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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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

                                   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 DECEMBER 31, 1999

                                       OR

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

                         COMMISSION FILE NUMBER 0-26881

                                E.PIPHANY, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                            <C>
                   DELAWARE                                      77-0443392
       (STATE OR OTHER JURISDICTION OF            (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
        INCORPORATION OR ORGANIZATION)

          1900 SOUTH NORFOLK STREET                                94403
            SAN MATEO, CALIFORNIA                                (ZIP CODE)
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (650) 356-3800

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                        COMMON STOCK, $0.0001 PAR VALUE
                                (TITLE OF CLASS)

     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, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]

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

     The approximate aggregate market value of the registrant's Common Stock
held by nonaffiliates on February 29, 2000 was $5,112,000,000. This amount
excludes shares held by directors, executive officers, and holders of 5% or more
of the outstanding Common Stock since such persons may be deemed to be
affiliates of the registrant. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

     The number of common shares outstanding as of February 29, 2000 was
32,309,194.

                      DOCUMENTS INCORPORATED BY REFERENCE:

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<CAPTION>
                                                            FORM 10-K REFERENCE
                                                            -------------------
<S>                                            <C>
(1) Proxy Statement for Stockholder Meeting                       Part III
    scheduled for May 31, 2000
</TABLE>

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                                     PART I

     The information in this Annual Report on Form 10-K that are not historical
are 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, including statements regarding our expectations,
beliefs, intentions or strategies regarding the future. Forward-looking
statements include statements regarding the extent and timing of future revenues
and expenses and customer demand, statements regarding the deployment of our
products, and statements regarding our reliance on third parties. All
forward-looking statements included in this document are based on information
available to us as of the date hereof, and we assume no obligation to update any
such forward-looking statement. Our actual results could differ materially from
those in such forward-looking statements. Factors that might cause or contribute
to such a discrepancy include, but are not limited to, those discussed under the
heading "Risk Factors" in Item 1 below and the risks discussed in our other
Securities Exchange Commission filings, including our Registration Statement on
Form S-1 declared effective on January 20, 2000 by the SEC.

ITEM 1. BUSINESS

OVERVIEW

     We develop and market software that helps companies establish, maintain and
continually improve customer relationships across both Internet and traditional
sales, marketing and distribution channels. Our E.piphany E.4 System is an
integrated family of software solutions that companies can deploy to collect and
analyze data from their existing software systems, and from third party data
providers, to profile their customers' characteristics and preferences. Business
users within these companies can then act on this information by using the
E.piphany E.4 System to design and execute marketing campaigns as well as
personalize products, services and related interactions. We have recently
extended our product offerings to enable companies to make marketing offers in
real time during interactions initiated by customers. Companies can implement
the E.piphany E.4 System to collect and analyze data from their existing
software systems and from third party data providers to profile their customers'
characteristics and preferences. By using our software to address the unique
characteristics and preferences of each customer, we believe companies are able
to improve the longevity and profitability of their customer relationships.

RECENT EVENTS

     On January 4, 2000, we acquired RightPoint in a merger transaction.
RightPoint develops and markets real-time marketing software. RightPoint's
software solutions enable companies to optimize and present marketing offers,
promotions, and communications while a customer is interacting with a web site,
call center agent or other point of customer interaction. RightPoint's real-time
marketing software applications provide a single integrated view of the customer
across multiple channels, allowing consistent marketing messages and promotions
to customers regardless of which channel a customer is using. In connection with
the acquisition, we issued approximately 3.1 million shares of our common stock.
In addition, options and warrants of RightPoint were converted into options and
warrants to purchase approximately 530,000 shares of our common stock. This
transaction has been accounted for under the purchase method of accounting.

     On January 20, 2000, we completed a public offering of 3,700,000 shares of
common stock. We sold 1,993,864 shares of our common stock and the selling
stockholders sold 1,706,136 shares of our common stock. In addition, on February
15, 2000 the underwriters exercised their option to purchase 418,500 shares, of
which 104,342 were from us and 314,158 were from selling stockholders, to cover
over-allotments of shares. We expect to use the net proceeds from the offering
of $356 million for working capital and general corporate purposes. We may also
use a portion of the net proceeds to acquire complementary products,
technologies or businesses.

     On March 15, 2000, we entered into a definitive agreement to acquire Octane
Software, Inc. Octane Software is a next-generation provider of multi-channel
customer interaction applications and infrastructure software for sales, service
and support. Under the terms of the agreement, we will issue approximately 12.8
million shares of its common stock to the stockholders of Octane Software. The
transaction will be

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accounted for as a purchase. The acquisition is subject to customary closing
conditions, including approval of E.piphany's and Octane's stockholders and
regulatory approvals.

INDUSTRY BACKGROUND

     The Internet is fundamentally changing the way businesses interact with
their customers and suppliers. Consumers can use the Internet to more quickly
evaluate products and prices from a wide range of vendors without regard to
geographical constraints. At the same time, companies across a variety of
industries are using the Internet to redefine the way that goods and services
are marketed, sold and distributed.

     To remain competitive in this dynamic business environment, many companies
are seeking to increase the longevity and profitability of their customer
relationships. We believe companies that improve their understanding of their
customers can gain the loyalty of their most profitable customers by
personalizing products, services and related interactions based on each
customer's characteristics and preferences. Furthermore, when companies
understand individual customer preferences, they can market complementary
products, known as "cross-selling," or market higher-end products, known as
"up-selling." To execute on these marketing strategies, companies need to
establish a single view of each customer across all of the company's various
departments, distribution channels and points of customer interaction. Companies
must then leverage this knowledge to market to customers through proactive
marketing campaigns, as well as by making marketing decisions in real time when
a customer initiates contact with the company. Finally, to better serve
customers, companies can use their knowledge of their customers to better
anticipate customer demand and optimize their processes for fulfilling customer
orders. For example, a company that identifies that many customers prefer a
particular product can increase inventories of that product to meet anticipated
demand.

     Over the past two decades, companies have invested in software applications
that reduce costs by automating business processes. AMR Research, an industry
and market analysis firm, estimates that, from 1995 through 1998, companies
spent more than $56 billion on industrial enterprise software applications that
are focused on automating sales, support, manufacturing, distribution and
finance processes. More recently, companies have begun investing in Internet
infrastructure software, including systems that enable commercial transactions
over the Web, as well as systems that monitor and track customers' behavior on
Web sites. Many companies also continue to operate older, custom-built systems
that automate critical business processes, such as order processing and
accounting. All of these applications have allowed companies to collect and
store enormous volumes of customer data, including customer demographic
information, historical purchasing information or delivery specifications. This
data is often augmented by marketing data from third-party data providers.

     Despite the vast amounts of data generated, these applications remain
focused on automating business processes, rather than helping companies better
understand their customers or manage marketing campaigns. Moreover, because
these data reside in disparate computer systems in different departments or are
delivered from third parties, combining and analyzing this information to
provide a single view of the customer is a significant challenge. For example, a
company may have over time acquired sales, customer service, and distribution
software applications, each operating on a different computer system. In
addition, many companies' Internet commerce systems operate independently of
systems that automate their traditional sales channels and fulfillment
processes. Because these applications and systems serve different purposes, they
collect vastly different types of customer data. To analyze and act on disparate
corporate data, many companies have attempted to integrate multiple software
tools designed to either extract data from various software systems, store it in
a central repository, analyze the data or manage marketing campaigns. Many of
these internally assembled software systems require substantial amounts of time
to integrate and customize, making them expensive to implement and maintain.
Moreover, these tools often have complex user interfaces that are not accessible
to all business users in a company. Finally, these tools are typically not able
to collect and analyze data in real time to rapidly make marketing offers when a
customer initiates contact with the company.

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     To allow all business users within a company to better understand and act
on customer information collected from multiple sources, companies need new
software solutions. These software solutions should be:

     - Focused on establishing, maintaining and improving customer
       relationships. Software should allow companies to identify and
       differentiate their current and potential customers and act on that
       knowledge to provide products, services, and related interactions
       personalized to each customer's preferences.

     - Deployable to all business users and points of interaction with
       customers. Software should be designed to offer the ease of use and
       availability of the Web to enable all business users -- not just
       information technology professionals and specialized analysts -- to
       access, understand and act on customer information. Additionally,
       software should easily integrate with companies' existing software to
       collect all relevant customer information and enable personalized
       interactions at each point of customer interaction.

     - Packaged to offer faster and less expensive implementation. Software
       should minimize the time and expense of implementation and maintenance by
       including in a single integrated system all of the technologies required
       to extract, store, analyze and act on customer data. In addition, the
       software should be designed to solve specific business problems without
       substantial customization.

     - Designed to generate marketing recommendations in real time. Software
       should enable companies to market to customers in real time during
       interactions initiated by the customer, such as Web site visits or
       contact with a customer support call center. This capability requires
       software systems to collect and analyze customer information and then
       immediately make a personalized marketing recommendation in real time.

THE E.PIPHANY SOLUTION

     Companies can use our software to establish, maintain and continually
improve customer relationships across both Internet and traditional sales,
marketing and distribution channels. Our E.piphany E.4 System allows companies
to profile customers' characteristics and preferences by collecting and
analyzing data from their existing software systems and third party data
providers. Business users within these companies can then act on this
information by using our E.piphany E.4 System to design and execute marketing
campaigns as well as personalize products, services and related interactions. We
believe that our software is differentiated by its combination of the following
characteristics:

     Software designed to establish, maintain and improve customer
relationships. Our software helps companies establish, maintain and improve
customer relationships by:

     - Identifying customers. Our software can be used by companies to better
       identify their customers by aggregating and analyzing data from existing
       software systems as well as from third-party data providers,

     - Differentiating customers. Our software allows companies to differentiate
       their customers by analyzing customer groups according to demographics,
       profitability, length of sales cycle, cross-sell success rates and other
       company-defined criteria,

     - Interacting with customers more personally. Our software helps companies
       to extend customer information to all employees that interact with
       customers as well as integrate this information with Internet
       infrastructure software that generates Web pages and e-mail. Moreover,
       our software can be used to design and execute marketing campaigns that
       tailor marketing messages to each customer based on his or her specific
       characteristics and preferences, and

     - Personalizing products, services and related interactions. Our software
       helps companies collect and analyze the data required to personalize
       products, services and related interactions based on customer
       characteristics and preferences. In addition, companies can use our
       software to better anticipate customer demand and to manage their
       processes for fulfilling orders in a more efficient manner.

     Web-based design to promote ease of use and wide-scale deployment to
business users. Our software offers an easy to use interface that is similar to
those used on most Web sites. The interface is accessed by

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business users across a corporate network or the Internet using a Web browser,
such as Microsoft Internet Explorer. The software is installed by the customer
in a central location, either on the customer's own computer servers or on those
of a third-party hosting service. This Web-based design does not require our
software to be installed on each user's computer, which reduces the costs of
deploying and maintaining software.

     Packaged software for faster and less expensive implementation. Our
software solutions are integrated to combine all of the technologies required to
collect and analyze customer data and manage marketing campaigns. As a result,
companies do not need to combine multiple vendors' software tools -- each of
which offers only limited capabilities -- into a single software solution and
then customize this software solution to meet their needs. Our software
solutions can generally be implemented in 16 weeks or less.

     Designed to generate marketing recommendations in real time. Our software
has been designed to generate marketing recommendations in real time during
interactions initiated by a customer. For example, the E.piphany E.4 System can
collect data while a customer navigates a company's Web site or speaks to a call
center operator. Our software immediately analyzes that data along with existing
customer data to determine a customized marketing offer to present to the
customer. The offer is then delivered through integration at the point of
customer contact, such as dynamically presenting Web site content or presenting
a script to a call center operator within their existing call center software
application.

E.PIPHANY STRATEGY

     We intend to be the leading provider of software that companies can use to
establish, maintain and continually improve customer relationships across both
Internet and traditional sales, marketing and distribution channels. Key
elements of our strategy include:

     Extend the breadth and depth of our product offerings. We intend to
continue to invest in research and development to build new software to extend
the range of problems that we solve. In particular, we intend to expand our
software offerings for Internet commerce and to develop new software that solves
additional problems in fulfillment, logistics and operations. We believe that
maintaining and enhancing our products is important to our ability to expand our
market share, retain existing customers and acquire new customers.

     Develop industry-specific software products. In the future, we plan to
offer versions of our software designed specifically for industries such as
financial services, high technology, Internet commerce, healthcare,
telecommunications and manufacturing. We intend to use the industry expertise of
our professional services organization and the consultants, system integrators
and other companies with which we have relationships to help us extend our
software to solve business problems specific to these industries.

     Increase market penetration by expanding our sales and distribution
capabilities. In addition to growing our direct sales force, we have developed
contractual relationships with consultants, systems integrators and resellers
that we believe will allow us to extend our sales presence. We intend to use
these relationships to support sales and help us develop new E.piphany E.4
System software solutions. We also intend to build our international presence
through relationships with consulting organizations and systems integrators that
have a strong international presence, such as KPMG, in addition to increasing
the size of our direct sales force.

     Offer our software through application service providers. In addition to
licensing our software directly to end-users, we intend to increasingly offer
our software through Internet-based applications service providers. For example,
we have recently entered into an applications service provider relationship with
Corio. Applications service providers host our software on their own servers,
integrate the software with their customers' existing systems and then allow
their customers to utilize our software over the Internet for a fee. These
applications service providers pay us fees for the right to host our
applications for their customers and a subscription fee for each of their
customers. We believe that the applications service provider option will be
particularly attractive to pure Internet commerce companies, as well as
mid-sized companies that typically have limited internal information technology
resources. We also intend to develop our own services that would complement the
applications hosting services offered by our partners. We intend to market our
services under the E.piphany.net brand.

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E.PIPHANY PRODUCTS

     The E.piphany E.4 System includes multiple software solutions designed to
solve specific business problems in areas such as sales, marketing, finance and
Internet commerce. Each of these software solutions incorporate core
technologies that we have designed to extract data from existing software
systems, store it in a central repository, analyze the data to discover customer
characteristics and preferences, and manage marketing campaigns. Our software
solutions can be deployed simultaneously or in incremental steps as our
customers address new business problems.

     The E.piphany E.4 System software solutions are grouped into three product
families:

     - Reporting & Analysis

     - Distributed Database Marketing, and

     - E-Commerce.

  Reporting & Analysis

     Our Reporting & Analysis software solutions allow any business user with a
Web browser to easily analyze customer, supplier and operational data from
across the enterprise and the Internet. To support this capability, we have
designed the E.piphany E.4 System to extract and manage data from a wide variety
of electronic data sources regardless of their format. The analytical
capabilities of our software solutions range from aggregating data from
disparate software systems to the application of complex statistical formulas to
that data, known as data mining. Once our software solutions have analyzed the
data, they present the resulting information in an easy-to-use format, such as
graphs and tables. The following are our current Reporting & Analysis software
solutions:

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<S>                                 <C>
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  SOFTWARE SOLUTION                 DESCRIPTION
--------------------------------------------------------------------------------------------
  Bookings, Billings &              Analyzes bookings, billings, backlog and other sales
  Backlog/Sales                     data to identify trends and the status of sales for
  Reporting & Analysis              sales managers and finance personnel.
--------------------------------------------------------------------------------------------
  Customer Relationship             Analyzes customer data from sales and support
  Management Reporting &            applications so that sales support and service managers
  Analysis                          can better understand the quantity and status of sales
                                    leads, customer inquiries and service calls as well as
                                    forecast future sales using data mining techniques such
                                    as trend analysis.
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  Channel Sell-Through              Analyzes sales data from indirect business channels such
  Management                        as resellers and distributors. Sales managers can use
                                    this information to track channel inventory trends,
                                    distributors' profit margins or other metrics to better
                                    manage sales through indirect channels.
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  Call Center Reporting &           Analyzes data from call centers. Managers of call
  Analysis                          centers can use this information to improve call center
                                    efficiency by tracking metrics such as the average cost
                                    and time for problem resolution, the frequency of
                                    customer contact, the profitability of individual
                                    representatives and the most common types of customer
                                    calls.
--------------------------------------------------------------------------------------------
  Customer Profitability            Analyzes data to segment customers according to their
                                    current and potential profitability and also calculates
                                    the profitability of divisions, geographies and the
                                    entire company. Managers throughout the company can use
                                    this information to better understand which customers
                                    and areas of the business they should target for
                                    profitability improvements.
--------------------------------------------------------------------------------------------
  Branch Information                Analyzes data from branch office systems so that branch
                                    managers can track regional sales, profile their
                                    customers and market to those customers.
--------------------------------------------------------------------------------------------
</TABLE>

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  Distributed Database Marketing

     Our Distributed Database Marketing software solutions allow employees in a
company's marketing department to collaborate on planning and designing
marketing campaigns that target each customer based on his or her specific
characteristics and preferences. Once a campaign is designed, our software
solutions can execute the campaign through direct mail, personalized e-mail,
customized Web pages and other points of customer interaction. When campaigns
are executed, our Distributed Database Marketing software solutions analyze
response data to refine and tune campaigns. The following are our current
Distributed Database Marketing software solutions:

<TABLE>
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  SOFTWARE SOLUTION                 DESCRIPTION
--------------------------------------------------------------------------------------------
  Cross-sell/Up-sell                Analyzes customer characteristics using data mining
                                    techniques to identify opportunities to sell
                                    complementary or higher-end products to existing
                                    customers, and then enables business users to plan,
                                    execute, measure and refine marketing campaigns.
--------------------------------------------------------------------------------------------
  Campaign Performance              Monitors the response rates, costs and profitability of
  Measurement                       corporate and regional marketing campaigns, and also
                                    predicts the likely returns on marketing campaign
                                    investments.
--------------------------------------------------------------------------------------------
  Loyalty Program Management        Analyzes customer buying and attrition data to enable
                                    companies to better identify and understand their most
                                    loyal customers as well as measure and improve the
                                    effectiveness of their loyalty programs.
--------------------------------------------------------------------------------------------
  Customer Acquisition              Identifies promising potential customers by using data
                                    mining techniques to analyze data from third party data
                                    providers, advertising programs and promotional events
                                    and then enables business users to plan, execute,
                                    measure and refine marketing campaigns to attract those
                                    customers.
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  Attrition Management              Enables companies to determine why some customers
                                    terminate their relationships with the company.
                                    Companies can then use this information to maximize the
                                    retention of profitable customers and manage the
                                    attrition of unprofitable customers.
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</TABLE>

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  E-Commerce

     Our E-Commerce software solutions help companies analyze customer behavior
on Internet commerce Web sites and personalize those sites by integrating
customer preference data into the software that generates Web pages. As a
result, each time a customer accesses the company's Web site, the customer will
see and interact with a Web site personalized for his or her preferences. These
software solutions also enable companies to design and execute Internet commerce
marketing campaigns through e-mail and other points of e-commerce customer
interaction, as well as personalize products, services and related transactions
based on customer preference information. Finally, these systems can be used to
measure the effectiveness of companies' Internet commerce initiatives as well as
their effect on traditional business channels. The following are our current
E-Commerce software solutions:

<TABLE>
<S>                                 <C>
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  SOFTWARE SOLUTION                 DESCRIPTION
--------------------------------------------------------------------------------------------
  E-Commerce Reporting &            Analyzes Internet commerce purchasing patterns and Web
  Analysis                          site effectiveness. Marketing and finance personnel can
                                    use this solution to analyze customer behavior on Web
                                    sites, including Web site navigation and purchase
                                    patterns. Companies can also use this solution to
                                    measure the effect of Internet commerce on traditional
                                    sales, marketing and distribution channels and overall
                                    corporate profitability.
--------------------------------------------------------------------------------------------
  E-Commerce Campaigns              Allows marketing personnel to manage marketing campaigns
                                    through e-mail and Web sites in addition to conventional
                                    direct mail and phone solicitations.
--------------------------------------------------------------------------------------------
  Emailer                           Allows marketing personnel to personalize and send
                                    e-mails based on customer characteristics and
                                    preferences, track e-mail delivery and responses, embed
                                    Internet addresses in e-mails to provide personalized
                                    Web pages and customized offers and finally, measure and
                                    help manage the effectiveness of Internet marketing
                                    campaigns.
--------------------------------------------------------------------------------------------
  Product Customization             Analyzes customer preference data so that product
                                    development personnel can personalize products for
                                    individual customers as well as develop new products
                                    based on current customer preferences.
--------------------------------------------------------------------------------------------
  Real-Time Personalization         Allows companies to cross-sell, up-sell and deliver
  Solution                          marketing offers for individual customers in real time
                                    across both Internet and traditional points of customer
                                    interaction.
--------------------------------------------------------------------------------------------
</TABLE>

PROFESSIONAL SERVICES

     Our internal professional services organization plays an integral role in
implementing our software for our customers as well as supporting and training
our customers. We believe that providing a high level of customer service and
technical support is critical to the satisfaction of our customers. Our
professional services staff consisted of 72 employees as of December 31, 1999.
Our professional services offerings include:

     Consulting and implementation services. We offer consulting and
implementation services focused on configuring and implementing software
solutions to meet each of our customer's unique needs. These services are
delivered primarily by our internal professional services organization, but also
by outside consulting organizations. When we work with third party consulting
organizations we typically subcontract to these consulting organizations or
enter into contracts with them to collaborate on specific projects. We believe
that our consulting services enhance the quality of our software solutions,
accelerate the implementation of our solutions and share best business practices
with client project teams.

