UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

(Mark One)

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

                 For the Quarterly Period Ended August 31, 2002

                                       or

[_]  Transition  report  pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

       For the transition period from ______________ to ________________.

                        Commission File Number: 000-22565

                              INGENUUS CORPORATION

             (Exact name of registrant as specified in its charter)

                                    Delaware
                         (State or other jurisdiction of
                         incorporation or organization)

                        7455 Longard Road, Livermore, CA
                    (Address of principal executive offices)

                                   77-0298386
                     (I.R.S. Employer Identification Number)

                                      94550
                                   (Zip Code)

       Registrant's telephone number, including area code: (925) 605-2600

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

The number of shares of the Registrant's  common stock  outstanding as of August
31, 2002, was 38,638,062.


<PAGE>

                              INGENUUS CORPORATION

                                    FORM 10-Q
                      FOR THE QUARTER ENDED AUGUST 31, 2002

                                TABLE OF CONTENTS
                                                                            Page
                                                                            ----

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

 a) Condensed Consolidated Statements of Operations for the
    three and nine months ended August 31, 2002 and 2001 ....................  1

 b) Condensed Consolidated Balance Sheets at August 31, 2002
    and November 30, 2001 ...................................................  2

 c) Condensed Consolidated Statements of Cash Flows for the
    nine months ended August 31, 2002 and 2001 ..............................  3

 d) Notes to Condensed Consolidated Financial Statements ....................  4

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations ........................................... 10

Item 3. Quantitative and Qualitative Disclosure About Market Risk ........... 23

Item 4. Controls and Procedures ............................................. 24

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K .................................... 25

SIGNATURES .................................................................. 25

CERTIFICATIONS .............................................................. 25


<PAGE>

                          PART I. FINANCIAL INFORMATION


ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                              INGENUUS CORPORATION

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        Quarter ended August 31,       Nine Months Ended August 31,
                                                                        ------------------------       ----------------------------
                                                                          2002            2001            2002            2001
                                                                        --------        --------        --------        --------
<S>                                                                     <C>             <C>             <C>             <C>
Revenue                                                                 $     66        $    366        $    383        $  1,320
Cost of revenue                                                              208             599             971           2,024
                                                                        --------        --------        --------        --------
Gross profit (loss)                                                         (142)           (233)           (588)           (704)
                                                                        --------        --------        --------        --------

Operating expenses:
  Research and development                                                   300             526           1,373           1,925
  Sales and marketing                                                        285           1,384           1,796           4,137
  General and administrative                                                 533             877           1,807           3,365
  Amortization of goodwill and other intangible assets                        97             834           1,633           2,502
  Impairment of assets                                                      --              --             7,433            --
  Loss on sale of Japan subsidiary                                            24            --                24            --
  Lease impairment                                                           289            --               289            --
                                                                        --------        --------        --------        --------
       Total operating expenses                                            1,528           3,621          14,355          11,929
                                                                        --------        --------        --------        --------

(Loss) from operations                                                    (1,670)         (3,854)        (14,943)        (12,633)

Gain (loss) on sale of investment - Slim Technology                          119            --               119            --
Gain (loss) on sale of investment - Virage Logic                            --                43            --             5,935
Interest and other, net                                                        3             547             136             712
                                                                        --------        --------        --------        --------
(Loss) from continuing operations                                         (1,548)         (3,264)        (14,688)         (5,986)
(Loss) on disposal of discontinued operation                                --              (705)           --              (705)
(Loss) from discontinued operations                                         --              (145)           --              (524)
                                                                        --------        --------        --------        --------
(Loss) before income taxes                                                (1,548)         (4,114)        (14,688)         (7,215)
Income tax provision                                                        --                 2            --                 5
                                                                        --------        --------        --------        --------
Net income(loss)                                                          (1,548)         (4,116)        (14,688)         (7,220)
                                                                        --------        --------        --------        --------
Net (loss) attributable to common stockholders                          $ (1,548)       $ (4,116)       $(14,688)       $ (7,220)
                                                                        ========        ========        ========        ========

EARNINGS (LOSS) PER SHARE -- BASIC AND DILUTED
Continuing operations                                                   $  (0.04)       $  (0.09)       $  (0.38)       $  (0.16)
Discontinued operations                                                     --             (0.02)           --             (0.04)
Net (loss) per share attributable to common stockholders                $  (0.04)       $  (0.11)       $  (0.38)       $  (0.20)
Shares used in basic and diluted per share calculation                    38,638          36,853          38,631          36,829
</TABLE>


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

                                       1

<PAGE>


                              INGENUUS CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS

                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                                        August 31,      November 30,
                                                                                                           2002             2001
                                                                                                         ---------        ---------
                                                                                                       (Unaudited)
                                                                 ASSETS
<S>                                                                                                      <C>              <C>
Current assets:
  Cash and cash equivalents                                                                              $     452        $   5,496
  Accounts receivable, (net of allowance)                                                                       12              549
  Income taxes receivable                                                                                     --                609
  Loan to related party and other receivable, (net of allowance)                                                12               62
  Prepaid expenses and other current assets                                                                    277              245
                                                                                                         ---------        ---------
       Total current assets                                                                                    753            6,961

Property and equipment, net                                                                                    105              858
Goodwill and other intangible assets                                                                           985            9,590
Restricted cash                                                                                               --                125
Investments and other assets                                                                                    71              114
                                                                                                         ---------        ---------
       Total assets                                                                                      $   1,914        $  17,648
                                                                                                         =========        =========

                                                 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                                                       $     683        $     865
  Accrued liabilities                                                                                        1,670            2,386
  Deferred revenue                                                                                             101              539
                                                                                                         ---------        ---------
       Total current liabilities                                                                             2,454            3,790

Long term liabilities:
  Lease liabilities                                                                                            289             --
                                                                                                         ---------        ---------
       Total liabilities                                                                                     2,743            3,790
                                                                                                         ---------        ---------

Commitments and contingencies (Note 12 )
Stockholders' equity:
  Common stock                                                                                             103,473          103,472
  Treasury stock                                                                                            (3,254)          (3,254)
  Accumulated deficit                                                                                     (101,048)         (86,360)
                                                                                                         ---------        ---------
       Total stockholders' equity                                                                             (829)          13,858
                                                                                                         ---------        ---------
       Total liabilities and stockholders' equity                                                        $   1,914        $  17,648
                                                                                                         =========        =========
</TABLE>

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


                                       2

<PAGE>


                              INGENUUS CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                                              Nine Months Ended
                                                                                                           ------------------------
                                                                                                                  August 31,
                                                                                                           ------------------------
                                                                                                             2002            2001
<S>                                                                                                        <C>             <C>
Cash flows from operating activities:
Net loss                                                                                                   $(14,688)       $ (7,220)
Deduct: Loss on disposal of discontined operations                                                             --               705
                                                                                                           --------        --------
Net Loss from operations                                                                                   $(14,688)         (6,515)
Adjustments to reconcile net loss to net cash provided by(used for) operating activities:
 Realized gain on sale of Virage Logic shares                                                                  --            (5,935)
 Realized gain on sale of  shares of Slim Tech                                                                 (119)           --
 Write-off of fixed assets                                                                                      (13)           --
 Depreciation and amortization                                                                                2,262           3,636
 Gain(Loss) on disposal of fixed assets                                                                          10               3
 Allowance for doubtful accounts                                                                               (121)           --
 Allowance for Loan to related party&other rec.                                                                  46            --
 Impairment of fixed assets                                                                                     906            --
 Impairment of intangible assets                                                                              6,527            --
 Lease impairment                                                                                               289            --
 Cumulative translation adjustment                                                                             --               (44)
 Changes in assets and liabilities, net of assets and liabilities acquired/disposed of:
   Accounts receivable                                                                                          416               4
   Income tax receivable                                                                                        609           1,480
   Loan to related party                                                                                         10            --
   Prepaid expenses and other current assets                                                                    (38)           (238)
   Restrict cash                                                                                                125             (19)
   Other assets                                                                                                  43            --
   Accounts payable                                                                                            (182)           (731)
   Accrued liabilities                                                                                         (716)         (2,728)
   Deferred revenue                                                                                            (196)             45
                                                                                                           --------        --------
     Net cash used for operating activities                                                                  (4,830)        (11,042)
                                                                                                           --------        --------

Cash flows from investing activities:
 Purchases of property and equipment                                                                           (334)            (40)
 Sales of fixed assets                                                                                         --                 3
 Proceeds from  sale of available-for-sale securities-Virage Logic                                             --             6,739
 Proceeds from sale of shares of Slim Tech                                                                      119            --
                                                                                                           --------        --------
     Net cash provided by (used for) investing activities                                                      (215)          6,702
                                                                                                           --------        --------

Cash flows from financing activities:
 Proceeds from issuance of common stock, net                                                                      1              14
 Repurchase of common stock                                                                                    --              (169)
                                                                                                           --------        --------
     Net cash provided by (used for) financing activities                                                         1            (155)
                                                                                                           --------        --------

 Net proceeds from the sale of discontinued operations                                                         --             3,000

Effective exchange rate changes on cash and cash equivalents                                                   --              --

Net (decrease) increase in cash and equivalents                                                              (5,044)         (1,495)
Cash and equivalents, beginning of period                                                                     5,496           8,789
                                                                                                           --------        --------
Cash and cash equivalents, end of period                                                                   $    452        $  7,294
                                                                                                           ========        ========
</TABLE>

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


                                       3

<PAGE>

                              INGENUUS CORPORATION

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1. Basis of Presentation

The  accompanying  consolidated  financial  statements have been prepared by the
Company  pursuant to the rules and  regulations  of the  Securities and Exchange
Commission for interim financial statements.  Therefore, they do not include all
the disclosures presented in the Company's Form 10-K. These financial statements
do not  include all  disclosures  required by  accounting  principles  generally
accepted  in the United  States of America  and  accordingly,  should be read in
conjunction  with the  consolidated  financial  statements and notes included as
part of the  Company's  latest Form 10-K for the fiscal year ended  November 30,
2001.

In the opinion of management,  the consolidated financial statements include all
adjustments  necessary to present fairly the  consolidated  financial  position,
results of  operations  and cash flows for the  interim  period.  The results of
operations  presented  are  not  necessarily  indicative  of the  results  to be
expected for the full year or for any other period.

