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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------

                                   FORM 10-K
                            ------------------------

                       FOR ANNUAL AND TRANSITION REPORTS
                        PURSUANT TO SECTIONS 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
      [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934

                    FOR THE FISCAL YEAR ENDED MARCH 31, 2000

                                       OR

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

                         FOR THE TRANSITION PERIOD FROM
                             ------------------ TO
                              ------------------ .

                        COMMISSION FILE NUMBER 000-27431

                             CALICO COMMERCE, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                              <C>
                   DELAWARE                                        77-0373344
        (STATE OR OTHER JURISDICTION OF                         (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)                       IDENTIFICATION NUMBER)
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                         333 WEST SAN CARLOS, SUITE 300
                           SAN JOSE, CALIFORNIA 95110
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (408) 975-7400
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                COMMON STOCK, $0.001 PAR VALUE (TITLE OF CLASS)

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

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

     The aggregate market value of voting stock held by non-affiliates of the
Registrant was approximately $351,791,000 as of May 31, 2000 based on the
closing price of the Common Stock as reported on the Nasdaq Stock Market for
that date. There were 34,970,861 shares of the Registrant's Common Stock issued
and outstanding on May 31, 2000.  [ ]
                            ------------------------

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's definitive proxy statement which is expected
to be filed not later than 120 days after the Registrant's fiscal year ended
March 31, 2000, to be delivered in connection with the Registrant's Annual
Meeting of Stockholders, are incorporated by reference into Part III of this
Form 10-K.
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                               TABLE OF CONTENTS

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                                   PART I
Item 1.   Business....................................................    3
Item 2.   Properties..................................................   24
Item 3.   Legal Proceedings...........................................   24
Item 4.   Submission of Matters to a Vote of Security Holders.........   24

                                  PART II
Item 5.   Market for Registrant's Common Equity and Related
          Stockholder Matters.........................................   24
Item 6.   Selected Financial Data.....................................   26
Item 7.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................   27
Item 7A.  Quantitative and Qualitative Disclosures about Market
          Risk........................................................   34
Item 8.   Financial Statements and Supplementary Data.................   35
Item 9.   Changes in and Disagreements with Accountants on Accounting
          and Financial
          Disclosure..................................................   35

                                  PART III
Item 10.  Directors and Executive Officers of the Registrant..........   35
Item 11.  Executive Compensation......................................   36
Item 12.  Security Ownership of Certain Beneficial Owners and
          Management..................................................   36
Item 13.  Certain Relationships and Related Transactions..............   36

                                  PART IV
Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form
          8-K.........................................................   36
Financial Statements..................................................   36
Financial Statement Schedule..........................................   36
Exhibits..............................................................   37
Signatures............................................................   39
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                                     PART I

     The information in this report 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. Such statements
are based upon current expectations that involve risks and uncertainties. Any
statements contained herein that are not statements of historical facts may be
deemed to be forward-looking statements. For example, words such as "may,"
"will," "should," "estimates," "predicts," "potential," "continue," "strategy,"
"believes," "anticipates," "plans," "expects," "intends," and similar
expressions are intended to identify forward-looking statements. Our actual
results and the timing of certain events may differ significantly from the
results discussed in the forward-looking statement. Factors that might cause or
contribute to such a discrepancy include, but are not limited to, those
discussed elsewhere in this report in the section entitled "Risk Factors" and
the risks discussed in our other Securities and Exchange Commission ("SEC")
filings including our Registration Statement on Form S-1 declared effective on
October 6, 1999 by the SEC (File No. 333-82907) and in our Form 10-Q filed
November 13, 1999, and February 13, 2000.

ITEM 1. BUSINESS

     Calico Commerce is a leading provider of eBusiness applications that enable
corporations to sell over the Internet, through existing channels and within Net
markets. Calico offers a highly scalable, open application server-based
e-Commerce application suite designed to serve the unique needs of Global 2000
suppliers, distributors and Net market makers. Calico's products and services
allow companies to rapidly deploy eBusiness capabilities that are designed to
increase revenue, lower operating costs, improve customer satisfaction and
create competitive advantage.

     Our electronic commerce software is broadly applicable to a wide range of
industries and markets, products and services. Our current customers include a
number of companies that have adopted aggressive electronic business strategies,
such as Best Buy, CitiGroup, Cisco, Dell, Gateway, GE Capital, Merrill Lynch,
Nortel Networks, Qwest, Staples, Telia and UUNET. Emerging Net market makers
customers include such companies as Chemdex (now Ventro), Home Depot Maintenance
Warehouse, ClubCorp (ePurchase.net), Exclaim Technologies, Inc., ZoneTrader.com,
TheAgZone.com, iCongo.com, SingleSourceIT and HomePortfolio.com.

                              INDUSTRY BACKGROUND

GROWTH OF THE INTERNET AND ELECTRONIC COMMERCE

     The rapid growth of the Internet is revolutionizing the way in which
businesses and consumers communicate, share information and conduct business.
The Internet has created a new means for businesses to reach and interact
directly with new and existing customers worldwide, transforming the traditional
ways companies market, sell and support their product and services offerings.
For most organizations, the Internet acts not only as a means to improve the
effectiveness of existing distribution channels, but also as an additional
direct channel, enabling entirely new business models in a world where
traditional barriers to entry are rapidly dissolving. Forrester Research, Inc.
estimates, based upon its research, that the total value of U.S. business trade
on the Internet will grow to approximately $1.8 trillion by 2003. Driven by
rapidly accelerating global competition, companies are seeking to improve their
operations by improving collaboration and communication along the supply chain,
increasing their responsiveness to customers, and offering a wider range of
products and services which can be dynamically matched with customers' specific
needs. In order to capitalize on this opportunity, companies are adopting more
sophisticated approaches to electronic commerce and are increasing their
investment in electronic commerce infrastructure. These approaches are
characterized by enhanced interactivity, greater personalization and the ability
to offer a broad array of complex configurable products and services, all at the
time of purchase and across every sales channel.

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ELECTRONIC COMMERCE REQUIRES A NEW CLASS OF SOFTWARE

     Over the past two decades, many major corporations have invested large
amounts of time and money automating their internal business processes through
the implementation of enterprise resource planning and sales force automation
software. These systems have enabled companies to centralize and better manage
important company-wide data and business processes, and provide sales
representatives with updated product information, contact management and data to
trace sales leads. While these systems have become an important element of
company-wide information technology processes and have brought many operational
benefits, they were developed prior to the commercial use of the Internet, and
were not designed for large scale, Internet-based, customer-driven interactions
and commerce. Because these process automation systems were designed for a
limited universe of internal users, they have not generally scaled to
accommodate the significant number of users or transactions made possible by the
Internet and have not provided the level of intuitive graphical user interface
that is necessary for engaging customer interactions.

     As commercial use of the Internet began to develop, early electronic
commerce vendors developed custom websites and transactions systems using
general purpose Internet publishing tools, such as HTML editors and specialized
database tools. These tools enabled companies to post static product catalogs
and brochure content on the Internet, but generally allowed only limited
real-time interactivity and did not provide proven reliability and scalability.
Recently, packaged electronic commerce applications have emerged, focusing
primarily on enabling transactions by providing security, credit card validation
and the management of "shopping baskets". In addition, a variety of point
solution software applications have been developed to provide functionality in
discrete aspects of the selling process, such as personalization and content
delivery.

     These early packaged applications and point solutions have helped to
automate online transactions, but they fell short in three regards. The first
was that they did not provide well-integrated functionality or capabilities for
the online purchasing of complex and configurable products and services, such as
computers, network equipment or financial services. Secondly, they did not
enable companies to sell through all their channels, on-line and off-line, in a
seamless and effortless way without recreating unique content for each channel.
Thirdly, they did not enable companies to effectively participate in existing
marketplaces serving multiple buyers and suppliers, or to set up a Net
marketplace as a new channel.

     We believe that the rapid growth and evolution of electronic commerce
requires a new class of software solutions designed specifically for electronic
commerce interactions with customers, resellers and partners. This new class of
software must leverage companies' large investments in company-wide business
applications, and combine the proven reliability of traditional enterprise
systems with the scalability and flexibility of Internet software. In addition,
this software must be customer-driven, built on standards, integrate a broad
range of sophisticated functionality and enable the sale of complex products and
services through all channels. Calico's software is thus designed to meet the
challenges of all three shortcomings we identified in early e-Commerce point
solutions.

THE CALICO SOLUTION

     The Calico Suite is designed to allow companies to create powerful sales
experiences for their customers, whether they interact directly with their
customers over the Internet, approach their customers through sales
representatives or existing reseller and distributor channels, or they offer
their products to customers within a marketplace serving multiple buyers and
suppliers. Using our software, companies can create a web-based guided selling
experience that can be customized based upon the needs of the customer. Our
software enables companies to capture information about their customers' needs
and requirements, provide tailored information and recommendations to their
customers, identify constraints in the buying process, propose alternatives to
the chosen items, provide personalized pricing, deliver quotes and conduct
transactions.

     Buyers use our software to research, evaluate, and weigh trade-offs on
price, performance and other attributes, and then configure in real-time and buy
complex goods and services. They also use our Net markets software to browse
catalogs that contain information on products from multiple suppliers, select
items and purchase them without having to contact individual suppliers.

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     Our solutions provide the following advantages:

     HIGHLY STRATEGIC. Our software is designed to help suppliers and
intermediaries increase their revenue by capitalizing on new electronic commerce
opportunities and reduce their costs by enhancing operating efficiency and order
accuracy. For example, our tailored solutions enable suppliers to provide
personalized products and services, to recommend additional or related
complementary items to a buyer during the purchase process, resulting in
improved sales effectiveness, order accuracy and reduced cost of returned items.
This functionality also reduces the time to market of new products and services.
As a result, we believe our software can provide a significant return on
investment and generally is viewed by our customers as a means of achieving
strategic and competitive advantage.

     CUSTOMER-DRIVEN. Unlike traditional enterprise applications, our software
is designed for interacting directly with customers, resellers and other
partners. Our "user-guided behavior" technology enables users to define the
purchasing process according to their own needs and to flexibly configure
complex goods and services at the point of sale in real time. In addition, our
agent technology delivers personalized information during the purchasing
process, enabling companies to proactively engage the customer, anticipate
customer needs, provide real-time information and speed product delivery. By
keeping the customer at the center of the buying experience, focus can be
shifted from the transaction to the customer relationship, creating a key source
of competitive differentiation for companies.

     INTEGRATED. By combining advanced configuration, information delivery,
content management and personalization functionality, we offer a broad,
integrated suite of electronic commerce software applications, providing
significant benefits to customers who wish to launch or improve comprehensive
electronic commerce functionality quickly. In addition, our software enables
customers to develop highly intuitive, interactive, graphical and content-rich
electronic commerce sites. We also provide professional consulting and
implementation services, complemented by our relationships with third-party
implementation partners, to provide a tailored solution for each company's
needs.

     SCALABLE AND FLEXIBLE. Our product architecture is designed to be highly
scalable, enabling enterprises to interact directly with large numbers of
customers via the Internet and other platforms. The Calico Suite employs highly
flexible modeling and tools to facilitate connections between computer
applications, designed to enable our software to be rapidly integrated with
other computer applications maintained by a company. These other computer
applications include enterprise resource planning, sales force automation and
supply chain management software programs and their underlying databases.

     DESIGNED TO BE ACCESSED ACROSS MULTIPLE CHANNELS OF DISTRIBUTION. The
Calico Suite is designed to connect multiple buyers and sellers, including
distributors, resellers, telemarketers and direct sales forces, to end users. To
reach these audiences, the Calico Suite can be implemented across the Internet,
intranets, extranets, corporate networks, and online marketplaces and can be
accessed through desktop and mobile computers and retail kiosks. The Calico
Suite uses a single set of business rules, enhancing consistency of user
experience and reducing maintenance.

STRATEGY

     Our objective is to be the leading provider of electronic commerce software
to suppliers and intermediaries in Net markets worldwide. The key elements of
our strategy include:

INCREASE THE BREADTH AND DEPTH OF OUR ELECTRONIC COMMERCE SOLUTIONS

     Our strategy is to provide software that enhances customer interaction over
all channels by adding new features to our Calico Suite and by adding new
products that provide marketing and post-sales service functionality. We plan to
accomplish this through internal product development, licensing and acquisitions
of third-party technology and partnering. Our acquisition of FirstFloor Software
Inc ("FirstFloor") provided agent technology which enables targeted,
personalized information delivery, a key element in our Calico solution. The
introduction of personalized products which provide marketing functionality
enable our customers to tailor Internet sites to help build relationships with
their most important customers. Our

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acquisition of ConnectInc.com Co. ("ConnectInc.com") provided Calico with a
product catalog and a transaction platform for electronic commerce between
multiple buyers and suppliers. In addition, we intend to facilitate integration
of our products with a broad range of enterprise and Internet software
applications. This can occur through the development of additional tools for
integration of our software with other computer applications and additional
application programming interfaces.

     ALIGN WITH ELECTRONIC COMMERCE LEADERS AND EXPAND IN OTHER TARGETED
VERTICAL MARKETS. Our electronic commerce software is broadly applicable to a
range of industries and markets. Our strategy has been to pursue relationships
with leading participants in key industries who have adopted aggressive
electronic business strategies. We have successfully provided electronic
commerce software to customers concentrated in the computer hardware and network
and telecommunications equipment industries. We have recently demonstrated
growth in other markets, such as manufacturing, retail, telecommunication
services, financial services and emerging growth companies.

     ENHANCE SALES AND IMPLEMENTATION SERVICES THROUGH INCREASED ALLIANCES. Our
strategy is to increase our revenue base by complementing our direct sales force
and professional services organization with strategic partnerships and
alliances. These partnerships are intended to increase geographic sales coverage
worldwide, address new industry market segments, and provide our customers with
access to additional design, modeling and implementation resources. In addition,
our goal is to form additional marketing and distribution alliances with
electronic commerce software vendors and resellers to broaden distribution or
provide complementary functionality to our applications. We also intend to
provide company-wide integration of our software through alliances with systems
integrators and vendors focused on providing software and integration services
for connecting computer applications from multiple business software providers.

     EXTEND TECHNOLOGY LEADERSHIP. Our Calico Suite is based on advanced expert
systems technology which allows matching of user requirements with suppliers'
product and service offerings. For example, the bill of materials created by our
Calico products is described in extensible markup language, or XML, enabling
dynamic and intelligent exchange among electronic commerce applications. Our
strategy is to continue developing leading technologies in order to deliver more
advanced functionality in our software to our customers.

     IDENTIFY AND CAPITALIZE ON NEW ELECTRONIC COMMERCE-BASED BUSINESSES. Our
strategy is to pursue relationships with and foster the development of emerging
electronic commerce-based businesses at an early stage of their development. By
entering into a variety of arrangements with these emerging leaders, we believe
we can further capitalize on the growth of electronic commerce and remain at the
forefront of electronic commerce trends and technology.

PRODUCTS

     Calico provides an integrated eBusiness application suite that enables
corporations to sell products and services via the Web, through existing
channels and in Net Markets. Our standards-based eBusiness applications provide
customers with the ability to create aspects of person-to-person selling in an
online environment, matching unique customer needs with products to drive
revenue growth and increase customer satisfaction. Our applications can be
implemented individually or as part of the entire suite, depending on customer
preference.

     All of Calico's eBusiness applications are based on Calico's Lightning
Architecture,(TM) Calico's standards-based eBusiness application platform. The
Calico Lightning Architecture incorporates the BEA WebLogic Server,(TM) a
Java-based application server which provides support for high transaction
volumes and has a proven track record as the foundation of many of the world's
most heavily trafficked e-Commerce sites. The Lightning Architecture was
designed to help corporations more efficiently integrate Calico's solutions into
their existing systems, leverage the information systems in which they have
already invested and bring new e-Commerce applications to market quickly.

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     The Calico Suite includes the following applications:

     CALICO ADVISOR. Calico Advisor is a high-performance configuration and
recommendation application designed for extremely large-scale e-Commerce sites.
This expert system matches customer requirements with product attributes,
guiding customers to products and services that meet their needs. Calico Advisor
employs our "user guided behavior" technology to explore different combinations
of solution elements. This technology enables users to evaluate trade-offs on
price, performance or other attributes, while at the same time determining that
the configured product or service meets business or legal constraints set by the
vendor. Calico Advisor uses dynamic models of customer requirements and product
attributes developed using the Calico Workbench. Once the models have been
created, they can be loaded into an application running standalone or in a
multi-user setting. A single model can be implemented and accessed across
multiple sales channels, including direct sales, in-store, resellers, value
added resellers, telesales, and sales over the Internet, streamlining
maintenance and permitting significant flexibility.

     In this way, customers can select and purchase complex products and
services without the individual attention of a sales person and speed the
process of creating complete and correct complex product configurations.

     CALICO MARKET MAKER. Calico Market Maker is a 100% Pure Java(TM) product
that was designed to be a business-to-business Net market platform for digital
marketplaces serving multiple buyers and multiple suppliers. Calico Market Maker
provides an integrated solution that includes cross-supplier catalog, customized
pricing, buyer profiling and user content, back-end system integration and
fulfillment tracking information. Calico Market Maker was designed with the
objective of accelerating time to market and making the selling process more
efficient for corporations by dynamically connecting multiple buying and selling
organizations via the Internet and providing the extensive core functionality
required for corporations to bring their businesses onto the Web and begin
taking orders. In addition, Calico's patented agent technology allows
corporations to keep track of their customers' dynamic requirements, enabling
them to aggregate product data from many suppliers and provide contractual
product and pricing notification to multiple buyers. This allows organizations
to build communities by grouping appropriate buyers and sellers, and proactively
notifying buyers about new products and services that are available to them.

     CALICO LOYALTY BUILDER. Calico Loyalty Builder is designed to address the
challenge of building and maintaining customer loyalty online. Calico Loyalty
Builder personalizes the Internet-based guided selling experience from the
customer's initial expression of interest through configuring and ordering
products and services. This personalized guided selling experience enables
companies to proactively engage customers to build stronger customer
relationships with the objective of increasing revenue and reducing costs.
Calico Loyalty Builder is an integral part of the Calico Suite and provides
organizations with customer-driven electronic commerce software with profiling
technology for personalized buying over the Internet. Calico Loyalty Builder's
agent technology automatically monitors content and notifies users of changes.
In addition, Loyalty Builder's Java and XML-based architecture is designed to
enable customers to adopt the technology within their existing web
infrastructures.

     CALICO QUOTE. Calico Quote provides customized sales quotations to
customers for selected products and stores quotes for later retrieval or
immediate entry into an order management system. Calico Quote is designed to
enable unification of product requirements, complex configurations and pricing
and acts as the intermediary to automating order entry. Calico Quote is built
using the Java programming language and XML-based architecture. This enables
companies to integrate the quoting and pricing functions of the Calico Suite
with existing order entry, enterprise resource planning and external pricing
tools and software programs. In addition, the core functionality of Calico Quote
can be extended via the Java-based application programming interfaces provided
with Calico Quote.

     CALICO INFOGUIDE. Calico InfoGuide delivers targeted marketing information,
such as brochures, product data sheets, product reviews and competitive
comparisons, directly to customers during the online buying process. Calico
InfoGuide is a Java-based programming tool that pairs content-sensitive
selections and browser clicks with content from any source, even pre-existing
content stored in multiple file formats. Calico

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InfoGuide enables customers to request additional information and have targeted
information delivered to them at any point during the buying process.

PROFESSIONAL SERVICES

     We offer a range of professional and support services including
requirements analysis and definition, creation and evolution of sample customer
implementations based on customer input, design, data analysis, process
modification advice, implementation consultation, education, and
post-implementation maintenance. Our staff of professionals and consultants who
define the implementation specifications for implementing our software work with
customers to capture and model the business logic and policies that reflect
marketing and selling practices. Our professional services consultants also help
with the integration of our applications into other company-wide computer
software systems. Our professional services team and our consulting partners use
Dreamweaver to design, create and finalize graphical user interfaces which meet
specific customer requirements, delivering a personalized buying experience.
These professionals have backgrounds in user interface design, systems
integration, technology strategy, and project management.

     We use our Planning and Assessment Methodology in working with customers to
define the opportunity set, quantify the business justification and plan the
business and technical components. This methodology includes a series of
cross-functional facilitation sessions, financial reviews and market comparisons
to determine how our customers' business needs and plans compare to leading
practices in their industries, as well as trends and available solutions in the
e-commerce space. This analysis enables our customers to prepare for the
business and technical critical dependencies of their upcoming project and
secure organizational understanding of and commitment to the requirements and
priorities that will be addressed in the initial phase. It also provides them a
solid understanding of the necessary resource commitments and a very specific,
executable implementation plan.

MAINTENANCE AND CUSTOMER SERVICE

     We offer a broad range of maintenance and customer service options to meet
the varying needs of each customer. Customers covered by maintenance agreements
can report application problems, make enhancement requests and obtain update
releases. Our help desk is staffed with technical support engineers experienced
in Calico products and in a variety of programming languages. Our Technical
Support Center consists of the On-line Care Center (OCC) and the Help Desk.
Maintenance customers are eligible for this support and can access the OCC via
the web and the Help Desk via the web, e-mail, phone, or fax. In addition to our
support service options we also offer remote consulting for customers needing
migration assistance or a performance consultation. Our implementation support
is targeted at customers who have completed their development and require
assistance in implementing their deployment. We also help troubleshoot problems
with network bandwidth, network access and configurations as they pertain to our
products.

SALES AND MARKETING

     We market and sell our products primarily through our direct sales force
located at our headquarters in San Jose, and our regional sales and service
offices in Atlanta, Boston, Chicago, England, Japan, Germany and Sweden. As of
March 31, 2000, our total sales and marketing organization consisted of 84
employees. We intend to increase our domestic and international direct and
indirect sales organizations, including an entry into Japan in the summer of
2000. We are also complementing our direct sales force through additional
distribution channels, including systems integrators and value added resellers,
both domestically and internationally. For example, we have entered into an
agreement with an entity to provide sales distribution and services in Japan.

     We have multi-disciplined sales teams that consist of sales, technical and
support professionals. Our senior management also takes an active role in our
sales efforts. We often develop a pilot or custom demonstration which we or our
partners can then use to design a model for a full scale implementation. Our
sales efforts are typically directed to senior executives at our customers'
organizations, including the chief executive officer, the chief information
officer and the vice presidents of sales and marketing.

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     To support our direct sales efforts and to actively promote our Calico
brand, we conduct comprehensive marketing programs and market research,
including public relations, print advertisements, online advertisements, trade
shows, speaking engagements and ongoing customer communications.

STRATEGIC ALLIANCES

     We are pursuing marketing, implementation and resale alliances with
electronic commerce software vendors, systems integrators, professional services
organizations, and application services providers. These alliances are intended
to increase geographic sales coverage worldwide and address new vertical markets
and market segments such as the Net Markets. In addition, these partnerships and
alliances allow us to provide our customers with access to additional resources
to design, install and customize our solutions. As of March 31, 2000, these
alliances have grown significantly and we have generated significant revenue
from these them.