     Maintenance services. We provide our customers with extensive maintenance
services including telephone support, Web-based support and updates to our
products and documentation. We enter into maintenance contracts separate from
our product license agreements. Fees are typically 15 to 20% of the license fees
for the associated software products.

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     Training services. We offer extensive training programs to our customers
and other companies with which we have relationships to accelerate the
implementation and adoption of our solutions by the users within a company. Fees
for our training services are typically charged separately from our software
license fees and consulting fees.

     In addition to implementing our software and supporting our customers, our
professional services organization works closely with our internal research and
development organization to design new E.piphany E.4 System software solutions.
Experience gained by our professional services organization through repeated
implementation of our products is routinely conveyed to our research and
development staff. Our research and development staff then uses this experience
to design new features into new releases of its software.

E.PIPHANY E.4 SYSTEM TECHNOLOGY

     The E.piphany E.4 System includes core technologies that enable our
software solutions to extract, manage and analyze data from existing systems as
well as manage marketing campaigns. These software technologies allow our
internal research and development organization to rapidly build and deploy new
software solutions as market opportunities arise, without re-developing and
configuring the underlying technologies. The major elements of the E.piphany E.4
System's core technologies include:

     EpiCenter. EpiCenter is the E.piphany E.4 System software technology we
developed for storing and managing data. Our software solutions utilize
EpiCenter to retrieve the data that they require to perform their analysis and
distributed database marketing. Key functional elements of EpiCenter include:

     - Adaptive Schema Generator. The Adaptive Schema Generator is the software
       technology that we developed and market as a part of the E.piphany E.4
       System. It automatically reconfigures EpiCenter, based on high-level
       specifications, each time a customer's software solutions are modified.
       This technology enables rapid customization of our products to meet the
       specific and dynamic business needs of our customers and allows system
       administrators to avoid having to manage complex data storage design
       tasks.

     - Metadata integration. All of the components of the E.piphany E.4 System
       are integrated through our metadata, which is a high-level,
       software-based description of a customer's E.piphany E.4 System and the
       data which resides in that system. Generic metadata is included in the
       E.piphany E.4 System when shipped, and is continually updated by the
       E.piphany E.4 System as consultants or users make changes to any portion
       of the system. As a result, when new data elements or functions are added
       to any software component of a customer's E.piphany E.4 System, all other
       software components are able to recognize the change and adapt
       accordingly.

     - Accelerators. We have integrated into the E.piphany E.4 System
       mathematical formulas called accelerators that improve the performance of
       our software by pre-computing some information, creating special indices
       and providing "hints" to the system on how to optimize the processing of
       user queries.

     Data extraction and transformation. Our E.piphany E.4 System offers a
powerful approach to extracting data from various sources and transforming that
data before loading it into EpiCenter. Central to this capability are our
Packaged Semantic Transformations, which are rules that change customer data
into a format well-suited for data analysis by business users.

     Software application server. Our software application server is the
software technology that we developed to manage the mathematical formulas that
are used to analyze data in response to user queries. In addition, the software
application server generates the user interface that end-users interact with
through their Web browsers.

     Real-Time Personalization Solution. Our Real-Time Personalization Solution
executes the marketing campaigns developed by end users for real-time marketing
recommendations. When a customer makes contact with the company through, for
example, a Web site or a call center, our Real-Time Campaign Server

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accesses existing customer information, pre-defined campaigns and information
gathered during the current interaction to provide the most appropriate
recommendation to the customer.

RELATIONSHIPS AND ALLIANCES

     An important element of our strategy is to establish relationships and
alliances to assist us in marketing, selling and implementing our software
solutions. These relationships and alliances fall into the following four
categories:

     Consulting and implementation relationships. We work with Cambridge
Technology Partners, Ernst & Young and KPMG through subcontractor relationships
whereby these firms implement our software on customers' computer systems. In
return for the services provided under these subcontractor agreements, we pay
fees to these entities and provide personnel and technical resources to support
their implementation of our software. In order to improve their opportunity to
generate service fees from our customers, each of these entities has committed
resources to training their consultants on our products, co-marketing our
products with their services and incorporating our products into their customer
relationship management marketing strategies. We have a contractual relationship
with Marketing 1:1 -- a marketing consulting firm -- under which they provide
consulting services to us and co-market and promote our software. In return, we
pay consulting fees and other compensation to the firm as well as fees for
customer referrals. Cambridge Technology Partners, KPMG and Marketing 1:1 are
also investors in E.piphany. We believe that these relationships will facilitate
the adoption and deployment of our software and expand the capabilities of our
software to target specific industries.

     Platform relationships. To help ensure that our products are based on
industry standards and take advantage of current and emerging technologies, we
have formed relationships with vendors of software and hardware technology
platforms. We currently maintain platform relationships with Hewlett-Packard,
Microsoft, Oracle and Sun Microsystems. These companies voluntarily provide us
with early releases of new technology platforms, education related to those
platforms and limited access to their technical resources to facilitate adoption
of their technology. As a result, we are able to more easily integrate our
products with these vendors' platforms, and we can also anticipate required
changes to our products based on new versions of these vendors' platforms. We
believe that these relationships allow us to focus on our core competencies,
simplify the task of designing and developing our software and reduce the time
it takes us to make our software compatible with their software or hardware.

     Technology relationships. We have formed relationships with vendors of
complementary software products. These relationships consist of non-exclusive
contractual agreements to co-market each other's products and share technical
resources in order to better integrate each other's products. These agreements
also provide, in some instances, for the payment of referral fees to each other
for customer referrals. We currently have such agreements with Art Technology
Group, BroadVision, FirePond and Vignette, all of which are providers of
Internet infrastructure software.

     Reseller and applications service provider relationships. We have entered
into contractual reseller agreements with vendors under which we sell software
solutions to them for resale to their customers. We believe that these
relationships will extend our sales presence in new and existing markets. We
have entered into reseller agreements with Acxiom and Harte-Hanks -- two
providers of customer data and strategic marketing services -- and a reseller
agreement with Pivotal Software -- a vendor of sales force automation and
customer support software. We have also recently entered into a relationship
with Corio -- an Internet-based application service provider. Under these
agreements, we sell our software solutions to these companies at a discount from
our list prices, provide some marketing and training support and must provide
advance notice of price increases. Each of these companies has committed
resources to training their employees, developing co-marketing programs and
incorporating our products into their customer relationship management marketing
strategies. We provide sales materials, training and support services to these
resellers on the implementation of our software solutions. We also have
contractual relationships with Exactis.com, Bullseye Interactive and Interrelate
under which these companies host our software solutions as Internet-based

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<PAGE>   11

application service providers. We have not yet generated any significant
revenues from any of these reseller and applications service provider
agreements.

CUSTOMERS

     Our customers represent large global institutions from industries such as
high technology, financial services, communications, and internet commerce. For
the year ended December 31, 1999, Sallie Mae accounted for 11% of our total
revenues. For the year ended December 31, 1998, Autodesk, Charles Schwab,
Hewlett-Packard, KPMG and Macromedia, accounted for 30%, 17%, 16%, 11% and 11%,
respectively, of our total revenues.

RESEARCH AND DEVELOPMENT

     Our research and development organization is responsible for developing new
software products, product architecture, core technologies, product testing,
quality assurance and ensuring the compatibility of our products with hardware
and software platforms. In addition, this organization supports some pre-sale
and customer support activities. Our research and development organization is
divided into teams consisting of development engineers, product managers,
quality assurance engineers and technical writers. In addition, our professional
services staff helps our research and development organization identify
potential new product features.

     Our research and development staff consisted of 76 employees as of December
31, 1999. E.piphany's total expenses for research and development were $7.1
million for the year ended December 31, 1999 and $3.8 million for the year ended
December 31, 1998. We expect that research and development expenses will
increase in absolute dollars and may increase as a percentage of revenue in
future periods.

SALES, MARKETING AND DISTRIBUTION

     To date, we have marketed our products primarily through our direct sales
force. However, we intend to expand our sales channels through additional
relationships with systems integrators and value-added resellers. In selling our
products, we typically approach both business users and information technology
professionals with an integrated team from our sales and professional services
organizations. Initial sales activities typically include a demonstration of our
product capabilities followed by one or more detailed technical reviews. We also
seek to establish relationships and alliances with major industry vendors that
will add value to our products and expand our distribution opportunities. Our
sales and marketing organization consisted of 99 employees as of December 31,
1999.

     We use a variety of marketing programs to build market awareness of our
company, our brand name and our products, as well as to attract potential
customers. These programs include our own market research, product and strategy
updates with industry analysts, public relations activities, direct mail
programs, telemarketing and telesales, seminars, trade shows, reseller programs,
speaking engagements and Web site marketing. Our marketing organization also
produces marketing materials in support of sales to prospective customers that
include brochures, data sheets, white papers, presentations and demonstrations.

INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS

     Our future success depends in part on legal protection of our technology.
To protect our technology, we rely on a combination of the following among
others:

     - patent laws

     - copyright laws

     - trademark laws

     - trade secret laws, and

     - employee and third-party nondisclosure agreements and confidentiality
       procedures.

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<PAGE>   12

     We hold one patent and have applied for seven other patents on our
technology in the United States and made one international application. We have
also applied for additional trademarks. Our pending patent and trademark
applications may not be allowed. Even if they are allowed, these patents may not
provide us a competitive advantage. Competitors may successfully challenge the
validity and scope of our patents and trademarks.

     Our end-user licenses are designed to prohibit unauthorized use, copying
and disclosure of our software and technology. However, these provisions may be
unenforceable under the laws of some jurisdictions and foreign countries.
Unauthorized third parties may be able to copy some portions of our products or
reverse engineer or obtain and use information and technology that we regard as
proprietary. Third parties could also independently develop competing technology
or design around our technology. If we are unable to successfully detect
infringement and enforce our rights to our technology, we may lose competitive
position in the market. We cannot assure you that our means of protecting our
proprietary rights in the United States or abroad will be adequate or that
competing companies will not independently develop similar technology. In
addition, some of our licensed users may allow additional unauthorized users to
use our software, and if we do not detect such use we could lose potential
license fees.

     From time to time, we may encounter disputes over rights and obligations
concerning intellectual property. We believe that our products do not infringe
the intellectual property rights of third parties. However, we cannot assure you
that we will prevail in all intellectual property disputes. We have not
conducted a search for existing patents and other intellectual property
registrations, and we cannot assure you that our products do not infringe upon
issued patents. In addition, because patent applications in the United States
are not publicly disclosed until the patent is issued, applications may have
been filed which would relate to our products.

     We indemnify some of our customers against claims that our products
infringe upon the intellectual property rights of others. We could incur
substantial costs in defending our company and our customers against
infringement claims. In the event of a claim of infringement, we or our
customers may be required to obtain one or more licenses from third parties. We
cannot assure you that such licenses could be obtained from third parties at a
reasonable cost, or at all. Defense of any lawsuit or failure to obtain any such
required license would have a material adverse effect on our business.

COMPETITION

     The market for our products is intensely competitive, subject to rapid
change and significantly affected by new product introductions and other market
activities of industry participants. Our integrated software competes against
various vendors' software tools designed to accomplish specific elements of a
complete process, including extracting data, storing and managing data,
analyzing data, or managing marketing campaigns. Our competitors include
companies that sell:

     - data management and data analysis software tools such as Brio Technology,
       Broadbase, Business Objects, Informatica, Microstrategy and Sagent
       Technology

     - enterprise application software such as Oracle, PeopleSoft, SAP and
       Siebel Systems

     - marketing campaign management software tools such as Exchange
       Applications, Prime Response and Recognition Systems, and

     - software that recommends products to customers in real time based on
       simple analytics rules such as Net Perceptions.

     Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing, or other resources, or greater name
recognition than we do. Our competitors may be able to respond more quickly to
new or emerging technologies and changes in customer requirements. Competition
could seriously harm our ability to sell additional software, maintenance
renewals, and services on terms favorable to us. Competitive pressures could
reduce our market share or require us to reduce the price of our

                                       12
<PAGE>   13

products and services, any of which could materially and adversely affect our
business, financial condition and operating results.

     We compete on the basis of certain factors, including:

     - product performance

     - product features

     - user scalability

     - open architecture

     - ease of use

     - product reliability

     - analytic capabilities

     - time to market

     - customer support, and

     - product pricing.

     We believe that we presently compete favorably with respect to each of
these factors. However, the markets for our products are still rapidly evolving,
and we may not be able to compete successfully against current and potential
competitors.

EMPLOYEES

     Based on the number of E.piphany employees and RightPoint employees as of
December 31, 1999, we have 279 full-time employees. Of these employees, 76 are
engaged in research and development, 99 are engaged in sales and marketing, 72
are engaged in professional services and 32 are engaged in finance and
administration.

     None of our employees is represented by a labor union or a collective
bargaining agreement. We have not experienced any work stoppages and consider
our relations with our employees to be good.

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<PAGE>   14

                                  RISK FACTORS

     An investment in our common stock is very risky. You should carefully
consider the risks below, together with all of the other information included in
this Annual Report on Form 10-K before investing in E.piphany.

WE HAVE A HISTORY OF LOSSES, WE EXPECT LOSSES IN THE FUTURE AND WE MAY NOT EVER
BECOME PROFITABLE.

     We incurred net losses of $22.4 million in the year ended December 31,
1999, $10.3 million in the year 1998 and $3.1 million in the year 1997. We had
an accumulated deficit of $35.9 million as of December 31, 1999. We expect to
incur losses before amortization charges in the foreseeable future. These losses
may be substantial, and we may not ever become profitable. In addition, we
expect to significantly increase our expenses in the near term, especially
research and development and sales and marketing expenses. Therefore, our
operating results will be harmed if our revenue does not keep pace with our
expected increase in expenses or is not sufficient for us to achieve
profitability. If we do achieve profitability in any period, we cannot be
certain that we will sustain or increase profitability on a quarterly or annual
basis.

OUR LIMITED OPERATING HISTORY MAKES FINANCIAL FORECASTING AND EVALUATION OF OUR
BUSINESS DIFFICULT.

     Our limited operating history makes it difficult to forecast our future
operating results. E.piphany was founded in November 1996, and RightPoint was
founded in 1991. Our revenue and income potential is unproven. E.piphany
received its first revenues from licensing its software and performing related
services in early 1998, and began shipping the E.piphany E.4 System software in
June 1999. RightPoint began offering its current real time marketing
applications in April 1998. Since we do not have a long history upon which to
base forecasts of future operating results, any predictions about our future
revenues and expenses may not be as accurate as they would be if we had a longer
business history.

VARIATIONS IN QUARTERLY OPERATING RESULTS DUE TO SUCH FACTORS AS CHANGES IN
DEMAND FOR OUR PRODUCTS AND CHANGES IN OUR MIX OF REVENUES MAY CAUSE OUR STOCK
PRICE TO DECLINE.

     We expect our quarterly operating results to fluctuate. We therefore
believe that quarter-to-quarter comparisons of our operating results may not be
a good indication of our future performance, and you should not rely on them to
predict our future performance or the future performance of our stock price. Our
short-term expense levels are relatively fixed and are based on our expectations
of future revenues. As a result, a reduction in revenues in a quarter may harm
our operating results for that quarter. Our quarterly revenues, expenses and
operating results could vary significantly from quarter to quarter. If our
operating results in future quarters fall below the expectations of market
analysts and investors, the trading price of our common stock will fall. Factors
that may cause our operating results to fluctuate on a quarterly basis are:

     - varying size, timing and contractual terms of orders for our products

     - our ability to timely complete our service obligations related to product
       sales

     - changes in the mix of revenue attributable to higher-margin product
       license revenue as opposed to substantially lower-margin service revenue

     - customers' decisions to defer orders or implementations, particularly
       large orders or implementations, from one quarter to the next

     - changes in demand for our software or for enterprise software and real
       time marketing solutions generally

     - announcements or introductions of new products by our competitors

     - software defects and other product quality problems

     - any increase in our need to supplement our professional services
       organization by subcontracting to more expensive consulting organizations
       to help provide implementation, support and training services when our
       own capacity is constrained, and

     - our ability to hire, train and retain sufficient engineering, consulting,
       training and sales staff.

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<PAGE>   15

WE CANNOT ASSURE YOU THAT WE WILL BE ABLE TO CONSUMMATE THE ACQUISITION OF
OCTANE SOFTWARE, INC.

     Although we have entered into an Agreement and Plan of Reorganization with
Octane Software, Inc., it is not certain that the transactions contemplated by
that agreement will be consummated. There are a number of conditions present
that must be met before the transaction will be consummated, including
governmental approval, the approval of the holders of the stock of both
companies and the lack of materially adverse changes to E.piphany or Octane
prior to such time. If any of the conditions precedent are not satisfied the
transactions contemplated by the agreement may not be consummated in a timely
manner, or at all, causing us to lose the anticipated benefits of the merger. It
is not certain that the conditions precedent will be met. Failure to do so could
seriously harm our business, financial condition and operating results.

WE MAY NOT REALIZE ANY BENEFITS FROM THE ACQUISITIONS OF RIGHTPOINT OR OCTANE
SOFTWARE.

     Achieving the benefits of the acquisitions of RightPoint and Octane
Software depends in part on the integration of technology, operations and
personnel. The integration of RightPoint and Octane Software into our operations
is a complex, time consuming and expensive process and may disrupt our business
if not completed in a timely and efficient manner. Among the challenges involved
in this integration are demonstrating to customers and suppliers that the
mergers will not result in adverse changes in client service standards or
business focus, persuading personnel that our business culture is compatible
with those of the other companies, retaining key personnel and addressing any
perceived adverse changes in business focus. Neither E.piphany nor RightPoint
nor Octane Software has experience in integrating operations on the scale
represented by the mergers, and it is not certain that we can successfully
integrate RightPoint and Octane Software in a timely manner or at all or that
any of the anticipated benefits of the mergers will be realized. Failure to do
so could seriously harm our business, financial condition and operating results.

IF WE DO NOT INTEGRATE ACQUIRED TECHNOLOGY QUICKLY AND EFFECTIVELY, MANY OF THE
POTENTIAL BENEFITS OF OUR ACQUISITIONS MAY NOT BE REALIZED.

     We intend to integrate RightPoint's and Octane Software's technology into
our own E.piphany software solutions as well as offer RightPoint's and Octane
Software's solutions separately. We cannot assure you that we will be able to
integrate RightPoint's and Octane Software's technology quickly and effectively.
In order to obtain the benefits of the mergers, we must make RightPoint's and
Octane Software's technology, products and services operate together with our
technology, products and services. We may be required to spend additional time
or money on integration which would otherwise be spent on developing our
business and services or other matters. If we do not integrate our technology
effectively or if management and technical staff spend too much time on
integration issues, it could harm our business, financial condition and
operating results.

THE LOSS OF KEY PERSONNEL OR ANY INABILITY TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL COULD AFFECT OUR ABILITY TO SUCCESSFULLY GROW OUR BUSINESS.

     Our future success will depend in large part on our ability to hire and
retain a sufficient number of qualified personnel, particularly in sales,
marketing, research and development, service and support. If we are unable to do
so, this inability could affect our ability to grow our business. Competition
for qualified personnel in high technology is intense, particularly in the
Silicon Valley region of Northern California where our principal offices are
located. Our future success also depends upon the continued service of our
executive officers and other key sales, engineering and technical staff. The
loss of the services of our executive officers and other key personnel would
harm our operations. None of our officers or key personnel is bound by an
employment agreement, other than Gayle Crowell, and we do not maintain key
person insurance on any of our employees. We would also be harmed if one or more
of our officers or key employees decided to join a competitor or otherwise
compete with us.

