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UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, DC 20549




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Form 10-K

|  |  |                                                                                           
|- |  | ------------------------------------------------------------------------------------------
|x |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
	15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934    
| 
|  |  | For the fiscal year ended March 31,
	2002                                                 
| 
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
	15(d)
	OF THE SECURITIES EXCHANGE ACT OF 1934
| 
|  |  | For the transition period
	from           to                                              

000-27431

(Commission File No.)




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CALICO COMMERCE, INC.

(Exact name of Registrant as specified in its
charter)


|                                                                |  |                                      
|--------------------------------------------------------------- |  | -------------------------------------
|Delaware                                                        |  | 77-0373344                           
|(State or other jurisdiction of
	incorporation or organization) |  | (I.R.S. Employer
	Identification No.)

333 West San Carlos Street,
Suite 1080

San Jose, California 95110


(Address of principal executive offices) (Zip
Code)


Registrants telephone number, including
area code:

408-975-7400




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Securities registered pursuant to
Section 12(b) of the Act:

None


Securities registered pursuant to
section 12(g) of the Act:

Common Stock, $.001 par value


(title of class)




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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 þ          No o

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

As of March 28, 2002, the aggregate market
value of the voting stock held by non-affiliates of the
registrant was approximately $8,972,617 based on the closing
sales price of such stock as reported on the Over the Counter
Bulletin Board on such date of $0.32 per share. Shares of Common
Stock held by officers, directors and holders of more than ten
percent of the outstanding Common Stock have been excluded from
this calculation because such persons may be deemed to be
affiliates. The determination of affiliate status is not
necessarily a conclusive determination for other purposes.

As of March 28, 2002, there were 35,868,280
shares of the registrants Common Stock, $.001 par value,
issued and outstanding.



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TABLE OF CONTENTS



|                              |                                                                                                         |  |  |  |  |  |  | 
|----------------------------- | ------------------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                       
|                              | Item 1. Business                                                                                       
|                              | Item 2. Properties                                                                                     
|                              | Item 3. Legal Proceedings                                                                              
|                              | Item 4. Submission of Matters to a Vote of Security Holders                                            
|PART II                      
|                              | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                          
|                              | Item 6. Selected Financial Data                                                                        
|                              | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations          
|                              | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                                    
|                              | Item 8. Financial Statements and Supplementary Data                                                    
|                              | Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure           
|PART III                     
|                              | Item 10. Directors and Executive Officers of the Registrant                                            
|                              | Item 11. Executive Compensation                                                                        
|                              | Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|                              | Item 13. Certain Relationships and Related Transactions                                                
|                              | Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                              
|SIGNATURES                   
|INDEX TO FINANCIAL STATEMENTS
|EXHIBIT 21.1                 



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##### Table of Contents



INDEX TO ANNUAL REPORT ON
FORM 10-K

For the Fiscal Year Ended March 31,
2002


|           |  |                                                                                        |    |      |    | 
|---------- |  | -------------------------------------------------------------------------------------- | -- | ---- | -- | 
|           |  |                                                                                        |    | Page
|           |  |                                                                                        |    |     
|PART I    
|Item 1.    |  | Business                                                                               |    |      | 1  | 
|Item 2.    |  | Properties                                                                             |    |      | 5  | 
|Item 3.    |  | Legal Proceedings                                                                      |    |      | 6  | 
|Item 4.    |  | Submission of Matters to a Vote of Security
	Holders                                   |    |      | 7  | 
|PART II   
|Item 5.    |  | Market for Registrants Common Stock and
	Related Stockholder Matters                  |    |      | 7  | 
|Item 6.    |  | Selected Financial Data                                                                |    |      | 8  | 
|Item 7.    |  | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |    |      | 9  | 
|Item 7A.   |  | Quantitative and Qualitative Disclosures about
	Market Risk                            |    |      | 31 | 
|Item 8.    |  | Financial Statements and Supplementary Data                                            |    |      | 32 | 
|Item 9.    |  | Changes in and Disagreements with Accountants on
	Accounting and Financial Disclosure  |    |      | 34 | 
|PART III  
|Item 10.   |  | Directors and Executive Officers of the Registrant                                     |    |      | 34 | 
|Item 11.   |  | Executive Compensation                                                                 |    |      | 36 | 
|Item 12.   |  | Security Ownership of Certain Beneficial Owners
	and Management                        |    |      | 38 | 
|Item 13.   |  | Certain Relationships and Related Transactions                                         |    |      | 40 | 
|PART IV   
|Item 14.   |  | Exhibits, Financial Statement Schedules and
	Reports on Form 8-K                       |    |      | 42 | 
|Signatures |  |                                                                                        | 46 |     

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PART I

The information in this report contains
forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as
amended. We use words like may, will,
should, estimates, predicts,
potential, continue,
strategy, believes,
anticipates, plans, expects,
intends, and similar expressions to identify these
forward-looking statements. We have based these statements on
our current expectations and projections about future events.
Statements concerning our financial position, strategy and plans
or objectives for administration of our bankruptcy estate and
promulgation and confirmation of our plan of reorganization
include forward-looking statements. Our actual results and the
result and timing of future events may differ materially from
the results discussed in the forward-looking statement due to
many factors, including those discussed below in Factors
That Could Affect Our Future Performance. The
forward-looking statements in this report speak only as of the
time they are made and do not necessarily reflect our outlook at
any other time. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of
new information or future events. However, readers should
carefully review the information included in other reports or
documents we file from time to time with the Securities and
Exchange Commission.




Item
1.     Business

Overview

Calico has historically provided interactive
selling software that enabled our customers to sell broad and
complex product offerings through their different sales channels
as well as direct to customers over the Internet. Our products
were Java and standards-based, and contained advanced
configuration, recommendation and pricing technology that
allowed our customers to interact directly with users to create
a web-based, guided selling experience. Although applicable to a
wide range of industries and markets, we historically focused on
the telecommunications, financial services, retail, computer
hardware and manufacturing industries.

On December 12, 2001, we executed an asset
purchase agreement with PeopleSoft, Inc.
(PeopleSoft), a Delaware corporation, providing for
the sale to PeopleSoft of our intellectual property and
substantially all of our operating assets for total
consideration of $5.0 million. Pursuant to the terms of the
asset purchase agreement, on December 14, 2001, we filed a
voluntary petition for relief under Chapter 11 of the
United States Bankruptcy Code in the United States Bankruptcy
Court for the Northern District of California, San Jose
Division, under Case No. 01-56101. On January 25,
2002, the U.S. Bankruptcy Court approved the sale to PeopleSoft,
and the sale closed on February 6, 2002. At the closing, we
transferred the purchased assets to PeopleSoft and PeopleSoft
paid $4.5 million to Calico. The remaining $500,000 of the
purchase price will be held in escrow for six months following
the closing date to satisfy any potential claims that PeopleSoft
may make under the asset purchase agreement.

Previously, on March 20, 2001, we sold the
assets of ConnectInc.com, our wholly-owned subsidiary,
consisting of ConnectInc.coms Market Stream product line
(which we had renamed MarketMaker) together with related
intellectual property rights, to Digital River, Inc.

We are currently operating as
debtor-in-possession in accordance with the applicable
provisions of Chapter 11 of the U.S. Bankruptcy Code.
However, as a result of the sales to PeopleSoft and Digital
River, we have few operating assets, are no longer generating
license revenue, and will not continue to sell any products.
Although our filing under Chapter 11 does not include any
of our subsidiaries (only the net realizable value of
investments held by Calico in our subsidiaries are included as
assets in our Chapter 11 case), we expect to windup,
dissolve, or liquidate all of our subsidiaries. In addition,
prior to filing for protection under Chapter 11,
ConnectInc.com, Inc. and FirstFloor Software, Inc., two of our
domestic subsidiaries, were merged into Calico Commerce, Inc.
and no longer exist as separate entities.

References in this annual report to
Calico, we, our, and
us collectively refer to Calico Commerce, Inc., a
Delaware corporation, its subsidiaries and its California
predecessor, Calico Technology,

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Inc. Our principal executive offices are located
at 333 West San Carlos Street, Suite 1080, San Jose, California
95110, and our telephone number at that address is
(408) 975-7400.


Products

Prior to the sales of our intellectual property
to PeopleSoft and Digital River, we provided an eBusiness
application suite that enabled our customers to sell broad or
complex products and service offerings over the Internet and
across their other existing sales channels, including direct
interaction with customers over the Internet, through sales
representatives or existing reseller and distributor channels,
or to customers within a marketplace serving multiple buyers and
suppliers. Our products enabled our clients to provide their
customers with the ability to create aspects of person-to-person
selling in an online environment, matching the customer needs
with the clients products. Our applications could be
implemented individually or as part of the suite, depending on
customer preference.

Historically, our suite of products included:

Calico Advisor.Calico Advisor was our configuration
and recommendation application that emulated an experienced
sales representative by dynamically analyzing customer needs,
and configuring, recommending, pricing, cross-selling and
up-selling complex products and services. Our technology enabled
users to evaluate alternatives on price, performance or other
attributes, while concurrently determining that the configured
product or service meets business or legal constraints set by
the vendor. It also included the quoting and information
delivery functionality previously offered separately by Calico
through our Quote and InfoGuide applications, which we
previously discontinued selling as separate products. Calico
Advisors quoting functionality provided customized sales
quotations to customers for selected products and its
information delivery functionality provided targeted marketing
content, such as brochures, product data sheets, product reviews
and competitive comparisons, directly to customers during the
online buying process.

Calico Network Advisor.Calico Network Advisor was our Java
application that guided users through the online customization
of networked communication services, thereby simplifying and
accelerating the sales process. Specifically designed for the
communication services industry, Network Advisor was optimized
for selling voice and data networks. A broad array of services
was represented, from simpler products such as wireless and DSL,
to the most complex solutions such as ATM/ Frame Relay and IP
VPN.

MarketMaker.Calico
MarketMaker was designed to be a business-to-business platform
for digital marketplaces serving multiple buyers and multiple
suppliers.

Price Point.Calico
Price Point was a web-based dynamic pricing solution that
enabled customers to create and deploy contracted, targeted and
promotional pricing information across all sales channels.

Loyalty Builder.Calico Loyalty Builder was designed to
provide customers with profiling technology for personalized
buying over the Internet.

We sold our MarketMaker product to Digital River
in March 2001. At that time, we also discontinued directly
selling our Price Point and Loyalty Builder products. In
February 2002, we sold our Advisor and Network Advisor products
to PeopleSoft, along with associated intellectual property
pertaining to Price Point and Loyalty Builder. However, under
the terms of our agreement with Digital River, Digital River may
continue to resell our Advisor and Price Point products in a
hosted environment worldwide. We intend to reject our agreement
with Digital River pursuant to Section 365(a) of the
Bankruptcy Code.

Professional Services

Prior to the sale to PeopleSoft, we offered a
range of professional and support services to our customers in
connection with the design and implementation of our products.
We analyzed customer requirements and then defined and created
sample customer implementations that capture and model the
business logic and policies that reflected the customers
marketing and selling practices. We also relied on the services
of third-party systems integrators and professional services
organizations to aid in the implementation and deployment of our
products.

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As we are no longer selling products, we no
longer offer professional services, have eliminated our
professional services organization, and terminated our
relationships with third-party systems integrators and
professional services organizations.

Maintenance and Customer Service

We are no longer offering maintenance or support
of our products; however, in connection with the sale of our
assets and intellectual property to PeopleSoft, PeopleSoft has
agreed to support the most recent releases of our products for
up to one year for the contracts and customers transferred to
PeopleSoft. This will provide these former customers with
support for the period and support level for which they
originally contracted with us.

Sales and Marketing

As a result of the sale of our assets and
intellectual property to PeopleSoft, we are no longer marketing
or selling our products and have closed our sales and marketing
offices, including our regional sales and service offices in
North America, Europe and Japan. Consequently, none of our
employees are engaged in sales and marketing activities.

Prior to the sale to PeopleSoft, as part of our
cost-cutting measures, we decreased our emphasis on
international sales and marketing, other than in Japan and the
U.K., and closed a number of our foreign sales offices. As of
the filing of our bankruptcy proceeding, the only international
offices we continued to operate were in Japan and the U.K. Sales
to Japanese customers represented 57% of our license revenue for
the year ended March 31, 2002, and 95% of our license
revenue for the six months ended March 31, 2002.

Strategic Alliances

Our strategic alliances were focused on
relationships with systems integrators and professional services
organizations. In addition, we also maintained marketing,
implementation and resale alliances with enterprise application
vendors and other software vendors that were intended to
increase our geographic sales coverage and address new vertical
markets and market segments. We are no longer engaged in any
direct marketing initiatives with such alliances and did not
generate significant revenue from these alliances in the past
fiscal year.

Customers

Historically, we concentrated sales to customers
in the telecommunications services, computer and electronic
hardware and network and telecommunications equipment
industries. Although in fiscal 2002 no single customer
represented more than 10% of our total net revenue, a
substantial portion of our revenue has been generated from a
limited number of customers. In fiscal 2002, 19 of our largest
customers accounted for 80% of our total revenue, net of
reimbursable out-of-pocket expenses and 7 of our largest
customers accounted for over 50% of our total revenue, net of
reimbursable out-of-pocket expenses. In fiscal 2002 we generated
revenue from 52 customers, down from 111 customers in fiscal
2001.

Technology

All of our applications were moved to the Java 2
Enterprise Edition platform, and BEA WebLogic was adopted as our
application server, in the prior two years. Our technology
comprised expert systems using artificial intelligence, and in
addition to the J2EE standards, used eXtensible Markup Language
(XML), a data-driven model and Internet-standard security
protocols.

The architecture of the Calico Suite comprised
several layers, including various front-end client interfaces,
the Web server, the Calico Server (built on BEAs WebLogic
Server), the data repository, custom-developed enterprise
connectors and industry-standard Java application programming
interfaces. The solution accommodated an open development
framework, a streamlined data maintenance environment,
data-independent rules builder tools in the development
environment and multiple industry-standard Web

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developer tools. Our Lightning
ArchitectureTM was the Java, standards-based system
framework for our suite. The Calico Lightning Architecture
included encryption technology supplied with BEAs WebLogic
Server, to enable secure online communications, and supported
all common relational database management systems, and load
balancing, clustering and automatic fail-over.


Our user-guided behavior technology
was based upon expert systems that provided the ability to match
user requirements with specific product and service offerings,
subject to a number of constraints, and allowed data to be
entered in tabular form for concise expression of relationships
between data. Applications that were constructed from the models
created with the Calico Visual Modeler required only constraints
and product content information. The user interface information
was defined separately using industry-standard tools such as
Macromedia Dreamweaver. Models could be loaded into an
application running standalone or in a multi-user setting,
allowing the same application to be targeted to run on laptops,
desktops and the Internet.

Research and Development

Our research and development expenses were
$5.9 million in fiscal 2002, $22.9 million in fiscal
2001 and $15.7 million in fiscal 2000. We do not intend to
continue future investment in research and development, and as
of March 31, 2002, none of our employees were engaged in
research and development activities.

Proprietary Rights

We sold our remaining intellectual property to
PeopleSoft and transferred all proprietary rights to such
intellectual property, including two U.S. patents, one of which
is related to monitoring and notification technology and the
other of which is related to certain aspects of our user-guided
product configuration technology, and additional patent
applications in the United States and three foreign
jurisdictions. We have also sold our remaining trademarks, trade
names and copyrights to PeopleSoft. However, PeopleSoft has
agreed to license to us the use of the name Calico
through December 1, 2002. Thereafter, we will change our
name and will no longer use the name Calico.

Competition

We do not intend to continue selling products and
are prohibited by the terms of the asset purchase agreement with
PeopleSoft from competing with PeopleSofts business,
including our former products. Accordingly, we are no longer
competing in any market.

In the periods prior to our sale to PeopleSoft,
competition in our market continued to persist and intensify,
with competition coming largely from vendors of enterprise class
application software, as well as point-solution, configuration
competitors, all of which offered integrated solutions for
electronic commerce incorporating some of the functionality that
we offered.

International Operations

Prior to the sale to PeopleSoft, as part of our
cost-cutting measures, we decreased our emphasis on
international sales and marketing, and other than in Japan and
the U.K., closed a number of our foreign sales offices. As of
the filing of our bankruptcy proceeding, the only international
offices we continued to operate were in Japan and the U.K. As a
result of the sale of our assets and intellectual property to
PeopleSoft, we are no longer marketing or selling our products
and, thus, have closed our offices in Japan and the U.K.

Employees

As of March 31, 2002, we had 3 employees,
all of which were engaged in concluding the bankruptcy
proceedings and other administrative matters.

As of May 31, 2001, we had 172 employees, of
which 58 were engaged in product development, engineering or
systems engineering, 56 were engaged in sales and marketing, 38
in professional services and 20 in general and administrative
services. During the course of fiscal 2002, we restructured our
organization several times in response to market conditions and
closed all of our international and regional offices. Prior to

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our bankruptcy filing, our headcount had been
reduced by approximately 118 employees to 54 employees. In
connection with the sale to PeopleSoft, approximately 40 of our
then remaining employees became employees of PeopleSoft. Since
our bankruptcy filing, we further reduced headcount by
approximately 11 employees. We will adjust our workforce as
appropriate going forward consistent with administration of our
Chapter 11 proceedings and proposal and confirmation of our
plan of reorganization.


In July 2001, we entered into an agreement with
Regent Pacific Management Corporation to provide personnel to
fill our senior management positions, including that of our
chief executive officer. The agreement has been extended to and
may be canceled at any time, subject to notice, after May 2002.
We entered into an agreement with David Powell, Inc. in March
2001 to provide the services of a chief financial officer, which
has been extended through April 30, 2002. See Item 13
Certain Relationships and Related Transactions for a
description of the terms of each of these arrangements.

During fiscal 2002, we implemented several
restructurings and reductions in force. As part of our July
restructuring activities, we made preliminary commitments to our
then current employees in regards to retention incentives to be
payable the earlier of January 31, 2002 or the occurrence
of a change in our ownership or a substantial portion of our
ownership, a further workforce reduction, a dissolution,
reorganization or restructuring. In accordance with the
retention plan, as a consequence of our voluntary petition for
reorganization under Chapter 11 this commitment was paid in
cash prior to the bankruptcy filing, and totaled approximately
$865,000.

As a result of our December restructuring
activities, we committed a further $175,000 to an employee
retention and severance program applicable to all remaining
employees in good standing who were not transferred to
PeopleSoft as part of our sale of assets to PeopleSoft in
February 2002. These remaining employees were eligible to
receive a pre-defined retention payment in the quarter ending
March 31, 2002; as a result, we have paid approximately
$140,000 as of March 31, 2002. The remainder will be paid
in cash during the quarter ending June 30, 2002.

In connection with the sale of assets to
PeopleSoft, we established a retention program in the aggregate
amount of $160,000, payable equally to 8 key employees, provided
that they remain in PeopleSofts employ for six months
after the closing of the sale of assets to PeopleSoft. This
retention was provided for in the quarter ending March 31,
2002 and is expected to be paid by August 31, 2002.

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




Item
2.     Properties

Our headquarters facility is located in San Jose,
California. We lease approximately 41,000 square feet for our
corporate headquarters, of which we are only occupying 1,874
square feet. This lease expires in October 2004. We have
rejected this lease under the provisions of the Bankruptcy Code
but are leasing the smaller space pursuant to a stipulation with
the landlord. We have accrued approximately $2.4 million,
not previously accrued under a restructuring plan, as the
estimated maximum allowable damages claim of the landlord in our
bankruptcy proceeding as a result of our rejection of this
lease. We also have leases of office space in Boston,
Massachusetts and Atlanta, Georgia under leases with terms
expiring through December 2005, none of which we are currently
occupying. We have rejected the Boston and Atlanta leases under
the provisions of the Bankruptcy Code, and have accrued
approximately $230,000 as the estimated aggregate allowable
damages claims of the landlords in our bankruptcy proceeding as
a result of our rejection of these leases. We also lease an
additional 31,000 square feet of office space in San Jose,
California and Chicago, Illinois, almost all of which we have
sublet to unrelated third parties. We intend to assign the
sublease for the Chicago lease to the landlord. We believe that
our current facilities will be adequate to meet our needs for
the foreseeable future.

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Item 3.     Legal
Proceedings

On December 14, 2001 we filed a voluntary
petition for reorganization relief under Chapter 11 of the
U.S. Bankruptcy Code in the United States Bankruptcy Court for
the Northern District of California under Case No. 01-56101 and
an order for relief was entered by the Bankruptcy Court. The
filing is intended to allow us to remain in possession of our
remaining assets and properties, and our existing directors and
officers will continue to oversee operation of our business as a
debtor-in-possession, subject to supervision and orders of the
Bankruptcy Court of matters outside the ordinary course of
business. As a result of the Chapter 11 filing, claims
against us are subject to an automatic stay. No creditors
committee has been formed in the case by the Office of the
United States Trustee based on its view that, as creditors
claims will likely be paid in full, a committee of equity
security holders is more appropriate. On January 15, 2002
the U.S. Trustee appointed a three-member committee to represent
the interests of our equity holders. As of March 8, 2002,
there were four members on the Equity Committee. On
December 28, 2001 we filed with the United States
Bankruptcy Court a schedule of our assets, liabilities, income,
expenditures, and lists of our executory contracts, and
unexpired leases, all as required by Bankruptcy
Rule 1007(b). A list of the Debtors equity security
holders was filed with the Bankruptcy Court on December 14,
2001. Certain of the Debtors schedules were amended on
April 11, 2002 to include several unsecured claims not
included in the original filing, and to remove the listing of
several expired contracts or leases, and to add several
contracts or leases.

On or around March 27, 2001, a class action
lawsuit was filed on behalf of all holders of our securities in
the Southern District of New York against Calico, our former
chief executive officer Alan P. Naumann, directors William D.
Unger and Bernard J. Lacroute, and former director William G.
Paseman, SDR Investors, LP v. Calico Commerce, Inc. et
al., 01CIV 2601. Plaintiffs allege, among other things, that
the investment banks which underwrote our initial public
offering of securities, and others, received commissions and
made agreements which were not disclosed, but should have been
disclosed in the initial public offering prospectus, and which
affected the price of our securities. Plaintiffs attempt to
state claims under Sections 11, 12 and 15 of the Securities
Act of 1933, and under Section 10(b) and 20(a) of the
Securities Exchange Act of 1934, and Rule 10b-5 promulgated
by the Securities Exchange Commission. Other class action
lawsuits on behalf of essentially the same putative class,
making substantially the same allegations and making some or all
of the same claims, have been filed in the same jurisdiction by
different lawyers. Several of these lawsuits also name our
former chief financial officer Arthur F. Knapp, Jr. All of the
Calico actions have been consolidated for pre-trial purposes
before Judge Shira A. Scheindlin, United States District Judge
for the Southern District of New York, together with more than
one thousand actions making virtually identical allegations
against the same and additional investment banks, approximately
310 other issuers of securities which conducted initial public
offerings in 1998-2000, and numerous individuals associated with
such issuers. The consolidated litigation is known as the
Initial Public Offering Securities Litigation (the
IPO Litigation). No specific amount of damages is
specified in the Complaint against the Calico defendants in the
IPO Litigation, and no time has been set for the Calico
defendants to respond to the complaints. On or around
April 4, 2002, the lead plaintiffs in the Calico IPO
Litigation filed a proof of claim in Calicos bankruptcy
proceeding, stating a claim in excess of $62 million. On
April 17, 2002, plaintiffs filed a further amended,
consolidated class action regarding Calico in the IPO
Litigation. While the complaint names the Calico individual
defendants, it does not name Calico as a defendant. We believe
that the allegations against the Calico defendants in the
litigation are without merit, and intend to vigorously defend
the litigation in both the civil and bankruptcy actions.

On June 16, 2000, we demanded that
BigMachines.com make payments due under its March 2000 license
and service agreements between us and BigMachines.com, and cease
and desist from improperly using our name and trademarks. We
claim that $1,030,315 is due under the license and service
agreements, including late fees, and seek an unknown amount in
damages from improper use of our name and marks. BigMachines.com
has denied that amounts are due to us. On September 12,
2001 we and BigMachines unsuccessfully participated in a
mediation. We are informed that on June 27, 2001
BigMachines filed an action against us in the Superior Court of
San Mateo County alleging causes of action for fraud,
rescission, negligent misrepresentation, and breach of contract.
We were not served with this summons or complaint in this action
prior to the filing of our petition pursuant to Chapter 11
of the bankruptcy code. On March 4, 2002 we filed and
served a Complaint in the United States Bankruptcy Court as
Adversary Proceeding Number

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02-5064. On April 8, 2002 we were served
with BigMachines Answer and Counterclaim for Rescission,
Fraud, Negligent Misrepresentation and Breach of Contract. We
intend to aggressively prosecute our affirmative claims against
BigMachines, and will vigorously defend against those claims
made by BigMachines against us.


We have also initiated litigation against a
former Calico employee by the name of Stephen Leahy. On
March 2, 2000 we issued a loan of $450,000 to Mr. Leahy.
Pursuant to a promissory note and security agreement executed
contemporaneously with the loan, the repayment on the loan was
to occur on or before November 30, 2000. Mr. Leahy
ceased employment thereafter, and we have not received repayment
on the outstanding loan. On or about March 15, 2002 we
filed and served a complaint in the Bankruptcy Court as
Adversary Proceeding No. 02-5111 against Mr. and
Mrs. Leahy. Mr. and Mrs. Leahy have not served an
answer to this proceeding. We intend to aggressively pursue our
claim against Mr. and Mrs. Leahy as well as their assets.




Item
4.     Submission of Matters to a
Vote of Security Holders

No matters were submitted to a vote of security
holders, through the solicitation of proxies or otherwise,
during the fourth quarter of the fiscal year covered by this
report.




PART II






|        |                                                                       
|------- | ----------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
	and Related Stockholder Matters

Our Common Stock is quoted on the Nasdaq
Over-the-Counter Bulletin Board quotation service. Prior to
July 17, 2001, our Common Stock was traded on the Nasdaq
National Market. Public trading of our Common Stock commenced on
October 7, 1999. Prior to that date, there was no public
market for our Common Stock. The following table sets forth, for
the periods indicated, the high and low closing sales prices per
share of our Common Stock as reported on the applicable
exchange, during each quarter the stock has been publicly traded.

|                          |  |      |       |     |  |   |       | 
|------------------------- |  | ---- | ----- | --- |  | - | ----- | 
|                          |  | High |       | Low
|                          |  |      |       |    
|Year Ended March 31, 2002 |  |      |       |     |  |   |       | 
|First Quarter             |  | $    | 0.57  |     |  | $ | 0.19  | 
|Second Quarter            |  | $    | 0.25  |     |  | $ | 0.05  | 
|Third Quarter             |  | $    | 0.23  |     |  | $ | 0.06  | 
|Fourth Quarter            |  | $    | 0.36  |     |  | $ | 0.17  | 
|Year Ended March 31, 2001 |  |      |       |     |  |   |       | 
|First Quarter             |  | $    | 31.31 |     |  | $ | 12.25 | 
|Second Quarter            |  | $    | 17.75 |     |  | $ | 5.81  | 
|Third Quarter             |  | $    | 6.13  |     |  | $ | 0.59  | 
|Fourth Quarter            |  | $    | 2.53  |     |  | $ | 0.30  | 
|Year Ended March 31, 2000 |  |      |       |     |  |   |       | 
|Third Quarter             |  | $    | 75.00 |     |  | $ | 40.00 | 
|Fourth Quarter            |  | $    | 58.88 |     |  | $ | 30.00 | 

As of March 28, 2002, there were
approximately 453 holders of record of our Common Stock. This
number does not include stockholders whose shares are held in
trust by other entities. We believe that the actual number of
stockholders is greater than this number of holders of record.

We have not yet proposed our plan of
reorganization, and it is uncertain at this time what will be
the effect of the plan on our creditors and stockholders. We do
not know if the plan will provide for payment of the whole or
part of the claims of our creditors, nor whether there will be a
distribution to stockholders. Due to the existence of contingent
claims, such as the securities class action lawsuit filed
against us, we may not be able to make a full distribution for
some time, even if a distribution is made at all. We also may
propose in the plan

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a further sale of the company to an unrelated
third party, which could result in our stockholders becoming
stockholders in the combined entity, or we may propose the
liquidation and dissolution of the Company. Consequently, we may
be unable to develop, prosecute, confirm and consummate a plan
of reorganization, repay our creditors, make any distributions
to stockholders or reorganize by merging our company with an
existing business.


During the year ended March 31, 2002, we
issued an aggregate of 544,595 shares of our Common Stock upon
the exercise of outstanding options to purchase our Common
Stock. A portion of those shares were issued pursuant to an
exemption by reason of Rule 701 under the Securities Act of
1933.




Item
6.     Selected Financial
Data

You should read the following selected financial
data in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and our financial statements and related notes included
elsewhere in this report. The consolidated statement of
operations data set forth below for the years ended
March 31, 2002, 2001 and 2000 and the balance sheet data as
of March 31, 2002 and 2001 are derived from, and are
qualified by reference to, our audited consolidated financial
statements included elsewhere in this report. The statement of
operations data set forth below for the years ended
March 31, 1999 and 1998 and the balance sheet data as of
March 31, 2000, 1999 and 1998 are derived from audited
consolidated financial statements not included in this report.
Historical results are not necessarily indicative of results to
be expected in any future period.