     As part of the Alliances strategy, we have formed marketing and
distribution alliances with electronic commerce software vendors. For example,
we have entered into joint marketing relationships with New Channel, a provider
of interactive e-business services designed to help companies improve their
Internet sales channel, and with Tibco and Vitria, providers of eBusiness
infrastructure. We have also entered into a joint marketing agreement with
Vignette to share sales and marketing leads, provide complementary training of
each other's sales teams and develop joint marketing materials. Vignette is a
provider of Internet relationship management software products and services. In
addition, we have a cooperative marketing agreement with IBM. These
relationships enable us to broaden distribution of our products and provide
complementary functionality to our applications.

     The company is also aggressively pursuing alliance opportunities in the
emerging Net Markets segment. As part of this strategy, we have entered into
joint marketing relationships with software vendors that offer complementary
technologies to provide an end-to-end solution to power digital marketplaces.
For example, we are partnering with @TheMoment for auction and exchange
technology, CyberSource for transaction processing, eCredit.com for credit
decisioning and financing, Emptoris for strategic sourcing solutions, Epicentric
for portal technology, OnDisplay for content aggregation, and Perfect.com for
RFQ solutions. Other Calico partners, including BEA Systems, Broadbase,
Interwoven, New Channel, Tibco, and Vitria, have joined Calico's Net Markets
Alliance, extending their support to our solutions in this new and rapidly
growing market space.

     Under these joint marketing arrangements, each party agrees to provide each
other with reasonable marketing and sales assistance. Our marketing and
distribution alliances are not exclusive and some of our partners provide
similar services to other companies.

     We have also expanded the professional services offered to our customers by
enhancing existing relationships with systems integrators and professional
services organizations. Our joint marketing agreement with Andersen Consulting
is a global alliance. Under this alliance, Andersen Consulting acquires rights
to market integration services related to our software, and we have agreed to
promote Andersen Consulting as the preferred integrator of our software. The
parties anticipate that this alliance will allow the development of offerings by
the two organizations to target specific industries, which may include banking,
healthcare and insurance, among others. In addition, Andersen Consulting has
made a significant investment in Calico.

     We have additional relationships with other professional services
organizations, such as Cap Gemini, who specialize in offering consulting
services for the installation and implementation of software products such as
the Calico Suite. Other services organizations we are teaming with to provide
Internet integration expertise in our customer deployments include KPMG, TSC,
and CGI.

     Calico's latest products are built with open standards, and our partner BEA
Systems is key to our success through our WebLogic Application server.

     We also participate in the Oracle Partner Program, which assists us in
marketing the Calico Suite of products to Oracle customers. Since our products
are built to be database independent, they can be easily integrated with
Oracle's products.
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     We are a Microsoft Certified Solution Provider and a member of the
Microsoft Developer Network, providing us with co-marketing and advertising
opportunities. As a member of Sun Microsystems' SunTone program, we join Sun in
its goal to promote delivery of secure, reliable, and predictable Internet
services.

SIGNIFICANT CUSTOMERS

     We have successfully provided electronic commerce software to customers
concentrated in the computer hardware and network and telecommunications
equipment industries. We have recently demonstrated growth in other markets,
such as manufacturing, retail, telecommunication services, financial services
and emerging growth companies that are adopting aggressive eBusiness strategies
In fiscal 2000, Nortel and Qwest each represented more than 10% of our total net
revenue. In fiscal 1999, Gateway and Dell each represented more than 10% of our
total net revenue. In fiscal 1998, Micron Electronics accounted for more than
10% of our total net revenue. A substantial portion of our revenue in any given
quarter has been, and is expected to continue to be, generated from a limited
number of customers with large financial commitment contracts.

     The following is a representative list of our customers:

<TABLE>
<S>                                 <C>
Best Buy                            Merrill Lynch
Car max online                      Mybike.com
Chemdex (now Ventro)                Motorola
Citibank                            Nortel
Clubcorp USA                        Qwest
Dell                                Siemens
Flextronics                         SingleSourceIT
Gateway                             Staples
GE Capital                          Starhub
Honeywell                           Telia
International Game Technology       United Ad Label
</TABLE>

     Including those listed above, is our top 20 customers by revenue which
accounted for 83% of our total net revenue for fiscal 2000.

TECHNOLOGY

     Our standards-based architecture provides the platform for our electronic
commerce software. Our technology is designed to provide interactive, scalable,
and easily maintained advanced electronic commerce applications. In developing
the Calico Suite, we applied our extensive experience in building expert systems
using artificial intelligence (AI). Our goal was to design a software system for
deploying and scaling Calico applications across our customers' enterprises and
to their own customers, while fully leveraging existing applications, data and
infrastructure.

     To meet this goal, the Calico Suite incorporates a variety of proven
technologies, chiefly the award-winning BEA WebLogic Server. By offering a set
of services for building e-commerce applications using the Java 2 Enterprise
Edition (J2EE) standards, the WebLogic Server provides the performance and
scalability required to power the Calico Suite and Internet business solutions.
Other key technologies used in the Calico Suite are eXtensible Markup Language
(XML), a data-driven model and Internet-standard security protocols.

     The architecture of the Calico Suite comprises several layers, including
various front-end client interfaces, the Web server, the Calico Server (BEA
WebLogic), the data repository, custom-developed Enterprise Connectors and
industry-standard Java application programming interfaces (APIs). The solution
accommodates an open development framework, a streamlined data maintenance
environment, data-independent rules builder tools in the development environment
and multiple industry-standard Web developer tools.

                                       10
<PAGE>   11

CALICO LIGHTNING ARCHITECTURE

     The Calico Lightning Architecture(TM) is the 100% Java, standards-based
system framework for Calico's Suite of e-Commerce applications. Built on BEA's
WebLogic Server, a J2EE-ready Web application server, the Calico Lightning
Architecture makes it possible for all Calico applications to deliver
scalability, performance and flexibility. As a result, eBusinesses that
implement the Calico Suite can grow rapidly and serve thousands of customers at
one time without compromising customer service or dramatically increasing
systems costs. Calico Lightning Architecture is completely operating and
installed in a variety of deployments.

     Benefits of the Calico Lightning Architecture include the following:

     - By utilizing the latest Java standards and the BEA WebLogic Application
       Server, the Calico Lightning Architecture provides rapid application
       development capabilities. Once an application is tested, businesses can
       rapidly distribute new functionality to large numbers of users over the
       Web by simply updating a single server.

     - The Calico Lightning Architecture supports Enterprise Java Beans, which
       means that Calico customers can easily integrate Calico applications with
       internally developed and third-party e-Commerce solutions and other
       business-critical systems.

     - Because the Calico Lightning Architecture is platform independent, Calico
       customers can implement Calico solutions on their existing server-side
       hardware. Adopting Calico requires no costly new hardware acquisitions.

     - The Calico Lightning Architecture comes with RSA Security's encryption
       technology, which enables secure online communications and supports all
       common relational database management systems (RDBMS). Consequently,
       Calico customers can choose from the widest possible array of
       data-security solutions.

     - The Calico Lightning Architecture supports load balancing, clustering and
       automatic failover. In addition, it lets customers add application and
       data servers as necessary to support rapid growth without interruptions
       to service.

     - Each of the Calico modules leverages the Calico Lightning Architecture,
       ensuring optimal performance throughout the online sales cycle.

USER-GUIDED BEHAVIOR TECHNOLOGY

     We have developed proprietary "user-guided behavior" technology that is
based upon expert systems that provide the ability to match user requirements
with specific product and service offerings from companies, subject to a number
of constraints. The user-guided behavior technology offers the following
benefits:

     - Our data maintenance system allows data to be entered in tabular form for
       concise expression of relationships between data, thereby reducing the
       system's maintenance requirements.

     - Applications that are constructed from the models created with the Calico
       Workbench require only constraints, product content information and user
       interface information. Since models can be loaded into an application
       running standalone or in a multi-user setting, the same application can
       be targeted to run on laptops, desktops and the Internet.

     Constraints, together with our user-guided behavior technology, provide
options to the end user and explain why particular configurations are not valid.

     The Calico software is designed to handle complex configurations. Our
technology allows for composite modeling, which permits the configuration to
expand to accommodate numerous sites at the user's request. Calico Advisor
supports multiprocessor servers as well as server clusters. This enables
organizations to scale their deployments readily to accommodate traffic. Because
session state information is stored in multiple locations, a user's
configuration session can proceed uninterrupted even in the event of a server
failure.

                                       11
<PAGE>   12

ACCESS TO ENTERPRISE DATA

     Our proprietary agent technology allows customers to quickly and easily
access their company-wide business data and content, as well as external content
from their intranet and the Internet as part of an electronic commerce software
system, without re-creating the content or re-submitting each document to a new
system. Automatic notification and delivery of documents and other important
information is possible without needing to modify existing software applications
or information sources.

ADHERENCE TO INDUSTRY STANDARDS

     Calico Advisor, Calico Loyalty Builder, Calico Quote and Calico InfoGuide
have been designed based on XML, an emerging standard for data representation
and computer-to-computer exchange of information supporting electronic commerce.
Software systems that support XML provide customers with the ability to reduce
application development time, easily integrate with prior generations of
business software and hardware systems and build applications that span the
business processes of a company, its suppliers, distributors and customers.

     In addition, Calico Market Maker, Calico Advisor, Calico Loyalty Builder,
Calico Quote and Calico InfoGuide have all been designed using Java, a
programming language that enables compatibility across multiple platforms and
facilitates Internet-based performance. Java is emerging as a development
language for electronic business and other Internet applications. Our
architecture is designed to comply with widely accepted commercial software
industry standards for building large-scale Internet applications. In addition
to XML, we use other widely accepted standards in developing our products,
including structured query language, Java database connectivity and open
database connectivity for accessing relational database management systems, HTTP
for Internet access and HTML for web information presentation. Calico
Configurator can be operated in conjunction with enterprise applications
provided by Oracle, Baan, SAP and JD Edwards. Integration with these and other
applications is facilitated by our support of open standards.

RESEARCH AND DEVELOPMENT

     Our future success will depend in part upon our ability to enhance the
Calico Suite of applications, develop new products and capitalize on our
technological leadership to provide electronic commerce software to a global
customer base. We are seeking to broaden our current product line by improving
performance, adaptation to standards, integration with company-wide business
applications, and ease of modeling and applicability to commercial products and
services.

     To foster development, definition, adoption and implementation of open
standards that can be leveraged by the Calico Suite, we work with several
industry standards organizations such as the World Wide Web Consortium,
RosettaNet, Commercenet, the American Association of Artificial Intelligence,
the Institute for Electrical and Electronic Engineering and the Association for
Computing Machinery. For example, through these organizations we are actively
promoting the use of XML technology for data representation and
computer-to-computer exchange of information.

     Our research and development expenses were $15.3 million for fiscal 2000,
$5.7 million for fiscal 1999, and $3.3 million for fiscal 1998. We expect to
continue to invest significantly in research and development in the future. We
have experienced technical personnel in the areas of agent-based technology,
artificial intelligence, expert systems, user interface design, enterprise and
middleware software development.

PROPRIETARY RIGHTS

     Our success and ability to compete are substantially dependent on our
internally developed technology and software applications. We have two U.S.
patents, one of which is related to the monitoring and notification technology
incorporated in the Calico Loyalty Builder and the other of which is related to
certain aspects of our user-guided product configuration technology. In
addition, we have filed patent applications in three foreign jurisdictions.
While we rely on patent, trademark, copyright and trade secret laws and
restrictions in the United States and other jurisdictions, together with
contractual restrictions, to protect our proprietary

                                       12
<PAGE>   13

rights, patent, trademark, copyright and trade secret protection may not be
available in every country in which we distribute our products.

     We also typically enter into confidentiality and invention assignment
agreements with our employees and contractors, and nondisclosure agreements with
our customers, suppliers and strategic partners in order to limit access to and
distribution and disclosure of our proprietary information. However, despite our
efforts to protect our proprietary rights, unauthorized parties could copy or
otherwise obtain and use our products or technology or develop products with the
same functionality as our products. Policing unauthorized use is difficult, and
the steps we have taken may not prevent misappropriation of our technology. In
addition, the laws of some foreign countries provide less protection of
proprietary rights than do the laws of the United States, and we expect that it
will become more difficult to monitor the use of our products if we continue to
increase our international presence.

     We utilize technology provided by BEA Systems, Inc. for our application
servers, Oracle Corporation for Relational Database, from Verity, Inc. for our
search capability software, from Rainbow Software, Inc. to provide a licensing
mechanism, from TideStone Technologies, Inc. for quote grid technology and from
Rogue Wave Software, Inc. for development software. Should this third-party
software no longer continue to be available at an acceptable cost, our products
could be delayed until equivalent software could be developed or licensed and
integrated into our products. However, we do not believe that our business could
be considered to be substantially dependent on any one of these license
agreements.

     Substantial litigation regarding intellectual property rights exists in the
software industry. We expect that software products may increasingly be subject
to third-party infringement claims as the number of competitors supplying
electronic commerce applications and solutions grows, and the functionality in
other industry segments overlaps. Some of our competitors may have filed or
intend to file patent applications covering aspects of their technology that
they claim our technology infringes. Our competitors may make a claim of
infringement against us with respect to our products and technology. These
claims could result in litigation subjecting us to significant liability for
damages, or in invalidation of our proprietary rights. Any claims, with or
without merit, could be time consuming to defend, result in costly litigation,
divert management's attention and resources or require us to enter into royalty
or licensing agreements in order to be able to sell our products. Royalty or
licensing agreements, if required, may not be available on terms acceptable to
us, or at all.

COMPETITION

     The market for software and services that enable electronic commerce for
the interactive buying and selling of products is new, intensely competitive,
highly fragmented and rapidly changing.

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

     - the performance, functionality, scalability and flexibility of our
       software solutions;

     - the timing and market acceptance of new products and product enhancements
       to the Calico Suite of applications;

     - the effectiveness of our sales and marketing efforts; and

     - the quality and performance of our professional services.

     Although we believe that we currently compete favorably as to each of these
factors, we expect competition to persist and intensify. Our primary competition
currently comes from companies developing solutions in-house and from a large
number of emerging companies focused on electronic commerce. We also compete
with vendors of enterprise class application software, including BroadVision,
Siebel Systems, Oracle, SAP, Baan and Microsoft. Within our Calico Advisor
product line, our competitors include Trilogy, pcOrder.com, Selectica and
FirePond. Within our Calico MarketMaker product line, our competitors include
Ariba (by virtue of its Tradex acquisition), I2, SAP, Oracle and Spaceworks.

                                       13
<PAGE>   14

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

     - a longer operating history;

     - preferred vendor status with our customers;

     - more extensive name recognition and marketing power; and significantly
       greater financial, technical, marketing and other resources, giving them
       the ability to respond more quickly to new or changing opportunities,
       technologies and customer requirements.

     We also expect that competition will increase as a result of software
industry consolidation. Our competitors may also bundle their products in a
manner that may discourage users from purchasing our products. Current and
potential competitors may establish cooperative relationships among themselves
or with third parties or adopt aggressive pricing policies to gain market share.
In addition, new competitors could emerge and rapidly capture market share.

EMPLOYEES

     As of March 31, 2000, we had 312 employees. Of that total, 107 were
primarily engaged in product development, engineering or systems engineering, 84
were engaged in sales and marketing, 89 were engaged in professional services
and 32 in operational, financial and administrative functions.

     None of our employees are represented by a labor union, and we have never
experienced a work stoppage. We believe our relations with our employees are
positive.

                                       14
<PAGE>   15

                        FACTORS THAT MAY AFFECT RESULTS

     In addition to the other information presented in this Form 10-K, the
following risk factors should be carefully considered in evaluating Calico and
its business because such factors currently may have a significant impact on
Calico's business, operating results and financial condition. As a result of the
risk factors set forth below and elsewhere in this Form 10-k, and the risks
discussed in Calico's other Securities and Exchange Commission filings, actual
results could differ materially form those projected in any forward looking
statements.

WE HAVE A HISTORY OF LOSSES, WE EXPECT TO CONTINUE TO INCUR LOSSES AND WE MAY
NOT ACHIEVE OR MAINTAIN PROFITABILITY

     We have incurred quarterly and annual losses in each of the six years since
we were formed, and we expect to continue to incur losses on both a quarterly
and annual basis for the foreseeable future. We incurred net losses of $27.8
million for fiscal 2000, $15.3 million for fiscal 1999 and $5.5 million for
fiscal 1998. As of March 31, 2000, we had an accumulated deficit of $57.5
million. Moreover, we expect to continue to incur significant sales and
marketing and research and development expenses, and, as a result, we will need
to generate significant revenue to achieve and maintain profitability. Although
our revenue has grown in recent quarters, we cannot be certain that we can
sustain this growth or that we will generate sufficient revenue for
profitability. If we do achieve profitability, we cannot be certain that we can
sustain or increase profitability on a quarterly or annual basis in the future.

OUR QUARTERLY RESULTS FLUCTUATE SIGNIFICANTLY, ARE SUBJECT TO SEASONALITY AND
MAY FALL SHORT OF ANTICIPATED LEVELS, WHICH MAY CAUSE VOLATILITY OR DECLINE IN
THE PRICE OF OUR COMMON STOCK

     Our quarterly operating results have varied significantly in the past and
we expect that they will continue to vary significantly from quarter to quarter
in the future.

     In addition, we receive a major portion of our orders near the end of each
quarter. Therefore, we have difficulty predicting the volume and timing of
orders, and short delays in closing orders or implementation of products can
cause our operating results to fall substantially short of anticipated levels
for that quarter.

     We also expect to experience seasonal fluctuations in the sales of our
software products. For example, our quarterly results may fluctuate based upon
our customers' calendar year budgeting cycles. These seasonal variations may
lead to fluctuations in our quarterly operating results.

     As a result of these and other factors, we believe that period-to-period
comparisons of our historical results of operations are not necessarily
meaningful and are not a good predictor of our future performance. In some
future quarter our operating results may be below the expectations of public
market analysts and investors, which could cause volatility or decline in the
price of our common stock.

OUR PRODUCTS HAVE A LONG SALES AND IMPLEMENTATION CYCLE WHICH MAKES IT DIFFICULT
TO PREDICT OUR QUARTERLY RESULTS AND MAY CAUSE OPERATING RESULTS TO VARY
SIGNIFICANTLY

     The sales cycle for our products is long, typically ranging from three
months to a year, making it difficult to predict the quarter in which revenue
recognition may occur. Our products have a relatively high sales price per unit,
and often are part of a significant strategic decision by our customers
regarding their information systems infrastructure. Accordingly, the decision to
purchase our products typically requires significant pre-purchase evaluation. We
spend significant time educating and providing information to prospective
customers regarding the use and benefits of our products. During this evaluation
period, we may expend substantial funds in sales, marketing and management
efforts.

     This lengthy sales cycle may cause license revenue and operating results to
vary significantly from period to period. If anticipated sales from a specific
customer for a particular quarter are not realized in that quarter, our
operating results may vary significantly and we may not achieve forecasted
revenues.

                                       15
<PAGE>   16

IF WE ARE UNABLE TO COMPLETE SUBSTANTIAL LICENSE SALES WHEN ANTICIPATED OR
EXPERIENCE DELAYS IN THE PROGRESS ON A PROJECT OR IN THE SATISFACTION OF
CONTRACT TERMS, WE MAY HAVE TO DEFER REVENUE UNTIL LATER QUARTERS, CAUSING OUR
QUARTERLY RESULTS TO FLUCTUATE AND FALL BELOW ANTICIPATED LEVELS

     Even after purchase of our products, it often takes substantial time and
resources to implement our software and to integrate it with our customers'
existing computer systems. We may not be able to recognize all or a portion of
the revenue until the implementation of the software is completed or milestones
are achieved. We have in the past and may in the future be required to defer
license revenue for software products from the period in which the agreement for
the license of software is signed to subsequent periods. If we are unable to
complete one or more substantial anticipated license sales or experience delays
in the progress on a project or product or in the satisfaction of contract terms
required for revenue recognition in a particular quarter, we may not be able to
recognize revenue when anticipated, causing our quarterly results to fluctuate
and fall below anticipated levels. This could cause our stock price to decline.

BECAUSE A SMALL NUMBER OF CUSTOMERS ACCOUNT FOR A SUBSTANTIAL PORTION OF OUR
REVENUE, OUR REVENUE COULD DECLINE IF WE LOSE A MAJOR CUSTOMER

     We derive a significant portion of our software license revenue in each
quarter from a limited number of customers. For example, for the fiscal year
ended March 31, 2000, two customers accounted for 31% of our revenue and ten
customers accounted for 61% of our revenue. A number of our contracts are in
excess of $1.0 million. We expect that a limited number of customers will
continue to account for a substantial portion of our revenue for the foreseeable
future. As a result, if we lose a major customer, if a contract is delayed,
cancelled or deferred or if an anticipated sale is not made, our revenue would
be adversely affected. In addition, customers that have accounted for
significant revenue in the past may not continue to generate revenue in any
future period.

A GROWING NUMBER OF EMERGING GROWTH CUSTOMERS HAS CONSEQUENTLY HEIGHTENED THE
EFFECT OF CREDIT-RELATED ISSUES ON US AND WE MAY NOT ACHIEVE ANTICIPATED REVENUE
SHOULD WE NEED TO DEFER A SIGNIFICANTLY INCREASED AMOUNT OF REVENUE

     The number of emerging growth companies to which we have sold licenses and
services has increased significantly. These emerging growth customers often are
in the process of obtaining funding and in many of these instances we have
deferred a portion or all of the revenues from these customers until they have
achieved adequate levels of financing and are able to compensate us. Should we
have more customers than we anticipate with credit issues or if payment is not
received on a timely basis, our business, operating results and general
financial condition could be materially and adversely affected.

WE MAY NOT ACHIEVE ANTICIPATED REVENUE IF WE DO NOT SUCCESSFULLY INTRODUCE, OR
IF OUR CUSTOMERS DO NOT ACCEPT, UPGRADES AND ENHANCEMENTS TO OUR PRODUCTS

     Our business depends on the success and customer acceptance of the
introduction of upgrades as well as future enhancements. Although our products
have been subject to our internal testing procedures, since a number of our
products have only recently been introduced, including the Advisor product and
the Lightning Architecture based Suite, customers may discover errors or other
problems with the products, which may adversely affect its acceptance.

     We expect that we will continue to depend on revenue from new and enhanced
versions of our products for the foreseeable future, and if our target customers
do not continue to adopt and expand their use of these products, we may not
achieve anticipated revenue.

WE COULD FAIL TO ACHIEVE ANTICIPATED REVENUE IF WE EXPERIENCE DELAYS IN
INTRODUCTION AND MARKET ACCEPTANCE OF NEW PRODUCTS

     We expect to add new products by acquisition or internal development and by
developing enhancements to our existing products. We have in the past
experienced delays in the planned release dates of our software products and
upgrades. New products may not be released on schedule or may contain defects
when released.
                                       16
<PAGE>   17

The introduction of enhancements to our suite of products may cause customers to
defer orders for our existing products. New and enhanced products may not meet
the requirements of the marketplace and achieve market acceptance. If we are
unable to ship or implement new or enhanced products when planned, or fail to
achieve timely market acceptance of our new or enhanced products, we may suffer
lost sales and could fail to achieve anticipated revenue.