     The market price of our common stock has increased substantially since its
initial public offering in September 1999. Consequently, potential employees may
perceive our equity incentives such as stock options as less attractive. In that
case, our ability to attract employees will be adversely affected. Furthermore,
a

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<PAGE>   16

substantial portion of the equity incentives previously granted to RightPoint
and Octane Software employees will accelerate and become fully vested upon the
closing of the mergers. New options granted to RightPoint and Octane Software
employees at the current market price of our common stock may not be sufficient
to retain RightPoint and Octane Software employees. Finally, should our stock
price decline substantially, the retention value of stock options granted since
our initial public offering will decline and our employees may choose not to
remain employed by us.

IF CUSTOMERS DO NOT CONTRACT DIRECTLY WITH CONSULTING ORGANIZATIONS TO IMPLEMENT
AND SUPPORT OUR PRODUCTS, OUR REVENUES, PROFITABILITY AND MARGINS MAY BE HARMED.

     Our principal focus has been to be a provider of software solutions rather
than services. As a result, we encourage our customers to purchase consulting,
implementation, maintenance and training services directly from consulting
organizations instead of purchasing these services from us. While we do not
receive any fees directly from these consulting organizations when they contract
directly with our customers, we believe that these consulting organizations
increase market awareness and acceptance of our software solutions and allow us
to focus on software development and licensing. If consulting organizations are
unwilling or unable to provide a sufficient level and quality of services
directly to our customers or if customers are unwilling to contract directly
with these consulting organizations, we may not realize these benefits and our
revenues and profitability may be harmed.

     Further, to the extent that consulting organizations do not provide
consulting, implementation, maintenance and training services directly to our
customers, we need to provide these services to the customers. We provide these
services to our customers either directly through our internal professional
services organization or indirectly through subcontractors we hire to perform
the services on our behalf. Because our margins on service revenues are less
than our margins on license revenues, our overall margins decline when we
provide services to customers. This is particularly true if we hire
subcontractors to perform these services because it costs us more to hire
subcontractors to perform these services than to provide the services ourselves.

IF OUR INTERNAL PROFESSIONAL SERVICES ORGANIZATION DOES NOT PROVIDE
IMPLEMENTATION SERVICES EFFECTIVELY AND ACCORDING TO SCHEDULE, OUR REVENUES AND
PROFITABILITY WOULD BE HARMED.

     Customers that license our products typically require consulting,
implementation, maintenance and training services and obtain them from our
internal professional services organization, which employed a staff of 53 as of
December 31, 1999, or from outside consulting organizations. RightPoint employed
a staff of 19 in its internal professional services organization as of December
31, 1999. When we provide these services we generally recognize revenue from the
licensing of our software products as the implementation services are performed.
If our internal professional services organization does not effectively
implement and support our products or if we are unable to expand our internal
professional services organization as needed to meet our customers' needs, our
ability to sell software and accordingly our revenues will be harmed.

     In addition, when we sell licenses together with professional services for
implementation, we generally recognize the revenue from both the license and the
services as we perform the implementation services. Therefore, delays in
providing implementation services will delay our recognition of revenue. If we
are unable to expand our internal professional services organization to keep
pace with sales, we will be required to increase our use of subcontractors to
help meet our implementation and service obligations, which will result in lower
gross margins. In addition, we may be unable to negotiate agreements with
subcontractors to provide a sufficient level and quality of services. If we fail
to retain sufficient subcontractors, our ability to sell software for which
these services are required will be harmed and our revenues will suffer.

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

     Our services revenues, which includes fees for consulting, implementation,
maintenance and training, were 47% of our revenues for the year ended December
31, 1999 and 34% of our revenues for the year ended December 31, 1998. Our
services revenues have substantially lower gross margins than license revenues.
Our

                                       16
<PAGE>   17

cost of services revenues for the year ended December 31, 1999 was 102% of our
services revenues. An increase in the percentage of total revenues represented
by services revenues could adversely affect our overall gross margins.

     Services revenues as a percentage of total revenues and cost of services
revenues as a percentage of total revenues have varied significantly from
quarter to quarter due to our relatively early stage of development. The
relative amount of services revenues as compared to license revenues has varied
based on the volume of software solution orders compared to the volume of
additional user orders. In addition, the amount and profitability of services
can depend in large part on:

     - the software solution which has been licensed

     - the complexity of the customers' information technology environment

     - the resources directed by customers to their implementation projects

     - the number of users licensed, and

     - the extent to which outside consulting organizations provide services
       directly to customers.

THE ACQUISITION OF OCTANE SOFTWARE MAY RESULT IN A LOSS OF EMPLOYEES.

     Despite our efforts to hire and retain quality employees, we might lose
some of Octane Software's or our own key employees following our proposed
acquisition of Octane Software. Competition for qualified management,
engineering and technical employees in the software industry is intense. We and
Octane Software historically have had different corporate cultures, and Octane
Software employees may not want to work for a larger, publicly-traded company
instead of a smaller, start-up company. Some key employees of Octane Software
hold options which partially or fully vest as a result of the merger, and this
may affect our ability to retain these employees. In addition, competitors may
recruit employees during integration, as is common in high technology mergers.
As a result, Octane Software's or our employees could leave with little or no
prior notice. We cannot assure you that we will be able to attract, retain and
integrate employees following the acquisition.

     In the acquisition, some key employees of Octane Software entered into
employment and non-competition agreements which restrict their ability to
compete with us if they leave us voluntarily. We cannot assure you of the
enforceability of these non-competition agreements or that these employees will
continue to work at E.piphany under their employment agreements after the
acquisition.

THE ACQUISITION OF OCTANE SOFTWARE MAY RESULT IN A LOSS OF CUSTOMERS.

     Octane Software has been dependent on a few key customers. As a result of
the acquisition, however, some customers or potential customers may not continue
to do business with Octane Software. In such case, we may lose significant
revenue Octane Software might have otherwise received had the merger not
occurred.

ACCOUNTING CHARGES RELATING TO THE ACQUISITION OF RIGHTPOINT AND THE PROPOSED
ACQUISITION OF OCTANE SOFTWARE WILL DELAY AND REDUCE OUR PROFITABILITY.

     We accounted for our acquisition of RightPoint under the purchase method of
accounting. Under the purchase method, the purchase price of RightPoint was
allocated to the assets acquired and liabilities assumed from RightPoint. As a
result, we will incur accounting charges from the acquisition which will delay
and reduce our profitability. To the extent future events result in impairment
of any capitalized intangible assets, the negative effect on our operating
results may occur sooner than we expect. These charges include:

     - amortization of intangible assets of approximately $472 million over
       three years

     - in-process research and development of approximately $22 million, to be
       expensed in the quarter ended March 31, 2000, and

     - other costs not currently known.

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<PAGE>   18

     We will account for the proposed acquisition of Octane Software under the
purchase method of accounting and we expect to allocate a significant portion of
the purchase price to intangible assets which will be amortized ratably over
their estimated useful lives. In addition, we expect to incur a write-off
related to in-process research and development upon closing of the transaction.

NEW PRODUCT INTRODUCTIONS AND PRICING STRATEGIES BY OUR COMPETITORS COULD
ADVERSELY AFFECT OUR ABILITY TO SELL OUR PRODUCTS AND COULD RESULT IN PRESSURE
TO PRICE OUR PRODUCTS IN A MANNER THAT REDUCES OUR MARGINS.

     Competitive pressures could prevent us from growing, reduce our market
share or require us to reduce prices on our products and services, any of which
could harm our business.

     We compete principally with vendors of:

     - data management and data analysis software tools such as Brio Technology,
       Broadbase, Business Objects, Informatica, Microstrategy and Sagent
       Technology

     - enterprise application software such as Oracle, PeopleSoft, SAP and
       Siebel Systems

     - marketing campaign management software tools such as Exchange
       Applications, Prime Response and Recognition Systems, and

     - software that recommends products to customers in real time based on
       simple analytics rules such as Net Perceptions.

     Many of these companies have significantly greater financial, technical,
marketing, service and other resources. Many of these companies also have a
larger installed base of users, have been in business longer or have greater
name recognition than we do. For example, in fiscal 1999, Oracle's annual
revenue exceeded $8.0 billion, and the annual revenue of Siebel Systems in
fiscal 1999 exceeded $790 million. Some large companies may attempt to build
capabilities into their products that are similar to the capabilities of our
products. Some of our competitors' products may be more effective than our
products at performing particular functions or be more customized for particular
needs. Even if these functions are more limited than those provided by our
products, our competitors' software products could discourage potential
customers from purchasing our products. For example, our competitors' software
products may incorporate other capabilities, such as recording accounting
transactions, customer orders or inventory management data. A software product
that performs these functions, as well as some of the functions of our software
solutions, may be appealing to some customers because it would reduce the number
of different types of software necessary to effectively run their business.
Further, our competitors may be able to respond more quickly than we can to
changes in customer requirements.

     In addition, our products must integrate with software solutions provided
by a number of our existing or potential competitors. These competitors could
alter their products so that our products no longer integrate well with them, or
they could deny or delay access by us to advance software releases that allow us
to timely adapt our products to integrate with their products.

     Our competitors have made and may also continue to make strategic
acquisitions or establish cooperative relationships among themselves or with
other software vendors. This may increase the ability of their products to
address the need for software solutions such as ours which provide both the
ability to collect data from multiple sources and analyze that data to profile
customer characteristics and preferences. Our competitors may also establish or
strengthen cooperative relationships with our current or future distributors or
other parties with whom we have relationships, thereby limiting our ability to
sell through these channels, reducing promotion of our products and limiting the
number of consultants available to implement our software.

OUR REVENUES MIGHT BE HARMED BY RESISTANCE TO ADOPTION OF OUR SOFTWARE BY
INFORMATION TECHNOLOGY DEPARTMENTS.

     Some businesses may have already made a substantial investment in other
third party or internally developed software designed to integrate data from
disparate sources and analyze this data or manage marketing campaigns. These
companies may be reluctant to abandon these investments in favor of our

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<PAGE>   19

software. In addition, information technology departments of potential customers
may resist purchasing our software solutions for a variety of other reasons,
particularly the potential displacement of their historical role in creating and
running software and concerns that packaged software products are not
sufficiently customizable for their enterprises. If the market for our products
does not grow for any of these reasons, our revenues may be harmed.

IF THE MARKET IN WHICH WE SELL OUR PRODUCTS AND SERVICES DOES NOT GROW AS WE
ANTICIPATE, OUR REVENUES WILL BE REDUCED.

     If the market for software that enables companies to establish, maintain
and continually improve customer relationships by collecting and analyzing data
to design and manage marketing campaigns and customize products and services
does not grow as quickly or become as large as we anticipate, our revenues will
be reduced. Our market is still emerging, and our success depends on its growth.
Our potential customers may:

     - not understand or see the benefits of using these products

     - not achieve favorable results using these products

     - experience technical difficulty in implementing or using these products,
       or

     - use alternative methods to solve the same business problems.

     In addition, because our products can be used in connection with Internet
commerce and we are currently developing additional Internet commerce solutions,
if the Internet commerce market does not grow as quickly as we anticipate, we
may experience sales which are lower than our expectations.

IF WE FAIL TO DEVELOP NEW PRODUCTS OR IMPROVE OUR EXISTING PRODUCTS TO MEET OR
ADAPT TO THE CHANGING NEEDS AND STANDARDS OF OUR INDUSTRY, SALES OF OUR PRODUCTS
MAY DECLINE.

     Our future success depends on our ability to address the rapidly changing
needs of our customers and potential customers. We must maintain and improve our
E.piphany E.4 System and real-time marketing products and develop new products
that include new technological developments, keep pace with products of our
competitors and satisfy the changing requirements of our customers. If we do
not, we may not achieve market acceptance and we may be unable to attract new
customers. We may also lose existing customers, to whom we seek to sell
additional software solutions and professional services.

     To achieve increased market acceptance of our products, we must, among
other things, continue to:

     - improve and introduce new software solutions for reporting and analysis,
       distributed database marketing and e-commerce

     - improve the effectiveness of our software, particularly in
       implementations involving very large databases and large numbers of
       simultaneous users

     - enhance our software's ease of administration

     - improve our software's ability to extract data from existing software
       systems, and

     - adapt to rapidly changing computer operating system and database
       standards and Internet technology.

     We may not be successful in developing and marketing these or other new or
improved products. If we are not successful, we may lose sales to competitors.

     In addition, E.piphany has entered into customer contracts which contain
specific performance goals relating to new product releases or enhancements, and
if we are not able to meet these goals, we may be required to, among other
things, return fees, pay damages and offer discounts.

                                       19
<PAGE>   20

IF OUR PRODUCTS DO NOT STAY COMPATIBLE WITH CURRENTLY POPULAR SOFTWARE PROGRAMS,
WE MAY LOSE SALES AND REVENUES.

     The E.piphany E.4 System and our real-time marketing software must work
with commercially available software programs that are currently popular. If
these software programs do not remain popular, or we do not update our software
to be compatible with newer versions of these programs, we may lose customers.

     In order to operate our software, it must be installed on both a computer
server running the Microsoft Windows NT or Windows 2000 computer operating
systems and a computer server running database software from Microsoft or
Oracle. We are currently modifying our software to also operate on UNIX
operating systems and IBM DB2 databases. If we fail to successfully complete
these modifications in a timely manner we may lose sales and revenues. In
addition, users access our software through standard Internet browsers such as
Microsoft Internet Explorer. If we fail to obtain access to developer versions
of these software products, we may be unable to build and enhance our products
on schedule.

     After installation, our software collects and analyzes data to profile
customers' characteristics and preferences. This data may be stored in a variety
of our customers' existing software systems, including leading systems from
Oracle, PeopleSoft, Siebel Systems, SAP and Vantive, running on a variety of
computer operating systems. If we fail to enhance our software to collect data
from new versions of these products, we may lose potential customers. If we lose
customers, our revenues and profitability may be harmed.

IF DATABASE ACCESS BECOMES STANDARDIZED, DEMAND FOR OUR PRODUCTS WILL BE
REDUCED.

     Our products are useful for integrating data from a variety of disparate
data sources. Adoption of uniform, industry-wide standards across various
database and analytic software programs could minimize the importance of the
data integration capabilities of our products. This, in turn, could adversely
affect the competitiveness and market acceptance of our products. Also, a single
competitor in the market for database and analytic software programs or real
time marketing software programs may become dominant, even if there is no formal
industry-wide standard. If large numbers of our customers adopt a single
standard, this would similarly reduce demand for our product. If we lose
customers because of the adoption of standards, we may have lower revenues and
profitability.

OUR PRODUCTS HAVE A LONG SALES CYCLE WHICH MAKES IT DIFFICULT TO PLAN OUR
EXPENSES AND FORECAST OUR RESULTS.

     It takes us between three and six months to complete the majority of our
sales, but it can take us up to one year or longer. It is therefore difficult to
predict the quarter in which a particular sale will occur and to plan our
expenditures accordingly. The period between our initial contact with a
potential customer and their purchase of our products and services is relatively
long due to several factors, including:

     - the complex nature of our products

     - our need to educate potential customers about the uses and benefits of
       our products

     - the purchase of our products requires a significant investment of
       resources by a customer

     - our customers have budget cycles which affect the timing of purchases

     - many of our customers require competitive evaluation and internal
       approval before purchasing our products

     - potential customers may delay purchases due to announcements or planned
       introductions of new products by us or our competitors, and

     - many of our customers are large organizations which may require a long
       time to make decisions.

     The delay or failure to complete sales in a particular quarter could reduce
our revenues in that quarter, as well as subsequent quarters over which revenues
for the sale would likely be recognized. If our sales cycle unexpectedly
lengthens in general or for one or more large orders, it would adversely affect
the timing of our revenues. If we were to experience a delay of several weeks on
a large order, it could harm our ability to meet our forecasts for a given
quarter.

                                       20
<PAGE>   21

IF WE FAIL TO ESTABLISH, MAINTAIN OR EXPAND OUR RELATIONSHIPS WITH THIRD
PARTIES, OUR ABILITY TO GROW REVENUES COULD BE HARMED.

     In order to grow our business, we must generate, retain and strengthen
relationships with third parties. To date, we have established relationships
with several companies, including consulting organizations and system
integrators that implement our software, including Cambridge Technology
Partners, Ernst & Young and KPMG; resellers, including Acxiom, Harte-Hanks and
Pivotal; and application service providers that provide access to our software
to their customers over the Internet, including Corio, Exactis.com, Bullseye
Interactive and Interrelate. If the third parties with whom we have
relationships do not provide sufficient, high-quality service or integrate and
support our software correctly, our revenues may be harmed. In addition, the
third parties with whom we have relationships may offer products of other
companies, including products that compete with our products. We typically enter
into contracts with third parties that generally set out the nature of our
relationships. However, our contracts do not require these third parties to
devote resources to promoting, selling and supporting our products. Therefore we
have little control over these third parties. We cannot assure you that we can
generate and maintain relationships that offset the significant time and effort
that are necessary to develop these relationships.

     We must also effectively take advantage of the resources and expertise of
third parties to help us develop additional E.piphany E.4 System and real-time
marketing software. Our agreements with third parties do not require them to
help us develop new software. If we fail to effectively work with third parties,
our ability to increase revenues by broadening our software solution offerings,
particularly in additional specific industries, will be limited.

IF WE FAIL TO EXPAND OUR DIRECT AND INDIRECT SALES CHANNELS, WE WILL NOT BE ABLE
TO INCREASE REVENUES.

     In order to grow our business, we need to increase market awareness and
sales of our products and services. To achieve this goal, we need to increase
both our direct and indirect sales channels. If we fail to do so, this failure
could harm our ability to increase revenues. E.piphany currently receives
substantially all of its revenues from direct sales, but we intend to increase
sales through indirect sales channels in the future. We need to expand our
direct sales force by hiring additional salespersons and sales management.

     We intend to derive our revenues from our indirect sales channels by
selling our software through value added resellers. These resellers offer our
software products to their customers together with consulting and implementation
services or integrate our software solutions with other software. We also intend
to increasingly offer our software through application service providers, who
install our software on their own computer servers and charge their customers
for access to our software. We need to expand our indirect sales channels by
entering into additional relationships with these third parties.

     We have not derived a material amount of revenues from international sales
to date, but we expect as part of our strategy to increase international sales
principally through the use of indirect sales channels. We will be even more
dependent on indirect sales channels in the future due to our international
strategy. We also plan to use international direct sales personnel and therefore
must hire additional sales personnel outside the United States. Our ability to
develop and maintain these channels will significantly affect our ability to
penetrate international markets.

WE HAVE GROWN VERY QUICKLY AND IF WE FAIL TO MANAGE OUR GROWTH, OUR ABILITY TO
GENERATE NEW REVENUES AND ACHIEVE PROFITABILITY WOULD BE HARMED.

     We have grown significantly since our inception and will need to grow
quickly in the future. Any failure to manage this growth could impede our
ability to increase revenues and achieve profitability. E.piphany has increased
its number of employees from 21 at December 31, 1997 to approximately 279
employees as of December 31, 1999, including RightPoint's employees. Our
recently completed acquisition of RightPoint, our

                                       21
<PAGE>   22

proposed acquisition of Octane Software and future expansion could be expensive
and strain our management and other resources. In order to manage growth
effectively, we must:

     - hire, train and integrate new personnel

     - continue to augment our financial and accounting systems

     - manage our sales operations, which are in several locations, and

     - expand our facilities.

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

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

     We have been contacted by a company who has asked us to evaluate the need
for a license of a patent it holds directed to data extraction technology. This
company has filed litigation alleging infringement of its patent against three
of our competitors. We cannot assure you that the holder of the patent will not
file litigation against us or that we would prevail in the case of such
litigation. In addition, the patent holder has informed us that it has
applications pending in numerous foreign countries. The patent holder may also
have applications on file in the United States covering related subject matter,
which are confidential until the patent is issued.

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

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

     In addition, in all of RightPoint's software license agreements, RightPoint
agreed to indemnify its customers against losses attributable to intellectual
property infringement by RightPoint's software. Should a third party claim that
RightPoint infringes their intellectual property, we could incur substantial
costs in defending and resolving such claims.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, THIS INABILITY
COULD WEAKEN OUR COMPETITIVE POSITION, REDUCE OUR REVENUES AND INCREASE OUR
COSTS.

     Our success depends in large part on our proprietary technology. We rely on
a combination of patent, copyright, trademark and trade secrets, confidentiality
procedures and licensing arrangements to establish and protect our proprietary
rights. We may be required to spend significant resources to monitor and police
our intellectual property rights. If we fail to successfully enforce our
intellectual property rights, our competitive position may be harmed.

     Our pending patent and trademark registration applications may not be
allowed or competitors may successfully challenge the validity or scope of these
registrations. In addition, our patents may not provide us a significant
competitive advantage.