Consolidated Selected Financial Data

|                                            |                         |                                       |         |        |   |      |          |        |   |      |         |        |   |   |         |       |   |   |        |       |  
|------------------------------------------- | ----------------------- | ------------------------------------- | ------- | ------ | - | ---- | -------- | ------ | - | ---- | ------- | ------ | - | - | ------- | ----- | - | - | ------ | ----- | -
|                                            |                         |                                      
|                                            |                         | Year Ended March 31,                 
|                                            |                         |                                      
|                                            |                         | 2002                                  |         | 2001   |   | 2000 |          | 1999   |   | 1998
|                                            |                         |                                       |         |        |   |      |          |        |   |     
|                                            |                         |                                      
|                                            |                         | (In thousands, except per share data)
|Consolidated Statement of Operations
	Data: |                         |                                       |         |        |   |      |          |        |   |      |         |        |   |   |         |       |   |   |        |      
|Total net revenue                           |                         | $                                     | 5,596   |        |   | $    | 31,249   |        |   | $    | 37,008  |        |   | $ | 22,018  |       |   | $ | 11,859 |      
|Gross profit                                |                         |                                       | 2,379   |        |   |      | 8,113    |        |   |      | 20,028  |        |   |   | 12,471  |       |   |   | 8,479  |      
|Loss from operations                        |                         |                                       | (17,544 | )      |   |      | (142,969 | )      |   |      | (30,163 | )      |   |   | (15,238 | )     |   |   | (5,458 | )    
|Net loss                                    |                         |                                       | (3,918  | )      |   |      | (141,329 | )      |   |      | (27,801 | )      |   |   | (15,261 | )     |   |   | (5,499 | )    
|Net loss per share:                         |                         |                                       |         |        |   |      |          |        |   |      |         |        |   |   |         |       |   |   |        |      
|                                            | Basic and diluted       |                                       | $       | (0.11  | ) |      | $        | (4.09  | ) |      | $       | (1.36  | ) |   | $       | (2.25 | ) |   | $      | (1.08 | )
|                                            | Weighted average shares |                                       |         | 35,327 |   |      |          | 34,525 |   |      |         | 20,450 |   |   |         | 6,775 |   |   |        | 5,075 |  

|                                                          |  |                                       |        |      |  |      |        |      |  |      |         |  |  |   |         |   |  |   |         |  
|--------------------------------------------------------- |  | ------------------------------------- | ------ | ---- |  | ---- | ------ | ---- |  | ---- | ------- |  |  | - | ------- | - |  | - | ------- | -
|                                                          |  |                                      
|                                                          |  | March 31,                            
|                                                          |  |                                      
|                                                          |  | 2002                                  |        | 2001 |  | 2000 |        | 1999 |  | 1998
|                                                          |  |                                       |        |      |  |      |        |      |  |     
|                                                          |  |                                      
|                                                          |  | (In thousands, except per share data)
|Consolidated Balance Sheet Data:                          |  |                                       |        |      |  |      |        |      |  |      |         |  |  |   |         |   |  |   |         |  
|Cash and cash equivalents                                 |  | $                                     | 26,536 |      |  | $    | 8,354  |      |  | $    | 25,917  |  |  | $ | 15,441  |   |  | $ | 2,514   |  
|Working capital                                           |  |                                       | 28,146 |      |  |      | 21,225 |      |  |      | 66,112  |  |  |   | 10,187  |   |  |   | 44      |  
|Total assets                                              |  |                                       | 30,575 |      |  |      | 44,730 |      |  |      | 188,660 |  |  |   | 31,368  |   |  |   | 7,692   |  
|Debt and capital leases, long term portion                |  |                                       |       |      |  |      | 32     |      |  |      | 1,519   |  |  |   | 877     |   |  |   | 814     |  
|Total mandatorily redeemable convertible
	preferred stock |  |                                       |       |      |  |      |       |      |  |      |        |  |  |   | 32,535  |   |  |   | 14,505  |  
|Total stockholders equity (deficit)                      |  | $                                     | 24,050 |      |  | $    | 27,331 |      |  | $    | 163,984 |  |  | $ | (16,780 | ) |  | $ | (13,428 | )

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Item
7.     Managements Discussion
and Analysis of Financial Condition and Results of
Operations

The following discussion contains forward-looking
statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. We use words like
may, will, should,
estimates, predicts,
potential, continue,
strategy, believes,
anticipates, plans, expects,
intends, and similar expressions to identify these
forward-looking statements. We have based these statements on
our current expectations and projections about future events.
Statements concerning our financial position, strategy and plans
or objectives for administration of our bankruptcy estate and
promulgation and confirmation of our plan of reorganization
include forward looking statements. Our actual results and the
result and timing of future events may differ materially from
the results discussed in the forward-looking statements due to
many factors, including those discussed below in Factors
That Could Affect Our Future Performance. The
forward-looking statements in this report speak only as of the
time they are made and do not necessarily reflect our outlook at
any other time. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of
new information or future events. However, readers should
carefully review the information included in other reports or
documents we file from time to time with the Securities and
Exchange Commission.

Overview

Historically we have derived substantially all of
our revenue from licensing our software and the delivery of
associated implementation and support services. However, as a
result of our sale of assets to PeopleSoft described below, we
will no longer be licensing our software or performing customer
services and do not expect to generate further revenue from
operations.

On December 12, 2001, we executed an asset
purchase agreement with PeopleSoft, Inc., a Delaware
corporation, providing for the sale of our intellectual property
and substantially all our operating assets to PeopleSoft for
total consideration of $5.0 million. Pursuant to the terms
of the asset purchase agreement, on December 14, 2001, we
filed a voluntary petition for relief under Chapter 11 of
the United States Bankruptcy Code in the United States
Bankruptcy Court for the Northern District of California under
Case No. 01-56101. On January 25, 2002, the U.S.
Bankruptcy Court approved the sale to PeopleSoft, and the sale
closed on February 6, 2002. At the closing, we transferred
the purchased assets to PeopleSoft and PeopleSoft paid to Calico
the sum of $4.5 million. The remaining $500,000 of the purchase
price will be held in escrow until August 6, 2002, to
satisfy any potential claims that PeopleSoft may make under the
asset purchase agreement.

We are currently operating as
debtor-in-possession in accordance with the applicable
provisions of the Bankruptcy Code, however, as a result of the
sale to PeopleSoft, we have few operating assets and will not
continue to sell any products. Although the Chapter 11
proceeding does not include any of our subsidiaries (only the
net realizable value of investments held by us in the
subsidiaries are included as assets in the Chapter 11
proceeding), we expect to windup, dissolve, or liquidate all of
our subsidiaries. In addition, prior to filing for protection
under Chapter 11, ConnectInc.com, Inc. and FirstFloor
Software, Inc., two of our domestic subsidiaries, were merged
into Calico Commerce, Inc. and no longer exist as separate
subsidiaries.

We have incurred quarterly and annual losses in
each of the seven years since we were formed. Although we
incurred net income of $1.7 million in the quarter ending
March 31, 2002, this was due to a gain of $4.7 million
on the sale of assets to PeopleSoft. We incurred a net loss of
$3.9 million for the fiscal year ended March 31, 2002,
as well as net losses of $141.3 million and
$27.8 million for the fiscal years ended March 31,
2001 and 2000, respectively. As of March 31, 2002, we had
an accumulated deficit of $202.7 million.

Consequences of the Chapter 11
Filing

As a consequence of our bankruptcy filing, all
pending claims and litigation against us are stayed
automatically by Section 362 of the Bankruptcy Code, and,
absent further order of the Bankruptcy Court, no party may take
any action to recover any pre-petition claims, enforce any lien
against or obtain possession of any property from us. In
addition, pursuant to Section 365 of the Bankruptcy Code,
we may reject or assume pre-petition executory contracts and
unexpired leases. We have already obtained an order to reject
certain leases and have filed a further motion to reject certain
executory contracts which has not yet been heard by the

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Court. Parties affected by the rejections of
these contracts or leases may file claims with the Bankruptcy
Court in accordance with the Chapter 11 reorganization
process. We are currently reviewing all other pre-petition
executory contracts to determine which commitments will be
assumed or rejected.


As provided by the Bankruptcy Code, we had the
exclusive right for 120 days following December 14,
2001, to propose a plan of reorganization. We have obtained an
order from the Bankruptcy Court extending this exclusivity
period for a further 120 days, although as part of this
extension, we have agreed that the Equity Committee established
in our bankruptcy proceeding may file a plan of reorganization
after 60 days beyond our initial period of exclusivity. If
we fail to file a plan of reorganization during the period of
exclusivity, as extended, or if the plan is not accepted by the
requisite numbers of creditors and equity holders entitled to
vote on the plan, other parties in interest, including the
Equity Committee, may be permitted to propose their own plan or
plans of reorganization for us. We are unable to predict at this
time what will be the treatment of our creditors and equity
holders under any proposed plan or plans of reorganization, and
whether creditors will be paid in full or equity holders will
receive a distribution.

The Bankruptcy Court may confirm a plan of
reorganization only upon making certain findings required by the
Bankruptcy Code, and a plan may be confirmed over the dissent of
non-accepting creditors and equity security holders if certain
requirements of the Bankruptcy Code are met. The payment rights
and other entitlements of pre-petition creditors and our
stockholders may be substantially altered by any plan of
reorganization confirmed in connection with our Chapter 11
filing. Currently, subject to resolution of outstanding
contingent claims, we believe that all known, non-disputed,
non-contingent claims will be paid in full. However, we are
subject to certain contingent liabilities as described in
Item 3 Legal Proceedings. Until resolution of
such claims, we may be unable to pay our creditors in full or
make a distribution to our equity securities, if at all.
Consequently, there is no assurance that there will be
sufficient assets to satisfy our pre-petition liabilities in
whole. Under a plan of reorganization, pre-petition creditors
could receive less than 100% of the face value of their claims.
Although we expect that we will have excess assets after payment
of liabilities, and that there is value for our equity
securities, there is no assurance that the holders of our equity
securities will receive value for their interests. In addition,
we have not yet determined what will be the terms of our
proposed plan, whether we will liquidate and distribute all
remaining assets after satisfaction of liabilities, or whether
we will merge or combine with or be sold to another entity. It
is not possible to predict the outcome of our Chapter 11
filing, the terms and provisions of any plan of reorganization,
or the effect of the Chapter 11 reorganization process on
the claims of our creditors or the interests of our equity
security holders.

As of March 31, 2002, we had
$26.5 million of cash and cash equivalents. We received
$4.5 million upon the closing of the sale to PeopleSoft on
February 6, 2002, and $500,000 was deposited into escrow to be
held for six months as a non-exclusive remedy to satisfy any
claims that PeopleSoft may have against us under the asset
purchase agreement. As a result of the sale, we no longer own
any intellectual property and have few operating assets, we do
not intend to continue selling products, and are prohibited by
the terms of the asset purchase agreement with PeopleSoft from
competing with its business. We believe that our cash on hand
will provide sufficient funds to allow us to continue our
operating activities and to meet our post-petition obligations
as they become due, while a plan of reorganization is developed
and considered. However, our ability to continue as a going
concern (including our ability to meet post-petition obligations
of Calico and its subsidiaries) and the appropriateness of
presenting our financial statements on a going concern basis are
dependent upon, among other things, any cash management orders
entered by the Bankruptcy Court concerning matters outside of
the ordinary course of business, and obtaining confirmation of a
plan of reorganization under the Bankruptcy Code that provides
for our continuation through a merger with or acquisition by
another entity. Alternatively, we may file a plan of
reorganization providing for our liquidation and dissolution.
Although we expect to satisfy all known, nondisputed,
non-contingent claims, at this time, we do not know if our cash
will be sufficient to pay all claims in full or to make a
distribution to stockholders.

Background of Filing

Prior to the sale of our intellectual property to
PeopleSoft, we provided interactive selling software that
enabled our customers to sell broad and complex product
offerings through their different sales channels as

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well as direct to customers over the Internet.
Our products were Java and standards-based, and contained
advanced configuration, recommendation and pricing technology
that allowed our customers to interact directly with users to
create a web-based, guided selling experience that improved
order accuracy, shortened sales cycles and resulted in improved
customer satisfaction. Although applicable to a wide range of
industries and markets, we historically focused on the
telecommunications, financial services, retail, computer
hardware and manufacturing industries. With our historical focus
primarily in the e-commerce sector, the decline of our
performance over the previous eighteen months paralleled that of
the economy generally.


In January 2001, we tried to respond to the
decline in the market by commencing a series of restructurings
which substantially reduced our workforce; significantly reduced
our use of contract labor; decreased our emphasis on
international sales and marketing, resulting in the closure of
several foreign sales offices; and reduced our office space and
disposed of related assets. We began calendar 2001 with
approximately 360 employees, but had only 3 employees as of
March 31, 2002. We recorded operating charges of
$1.9 million in fiscal 2002 related to our restructuring
activities during the year ended March 31, 2002.

Although we reported net income of
$1.7 million in the three months ended March 31, 2002,
$4.7 million of this was due to a gain on the sale of
assets to PeopleSoft. We also reported net income for the
quarter ended December 31, 2001, however,
$16.3 million of income was comprised of a realized gain
from the sale of shares of Digital River stock. Income from the
sale of Digital River Common Stock was a one-time, non-recurring
event. We have historically incurred substantial operating
losses and negative cash flows from operations in every fiscal
period since inception. For the year ended March 31, 2002,
we incurred a loss from operations of $17.5 million and
negative cash flows from operations of $10.4 million. As of
March 31, 2002, we had an accumulated deficit of
$202.7 million.

Critical Accounting Policies

We believe the following represent our critical
accounting policies:

Revenue
Recognition

Our services business derived a significant
portion of its revenue from fixed-price, fixed-time contracts,
which required the accurate estimation of the cost, scope and
duration of each engagement. Revenue and the related costs for
these projects was generally recognized on percentage of
completion, using the time-to-completion method to measure the
percent complete with revisions to estimates reflected in the
period in which changes become known. If we did not accurately
estimate the resources required or the scope of work to be
performed, or did not manage our projects properly within the
planned periods of time or satisfy our obligations under the
contracts, then future consulting margins may have been
significantly and negatively affected or losses on existing
contracts may have been recognized.

On license revenue, for contracts with multiple
elements, and for which vendor-specific objective evidence of
fair value existed for the undelivered elements, we recognized
revenue for the delivered elements based upon the residual
contract value as prescribed by SOP 98-9. Revenue from license
fees was recognized when persuasive evidence of an agreement
existed, the product had been delivered, the arrangement did not
involve significant customization of the software, acceptance
had occurred, the license fee was fixed or determinable, and
collection of the fee was probable. If the arrangement involved
significant customization of the software or services which were
essential to the functionality of the software, the license
revenue was recognized under contract accounting using the
completed contract or percentage-of-completion methods as
appropriate. For those arrangements accounted for using contract
accounting that did not include contractual milestones or other
acceptance criteria, we utilized the percentage of completion
method based upon the number of labor hours completed as the
measure of progress towards completion.

Services revenue was primarily comprised of
revenue from consulting services, maintenance contracts and
training. Services revenue from consulting and training was
generally recognized as the service was performed. Maintenance
contracts included the right to unspecified upgrades and ongoing
support. Maintenance revenue was deferred and recognized on a
straight-line basis as services revenue over the life of the
related contract, which was typically one year. Our customers
generally purchased maintenance contracts with

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their initial software implementation. Future
renewal rates were included as a term of the contract, and we
used the renewal rate as vendor-specific objective evidence of
fair value for post-contract support. Revenue under arrangements
where multiple products or services were sold together was
allocated to each element based on their relative fair values.
We classified revenue for these arrangements as license revenue
and services revenue based upon our estimate of fair value for
each element and recognized the revenue based on the
percentage-of-completion ratio for the arrangement. A provision
for estimated losses on engagements was made in the period in
which the loss became probable and could be reasonably estimated.


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

Our cost of license revenue includes royalties
due to third parties for technology integrated into our
products, the cost of product documentation, and shipping and
delivery costs. Cost of services revenue consists primarily of
personnel-related expenses, subcontracted consultants, travel
costs, equipment costs and overhead associated with delivering
professional services to our customers.

Our operating expenses are classified into three
general categories: sales and marketing, research and
development, and general and administrative. We classify all
charges to these operating expense categories based on the
nature of the expenditures. Although each category includes
expenses that are unique to the category, some expenditures,
such as compensation, employee benefits, recruiting costs,
equipment costs, travel and entertainment costs, facilities
costs and third-party professional services fees, occur in each
of these categories. We expect to continue to incur certain
operating expenses until our bankruptcy proceeding is concluded.

Allowance for
doubtful accounts

We must make estimates of the uncollectability of
our accounts receivable. Management specifically analyzes
accounts receivable and analyzes historical bad debts, customer
concentrations, customer credit-worthiness, current economic
trends and changes in our customer payment terms when evaluating
the adequacy of the allowance for doubtful accounts. Material
differences may result in the amount and timing of our bad debt
expense for any period if management makes different judgments
or utilizes different estimates.

Litigation

Our current estimated range of liability related
to some of the pending litigation is based on claims for which
we can estimate the amount and range of loss. We have recorded
the minimum estimated liability related to those claims, where
there is a range of loss. Because of the uncertainties related
to both the amount and range of loss on the remaining pending
litigation, we are unable to make a reasonable estimate of the
liability that could result from an unfavorable outcome. As
additional information becomes available, we will assess the
potential liability related to our pending litigation and revise
our estimates. Such revisions in our estimates of the potential
liability could materially impact our results of operations,
financial position and cash flows.

Impairment of
long-lived assets

Our long-lived assets include property and
equipment, long-term investments, goodwill and other intangible
assets. The fair value of the long-term investments is dependent
on the performance of the companies in which we have invested,
as well as volatility inherent in the external markets for these
investments. In assessing potential impairment for these
investments we have considered these factors as well as
forecasted financial performance of the entities in which we
have invested. During the year ended March 31, 2002, we
recognized approximately $1.7 million of impairment losses
related to our property and equipment and approximately $390,000
of impairment losses related to our long-term investments.
During the year ended March 31, 2001, we recognized
approximately $1.4 million related to our long-term
investments, approximately $1.1 million related to our property
and equipment, and approximately $1.4 million related to
our goodwill and other intangible assets. In assessing the
recoverability of our goodwill and other intangibles

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we made assumptions regarding estimated future
cash flows and other factors to determine the fair value of the
respective assets.


Financial
Statement Presentation

The accompanying Consolidated Financial
Statements have been prepared in accordance with AICPA Statement
of Position 90-7 (SOP 90-7), Financial
Reporting by Entities in Reorganization under the Bankruptcy
Code, and on a going concern basis, which contemplates
continuity of operations, realization of assets and liquidation
of liabilities in the ordinary course of business. However, as a
result of the bankruptcy filing, and the contingent liabilities
described below, such realization of assets and liquidation of
liabilities are subject to uncertainty. While operating as
debtor-in-possession under the protection of Chapter 11 of
the Bankruptcy Code, and subject to Bankruptcy Court approval or
otherwise as permitted in the normal course of business, we have
sold substantially all of our operating assets. In connection
with our plan of reorganization, we may liquidate or settle
liabilities for amounts other than those reflected in the
consolidated financial statements. Further, a plan of
reorganization could materially change the amounts and
classifications reported in the consolidated historical
financial statements, which do not give effect to any
adjustments to the carrying value of assets or amounts of
liabilities that might be necessary as a consequence of a plan
of reorganization.

As reflected in the consolidated financial
statements, liabilities subject to compromise refer
to our liabilities incurred prior to the commencement of the
Chapter 11 Case. The amounts of the various liabilities
that are subject to compromise are set forth below. These
amounts represent our estimate of known or potential
pre-petition claims to be resolved in connection with the
Chapter 11 Case. Such claims remain subject to future
adjustment. Adjustments may result from negotiations, actions of
the Bankruptcy Court, further developments with respect to
disputed claims, rejection of executory contracts and unexpired
leases, the determination as to the value of any collateral
securing claims, proofs of claim, or other events. Payment terms
for these amounts will be established in connection with the
Chapter 11 Case.

Pursuant to the Bankruptcy Code, schedules have
been filed by us with the Bankruptcy Court setting forth the
assets and liabilities of the Debtor. Differences between
amounts recorded by us and claims filed by creditors will be
investigated and resolved as part of the Chapter 11 Case.
Bar dates for the filing of proofs of claim against us have been
set for April 10, 2002 for all creditors other than
governmental units, and May 10, 2002 for governmental
units. The bar dates for claims arising from rejection of
unexpired leases and contracts will be established by the
Bankruptcy Court at the time of the hearing on our motion to
reject such contracts and leases. As of April 11, 2002,
approximately $63.7 million of claims had been filed with
the Bankruptcy Court, of this amount at least $62 million
is believed to be without merit. The difference of
$1.7 million between filed claims and disputed claims by
plaintiffs has not yet been formally reviewed. Additional claims
may also be filed with the Bankruptcy Court and therefore the
ultimate number and allowed amounts of all claims is presently
unknown.

We have received approval from the Bankruptcy
Court to pay or otherwise honor certain of our pre-petition
obligations, including employee wages, salaries, benefits and
other employee obligations and certain other pre-petition
claims. The pre-petition liabilities that have been approved by
the Bankruptcy Court to be paid are not included in
liabilities subject to compromise on the
accompanying consolidated debtor-in-possession balance sheets as
of March 31, 2002.

The liabilities subject to compromise in the
consolidated and debtor-in-possession balance sheets consist of
the following items at March 31, 2002 (in thousands):

|                                                                                            |                                         |   |       |       | 
|------------------------------------------------------------------------------------------- | --------------------------------------- | - | ----- | ----- | 
|Accounts payable                                                                            |                                         | $ | 986   |      
|Estimated claims for rejection of unexpired
	maintenance and professional service contracts |                                         |   | 828   |      
|Estimated allowable claims for rejection of
	unexpired leases                               |                                         |   | 2,924 |      
|Taxes payable                                                                               |                                         |   | 526   |      
|                                                                                            |                                         |   |       |      
|                                                                                            | Total liabilities subject to compromise |   | $     | 5,264 | 
|                                                                                            |                                         |   |       |      

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As part of the our bankruptcy filing, we intend
to reject certain leases and executory contracts as allowed by
the Bankruptcy Code. For capital and operating leases that we
intend to reject, for which accruals had not been previously
made, we recorded an accrual of $2.1 million for the
estimated maximum amount of allowable claims under the
Bankruptcy Code, which consists of estimated lease payments for
12 months from the date that we filed our petition under
Chapter 11 of the Bankruptcy Code. The accrual is included
in liabilities subject to compromise in the accompanying
consolidated and debtor-in-possession balance sheets.

The $2.9 million for Chapter 11 related
reorganization items in the consolidated and
debtor-in-possession statements of operations consisted of
approximately $2.1 million of estimated allowable claims
for rejected leases not previously accrued under a restructuring
plan, $256,000 of liabilities related to valid claims not
previously accrued, and $495,000 of professional fees for the
fiscal year ended March 31, 2002.

Acquisitions
and Dispositions

On February 6, 2002, we completed the sale
of our intellectual property and significantly all of our
operating assets to PeopleSoft for $5.0 million in cash. At
the closing, PeopleSoft paid us $4.5 million and $500,000
was deposited into escrow to be held for six months as a
non-exclusive remedy to satisfy any claims that PeopleSoft may
have against us under the asset purchase agreement.

The total proceeds from the sale of
$5.0 million, less the book value of transferred equipment,
intangible assets, deferred revenue, and transaction costs,
based on their respective estimated fair values at the sale
date, were recorded as a gain on sale of assets in the quarter
ended March 31, 2002.

The calculation of the gain on the sale was
determined as follows (in thousands):

|                                                                 |              |   |       |       | 
|---------------------------------------------------------------- | ------------ | - | ----- | ----- | 
|Total consideration                                              |              | $ | 5,000 |      
|Book value of equipment, intangible assets and
	deferred revenue |              |   | (53   | )    
|Transaction costs                                                |              |   | (256  | )    
|                                                                 |              |   |       |      
|                                                                 | Gain on sale |   | $     | 4,691 | 
|                                                                 |              |   |       |      

In January 2000, we acquired ConnectInc.com, a
provider of technology and services that connected 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 exchanged
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 our 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 was 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, were amortized
using estimated useful lives of three years. Goodwill was
amortized using the straight-line method over three years,
resulting in an aggregate quarterly charge of $7.7 million
during the amortization period.

In connection with the acquisition, we assumed
all outstanding options and warrants of ConnectInc.com, of which
58% were vested options and 41% were unvested options and 1%
were warrants. The fair value of the unvested options was
included in the total purchase consideration. Upon acquisition,
these options and warrants converted to options and warrants to
acquire an aggregate of 219,717 shares of Common Stock and
warrants, with an average exercise price of $20.77 per share. We
used the Black Scholes pricing model to determine the fair value
of approximately $10.8 million for the assumed options and
warrants, based on the following assumptions in determining the
fair value of the options and warrants assumed: (i) risk
free rate of 5.6%; (ii) average expected life of
2.5 years; (iii) expected volatility of 75%; and
(iv) no dividends expected to be paid on the outstanding
shares. This amount was included as a component of the purchase
price.

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On March 20, 2001, we sold the assets of
ConnectInc.com, our wholly-owned subsidiary, consisting of
ConnectInc.coms MarketMaker business, in exchange for
approximately 1.63 million shares of Common Stock of
Digital River, Inc., valued at $7.9 million on the date of
sale. The assets sold to Digital River primarily consisted of
our MarketMaker software product and the related intellectual
property rights. The agreement with Digital River includes a
contingent earnout whereby we were eligible to receive
additional shares of Digital Rivers Common Stock based
upon the revenue generated by the MarketMaker product, from
sales by Digital River or by us, over the 13 months
following March 21, 2001. According to the terms of the
contingent earnout, as of September 30, 2001, based upon
revenue generated by the MarketMaker product, we received notice
on October 23, 2001 from Digital River that we were
eligible to receive, and did receive, approximately 60,000
additional shares of Digital River Common Stock. We commenced
sales of Digital River stock on October 23, 2001. During
the year ended March 31, 2002, we sold all
1.69 million shares of Common Stock for net proceeds of
approximately $24.4 million and a realized gain of
approximately $16.3 million.

We incurred a loss on the sale in the aggregate
amount of approximately $49.4 million calculated as follows
(in thousands):

|                                                                 |              |   |         |         |  
|---------------------------------------------------------------- | ------------ | - | ------- | ------- | -
|Fair value of marketable securities received                     |              | $ | 8,160   |        
|Book value of equipment, intangible assets and
	deferred revenue |              |   | (56,807 | )      
|Transaction costs                                                |              |   | (706    | )      
|                                                                 |              |   |         |        
|                                                                 | Loss on sale |   | $       | (49,353 | )
|                                                                 |              |   |         |        

Results of Operations

The following table presents the historical
results of our operations during fiscal years 2002, 2001 and
2000 and the relative composition of selected statement of
operations data, as well as such data as a percentage of net
revenues during fiscal 2002, 2001 and 2000. Historically, the
amount and timing of our operating expenses generally have
varied from quarter to quarter depending on our level of actual
and anticipated business activities. Our revenues and operating
results have been difficult to forecast. As a result of the sale
to PeopleSoft, we will have few operating assets, we will not
continue to sell any products, and do not expect to generate
operating revenue. Therefore, period-to-period future
comparisons of our operating results will not be meaningful.
Consequently, you should not rely upon the following results as
an indication of future performance. Additionally, net loss for
the year ended March 31, 2002 included a realized gain of
$16.3 million from the sale of shares of Digital River
Common Stock, and a gain of $4.7 million on the sale of
assets to PeopleSoft. We believe that income from the sale of
Digital River Common Stock was a one-time,

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non-recurring event. Basic and diluted net loss
per share on a pro forma basis excluding the effect of such sale
would have been $0.58 for the year ending March 31, 2002.


|                                        |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |    |     | 
|--------------------------------------- | -------------------------------------------- | ------------------------- | ------- | -------------------- | ------ | ---- | -------- | ------ | ------- | ---- | ------- | ------ | ------ |  | ---- | --- | --- |  | ---- | --- | --- |  | --- | -- | --- | 
|                                        |                                              |                           |         |                      |        |      |          |       
|                                        |                                              |                           |         | As a Percentage     
|                                        |                                              | Year Ended March 31       |         | of Total Net Revenue
|                                        |                                              |                           |         |                     
|                                        |                                              | 2002                      |         | 2001                 |        | 2000 |          | 2002   |         | 2001 |         | 2000  
|                                        |                                              |                           |         |                      |        |      |          |        |         |      |         |       
|                                        |                                              |                           |         |                      |        |      |          |       
|                                        |                                              | (in thousands)            |         |                      |        |      |          |       
|Net revenue:                            |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   
|                                        | License                                      |                           | $       | 2,739                |        |      | $        | 12,992 |         |      | $       | 17,030 |        |  |      | 49  | %   |  |      | 42  | %   |  |     | 46 | %  
|                                        | Services                                     |                           |         | 2,857                |        |      |          | 18,257 |         |      |         | 19,978 |        |  |      | 51  |     |  |      | 58  |     |  |     | 54 |    
|                                        |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   
|                                        |                                              | Total net revenue         |         |                      | 5,596  |      |          |        | 31,249  |      |         |        | 37,008 |  |      |     | 100 |  |      |     | 100 |  |     |    | 100 | 
|                                        |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   
|Cost of net revenue:                    |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   
|                                        | License                                      |                           |         | 245                  |        |      |          | 1,354  |         |      |         | 1,143  |        |  |      | 4   |     |  |      | 4   |     |  |     | 3  |    
|                                        | Amortization of purchased technology         |                           |         |                     |        |      |          | 1,860  |         |      |         | 739    |        |  |      |    |     |  |      | 6   |     |  |     | 2  |    
|                                        | Services                                     |                           |         | 2,972                |        |      |          | 19,922 |         |      |         | 15,098 |        |  |      | 53  |     |  |      | 64  |     |  |     | 41 |    
|                                        |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   
|                                        |                                              | Total cost of net revenue |         |                      | 3,217  |      |          |        | 23,136  |      |         |        | 16,980 |  |      |     | 57  |  |      |     | 74  |  |     |    | 46  | 
|                                        |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   
|Gross profit                            |                                              |                           | 2,379   |                      |        |      | 8,113    |        |         |      | 20,028  |        |        |  | 43   |     |     |  | 26   |     |     |  | 54  |   
|                                        |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   
|Operating expenses:                     |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   
|                                        | Sales and marketing                          |                           |         | 7,027                |        |      |          | 37,278 |         |      |         | 21,881 |        |  |      | 126 |     |  |      | 119 |     |  |     | 59 |    
|                                        | Research and development                     |                           |         | 5,937                |        |      |          | 22,892 |         |      |         | 15,736 |        |  |      | 106 |     |  |      | 73  |     |  |     | 43 |    
|                                        | General and administrative                   |                           |         | 7,269                |        |      |          | 8,343  |         |      |         | 6,566  |        |  |      | 130 |     |  |      | 27  |     |  |     | 18 |    
|                                        | Acquired in-process research and development |                           |         |                     |        |      |          |       |         |      |         | 230    |        |  |      |    |     |  |      |    |     |  |     | 1  |    
|                                        | Amortization of intangibles and other assets |                           |         |                     |        |      |          | 29,125 |         |      |         | 5,778  |        |  |      |    |     |  |      | 93  |     |  |     | 16 |    
|                                        | Restructuring and other activities           |                           |         | 1,948                |        |      |          | 1,362  |         |      |         |       |        |  |      | 35  |     |  |      | 4   |     |  |     |   |    
|                                        | Loss on disposal of long-lived assets        |                           |         | 1,013                |        |      |          |       |         |      |         |       |        |  |      | 18  |     |  |      |    |     |  |     |   |    
|                                        | Impairment of long-lived assets              |                           |         | 1,734                |        |      |          | 2,415  |         |      |         |       |        |  |      | 31  |     |  |      | 8   |     |  |     |   |    
|                                        | (Gain) loss on sales of product lines        |                           |         | (5,005               | )      |      |          | 49,667 |         |      |         |       |        |  |      | (89 | )   |  |      | 159 |     |  |     |   |    
|                                        |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   
|                                        |                                              | Total operating expenses  |         |                      | 19,923 |      |          |        | 151,082 |      |         |        | 50,191 |  |      |     | 357 |  |      |     | 484 |  |     |    | 136 | 
|                                        |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   
|Loss from operations                    |                                              |                           | (17,544 | )                    |        |      | (142,969 | )      |         |      | (30,163 | )      |        |  | (314 | )   |     |  | (458 | )   |     |  | (82 | ) 
|Chapter 11-related reorganization items |                                              |                           | (2,888  | )                    |        |      |         |        |         |      |        |        |        |  | (52  | )   |     |  |     |     |     |  |    |   
|Realized gains on sale of securities    |                                              |                           | 16,261  |                      |        |      |         |        |         |      |        |        |        |  | 291  |     |     |  |     |     |     |  |    |   
|Impairment of long term investments     |                                              |                           | (390    | )                    |        |      | (1,350   | )      |         |      |        |        |        |  | (7   | )   |     |  | (4   | )   |     |  |    |   
|Interest and other income, net          |                                              |                           | 607     |                      |        |      | 3,624    |        |         |      | 2,362   |        |        |  | 11   |     |     |  | 12   |     |     |  | 6   |   
|                                        |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   
|Net loss before income taxes            |                                              |                           | (3,954  | )                    |        |      | (140,695 | )      |         |      | (27,801 | )      |        |  | (71  | )   |     |  | (473 | )   |     |  | (75 | ) 
|(Benefit) provision for income taxes    |                                              |                           | (36     | )                    |        |      | 634      |        |         |      |        |        |        |  | 1    |     |     |  | 2    |     |     |  |    |   
|                                        |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   
|Net loss                                |                                              | $                         | (3,918  | )                    |        | $    | (141,329 | )      |         | $    | (27,801 | )      |        |  | (70  | )%  |     |  | (452 | )%  |     |  | (75 | )%
|                                        |                                              |                           |         |                      |        |      |          |        |         |      |         |        |        |  |      |     |     |  |      |     |     |  |     |   

Comparison of
Fiscal Years Ended March 31, 2002, 2001 and
2000

Revenue

Total net revenue decreased 82% to
$5.6 million in fiscal 2002 from $31.2 million in fiscal
2001, and decreased 16% in fiscal 2001 from $37.0 million
in fiscal 2000.