WE HAVE LIMITED EXPERIENCE WITH LARGE-SCALE DEPLOYMENTS AND IF OUR PRODUCTS DO
NOT SCALE TO OPERATE IN A COMPANY-WIDE ENVIRONMENT, WE MAY LOSE SALES AND SUFFER
DECREASED REVENUE

     Our strategy requires that our software be highly scalable, or able to
accommodate substantial increases in the number of users concurrently using the
product. However, we are just beginning to deploy large-scale Internet-based
solutions and no large-scale deployment has been operating at any customer site
for an extended period of time. If our solutions do not perform adequately in
large-scale implementations, we may lose customer sales resulting in a decline
in revenue.

     In addition, the computer software for our larger customer applications is
often implemented together with computer software applications from other
companies. Some of these implementations are performed by third parties. If our
customers experience delays or difficulties implementing our software together
with these computer software applications in large scale complex integrations,
we may lose sales, incur customer dissatisfaction and suffer decreased revenue.

TO DATE, OUR SALES HAVE BEEN CONCENTRATED IN THE COMPUTER HARDWARE AND NETWORK
AND TELECOMMUNICATIONS EQUIPMENT MARKETS AND IF WE ARE UNABLE TO SUCCESSFULLY
PENETRATE NEW MARKETS, WE MAY NOT BE ABLE TO ACHIEVE EXPECTED SALES GROWTH

     Sales of our products and services in three markets -- computer hardware,
network and telecommunications equipment and emerging growth
companies -- accounted for nearly 64% of our total net revenue in the fiscal
year ended March 31, 2000. We expect that revenue from these three markets will
continue to account for a substantial portion of our total net revenue in fiscal
2001. We are targeting expansion in additional market segments defined by
industry where e-commerce software is highly strategic and promote competitive
advantage, including manufacturing, retail, telecommunications services and
financial services. If we are unable to successfully increase penetration of our
existing markets or expand in these additional markets, or if the overall
economic climate of our target markets deteriorates, we may not be able to
achieve expected sales growth.

IN ORDER TO INCREASE SALES OF OUR PRODUCTS, WE MUST INCREASE OUR DIRECT SALES
FORCE; HOWEVER, HIRING AND INTEGRATING SALES PERSONNEL TAKES TIME AND THERE IS A
SHORTAGE OF QUALIFIED PERSONNEL

     Our future growth depends on the ability of our direct sales force to
develop customer relationships and increase sales to a level that will allow us
to reach and maintain profitability. Our ability to increase our sales will
depend on our ability to recruit, train and retain top quality sales people who
are able to target prospective customers' senior management, and who can
productively generate and service large accounts. In addition, our Vice
President of Worldwide Sales has only joined us in June of 2000.

     There is a shortage of the sales personnel we need, and competition for
qualified personnel is intense. In addition, it will take time for new sales
personnel to achieve full productivity. If we are unable to hire or retain
qualified sales personnel, or if newly hired personnel fail to develop the
necessary skills or to reach productivity when anticipated, we may not be able
to expand our sales organization and increase sales of our products.

IF WE DO NOT EXPAND OUR PROFESSIONAL SERVICES ORGANIZATION AND ESTABLISH AND
MAINTAIN RELATIONSHIPS WITH THIRD PARTY CONSULTANTS, WE MAY NOT BE ABLE TO
PROVIDE ADEQUATE IMPLEMENTATION SERVICES TO OUR CUSTOMERS

     Growth in the license of our products depends on our ability to provide our
customers with professional services to assist with design, implementation and
maintenance. If we are unable to get the support of third-party consultants to
provide these services or if third parties do not provide these services
effectively or in a cost-efficient manner, or decide to develop their own
products or support the products of our competitors
                                       17
<PAGE>   18

rather than our products, we may not be able to provide sufficient
implementation services to our customers. This could result in decreased
customer satisfaction and loss of sales. In addition, if we have to retain third
party consultants to provide services for our customers for which we have
previously committed, the resulting increased costs could have an adverse impact
on the gross margins for our professional services.

OUR DEPENDENCE ON SERVICES REVENUE, WHICH HAS A LOWER GROSS MARGIN THAN LICENSE
REVENUE, COULD ADVERSELY IMPACT OUR GROSS MARGIN AND OPERATING RESULTS

     We anticipate that services revenue will continue to represent a
significant percentage of total net revenue as we continue to provide consulting
and training services that complement our products and as our installed base of
customers grows. To increase services revenue, we must expand our services
organization, successfully recruit and train a sufficient number of qualified
services personnel, and obtain renewals of current maintenance contracts by our
customers.

     Although services revenue is important to our business, services revenue
has lower gross margins than license revenue. As a result, a continued increase
in the percentage of total net revenue represented by services revenue or an
unexpected decrease in license revenue could have a detrimental impact on our
overall gross margins and our operating results.

WE NEED TO ESTABLISH AND MAINTAIN KEY MARKETING ALLIANCES TO COMPLEMENT OUR
DIRECT SALES FORCE IN ORDER TO GROW SALES; HOWEVER, FEW POTENTIAL PARTNERS HAVE
FOCUSED ON OUR SOFTWARE MARKET AND WE HAVE ONLY ENTERED INTO A SMALL NUMBER OF
KEY ALLIANCES

     In order to increase geographic sales coverage worldwide and to address new
markets and customer segments, we must complement our direct sales force with
strategic marketing alliances. Until recently, few potential partner
organizations have focused on the emerging class of packaged electronic commerce
applications and we have only established a limited number of such key
alliances. To date, we have not generated significant revenue from these
alliances. If we fail to maintain our existing relationships and to establish
new key alliances, or if our partners do not perform to our or our customers'
expectations, we may not be able to expand our sales as anticipated.

ACQUISITIONS, SUCH AS OUR ACQUISITION OF FIRSTFLOOR AND THE RECENTLY COMPLETED
ACQUISITION OF CONNECTINC.COM, MAY BE COSTLY AND DIFFICULT TO INTEGRATE, DIVERT
MANAGEMENT RESOURCES OR DILUTE STOCKHOLDER VALUE

     As part of our business strategy, we have in the past and may in the future
make acquisitions of, or investments in companies, products or technologies that
complement our current products, augment our market coverage, enhance our
technical capabilities or that may otherwise offer growth opportunities. For
example, in 1998 we acquired FirstFloor Software and in January 2000 we
completed our acquisition of ConnectInc.Com. We encountered the following
difficulties in these acquisitions and would anticipate similar difficulties in
any other future acquisitions:

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

     - unanticipated costs associated with the acquisition;

     - diversion of management's attention from other business concerns; and

     - adverse effects on existing business relationships with suppliers and
       customers.

     Future acquisitions could also pose risks of entering markets where we have
no or limited prior experience and require us to use substantial portions of our
available cash to consummate the acquisition.

     In addition, in connection with any future acquisitions, we could:

     - issue equity securities which would dilute current stockholders'
       percentage ownership;

                                       18
<PAGE>   19

     - incur substantial debt; or

     - assume significant liabilities.

     These actions by us could materially adversely affect our operating results
and/or the price of our common stock.

COMPETITION IN THE MARKET FOR ADVANCED ELECTRONIC COMMERCE PRODUCTS AND SERVICES
IS INTENSE AND COMES FROM DEVELOPERS OF IN-HOUSE SOLUTIONS, VENDORS OF
ENTERPRISE CLASS SOFTWARE AND EMERGING COMPANIES FOCUSED ON ELECTRONIC COMMERCE,
AND COULD REDUCE OUR SALES AND PREVENT US FROM ACHIEVING PROFITABILITY

     The market for software and services that enable electronic commerce is
new, intensely competitive, highly fragmented, and rapidly changing. We expect
competition to persist and intensify, which could result in price reductions,
reduced gross margins and loss of market share.

     Competitors vary in size and in the scope and breadth of the products and
services offered. Many of our competitors and potential competitors have a
number of significant advantages over us, including:

     - a longer operating history;

     - preferred vendor status with our customers;

     - more extensive name recognition and marketing power; and

     - significantly greater financial, technical, marketing and other
       resources, giving them the ability to respond more quickly to new or
       changing opportunities, technologies and customer requirements.

     Our competitors may also bundle their products in a manner that may
discourage users from purchasing our products. Current and potential competitors
may establish cooperative relationships with each other or with third parties,
or adopt aggressive pricing policies to gain market share. Competitive pressures
may require us to reduce the prices of our products and services. We may not be
able to maintain or expand our sales if competition increases and we are unable
to respond effectively.

MANY OF OUR EXECUTIVE OFFICERS AND KEY PERSONNEL ARE RELATIVELY NEW AND MUST BE
INTEGRATED INTO OUR ORGANIZATION, AND WE NEED TO IMPROVE AND IMPLEMENT NEW
SYSTEMS, PROCEDURES AND CONTROLS AND HIRE ADDITIONAL PERSONNEL IN ORDER TO
CONTINUE TO MANAGE OUR RAPID GROWTH

     We have recently experienced a period of rapid growth and expansion, which
places significant demands on our managerial administrative, operational,
financial and other resources. All members of our management team, other than
our Vice President, Research and Development have joined Calico since June 1997.
Our Vice President, Engineering joined Calico in January 1999, Our Vice
President, our Vice President and Chief Financial Officer joined Calico in June
1999, our Vice President, Human Resources joined Calico in April 2000, and our
Vice President, Worldwide Sales joined Calico in June 2000. From September 30,
1997 to March 31, 2000, we expanded from 85 to 312 employees. Our new employees
include a number of key managerial, marketing, planning, technical and
operations personnel who have not yet been fully integrated into our
organization.

     We also plan to expand the geographic scope of our operations. Our rapid
growth and expansion places significant demands on our managerial,
administrative, operational, financial and other resources. To accommodate
continued anticipated growth and expansion, we will be required to:

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

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

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

                                       19
<PAGE>   20

THE MARKET FOR OUR ELECTRONIC COMMERCE PRODUCTS AND SERVICES IS NEW AND EVOLVING
AND CUSTOMERS MAY NOT ACCEPT OUR PRODUCTS

     The market for our products and services is at an early stage of
development and is rapidly evolving. This market may not continue to develop and
grow, and companies may not elect to utilize our products and services rather
than attempt to develop applications internally or through other sources.
Companies that have already invested substantial resources in other methods of
conducting commerce may be reluctant to adopt a new approach that may replace,
limit or compete with their existing systems. We expect that we will continue to
need intensive marketing and sales efforts to educate prospective customers
about the uses and benefits of our products and services. Therefore, demand for
and market acceptance of our products and services will be subject to a high
level of uncertainty.

NEW TECHNOLOGIES COULD RENDER OUR PRODUCTS OBSOLETE OR REQUIRE US TO REWRITE OUR
SOFTWARE IN NEW COMPUTER LANGUAGES OR FOR OTHER OPERATING SYSTEMS

     The market for software and services that enable electronic commerce is
characterized by rapid technological change, changes in customer requirements,
frequent new product and service introductions and enhancements, and emerging
industry standards. Advances in Internet technology or in applications software
directed at electronic commerce, or the development of entirely new technologies
to replace existing software, could lead to new competitive products that have
better performance or lower prices than our products and could render our
products obsolete and unmarketable. In addition, if a new software language or
operating system becomes standard or is widely adopted in our industry, we may
need to rewrite portions of our products in another computer language or for
another operating system to remain competitive. If we are unable to develop
products that respond to changing technology, our business could be harmed.

     It is common for software companies to acquire other companies as a means
of introducing new products or emerging technologies. If a new technology or
product emerges that may displace our product lines, competitors with large
market capitalizations or cash reserves would be better positioned than we are
to acquire such new technology or product.

IF WE LOSE KEY PERSONNEL, WE COULD EXPERIENCE REDUCED SALES, DELAYED PRODUCT
DEVELOPMENT AND DIVERSION OF MANAGEMENT RESOURCES

     Our success depends largely on the continued contributions of our key
management, engineering, sales and marketing and professional services
personnel, many of whom would be difficult to replace. We do not have employment
agreements with most of our key personnel. Although we have not experienced
significant turnover in our key personnel in the recent past, if one or more
members of our senior management were to resign, the loss of personnel could
result in loss of sales, delays in new product development and diversion of
management resources.

BECAUSE COMPETITION FOR QUALIFIED PERSONNEL IS INTENSE, WE MAY NOT BE ABLE TO
RECRUIT OR RETAIN PERSONNEL, WHICH COULD IMPACT THE DEVELOPMENT OR SALES OF OUR
PRODUCTS

     Our success depends on our ability to attract and retain additional
qualified engineering, sales and marketing and professional services personnel.
Competition for these types of personnel is intense, especially in Silicon
Valley. If we are unable to retain our existing key personnel, or attract and
train additional qualified personnel, our growth may be limited due to our lack
of capacity to develop and market our products.

WE INTEND TO PURSUE RELATIONSHIPS WITH EMERGING ELECTRONIC COMMERCE BUSINESSES
THAT MAY HAVE NO PROVEN RECORD OF SUCCESS

     We intend to pursue relationships with and foster development of emerging
electronic commerce-based businesses at an early stage of their development. We
may pursue these new ventures by acquisition, joint venture, or other
alternative investment. We cannot be certain that these new ventures will be
successful, or that we will generate any revenue from these new ventures. In
addition to the risks posed by traditional acquisitions, these new ventures may
have no proven record of success, and may fail, causing us to lose our
investment, and may divert management time and resources.
                                       20
<PAGE>   21

WE DEPEND ON TECHNOLOGY LICENSED TO US BY THIRD PARTIES FOR OUR APPLICATION
SERVERS, SEARCH CAPABILITY SOFTWARE, A LICENSING MECHANISM AND QUOTE GRID
TECHNOLOGY, AND THE LOSS OR INABILITY TO MAINTAIN THESE LICENSES COULD RESULT IN
INCREASED COSTS OR DELAY SALES OF OUR PRODUCTS

     We license technology from several software providers for our application
servers, our search capability software, a licensing mechanism and quote grid
technology. We anticipate that we will continue to license technology from third
parties in the future. This software may not continue to be available on
commercially reasonable terms, if at all. Some of the software we license from
third parties could be difficult to replace. The loss of any of these technology
licenses could result in delays in the license of our products until equivalent
technology, if available, is developed or identified, licensed and integrated.
In addition, the effective implementation of our products depends upon the
successful operation of third-party licensed products in conjunction with our
products, and therefore any undetected errors in these licensed products could
prevent the implementation or impair the functionality of our products, delay
new product introductions and/or injure our reputation. The use of additional
third-party software would require us to enter into license agreements with
third parties, which could result in higher royalty payments and a loss of
product differentiation.

SOFTWARE DEFECTS IN OUR SOFTWARE PRODUCTS AND SYSTEM ERRORS IN OUR CUSTOMERS'
SYSTEMS AFTER INSTALLING OUR SOFTWARE COULD DIMINISH DEMAND FOR OUR PRODUCTS AND
RESULT IN LOSS OF REVENUE, DELAY IN MARKET ACCEPTANCE AND INJURY TO OUR
REPUTATION

     Complex software products like ours may contain undetected errors or
defects, that may be detected at any point in the life of the product. We have
in the past discovered software errors in our products and as a result have
experienced delays in shipment of products during the period required to correct
these errors. Errors may be found from time to time in our new or enhanced
products after commencement of commercial shipments, such as this latest version
of our suite, resulting in loss of revenue, delay in market acceptance and
sales, diversion of development resources, injury to our reputation or increased
warranty and repair costs.

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

IF WE BECOME SUBJECT TO PRODUCT LIABILITY LITIGATION, IT COULD BE COSTLY AND
TIME CONSUMING TO DEFEND

     Since our products are used for company-wide, integral computer
applications with potentially strong impact on our customers' sales of their
products, errors, defects or other performance problems could result in
financial or other damages to our customers. Although our license agreements
generally contain provisions designed to limit our exposure to product liability
claims, existing or future laws or unfavorable judicial decisions could negate
such limitation of liability provisions. Product liability litigation, even if
it were unsuccessful, would be time consuming and costly to defend.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY WE MAY LOSE A VALUABLE
ASSET OR INCUR COSTLY LITIGATION TO PROTECT OUR RIGHTS

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

     We may have to litigate to enforce our intellectual property rights, to
protect our trade secrets or know-how or to determine their scope, validity or
enforceability. Enforcing or defending our proprietary technology
                                       21
<PAGE>   22

is expensive, could cause the diversion of our resources and may not prove
successful. Our protective measures may prove inadequate to protect our
proprietary rights. Any failure to enforce or protect our rights could cause us
to lose a valuable asset. If we are unable to protect our intellectual property,
we may lose a valuable asset or incur costly litigation to protect our rights.

IF THE FUNCTIONALITY OF OUR PRODUCTS OVERLAPS A COMPETITORS' PRODUCTS AND WE
BECOME SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS, THESE CLAIMS COULD
BE COSTLY AND TIME-CONSUMING TO DEFEND, DIVERT MANAGEMENT ATTENTION OR CAUSE
PRODUCT DELAYS

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

IF USE OF THE INTERNET DOES NOT CONTINUE TO DEVELOP AND RELIABLY SUPPORT THE
DEMANDS PLACED ON IT BY ELECTRONIC COMMERCE, IT MAY NOT DEVELOP AS A COMMERCIAL
MARKETPLACE, CAUSING US TO FAIL TO ACHIEVE ANTICIPATED SALES GROWTH

     Growth in sales of our products and services depends upon the continued and
increased use of the Internet as a medium for commerce and communication.
Although the Internet is experiencing growth in the number of users and traffic,
such rapid growth is a recent phenomenon and may not continue. In addition, the
Internet infrastructure may not be able to support the demands placed on it by
increased usage and bandwidth requirements. Other risks associated with
commercial use of the Internet could slow its growth, including:

     - inadequate security of information distributed over the Internet,
       resulting in privacy concerns;

     - inadequate reliability of the network infrastructure;

     - slow development of enabling technologies and complementary products; and

     - limited accessibility and ability to deliver quality service.

     In addition, the recent growth in the use of the Internet has caused
frequent periods of poor or slow performance, requiring components of the
Internet infrastructure to be upgraded. Delays in the development or adoption of
new equipment and standards or protocols required to handle increased levels of
Internet activity, or increased government regulation, could cause the Internet
to lose its viability as a commercial medium. If the Internet infrastructure
does not develop sufficiently to address these concerns, it may not develop as a
commercial marketplace, necessary for us to increase sales.

INCREASING GOVERNMENT REGULATION OF THE INTERNET COULD LIMIT THE MARKET FOR OUR
PRODUCTS AND SERVICES, OR IMPOSE ON US GREATER TAX BURDENS OR LIABILITY FOR
TRANSMISSION OF PROTECTED DATA

     As electronic commerce and the Internet continue to evolve, we expect that
federal, state and foreign governments will adopt laws and regulations covering
issues such as user privacy, taxation of goods and services provided over the
Internet, pricing, content and quality of products and services. If enacted,
these laws and regulations could limit the market for electronic commerce, and
therefore the market for our products and services. Although many of these
regulations may not apply directly to our business, we expect that laws
regulating the solicitation, collection or processing of personal or consumer
information could indirectly affect our business.

     The Telecommunications Act of 1996 prohibits certain types of information
and content from being transmitted over the Internet. The prohibition's scope
and the liability associated with a Telecommunications

                                       22
<PAGE>   23

Act violation are currently unsettled. The imposition upon us and other software
and service providers of potential liability for information carried on or
disseminated through our applications could require us to implement measures to
reduce our exposure to this liability. These measures could require us to expend
substantial resources or discontinue certain services. In addition, although
substantial portions of the Communications Decency Act (the Act through which
the Telecommunications Act of 1996 imposes criminal penalties) were held to be
unconstitutional, similar legislation may be enacted and upheld in the future.
It is possible that this legislation could expose companies involved in
electronic commerce to liability, which could limit the growth of electronic
commerce generally. Legislation like the Telecommunications Act and the
Communications Decency Act could dampen the growth of Internet usage and
decrease its acceptance as a communications and commercial medium.

RESTRICTIONS ON EXPORT OF ENCRYPTED TECHNOLOGY COULD CAUSE US TO INCUR DELAYS IN
INTERNATIONAL PRODUCT SALES

     Our software utilizes encryption technology, the export of which is
regulated by the United States government. If our export authority is revoked or
modified, if our software is unlawfully exported or if the United States adopts
new legislation restricting export of software and encryption technology, we may
experience delay or reduction in shipment of our products internationally.
Current or future export regulations could limit our ability to distribute our
products outside of the United States. While we take precautions against
unlawful exportation of our software, we cannot effectively control the
unauthorized distribution of software across the Internet.

IF WE DO NOT EXPAND OUR INTERNATIONAL OPERATIONS, WE MAY NOT ACHIEVE ANTICIPATED
SALES GROWTH

     In order to increase our international sales opportunities, we will need to
develop further our international sales, professional services and support
organizations, and we will need to form additional relationships with partners
worldwide. If we are unable to expand our international operations and
international sales on a timely basis, we may not achieve anticipated sales
growth. This expansion may be more difficult or take longer than we anticipate,
and we may not be able to successfully market, sell, deliver and support our
products internationally.

INTERNATIONAL EXPANSION COULD BE DIFFICULT AND PRESENT RISKS TO OUR BUSINESS

     If successful in our international expansion, we will be subject to a
number of risks associated with international operations, including:

     - longer accounts receivable collection cycles;

     - expenses associated with localizing products for foreign markets;

     - difficulties in managing operations across disparate geographic areas;

     - difficulties in hiring qualified local personnel;

     - difficulties associated with enforcing agreements and collecting
       receivables through foreign legal systems; and

     - unexpected changes in regulatory requirements that impose multiple
       conflicting tax laws and regulations.

FLUCTUATIONS IN FOREIGN EXCHANGE RATES AND THE POSSIBLE LACK OF FINANCIAL
STABILITY IN FOREIGN COUNTRIES COULD PREVENT OVERSEAS SALES GROWTH

     Our international sales are currently U.S. dollar-denominated. As a result,
an increase in the value of the U.S. dollar relative to foreign currencies could
make our products less competitive in international markets. In the future, we
may elect to invoice some of our international customers in local currencies.
Doing so will subject us to fluctuations in exchange rates between the U.S.
dollar and the particular local currency. Our operating results could also be
adversely affected by the seasonality of international sales and the economic
conditions of our overseas markets.
                                       23
<PAGE>   24

ITEM 2. PROPERTIES

     Our headquarters are located in approximately 58,000 square feet in San
Jose, California, occupied under an office lease expiring in September 2004. We
also lease office space in Pleasanton, California; Boston, Massachusetts;
Atlanta, Georgia; Chicago, Illinois; Reading, England; Tokyo, Japan and
Stockholm, Sweden, under leases for terms expiring from March 2001 to August
2005. We have additional leased space in San Jose and Mountain View, California,
some of which we have sublet to unrelated third parties.