     Other software providers could copy or otherwise obtain and use our
products or technology without authorization. They also could develop similar
technology independently which may infringe our proprietary rights. We may not
be able to detect infringement and may lose a competitive position in the market
before we do so. In addition, competitors may design around our technology or
develop competing technologies. The

                                       22
<PAGE>   23

laws of some foreign countries do not protect proprietary rights to the same
extent as do the laws of the United States.

     In addition, one of the ways in which we charge for our software is based
on the number of users at a particular site that will be permitted to use our
software. Organizations that have a site license for a fixed number of users for
our products may allow unauthorized use of our software by unlicensed users.
Unauthorized use is difficult to detect and, to the extent that our software is
used without authorization, we may lose potential license fees.

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

     The effectiveness of our software products relies on the use of customer
data collected from various sources, including information collected on Web
sites, as well as other data derived from customer registrations, billings,
purchase transactions and surveys. Our collection and use of such data for
customer profiling may raise privacy and security concerns. Our customers
generally have implemented security measures to protect customer data from
disclosure or interception by third parties. However, the security measures may
not be effective against all potential security threats. If a well publicized
breach of customer data security were to occur, our software products may be
perceived as less desirable, impacting our future sales and profitability.

     In addition, due to privacy concerns, some Internet commentators, consumer
advocates, and governmental or legislative bodies have suggested legislation to
limit the use of customer profiling technologies. The European Union and some
European countries have already adopted some restrictions on the use of customer
profiling data. In addition, Internet users can, if they choose, configure their
Web browsers to limit the collection of user data for customer profiling. Should
many Internet users choose to limit the use of customer profiling technologies,
or if major countries or regions adopt legislation or other restrictions on the
use of customer profiling data, our software would be less useful to our
customers, and our sales and profits could decrease.

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

     E.piphany began shipping its first products in early 1998, and in June
1999, began shipping its E.piphany E.4 System software. RightPoint began
shipping its real time marketing software in April 1998. These products are
complex and may contain currently unknown errors, defects or failures,
particularly since they are new and recently released. In the past we have
discovered software errors in some of our products after introduction. We may
not be able to detect and correct errors before releasing our products
commercially. If our commercial products contain errors, we may be required to:

     - expend significant resources to locate and correct the error

     - delay introduction of new products or commercial shipment of products, or

     - experience reduced sales and harm to our reputation from dissatisfied
       customers.

     Our customers also may encounter system configuration problems which
require us to spend additional consulting or support resources to resolve these
problems.

     In addition, our customers generally store their data across computer
networks, which are often connected to the Internet. Our software operates
across our customers' computer networks and can, at the customer's option, be
accessed through an Internet connection. Our software contains technology
designed to prevent theft or loss of data. Nevertheless, customers may encounter
security issues with their existing databases installed across networks,
particularly the Internet, or with our software. A security breach involving our
software, or a widely publicized security breach involving the Internet
generally, could harm our sales. A security breach involving our software could
also expose us to claims for damages.

     Because our software products are used for important decision-making
processes by our customers, product defects may also give rise to product
liability claims. Although our license agreements with customers

                                       23
<PAGE>   24

typically contain provisions designed to limit our exposure, some courts may not
enforce all or part of these limitations. Although we have not experienced any
product liability claims to date, we may encounter these claims in the future.
Product liability claims, whether or not successful, could:

     - divert the attention of our management and key personnel from our
       business

     - be expensive to defend, and

     - result in large damage awards.

     Our product liability insurance may not be adequate to cover all of the
expenses resulting from a claim. In addition, if our customers do not find our
services to be of high quality, they may elect to use other training, consulting
and product integration firms rather than contract for our services. If
customers are dissatisfied with our services, we may lose revenues.

WE INTEND TO EXPAND OUR INTERNATIONAL SALES EFFORTS BUT DO NOT HAVE SUBSTANTIAL
EXPERIENCE IN INTERNATIONAL MARKETS.

     Although our international sales have been immaterial to date, we intend to
expand our international sales efforts in the future. We have very limited
experience in marketing, selling and supporting our products and services
abroad. If we are unable to grow our international operations successfully and
in a timely manner, our business and operating results could be seriously
harmed. In addition, doing business internationally involves greater expense and
many additional risks, particularly:

     - unexpected changes in regulatory requirements, taxes, trade laws and
       tariffs

     - differing intellectual property rights

     - differing labor regulations

     - unexpected changes in regulatory requirements

     - changes in a specific country's or region's political or economic
       conditions

     - greater difficulty in establishing, staffing and managing foreign
       operations, and

     - fluctuating exchange rates.

     We plan to expand our international operations in the near future, and this
will require a significant amount of attention from our management and
substantial financial resources. We have begun our efforts at international
expansion in Europe and, as of December 31, 1999, including RightPoint's
international presence, we had nine sales and marketing professionals located in
the United Kingdom and France. We are also exploring other regions for future
expansion.

IF WE ACQUIRE ADDITIONAL COMPANIES OR TECHNOLOGIES IN THE FUTURE, THEY COULD
PROVE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS, DILUTE STOCKHOLDER VALUE OR
ADVERSELY AFFECT OUR OPERATING RESULTS.

     In addition to our recent acquisition of RightPoint and proposed
acquisition of Octane Software, we may acquire or make investments in other
complementary companies, services and technologies in the future. Aside from the
RightPoint acquisition and proposed acquisition of Octane Software, we have not
completed any acquisitions or investments to date, and therefore our ability as
an organization to conduct acquisitions or investments is unproven. If we fail
to properly evaluate and execute acquisitions and investments, they may
seriously harm our business and prospects. To successfully complete an
acquisition, we must:

     - properly evaluate the technology

     - accurately forecast the financial impact of the transaction, including
       accounting charges and transactions expenses

     - integrate and retain personnel

     - combine potentially different corporate cultures, and

     - effectively integrate products and research and development, sales,
       marketing and support operations.

                                       24
<PAGE>   25

     If we fail to do any of these, we may suffer losses or our management may
be distracted from our day-to-day operations. In addition, if we conduct
acquisitions using convertible debt or equity securities, existing stockholders
may be diluted which could affect the market price of our stock.

SEASONAL TRENDS IN SALES OF BUSINESS SOFTWARE MAY AFFECT OUR QUARTERLY REVENUES.

     The market for business software has experienced seasonal fluctuations in
demand. The first and third quarters of the year have been typically
characterized by lower levels of revenue growth. We believe that these
fluctuations are caused in part by customer buying patterns, which are
influenced by year-end budgetary pressures and by sales force commission
structures. As our revenues grow, we may experience seasonal fluctuations in our
revenues.

FUTURE SALES OF OUR COMMON STOCK, INCLUDING THOSE SHARES PURCHASED IN THIS
OFFERING, MAY DEPRESS OUR STOCK PRICE.

     If our stockholders or optionees sell substantial amounts of our common
stock in the public market following this offering, the market price of our
common stock could fall. In addition, such sales could create the perception to
the public of difficulties or problems with our products and services. As a
result, these sales also might make it more difficult for us to sell equity or
equity-related securities in the future at a time and price that we deem
appropriate.

     February 29, 2000, we had 32,309,194 shares of common stock outstanding. Of
those shares, 10,532,278 are currently available for sale in the public market.
The remaining shares of our common stock outstanding will be eligible for sale
in the public market as follows:

<TABLE>
<CAPTION>
  NUMBER
OF SHARES                                 DATE
---------                                 ----
<C>         <S>                   <C>
20,515,245  ....................  At April 20, 2000
   843,376  ....................  At June 16, 2000
   316,407  ....................  At August 19, 2000
    21,571  ....................  At September 22, 2000
     6,250  ....................  At September 27, 2000
    74,067  ....................  At December 14, 2000
</TABLE>

     The above table includes the effect of "lock-up" arrangements which prevent
certain existing stockholders from selling or otherwise disposing of their
shares of common stock until April 20, 2000. The above table excludes options
and warrants. Shares issued upon the exercise of outstanding options may
generally also be sold in the public market. We and the underwriters may remove
the lock-up restrictions in advance without prior notice.

WE DO NOT INTEND TO PAY DIVIDENDS, YOU WILL NOT RECEIVE FUNDS WITHOUT SELLING
SHARES AND YOU MAY LOSE THE ENTIRE AMOUNT OF YOUR INVESTMENT.

     We have never declared or paid any cash dividends on our capital stock and
do not intend to pay dividends in the foreseeable future. We intend to invest
our future earnings, if any, to fund our growth. Therefore, you will not receive
any funds without selling your shares. We further cannot assure you that you
will receive a return on your investment when you sell your shares or that you
will not lose the entire amount of your investment.

BECAUSE SOME EXISTING STOCKHOLDERS TOGETHER OWN 44.2% OF OUR STOCK, THE VOTING
POWER OF OTHER STOCKHOLDERS MAY BE LIMITED.

     As of January 20, 2000, it is anticipated that our officers, directors and
five percent or greater stockholders beneficially owned or controlled, directly
or indirectly, approximately 14,183,835 shares of common stock, which in the
aggregate represented approximately 44.2% of the outstanding shares of common
stock. As a result, if some of these twelve persons or entities act together,
they will have the ability to control all matters

                                       25
<PAGE>   26

submitted to our stockholders for approval, including the election and removal
of directors and the approval of any business combination. This may delay or
prevent an acquisition or cause the market price of our stock to decline. Some
of these persons or entities may have interests different than yours. For
example, they may be more interested in selling E.piphany to an acquiror than
other investors or may want us to pursue strategies that are different from the
wishes of other investors.

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY DELAY OR PREVENT AN
ACQUISITION OF OUR COMPANY.

     Our certificate of incorporation and bylaws contain provisions which could
make it harder for a third party to acquire us without the consent of our board
of directors. For example, if a potential acquiror were to make a hostile bid
for us, the acquiror would not be able to call a special meeting of stockholders
to remove our board of directors or act by written consent without a meeting. In
addition, our board of directors has staggered terms which make it difficult to
remove them all at once. The acquiror would also be required to provide advance
notice of its proposal to remove directors at an annual meeting. The acquiror
also will not be able to cumulate votes at a meeting, which will require the
acquiror to hold more shares to gain representation on the board of directors
than if cumulative voting were permitted.

     Our board of directors also has the ability to issue preferred stock which
would significantly dilute the ownership of a hostile acquiror. In addition,
Section 203 of the Delaware General Corporation Law limits business combination
transactions with 15% stockholders that have not been approved by the board of
directors. These provisions and other similar provisions make it more difficult
for a third party to acquire us without negotiation. These provisions may apply
even if the offer may be considered beneficial by some stockholders.

     Our board of directors could choose not to negotiate with an acquiror that
it did not feel was in the strategic interests of E.piphany. If the acquiror was
discouraged from offering to acquire us or prevented from successfully
completing a hostile acquisition by the antitakeover measures, you could lose
the opportunity to sell your shares at a favorable price.

ITEM 2. PROPERTIES

     We currently lease approximately 32,500 square feet of office space for our
headquarters in one building in San Mateo, California. We also lease
approximately 35,500 square feet of additional office space in two additional
buildings in San Mateo, California. We also lease sales offices near Atlanta,
Boston, Chicago, Dallas, Detroit, London, Los Angeles, Minneapolis, Phoenix, St.
Louis and Stamford, Connecticut. We believe that our facilities are adequate for
our current needs. We may need to locate additional space to meet our needs in
the future.

ITEM 3. LEGAL PROCEEDINGS

     From time to time, we may become involved in litigation relating to claims
arising from our ordinary course of business. We believe that there are no
claims or actions pending or threatened against us, the ultimate disposition of
which would have a material adverse effect on us.

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

     None.

                                       26
<PAGE>   27

                                    PART II

ITEM 5. MARKET FOR REGISTRANTS'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common stock has been traded on the Nasdaq Stock Market's National
Market under the symbol "EPNY" since September 22, 1999, the date of our initial
public offering. The following table sets forth, for the periods indicated, the
high and low sales prices for our common stock as reported by the Nasdaq Stock
Market's National Market:

<TABLE>
<CAPTION>
                                                     HIGH       LOW
                                                    -------    ------
<S>                                                 <C>        <C>
Third Quarter 1999 (from September 22, 1999)......  $ 52.38    $38.00
Fourth Quarter 1999...............................  $262.75    $44.50
</TABLE>

     The last reported sale price for our common stock on the Nasdaq Stock
Market's National Market was $219.88 per share on February 29, 2000. As of
February 29, 2000, we estimate that there were approximately 319 holders of
record of our common stock. This does not include the number of persons whose
stock is in nominee or "street name" accounts through brokers.

DIVIDEND POLICY

     We have never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future. Our existing lines of credit prohibit the payment of cash
dividends.

ITEM 6. SELECTED FINANCIAL DATA

     The following selected financial data should be read in conjunction with
the financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," which are included elsewhere in this
report.

<TABLE>
<CAPTION>
                                                                      YEAR ENDED DECEMBER 31,
                                                              ----------------------------------------
                                                                 1997          1998           1999
                                                              ----------    -----------    -----------
                                                              (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                                           <C>           <C>            <C>
STATEMENT OF OPERATIONS DATA:
  Total revenues............................................   $             $  3,377       $ 19,182
  Cost of revenues..........................................        --          1,400          9,349
  Gross profit..............................................        --          1,977          9,833
  Stock-based compensation..................................         1            799          2,929
  Loss from operations......................................    (3,220)       (10,613)       (23,473)
  Net loss..................................................    (3,149)       (10,330)       (22,390)
  Basic and diluted net loss per share......................   $ (2.90)      $  (4.50)      $  (2.19)
  Shares used in computing basic and diluted net loss per
     share..................................................     1,087          2,299         10,247
  Pro forma basic and diluted net loss per share
     (unaudited)............................................                 $  (1.07)      $  (1.23)
  Shares used in computing pro forma basic and diluted net
     loss per share (unaudited).............................                    9,694         18,201
</TABLE>

<TABLE>
<CAPTION>
                                                               1997        1998        1999
                                                              -------    --------    --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>         <C>
BALANCE SHEET DATA:
  Cash, cash equivalents and short-term investments.........  $   369    $ 13,595    $ 81,010
  Working capital...........................................      131      12,601      78,351
  Total assets..............................................      801      16,364      93,586
  Long-term obligations, net of current portion.............       --         333       7,824
  Total stockholders' equity................................      468      13,440      74,642
</TABLE>

                                       27
<PAGE>   28

     The statement of operations data for the year ended December 31, 1997 is
presented for the period from inception in November 1996 to December 31, 1997.
Operating expenses totaled $12,000 for the period from inception in November
1996 to December 31, 1996.

     See Note 2 of Notes to E.piphany's Financial Statements for an explanation
of the determination of the number of shares used in computing per share data.

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

     The following discussion of our financial condition and results of
operations should be read in conjunction with our financial statements and
related notes. This discussion contains forward-looking statements that involve
risks and uncertainties. Forward-looking statements include statements regarding
the extent and timing of future revenues and expenses and customer demand,
statements regarding the deployment of our products, and statements regarding
our reliance on third parties. All forward-looking statements included in this
document are based on information available to us as of the date hereof, and we
assume no obligation to update any such forward-looking statement. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including but not limited to, those
discussed in "Risk Factors" in Item 1 above and elsewhere in this Annual Report
on Form 10-K.

OVERVIEW

     Our E.piphany E.4 System is an integrated set of software solutions that
provide capabilities for analysis of customer data and managing distributed
database marketing. Companies can implement the E.piphany E.4 System to collect
and analyze data from their existing software systems, and from third party data
providers, to profile their customers' characteristics and preferences. Business
users within these companies can then act on this information by using the
E.piphany E.4 System to design and execute marketing campaigns as well as
personalize products, services and related interactions.

     E.piphany was founded in November 1996. From our founding through the end
of 1997, we primarily engaged in research activities, developing our products
and building our business infrastructure. We began shipping our first software
product and first generated revenues from software license fees, implementation
and consulting fees, and maintenance fees in early 1998. During 1998, we
introduced several other software products, and in June 1999, we began shipping
our E.piphany E.4 System software solutions. Although our revenues consistently
increased from quarter to quarter during 1998, we incurred significant costs to
develop our technology and products, to continue the recruitment of research and
development personnel, to build a direct sales force and a professional services
organization, and to expand our general and administrative infrastructure. Our
total headcount has increased from 69 employees at December 31, 1998 to 279
employees at December 31, 1999.

THE RIGHTPOINT ACQUISITION

     We acquired RightPoint Software, Inc. on January 4, 2000 in a merger
transaction. RightPoint develops and markets real time marketing software
solutions that enable companies to optimize and present marketing offers,
promotions, and communications while a customer is interacting with a web site,
call center agent or other point of customer interaction. In connection with
this transaction, we acquired all of the outstanding shares of capital stock of
RightPoint in exchange for approximately 3.1 million shares of our common stock.
In addition, options and warrants of RightPoint were converted into options and
warrants to purchase approximately 530,000 shares of our common stock.

     RightPoint began offering its current real-time marketing applications in
April 1998. RightPoint began generating revenue from its real-time marketing
applications in its fiscal year ended June 30, 1998. RightPoint's revenues grew
from $806,000 in its fiscal 1998 to $3.5 million in its fiscal 1999. RightPoint
also experienced significant increases in headcount during this period.
RightPoint grew from 34 employees on June 30, 1998 to 79 employees as of
December 31, 1999. RightPoint has incurred substantial costs to develop its
products, and to recruit and train personnel for its engineering, sales and
marketing services organizations.

                                       28
<PAGE>   29

     We expect that we will continue to add employees across all departments to
invest in the development of technology, to continue to build our direct sales
force and professional services organization and to expand our general and
administrative infrastructure following the merger. This expansion places
significant demands on our management and operational resources. To manage rapid
growth and increased demand, we must continue to invest in and implement
additional operational systems, procedures and controls.

     We expect that the combination of the companies will result in significant
increases in all expense categories. As of December 31, 1999, E.piphany and
RightPoint had 53 employees and 19 employees, respectively, engaged in the
delivery of services. We expect that the cost of services will increase in
absolute dollars as a result of the acquisition and we expect to continue to
rapidly grow our professional services organization.

     As of December 31, 1999, E.piphany and RightPoint had 55 employees and 21
employees, respectively, engaged in research and development. We expect that
research and development expenses will increase in absolute dollars and may
increase as a percentage of revenue as a result of the acquisition.

     As of December 31, 1999 E.piphany and RightPoint had 70 and 29 employees,
respectively, engaged in sales and marketing. We expect that sales and marketing
expenses will increase in absolute dollars. We expect to incur marketing
expenses related to integration of the companies which could result in an
increase in sales and marketing expenses as a percentage of revenues as a result
of the acquisition. As of December 31, 1999 E.piphany and RightPoint had 22
employees and 10 employees respectively, engaged in general and administrative
activities. We expect that general and administrative expenses will increase in
absolute dollars and may increase as a percentage of revenue as a result of the
acquisition.

     We accounted for the acquisition under the purchase method of accounting
and incurred an estimated write-off related to in-process research and
development of approximately $22 million which will be reflected in the quarter
ended March 31, 2000, as the in-process technology acquired had not reached
technological feasibility and, in the opinion of our management, has no
alternative future use. In addition to the in-process research and development
charge we incurred, we recorded intangible assets of approximately $472 million
which is being amortized ratably over an estimated useful life of three years.

THE OCTANE ACQUISITION

     On March 15, 2000, we entered into a definitive agreement to acquire Octane
Software, Inc. Octane Software is a next-generation provider of multi-channel
customer interaction applications and infrastructure software for sales, service
and support. Octane Software enables companies to provide real-time, interactive
customer care to engage, acquire and retain customers in the new Internet
economy. Under the terms of the agreement, we will issue approximately 12.8
million shares of our common stock to the stockholders of Octane Software
resulting in a purchase price of approximately $3 billion. The acquisition is
subject to customary closing conditions, including regulatory approval and the
approval of E.piphany's and Octane Software's stockholders.

     Octane began offering its current real-time applications in September 1999,
and began generating revenue from its real-time marketing applications in the
quarter ended December 31, 1999. Octane has also experienced significant
increases in headcount during 1999 and had 142 employees as of December 31, 1999
compared to 51 employees as December 31, 1998. Octane Software has incurred
substantial costs to develop its products, and to recruit and train personnel
for its engineering, sales and marketing services organizations.

     We expect that the combination of the companies will result in significant
increases in all expense categories. As of December 31, 1999, Octane Software
had 37 employees engaged in the delivery of services, 53 employees engaged in
research and development, 41 employees engaged in sales and marketing and 11
employees engaged in general and administrative activities. We expect that
operating expenses will increase in absolute dollars and may increase as a
percentage of revenue as a result of the acquisition.