License.License
revenue decreased 79% to $2.7 in fiscal 2002 from $13.0 million
in fiscal 2001, and decreased 24% in fiscal 2001 from
$17.0 million in fiscal 2000. License revenue as a
percentage of total net

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revenue was 49% in fiscal 2002, 42% in fiscal
2001 and 46% in fiscal 2000. The decrease in license revenue in
absolute dollars from fiscal 2001 to 2002 is attributable
primarily to a decrease in the number of license transactions
due to the current economic environment, our restructuring and
reductions in our operations. The decrease in license revenue in
absolute dollars from fiscal 2000 to 2001 is attributable
primarily to a decrease in the average dollar value per license
transaction. The number of license transactions recognized
during 2001 remained relatively constant when compared to 2000.
We do not expect to generate any future license revenue.


Services.Services
revenue decreased 84% to $2.9 million in fiscal 2002 from
$18.3 million in fiscal 2001, and decreased 9% in fiscal
2001 from $20.0 million in fiscal 2000. Services revenue as a
percentage of total net revenue was 51% in fiscal 2002, 58% in
fiscal 2001 and 54% in fiscal 2000. The decrease in services
revenue in absolute dollars in fiscal 2002 from fiscal 2001 is
attributable to a decrease in the number of license
transactions. The decrease in services revenue in absolute
dollars in fiscal 2001 from fiscal 2000 is attributable
primarily to a decrease in the average amount of services
purchased in connection with new license transactions. We do not
expect to generate any future services revenue.

Cost of
Revenue

License.Cost of
license revenue decreased 82% to $245,000 in fiscal 2002 from
$1.4 million in fiscal 2001, and increased 18% in fiscal
2001 from $1.1 million in fiscal 2000. Cost of license revenue
as a percentage of total net revenue was 4% in fiscal 2002, 4%
in fiscal 2001 and 3% in fiscal 2000. The decrease in cost of
license revenue in absolute dollars in fiscal 2002 from fiscal
2001 is primarily due to a decrease in both revenues and in the
number of new license transactions. Cost of license revenue as a
percentage of license revenue in fiscal 2002 remained relatively
constant with fiscal 2001. The increase in cost of license
revenue in fiscal 2001 from fiscal 2000 was primarily due to an
increase in license revenues and increased expenses related to
embedded technology royalties. The increase in cost of license
revenue as a percentage of license revenue in fiscal 2001 was
due primarily to an increase in the number of our products which
incur royalties for embedded technology.

Amortization of Purchased
Technology.There was no expense for
the amortization of purchased technology in fiscal 2002. This
represented a decrease from $1.9 million in fiscal 2001,
which increased from $739,000 in fiscal 2000. As a result of the
sale in March 2001 of the ConnectInc.com product, MarketMaker,
to Digital River, there were no costs related to amortization of
purchased technology in fiscal 2002. The increase in expenses
for amortization of purchased technology in fiscal 2001 was due
to the amortization of existing technology acquired in the
ConnectInc.com acquisition. We will not have any future expenses
for amortization of purchased technology.

Services.Cost of
services revenue decreased 85% to $3.0 million in fiscal
2002 from $19.9 million in fiscal 2001, and increased 32%
in fiscal 2001 from $15.1 million in fiscal 2000. Cost of
services revenue as a percentage of total net revenue was 53% in
fiscal 2002, 64% in fiscal 2001 and 41% in fiscal 2000. The
decrease in cost of services revenue in absolute dollars in
fiscal 2002 from fiscal 2001 is primarily due to lower costs
associated with decreased personnel and subcontractor expenses
in our services organization, resulting from multiple
restructurings and reductions in personnel. Services experienced
a negative gross margin in fiscal 2002 as a result of excess
capacity in our consulting organization. The decrease in cost of
services revenue as a percentage of services revenue in fiscal
2002 was primarily due to reductions in headcount-related
expenses and outside consulting expenses, as a result of our
restructurings. The increase in cost of services revenue in
absolute dollars in fiscal 2001 from fiscal 2000 was primarily
due to costs associated with increased personnel and
subcontractor expenses in our services organization. Services
experienced a negative gross margin in the year ended
March 31, 2001 due to expenses for project activities
beyond the billable scope of engagements, work on engagements
where revenue was not recognized because of customer
creditworthiness, investments in services infrastructure, as
well as additional costs incurred due to starting up our
services organization in Japan. The increase in cost of services
revenue as a percentage of services revenue in fiscal 2001 was
primarily due to excess capacity within our consulting
organization.

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Operating
Expenses

Sales and Marketing.Sales and marketing expenses decreased 81% to $7.0 million in
fiscal 2002 from $37.3 million in fiscal 2001, and
increased 70% in fiscal 2001 from $21.9 million in fiscal
2000. Sales and marketing expenses as a percentage of total net
revenue was 126% in fiscal 2002, 119% in fiscal 2001 and 59% in
fiscal 2000. Sales and marketing expenses decreased in absolute
dollars in fiscal 2002 from fiscal 2001 primarily due to
decreased personnel-related costs as well as decreased
advertising and other marketing activities. Sales and marketing
expenses increased in absolute dollars in fiscal 2001 from
fiscal 2000 primarily due to increased personnel-related costs,
resulting from our expansion in the development of our domestic
and international sales and marketing organizations, including
our expansion into Japan during fiscal 2001, as well as
advertising and other marketing activities. We have terminated
our sales and marketing activities and expect little, if any,
future sales and marketing expenses.

Research and
Development.Research and development
expenses decreased 74% to $5.9 million in fiscal 2002 from
$22.9 million in fiscal 2001, and increased 46% in fiscal
2001 from $15.7 million in fiscal 2000. Research and
development expenses as a percentage of total net revenue was
106% in fiscal 2002, 73% in fiscal 2001 and 43% in fiscal 2000.
Research and development expenses decreased in absolute dollars
in fiscal 2002 from fiscal 2001 as a result of the decrease in
the number of engineering and product development personnel and
consultants. Research and development expenses increased in
absolute dollars and as a percentage of total net revenue in
fiscal 2001 as a result of the addition of engineering and
product development personnel and consultants, partially due to
our acquisition of ConnectInc.com and our addition of an
engineering office in India. Personnel-related expenses
accounted for the majority of the increase in absolute dollars.
As a result of the sale to PeopleSoft, we no longer have any
research and development activities and will incur no future
research and development expenses.

General and
Administrative.General and
administrative expenses decreased 12% to $7.3 million in
fiscal 2002 from $8.3 million in fiscal 2001 and increased
26% in fiscal 2001 from $6.6 million in fiscal 2000.
General and administrative expenses as a percentage of total net
revenue were 130% in fiscal 2002, 27% in fiscal 2001 and 18% in
fiscal 2000. General and administrative expenses decreased in
absolute dollars in fiscal 2002 from fiscal 2001 due to
reductions in administrative personnel and personnel-related
costs, offset by the cancellation of employee and executive
loans and increased costs for professional services. General and
administrative expenses increased in absolute dollars and as a
percentage of revenue in fiscal 2001 from fiscal 2000 due to
increased bad debt provisions and increased personnel costs. We
expect general and administrative expenses to continue to
decline as a result of the sale to PeopleSoft and as we reduce
administrative personnel.

Acquired in-Process Research and
Development.In fiscal 2002 and 2001
we made no charges to acquired in-process research and
development. In fiscal 2000, 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 were charged to operations in the
quarter ended March 31, 2000.

To value the in-process technology, we used the
income approach. Management estimated revenue that each
in-process product would generate over its economic life. From
this amount, a deduction was made for the revenue that was
attributable to the previously existing technology. The result
was 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.

Unearned
Stock-Based Compensation

In connection with certain stock option grants
issued prior to the year ended March 31, 2000, we recorded
unearned stock-based compensation for the estimated difference
between the exercise price of the options and their deemed fair
value, which was amortized over the four year vesting period of
the options using the method per Financial Accounting Standards
Board Interpretation No. 28. The remaining unamortized
amount of $7,000 as of March 31, 2001 was included as a
component of stockholders equity and was fully amortized as

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of March 31, 2002. Amortization of unearned
stock-based compensation totaled $7,000, $218,000 and $1,551,000
for the years ended March 31, 2002, 2001 and 2000,
respectively.


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 an
equipment lease financier. The fair value of the warrants had
been recognized as interest expense over the life of the
associated financing instrument. The warrants were immediately
vested and exercisable upon issuance and have a three year term.

In December 1999, the Company entered into
license, maintenance and services agreements with a business
partner. Concurrently with the license agreement, the Company
issued a Common Stock warrant to the business partner to
purchase 4,108 shares of the Companys Common Stock at 85%
of the average market price for the 20 consecutive business days
commencing 39 days before the date of grant, which was
$46.37. The warrant vested immediately and has a three year
term. The warrant was valued at $118,000.

In March 2000, we entered into further license,
maintenance and service agreements with a business partner.
Concurrently with the license agreement, we issued a Common
Stock warrant to the business partner to purchase 5,475 shares
of our Common Stock at 85% of the average market price for the
20 consecutive business days commencing 30 days before the
date of grant, which was $31.051. The warrant vested immediately
and had a three year term. The warrant was valued at $115,000.

In June 2000 and December 2000, in connection
with sales transactions, we issued warrants to purchase 5,395
and 100,000 shares, respectively, of Common Stock to customers.
These warrants were immediately exercisable after issuance. The
fair value of the warrants of $60,000 has been recorded as a
reduction in revenue in the year ended March 31, 2001.

We estimated the fair value of each of the
warrants, using the Black Scholes option pricing model, at the
date of grant and based upon the following assumptions: Risk
free rate of 5.50%  6.80%, average expected life of
three years, no dividends expected to be paid on the Common
Stock and expected volatility of 75%.

The following lists information on the warrants
we have issued to business partners since September 1999:

|               |  |        |        |                |  |            |       |                |  |   |         |  |  |  |      | 
|-------------- |  | ------ | ------ | -------------- |  | ---------- | ----- | -------------- |  | - | ------- |  |  |  | ---- | 
|               |  |        |        |                |  | Estimated  |       | Fiscal Year of
|Date of Grant  |  | Shares |        | Exercise Price |  | Fair value |       | Expiration    
|               |  |        |        |                |  |            |       |               
|September 1999 |  |        | 5,263  |                |  | $          | 9.50  |                |  | $ | 30,000  |  |  |  | 2003 | 
|December 1999  |  |        | 4,108  |                |  |            | 45.05 |                |  |   | 118,000 |  |  |  | 2003 | 
|March 2000     |  |        | 5,475  |                |  |            | 31.05 |                |  |   | 115,000 |  |  |  | 2003 | 
|June 2000      |  |        | 5,395  |                |  |            | 12.60 |                |  |   | 27,450  |  |  |  | 2004 | 
|December 2000  |  |        | 50,000 |                |  |            | 1.50  |                |  |   | 13,600  |  |  |  | 2004 | 
|December 2000  |  |        | 50,000 |                |  |            | 1.00  |                |  |   | 18,950  |  |  |  | 2004 | 

Amortization of
Goodwill and Other Intangible Assets

Of the $6.1 million purchase price paid for
FirstFloor Software in August 1998 and $90.5 million for
ConnectInc.com in January 2001, amortization of goodwill and
other intangibles expenses was zero in fiscal 2002,
$29.1 million in fiscal 2001 and $5.8 million in
fiscal 2000, reflecting the amortization of goodwill and other
intangible assets acquired as part of the acquisitions. As a
result of the sale in March 2001 of the ConnectInc.com product,
MarketMaker, to Digital River, and the impairment of the
goodwill and other intangible assets of FirstFloor in fiscal
2001, there were no costs related to amortization of goodwill
and other intangible assets in fiscal 2002.

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Restructuring
and Other Activities

In January 2001, we announced our first strategic
restructuring plan, designed to reduce operating expenses. In
connection with the restructuring, we reduced our workforce by
36 employees, and significantly reduced our use of outside
contract labor. We also made provisions for reductions in office
space and the disposal of related assets. The total amount of
the restructuring charge was $1.4 million and was comprised
of $590,000 in employee-related expenses for employee
terminations, $749,000 of estimated expenses for
facilities-related charges, and $24,000 for the disposal of
certain excess capital equipment. Of these amounts,
$1.3 million were cash-related charges, and $24,000 were
non-cash charges. During the three months ended June 30,
2001, we decreased this provision by $43,000 as a result of
lower than anticipated payroll taxes. As of March 31, 2002,
we had incurred costs totaling $968,000 related to this
restructuring, which required $944,000 in cash expenditures. As
part of the Chapter 11 filing, we have rejected certain of
the leases and contracts accrued in our first restructuring plan
as allowed under the terms of the United States Bankruptcy Code.
Consequently, we reduced the related accrual by approximately
$351,000 in the quarter ended December 31, 2001. The
reduction has been classified as a Chapter 11 related
reorganization item in the accompanying condensed consolidated
statement of operations.

In April 2001, we undertook further restructuring
designed to reduce operating expenses. In connection with this
second restructuring, we reduced our workforce by another 77
employees and affected headcount in all functional areas. All
employees were notified of this termination during the quarter
that ended June 30, 2001. The total amount of the
restructuring charge from this second restructuring was
$753,000, was comprised entirely of employee-related expenses
for employee terminations and was a cash-related charge. As of
March 31, 2002, we had recorded a net decrease to the
provision of $54,000, due to lower than anticipated severance
costs, and had incurred all remaining costs related to the
restructuring, all of which were cash-related.

In July 2001, we announced a third strategic
restructuring plan, designed to further reduce operating
expenses. In connection with the restructuring, we further
reduced our workforce by approximately 80 full-time positions
and closed our operations in India. This restructuring affected
headcount in all functional areas. The total amount of the
restructuring charge was approximately $1.1 million, was
comprised of $985,000 in employee-related expenses for employee
terminations, and $162,000 of estimated expenses for
facilities-related charges, and all are cash-related charges. As
of March 31, 2002 we had incurred costs totaling
approximately $995,000 related to the restructuring, all of
which were cash-related, and had recorded a net decrease to the
provision of $128,000 due to lower than anticipated
international severance costs. The remaining reserve for this
restructuring is approximately $24,000, which is included in
accrued liabilities.

In connection with the sale to PeopleSoft,
approximately 40 of our employees became employees of
PeopleSoft, leaving us with approximately 8 employees to perform
the remaining tasks necessary to conclude our bankruptcy
proceedings and other administrative matters. In anticipation of
this sale and pending Bankruptcy filing, we had further reduced
our workforce by approximately 9 full-time positions in December
and reduced our workforce again as of the end of March 31,
2002 by another 5 employees. We have 3 remaining employees and
will reduce our workforce as appropriate going forward
consistent with administration of our Chapter 11 Case and
plan of reorganization. The total amount of the related
restructuring charge was approximately $248,000, all of which
consisted of employee-related expenses for employee
terminations, and all were cash-related charges. We recorded an
increase to the provision of $25,000 during the three months
ended March 31, 2002 related to higher than anticipated
expenses related to international severance. As of
March 31, 2002, we had incurred costs totaling
approximately $237,000 related to the restructuring. The
remaining reserve for this restructuring is approximately
$36,000, which is included in accrued liabilities.

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The following table lists the components of the
January, April, July and December 2001 restructuring charges for
fiscal 2002 (in thousands):

|                              |                                             |          |     |            |   |       |     |      |   |   |     |       |  
|----------------------------- | ------------------------------------------- | -------- | --- | ---------- | - | ----- | --- | ---- | - | - | --- | ----- | -
|                              |                                             |          |     | Excess     |   |      
|                              |                                             |          |     | Facilities |   |      
|                              |                                             | Employee |     | and        |   |      
|                              |                                             | Costs    |     | Equipment  |   | Total
|                              |                                             |          |     |            |   |      
|Balance at March 31, 2001     |                                             | $        | 217 |            |   | $     | 588 |      |   | $ | 805 |      
|                              | Adjustment to reserve                       |          |     | (37        | ) |       |     | (6   | ) |   |     | (43   | )
|                              | Reserve established, April restructuring    |          |     | 753        |   |       |     |     |   |   |     | 753   |  
|                              | Reserve utilized                            |          |     | (777       | ) |       |     | (185 | ) |   |     | (962  | )
|                              |                                             |          |     |            |   |       |     |      |   |   |     |      
|Balance at June 30, 2001      |                                             |          | 156 |            |   |       | 397 |      |   |   | 553 |      
|                              | Adjustment to reserve                       |          |     | (121       | ) |       |     |     |   |   |     | (121  | )
|                              | Reserve established, July restructuring     |          |     | 985        |   |       |     | 162  |   |   |     | 1,147 |  
|                              | Reserve utilized                            |          |     | (875       | ) |       |     | (57  | ) |   |     | (932  | )
|                              |                                             |          |     |            |   |       |     |      |   |   |     |      
|Balance at September 30, 2001 |                                             |          | 145 |            |   |       | 502 |      |   |   | 647 |      
|                              | Adjustment to reserve                       |          |     | (27        | ) |       |     |     |   |   |     | (27   | )
|                              | Adjustment for rejected leases              |          |     |           |   |       |     | (351 | ) |   |     | (351  | )
|                              | Reserve established, December restructuring |          |     | 248        |   |       |     |     |   |   |     | 248   |  
|                              | Reserve utilized                            |          |     | (225       | ) |       |     | (95  | ) |   |     | (320  | )
|                              |                                             |          |     |            |   |       |     |      |   |   |     |      
|Balance at December 31, 2001  |                                             |          | 141 |            |   |       | 56  |      |   |   | 197 |      
|                              | Adjustment to reserve                       |          |     | (23        | ) |       |     | 13   |   |   |     | (10   | )
|                              | Reserve utilized                            |          |     | (82        | ) |       |     | (45  | ) |   |     | (127  | )
|                              |                                             |          |     |            |   |       |     |      |   |   |     |      
|Balance at March 31, 2002     |                                             | $        | 36  |            |   | $     | 24  |      |   | $ | 60  |      
|                              |                                             |          |     |            |   |       |     |      |   |   |     |      

Loss
on Disposal of Long-Lived Assets

During fiscal 2002, we sold and disposed of
approximately $2.3 million of excess furniture and fixtures
and computer equipment with a net book value of approximately
$1.2 million. We incurred a net loss of approximately
$1 million on the sale of those assets.

Impairment
of Long-Lived Assets

In fiscal 2002, due to the large amount of excess
computer equipment and software on hand at September 30,
2001, primarily resulting from our reductions in force announced
in April and July 2001, an assessment of the carrying value of
property and equipment was performed. All excess (i.e. no longer
in service) capital equipment, software, and furniture and
fixtures were reduced to their residual value based on published
resale information. The carrying value of assets determined not
to have any significant resale value was reduced to zero. As a
result, we recorded an impairment charge of $985,000. In the
third quarter of fiscal 2002, an adjustment of $75,000 was made
to this impairment charge as we were able to realize greater
than anticipated resale values for some of these assets.

In the fourth quarter of fiscal 2002, primarily
as a result of further reductions in our workforce from December
2001 through March 2002, the closure and impending closure of
our international offices, the sale of substantially all of our
operating assets to PeopleSoft, and the anticipated auction of
substantially all of our remaining capital assets on
May 22, 2002 by DoveBid, Inc., another assessment of the
carrying value of property and equipment was performed. All
excess (i.e. no longer in service) capital equipment, software,
and furniture and fixtures were reduced to their residual value
based on published resale information. The carrying value of
assets determined not to have any significant resale value was
reduced to zero. As a result, we recorded an impairment of
charge of $824,000.

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In fiscal 2001, as part of our review of our
fourth quarter financial results, an impairment assessment of
our long-lived assets was performed. The assessment was
performed primarily due to the significant decline in our stock
price, the overall decline in industry growth rates and our
lower fourth quarter and projected fiscal 2002 operating
results. As a result, we determined that the carrying value of
goodwill and other intangible assets identified below would not
be recoverable based upon the existence of one or more of these
indicators of impairment, and recorded an impairment charge
aggregating $2.5 million in the fourth quarter of fiscal
2001, as described below.

We recorded a $1.4 million impairment charge
to adjust goodwill and other intangible assets and deferred
costs associated with our acquisition of First Floor Software,
Inc. to zero, which approximated its estimated fair value. The
estimate of fair value was based upon the discounted estimated
cash flows for the succeeding three years using a discount rate
of 25%. The assumption supporting the estimated cash flows,
including the discount rate and an estimated terminal value,
reflects managements best estimates. The discount rate was
primarily based upon the weighted average cost of capital for
comparable companies.

Due to the large amount of excess computer
equipment on hand at March 31 2001, primarily resulting
from our reduction in force announced in January 2001, an
assessment of the carrying value of property and equipment was
performed. All excess capital equipment (i.e. no longer in
service) was reduced to its residual value based on published
resale information. The carrying value of assets determined not
to have any significant resale value were reduced to zero. As a
result, an impairment charge of $1.1 million was recorded
in the fourth quarter of fiscal 2001.

Sales
of Product Lines

On February 6, 2002, we completed the sale
of our intellectual property and significantly all of our
operating assets to PeopleSoft for $5.0 million in cash. At
the closing, PeopleSoft paid us $4.5 million and $500,000
was deposited into escrow to be held for six months as a
non-exclusive remedy to satisfy any claims that PeopleSoft may
have against us under the asset purchase agreement.

The total proceeds from the sale of
$5.0 million, less the book value of transferred equipment,
intangible assets, deferred revenue, and transaction costs,
based on their respective estimated fair values at the sale
date, were recorded as a gain on sale of assets in the quarter
ended March 31, 2002.

The calculation of the gain on the sale was
determined as follows (in thousands):

|                                                                 |              |   |       |       | 
|---------------------------------------------------------------- | ------------ | - | ----- | ----- | 
|Total consideration                                              |              | $ | 5,000 |      
|Book value of equipment, intangible assets and
	deferred revenue |              |   | (53   | )    
|Transaction costs                                                |              |   | (256  | )    
|                                                                 |              |   |       |      
|                                                                 | Gain on sale |   | $     | 4,691 | 
|                                                                 |              |   |       |      

In March 2001, we sold our MarketMaker business
to Digital River, Inc. in exchange for 1.63 million shares
of Common Stock of Digital River, valued at $7.9 million on
the date of sale. We incurred a loss in fiscal 2001 on the sale
of these assets in the aggregate amount of $49.7 million.

Chapter 11
Related Reorganization Items

The accompanying consolidated financial
statements have been prepared in accordance with SOP 90-7. SOP
90-7 requires charges, including professional fees, realized
gains and losses and provisions for losses resulting from the
reorganization and restructuring of the business due to our
bankruptcy filing to be reported separately.

The $2.9 million for Chapter 11 related
reorganization items in the consolidated and
debtor-in-possession statements of operations consisted of
approximately $2.1 million of estimated allowable claims
for rejected leases not previously accrued under a restructuring
plan, $256,000 of liabilities related to valid claims not
previously accrued, and $495,000 of professional fees for the
fiscal year ended March 31, 2002.

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Realized
Gains on Sale of Securities

On March 20, 2001, we sold the assets of
ConnectInc.com, our wholly-owned subsidiary, consisting of
ConnectInc.coms MarketMaker product line, to Digital
River, Inc., in exchange for approximately 1.63 million
shares of Common Stock of Digital River, valued at
$7.9 million on the date of sale. The agreement with
Digital River included a contingent earnout whereby we were
eligible to receive additional shares of Digital Rivers
Common Stock based upon the revenue generated by the MarketMaker
product, from sales by Digital River or by us, over the 13
months following March 21, 2001. According to the terms of
the contingent earnout, as of September 30, 2001, based
upon revenue generated by the MarketMaker product, we received
notice on October 23, 2001 from Digital River that we were
eligible to receive, and did receive, approximately 60,000
additional shares of Digital River Common Stock valued at
approximately $314,000. We commenced sales of Digital River
stock on October 23, 2001. During the year ended
March 31, 2002, we sold all 1.69 million shares of
Common Stock for net proceeds of approximately
$24.4 million, and a realized gain of approximately
$16.3 million.

Impairment
of Long Term Investments

In fiscal 2002, we incurred losses on our equity
investments of approximately $390,000. The losses related
primarily to declines in the fair value of our investments in
privately held companies, which we deemed to be other than
temporary.

In fiscal 2001, we determined that certain of our
investments had suffered an other-than-temporary decline in
value primarily due to their limited liquidity and poor
prospects for additional funding. We thus reduced their carrying
amounts to their estimated fair value by a charge of
$1.3 million.

Interest
and Other Income, Net

Interest and other income, net was $607,000 in
fiscal 2002, $3.6 million in fiscal 2001 and
$2.4 million in fiscal 2000. The decrease in fiscal 2002 is
primarily due to a reduction in interest income resulting from
the liquidation of investments to fund ongoing operations, as
well as increased losses on currency exchange. The increases in
fiscal 2001 and fiscal 2000 are both primarily due to interest
generated on higher average investments, and cash and cash
equivalents balances as a result of our initial public offering
in fiscal 2000.

Income
Taxes

We have incurred operating losses for all periods
from inception through March 31, 2002, and therefore have
not recorded a provision for federal or state income taxes for
fiscal 2001 or fiscal 2000. However, in fiscal 2002, we
generated revenues and established sales subsidiaries in foreign
locales. Accordingly, we have recorded a benefit for income
taxes of $36,000 for fiscal 2002, representing a reduction of
previously estimated taxes due on revenues generated in our
foreign locations. The benefit as a percentage of total net
revenue was 1%. We are in the process of liquidating and closing
down all of our foreign subsidiaries.

As of March 31, 2002, we had approximately
$82 million of federal and $22 million of state net
operating loss carryforwards available to offset future taxable
income, which expire in varying amounts beginning in 2009 and
2003, respectively. We had net deferred tax assets, including
our net operating loss carryforwards and tax credits of
$44.4 million as of March 31, 2001. We have recorded a
valuation allowance for the net deferred tax asset balance of
our deferred taxes assets, as the future realization of the tax
benefit is not currently likely. See Note 6 of the notes to the
consolidated financial statements. Under the provisions of the
Internal Revenue Code of 1986, as amended, substantial changes
in ownership may limit the amount of net operating loss
carryforwards that could be utilized annually in the future to
offset taxable income.

Liquidity and Capital Resources

As of March 31, 2002, we had
$26.5 million of cash and cash equivalents compared with
$8.4 million of cash and cash equivalents and
$24.4 million of short-term investments, as of
March 31, 2001. The increase in cash and cash equivalents
is largely attributable to proceeds from the sale of assets to
PeopleSoft, as well as

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the sale of all of the shares of Digital River
Common Stock held by us, for net proceeds of approximately
$24.4 million. We received $4.5 million upon the
closing of the sale to PeopleSoft on February 6, 2002, and
$500,000 was deposited into escrow to be held for six months as
a non-exclusive remedy to satisfy any claims that PeopleSoft may
have against us under the asset purchase agreement.


We expect cash and cash equivalents to continue
to decrease in the future, as we have ceased operations and are
no longer generating revenues, and we expect cash used in
operating and investing activities to continue to be greater
than cash provided by financing activities.

Cash used in operating activities was
$10.4 million for fiscal 2002, primarily from net losses,
net of non-cash expenses including depreciation, impairment of
long-lived assets, amortization and forgiveness of stockholder
notes, and a decrease in accounts payable and accrued
liabilities, offset by a decrease in accounts receivable. Cash
used in operating activities was $51.2 million for fiscal
2001, primarily from net losses, net of non-cash expenses
including depreciation, amortization and stock compensation, and
a decrease in accounts payable and accrued liabilities. Cash
used in operating activities was $17.7 million for fiscal
2000, primarily from net losses, net of non-cash expenses
including depreciation and stock compensation, and increases in
our accounts receivable and other current assets offset by
increases in accounts payable and accrued liabilities.

Net cash provided by investing activities was
$29.7 million for fiscal 2002, primarily related to sales
and maturities of investments, including the sale of all of our
Digital River stock. Net cash provided by investing activities
was $31.8 million for fiscal 2001, primarily related to
sales and maturities of investments, partially offset by the
purchase of capital equipment and software. Net cash used in
investing activities of $56.8 million for fiscal 2000,
related primarily to the purchase of investments after our
initial public offering and, to a lesser extent, purchases of
computer equipment and software.

Financing activities used $1.1 million in
fiscal 2002 primarily as a result of payments on debts and
leases. Financing activities provided $1.8 million in
fiscal 2001 and primarily related to the sales of our Common
Stock through the exercise of stock options, partially offset by
payments on debt and leases. Net cash provided by financing
activities of $84.9 million for fiscal 2000 consisted
primarily of net proceeds from the sale of our Common Stock in
our initial public offering. We have used debt and leases to
partially finance our operations and capital purchases.

