
a formal complaint on July 13, 1999, in the District Court of Travis County,
Texas, which was removed to the United States District Court for the Western
District of Texas on August 13, 1999. In its complaint, PolyDyne alleged that
Digital Market introduced its Digital Buyer software, a product that it alleges
competes with PolyDyne's QuoteWin and SupplyWin software, under circumstances
that it claims constituted trade secrets misappropriation, theft of trade
secrets and conversion. Digital Market responded by denying all allegations,
and defended itself vigorously.

   Related to this lawsuit, Digital Market filed suit on July 26, 1999 in the
Federal District Court for the Northern District of California, alleging that
PolyDyne made false, misleading and deceptive statements about Digital Market,
involving accusations that Digital Market infringed PolyDyne's copyrights and
trade secrets, resulting in commercial disparagement, trade libel, defamation.
Digital Market sought damages and declaratory relief. PolyDyne answered the
pleadings and brought counterclaims alleging theft of trade secrets, conversion
and common law misappropriation.

   We settled all outstanding litigation in April 2000 and both actions were
dismissed with prejudice.

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

   None

ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT

   The executive officers and directors of Agile and their ages as of April 30,
2000 are as follows:

<TABLE>
<CAPTION>
           Name          Age                       Position
           ----          ---                       --------
   <C>                   <C>  <S>
   Bryan D. Stolle......  42  Chairman of the Board, Chief Executive Officer,
                               President and Director

   Thomas P. Shanahan...  54  Executive Vice President, Chief Financial
                               Officer, Secretary and Director

   D. Kenneth Coulter...  55  Senior Vice President, Worldwide Field Operations

   Scott R. Hammond.....  38  Vice President, e-Procurement and e-Services

   Gregory G. Schott....  36  Vice President, Business Development

   Carol B. Schrader....  44  Vice President, Marketing

   Dorothy O. Wise......  39  Vice President, Development and Support

   Klaus-Dieter Laidig..  58  Director

   Michael Moritz.......  45  Director

   James L. Patterson...  62  Director

   Nancy J. Schoendorf..  45  Director
</TABLE>

   Bryan D. Stolle is a co-founder of Agile and has served as our President and
Chief Executive Officer and a member of our board of directors since our
inception in March 1995. From 1987 to 1994, Mr. Stolle served as Director of
Product and Strategic Marketing at Sherpa Corporation, a developer of
enterprise product data management software. From 1983 to 1987, Mr. Stolle
served as Marketing Officer at Rexcom Systems, a software company co-founded by
Mr. Stolle. Mr. Stolle received a B.A. in Business Administration and an M.B.A.
from the University of Texas at Austin.


                                       25
<PAGE>

   Thomas P. Shanahan is a co-founder of Agile and has been a member of our
board of directors since our inception in March 1995. Since November 1997, Mr.
Shanahan has served as Agile's Executive Vice President and Chief Financial
Officer. From 1994 to 1997, Mr. Shanahan served as Vice President and Chief
Financial Officer of Digital Generation Systems, Inc., a provider of digital
distribution systems to the broadcast advertising industry. From 1993 to 1994,
Mr. Shanahan served as Chief Financial Officer of Sherpa Corporation. Mr.
Shanahan received a B.A. in Economics from Stanford University and an M.B.A.
from Harvard University.

   D. Kenneth Coulter has served as Agile's Senior Vice President of Worldwide
Field Operations since August 1999. From 1998 to 1999, Mr. Coulter served as
President, and as Senior Vice President, Worldwide Sales, at TriStrata, Inc., a
provider of network security software. From 1997 to 1998, Mr. Coulter served as
Senior Vice President, Worldwide Sales, at Memco Software, a provider of
network security software. From 1988 to 1997, Mr. Coulter served in various
positions culminating in Executive Vice President, Worldwide Operations, at
Informix Software, a provider of database software.

   Scott R. Hammond has served as Agile's Vice President of e-Procurement and
e-Services since November, 1999, when Agile acquired Digital Market. From 1995
to 1999, Mr. Hammond was founder, President and Chief Executive Officer of
Digital Market. Prior to that date, Mr. Hammond was co-founder and Director of
Sales for EcoSystems Software, a provider of integrated systems management
software tools. Mr. Hammond received a B.S. in Electrical Engineering from the
University of Rochester and an M.B.A. from the Wharton School of Business.

   Gregory G. Schott has served as Agile's Vice President of Business
Development since June 1999. From 1997 to 1999, Mr. Schott served as Vice
President of Marketing at Digital Generation Systems, Inc., a provider of
digital distribution systems to the broadcast advertising industry. From 1996
to 1997, Mr. Schott served as Vice President of Operations, from 1995 to 1996
as Director of Business Development and from 1994 to 1995 as Director of
Operations, all at Digital Generation Systems. From 1991 to 1994, Mr. Schott
served as a management consultant at The Boston Consulting Group. Mr. Schott
received a B.S. in Mechanical Engineering from North Carolina State University
and an M.B.A. from Stanford University.

   Carol B. Schrader has served as Agile's Vice President of Marketing since
October 1997. In 1997, Ms. Schrader served as an independent consultant with
Killarney Group. From 1995 to 1997, Ms. Schrader served as Director, Industry
Development at Documentum, Inc., a provider of web content management
solutions. From 1990 to 1995, Ms. Schrader served as Director, Market
Development at Sherpa Corporation. Ms. Schrader received a B.A. in Business
Management from Clarke College.

   Dorothy O. Wise has served as Agile's Vice President of Development and
Support since March 1996. From 1994 to 1996, Ms. Wise served as Vice President,
Quattro Pro Business Unit, at Novell, Inc., a provider of network services
operating system software. Ms. Wise received a B.S.E. in Electrical Engineering
and Computer Science from Princeton University.

   Klaus-Dieter Laidig has served as a director of Agile since 1998. Mr. Laidig
has served as a management consultant with Laidig Business Consulting GmbH
since 1998. From 1984 to 1997, Mr. Laidig served as General Manager of Hewlett-
Packard GmbH. Mr. Laidig currently serves as a director of Lattitude
Communications, Inc., SAP AG, Henninger Braeu AG and several privately held
companies. Mr. Laidig received an M.B.A. from the Pforzheim University of
Applied Sciences in Germany.

   Michael Moritz has served as a director of Agile since 1996. Mr. Moritz has
been a general partner of Sequoia Capital, a venture capital firm, since 1986.
Mr. Moritz serves as a director of eToys, Inc., Flextronics International Ltd.,
Yahoo! Inc., WebVan Group,Inc., PlanetRx.com and several additional private
companies. Mr. Moritz received an M.A. from Christ Church, Oxford.


                                       26
<PAGE>

   James L. Patterson has served as a director of Agile since 1996. Mr.
Patterson has been an independent consultant since 1989. Mr. Patterson
currently serves as a director of Latitude Communications, Inc., a provider of
integrated voice and data conferencing solutions, and several privately held
companies. Mr. Patterson received a B.S. in Electrical Engineering from the
University of Colorado.

   Nancy J. Schoendorf has served as a director of Agile since 1995. Ms.
Schoendorf has been a general partner of Mohr, Davidow Ventures, a venture
capital firm, since 1994, and a Managing Partner since 1997. Prior to joining
Mohr, Davidow Ventures, Ms. Schoendorf spent 17 years in the computer industry
including management positions with Hewlett-Packard, Software Publishing
Corporation and Sun Microsystems. Ms. Schoendorf currently serves as a director
of Broadbase Software, Inc., onvidia.com, Inc. and several privately held
companies. Ms. Schoendorf received a B.S. in Computer Science from Iowa State
University and an M.B.A. from Santa Clara University.

   There are no family relationships among any of our directors or officers.
All executive officers are appointed by the board of directors on an annual
basis and serve until their successors have been duly appointed and qualified.

                                       27
<PAGE>

                                    PART II

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

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

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

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

   Our present policy is to retain earnings, if any, to finance future growth.
We have never paid cash dividends and have no present intention to pay cash
dividends. At July 3, 2000, there were approximately 950 stockholders of record
and there are a substantially greater number of Agile Software beneficial
owners and the price per share of our common stock was $37.063.

   On August 25, 1999, we completed the initial public offering of our common
stock. The managing underwriters in the offering were Morgan Stanley Dean
Witter, Deutsche Banc Alex Brown, and Hambrecht & Quist. The shares of the
common stock sold in the offering were registered under the Securities Act of
1933, as amended, on a Registration Statement on Form S-1 (No.333-81387). The
Securities and Exchange Commission declared the Registration Statement
effective on August 19, 1999.

   The offering commenced on August 19, 1999 and terminated on August 25, 1999
after we had sold all of the 6,900,000 shares of common stock registered under
the Registration Statement (including 900,000 shares sold in connection with
the exercise of the underwriters' over-allotment option). The initial public
offering price was $10.50 per share for an aggregate initial public offering of
$72.5 million.

   After deducting the underwriting discounts and commissions the net proceeds
to Agile were approximately $67.4 million. The net offering proceeds have been
used for general corporate purposes, to provide working capital, to develop
products and to expand the Company's operations. Funds that have not been used
have been invested in money market funds, certificate of deposits and other
investment grade securities. We also may use a portion of the net proceeds to
acquire or invest in businesses, technologies, products or services.

   On December 17, 1999, Agile and certain selling stockholders completed the
secondary offering of Agile's common stock. The managing underwriters in the
offering were Morgan Stanley Dean Witter, Deutsche Banc Alex Brown and
Hambrecht & Quist. The shares of the common stock sold in the offering were
registered under the Securities Act of 1933, as amended, on a Registration
Statement on Form S-1 (No 333-91243). The Securities and Exchange Commission
declared the Registration Statement effective on December 13, 1999.

   The offering commenced on December 13, 1999 and terminated on December 17,
1999 after Agile sold all of the 3,290,000 shares and the selling shareholders
sold all of 2,000,000 shares registered under the Registration Statement
(including 290,000 shares sold in connection with the exercise of the
underwriters' over-allotment option). The offering price was $87.00 per share
for an aggregate offering of $460.2 million.

   After deducting the underwriting discounts and commissions the net proceeds
to Agile were approximately $272.6 million. The net offering proceeds have been
used for general corporate purposes, to provide working capital, to develop
products and to expand the company's operations. Funds that have not been used
have been invested in money market funds, certificates of deposits, and other
investment grade securities. We also may use a portion of the net proceeds to
acquire or invest in businesses, technologies, products, or services.