The accompanying  consolidated  financial statements have been prepared assuming
that  Ingenuus  Corporation  will continue as a going  concern.  The Company has
suffered  recurring  losses from  operations and has an  accumulated  deficit of
$101.0 million. In the first quarter of fiscal 2000, the Company purchased Inbox
Software,  Inc, and this acquisition has yet to generate  significant  revenues.
The Company's  continued  existence depends on its ability to achieve profitable
operations.  If this does not happen,  the Company will need to raise additional
capital  to  fund  its  operations.  There  is  substantial  doubt  that,  as  a
stand-alone  entity, the Company will either achieve  profitability,  or that it
will be  successful  in  raising  additional  funding  if  profitability  is not
achieved. The Company had no new software sales in the third quarter of 2002.

The Company sold its Japanese subsidiary for 4.124 million yen, or $34,300.  The
Company  assumed  liability  of 2.600  million  yen, or $21,625,  and paid 1.328
million yen, or $11,049 related to deferred  revenue that was already  collected
for  maintenance  service  contracts  that  extended  beyond July 31, 2002.  The
Company  wrote-off all the assets and  liabilities  of the Japan  subsidiary and
recognized a loss of $24,000 in the third quarter ended August 31, 2002.

The  Company  evaluated  its assets to  determine  if they were  impaired  under
Financial  Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards  No. 121 ("SFAS  121") at November  30, 2001 and again at February 28,
2002, using  undiscounted  cash flows.  These projected  undiscounted cash flows
were based on a  sixty-month  forecast.  Although  these  cash flow  projections
reflected decreasing cash balances during fiscal year 2002, there was sufficient
cash available during the entire  forecasted  period.  Hence,  based on the fact
that the Company had some strong prospects in its sales pipeline,  the improving
economic condition, and the Company's ability to further restructure to preserve
cash and be able to fund its operations,  the Company  concluded the assets were
not impaired.

Management noted the following factors during the second quarter of 2002:

         o        certain sales  expected for the second quarter of 2002 had not
                  materialized;

         o        certain   sales   projected   for  the   third   quarter   and
                  substantially  all for the  second  quarter  of 2002 have been
                  canceled or extended to the fourth quarter of 2002 or beyond;

         o        overall  economic  conditions  had not  improved to the extent
                  that it was forecasted in fiscal 2001 and the first quarter of
                  fiscal 2002; and

         o        based upon the  revised  cash flow  projections,  the  Company
                  would use in operations  all remaining  cash by September 2002
                  unless additional funding becomes available.

While the Company  aggressively  pursued its sales goal of at least  $600,000 in
the third  quarter  of 2002,  without  significant  improvement  in the  overall
economy, its ability to close these accounts was substantially at risk.

Due to the factors  outlined  above,  the cash flow forecast  projects a deficit
cash balance during September 2002. Accordingly, the Company determined it is no
longer appropriate to include projected undiscounted cash flows beyond September
2002 for the purposes of determining asset impairment under SFAS 121.

The Company  concluded that with no revenue in the first and second  quarters of
2002 from Ingenuus  software,  and given the fact that the  Company's  prospects
keep delaying capital purchases,  there is a strong possibility that the Company
will not be able to generate  enough  revenue  and cash to continue  operations.
Hence,  in the  second  quarter  of fiscal  2002  using  SFAS 121,  the  Company
concluded the assets and

                                       4

<PAGE>

the intangibles were impaired and were written-down to the estimated fair value.

Based on current cash flows,  and on the assumption that the Company will be out
of funds by  September  2002,  several  intangible  and fixed assets were deemed
impaired. The total impairment of assets was $7.4 million, which was recorded in
the second quarter:

         The Company  recognized an impairment of $59,000 for intangible  assets
         related to developed  technology of the Novo maintenance business since
         the Company is no longer engaged in that business,  including in Japan,
         where as of May 31, 2002,  the Company gave notice to its employees and
         partners to cease operations at the end of July 2002.

         The Company  recognized  an impairment  of  $6,468,000  for  intangible
         assets,  down to their estimated fair value,  based on the fact that if
         the Company is not able to raise any additional  funds, it will run out
         of cash by September  2002. The  intangible  assets  included  $115,000
         related to the core  technology of Inbox and $6,353,000  related to the
         goodwill from Inbox.

         The  Company   recognized  an  impairment  of  $856,000  for  leasehold
         improvements,  down to their  estimated  fair value,  based on the fact
         that  there is a high  vacancy  rate in  Livermore,  and that there are
         empty buildings surrounding  Ingenuus's premises.  The Company believes
         that it may be able to sublease  the building at the same rent that the
         Company is currently  paying,  but may not be able to recover any costs
         related to the leasehold improvements.

         The Company  recognized an impairment of $32,000 for computer  software
         down to its estimated fair value.

         The Company  recognized an impairment for furniture and fixtures in the
         amount of $15,000, down to their estimated fair value.

         The Company recognized an impairment of $2,000 for its automobile, down
         to its estimated fair value.

In the third quarter  ended August 31, 2002,  the Company,  once again,  was not
able to achieve its sales goals and also, was not able to close any new orders.

On September 9, 2002, the Company restructured the note that was due from Chip &
Chip, Inc., ("Chip & Chip"),  with a third party, named Pulsic Ltd, a company in
the United Kingdom,  which acquired Chip & Chip. The Company  received a note in
the amount of $852,500,  of which $150,000 was to be paid on September 13, 2002,
another $150,000 to be paid on September 27, 2002, and the balance to be paid on
October 31,  2002.  This note was in exchange for the two notes in the amount of
$850,000 each,  plus interest that was due from Chip & Chip to Ingenuus.  Chip &
Chip  previously  defaulted on its  payments  that were due to Ingenuus and were
written-off during fiscal year 2001. Based on this prior collection  experience,
Ingenuus will use the cash-basis of accounting, and will record any gain once it
receives payments due from Pulsic for the restructured note.

Pulsic made its first  payment of $150,000 on  September  13,  2002.  The second
payment  due was  received  on  October  2,  2002.  These two  payments  will be
recognized in the fourth quarter.

The Company  further was able to sell 10% of its 40% holding in Slim  Technology
Co, Ltd., a Korean company, ("Slim Tech"), which was written-off in prior years,
to Slim Tech  employees in the amount of $125,000.  The funds were  collected on
August 14, 2002.

Based on the  collection  of funds from the first two  payments in the amount of
$150,000 each that were due from Pulsic, and the net amount of $118,750 from the
sale of Slim Tech  shares as noted  above,  the  Company  expects  to be able to
continue its operations through the end of October 2002.

The Company  reevaluated  its assets to determine if they were further  impaired
under SFAS 121 at August 31, 2002.  The Company  concluded  that all assets were
carried at or below their estimated fair value, and hence, no impairment  charge
was recorded in the third quarter 2002.

The Company is currently  not  utilizing  all of its leased  office space and is
trying to sublease its building in Livermore.  Since the Company may not be able
to sublease the building at the full rate, it may have to discount its sublease,
and may also include free rent. As a result, the Company used EITF 88-10; "Costs
Associated  With Lease  Modification or  Termination",  with respect to the loss
related to the operating  lease.  The Company also used the guidance  under EITF
issue #94-3 "Liability Recognition for Certain Employee Termination Benefits and
Other  Costs  to  Exit  an  Activity   (including   Certain  Costs  Incurred  in
Restructuring)".  The estimated  loss on the  sublease,  $289,000 was charged to
expense  in  the  third  quarter  of  2002.  The  estimated  liability  will  be
reevaluated at the end of each quarter going forward.

Certain  reclassifications have been made to 2001 amounts to conform to the 2002
presentation. These reclassifications had no effect on net loss.

                                       5

<PAGE>

2. Discontinued Operations

In February 2000, the Company entered into an asset purchase  agreement with DII
Semiconductor,  Inc. ("DII"),  whereby the Company's Semiconductor  Intellectual
Property  ("SIP")  business  would  be sold,  subject  to  Board  approval.  The
agreement was ratified in March 2000.

On April 6, 2000,  the Company  sold the SIP  business to DII for $11.3  million
($5.5 million in cash and approximately $1 million due quarterly through October
2001).  As a result,  the operations of the SIP business have been classified as
discontinued  operations in the accompanying  Condensed  Consolidated  Financial
Statements and related Notes.

At November  30,  2001,  the $11.3  million for the sale of the SIP business had
been collected in full.

The  Company  was  unsuccessful  in  selling  Verilux  Design  Technology,  Inc.
("Verilux"), the Electronic Design Automation ("EDA") segment of the Company. On
May 15, 2001, the Company notified Verilux  employees of its intent to terminate
their  employment  with the  Company  in one  hundred  twenty  days and  accrued
termination  benefits of $226,000 in the second  quarter.  On June 18, 2001, the
Company adopted a plan to dispose of the assets of Verilux.  Since the assets of
Verilux were not sold, the Verilux  business was  discontinued  effective August
31, 2001. As a result,  the operations of the EDA business have been  classified
as discontinued  operations in the accompanying Condensed Consolidated Financial
Statements and related Notes.

3. Earnings Per Share (EPS) Disclosures

Basic EPS excludes dilution and is computed by dividing net income  attributable
to common  stockholders  by the weighted  average of common  shares  outstanding
(excluding  shares  subject to  repurchase  rights) for the period.  Diluted EPS
reflects  the  potential  dilution  that  could  occur  if  securities  or other
contracts to issue common stock were exercised or converted into common stock.

4. Recent Accounting Pronouncements

In July 2001,  the FASB issued two  statements,  Statement  No.  141,  "Business
Combinations"  ("SFAS No.  141"),  and  Statement  No. 142,  "Goodwill and Other
Intangible Assets" ("SFAS No. 142"). SFAS No. 141 revises  accounting  treatment
for  business  combinations   requiring  the  use  of  purchase  accounting  and
prohibiting  the  use  of  the  pooling-of-interests  method  for  all  business
combinations  initiated  after  June 30,  2001 and  broadens  the  criteria  for
recording intangible assets separate from goodwill for all business combinations
completed  after June 30, 2001. SFAS No. 142 revises the accounting for goodwill
and other  intangible  assets  by not  allowing  amortization  of  goodwill  and
establishing  accounting for impairment of goodwill and other intangible assets.
SFAS No. 142 will be effective  for fiscal years  beginning  after  December 15,
2001,  with early  adoption  allowed for companies  with a fiscal year beginning
after March 15, 2001.  The Company did not early adopt SFAS 142.  Companies with
fiscal year  beginning  after  December 15, 2001 are required to adopt SFAS 142.
Companies with fiscal year  beginning  after March 15, 2001 can early adopt SFAS
142. The Company will adopt SFAS 142 in fiscal year 2003,  beginning December 1,
2002. The Company has not yet determined  what effects these changes may have on
its consolidated financial statements.