     We will account for the acquisition under the purchase method of accounting
and we expect to allocate a significant portion of the purchase price to
intangible assets which will be amortized over their estimated

                                       29
<PAGE>   30

useful lives. In addition, we expect to incur a write off related to in-process
research and development upon closing of the transaction.

SOURCE OF REVENUES AND REVENUE RECOGNITION POLICY

     We generate revenues principally from licensing our software products
directly to customers and providing related professional services including
implementation, consulting, support and training. Through December 31, 1999,
substantially all of our revenues have been derived from sales within the United
States through our direct sales force. Our license agreements generally provide
that customers pay a software license fee for one or more software solutions for
a specified number of users. The amount of the license fee varies based on which
software solution is purchased, the number of software solutions purchased and
the number of users licensed. Customers can subsequently pay additional license
fees to allow additional users to use previously purchased software solutions or
to purchase additional software solutions. Each software solution included in
the E.piphany E.4 System contains the same core technology, allowing for easy
integration of additional software solutions as they are purchased from us.
Customers that purchase software solutions receive the software on compact disc
or via Internet delivery.

     Customers generally require consulting and implementation services which
include evaluating their business needs, identifying the data sources necessary
to meet these needs and installing the software solution in a manner which
fulfills their needs. Customers have generally purchased these services directly
from us through our internal professional services organization on either a
fixed fee or a time and expense basis. We have historically supplemented the
capacity of our internal professional services organization by subcontracting
some of these services to consulting organizations, especially to those
organizations with which we have relationships such as KPMG, Cambridge
Technology Partners and Ernst & Young. However, we intend to increasingly
encourage customers to purchase services directly from these consulting
organizations. We believe that this would increase the number of consultants
which can provide consulting and implementation services related to our software
products and that it would increase our overall gross margins by increasing our
percentage of license revenue, which has substantially higher gross margins than
services revenue, as a percentage of total revenue. We also believe that it will
encourage these consulting organizations to generate sales leads within their
customer base.

     Customers also generally purchase maintenance contracts which provide
software upgrades and technical support over a stated term, generally twelve
months. Revenue on software upgrades and technical support is recognized ratably
over the term of the maintenance contract.

     We recognize product license revenues in accordance with the provisions of
American Institute of Certified Public Accounts (AICPA) Statement of Position
(SOP) 97-2, "Software Revenue Recognition." Pursuant to the requirements of SOP
97-2, we recognize product license revenues when all of the following conditions
are met:

     - we have signed a noncancellable agreement with the customer

     - we have delivered the software product to the customer

     - the amount of fees to be paid by the customer is fixed or determinable,
       and

     - we believe that collection of these fees is probable.

     To date, when we manage the implementation process for our customers, the
implementation services have been considered essential to the functionality of
the software products. Accordingly, both the product license revenues and
services revenues are recognized in accordance with the provisions of SOP 81-1,
"Accounting for Performance of Construction Type and Certain Production Type
Contracts." Prior to 1999, we recognized substantially all of our revenues using
the completed contract method as estimates of costs and efforts necessary to
complete the implementation were generally not reliable given our lack of
history with implementing our products. In 1999 and future periods, we expect to
recognize most of our revenues using the percentage of completion method, and
therefore both product license and services revenues are recognized as work
progresses. While our software solutions can generally be implemented in less
than 16 weeks,

                                       30
<PAGE>   31

implementation can take longer depending on the solution which has been
licensed, the number of software solutions licensed, the complexity of the
customer's information technology environment and the resources directed by
customers to the implementation projects. To date, we have managed the
implementation of our solutions for the substantial majority of our customers.
When we subcontract services to consulting organizations, we are responsible for
managing the implementation. To the extent that customers contract directly with
consulting organizations to provide implementation services, we do not manage
the implementation, and license revenues are recognized when the relevant
conditions of SOP 97-2 are met. Some of our contracts provide for the delivery
of unspecified future products over a period of time. Accordingly, payments
received from our customers upon the signing of these agreements are deferred
and the revenues are recognized ratably over the contract period. Revenue
allocated to training and other services is recognized as the services are
performed.

COST OF REVENUES AND OPERATING EXPENSES

     Our cost of license revenues primarily consists of license fees due to
third parties for integrated technology. Our cost of services revenues includes
salaries and related expenses for our implementation, consulting support and
training organizations, costs of subcontracting to consulting organizations to
provide consulting services to customers and an allocation of facilities,
communications and depreciation expenses. Our operating expenses are classified
into three general categories: 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. We allocate the
costs for overhead and facilities to each of the functional areas that use the
overhead and facilities services based on their headcount. These allocated
charges include facility rent for corporate offices, communication charges and
depreciation expenses for office furniture and equipment.

     Software development costs incurred prior to the establishment of
technological feasibility are included in research and development costs as
incurred. Since license revenues from our software solutions are not recognized
until after technological feasibility has been established, software development
costs are not generally expensed in the same period in which license revenues
for the developed products are recognized.

                                       31
<PAGE>   32

RESULTS OF OPERATIONS

     The following table sets forth statement of operations data for the three
years ended December 31, 1999:

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                               1997        1998        1999
                                                              -------    --------    --------
<S>                                                           <C>        <C>         <C>
Revenues:
  Product license...........................................  $    --    $  2,216    $ 10,161
  Services..................................................       --       1,161       9,021
                                                              -------    --------    --------
                                                                   --       3,377      19,182
                                                              -------    --------    --------
Cost of revenues:
  Product license...........................................       --           4         158
  Services..................................................       --       1,396       9,191
                                                              -------    --------    --------
                                                                   --       1,400       9,349
                                                              -------    --------    --------
     Gross profit...........................................       --       1,977       9,833
                                                              -------    --------    --------
Operating expenses:
  Research and development..................................    1,646       3,769       7,074
  Sales and marketing.......................................    1,200       6,519      18,727
  General and administrative................................      373       1,503       4,576
  Stock-based compensation..................................        1         799       2,929
                                                              -------    --------    --------
          Total operating expenses..........................    3,220      12,590      33,306
                                                              -------    --------    --------
     Loss from operations...................................   (3,220)    (10,613)    (23,473)
                                                              -------    --------    --------
Other income (expense):
  Interest income...........................................       71         333       1,722
  Interest expense..........................................       --         (48)       (639)
  Other.....................................................       --          (2)         --
                                                              -------    --------    --------
          Total other income................................       71         283       1,083
                                                              -------    --------    --------
     Net loss...............................................  $(3,149)   $(10,330)   $(22,390)
                                                              =======    ========    ========
Basic and diluted net loss per share........................  $ (2.90)   $  (4.50)   $  (2.19)
                                                              =======    ========    ========
Shares used in computing basic and diluted net loss per
  share.....................................................    1,087       2,299      10,247
                                                              =======    ========    ========
Pro forma basic and diluted net loss per share
  (unaudited)...............................................             $  (1.07)   $  (1.23)
                                                                         ========    ========
Shares used in computing pro forma basic and diluted net
  loss per share (unaudited)................................                9,694      18,201
                                                                         ========    ========
</TABLE>

YEARS ENDED DECEMBER 31, 1999 AND 1998

REVENUES

     Total revenues increased to $19.2 million for the year ended December 31,
1999, from $3.4 million for the year ended December 31, 1998. This rapid growth
in revenues reflects our relatively early stage of development, and we do not
expect revenues to increase at the same rate in the future. For the year ended
December 31, 1999, Sallie Mae accounted for 11% of E.piphany's total revenues,
and for the year ended December 31, 1998, Autodesk, Charles Schwab,
Hewlett-Packard, KPMG, and Macromedia accounted for 30%, 17%, 16%, 11%, and 11%
of total revenues, respectively.

     Product license revenues increased to $10.2 million, or 53% of total
revenue, for the year ended December 31, 1999 from $2.2 million, or 66% of total
revenue, for the year ended December 31, 1998. The increase in dollar amount of
product license revenues was due to both an increase in the number of licenses

                                       32
<PAGE>   33

sold and the average size of the licenses, and resulted primarily from the
growth of our direct sales force and the introduction and shipment of new
products.

     Services revenues increased to $9.0 million, or 47% of total revenues, for
the year ended December 31, 1999 from $1.2 million, or 34% of revenues, for the
year ended December 31, 1998. The increase in dollar amount of service revenues
was primarily attributable to increased implementation and consulting services
performed in connection with increased license sales and to maintenance
contracts sold to our new customers.

     Services revenues as a percentage of total revenues has varied
significantly from quarter to quarter due to our relatively early stage of
development. The relative amount of services revenues as compared to license
revenues has varied based on the volume of license fees for software solutions
compared to the volume of license fees for additional users, which generally do
not require services. In addition, the amount of services we provide for a
software solution can vary greatly depending on the solution which has been
licensed, the complexity of the customers' information technology environment,
the resources directed by customers to their implementation projects, the number
of users licensed and the extent to which consulting organizations provide
services directly to customers. Services revenues as a percentage of total
revenues has also increased because of increased maintenance revenues due to the
growth in our customer base. Services revenues have substantially lower margins
relative to product license revenues. To the extent that services revenues
become a greater percentage of our total revenues and services margins do not
increase, our overall gross margins will decline.

     This is especially true when we are required to subcontract with consulting
organizations to supplement our internal professional services organization. It
generally costs us more to subcontract with consulting organizations to provide
these services than to provide these services ourselves. To offset the effect
that providing services ourselves or through subcontractors has on our gross
margins, we intend to further encourage customers to contract directly with
consulting organizations for implementation and consulting services. Encouraging
direct contracts between our customers and consulting organizations may also
increase the overall amount of services available to customers and generate
sales leads. We do not receive any services revenues when customers contract
directly with consulting organizations for implementation and consulting
services.

COST OF REVENUES

     Total cost of revenues increased to $9.3 million for the year ended
December 31, 1999 from $1.4 million for the year ended December 31, 1998. Cost
of product license revenues consists primarily of license fees paid to third
parties under technology license arrangements and have not been significant to
date. Cost of services revenues consists primarily of the costs of consulting
and customer service and support. Cost of services revenues increased to $9.2
million, or 102% of services revenues, for the year ended December 31, 1999 from
$1.4 million, or 120% of services revenues, for the year ended December 31,
1998. The increase in cost of services revenues in absolute dollars resulted
primarily from the hiring of additional employees and the subcontracting of
consulting services to consulting organizations to support increased customer
demand for consulting services. Cost of services revenues has exceeded services
revenues due to the rapid growth of our services organization from 11 employees
at December 31, 1998 to 53 employees at December 31, 1999 and our investment in
experienced management in anticipation of future revenue growth.

OPERATING EXPENSES

  Research and Development

     Research and development expenses consist primarily of personnel and
related costs associated with our product development efforts. Research and
development expenses increased to $7.1 million for the year ended December 31,
1999 from $3.8 million for the year ended December 31, 1998. The increase in
absolute dollars was primarily due to an increase in the number of employees
engaged in research and development from 23 employees as of December 31, 1998 to
55 employees as of December 31, 1999. Research and development expenses as a
percentage of total revenues decreased from 112% for the year ended December 31,
1998 to 37% for the year ended December 31, 1999. Research and development
expenses as a percentage of total revenues

                                       33
<PAGE>   34

decreased primarily due to growth in our revenues. We believe that investments
in product development are essential to our future success and expect that the
absolute dollar amount of research and development expenses will increase in
future periods.

  Sales and Marketing

     Sales and marketing expenses consist primarily of employee salaries,
benefits and commissions, and the costs of trade shows, seminars, promotional
materials and other sales and marketing programs. Sales and marketing expenses
increased to $18.7 million for the year ended December 31, 1999 from $6.5
million for the year ended December 31, 1998. Sales and marketing expenses as a
percentage of total revenues decreased from 193% for the year ended December 31,
1998 to 98% for the year ended December 31, 1999. The increase in sales and
marketing expenses in absolute dollars was primarily attributable to an increase
in the number of direct sales, pre-sales support and marketing employees from 30
as of December 31, 1998 to 70 as of December 31, 1999. We expect that the
absolute dollar amount of sales and marketing expenses will continue to increase
due to the planned growth of our sales force, including the establishment of
sales offices in additional domestic and international locations including
Europe and Asia, and due to expected additional increases in advertising and
marketing programs and other promotional activities.

  General and Administrative

     General and administrative expenses consist primarily of employee salaries
and related expenses for executive, finance and administrative personnel.
General and administrative expenses increased to $4.6 million for the year ended
December 31, 1999 from $1.5 million for the year ended December 31, 1998. The
increase in general and administrative expenses in absolute dollars was
primarily attributable to an increase in the number of executive, finance and
administrative employees from 5 as of December 31, 1998 to 22 as of December 31,
1999. We expect general and administrative expenses to increase in absolute
dollars in future periods.

  Stock-Based Compensation

     Stock-based compensation consists of amortization of deferred compensation
in connection with stock option grants and sales of stock to employees at
exercise or sales prices below the deemed fair market value of our common stock
and compensation related to equity instruments issued to non-employees for
services rendered. We have recorded aggregate deferred compensation of $5.9
million related to stock-based compensation to employees. This amount is being
amortized over the respective vesting periods of these equity instruments in a
manner consistent with Financial Accounting Standards Board Interpretation No.
28. Total stock-based compensation was $2.9 million for the year ended December
31, 1999. We expect amortization of approximately $1,500,000, $781,000,
$309,000, and $25,000 in the years ended December 31, 2000, 2001, 2002, and the
first half of 2003, respectively. See Note 6 to E.piphany's Notes to Financial
Statements for further discussion regarding the accounting treatment for
stock-based compensation.

INTEREST INCOME, NET

     Interest income, net of interest expense, for the year ended December 31,
1999 increased by $0.8 million compared to the same period in the prior year.
The increase was primarily attributable to interest income resulting from higher
average cash balances during the more recent period.

YEARS ENDED DECEMBER 31, 1998 AND 1997

REVENUES

     Our total revenues were $3.4 million in 1998 and were comprised of the
first commercial sales of software products and related services fees from
implementation, training and support. Product license revenues were $2.2 million
in 1998. Services revenues were $1.2 million in 1998. For 1998, product license
revenues and services revenues accounted for 66% and 34% of revenues,
respectively. We did not recognize any revenues in 1997.

                                       34
<PAGE>   35

     In 1998, Autodesk, Charles Schwab, Hewlett-Packard, KPMG and Macromedia,
accounted for 30%, 17%, 16%, 11% and 11% of total revenues, respectively.

COST OF REVENUES

     Cost of revenues was $1.4 million in 1998. Cost of services revenues as a
percentage of services revenues was 120%. Cost of services revenues in 1998
resulted primarily from the hiring of employees and, to a lesser extent, the
subcontracting of consulting organizations to support customer demand for
consulting and maintenance services. We did not have any revenues in 1997 and
thus had no cost of revenues in 1997.

OPERATING EXPENSES

  Research and Development

     Research and development expenses increased to $3.8 million, or 112% of
total revenues, in 1998 from $1.6 million in 1997. The increase in research and
development expenses was related primarily to an increase in the number of
employees engaged in research and development to support the development of new
products.

  Sales and Marketing

     Sales and marketing expenses increased to $6.5 million, or 193% of total
revenues, in 1998 from $1.2 million in 1997. The increase in sales and marketing
expenses resulted primarily from building a direct sales force and investing in
sales and marketing infrastructure which included significant personnel-related
expenses, recruiting fees, travel expenses, and related facility and equipment
costs, as well as increased marketing activities, including trade shows, public
relations, direct mail campaigns and other promotional expenses.

  General and Administrative

     General and administrative expenses increased to $1.5 million, or 45% of
total revenues, in 1998 from $0.4 million in 1997. The increase in dollar amount
of general and administrative expenses resulted primarily from the addition of
executive, finance and administrative personnel to support the growth of our
business.

  Stock-Based Compensation

     We recorded aggregate deferred compensation of $3.2 million in 1998 related
to stock transactions with employees. Of the deferred compensation, $0.7 million
was amortized in 1998. Total stock-based compensation was $0.8 million in 1998.

INTEREST INCOME, NET

     Interest income, net of interest expense, increased to $0.3 million from
$0.1 million as a result of higher interest income due to higher average cash
balances related to capital financing activities, partially offset by higher
interest expense due to bank borrowings.

PROVISION FOR INCOME TAXES

     From inception through December 31, 1999, we incurred net losses for
federal and state tax purposes and have not recognized any tax provision or
benefit. As of December 31, 1999, we had $47.2 million of federal and state net
operating loss carryforwards to offset future taxable income. The federal net
operating loss carryforwards begin to expire on varying dates beginning in 2012
through 2019 and the state operating loss carryforwards begin to expire in 2004.
Given our limited operating history, our losses incurred to date and the
difficulty in accurately forecasting our future results, management does not
believe that the realization of the related deferred income tax asset meets the
criteria required by generally accepted accounting principles. Therefore, we
have recorded a 100% valuation allowance against the deferred income tax asset.
See Note 7 of Notes to E.piphany's Financial Statements for the components of
the deferred income tax asset.

                                       35
<PAGE>   36

LIQUIDITY AND CAPITAL RESOURCES

     Net cash used in operating activities totaled $17.8 million and $8.7
million for the years ended December 31, 1999 and 1998, respectively. Cash used
in operating activities for each period resulted primarily from net losses in
those periods, and to a lesser extent, increases in accounts receivable. These
uses of cash were partially offset by increases in accrued liabilities and
deferred revenue.

     Net cash used in investing activities totaled $25.9 million and $1.1
million for the years ended December 31, 1999 and 1998, respectively. The
increase resulted primarily from the purchase of short term investments and to a
lesser extent, purchases of furniture and equipment, consisting largely of
computer servers and workstations.

     Net cash provided by financing activities totaled $88.2 million and $23.0
million for the years ended December 31, 1999 and 1998, respectively. The
increase was due primarily to the receipt of proceeds from our recently
completed initial public offering.

     At December 31, 1999, we had $58.1 million in cash and cash equivalents and
$22.9 million in short-term investments. We have a $3.0 million term loan under
a senior credit facility that is repayable ratably over a 36 month period
beginning March 1, 2000. The term loan bears variable interest at the bank's
prime rate plus 0.5%, currently 9.0%. As of December 31, 1999, we had borrowed
$3.0 million against this term loan. This loan is secured by essentially all of
our assets and was paid in full during January 2000.

     In addition, we have a subordinated debt facility with Comdisco, Inc. under
which we are entitled to borrow up to $10.0 million, of which $5.0 million was
outstanding as of December 31, 1999, over 42 months beginning June 1999 at a
fixed interest rate of 10.0%. All borrowings under the subordinated facility are
secured by essentially all of our assets after the rights of senior creditors,
and we cannot maintain more than $5.0 million of senior debt without approval of
the lender. This loan was paid in full during January 2000. We also have a $2.0
million equipment lease line with Comdisco. Under the equipment lease line, we
are entitled to lease equipment with payment terms extending over 42 months. The
ability to lease new equipment expires on May 31, 2000 and borrowings bear
interest at 8.5% for the first six months of the lease, and 8.0% thereafter.

     As of December 31, 1999, our principal sources of liquidity included $58.1
million of cash and cash equivalents and $22.9 million in short-term
investments. In addition, we completed a secondary offering on January 20, 2000
which generated net proceeds of approximately $356 million. We anticipate a
substantial increase in our capital expenditures consistent with anticipated
growth in operations, infrastructure and personnel, including the acquisition
and the addition of RightPoint employees in January, 2000. We believe that our
current cash and cash equivalents and short-term investments will be sufficient
to meet our anticipated liquidity needs for working capital and capital
expenditures for at least 12 months. If we require additional capital resources
to grow our business internally or to acquire complementary technologies and
businesses at any time in the future, we may seek to sell additional equity or
debt securities or secure an additional bank line of credit. The sale of
additional equity or convertible debt securities could result in additional
dilution to our stockholders. We cannot assure you that any financing
arrangements will be available in amounts or on terms acceptable to us in the
future.

RECENT ACCOUNTING PRONOUNCEMENTS

     In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which requires companies to
record derivative financial instruments on their balance sheets as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. The key criterion
for hedge accounting is that the hedging relationship must be highly effective
in achieving offsetting changes in fair value or cash flows. In June 1999, the
FASB issued SFAS No. 137, "Accounting For Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133," which
amends SFAS No. 133 to be effective for all fiscal quarters or all fiscal years
beginning after

                                       36
<PAGE>   37

June 15, 2000, or January 1, 2001 for us. We believe that this statement will
not have a material impact on the financial condition or results of our
operations.