   Approximately $2.4 million has been paid for costs and expenses related to
the offerings. None of the costs and expenses related to the offerings were
paid directly or indirectly to any director, officer, general partner of Agile
or their associates, persons owning 10 percent or more of any class of equity
securities of Agile or an affiliate of Agile.

                                       28
<PAGE>

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

   The following selected consolidated financial data should be read in
conjunction with, and are qualified by reference to, our consolidated financial
statements and related notes and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
                                       Fiscal Years Ended April 30,
                                ----------------------------------------------
                                  2000      1999     1998     1997    1996(**)
                                --------  --------  -------  -------  --------
                                  (in thousands, except per share data)
<S>                             <C>       <C>       <C>      <C>      <C>
Consolidated Statement of
 Operations Data:
Revenues:
  License...................... $ 21,463  $ 10,859  $ 6,102  $ 1,143  $    24
  Professional services........    4,787     3,665    1,385      187       14
  Maintenance..................    5,948     2,283      516       22      --
                                --------  --------  -------  -------  -------
    Total revenues.............   32,198    16,807    8,003    1,352       38
                                --------  --------  -------  -------  -------
Cost of revenues:
  License......................    1,451       819      543      113        2
  Professional services........    3,718     3,823    1,347       88        4
  Maintenance..................    2,510     1,343      278       65      --
                                --------  --------  -------  -------  -------
    Total cost of revenues.....    7,679     5,985    2,168      266        6
                                --------  --------  -------  -------  -------
Gross profit...................   24,519    10,822    5,835    1,086       32
                                --------  --------  -------  -------  -------
Operating expenses:
  Sales and marketing..........   26,657    13,495    8,070    2,149      198
  Research and development.....    9,411     4,742    3,788    2,510      852
  General and administrative...    3,411     1,938    1,995    1,333      381
  Amortization of stock
   compensation................   11,845     2,253      856      --       --
  Amortization of intangible
   assets......................   14,911       --       --       --       --
  Acquired in-process
   technology..................    1,300       --       --       --       --
                                --------  --------  -------  -------  -------
    Total operating expenses...   67,535    22,428   14,709    5,992    1,431
                                --------  --------  -------  -------  -------
Loss from operations...........  (43,016)  (11,606)  (8,874)  (4,906)  (1,399)
Interest income (expense),
 net...........................    7,823       178      (68)      70       72
                                --------  --------  -------  -------  -------
Net loss....................... $(35,193) $(11,428) $(8,942) $(4,836) $(1,327)
                                ========  ========  =======  =======  =======
Net loss per share:
Basic and diluted*............. $  (1.14) $  (1.94) $ (2.10) $ (1.86) $ (0.97)
                                ========  ========  =======  =======  =======
Weighted average shares*.......   30,967     5,904    4,258    2,600    1,368
                                ========  ========  =======  =======  =======
<CAPTION>
                                             As of April 30,
                                ----------------------------------------------
                                  2000      1999     1998     1997      1996
                                --------  --------  -------  -------  --------
<S>                             <C>       <C>       <C>      <C>      <C>
Consolidated Balance Sheet
 Data:
Cash, cash equivalents and
 short-term investments........ $299,875  $ 10,003  $ 2,160  $ 3,292  $ 3,829
Working capital (deficit)......  294,251     4,174     (930)   2,617    3,747
Total assets...................  430,801    17,948    7,531    5,366    4,219
Long-term obligations..........    1,015     3,224      782      626      152
Stockholders' equity...........  412,646     3,291      177    3,154    3,867
</TABLE>
--------
 * Reflects the two-for-one stock split effective March 2000.

** Period from March 13, 1995 (inception) to April 30, 1996.

                                       29
<PAGE>

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

   The information in this discussion contains forward-looking statements. Such
statements are based upon current expectations that involve risks and
uncertainties. Any statements contained herein that are not statements of
historical fact may be deemed to be forward-looking statements. Our actual
results and the timing of certain events may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a discrepancy include, but are not limited to, those discussed in "Other
Factors Affecting Operating Results" and "Liquidity and Capital Resources"
below, as well as Risk Factors included in the our Rule 424(b)(4) prospectus
dated December 13, 1999, and Form 10-Q dated March 16, 2000, as filed with the
Securities and Exchange Commission. The following discussion should be read in
conjunction with the Condensed Consolidated Financial Statements and notes
thereto appearing elsewhere in this report.

Overview

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

   Customers who license our software products receive a license for our
application servers, one or more user licenses, and third-party provided
adapters to connect with the customer's other existing enterprise systems. Our
customers generally purchase a limited number of user licenses at the time of
the initial license of the software products and may purchase additional user
licenses as needed. Customers may purchase implementation services from us.
These professional services are generally provided on a fixed-price basis and
are often provided by third-party consulting organizations. We also offer fee-
based training services to our customers. As of April 30, 2000, over 98% of our
customers who licensed our products had purchased maintenance contracts, which
provide unspecified software upgrades, on a when-and-if available basis, and
technical support over a stated term, which is generally a twelve-month period,
and over 95% of our customers had renewed their maintenance contracts. We
cannot assure that we will continue to experience these rates of purchases of
maintenance agreements or renewals.

   We recognize revenue under Statement of Position, or SOP, 97-2, "Software
Revenue Recognition," and SOP 98-9, "Modification of SOP 97-2, Software Revenue
Recognition, with Respect to Certain Transactions". When contracts contain
multiple elements and vendor-specific objective evidence exists for all
undelivered elements, we account for the delivered elements in accordance with
the "Residual Method" prescribed by SOP 98-9. Software licenses sold to new
customers are recognized upon installation and acceptance by the customer.
Software licenses sold to existing customers, or add-on sales, do not include
acceptance provisions and are recognized upon shipment of the software product.
In the event we grant our customers the right to specified upgrades, license
revenue is deferred until delivery of the specified upgrade. If vendor-specific
objective evidence of fair value exists for the specified upgrade, then an
amount equal to this fair value is deferred. If vendor-specific objective
evidence of fair value does not exist, then the entire license fee is deferred
until the delivery of the specified upgrade. License revenues generated from
new customers represented 47% in fiscal 2000, 66% in fiscal 1999 and 79% of
license revenues in fiscal 1998, with the remaining license revenues in each
period attributable to existing customers. Our professional services revenues
consist of implementation services which are recognized upon customer
acceptance and training revenues which are recognized as the services are
performed. Our maintenance revenues are recognized ratably over the contract
period, generally twelve months.

                                       30
<PAGE>

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

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

   On November 23, 1999, we acquired Digital Market, Inc. ("DMI") in a
transaction accounted for as a purchase business combination. We paid $20.0
million in cash and issued 1,202,018 shares of common stock valued at $75.7
million or $62.95 per share based upon the average price of our common stock
two days before, day of and two days after the transaction measurement date. In
addition, we assumed all unvested outstanding stock options granted by DMI. The
estimated fair value of the assumed options was $5.6 million, and was included
as a component of the purchase price. We incurred $3.4 million in acquisition
expenses, including financial advisory and legal fees and other direct
transaction costs, resulting in an adjusted aggregate purchase price of $102.5
million.

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

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

                                       31
<PAGE>

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

   We granted options below market price to purchase 269,144 shares of our
Common Stock to certain DMI employees who have remained our employees after the
acquisition. We recorded additional deferred stock compensation of
approximately $11.7 million associated with these stock option grants, which
will be amortized over their expected term of 18 months.

   In connection with the granting of stock options to our employees (including
the DMI employees who remained our employees after the acquisition) and non-
employee consultants, we have recorded unearned stock compensation totaling
approximately $30.7 million through April 30, 2000, of which $23.8 million
remains to be amortized. This amount is included as a component of
stockholders' equity and is being amortized by charges to operations over the
expected term of the options, consistent with the method described in Financial
Accounting Standards Board, or FASB, Interpretation No. 28. We recognized
amortization of unearned stock compensation of $11.8 million in fiscal 2000 and
$2.3 million in fiscal 1999. The amortization of the remaining unearned stock
compensation at April 30, 2000 will result in additional charges to operations
through fiscal 2005. We calculated the fair value of options to purchase
214,000 shares of our common stock granted to non-employee consultants which
totals $6.0 million as of April 30, 2000 using the Black-Scholes option pricing
model as prescribed by SFAS No. 123 with the following underlying assumptions:
expected volatility of 100%, risk-free interest rate of 6.5% and option terms
of nine years. We are accounting for these options under variable plan
accounting and therefore the expense associated with these options may
fluctuate significantly from quarter to quarter through fiscal 2005. The
amortization of stock compensation is classified as a separate component of
operating expenses in our consolidated statement of operations.

   Although our total revenues have increased from year to year, we have
incurred significant costs to develop our products and to recruit and train
personnel for our engineering, sales, marketing, professional services and
administration departments. As a result, we have incurred significant losses
since inception, and, as of April 30, 2000, had an accumulated deficit of $61.7
million.

   We intend to continue to incur significant sales and marketing, research and
development and general and administrative expenses. For example, we had 289
full-time employees at April 30, 2000, compared to 156 at April 30, 1999, 103
at April 30, 1998 and 65 at April 30, 1997. We will seek to hire additional
employees in the future. We expect to continue to incur operating losses for
the foreseeable future. In order to achieve profitability, we will need to
increase our revenues significantly. Therefore, we cannot assure you that we
will ever attain or maintain profitability. Our expansion will also place
significant demands on our management and operational resources. To manage this
rapid growth and increased demands, we must improve existing and implement new
operational and financial ystems, procedures and controls. We must also hire,
train, manage, retain and motivate qualified personnel. We expect future
expansion to continue to challenge our ability to hire, train, manage, retain
and motivate our employees.