In August 2001,  the FASB issued  Statement of  Financial  Accounting  Standards
No.144 ("SFAS 144"),  "Accounting  for the  Impairment or Disposal of Long-Lived
Assets",  effective for financial  statements  issued for fiscal years beginning
after December 15, 2001 and interim periods within those fiscal years.  SFAS 144
addresses  financial  accounting and reporting for the impairment or disposal of
long-lived assets and replaces SFAS 121 while retaining the substantive aspects,
and amends certain accounting and reporting  provisions of APB Opinion No.30 and
ARB  No.51.  The new rule  removes  goodwill  from  its  scope  and,  therefore,
eliminates the requirement of SFAS 121 to allocate goodwill to long-lived assets
to be tested for impairment.  It also  establishes  guidance and criteria beyond
that  previously   specified  in  SFAS  121,  including  guidance  on  reporting
discontinued  operations.  The Company  did not early adopt SFAS 144.  Companies
with fiscal year  beginning  after  December 15, 2001 are required to adopt SFAS
144. The Company will adopt SFAS 144 in fiscal year 2003,  beginning December 1,
2002. The Company will apply the new rule on accounting  for  long-lived  assets
beginning in the first quarter of 2003 and has not yet  determined the extent of
such effects on the Company's financial statements.

                                       6

<PAGE>

In July 2002,  the FASB issued SFAS No. 146,  "Accounting  for Costs  Associated
with Exit or Disposal  Activities,"  which replaces  Emerging  Issues Task Force
("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits  and Other  Costs to Exit an  Activity."  SFAS No.  146  requires  that
liabilities  associated with exit or disposal activities be recognized when they
are  incurred.  Under  EITF  Issue  No.  94-3,  a  liability  for exit  costs is
recognized  at the date of a  commitment  to an exit  plan.  SFAS  No.  146 also
requires that the liability be measured and recorded at fair value. Accordingly,
the  adoption  of this  standard  may affect the  timing of  recognizing  future
restructuring  costs  as well as the  amounts  recognized.  We  will  adopt  the
provisions  of SFAS  No.  146,  for  restructuring  activities  initiated  after
November 30, 2002.

5. Comprehensive Income (Loss)

The Company  follows the  provisions of SFAS No. 130,  "Reporting  Comprehensive
Income."  This  statement   requires   companies  to  classify  items  of  other
comprehensive income by their components in the financial statements and display
the accumulated balance of other  comprehensive  income separately from retained
earnings in the equity section of a statement of financial position.

The Company's total comprehensive income (loss) was as follows (in thousands):
<TABLE>
<CAPTION>
                                                               Quarter Ended             Nine Months Ended
                                                           ----------------------      ----------------------
                                                                  August 31,                 August 31,
                                                           ----------------------      ----------------------
                                                             2002          2001          2002          2001
                                                           --------      --------      --------      --------
<S>                                                        <C>           <C>           <C>           <C>
Net Loss                                                   $ (1,548)     $ (4,116)     $(14,688)     $ (7,220)
Other comprehensive income:
Realized gain--previously recognized                           --            --            --          (6,050)
Unrealized holding gain on available--for sale
   marketable securities                                       --             (50)         --           1,145
                                                           --------      --------      --------      --------
Comprehensive Income/(Loss)                                $ (1,548)     $ (4,166)     $(14,688)     $(12,125)
</TABLE>


6. Investments

Investment in Virage Logic

In fiscal 1998,  the Company made a private  equity  investment  in Virage Logic
Corp.  ("Virage"),  for an aggregate cost of $840,000.  As of November 30, 1999,
this  investment  was  carried  at cost in the  balance  sheet as the  Company's
ownership  interest in Virage was less than 20%. Since August 2000,  when Virage
completed an initial public offering of its common stock, the equity  securities
have been publicly traded.  As of November 30, 2001, the Company sold all of the
Virage  shares held,  525,000,  for $7.0  million at a cost of  $840,000,  which
resulted in a gain of $6.2  million.  $5.9  million of this gain was included in
income from operations for the nine months ended August 31, 2001.

Impairment of Investment in Slim Technology

During the first quarter of fiscal 1999, the Company purchased a 40% interest in
Slim Tech at a cost of $2.3  million.  Slim Tech performs  semiconductor  design
services  for Korean  customers.  With the disposal of the SIP business in April
2000  and  the   Company's   new  focus  as  a   software   business-to-business
collaborative  commerce  company,  the  investment  in Slim  Tech was no  longer
strategic to the Company's  operations,  and as a result, the Board of Directors
authorized  management  to sell the  investment.  Based on a number of  factors,
including the failure to find a buyer for the investment and recurring operating
losses generated from the investment,  management assessed that there had been a
permanent decline in the value of this investment.  An impairment charge of $1.7
million was recorded in fiscal 2000 to write down the value of the investment to
zero.

In August  2002,  the Company  sold 10% of its 40% interest in Slim Tech to Slim
Tech employees in the amount of $125,000.  The Company  received payment for the
sale on August 14, 2002. A net gain of $118,750 was  recognized in this quarter.
The Company paid 5%, or $6,250,  commission  related to the sale. The Company is
continuing its efforts to sell its remaining investment in Slim Tech.

                                       7

<PAGE>

7. Sale of Chip & Chip, Inc.

On June 13, 2000, the Company entered into an Asset Purchase  Agreement with the
management of Chip & Chip,  part of the EDA segment of the Company.  Chip & Chip
Management purchased the assets and certain liabilities of Chip & Chip for $2.58
million (payable in three  installments  over the next two years).  The proceeds
are secured by 1,000,000  Ingenuus  shares and fully vested  options to purchase
700,000 shares held by Chip & Chip  management,  and 1,000,000  shares of Chip &
Chip.  The  gain of  $292,000  from  the  sale  has  been  deferred  and will be
recognized as the payments are received.

The first installment of the sales consideration was paid on the due date in the
fourth  quarter of fiscal 2000,  $242,000 in cash and  $633,000 by  surrendering
500,000  shares of Ingenuus  stock to the Company.  Chip & Chip defaulted on the
second  payment of $850,000 due in October  2001.  Subsequent  to the default of
payment by Chip & Chip, it was also noted that Chip & Chip was not able to raise
enough capital to continue as a going-concern  and/or be able to repay the notes
to the Company. The second and third payments were deemed uncollectible and were
written-off on November 30, 2001.
On September 9, 2002, the Company restructured the note that was due from Chip &
Chip with a third  party,  named  Pulsic  Ltd, a company in the United  Kingdom,
which  acquired  Chip & Chip.  The  Company  received  a note in the  amount  of
$852,500,  of which  $150,000  was to be paid on  September  13,  2002,  another
$150,000 to be paid on September 27, 2002, and the balance to be paid on October
31, 2002.  This note was in exchange for the two notes in the amount of $850,000
each  plus  interest  that was due  from  Chip & Chip to  Ingenuus.  Chip & Chip
previously  defaulted on its payments  that were due to Ingenuus.  Based on this
fact,  Ingenuus will use the cash-basis of accounting,  and will record any gain
once it receives payments due from Pulsic for the restructured note.

Pulsic made its first  payment of $150,000 on  September  13,  2002.  The second
payment  due was  received  on  October  2,  2002.  These two  payments  will be
recognized in the fourth quarter.
8. Segment and Geographic Information

As of August 31, 2002,  the Company  operated as only one segment.  This segment
includes the  business-to-business  collaborative commerce solutions, as well as
the hardware and software maintenance services. The EDA segment was discontinued
as of August 31, 2001.

Enterprise-wide information is provided in accordance with SFAS No. 131. Revenue
is reported by country,  based on the location of the customer. All property and
equipment,  except for an immaterial  amount, is based in the U.S. and therefore
is not disclosed below.  Geographic revenue for each of the three-month  periods
ended August 31, 2002 and August 31, 2001 is as follows (in thousands):


                                                   QUARTER ENDED (in thousands)
                                                   ----------------------------
                                                     August 31,      August 31,
                                                       2002             2001
                                                       ----             ----
United States ................................         $ 56             $127
Asia .........................................           10              224
Other International ..........................          --                15
                                                       ----             ----
 Total .......................................         $ 66             $366
                                                       ====             ====

We  closed  our   international   operation  in  Japan  as  of  July  31,  2002.
International  revenue from our  operations  in Japan  accounted for $10,000 and
$220,000 for the quarters ended August 31, 2002 and 2001, respectively.

Major Customers.

For the quarter ended August 31, 2002,  three customers  accounted for 35%, 28%,
and 13% for a total of 76% of revenue.  For the quarter  ended  August 31, 2001,
three customers accounted for 37%, 20%, and 14% for a total of 71% of revenue.

9. Stock Repurchase Program

In March 2001, the Company  approved a stock  repurchase  program in which up to
$1,500,000  of its  common  stock may be,  from time to time,  purchased  by the
Company in the open market  depending  upon market  conditions,  share price and
other factors. There were no repurchases of common stock in the quarter and nine
months ended August 31, 2002.  Ingenuus had repurchased 86,700 shares at a total
cost of $21,100  and  482,200  shares at a total cost of  $169,200 of its common
stock under this  program for the quarter and nine months ended August 31, 2001,
respectively.

                                       8

<PAGE>

10.  Repricing of Stock Option

In January 2001,  the Board of Directors  approved a  proposition  to reduce the
exercise price of all outstanding  employees' and consultants'  stock options to
$0.375 per share,  the fair market  value of the  Company's  common  stock as of
January 8, 2001.  On  September  24,  2001,  the Board of  Directors  approved a
proposition  to reduce the  exercise  price of all  outstanding  employees'  and
consultants'  stock  options to $0.11 per share,  the fair  market  value of the
Company's common stock as of September 25, 2001.