ITEM 3. LEGAL PROCEEDINGS

     On or about June 11, 1997, Suzy Quinn filed a complaint for sexual
harassment and related causes of action against the Company and Ron Ellis, one
of her co-workers, in Santa Clara County Superior Court, action no. CV 766780.
In or about June 1998, Ms. Quinn filed an amended complaint against the Company
and Mr. Ellis for various claims including violation of the California
Government Code, violations of the California Civil Code, wrongful termination
and demotion, defamation, and intentional infliction of emotional distress. The
Company filed its answer to the amended complaint in or about July 1998,
generally denying each of its material allegations and denying that Ms. Quinn is
entitled to any relief whatsoever. The parties have engaged in extensive written
discovery to date, and depositions of the principal parties have begun. The
parties have been engaging in settlement negotiations, and a tentative agreement
has been reached. However, if the settlement is not finalized, Calico intends to
defend itself vigorously.

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

     Not applicable.

                                    PART II

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

     Our Common Stock is traded on the Nasdaq National Market under the symbol
"CLIC." Public trading of the Common Stock commenced on October 7, 1999. Prior
to that, there was no public market for the Common Stock. The following table
sets forth, for the periods indicated, the high and low sale price per share of
the Common Stock as reported on the Nasdaq National Market, during each quarter
the stock has been publicly traded.

<TABLE>
<CAPTION>
                                                              HIGH      LOW
                                                             ------    ------
<S>                                                          <C>       <C>
Year Ended March 31, 2000:
  Third Quarter (from October 7, 1999).....................  $75.00    $40.00
  Fourth Quarter...........................................   58.88     30.00
</TABLE>

     As of June 15, 2000, there were approximately 518 holders of record of our
Common Stock. Brokers and other institutions hold many of such shares on behalf
of Stockholders.

     We have never declared or paid any cash dividends on our Common Stock. We
currently intend to retain any earnings, if any, for use in our business and do
not anticipate paying any cash dividends in the foreseeable future.

     The effective date of the Registration Statement for the Company's initial
public offering, filed on Form S-1 under the Securities Act of 1933
(Registration Statement Number 333-82907), was October 6, 1999. The class of
securities registered was Common Stock. The managing underwriters in the
offering was Goldman, Sachs & Co.; Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Hambrecht & Quist LLC.

                                       24
<PAGE>   25

     Pursuant to the Registration Statement, the Company registered and sold
4,600,000 shares of it's Common Stock to an underwriting syndicate at an initial
public offering price of $14.00 per share. Net proceeds to the Company, before
offering expenses, were $59.9 million or $13.02 per share. The offering
commenced on October 6, 1999 and terminated on October 13, 1999 after we sold
all 4,600,000 shares of common stock registered (including 600,000 shares sold
in connection with the exercise of the underwriters' over-allotment option).

     We paid a total of $3.9 million in underwriting discounts and commissions.
In addition, we incurred estimated expenses of $2.2 million, for estimated net
proceeds of approximately $57.7 million.

     Simultaneous with the closing of the initial public offering, the Company
received an additional $24.0 million from the sale of an aggregate of 1,843,200
shares of common stock at $13.02 per share in private placements to Dell U.S.A.,
L.P., a Texas limited partnership ($20.0 million) and Andersen Consulting LLP
($4.0 million).

     We have used, and continue to expect to use, the proceeds from the sale of
stock for general corporate purposes, including working capital. A portion of
the proceeds may also be used to acquire or invest in complementary companies,
product lines, products or technologies. Pending such uses, we have invested the
net proceeds from the sale of stock in investment grade, interest-bearing
securities. None of the net proceeds of the offering were paid by the Company,
directly or indirectly, to any director, officer or general partner of the
Company or any of their associates, or to any persons owning ten percent or more
of any class of the Company's equity securities, or any affiliates of the
Company.

     During the period between October 7, 1999 and February 9, 2000, we issued
options to purchase an aggregate of 173,125 shares of our common stock to our
employees and consultants. The issuances of these securities were deemed to be
exempt from registration under the Securities Act in reliance on Section 4(2) or
Rule 701 promulgated thereunder as transactions pursuant to compensatory benefit
plans and contracts relating to compensation. The recipients of securities in
each such transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions. All recipients
either received adequate information about us or had access, through employment
or other relationships, to this information. The shares underlying options which
were granted between October 7, 1999 and February 9, 2000 but which remained
unexercised as of February 9, 2000 were registered with the Securities and
Exchange Commission on a Form S-8 filed on February 9, 2000.

                                       25
<PAGE>   26

ITEM 6. SELECTED FINANCIAL DATA

     The following selected consolidated financial data are derived from our
consolidated financial statements. Share and per share data applicable to prior
periods has been restated to give retroactive effect to our stock split. The
data should be read in conjunction with the consolidated financial statements
and notes thereto, and Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations.

                      CONSOLIDATED SELECTED FINANCIAL DATA
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                         YEAR ENDED MARCH 31,
                                        ------------------------------------------------------
                                          2000        1999        1998       1997       1996
                                        --------    --------    --------    -------    -------
<S>                                     <C>         <C>         <C>         <C>        <C>
CONSOLIDATED STATEMENT OF OPERATIONS
  DATA:
Total net revenue.....................  $ 35,624    $ 21,413    $ 11,859    $ 5,903    $ 2,270
Gross profit..........................    20,187      12,962       8,479      3,603      1,830
Loss from operations..................   (30,163)    (15,238)     (5,458)    (6,921)    (2,070)
Net loss..............................   (27,801)    (15,261)     (5,499)    (6,900)    (1,970)
Net loss per share:
  Basic and diluted...................  $  (1.36)   $  (2.25)   $  (1.08)   $ (2.12)   $ (0.69)
  Weighted average shares.............    20,450       6,775       5,075      3,250      2,850
</TABLE>

<TABLE>
<CAPTION>
                                                              MARCH 31,
                                        ------------------------------------------------------
                                          2000        1999        1998       1997       1996
                                        --------    --------    --------    -------    -------
<S>                                     <C>         <C>         <C>         <C>        <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............  $ 25,917    $ 15,441    $  2,514    $ 1,921    $ 1,780
Working capital.......................    66,112      10,187          44        353      1,683
Total assets..........................   188,660      31,368       7,692      4,356      2,800
Debt and capital leases, long-term
  portion.............................     1,519         877         814        815         90
Total Mandatorily Redeemable
  Convertible Preferred Stock.........        --      32,535      14,505      9,500      3,842
Total stockholders' equity
  (deficit)...........................   163,984     (16,780)    (13,428)    (8,854)    (2,012)
</TABLE>

                                       26
<PAGE>   27

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

     The information in this discussion 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. Such statements
are based upon current expectations that involve risks and uncertainties. Any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Factors that might cause such a
discrepancy include, but are not limited to, those discussed in "Factors that
May Affect Results" and "Liquidity and Capital Resources" below as well as Risk
Factors included in our prospectus dated October 6, 1999, as filed with the
Securities and Exchange Commission. The following discussion should be read in
conjunction with the Condensed Consolidated Financial Statements and notes
thereto appearing elsewhere in this report.

OVERVIEW

     We provide software and services that enable companies to interact directly
with their customers over the Internet, intranets, extranets, and corporate
networks, and accessed through desktop and mobile computers and retail kiosks to
improve the interactive buying and selling of complex products and services. We
were incorporated in April 1994. From May 1994 through March 1997, we generated
revenue primarily from the license of products based upon our first generation
configuration technology. In March 1997, we released our first product designed
for use over the Internet and corporate networks. In December 1998, we released
Calico eSales 2.0, an integrated suite of products that extended the
Internet-based architecture and included Calico eSales Catalog(since re-named
Calico eSales InfoGuide), a product that allows targeted delivery of information
without the need to modify existing applications or information sources. Calico
eSales InfoGuide was the first product release based upon technology obtained
from our August 1998 acquisition of FirstFloor, Inc. In May 1999, we released
Calico eSales Loyalty Builder, which incorporates technology also obtained from
our acquisition of FirstFloor. In June 1999, we released Calico eSales 2.5, an
integrated suite that incorporates eSales Loyalty Builder, eSales Quote and
improved versions of our other products. During the quarter ended December 31,
1999, we first sold the product obtained through our sublicense agreement with
ConnectInc.com. We subsequently acquired ConnectInc.com in January 2000, and
sell the product under the name Market Maker. In March 2000, we released Calico
eSales 2.7, an improved version of our suite, and introduced Calico Advisor, a
product with a next generation configuration and recommendation application
designed for extremely large scale e-commerce sites. In March 2000 the Company
also introduced the Calico "Lightning Architecture(TM)", Calico's
next-generation, standards based eBusiness application platform.

     We derive revenue principally from the license of our Calico eSales Suite
of products and the delivery of associated implementation and support services.
The mix of products and services sold varies by customer, and follow-on sales
typically reflect an expansion of the use of our products within the customer's
business, rather than a migration to different products. To date, our sales have
been primarily within the computer hardware, emerging growth and network and
telecommunications equipment industries.

     Licenses for our suite of products are sold in different methods, such as
per user, per site or per enterprise. Customer licenses are typically several
hundred thousand dollars. The price of our annual maintenance contracts are
based on a percentage of the related product license price and is generally paid
in advance. Consulting fees for implementation and training are generally priced
on a per hour basis.

     For contracts with multiple elements, and for which vendor-specific
objective evidence of fair value exists for the undelivered elements, we
recognize revenue for the delivered elements based upon the residual contract
value as prescribed by SOP 98-9. Revenue from license fees is recognized when
persuasive evidence of an agreement exists, delivery of the product has
occurred, no significant obligations of Calico with regard to implementation
exist, the fee is fixed or determinable, and collection is probable. Provisions
for sales returns are made at the time of revenue recognition based upon
estimated returns. License revenue from contracts involving customization or
services which are essential to the functionality of the software is recognized
under contract accounting using the completed contract or
percentage-of-completion methods as appropriate.

     Services revenue primarily comprises revenue from consulting services,
maintenance contracts and training. Services revenue from consulting and
training is generally recognized as the service is performed.
                                       27
<PAGE>   28

Maintenance contracts include the right to unspecified upgrades and ongoing
support. Maintenance revenue is deferred and recognized on a straight-line basis
as services revenue over the life of the related contract, which is typically
one year. Our customers generally purchase maintenance contracts with their
initial software implementation.

     Revenue from contracts involving significant implementation, customization
or services essential to the functionality of the software is recognized over
the period of each engagement, primarily using the percentage-of-completion
method of contract accounting. Labor hours completed is generally used as the
measure of progress towards completion. We classify revenue for these
arrangements as license revenue and services revenue based upon our estimate of
fair value for each element and recognize the revenue based on the
percentage-of-completion ratio for the arrangement. A provision for estimated
losses on engagements is made in the period in which the loss becomes probable
and can be reasonably estimated.

     We bill customers in accordance with contract terms. Customer advances and
amounts billed to customers in excess of revenue recognized are recorded as
deferred revenue. Amounts recognized as revenue in advance of billing are
recorded as unbilled receivables.

     Since our inception, we have incurred quarterly and annual losses, and we
expect to continue to incur losses on both a quarterly and annual basis for the
foreseeable future. We incurred net losses of $27.8 million for fiscal 2000,
$15.3 million for fiscal 1999, $5.5 million for fiscal 1998. As of March 31,
2000, we had an accumulated deficit of $57.5 million. We expect that our
operating expenses will continue to increase substantially in future quarters as
we increase sales and marketing operations, develop new distribution channels,
expand our professional services organization, and continue to fund research and
development.

     We have recently experienced a period of rapid growth and expansion, and
expect to continue to expand through multiple growth strategies. To manage this
growth effectively, we will have to improve our existing operational and
financial systems and hire additional qualified personnel. In addition, we
expanded our current headquarters during the first half of fiscal 2000, and
expect to expand into additional facilities during the first half of fiscal
2001. The expenses related to this expansion or move may be greater than our
obligations for our current facility.

ACQUISITIONS

     In January 2000, we acquired ConnectInc.com, a provider of technology and
services that dynamically connect buying and selling companies over the
Internet. Under the terms of the Agreement and Plan of Merger dated November
19,1999, among ConnectInc.com and Calico Acquisition Corporation, approximately
1.4 million shares of Calico Common Stock were issued or reserved for issuance
for all outstanding shares, options and warrants of ConnectInc.com. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, the net assets and results of operations of ConnectInc.com have
been included in the Company's consolidated financial statements since the
acquisition date. Of the total purchase price of $90.5 million, approximately
$3.6 million was allocated to tangible assets acquired, offset by $5.4 million
of liabilities assumed and the remainder was allocated to intangible assets
including customer base of $150,000, in-place workforce of $2.6 million,
in-process research and development of $230,000, existing technology of $5.0
million and goodwill of $84.2 million. The estimate of fair value of the net
assets acquired is based on an independent appraisal and management estimates.
The acquired in-process research and development was expensed in the period of
acquisition. The other acquired intangible assets, excluding goodwill, will be
amortized over their estimated useful lives of three years. Goodwill will be
amortized using the straight-line method over three years, resulting in an
aggregate quarterly charge of $7.7 million during the amortization period.

     In August 1998, we acquired all of the outstanding shares of FirstFloor, a
developer and marketer of interactive marketing systems for business-to-business
communications, in exchange for 1,248,423 shares of our Series D preferred
stock, valued at $4.558 per share. In addition, we assumed all of the
outstanding options to purchase FirstFloor common stock and converted them into
options to acquire 47,203 shares of our Series D preferred stock. We accounted
for the acquisition using the purchase method of accounting. Of the total
purchase price, valued at approximately $6.1 million, approximately $1.8 million
was allocated to in-
                                       28
<PAGE>   29

process research and development and immediately charged to operations, $360,000
to tangible assets, $1.5 million to existing products and core technology, $2.0
million to liabilities assumed, and $4.3 million to goodwill. The intangible
assets will be amortized over their estimated useful lives which range from
seven to 48 months. We structured the acquisitions as a tax-free exchange of
stock; therefore, the differences between the recognized fair values of acquired
assets, including tangible and intangible assets, and their historical tax bases
are not deductible for tax purposes.

RESULTS OF OPERATIONS

     The following table sets forth the periods indicated, the percentage of
revenues represented by certain lines in our condensed consolidated statements
of operations.

<TABLE>
<CAPTION>
                                                              YEAR ENDED MARCH 31,
                                                              --------------------
                                                              2000    1999    1998
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
Net revenue:
  License...................................................   48%     49%     59%
  Services..................................................   52      51      41
                                                              ---     ---     ---
          Total net revenue.................................  100     100     100
                                                              ---     ---     ---
Cost of net revenue:
  License...................................................    3       2       2
  Services..................................................   38      33      26
  Amortization of Intangibles...............................    2       4      --
                                                              ---     ---     ---
          Total cost of net revenue.........................   43      39      28
                                                              ---     ---     ---
Gross profit................................................   57      61      72
                                                              ---     ---     ---
Operating expenses:
  Sales and marketing.......................................   59      65      64
  Research and development..................................   43      27      28
  General and administrative................................   18      19      19
  Stock compensation........................................    4       9       7
  Acquired in-process research and development..............    1       9      --
  Amortization of goodwill..................................   16       3      --
                                                              ---     ---     ---
          Total operating expenses..........................  141     132     118
                                                              ---     ---     ---
Loss from operations........................................  (84)    (71)    (46)
Interest and other income, net..............................    6      --      --
                                                              ---     ---     ---
Net loss....................................................  (78)%   (71)%   (46)%
                                                              ===     ===     ===
</TABLE>

COMPARISON OF FISCAL YEARS ENDED MARCH 31, 2000, 1999 AND 1998

REVENUE

     Total net revenue increased 66% to $35.6 million in fiscal 2000 from $21.4
million in fiscal 1999, which increased 81% from $11.9 million in fiscal 1998.

     LICENSE. License revenue increased 62% to $17.0 million in fiscal 2000 from
$10.5 million in fiscal 1999, which increased 50% from $7.0 million in fiscal
1998. License revenue as a percentage of total net revenue was 48% in fiscal
2000, 49% in fiscal 1999 and 59% in fiscal 1998. The increase in license revenue
in absolute dollars is attributable to an increase in the number of license
transactions recognized during the period.

     SERVICES. Services revenue increased 70% to $18.6 million in fiscal 2000
from $10.9 million in fiscal 1999, which increased 123% from $4.9 million in
fiscal 1998. Services revenue as a percentage of total net revenue was 52% in
fiscal 2000, 51% in fiscal 1999 and 41% in fiscal 1998. The increase in services
revenue in absolute dollars is attributable to an increase in the number and
size of consulting engagements, as well as an increase in the installed base of
customers and in the average size of maintenance contracts. During fiscal

                                       29
<PAGE>   30

2000, 70% of maintenance revenue came from initial maintenance contracts, with
the remainder from maintenance renewals.

COST OF REVENUE

     LICENSE. Cost of license revenue increased 216% to $1.1 million in fiscal
2000 from $362,000 in fiscal 1999, which increased 37% from $265,000 in fiscal
1998. Cost of license revenue as a percentage of total net revenue was 3% in
fiscal 2000, 2% in fiscal 1999 and 2% in fiscal 1998. The increase in cost of
license revenue as a percentage of license revenue is due to royalties paid to
third parties for embedded technology. Since it is our continuing strategy to
license third-party technology for inclusion in our products, we expect the cost
of license revenue as a percentage of license revenue to fluctuate or increase
in future periods.

     SERVICES. Cost of services revenue increased 86% to $13.6 million in fiscal
2000 from $7.3 million in fiscal 1999, which increased 133% from $3.1 million in
fiscal 1998. Cost of services revenue as a percentage of total net revenue was
38% in fiscal 2000, 33% in fiscal 1999 and 26% in fiscal 1998. The increase in
cost of services revenue in absolute dollars is primarily due to costs
associated with increased personnel in our services organization. The increase
in cost of services revenue as a percentage of services revenue is primarily due
to costs of contract personnel used to augment company services capacity, as
well as investments in infrastructure and training to support our systems
integrator partners.

     AMORTIZATION OF PURCHASED TECHNOLOGY. Expenses for amortization of
purchased technology declined to $739,000 in fiscal 2000 from $817,000 in fiscal
1999. The decline is due to one of the two products acquired in the acquisition
of FirstFloor being fully amortized, offset by the $278,000 of amortization
related to the additional $5.0 million of existing technology acquired in the
acquisition of ConnectInc.com.

OPERATING EXPENSES

     SALES AND MARKETING. Sales and marketing expenses increased 50% to $21.2
million in fiscal 2000 from $14.1 million in fiscal 1999, which increased 86%
from $7.6 million in fiscal 1998. Sales and marketing expenses as a percentage
of total net revenue was 59% in fiscal 2000, 65% in fiscal 1999 and 64% in
fiscal 1998. Sales and marketing expenses increased in absolute dollars
primarily due to increased personnel-related costs, resulting from our continued
investment in the development of our domestic and international sales and
marketing organizations. We intend to continue to expand our sales and marketing
efforts, including an entry into Japan during fiscal 2001, and accordingly,
expect sales and marketing expenses to increase in absolute dollars in future
periods.

     RESEARCH AND DEVELOPMENT. Research and development expenses increased 170%
to $15.3 million in fiscal 2000 from $5.7 million in fiscal 1999, which
increased 70% from $3.3 million in fiscal 1998. Research and development
expenses as a percentage of total net revenue was 43% in fiscal 2000, 27% in
fiscal 1999 and 28% in fiscal 1998. Research and development expenses increased
in absolute dollars and as a percentage of total net revenue as a result of the
addition of engineering and product development personnel and consultants.
Personnel-related expenses accounted for the majority of the increase in
absolute dollars. We believe that continued investment in new product
development is central to achieving our strategic objectives, and expect
research and development expenses to increase in absolute dollars in future
periods.

     GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
57% to $6.3 million in fiscal 2000 from $4.0 million in fiscal 1999, which
increased 79% from $2.2 million in fiscal 1998. General and administrative
expenses as a percentage of total net revenue were 18% in fiscal 2000, 19% in
fiscal 1999 and 19% in fiscal 1998. General and administrative expenses
increased on an absolute basis as a result of increased personnel-related costs
resulting from the growth of our finance, human resources and information
systems staff, along with increased legal and financial advisory fees. General
and administrative expenses declined slightly as a percentage of net revenues
due primarily to higher sales growth. We expect general and administrative
expenses to continue to increase in absolute dollars in future periods as we add
personnel and incur costs to support the growth of our business.

                                       30
<PAGE>   31

     STOCK COMPENSATION. In connection with the granting of stock options to our
employees, we recorded aggregate unearned compensation totaling $5.6 million
through March 31, 2000. The unearned compensation represents the difference
between the exercise price of stock option grants and the deemed fair value of
our common stock at the time of the grants. Stock compensation expenses was $1.6
million in fiscal 2000, $2.0 million in fiscal 1999, and $780,000 in fiscal
1998. Stock compensation expenses as a percentage of total net revenue was 4% in
fiscal 2000, 9% in fiscal 1999 and 7% in fiscal 1998.

     ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT. In connection with our
acquisition of ConnectInc.com, we ascribed $230,000 to three specific in-process
research and development projects -- all additional features to be added to the
MarketStream product -- which was charged to operations in the quarter ended
March 31, 2000.

     To value the in-process technology, an independent third party appraiser
used the income approach. Management estimated revenue that each in-process
product will generate over its economic life. From this amount, a deduction was
made for the revenue that is attributable to the previously existing technology.
The result is the revenue attributable to in-process technology for each
in-process product, which we used to apply the income approach. Cost of goods
sold and estimated operating expenses were then deducted, a 40% corporate tax
rate applied and finally the present value of the cash flow stream was
calculated using a 35% discount rate.

     In connection with our acquisition of FirstFloor, we ascribed $1.8 million
to two specific in-process research and development projects -- a marketing
information delivery system and a personalization solution -- which was charged
to operations in the quarter ended September 30, 1998.

     The amount of purchase price allocated to in-process research and
development in the FirstFloor acquisition was determined using appropriate
valuation techniques, including percentage-of-completion, which utilizes
research and development cost metrics and key milestones to estimate the stage
of development of each in-process research and development project at the date
of acquisition, estimating cash flows resulting from the revenue expected to be
generated from these projects, and discounting the net cash flows back to their
present value. The discount rate includes a factor that takes into account the
uncertainty surrounding the successful development of the purchased in-process
technology. The remaining identified intangibles, including the value of
acquired existing products and core technology, is amortized over the periods of
benefit ranging from 7 to 48 months.

     AMORTIZATION OF GOODWILL. Amortization of goodwill expenses was $5.8
million in fiscal 2000 and $550,000 in fiscal 1999, reflecting the amortization
of goodwill acquired as part of the FirstFloor and ConnectInc.com acquisitions.