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

                                       32
<PAGE>

Results of Operations

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

<TABLE>
<CAPTION>
                                     Fiscal
                                   Year Ended
                                   April 30,
                                 ------------------
                                 2000   1999   1998
                                 ----   ----   ----
   <S>                           <C>    <C>    <C>
   Revenues:
     License...................    67 %  65 %    76 %
     Professional services.....    15    22      17
     Maintenance...............    18    13       7
                                 ----   ---    ----
       Total revenues..........   100   100     100
                                 ----   ---    ----
   Cost of revenues:
     License...................     5     5       7
     Professional services.....    12    23      17
     Maintenance...............     8     8       3
                                 ----   ---    ----
       Total cost of revenues..    24    36      27
                                 ----   ---    ----
   Gross profit................    76    64      73
                                 ----   ---    ----
   Operating expenses:
     Sales and marketing.......    83    80     101
     Research and development..    29    28      47
     General and
      administrative...........    11    12      25
     Amortization of stock
      compensation.............    37    13      11
     Amortization of intangible
      assets...................    46    --      --
     Acquired in-process
      technology...............     4    --      --
                                 ----   ---    ----
       Total operating
        expenses...............   210   133     184
                                 ----   ---    ----
   Loss from operations........  (134)  (69)   (111)
   Interest income (expense),
    net........................    25     1      (1)
                                 ----   ---    ----
   Net loss....................  (109)% (68)%  (112)%
                                 ====   ===    ====
</TABLE>

Fiscal Years Ended April 30, 2000, 1999 and 1998

 Revenues

   Our total revenues were $32.2 million in fiscal 2000, $16.8 million in
fiscal 1999 and $8.0 million in fiscal 1998, representing increases of $15.4
million, or 92%, in fiscal 2000 compared to fiscal 1999 and $8.8 million, or
110%, in fiscal 1999 compared to fiscal 1998. We had no customer that accounted
for more than 10% of our total revenues in fiscal 2000, fiscal 1999 or fiscal
1998.

   License Revenues. Our license revenues were $21.5 million in fiscal 2000,
$10.9 million in fiscal 1999 and $6.1 million in fiscal 1998, representing
increases of $10.6 million, or 98%, in fiscal 2000 compared to fiscal 1999 and
$4.8 million, or 78%, in fiscal 1999 compared to fiscal 1998. License revenues
as a percentage of total revenues were 67% in fiscal 2000, 65% in fiscal 1999
and 76% in fiscal 1998. The increase in absolute dollars in fiscal 2000
compared to 1999 and in fiscal 1999 compared to fiscal 1998 was due to
increased market acceptance of our suite of products, including new versions of
our products.

   Professional Services Revenues. Our professional services revenues were $4.8
million in fiscal 2000, $3.7 million in fiscal 1999 and $1.4 million in fiscal
1998, representing increases of $1.1 million, or 31%, in fiscal 2000 compared
to fiscal 1999 and $2.3 million, or 165%, in fiscal 1999 compared to fiscal
1998.

                                       33
<PAGE>

Professional services revenues as a percentage of total revenues were 15% in
fiscal 2000, 22% in fiscal 1999 and 17% in fiscal 1998. The increase in
professional services revenues in absolute dollars in fiscal 2000 compared to
fiscal 1999 and in fiscal 1999 compared to fiscal 1998 reflects increased
license revenues and an increased range of services, consisting of additional
data migration and integration services. To date, a portion of our professional
services revenues relates to our invoicing for services provided by third
parties. In the future, we anticipate that an increasing percentage of
professional services will be provided by third parties who will invoice the
customer directly. As a result, we anticipate that professional services
revenues will decline as a percentage of total revenues.

   Maintenance Revenues. Our maintenance revenues were $5.9 million in fiscal
2000, $2.3 million in fiscal 1999 and $516,000 in fiscal 1998, representing
increases of $3.7 million, or 161%, in fiscal 2000 compared to fiscal 1999 and
$1.8 million, or 342%, in fiscal 1999 compared to fiscal 1998. Maintenance
revenues as a percentage of total revenues were 18% in fiscal 2000, 13% in
fiscal 1999 and 7% in fiscal 1998. The increase in maintenance revenues and
maintenance revenues as a percentage of total revenues in fiscal 2000 compared
to fiscal 1999 and in fiscal 1999 compared to fiscal 1998 was due to increased
licenses of our products.

 Cost of Revenues

   Cost of License Revenues. Cost of license revenues were $1.5 million in
fiscal 2000, $819,000 in fiscal 1999 and $543,000 in fiscal 1998, representing
increases of $632,000, or 77%, in fiscal 2000 compared to fiscal 1999 and
$276,000, or 51%, and in fiscal 1999 compared to fiscal 1998. Cost of license
revenues as a percentage of license revenues were 7% in fiscal 2000, 8% in
fiscal 1999 and 9% in fiscal 1998. The increase in the cost of license revenue
in absolute dollars in fiscal 2000 compared to fiscal 1999 and in fiscal 1999
compared to fiscal 1998 reflects increased expenses associated with the sub-
licensing of third-party software used in our products. Cost of license
revenues as a percentage of total license revenues have decreased as add-on
licenses, which have a higher gross margin than initial customer licenses, have
increased as a percentage of total license revenues.

   Cost of Professional Services Revenues. Cost of professional services
revenues were $3.7 million in fiscal 2000, $3.8 million in fiscal 1999 and $1.3
million in fiscal 1998, representing a decrease of $105,000, or 3% in fiscal
2000 compared to 1999 and an increase of $2.5 million, or 184%, in fiscal 1999
compared to 1998. Cost of services revenues as a percentage of services
revenues were 78% in fiscal 2000, 104% in fiscal 1999 and 97% in fiscal 1998.
The decrease in cost as a percentage of professional services revenue in fiscal
2000 compared to fiscal 1999 was due to the decreased amount of professional
services outsourced to third parties. The increase in cost and as a percentage
of professional services revenues in fiscal 1999 compared to fiscal 1998 was
due to an increase in third-party professional services personnel to support
the increased customer base. In certain periods in the past, and potentially in
the future, our cost of professional services revenues exceeded our
professional services revenues, primarily because the actual cost of providing
the services, whether provided internally or through third parties, exceeded
the fixed price payment received from some of our customers. In addition, as we
increase the size of our professional services staff, costs are incurred for
new personnel before they become fully productive.

   Cost of Maintenance Revenues. Cost of maintenance revenues were $2.5 million
for fiscal 2000, $1.3 million for fiscal 1999 and $278,000 for fiscal 1998,
representing increases of $1.2 million, or 87%, in fiscal 2000 compared to
fiscal 1999 and $1.0 million, or 383%, in fiscal 1999 compared to fiscal 1998.
Cost of maintenance revenues as a percentage of maintenance revenues were 42%
in fiscal 2000, 59% in fiscal 1999 and 54% in fiscal 1998. The increase in cost
of maintenance revenues in fiscal 2000 compared to fiscal 1999 and in fiscal
1999 compared to fiscal 1998 was due to hiring and training a support
organization needed in connection with our increased customer base during these
periods. The decrease in cost of maintenance revenues as a percentage of
maintenance revenues in fiscal 2000 compared to fiscal 1999 was due to
economies of scale realized as a result of increased management personnel and
experienced maintenance personnel. The increase in the cost of maintenance
revenues as a percentage of maintenance revenues in fiscal 1999 compared to
fiscal 1998 was due to expansion of the support organization.

                                       34
<PAGE>

 Operating Expenses

   Sales and Marketing. Sales and marketing expenses were $26.7 million in
fiscal 2000, $13.5 million in fiscal 1999 and $8.1 million in fiscal 1998,
representing increases of $13.2 million, or 98%, in fiscal 2000 compared to
1999 and $5.4 million, or 67%, in fiscal 1999 compared to fiscal 1998. Sales
and marketing expenses as a percentage of total revenues were 83% in fiscal
2000, 80% in fiscal 1999 and 101% in fiscal 1998. The increase in sales and
marketing expenses in fiscal 2000 compared to fiscal 1999 and in fiscal 1999
compared to fiscal 1998 reflect significant personnel-related expenses such as
salaries, benefits and commissions, recruiting fees, travel expenses and
related costs of hiring sales management, sales representatives, sales
engineers and marketing personnel. We anticipate that our sales and marketing
expenses will increase in absolute dollars for the foreseeable future as we
expand our domestic and international sales force.

   Research and Development. Research and development expenses were $9.4
million in fiscal 2000, $4.7 million for in fiscal 1999 and $3.8 million in
fiscal 1998, representing increases of $4.7 million, or 98%, in fiscal 2000
compared to fiscal 1999 and $954,000, or 25%, in fiscal 1999 compared to fiscal
1998. Research and development costs as a percentage of total revenues were 29%
in fiscal 2000, 28% in fiscal 1999 and 47% in fiscal 1998. The absolute dollar
increases in research and development expenses in fiscal 2000 compared to
fiscal 1999 and in fiscal 1999 compared to fiscal 1998 were due to the increase
in the number of our software developers, quality assurance personnel and
outside contractors to support our product development, documentation and
testing activities related to the development and release of the latest
versions of our products. We anticipate that research and development expenses
will continue to increase in absolute dollars for the foreseeable future as we
continue to add to our research and development staff.

   General and Administrative. General and administrative expenses were $3.4
million in fiscal 2000, $1.9 million in fiscal 1999 and $2.0 million in fiscal
1998, representing an increase of $1.5 million, or 76%, in fiscal 2000 compared
to 1999 and a decrease of $57,000, or 3%, in fiscal 1999 compared to 1998.
General and administrative expenses as a percentage of total revenues were 11%
in fiscal 2000, 12% in fiscal 1999 and 25% in fiscal 1998. The absolute dollar
increase in costs in fiscal 2000 compared to fiscal 1999 and in fiscal 1999
compared to fiscal 1998 was due to hiring additional finance, executive and
administrative personnel to support the growth of our business during that
period. We expect that general and administrative expenses will increase in
absolute dollars for the foreseeable future as we expand our operations and
incur the normal costs of a public company.

   Amortization of Stock Compensation. During fiscal 2000, fiscal 1999 and
fiscal 1998 we recorded a total of approximately $38.8 million of unearned
stock compensation. We recognized amortization of stock compensation of $11.8
million in fiscal 2000, $2.3 million in fiscal 1999 and $856,000 in fiscal
1998.

   Amortization of Intangible Assets. Of the $102.5 million purchase price for
Digital Market, Inc., $103.8 million was allocated to goodwill and $4.1 million
was allocated to intangible assets, both of which are being amortized over a
period of 3 years. We amortized $14.9 million of goodwill and intangibles in
fiscal 2000.

   Acquired In-process Technology. Of the $102.5 million purchase price for
Digital Market, Inc., $1.3 million was allocated to in-process research and
development, which was expensed in full upon completion of the acquisition in
November 1999. Please see Note 5 in the notes to the consolidated financial
statements for a more detailed discussion of the charge for in-process research
and development.