In July 2001, in order to retain key employees
after our reductions in force, we agreed to pay retention
bonuses on the earlier of January 31, 2002 or the
occurrence of a change in our ownership, a further workforce
reduction, a dissolution, reorganization or restructuring. In
accordance with the terms of the retention plan, as a
consequence of our voluntary petition for reorganization under
Chapter 11 on December 14, 2001, the retention bonuses
of approximately $865,000 were paid in cash in December 2001,
prior to the bankruptcy filing.

As a result of our December restructuring
activities, we committed a further $175,000 to an employee
retention and severance program applicable to all remaining
employees in good standing who were not transferred to
PeopleSoft as part of our sale of assets to PeopleSoft in
February 2002. These remaining employees were eligible to
receive a pre-defined retention payment in the quarter ending
March 31, 2002; as a result, we have paid approximately
$140,000 as of March 31, 2002. The remainder will be paid
in cash during the June 2002 quarter.

In connection with the sale of assets to
PeopleSoft, we established a retention program in the aggregate
amount of $160,000, payable equally to 8 key employees, provided
that they remain in PeopleSofts employ for six months
after the closing of the sale of assets to PeopleSoft. This
retention is expected to be paid by August 31, 2002.

We do not expect to make capital expenditures
over the next 12 months, however, our capital requirements
will depend on many factors, including the success of our
reorganization, the form of our Chapter 11 plan of
reorganization, the aggregate amount to be fully distributed to
creditors to satisfy claims, the amount of any unknown claims or
contingent claims from creditors or equity holders, the outcome
of litigation, the cost to shut-down our international
subsidiaries and the costs of administering our Chapter 11
process, including legal and other fees.

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Post Filing Liquidity

On December 14, 2001 we filed a voluntary
petition for relief under Chapter 11 of the Bankruptcy Code
and as such all pending claims and litigation against us are
stayed automatically. Accordingly, we may reject or assume
pre-petition executory contracts as allowed by the Bankruptcy
Code. We have filed motions to reject certain unexpired leases
and executory contracts which have either already been approved
or are set for hearing before the Bankruptcy Court. We are
currently reviewing all remaining pre-petition executory
contracts to determine which commitments will be assumed or
rejected by us.

Currently, subject to resolution of outstanding
contingent claims, we believe that all known, non-disputed,
non-contingent claims will be paid in full. However, we are
subject to certain contingent liabilities as described in
Item 3  Legal Proceedings above, that may reduce
the amounts available to repay outstanding creditor claims.

Pre-Petition Liabilities

Due to the factors mentioned in the paragraphs
above, there is no assurance that there will be sufficient
assets to satisfy our pre-petition liabilities in whole. Under a
plan of reorganization, pre-petition creditors could receive
less than 100% of the face value of their claims. Although we
expect that we will have excess assets after payment of
liabilities, and that there is value for our equity securities,
there is no assurance that the holders of our equity securities
will receive value for their interests. Until resolution of such
claims, we may be unable to make a distribution to our equity
security holders, if at all. In addition, we have not yet
determined what our proposed plan will be, whether we will
liquidate and distribute all remaining assets after satisfaction
of liabilities, or whether we will merge or combine with or be
sold to another entity. It is not possible to predict the
outcome of the Chapter 11 Case, the terms and provisions of
any plan of reorganization, or the effect of the Chapter 11
reorganization process on the claims of our creditors or the
interests of our equity security holders.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards No. 141, Business
Combinations (SFAS 141). SFAS 141
requires the purchase method of accounting for business
combinations initiated after June 30, 2001 and eliminates
the pooling-of-interests method. We have not initiated any
business combinations since June 30, 2001 and accordingly
the implementation of SFAS 141 has not had a material
effect on our financial statements.

In July 2001, the FASB issued Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets (SFAS 142), which
is effective for fiscal years beginning after March 15,
2001. SFAS 142 requires, among other things, the
discontinuance of goodwill amortization. In addition, the
standard includes provisions upon adoption for the
reclassification of certain existing recognized intangibles as
goodwill, reassessment of the useful lives of existing
recognized intangibles, reclassification of certain intangibles
out of previously reported goodwill and the testing for
impairment of existing goodwill and other intangibles. We
recorded impairment charges aggregating $2.5 million in the
fourth quarter of fiscal 2001 to adjust goodwill and other
intangible assets to zero, and accordingly ceased goodwill
amortization. Accordingly, the implementation of SFAS 142 in
fiscal year 2002 has not had a material effect on our financial
statements.

In July 2001, the FASBs Emerging Issues
Task Force (EITF) reached final consensus on EITF
No. 00-25, Vendor Income Statement Characterization
of Consideration Paid to a Reseller of the Vendors
Products (EITF 00-25). EITF 00-25
generally requires that consideration, including equity
instruments, given to a customer be classified in a
vendors financial statements not as an expense, but as an
offset to revenue up to the amount of cumulative revenue
recognized or to be recognized. In November 2001, the EITF
reached consensus on EITF No. 01-09, Accounting for
Consideration Given by a Vendor to a Customer or Reseller of the
Vendors Products (EITF 01-09).
EITF 01-09 clarifies and modifies certain items discussed
in EITF 00-25. We have adopted these new standards in our
fiscal year ended March 31, 2002. The implementation of
EITF 00-25, EITF 01-09, and the accompanying
interpretive guidance has not had a material impact on our
financial position, results of operations, or cash flows.

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In August 2001, the FASB issued Statement of
Financial Accounting Standard No. 144
(SFAS 144) Accounting for the Impairment
or Disposal of Long-Lived Assets, which is effective
January 1, 2002. SFAS 144 supersedes FASB Statement
No. 121, Accounting for the Impairment or Disposal of
Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, and the accounting and reporting provisions relating
to the disposal of a segment of a business set forth in
Accounting Principles Board Opinion No. 30. This Statement
retains many of the fundamental provisions of SFAS 121 and
expands the scope of discontinued operations to include more
disposal transactions. We have adopted SFAS 144 in our
quarter ended March 31, 2002. The implementation of
SFAS 144 has not had a material effect on our financial
statements.

In August 2001, the FASB issued Statement of
Financial Accounting Standard No. 143
(SFAS 143) Accounting for Asset
Retirement Obligations, which is effective for fiscal
years beginning after June 15, 2002. Earlier adoption is
encouraged. SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement
costs. The Company does not believe the adoption of
SFAS 143 will have a material effect on its financial
statements.

In February 2002, the EITF issued Topic
Number D-103 Income Statement Characterization of
Reimbursements Received for Out-of-Pocket Expenses
Incurred, which is effective for financial statements
beginning after December 31, 2001. Topic Number 
 D-103 requires that reimbursements received for out-of-pocket
expenses incurred, generally, be characterized as revenue in the
statement of operations. We have adopted Topic Number D-103
in its quarter ended March 31, 2002. We have historically
recorded reimbursements for out-of-pocket expenses as net
amounts in cost of services revenue in the statement of
operations. In accordance with the transition guidance included
in Topic Number D-103, adoption required the
reclassification of financial statements for prior periods
presented for comparative purposes. The adoption of Topic
Number D-103 did not affect our net loss, financial
position or cash flows. The reclassification did affect the
presentation of certain revenue and cost of revenue items
contained within our financial statements.

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Factors That Could Affect Our Future
Performance

Our bankruptcy filing may have unanticipated
adverse impacts on our business and the ability of our
stockholders to realize value for their shares.

On December 14, 2001, we filed a voluntary
petition for bankruptcy protection under Chapter 11 of the
U.S. Bankruptcy Code. As a result, we are presently operating
our business as a debtor-in-possession.

Currently, neither we nor our creditors nor the
Equity Committee have proposed a plan of reorganization and
there can be no assurance that the Bankruptcy Court will confirm
any plan of reorganization that we or our creditors or our
equity committee may propose. As provided by the Bankruptcy
Code, we initially have the exclusive right to propose a plan of
reorganization for 120 days following the filing of our
Chapter 11 petition. We have obtained an order from the
Bankruptcy Court extending our exclusive rights to file a plan.
In connection with this order, we entered into a stipulation
with the Equity Committee established in the bankruptcy case
that, absent a further court order, allows the Equity Committee
to file its own plan after 60 days beyond our initial
period of exclusivity. If we fail to file a plan of
reorganization during our period of exclusivity or any extension
thereof, or if such plan is not accepted by the requisite
numbers of creditors and equity holders entitled to vote on the
plan, other parties in interest to our Chapter 11
proceeding may be permitted to propose their own plan or plans
of reorganization. The failure to have a plan of reorganization
approved by the Bankruptcy Court could result in a liquidation
of our remaining assets, consisting predominantly of our cash,
cash equivalents, equity investments and corporate shell.
Furthermore, there can be no assurance that there will be any
improvement in our financial condition or results of operations
upon consummation of a plan of reorganization, or that
sufficient assets will remain to repay creditors or make a
distribution to stockholders. During our Chapter 11
proceeding, we have incurred, and will continue to incur,
significant costs associated with the reorganization, including,
but not limited to, professional fees and other cash demands
typical in bankruptcy proceedings. These costs, which are being
expensed as incurred, are expected to significantly affect our
results of operations and decrease assets available for use in
the reorganization. Further, we may incur unanticipated expenses
of and liabilities associated with the bankruptcy.

In addition, we have not yet proposed our plan of
reorganization, and it is uncertain at this time what will be
the effect of the plan on our creditors and stockholders. We do
not know if the plan will provide for payment of the whole or
part of the claims of our creditors, nor whether there will be a
distribution to stockholders. Due to the existence of contingent
claims, such as the securities class action lawsuit filed
against us, we may not be able to make a full distribution for
some time, even if a distribution is made at all. We also may
propose in the plan a further sale of the company to an
unrelated third party, which could result in our stockholders
becoming stockholders in the combined entity, or we may propose
the liquidation and dissolution of the Company. Consequently, we
may be unable to develop, prosecute, confirm and consummate a
plan of reorganization, repay our creditors, make any
distributions to stockholders or reorganize by merging our
company with an existing business.

We have a history of losses, we have sold all
of our products and associated assets to other companies, and do
not expect to generate future revenues.

Since inception, we have funded our business
primarily through selling our stock, not from cash generated by
our business. With the exception of the third and fourth quarter
of fiscal 2002, we have incurred quarterly and annual losses in
each of the seven years since we were formed. We incurred net
losses of $3.9 million for the fiscal year ended March 31,
2002, as well as $141.3 million and $27.8 million for
the fiscal years ended March 31, 2001 and 2000,
respectively. As of March 31, 2002, we had an accumulated
deficit of $202.7 million. Moreover, our revenues reached a
high of $11.3 million in the quarter ended March 31,
2000 and have declined in every quarter since that date.

We have sold all of our intellectual property,
trademarks, tradenames, patents, copyrights, and associated
assets, including the intellectual property related to our
products, and we have scaled back our business to only very
limited administrative functions. Our sole source of income is
anticipated to be interest income earned on the cash realized
from the sale of our operating assets and, potentially, proceeds
from the sale of remaining

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tangible assets, and returns that may be
generated from our limited equity investments in generally
high-risk technology start-up companies. There can be no
assurance that this income will be sufficient to cover our
administrative costs and other costs, such as ongoing litigation
and the winding down of our international subsidiaries. We may
have insufficient cash to satisfy all of the claims of our
creditors or to make a distribution to stockholders, or to
reorganize and merge our company with an existing business.


Our ability to continue as a going
concern is uncertain.

The accompanying consolidated financial
statements have been prepared assuming that we will continue to
operate as a going concern, which contemplates continuity of
operations, control of operating costs and expenses and the
realization of asset sales and liquidation of liabilities and
commitments. While we expect that our cash on hand will provide
sufficient funds to allow us to meet our pre- and post-petition
debt, operating expenses and capital requirements while a plan
of reorganization is developed and considered, the bankruptcy
filing and related circumstances, and the sale of substantially
all of our operating assets, raise substantial doubt about our
ability to continue as a going concern. The appropriateness of
reporting on a going concern basis is dependent upon, among
other things, the availability of sufficient capital to meet
expenses, confirmation of a plan of reorganization, future
profitable operations, customer and employee retention and the
ability to generate sufficient cash from operations and
financing sources to meet our obligations as they become due. We
have considered all of the foregoing. However, our ability to
survive the bankruptcy and emerge as a going concern is
contingent on our sale to, or merger or combination with,
another company, or identification of another product or
business in which to invest, and there is no assurance that we
will undertake these actions. Without a sale to, or merger or
combination with, another company, we would likely file a plan
of reorganization that provides for our liquidation and
distribution of assets. Should some or all of our assumptions
prove to be unfounded or prove to be untrue in the future, our
results of operations and financial condition will be adversely
affected.

Additional claims may be filed against us in
our bankruptcy proceeding and may significantly affect
stockholder value.

We may incur additional, unknown claims, as part
of our bankruptcy proceeding that we cannot currently determine.
If such claims are filed, they will reduce the amount available
for distribution to our creditors and stockholders. Our
customers could file claims for termination of license
agreements or for loss of maintenance and support, or may claim
that the technical support and assistance offered by PeopleSoft
to our customers for the current versions of our Configurator
and Advisor products, and to correct errors in such products,
for a period of one year after the closing, is less than what we
had agreed to provide. In addition, we are subject to certain
contingent, unliquidated claims in connection with litigation
filed against us. These claims, once liquidated, may be higher
than expected, and may reduce the amounts available to repay
creditors or distribute to stockholders, if any.

We are no longer listed on the NASDAQ National
Market and the market in our stock may not continue.

In July 2001, our Common Stock was delisted from
the Nasdaq National Market. Our Common Stock is quoted on the
Nasdaq Over-the-Counter (OTC) Bulletin Board quotation service.
This has reduced the market and liquidity of our Common Stock
and consequently may adversely affect the ability of our
stockholders and broker/dealers to purchase and sell our shares
in an orderly manner or at all. The volume of trading in our
stock has continued to decline since our bankruptcy filing.
Trading in our Common Stock through market makers and quotation
on the OTC Bulletin Board entails other risks. Due in part to
the decreased trading price of our Common Stock and lack of
analyst coverage, the trading price of our Common Stock may
change quickly, and market makers may not be able to execute
trades as quickly as they could when the Common Stock was listed
on the Nasdaq National Market. Although trading continues, if
the plan of reorganization provides for liquidation of the
company, the plan will set forth the date on which stockholders
of record will be entitled to any distribution. In such an
event, trading in our stock will be suspended after such date.

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We may be unable to retain the personnel
necessary to manage our business through the bankruptcy
proceeding.

We will need to retain select personnel to
propose and submit for confirmation our plan of reorganization
and complete our bankruptcy proceeding. Although our board of
directors has entered into an agreement with Regent Pacific
Management Corporation to provide personnel to fill some of
these and other senior management positions, the agreement may
be canceled at any time, subject to notice provisions, after May
2002. Our agreement with David Powell, Inc., for the provision
of the services of our Chief Financial Officer, terminated in
February 2002, although Mr. Wright has agreed to remain in
his capacity as our Chief Financial Officer, at a reduced fee,
through April 30, 2002. If the agreement with Regent
Pacific is not renewed, the loss of the Regent Pacific personnel
could have a material adverse effect on our operations, and our
ability to propose and confirm a plan of reorganization,
especially during any transition phase to new management after
the cancellation or non-renewal. Similarly, if Regent Pacific
were no longer able to provide us with management services, our
ability to direct our business and manage the administration of
our bankruptcy proceeding could be hindered, and might
ultimately adversely affect our ability to repay creditors or
distribute any remaining assets to our stockholders, or may
require us to convert our bankruptcy proceeding to a liquidation
under Chapter 7 of the Bankruptcy Code. In addition, the
loss of the services of any other key administrative personnel
could materially adversely affect our ability to manage our
affairs while in bankruptcy.

We may experience difficulty collecting
amounts due from our customers.

Although PeopleSoft has, under the terms of our
asset purchase agreement and the servicing agreement entered
into pursuant thereto, agreed to be responsible to collect our
outstanding accounts receivable and transmit collections to us,
we may be unable to collect any of our outstanding accounts
receivable. With the recent economic slow down and the down turn
in the market for products and services offered by our
customers, many of these customers are forecasting that their
revenue for the foreseeable future will be lower than
anticipated, and some customers have experienced or are likely
to experience serious cash flow problems and even bankruptcy.
Economic conditions affecting our customers could cause
customers to become unable or unwilling to pay us in a timely
manner, or at all, for products and services that we have
provided them. These customers may also use our bankruptcy
filing, sale to PeopleSoft and termination of relations with the
customer as a reason to withhold payment on outstanding accounts
receivable. We have established allowances that we believe are
sufficient to cover losses due to bad debts.

Defects in our software products could result
in claims made against us.

Complex software products like ours may contain
undetected errors or defects, that may be detected at any point
in the life of the product. Although we no longer sell software
products, we may continue to be subject to claims from
customers, or from PeopleSoft, in the event errors are
discovered in our products. We have in the past discovered
software errors in our products. Errors may be found from time
to time in our products after commencement of commercial
shipments, resulting in claims made against us for increased
warranty and repair costs. Since our products are used for
company-wide, integral computer applications with potentially
strong impacts on our customers sales of their products,
errors, defects or other performance problems could result in
financial or other damages to our customers. Litigation over
such product claims, even if unsuccessful, would be time
consuming and costly. In addition, customers could file warranty
claims in our bankruptcy proceeding, reducing the total
available to repay other creditors and distribute to
stockholders, if any.

If PeopleSoft makes a claim against us under
the asset purchase agreement, the purchase price may be
decreased, resulting in a reduction of cash available for
repayment of creditors or distribution to
stockholders.

In connection with our sale of assets to
PeopleSoft, $500,000 of the purchase price was deposited in
escrow for six months as a non-exclusive remedy to satisfy any
claims that PeopleSoft may have against us

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under the asset purchase agreement. Should
PeopleSoft make, and ultimately prevail, on any such claim, the
claim will be satisfied from the escrow fund and the amount of
the purchase price will be reduced accordingly.


Pending litigation could cause us to incur
increased costs and result in a costly judgment or settlement
against us.

Since March 2001, various of our stockholders
have filed class action lawsuits against us, certain of our
current and former directors and officers and certain
underwriters of our initial public offering of Common Stock in
October 1999. The complaints, which have been consolidated,
alleged generally that we and other named defendants failed
properly to disclose certain underwriting arrangements or terms
in connection with our initial public offering, which resulted
in the manipulation of the price of our Common Stock. The
lawsuits seek an unspecified amount of damages and are based on
transactions in Calico Common Stock generally between October
1999 and June 2000. The uncertainty associated with these
substantial, unresolved lawsuits could seriously harm our
business and financial condition. The continued defense of these
lawsuits also could result in the diversion of resources.
Negative developments with respect to the lawsuits could cause
our stock price to decline significantly. In addition, although
we are unable to determine the amount, if any, that we may be
required to pay in connection with the defense and resolution of
these lawsuits, by settlement or otherwise, the size of any such
payments could seriously harm our financial condition and result
in decreased distributions to creditors and stockholders.
Because the complaints do not specify the amount of damages
plaintiffs seek, we are unable to estimate the possible range of
damages that could be awarded as a result of the lawsuits,
although plaintiffs in the lawsuit have filed a claim in our
bankruptcy proceeding in excess of $62 million. We maintain
directors and officers insurance applicable to the lawsuits, but
there can be no guarantee that the proceeds of such insurance
will be available for defense fees and costs, or payment of any
settlement or judgment in the lawsuits. We are also
contractually committed to indemnify officers and directors for
losses they may incur in defense, settlement, or judgment of
such suit. We have not set aside any financial reserves relating
to potential damages associated with these lawsuits. Because the
lawsuit represents a disputed, contingent, unliquidated claim,
we may be unable to confirm a plan of reorganization until
resolution of the lawsuit, or may have to set aside a reserve of
some or all of the cash that would otherwise be available to
satisfy claims of creditors or distributed to stockholders,
resulting in a reduced or delayed distribution, or eliminate
such distribution in its entirety.

Some of our investments in portfolio companies
may lose value or become impaired.

We have investments in several privately held
technology companies in development stage. These investments are
inherently risky because the companies businesses may
never develop, and we may incur losses related to these
investments. We may be required to reduce the value of those
investments as reflected on our balance sheet, which also may
affect our results of operations. If we incur a charge to
reflect other than temporary declines in the value of our
private equity investments below our recorded value, our balance
sheet and results of operations will be reduced.

The market valuations of technology companies
have been highly volatile in recent years, and in the most
recent year those market valuations have generally trended
downward. Because of this downward trend, we incurred charges
for the impairment of values of our investments of $390,000 for
the year ended March 31, 2002. The value of our investments
could be further impaired, and we may not receive any return on
our investment, causing the value of our assets to decline.

We intend to wind up all of our international
subsidiaries, which may cause us to incur costs associated with
their closure.

We intend to wind up and dissolve all of our
foreign and domestic subsidiaries, and expect to incur
additional costs as a result of their closure for termination of
employees, disposal of assets, termination of office leases and
related professional costs and fees. Such costs and expenses
will reduce the amount of cash that we might otherwise have
available to repay creditors and distribute any remaining assets
to stockholders, if any, if a liquidation and distribution is
made.

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We have implemented certain anti-takeover
provisions that may prevent or delay an acquisition of Calico
that might be beneficial to our stockholders.

Provisions of our certificate of incorporation
and bylaws, as well as provisions of Delaware law, could make it
more difficult for a third party to acquire us, even if doing so
would be beneficial to our stockholders. These provisions
include:



| |   |                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | establishment of a classified board of directors
	such that not all members of the board may be elected at one
	time;                                                                                
|
| |  | the ability of the board of directors to issue
	without stockholder approval up to 10,000,000 shares of
	preferred stock to increase the number of outstanding shares and
	thwart a takeover attempt;
|
| |  | no provision for cumulative voting in the
	election of directors, which would otherwise allow less than a
	majority of stockholders to elect director candidates;                                    
|
| |  | limitations on who may call special meetings of
	stockholders;                                                                                                                                       
|
| |  | prohibiting stockholder action by written
	consent, thereby requiring all stockholder actions to be taken
	at a meeting of our stockholders; and                                                     
|
| |  | establishing advance notice requirements for
	nominations for election to the board of directors or for
	proposing matters that can be acted upon by stockholders at
	stockholder meetings.          

Our stock price has been highly volatile and
has experienced a significant decline, particularly because our
business depends on the Internet, and may continue to be
volatile and decline.

The trading price of our Common Stock has
fluctuated widely in the past and is expected to continue to do
so in the future, as a result of a number of factors, many of
which are outside our control. In addition, the stock market has
experienced extreme price and volume fluctuations that have
affected the market prices of many technology and computer
software companies, particularly Internet-related companies, and
that have often been unrelated or disproportionate to the
operating performance of these companies. These broad market
fluctuations have adversely affected the market price of our
Common Stock. In the past, following periods of volatility in
the market price of a particular companys securities,
securities class action litigation has often been brought
against that company. Current pending securities class action
litigation could result in substantial costs and a diversion of
our managements attention and resources. Our Common Stock
reached a high of $0.66 during the year ended March 31,
2002 and traded as low as $0.03 through March 31, 2002.




Item
7A.     Quantitative and Qualitative
Disclosures About Market Risk

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.
However, due to the short-term nature of our cash investments,
we do not believe that we have a material risk exposure.

At March 31, 2002, we had cash and cash
equivalents consisting of cash and money market funds of
$26.5 million, compared to $32.8 million of cash, cash
equivalents and short-term investments at March 31, 2001,
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. Declines in
interest rates over time will reduce our interest income.

Equity Price
Risk

We have also invested in a small number of
privately held companies, almost all of which can still be
considered in the start-up or development stages. These
investments are inherently risky as the market for the
technologies or products the companies have under development
are typically in the early stages and may never materialize. We
could lose our entire initial investment in these companies. Our
investments are carried at original cost unless an other than
temporary decline in the value of the investment occurs, and at
such time

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the investment is written down to its estimated
fair value and a new cost basis is established. At
March 31, 2002, the carrying value of investments in
privately held companies aggregated $160,000 after writing them
down to the estimated fair value, and is included in long-term
investments in the accompanying consolidated balance sheets. We
monitor these investments for changes in value, including
impairment, by reference to factors such as the companies
technology, product launch, funding and liquidity.





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 annual report on
Form 10-K.

Selected Quarterly Results of
Operations

The Selected Quarterly Results of Operations
required by this Item 8 are included below.

Supplemental Data

The following table sets forth certain unaudited
quarterly statements of operations data for the fiscal years
ended March 31, 2001 and 2002. This information has been
derived from our consolidated, unaudited financial statements,
which, in managements opinion, have been prepared on the
same basis as the audited financial statements, and include all
adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the information for the
quarters presented. This information should be read in
conjunction with our audited consolidated financial statements
and the notes thereto included elsewhere in this document.

The amount and timing of operating expenses
generally has varied from quarter to quarter. As a result of the
sale of substantially all of our assets to PeopleSoft, we
believe that period-to-period comparisons of our operating
results are not meaningful, and as a result, you should not rely
upon our historical results as an indication of future
performance.

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CONSOLIDATED STATEMENT OF OPERATIONS
DATA

|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |        |         |  
|------------------------------------ | -------------------------------------------- | ----------------------------- | --- | ------------ | ------ | ------------- | --- | -------- | ------ | --------- | ---- | ------------ | ------ | ------------- | --- | -------- | ------ | - | --- | ------ | ------- | - | --- | ------ | ------- | - | - | ------ | ------- | - | - | ------ | ------- | -
|                                     |                                              |                              
|                                     |                                              | Quarter Ended                
|                                     |                                              |                              
|                                     |                                              | March 31,                     |     | December 31, |        | September 30, |     | June 30, |        | March 31, |      | December 31, |        | September 30, |     | June 30,
|                                     |                                              | 2002                          |     | 2001         |        | 2001          |     | 2001     |        | 2001      |      | 2000         |        | 2000          |     | 2000    
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |         
|                                     |                                              |                              
|                                     |                                              | (In thousands)               
|Net revenue:                         |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     | License                                      |                               | $   | 608          |        |               | $   | 458      |        |           | $    | 555          |        |               | $   | 1,118    |        |   | $   | 2,936  |         |   | $   | 1,569  |         |   | $ | 3,461  |         |   | $ | 5,026  |        
|                                     | Services                                     |                               |     | 266          |        |               |     | 633      |        |           |      | 816          |        |               |     | 1,142    |        |   |     | 2,672  |         |   |     | 4,275  |         |   |   | 5,171  |         |   |   | 6,139  |        
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     |                                              | Total net revenue             |     |              | 874    |               |     |          | 1,091  |           |      |              | 1,371  |               |     |          | 2,260  |   |     |        | 5,608   |   |     |        | 5,844   |   |   |        | 8,632   |   |   |        | 11,165  |  
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|Cost of net revenue:                 |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     | License                                      |                               |     | 43           |        |               |     | 12       |        |           |      | 66           |        |               |     | 124      |        |   |     | 751    |         |   |     | 851    |         |   |   | 275    |         |   |   | 357    |        
|                                     | Amortization of purchased technology         |                               |     |             |        |               |     |         |        |           |      |             |        |               |     |         |        |   |     |       |         |   |     |       |         |   |   | 483    |         |   |   | 497    |        
|                                     | Services                                     |                               |     | 233          |        |               |     | 850      |        |           |      | 533          |        |               |     | 1,356    |        |   |     | 3,425  |         |   |     | 4,717  |         |   |   | 6,271  |         |   |   | 5,509  |        
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     |                                              | Total cost of net revenue     |     |              | 276    |               |     |          | 862    |           |      |              | 599    |               |     |          | 1,480  |   |     |        | 4,176   |   |     |        | 5,568   |   |   |        | 7,029   |   |   |        | 6,363   |  
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     |                                              | Gross profit                  |     |              | 598    |               |     |          | 229    |           |      |              | 772    |               |     |          | 780    |   |     |        | 1,432   |   |     |        | 276     |   |   |        | 1,603   |   |   |        | 4,802   |  
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|Operating expenses:                  |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     | Sales and marketing                          |                               |     | 478          |        |               |     | 1,674    |        |           |      | 1,312        |        |               |     | 3,563    |        |   |     | 8,993  |         |   |     | 11,039 |         |   |   | 10,020 |         |   |   | 7,226  |        
|                                     | Research and development                     |                               |     | 493          |        |               |     | 1,334    |        |           |      | 1,487        |        |               |     | 2,623    |        |   |     | 5,919  |         |   |     | 5,866  |         |   |   | 5,723  |         |   |   | 5,384  |        
|                                     | General and administrative                   |                               |     | 1,716        |        |               |     | 1,219    |        |           |      | 1,940        |        |               |     | 2,394    |        |   |     | 2,643  |         |   |     | 2,370  |         |   |   | 1,824  |         |   |   | 1,506  |        
|                                     | Acquired in-process research and development |                               |     |             |        |               |     |         |        |           |      |             |        |               |     |         |        |   |     |       |         |   |     |       |         |   |   |       |         |   |   |       |        
|                                     | Amortization of intangibles                  |                               |     |             |        |               |     |         |        |           |      |             |        |               |     |         |        |   |     | 6,682  |         |   |     | 7,481  |         |   |   | 7,481  |         |   |   | 7,481  |        
|                                     | Impairment of long-lived assets              |                               |     | 822          |        |               |     | (74      | )      |           |      | 986          |        |               |     |         |        |   |     |       |         |   |     |       |         |   |   |       |         |   |   |       |        
|                                     | Loss on disposal of long-lived assets        |                               |     | 169          |        |               |     | 222      |        |           |      | 622          |        |               |     |         |        |   |     | 2,415  |         |   |     |       |         |   |   |       |         |   |   |       |        
|                                     | Restructuring and other activities           |                               |     | (9           | )      |               |     | 221      |        |           |      | 1,026        |        |               |     | 710      |        |   |     | 1,362  |         |   |     |       |         |   |   |       |         |   |   |       |        
|                                     | (Gain) loss on sales of product lines        |                               |     | (4,691       | )      |               |     | (314     | )      |           |      |             |        |               |     |         |        |   |     | 49,667 |         |   |     |       |         |   |   |       |         |   |   |       |        
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     |                                              | Total operating expenses      |     |              | (1,022 | )             |     |          | 4,282  |           |      |              | 7,373  |               |     |          | 9,290  |   |     |        | 77,681  |   |     |        | 26,756  |   |   |        | 25,048  |   |   |        | 21,597  |  
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     |                                              | Income (loss) from operations |     |              | 1,620  |               |     |          | (4,053 | )         |      |              | (6,601 | )             |     |          | (8,510 | ) |     |        | (76,249 | ) |     |        | (26,480 | ) |   |        | (23,445 | ) |   |        | (16,795 | )
|                                     | Interest and other income, net               |                               |     | 493          |        |               |     | (211     | )      |           |      | 195          |        |               |     | 130      |        |   |     | 717    |         |   |     | 849    |         |   |   | 947    |         |   |   | 1,111  |        
|                                     | Chapter 11 related reorganization items      |                               |     | (412         | )      |               |     | (2,476   | )      |           |      |             |        |               |     |         |        |   |     |       |         |   |     |       |         |   |   |       |         |   |   |       |        
|                                     | Realized gains on sale of securities         |                               |     | 17           |        |               |     | 16,244   |        |           |      |             |        |               |     |         |        |   |     |       |         |   |     |       |         |   |   |       |         |   |   |       |        
|                                     | Impairment of long-term investments          |                               |     |             |        |               |     | (390     | )      |           |      |             |        |               |     |         |        |   |     | (1,350 | )       |   |     |       |         |   |   |       |         |   |   |       |        
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     |                                              | Income (loss) before taxes    |     |              | 1,718  |               |     |          | 9,114  |           |      |              | (6,406 | )             |     |          | (8,380 | ) |     |        | (76,882 | ) |     |        | (25,631 | ) |   |        | (22,498 | ) |   |        | (15,684 | )
|Provision (benefit) for income taxes |                                              |                               | (11 | )            |        |               | (20 | )        |        |           | (150 | )            |        |               | 145 |          |        |   | 220 |        |         |   | 414 |        |         |   |  |        |         |   |  |       
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     |                                              | Net income (loss)             |     | $            | 1,729  |               |     | $        | 9,134  |           |      | $            | (6,256 | )             |     | $        | (8,525 | ) |     | $      | (77,102 | ) |     | $      | (26,045 | ) |   | $      | (22,498 | ) |   | $      | 15,684  |  
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|Net income (loss) per share:         |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     | Basic earnings per share                     |                               | $   | 0.05         |        |               | $   | 0.26     |        |           | $    | (0.18        | )      |               | $   | (0.24    | )      |   | $   | (2.20  | )       |   | $   | (0.75  | )       |   | $ | (0.65  | )       |   | $ | (0.46  | )      
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     | Weighted average shares                      |                               |     | 35,407       |        |               |     | 35,183   |        |           |      | 35,154       |        |               |     | 35,075   |        |   |     | 34,900 |         |   |     | 34,700 |         |   |   | 34,400 |         |   |   | 34,000 |        
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     | Diluted earnings per share                   |                               | $   | 0.05         |        |               | $   | 0.26     |        |           | $    | (0.18        | )      |               | $   | (0.24    | )      |   | $   | (2.20  | )       |   | $   | (0.75  | )       |   | $ | (0.65  | )       |   | $ | (0.46  | )      
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       
|                                     | Weighted average shares                      |                               |     | 35,569       |        |               |     | 35,349   |        |           |      | 35,154       |        |               |     | 35,075   |        |   |     | 34,900 |         |   |     | 34,700 |         |   |   | 34,400 |         |   |   | 34,000 |        
|                                     |                                              |                               |     |              |        |               |     |          |        |           |      |              |        |               |     |          |        |   |     |        |         |   |     |        |         |   |   |        |         |   |   |       

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License and service revenue declined
significantly in each quarter of fiscal 2002, as our performance
paralleled that of the economy generally. Operating and net
losses decreased significantly on a quarterly basis during
fiscal 2002, due to a substantial reduction in our workforce,
closure of foreign and domestic sales offices, reduction in our
headquarters office space, and disposal of assets.