INTEREST AND OTHER INCOME, NET

     Interest and other income, net was $2.4 million in fiscal 2000, ($23,000)
in fiscal 1999, and ($41,000) in fiscal 1998. The increase is primarily due to
interest earned on increased cash and equivalents balances as a result of our
initial public offering.

INCOME TAXES

     No provision for federal and state income taxes was recorded for fiscal
1998, 1999 or 2000 because we incurred net operating losses in each of those
periods.

     As of March 31, 2000, we had net operating loss carryforwards for federal
income tax reporting purposes of $103.0 million that expire in various amounts
beginning in fiscal 2004. We also had net operating loss carryforwards for state
income tax reporting purposes of $65.7 million that expire in various amounts
beginning in fiscal 2001. We had net deferred tax assets, including our net
operating loss carryforwards and tax credits of $47.2 million as of March 31,
2000. A valuation allowance has been recorded for the net deferred tax asset
balance as a result of uncertainties regarding the realization of the asset
balance. See note 5 of the notes to the consolidated financial statements.

                                       31
<PAGE>   32

QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth our unaudited consolidated statement of
operations data for each of the four quarters in the period ended March 31,
2000, as well as that data expressed as a percentage of our total net revenue
for the quarters presented. We have prepared this unaudited consolidated
information on a basis consistent with our audited consolidated financial
statements, and in the opinion of our management, this information reflects all
normal recurring adjustments necessary for a fair presentation of our operating
results for the quarters presented. You should read this information in
conjunction with our consolidated financial statements and related notes
included elsewhere in this prospectus. You should not draw any conclusions about
our future results from the operating results for any quarter.

<TABLE>
<CAPTION>
                                                                         QUARTER ENDED
                                 ----------------------------------------------------------------------------------------------
                                 MAR. 31,    DEC. 31,    SEPT. 30,    JUNE 30,    MAR. 31,    DEC. 31,    SEPT. 30,    JUNE 30,
                                   2000        1999        1999         1999        1999        1998        1998         1998
                                 --------    --------    ---------    --------    --------    --------    ---------    --------
                                                                         (IN THOUSANDS)
<S>                              <C>         <C>         <C>          <C>         <C>         <C>         <C>          <C>
CONSOLIDATED STATEMENT OF
  OPERATIONS DATA:
Net revenue:
License........................  $  5,668    $ 4,403      $ 3,502     $ 3,457     $ 2,333     $ 2,560      $ 2,657     $ 2,932
Services.......................     5,627      4,317        4,674       3,976       3,427       3,155        2,628       1,721
                                 --------    -------      -------     -------     -------     -------      -------     -------
Total net revenue..............    11,295      8,720        8,176       7,433       5,760       5,715        5,285       4,653
Cost of net revenue:
License........................     1,055        455          236         137         463         350          265         101
Services.......................     4,344      3,078        3,473       2,660       2,127       2,036        1,742       1,367
                                 --------    -------      -------     -------     -------     -------      -------     -------
Total cost of net revenue......     5,399      3,533        3,709       2,797       2,590       2,386        2,007       1,468
                                 --------    -------      -------     -------     -------     -------      -------     -------
Gross profit...................     5,896      5,187        4,467       4,636       3,170       3,329        3,278       3,185
                                 --------    -------      -------     -------     -------     -------      -------     -------
Operating expenses:
Sales and marketing............     6,383      5,583        4,641       4,558       4,615       3,699        3,066       2,758
Research and development.......     4,981      3,899        3,801       2,666       1,789       1,684        1,232         972
General and administrative.....     1,051      1,875        1,900       1,452         954         934        1,459         641
Stock compensation.............       295        322          420         514         532         582          469         424
Acquired in-process research
  and development..............       230         --           --          --          --          --        1,840          --
Amortization of goodwill.......     5,066        236          236         240         238         234           78          --
                                 --------    -------      -------     -------     -------     -------      -------     -------
Total operating expenses.......    18,006     11,915       10,998       9,430       8,128       7,133        8,144       4,795
                                 --------    -------      -------     -------     -------     -------      -------     -------
Loss from operations...........   (12,110)    (6,728)      (6,531)     (4,794)     (4,958)     (3,804)      (4,866)     (1,610)
Interest and other income,
  net..........................     1,081      1,071           66          71           4          54          (46)        (35)
                                 --------    -------      -------     -------     -------     -------      -------     -------
Net loss.......................  $(11,029)   $(5,657)     $(6,465)    $(4,723)    $(4,954)    $(3,750)     $(4,912)    $(1,645)
                                 ========    =======      =======     =======     =======     =======      =======     =======
AS A PERCENTAGE OF TOTAL NET
  REVENUE:
Net revenue:
License........................        50%        50%          43%         47%         41%         45%          50%         63%
Services.......................        50         50           57          53          59          55           50          37
                                 --------    -------      -------     -------     -------     -------      -------     -------
Total net revenue..............       100        100          100         100         100         100          100         100
                                 --------    -------      -------     -------     -------     -------      -------     -------
Cost of net revenue:
License........................         9          5            3           2           8           6            5           2
Services.......................        39         35           42          36          37          36           33          30
                                 --------    -------      -------     -------     -------     -------      -------     -------
Total cost of net revenue......        48         40           45          38          45          42           38          32
                                 --------    -------      -------     -------     -------     -------      -------     -------
Gross profit...................        52         60           55          62          55          58           62          68
                                 --------    -------      -------     -------     -------     -------      -------     -------
Operating expenses:
Sales and marketing............        56         64           57          61          80          65           58          59
Research and development.......        44         45           47          36          31          29           23          21
General and administrative.....         9         21           23          20          17          17           28          14
Stock compensation.............         3          4            5           7           9          10            9           9
Acquired in-process research
  and development..............         2         --           --          --          --          --           35          --
Amortization of goodwill.......        45          3            3           3           4           4            1          --
                                 --------    -------      -------     -------     -------     -------      -------     -------
Total operating expenses.......       159        137          135         127         141         125          154         103
                                 --------    -------      -------     -------     -------     -------      -------     -------
Loss from operations...........      (107)       (77)         (80)        (65)        (86)        (67)         (92)        (35)
Interest and other income,
  net..........................         9         12            1           1          --           1           (1)         --
                                 --------    -------      -------     -------     -------     -------      -------     -------
Net loss.......................       (98)%      (65)%        (79)%       (64)%       (86)%       (66)%        (93)%       (35)%
                                 ========    =======      =======     =======     =======     =======      =======     =======
</TABLE>

                                       32
<PAGE>   33

     Total net revenue has increased in each of the quarters presented,
representing a general increase in the number of customers added during each
quarter, the number of consulting engagements in process during each quarter,
the overall installed base of maintenance customers, and as a result of our
acquisition of ConnectInc. Services revenue increased substantially in the
quarter ended September 30, 1999 then declined in the quarter ended December 31,
1999, due to a significant implementation project in the September quarter.

     Cost of license revenue increased sequentially in all quarters due an
increase in the number of products containing embedded technology, and the
increase in the sales of those products. Cost of services increased
significantly in the quarter ended September 30, 1999, then declined in the
following quarter. This is due to outside contractor staffing due in part to the
significant implementation project mentioned above.

     Sales and marketing expenses increased in all quarters due to increases in
sales and marketing headcount, marketing program expenditures, and commissions
expenses associated with higher sales results. Research and development
increased in all quarters due to increased product development headcount and
consulting expenses.

     General and administrative expenses increased in the three quarters ending
December 31, 1999, due to increases in finance, legal and administrative staff
and costs associated with being a public company. General and administrative
expenses declined in the quarter ended March 31, 2000, due to the reversal of a
portion of our bad debt reserve.

     Interest and other income increased sequentially due to an increase in our
cash and equivalents balances as a result of our October 1999 IPO, as well as
increased interest rates earned.

     Our quarterly operating results have varied significantly in the past and
we expect that they will vary significantly from quarter to quarter in the
future. These variations are caused by a number of factors, including the length
of our sales cycle, demand for and market acceptance of our products and
services, the timing of orders and deployment of our products and services, the
impact of our revenue recognition policies, changes in technology and changes
caused by the rapidly evolving electronic commerce market.

     As a result of these and other factors, we believe that period-to-period
comparisons of our historical results of operations are not necessarily
meaningful and are not a good predictor of our future performance. Our operating
results may be below the expectations of public market analysts and investors in
future quarters, which could cause volatility in the price of our stock.

LIQUIDITY AND CAPITAL RESOURCES

     In October 1999, we completed an initial public offering of 4,600,000
shares of Common Stock (including the exercise of the underwriters'
overallotment option) at $14.00 per share. Net proceeds to us, before offering
expenses, were $59.9 million or $13.02 per share. Simultaneous with the closing
of the initial public offering, the Company received an additional $24.0 million
from the sale of an aggregate of 1,843,200 shares of common stock at $13.02 per
share in private placements to Dell U.S.A., L.P., a Texas limited partnership
($20.0 million) and Andersen Consulting LLP ($4.0 million). We have used, and
continue to expect to use, the proceeds from the sale of stock for general
corporate purposes, including working capital. A portion of the proceeds may
also be used to acquire or invest in complementary companies, product lines,
products or technologies. Pending such uses, we have invested the net proceeds
from the sale of stock in investment grade, interest-bearing securities. Prior
to our initial public offering, we had financed our operations and met our
capital expenditure requirements primarily through the sale of private equity
securities, and to a lesser extent, notes payable and capital equipment leases.

     As of March 31,2000, we had $25.9 million of cash and cash equivalents,
$49.9 million of short-term investments and $5.4 million of long-term
investments, compared with $15.4 million of cash and cash equivalents as of
March 31, 1999. Cash used in operating activities was $17.7 million in the year
ended March 31, 2000 and $7.4 million in the year ended March 31, 1999. Cash
used in operations resulted primarily from net losses net of non-cash expenses
including depreciation and stock compensation, and increases in our accounts
receivable, offset in part by the growth in accounts payable and accrued
liabilities.
                                       33
<PAGE>   34

     Net cash used in investing activities of $1.8 million for the year ended
March 31, 1999, related to purchases of computer equipment and to a lesser
extent software and office furniture to support our expanding operations. Net
cash used in investing activities was $56.8 million for the year ended March 31,
2000, primarily related to the purchases of investments and capital equipment,
offset by sales of investments and net cash from the acquisition of
ConnectInc.com.

     Financing activities provided net cash of $22.1 million for the year ended
March 31, 1999 and $84.9 million in the year ended March 31, 2000. Financing
activities consisted primarily of the sale of our common and preferred stock,
including $83.9 million received from our initial public offering and
simultaneous private placements. We have also used debt and leases to partially
finance our operations and capital purchases. At March 31, 2000 we also had $2.7
million in current and non-current debt as well as $381,000 in current and
non-current capital lease obligations.

     Included in the amounts above are four variable rate installment notes with
a bank that are secured by the equipment financed by the bank. The notes bear
interest at the bank's prime rate and are due between March 2001 and February
2002. Also included are three notes payable to an equipment financing company
that bear interest at 7% per year and are due between June 2000 and October
2000, and three capital leases for the lease of computer and office equipment
due through January 2003.

     In September 1999, we entered into a commitment with the bank issuing the
variable rate installment notes described above in connection with a proposed
$3.0 million equipment financing credit line expiring June 30, 2000. Each
advance bears interest at the bank's prime rate plus 0.5% per year, with
principal to be repaid in 36 equal monthly installments. The bank advanced us
$1.0 million under this commitment on September 30, 1999, $800,000 on December
30, 1999, and $343,000 on March 31, 2000. In September 1999 we issued warrants
to the bank to purchase 5,263 shares of common stock at $9.50 per share in
connection with this commitment.

     This commitment requires us to meet certain monthly and quarterly financial
tests, including minimum operating results and certain liquidity, leverage and
debt service ratios. All previous agreements with the above financial
institution are now under these same covenants. At March 31, 2000 we were in
compliance with all of the financial covenants.

     In September 1999, we entered into a new office lease for our corporate
headquarters, as the previous sub-lease had expired. At March 31, 2000, we had
noncancelable operating leases for office space and equipment of approximately
$11.2 million, which are payable through fiscal 2005.

     Although we have no material long-term commitments for capital
expenditures, we anticipate a substantial increase in our capital expenditures
and lease commitments consistent with anticipated growth in operations,
infrastructure and personnel. We intend to fund the intended increase in
expenses and capital expenditures through the proceeds of the completed October
1999 initial public offering, together with existing cash and cash equivalents,
and believe that these funds will be sufficient to meet our working capital
needs for at least the next 12 months. However, we may need to raise additional
funds in order to support more rapid expansion of our sales force, develop new
or enhanced products or services, respond to competitive pressures, acquire
complementary businesses or technologies or respond to unanticipated
requirements. If we seek to raise additional funds, we may not be able to obtain
funds on terms which are favorable or otherwise acceptable to us. If we raise
additional funds through the issuance of equity securities, the percentage
ownership of our stockholders would be reduced. Furthermore, these securities
may have rights, preferences or privileges senior to our Common Stock.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

FOREIGN EXCHANGE RATE SENSITIVITY

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

                                       34
<PAGE>   35

revenue is currently denominated in U.S. dollars, a strengthening of the dollar
could make our products less competitive in foreign markets.

     We do not use derivative financial instruments for speculative purposes. We
do not engage in exchange rate hedging or hold or issue foreign exchange
contracts for trading purposes. We do have foreign-based operations where
transactions are denominated in foreign currencies and are subject to market
risk with respect to fluctuations in the relative value of currencies.
Currently, we have operations in the United Kingdom and conduct transactions in
the local currency. To date, the impact of fluctuations in the relative fair
value of other currencies has not been material.

INTEREST RATE SENSITIVITY

     Our interest income is sensitive to changes in the general level of U.S.
interest rates, particularly since the majority of our investments are in
short-term instruments. Due to the short-term nature of our investments, we do
not believe that we have a material risk exposure. Because some of our debt
arrangements are based on variable rates of interest, our interest expense is
sensitive to changes in the general level of U.S. interest rates. Since these
obligations represent a small percentage of our total capitalization, we believe
that there is not a material risk exposure.

     At March 31, 2000, we had cash, cash equivalents , short term investments
and long term investments of $81.2 million, compared to $15.4 million at March
31, 1999, which consisted of cash, money market funds, corporate notes and
corporate, municipal and other government agency bonds. These investments may be
subject to interest rate risk and will decrease in value if market interest
rates decrease. A hypothetical increase or decrease in market interest rates by
10 percent from the market interest rates at March 31, 2000 would cause interest
income to change by $517,000. Declines in interest rates over time will,
however, reduce our interest income and interest expense.

EQUITY PRICE RISK

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

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

  ANNUAL FINANCIAL STATEMENTS

     The financial statements and supplementary data required by this Item 8 are
listed in Item 14(a)(1) and begin at page F-1 of this report.

  SELECTED QUARTERLY RESULTS OF OPERATIONS

     The Selected Quarterly Results of Operations required by this Item 8 are
included in Item 7. -- Management's Discussion and Analysis of Financial
Condition and Results of Operations.

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

     Not applicable.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  DIRECTORS

     Information with respect to directors may be found in the section captioned
"Election of Directors" appearing in the definitive proxy statement to be
delivered to stockholders in connection with the 2000 Annual Meeting of
Stockholders. Such information is incorporated herein by reference.

                                       35
<PAGE>   36

  EXECUTIVE OFFICERS

     Information with respect to executive officers may be found in the section
captioned "Executive Officers" appearing in the definitive proxy statement to be
delivered to stockholders in connection with the 2000 Annual Meeting of
Stockholders. Such information is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

     Information with respect to directors may be found in the section captioned
"Executive Compensation" appearing in the definitive proxy statement to be
delivered to stockholders in connection with the 2000 Annual Meeting of
Stockholders. Such information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Information with respect to directors may be found in the section captioned
"Security Ownership of Certain Beneficial Owners and Management" appearing in
the definitive proxy statement to be delivered to stockholders in connection
with the 2000 Annual Meeting of Stockholders. Such information is incorporated
herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Information with respect to directors may be found in the section captioned
"Certain Relationships and Related Transactions" appearing in the definitive
proxy statement to be delivered to stockholders in connection with the 2000
Annual Meeting of Stockholders. Such information is incorporated herein by
reference.

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

(a) The following documents are filed as part of this report:

     1. FINANCIAL STATEMENTS

     The following consolidated financial statements of the Company are filed as
part of this Annual Report on Form 10-K as follows:

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Independent Accountants...........................  F-2
Consolidated Balance Sheet..................................  F-3
Consolidated Statement of Operations........................  F-4
Consolidated Statement of Stockholders' Equity (Deficit)....  F-5
Consolidated Statement of Cash Flows........................  F-6
Notes to Consolidated Financial Statements..................  F-7
</TABLE>

     2. FINANCIAL STATEMENT SCHEDULES

     Financial statement schedules have been omitted because the information
required to be set forth therein is not applicable or is included in the
Financial Statement notes thereto.

                                       36
<PAGE>   37

     3. EXHIBITS

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

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                           DESCRIPTION
    -------                          -----------
    <S>      <C>
     2.1**   Agreement and Plan of Reorganization dated as of June 23,
             1998 by and among Calico Technology, Inc., Calico
             Acquisition Corporation, FirstFloor Software, Inc., Certain
             Shareholders of FirstFloor Software, Inc., and Certain
             Shareholders of Calico Technology, Inc.
     2.2**   Form of Agreement and Plan of Merger between Calico
             Technology, Inc., a California corporation, and Calico
             Commerce, Inc., a Delaware corporation
     2.3*    Agreement and Plan of Merger dated as of November 19, 1999
             by and between Calico Commerce, Inc., ConnectInc.com, Co.,
             and Calico Acquisition, Inc.
     3.1**   Certificate of Incorporation
     3.2**   Bylaws
    10.1**   Office Lease between Metropolitan Life Insurance Company and
             Calico Commerce, Inc. dated as of August 18, 1999
    10.2**   1997 Stock Option Plan and forms of agreements thereunder
    10.3**   1995 Stock Option Plan and forms of agreements thereunder
    10.4**   1999 Employee Stock Purchase Plan
    10.5**   Form of Indemnity Agreement for directors and officers
    10.6**   Investors' Rights Agreement, dated as of May 26, 1995, as
             amended, among Calico Technology, Inc. William G. Paseman,
             and the persons identified on the schedules attached thereto
    10.7**   Loan Agreement dated as of January 21, 1997, between Calico
             Technology, Inc. and Venture Lending and Leasing, Inc.
    10.8**   Four Variable Rate Installment Notes between Calico
             Technology, Inc. and Comerica Bank -- California
    10.9**   Common Stock Purchase Agreement dated September 3, 1999
             between Calico Commerce, Inc. and Dell U.S.A., L.P.
    10.10**  Letter Agreement between Andersen Consulting LLP and Calico
             Commerce, Inc. dated September 17, 1999
    10.11**  Common Stock Purchase Agreement dated September 29, 1999
             between Calico Commerce, Inc. and AC II Technology (ACT II)
             B.V.
    10.12**  Amendment Number Nine to Investors' Rights Agreement dated
             September 28, 1999
    10.13    2000 Non-officer Stock Option Plan
    10.14+   Software License Agreement dated April 27, 1999 as amended
             October 28, 1999, between Calico Commerce, Inc. and
             WebXpress, A BEA Company
    21.1     List of Subsidiaries
    23.1     Consent of PricewaterhouseCoopers LLP, Independent
             Accountants
    27.1     Financial Data Schedule (in EDGAR format only)
</TABLE>

                                       37
<PAGE>   38

---------------
*  Incorporated by reference to Calico's Current Report on Form 8-K filed
   November 29, 1999

** Incorporated by reference to Calico's Registration Statement on Form S-1, as
   amended (File No. 333-82907)

+  Confidential treatment has been requested for certain portions of this
   exhibit. The omitted portions have been separately filed with the Commission.

(b) REPORTS ON FORM 8-K

     Report on Form 8-K dated November 19, 1999 regarding the acquisition of
ConnectInc.com, Co., as filed with the Securities and Exchange Commission on
November 29, 1999.

                                       38
<PAGE>   39

                                   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.

Date: June 28, 2000                            /s/ ARTHUR F. KNAPP, JR.
                                          --------------------------------------
                                                   Arthur F. Knapp, Jr.
                                            Vice President and Chief Financial
                                                         Officer
                                           (Principal Financial and Accounting
                                                         Officer)

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

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

<TABLE>
<CAPTION>
                      SIGNATURE                                     TITLE                     DATE
                      ---------                                     -----                     ----
<C>                                                    <C>                                <S>
                 /s/ ALAN P. NAUMANN                     President, Chief Executive       June 28, 2000
-----------------------------------------------------       Officer and Director
                   Alan P. Naumann

              /s/ ARTHUR F. KNAPP, JR.                    Vice President and Chief        June 28, 2000
-----------------------------------------------------         Financial Officer
                Arthur F. Knapp, Jr.

               /s/ WILLIAM G. PASEMAN                    Vice President Research and      June 28, 2000
-----------------------------------------------------          Development and
                 William G. Paseman                         Chairman of the Board

               /s/ JOSEPH B. COSTELLO                             Director                June 28, 2000
-----------------------------------------------------
                 Joseph B. Costello

                /s/ JOEL P. FRIEDMAN                              Director                June 28, 2000
-----------------------------------------------------
                  Joel P. Friedman

               /s/ BERNARD J. LACROUTE                            Director                June 28, 2000
-----------------------------------------------------
                 Bernard J. Lacroute

                /s/ WILLIAM D. UNGER                              Director                June 28, 2000
-----------------------------------------------------
                  William D. Unger
</TABLE>

                                       39
<PAGE>   40

                             CALICO COMMERCE, INC.

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
CALICO COMMERCE, INC. CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants...........................  F-2
Consolidated Balance Sheet..................................  F-3
Consolidated Statement of Operations........................  F-4
Consolidated Statement of Stockholders' Equity (Deficit)....  F-5
Consolidated Statement of Cash Flows........................  F-6
Notes to Consolidated Financial Statements..................  F-7
</TABLE>

                                       F-1
<PAGE>   41

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Calico Commerce, Inc.

     In our opinion, the consolidated financial statements listed in the
accompanying index appearing under Item 14(a)(1) on page 36 present fairly, in
all material respects, the financial position of Calico Commerce, Inc. and its
subsidiaries at March 31, 1999 and 2000, and the results of their operations and
their cash flows for each of the three years in the period ended March 31, 2000
in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

/s/ PRICEWATERHOUSECOOPERS LLP

San Jose, California
June 28, 2000

                                       F-2
<PAGE>   42

                             CALICO COMMERCE, INC.