On August 27, 2002, the Board of Directors  approved a proposition to reduce the
exercise  price of employees'  stock option grants to $0.01 per share,  the fair
market value of the Company's common stock as of August 26, 2002. As a result of
such  modification,  all options  eligible for the offer are subject to variable
plan accounting until the option is exercised,  cancelled or expired. Any future
increase in stock market price will result in additional compensation expense.

For the quarters ending August 31, 2002 and August 31, 2001, the Company did not
record any compensation expenses related to repricing of stock options since the
stock market price was at or below the repriced option price.

11.  Other Significant Events

In  December  2001,  the  Company  relocated  its  corporate  headquarters  from
Sunnyvale, California to 7455 Longard Road, Livermore, California, pursuant to a
new lease that  expires in November  2011.  The Company  incurred  approximately
$900,000 in capital  expenditures  related to the interior  improvements  of the
Livermore  facility,  and  approximately  $100,000 in moving and other expenses.
During the second quarter of 2002, the Company took a charge of $856,000 related
to  leasehold  improvements  (see Note 1 - Leasehold  Improvements).  The annual
lease payments for the new facility are as follows:

Year ended November 30, (in thousands)
--------------------------------------
2002 ...........................................................          $  270
2003 ...........................................................             282
2004 ...........................................................             294
2005 ...........................................................             305
2006 ...........................................................             317
For the years thereafter .......................................           1,782
                                                                          ------
Total minimum lease for Livermore office .......................          $3,250

During the third quarter of 2002, the Company took a charge of $289,000, related
to the lease modification.

12.  Commitments

On May 29, 2002,  the Board of Directors  approved  further  expense  reduction,
including a reduction in headcount.

As  a  result,  eleven  employees,   (two  in  professional  services,  four  in
engineering,   three  in  sales  and   marketing,   and  two  in   general   and
administrative), were terminated.

The Company accrued approximately $285,000 in severance,  which will be paid out
until May 2003.  The Company  recorded  the  expenses  related to the accrual as
follows: $18,000 in professional services/cost of sales, $23,000 in research and
development,  $112,000  in sales and  marketing,  and  $132,000  in general  and
administrative.  Payments to three  employees  accounted  for 82% of the accrued
severance. As of August 31, 2002, $166,600 remained as an accrued liability.

On July 31, 2002, the Board of Directors,  once again,  approved further expense
reduction, including a reduction in headcount.

As a result,  five employees,  (two in engineering,  two in sales and marketing,
and one in general  and  administrative)  were  terminated.  In  addition,  five
employees, all in engineering, became inactive, until further notice.

The Company accrued approximately  $71,000 in severance,  which will be paid out
until May 2003. The entire accrual was made for one key employee in engineering.
As of August 31, 2002, $68,000 remained as an accrued liability.

                                       9

<PAGE>

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Introduction

This  section--Management's  Discussion and Analysis of Financial  Condition and
Results of Operations--contains forward-looking statements within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended.  These  forward-looking  statements
are based on current  expectations  and include various risks and  uncertainties
that could cause actual results to differ materially from those projected.  Such
risks and  uncertainties  are set forth below and under "Other Factors Affecting
Future Operating Results." These forward-looking statements speak only as of the
date hereof and are expressly  qualified in their  entirety by those factors and
all related cautionary language.  The company is under no obligation (and hereby
expressly disclaims any obligation) to update these forward-looking  statements,
whether as a result of new information, future events, or otherwise.

Company Overview

Ingenuus Corporation ("the Company"),  a Delaware corporation,  was incorporated
in 1991 as Aspec  Technology,  Inc.  Until  fiscal  2000,  the  Company  derived
primarily  all of its  revenues  from its  Semiconductor  Intellectual  Property
("SIP")  business.  During fiscal 2000, the Company disposed of its SIP business
for $11.3 million and recorded a gain on disposal of discontinued  operations of
$4.4 million.

In  September  1999,  the Company  purchased  Verilux  Design  Technology,  Inc.
("Verilux")  and Chip & Chip,  Inc.  ("Chip &  Chip"),  two  start-up  companies
developing  Electronic  Design  Automation  ("EDA") tools for the  semiconductor
industry.  On June 13, 2000,  the Company  entered into an agreement to sell the
Chip & Chip  business  to the  management  of Chip & Chip  for a price  of $2.58
million,  payable in three installments over two years. The first installment of
the sales consideration was paid on the due date in the fourth quarter of fiscal
2000,  $242,000 in cash and $633,000 by surrendering  500,000 shares of Ingenuus
stock to the Company.  The two remaining payments,  due in October 2001 and July
2002, were written-off in November 2001 because they were deemed uncollectible.

The Company also attempted to sell Verilux,  but was  unsuccessful.  The Company
notified Verilux of its intent to cease operations on May 15, 2001.  Verilux was
discontinued on August 31, 2001.

In October 1999, the Company also purchased Novo Systems Corporation ("Novo"), a
company providing  maintenance  services to the semiconductor  industry and also
engaged in the development of EDA tools.

In  December  1999,  the  Company  purchased  Inbox  Software,  Inc.,  a company
providing  business-to-business  collaborative  commerce software  solutions for
manufacturers.

As of August 31, 2002,  the Company  operated as only one segment.  This segment
includes the  business-to-business  collaborative commerce solutions, as well as
the hardware and software maintenance services. The EDA segment was discontinued
as of August 31, 2001.

Consulting Services

While the Ingenuus  product and  maintenance  revenue is expected to be our main
revenue  source in 2002,  we also  expect to derive  revenue  from  delivery  of
consulting services.  Costs for these professional consulting services are based
on fixed hourly and/or daily rates charged by the Company.

Maintenance Services

We offer standard support services, which include product updates, telephone and
Internet support. Custom support services are also available, including standard
support  services  plus  technical   management,   application  and  educational
services.

Critical Accounting Policies

In the ordinary  course of business,  the Company has made a number of estimates
and assumptions relating to the

                                       10

<PAGE>

reporting of results of operations and financial  conditions in the  preparation
of its financial  statements in conformity with accounting  principles generally
accepted  in the U.S.  Actual  results  could  differ  significantly  from those
estimates under different assumptions and conditions.  The Company believes that
the  following  discussion  addresses the  Company's  most  critical  accounting
policies,  which are  those  that are most  important  to the  portrayal  of the
Company's financial condition and results.  The Company constantly  re-evaluates
these  significant  factors and makes  adjustments where facts and circumstances
dictate.  Although historically,  actual results have not significantly deviated
from those determined using the necessary  estimates inherent in the preparation
of financial statements, future actual results may vary significantly. Estimates
and assumptions  include,  but are not limited to, customer  receivables,  fixed
asset lives,  contingencies and litigation.  The Company has also chosen certain
accounting policies when options were available, including:

         o        impairment  of  long-lived   assets,   SFAS  121,  to  measure
                  impairment  of  long-lived  assets,   identifiable  intangible
                  assets and any related goodwill.  This Statement requires that
                  long-lived assets and certain  identifiable  intangibles to be
                  held and used by an entity be reviewed for impairment whenever
                  events or changes in circumstances  indicate that the carrying
                  amount  of an  asset  may  not  be  recoverable.  The  Company
                  recorded an impairment  charge as discussed under  "Impairment
                  of Assets."

         o        the intrinsic value method,  or APB Opinion No. 25, to account
                  for our common stock incentive awards;

         o        the EITF 88-10  "Costs  Associated With Lease  Modification or
                  Termination";

         o        the  EITF 94-3 "Liability  Recognition  for  Certain  Employee
                  Termination  Benefits  and  Other  Costs  to Exit an  Activity
                  (including Certain Costs Incurred in Restructuring)"; and

         o        we recorded an allowance  for credit losses based on estimates
                  of customers'  ability to pay. If the  financial  condition of
                  our customers were to deteriorate,  additional  allowances may
                  be required.

These accounting  policies are applied  consistently for all periods  presented.
Our  operating  results  would be  affected  if other  alternatives  were  used.
Information  about the  impact  on our  operating  results  is  included  in the
footnotes to our consolidated financial statements.

Results of Continuing Operations

As  of  August  31,  2002,  the  Company  operated  as  only  one  segment,  the
business-to-business collaborative commerce solutions related to Inbox, hardware
and  services  related to Novo,  and  maintenance  services  related to Novo and
Inbox.  The Ingenuus  segment's  activities  for the three and nine months ended
August 31, 2002 and 2001, excluding amortization of goodwill, involved primarily
activities  surrounding  product  revenues  from  the  Inbox  business,   system
maintenance   revenue  from  the  Novo   business,   research  and   development
expenditures, sales and marketing, and general and administrative expenses.

As of July 31,  2002,  the Company  closed its  subsidiary  in Japan.  The Japan
subsidiary,  which  was  part of the  Ingenuus  business,  provided  maintenance
services related to Novo business,  and hence, most of the revenue generated was
from maintenance contracts.  For the quarter ended August 31, 2002 and 2001, the
revenues from our Japan operations were $10,000 and $220,000,  respectively. For
the nine months  ended  August 31, 2002 and 2001,  the  revenues  from our Japan
operations were $187,000 and $709,000, respectively.

The  Company  sold its  Japan  subsidiary  to a  former  employee  of the  Japan
subsidiary for 4.124 million yen, or $34,300.  The Company assumed  liability of
2.600 million yen, or $21,625, and paid 1.328 million yen, or $11,049 related to
deferred revenue that was already  collected for maintenance  service  contracts
that  extended  beyond July 31, 2002.  The Company  wrote-off all the assets and
liabilities  of the Japan  subsidiary  and  recognized  a loss of $24,000 in the
third quarter ended August 31, 2002.

The EDA segment,  which included the  development and sale of software tools for
EDA, related to Verilux, was discontinued as of August 31, 2001.