   Interest and Other Income (Expense), Net. Interest and other income, net was
$7.8 million for fiscal 2000, $178,000 for fiscal 1999 and $(68,000) for fiscal
1998. The increase in fiscal 2000 compared to fiscal 1999 was due primarily to
higher interest income generated from the increase in cash and cash equivalents
and investments as a result of our initial and follow-on public offerings.

   Income Taxes. No provision for income taxes has been recorded since our
inception because we have incurred net losses in all periods. As of April 30,
2000, we had net operating loss carryforwards for federal income tax reporting
purposes of approximately $42.0 million that expire in various amounts
beginning in

                                       35
<PAGE>

fiscal 2011. We also had net operating loss carryforwards for state income tax
reporting purposes of approximately $22.7 million that expire in various
amounts beginning in fiscal 2001. The U.S. tax laws contain provisions that
limit the use in any future period of net operating loss and credit
carryforwards upon the occurrence of certain events, including a significant
change in ownership interests. We had deferred tax assets, including our net
operating loss carryforwards and tax credits of approximately $20.6 million as
of April 30, 2000. A valuation allowance has been recorded for the entire
deferred tax asset as a result of uncertainties regarding the realization of
the asset balance. See note 6 in the notes to consolidated financial
statements.

Liquidity and Capital Resources

   Since our inception, prior to our initial public offering, we raised $26.2
million of equity capital from the sale of preferred stock, net of issuance
costs, which was the primary source of financing for our operations.

   In August 1999, we completed our initial public offering of 6,900,000 shares
of our Common Stock, including the exercise of the underwriters' overallotment
option, at $10.50 per share. Net proceeds to us, before offering expenses, were
$67.4 million, or $9.77 per share. Offering expenses were $1.6 million.
Simultaneous with the closing of the initial public offering, we sold an
aggregate of 1,331,282 shares of our common stock at $9.77 per share in a
private placement to Dell Computer Corporation, Flextronics International Ltd.
and Marshall Industries (now owned by Avnet, Inc.). Net proceeds from sales of
common stock in the private placement were $13.0 million. We used $20.0 million
of the proceeds from our initial public offering to pay the cash portion of the
consideration payable by us in our acquisition of Digital Market.

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

   We have a $5.0 million senior line of credit facility with a bank,
borrowings thereunder bearing interest at 8.5%, which expires on August 31,
2000. At April 30, 2000, no balance was outstanding under this line of credit.
This line of credit is secured by accounts receivable and certain other assets
of ours. Capital lease obligations, including both short-term and long-term
portions, were $1.2 million at April 30, 2000, and are payable through fiscal
2003. Our senior line of credit requires us to maintain certain monthly
financial covenants, including a minimum tangible net worth and a minimum quick
ratio. We were in compliance with all of our financial covenants at April 30,
2000.

   We also have noncancelable operating leases for office space of
approximately $8.2 million at April 30, 2000 which are payable through fiscal
2005.

   As of April 30, 2000, we had cash and cash equivalents and short-term
investments totaling $300.0 million, an increase from $10.0 million of cash and
cash equivalents held as of April 30, 1999. Our working capital at April 30,
2000 was $294.3 million.

   Our operating activities resulted in net cash outflows of $11.4 million for
fiscal 2000, $5.1 million for fiscal 1999 and $6.4 million for fiscal 1998. Net
cash flows used in operating activities for each period reflect increasing net
losses, and to a lesser extent increases in accounts receivable.

   Investing activities used cash of $206.3 million in fiscal 2000, used cash
of $459,000 in fiscal 1999 and provided cash of $2.6 million in fiscal 1998.
Net cash used in investing activities for fiscal 2000 consisted of purchases of
marketable securities, the acquisition of Digital Market, Inc., and to a lesser
extent an equity investment in a privately held company, and purchases of
property and equipment. Purchases of property and equipment in fiscal 2000 were
approximately $5.6 million. These expenditures were primarily for computer
hardware and software and furniture and fixtures. Net cash provided by
investing activities for fiscal 1998

                                       36
<PAGE>

consisted of proceeds from the sale of short-term investments offset by cash
used to acquire property and equipment. We expect that capital expenditures
will continue to increase to the extent we continue to increase our headcount
or expand our operations.

   Financing activities provided cash of $350.4 million in fiscal 2000, $13.4
million in fiscal 1999 and $5.7 million in fiscal 1998. In fiscal 2000, cash
was provided from our initial public offering and follow-on stock offering,
offset by repayments of our debt obligations. In fiscal 1999 and fiscal 1998,
cash was provided from the issuance of preferred stock.

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

  .  enter new markets for our products;

  .  increase research and development spending;

  .  increase our sales and marketing activities; and

  .  enhance our operational and financial systems.

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

Year 2000 Readiness Disclosure

   We have tested our products and believe that they are year 2000 compliant.
We have also inquired of significant vendors of our internal systems as to
their year 2000 readiness, and we have also tested our material internal
systems. We believe that, based on these tests and assurances of our vendors,
we will not incur material costs to resolve year 2000 issues for our products
and internal systems. Furthermore, to date we have not experienced any year
2000 problems and our customers or vendors have not informed us of any material
year 2000 problems. If it comes to our attention that there are any year 2000
problems with our products or that some of our third-party hardware and
software used in our internal systems are not year 2000 compliant, then we will
endeavor to make modifications to our products and internal systems, or
purchase new internal systems, to quickly respond to the problem. The costs
already incurred by us to date related to year 2000 compliance are not
material, and we do not anticipate incurring additional material costs related
to year 2000 compliance.

Recent Accounting Pronouncements

   In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities." This statement establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. In July 1999, the FASB
issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities, Deferral of the Effective Date of FASB Statement 133." SFAS No. 137
deferred the effective date of SFAS No. 133 until the first fiscal quarter of
all fiscal years beginning after June 15, 2000. SFAS No. 133 will be effective
for the Company's fiscal year ending April 30, 2002. The adoption of SFAS No.
133 is not expected to have a material effect on the Company's results of
operations, financial position or cash flows since the Company has not engaged
in hedging activities or invested in derivative instruments.

   In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on the recognition, presentation and
disclosure of revenue

                                       37
<PAGE>

in financial statements of all public registrants. The Company is currently
evaluating the impact of SAB 101 on its financial statements and related
disclosures, but does expect that such impact, if any, will be material. The
accounting and disclosures prescribed by SAB 101 will be effective no later
than the fourth quarter of the fiscal year ended April 30, 2001.

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

ITEM 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

   We develop products in the United States and market our products in North
America, and to a lesser extent in Europe and Asia. As a result, our financial
results could be affected by factors such as changes in foreign currency
exchange rates or weak economic conditions in foreign markets. Because nearly
all of our revenue is currently denominated in U.S. dollars, an increase in the
value of the U.S. dollar relative to foreign currencies could make our products
less competitive in foreign markets. Although we will continue to monitor our
exposure to currency fluctuations, and, where appropriate, may use financial
hedging techniques in the future to minimize the effect of these fluctuations,
we cannot assure you that exchange rate fluctuations will not harm our business
in the future.

Interest Rate Risk

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

Equity Price Risk

   We do not own any significant equity investments. Therefore, we believe we
are not currently exposed to significant equity price risk.

                                       38
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                           AGILE SOFTWARE CORPORATION

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----

<S>                                                                         <C>
Agile Software Corporation

Report of Independent Accountants..........................................  40

Consolidated Balance Sheet.................................................  41

Consolidated Statement of Operations.......................................  42

Consolidated Statement of Stockholders' Equity.............................  43

Consolidated Statement of Cash Flows.......................................  44

Notes to Consolidated Financial Statements.................................  45
</TABLE>

                                       39
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
 of Agile Software Corporation

   In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Agile
Software Corporation and its subsidiaries (the "Company") at April 30, 2000 and
1999, and the results of their operations and their cash flows for each of the
three years in the period ended April 30, 2000, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.

/s/ PricewaterhouseCoopers LLP

San Jose, California
May 24, 2000

                                       40
<PAGE>

                           AGILE SOFTWARE CORPORATION

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

<TABLE>
<CAPTION>
                                                                April 30,
                                                            ------------------
                                                              2000      1999
                                                            --------  --------
                          ASSETS
                          ------

<S>                                                         <C>       <C>
Current assets:
  Cash and cash equivalents................................ $142,721  $ 10,003
  Short-term investments...................................  157,154       --
  Accounts receivable, net of allowance for doubtful
   accounts of $603, and $495, respectively................    6,537     4,980
  Other current assets.....................................    4,979       624
                                                            --------  --------
    Total current assets...................................  311,391    15,607
Long-term investments......................................   19,550       --
Property and equipment, net................................    6,519     1,973
Intangible assets, net.....................................   92,965       --
Other assets...............................................      376       368
                                                            --------  --------
                                                            $430,801  $ 17,948
                                                            ========  ========

<CAPTION>
           LIABILITIES AND STOCKHOLDERS' EQUITY
           ------------------------------------

<S>                                                         <C>       <C>
Current liabilities:
  Accounts payable......................................... $  1,434  $  1,287
  Accrued expenses and other liabilities...................    6,391     3,618
  Deferred revenue.........................................    8,634     5,107
  Current portion of capital lease obligations.............      681       735
  Current portion of notes payable.........................      --        686
                                                            --------  --------
    Total current liabilities..............................   17,140    11,433
Capital lease obligations, noncurrent......................      518       871
Notes payable, noncurrent..................................       39     2,353
Other liabilities..........................................      458       --
                                                            --------  --------
                                                              18,155    14,657
                                                            --------  --------

Commitments and contingencies (Note 9)

Stockholders' equity:
  Convertible Preferred Stock, $.001 par value; 31,176
   shares authorized; no shares and 11,874 shares issued
   and outstanding.........................................      --         12
  Common Stock, $.001 par value; 200,000 shares authorized;
   46,475 and 8,400 shares issued and outstanding..........       46         8
  Additional paid-in capital...............................  500,155    35,499
  Notes receivable from stockholders.......................   (1,461)     (748)
  Unearned stock compensation..............................  (23,838)   (4,947)
  Accumulated other comprehensive loss.....................     (530)      --
  Accumulated deficit......................................  (61,726)  (26,533)
                                                            --------  --------
    Total stockholders' equity.............................  412,646     3,291
                                                            --------  --------
                                                            $430,801  $ 17,948
                                                            ========  ========
</TABLE>