                           CONSOLIDATED BALANCE SHEET
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

                                     ASSETS

<TABLE>
<CAPTION>
                                                                   MARCH 31,
                                                              -------------------
                                                                2000       1999
                                                              --------    -------
<S>                                                           <C>         <C>
Current assets:
  Cash and cash equivalents.................................  $ 25,917    $15,441
  Short-term investments....................................    49,923         --
  Accounts receivable, net..................................    10,829      7,443
  Other current assets......................................     2,568      1,417
                                                              --------    -------
          Total current assets..............................    89,237     24,301
Long-term investments.......................................     5,377         --
Property and equipment, net.................................     4,462      2,532
Intangible and other assets, net............................    89,584      4,535
                                                              --------    -------
                                                              $188,660    $31,368
                                                              ========    =======

LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable..........................................  $  4,152    $ 1,728
  Accrued liabilities.......................................    11,641      5,448
  Deferred revenue..........................................     5,802      6,054
  Current portion of notes payable..........................     1,255        628
  Current portion of capital lease obligations..............       275        256
                                                              --------    -------
          Total current liabilities.........................    23,125     14,114
Notes payable, non-current..................................     1,413        700
Capital lease obligations, non-current......................       106        177
Other liabilities...........................................        32        622
                                                              --------    -------
                                                                24,676     15,613
                                                              --------    -------
Mandatorily Redeemable Convertible Preferred Stock..........        --     32,535
                                                              --------    -------

Commitments and contingencies (Notes 10)

Stockholders' equity (deficit):
  Preferred Stock; $0.001 par value; 15,000 shares
     authorized; no shares issued and outstanding...........        --         --
  Common Stock; $0.001 par value; 150,000 shares authorized;
     34,942, and 11,436 shares issued and outstanding.......        35         11
  Additional paid-in capital................................   224,587     17,877
  Notes receivable from stockholders........................    (1,752)    (2,211)
  Unearned compensation.....................................    (1,228)    (2,779)
  Accumulated other comprehensive loss......................      (179)        --
  Accumulated deficit.......................................   (57,479)   (29,678)
                                                              --------    -------
          Total stockholders' equity (deficit)..............   163,984    (16,780)
                                                              --------    -------
                                                              $188,660    $31,368
                                                              ========    =======
</TABLE>

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

                                       F-3
<PAGE>   43

                             CALICO COMMERCE, INC.

                      CONSOLIDATED STATEMENT OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                   YEAR ENDED MARCH 31,
                                                              -------------------------------
                                                                2000        1999       1998
                                                              --------    --------    -------
<S>                                                           <C>         <C>         <C>
Net revenue:
  License...................................................  $ 17,030    $ 10,482    $ 6,965
  Services..................................................    18,594      10,931      4,894
                                                              --------    --------    -------
          Total net revenue.................................    35,624      21,413     11,859
                                                              --------    --------    -------
Cost of net revenue:
  License...................................................     1,882       1,179        265
  Services..................................................    13,555       7,272      3,115
                                                              --------    --------    -------
          Total cost of net revenue.........................    15,437       8,451      3,380
                                                              --------    --------    -------
Gross profit................................................    20,187      12,962      8,479
                                                              --------    --------    -------
Operating expenses:
  Sales and marketing.......................................    21,166      14,138      7,593
  Research and development..................................    15,347       5,677      3,342
  General and administrative................................     6,278       3,988      2,222
  Stock compensation........................................     1,551       2,007        780
  Acquired in-process research and development..............       230       1,840         --
  Amortization of intangibles...............................     5,778         550         --
                                                              --------    --------    -------
          Total operating expenses..........................    50,350      28,200     13,937
                                                              --------    --------    -------
Loss from operations........................................   (30,163)    (15,238)    (5,458)
Interest expense............................................      (222)       (314)      (154)
Interest income and other...................................     2,584         291        113
                                                              --------    --------    -------
Net loss....................................................  $(27,801)   $(15,261)   $(5,499)
                                                              ========    ========    =======
Net loss per share:
  Basic and diluted.........................................  $  (1.36)   $  (2.25)   $ (1.08)
                                                              ========    ========    =======
  Weighted average shares...................................    20,450       6,775      5,075
                                                              ========    ========    =======
</TABLE>

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

                                       F-4
<PAGE>   44

                             CALICO COMMERCE, INC.

            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                                                                    ACCUMULATED
                                                                          NOTES                                        OTHER
                                         COMMON STOCK     ADDITIONAL    RECEIVABLE                                 COMPREHENSIVE
                                        ---------------    PAID-IN         FROM         UNEARNED     ACCUMULATED      INCOME
                                        SHARES   AMOUNT    CAPITAL     STOCKHOLDERS   COMPENSATION     DEFICIT        (LOSS)
                                        ------   ------   ----------   ------------   ------------   -----------   -------------
<S>                                     <C>      <C>      <C>          <C>            <C>            <C>           <C>
Balance at March 31, 1997.............   6,857    $ 6      $    224      $  (166)       $    --       $ (8,918)        $  --
Exercise of stock options.............   2,936      3           707         (574)            --             --            --
Repayments of notes receivable........      --     --           (16)          28             --             --            --
Issuance of Common Stock..............       8     --             2           --             --             --            --
Repurchase of Common Stock............    (303)    --            (5)          --             --             --            --
Unearned compensation.................      --     --         2,746           --         (2,746)            --            --
Amortization of unearned
  compensation........................      --     --            --           --            780             --            --
Net loss..............................      --     --            --           --             --         (5,499)           --
                                        ------    ---      --------      -------        -------       --------         -----
Balance at March 31, 1998.............   9,498      9         3,658         (712)        (1,966)       (14,417)           --
Exercise of stock options.............   1,526      2         1,811       (1,660)            --             --            --
Issuance of Common Stock..............   1,053      1         9,999           --             --             --            --
Repayments of notes receivable........      --     --           (92)         161             --             --            --
Repurchase of Common Stock............    (641)    (1)         (501)          --             --             --            --
Issuance of Common Stock options to
  non-employees.......................      --     --           148           --             --             --            --
Unearned compensation.................      --     --         2,854           --         (2,854)            --            --
Amortization of unearned
  compensation........................      --     --            --           --          2,041             --            --
Net loss..............................      --     --            --           --             --        (15,261)           --
                                        ------    ---      --------      -------        -------       --------         -----
Balance at March 31, 1999.............  11,436     11        17,877       (2,211)        (2,779)       (29,678)           --
Exercise of stock options.............     584      1         1,905         (285)            --             --            --
Repurchase of Common Stock............    (488)    --          (217)         216             --             --            --
Repayments of notes receivable........      --     --            --          528             --             --            --
Issuance of Common Stock Options to
  non-employees.......................      --     --            83           --             --             --            --
Issuance of warrants..................      --     --           232           --             --             --            --
Exercise or warrants..................     129     --            --           --             --             --            --
Issuance of Common Stock in initial
  public offering.....................   6,443      6        81,709           --             --             --            --
Issuance of Common Stock in business
  combination.........................   1,206      1        79,741           --             --             --            --
Issuance of options assumed in
  business combination................      --     --        10,722           --             --             --            --
Conversion of Preferred Stock to
  Common Stock upon initial public
  offering............................  15,632     16        32,536           --             --             --            --
Amortization of unearned
  compensation........................      --     --            --           --          1,551             --            --
Accumulated other Comprehensive
  loss................................      --     --            --           --             --             --          (179)
Net loss..............................      --     --            --           --             --        (27,801)           --
                                        ------    ---      --------      -------        -------       --------         -----
Comprehensive loss....................      --     --            --           --             --        (57,479)         (179)
                                        ------    ---      --------      -------        -------       --------         -----
Balance at March 31, 2000.............  34,942    $35      $224,587      $(1,752)       $(1,228)      $(57,479)        $(179)
                                        ======    ===      ========      =======        =======       ========         =====

<CAPTION>

                                             TOTAL
                                         STOCKHOLDERS'
                                        (DEFICIT) EQUITY
                                        ----------------
<S>                                     <C>
Balance at March 31, 1997.............      $ (8,854)
Exercise of stock options.............           136
Repayments of notes receivable........            12
Issuance of Common Stock..............             2
Repurchase of Common Stock............            (5)
Unearned compensation.................            --
Amortization of unearned
  compensation........................           780
Net loss..............................        (5,499)
                                            --------
Balance at March 31, 1998.............       (13,428)
Exercise of stock options.............           153
Issuance of Common Stock..............        10,000
Repayments of notes receivable........            69
Repurchase of Common Stock............          (502)
Issuance of Common Stock options to
  non-employees.......................           148
Unearned compensation.................            --
Amortization of unearned
  compensation........................         2,041
Net loss..............................       (15,261)
                                            --------
Balance at March 31, 1999.............       (16,780)
Exercise of stock options.............         1,621
Repurchase of Common Stock............            (1)
Repayments of notes receivable........           528
Issuance of Common Stock Options to
  non-employees.......................            83
Issuance of warrants..................           232
Exercise or warrants..................            --
Issuance of Common Stock in initial
  public offering.....................        81,715
Issuance of Common Stock in business
  combination.........................        79,742
Issuance of options assumed in
  business combination................        10,722
Conversion of Preferred Stock to
  Common Stock upon initial public
  offering............................        32,552
Amortization of unearned
  compensation........................         1,551
Accumulated other Comprehensive
  loss................................          (179)
Net loss..............................       (27,801)
                                            --------
Comprehensive loss....................       (57,658)
                                            --------
Balance at March 31, 2000.............      $163,984
                                            ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-5
<PAGE>   45

                             CALICO COMMERCE, INC.

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                    YEAR ENDED MARCH 31,
                                                              --------------------------------
                                                                2000         1999       1998
                                                              ---------    --------    -------
<S>                                                           <C>          <C>         <C>
Cash flows from operating activities:
  Net loss..................................................  $ (27,801)   $(15,261)   $(5,499)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Provision for doubtful accounts.........................        102         200        200
    Provision for sales returns.............................        261         330        200
    Depreciation, amortization and other....................      8,491       2,641        664
    Stock compensation and other............................      1,866       2,189        780
    Loss on disposal of assets..............................         36         260         --
    Acquired in-process research and development............        230       1,840         --
    Changes in assets and liabilities, net of acquisition:
      Accounts receivable...................................     (2,913)     (4,904)    (2,248)
      Other current assets..................................     (1,131)     (1,072)      (103)
      Accounts payable......................................      2,282         531        406
      Accrued liabilities...................................      1,437       2,662      1,202
      Deferred revenue......................................       (487)      3,130      1,062
      Other liabilities.....................................        (59)         91         --
                                                              ---------    --------    -------
         Net cash used in operating activities..............    (17,686)     (7,363)    (3,336)
                                                              ---------    --------    -------
Cash flows from investing activities:
  Purchases of property and equipment.......................     (3,696)     (1,829)    (1,403)
  Purchases of investments..................................   (100,550)         --         --
  Maturity of investments...................................     45,071          --         --
  Deposits..................................................       (184)         --         --
  Acquisition, net of cash acquired.........................      2,601          --         --
                                                              ---------    --------    -------
         Net cash used in investing activities..............    (56,758)     (1,829)    (1,403)
                                                              ---------    --------    -------
Cash flows from financing activities:
  Proceeds from initial public offering, net of issuance
    cost....................................................     81,715          --         --
  Proceeds from issuance of Common Stock, net of issuance
    cost....................................................      1,605      10,153        133
  Common stock repurchases..................................       (135)       (502)        --
  Proceeds from repayments of stockholder loans.............        662          69         12
  Proceeds from issuance of preferred stock, net of issuance
    cost....................................................         16      12,217      4,952
  Proceeds from issuance of notes payable...................      2,143         763        443
  Repayments of notes payable...............................       (803)       (409)      (144)
  Principal payments under capital lease obligations........       (283)       (172)       (64)
                                                              ---------    --------    -------
         Net cash provided by financing activities..........     84,920      22,119      5,332
                                                              ---------    --------    -------
Net increase in cash and cash equivalents...................     10,476      12,927        593
Cash and cash equivalents at beginning of period............     15,441       2,514      1,921
                                                              ---------    --------    -------
Cash and cash equivalents at end of period..................  $  25,917    $ 15,441    $ 2,514
                                                              =========    ========    =======
Supplemental cash flow disclosures:
  Cash paid for interest....................................  $     222    $    192    $   154
                                                              =========    ========    =======
Non-cash transactions:
  Issuance of Common Stock for notes receivable.............  $     285    $  1,660    $   574
                                                              =========    ========    =======
  Cancellation of notes receivable related to forfeited
    unvested restricted Common Stock........................  $     216    $     92    $    16
                                                              =========    ========    =======
  Equipment acquired through capital lease obligations......  $      --    $    136    $    --
                                                              =========    ========    =======
  Issuance of Series B Mandatorily Redeemable Convertible
    Preferred Stock warrants................................  $            $     --    $    53
                                                              =========    ========    =======
Acquired net assets associated with acquisitions included:
  Fair value of tangible assets.............................  $   3,648    $    360
  Fair value of existing products and core technology.......      5,000       1,547
  Acquired in-process research and development..............        230       1,840
  Goodwill, customer base and in-place workforce............     86,965       4,266
  Fair value of liabilities assumed.........................     (5,363)     (1,951)
                                                              ---------    --------
                                                              $  90,480    $  6,062
                                                              =========    ========
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                       F-6
<PAGE>   46

                             CALICO COMMERCE, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

THE COMPANY

     Calico Commerce, Inc. ("Calico" or the "Company") was incorporated on April
14, 1994 as an S-corporation. In May 1995, the Company was reorganized as a
C-corporation under California law.

     Calico Commerce, Inc., headquartered in San Jose, California, provides
software and services that enable companies to interact directly with their
customers over the Internet, intranets, extranets, and corporate networks, and
accessed through desktop and mobile computers and retail kiosks to improve the
interactive buying and selling of complex products and services.

     We derive revenue principally from the license of our Calico eSales Suite
of products and the delivery of associated implementation and support services.
The mix of products and services sold varies by customer, and follow-on sales
typically reflect an expansion of the use of our products within the customer's
business, rather than a migration to different products. To date, our sales have
been primarily within the computer hardware and network and telecommunications
equipment industries.

REINCORPORATION

     In September 1999, the Company reincorporated in the State of Delaware. As
a result of the reincorporation, the Company is authorized to issue 150,000,000
shares of $0.001 par value Common Stock and 15,000,000 shares of $0.001 par
value Preferred Stock. The Board of Directors has the authority to issue the
undesignated Preferred Stock in one or more series and to fix the rights,
preferences, privileges and restrictions thereof. Share and per share
information for each of the three years in the period ended March 31, 2000 have
been retroactively adjusted to reflect the reincorporation.

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

     The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries, Calico Technology UK Limited, which commenced
operations in April 1998, FirstFloor Software, Inc ("FirstFloor") and
ConnectInc.com, Co ("Connect"). All significant intercompany balances and
transactions have been eliminated in consolidation.

USE OF ESTIMATES

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

CASH, CASH EQUIVALENTS AND INVESTMENTS

     The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash and cash
equivalents consist of cash on deposit with banks, high quality money market
funds and commercial paper.

     All other investments are classified as either short-term or long-term
investments. Short-term investments consist of municipal bonds, corporate bonds,
commercial paper and government agencies coupon bonds. Long-term investments
consist of corporate bonds.

     Management determines the appropriate classification of investment
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. At March 31, 2000, all investment securities

                                       F-7
<PAGE>   47
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

were designated as available-for-sale. Available-for-sale securities are carried
at fair value, using available market information and appropriate valuation
methodologies, with unrealized gains and losses reported in stockholder' equity
(deficit).

     Realized gains and losses and declines in value judged to be
other-than-temporary on available-for-sale securities are included in the
statement of income. The cost of securities is based on the specific
identification method. Interest and dividends on securities classified as
available-for-sale are included in interest income.

     At March 31, 2000, the Company's available-for-sale securities consist of
the following: Commercial paper $14,256,000, corporate bonds $19,272,000,
municipal bonds $28,729,000, government agencies coupon bonds $5,000,000, and
money market funds of $438,000. Of these securities, $14,495,000, $49,923,000
and $3,277,000 million were classified as cash equivalent, short-term
investments and long term investments, respectively.

     At March 31, 2000, the difference between the fair value and the amortized
cost of available-for-sale securities was $179,000, which has been recorded in
other comprehensive loss in stockholders' (deficit) equity. For the year ended
March 31, 2000, there were no realized gains or losses.

     In accordance with Statement of Financial Accounting Standard No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", the Company
uses the cost method to account for investments in which it holds a minority
interest and does not exercise significant influence.

RESTRICTED CASH

     At March 31, 2000, investment balances of approximately $800,000 were
restricted from withdrawal and held by a bank in the form of certificates of
deposit. These certificates serve as collateral supporting a lease for
facilities and are classified as other long term assets.

CONCENTRATION OF CREDIT RISK AND BUSINESS RISK

     Financial instruments which potentially subject the Company to a
concentration of credit risk consist of cash, cash equivalents and accounts
receivable. The Company by policy and practice maintains its cash and cash
equivalents with financial institutions the Company believes are of high credit
quality. Deposits with these financial institutions may exceed the amount of
insurance provided on such deposits. The Company has not experienced any losses
on its deposits of cash and cash equivalents. The Company generally requires no
collateral from its customers. To reduce its risk, the Company periodically
reviews the credit worthiness of its customers and establishes reserves for
potential credit losses. To date such losses have been within management's
estimations.

     At March 31, 2000 two customers represented 11% and 9%, respectively, of
gross accounts receivable. At March 31, 1999, three customers represented 32%,
12% and 11%, respectively, of gross accounts receivable. At March 31, 1998,
three customers represented 27%, 14% and 12%, respectively, of gross accounts
receivable.

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company's financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities are carried at
cost, which approximates their fair value because of the short-term maturity of
these instruments. Notes payable are carried at cost, which approximates fair
value due to the proximity of the implicit rate of these financial instruments
and the prevailing market rates for similar instruments.

                                       F-8
<PAGE>   48
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets;
generally two to five years. The cost of equipment acquired under a capital
lease is amortized over the shorter of the life of the lease, or the estimated
useful life of the assets. Maintenance and repairs are charged to operations as
incurred and major improvements are capitalized. The cost of assets retired or
otherwise disposed of and the accumulated depreciation thereon are removed from
the accounts with any gain or loss realized upon sale or disposal credited or
charged to operations, respectively.

INTANGIBLE ASSETS

     Goodwill represents the excess of the purchase price of acquired businesses
over the fair value of the identifiable net assets acquired and is amortized
using the straight-line method over estimated useful lives ranging from three to
four years. Acquired in-place workforce and customer base is amortized over the
benefit of three years. Acquired existing products and core technology have been
and are being amortized over the period of benefit ranging from seven to 36
months and is classified as a component of cost of license revenue.

VALUATION OF LONG-LIVED ASSETS

     The Company periodically evaluates the carrying value of its long-lived
assets, including, but not limited to, property and equipment, goodwill, and
other assets. The carrying value of a long-lived asset is considered impaired
when the undiscounted cash flow from such asset is separately identifiable and
is estimated to be less than its carrying value. In that event, a loss is
recognized based on the amount by which the carrying value exceeds the fair
market value of the long-lived asset. Fair market value is determined primarily
using the anticipated cash flows discounted at a rate commensurate with the
involved asset. Losses on long-lived assets to be disposed of would be
determined in a similar manner, except that fair market values would be reduced
by the cost of disposal.

FOREIGN CURRENCY TRANSLATION

     The Company's functional currency is the United States dollar, except as
noted below. Foreign denominated non-monetary assets, liabilities and operating
items of the Company are measured in United States dollars at the exchange rate
prevailing at the respective transaction dates. Monetary assets and liabilities
denominated in foreign currencies are measured at exchange rates prevailing at
the balance sheet date. Resulting remeasurement adjustments are included in the
consolidated statements of operations, and were not significant during any of
the periods presented.

     The functional currency of the Company's subsidiary in the United Kingdom
is the local currency, the United Kingdom Pound. Accordingly, the Company
applies the current exchange rate to translate the subsidiary's assets and
liabilities and weighted average exchange rate to translate the subsidiary's
revenues, expenses, gains and losses into United States dollars. Translation
adjustments are included as a separate component of comprehensive income within
stockholders' equity (deficit) in the accompanying consolidated financial
statements.

REVENUE RECOGNITION

     Revenues are derived from software licenses and related services, which
include implementation and integration, technical support, training and
consulting. For contracts with multiple elements, and for which vendor-specific
objective evidence of fair value for the undelivered elements exists, revenue is
recognized for the delivered elements based upon the residual contract value as
prescribed by Statement of Position No. 98-9, "Modification of SOP No. 97-2 with
Respect to Certain Transactions".

                                       F-9
<PAGE>   49
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Revenue from license fees is recognized when persuasive evidence of an
agreement exists, delivery of the product has occurred, no significant Company
obligations with regard to implementation or integration exist, the fee is fixed
or determinable and collectibility is probable. Provisions for sales returns are
provided at the time of revenue recognition based upon estimated returns.

     Services revenue primarily comprises revenue from consulting fees,
maintenance contracts and training. Services revenue from consulting and
training is recognized as the service is performed.

     Maintenance contracts include the right to unspecified upgrades and ongoing
support. Maintenance revenue is deferred and recognized on a straight-line basis
as services revenue over the life of the related contract, which is typically
one year. License and services revenue on contracts involving significant
implementation, customization or services which are essential to the
functionality of the software is recognized over the period of each engagement,
primarily using the percentage-of-completion method. Labor hours incurred is
generally used as the measure of progress towards completion. Revenue for these
arrangements is classified as license revenue and services revenue based upon
our estimates of fair value for each element and recognizes the revenue based on
the percentage-of-completion ratio for the arrangement. A provision for
estimated losses on engagements is made in the period in which the loss becomes
probable and can be reasonably estimated.

     Customer billing occurs in accordance with contract terms. Customer
advances and amounts billed to customers in excess of revenue recognized are
recorded as deferred revenue. Amounts recognized as revenue in advance of
billing (typically under percentage-of-completion accounting) are recorded as
unbilled receivables.

RESEARCH AND DEVELOPMENT COSTS

     Expenditures for research and development are charged to expense as
incurred. Under Statement of Financial Accounting Standards No. 86, "Accounting
for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed"
certain software development costs are capitalized after technological
feasibility has been established. Development costs incurred in the period
between achievement of technological feasibility, which the Company defines as
the establishment of a working model and until the general availability of such
software to customers, have been insignificant. Accordingly, the Company has not
capitalized any software development costs to date.

STOCK-BASED COMPENSATION

     The Company accounts for stock-based employee compensation arrangements in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB No. 25") and complies with the
disclosure provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123"). Under APB No. 25,
compensation expense is based on the difference, if any, on the date of the
grant, between the fair value of the Company's stock and the exercise price.
Unearned compensation is amortized and expensed in accordance with Financial
Accounting Standards Board ("FASB") Interpretation No. 28. ("FIN 28") The
Company accounts for stock issued to non-employees in accordance with the
provisions of SFAS No. 123 and Emerging Issues Task Force No. 96-18, "Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or
in Conjunction with Selling, Goods or Services."

     The Company uses the Black-Scholes option pricing model to value options
granted to consultants. The related expense is recorded on the option grant date
as the options are fully vested and earned at such time.

                                      F-10
<PAGE>   50
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ADVERTISING EXPENSE

     Advertising costs are expensed as incurred and totaled $842,000, $339,000
and $92,000 during the years ended March 31, 2000, 1999 and 1998, respectively.