During the third quarter of fiscal 2002, we sold
1.69 million shares of Digital River Common Stock for net
proceeds of approximately $24.4 million and a realized gain
of approximately $16.3 million.

During the fourth quarter of fiscal 2002, we
completed the sale of our intellectual property and
significantly all of our operating assets to Peoplesoft for
$5.0 million in cash. The total proceeds from the sale of
$5.0 million, less the book value of transferred equipment,
intangible assets, deferred revenue, and transaction costs, were
recorded as a gain on sale of product line of $4.7 million.




Item
9.     Changes In and Disagreements
With Accountants on Accounting and Financial
Disclosure

None.




PART III




Item
10.     Directors and Executive
Officers of the Registrant

Our Amended and Restated Certificate of
Incorporation provides for a classified board of directors
consisting of three classes of directors, each serving staggered
three-year terms. As a result, a portion of our Board of
Directors will be elected each year. At our initial public
offering in October 1999, to implement the classified board, two
of the nominees to the board were elected to one-year terms, two
were elected to two-year terms and two were elected to
three-year terms. Thereafter, directors are to be elected to
three year terms. Effective as of the date of the Annual Meeting
of Stockholders in 2000, the Board of Directors reduced the size
of the board to five members. Alan P. Naumann resigned as
both a Class I director and our president and chief
executive officer in July 2001. Gary J. Sbona has been
designated as Mr. Naumanns replacement on our Board
of Directors and will serve as a Class I director until the
2003 Annual Meeting of Stockholders. Messrs. Lacroute and
Unger are Class II directors whose terms expire as of the
date of the 2004 Annual Meeting of Stockholders.
Mr. Friedman is a Class III director whose term
expires at the 2002 Annual Meeting of Stockholders. As we do not
anticipate holding an annual meeting during 2002, it is expected
that Mr. Friedman will continue to serve until the next
meeting of stockholders is held.

Executive officers are appointed by the Board of
Directors on an annual basis and serve until their successors
have been duly elected and qualified. There are no family
relationships among any of our directors, officers or key
employees.

Directors.This section sets forth
information concerning the age and background of our current
directors.

|                    |  |                      |  |     |    |                |  |  |      | 
|------------------- |  | -------------------- |  | --- | -- | -------------- |  |  | ---- | 
|Name                |  | Position With Calico |  | Age |    | Director Since
|                    |  |                      |  |     |    |               
|Gary J. Sbona       |  | Director             |  |     | 58 |                |  |  | 2001 | 
|Bernard J. Lacroute |  | Director             |  |     | 58 |                |  |  | 1995 | 
|William D. Unger    |  | Director             |  |     | 52 |                |  |  | 1995 | 
|Joel P. Friedman    |  | Director             |  |     | 54 |                |  |  | 2000 | 

Gary J. Sbonahas
been a member of the Board since July 2001. Mr. Sbona also
currently serves as Chief Executive Officer and Chairman of the
Board of Directors for the following publicly-traded companies:
Accelerated Networks, Inc., a provider of broadband access
solutions for communications service providers, Auspex Systems,
Inc., a network attached storage company; Clarent Corporation, a
provider of software-based communications solutions; and Verity,
Inc., a knowledge retrieval software company. In addition, he
serves as a director of 3D Systems Corporation, a
publicly-traded solid imaging and mass customization company.
Since 1974, Mr. Sbona has served as Chief Executive Officer
and Chairman of the Board of Directors of

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Regent Pacific Management Corporation, a
professional services firm that is currently providing us with
management services.


Bernard J. Lacroutehas been a member of the Board since
June 1995. Mr. Lacroute has been a partner with Kleiner
Perkins Caufield & Byers since 1989. Prior to joining
Kleiner Perkins Caufield & Byers, Mr. Lacroute
held a number of senior executive positions in high technology
firms including Digital Equipment Corporation and Sun
Microsystems, Inc. Mr. Lacroute is a director of Brio
Technology, Inc., a publicly-traded software provider, and a
privately held company. Mr. Lacroute holds graduate degrees
in Physics from the University of Grenoble and in Engineering
from the Ecole Nationale Superieure dIngenieurs of France,
as well as an M.S. degree in Electrical Engineering from the
University of Michigan.

William D. Ungerhas
been a member of the Board since June 1995. Mr. Unger
joined the Mayfield Fund, a venture capital firm, in 1983, and
has been a general partner of several venture capital funds
affiliated with the Mayfield Fund since 1987. Before joining
Mayfield, Mr. Unger founded the executive recruitment firm
Positek. Mr. Unger is a director of several privately held
companies. Mr. Unger holds a B.A. degree in Elementary
Education form the University of Illinois.

Joel P. Friedmanhas
been a member of the Board since March 2000. Since February
2000, Mr. Friedman has been a General Partner in Accenture
Technology Ventures, formerly known as AC Ventures, the venture
capital arm of Accenture Ltd., formerly known as Andersen
Consulting LLP. Mr. Friedman joined Andersen Consulting LLP
in 1971 and in 1997 assumed worldwide leadership for the banking
and financial markets consulting practice, the largest industry
segment served by the firm. Mr. Friedman is a director of
Accenture Ltd., a publicly held consulting company, and two
privately held companies. Mr. Friedman holds a B.A. in
Economics from Yale University and an M.B.A. from Stanford
University.

Executive Officers.The following is a list of our
current Executive Officers and information concerning their age
and background.

|                     |  |     |    |                      |  |                                              
|-------------------- |  | --- | -- | -------------------- |  | ---------------------------------------------
|Name                 |  | Age |    | Position with Calico
|                     |  |     |    |                     
|James B. Weil        |  |     | 55 |                      |  | President and Chief Executive Officer        
|Leslie E. Wright     |  |     | 48 |                      |  | Interim Chief Financial Officer and Secretary
|H. Michael Hogan III |  |     | 39 |                      |  | Vice President                               

James B. Weilhas
been our President and Chief Executive Officer since July 2001.
From August 1999 to May 2001, Mr. Weil was a Senior Vice
President at Tacit Knowledge Systems, a privately held expertise
knowledge management software company. From October 1996 to July
1999, he served as President, Inprise Products at Borland
Software Corporation, an enterprise software company. From
January 1996 until November 1996, he was Vice
President  Field Operations for Ramco Systems, an
application software developer. Mr. Weil holds a B.A. in
Business from DePaul University.

Leslie E. Wrighthas
been our Interim Chief Financial Officer and Secretary since
April 2001. Mr. Wright has also been the interim Chief
Financial Officer of Pharsight Corporation since October 2001.
From August 1997 to July 1999, Mr. Wright was Vice
President, Finance and Chief Financial Officer for Infoseek
Corporation, an Internet portal company. From 1994 to July 1997,
he worked with Fractal Design Corporation, a graphics software
company, where from May 1995 to July 1997 he served as Chief
Operating Officer. From 1984 to 1994, Mr. Wright was
employed with The ASK Group, Inc., a software company, where
from 1986 through 1994, he served as Executive Vice President
and Chief Financial Officer. Mr. Wright holds a B.S. degree
in Business from San Jose State University. Mr. Wright is a
Certified Public Accountant in the State of California.

H. Michael Hogan IIIhas been a Vice President since August
2001. Mr. Hogan is also the Vice President, Finance and
Administration, Chief Financial Officer and Secretary of
Accelerated Networks. Mr. Hogan served as Senior Vice
President, Finance, Chief Financial Officer and Secretary of
3D Systems Corporation from September 1999 to February
2001. Mr. Hogan has been a Principal of Regent Pacific, the
professional services firm that is currently providing us with
management services, since November 1996.

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Mr. Hogan holds a B.A. from Colgate
University and is a Certified Insolvency Reorganization
Accountant and a Certified Turnaround Professional.


Compliance with Section 16(a) of the
Exchange Act

Section 16(a) of the Securities Exchange Act
of 1934 requires our executive officers, directors and persons
who beneficially own more than 10% of our Common Stock to file
initial reports of ownership and reports of changes in ownership
with the Securities and Exchange Commission (SEC).
Such persons are required by SEC regulations to furnish us with
copies of all Section 16(a) forms filed by such persons.

Based solely on our review of such forms
furnished to us and written representations from certain
reporting persons, we believe that all filing requirements
applicable to our executive officers, directors and more than
10% stockholders were complied with.




Item
11.     Executive
Compensation

The following table sets forth information
concerning the compensation during the fiscal years ended
March 31, 2002, 2001 and 2000 of our chief executive
officer, our other executive officers serving as of
March 31, 2002 who made in excess of $100,000 during the
fiscal year and two former executive officers whose compensation
would have required disclosure but for the fact that they were
no longer serving as executive officers as of March 31,
2002. See also Employment Contracts and Termination of
Employment and Change-in-Control Arrangements and
Certain Relationships and Related Transactions.

Summary Compensation Table

|                            |                         |                     |      |                     |  |            |         |              |  |           |       |              |  |  |   |        |  |  |        |         |  |   |         |   | 
|--------------------------- | ----------------------- | ------------------- | ---- | ------------------- |  | ---------- | ------- | ------------ |  | --------- | ----- | ------------ |  |  | - | ------ |  |  | ------ | ------- |  | - | ------- | - | 
|                            |                         |                     |      |                     |  |            |         |              |  |          
|                            |                         |                     |      |                     |  |            |         |              |  | Long Term
|                            |                         |                     |      | Compensation Awards
|                            |                         | Annual Compensation |      |                    
|                            |                         |                     |      | Securities          |  |           
|                            |                         |                     |      | Other Annual        |  | Underlying |         | All Other   
|Name and Principal Position |                         | Year                |      | Salary              |  | Bonus(1)   |         | Compensation |  | Options   |       | Compensation
|                            |                         |                     |      |                     |  |            |         |              |  |           |       |             
|James B. Weil(2)            |                         |                     | 2002 |                     |  |            |        |              |  |           |      |              |  |  |  |        |  |  |       |         |  |   |        |  
|                            | President and Chief     |                     |      | 2001                |  |            |         |             |  |           |       |             |  |  |   |       |  |  |        |        |  |   |         |  | 
|                            | Executive Officer       |                     |      | 2000                |  |            |         |             |  |           |       |             |  |  |   |       |  |  |        |        |  |   |         |  | 
|Leslie E. Wright(3)         |                         |                     | 2002 |                     |  |            |        |              |  |           |      |              |  |  |  |        |  |  | 33,750 |         |  |   |        |  
|                            | Interim Chief Financial |                     |      | 2001                |  |            |         |             |  |           |       |             |  |  |   |       |  |  |        |        |  |   |         |  | 
|                            | Officer and Secretary   |                     |      | 2000                |  |            |         |             |  |           |       |             |  |  |   |       |  |  |        |        |  |   |         |  | 
|Alan P. Nauman(4)           |                         |                     | 2002 |                     |  | $          | 76,070  |              |  |           |      |              |  |  |  |        |  |  |       |         |  | $ | 494,354 |  
|                            | Former President and    |                     |      | 2001                |  |            |         | 215,178      |  |           | $     | 52,189       |  |  |   |       |  |  |        | 300,000 |  |   |         |  | 
|                            | Chief Executive Officer |                     |      | 2000                |  |            |         | 211,667      |  |           |       | 45,797       |  |  |   |       |  |  |        | 300,000 |  |   |         |  | 
|Michelle A. Begun(5)        |                         |                     | 2002 |                     |  | $          | 114,060 |              |  | $         | 6,375 |              |  |  |  |        |  |  |       |         |  |   |        |  
|                            | Former Vice President,  |                     |      | 2001                |  |            |         | 153,379      |  |           |       | 7,330        |  |  |   | 25,000 |  |  |        | 300,000 |  |   |         |  | 
|                            | Human Resources         |                     |      | 2000                |  |            |         |             |  |           |       |             |  |  |   |       |  |  |        |        |  |   |         |  | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Bonuses are based on performance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(2) | Under the terms of our engagement agreement with
	Regent Pacific Management Corporation, Mr. Weil was
	appointed as our President and Chief Executive Officer as of
	July 16, 2001. In addition to Mr. Weil, in August
	2001, H. Michael Hogan III was appointed a Vice
	President of the Company. Mr. Weil and Mr. Hogan are
	employees of and are paid by Regent Pacific and had no direct
	compensation from Calico during the fiscal year ended
	March 31, 2002. For further information concerning the
	terms of our agreement with Regent Pacific and amounts paid
	thereunder, please see Item 13: Certain
	Relationships and Related Transactions.
|   
|(3) | Under the terms of our engagement of David
	Powell, Inc., Mr. Wright was appointed as our Interim Chief
	Financial Officer in April 2001. No separate amounts were paid
	to Mr. Wright. For further information concerning the terms
	of our agreement with David Powell and amounts paid thereunder,
	including our                                                                                                                                                                                                                                                                                                                                        

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##### Table of Contents



| |                                                                                                                                                                           
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | payment to David Powell in connection with the
	sale of certain of our assets to PeopleSoft, Inc., please see
	Item 13: Certain Relationships and Related
	Transactions.



|    |                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Mr. Naumann resigned as a director and our
	President and Chief Executive Officer as of July 16, 2001.
	Pursuant to the terms of an Independent Contractor Agreement
	entered into between Mr. Naumann and us as of July 16,
	2001, we paid Mr. Naumann a total of $290,000 through
	November 2001. The amount under All Other
	Compensation represents loan forgiveness.
|   
|(5) | Ms. Begun resigned as our Vice President,
	Human Resources in July 2001. Pursuant to the terms of a
	resignation agreement with us, Ms. Begun continued to vest
	on shares underlying option grants made to her through September
	2001.                                                                                                                                   

Stock Options Granted in Fiscal Year Ended
March 31, 2002

The following table provides the specified
information concerning grants of options to purchase
Calicos Common Stock made during the fiscal year ended
March 31, 2002, to the persons named in the Summary
Compensation Table. The options listed below were all granted
under our 1997 Stock Option Plan, as amended, and are
exercisable only upon the vesting of the underlying shares.
Vesting generally occurs over a four-year period, at the rate of
one-fourth on the first anniversary of the date of grant
and  1/48th per month thereafter for each full month of the
optionees continuous employment with Calico. Under both
our 1997 Stock Option Plan, as amended, and our 2000 Non-Officer
Stock Option Plan, our Board retains discretion to modify the
terms, including the prices, of outstanding options. For
additional information regarding options, see Report of
the Compensation Committee on Executive Compensation.

Option Grants In Last Fiscal Year

|                 |                         |                   |        |                    |  |             |   |                  |  |                |        |     |  |  |            |  |  |   |       |  |  |   |        |  | 
|---------------- | ----------------------- | ----------------- | ------ | ------------------ |  | ----------- | - | ---------------- |  | -------------- | ------ | --- |  |  | ---------- |  |  | - | ----- |  |  | - | ------ |  | 
|                 |                         |                   |        |                    |  |             |   |                  |  |               
|                 |                         |                   |        | Potential Realized
|                 |                         | Individual Grants |        | Value at Assumed  
|                 |                         |                   |        | Annual Rates of   
|                 |                         | Number of         |        | % of Total         |  |             |   | Stock Price     
|                 |                         | Securities        |        | Options            |  |             |   | Appreciation for
|                 |                         | Underlying        |        | Granted to         |  | Exercise or |   |                  |  | Option Term(3)
|                 |                         | Options           |        | Employees in       |  | Base Price  |   | Expiration       |  |               
|Name             |                         | Granted           |        | Fiscal Year(1)     |  | ($/Sh)(2)   |   | Date             |  | 5%             |        | 10%
|                 |                         |                   |        |                    |  |             |   |                  |  |                |        |    
|Leslie E. Wright |                         |                   | 33,750 |                    |  |             | * |                  |  | $              | 0.1875 |     |  |  | 04/03/2011 |  |  | $ | 3,980 |  |  | $ | 10,085 | 
|                 | Interim Chief Financial |                   |        |                    |  |             |   |                  |  |                |        |     |  |  |            |  |  |   |       |  |  |   |        |  | 
|                 | Officer and Secretary   |                   |        |                    |  |             |   |                  |  |                |        |     |  |  |            |  |  |   |       |  |  |   |        |  | 



---



| |   |                            
| | - | ---------------------------
| | * | Less than one percent (1%).



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Reflects total option grants made to executive
	officer during the fiscal year as a percentage of an aggregate
	of options to purchase 2,849,882 shares of our Common Stock that
	were granted to all Calico employees during the fiscal year
	ended March 31, 2002.                                                                                                                                                                                                                                         
|   
|(2) | All options were granted at market value on the
	date of grant.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(3) | Potential gains are net of exercise price, but
	before taxes associated with exercise. These amounts represent
	certain assumed rates of appreciation only, based on the
	Securities and Exchange Commission rules. Actual gains, if any,
	on stock option exercises are dependent on the future
	performance of the Common Stock, overall market conditions and
	the option holders continued employment through the
	vesting period. The amounts reflected in this table may not
	necessarily be achieved.

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##### Table of Contents



Option Exercises and Fiscal Year Ended
March 31, 2002 Year-End Option Values

The following table provides the specified
information concerning exercises of options to purchase
Calicos Common Stock in the fiscal year ended
March 31, 2002, and unexercised options held as of
March 31, 2002, by the persons named in the Summary
Compensation Table above.

Aggregate Option Exercises In Last Fiscal Year
and Fiscal Year-end Values

|                 |                         |             |        |          |  |                            |       |                      |  |             |   |               |  |  |   |  |  |  |   |  |  |  |   |  | 
|---------------- | ----------------------- | ----------- | ------ | -------- |  | -------------------------- | ----- | -------------------- |  | ----------- | - | ------------- |  |  | - |  |  |  | - |  |  |  | - |  | 
|                 |                         |             |        |          |  |                            |       |                     
|                 |                         |             |        |          |  | Number of Securities       |       | Value of Unexercised
|                 |                         |             |        |          |  | Underlying Unexercised     |       | In-the-Money Options
|                 |                         | Shares      |        |          |  | Options at Fiscal Year End |       | at Fiscal Year End  
|                 |                         | Acquired on |        | Value    |  |                            |       |                     
|Name             |                         | Exercise    |        | Realized |  | Exercisable                |       | Unexercisable        |  | Exercisable |   | Unexercisable
|                 |                         |             |        |          |  |                            |       |                      |  |             |   |              
|Leslie E. Wright |                         |             | 33,750 |          |  | $                          | 6,328 |                      |  |             |  |               |  |  |  |  |  |  |  |  |  |  |  | 
|                 | Interim Chief Financial |             |        |          |  |                            |       |                      |  |             |   |               |  |  |   |  |  |  |   |  |  |  |   |  | 
|                 | Officer and Secretary   |             |        |          |  |                            |       |                      |  |             |   |               |  |  |   |  |  |  |   |  |  |  |   |  | 

Employment Contracts and Termination of
Employment and Change-in-Control Arrangements

We currently do not have employment contracts or
change-of-control arrangements with our named executive
officers, except as described in Certain Relationships and
Related Transactions.

Compensation of Directors

Our non-employee directors do not receive any
compensation for their service as directors, other than
reimbursement of all reasonable out-of-pocket expenses for
attendance at meetings of the Board of Directors.

Compensation Committee Interlocks and Insider
Participation in Compensation Decisions

No member of our Compensation Committee serves as
a member of the Board of Directors or Compensation Committee of
any entity that has one or more executive officers serving as a
member of our Board of Directors or Compensation Committee.






|         |                                                                                                 
|-------- | ------------------------------------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
	Owners and Management and Related Stockholder
	Matters

The following table sets forth, as of
March 31, 2002, certain information with respect to the
beneficial ownership of our Common Stock by (i) each
stockholder known by us to be the beneficial owner of more than
5% of our Common Stock, (ii) each director and
director-nominee of Calico, (iii) the Chief Executive
Officer and the other executive officers of Calico as of
March 31, 2002, and (iv) all directors and executive
officers of Calico as a group.

|                                    |                                                       |                   |           |                |  |  |      |   | 
|----------------------------------- | ----------------------------------------------------- | ----------------- | --------- | -------------- |  |  | ---- | - | 
|                                    |                                                       | Amount and Nature |           | Percent of    
|                                    |                                                       | Of Beneficial     |           | Common Stock  
|Name of Beneficial Owner(1)         |                                                       | Ownership(2)      |           | Outstanding(3)
|                                    |                                                       |                   |           |               
|5% or Greater Holder                |                                                       |                   |           |                |  |  |      |  
|Kleiner Perkins Caufield & Byers(4) |                                                       |                   | 4,012,441 |                |  |  | 11.2 | %
|                                    | 2750 Sand Hill Road
	Menlo Park, California 94025     |                   |           |                |  |  |      |   | 
|Arthur F. Knapp(5)                  |                                                       |                   | 3,591,071 |                |  |  | 10.0 |  
|                                    | 5656 Country Club Parkway
	San Jose, California 95138 |                   |           |                |  |  |      |   | 
|William G. Paseman(6)               |                                                       |                   | 2,222,912 |                |  |  | 6.2  |  
|                                    | 14510 Big Basin Way, #165
	Saratoga, California 95070 |                   |           |                |  |  |      |   | 

38



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##### Table of Contents



|                                                            |  |                   |           |                |  |  |      | 
|----------------------------------------------------------- |  | ----------------- | --------- | -------------- |  |  | ---- | 
|                                                            |  | Amount and Nature |           | Percent of    
|                                                            |  | Of Beneficial     |           | Common Stock  
|Name of Beneficial Owner(1)                                 |  | Ownership(2)      |           | Outstanding(3)
|                                                            |  |                   |           |               
|Executive Officers                                          |  |                   |           |                |  |  |      | 
|James B. Weil                                               |  |                   |          |                |  |  |     | 
|Leslie E. Wright                                            |  |                   | 33,750    |                |  |  | *    | 
|H. Michael Hogan III                                        |  |                   |          |                |  |  |     | 
|                                                           
|Directors                                                   |  |                   |           |                |  |  |      | 
|Joel P. Friedman(7)                                         |  |                   | 307,200   |                |  |  | *    | 
|Bernard J. Lacroute(8)                                      |  |                   | 4,013,088 |                |  |  | 11.2 | 
|Gary J. Sbona(9)                                            |  |                   | 3,548,777 |                |  |  | 9.0  | 
|William D. Unger                                            |  |                   | 190,944   |                |  |  | *    | 
|                                                           
|Directors and executive officers as a group(7 persons) (10) |  |                   | 8,093,759 |                |  |  | 20.5 | 



---



|  |  |              
|- |  | -------------
|* |  | Less than 1%.



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) |  | The persons named in the table above have sole
	voting and investment power with respect to all shares of Common
	Stock shown as beneficially owned by them, subject to community
	property laws where applicable and to the information contained
	in the footnotes to this table.                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(2) |  | Under the rules of the Securities and Exchange
	Commission, a person is deemed to be the beneficial owner of
	shares that can be acquired by such person within 60 days
	upon the exercise of options. Only options granted before
	June 30, 1998 under our 1997 Stock Option Plan are
	immediately exercisable, subject to our right to repurchase
	unvested shares. None of the outstanding options which are
	exercisable within 60 days of March 31, 2002 and are
	treated as outstanding for purposes of this table are
	immediately exercisable and thus subject to the repurchase of
	unvested shares.                                                                            
|   
|(3) |  | Calculated on the basis of 35,868,280 shares of
	Common Stock outstanding as of March 28, 2002, the last
	business day of our fiscal year, except that shares of Common
	Stock underlying options exercisable within 60 days of
	March 31, 2002 are deemed outstanding for purposes of
	calculating the beneficial ownership of Common Stock of the
	holders of such options.                                                                                                                                                                                                                                                                                                            
|   
|(4) |  | Includes 3,109,752 shares held by Kleiner
	Perkins Caufield & Byers VII, L.P. and
	902,689 shares held by KPCB Java Fund, L.P. One of our
	directors, Mr. Lacroute, is a general partner of
	KPCB VII Associates, L.P. which in turn is a general
	partner of Kleiner Perkins Caufield & Byers VII, L.P.
	Mr. Lacroute is also a general partner of KPCB VIII
	Associates, L.P. which in turn is a general partner of KPCB Java
	Fund, L.P. Mr. Lacroute disclaims beneficial ownership of
	the shares held directly by Kleiner Perkins Caufield &
	Byers VII, L.P. and KPCB Java Fund, L.P. except to the
	extent of any indirect pecuniary interest in his distributive
	share therein.
|   
|(5) |  | Based upon information provided by Mr. Knapp
	in a Schedule 13D/A filed with the Securities and Exchange
	Commission on February 28, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(6) |  | Based upon information provided by
	Mr. Paseman in a Schedule 13G filed with the
	Securities and Exchange Commission on February 13, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|(7) |  | Includes 307,200 shares owned by AC II
	Technology B.V. (ACT II). ACT II is one of a series of
	entities that is directly or indirectly owned by a holding
	company that is, in turn, controlled by the partners of
	Accenture Ltd., formerly known as Andersen Consulting LLP.
	Mr. Friedman is a general partner of Accenture Technology
	Ventures, which is also controlled by Accenture Ltd.
	Mr. Friedman disclaims beneficial ownership of all shares
	held by ACT II or Accenture Ltd. except to the extent of
	any indirect pecuniary interest in his distributive share
	therein.                                                                                               
|   
|(8) |  | Includes 4,012,441 shares held by two
	partnerships associated with Kleiner Perkins Caufield &
	Byers, which are disclosed in note 4 to this table, and an
	additional 647 shares held directly by Mr. Lacroute.
	Mr. Lacroute disclaims beneficial ownership of all shares
	held by partnerships associated with Kleiner                                                                                                                                                                                                                                                                                                                                                                

39



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##### Table of Contents



| |                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------
| | Perkins Caufield & Byers, except to the
	extent of any indirect pecuniary interest in his distributive
	share therein.



|     |  |                                                                                                                                                                                       
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(9)  |  | All shares are issuable upon exercise of options
	to purchase our Common Stock that are fully vested and
	exercisable.                                                                
|    
|(10) |  | See Notes 5 through 9. Includes
	3,548,777 shares subject to options exercisable within
	60 days of March 31, 2002 and deemed beneficially
	owned by executive officers and directors.

Equity Compensation Plan Information

The following table sets forth, as of
March 31, 2002, certain information with respect to
securities to be issued under equity compensation plans.