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

                                       41
<PAGE>

                           AGILE SOFTWARE CORPORATION

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

<TABLE>
<CAPTION>
                                                    Fiscal Year Ended April
                                                              30,
                                                   ---------------------------
                                                     2000      1999     1998
                                                   --------  --------  -------
<S>                                                <C>       <C>       <C>
Revenues:
  License......................................... $ 21,463  $ 10,859  $ 6,102
  Professional services...........................    4,787     3,665    1,385
  Maintenance.....................................    5,948     2,283      516
                                                   --------  --------  -------
    Total revenues................................   32,198    16,807    8,003
                                                   --------  --------  -------

Cost of revenues:
  License.........................................    1,451       819      543
  Professional services...........................    3,718     3,823    1,347
  Maintenance.....................................    2,510     1,343      278
                                                   --------  --------  -------
    Total cost of revenues........................    7,679     5,985    2,168
                                                   --------  --------  -------
Gross profit......................................   24,519    10,822    5,835
                                                   --------  --------  -------

Operating expenses:
  Sales and marketing.............................   26,657    13,495    8,070
  Research and development........................    9,411     4,742    3,788
  General and administrative......................    3,411     1,938    1,995
  Amortization of stock compensation..............   11,845     2,253      856
  Amortization of intangible assets...............   14,911       --       --
  Acquired in-process technology..................    1,300       --       --
                                                   --------  --------  -------
    Total operating expenses......................   67,535    22,428   14,709
                                                   --------  --------  -------
Loss from operations..............................  (43,016)  (11,606)  (8,874)
Interest and other income.........................    8,554       447       95
Interest expense..................................     (731)     (269)    (163)
                                                   --------  --------  -------
Net loss.......................................... $(35,193) $(11,428) $(8,942)
                                                   ========  ========  =======
Net loss per share:
  Basic and diluted............................... $  (1.14) $  (1.94) $ (2.10)
                                                   ========  ========  =======
  Weighted average shares.........................   30,967     5,904    4,258
                                                   ========  ========  =======
</TABLE>


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

                                       42
<PAGE>

                          AGILE SOFTWARE CORPORATION

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

<TABLE>
<CAPTION>
                   Convertible
                    Preferred                                   Notes                   Accumulated
                      Stock        Common Stock   Additional  Receivable    Unearned       Other
                  ---------------  --------------  Paid-In       From        Stock     Comprehensive Accumulated
                  Shares   Amount  Shares  Amount  Capital   Stockholders Compensation     Loss        Deficit    Total
                  -------  ------  ------  ------ ---------- ------------ ------------ ------------- ----------- --------
<S>               <C>      <C>     <C>     <C>    <C>        <C>          <C>          <C>           <C>         <C>
Balance at April
30, 1997........    9,096  $   9    5,686   $  6   $  9,342    $   (40)     $    --        $ --       $ (6,163)  $  3,154
Repurchase of
unvested Common
Stock...........      --     --       (96)   --         (18)        15           --          --            --          (3)
Issuance of
Common Stock on
exercise of
options.........      --     --     2,054      2        363       (294)          --          --            --          71
Issuance of
restricted
Common Stock in
exchange for
notes
receivable......      --     --       352    --         106       (106)          --          --            --         --
Repayment of
notes receivable
from
stockholders....      --     --       --     --         --          62           --          --            --          62
Issuance of
Series E
Convertible
Preferred Stock
at $5.00 per
share, net of
issuance costs..    1,000      1      --     --       4,978        --            --          --            --       4,979
Unearned stock
compensation....      --     --       --     --       3,093        --         (3,093)        --            --         --
Amortization of
unearned stock
compensation....      --     --       --     --         --         --            856         --            --         856
Net loss........      --     --       --     --         --         --            --          --         (8,942)    (8,942)
                  -------  -----   ------   ----   --------    -------      --------       -----      --------   --------
Balance at April
30, 1998........   10,096     10    7,996      8     17,864       (363)       (2,237)        --        (15,105)       177
Repurchase of
unvested Common
Stock...........      --     --      (240)   --         (38)        32           --          --            --          (6)
Issuance of
Common Stock on
exercise of
options.........      --     --       630    --         447       (419)          --          --            --          28
Issuance of
restricted
Common Stock in
exchange for
notes
receivable......      --     --        14    --          19        (19)          --          --            --         --
Repayment of
notes receivable
from
stockholders....      --     --       --     --         --          21           --          --            --          21
Issuance of
Series F
Convertible
Preferred Stock
at $6.75 per
share, net of
issuance costs..    1,778      2      --     --      11,970        --            --          --            --      11,972
Issuance of
warrants........      --     --       --     --         274        --            --          --            --         274
Unearned stock
compensation....      --     --       --     --       4,963        --         (4,963)        --            --         --
Amortization of
unearned
compensation....      --     --       --     --         --         --          2,253         --            --       2,253
Net loss........      --     --       --     --         --         --            --          --        (11,428)   (11,428)
                  -------  -----   ------   ----   --------    -------      --------       -----      --------   --------
Balance at April
30, 1999........   11,874     12    8,400      8     35,499       (748)       (4,947)        --        (26,533)     3,291
Repurchase of
unvested Common
Stock...........      --     --       (56)   --         (12)       --            --          --            --         (12)
Issuance of
Common Stock
under Employee
Stock Purchase
Plan............      --     --        87    --         774        --            --          --            --         774
Issuance of
Common Stock on
exercise of
options.........      --     --     1,339      1      2,283     (1,378)          --          --            --         906
Conversion of
Convertible
Preferred to
Common Stock in
initial public
offering........  (11,874)   (12)  23,748     24        (12)       --            --          --            --         --
Issuance of
Common Stock in
public
offerings.......      --     --    11,521     12    351,325        --            --          --            --     351,337
Issuance of
Common Stock for
acquisition of
DMI.............      --     --     1,202      1     79,051        --            --          --            --      79,052
Unrealized loss
on investments..      --     --       --     --         --         --            --         (530)          --        (530)
Repayment of
notes receivable
from
stockholders....      --     --       --     --         --         665           --          --            --         665
Issuance of
Common Stock on
exercise of
warrants........      --     --       234    --         511        --            --          --            --         511
Unearned stock
compensation....      --     --       --     --      30,736        --        (30,736)        --            --         --
Amortization of
unearned stock
compensation....      --     --       --     --         --         --         11,845         --            --      11,845
Net loss........      --     --       --     --         --         --            --          --        (35,193)   (35,193)
                  -------  -----   ------   ----   --------    -------      --------       -----      --------   --------
Balance at April
30, 2000........      --   $ --    46,475   $ 46   $500,155    $(1,461)     $(23,838)      $(530)     $(61,726)  $412,646
                  =======  =====   ======   ====   ========    =======      ========       =====      ========   ========
<CAPTION>
                  Comprehensive
                      Loss
                  -------------
<S>               <C>
Balance at April
30, 1997........    $ (4,836)
                  =============
Repurchase of
unvested Common
Stock...........
Issuance of
Common Stock on
exercise of
options.........
Issuance of
restricted
Common Stock in
exchange for
notes
receivable......
Repayment of
notes receivable
from
stockholders....
Issuance of
Series E
Convertible
Preferred Stock
at $5.00 per
share, net of
issuance costs..
Unearned stock
compensation....
Amortization of
unearned stock
compensation....
Net loss........    $ (8,942)
                  -------------
Balance at April
30, 1998........    $ (8,942)
                  =============
Repurchase of
unvested Common
Stock...........
Issuance of
Common Stock on
exercise of
options.........
Issuance of
restricted
Common Stock in
exchange for
notes
receivable......
Repayment of
notes receivable
from
stockholders....
Issuance of
Series F
Convertible
Preferred Stock
at $6.75 per
share, net of
issuance costs..
Issuance of
warrants........
Unearned stock
compensation....
Amortization of
unearned
compensation....
Net loss........    $(11,428)
                  -------------
Balance at April
30, 1999........    $(11,428)
                  =============
Repurchase of
unvested Common
Stock...........
Issuance of
Common Stock
under Employee
Stock Purchase
Plan............
Issuance of
Common Stock on
exercise of
options.........
Conversion of
Convertible
Preferred to
Common Stock in
initial public
offering........
Issuance of
Common Stock in
public
offerings.......
Issuance of
Common Stock for
acquisition of
DMI.............
Unrealized loss
on investments..    $   (530)
Repayment of
notes receivable
from
stockholders....
Issuance of
Common Stock on
exercise of
warrants........
Unearned stock
compensation....
Amortization of
unearned stock
compensation....
Net loss........     (35,193)
                  -------------
Balance at April
30, 2000........    $(35,723)
                  =============
</TABLE>

                                       43
<PAGE>

                           AGILE SOFTWARE CORPORATION

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                   Fiscal Year Ended April
                                                             30,
                                                  ----------------------------
                                                    2000       1999     1998
                                                  ---------  --------  -------
<S>                                               <C>        <C>       <C>
Cash flows from operating activities:
  Net loss....................................... $ (35,193) $(11,428) $(8,942)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
    Acquired in-process technology...............     1,300       --       --
    Provision for doubtful accounts..............       108       155      277
    Depreciation and amortization................    16,922     1,180      673
    Amortization of stock compensation...........    11,845     2,253      856
    Warrant expense..............................       253        21      --
    Changes in operating assets and liabilities,
     net of acquisition:
      Accounts receivable........................    (1,490)   (1,751)  (2,900)
      Other assets...............................    (4,608)     (446)     (89)
      Accounts payable...........................       140       589      313
      Accrued expenses and other liabilities.....    (4,076)    2,391      912
      Deferred revenue...........................     3,424     1,961    2,485
                                                  ---------  --------  -------
        Net cash used in operating activities....   (11,375)   (5,075)  (6,415)
                                                  ---------  --------  -------
Cash flows from investing activities:
  Purchases of investments.......................  (183,672)      --       --
  Proceeds from sale of investments..............     6,438       --     3,023
  Cash paid in business combination, net.........   (23,462)      --       --
  Acquisition of property and equipment..........    (5,570)     (459)    (420)
                                                  ---------  --------  -------
        Net cash provided by (used in) investing
         activities..............................  (206,266)     (459)   2,603
                                                  ---------  --------  -------
Cash flows from financing activities:
  Proceeds from bank line of credit..............       --      1,900    2,230
  Repayment of bank line of credit...............       --     (2,900)  (1,230)
  Repayment of capital lease obligations.........      (822)     (638)    (382)
  Proceeds from notes payable....................       --      3,000      --
  Repayment of notes payable.....................    (3,000)      --       (24)
  Proceeds from issuance of Common Stock, net of
   repurchases...................................   353,516        22       68
  Repayment of notes receivable from
   stockholders..................................       665        21       62
  Proceeds from issuance of Convertible Preferred
   Stock, net....................................       --     11,972    4,979
                                                  ---------  --------  -------
        Net cash provided by financing
         activities..............................   350,359    13,377    5,703
                                                  ---------  --------  -------
Net increase in cash and cash equivalents........   132,718     7,843    1,891
Cash and cash equivalents at beginning of year...    10,003     2,160      269
                                                  ---------  --------  -------
Cash and cash equivalents at end of year......... $ 142,721  $ 10,003  $ 2,160
                                                  =========  ========  =======
Supplemental disclosure:
  Cash paid during the period for interest....... $     326  $    168  $   138
                                                  =========  ========  =======
Non-cash investing and financing activities:
  Common Stock issued in exchange for notes
   receivable.................................... $   1,378  $    438  $   400
                                                  =========  ========  =======
  Property and equipment acquired under capital
   lease......................................... $     415  $  1,000  $   838
                                                  =========  ========  =======
  Issuance of warrants........................... $      --  $    274  $    --
                                                  =========  ========  =======
</TABLE>