INCOME TAXES

     Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current year and
deferred tax liabilities and assets for the future tax consequences of events
that have been recognized in the Company's financial statements or tax returns.
The measurement of current and deferred tax liabilities and assets are based on
provisions of the enacted tax law; the effects of future changes in tax laws or
rates are not anticipated. The measurement of deferred tax assets is reduced, if
necessary, by the amount of any tax benefits that, based on available evidence,
are not expected to be realized.

COMPREHENSIVE INCOME (LOSS)

     Comprehensive income is defined as a change in equity of a company during a
period from transactions and other events and circumstances excluding
transactions resulting from investments by owners and distributions to owners.
The primary difference between net loss and comprehensive income (loss) for the
Company arises from foreign currency translation adjustments and unrealized
gains/(losses) on securities. Comprehensive income is shown in the statement of
stockholders' equity. As of March 31, 2000, the accumulated other comprehensive
income (loss) consisted of $179,000 of unrealized loss on securities. In the
years ended March 31, 1999 and 1998, the Company did not have significant
transactions that were required to be reported in comprehensive income (loss).

NET LOSS PER SHARE

     Basic net loss per share is computed by dividing the net loss available to
Common Stockholders for the period by the weighted average number of shares of
Common Stock outstanding during the period. Diluted net loss per share is
computed by dividing the net loss for the period by the weighted average number
of shares of Common Stock and potential shares of Common Stock outstanding
during the period. The calculation of diluted net loss per share excludes
potential shares of Common Stock if the effect is anti-dilutive. Potential
shares of Common Stock consist of unvested restricted Common Stock, incremental
shares of Common Stock issuable upon the exercise of stock options and warrants
and shares issuable upon conversion of the Series A, Series B, Series C, Series
D and Series E Mandatorily redeemable Convertible Preferred Stock prior to their
conversion to common stock and warrants upon the initial public offering.

                                      F-11
<PAGE>   51
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

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

<TABLE>
<CAPTION>
                                                           YEAR ENDED MARCH 31,
                                                      -------------------------------
                                                        2000        1999       1998
                                                      --------    --------    -------
<S>                                                   <C>         <C>         <C>
Numerator:
  Net loss..........................................  $(27,801)   $(15,261)   $(5,499)
                                                      ========    ========    =======
Denominator:
  Weighted average shares...........................    22,352      10,392      8,132
  Weighted average unvested shares of Common Stock
     subject to repurchase..........................    (1,902)     (3,617)    (3,057)
                                                      --------    --------    -------
  Denominator for basic and diluted calculation.....    20,450       6,775      5,075
                                                      ========    ========    =======
Net loss per share:
  Basic and diluted.................................  $  (1.36)   $  (2.25)   $ (1.08)
                                                      ========    ========    =======
</TABLE>

     The above table reflects the restated weighted average shares for the year
ended March 31, 1999 to reflect 1,052,632 shares sold to a private investor in
March 1999. Using these shares, the previously reported net loss per share for
that quarter would have been $2.25 instead of the $2.27 shown in the Company's
S-1 registration statement.

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

<TABLE>
<CAPTION>
                                                              YEAR ENDED MARCH 31,
                                                            -------------------------
                                                            2000      1999      1998
                                                            -----    ------    ------
<S>                                                         <C>      <C>       <C>
Weighted average effect of Common Stock equivalents:
  Series A Preferred Stock................................     --     6,000     6,000
  Series B Preferred Stock................................     --     3,600     3,600
  Series C Preferred Stock................................     --     2,083     1,441
  Series D Preferred Stock................................     --       766        --
  Series E Preferred Stock................................     --     1,530        --
  Common Stock warrants...................................     79       133       124
  Preferred Stock options.................................     --        24        --
  Unvested shares of Common Stock subject to repurchase...  1,902     3,617     3,057
  Common Stock options....................................  5,813     2,245     1,646
                                                            -----    ------    ------
                                                            7,794    19,998    15,868
                                                            =====    ======    ======
</TABLE>

RECENT ACCOUNTING PRONOUNCEMENTS

     In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements", which provides guidance on the recognition, presentation, and
disclosure or revenue in financial statements filed with the SEC. SAB No. 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. The Company
will adopt SAB No. 101 in the fiscal quarter ended March 31, 2001. Management
believes the impact of SAB No. 101 will not have a material effect on the
financial position or results of operations of the Company.

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 established accounting and

                                      F-12
<PAGE>   52
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. In July
1999, the Financial Accounting Standards Board issued SFAS No. 137, "Accounting
with Derivative Instruments and Hedging Activities Deferral of the Effective
Date of FASB Statement 133" ("SFAS No. 137"). SFAS No. 137 deferred the
effective date of until the first fiscal quarter of all fiscal years beginning
after June 15, 2000. The Company will adopt SFAS No. 133 in its quarter ended
June 30, 2002. The Company has not engaged in hedging activities or invested in
derivative instruments and accordingly, does not believe implementation of SFAS
No. 133 will have a material effect on its financial statements.

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

NOTE 2 -- ACQUISITIONS:

CONNECTINC.COM

     On January 31, 2000, the Company completed the acquisition of Connect, a
provider of technology and services that dynamically connect buying and selling
companies over the Internet. Under the terms of the Agreement and Plan of Merger
dated November 19,1999, among Connect and Calico Acquisition Corporation,
approximately 1.4 million shares of Calico Common Stock were issued or reserved
for issuance for all outstanding shares, options and warrants of Connect. The
acquisition was accounted for using the purchase method of accounting and,
accordingly, the net assets and results of operations of Connect have been
included in the Company's consolidated financial statements since the
acquisition date.

     The purchase consideration included 1,206,363 shares of Common Stock valued
at approximately $79,741,000. In addition, all of the outstanding stock options
granted under the Connect Stock Option Plans were converted at the ratio of
0.081 into stock options to purchase 219,717 shares of the Company's Common
Stock. The Black-Scholes option pricing model was used to determine the fair
value of the converted options. The fair value of the stock options, of
approximately $10,772,000, was included as a component of the purchase price.
The Company also incurred approximately $2.0 million in acquisition expenses.

     The total purchase price of $90,480,000 was allocated to assets acquired,
based on their estimated fair value at the acquisition date. Approximately
$3,648,000 was allocated to tangible assets acquired, offset by $5,363,000 of
liabilities. The remainder was allocated to intangible assets, including
customer base of $150,000, in-place workforce of $2,580,000, in-process research
and development of $230,000, existing technology of $5,000,000 and goodwill of
$84,235,000 assumed. The estimate of fair value of the net assets acquired is
based on an independent appraisal and management estimates.

                                      F-13
<PAGE>   53
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The total purchase price was allocated as follows (in thousands):

<TABLE>
<S>                                                           <C>
Fair value of tangible assets...............................  $ 3,648
Fair value of existing products and core technology.........    5,000
Acquired in-process research and development................      230
Goodwill, customer base and in-place workforce..............   86,965
Fair value of liabilities assumed...........................   (5,363)
                                                              -------
                                                              $90,480
                                                              =======
</TABLE>

FIRSTFLOOR SOFTWARE, INC.:

     The Company completed the acquisition of all outstanding capital stock of
FirstFloor on August 21, 1998. The transaction was completed pursuant to the
Agreement and Plan of Reorganization, dated as of June 23, 1998 among the
Company, Calico Acquisition Corporation, FirstFloor and certain stockholders of
Calico and certain shareholders of FirstFloor. The acquisition was accounted for
using the purchase method of accounting and, accordingly, the net assets and
results of operations of FirstFloor have been included in the Company's
consolidated financial statements since the acquisition date.

     The purchase consideration included 1,248,423 shares of Series D
Mandatorily Redeemable Convertible Preferred Stock valued at approximately
$5,690,000. In addition, all of the outstanding stock options granted under the
FirstFloor 1993 Stock Option Plan were converted into stock options to purchase
47,203 shares of the Company's Series D Mandatorily Redeemable Convertible
Preferred Stock at $4.558 per share. The Black-Scholes option pricing model was
used to determine the fair value of the converted options. The fair value of the
stock options, of approximately $122,000, was included as a component of the
purchase price. The Company also incurred approximately $250,000 in acquisition
expenses.

     The total purchase price of $6,062,000 was allocated to assets acquired,
including tangible and intangible assets, and liabilities assumed, based on
their respective estimated fair values at the acquisition date. The estimate of
fair value of the net assets acquired is based on an independent appraisal and
management estimates.

     The total purchase price was allocated as follows (in thousands):

<TABLE>
<S>                                                           <C>
Fair value of tangible assets...............................  $   360
Fair value of existing products and core technology.........    1,547
Acquired in-process research and development................    1,840
Goodwill....................................................    4,266
Fair value of liabilities assumed...........................   (1,951)
                                                              -------
                                                              $ 6,062
                                                              =======
</TABLE>

     These acquisitions were structured as a tax free exchange of stock,
therefore, the differences between the recognized fair values of acquired net
assets, and their historical tax bases are not deductible for tax purposes.
Accordingly, a deferred tax liability has been recognized for the differences
between the assigned value of intangible assets (excluding goodwill) for book
purposes and the tax basis of such assets in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes".

ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT

     In connection with the acquisitions, the Company acquired one existing
product and five in process projects. The existing product provides customers
with the ability to automatically update their sales force with the latest
information. The first acquired in-process project, a marketing information
delivery system, is a complete rewrite of the acquired product, and replaced the
product upon its release. While the solution

                                      F-14
<PAGE>   54
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

remains the same, the functionality has been completely reengineered. This
development effort increased the product's utility as well as its scalability on
larger intranets, which increases the possible number of users, and provides a
variety of data sources instead of just one central database. The second
in-process project, a personalization solution, provides customers with the
ability to obtain in-depth information and critical data needed to build
stronger customer relationships with the objective of increasing revenue and
reducing sales cost. The remaining three projects are developing additional
features to be added to the MarketStream (now MarketMaker) product.

     In connection with our acquisition of ConnectInc.com, we ascribed $230,000
to three specific in-process research and development projects -- all additional
features to be added to the MarketStream product -- which was charged to
operations in the quarter ended March 31, 2000.

     To value the in-process technology, an independent third party appraiser
used the income approach. Management estimated revenue that each in-process
product will generate over its economic life. From this amount, a deduction was
made for the revenue that is attributable to the previously existing technology.
The result is the revenue attributable to in-process technology for each
in-process product, which we used to apply the income approach. Cost of goods
sold and estimated operating expenses were then deducted, a 40% corporate tax
rate applied and finally the present value of the cash flow stream was
calculated using a 35% discount rate.

     In connection with the FirstFloor acquisition, the Company recorded a $1.8
million charge in the year ended March 31, 1999 for acquired in-process research
and development. This represents the value of purchased in-process research and
development on projects that have not yet reached technological feasibility and
have no alternative future use.

     The amount of purchase price allocated to in-process research and
development was determined using appropriate valuation techniques, including
percentage-of-completion which utilizes research and development cost metrics
and key milestones to estimate the stage of development of each in-process
research and development project at the date of acquisition, estimating cash
flows resulting from the expected revenues generated from such projects, and
discounting the net cash flows back to their present value. The discount rate
includes a factor that takes into account the uncertainty surrounding the
successful development of the purchased in-process technology. The remaining
identified intangibles, including the value of acquired existing products and
core technology, will be amortized over the periods of benefit ranging from
seven to 36 months.

     The value assigned to acquired in-process research and development was
determined by identifying the two specific research and development projects
discussed above, for which technological feasibility had not been established.
The first project reached technological feasibility and was commercially
released in December 1998. The second project reached technological feasibility
and was commercially released in May 1999. In June 1999, we released Calico
eSales 2.5, an integrated suite that incorporate eSales Loyalty Builder, eSales
Quote and improved versions of our other products. In assigning value to the
in-process projects, consideration was given, as appropriate, to the stage of
completion, the complexity of the work completed to date, the difficulty of
completing the remaining development, costs already incurred and the projected
cost to complete the projects, adjusting for the relative value and contribution
of the core technology. The value assigned to acquired in-process research and
development was based on the assumptions set forth in the following paragraph.

     Net cash flows from such projects were determined based on the Company's
estimates of revenues, cost of sales, research and development costs, selling,
general and administrative costs, and income taxes associated with such
projects. Revenue growth rates for each technology was developed considering,
among other things, the current and expected industry trends, acceptance of the
technologies and historical growth rates for similar industry products.
Estimated total revenue from the acquired in-process research and development
projects are expected to generally peak in fiscal year 2000 and decline through
fiscal year 2001 as other new products

                                      F-15
<PAGE>   55
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

are expected to be introduced. These revenue projections were based on
management's estimates of market size and growth, expected trends in technology
and the expected timing of new product introductions. The Company assumed no
synergies as a result of the acquisition and the revenue projections are within
the historical growth rates of FirstFloor product introductions. Projected gross
margins for the marketing delivery system and personalization solution averaged
74% and 69%, respectively, over the estimated product lives. The estimated
selling, general and administrative costs for the marketing delivery system and
the personalization solution averaged 41% and 47%, respectively, as a percentage
of revenue over the estimated product lives, and are consistent with
FirstFloor's historical operating cost structure. The estimated net cash flows
of each project were discounted back to their present value using discount rates
of 30% and 40%, respectively, which represent premiums over the Company's cost
of capital of 20% to reflect the risk associated with the stage of completion of
the in-process technologies. The estimated percentage-of-completion of the
in-process research and development projects were 82% and 47%, respectively.

     The actual development timeline and costs of approximately $200,000 for the
marketing information delivery system and approximately $1.2 million for the
personalization solution were in line with the estimates used to compute the
estimated percentage-of-completion used in the valuation of the in-process
research and development projects. These products were just recently released
and it is too premature to compare the actual revenues with those projected. To
date, management's cash flow and other assumptions have not materially changed.

CORE TECHNOLOGY

     The amount of purchase price allocated to acquired core technology in the
FirstFloor acquisition was determined based upon royalty streams that were
assigned as revenue to such technology, recognizing the value of that core
technology to the expected product resulting from the in-process research and
development. Royalty rates were developed based on published documentation of
royalty rates and the specific facts and circumstances, and in Calico's view,
are considered reasonable approximations of fair value rates for the respective
types of technology under exclusive, perpetual, worldwide licenses.

     The value the core technology in the Connect acquisition we used the Income
Approach. The revenue attributable to existing technology excludes the revenue
from existing products and a certain percentage of the revenue form in-process
products. The percentage of revenue from the in-process products is based on
percentages of existing technology in the final product. Using the revenue
attributable to existing technology, we applied the Income Approach.

PRO FORMA RESULTS (UNAUDITED)

     The following unaudited pro forma summary results presents the Company's
consolidated results of operations for the year ended March 31, 2000 and 1999 as
if the acquisitions of Connect and FirstFloor had been consummated at the
beginning of each period. The results of operations of Connect for its year
ended December 31, 1998 have been included in the proforma summary year ended
March 31, 1999. The results of operations of Connect for its fiscal year ended
March 31, 1999 have been included in the year ended March 31, 2000. The
unaudited results of operations of ConnectInc. for the three months ended March
31, 1999 excluded from pro forma results are as follows (in thousands): revenues
$2,026, net loss $(10,332) and net loss per share $(0.48). The pro forma
consolidated results of operations include certain pro forma adjustments,
including the amortization of intangible assets.

<TABLE>
<CAPTION>
                                                         YEAR ENDED MARCH 31,
                                                         --------------------
                                                           2000        1999
                                                         --------    --------
                                                            (IN THOUSANDS)
<S>                                                      <C>         <C>
Net revenues...........................................  $ 40,339    $ 28,215
Net loss...............................................   (58,524)    (53,736)
Net loss per share, Basic and diluted..................     (2.73)      (2.45)
</TABLE>

                                      F-16
<PAGE>   56
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The pro forma results are not necessarily indicative of those that would
have actually occurred had the acquisitions taken place at the beginning of the
periods presented and should not be construed as being a representation of
future operating results.

NOTE 3 -- BALANCE SHEET COMPONENTS (IN THOUSANDS):

<TABLE>
<CAPTION>
                                                               MARCH 31,
                                                           ------------------
                                                            2000       1999
                                                           -------    -------
<S>                                                        <C>        <C>
ACCOUNTS RECEIVABLE, NET:
  Accounts receivable....................................  $10,302    $ 8,561
  Unbilled receivables...................................    2,077        571
  Allowance for doubtful accounts........................     (659)      (659)
  Allowance for sales returns............................     (891)    (1,030)
                                                           -------    -------
                                                           $10,829    $ 7,443
                                                           =======    =======
</TABLE>

     Write-offs of accounts receivable charged against the allowance for
doubtful accounts were $102,000, $121,000 and $0 for the years ended March 31,
2000, 1999 and 1998, respectively. Charges against allowance for sales returns
were $400,000, $0 and $0 for the years ended March 31, 2000, 1999 and 1998,
respectively.

<TABLE>
<CAPTION>
                                                               MARCH 31,
                                                           ------------------
                                                            2000       1999
                                                           -------    -------
<S>                                                        <C>        <C>
PROPERTY AND EQUIPMENT, NET:
  Computer equipment and software........................  $ 7,246    $ 3,878
  Furniture, fixtures and leasehold improvements.........    1,126      1,223
                                                           -------    -------
                                                             8,372      5,101
  Less: Accumulated depreciation and amortization........   (3,910)    (2,569)
                                                           -------    -------
                                                           $ 4,462    $ 2,532
                                                           =======    =======
</TABLE>

     Depreciation and amortization expense for the year ended March 31, 2000,
1999 and 1998 was $1,922,000, $1,591,000 and $350,000, respectively. Property
and equipment includes $944,000 and $700,000 of computer and office equipment
under capital leases at March 31, 2000 and 1999, respectively. Accumulated
depreciation of assets under capital leases totaled $587,000 and $360,000 at
March 31, 2000 and 1999, respectively.

<TABLE>
<CAPTION>
                                                               MARCH 31,
                                                           ------------------
                                                            2000       1999
                                                           -------    -------
<S>                                                        <C>        <C>
INTANGIBLE AND OTHER ASSETS, NET:
  Existing and core technology...........................  $ 6,547    $ 1,547
  Goodwill...............................................   88,033      4,329
  In-place workforce and customer base...................    2,730         --
  Other long-term assets.................................      184         --
                                                           -------    -------
                                                            97,494      5,876
  Less: Accumulated amortization.........................   (7,910)    (1,341)
                                                           -------    -------
                                                           $89,584    $ 4,535
                                                           =======    =======
</TABLE>

                                      F-17
<PAGE>   57
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Amortization expense for the year ended March 31, 2000, 1999 and 1998 was
$6,569,000, $1,341,000 and $nil, respectively.

<TABLE>
<CAPTION>
                                                                MARCH 31,
                                                            -----------------
                                                             2000       1999
                                                            -------    ------
<S>                                                         <C>        <C>
ACCRUED LIABILITIES:
  Accrued compensation and benefits.......................  $ 1,973    $1,149
  Accrued commissions.....................................    2,047     1,573
  Accrued trade liabilities...............................    4,972     1,856
  Employee Stock Purchase Plan withholdings...............    1,271        --
  Other accrued liabilities...............................    1,378       870
                                                            -------    ------
                                                            $11,641    $5,448
                                                            =======    ======
</TABLE>

NOTE 4 -- BORROWINGS:

NOTES PAYABLE

     Notes payable consist of amounts payable to an equipment financing company
and bank and are collateralized by the underlying assets as follows (in
thousands):

<TABLE>
<CAPTION>
                                                                  MARCH 31,
                                                              -----------------
                                                               2000       1999
                                                              -------    ------
<S>                                                           <C>        <C>
7% note; principal and interest payable monthly; matures
  June 2000.................................................  $    86    $  236
7% note; principal and interest payable monthly; matures
  August 2000...............................................       52       120
7% note; principal and interest payable monthly; matures
  October 2000..............................................       31        63
Bank prime (9.0% at March 31, 2000) plus 0.5% note;
  principal and interest payable monthly; matures March
  2001......................................................      112       230
Bank prime (9.0% at March 31, 2000) plus 0.5% note;
  principal and interest payable monthly; matures May
  2001......................................................       66       121
Bank prime (9.0% at March 31, 2000) plus 0.5% note;
  principal and interest payable monthly; matures September
  2001......................................................      132       218
Bank prime (9.0% at March 31, 2000) plus 0.5% note;
  principal and interest payable monthly; matures February
  2002......................................................      224       340
Bank prime (9.0% at March 31, 2000) plus 0.5% note;
  principal and interest payable monthly; matures November
  2002......................................................      889        --
Bank prime (9.0% at March 31, 2000) plus 0.5% note;
  principal and interest payable monthly; matures December
  2002......................................................      733        --
Bank prime (9.0% at March 31, 2000) plus 0.5% note;
  principal and interest payable monthly; matures March
  2003......................................................      343        --
                                                              -------    ------
                                                                2,668     1,328
Less: current portion of notes payable......................   (1,255)     (628)
                                                              -------    ------
Notes payable, non-current..................................  $ 1,413    $  700
                                                              =======    ======
</TABLE>

     In September 1999, Calico entered into a commitment with a bank to issue
variable rate installment notes in connection with a proposed $3.0 million
equipment financing credit line expiring June 30, 2000. This commitment was
finalized in October 1999. Each advance above bears interest at the bank's prime
rate plus 0.5% per year, with the principal to be repaid in 36 equal monthly
installments. The bank advanced $1.0 million under this commitment on September
30, 1999 an additional $800,000 on December 30, 1999, and $343,000 on March 31,
2000. Under the bank prime plus 0.5% notes above, the Company is required to
meet certain quarterly financial tests, including minimum operating results and
certain liquidity, leverage and debt service ratios. At March 31, 2000, the
Company was in compliance with the minimum operating results covenant and other
monthly financial tests.
                                      F-18
<PAGE>   58
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Future minimum principal payments under the notes at March 31, 2000 are as
follows (in thousands):

<TABLE>
<CAPTION>
                                                   YEAR ENDING
                                                    MARCH 31,
                                                   -----------
<S>                                                <C>
2001.............................................    $1,255
2002.............................................       875
2003.............................................       538
2004.............................................        --
2005.............................................        --
                                                     ------
          Total payments.........................    $2,668
                                                     ======
</TABLE>

NOTE 5 -- INCOME TAXES:

     At March 31, 2000, the Company had approximately $102,973,000 of federal
and $65,659,000 of state net operating loss carryforwards available to offset
future taxable income which expire in varying amounts beginning in 2004 and
2001, respectively. At March 31, 2000, the Company had approximately $1,851,000
of federal and $1,572,000 of state research and development credit carryforwards
available to offset future taxable income some of which expire in varying
amounts beginning in 2008 and indefinitely, respectively. Under the Tax Reform
Act of 1986, the amounts of and benefits from net operating loss carryforwards
may be impaired or limited in certain circumstances. Events which cause
limitations in the amount of net operating losses that the Company may utilize
in any one year include, but are not limited to, a cumulative ownership change
of more than 50%, as defined, over a three year period. Due to cumulative
ownership changes, at March 31, 2000, the net operating loss carryforwards will
be limited to approximately $6,000,000 annually to offset future taxable income.