                                       11

<PAGE>

Results of Operations

The following tables set forth selected  statements of operations data expressed
both in dollars (in  thousands) and as a percentage of revenue for the three and
nine month  periods  ending August 31, 2002 compared to the three and nine month
periods ending August 31, 2001:


                              INGENUUS CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                 (in thousands)
                                   (Unaudited)

                                                               Quarter Ended
                                                                August 31,
                                                            --------------------
                                                              2002        2001
                                                            --------    --------
                                                            Ingenuus    Ingenuus
                                                            --------    --------
CONSOLIDATED STATEMENT OF INCOME DATA:
  Revenue                                                    $    66    $   366
  Cost of revenue                                                208        599
                                                             -------    -------
  Gross profit (loss)                                           (142)      (233)

  Operating expenses:
    Research and development                                     300        526
    Sales and marketing                                          285      1,384
    General and administrative                                   533        877
    Amortization of goodwill and other intangible assets          97        834
    Impairment of assets                                        --         --
    Loss on sale of Japan subsidiary                              24       --
    Lease impairment                                             289       --
                                                             -------    -------
      Total operating expenses                                 1,528      3,621
                                                             -------    -------

 (Loss) from operations:                                      (1,670)    (3,854)

  Gain (loss) on sale of investment - Slim Technology            119       --
  Gain (loss) on sale of investment - Virage Logic              --           43
  Interest and other, net                                          3        547
                                                             -------    -------

(Loss) from continuing operations                             (1,548)    (3,264)
(Loss) on disposal of discontinued operation                    --         (705)
(Loss) from discontinued operations                             --         (145)
                                                             -------    -------
(Loss) before income taxes                                    (1,548)    (4,114)
 Income tax provision                                           --            2
                                                             -------    -------
 Net income (loss)                                           $(1,548)   $(4,116)
                                                             =======    =======


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

                                       12

<PAGE>

                              INGENUUS CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS
                             (percentage of revenue)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                         Quarter Ended August 31,
                                                                                                      ------------------------------
                                                                                                        2002                 2001
                                                                                                      --------             --------
                                                                                                      Ingenuus             Ingenuus
                                                                                                      --------             --------
                                                                                                          %                    %
                                                                                                      --------             --------
<S>                                                                                                       <C>                  <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
  Revenue                                                                                                 100%                 100%
  Cost of revenue                                                                                         315                  164
                                                                                                       ------               ------
  Gross profit (loss)                                                                                    (215)                 (64)


  Operating expenses:
    Research and development                                                                              455                  144
    Sales and marketing                                                                                   432                  378
    General and administrative                                                                            808                  239
    Amortization of goodwill and other intangible assets                                                  147                  228
    Impairment of assets                                                                                    0                    0
    Loss on sale of Japan subsidiary                                                                       36                    0
    Lease impairment                                                                                      438                    0
                                                                                                       ------               ------
      Total operating expenses                                                                          2,316                  989
                                                                                                       ------               ------

  (Loss) from operations:                                                                              (2,531)              (1,053)

  Gain (loss) on sale of investment - Slim Technology                                                     180                    0
  Gain (loss) on sale of investment - Virage Logic                                                          0                   12
  Interest and other, net                                                                                   5                  149
                                                                                                       ------               ------

(Loss) from continuing operations                                                                      (2,346)                (892)
(Loss) on disposal of discontinued operation                                                                0                 (193)
(Loss) from discontinued operations                                                                         0                  (40)
                                                                                                       ------               ------
(Loss) before income taxes                                                                             (2,346)              (1,125)
  Income tax provision                                                                                      0                    0
                                                                                                       ------               ------
  Net income (loss)                                                                                    (2,346)%             (1,125)%
                                                                                                       ======               ======
</TABLE>

See accompanying notes to condensed consolidated financial statements.

                                       13

<PAGE>

                              INGENUUS CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                 (in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                                     Nine Months Ended August 31,
                                                                                                   --------------------------------
                                                                                                     2002                    2001
                                                                                                   --------                --------
<S>                                                                                                <C>                     <C>
Revenue                                                                                            $    383                $  1,320
  Cost of revenue                                                                                       971                   2,024
                                                                                                   --------                --------
  Gross profit(loss)                                                                                   (588)                   (704)
                                                                                                   --------                --------

Operating expenses:
  Research and development                                                                            1,373                   1,925
  Sales and marketing                                                                                 1,796                   4,137
  General and administrative                                                                          1,807                   3,365
  Amortization of goodwill and other intangible assets                                                1,633                   2,502
  Impairment of assets                                                                                7,433                    --
  Loss on sale of Japan subsidiary                                                                       24                    --
  Lease impairment                                                                                      289                    --
                                                                                                   --------                --------
       Total operating expenses                                                                      14,355                  11,929
                                                                                                   --------                --------

(Loss) from operations                                                                              (14,943)                (12,633)

Gain(loss) on sale of investment - Slim Technology                                                      119                    --
Gain(loss) on sale of investment - Virage Logic                                                        --                     5,935
Interest and other, net                                                                                 136                     712
                                                                                                   --------                --------

(Loss) from continuing operations                                                                   (14,688)                 (5,986)
(Loss) on disposal of discontinued operation                                                           --                      (705)
(Loss) from discontinued operations                                                                    --                      (524)
                                                                                                   --------                --------
(Loss) before income taxes                                                                          (14,688)                 (7,215)
Income tax provision                                                                                   --                         5
                                                                                                   --------                --------
Net income (loss)                                                                                  $(14,688)               $ (7,220)
                                                                                                   --------                --------
</TABLE>


See accompanying notes to condensed consolidated financial statements.


                                       14
<PAGE>


                              INGENUUS CORPORATION
                      CONSOLIDATED STATEMENT OF OPERATIONS
                             (percentage of revenue)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                                       Nine Months Ended August 31,
                                                                                                      ------------------------------
                                                                                                        2002                  2001
                                                                                                      --------              --------
                                                                                                      Ingenuus              Ingenuus
                                                                                                      --------              --------
                                                                                                          %                     %
<S>                                                                                                       <C>                  <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
Revenue                                                                                                   100%                 100%
Cost of revenue                                                                                           254                  153
                                                                                                       ------               ------
Gross profit (loss)                                                                                      (154)                 (53)

  Operating expenses:
    Research and development                                                                              358                  146
    Sales and marketing                                                                                   469                  313
    General and administrative                                                                            472                  255
    Amortization of goodwill and other intangible assets                                                  426                  190
    Impairment of assets                                                                                1,941                    0
    Loss on sale of Japan subsidiary                                                                        6                    0
    Lease impairment                                                                                       75                    0
                                                                                                       ------               ------
      Total operating expenses                                                                          3,747                  904
                                                                                                       ------               ------

  (Loss) from operations:                                                                              (3,901)                (957)

  Gain (loss) on sale of investment - Slim Technology                                                      31                    0
  Gain (loss) on sale of investment - Virage Logic                                                          0                  450
  Interest and other, net                                                                                  36                   54
                                                                                                       ------               ------

(Loss) from continuing operations                                                                      (3,834)                (453)
(Loss) on disposal of discontinued operation                                                                0                  (54)
(Loss) from discontinued operations                                                                         0                  (40)
                                                                                                       ------               ------
(Loss) before income taxes                                                                             (3,834)                (547)
  Income tax provision                                                                                      0                    0
                                                                                                       ------               ------
  Net income (loss)                                                                                    (3,834)%               (547)%
                                                                                                       ======               ======
</TABLE>

See accompanying notes to condensed consolidated financial statements.


Revenue.

Product  revenue  primarily  consisted of engineering and  manufacturing  change
management  software  licenses  sold to  companies.  Service  revenue  primarily
consisted of Novo  maintenance  services for  third-party  hardware and software
products as well as maintenance services related to Inbox products.

Revenue  decreased  82% to $66,000 in the  quarter  ended  August 31,  2002 from
$366,000 in the quarter  ended  August 31,  2001 and  revenue  decreased  71% to
$383,000 in the nine months  ended August 31, 2002 from $1.3 million in the nine
months  ended  August 31,  2001.  Product  revenue  decreased  to  $19,000  from
$166,000,  while  service  revenue  decreased  to $47,000  from  $200,000 in the
quarters  ended  August  31,  2002 and August 31,  2001,  respectively.  Product

                                       15

<PAGE>
revenue  decreased to $40,000 from $312,000,  while service revenue decreased to
$343,000  from $1.0  million in the nine months ended August 31, 2002 and August
31, 2001,  respectively.  These  decreases were primarily  attributable to lower
demand for our  products and  services.  Such lower demand is the result of both
our deteriorating  financial condition and deteriorating  economic conditions in
the overall economy.

International  revenue for the Company  accounted for 15% and 50% of revenue for
the quarter and nine months  ended August 31,  2002,  respectively.  The Company
recorded $10,000 and $191,000 of revenue related to international operations for
the quarter and nine months  ended August 31,  2002,  respectively.  The Company
closed its  international  operation  in Japan on July 31,  2002.  International
revenue  from  operations  in Japan  accounted  for $10,000 and $187,000 for the
quarter and nine months ended August 31, 2002, respectively.

Cost of Revenues.

Cost of  revenues  primarily  consists  of the  costs  of  products,  personnel,
amortization of acquired Inbox technology and other operating  expenses incurred
in  providing  services to  customers.  Cost of revenues  for  Ingenuus  segment
decreased  65% to $208,000 in the quarter ended August 31, 2002 from $599,000 in
the quarter ended August 31, 2001. Cost of revenues decreased 52% to $971,000 in
the nine months ended August 31, 2002 from $2.0 million in the nine months ended
August 31, 2001.  The decreases in cost of revenues were mainly due to decreases
in  salaries  and  benefits of $120,000  and  $452,000  for the quarter and nine
months  ended August 31,  2002,  as compared to the same periods in 2001.  These
reductions occurred as a result of a reduction in workforce.  For our operations
in Japan,  the  decrease of $157,000  and  $366,000 in cost of revenues  for the
quarter and nine months ended  August 31, 2002,  as compared to the same periods
in 2001,  was due to  reduced  revenues,  which  resulted  in the  reduction  of
subcontractor  costs.  Cost of revenues as a percentage of revenues was 315% and
164% in the quarters ended August 31, 2002 and August 31, 2001 and 254% and 153%
for the nine months  ended  August 31, 2002 and August 31,  2001,  respectively.
Cost of  revenues  for the EDA segment  was  immaterial  in the quarter and nine
months ended August 31, 2001. The EDA segment was  discontinued as of August 31,
2001.

Research and Development.