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

                                       44
<PAGE>

                           AGILE SOFTWARE CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company

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

Principles of consolidation and basis of presentation

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

Use of estimates

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

Cash and cash equivalents

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

Investments

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

Concentrations of credit risk

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

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

                                       45
<PAGE>

                          AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Fair value of financial instruments

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

Property and equipment

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

Software development costs

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

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

Intangible assets

   Intangible assets are presented at cost, net of accumulated amortization.
Amortization is computed using the straight line method over the estimated
useful life of the assets, which is generally three years. At each balance
sheet date, the Company assesses the value of recorded intangible assets for
possible impairment based upon a number of factors including turnover of the
acquired workforce and the undiscounted value of expected future operating
cash flows. Since inception, the Company has not recorded any provisions for
possible impairment of intangible assets.

   Amortization expense related to intangibles was $14,911,000, $0 and $0 in
2000, 1999 and 1998, respectively.

Revenue recognition

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

   The Company derives revenues from the license of software products under
software license agreements and from the delivery of professional services and
maintenance services. When contracts contain multiple elements, and vendor
specific objective evidence exists for all undelivered elements, the Company
accounts for the delivered elements in accordance with the "Residual Method"
prescribed by SOP 98-9.

   License revenues are recognized when persuasive evidence of an arrangement
exists, the fee is fixed or determinable, collectibility is probable, and
delivery and customer acceptance, if required under the terms of the contract,
of the software products have occurred. In the event the Company grants its
customers the right to

                                      46
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

specified upgrades, license revenue is deferred until delivery of the specified
upgrade. If vendor-specific objective evidence of fair value exists for the
specified upgrade, then an amount equal to this fair value is deferred. If
vendor-specific objective evidence of fair value does not exist, then the
entire license fee is deferred until the delivery of the specified upgrade.
Allowances for estimated returns are provided upon product delivery. In
instances where vendor obligations remain, revenues are deferred until the
obligation has been satisfied.

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

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

Income taxes

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

Comprehensive income

   Unrealized losses on investments for fiscal 2000 represent the Company's
only component of comprehensive loss, which is excluded from net loss.

Net loss per share

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

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

<TABLE>
<CAPTION>
                                                   Fiscal Year Ended April
                                                             30,
                                                  ---------------------------
                                                    2000      1999     1998
                                                  --------  --------  -------
   <S>                                            <C>       <C>       <C>
   Numerator:
     Net loss.................................... $(35,193) $(11,428) $(8,942)
                                                  ========  ========  =======
   Denominator:
     Weighted average shares.....................   33,007     8,280    6,934
     Weighted average unvested shares of Common
      Stock subject to repurchase................   (2,040)   (2,376)  (2,676)
                                                  --------  --------  -------
     Denominator for basic and diluted
      calculation................................   30,967     5,904    4,258
                                                  ========  ========  =======
   Net loss per share:
     Basic and diluted........................... $  (1.14) $  (1.94) $ (2.10)
                                                  ========  ========  =======
</TABLE>


                                       47
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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

<TABLE>
<CAPTION>
                                                              As of April 30,
                                                            --------------------
                                                             2000   1999   1998
                                                            ------ ------ ------
   <S>                                                      <C>    <C>    <C>
   Series A Preferred Stock................................    --   2,466  2,466
   Series B Preferred Stock................................    --   5,876  5,876
   Series C Preferred Stock................................    --   7,150  7,150
   Series D Preferred Stock................................    --   2,700  2,700
   Series E Preferred Stock................................    --   2,000  2,000
   Series F Preferred Stock................................    --   3,556    --
   Preferred Stock warrants................................     82    316    196
   Unvested Common Stock subject to repurchase.............  1,763  1,928  2,722
   Common Stock options....................................  9,335  2,320  1,054
                                                            ------ ------ ------
                                                            11,180 28,312 24,164
                                                            ====== ====== ======
</TABLE>

Stock compensation

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

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

Foreign currency translation

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

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

Segment information

   The Company identifies its operating segments based on business activities,
management responsibility and geographical location. During each of the three
years in the period ended April 30, 2000, the Company operated in a single
business segment, primarily in the United States. Through April 30, 2000,
foreign operations have not been significant in either revenue or investment in
long-lived assets.

                                       48
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Recent accounting pronouncements

   In June 1998, the FASB issued Statement of Financial Accounting Standards
("SFAS") No. 133, "Accounting for Derivatives and Hedging Activities." This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. In July 1999, the FASB issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities, Deferral of
the Effective Date of FASB Statement No. 133." SFAS No. 137 deferred the
effective date of SFAS No. 133 until the first fiscal quarter of fiscal years
beginning after June 15, 2000. SFAS No. 133 will be effective for the Company's
fiscal year ending April 30, 2002. The adoption of SFAS No. 133 is not expected
to have a material effect on the Company's results of operations, financial
position or cash flows since the Company has not engaged in hedging activities
or invested in derivative instruments.

   In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance for revenue recognition under certain
circumstances. The Company is currently evaluating the impact of SAB 101 on its
financial statements and related disclosures, but does not expect that such
impact, if any, will be material. The accounting and disclosures prescribed by
SAB 101 will be effective no later than the fourth quarter of the fiscal year
ended April 30, 2001.

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

Reclassifications

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

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

   Property and equipment comprise the following:

<TABLE>
<CAPTION>
                                                               As of April 30,
                                                               ----------------
                                                                2000     1999
                                                               -------  -------
   <S>                                                         <C>      <C>
   Computer hardware and software............................. $ 7,753  $ 3,214
   Furniture and equipment....................................   2,100      828
   Leasehold improvements.....................................     792       46
                                                               -------  -------
                                                                10,645    4,088
   Less: Accumulated depreciation and amortization............  (4,126)  (2,115)
                                                               -------  -------
                                                               $ 6,519  $ 1,973
                                                               =======  =======
</TABLE>

                                       49
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Accrued expenses and other liabilities comprise the following:

<TABLE>
<CAPTION>
                                                               As of April 30,
                                                               ----------------
                                                                 2000     1999
                                                               --------  ------
   <S>                                                         <C>       <C>
   Accrued employee costs..................................... $  2,903  $1,770
   Sales taxes payable........................................      158     172
   Accrued professional fees..................................    1,156     400
   Other......................................................    2,174   1,276
                                                               --------  ------
                                                               $  6,391  $3,618
                                                               ========  ======

   Intangible assets comprise the following:

<CAPTION>
                                                               As of April 30,
                                                               ----------------
                                                                 2000     1999
                                                               --------  ------
   <S>                                                         <C>       <C>
   Technology................................................. $  1,850  $  --
   Trademark..................................................      150     --
   Assembled workforce........................................    2,100     --
   Goodwill...................................................  103,776     --
                                                               --------  ------
                                                                107,876     --
   Less: Accumulated amortization.............................  (14,911)    --
                                                               --------  ------
                                                               $ 92,965  $  --
                                                               ========  ======
</TABLE>

NOTE 3--INVESTMENTS:

   At April 30, 2000, the amortized cost and estimated fair value of
investments were as follows (in thousands):

<TABLE>
<CAPTION>
                                                   Amortized   Fair   Unrealized
                                                     Cost     Value     Losses
                                                   --------- -------- ----------
   <S>                                             <C>       <C>      <C>
   Commercial paper............................... $120,441  $120,378   $ (63)
   Corporate debt securities......................   91,230    90,885    (345)
   Government debt securities.....................   58,426    58,354     (72)
   Foreign debt securities........................   17,121    17,071     (50)
   Preferred stock................................    7,000     7,000     --
                                                   --------  --------   -----
                                                   $294,218  $293,688   $(530)
                                                   ========  ========   =====
</TABLE>

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

                                       50
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


NOTE 4--BORROWINGS:

Notes payable

   Notes payable consisted of amounts payable to equipment financing companies
and were collateralized by the underlying assets as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  As of April
                                                                      30,
                                                                  ------------
                                                                  2000   1999
                                                                  ----- ------
   <S>                                                            <C>   <C>
   11.75% note; interest payable monthly; principal payable
    monthly commencing September 1999; repaid in August 1999....  $ --  $1,000
   11.75% note; interest payable monthly; principal payable
    monthly commencing November 1999; repaid in August 1999.....    --   1,000
   11.75% note; interest payable monthly; principal payable
    monthly commencing December 1999; repaid in August 1999.....    --   1,000
   Non-interest bearing note; principal payable upon maturity in
    July 2002...................................................     39     39
                                                                  ----- ------
                                                                     39  3,039
   Less: Current portion........................................    --    (686)
                                                                  ----- ------
   Notes payable, non-current...................................  $  39 $2,353
                                                                  ===== ======
</TABLE>

Bank line-of-credit

   As of April 30, 2000, the Company had a line-of-credit agreement with a bank
that provides for borrowings of up to $5,000,000, including $500,000 available
for the issuance of letters of credit and foreign currency exchange activity.
Borrowings under the line-of-credit agreement bear interest at an annual rate
of 8.5%, subject to adjustment by the bank. Borrowings under the line of credit
are secured by the assets of the Company. As of April 30, 2000, there were no
borrowings outstanding under the line-of-credit. The line-of-credit agreement
expires in August 2000.