     In December 1998, the AICPA issued Statement of Position (SOP) 98-9,
"Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain
Transactions." SOP 98-9 amends SOP 97-2 and SOP 98-4 by extending the deferral
of the application of some provisions of SOP 97-2 amended by SOP 98-4 through
fiscal years beginning on or before March 15, 1999. All other provisions of SOP
98-9 are effective for transactions entered into in fiscal years beginning after
March 15, 1999. We do not anticipate that this statement will have a material
adverse impact on our statement of operations.

     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 applying generally accepted accounting
principles to revenue issues in financial statements. We will adopt SAB 101 as
required in the first quarter of 2000. We do not expect the adoption of SAB 101
to have a material impact on our consolidated results of operations and
financial position.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

  Foreign Currency Exchange Rate Risk

     To date, all of our recognized revenues have been denominated in U.S.
dollars and primarily from customers in the United States, and our exposure to
foreign currency exchange rate changes has been immaterial. We expect, however,
that future product license and services revenues may also be derived from
international markets and may be denominated in the currency of the applicable
market. As a result, our operating results may become subject to significant
fluctuations based upon changes in the exchange rates of certain currencies in
relation to the U.S. dollar. Furthermore, to the extent that we engage in
international sales 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 international markets. Although we will continue to monitor our
exposure to currency fluctuations, and, when 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 adversely affect
our financial results in the future.

  Interest Rate Risk

     As of December 31, 1999, we had cash and cash equivalents of $58.1 million
which consist of cash and highly liquid short-term investments. Declines of
interest rates over time will reduce our interest income from our short-term
investments. Based upon our balance of cash and cash equivalents, a decrease in
interest rates of 0.5% would cause a corresponding decrease in our annual
interest income by approximately $291,000. As of December 31, 1999, we had total
short term and long term debt outstanding of $894,000 and $2,425,000,
respectively, which contain interest rates that are tied to the prime rate.
Therefore, we are subject to exposure to interest rate risk for these borrowings
based on fluctuations in the prime rate.

                                       37
<PAGE>   38

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                E.PIPHANY, INC.

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S>                                                           <C>
Report of Independent Public Accountants....................   39
Balance Sheets..............................................   40
Statements of Operations....................................   41
Statement of Stockholders' Equity and Comprehensive Loss....   42
Statements of Cash Flows....................................   43
Notes to Financial Statements...............................   44
</TABLE>

                                       38
<PAGE>   39

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To E.piphany, Inc.:

     We have audited the accompanying balance sheets of E.piphany, Inc. (a
Delaware corporation) as of December 31, 1998 and 1999, and the related
statements of operations, stockholders' equity and comprehensive loss, and cash
flows for each of the three years in the period ended December 31, 1999. These
financial statements are the responsibility of E.piphany's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards 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. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of E.piphany, Inc. as of
December 31, 1998 and 1999, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States.

                                          ARTHUR ANDERSEN LLP

San Jose, California
January 7, 2000

                                       39
<PAGE>   40

                                E.PIPHANY, INC.

                                 BALANCE SHEETS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                1998        1999
                                                              --------    --------
<S>                                                           <C>         <C>
Current assets:
  Cash and cash equivalents.................................  $ 13,595    $ 58,084
  Short-term investments....................................        --      22,926
  Accounts receivable, net of allowance for doubtful
     accounts of $30 and $300, respectively.................     1,243       5,502
  Prepaid expenses and other current assets.................       354       2,959
                                                              --------    --------
          Total current assets..............................    15,192      89,471
Property and equipment, net.................................     1,172       3,932
Other assets................................................        --         183
                                                              --------    --------
                                                              $ 16,364    $ 93,586
                                                              ========    ========
                       LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion of capital lease obligations..............  $     --    $    237
  Current portion of notes payable..........................       167         894
  Accounts payable..........................................     1,015         650
  Accrued liabilities.......................................     1,028       5,696
  Deferred revenue..........................................       381       3,643
                                                              --------    --------
          Total current liabilities.........................     2,591      11,120
  Capital lease obligations, net of current portion.........        --         399
  Notes payable, net of current portion.....................       333       7,425
                                                              --------    --------
          Total liabilities.................................     2,924      18,944
                                                              --------    --------
Commitments (Note 4)
Stockholders' equity:
  Series A - D convertible preferred stock, $0.0001 par
     value;
     Authorized -- 12,703 shares in 1998 and 0 shares in
      1999
     Outstanding -- 10,623 shares in 1998 and 0 in 1999.....         3          --
  Convertible preferred stock, $0.0001 par value;
     Authorized -- 5,000 in 1999
     Outstanding -- none....................................        --          --
  Common stock, $0.0001 par value;
     Authorized -- 100,000 in 1999
     Outstanding -- 8,913 shares in 1998 and 27,049 shares
      in 1999...............................................         2           5
  Additional paid-in capital................................    30,030     113,636
  Warrants..................................................        --         143
  Note receivable...........................................      (640)       (640)
  Accumulated and other comprehensive income (loss).........        --         (31)
  Deferred compensation.....................................    (2,476)     (2,602)
  Accumulated deficit.......................................   (13,479)    (35,869)
                                                              --------    --------
          Total stockholders' equity........................    13,440      74,642
                                                              --------    --------
                                                              $ 16,364    $ 93,586
                                                              ========    ========
</TABLE>

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

                                       40
<PAGE>   41

                                E.PIPHANY, INC.

                            STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                               1997        1998        1999
                                                              -------    --------    --------
<S>                                                           <C>        <C>         <C>
Revenues:
  Product license...........................................  $    --    $  2,216    $ 10,161
  Services..................................................       --       1,161       9,021
                                                              -------    --------    --------
                                                                   --       3,377      19,182
                                                              -------    --------    --------
Cost of revenues:
  Product license...........................................       --           4         158
  Services..................................................       --       1,396       9,191
                                                              -------    --------    --------
                                                                   --       1,400       9,349
                                                              -------    --------    --------
     Gross profit...........................................       --       1,977       9,833
                                                              -------    --------    --------
Operating expenses:
  Research and development..................................    1,646       3,769       7,074
  Sales and marketing.......................................    1,200       6,519      18,727
  General and administrative................................      373       1,503       4,576
  Stock-based compensation..................................        1         799       2,929
                                                              -------    --------    --------
          Total operating expenses..........................    3,220      12,590      33,306
                                                              -------    --------    --------
     Loss from operations...................................   (3,220)    (10,613)    (23,473)
                                                              -------    --------    --------
Other income (expense):
  Interest income...........................................       71         333       1,722
  Interest expense..........................................       --         (48)       (639)
  Other.....................................................       --          (2)         --
                                                              -------    --------    --------
          Total other income................................       71         283       1,083
                                                              -------    --------    --------
     Net loss...............................................  $(3,149)   $(10,330)   $(22,390)
                                                              =======    ========    ========
Basic and diluted net loss per share........................  $ (2.90)   $  (4.50)   $  (2.19)
                                                              =======    ========    ========
Shares used in computing basic and diluted net loss per
  share.....................................................    1,087       2,299      10,247
                                                              =======    ========    ========
Pro forma basic and diluted net loss per share
  (unaudited)...............................................             $  (1.07)   $  (1.23)
                                                                         ========    ========
Shares used in computing pro forma basic and diluted net
  loss per share (unaudited)................................                9,694      18,201
                                                                         ========    ========
</TABLE>

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

                                       41
<PAGE>   42

                                E.PIPHANY, INC.

           STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                      CONVERTIBLE          COMMON                                              ACCUMULATED
                                    PREFERRED STOCK         STOCK        ADDITIONAL                             AND OTHER
                                    ----------------   ---------------    PAID-IN                   NOTE      COMPREHENSIVE
                                    SHARES    AMOUNT   SHARES   AMOUNT    CAPITAL     WARRANTS   RECEIVABLE   INCOME (LOSS)
                                    -------   ------   ------   ------   ----------   --------   ----------   -------------
<S>                                 <C>       <C>      <C>      <C>      <C>          <C>        <C>          <C>
  Issuance of common stock........       --     --      5,600    $ 1      $      2     $  --       $  --          $ --
  Exercise of common stock
    options.......................       --     --          8     --             1        --          --            --
  Issuance of common stock in
    exchange for services.........       --     --         11     --             1        --          --            --
  Issuance of Series A preferred
    stock, net....................    3,228      1         --     --         3,611        --          --            --
  Comprehensive loss:
    Net loss......................       --     --         --     --            --        --          --            --
                                    -------    ---     ------    ---      --------     -----       -----          ----
        Total comprehensive
          loss....................
Balance, December 31, 1997........    3,228      1      5,619      1         3,615        --          --            --
  Issuance of Series B preferred
    stock, net....................    3,229      1         --     --         8,019        --          --            --
  Sale of common stock to Series B
    investors.....................       --     --        250     --            62        --          --            --
  Issuance of common stock to
    officer.......................       --     --      1,600     --           640        --        (640)           --
  Issuance of common stock in
    exchange for services.........       --     --         60     --            36        --          --            --
  Issuance of Series C preferred
    stock, net....................    4,160      1         --     --        13,992        --          --            --
  Exercise of common stock
    options.......................       --     --      1,540      1           488        --          --            --
  Repurchase of stock.............       --     --       (156)    --           (70)       --          --            --
  Issuance of Series C preferred
    stock in exchange for
    services......................        6     --         --     --            20        --          --            --
  Stock-based compensation........       --     --         --     --            11        --          --            --
  Deferred stock compensation.....       --     --         --     --         3,217        --          --            --
  Amortization of deferred stock
    compensation..................       --     --         --     --            --        --          --            --
  Comprehensive loss:
    Net loss......................       --     --         --     --            --        --          --            --
                                    -------    ---     ------    ---      --------     -----       -----          ----
        Total comprehensive
          loss....................
Balance, December 31, 1998........   10,623      3      8,913      2        30,030        --        (640)           --
  Exercise of common stock
    options.......................       --     --      1,522     --         2,579        --          --            --
  Issuance of stock options in
    exchange for services.........       --     --         --     --           388        --          --            --
  Issuance of Series D preferred
    stock, net....................      937     --         --     --         5,970        --          --            --
  Issuance of warrants............       --     --         --     --            --       532          --            --
  Repurchase of stock.............       --     --       (172)    --           (10)       --          --            --
  Issuance of stock related to
    leases and debt financing.....       --     --          6     --           100        --          --            --
  Issuance of common stock in
    initial public offering,
    net...........................       --     --      4,773     --        69,598        --          --            --
  Conversion of preferred stock...  (11,560)    (3)    11,560      3            --        --          --            --
  Exercise of warrants............       --     --        447     --         2,315      (389)         --            --
  Acceleration of common stock
    option vesting................       --     --         --     --            47        --          --            --
  Deferred stock compensation.....       --     --         --     --         2,619        --          --            --
  Amortization of deferred stock
    compensation..................       --     --         --     --            --        --          --            --
  Comprehensive loss:
    Unrealized loss on
      investments.................       --     --         --     --            --        --          --           (31)
    Net loss......................       --     --         --     --            --        --          --            --
                                    -------    ---     ------    ---      --------     -----       -----          ----
        Total comprehensive
          loss....................
Balance, December 31, 1999........       --    $--     27,049    $ 5      $113,636     $ 143       $(640)         $(31)
                                    =======    ===     ======    ===      ========     =====       =====          ====

<CAPTION>

                                                                     TOTAL
                                      DEFERRED     ACCUMULATED   STOCKHOLDERS'   COMPREHENSIVE
                                    COMPENSATION     DEFICIT        EQUITY           LOSS
                                    ------------   -----------   -------------   -------------
<S>                                 <C>            <C>           <C>             <C>
  Issuance of common stock........    $    --       $     --       $      3
  Exercise of common stock
    options.......................         --             --              1
  Issuance of common stock in
    exchange for services.........         --             --              1
  Issuance of Series A preferred
    stock, net....................         --             --          3,612
  Comprehensive loss:
    Net loss......................         --         (3,149)        (3,149)       $ (3,149)
                                      -------       --------       --------        --------
        Total comprehensive
          loss....................                                                 $ (3,149)
                                                                                   ========
Balance, December 31, 1997........         --         (3,149)           468
  Issuance of Series B preferred
    stock, net....................         --             --          8,020
  Sale of common stock to Series B
    investors.....................         --             --             62
  Issuance of common stock to
    officer.......................         --             --             --
  Issuance of common stock in
    exchange for services.........         --             --             36
  Issuance of Series C preferred
    stock, net....................         --             --         13,993
  Exercise of common stock
    options.......................         --             --            489
  Repurchase of stock.............         --             --            (70)
  Issuance of Series C preferred
    stock in exchange for
    services......................         --             --             20
  Stock-based compensation........         --             --             11
  Deferred stock compensation.....     (3,217)            --             --
  Amortization of deferred stock
    compensation..................        741             --            741
  Comprehensive loss:
    Net loss......................         --        (10,330)       (10,330)       $(10,330)
                                      -------       --------       --------        --------
        Total comprehensive
          loss....................                                                 $(10,330)
                                                                                   ========
Balance, December 31, 1998........     (2,476)       (13,479)        13,440
  Exercise of common stock
    options.......................         --             --          2,579
  Issuance of stock options in
    exchange for services.........         --             --            388
  Issuance of Series D preferred
    stock, net....................         --             --          5,970
  Issuance of warrants............         --             --            532
  Repurchase of stock.............         --             --            (10)
  Issuance of stock related to
    leases and debt financing.....         --             --            100
  Issuance of common stock in
    initial public offering,
    net...........................         --             --         69,598
  Conversion of preferred stock...         --             --             --
  Exercise of warrants............         --             --          1,926
  Acceleration of common stock
    option vesting................         --             --             47
  Deferred stock compensation.....     (2,619)            --             --
  Amortization of deferred stock
    compensation..................      2,493             --          2,493
  Comprehensive loss:
    Unrealized loss on
      investments.................         --             --            (31)       $    (31)
    Net loss......................         --        (22,390)       (22,390)        (22,390)
                                      -------       --------       --------        --------
        Total comprehensive
          loss....................                                                 $(22,421)
                                                                                   ========
Balance, December 31, 1999........    $(2,602)      $(35,869)      $ 74,642
                                      =======       ========       ========
</TABLE>

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

                                       42
<PAGE>   43

                                E.PIPHANY, INC.

                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                              -------------------------------
                                                               1997        1998        1999
                                                              -------    --------    --------
<S>                                                           <C>        <C>         <C>
Cash flows from operating activities:
Net loss....................................................  $(3,149)   $(10,330)   $(22,390)
  Adjustments to reconcile net loss to net cash used in
     operating activities:
     Depreciation...........................................       47         269         908
     Allowance for doubtful accounts........................       --          30         270
     Loss on sale of property and equipment.................        9          --          --
     Noncash compensation expense...........................        1         799       2,929
     Noncash interest expense...............................       --          --          86
     Changes in operating assets and liabilities:
       Accounts receivable..................................      (16)     (1,257)     (4,529)
       Prepaid expenses and other assets....................      (79)       (275)     (2,628)
       Accounts payable.....................................      117         898        (365)
       Accrued liabilities..................................      140         888       4,668
       Deferred revenue.....................................       76         305       3,262
                                                              -------    --------    --------
          Net cash used in operating activities.............   (2,854)     (8,673)    (17,789)
                                                              -------    --------    --------
Cash flows from investing activities:
  Purchase of property and equipment........................     (408)     (1,104)     (2,952)
  Proceeds from the sale of property and equipment..........       15          --          --
  Purchases of short-term investments.......................       --          --     (22,957)
                                                              -------    --------    --------
          Net cash used in investing activities.............     (393)     (1,104)    (25,909)
                                                              -------    --------    --------
Cash flows from financing activities:
  Borrowings................................................       --         500       8,000
  Repayments on line of credit..............................       --          --        (181)
  Principal payments on capital lease obligations...........       --          --         (81)
  Proceeds from initial public offering of common stock,
     net....................................................       --          --      69,598
  Proceeds from exercise of warrant.........................       --          --       2,250
  Net proceeds from issuance of convertible preferred
     stock..................................................    3,612      22,033       5,970
  Issuance of common stock..................................        4         470       2,631
                                                              -------    --------    --------
          Net cash provided by financing activities.........    3,616      23,003      88,187
                                                              -------    --------    --------
Net increase in cash and cash equivalents...................      369      13,226      44,489
Cash and cash equivalents at beginning of period............       --         369      13,595
                                                              -------    --------    --------
Cash and cash equivalents at end of period..................  $   369    $ 13,595    $ 58,084
                                                              =======    ========    ========
Supplemental cash flow information:
  Cash paid for interest....................................  $    --    $     48    $    487
                                                              =======    ========    ========
Non-cash transactions:
  Loan to officer to purchase stock.........................  $    --    $    640    $     --
                                                              =======    ========    ========
  Equipment acquired under capital lease....................  $    --    $     --    $    716
                                                              =======    ========    ========
</TABLE>

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

                                       43
<PAGE>   44

                                E.PIPHANY, INC.

                         NOTES TO FINANCIAL STATEMENTS

 1. ORGANIZATION AND OPERATIONS

     E.piphany, Inc. ("E.piphany" or the "Company"), formerly Epiphany Marketing
Software, Inc., was incorporated in Delaware in November 1996, and develops and
markets software that companies can use to establish, maintain and continually
improve customer relationships across both Internet and traditional sales,
marketing and distribution channels. In 1997, E.piphany was in the development
stage and was primarily engaged in obtaining equity financing and performing
research and development activities. Although E.piphany began actively selling
its products in 1998 and no longer considers itself to be in the development
stage, it has not operated profitably to date and there are no assurances that
it will operate profitably in the future.

     E.piphany has incurred net operating losses since inception and, as of
December 31, 1999, had an accumulated deficit of $35.9 million. E.piphany is
subject to various risks associated with companies in a comparable stage of
development, including having a limited operating history; competition from
substitute products and larger competitors; dependence on a limited number of
customers; dependence on key individuals; and the ability to obtain adequate
financing to support its growth.

 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates in Preparation of Financial Statements

     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 the reported amounts of expenses during the reporting period.
Actual results could differ from those estimates.

  Statements of Cash Flows

     For purposes of the statements of cash flows, E.piphany considers all
highly liquid investments purchased with original maturities of three months or
less to be cash equivalents. Cash equivalents consist of amounts on deposit at a
commercial bank and investments in commercial paper and other securities.

  Concentration of Credit Risk and Significant Customers

     E.piphany provides credit to its customers in the normal course of
business, performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses which, to date, have not been material.

     Sales to significant customers as a percentage of total revenues were as
follows:

<TABLE>
<CAPTION>
                                                      YEARS ENDED
                                                      DECEMBER 31,
                                                  --------------------
                                                  1997    1998    1999
                                                  ----    ----    ----
<S>                                               <C>     <C>     <C>
Customer A......................................  --       30%     --
Customer B......................................  --       17%     --
Customer C......................................  --       16%     --
Customer D......................................  --       11%     --
Customer E......................................  --       11%     --
Customer F......................................  --       --      11%
</TABLE>

     In September 1998, the President and Chief Executive Officer of E.piphany
was elected to the board of directors of Customer D. E.piphany recognized
$357,000 and $273,000 in revenue from this customer in 1998 and 1999,
respectively, and had $146,000 and $118,000 in accounts receivable due from
Customer D at December 31, 1998 and 1999, respectively. The majority of the
agreements relating to this revenue were

                                       44
<PAGE>   45
                                E.PIPHANY, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

entered into before the chief executive officer was employed by E.piphany or
elected to Customer D's board of directors.

     The President and Chief Executive Officer of E.piphany is a member of the
board of directors of an additional customer. E.piphany recognized a total of
$296,000 in revenue from this customer in 1999, and had a total of $280,000 in
accounts receivable at December 31, 1999 from this customer. An outside director
of E.piphany is also a member of the board of directors of this customer.

     An outside director of E.piphany is a member of the board of directors of
two additional customers. E.piphany recognized $233,000 and $704,000 in revenue
from these customers in 1998 and 1999, and had a total of $57,000 and $112,000
in accounts receivable as of December 31, 1998 and 1999, respectively. The first
agreement with one of these customers was entered into before the outside
director was elected to E.piphany's board of directors.

  Property and Equipment

     Property and equipment are stated at cost. Depreciation is computed using
the straight-line method based on estimated useful lives, generally three to
five years. Depreciation expense is included in operating expenses.

     Property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                             ----------------
                                                              1998      1999
                                                             ------    ------
<S>                                                          <C>       <C>
Computer software and equipment............................  $1,329    $4,959
Furniture and fixtures.....................................     159       197
                                                             ------    ------
                                                              1,488     5,156
Less: Accumulated depreciation.............................    (316)   (1,224)
                                                             ------    ------
                                                             $1,172    $3,932
                                                             ======    ======
</TABLE>

     Included in property and equipment are assets acquired under capital leases
with original cost of approximately $715,000 as of December 31, 1999.
Accumulated amortization on the leased assets is approximately $106,000 as of
December 31, 1999.