Research and development  expenses  represent the cost of engineering  personnel
and other  expenses  incurred in the  development  and  enhancement  of our core
technology  and products.  Research and  development  expenses  decreased 43% to
$300,000 in the quarter ended August 31, 2002 from $526,000 in the quarter ended
August 31,  2001.  The  decrease in  research  and  development  expenses in the
quarter  ended  August 31,  2002 was  mainly due to  decreases  in  salaries  of
$17,000,  depreciation expenses of $39,000, and consulting expenses of $148,000.
Research and development  expenses for Ingenuus decreased 29% to $1.4 million in
the nine months ended August 31, 2002 from $1.9 million in the nine months ended
August 31, 2001. This decrease was mostly due to decreases in professional  fees
of $303,000,  travel expenses of $43,000 and depreciation  expenses of $188,000.
These  decreases  were partially  offset by an increase in salaries  expenses of
$25,000.  Research and development expenses as a percentage of revenue were 455%
in the quarter  ended August 31, 2002,  and 144% in the quarter ended August 31,
2001. Research and development  expenses as a percentage of revenue were 358% in
the nine months ended August 31, 2002  compared to 146% in the nine months ended
August 31, 2001.
Sales and Marketing.
Sales and  marketing  expenses  consist of salaries  paid to internal  sales and
marketing personnel and sales  representatives and advertising costs and related
operating  expenses.  Sales and marketing  expenses decreased 79% to $285,000 in
the quarter  ended August 31, 2002 from $1.4 million in the quarter ended August
31, 2001.  The  decrease of sales and  marketing  expenses in the quarter  ended
August 31, 2002,  compared with the quarter ended August 31, 2001 was mainly due
to decreases of $454,000 in advertising  related expenses,  $504,000 in salaries
expenses due to the reduction in headcount,  $67,000 in recruiting expenses, and
$28,000 in travel expenses.  Sales and marketing expenses for Ingenuus decreased
57% to $1.8 million in the nine months ended August 31, 2002,  from $4.1 million
in the nine months ended August 31,  2001.  The decrease in sales and  marketing
expenses in the nine months ended August 31, 2002, compared with the nine months
ended  August 31, 2001,  was mainly due to decreases of $980,000 in  advertising
related  expenses,  $744,000  in  salaries  expenses  due  to the  reduction  in
headcount,  $423,000 in recruiting  expenses,  and $137,000 in travel  expenses.
Sales and  marketing  expenses as a percentage  of revenue were 432% and 378% in
the quarters ended August 31, 2002, and 2001, respectively.  Sales and marketing
expenses,  as a  percentage  of revenue was 469% in the nine months ended August
31, 2002 and 313% in the nine months ended August 31, 2001.

                                       16

<PAGE>

General and Administrative Expenses.

General and  administrative  expenses  include  salaries and expenses related to
executives,  corporate  finance,  legal  and  human  resources.  These  expenses
decreased  39% to $533,000 in the quarter ended August 31, 2002 from $877,000 in
the  quarter  ended  August 31,  2001.  For the United  States  operations,  the
decrease in general  and  administrative  expenses  was mainly due to a $261,000
decrease  in salaries  expenses as a result of  reductions  in  workforce  and a
$53,000  decrease  in  shareholder  expenses.  This was  partially  offset by an
increase in facility expenses of $27,000.  General and  administrative  expenses
decreased  46% to $1.8 million in the nine months  ended  August 31, 2002,  from
$3.4 million in the nine months  ended August 31, 2001.  The decrease in general
and administrative  expenses in the nine months ended August 31, 2002,  compared
with the nine  months  ended  August 31,  2001,  was mainly due to a decrease in
salary expenses of $468,000 as a result of reduced headcount, a $96,000 decrease
in recruiting expenses, a $83,000 decrease in shareholders  expenses,  and lower
fees related to professional  services and legal expenses of $444,000.  This was
partially offset by an increase in facility expenses of $133,000.

For our  operations  in Japan,  the general  and  administrative  expenses  were
$30,000 in the  quarters  ended  August  31,  2002 and 2001,  respectively.  Our
general and  administrate  expenses were $58,000 and $196,000 in the nine months
ended  August 31, 2002 and 2001.  The  decrease  of  $138,000 in the  nine-month
period  ended August 31,  2002,  compared to the same period last year  included
decreases  of $ 100,000 in  salaries,  $10,000  in travel and  $28,000 in common
expenses. The decrease in salaries and common expenses were due to the reduction
in headcount and relocation to a smaller facility.

General and  administrative  expenses as a  percentage  of revenue were 808% and
239% in the quarters ended August 31, 2002, and 2001, respectively.  General and
administrative  expenses as a percentage of revenue were 472% in the nine months
ended August 31, 2002 and 255% in the nine months ended August 31, 2001.

Amortization of Goodwill and Other Intangible Assets.

Amortization of goodwill and other  intangible  assets were $97,000 and $834,000
in the quarters ended August 31, 2002 and 2001,  respectively.  The amortization
expenses of intangible  assets were $1.6 million and $2.5 million in nine months
ended  August 31, 2002 and 2001,  respectively.  The  decrease  of $737,000  and
$869,000 in the quarter and nine months ended August 31, 2002, respectively, was
due to lower amortization expenses because the acquired workforce and trade name
of Inbox,  and  franchise  fee of Novo were fully  amortized  as of November 30,
2001.  In addition,  the Company  recorded  $6.4 million of  impairment  charges
related to goodwill  and $59,000  related to Novo  developed  technology  in the
second quarter of this year, which further  substantially  reduced  amortization
expenses for the quarter ended August 31, 2002. Due to the going-concern  issues
of the Company, the Company wrote down the goodwill and its intangible assets to
its fair value. Amortization of intangible assets as a percentage of revenue was
147% and 228% in the quarters  ended August 31, 2002 and 2001, and 426% and 190%
in the nine months ended August 31, 2002 and 2001, respectively.

Impairment of Assets.

The  Company  evaluated  its assets to  determine  if they were  impaired  under
Financial  Accounting Standards Board ("FASB") Statement of Financial Accounting
Standards  No. 121 ("SFAS  121") at November  30, 2001 and again at February 28,
2002, using undiscounted cash flow. These projected undiscounted cash flows were
based on a sixty-month forecast.  Although these cash flow projections reflected
decreasing  cash balances  during fiscal year 2002,  there was  sufficient  cash
available during the entire forecasted period. Hence, based on the fact that the
Company had some strong prospects in its sales pipeline,  the improving economic
conditions,  and the Company's  ability to further  restructure to preserve cash
and be able to fund its  operations,  the Company  concluded its assets were not
impaired.

Management noted the following factors during the second quarter of 2002:

         o        certain sales  expected for the second quarter of 2002 had not
                  materialized;

         o        certain   sales   projected   for  the   third   quarter   and
                  substantially  all for the  second  quarter  of 2002 have been
                  canceled or extended to the fourth quarter of 2002 or beyond;


                                       17

<PAGE>


         o        overall  economic  conditions  had not  improved to the extent
                  that it was forecasted in fiscal 2001 and the first quarter of
                  fiscal 2002; and

         o        based upon the  revised  cash flow  projections,  the  Company
                  would use in operations  all remaining  cash by September 2002
                  unless additional funding becomes available.

While the Company aggressively pursued a sales goal of at least $600,000, in the
third quarter of 2002, without  significant  improvement in the overall economy,
its ability to close these accounts was substantially at risk.

Due to the factors  outlined  above,  our cash flow forecast  projects a deficit
cash balance during September 2002. Accordingly, the Company determined it is no
longer appropriate to include projected undiscounted cash flows beyond September
2002 for the purposes of determining asset impairment under SFAS 121.

The Company  concluded that with no revenue in the first and second  quarters of
2002 from Ingenuus  software,  and given the fact that the  Company's  prospects
keep delaying capital purchases,  there is a strong possibility that the Company
will not be able to generate  enough  revenue  and cash to continue  operations.
Hence,  in the  second  quarter  of fiscal  2002  using  SFAS 121,  the  Company
concluded the assets and the intangibles were impaired and were  written-down to
the estimated fair value.

Based on current cash flows,  and on the assumption that the Company will be out
of funds by  September  2002,  several  intangible  and fixed assets were deemed
impaired. The total impairment of assets was $7.4 million, which was recorded in
the second quarter:

         The Company  recognized an impairment of $59,000 for intangible  assets
         related to developed  technology of the Novo maintenance business since
         the Company is no longer engaged in that business,  including in Japan,
         where as of May 31, 2002,  the Company gave notice to its employees and
         partners to cease operations at the end of July 2002.

         The Company  recognized  an impairment  of  $6,468,000  for  intangible
         assets,  down to their estimated fair value,  based on the fact that if
         the Company is not able to raise any additional  funds, it will run out
         of cash by September  2002. The  intangible  assets  included  $115,000
         related to the core  technology of Inbox and $6,353,000  related to the
         goodwill from Inbox.

         The  Company   recognized  an  impairment  of  $856,000  for  leasehold
         improvements,  down to their  estimated  fair value,  based on the fact
         that  there is a high  vacancy  rate in  Livermore,  and that there are
         empty buildings surrounding  Ingenuus's premises.  The Company believes
         that it may be able to sublease  the building at the same rent that the
         Company is currently  paying,  but may not be able to recover any costs
         related to the leasehold improvements.

         The Company  recognized an impairment of $32,000 for computer  software
         down to its estimated fair value.

         The Company  recognized an impairment for furniture and fixtures in the
         amount of $15,000, down to their estimated fair value.

         The Company recognized an impairment of $2,000 for its automobile, down
         to its estimated fair value.

The Company  reevaluated  its assets to determine if they were further  impaired
under SFAS 121 at August 31, 2002.  The Company  concluded  that all assets were
carried at or below their estimated fair value, and hence, no impairment  charge
was recorded in the third quarter 2002.

Lease Impairment

The Company is currently  not  utilizing  all of its leased  office space and is
trying to sublease its building in Livermore.  Since the Company may not be able
to sublease the building at the full rate, it may have to discount its sublease,
and may also include free rent. As a result, the Company used EITF 88-10; "Costs
Associated  With Lease  Modification or  Termination",  with respect to the loss
related to the operating  lease.  The Company also used the guidance  under EITF
issue #94-3 "Liability Recognition for Certain Employee Termination Benefits and
Other  Costs  to  Exit  an  Activity   (including   Certain  Costs  Incurred  in
Restructuring)".  The loss on the  sublease,  $289,000 was charged to expense in
the  third  quarter  of  2002.  The  estimated  loss  on the  sublease  will  be
reevaluated at the end of each quarter going forward.