Equity Compensation Plan Information

|                                                               |       |                      |           |                |  |                      |      |      |  |  |   |   | 
|-------------------------------------------------------------- | ----- | -------------------- | --------- | -------------- |  | -------------------- | ---- | ---- |  |  | - | - | 
|                                                               |       |                      |           | Weighted-      |  |                     
|                                                               |       |                      |           | average        |  |                     
|                                                               |       |                      |           | Exercise Price |  |                     
|                                                               |       | Number of securities |           | of             |  | Number of Securities
|                                                               |       | to be issued         |           | Outstanding    |  | Remaining Available 
|                                                               |       | Upon Exercise of     |           | Options,       |  | for Future Issuance 
|                                                               |       | Outstanding Options, |           | Warrants       |  | Under Equity        
|Plan Category                                                  |       | Warrants and Rights  |           | and Rights     |  | Compensation Plans  
|                                                               |       |                      |           |                |  |                     
|Equity compensation plans approved by security
	holders        |       |                      | 0         |                |  | $                    | 0.0  |      |  |  | 0 |  
|Equity compensation plans not approved by
	security holders(1) |       |                      | 3,548,777 |                |  | $                    | 0.18 |      |  |  | 0 |  
|                                                               |       |                      |           |                |  |                      |      |      |  |  |   |  
|                                                               | Total |                      |           | 3,548,777      |  |                      | $    | 0.18 |  |  |   | 0 | 
|                                                               |       |                      |           |                |  |                      |      |      |  |  |   |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Nonstatutory stock option agreement for
	3,548,777 shares granted to Gary J. Sbona on July 16,
	2001. Mr. Sbonas option originally vested in equal
	monthly installments over twelve months. However, pursuant to
	the terms of the stock option agreement, and in connection with
	the sale of assets to PeopleSoft, vesting of the option was
	accelerated and it is now fully vested and exercisable. The
	option will terminate on July 15, 2006, although it may
	terminate sooner if Mr. Sbonas employment with us is
	terminated. The option will terminate immediately if
	Mr. Sbonas employment is terminated for cause. If
	Mr. Sbonas employment terminates as a result of his
	death, the option will terminate 18 months after such
	termination of service (but in no event later than July 15,
	2006). If Mr. Sbonas employment terminates for any
	reason other than for cause or death, the option will terminate
	one year after his employment with us ceases (but in no event
	later than July 15, 2006).




Item
13.     Certain Relationships and
Related Transactions

Since April 1, 2000, there has not been, nor
is there currently proposed, any transaction or series of
similar transactions to which we were or are to be party in
which the amount involved exceeds $60,000, and in which any
director, executive officer or holder of more than 5% of any
class of our voting securities and members of that persons
immediate family had or will have a direct or indirect material
interest other than the transactions described below.

Business Partners

In September 1999 and in connection with our
initial public offering of Common Stock in October 1999, we
announced a strategic alliance with Andersen Consulting, LLP,
subsequently renamed Accenture, Ltd. As part of the alliance, we
agreed to use a minimum of $1.0 million worth of
Accentures consulting services over 18 months. In
addition, concurrent with the close of our initial public
offering of Common Stock, we sold 307,200 shares of our Common
Stock to AC II Technology B.V., an entity controlled by
Accenture, at a price per share of $13.02. As of the end of the
eighteenth month period on March 15, 2001, Accenture had
billed us

40



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##### Table of Contents



a total of $834,311, all of which was billed
during the fiscal year ended March 31, 2001. We were unable
to use the $165,689 which remained under our $1.0 million
commitment by the time of the sale to PeopleSoft. Joel Friedman,
one of our directors, is a General Partner in Accenture
Technology Ventures, formerly known as AC Ventures, the venture
capital arm of Accenture.


Agreements with Former Executive
Officers

On January 31, 2001, we entered into a
Confidential Resignation Agreement with H. Tayloe
Stansbury, our former Vice President, Engineering. Under the
terms of the agreement, we agreed to continue paying
Mr. Stansbury his annual salary of $146,250 until October
2001, equal to an aggregate amount to be paid of approximately
$96,525. We also agreed to allow Mr. Stansbury to continue
to vest on stock options granted to him through September 2001.

In connection with the resignation of
Ms. Michelle A. Begun in July 2001 from her position as
Vice President, Human Resources, we entered into an agreement
with Ms. Begun under which she continued to vest through
September 2001 on shares underlying stock option grants
previously made to her.

On July 16, 2001, we entered into a
Separation Agreement and Release with Alan P. Naumann, our
former President, Chief Executive Officer and member of our
Board of Directors. Under the terms of the agreement, we agreed
to forgive outstanding loans by Mr. Naumann in favor of us
issued in connection with the exercise of options in an
aggregate amount of $607,000, including unpaid principal and
interest, net of our repurchase of 87,497 shares of Common
Stock held by Mr. Naumann at an aggregate price of
$113,000, representing the original purchase price, that had not
vested as of July 16, 2001. We also agreed to reimburse
Mr. Naumann for the cost of health and dental benefits, and
agreed that he could continue use of a laptop computer and
accessories until November 16, 2001.

We also entered into a consulting agreement with
Mr. Naumann, under which we agreed to pay Mr. Naumann
the sum of $72,500 per month, for four months beginning
August 1, 2001 and ending November 1, 2001, or an
aggregate of $290,000, in return for consulting services and
assistance in the transition to new management.

Employment Contracts, Termination of
Employment and Change-in-Control Arrangements and Management
Consulting Services

Agreement
with David Powell, Inc. and Leslie E. Wright

On February 22, 2001, we entered into an
engagement letter with David Powell, Inc. (the David
Powell Agreement) pursuant to which we agreed to pay David
Powell, Inc. a monthly fee, plus a bonus payable quarterly on
meeting performance obligations in return for retaining Leslie
E. Wright as our Interim Chief Financial Officer for an initial
two month noncancellable term, and thereafter terminable upon
30 days written notice by us or David Powell Inc. The
agreement was later changed to provide for a monthly fee with
the bonus eliminated. In accordance with the terms of the David
Powell Agreement, we granted Mr. Wright an option to
purchase 33,750 shares of our Common Stock at an exercise
price of $0.1875 per share. The shares underlying the option
were fully vested and exercisable, and Mr. Wright exercised
this option during our fiscal year ended March 31, 2002. In
addition, as a result of the sale to PeopleSoft, 1% of the
purchase price payable by PeopleSoft, minus the value of the
vested options granted to Mr. Wright as of the date the
sale closed, was paid to David Powell, Inc. as a bonus relating
to services rendered by Mr. Wright. In February 2002, we
amended the agreement with David Powell Inc. to reduce the
monthly fee under the agreement through April 30, 2002. We
also entered into an Indemnification Agreement with
Mr. Wright pursuant to which we agreed to indemnify
Mr. Wright for certain liabilities arising out of the
performance of services under the agreement.

Agreement
with Regent Pacific Management Corporation and Gary J.
Sbona

In July 2001, Mr. James B. Weil replaced
Mr. Alan Naumann as our Chief Executive Officer and
Mr. Gary J. Sbona was appointed to the Board of Directors.
In addition, we entered into an agreement with

41



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##### Table of Contents



Regent Pacific Management Corporation
(Regent Pacific), a management firm of which
Mr. Sbona is the Chief Executive Officer and Mr. Weil
is a principal, pursuant to which Regent Pacific has provided
management services to us, including the services of
Mr. Sbona and Mr. Weil, and other Regent Pacific
personnel. The initial agreement had a 6 month term
commencing July 2001 with compensation to Regent Pacific of
$1.3 million for that period. The agreement requires that
we indemnify Regent Pacific and Mr. Sbona for certain
liabilities arising out of the performance of services under the
agreement. In December 2001, we amended the agreement with
Regent Pacific to extend the noncancellable term of the
agreement to May 2002, and in connection thereto, paid to Regent
Pacific $750,000 as fees due for the noncancellable portion of
the agreement. In April 2002, we further amended our agreement
with Regent Pacific to provide that after May 5, 2002,
Regent Pacific will continue to provide management services to
us indefinitely at a rate of $15,000 per week.


In addition, as part of the original engagement,
Mr. Sbona was granted an option to purchase 3,548,777
shares of the Companys Common Stock. Vesting on all of the
shares underlying the option accelerated as a result of the sale
to PeopleSoft, and the option is now fully vested and
exercisable. Separately, in connection with entering into the
agreement with Regent Pacific, in July 2001 we also entered into
an employment agreement with Mr. Sbona under which we have
agreed to pay him $500 per week for so long as the agreement
with Regent Pacific remains in effect.

In addition, at the time of the original
engagement, we entered into Indemnification Agreements with
Mr. Weil, Mr. Sbona and H. Michael Hogan III, a
Vice-President of the Company and a principal of Regent Pacific,
that requires us to indemnify them for certain liabilities
arising out of the performance of services under the agreement.




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:

|                                                                    |  |      |     | 
|------------------------------------------------------------------- |  | ---- | --- | 
|                                                                    |  | Page
|                                                                    |  |     
|Report of Independent Accountants                                   |  |      | F-2 | 
|Consolidated Balance Sheets                                         |  |      | F-3 | 
|Consolidated Statements of Operations and Other
	Comprehensive Loss |  |      | F-4 | 
|Consolidated Statements of Stockholders
	Equity                    |  |      | F-5 | 
|Consolidated Statements of Cash Flows                               |  |      | F-6 | 
|Notes to Consolidated Financial Statements                          |  |      | F-7 | 



| |                                      
| | -------------------------------------
| | 2.     Financial
	Statement Schedules



| |                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Financial statement schedules have been omitted
	because the information required to be set forth therein is not
	applicable or is shown in the financial statements or the notes
	thereto.



| |                
| | ---------------
| | 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.

42



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##### Table of Contents



(a) Exhibits

EXHIBIT INDEX

|    |          |             |  |                                                                                                                                                                                                                                                                           
|--- | -------- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No. |          | Description
|    |          |            
|    | 2.1(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(1)   |             |  | Form of Agreement and Plan of Merger between
	Calico Technology, Inc., a California corporation, and Calico
	Commerce, Inc., a Delaware corporation                                                                                                                       
|    | 2.3(2)   |             |  | Agreement and Plan of Merger dated as of
	November 19, 1999 by and between Calico Commerce, Inc.,
	ConnectInc.com, Co., and Calico Acquisition, Inc.                                                                                                                      
|    | 2.4(3)   |             |  | Asset Purchase Agreement, dated March 20,
	2001, by and between Calico, ConnectInc.com, Co. and Digital
	River, Inc.                                                                                                                                                      
|    | 2.5(4)   |             |  | Asset Purchase Agreement dated as of
	December 12, 2001 by and between Registrant and PeopleSoft,
	Inc.                                                                                                                                                                   
|    | 3.1(1)   |             |  | Certificate of Incorporation                                                                                                                                                                                                                                              
|    | 3.2(1)   |             |  | Bylaws                                                                                                                                                                                                                                                                    
|    | 10.1(1)  |             |  | Office Lease between Metropolitan Life Insurance
	Company and Calico Commerce, Inc. dated as of August 18,
	1999                                                                                                                                                          
|    | 10.2(1)  |             |  | 1997 Stock Option Plan and forms of agreements
	thereunder                                                                                                                                                                                                                
|    | 10.3(1)  |             |  | 1995 Stock Option Plan and forms of agreements
	thereunder                                                                                                                                                                                                                
|    | 10.4(1)  |             |  | 1999 Employee Stock Purchase Plan                                                                                                                                                                                                                                         
|    | 10.5(1)  |             |  | Form of Indemnity Agreement for directors and
	officers                                                                                                                                                                                                                   
|    | 10.6(1)  |             |  | 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(1)  |             |  | Loan Agreement dated as of January 21, 1997
	between Calico Technology, Inc. and Venture Lending and Leasing,
	Inc.                                                                                                                                                       
|    | 10.8(1)  |             |  | Four Variable Rate Installment Notes between
	Calico Technology, Inc. and Comerica Bank  California                                                                                                                                                                      
|    | 10.9(1)  |             |  | Common Stock Purchase Agreement dated
	September 3, 1999 between Calico Commerce, Inc. and Dell
	U.S.A., L.P.                                                                                                                                                             
|    | 10.10(1) |             |  | Letter Agreement between Andersen Consulting LLP
	and Calico Commerce, Inc. dated September 17, 1999                                                                                                                                                                      
|    | 10.11(1) |             |  | Common Stock Purchase Agreement dated
	September 29, 1999 between Calico Commerce, Inc. and AC II
	Technology (ACT II) B.V.                                                                                                                                               
|    | 10.12(1) |             |  | Amendment Number Nine to Investors Rights
	Agreement dated September 28, 1999                                                                                                                                                                                            
|    | 10.13(5) |             |  | Amended and Restated Loan and Security Agreement
	dated October 15, 1999 between Calico Commerce, Inc. and
	Comerica Bank  California                                                                                                                                    
|    | 10.14(6) |             |  | 2000 Non-officer Stock Option Plan                                                                                                                                                                                                                                        
|    | 10.15(7 | )           |  | Software License Agreement dated April 27,
	1999, as amended October 28, 1999, between Calico Commerce, Inc.
	and WebXpress, A BEA Company                                                                                                                                
|    | 10.16(8 | )           |  | Second Amendment, dated April 28, 2000, and
	Third Amendment, dated March 15, 2001, to Software License
	Agreement between Calico Commerce, Inc. and WebXpress, A BEA
	Company                                                                                            
|    | 10.17(9) |             |  | Security Agreement by and between Calico
	Commerce, Inc. and Comerica Bank  California, dated
	March 16, 2001                                                                                                                                                            
|    | 10.18(10 | )           |  | Common Stock Warrant issued to Anjes, Inc. dated
	December 28, 2000                                                                                                                                                                                                       

43



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##### Table of Contents



|    |          |             |  |                                                                                                                                                
|--- | -------- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|No. |          | Description
|    |          |            
|    | 10.19(11 | )           |  | Common Stock Warrant issued to Hefei Xin Hua Hai
	Electronics Limited dated December 28, 2000                                                  
|    | 10.20 ( | 12)         |  | Letter of Agreement Regarding Financial Services
	Proposal by and between Calico Commerce, Inc. and David Powell,
	Inc. dated February 22, 2001
|    | 10.21(13 | )           |  | Separation Agreement and Release by and between
	Alan P. Naumann and Calico Commerce, Inc., dated July 16,
	2001                               
|    | 10.22(14 | )           |  | Independent Contractor Agreement by and between
	Alan P. Naumann and Calico Commerce, Inc., dated July 16,
	2001                               
|    | 10.23(15 | )           |  | Retainer Agreement by and between Regent Pacific
	Management Corporation and Calico Commerce, Inc., dated
	July 13, 2001                       
|    | 10.24(16 | )           |  | Employment Agreement by and between Gary J. Sbona
	and Calico Commerce, Inc. dated July 16, 2001                                               
|    | 10.25(17 | )           |  | Stock Option Agreement by and between Gary J.
	Sbona and Calico Commerce, Inc. dated July 16, 2001                                             
|    | 10.25(18 | )           |  | First Amendment to Management Services Agreement
	between Regent Pacific Management Corporation and Registrant,
	dated December 6, 2001        
|    | 10.26(19 | )           |  | First Amendment to Financial Services Arrangement
	between David Powell, Inc. and Registrant, dated
	December 6, 2001                          
|    | 21.1     |             |  | List of Subsidiaries                                                                                                                           



---



|     |  |                                                                                                                      
|---- |  | ---------------------------------------------------------------------------------------------------------------------
|(1)  |  | Incorporated herein by reference to Calicos
	Registration Statement on Form S-1, as amended (File
	No. 333-82907)   
|    
|(2)  |  | Incorporated herein by reference to Calicos
	Current Report on Form 8-K filed November 29, 1999                     
|    
|(3)  |  | Incorporated herein by reference to Calicos
	Current Report on Form 8-K filed April 4, 2001                         
|    
|(4)  |  | Incorporated herein by reference to Calicos
	Quarterly Report on Form 10-Q filed February 19, 2002                  
|    
|(5)  |  | Incorporated herein by reference to Calicos
	Quarterly Report on Form 10-Q filed November 16, 1999                  
|    
|(6)  |  | Incorporated herein by reference to
	Exhibit 10.13 on Calicos Annual Report on
	Form 10-K filed June 29, 2000       
|    
|(7)  |  | Incorporated herein by reference to
	Exhibit 10.14 on Calicos Annual Report on
	Form 10-K filed June 29, 2000       
|    
|(8)  |  | Incorporated herein by reference to
	Exhibit 10.15 on Calicos Annual Report on
	Form 10-K filed July 13, 2001       
|    
|(9)  |  | Incorporated herein by reference to
	Exhibit 10.16 on Calicos Annual Report on
	Form 10-K filed July 13, 2001       
|    
|(10) |  | Incorporated herein by reference to
	Exhibit 10.17 on Calicos Annual Report on
	Form 10-K filed July 13, 2001       
|    
|(11) |  | Incorporated herein by reference to
	Exhibit 10.18 on Calicos Annual Report on
	Form 10-K filed July 13, 2001       
|    
|(12) |  | Incorporated herein by reference to
	Exhibit 10.19 on Calicos Annual Report on
	Form 10-K filed July 13, 2001       
|    
|(13) |  | Incorporated herein by reference to
	Exhibit 10.15 on Calicos Quarterly Report on
	Form 10-Q filed August 14, 2001  
|    
|(14) |  | Incorporated herein by reference to
	Exhibit 10.16 on Calicos Quarterly Report on
	Form 10-Q filed August 14, 2001  
|    
|(15) |  | Incorporated herein by reference to
	Exhibit 10.17 on Calicos Quarterly Report on
	Form 10-Q filed August 14, 2001  
|    
|(16) |  | Incorporated herein by reference to
	Exhibit 10.18 on Calicos Quarterly Report on
	Form 10-Q filed November 14, 2001

44



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##### Table of Contents





|     |  |                                                                                                                                                       
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|(17) |  | Incorporated herein by reference to
	Exhibit 10.19 on Calicos Quarterly Report on
	Form 10-Q filed November 14, 2001                                 
|    
|(18) |  | Incorporated herein by reference to
	Exhibit 10.20 on Calicos Quarterly Report on
	Form 10-Q filed February 19, 2002                                 
|    
|(19) |  | Incorporated herein by reference to
	Exhibit 10.21 on Calicos Quarterly Report on
	Form 10-Q filed February 19, 2002                                 
|    
|    |  | 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 filed on
	February 21, 2002.

45



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) 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.



| |                      
| | ---------------------
| | CALICO COMMERCE, INC.



| |     |                  
| | --- | -----------------
| | By: | /s/ JAMES B. WEIL

| |                                       
| | --------------------------------------
| |                                       
| | James B. Weil                         
| | President and Chief Executive
	Officer

Date: May 1, 2002

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE
PRESENTS, that each person whose
signature appears below constitutes and appoints James B. Weil
and Leslie E. Wright, and each of them, as such persons
true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for such person and in such
persons name, place and stead, in any and all capacities,
to sign any and all amendments to this report on Form 10-K,
and to file same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as
such person might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of
them, or their or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed by the
following persons in the capacities and on the dates indicated:

|                                           |  |                                                                                |  |            
|------------------------------------------ |  | ------------------------------------------------------------------------------ |  | -----------
|                                           |  |                                                                               
|Signature                                  |  | Title                                                                         
|                                           |  |                                                                               
|                                          
|/s/ JAMES B. WEILJames B. Weil             |  | President and Chief Executive Officer
	(Principal Executive Officer)           |  | May 1, 2002
|                                          
|/s/ LESLIE E. WRIGHTLeslie E. Wright       |  | Interim Chief Financial Officer
	(Principal Financial and
	Accounting Officer) |  | May 1, 2002
|                                          
|/s/ JOEL P. FRIEDMANJoel P. Friedman       |  | Director                                                                       |  | May 1, 2002
|                                          
|/s/ BERNARD J. LACROUTEBernard J. Lacroute |  | Director                                                                       |  | May 1, 2002
|                                          
|/s/ WILLIAM D. UNGERWilliam D. Unger       |  | Director                                                                       |  | May 1, 2002
|                                          
|/s/ GARY J. SBONAGary J. Sbona             |  | Director                                                                       |  | May 1, 2002

46



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##### Table of Contents



CALICO COMMERCE, INC.






INDEX TO FINANCIAL STATEMENTS


|                                                         |                                                                     |      |  |     | 
|-------------------------------------------------------- | ------------------------------------------------------------------- | ---- |  | --- | 
|                                                         |                                                                     | Page
|                                                         |                                                                     |     
|CALICO COMMERCE, INC. CONSOLIDATED FINANCIAL
	STATEMENTS |                                                                     |      |  |    
|                                                         | Report of Independent Accountants                                   |      |  | F-2 | 
|                                                         | Consolidated Balance Sheets                                         |      |  | F-3 | 
|                                                         | Consolidated Statements of Operations and Other
	Comprehensive Loss |      |  | F-4 | 
|                                                         | Consolidated Statements of Stockholders
	Equity                    |      |  | F-5 | 
|                                                         | Consolidated Statements of Cash Flows                               |      |  | F-6 | 
|                                                         | Notes to Consolidated Financial Statements                          |      |  | F-8 | 

F-1



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##### Table of Contents



REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of

Calico Commerce, Inc. (a debtor-in-possession)


In our opinion, the consolidated financial
statements listed in the index appearing under
Item 14(a)(1) on page 42 present fairly, in all material
respects, the financial position of Calico Commerce, Inc. (a
debtor-in-possession) and its subsidiaries at March 31,
2002 and 2001, and the results of their operations and their
cash flows for each of the three years in the period ended
March 31, 2002 in conformity with accounting principles
generally accepted in the United States of America. 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 of
America, 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 our opinion.

The accompanying consolidated financial
statements have been prepared assuming that the Company will
continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, on December 14, 2001,
the Company filed a voluntary petition for reorganization under
Chapter 11 of the United States Bankruptcy Code. The
uncertainties inherent in the bankruptcy process and the
Companys sale of its operating assets raise substantial
doubt about the Companys ability to continue as a going
concern. Managements plans in regard to these matters are
also described in Note 1. The consolidated financial
statements do not include any adjustments that may result from
the outcome of these uncertainties.

April 29, 2002

San Francisco, California


F-2



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##### Table of Contents



CALICO COMMERCE, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share
amounts)


On December 14, 2001, Calico Commerce, Inc.
(the Debtor) filed a voluntary petition for relief
(the Filing) under Chapter 11 of the United
States Bankruptcy Code (the Bankruptcy Code). Please
see Note 1 of the Notes to the Consolidated Financial
Statements.

|                                           |                                                                                                             |                            |        |          |        |   |        |          |        | 
|------------------------------------------ | ----------------------------------------------------------------------------------------------------------- | -------------------------- | ------ | -------- | ------ | - | ------ | -------- | ------ | 
|                                           |                                                                                                             |                           
|                                           |                                                                                                             | March 31,                 
|                                           |                                                                                                             |                           
|                                           |                                                                                                             | 2002                       |        | 2001    
|                                           |                                                                                                             |                            |        |         
|ASSETS                                    
|Current assets:                            |                                                                                                             |                            |        |          |        |   |        |         
|                                           | Cash and cash equivalents                                                                                   |                            | $      | 26,536   |        |   | $      | 8,354    |       
|                                           | Restricted cash                                                                                             |                            |        | 500      |        |   |        | 400      |       
|                                           | Short-term investments                                                                                      |                            |        |         |        |   |        | 24,411   |       
|                                           | Accounts receivable, net                                                                                    |                            |        | 380      |        |   |        | 2,582    |       
|                                           | Prepaid and other current assets                                                                            |                            |        | 1,991    |        |   |        | 2,449    |       
|                                           |                                                                                                             |                            |        |          |        |   |        |         
|                                           |                                                                                                             | Total current assets       |        |          | 29,407 |   |        |          | 38,196 | 
|Long-term investments                      |                                                                                                             |                            | 160    |          |        |   | 250    |         
|Restricted time-deposit                    |                                                                                                             |                            | 600    |          |        |   | 1,450  |         
|Property and equipment, net                |                                                                                                             |                            | 218    |          |        |   | 4,644  |         
|Other assets                               |                                                                                                             |                            | 190    |          |        |   | 190    |         
|                                           |                                                                                                             |                            |        |          |        |   |        |         
|                                           |                                                                                                             | $                          | 30,575 |          |        | $ | 44,730 |         
|                                           |                                                                                                             |                            |        |          |        |   |        |         
|LIABILITIES AND STOCKHOLDERS
	EQUITY     
|Current liabilities:                       |                                                                                                             |                            |        |          |        |   |        |         
|                                           | Accounts payable                                                                                            |                            | $      | 203      |        |   | $      | 1,823    |       
|                                           | Accrued liabilities                                                                                         |                            |        | 1,058    |        |   |        | 11,187   |       
|                                           | Deferred revenue                                                                                            |                            |        |         |        |   |        | 2,031    |       
|                                           | Current portion of notes payable                                                                            |                            |        |         |        |   |        | 1,826    |       
|                                           | Current portion of capital lease obligations                                                                |                            |        |         |        |   |        | 104      |       
|                                           |                                                                                                             |                            |        |          |        |   |        |         
|                                           |                                                                                                             | Total current liabilities  |        |          | 1,261  |   |        |          | 16,971 | 
|Notes payable, non-current                 |                                                                                                             |                            |       |          |        |   | 3      |         
|Capital lease obligations, non-current     |                                                                                                             |                            |       |          |        |   | 29     |         
|Other liabilities                          |                                                                                                             |                            |       |          |        |   | 396    |         
|Liabilities subject to compromise          |                                                                                                             |                            | 5,264  |          |        |   |       |         
|                                           |                                                                                                             |                            |        |          |        |   |        |         
|                                           |                                                                                                             |                            | 6,525  |          |        |   | 17,399 |         
|                                           |                                                                                                             |                            |        |          |        |   |        |         
|Commitments and contingencies (Note 12)    |                                                                                                             |                            |        |          |        |   |        |         
|Stockholders equity:                      |                                                                                                             |                            |        |          |        |   |        |         
|                                           | 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; 35,868 and 35,282 shares issued and outstanding |                            |        | 35       |        |   |        | 35       |       
|                                           | Additional paid-in capital                                                                                  |                            |        | 226,785  |        |   |        | 226,786  |       
|                                           | Notes receivable from stockholders                                                                          |                            |        |         |        |   |        | (617     | )     
|                                           | Unearned compensation                                                                                       |                            |        |         |        |   |        | (7       | )     
|                                           | Other comprehensive loss                                                                                    |                            |        | (44      | )      |   |        | (58      | )     
|                                           | Accumulated deficit                                                                                         |                            |        | (202,726 | )      |   |        | (198,808 | )     
|                                           |                                                                                                             |                            |        |          |        |   |        |         
|                                           |                                                                                                             | Total stockholders equity |        |          | 24,050 |   |        |          | 27,331 | 
|                                           |                                                                                                             |                            |        |          |        |   |        |         
|Total liabilities and stockholders equity |                                                                                                             | $                          | 30,575 |          |        | $ | 44,730 |         
|                                           |                                                                                                             |                            |        |          |        |   |        |         

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

F-3



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##### Table of Contents



CALICO COMMERCE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND
OTHER COMPREHENSIVE LOSS

(In thousands, except per share
amounts)


On December 14, 2001, Calico Commerce, Inc.
(the Debtor) filed a voluntary petition for relief
(the Filing) under Chapter 11 of the United
States Bankruptcy Code (the Bankruptcy Code). Please
see Note 1 of the Notes to the Consolidated Financial
Statements.

|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |        |         |  
|------------------------------------ | --------------------------------------------------------------------------------------------------- | ------------------------- | --- | ------ | ------- | ---- | --- | ------ | -------- | - | - | ------ | ------- | -
|                                     |                                                                                                     |                          
|                                     |                                                                                                     | Year Ended March 31,     
|                                     |                                                                                                     |                          
|                                     |                                                                                                     | 2002                      |     | 2001   |         | 2000
|                                     |                                                                                                     |                           |     |        |         |     
|Net revenue:                         |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     | License                                                                                             |                           | $   | 2,739  |         |      | $   | 12,992 |          |   | $ | 17,030 |        
|                                     | Services                                                                                            |                           |     | 2,857  |         |      |     | 18,257 |          |   |   | 19,978 |        
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     |                                                                                                     | Total net revenue         |     |        | 5,596   |      |     |        | 31,249   |   |   |        | 37,008  |  
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|Cost of net revenue:                 |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     | License                                                                                             |                           |     | 245    |         |      |     | 1,354  |          |   |   | 1,143  |        
|                                     | Amortization of purchased technology                                                                |                           |     |       |         |      |     | 1,860  |          |   |   | 739    |        
|                                     | Services (including stock-based compensation of
	$0, $16 and $159, respectively)                    |                           |     | 2,972  |         |      |     | 19,922 |          |   |   | 15,098 |        
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     |                                                                                                     | Total cost of net revenue |     |        | 3,217   |      |     |        | 23,136   |   |   |        | 16,980  |  
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     |                                                                                                     | Gross profit              |     |        | 2,379   |      |     |        | 8,113    |   |   |        | 20,028  |  
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|Operating expenses:                  |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     | Sales and marketing (including stock-based
	compensation of $0, $72 and $715, respectively)         |                           |     | 7,027  |         |      |     | 37,278 |          |   |   | 21,881 |        
|                                     | Research and development (including stock-based
	compensation of $0, $14 and $389, respectively)    |                           |     | 5,937  |         |      |     | 22,892 |          |   |   | 15,736 |        
|                                     | General and administrative (including stock-based
	compensation of $7, $116 and $288, respectively) |                           |     | 7,269  |         |      |     | 8,343  |          |   |   | 6,566  |        
|                                     | Acquired in-process research and development                                                        |                           |     |       |         |      |     |       |          |   |   | 230    |        
|                                     | Amortization of intangibles                                                                         |                           |     |       |         |      |     | 29,125 |          |   |   | 5,778  |        
|                                     | Loss on disposal of long-lived assets                                                               |                           |     | 1,013  |         |      |     |       |          |   |   |       |        
|                                     | Impairment of long-lived assets                                                                     |                           |     | 1,734  |         |      |     | 2,415  |          |   |   |       |        
|                                     | Restructuring and other activities                                                                  |                           |     | 1,948  |         |      |     | 1,362  |          |   |   |       |        
|                                     | (Gain) loss on sales of product lines                                                               |                           |     | (5,005 | )       |      |     | 49,667 |          |   |   |       |        
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     |                                                                                                     | Total operating expenses  |     |        | 19,923  |      |     |        | 151,082  |   |   |        | 50,191  |  
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     |                                                                                                     | Loss from operations      |     |        | (17,544 | )    |     |        | (142,969 | ) |   |        | (30,163 | )
|                                     | Interest expense                                                                                    |                           |     | (111   | )       |      |     | (335   | )        |   |   | (222   | )      
|                                     | Interest income                                                                                     |                           |     | 492    |         |      |     | 3,868  |          |   |   | 2,620  |        
|                                     | Chapter 11 related reorganization items                                                             |                           |     | (2,888 | )       |      |     |       |          |   |   |       |        
|                                     | Realized gains on sale of securities                                                                |                           |     | 16,261 |         |      |     |       |          |   |   |       |        
|                                     | Impairment of long-term investments                                                                 |                           |     | (390   | )       |      |     | (1,350 | )        |   |   |       |        
|                                     | Other income (expense), net                                                                         |                           |     | 226    |         |      |     | 91     |          |   |   | (36    | )      
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     |                                                                                                     | Loss before taxes         |     |        | (3,954  | )    |     |        | (140,695 | ) |   |        | (27,801 | )
|(Benefit) provision for income taxes |                                                                                                     |                           | (36 | )      |         |      | 634 |        |          |   |  |       
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     |                                                                                                     | Net loss                  |     |        | (3,918  | )    |     |        | (141,329 | ) |   |        | (27,801 | )
|Other comprehensive loss:            |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     | Unrealized gain (loss) on investments                                                               |                           |     |       |         |      |     | 11     |          |   |   | (179   | )      
|                                     | Reclassification adjustment for gains included in
	net loss                                         |                           |     | (11    | )       |      |     | 179    |          |   |   |       |        
|                                     | Foreign currency translation adjustments                                                            |                           |     | 25     |         |      |     | (69    | )        |   |   |       |        
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     |                                                                                                     | Comprehensive loss        |     | $      | (3,904  | )    |     | $      | (141,208 | ) |   | $      | (27,980 | )
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|Net loss per share:                  |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     | Basic and diluted earnings per share                                                                |                           | $   | (0.11  | )       |      | $   | (4.09  | )        |   | $ | (1.36  | )      
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       
|                                     | Weighted average shares                                                                             |                           |     | 35,192 |         |      |     | 34,525 |          |   |   | 20,450 |        
|                                     |                                                                                                     |                           |     |        |         |      |     |        |          |   |   |       