     Deferred taxes are composed of the following (in thousands):

<TABLE>
<CAPTION>
                                                                 MARCH 31,
                                                       ------------------------------
                                                         2000       1999       1998
                                                       --------    -------    -------
<S>                                                    <C>         <C>        <C>
Deferred tax assets:
  Depreciation and amortization......................  $    694    $   250    $    --
  Other accruals and liabilities.....................     4,480      3,146        725
  Net operating loss and credit carryforwards........    42,019      5,399      4,460
                                                       --------    -------    -------
                                                         47,193      8,795      5,185
  Less: Valuation allowance..........................   (43,901)    (8,795)    (5,134)
                                                       --------    -------    -------
                                                       $  3,292    $    --    $    51
                                                       ========    =======    =======
Deferred tax liabilities:
  Non-deductible intangible assets...................  $  3,292    $   531    $    --
  Depreciation.......................................        --         --         51
                                                       --------    -------    -------
                                                       $  3,292    $   531    $    51
                                                       ========    =======    =======
</TABLE>

     The valuation allowance increased by $2,304,000 during 1998, $3,661,000
during 1999 and $35,106,000 in 2000.

     The acquisitions of FirstFloor and Connect were structured as a tax-free
exchange of stock, therefore, the differences between the recognized fair values
of acquired net assets and their historical tax bases are not deductible for tax
purposes. A deferred tax liability has been recognized for the differences
between the assigned fair values of intangible assets (excluding goodwill) for
book purposes and the tax bases of such assets.

                                      F-19
<PAGE>   59
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     For financial reporting purposes the Company has incurred a loss in each
period since its inception. Based on the available objective evidence, including
the Company's history of losses, management believes it is more likely than not
that the net deferred tax assets will not be fully realizable. Accordingly, the
Company has provided a full valuation allowance against its net deferred tax
assets at March 31, 2000 and 1999. The Company's operating losses are generated
domestically and amounts attributable to its foreign operations have been
insignificant for all periods presented. A reconciliation between the amount of
income tax benefit determined by applying the applicable U.S. statutory income
tax rate to pre-tax loss is as follows:

<TABLE>
<CAPTION>
                                                              YEAR ENDED MARCH 31,
                                                              --------------------
                                                              2000    1999    1998
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
Federal statutory rate......................................  (35)%   (35)%   (35)%
State tax, net of federal impact............................   (6)     (6)     (6)
Provision for valuation allowance on deferred tax assets....   26      26      36
Permanent differences.......................................   15      15       5
                                                              ---     ---     ---
                                                               --%     --%     --%
                                                              ===     ===     ===
</TABLE>

NOTE 6 -- MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK:

     As of the closing of the Company's initial public offering, all of the
Preferred Stock outstanding was converted into an aggregate of 15,632,000 shares
of Common Stock at a conversion ratio of one to one.

MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK OPTIONS AND WARRANTS

     In connection with certain financing arrangements, the Company issued
warrants to purchase shares of the Company's Mandatorily Redeemable Convertible
Preferred Stock to a capital lessor and lender. These warrants were immediately
exercisable after issuance. The Company estimated the fair value of the warrants
using the Black-Scholes option pricing model. The Company records the expense
related to the warrants over the life of the associated financing instrument as
additional interest expense. The following table summarizes the outstanding
warrants:

<TABLE>
<CAPTION>
                                      DATE OF                 EXERCISE    ESTIMATED      FISCAL YEAR
                                       GRANT        SHARES     PRICE      FAIR VALUE    OF EXPIRATION
                                   -------------    ------    --------    ----------    -------------
<S>                                <C>              <C>       <C>         <C>           <C>
Series A Preferred Stock
  warrants.......................  December 1995    42,000     $0.67       $10,000          2003
Series B Preferred Stock
  warrants.......................   January 1997    34,999      1.60        25,000          2005
Series B Preferred Stock
  warrants.......................      June 1997    56,250      1.60        53,000          2008
</TABLE>

     These warrants were converted into Common stock warrants on a one-for-one
ratio on October 6, 1999.

     In connection with the acquisition of FirstFloor in August 1998, the
Company exchanged the options granted under the FirstFloor 1993 Stock Option
Plan into options to purchase 47,203 shares of Company's Series D Mandatorily
Redeemable Convertible Preferred Stock. These options had a weighted average
exercise price of $2.63 per share. At October 6, 1999, 24,000 of such options
were outstanding with a weighted average exercise price of $2.57 per share.
These options were converted into Common Stock options on October 6, 1999. The
options expire upon the earlier of the respective employee termination or 10
years from grant date. See Note 3.

NOTE 7 -- COMMON STOCK:

     The Company's Certificate of Incorporation, as amended, authorizes the
Company to issue 150,000,000 shares of $0.001 par value Common Stock.

                                      F-20
<PAGE>   60
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     On October 6, 1999, the Company registered and sold 4,600,000 common shares
in an initial public offering ("IPO") at $14.00 per share, including 600,000
shares sold in connection with the exercise of the underwriters over allotment.
Simultaneously with the closing of the IPO, the Company sold 1,843,200 shares of
common stock in private placements at $13.02 per share. Total net proceeds were
approximately $81,709,000, after underwriting fees of $3,900,000 and $2,200,000
of other estimated offering expenses.

     Certain Common Stock option holders have the right to exercise unvested
options, subject to a repurchase right held by the Company, in the event of
voluntary or involuntary termination of employment of the stockholder. As of
March 31, 2000, approximately 1,160,613 shares of outstanding Common Stock were
subject to repurchase by the Company at their original exercise price. Of the
1,160,613 shares of unvested restricted Common Stock repurchaseable, 1,157,057
are available for reissuance under the 1997 Stock Option Plan.

COMMON STOCK WARRANTS

     In September 1999, in connection with an equipment lease financing
arrangement, the Company issued warrants to purchase 5,263 shares of common
stock to the financier. The fair value of the warrants will be recognized as
interest expense over the life of the associated financing instrument. The
warrants were immediately exercisable after issuance.

     In December 1999 and March 2000, in connection with a sales transaction,
the Company issued warrants to purchase 4,100 and 5,475 shares, respectively, of
common stock to a customer. These warrants were immediately exercisable after
issuance. The fair value of the warrants of $233,000 has been recorded in the
Statement of operations as a reduction in revenue in the year ended March 31,
2000.

     The Company estimated the fair value of the warrants, using the
Black-Scholes option pricing model, at the date of grant and the following
assumptions: Risk free rate of 5.50% - 6.77%, no expected dividends and 50% - 75
% volatility.

<TABLE>
<CAPTION>
                                                                                    ESTIMATED
                                                                                  FISCAL YEAR OF
            DATE OF GRANT               SHARES    EXERCISE PRICE    FAIR VALUE      EXPIRATION
            -------------               ------    --------------    ----------    --------------
<S>                                     <C>       <C>               <C>           <C>
September 1999........................  5,263         $ 9.50         $ 30,000          2002
December 1999.........................  4,100          45.05          118,000          2002
March 2000............................  5,475          31.05          115,000          2003
</TABLE>

     As of March 31, 2000, the Company had reserved shares of Common stock for
future issuance as follows (in thousands):

<TABLE>
<CAPTION>
                                                         MARCH 31, 2000
                                                         --------------
<S>                                                      <C>
Exercise of options under stock option plans...........      11,350
Undesignated...........................................     138,650
</TABLE>

NOTE 8 -- EMPLOYEE BENEFIT PLANS:

401(K) SAVINGS PLAN

     The Company sponsors a 401(k) defined contribution plan covering eligible
employees who elect to participate. The Company may elect to contribute matching
and discretionary contributions to the plan; however, no contributions were made
by the Company since the inception of the plan.

STOCK OPTION PLANS

     In July 1995 and April 1997, the Board of Directors adopted the 1995 Stock
Option Plan and 1997 Stock Option Plan, respectively, (collectively, the
"Plans") which provide for the issuance of incentive and non-

                                      F-21
<PAGE>   61
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

statutory stock options to employees, officers, directors, and consultants of
the Company. The Company has reserved 14,715,000 shares of Common Stock for
issuance under the Plans. The share reserve will automatically be increased on
the first day of each fiscal year beginning on or after April 1, 2001 by an
amount equal to 5% of the number of shares of the Company's Common Stock which
were issued and outstanding on the last day of the preceding fiscal year.

     In March 2000, the Board of Directors adopted the 2000 Non-Statutory Stock
Option Plan, which provides for the issuance of non-statutory stock options to
employees of the Company who are not executive officers or directors. The Plan
provide for 25% acceleration of vesting of any unvested shares upon a Change in
Control. The Board may provide for different acceleration of vesting in
individual agreements. The Company has reserved 3,000,000 shares of Common Stock
for issuance under this plan.

     Options under the Plans are generally for periods not to exceed ten years,
and must be issued at prices not less than 100% and 85%, for incentive and
non-statutory stock options, respectively, of the estimated fair value of the
underlying shares of Common Stock on the date of grant as determined by the
Board of Directors. Options granted to stockholders who own greater than 10% of
the outstanding stock are for periods not to exceed five years, and must be
issued at prices not less than 110% of the estimated fair value of the
underlying shares of Common Stock on the date of grant. The plan provides for
grants of immediately exercisable options, however, the Company has the right to
repurchase any unvested Common Stock upon termination of employment at the
original exercise price. Options become exercisable at such times and under such
conditions as determined by the Board of Directors. Options generally vest over
four years. The Board of Directors has determined that no further options will
be granted under the 1995 Option Plan.

     In December 1998, the Company granted immediately exercisable options to a
charitable organization to purchase 15,000 shares of Common Stock at an exercise
price of $4.50 per share. The Company recorded a charge associated with these
options of $45,000, measured using the Black-Scholes option pricing model, which
is included in the total stock compensation charge for the year ended March 31,
1999.

EMPLOYEE STOCK PURCHASE PLAN

     In Fiscal 2000, the Board of Directors adopted and the stockholders
approved, the 1999 Employee Stock Purchase Plan (the "Purchase Plan"). There are
750,000 shares of Common Stock reserved for issuance under the Purchase Plan, of
which 122,017 were issued on April 30, 2000. Employees generally will be
eligible to participate in the Purchase Plan if they are customarily employed by
the Company for more than 20 hours per week and more than five months in a
fiscal year. Under the Purchase Plan, eligible employees may select a rate of
payroll deduction up to 15% of their compensation, but may not purchase more
than 750 shares on any purchase date or stock having a value measured at the
beginning of the offering period greater than $25,000 in any calendar year. The
first Offering Period commenced on the October 6, 1999, will run for
approximately 24 months and will be divided into four consecutive purchase
periods of approximately six months. Offering Periods and Purchase Periods
thereafter will begin on May 1 and November 1 of each year. The price at which
the Common Stock is purchased under the Purchase Plan is 85% of the lower of the
fair market value of the Company's Common Stock on the first day of the
applicable Offering Period or on the last day of that Purchase Period.

                                      F-22
<PAGE>   62
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following table summarizes stock option activity under the Plans and
non-plan options (shares in thousands):

<TABLE>
<CAPTION>
                                                                     OPTIONS OUTSTANDING
                                                                    ---------------------
                                                        OPTIONS                  WEIGHTED
                                                       AVAILABLE                 AVERAGE
                                                          FOR       NUMBER OF    EXERCISE
                                                         GRANT       OPTIONS      PRICE
                                                       ---------    ---------    --------
<S>                                                    <C>          <C>          <C>
Balance at March 31, 1997............................      594        1,440       $0.09
Additional shares authorized.........................    3,393           --          --
Options granted......................................   (3,847)       3,847        0.41
Repurchase of restricted Common Stock................      303           --        0.07
Options exercised....................................       --       (2,936)       0.24
Options cancelled....................................      411         (411)       0.14
                                                        ------       ------
Balance at March 31, 1998............................      854        1,940        0.49
Additional shares authorized.........................    6,465           --          --
Options granted......................................   (3,688)       3,688        4.59
Repurchase of restricted Common Stock................      466           --        0.23
Options exercised....................................       --       (1,526)       1.19
Options cancelled....................................      605         (605)       0.69
                                                        ------       ------
Balance at March 31, 1999............................    4,702        3,497        4.47
Additional shares authorized.........................    3,268           --          --
Options granted......................................   (3,783)       3,783       11.95
Options assumed in acquisition.......................     (220)         220       19.55
Preferred options converted..........................      (24)          24        2.54
Repurchase of restricted Common Stock................      488           --        0.44
Options exercised....................................       --         (584)       3.26
Options cancelled....................................      651         (651)       7.93
                                                        ------       ------
Balance at March 31, 2000............................    5,082        6,289       $9.28
                                                        ======       ======
</TABLE>

     The following table summarizes the information about stock options
outstanding and exercisable as of March 31, 2000 (shares in thousands):

<TABLE>
<CAPTION>
                                                                          OPTIONS VESTED AND
                                       OPTIONS OUTSTANDING                    EXERCISABLE
                             ---------------------------------------    -----------------------
                                              WEIGHTED
                                              AVERAGE       WEIGHTED                   WEIGHTED
                                             REMAINING      AVERAGE                    AVERAGE
         RANGE OF              NUMBER       CONTRACTUAL     EXERCISE      NUMBER       EXERCISE
      EXERCISE PRICES        OUTSTANDING    LIFE (YEARS)     PRICE      OUTSTANDING     PRICE
      ---------------        -----------    ------------    --------    -----------    --------
<S>                          <C>            <C>             <C>         <C>            <C>
$ 0.07 - $  1.00...........       209           7.3          $ 0.46          132        $ 0.36
  1.06 -    3.17...........     1,098           8.3            2.68          426          2.62
  4.50 -    7.83...........     1,039           8.7            6.48          358          6.29
  9.50 -    9.50...........     2,117           9.1            9.50          135          9.50
 10.45 -   38.97...........     1,618           9.4           12.12           61         25.21
 42.75 -  185.19...........       208           9.6           44.07           31         49.60
                                -----                                      -----
                                6,289           8.9          $ 9.33        1,143        $ 6.80
                                =====                                      =====
</TABLE>

     At March 31, 2000, 1999 and 1998, approximately 1,143,000, 385,000 and
206,000 options were vested and exercisable at a weighted average exercise price
per share of $6.80, $1.80 and $0.13 respectively.

                                      F-23
<PAGE>   63
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

FAIR VALUE DISCLOSURE

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

<TABLE>
<CAPTION>
                                                 STOCK OPTION PLANS          EMPLOYEE STOCK
                                                YEAR ENDED MARCH 31,          PURCHASE PLAN
                                               -----------------------    ---------------------
                                               2000     1999     1998     2000     1999    1998
                                               -----    -----    -----    -----    ----    ----
<S>                                            <C>      <C>      <C>      <C>      <C>     <C>
Stock option plans:
  Dividend yield.............................     --%      --%      --%      --%    --%     --%
  Expected volatility........................     75%      --%      --%      75%    --%     --%
  Average risk free interest rate............   6.33%    4.72%    6.06%    6.33%    --%     --%
  Expected life (in years)...................      4        4        4        2     --      --
  Weighted average fair value of options
     granted.................................  $5.05    $1.22    $0.11    $4.06     $--     $--
</TABLE>

PRO FORMA NET LOSS

     For purposes of proforma disclosures, the estimated fair value of the
options are amortized into expense over the option's vesting period using the
method per FIN 44. Had the Company recorded compensation based on the estimated
grant date fair value, as defined by SFAS No. 123, for awards granted under its
Plans, the Company's net loss would have been increased to the pro forma amounts
below for the fiscal years ended March 31, 2000, 1999 and 1998, respectively,
(in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                           YEAR ENDED MARCH 31,
                                                      -------------------------------
                                                        2000        1999       1998
                                                      --------    --------    -------
                                                                (UNAUDITED)
<S>                                                   <C>         <C>         <C>
Net loss as reported................................  $(27,801)   $(15,261)   $(5,499)
Pro forma net loss..................................   (34,044)    (16,207)    (5,546)
Net loss per share as reported......................     (1.36)      (2.25)     (1.08)
Pro forma net loss per share........................     (1.66)      (2.41)     (1.09)
</TABLE>

     Because additional option grants are expected to be made each year, the
above pro forma disclosures are not representative of the pro forma effects of
option grants on reported net income (loss) for future years.

UNEARNED STOCK-BASED COMPENSATION

     In connection with certain stock option grants during the years ended March
31, 2000, 1999 and 1998, the Company recorded unearned compensation for the
estimated difference between the exercise price of the options and their deemed
fair value totaling $nil, $2,854,000 and $2,746,000, respectively, which is
being amortized over the four year vesting period of the options using the
method per FIN 28. Amortization of unearned compensation totaled $1,551,000,
$2,041,000 and $780,000 for the year ended March 31, 2000, 1999 and 1998,
respectively. The remaining unearned compensation will be amortized as follows:
$834,000 in 2001, $343,000 in 2002 and $51,000 in 2003.

NOTE 9 -- RELATED PARTY TRANSACTIONS:

     In exchange for the issuance of Common Stock upon the exercise of options
in the years ended March 31, 2000 and 1999, the Company received notes
receivable from certain employees of the Company which bear simple interest at
various rates ranging from 5.54% to 6.65% per annum. The notes, which are
collateralized by the underlying shares of Common Stock, are full recourse and
mature on various dates through fiscal 2002.

                                      F-24
<PAGE>   64
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     In March 2000, the Company advanced $450,000 to an employee for a home loan
and received a note receivable which bears simple interest at a rate of 6.45%.
The note, which is secured by all of the employee's assets including vested and
unvested stock options granted to the employee and any proceeds, is due November
30, 2000.

     During fiscal 2000, the Company purchased $545,000 of services from the
firm of a director. At March 31, 2000, $545,000 owing to this firm are included
in accrued liabilities.

NOTE 10 -- COMMITMENTS AND CONTINGENCIES:

CAPITAL LEASES

     In January 1996, the Company entered into a lease financing agreement that
provides for the lease of computers and office equipment up to $400,000
collateralized by the underlying assets. Equipment financed under this agreement
is subject to repayment at various times through October 2000. At March 31,
2000, purchases of computers and office equipment under this agreement totaled
$394,000. At the end of the term, the Company has the options to either: re-new
the lease, buy out the equipment at either the fair market value or at 15% of
the face lease amount, or return the assets to the lessor.

     In September 1998, the Company entered into a lease financing agreement
that provides for the lease of office equipment of $136,000, collateralized by
the underlying assets. Equipment financed under this agreement is subject to
repayment through January 2003.

     In connection with the FirstFloor acquisition, the Company assumed an
equipment financing agreement entered into in March 1997 which provides for the
lease of office equipment of up to $360,000, in one or more leases. Each lease
is repayable over 36 months and is secured by a first priority security interest
in certain assets of the Company. At March 31, 2000, the fair value of office
equipment purchased under this agreement totaled $33,000.

     In connection with the Connect acquisition, the Company assumed an
equipment financing agreement entered into in January 2000 which provides for
the lease of office equipment of up to $230,000, in one or more leases. Each
lease is repayable over 36 months and is secured by a first priority security
interest in certain assets of the Company. At March 31, 2000, the fair value of
office equipment purchased under this agreement totaled $192,000.

OPERATING LEASES

     The Company leases office space and equipment under certain non-cancelable
operating leases expiring through the year 2005. Total rent expense was
$1,437,000, $1,141,000 and $580,000 for the years ended March 31, 2000, 1999 and
1998, respectively.

     In August 1998, the Company relocated its headquarters to a new leased
facility. As a result, the Company recorded a charge, classified in general and
administrative expense, of approximately $660,000 for the minimum lease payments
committed under the previous leased facility and losses of certain fixed assets.
At March 31, 2000, there was approximately $115,000 of minimum lease payments
remaining. The facility is not occupied or subleased.

     In September 1999, as a part of an approved plan, the Company expanded its
corporate headquarters facilities in the same location and entered into a new
five year (sixty months) lease agreement. At March 31, 2000, there was
approximately $9,760,000 of minimum lease payments remaining associated with
this lease agreement.

                                      F-25
<PAGE>   65
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

LETTER OF CREDIT

     At March 31, 2000, the Company maintained an $800,000 letter of credit to
secure the lease deposit on its corporate headquarters. Of this letter of credit
$200,000 expires on each year starting from September 2000.

     Future minimum payments under non-cancelable operating and capital leases
at March 31, 2000 are as follows (in thousands):

<TABLE>
<CAPTION>
                                                              CAPITAL
                   YEAR ENDING MARCH 31,                      LEASES     OPERATING
                   ---------------------                      -------    ---------
<S>                                                           <C>        <C>
2001........................................................   $ 269      $ 2,942
2002........................................................     124        2,593
2003........................................................      30        2,464
2004........................................................      --        2,296
2005........................................................      --          962
                                                               -----      -------
          Total minimum lease obligations...................     423      $11,257
                                                                          =======
Less: Amount representing interest..........................     (42)
                                                               -----
Present value of minimum lease obligations..................     381
Less: Current portion.......................................    (275)
                                                               -----
Capital lease obligations, non-current......................   $ 106
                                                               =====
</TABLE>

CONTINGENCIES

     From time to time, in the normal course of business, various claims are
made against the Company. In the opinion of management, based on consultation
with legal counsel, there are no pending claims for which the outcome is
expected to result in a material adverse effect on the financial position or
results of operations of the Company.

NOTE 11 -- INFORMATION CONCERNING BUSINESS SEGMENTS:

     The Company operates in one single industry segment. The Company does not
have separate operating segments for which discrete financial statements are
prepared. The Company's management makes operating decisions and assesses
performance primarily based upon product revenues and related gross margins.

     The majority of the Company's sales to other foreign countries are
originated in the United States and therefore represent export sales. The
following is a breakdown of revenues by shipment destination and customer
location for services for the years ended March 31, 2000, 1999 and 1998,
respectively (in thousands):

<TABLE>
<CAPTION>
                                                            YEAR ENDED MARCH 31,
                                                        -----------------------------
                                                         2000       1999       1998
                                                        -------    -------    -------
<S>                                                     <C>        <C>        <C>
United States.........................................  $31,155    $20,108    $11,827
European countries....................................    3,594      1,276         32
Other foreign countries...............................      875         29         --
                                                        -------    -------    -------
                                                        $35,624    $21,413    $11,859
                                                        =======    =======    =======
</TABLE>

                                      F-26
<PAGE>   66
                             CALICO COMMERCE, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following table sets forth customers comprising 10% or more of the
Company's net revenue for each of the periods indicated:

<TABLE>
<CAPTION>
                                                  YEAR ENDED MARCH 31,
                                                  --------------------
                    CUSTOMER                      2000    1999    1998
                    --------                      ----    ----    ----
<S>                                               <C>     <C>     <C>
A...............................................   17%     --%     --%
B...............................................   14      --      --
C...............................................   --      22      --
D...............................................   --      13      --
E...............................................   --      --      11
</TABLE>

                                      F-27