The lease  impairment for the quarter ended August 31, 2002 was $289,000.  Lease
impairment  as a percentage of revenue was 438% and 75% for the quarter and nine
months ended August 31, 2002, respectively.


                                       18

<PAGE>

Gain on Sale of Investments.

In the quarter  ended August 31, 2002 the Company sold 20,700  shares of capital
stock of Slim Technology,  representing 10% of issued and outstanding shares, to
the Slim Tech  employees  for  $125,000.  The Company  received  the proceeds on
August 14, 2002. The Company recorded a $1.7 million impairment of investment in
Slim  Technology in fiscal year 2000 to write down the value of this  investment
to zero,  therefore,  the amount of $118,750,  the proceeds of $125,000 less the
commission  of $6,250,  have been  realized as gain on sale of  investment.  The
Company has  continued  its efforts to sell the remainder of its holding in Slim
Tech.  As of the filing  date of this  report on Form 10Q,  the  Company had not
entered into any agreement to sell  additional  shares of Slim Tech. The gain on
sale of  investment in Slim Tech, as a percentage of revenue was 180% and 31% in
the quarter and nine months ended August 31, 2002, respectively.

In the nine months ended August 31, 2001 the Company sold 503,000  shares of the
525,000  shares of Virage Logic it held for $6.7 million at an aggregate cost of
$800,000,  resulting in a gain of $5.9  million.  During  fiscal year 2001,  the
Company  sold  its  entire  525,000  shares  of  Virage  Logic.  Gain on sale of
investment in Virage  Logic,  as a percentage of revenue was 12% and 450% in the
quarter and nine months ended August 31, 2001, respectively.

Interest and Other, Net.

Interest and other,  net decreased 99% to $3,000 in the quarter ended August 31,
2002 from $547,000 in the quarter ended August 31, 2001. The interest and other,
net  decreased  81% to $136,000  in nine  months  ended  August 31,  2002,  from
$712,000 in the nine months ended  August 31, 2001.  The decrease in the quarter
ended  August 31,  2002  compared to the same period last year was mainly due to
the  decrease  in  interest  of $398,000 on income tax refunds and a decrease in
interest and dividends of $53,000 on investments. The decrease in the nine-month
period of 2002  compared  to the same  period last year was also mainly due to a
decrease in interest of $280,000 related to income tax refunds and a decrease in
interest and dividends of $196,000 on investments.  Interest and other, net as a
percentage of revenue were 5% and 149% in the quarters ended August 31, 2002 and
2001, respectively, and 36% and 54% in the nine months ended August 31, 2002 and
2001, respectively.

Foreign currency balance sheet accounts of the Novo foreign  subsidiary in Japan
are translated  into U.S.  dollars at exchange  rates  prevailing on the balance
sheet dates.  Revenue,  costs and expenses are translated  into U.S.  dollars at
average rates for the period.  Gains and losses  resulting from foreign exchange
transactions   are  included  in  the  statement  of  operations  and  were  not
significant during the periods presented.

Provision for Income Taxes.

There was no  provision  for income  taxes in the quarter and nine months  ended
August 31,  2002.  There were  provisions  of $2,000 and $5,000 taken for income
taxes in the quarter and nine months ended August 31, 2001.

The  Company  has  taken a  valuation  allowance  on the full  amount of the net
operating loss  carry-forwards and its other net deferred tax assets since it is
likely that the benefit will not be realized in the future.

Liquidity and Capital Resources.

We have  funded  our  operations  primarily  from  license  revenue  and the net
proceeds of $71.9 million from the initial  public  offering of our common stock
in May 1998.

Our operating  activities used net cash of $4.8 million and $11.0 million in the
nine months ended August 31, 2002 and 2001,  respectively.  Net cash used in the
nine  months  ended  August 31,  2002 and 2001 were due to the  significant  net
losses incurred for these periods. During the nine months ended August 31, 2002,
we received $609,000 in income tax refunds from the IRS.

Net cash (used for) and provided by investing  activities  were  ($215,000)  and
$6.7 million in the nine months ended August 31, 2002,  and 2001,  respectively.
During the nine months  ended  August 31,  2002,  we used  $295,000  for capital
expenditures  related to interior  improvements  to our  Livermore  facility and
$31,000 for leased equipment  buyout.  In the nine months ended August 31, 2002,
we received  net  proceeds of  $118,750  from the sale of 20,700  shares of Slim
Technology, representing 10% of the issued and outstanding capital stock of Slim
Technology  Co. Ltd. In the nine months ended  August 31, 2001,  we received net
proceeds of $6.7 million from the sale of 503,000 shares of Virage


                                       19

<PAGE>
Logic, Corp. and we used $40,000 for purchases of property and equipment.

Net cash  provided  by and (used  for)  financing  activities  were  $1,000  and
($155,000) in the nine months ended August 31, 2002, and 2001  respectively. Net
cash  provided by financing  activities in the nine months ended August 31, 2002
was from the issuance of common stock under our employee  stock  purchase  plan.
Net cash used by financing  activities  in the nine months ended August 31, 2001
consisted primarily of repurchase of common stock of $169,000.

Net  proceeds  from the sale of our SIP  business  were $3.0 million in the nine
months ended August 31, 2001.  The entire  amount of $11.3 million from the sale
of SIP business had been received as of November 30, 2001.

As of  August  31,  2002,  we had cash  and cash  equivalents  of  $452,000,  an
accumulated deficit of $101.0 million and working capital of ($1.7 million).

We have  suffered  recurring  losses in the first  nine  months of fiscal  2002,
fiscal 2001,  and 2000.  Our continued  existence is dependent on our ability to
achieve profitable operations.  If we achieve profitability or obtain additional
financing,  we intend to continue to invest in the  development  of new products
and  enhancements  to our existing  products.  Our future  liquidity and capital
requirements will depend upon numerous factors, including:

         o        the costs and timing of our  product  development  efforts and
                  the success of these development efforts;

         o        the costs and timing of our sales and marketing activities;

         o        the extent to which our existing and new products  gain market
                  acceptance;

         o        competing technological and market developments;

         o        the costs involved in maintaining and enforcing  patent claims
                  and other intellectual property rights; and

         o        economic conditions.

Overall  weakness  in  the  general  economy  and  our  deteriorating  financial
condition  caused demand for our product to decline  during the third quarter of
2002.  As a result,  the Company made no software  sales in the third quarter of
2002, and therefore did not meet its revenue target for that period.

In the third  quarter of 2002,  we further  reduced our  headcount and operating
expenses to preserve cash.  However,  even without revenues,  we believe that we
will be able to fund our operations  with existing cash through October 2002. We
need to raise  immediate  additional  funds in order to  support  our  continued
operating losses and to otherwise fund our operations.

We are  attempting  to raise  funds  through  our  on-going  efforts to sell the
Company's  products  and  services,  and by  trying  to sell  off our  remaining
investments in Slim Technology.  We also hope to raise funds from the collection
of the notes receivable of $552,500 due from Pulsic, related to the restructured
Chip & Chip note (see Note 7).

In addition,  the Company is actively pursuing strategic  business  combinations
with a couple of companies.  If additional funding becomes available,  we cannot
be sure that such  investments  will be offered on  acceptable  terms.  Also, we
cannot be sure that any business  combination  will be entered into. If adequate
funds are not available or a business combination is not entered into by the end
of  October  2002,  we may be  required  to cease  our  operations  and/or  seek
protection under the bankruptcy laws.

The amount and timing of our future capital needs will be highly  dependent upon
our ability to increase  our revenue,  control our  expenses,  and  successfully
manage the  restructuring  of our  operations.  Thus,  our current  expectations
regarding  the amount  and  timing of our  future  cash needs and cash flows are
subject to substantial  uncertainty.  If we succeed in raising  additional funds
through  the  issuance  of  equity  securities,  the  issuance  will  result  in
substantial  dilution to existing  stockholders.  If we raise  additional  funds
through the issuance of debt securities or preferred stock, these new securities
would have rights,  preferences and privileges senior to those of the holders of
our common stock. The terms of these securities may also impose  restrictions on
our operations.

                                       20

<PAGE>

Other Factors Affecting Future Operating Results

Possible Challenges to Success

We May Not Be Successful in Marketing our MCM Product

In January 2001, we formally introduced Manufacturing Change Manager TM ("MCM"),
a software program that allows all members of the manufacturing  supply chain to
communicate  and  collaborate  using  the  Internet  as a fully  integrated  and
automated system.

Our future  depends  on our  ability to  enhance  and  expand our  existing  MCM
product,  and to introduce  new products as technology  allows.  There can be no
assurance  that we will be successful in marketing the MCM product.  We may also
experience  release  delays that are costly,  and that can harm our business and
result in possible litigation.  Other possible risks affecting our product sales
include:

         o        manufacturers' resistance to change;

         o        reductions  in capital  spending by customers  due to economic
                  downturn;

         o        miscalculations regarding the need for the MCM product;

         o        misappropriation  of the  Company's  technology  or  copyright
                  infringement;

         o        diversion   of   resources   due  to   litigation,   including
                  intellectual propriety rights litigation;

         o        lack of sales, marketing, and customer support;

         o        rapid technological change;

         o        frequent introductions of new products by our competitors;

         o        short product life cycles;

         o        changes in customer demands and requirements; and

         o        evolving industry standards.

Our Ability to Continue Operations Will Depend on Our Ability to Secure Funding.

The  Company  made no software  sales in the  quarter  ended May 31, 2002 or the
quarter ended August 31, 2002. If this condition continues,  we will not be able
to  continue  operations  beyond  the end of  October  2002.  As a  result,  the
Company's short-term viability will depend on our ability to secure an immediate
source of funding through either the sale of additional  equity  securities or a
merger.  If such  funding or merger  does not  occur,  we may be forced to cease
operations and/or file for bankruptcy.