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

F-4



---



##### Table of Contents



CALICO COMMERCE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY

(In Thousands)


On December 14, 2001, Calico Commerce, Inc.
(the Debtor) filed a voluntary petition for relief
(the Filing) under Chapter 11 of the United
States Bankruptcy Code (the Bankruptcy Code). Please
see Note 1 of the Notes to the Consolidated Financial
Statements.

|                                                                            |  |                |        |            |  |            |    |              |  |               |         |             |  |               |        |        |  |   |        |   |  |   |      |   |  |   |          |   |  |   |          |  
|--------------------------------------------------------------------------- |  | -------------- | ------ | ---------- |  | ---------- | -- | ------------ |  | ------------- | ------- | ----------- |  | ------------- | ------ | ------ |  | - | ------ | - |  | - | ---- | - |  | - | -------- | - |  | - | -------- | -
|                                                                            |  |                |        |            |  | Notes      |    |              |  |               |         |             |  |              
|                                                                            |  | Common Stock   |        | Additional |  | Receivable |    |              |  | Other         |         |             |  | Total        
|                                                                            |  |                |        | Paid-In    |  | from       |    | Unearned     |  | Comprehensive |         | Accumulated |  | Stockholders
|                                                                            |  | Shares         |        | Amount     |  | Capital    |    | Stockholders |  | Compensation  |         | Loss        |  | Deficit       |        | Equity
|                                                                            |  |                |        |            |  |            |    |              |  |               |         |             |  |               |        |       
|                                                                            |  |               
|                                                                            |  | (In thousands)
|Balance at March 31, 1999                                                   |  |                | 11,436 |            |  | $          | 11 |              |  | $             | 17,877  |             |  | $             | (2,211 | )      |  | $ | (2,779 | ) |  | $ |     |   |  | $ | (29,678  | ) |  | $ | (16,780  | )
|Exercise of stock options                                                   |  |                | 584    |            |  |            | 1  |              |  |               | 1,905   |             |  |               | (285   | )      |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 1,621    |  
|Repurchase of Common Stock                                                  |  |                | (488   | )          |  |            |   |              |  |               | (218    | )           |  |               | 216    |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | (2       | )
|Repayments of notes receivable                                              |  |                |       |            |  |            |   |              |  |               |        |             |  |               | 528    |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 528      |  
|Issuance of Common Stock options to non-employees                           |  |                |       |            |  |            |   |              |  |               | 83      |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 83       |  
|Issuance of warrants                                                        |  |                |       |            |  |            |   |              |  |               | 232     |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 232      |  
|Exercise of warrants                                                        |  |                | 129    |            |  |            |   |              |  |               |        |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   |         |  
|Issuance of Common Stock in initial public
	offering                        |  |                | 6,443  |            |  |            | 6  |              |  |               | 81,709  |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 81,715   |  
|Issuance of Common Stock in business combination                            |  |                | 1,206  |            |  |            | 1  |              |  |               | 79,741  |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 79,742   |  
|Issuance of options assumed in business
	combination                        |  |                |       |            |  |            |   |              |  |               | 10,722  |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 10,722   |  
|Conversion of preferred stock to Common Stock
	upon initial public offering |  |                | 15,632 |            |  |            | 16 |              |  |               | 32,536  |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 32,552   |  
|Amortization of unearned compensation                                       |  |                |       |            |  |            |   |              |  |               |        |             |  |               |       |        |  |   | 1,551  |   |  |   |     |   |  |   |         |   |  |   | 1,551    |  
|Unearned loss on investments                                                |  |                |       |            |  |            |   |              |  |               |        |             |  |               |       |        |  |   |       |   |  |   | (179 | ) |  |   |         |   |  |   | (179     | )
|Net loss                                                                    |  |                |       |            |  |            |   |              |  |               |        |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   | (27,801  | ) |  |   | (27,801  | )
|                                                                            |  |                |        |            |  |            |    |              |  |               |         |             |  |               |        |        |  |   |        |   |  |   |      |   |  |   |          |   |  |   |          |  
|Balance at March 31, 2000                                                   |  |                | 34,942 |            |  |            | 35 |              |  |               | 224,587 |             |  |               | (1,752 | )      |  |   | (1,228 | ) |  |   | (179 | ) |  |   | (57,479  | ) |  |   | 163,984  |  
|Exercise of stock options                                                   |  |                | 354    |            |  |            |   |              |  |               | 1,545   |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 1,545    |  
|Repurchase of Common Stock                                                  |  |                | (274   | )          |  |            |   |              |  |               | (214    | )           |  |               | 177    |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | (37      | )
|Repayments of notes receivable                                              |  |                |       |            |  |            |   |              |  |               |        |             |  |               | 350    |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 350      |  
|Interest on notes receivable                                                |  |                |       |            |  |            |   |              |  |               |        |             |  |               | (144   | )      |  |   |       |   |  |   |     |   |  |   |         |   |  |   | (144     | )
|Forgiveness of notes receivable                                             |  |                |       |            |  |            |   |              |  |               |        |             |  |               | 752    |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 752      |  
|Issuance of Common Stock under employee stock
	purchase plan                |  |                | 260    |            |  |            |   |              |  |               | 1,811   |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 1,811    |  
|Issuance of warrants to customers                                           |  |                |       |            |  |            |   |              |  |               | 60      |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 60       |  
|Amortization of unearned compensation                                       |  |                |       |            |  |            |   |              |  |               |        |             |  |               |       |        |  |   | 218    |   |  |   |     |   |  |   |         |   |  |   | 218      |  
|Unearned compensation, net of cancellations                                 |  |                |       |            |  |            |   |              |  |               | (1,003  | )           |  |               |       |        |  |   | 1,003  |   |  |   |     |   |  |   |         |   |  |   |         |  
|Unrealized gain on investments                                              |  |                |       |            |  |            |   |              |  |               |        |             |  |               |       |        |  |   |       |   |  |   | 190  |   |  |   |         |   |  |   | 190      |  
|Foreign currency translation adjustments                                    |  |                |       |            |  |            |   |              |  |               |        |             |  |               |       |        |  |   |       |   |  |   | (69  | ) |  |   |         |   |  |   | (69      | )
|Net loss                                                                    |  |                |       |            |  |            |   |              |  |               |        |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   | (141,329 | ) |  |   | (141,329 | )
|                                                                            |  |                |        |            |  |            |    |              |  |               |         |             |  |               |        |        |  |   |        |   |  |   |      |   |  |   |          |   |  |   |          |  
|Balance at March 31, 2001                                                   |  |                | 35,282 |            |  |            | 35 |              |  |               | 226,786 |             |  |               | (617   | )      |  |   | (7     | ) |  |   | (58  | ) |  |   | (198,808 | ) |  |   | 27,331   |  
|Exercise of stock options                                                   |  |                | 545    |            |  |            |   |              |  |               | 101     |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 101      |  
|Repurchase of Common Stock                                                  |  |                | (35    | )          |  |            |   |              |  |               | (105    | )           |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | (105     | )
|Repayments of notes receivable                                              |  |                |       |            |  |            |   |              |  |               |        |             |  |               | 10     |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 10       |  
|Forgiveness of notes receivable                                             |  |                |       |            |  |            |   |              |  |               | (16     | )           |  |               | 607    |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 591      |  
|Issuance of Common Stock under employee stock
	purchase plan                |  |                | 76     |            |  |            |   |              |  |               | 19      |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   |         |   |  |   | 19       |  
|Amortization of unearned compensation                                       |  |                |       |            |  |            |   |              |  |               |        |             |  |               |       |        |  |   | 7      |   |  |   |     |   |  |   |         |   |  |   | 7        |  
|Unrealized gain on investments                                              |  |                |       |            |  |            |   |              |  |               |        |             |  |               |       |        |  |   |       |   |  |   | (11  | ) |  |   |         |   |  |   | (11      | )
|Foreign currency translation adjustments                                    |  |                |       |            |  |            |   |              |  |               |        |             |  |               |       |        |  |   |       |   |  |   | 25   |   |  |   |         |   |  |   | 25       |  
|Net loss                                                                    |  |                |       |            |  |            |   |              |  |               |        |             |  |               |       |        |  |   |       |   |  |   |     |   |  |   | (3,918   | ) |  |   | (3,918   | )
|                                                                            |  |                |        |            |  |            |    |              |  |               |         |             |  |               |        |        |  |   |        |   |  |   |      |   |  |   |          |   |  |   |          |  
|Balance at March 31, 2002                                                   |  |                | 35,868 |            |  | $          | 35 |              |  | $             | 226,785 |             |  | $             |       |        |  | $ |       |   |  | $ | (44  | ) |  | $ | (202,726 | ) |  | $ | 24,050   |  
|                                                                            |  |                |        |            |  |            |    |              |  |               |         |             |  |               |        |        |  |   |        |   |  |   |      |   |  |   |          |   |  |   |          |  

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

F-5



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##### Table of Contents



CALICO COMMERCE, INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands)


On December 14, 2001, Calico Commerce, Inc.
(the Debtor) filed a voluntary petition for relief
(the Filing) under Chapter 11 of the United
States Bankruptcy Code (the Bankruptcy Code). Please
see Note 1 of the Notes to the Consolidated Financial
Statements.

|                                                        |                                                                              |                                                        |   |         |         |      |   |          |         |   |   |          |         |  
|------------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------ | - | ------- | ------- | ---- | - | -------- | ------- | - | - | -------- | ------- | -
|                                                        |                                                                              |                                                       
|                                                        |                                                                              | Year Ended March 31,                                  
|                                                        |                                                                              |                                                       
|                                                        |                                                                              | 2002                                                   |   | 2001    |         | 2000
|                                                        |                                                                              |                                                        |   |         |         |     
|Cash flows from operating activities:                   |                                                                              |                                                        |   |         |         |      |   |          |         |   |   |         
|                                                        | Net loss                                                                     |                                                        | $ | (3,918  | )       |      | $ | (141,329 | )       |   | $ | (27,801  | )      
|                                                        | Adjustments to reconcile net loss to net cash
	used in operating activities: |                                                        |   |         |         |      |   |          |         |   |   |          |        
|                                                        |                                                                              | Depreciation and amortization                          |   |         | 1,598   |      |   |          | 34,000  |   |   |          | 8,721   |  
|                                                        |                                                                              | Amortization of unearned compensation                  |   |         | 7       |      |   |          | 218     |   |   |          | 1,866   |  
|                                                        |                                                                              | Warrants to customers                                  |   |         |        |      |   |          | 60      |   |   |          |        |  
|                                                        |                                                                              | Provision for doubtful accounts                        |   |         | 100     |      |   |          | 1,203   |   |   |          | 102     |  
|                                                        |                                                                              | Loss on disposal of long-lived assets                  |   |         | 1,013   |      |   |          | 922     |   |   |          | 36      |  
|                                                        |                                                                              | Loss on impairment of investments                      |   |         | 390     |      |   |          | 1,350   |   |   |          |        |  
|                                                        |                                                                              | Impairment of long-lived assets                        |   |         | 1,734   |      |   |          | 1,493   |   |   |          |        |  
|                                                        |                                                                              | Forgiveness of stockholder notes receivable            |   |         | 591     |      |   |          | 752     |   |   |          |        |  
|                                                        |                                                                              | Interest on notes receivable                           |   |         |        |      |   |          | (144    | ) |   |          |        |  
|                                                        |                                                                              | Forgiveness of employee loan                           |   |         |        |      |   |          | 60      |   |   |          |        |  
|                                                        |                                                                              | (Gain) loss on sales of product lines                  |   |         | (4,691  | )    |   |          | 49,667  |   |   |          |        |  
|                                                        |                                                                              | Restriction of cash under asset sale escrow
	agreement |   |         | (500    | )    |   |          |        |   |   |          |        |  
|Changes in assets and liabilities, net of
	acquisition: |                                                                              |                                                        |   |         |         |      |   |          |         |   |   |         
|                                                        | Accounts receivable                                                          |                                                        |   | 2,102   |         |      |   | 7,044    |         |   |   | (2,652   | )      
|                                                        | Prepaid and other current assets                                             |                                                        |   | 392     |         |      |   | 59       |         |   |   | (1,131   | )      
|                                                        | Other assets                                                                 |                                                        |   |        |         |      |   | (6       | )       |   |   |         |        
|                                                        | Accounts payable                                                             |                                                        |   | (2,046  | )       |      |   | (2,329   | )       |   |   | 2,282    |        
|                                                        | Accrued liabilities                                                          |                                                        |   | 101     |         |      |   | (1,160   | )       |   |   | 1,437    |        
|                                                        | Chapter 11 related reorganization items                                      |                                                        |   | (5,239  | )       |      |   |         |         |   |   |         |        
|                                                        | Deferred revenue                                                             |                                                        |   | (2,030  | )       |      |   | (2,992   | )       |   |   | (487     | )      
|                                                        | Other liabilities                                                            |                                                        |   | 35      |         |      |   | (23      | )       |   |   | (59      | )      
|                                                        |                                                                              |                                                        |   |         |         |      |   |          |         |   |   |         
|                                                        |                                                                              | Net cash used in operating activities                  |   |         | (10,361 | )    |   |          | (51,155 | ) |   |          | (17,686 | )
|                                                        |                                                                              |                                                        |   |         |         |      |   |          |         |   |   |         
|Cash flows from investing activities:                   |                                                                              |                                                        |   |         |         |      |   |          |         |   |   |         
|                                                        | Purchases of property and equipment                                          |                                                        |   | (144    | )       |      |   | (4,442   | )       |   |   | (3,696   | )      
|                                                        | Proceeds from sale of property and equipment                                 |                                                        |   | 193     |         |      |   |         |         |   |   |         |        
|                                                        | Sale of investments                                                          |                                                        |   | 24,395  |         |      |   |         |         |   |   |         |        
|                                                        | Purchases of investments                                                     |                                                        |   | (22,458 | )       |      |   | (21,996  | )       |   |   | (100,550 | )      
|                                                        | Release of restricted cash to cash equivalents                               |                                                        |   | 200     |         |      |   |         |         |   |   |         |        
|                                                        | Maturity of investments                                                      |                                                        |   | 27,464  |         |      |   | 58,521   |         |   |   | 45,071   |        
|                                                        | Deposits                                                                     |                                                        |   |        |         |      |   | (300     | )       |   |   | (184     | )      
|                                                        | Acquisition, net of cash acquired                                            |                                                        |   |        |         |      |   | 46       |         |   |   | 2,601    |        
|                                                        |                                                                              |                                                        |   |         |         |      |   |          |         |   |   |         
|                                                        |                                                                              | Net cash provided by (used in) investing
	activities   |   |         | 29,650  |      |   |          | 31,829  |   |   |          | (56,758 | )
|                                                        |                                                                              |                                                        |   |         |         |      |   |          |         |   |   |         
|Cash flows from financing activities:                   |                                                                              |                                                        |   |         |         |      |   |          |         |   |   |         
|                                                        | Proceeds from initial public offering, net of
	issuance costs                |                                                        |   |        |         |      |   |         |         |   |   | 81,715   |        
|                                                        | Proceeds from issuance of common stock, net of
	issuance costs               |                                                        |   | 120     |         |      |   | 3,356    |         |   |   | 1,605    |        
|                                                        | Common stock repurchases                                                     |                                                        |   | (105    | )       |      |   | (37      | )       |   |   | (135     | )      
|                                                        | Proceeds from issuance of preferred stock, net of
	issuance costs            |                                                        |   |        |         |      |   |         |         |   |   | 16       |        

F-6



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##### Table of Contents



|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |        |        | 
|----------------------------------------------------------- | --------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------ | ------ | ------ | ---- | ------- | ------ | ----- | - | ------ | ------ | ------ | 
|                                                            |                                                                                         |                                                     
|                                                            |                                                                                         | Year Ended March 31,                                
|                                                            |                                                                                         |                                                     
|                                                            |                                                                                         | 2002                                                 |        | 2001   |        | 2000
|                                                            |                                                                                         |                                                      |        |        |        |     
|                                                            | Proceeds from repayments of stockholder notes
	receivable                               |                                                      |        | 10     |        |      |         | 350    |       |   |        | 662    |       
|                                                            | Proceeds from issuance of notes payable                                                 |                                                      |        |       |        |      |         | 515    |       |   |        | 2,143  |       
|                                                            | Restriction of cash under compensating balance
	agreement                               |                                                      |        | (500   | )      |      |         | (750   | )     |   |        |       |       
|                                                            | Release of restricted cash collateral                                                   |                                                      |        | 1,258  |        |      |         |       |       |   |        |       |       
|                                                            | Repayments of notes payable                                                             |                                                      |        | (1,826 | )      |      |         | (1,354 | )     |   |        | (803   | )     
|                                                            | Principal payments under capital lease obligations                                      |                                                      |        | (88    | )      |      |         | (248   | )     |   |        | (283   | )     
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|                                                            |                                                                                         | Net cash provided by (used in) financing
	activities |        |        | (1,131 | )    |         |        | 1,832 |   |        |        | 84,920 | 
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|Effect of foreign exchange on cash                          |                                                                                         |                                                      | 24     |        |        |      | (69     | )      |       |   |       |       
|Net increase (decrease) in cash and cash
	equivalents       |                                                                                         |                                                      | 18,182 |        |        |      | (17,563 | )      |       |   | 10,476 |       
|Cash and cash equivalents at beginning of period            |                                                                                         |                                                      | 8,354  |        |        |      | 25,917  |        |       |   | 15,441 |       
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|Cash and cash equivalents at end of period                  |                                                                                         | $                                                    | 26,536 |        |        | $    | 8,354   |        |       | $ | 25,917 |       
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|Supplemental cash flow disclosures:                         |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|                                                            | Cash paid for interest                                                                  |                                                      | $      | 83     |        |      | $       | 333    |       |   | $      | 222    |       
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|Non-cash transactions:                                      |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|                                                            | Issuance of Common Stock for notes receivable                                           |                                                      | $      |       |        |      | $       |       |       |   | $      | 285    |       
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|                                                            | Cancellation of notes receivable related to
	forfeited unvested restricted Common Stock |                                                      | $      |       |        |      | $       | 177    |       |   | $      | 216    |       
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|                                                            | Forgiveness of stockholder notes receivable                                             |                                                      | $      | 607    |        |      | $       | 752    |       |   | $      |       |       
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|                                                            | Equipment acquired through capital lease
	obligations                                   |                                                      | $      |       |        |      | $       |       |       |   | $      |       |       
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|                                                            | Stock proceeds from sale of MarketMaker assets                                          |                                                      | $      |       |        |      | $       | 7,846  |       |   | $      |       |       
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|                                                            | Unearned compensation charge (forfeitures), net                                         |                                                      | $      |       |        |      | $       | (1,003 | )     |   | $      |       |       
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|Acquired net assets associated with acquisitions
	included: |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|                                                            | 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 | )     
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       
|                                                            |                                                                                         | Total acquired net assets                            |        |        |        |      |         |        |       |   |        | $      | 90,480 | 
|                                                            |                                                                                         |                                                      |        |        |        |      |         |        |       |   |        |       

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

F-7



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##### Table of Contents



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. In September 1999, the
Company was reincorporated as a Delaware corporation.

On December 12, 2001, the Company and
PeopleSoft, Inc., a Delaware corporation
(PeopleSoft) entered into an asset purchase
agreement providing for the sale by the Company of its
intellectual property and substantially all of its operating
assets to PeopleSoft. Pursuant to the terms of the asset
purchase agreement, on December 14, 2001 (the
Petition Date), the Company filed a voluntary
petition for relief under Chapter 11
(Chapter 11) of title 11 of the United
States Bankruptcy Code in the United States Bankruptcy Court for
the Northern District of California (the Bankruptcy
Court) under Case No. 01-56101 (the
Chapter 11 Case). On January 25, 2002, the
Bankruptcy Court approved the sale of assets to PeopleSoft, and
the sale closed on February 6, 2002.

The Company is currently operating as
debtor-in-possession in accordance with the applicable
provisions of the Bankruptcy Code, provided, however, that as a
result of the sale to PeopleSoft, the Company no longer has
operating assets and will not continue to sell any products. The
Chapter 11 Case does not include any of the subsidiaries of
Calico Commerce (collectively the Non-Debtor
Subsidiaries). Only the net realizable value of
investments held by Calico Commerce, Inc. in the Non-Debtor
Subsidiaries are included as assets in the Chapter 11 Case.
The Company expects to wind-up, dissolve, or liquidate all of
its subsidiaries. In addition, prior to filing the
Chapter 11 Case, ConnectInc.com, Inc. and FirstFloor
Software, Inc., two of the Companys domestic subsidiaries,
were merged into the Company and no longer exist as separate
subsidiaries.

Prior to the sale of its intellectual property to
PeopleSoft, the Company provided interactive selling software
that enabled its customers to sell broad and complex product
offerings through their different sales channels as well as
direct to customers over the Internet. The products sold by the
Company were Java and standards-based, and contained advanced
configuration, recommendation and pricing technology that
allowed the Companys customers to interact directly with
users to create a web-based, guided selling experience that
improved order accuracy, shortened sales cycles and resulted in
improved customer satisfaction. Although applicable to a wide
range of industries and markets, the Company historically
focused on the telecommunications, financial services, retail,
computer hardware and manufacturing industries. With its
historical focus primarily in the e-commerce sector, the decline
of the Companys performance over the previous eighteen
months paralleled that of the economy generally. In January of
2001, the Company tried to respond to the decline by commencing
a series of restructurings which substantially reduced its
workforce; significantly reduced its use of contract labor;
decreased its emphasis on international sales and marketing,
resulting in the closure of several foreign sales offices; and
reduced its office space and related assets. The Company began
calendar 2001 with approximately 360 employees and had
approximately 54 employees as of December 31, 2001. As
of March 31, 2002, the Company had 3 employees.

Liquidity

As of March 31, 2002, the Company had
$26.5 million of cash and cash equivalents. The Company
received $5.0 million upon closing of the sale to
PeopleSoft on February 6, 2002, $500,000 of which was
deposited into an escrow account to be held for six months as a
non-exclusive remedy to satisfy any claims that PeopleSoft may
make against the Company under the asset purchase agreement. As
a result of the sale, the Company no longer owns any
intellectual property and has few operating assets, does not
intend to continue selling products, and is prohibited by the
terms of the asset purchase agreement with PeopleSoft from
competing with PeopleSofts business, including the
Companys prior business. The accompanying Consolidated
Financial Statements have been prepared in accordance with AICPA
Statement of Position 90-7

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CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(SOP 90-7), Financial
Reporting by Entities in Reorganization under the Bankruptcy
Code, and on a going concern basis, which contemplates
continuity of operations, realization of assets and liquidation
of liabilities in the ordinary course of business. However,
while we expect that our cash on hand will provide sufficient
funds to allow us to meet our pre- and post-petition debt,
operating expenses and capital requirements while a plan of
reorganization is developed and considered, the bankruptcy
filing and related circumstances, and the sale of our operating
assets, raise substantial doubt about our ability to continue as
a going concern. The appropriateness of reporting on a going
concern basis is dependent upon, among other things, the
availability of sufficient capital to meet expenses,
confirmation of a plan of reorganization and the ability to
generate sufficient cash from operations and financing sources
to meet our obligations as they become due. We have assumed all
of the foregoing. However, our ability to survive the bankruptcy
and emerge as a going concern is contingent on our sale to or
merger or combination with another company, or identification of
another product or business in which to invest, and there is no
assurance that we will undertake these actions. Without a sale
to or merger or combination with another company, we would
likely file a plan of reorganization that provides for our
liquidation and distribution of assets.

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 the years ended
March 31, 2000 and 1999 have been retroactively adjusted to
reflect the reincorporation. As of March 31, 2002, no
preferred stock was issued or outstanding.

Principles of
Consolidation

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

Use of
Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States of America 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 materially from
those estimates.

Cash and Cash
Equivalents

The Company considers all highly liquid
investments with an original or remaining maturity at the date
of purchase of three months or less to be cash equivalents. Cash
and cash equivalents consist of cash on deposit with banks, and
high quality money market funds. The Guidelines promulgated by
Region 17 of the United States Trustees Office
governing the administration of bankruptcy cases require that
all accounts of a debtor be maintained only in depositories that
are on the List of Cooperating Depositories, unless the debtor
obtains prior written approval from the United States Trustee to
use a non-cooperating financial institution. In accordance with
these Guidelines, the companys post-petition deposit
accounts are maintained with institutions that are on the List
of Cooperating Depositories.

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CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Restricted
Cash

The Company has issued a $600,000 letter of
credit, collateralized by a $600,000 certificate of deposit, to
one of its landlords as a portion of its security deposit for a
lease of the Companys headquarters. The letter of credit
is callable if the Company defaults on its lease. The letter of
credit may be reduced by amendment in increments of $200,000 on
each anniversary date of the lease. As of March 31, 2002,
$600,000 remained restricted, all of which has been classified
as long-term restricted time deposit. The Company intends to
reject the lease pursuant to applicable Bankruptcy Code
provisions. The Company has reached a tentative agreement with
the landlord setting forth the maximum amount of the allowable
claim for rejection of the lease on its corporate headquarters
and allowing the landlord relief from the automatic stay to
apply the letter of credit and the cash portion of the security
deposit of approximately $184,000 to payment of the maximum
amount of the allowable claim, subject to approval by the
Bankruptcy Court. The agreement also provides that in the event
the allowable claim is determined to be less than the amount of
the security deposit, the landlord will refund any excess to the
Company.

In March 2001, the Company agreed with one of its
lenders to maintain a money market cash balance of $750,000 as
collateral against its installment notes payable in favor of the
lender. These notes were originally collateralized with
equipment and intellectual property that was subsequently sold
to Digital River in conjunction with the Companys sale of
its MarketMaker product line. At September 30, 2001, the
Company was not in compliance with the financial covenants
concerning its quick ratio, minimum tangible net worth and
profitability due to larger than expected net operating losses.
The Company provided the bank with $500,000 of additional cash
to collateralize the loan, resulting in the bank holding
restricted cash in the amount of $1,250,000 to collateralize the
Companys obligations to them. The Company repaid these
notes in full in November 2001 and the restricted cash was
released.

In February 2002, at the closing of the sale to
PeopleSoft, $500,000 of the purchase price was deposited into an
escrow account to be held for six months as a non-exclusive
remedy to satisfy any claims that PeopleSoft may make against
the Company under the asset purchase agreement. As of
March 31, 2002, the $500,000 has been classified as
restricted cash.

Investments

Investments with an original or remaining
maturity at the date of purchase of greater than three months,
but less than one year at the balance sheet date, are classified
as short-term investments. Short-term investments, which are
classified as available-for-sale, are reported at fair value,
which is determined using available market information. At
March 31, 2002, the Company did not hold any short-term
investments.

The Company uses the cost method to account for
investments in which it holds a minority interest and does not
exercise significant influence.

Concentration
Of Credit Risk

Financial instruments which potentially subject
the Company to a concentration of credit risk consist of cash,
cash equivalents, accounts receivable and other current assets.
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. Historically, the Company
did not require collateral from its customers. To reduce its
risk, the Company periodically reviewed the credit-worthiness of
its customers and established reserves for potential credit
losses. To date such losses have been within managements
estimations.

At March 31, 2002, four customers each
accounted for 40%, 24%, 14% and 11% of gross accounts
receivable, respectively. At March 31, 2001, one customer
accounted for 13% of gross accounts receivable.

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CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

During the fiscal year ended March 31, 2002,
no customer accounted for more than 10% of net revenues. In the
fiscal year ended March 31, 2001, two customers each
accounted for 17% and 14% of total revenues, net of reimbursable
out-of-pocket expenses. In the fiscal year ended March 31,
2000, two additional customers each accounted for 22% and 13% of
total revenues, net of reimbursable out-of-pocket expenses.

As part of the sale of assets to PeopleSoft on
February 6, 2002, the Company entered into an agreement
whereby PeopleSoft assumed responsibility for the collection of
certain accounts receivable of the Company. There is no
guarantee that PeopleSoft will collect these accounts
receivable. Any such amounts collected will be remitted in full
to the Company.

Fair Value Of
Financial Instruments

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

Property And
Equipment

Property and equipment are stated at cost.
Depreciation is computed using the straight-line method over the
estimated useful lives of the assets, which are generally three
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

Identifiable intangible assets resulted from the
application of the purchase method of accounting for the
Companys acquisitions and were composed of the unamortized
identifiable assets, including assembled workforce, customer
base and acquired technology. Goodwill represented the
unamortized portion of the excess of the purchase price of
acquired businesses over the fair value of the identifiable net
assets acquired and was amortized using the straight-line method
over estimated useful lives ranging from three to four years.
Acquired in-place workforce and customer base was being
amortized over the period of benefit of three years. Acquired
existing products and core technology were amortized over the
period of benefit ranging from seven to 36 months, with the
related amortization expense being classified as a component of
cost of license revenue.

Valuation Of
Long-Lived Assets

The Company evaluates the carrying value of
long-lived assets and certain identifiable intangibles for
impairment when events and circumstances indicate that the
carrying amount of an asset may not be recoverable. Factors
considered important which could trigger an impairment review
include, but are not limited to, significant changes in the
manner of use of the acquired assets or the strategy for the
Companys overall business, significant negative industry
or economic trends, a significant decline in the Companys
stock price for a sustained period, and the Companys
market capitalization relative to net book value. When the
Company determines that the carrying value of goodwill may not
be recoverable based on the existence of one or more of the
above indicators of impairment, the Company measures any
impairment based on a projected discounted cash flow method
using a discount rate commensurate with the risk inherent in the
Companys current business model. An impairment loss is
recognized whenever the evaluation indicates that the carrying
amount of a long-lived asset is not recoverable (See
Note 3  Investments, Note 4  Balance
Sheet Components and Note 16  Impairment of
Long-Lived Assets).