     Future minimum lease payments on capital leases are as follows at December
31, 1999 (in thousands):

<TABLE>
<CAPTION>
                 YEARS ENDING DECEMBER 31,
                 -------------------------
<S>                                                           <C>
2000........................................................  $ 272
2001........................................................    233
2002........................................................    149
2003........................................................     24
                                                              -----
Total minimum lease payments................................    678
Less: Imputed interest (10.0%)..............................    (42)
                                                              -----
Present value of payments under capital leases..............    636
Less: Current portion.......................................   (237)
                                                              -----
Long-term capital lease obligations.........................  $ 399
                                                              =====
</TABLE>

  Software Development Costs

     Software development costs incurred prior to the establishment of
technological feasibility are included in research and development expenses.
E.piphany defines establishment of technological feasibility as the completion
of a working model. Software development costs incurred subsequent to the
establishment of technological feasibility through the period of general market
availability of the products are capitalized, if

                                       45
<PAGE>   46
                                E.PIPHANY, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

material, after consideration of various factors, including net realizable
value. To date, software development costs that are eligible for capitalization
have not been material and have been expensed.

  Accrued Liabilities

     Accrued liabilities consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                             ----------------
                                                              1998      1999
                                                             ------    ------
<S>                                                          <C>       <C>
Accrued professional services..............................  $  158    $  603
Accrued sales tax..........................................      93        20
Accrued payroll............................................     249        --
Accrued vacation...........................................     153       739
Accrued commissions and bonus..............................     212     1,877
Accrued marketing expenses.................................      --       660
Accrued ESPP...............................................      --       888
Accrued other..............................................     163       909
                                                             ------    ------
                                                             $1,028    $5,696
                                                             ======    ======
</TABLE>

  Stock-Based Compensation

     The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," in October 1995. This accounting standard permits the use of
either a fair value based method of accounting or the method defined in
Accounting Principles Board Opinion 25 ("APB 25"), "Accounting for Stock Issued
to Employees" to account for stock-based compensation arrangements. Companies
that elect to employ the method proscribed by APB 25 are required to disclose
the pro forma net income (loss) that would have resulted from the use of the
fair value based method. E.piphany has elected to continue to account for its
stock-based compensation arrangements under the provisions of APB 25, and
accordingly, has included in Note 6 the pro forma disclosures required under
SFAS No. 123.

  Revenue Recognition

     E.piphany generates several types of revenue including the following:

     License Fees. E.piphany's standard end user license agreement for
E.piphany's products provides for an initial fee to use the product in
perpetuity up to a maximum number of users. E.piphany also enters into other
license agreement types, which allow for the use of E.piphany's products,
usually restricted by the number of employees, the number of users, or the
license term. Fees from licenses are recognized as revenue upon contract
execution, provided all shipment obligations have been met, fees are fixed or
determinable, collection is probable, and vendor specific objective evidence
exists to allocate the total fee between all elements of the arrangement. Fees
from license agreements which include the right to receive unspecified future
products are recognized over the term of the arrangement or, if not specified,
the estimated economic life of the product.

     When licenses are sold together with consulting and implementation
services, license fees are recognized upon shipment, provided that (1) the above
criteria have been met, (2) payment of the license fees is not dependent upon
the performance of the consulting services, and (3) the services do not include
significant alterations to the features and functionality of the software. To
date, services have been essential to the functionality of the software products
for substantially all license agreements entered into which included
implementation services. For these arrangements and other arrangements which
don't meet the above criteria, both the product license revenues and services
revenues are recognized in accordance with the provisions of

                                       46
<PAGE>   47
                                E.PIPHANY, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Statement of Position ("SOP") 81-1, "Accounting for Performance of Construction
Type and Certain Production Type Contracts." When reliable estimates are
available for the costs and efforts necessary to complete the implementation
services, the Company accounts for the arrangements under the percentage
completion contract method pursuant to SOP 81-1. When such estimates are not
available, the completed contract method is utilized. License revenue recognized
pursuant to SOP 81-1 comprised 76% and 66% of total product revenue for the
years ended December 31, 1998 and 1999, respectively.

     E.piphany provides for sales returns based on historical rates of return
which, to date, have not been material.

     Maintenance Agreements. Maintenance agreements generally call for E.piphany
to provide technical support and software updates to customers. Revenue on
technical support and software update rights is recognized ratably over the term
of the maintenance agreement and is included in services revenue in the
accompanying statements of operations.

     Consulting, Implementation and Training Services. E.piphany provides
consulting, implementation and training services to its customers. Revenue from
such services, when not sold in conjunction with product licenses, is generally
recognized as the services are performed.

     As of December 31, 1999, $545,000 of accounts receivable was unbilled due
to services performed in advance of billings.

  Advertising Costs

     The Company expenses all advertising costs as incurred. The Company does
not incur any direct-response advertising costs.

  Comprehensive Income (Loss)

     In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which E.piphany adopted beginning on January 1, 1998. SFAS No. 130
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. The objective
of SFAS No. 130 is to report a measure of all changes in equity of an enterprise
that results from transactions and other economic events of the period other
than transactions with shareholders ("comprehensive income"). Comprehensive
income is the total of net income and all other non-owner changes in equity. For
each of the three years ended December 31, 1999, E.piphany's comprehensive
income did not differ materially from reported net loss.

  Computation of Basic and Diluted Net Loss Per Share and Pro Forma Basic and
  Diluted Net Loss Per Share

     Basic and diluted net loss per common share are presented in conformity
with SFAS No. 128, "Earnings Per Share," for all periods presented. In
accordance with SFAS No. 128, basic net loss per common share has been computed
using the weighted average number of shares of common stock outstanding during
the period, less shares subject to repurchase. Basic and diluted pro forma net
loss per common share, as presented in the statements of operations, has been
computed as described above and also gives effect to the conversion of the
convertible preferred stock (using the if-converted method) from the original
date of issuance (in thousands, except per share amounts).

                                       47
<PAGE>   48
                                E.PIPHANY, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                 YEARS ENDED DECEMBER 31,
                                              -------------------------------
                                               1997        1998        1999
                                              -------    --------    --------
<S>                                           <C>        <C>         <C>
Net loss....................................  $(3,149)   $(10,330)   $(22,390)
                                              =======    ========    ========
Basic and diluted:
  Weighted average shares of common stock
     outstanding............................    5,486       7,235      14,216
Less: Weighted average shares subject to
  repurchase................................   (4,399)     (4,936)     (3,969)
                                              -------    --------    --------
Weighted average shares used in computing
  basic and diluted net loss per common
  share.....................................    1,087       2,299      10,247
                                              =======    ========    ========
  Basic and diluted net loss per common
     share..................................  $ (2.90)   $  (4.50)   $  (2.19)
                                              =======    ========    ========
  Net loss..................................             $(10,330)   $(22,390)
                                                         ========    ========
Shares used above...........................                2,299      10,247
Pro forma adjustment to reflect weighted
  effect of assumed conversion of
  convertible preferred stock (unaudited)...                7,395       7,954
                                                         --------    --------
Shares used in computing pro forma basic and
  diluted net loss per common share
  (unaudited)...............................                9,694      18,201
                                                         --------    --------
Pro forma basic and diluted net loss per
  common share (unaudited)..................             $  (1.07)   $  (1.23)
                                                         ========    ========
</TABLE>

     E.piphany has excluded all convertible preferred stock, warrants for
convertible preferred stock, outstanding stock options, and shares subject to
repurchase from the calculation of diluted net loss per common share because all
such securities are antidilutive for all periods presented. The total number of
shares excluded from the calculations of diluted net loss per share were
approximately 8,124,000, 14,952,000, and 16,256,000 for the years ended December
31, 1997, 1998 and 1999, respectively. See Note 6 for further information on
these securities.

  Segment Reporting

     During 1998, E.piphany adopted SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 requires a new basis of
determining reportable business segments (i.e., the management approach). This
approach requires that business segment information used by management to assess
performance and manage company resources be the source for segment information
disclosure. On this basis, E.piphany is organized and operates as one business
segment, the design, development, and marketing of software solutions.

     During the years ended December 31, 1997, 1998 and 1999, E.piphany did not
generate significant revenues in foreign countries and did not have any material
assets in foreign countries.

  Recent Accounting Pronouncements

     In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which requires companies to record
derivative financial instruments on the balance sheet as assets or liabilities,
measured at fair value. Gains or losses resulting from changes in the values of
those derivatives would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. The key criterion for hedge
accounting is that the hedging relationship must be highly effective in
achieving offsetting changes in fair value or cash flows. In June 1999, the FASB
issued SFAS No. 137, "Accounting For Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133," which
amends SFAS No. 133 to be effective for all fiscal quarters of all fiscal years
beginning after

                                       48
<PAGE>   49
                                E.PIPHANY, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

June 15, 2000 (or January 1, 2001 for E.piphany). Management believes that this
Statement will not have a material impact on the financial condition or results
of the operations of E.piphany.

     In December 1998, the AICPA issued Statement of Position ("SOP") 98-9,
"Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain
Transactions." SOP 98-9 amends SOP 97-2 and SOP 98-4 by extending the deferral
of the application of certain provisions of SOP 97-2 amended by SOP 98-4 through
fiscal years beginning on or before March 15, 1999. All other provisions of SOP
98-9 are effective for transactions entered into in fiscal years beginning after
March 15, 1999. E.piphany does not anticipate that this statement will have a
material impact on its statement of operations.

     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 applying generally accepted accounting
principles to revenue recognition issues in financial statements. We will adopt
SAB 101 as required in the first quarter of 2000. We do not expect the adoption
of SAB 101 to have a material impact on our consolidated results of operations
and financial position.

 3. LONG-TERM DEBT

     E.piphany had the following long-term debt arrangements as of December 31
(in thousands):

<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                              ---------------
                                                              1998      1999
                                                              -----    ------
<S>                                                           <C>      <C>
Subordinated convertible debt facility for $10.0 million.
  Expires in February 2000. Borrowings bear interest at 10%
  and are payable in equal monthly installments of interest
  only through June 2001 and equal installments of principal
  and interest from June 2001 to December 2002..............  $  --    $5,000
Non-revolving equipment line of credit with a bank for $3.0
  million. Expires in March 2000 with all payments due March
  2003. Borrowings bear interest at the bank's prime rate
  plus 0.5% (9.0% at December 31, 1999).....................     --     3,000
Non-revolving equipment line of credit with a bank for $1.25
  million. Borrowings bear interest at the bank's prime rate
  plus 0.5% (9.0% at December 31, 1999) and are payable in
  monthly installments through September 2001...............    500       319
                                                              -----    ------
  Total borrowings outstanding..............................    500     8,319
  Less: current portion.....................................   (167)     (894)
                                                              -----    ------
          Total long-term debt..............................  $ 333    $7,425
                                                              =====    ======
</TABLE>

     All of the debt arrangements above are collateralized by substantially all
of E.piphany's assets. E.piphany must comply with certain covenants under some
of these arrangements including minimum deposits and liquidity ratios.

     The subordinated convertible debt facility lender had the option to convert
a portion of the outstanding borrowings under the facility to 351,563 shares of
E.piphany's Series C preferred stock at a price of $6.40 per share. The fair
value of the warrant at the date of issuance was determined to be $391,000 and
was estimated using the Black-Scholes model with the following assumptions:
risk-free interest rate of 5.6%; expected life of 0.25 years; and expected
volatility of 85%. This amount will be recognized as additional interest expense
over the term of this arrangement with the lender. As of December 31, 1999, this
warrant has been exercised.

                                       49
<PAGE>   50
                                E.PIPHANY, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     Borrowings outstanding as of December 31, 1999 are payable as follows (in
thousands):

<TABLE>
<S>                                   <C>
2000................................  $  894
2001................................   2,759
2002................................   4,416
2003................................     250
                                      ------
                                      $8,319
                                      ======
</TABLE>

 4. COMMITMENTS

     E.piphany leases certain equipment and its facilities under operating lease
agreements. The leases expire at various dates through 2004. Future minimum
lease payments under these leases as of December 31, 1999 are as follows (in
thousands):

<TABLE>
<CAPTION>
      YEAR ENDED DECEMBER 31,
      -----------------------
<S>                                   <C>
2000................................  $2,303
2001................................   2,331
2002................................   1,833
2003................................   1,458
2004................................     275
                                      ------
                                      $8,200
                                      ======
</TABLE>

     Total rent expense for the years ended December 31, 1997, 1998 and 1999,
was approximately $127,000, $610,000 and $1,220,000, respectively.

 5. PREFERRED STOCK

     Since inception, E.piphany has issued 11,560,000 shares of preferred stock.
These shares were converted to shares of common stock upon the closing of the
Company's initial public offering (IPO). All outstanding warrants to purchase
preferred stock are now exercisable for common stock. Upon the closing of the
IPO, E.piphany authorized 5,000,000 shares of undesignated preferred stock for
future issuance.

 6. COMMON STOCK

     During January and February 1997, E.piphany issued 5,600,000 shares of
common stock, under restricted stock purchase agreements, for $0.0005 per share
in exchange for cash. Pursuant to the restricted stock purchase agreements,
E.piphany has the right to repurchase the common stock at the original purchase
price. The repurchase right expires over a 48-month period. In July 1998,
E.piphany's chief executive officer purchased 1,600,000 shares of common stock
under a restricted stock purchase agreement in exchange for a promissory note
(see Note 8). Pursuant to the stock purchase agreement, E.piphany has the right
to repurchase the common stock at the original purchase price. The repurchase
right expires over a 48-month period. As of December 31, 1999, 1,189,583 shares
of common stock were subject to repurchase under these founders agreements. All
exercised but unvested stock options are also subject to repurchase by E.piphany
at the original purchase price. As of December 31, 1999 2,115,282 shares of
common stock were subject to repurchase under these stock options agreements.

     Effective upon the closing of the IPO, the number of authorized shares of
common stock was increased to 100,000,000 shares.

                                       50
<PAGE>   51
                                E.PIPHANY, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     As of December 31, 1999, E.piphany had reserved the following shares of
authorized but unissued common stock:

<TABLE>
<S>                                                           <C>
Stock options outstanding under the 1997 stock option
  plan......................................................  2,945,942
Stock options outstanding under the 1999 stock option
  plan......................................................    203,797
Stock options to be granted under the 1999 stock plan.......  3,410,816
Stock reserved for issuance under the 1999 employee stock
  purchase plan.............................................  2,000,000
Warrants....................................................     31,250
                                                              ---------
          Total shares reserved.............................  8,591,805
                                                              =========
</TABLE>

  Warrants

     In May 1997, E.piphany issued a warrant to purchase 22,124 shares of Series
A preferred stock at $1.13 per share in connection with obtaining a line of
credit. The fair value of the warrant at the date of issuance was estimated
using the Black-Scholes model with the following assumptions: risk-free interest
rate of 6.4%; expected life of 4 years; and expected volatility of 85%. The
value was determined to be immaterial. As of December 31, 1999, this warrant has
been exercised.

     In January 1998, E.piphany issued a warrant to purchase shares of Series B
preferred stock at $2.50 per share in connection with obtaining a line of credit
with a bank. The number of shares is calculated based on $97,500 plus a
percentage of borrowings under the revolving line of credit divided by the share
price. The fair value of the warrant at the date of issuance was estimated using
the Black-Scholes model with the following assumptions: risk-free interest rate
of 5.6%; expected life of 3 years; and expected volatility of 85%. The value was
determined to be immaterial. As of December 31, 1999, this warrant has been
exercised for 75,000 shares.

     In June 1999, E.piphany issued a warrant to purchase 31,250 shares of
Series C preferred stock at $3.38 per share in connection with obtaining an
equipment lease line. The warrant is exercisable immediately and expires in June
2009. The fair value of the warrant at the date of issuance was determined to be
$141,000 and was estimated using the Black-Scholes model with the following
assumptions: risk-free interest rate of 5.2%; expected life of 3 years; and
expected volatility of 85%. This amount will be recognized as additional
interest expense over the term of this arrangement with the lender.

     Upon the closing of the Company's IPO, all warrants to purchase preferred
stock converted to warrants to purchase common stock.

  Stock-Based Compensation

     In connection with the grant of certain stock options to employees during
the years ended December 31, 1998 and 1999, the Company recorded deferred
compensation of approximately $5.9 million, representing the difference between
the deemed value of the common stock for accounting purposes and the option
exercise price or stock sale price at the date of the option grant or stock
sale. Such amount is presented as a reduction of stockholders' equity and
amortized over the vesting period of the applicable options in a manner
consistent with FASB Interpretation No. 28. Approximately $0.7 million and $2.5
million was expensed during the years ended December 31, 1998 and 1999,
respectively. Compensation expense is decreased in the period of forfeiture for
any accrued but unvested compensation arising from the early termination of an
option holder's services.

     During the years ended December 31, 1997, 1998 and 1999, E.piphany recorded
stock-based compensation of $1,000, $58,000, and $435,000, respectively, related
to equity instruments issued to non-employees. Stock-based compensation related
to stock options to purchase common stock which are issued to non-

                                       51
<PAGE>   52
                                E.PIPHANY, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

employees is determined based upon the fair value at the date of issuance in
accordance with the provisions of SFAS No. 123.

  1999 Employee Stock Purchase Plan

     On June 30, 1999, the board of directors approved the adoption of
E.piphany's 1999 Employee Stock Purchase Plan (the "Purchase Plan"). A total of
2,000,000 shares of common stock have been reserved for issuance under the
Purchase Plan. The Purchase Plan permits eligible employees to purchase shares
of common stock through payroll deductions at 85% of the fair market value of
the common stock, as defined in the Purchase Plan. As of December 31, 1999, no
shares had been purchased.

  Initial Public Offering

     On September 21, 1999, E.piphany completed an IPO of 4,772,500 shares of
its common stock at a price of $16.00 per share and received net proceeds of
approximately $69.9 million.

  Stock Split

     On June 30, 1999, E.piphany's board of directors approved a 1-for-2 reverse
stock split of E.piphany's outstanding common and preferred shares which was
effective upon E.piphany's IPO. All share and per share information included in
these financial statements have been retroactively adjusted to reflect this
reverse stock split.

  Stock Options

     In 1997, E.piphany adopted the 1997 Stock Plan (the "1997 Plan") under
which incentive stock options and nonstatutory stock options may be granted to
employees and consultants of E.piphany. The exercise price for incentive stock
options is at least 100% of the fair market value on the date of grant for
employees owning less than 10% of the voting power of all classes of stock and
at least 110% of the fair market value on the date of grant for employees owning
more than 10% of the voting power of all classes of stock. For nonstatutory
stock options, the exercise price is at least 110% of the fair market value on
the date of grant for employees owning more than 10% of voting power of all
classes of stock and at least 85% for employees owning less than 10% of the
voting power of all classes of stock. Options generally expire in 10 years.
Options are immediately exercisable, but shares so purchased vest over periods
determined by the board of directors, generally four years. Upon termination of
employment, unvested shares may be repurchased by E.piphany for the original
purchase price.

     On June 30, 1999, the board of directors approved the adoption of
E.piphany's 1999 Stock Plan (the "1999 Plan"). A total of 3,500,000 shares of
common stock have been reserved for issuance related to stock options under the
1999 Plan. As of December 31, 1999, 203,797 shares have been granted.

     E.piphany's board of directors determined that no further options would be
granted under the 1997 Plan after the IPO. In addition to the 3,500,000 shares
authorized for the 1999 Plan, the 1997 Plan options authorized but not granted
as of the IPO date were made available for grant under the 1999 Plan.
Accordingly as of December 31, 1999, an aggregate of 3,410,816 shares were
available for future option grants under the 1999 Plan.