The Introduction of a Competing Product by a Large Company Could Have an Adverse
Effect on Sales.

We must deliver our product in the marketplace before the competition provides a
similar whole  solution.  If a competitor with better name  recognition  were to
produce a comprehensive  manufacturing  change product,  it would likely have an
adverse effect on our financial condition.

If We Do Not Establish Our Name in the Industry, Our Business Could Be Harmed

We are a small,  relatively  unknown new entrant into the  manufacturing  change
marketplace.  Customers have been, and may continue to be, reluctant to purchase
our products because of concerns about our viability.  If customers  continue to
resist the idea of having an unknown company supply their  manufacturing  change
needs,  such  resistance  will  likely have an adverse  effect on our  financial
condition.

If We Do Not Establish a Firm Customer Base, Our Business Could Be Harmed

If our sales team is not  successful in closing sales with major  manufacturers,
this will have an adverse  effect on the overall sales plan and on the financial
condition of the company.

The Manufacturing Industry May Resist Changing to Our Platform

Manufacturers with significant investment in present systems may resist the idea
of a basic platform such as ours,  fearing that it may not be flexible enough to
meet their individual needs. Such resistance would likely have an adverse effect
on our financial condition.

                                       21

<PAGE>

Product Defects May Harm Our Business

Like any new software product,  the MCM software may have some "bugs" or defects
that could appear after a company has purchased and installed the software. Such
occurrences  could  have an adverse  effect on our  financial  condition  due to
customer dissatisfaction,  the additional labor costs involved in fixing it, and
delays in shipping additional products.

A Recession or Economic Downfall Would Harm Our Business

If current  economic  conditions  persist,  customers  may further delay capital
spending, which will have an adverse effect on our financial condition.

In addition,  terrorist acts or acts of war (wherever  located around the world)
may cause damage or disruption to the overall economy, our business,  employees,
supplies,  distributors and resellers, and customers, all of which could have an
adverse effect on our operations and financial results.

Risks Associated with Our International Sales Could Harm Our Business

We continue  to market our  products to the  international  market.  There are a
number of risks inherent in dealing with foreign companies.  Some of those risks
include:

         o        economic recessions and political instability;

         o        exchange rate fluctuations;

         o        extended accounts receivables and collections difficulties;

         o        difficulty   in  managing  both  sales   representatives   and
                  distributors;

         o        unexpected changes in regulatory requirements;

         o        reduced  or  limited  protection  for  intellectual   property
                  rights;

         o        export license  requirements and documentation;  and

         o        tariffs and possible adverse tax consequences.

Our Future Operating Results Are Expected to Fluctuate and We Depend Upon Timely
Project Completion

Our operating  results have fluctuated in the past and are expected to fluctuate
significantly  on a  quarterly  and annual  basis in the future as a result of a
number of factors including:

         o        the size and timing of customer orders;

         o        the length of our sales cycle;

         o        the timing of new product  announcements  and introductions by
                  us and our competitors;

         o        our ability to successfully develop,  introduce and market new
                  products and product enhancements;

         o        market acceptance of our products;

         o        the cancellation or delay of orders from major customers;

         o        the level of changes to customer  requirements due to specific
                  changes requested by customers;

         o        our  ability  to  retain  our  existing   personnel  and  hire
                  additional personnel; and

         o        general economic conditions.

We Face the Risk of Losing Existing Contracts.

Our contracts may generally be canceled without cause, and if a customer cancels
or delays performance under any such contracts, our business,  operating results
and financial condition could be materially adversely affected.

Manufacturers May be Reluctant to Make Capital Investments.

A customer's  license of our products may involve a  significant  commitment  of
capital with the  attendant  delays  frequently  associated  with  authorization
procedures for capital expenditures within customer organizations. Our operating
expenses  will be based  in part on our  expectations  of  future  revenue  from
product licenses.  Accordingly,  if we do not realize our expected revenues, our
business,  operating  results,  and  financial  condition  could  be  materially
adversely affected.

                                       22

<PAGE>

We May Fail to  Successfully  Integrate Our Business With Merger and  Acquistion
Partners.

From time to time,  we expect to evaluate  potential  acquisitions  to build our
expertise. There can be no assurance that:

         o        we will be able to identify attractive acquisition candidates;

         o        that  we  will  be able  to  successfully  complete  any  such
                  acquisition; or

         o        that we will be able to integrate  any  acquired  company with
                  our other operations.

In connection  with  potential  acquisitions,  the failure to  successfully  and
efficiently  integrate new employees and operations of the acquired company with
our existing  employees  and  operations or to  successfully  manage an acquired
company could materially  adversely effect our business,  operating results, and
financial condition.

We Depend on Key Personnel

Our business  depends on the  continued  service of our  executive  officers and
other  senior  management  and  key  employees,   including  certain  technical,
managerial  and  marketing  personnel.  The loss of the services of any of these
individuals or groups of individuals could have a material adverse effect on our
business,  operating  results and  financial  condition.  None of our  executive
officers has an employment  agreement with us. Also, any  significant  growth of
our business and expansion of our customer base would place a significant strain
on our management and operations.  We believe that our future  business  results
will  depend  upon  our  ability  to  identify,  attract,  motivate  and  retain
additional highly skilled technical,  managerial and marketing  personnel and to
hire replacements for employees that leave us. Competition for such personnel in
the computer software industry is intense.  There can be no assurance we will be
successful in  identifying,  attracting  and retaining such  personnel,  and the
failure to do so could have a material adverse effect on our business, operating
results and financial condition.

Our Share Price Is Volatile

Since our initial public  offering in April 1998, the market price of our Common
Stock has been highly volatile and is expected to be  significantly  affected by
factors such as:

         o        our  actual and  perceived  ability  to  continue  to fund our
                  operations;

         o        actual or anticipated fluctuations in our operating results;

         o        the trading liquidity of our common stock;

         o        our failure to meet or exceed published earnings estimates;

         o        changes in earnings estimates or recommendations by securities
                  analysts;

         o        announcements of technological innovations;

         o        new  products  or  new  contracts  by us or  our  existing  or
                  potential competitors;

         o        developments   with   respect  to   patents,   copyrights   or
                  proprietary rights;

         o        adoption of new  accounting  standards  affecting the software
                  industry; and

         o        general market conditions.

In  addition,  the stock  market has from time to time  experienced  significant
price and volume fluctuations that have particularly  affected the market prices
for the securities of technology  companies,  which have often been unrelated to
the operating performance of such companies. These broad market fluctuations may
materially adversely affect the market price of our Common Stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

We  develop  products  in the U.S.  and sell them  worldwide.  As a result,  our
financial  results  could be  affected  by  factors  such as  changes in foreign
currency  exchange  rates or weak  economic  conditions in foreign  markets.  We
currently have funds in foreign currency,  which are translated to U.S. dollars.
Hence, strengthening of the dollar may result in a decrease in the value of such
foreign currency when converted to U.S. dollars.

Interest  income is sensitive to changes in the general  level of U.S.  interest
rates,   particularly  since  our  investments  are  in  short-term  instruments
calculated at variable rates.

We have  established  policies and business  practices  regarding our investment
portfolio  to preserve  principal  while  obtaining  reasonable  rates of return
without significantly increasing risk. We place our investments with high credit

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<PAGE>


quality  issuers  according to our investment  policy.  We do not use derivative
financial instruments in our investment  portfolio.  All investments are carried
at cost, which  approximates  market value. Due to the short-term  nature of our
investments and the immaterial  amount of our debt  obligation,  we believe that
there is no material  exposure  to  interest  rate  fluctuation.  Therefore,  no
accompanying table has been provided.

ITEM 4. CONTROLS AND PROCEDURES

Based upon an  evaluation of our  disclosure  controls and  procedures  that was
performed  within 90 days of our filing of this  quarterly  report on Form 10-Q,
our Chief Executive  Officer and our Chief Financial Officer have concluded that
our  disclosure  controls  and  procedures  are  effective  to ensure the timely
collection,  evaluation  and disclosure of  information  potentially  subject to
disclosure under the Securities Exchange Act of 1934, as amended,  and the rules
and regulations promulgated thereunder. Based upon an evaluation of our internal
controls  that was  performed  within 90 days of our  filing  of this  quarterly
report on Form 10-Q, there have been no significant changes in internal controls
or other factors that could significantly affect internal controls subsequent to
the date of evaluation.  No significant deficiencies or material weaknesses were
identified  in  the  evaluation  of  our  internal  controls  and  therefore  no
corrective actions have been taken.

                                       24

<PAGE>

                           PART II. OTHER INFORMATION


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibit 99.1 Certification

(b) Reports on Form 8-K

None.

                                   SIGNATURES

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

                                        INGENUUS CORPORATION


                                        BY: /s/ Randy Singh
                                            --------------------------
                                            Randy Singh
                                            Chief Financial Officer

Date: October 15, 2002

                                 CERTIFICATIONS

I,  Michael  J.  Carroll,  Chairman  and Chief  Executive  Officer  of  Ingenuus
Corporation, certify that:

1. I have  reviewed  this  quarterly  report on Form 10-Q for the third  quarter
ended August 31, 2002 of Ingenuus Corporation;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the period presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a

                                       25

<PAGE>

significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: October 15, 2002
      ----------------


                /s/ Michael J. Carroll
                -------------------
                Chairman and Chief Executive Officer


                                       26

<PAGE>

I, Randy Singh, Chief Financial Officer of Ingenuus Corporation, certify that:

1. I have  reviewed  this  quarterly  report on Form 10-Q for the third  quarter
ended August 31, 2002 of Ingenuus Corporation;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the period presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed  such  disclosure  controls and  procedures  to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

b) evaluated  the  effectiveness  of the  registrant's  disclosure  controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the effectiveness of
the  disclosure  controls  and  procedures  based  on our  evaluation  as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):

a) all significant  deficiencies in the design or operation of internal controls
which  could  adversely  affect the  registrant's  ability  to record,  process,
summarize and report  financial data and have  identified  for the  registrant's
auditors any material weaknesses in internal controls; and

b) any  fraud,  whether  or not  material,  that  involves  management  or other
employees who have a

                                       27

<PAGE>

significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date: October 15, 2002
      ----------------


                /s/ Randy Singh
                -------------------
                Chief Financial Officer

                                       28