NOTE 5--ACQUISITION:

   On November 23, 1999, the Company acquired Digital Market, Inc. ("DMI") in a
transaction accounted for as a purchase business combination. The Company paid
$20.0 million in cash and issued 1,202,018 shares of its Common Stock valued at
$75.7 million or $62.95 per share based upon the average price of the Company's
Common Stock two days before, day of and two days after the transaction
measurement date. In addition, the Company also assumed all unvested
outstanding stock options granted by DMI. The estimated fair value of the
assumed options was $5.6 million, and was included as a component of the
purchase price. The Company incurred $3.4 million in acquisition expenses,
including financial advisory and legal fees and other direct transaction costs
resulting in an adjusted aggregate purchase price of $102.5 million

                                       51
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


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

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

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

Acquired in-process technology

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

Pro forma results (unaudited)

   The following table presents the unaudited pro forma condensed consolidated
results of operations of the Company for the years ended April 30, 2000 and
1999, combined with the results of operations of DMI for the period from April
1, 1999 through the date of its acquisition by the company (November 23, 1999)
and the year ended March 31, 1999. The unaudited pro forma condensed
consolidated results of operations gives effect to this acquisition as if it
had occurred at the beginning of each period (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                                            Year Ended April
                                                                   30,
                                                            ------------------
                                                              2000      1999
                                                            --------  --------
   <S>                                                      <C>       <C>
   Pro forma net revenue................................... $ 32,682  $ 18,293
   Pro forma net loss...................................... $(61,071) $(52,463)
   Pro forma net loss per share............................ $  (1.93) $ (14.77)
   Pro forma shares outstanding............................   31,644     3,553
</TABLE>


                                       52
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   These results are presented for illustrative purposes only and are not
necessarily indicative of the actual operating results or financial position
that would have occurred if the transaction had been consummated at the
beginning of each period.

NOTE 6--INCOME TAXES:

   The Company's operating losses are generated domestically, and amounts
attributable to its foreign operations have been insignificant for all periods
presented. For each of the three years in the period ended April 30, 2000, the
Company incurred net operating losses and accordingly no provision for income
taxes has been recorded. In addition, no benefit for income taxes has been
recorded due to the uncertainty of the realization of any tax assets. At April
30, 2000, the Company had approximately $42.0 million of federal and $22.7
million of state net operating loss carryforwards available to offset future
taxable income which expire in varying amounts beginning in 2011 and 2001,
respectively. These amounts include $11.7 million of federal and $8.4 million
of state net operating loss carryforwards from the acquisition of DMI. The
Company's utilization of these net operating loss carryforwards will be subject
to annual limitations. Under the Tax Reform Act of 1986, the amounts of and
benefits from net operating loss carryforwards may be impaired or limited in
certain circumstances. Events which cause limitations in the amounts of net
operating losses that the Company may utilize in any one year include, but are
not limited to, a cumulative ownership change of more than 50%, as defined,
over a three year period.

   Deferred taxes comprised the following (in thousands):

<TABLE>
<CAPTION>
                                                              As of April 30,
                                                              -----------------
                                                                2000     1999
                                                              --------  -------
   <S>                                                        <C>       <C>
   Deferred tax assets:
     Depreciation............................................ $    692  $    67
     Other accruals and liabilities..........................    1,717      398
     Net operating loss and credit carryforwards.............   18,188    8,197
                                                              --------  -------
     Total deferred tax assets...............................   20,597    8,662
     Less: Valuation allowance...............................  (20,597)  (8,662)
                                                              --------  -------
   Net deferred tax assets................................... $    --   $   --
                                                              ========  =======
</TABLE>

   For financial reporting purposes, the Company has incurred a loss in each
period since its inception. Based on the available objective evidence,
including the Company's history of losses, management believes it is more
likely than not that the net deferred tax assets will not be fully realizable.
Accordingly, the Company provided for a full valuation allowance against its
net deferred tax assets at April 30, 2000 and 1999.

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

<TABLE>
<CAPTION>
                                                             Fiscal Year
                                                             Ended April
                                                                 30,
                                                            ------------------
                                                            2000   1999   1998
                                                            ----   ----   ----
   <S>                                                      <C>    <C>    <C>
   Federal statutory rate.................................. (35)%  (35)%  (35)%
   State tax, net of federal impact........................  (2)    (6)    (6)
   Acquisition and related amortization....................   2     --     --
   Nondeductible stock compensation........................   6     --     --
   Tax credit carryforwards generated......................  (5)    --     --
   Change in valuation allowance on deferred tax assets....  34     41     41
                                                            ---    ---    ---
                                                             -- %   -- %   -- %
                                                            ===    ===    ===
</TABLE>


                                       53
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 7--STOCKHOLDERS' EQUITY:

   In June 1999, the Company's Board of Directors authorized the
reincorporation of the Company in the State of Delaware. As a result of the
reincorporation, the Company is authorized to issue 200,000,000 shares of $.001
par value Common Stock and 31,175,556 shares of $.001 par value Preferred
Stock. The Board of Directors has the authority to issue the undesignated
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof. All share and per share amounts as of and
for each period presented have been adjusted to reflect the reincorporation.

Initial public offering and concurrent private placement of common stock

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

Follow-on stock offering

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

Stock split

   In February 2000, the Company's Board of Directors authorized a Common Stock
split on a two-for-one basis. All information presented in these financial
statements has been retroactively adjusted to reflect the stock split.

Restricted stock

   The Company has granted stock to certain founders and granted stock to
certain employees under a restricted stock plan. This plan was terminated in
June 1999. Through June 1999, the Company had sold 4,496,550 shares of Common
Stock to such founders and employees that were subject to certain repurchase
rights by the Company. The Company has a right of first offer in connection
with any proposed sale or transfer of these shares and has the right to
repurchase these shares at the original issue price. The Company's right to
repurchase such shares declines on a percentage basis, usually over four years,
based on the length of the employees' continual employment with the Company. At
April 30, 2000, no shares of founders restricted stock and 318,248 shares
granted under the Company's restricted stock plan were subject to repurchase at
a weighted average price of $0.34 per share.

   Certain of these and other shares were issued in exchange for notes
receivable, which are full recourse and additionally collateralized by the
underlying shares of Common Stock. These notes receivable are payable on
various dates through March 2004 and bear interest at rates ranging from 4.52%
to 7.34%. These notes receivable have been included as a component of
stockholders' equity.

NOTE 8--EMPLOYEE BENEFIT PLANS:

401(k) plan

   Employees of the Company may elect to participate in the Company's 401(k)
plan. The Company has not made any contributions to the 401(k) plan.

                                       54
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Employee stock purchase plan

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

   During fiscal 2000, 86,716 shares were issued under the Purchase Plan at an
average price of $8.90 per share.

 1995 Stock option plan

   In May 1995, the Company adopted the 1995 Stock Option Plan (the "1995
Plan") which, as amended, provides for the issuance of incentive and
nonqualified stock options to employees, directors and consultants of the
Company. Under the 1995 Plan, 10,750,000 shares have been authorized for
issuance as of April 30, 2000. This reserve will be automatically increased on
the first day of each fiscal year beginning on and after May 1, 2001 by the
lesser of 1,000,000 shares per year, 5% of the number of shares of the
Company's Common Stock which were issued and outstanding on the last day of the
preceding fiscal year or a number of shares determined by the Company's board
of directors. Options granted under the 1995 Plan are for periods not to exceed
ten years and options must be issued at prices not less than 100% and 85%, for
incentive and nonqualified stock options, respectively, of the estimated fair
value of the stock on the date of grant as determined by the Board of
Directors. Options granted to shareholders who owns greater than 10% of the
outstanding stock are for periods not to exceed five years, and must be issued
at prices not less than 110% of the estimated fair value of the stock on the
date of grant. Options are exercisable upon grant and generally vest 25% or 20%
at the end of the first year and at a rate of 1/36 or 1/48 per month thereafter
such that they vest over four or five years, respectively.

 2000 Nonstatutory stock option plan

   In February 2000, the Company adopted the 2000 Nonstatutory Stock Option
Plan (the "2000 Plan") which provides for the issuance of nonqualified stock
options to employees and consultants of the Company. Under the 2000 Plan,
6,000,000 shares have been authorized for issuance. Options granted under the
2000 Plan must be issued at prices not less than 85% of the estimated fair
value of the stock on the date of grant as determined by the Board of
Directors, or a committee designated by the Board. The Company's Board of
Directors, or a committee designated Board, determines the vesting schedule and
term of each grant.

                                       55
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


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

<TABLE>
<CAPTION>
                                           Shares
                                          Available   Number    Weighted Average
                                          for Grant Outstanding  Exercise Price
                                          --------- ----------- ----------------
   <S>                                    <C>       <C>         <C>
   Balance at April 30, 1997.............     114      1,464         $ 0.13
     Options authorized..................   1,600        --             --
     Options granted.....................  (1,714)     1,714           0.31
     Options exercised...................     --      (2,054)          0.15
     Options canceled....................      70        (70)          0.28
     Unvested shares repurchased.........      86        --             --
                                           ------     ------
   Balance at April 30, 1998.............     156      1,054           0.42
     Options authorized..................   2,000        --             --
     Options granted.....................  (1,956)     1,956           1.28
     Options exercised...................     --        (630)          0.71
     Options canceled....................      60        (60)          0.85
     Unvested shares repurchased.........     230        --             --
                                           ------     ------
   Balance at April 30, 1999.............     490      2,320           1.06
     Options authorized..................  10,000        --             --
     Options granted.....................  (8,864)     8,864          24.86
     Options exercised...................     --      (1,339)          1.70
     Options canceled....................     510       (510)         12.18
     Unvested shares repurchased.........      56        --             --
                                           ------     ------
   Balance at April 30, 2000.............   2,192      9,335         $22.95
                                           ======     ======
</TABLE>

   At April 30, 2000, 1,763,000 outstanding shares of Common Stock purchased
under the stock option plans were subject to repurchase. Upon termination of
employment, unvested shares previously purchased under the plans are subject to
repurchase by the Company at a price equal to the exercise price.