                                       52
<PAGE>   53
                                E.PIPHANY, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     E.piphany accounts for its stock option plans pursuant to APB 25 whereby
the difference between the exercise price and the fair value at the date of
grant is recognized as compensation expense. Had compensation expense for stock
option plans been determined consistent with SFAS No. 123, net losses would have
increased to the following pro forma amounts (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                                 YEARS ENDED DECEMBER 31,
                                              -------------------------------
                                               1997        1998        1999
                                              -------    --------    --------
<S>                                           <C>        <C>         <C>
Net loss as reported........................  $(3,149)   $(10,330)   $(22,390)
Net loss pro forma..........................  $(3,163)   $(10,457)   $(24,956)
Net loss per share as reported..............  $ (2.90)   $  (4.50)   $  (2.19)
Net loss per share pro forma................  $ (2.91)   $  (4.55)   $  (2.44)
</TABLE>

     The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted average
assumptions for grants in 1997, 1998, and 1999:

<TABLE>
<CAPTION>
                                               1997         1998         1999
                                             ---------    ---------    ---------
<S>                                          <C>          <C>          <C>
Risk-free interest rate....................  5.8 - 6.9%   4.3 - 5.7%   4.5 - 6.2%
Expected life of the option................  4.5 years    4.5 years    4.5 years
Dividend yield.............................     0%           0%           0%
Volatility.................................     0%           85%          85%
</TABLE>

     The following table summarizes the stock option plan activity under the
stock option plans (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                      YEAR ENDED            YEAR ENDED             YEAR ENDED
                                  DECEMBER 31, 1997      DECEMBER 31, 1998      DECEMBER 31, 1999
                                  ------------------    -------------------    -------------------
                                            WEIGHTED               WEIGHTED               WEIGHTED
                                            AVERAGE                AVERAGE                AVERAGE
                                            EXERCISE               EXERCISE               EXERCISE
                                  SHARES     PRICE      SHARES      PRICE      SHARES      PRICE
                                  ------    --------    -------    --------    -------    --------
<S>                               <C>       <C>         <C>        <C>         <C>        <C>
Outstanding at beginning of
  period........................      --     $0.00        1,210     $0.12        1,661     $ 0.57
Granted.........................   1,218     $0.12        2,560     $0.56        3,438     $13.21
Exercised.......................      (8)    $0.12       (1,540)    $0.31       (1,522)    $ 1.69
Canceled........................      --     $0.00         (569)    $0.25         (428)    $ 3.52
                                  ------                -------                -------
Outstanding at end of period....   1,210     $0.12        1,661     $0.57        3,150     $13.42
                                  ======                =======                =======
Vested and exercisable at end of
  period........................      60     $0.15          156     $0.13          231     $ 3.87
                                  ======                =======                =======
Weighted average fair value per
  share.........................  $ 0.08                $  0.28                $ 13.42
                                  ======                =======                =======
</TABLE>

                                       53
<PAGE>   54
                                E.PIPHANY, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                 OPTIONS VESTED
                                  OPTIONS OUTSTANDING           AND EXERCISABLE
                            -------------------------------    ------------------
                                      WEIGHTED     WEIGHTED              WEIGHTED
                                       AVERAGE     AVERAGE               AVERAGE
    DECEMBER 31, 1999                 REMAINING    EXERCISE              EXERCISE
 RANGE OF EXERCISE PRICES   NUMBER      YEARS       PRICE      NUMBER     PRICE
 ------------------------   ------    ---------    --------    ------    --------
<S>                         <C>       <C>          <C>         <C>       <C>
$  0.12 - $  0.30.........    122       7.91       $  0.18       12       $ 0.16
$  0.40 - $  0.60.........    281       8.46       $  0.51       39       $ 0.55
$  1.00 - $  2.00.........    258       8.82       $  1.12       53       $ 1.09
$  2.70 - $  4.00.........    523       9.22       $  3.10       12       $ 4.00
$  6.00 - $  6.40.........    655       9.45       $  6.11      100       $ 6.00
$ 11.00 - $ 11.00.........  1,107       9.64       $ 11.00       15       $11.00
$ 62.00 - $ 88.56.........    121       9.80       $ 73.44        0       $ 0.00
$120.00 - $178.00.........     43       9.92       $165.69        0       $ 0.00
$183.88 - $211.38.........     40       9.96       $200.39        0       $ 0.00
                            -----       ----       -------      ---       ------
$  0.12 - $211.38.........  3,150       9.31       $ 13.42      231       $ 3.87
                            =====       ====       =======      ===       ======
</TABLE>

     During the years ended December 31, 1997 and 1998, E.piphany issued 11,250
and 60,000 shares, respectively, under the 1997 Plan for services rendered. The
fair value of these shares is reflected in operating expenses in the respective
years.

 7. INCOME TAXES

     E.piphany accounts for income taxes pursuant to SFAS No. 109, "Accounting
for Income Taxes." A valuation allowance has been recorded for the total
deferred tax assets of E.piphany as a result of uncertainties regarding the
realization of the assets based on the limited operating history of E.piphany,
the lack of profitability to date, and the uncertainty of future profitability.
The components of net deferred tax assets are as follows (in thousands):

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                          -------------------
                                                           1998        1999
                                                          -------    --------
<S>                                                       <C>        <C>
Net operating loss carryforwards........................  $ 4,889    $ 10,511
Accruals and reserves...................................       --       1,455
Plant and equipment.....................................       --         150
Startup and organization costs..........................       --         166
Research and development credits........................      333         503
                                                          -------    --------
Total deferred tax assets...............................    5,222      12,785
Valuation allowance.....................................   (5,222)    (12,785)
                                                          -------    --------
Net deferred tax assets.................................  $    --    $     --
                                                          =======    ========
</TABLE>

     As of December 31, 1999, E.piphany had net operating loss carryforwards of
approximately $27.5 million and $19.7 million for federal and state tax
purposes, respectively. The federal net operating loss and other credit
carryforwards expire on various dates beginning on 2012 through 2019. The state
net operating loss carryforwards will expire in 2004.

     Under current tax law, net operating loss and credit carryforwards
available to offset future income in any given year may be limited upon the
occurrence of certain events, including significant changes in ownership
interests.

                                       54
<PAGE>   55
                                E.PIPHANY, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

     The provision for income taxes differs from the expected tax benefit amount
computed by applying the statutory federal income rate of 34% to income (loss)
before taxes as follows:

<TABLE>
<CAPTION>
                                                    YEARS ENDED DECEMBER 31,
                                                    -------------------------
                                                    1997      1998      1999
                                                    -----    ------    ------
<S>                                                 <C>      <C>       <C>
Federal statutory rate............................  (34.0)%   (34.0)%   (34.0)%
State taxes, net of federal benefit...............     --        --        --
Amortization of stock compensation................     --     (2.92)%   (4.45)%
Net operating loss not benefitted.................  (34.0)%  (31.08)%  (29.55)%
                                                    -----    ------    ------
                                                        0%        0%        0%
                                                    =====    ======    ======
</TABLE>

 8. RELATED PARTY TRANSACTIONS

     In 1998, E.piphany loaned its chief executive officer $175,000 for
relocation expenses. In accordance with the loan agreement, the entire amount of
the loan was forgiven on March 31, 1999. The loan was charged to compensation
expense and is included in general and administrative expense in the
accompanying statement of operations for the year ended December 31, 1998. The
chief executive officer was also offered a loan of $250,000 per year for two
years, drawable monthly. This loan bears interest at 5.6% per annum compounded
monthly and is repayable by the officer's first stock sales. As of December 31,
1999, $368,000 was outstanding on this loan. As the repayment of this amount was
contingent on future stock sales, this amount has been expensed as paid.
Advances under the loan were charged to compensation expense in the period in
which the amounts were loaned to the officer, and thus, $104,000 and $250,000
are included in general and administrative expense in the accompanying
statements of operations for the years ended December 31, 1998 and 1999,
respectively. This chief executive officer was also given a loan to purchase
1,600,000 shares of common stock at $0.40 per share. This loan is due on July 1,
2008 and accrues interest at 5.88% per annum.

 9. 401(K) PLAN

     In January 1999, the Company adopted a 401(k) plan (the "401(k)").
Participation in the 401(k) is available to all employees. Employees are
eligible to participate in the 401(k) at any time beginning with their first day
of employment. Each participant may elect to contribute an amount up to 15% of
his or her annual base salary plus commission and bonus, but not to exceed the
statutory limit as prescribed by the Internal Revenue Code. The Company may make
discretionary contributions to the 401(k). To date, no contributions have been
made by the Company.

10. ACQUISITIONS (UNAUDITED)

     The RightPoint Acquisition

     On January 4, 2000, E.piphany acquired RightPoint Software, Inc. in a
merger transaction. Under the terms of the Merger Agreement, stockholders of
RightPoint will exchange approximately 0.1185 shares of E.piphany common stock
for each share of RightPoint common stock they own at the time the merger is
consummated. In addition, options and warrants to acquire RightPoint common
stock will be converted as a result of the merger into equivalent options and
warrants for E.piphany common stock, based upon the exchange ratio. E.piphany
expects to incur costs directly related to completing the Merger of
approximately $7.8 million. E.piphany anticipates that the total purchase price
will be approximately $472.0 million, of which approximately $22.0 million will
be allocated to in-process research and development and expensed upon closing of
the acquisition as it has not reached technological feasibility and, in
management's opinion, has no alternative future use. The remaining purchase
price consists principally of acquired intangibles and goodwill which will be
amortized over a period of 3 years.

                                       55
<PAGE>   56
                                E.PIPHANY, INC.

                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)

  The Octane Acquisition

     On March 15, 2000, E.piphany entered into a definitive agreement to acquire
Octane Software, Inc. Octane Software is a next-generation provider of
multi-channel customer interaction applications and infrastructure software for
sales, service and support. Octane Software enables companies to provide
real-time, interactive customer care to engage, acquire and retain customers in
the new Internet economy. Under the terms of the agreement, we will issue
approximately 12.8 million shares of its common stock to the stockholders of
Octane Software. The acquisition is subject to customary closing conditions,
including regulatory approval and the approval of E.piphany's and Octane
Software's stockholders.

     E.piphany will account for the acquisition under the purchase method of
accounting and E.piphany expects to allocate a portion of the purchase price to
intangible assets which will be amortized ratably over their estimated useful
lives. In addition, E.piphany expects to incur a write-off related to in-process
research and development upon closing of the transaction.

11. SECONDARY OFFERING (UNAUDITED)

     In January 2000, E.piphany completed a public offering (the "Offering") of
3,700,000 shares of common stock. E.piphany sold 1,993,864 shares of common
stock and the selling stockholders sold 1,706,136 shares of common stock. In
addition, the underwriters exercised their option to purchase 418,500 shares, of
which 104,342 were from E.piphany and 314,158 were from selling stockholders, to
cover over-allotments of shares. The net proceeds from the Offering totalled
$356 million.

                                       56
<PAGE>   57

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

     In July 1998, KPMG Peat Marwick LLP resigned as E.piphany's independent
public accountants, as KPMG Peat Marwick LLP became an integrator of E.piphany's
products and purchased E.piphany's preferred stock. The former independent
accountants' report on E.piphany's financial statements for the year ended
December 31, 1997 did not contain an adverse opinion, a disclaimer of opinion or
any qualifications or modifications related to uncertainty, limitation of audit
scope or application of accounting principles. The former independent public
accountants' report does not cover any of E.piphany's financial statements in
this Form 10-K. KPMG Peat Marwick LLP did not issue an audit opinion on
E.piphany's financial statements for any other period. There were no
disagreements with the former public accountants on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure with respect to E.piphany's financial statements up through the time
of dismissal that, if not resolved to the former accountants' satisfaction,
would have caused them to make reference to the subject matter of the
disagreement in connection with their report. In September 1998, E.piphany
retained Arthur Andersen LLP as its independent public accountants. The decision
to retain Arthur Andersen LLP was approved by resolution of the board of
directors. Prior to retaining Arthur Andersen LLP, E.piphany had not consulted
with Arthur Andersen LLP regarding accounting principles.

                                    PART III

ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT

     The information concerning the Company's directors required by this Item is
incorporated by reference to the information under the heading "Proposal No.
1 -- Election of Directors" in E.piphany's Proxy Statement.

     The information concerning the Company's executive officers required by
this Item is incorporated by reference to the information under the heading
"Other Information -- Executive Officers" in E.piphany's Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

     The information required by this Item is incorporated by reference to
information under the heading "Executive Compensation," "Option Grants in Last
Fiscal Year," and "Aggregate Option Exercises in Last Fiscal Year and Fiscal
Year End Option Values" in E.piphany's Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this Item is incorporated by reference to the
information under the heading "Security Ownership of Certain Beneficial Owners
and Management" in E.piphany's Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item is incorporated by reference to the
information under the headings "Compensation Committee Interlocks and Insider
Participation" and "Certain Relationships and Related Transactions" in
E.piphany's Proxy Statement.

                                       57
<PAGE>   58

                                    PART IV

     (a)

     1. Financial Statements. See Item 8 above.

     2. Financial Statement Schedules. See Item 14(d) below.

     3. Exhibits.

<TABLE>
<CAPTION>
        NUMBER                            EXHIBIT TITLE
        ------                            -------------
        <C>        <S>
         2.1+      Agreement and Plan of Reorganization by and among the
                   Registrant, Yosemite Acquisition Corporation and RightPoint
                   Software, Inc.
         2.2++     Agreement and Plan of Merger and Reorganization dated March
                   14, 2000 by and among the Registrant, Octane Software, Inc.
                   and Orchid Acquisition Corporation.
         2.3++     Form of Octane Software, Inc. shareholder Voting Agreement
                   relating to the proposed acquisition of Octane Software,
                   Inc.
         2.4++     Form of Registrant's stockholder Voting Agreement relating
                   to the proposed acquisition of Octane Software, Inc.
         3.1*      Restated Certificate of Incorporation of the Registrant.
         3.2*      Restated Bylaws of the Registrant.
        10.1*      Form of Indemnification Agreement between the Registrant and
                   each of its directors and officers.
        10.2*      1999 Stock Plan and form of agreements thereunder.
        10.3*      1999 Employee Stock Purchase Plan and form of agreements
                   thereunder.
        10.4*      1997 Stock Plan and form of agreements thereunder.
        10.5*      Fourth Amended and Restated Investors' Rights Agreement
                   dated June 16, 1999.
        10.6*      Loan and Security Agreement entered into as of January 9,
                   1998 with Silicon Valley Bank.
        10.7*      Loan Modification Agreement between the Registrant and
                   Silicon Valley Bank dated December 1, 1998.
        10.8*      Master Lease Agreement dated June 2, 1999 by and between
                   Comdisco, Inc. and the Registrant.
        10.9*      Subordinated Loan and Security Agreement dated as of June 2,
                   1999 by and between the Registrant and Comdisco, Inc.
        10.10*     Sublease Portion of Third Floor of 1900 Norfolk Street, San
                   Mateo, California dated April 23, 1999 by and between
                   Inktomi Corporation and the Registrant.
        10.11*     Form of Amended and Restated Common Stock Purchase Agreement
                   dated March 18, 1997 between the Registrant and four
                   stockholders.
        10.12*     Restricted Stock Purchase Agreement, Promissory Note, Stock
                   Pledge Agreement and Joint Escrow Instructions dated July 1,
                   1998 between Roger S. Siboni and the Registrant.
        10.13*     Promissory Note dated August 15, 1998 between Roger S.
                   Siboni and the Registrant.
        10.14**    RightPoint Software, Inc. (formerly Datamind Corporation)
                   1996 Stock Option Plan.
        16.1*      Letter from KPMG LLP.
        23.1       Consent of Arthur Andersen LLP, Independent Public
                   Accountants.
        24.1       Power of Attorney (see page 60).
        27.1       Financial Data Schedule.
</TABLE>

---------------
  * Incorporated by reference to the Registrant's Registration Statement on Form
    S-1 (Registration No. 333-82799) declared effective by the Securities and
    Exchange Commission on September 21, 1999.

 ** Incorporated by reference to the Registrant's Registration Statement on Form
    S-1 (Registration No. 333-94033) declared effective by the Securities and
    Exchange Commission on January 20, 2000.

                                       58
<PAGE>   59

  + Incorporated by reference to Registrant's Registration Statement on Form S-4
    (File No. 333-92013), declared effective on December 3, 1999.

++ Incorporated by reference to Registrant's Current Report on Form 8-K dated
   March 14, 2000 filed with the Commission on March 28, 2000.

     (b) Reports on Form 8-K. None.

     (c) Exhibits. See Item 14(a)(3) above.

     (d) Financial Statement Schedules.

     Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.

                                       59
<PAGE>   60

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, as amended, the Registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of San
Mateo, State of California, on the 30th day of March, 2000.

                                          E.PIPHANY, INC.

                                          By:      /s/ ROGER S. SIBONI
                                            ------------------------------------
                                                      Roger S. Siboni
                                               President and Chief Executive
                                                           Officer

     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Roger S. Siboni and Kevin J. Yeaman, his
attorney-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any amendments to this Annual 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
conforming all that said attorney-in-fact, or his substitute or substitutes, any
do or cause to be done by virtue hereof.

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

<TABLE>
<CAPTION>
                SIGNATURE                                     TITLE                         DATE
                ---------                                     -----                         ----
<S>                                         <C>                                        <C>
           /s/ ROGER S. SIBONI                     President, Chief Executive          March 30, 2000
------------------------------------------            Officer and Director
             Roger S. Siboni                      (Principal Executive Officer)

           /s/ KEVIN J. YEAMAN                       Chief Financial Officer           March 30, 2000
------------------------------------------     (Principal Financial and Accounting
             Kevin J. Yeaman                                Officer)

            /s/ PAUL M. HAZEN                               Director                   March 30, 2000
------------------------------------------
              Paul M. Hazen

            /s/ ROBERT L. JOSS                              Director                   March 30, 2000
------------------------------------------
              Robert L. Joss

              /s/ SAM H. LEE                                Director                   March 30, 2000
------------------------------------------
                Sam H. Lee

                                                            Director                   March 30, 2000
------------------------------------------
           Douglas J. Mackenzie
</TABLE>

                                       60
<PAGE>   61

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
        NUMBER                            EXHIBIT TITLE
        ------                            -------------
        <C>        <S>
         2.1+      Agreement and Plan of Reorganization by and among the
                   Registrant, Yosemite Acquisition Corporation and RightPoint
                   Software, Inc.
         2.2++     Agreement and Plan of Merger and Reorganization dated March
                   14, 2000 by and among the Registrant, Octane Software, Inc.
                   and Orchid Acquisition Corporation.
         2.3++     Form of Octane Software, Inc. shareholder Voting Agreement
                   relating to the proposed acquisition of Octane Software,
                   Inc.
         2.4++     Form of Registrant's stockholder Voting Agreement relating
                   to the proposed acquisition of Octane Software, Inc.
         3.1*      Restated Certificate of Incorporation of the Registrant.
         3.2*      Restated Bylaws of the Registrant.
        10.1*      Form of Indemnification Agreement between the Registrant and
                   each of its directors and officers.
        10.2*      1999 Stock Plan and form of agreements thereunder.
        10.3*      1999 Employee Stock Purchase Plan and form of agreements
                   thereunder.
        10.4*      1997 Stock Plan and form of agreements thereunder.
        10.5*      Fourth Amended and Restated Investors' Rights Agreement
                   dated June 16, 1999.
        10.6*      Loan and Security Agreement entered into as of January 9,
                   1998 with Silicon Valley Bank.
        10.7*      Loan Modification Agreement between the Registrant and
                   Silicon Valley Bank dated December 1, 1998.
        10.8*      Master Lease Agreement dated June 2, 1999 by and between
                   Comdisco, Inc. and the Registrant.
        10.9*      Subordinated Loan and Security Agreement dated as of June 2,
                   1999 by and between the Registrant and Comdisco, Inc.
        10.10*     Sublease Portion of Third Floor of 1900 Norfolk Street, San
                   Mateo, California dated April 23, 1999 by and between
                   Inktomi Corporation and the Registrant.
        10.11*     Form of Amended and Restated Common Stock Purchase Agreement
                   dated March 18, 1997 between the Registrant and four
                   stockholders.
        10.12*     Restricted Stock Purchase Agreement, Promissory Note, Stock
                   Pledge Agreement and Joint Escrow Instructions dated July 1,
                   1998 between Roger S. Siboni and the Registrant.
        10.13*     Promissory Note dated August 15, 1998 between Roger S.
                   Siboni and the Registrant.
        10.14**    RightPoint Software, Inc. (formerly Datamind Corporation)
                   1996 Stock Option Plan.
        16.1*      Letter from KPMG LLP.
        23.1       Consent of Arthur Andersen LLP, Independent Public
                   Accountants.
        24.1       Power of Attorney (see page 60).
        27.1       Financial Data Schedule.
</TABLE>

---------------
  * Incorporated by reference to the Registrant's Registration Statement on Form
    S-1 (Registration No. 333-82799) declared effective by the Securities and
    Exchange Commission on September 21, 1999.

 ** Incorporated by reference to the Registrant's Registration Statement on Form
    S-1 (Registration No. 333-94033) declared effective by the Securities and
    Exchange Commission on January 20, 2000.

 + Incorporated by reference to Registrant's Registration Statement on Form S-4
   (File No. 333-92013), declared effective on December 3, 1999.

++ Incorporated by reference to Registrant's Current Report on Form 8-K dated
   March 14, 2000 filed with the Commission on March 28, 2000.