   The following table summarizes the information about stock options
outstanding and exercisable as of April 30, 2000 (shares in thousands):

<TABLE>
<CAPTION>
                                                         Options Vested
                           Options Outstanding          and Exercisable
                     -------------------------------- --------------------
                                  Weighted
                                   Average
                                  Remaining  Weighted             Weighted
                                 Contractual Average              Average
       Range of        Number       Life     Exercise   Number    Exercise
   Exercise Prices   Outstanding   (Years)    Price   Outstanding  Price
   ---------------   ----------- ----------- -------- ----------- --------
   <S>               <C>         <C>         <C>      <C>         <C>
   $0.075 - $ 0.225        37       6.67      $ 0.14       24      $ 0.11
     0.25 -   0.625       108       7.51        0.43       41        0.39
     1.45 -    2.50       329       8.12        1.02       49        0.94
     2.65 -    3.00       669       8.74        1.42      115        1.42
     2.50 -    5.00     1,991       9.20        4.14      116        4.98
     9.50 -   15.52       383       9.59       11.81      --          --
    20.69 -   77.75     5,779       9.78       33.64       54       24.83
    78.50 -  100.50        39       9.70       94.69        1       78.50
                        -----                             ---
   $0.075 - $100.50     9,335       9.47      $22.73      400      $ 5.47
                        =====                             ===
</TABLE>


                                       56
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

 Fair value disclosures

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

<TABLE>
<CAPTION>
                                                             Fiscal Year Ended
                                                                 April 30,
                                                             ------------------
                                                              2000  1999  1998
                                                             ------ ----- -----
   <S>                                                       <C>    <C>   <C>
   Dividend yield...........................................   --    --    --
   Expected volatility......................................   100%  --    --
   Average risk-free interest rate..........................   6.5%  5.7%  6.0%
   Expected life (in years).................................   5      5     5
   Weighted average fair value of options granted........... $22.16 $0.64 $0.17
</TABLE>

   The minimum value method was used in fiscal 1999 and 1998.

   Had compensation cost for options granted under the Plan been determined
based on the fair value at the grant dates for the awards under a method
prescribed by SFAS No. 123, the Company's net loss would have been increased to
the pro forma amounts below for the fiscal years ended April 30, 2000, 1999 and
1998, respectively (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                    Fiscal Year Ended April
                                                              30,
                                                   ---------------------------
                                                     2000      1999     1998
                                                   --------  --------  -------
   <S>                                             <C>       <C>       <C>
   Net loss as reported........................... $(35,193) $(11,428) $(8,942)
   Pro forma net loss............................. $(50,881) $(11,529) $(8,973)
   Net loss per share as reported................. $  (1.14) $  (1.94) $ (2.10)
   Pro forma net loss per share................... $  (1.64) $  (1.95) $ (2.11)
</TABLE>


   Because the determination of the fair value of all options granted after the
Company became a public entity includes an expected volatility factor and
because additional option grants are expected to be made each year, the
compensation expense for options granted during each of the three years in the
period ended April 30, 2000 are not representative of the pro forma effects of
options grants on reported net income (loss) for future years.

 Unearned stock compensation

   In connection with certain stock option grants during the fiscal years ended
April 30, 2000, 1999 and 1998, the Company recorded unearned stock compensation
cost totaling $30,736,000, $4,963,000 and $3,093,000, respectively, which is
being amortized over the vesting period of the related options of five years
using the multiple option approach. Amortization of unearned stock compensation
totaled $11,845,000, $2,253,000 and $856,000 for the years ended April 30,
2000, 1999 and 1998, respectively.

NOTE 9--COMMITMENTS AND CONTINGENCIES:

   The Company has entered into noncancelable operating leases for office space
and capital leases for equipment with original terms ranging from 12 to 60
months. The terms of certain operating leases provide for rental payments on a
graduated scale. The Company recognizes expense on a straight-line basis

                                       57
<PAGE>

                           AGILE SOFTWARE CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

over the lease period and has accrued for rent expense incurred but not paid.
The future minimum lease payments under these leases at April 30, 2000 are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                 Operating Leases
                                           ----------------------------
                                            Future           Net Future
                                           Minimum    Less    Minimum
                                            Lease   Sublease   Lease    Capital
   Fiscal Year Ending April 30,            Payments  Income   Payments  Leases
   ----------------------------            -------- -------- ---------- -------
   <S>                                     <C>      <C>      <C>        <C>
   2001..................................   $2,616    $264     $2,352   $  758
   2002..................................    1,732     264      1,468      441
   2003..................................    1,342     220      1,122      107
   2004..................................    1,335     --       1,335      --
   2005..................................    1,152     --       1,152      --
                                            ------    ----     ------   ------
   Total minimum lease payments..........   $8,177    $748     $7,429    1,306
                                            ======    ====     ======
   Less: Amount representing interest....                                 (107)
                                                                        ------
   Present value of capital lease obliga-
    tions................................                                1,199
   Less: Current portion.................                                 (681)
                                                                        ------
   Capital lease obligations,
    noncurrent...........................                               $  518
                                                                        ======
</TABLE>

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

<TABLE>
<CAPTION>
                                                               As of April 30,
                                                               ----------------
                                                                2000     1999
                                                               -------  -------
   <S>                                                         <C>      <C>
   Computer hardware and software............................. $ 2,702  $ 2,338
   Furniture and equipment....................................     520      470
                                                               -------  -------
                                                                 3,222    2,808
   Less: Accumulated depreciation.............................  (2,466)  (1,558)
                                                               -------  -------
                                                               $   756  $ 1,250
                                                               =======  =======
</TABLE>


   Rent expense under noncancelable operating leases was approximately
$1,261,000, net of sublease rental income of $184,000, for the year ended April
30, 2000, $568,000, net of sublease rental income of $208,000, for the year
ended April 30, 1999 and $396,000 for the year ended April 30, 1998.

 Litigation

   The Company was involved in litigation with Facilities Management
International. The complaint against the Company alleged interference with
prospective economic advantage and unfair business practices in connection with
the Company's quote for services to a customer. The Company settled this matter
in December 1999 by paying an insignificant amount.

   In connection with the acquisition of DMI, the Company became the successor
in litigation with Polydyne Development Corporation ("Polydyne"). The compliant
against DMI alleged causes of action for theft of trade secrets, conversion and
other claims for relief. DMI had a separate complaint against Polydyne for
alleged violations of The Lanham Act, declaratory relief, commercial
disparagement, trade libel, defamation, interference with prospective business
relations, unfair competition and other claims for relief. In April 2000 the
Company and Polydyne entered into a settlement agreement whereby both
complaints were dismissed.

                                       58
<PAGE>

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

   None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

   See the information set forth in the section entitled "Proposal No. 1--
Election of Directors" in Agile's Proxy Statement for the 2000 Annual Meeting
of Stockholders to be filed with the Securities and Exchange Commission within
120 days after the end of Agile's fiscal year ended April 20, 2000 (the "2000
Proxy Statement"), which is incorporated herein by reference, and the
information set forth in the section entitled "Executive Officers of the
Registrant" in Part I, Item 4A of this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

   See the information set forth in the section entitled "Executive
Compensation and Related Information" in the 2000 Proxy Statement, which is
incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   See the information set forth in the section entitled "Stock Ownership of
Certain Beneficial Owners and Management" in the 2000 Proxy Statement, which is
incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS

   See the information set forth in the section entitled "Certain Relationships
and Related Transactions" in the 2000 Proxy Statement, which is incorporated
herein by reference.

                                       59
<PAGE>

                                    PART IV

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

   (a) 1. Financial Statements

       See Item 8 of this Form 10-K.

       2. Financial Statement Schedules

       None

       3. Exhibits

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

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

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

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

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

  3.3    Bylaws of Agile Software Corporation.(1)

  4.1    Specimen Common Stock Certificate.(1)

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

 10.2    1999 Employee Stock Purchase Plan.(1)

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

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

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

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

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

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

 10.9    Series A Preferred Stock Purchase Agreement.(1)

 10.10   Series B Preferred Stock Purchase Agreement.(1)

 10.11   Series C Preferred Stock Purchase Agreement.(1)

 10.12   Series D Preferred Stock Purchase Agreement.(1)

 10.13   Series E Preferred Stock Purchase Agreement.(1)

 10.14   Series F Preferred Stock Purchase Agreement.(1)

</TABLE>


                                       60
<PAGE>

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

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

 10.17   2000 Nonstatutory Stock Option Plan.(5)

 21.1    Subsidiaries of Agile Software Corporation.

 23.1    Consent of PricewaterhouseCoopers LLP, Independent Accountants.

 24.1    Power of Attorney (included on page 62).

 27.1    Financial Data Schedule (EDGAR filed version only).
</TABLE>
--------
(1)  Incorporated by reference to Agile's Registration Statement on Form S-1
     (File No. 333-81387), declared effective on August 19, 1999.

(2)   Incorporated by reference to Agile's Quarterly Report on Form 10-Q (file
     No. 000-27071), filed on July 14, 1999.
(3)  Incorporated by reference to Agile's current report on Form 8-K (file No.
     000-27071), filed on December 8, 1999.

(4)  Incorporated by reference to Agile's Registration Statement on Form S-1
     (File No. 333-91243), declared effective on December 13, 1999.

(5)  Incorporated by reference to Agile's Registration Statement on Form S-8
     (file No. 333-35416), filed on April 21, 2000.

   (b) Reports On Form 8-K

   No reports on Form 8-K were filed during the last period covered by this
Report.

   (c) Exhibits

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

   (d) Financial Statement Schedules

   See Item 8, above.

                                       61
<PAGE>

                                   SIGNATURES

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

                                          AGILE SOFTWARE CORPORATION

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

                                          Date: July 21, 2000

                               POWER OF ATTORNEY

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

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

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

<S>                                <C>                               <C>
     /s/ Bryan D. Stolle           Chairman of the Board, Chief           July 21, 2000
_________________________________   Executive Officer, President
         Bryan D. Stolle            and Director (Principal
                                    Executive Officer)

    /s/ Thomas P. Shanahan         Executive Vice President, Chief        July 21, 2000
_________________________________   Financial Officer, Secretary
       Thomas P. Shanahan           and Director (Principal
                                    Financial and Accounting
                                    Officer)

   /s/ Klaus-Dieter Laidig         Director                               July 21, 2000
_________________________________
       Klaus-Dieter Laidig

      /s/ Michael Moritz           Director                               July 21, 2000
_________________________________
         Michael Moritz

    /s/ James L. Patterson         Director                               July 21, 2000
_________________________________
       James L. Patterson

   /s/ Nancy J. Schoendorf         Director                               July 21, 2000
_________________________________
       Nancy J. Schoendorf
</TABLE>


                                       62