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CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Foreign
Currency Translation

The Company considers the local currency to be
the functional currency for all of its foreign operations.
Assets and liabilities recorded in foreign currencies are
translated at the exchange rate on the balance sheet date.
Revenue and expenses are translated at average rates of exchange
prevailing during the period. Translation adjustments are
charged or credited to other comprehensive income. Gains and
losses on foreign currency transactions are included in
non-operating income and expense.

Revenue
Recognition

Although the Company does not expect to continue
to generate revenue because of the sale of its intellectual
property and substantially all of its operating assets to
PeopleSoft, historically, revenues, including revenues reported
in this annual report on Form 10-K, were 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 has been 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.

Although the Company does not expect continuing
revenue from license fees, revenue from license fees reported
herein was recognized when persuasive evidence of an agreement
existed, delivery of the product had occurred, the fee was fixed
or determinable and collectibility was probable. Arrangements
for which the fees were not deemed probable for collection were
recognized upon cash collection. Arrangements for which the fees
were not deemed fixed or determinable were recognized in the
period they became due.

Services revenue was primarily comprised of
revenue from consulting fees, maintenance contracts and
training. Services revenue from consulting and training was
recognized as the service was performed. The Company does not
expect to generate future services revenue as a result of the
closing of the sale of assets to PeopleSoft.

Maintenance contracts included the right to
unspecified upgrades and ongoing support. Maintenance revenue
was deferred and recognized on a straight-line basis as services
revenue over the life of the related contract, which was
typically one year. As a part of the sale of assets to
PeopleSoft, PeopleSoft has agreed to support the most recent
releases of the Companys products for up to one year for
the contracts and customers transferred to PeopleSoft. This will
provide most customers with support for the period and support
level for which they originally contracted with the Company. In
the quarter ending March 31, 2002, the Company has
reclassified the remaining amount of deferred revenue for the
support obligations that were transferred to PeopleSoft as part
of the asset purchase agreement to other accrued liabilities and
has ceased to recognize revenue on the amortization of these
obligations. The Company will periodically assess actual and
contingent liabilities surrounding these support obligations and
adjust the amount of the liability as appropriate. Those support
obligations which were not assumed by PeopleSoft, and which the
Company intends to reject, were reclassified as liabilities
subject to compromise.

License and services revenue on contracts
involving significant implementation, customization or services
which were essential to the functionality of the software was
recognized over the period of each engagement, primarily using
the percentage-of-completion method. Labor hours incurred were
generally used as the measure of progress towards completion.
Revenue for these arrangements was classified as license revenue
and services revenue based upon the Companys estimates of
fair value for each element. A provision for estimated losses on
engagements was made in the period in which the loss became
probable and could be reasonably estimated.

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CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company accumulated relevant information from
contracts to use in determining the availability of
vendor-specific objective evidence and believes that such
information complies with the criteria established in Statement
of Position 97-2 as follows:



| |   |                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Customers were required to pay separately for
	annual maintenance. Future renewal rates are included as a term
	of the contracts. The Company used the renewal rate as
	vendor-specific objective evidence of fair value for maintenance.
|
| |  | The Company charged standard hourly rates for
	consulting services based upon the nature of the services and
	experience of the professionals performing the services and such
	services were separately priced in contracts.            
|
| |  | For training, the Company charged standard course
	rates for each course based upon the duration of the course, and
	such courses are separately priced in contracts. The Company has
	a history of selling such courses separately.     

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

The Company recognized revenues on a gross basis
pursuant to Emerging Issues Task Force (EITF)
No. 99-19 Reporting Revenue Gross as a Principal
versus Net as an Agent.

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 of the option.

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 EITF 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 used the Black-Scholes option pricing
model to value options granted to non-employees.

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CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Advertising
Expense

Advertising costs are generally expensed as
incurred. Advertising (credits) costs totaled $(695,000),
$3.6 million and $842,000 during the years ended
March 31, 2002, 2001 and 2000, respectively. The credits in
the year ended March 31, 2002 were related to cancellations
and refunds of unused programs and advertising as part of the
Companys restructuring activities. The Company does not
expect to incur additional advertising costs.

Segment And
Geographic Information

In June 1997, the Financial Accounting Standards
Board issued SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. This Statement
establishes standards for the way companies report information
about operating segments in annual financial statements. It also
establishes standards for related disclosures about products and
services, geographic areas and major customers. In accordance
with the provisions of SFAS No. 131, the Company has
determined that it does not have separately reportable operating
segments. The Company operates in one principal business segment
across domestic and international markets.

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 (loss) 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 available-for-sale securities. As of
March 31, 2002, accumulated other comprehensive loss
consisted of a net loss on foreign currency translation
adjustments of $44,000. As of March 31, 2001, the Company
had $11,000 of net unrealized gains on securities and a net loss
on foreign currency translation adjustments of $69,000.

Net Loss Per
Share

SFAS 128, Earnings Per Share,
establishes standards for computing and presenting earnings per
share. Basic earnings per share is calculated using the weighted
average number of common shares outstanding during the period.

Diluted earnings per share is computed using the
weighted average number of common and potential common shares
outstanding during the period, except if anti-dilutive.
Potential common shares used in the diluted earnings per share
calculation consist of shares issuable upon the exercise of
stock options and warrants computed using the treasury stock
method.

Recent
Accounting Pronouncements

In July 2001, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards No. 141, Business
Combinations (SFAS 141). SFAS 141
requires the purchase

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CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

method of accounting for business combinations
initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company has not initiated any
business combinations since June 30, 2001 and accordingly
the implementation of SFAS 141 has not had a material
effect on its financial statements.

In July 2001, the FASB issued Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets (SFAS 142), which
is effective for fiscal years beginning after March 15,
2001. SFAS 142 requires, among other things, the
discontinuance of goodwill amortization. In addition, the
standard includes provisions upon adoption for the
reclassification of certain existing recognized intangibles as
goodwill, reassessment of the useful lives of existing
recognized intangibles, reclassification of certain intangibles
out of previously reported goodwill and the testing for
impairment of existing goodwill and other intangibles. The
Company recorded impairment charges aggregating
$2.5 million in the fourth quarter of fiscal 2001 to adjust
goodwill and other intangible assets to $0, and accordingly
ceased goodwill amortization. Accordingly, the implementation of
SFAS 142 in fiscal year 2002 has not had an material effect
on the Companys financial statements.

In July 2001, the FASBs Emerging Issues
Task Force (EITF) reached final consensus on EITF
No. 00-25, Vendor Income Statement Characterization
of Consideration Paid to a Reseller of the Vendors
Products (EITF 00-25). EITF 00-25
generally requires that consideration, including equity
instruments, given to a customer be classified in a
vendors financial statements not as an expense, but as an
offset to revenue up to the amount of cumulative revenue
recognized or to be recognized. In November 2001, the EITF
reached consensus on EITF No. 01-09, Accounting for
Consideration Given by a Vendor to a Customer or Reseller of the
Vendors Products (EITF 01-09).
EITF 01-09 clarifies and modifies certain items discussed
in EITF 00-25. The Company has adopted these new standards
in its fiscal year ended March 31, 2002. The implementation
of EITF 00-25, EITF 01-09, and the accompanying
interpretive guidance has not had a material impact on its
financial position, results of operations, or cash flows.

In August 2001, the FASB issued Statement of
Financial Accounting Standard No. 144
(SFAS 144) Accounting for the Impairment
or Disposal of Long-Lived Assets, which is effective
January 1, 2002. SFAS 144 supersedes FASB Statement
No. 121, Accounting for the Impairment or Disposal of
Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of, and the accounting and reporting provisions relating
to the disposal of a segment of a business set forth in
Accounting Principles Board Opinion No. 30. This Statement
retains many of the fundamental provisions of SFAS 121 and
expands the scope of discontinued operations to include more
disposal transactions. The Company has adopted SFAS 144 in
its quarter ended March 31, 2002. The implementation of
SFAS 144 has not had a material effect on its financial
statements.

In August 2001, the FASB issued Statement of
Financial Accounting Standard No. 143
(SFAS 143) Accounting for Asset
Retirement Obligations, which is effective for fiscal
years beginning after June 15, 2002. Earlier adoption is
encouraged. SFAS 143 addresses financial accounting and
reporting for obligations associated with the retirement of
tangible long-lived assets and the associated asset retirement
costs. The Company does not believe the adoption of
SFAS 143 will have a material effect on its financial
statements.

In February 2002, the EITF issued Topic
Number D-103 Income Statement Characterization of
Reimbursements Received for Out-of-Pocket Expenses
Incurred, which is effective for financial statements
beginning after December 31, 2001. Topic Number D-103
requires that reimbursements received for out-of-pocket expenses
incurred, generally, be characterized as revenue in the
statement of operations. The Company has adopted Topic
Number D-103 in its quarter ended March 31, 2002. The
Company has historically recorded reimbursements for
out-of-pocket expenses as net amounts in cost of services
revenue in the statement of operations. In accordance with the
transition guidance included in Topic Number D-103,
adoption required the reclassification of financial statements
for prior periods presented for comparative purposes. The
adoption of Topic Number D-103 did not affect the
Companys net loss, financial position or cash flows. The
reclassification did affect the presentation of certain revenue
and cost of revenue items contained within the Companys
financial statements.

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CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Service revenues for the years ended
March 31, 2001 and 2000 are presented as follows along with
reimbursable expenses that have been reclassified from cost of
service revenues to service revenues in accordance with Topic
Number D-103 (in thousands):

|                                             |  |                      |        |      |  |   |        | 
|-------------------------------------------- |  | -------------------- | ------ | ---- |  | - | ------ | 
|                                             |  |                     
|                                             |  | Year Ended March 31,
|                                             |  |                     
|                                             |  | 2001                 |        | 2000
|                                             |  |                      |        |     
|Services revenue (as historically presented) |  | $                    | 16,742 |      |  | $ | 18,594 | 
|Impact of Topic Number D-103                 |  |                      | 1,515  |      |  |   | 1,384  | 
|                                             |  |                      |        |      |  |   |        | 
|Services revenue (as currently presented)    |  | $                    | 18,257 |      |  | $ | 19,978 | 
|                                             |  |                      |        |      |  |   |        | 

Cost of service revenues are presented as follows
(in thousands):

|                                                  |  |            |        |      |  |   |        | 
|------------------------------------------------- |  | ---------- | ------ | ---- |  | - | ------ | 
|                                                  |  |           
|                                                  |  | Year Ended
|                                                  |  | March 31, 
|                                                  |  |           
|                                                  |  | 2001       |        | 2000
|                                                  |  |            |        |     
|Cost of service revenue (as previously presented) |  | $          | 18,407 |      |  | $ | 13,714 | 
|Impact of Topic Number D-103                      |  |            | 1,515  |      |  |   | 1,384  | 
|                                                  |  |            |        |      |  |   |        | 
|Cost of service revenue (as currently presented)  |  | $          | 19,922 |      |  | $ | 15,098 | 
|                                                  |  |            |        |      |  |   |        | 

Financial
Statement Presentation

The consolidated financial statements have been
prepared in accordance with AICPA Statement of
Position 90-7 (SOP 90-7), Financial
Reporting by Entities in Reorganization under the Bankruptcy
Code, and on a going concern basis, which contemplates
continuity of operations, realization of assets and liquidation
of liabilities in the ordinary course of business. However, as a
result of the Filing, and the contingent liabilities described
below, such realization of assets and liquidation of liabilities
are subject to uncertainty. While operating as
debtor-in-possession under the protection of Chapter 11,
and subject to Bankruptcy Court approval or otherwise as
permitted in the normal course of business, the Company has sold
substantially all of its operating assets. In connection with
its plan of reorganization, the Company may liquidate or settle
liabilities for amounts other than those reflected in the
condensed consolidated financial statements. Further, a plan of
reorganization could materially change the amounts and
classifications reported in the consolidated historical
financial statements, which do not give effect to any
adjustments to the carrying value of assets or amounts of
liabilities that might be necessary as a consequence of a plan
of reorganization.

As reflected in the Consolidated Financial
Statements, Liabilities subject to compromise refer
to the Companys liabilities incurred prior to the
commencement of the Chapter 11 Case. The amounts of the
various liabilities that are subject to compromise are included
in the financial statements set forth below (the
Debtor-in-Possession Financial Statements). These
amounts represent the Companys estimate of known or
potential pre-petition claims to be resolved in connection with
the Chapter 11 Case. Such claims remain subject to future
adjustment. Adjustments may result from negotiations, actions of
the Bankruptcy Court, further developments with respect to
disputed claims, rejection of executory contracts and unexpired
leases, the determination as to the value of any collateral
securing claims, proofs of claim, or other events. Payment terms
for these amounts will be established in connection with the
Chapter 11 Case.

Pursuant to the Bankruptcy Code, schedules have
been filed by the Company with the Bankruptcy Court setting
forth the assets and liabilities of the Company. Differences
between amounts recorded by the Company and claims filed by
creditors will be investigated and resolved as part of the
Chapter 11 Case. Bar dates for the filing of proofs of
claim against the Company have been set for April 10, 2002
for all creditors other than governmental units, and
May 10, 2002 for governmental units. The bar dates for
claims arising from rejection of unexpired leases and contracts
will be established by the Bankruptcy Court at the time of the
hearing on the

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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Companys motion to reject such contracts
and leases. As of April 11, 2002, approximately
$63.7 million of claims had been filed with the Bankruptcy
Court, of this amount at least $62 million is believed to
be without merit. The difference between filed claims and
disputed claims by plaintiffs of $1.7 million have not yet
been formally reviewed. Additional claims may also be filed with
the Bankruptcy Court and therefore the ultimate number and
allowed amounts of all claims is presently unknown.

The Company has received approval from the
Bankruptcy Court to pay or otherwise honor certain of its
pre-petition obligations, including employee wages, salaries,
benefits and other employee obligations and certain other
pre-petition claims. The pre-petition liabilities that have been
approved by the Bankruptcy Court to be paid are not included in
Liabilities subject to compromise on the
accompanying consolidated and debtor-in-possession balance
sheets as of March 31, 2002.

The liabilities subject to compromise in the
consolidated and debtor-in-possession balance sheets consist of
the following items at March 31, 2002 (in thousands):

|                                                                                                                       |                                         |   |       |       | 
|---------------------------------------------------------------------------------------------------------------------- | --------------------------------------- | - | ----- | ----- | 
|Accounts payable                                                                                                       |                                         | $ | 986   |      
|Estimated claims for rejection of unexpired
	maintenance and professional service contracts not assumed by
	PeopleSoft |                                         |   | 828   |      
|Estimated allowable claims for rejection of
	unexpired leases                                                          |                                         |   | 2,924 |      
|Taxes payable                                                                                                          |                                         |   | 526   |      
|                                                                                                                       |                                         |   |       |      
|                                                                                                                       | Total liabilities subject to compromise |   | $     | 5,264 | 
|                                                                                                                       |                                         |   |       |      

As part of the Filing, the Company intends to
reject certain leases and executory contracts as allowed by the
Bankruptcy Code. For capital and operating leases that the
Company intends to reject, for which accruals had not been
previously made, the Company recorded an accrual of
$2.1 million for the estimated maximum amount of allowable
claims under the Bankruptcy Code, which consists of estimated
lease payments for 12 months from the filing for
Chapter 11. The accrual is included in liabilities subject
to compromise in the accompanying consolidated and
debtor-in-possession balance sheets.

The $2.9 million for Chapter 11 related
reorganization items in the consolidated and
debtor-in-possession statements of operations consisted of
approximately $2.1 million of estimated allowable claims
for rejected leases not previously accrued under a restructuring
plan, $256,000 of costs related to valid claims not previously
accrued, and $495,000 of professional fees for the fiscal year
ended March 31, 2002.

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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In accordance with SOP 90-7,
debtor-in-possession financial statements of the Debtor are
presented below. Such financial statements have been prepared on
the same basis as the consolidated financial statements, and
include investments in its subsidiaries at net realizable value
and are presented as follows:

CALICO COMMERCE, INC.

DEBTOR-IN-POSSESSION BALANCE SHEET

(In Thousands)


(Unaudited)


|                                           |                                  |                            |        |          |        | 
|------------------------------------------ | -------------------------------- | -------------------------- | ------ | -------- | ------ | 
|                                           |                                  | March 31, 2002            
|                                           |                                  |                           
|ASSETS                                    
|Current assets:                            |                                  |                            |        |         
|                                           | Cash and cash equivalents        |                            | $      | 25,728   |       
|                                           | Restricted cash                  |                            |        | 500      |       
|                                           | Accounts receivable, net         |                            |        | 5        |       
|                                           | Prepaid and other current assets |                            |        | 1,975    |       
|                                           |                                  |                            |        |         
|                                           |                                  | Total current assets       |        |          | 28,208 | 
|Long-term investments                      |                                  |                            | 160    |         
|Restricted time-deposit                    |                                  |                            | 600    |         
|Property and equipment, net                |                                  |                            | 218    |         
|Investments in Non-Debtor Subsidiaries     |                                  |                            | 600    |         
|Other assets                               |                                  |                            | 184    |         
|                                           |                                  |                            |        |         
|                                           |                                  | $                          | 29,970 |         
|                                           |                                  |                            |        |         
|LIABILITIES AND STOCKHOLDERS
	EQUITY     
|Current liabilities:                       |                                  |                            |        |         
|                                           | Accounts payable                 |                            | $      | 186      |       
|                                           | Accrued liabilities              |                            |        | 893      |       
|                                           |                                  |                            |        |         
|                                           |                                  | Total current liabilities  |        |          | 1,079  | 
|Liabilities subject to compromise          |                                  |                            | 5,264  |         
|                                           |                                  |                            |        |         
|                                           |                                  |                            | 6,343  |         
|                                           |                                  |                            |        |         
|Commitments and contingencies (Note 12)    |                                  |                            |        |         
|Stockholders equity:                      |                                  |                            |        |         
|                                           | Preferred Stock                  |                            |        |         |       
|                                           | Common Stock                     |                            |        | 35       |       
|                                           | Additional paid-in capital       |                            |        | 226,785  |       
|                                           | Other comprehensive income       |                            |        | 16       |       
|                                           | Accumulated deficit              |                            |        | (203,209 | )     
|                                           |                                  |                            |        |         
|                                           |                                  | Total stockholders equity |        |          | 23,627 | 
|                                           |                                  |                            |        |         
|Total liabilities and stockholders equity |                                  | $                          | 29,970 |         
|                                           |                                  |                            |        |         

F-18



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CALICO COMMERCE, INC.

DEBTOR-IN-POSSESSION STATEMENTS OF
OPERATIONS

(In Thousands)


(Unaudited)


|                    |                                                                |                          |                               |                |        |       |        |        |        |         |  
|------------------- | -------------------------------------------------------------- | ------------------------ | ----------------------------- | -------------- | ------ | ----- | ------ | ------ | ------ | ------- | -
|                    |                                                                | Three Months             |                               | Twelve Months 
|                    |                                                                | Ended                    |                               | Ended         
|                    |                                                                | March 31, 2002           |                               | March 31, 2002
|                    |                                                                |                          |                               |               
|Net revenue         |                                                                | $                        | 187                           |                |        | $     | 4,375  |       
|Cost of net revenue |                                                                |                          | 72                            |                |        |       | 1,618  |       
|                    |                                                                |                          |                               |                |        |       |        |       
|                    |                                                                | Gross profit             |                               |                | 115    |       |        |        | 2,757  |        
|                    |                                                                |                          |                               |                |        |       |        |       
|Operating expenses: |                                                                |                          |                               |                |        |       |        |       
|                    | Sales and marketing                                            |                          |                               | 123            |        |       |        | 3,064  |       
|                    | Research and development                                       |                          |                               | 493            |        |       |        | 5,937  |       
|                    | General and administrative                                     |                          |                               | 1,709          |        |       |        | 7,261  |       
|                    | Loss on disposal of long-lived assets                          |                          |                               | (86            | )      |       |        | 759    |       
|                    | Impairment of long-lived assets                                |                          |                               | 823            |        |       |        | 1,734  |       
|                    | Restructuring and other activities                             |                          |                               | (24            | )      |       |        | 1,812  |       
|                    | Gain on sale of product line                                   |                          |                               | (4,541         | )      |       |        | (4,855 | )     
|                    |                                                                |                          |                               |                |        |       |        |       
|                    |                                                                | Total operating expenses |                               |                | (1,503 | )     |        |        | 15,712 |        
|                    |                                                                |                          |                               |                |        |       |        |       
|                    |                                                                |                          | Income (loss) from operations |                |        | 1,618 |        |        |        | (12,955 | )
|                    | Chapter 11 related reorganization items                        |                          |                               | (412           | )      |       |        | (2,888 | )     
|                    | Realized gains on sale of securities                           |                          |                               | 17             |        |       |        | 16,261 |       
|                    | Impairment of long-term investments and
	intercompany balances |                          |                               | 486            |        |       |        | (4,828 | )     
|                    | Other income, net                                              |                          |                               | 464            |        |       |        | 645    |       
|                    |                                                                |                          |                               |                |        |       |        |       
|Net income (loss)   |                                                                | $                        | 2,173                         |                |        | $     | (3,765 | )     
|                    |                                                                |                          |                               |                |        |       |        |       

F-19



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

CALICO COMMERCE, INC.

DEBTOR-IN-POSSESSION STATEMENT OF CASH
FLOWS

For The Twelve Months Ended March 31,
2002


(In Thousands)


(Unaudited)


|                                                 |                                                                              |                                                                |                                           |        |         |        |  
|------------------------------------------------ | ---------------------------------------------------------------------------- | -------------------------------------------------------------- | ----------------------------------------- | ------ | ------- | ------ | -
|Cash flows from operating activities:            |                                                                              |                                                                |                                           |       
|                                                 | Net loss                                                                     |                                                                | $                                         | (3,765 | )      
|                                                 | Adjustments to reconcile net loss to net cash
	used in operating activities: |                                                                |                                           |        |        
|                                                 |                                                                              | Depreciation and amortization                                  |                                           |        | 1,519   |       
|                                                 |                                                                              | Amortization of unearned compensation                          |                                           |        | 7       |       
|                                                 |                                                                              | Provision for doubtful accounts                                |                                           |        | 92      |       
|                                                 |                                                                              | Loss on disposal of assets                                     |                                           |        | 758     |       
|                                                 |                                                                              | Loss on impairment of investments and
	intercompany balances   |                                           |        | 4,828   |       
|                                                 |                                                                              | Impairment of long-lived assets                                |                                           |        | 1,733   |       
|                                                 |                                                                              | Forgiveness of stockholder notes receivable                    |                                           |        | 591     |       
|                                                 |                                                                              | Gain on sale of product line                                   |                                           |        | (4,691  | )     
|                                                 |                                                                              | Restriction of cash under asset sale escrow
	agreement         |                                           |        | (500    | )     
|                                                 | Changes in assets and liabilities:                                           |                                                                |                                           |        |        
|                                                 |                                                                              | Accounts receivable                                            |                                           |        | 2,432   |       
|                                                 |                                                                              | Prepaids and other current assets                              |                                           |        | (105    | )     
|                                                 |                                                                              | Accounts payable                                               |                                           |        | (1,948  | )     
|                                                 |                                                                              | Accrued liabilities                                            |                                           |        | 744     |       
|                                                 |                                                                              | Chapter 11 related reorganization items                        |                                           |        | (5,239  | )     
|                                                 |                                                                              | Deferred revenue                                               |                                           |        | (2,030  | )     
|                                                 |                                                                              | Other liabilities                                              |                                           |        | 35      |       
|                                                 |                                                                              |                                                                |                                           |       
|                                                 |                                                                              |                                                                | Net cash used in operating activities     |        |         | (5,539 | )
|                                                 |                                                                              |                                                                |                                           |       
|                                                 | Cash flows from investing activities:                                        |                                                                |                                           |        |        
|                                                 |                                                                              | Purchases of property and equipment, net                       |                                           |        | (164    | )     
|                                                 |                                                                              | Proceeds from sale of property and equipment                   |                                           |        | 186     |       
|                                                 |                                                                              | Sale of investments                                            |                                           |        | 24,395  |       
|                                                 |                                                                              | Purchases of short-term investments                            |                                           |        | (22,458 | )     
|                                                 |                                                                              | Cash paid to fund Non-Debtor subsidiaries                      |                                           |        | (4,516  | )     
|                                                 |                                                                              | Release of restricted cash to cash equivalents                 |                                           |        | 200     |       
|                                                 |                                                                              | Maturity of short-term investments                             |                                           |        | 27,464  |       
|                                                 |                                                                              |                                                                |                                           |       
|                                                 |                                                                              |                                                                | Net cash provided by investing activities |        |         | 25,107 |  
|                                                 |                                                                              |                                                                |                                           |       
|                                                 | Cash flows from financing activities:                                        |                                                                |                                           |        |        
|                                                 |                                                                              | Proceeds from issuance of common stock, net of
	issuance costs |                                           |        | 120     |       
|                                                 |                                                                              | Common stock repurchases                                       |                                           |        | (105    | )     
|                                                 |                                                                              | Proceeds from repayments of stockholder notes
	receivable      |                                           |        | 10      |       
|                                                 |                                                                              | Restriction of cash under compensating balance
	agreement      |                                           |        | (500    | )     
|                                                 |                                                                              | Release of restricted cash collateral                          |                                           |        | 1,258   |       
|                                                 |                                                                              | Repayments of notes payable                                    |                                           |        | (1,826  | )     
|                                                 |                                                                              | Principal payments under capital lease obligations             |                                           |        | (88     | )     
|                                                 |                                                                              |                                                                |                                           |       
|                                                 |                                                                              |                                                                | Net cash used in financing activities     |        |         | (1,131 | )
|                                                 |                                                                              |                                                                |                                           |       
|Net increase in cash and cash equivalents        |                                                                              |                                                                | 18,437                                    |       
|Cash and cash equivalents at beginning of period |                                                                              |                                                                | 7,291                                     |       
|                                                 |                                                                              |                                                                |                                           |       
|Cash and cash equivalents at end of period       |                                                                              | $                                                              | 25,728                                    |       
|                                                 |                                                                              |                                                                |                                           |       

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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 2  Acquisitions:

ConnectInc.Com

On January 31, 2000, the Company completed
the acquisition of ConnectInc.com, Inc. (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, by and among the Company, Connect and Calico Acquisition
Corporation, approximately 1.4 million shares of the
Companys 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, the Company assumed all outstanding options and
warrants of Connect. Upon the acquisition, these options and
warrants converted to options and warrants to acquire an
aggregate of 219,717 shares of Common Stock and warrants of the
Company and had an average exercise price of $20.77 per share.
The Company used the Black-Scholes option pricing model to
determine the fair value of the assumed options and warrants,
based upon the following assumptions: (i) risk free rate of
5.6% ; (ii) average expected life of 2.5 years;
(iii) expected volatility of 75%; and (iv) no
dividends expected to be paid on the outstanding shares. The
fair value of the stock options and warrants of approximately
$10,772,000 was included as a component of the purchase price.

The total purchase price of $90,480,000 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 total purchase price was allocated as follows
(in thousands):

|                                                     |  |   |        |  
|---------------------------------------------------- |  | - | ------ | -
|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 |  
|                                                     |  |   |        |  

F-21



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 3  Investments:

The carrying amount of the Companys
investments are as follows (in thousands):

|                     |                         |                                 |        |                |       |            |    |            |    |   |   |   |        |   |        |   |       | 
|-------------------- | ----------------------- | ------------------------------- | ------ | -------------- | ----- | ---------- | -- | ---------- | -- | - | - | - | ------ | - | ------ | - | ----- | 
|                     |                         |                                 |        |                |       | Other Than |    |           
|                     |                         | Cost                            |        | Net Unrealized |       | Temporary  |    | Estimated 
|                     |                         | Basis                           |        | Gains (Losses) |       | Impairment |    | Fair Value
|                     |                         |                                 |        |                |       |            |    |           
|As of March 31, 2002 |                         |                                 |        |                |       |            |    |            |    |   |   |   |        |   |        |  
|                     | Long-Term Investments:  |                                 |        |                |       |            |    |            |    |   |   |   |        |   |        |   |      
|                     |                         | Equity securities               |        | $              | 250   |            |    | $          |   |   |   | $ | (90    | ) |        | $ | 160   | 
|                     |                         |                                 |        |                |       |            |    |            |    |   |   |   |        |   |        |  
|As of March 31, 2001 |                         |                                 |        |                |       |            |    |            |    |   |   |   |        |   |        |  
|                     | Short-Term Investments: |                                 |        |                |       |            |    |            |    |   |   |   |        |   |        |   |      
|                     |                         | Corporate bonds                 |        | $              | 7,504 |            |    | $          | 11 |   |   | $ |       |   |        | $ | 7,515 | 
|                     |                         | U.S. Government bonds           |        |                | 9,050 |            |    |            |   |   |   |   |       |   |        |   | 9,050 | 
|                     |                         | Digital River equity securities |        |                | 7,846 |            |    |            |   |   |   |   |       |   |        |   | 7,846 | 
|                     |                         |                                 |        |                |       |            |    |            |    |   |   |   |        |   |        |  
|                     |                         | $                               | 24,400 |                |       | $          | 11 |            |    | $ |  |   |        | $ | 24,411 |  
|                     |                         |                                 |        |                |       |            |    |            |    |   |   |   |        |   |        |  
|                     | Long-Term Investments:  |                                 |        |                |       |            |    |            |    |   |   |   |        |   |        |   |      
|                     |                         | Equity securities               |        | $              | 1,600 |            |    | $          |   |   |   | $ | (1,350 | ) |        | $ | 250   | 
|                     |                         |                                 |        |                |       |            |    |            |    |   |   |   |        |   |        |  

Note 4  Balance Sheet
Components:

|                          |                                 |                |     |        |   |   |       |        |  
|------------------------- | ------------------------------- | -------------- | --- | ------ | - | - | ----- | ------ | -
|                          |                                 |               
|                          |                                 | March 31,     
|                          |                                 |               
|                          |                                 | 2002           |     | 2001  
|                          |                                 |                |     |       
|                          |                                 |               
|                          |                                 | (In thousands)
|Accounts Receivable, Net: |                                 |                |     |        |   |   |       |       
|                          | Accounts receivable             |                | $   | 1,499  |   |   | $     | 3,432  |  
|                          | Unbilled receivables            |                |     |       |   |   |       | 850    |  
|                          | Allowance for doubtful accounts |                |     | (1,119 | ) |   |       | (1,700 | )
|                          |                                 |                |     |        |   |   |       |       
|                          |                                 | $              | 380 |        |   | $ | 2,582 |       
|                          |                                 |                |     |        |   |   |       |       

Write offs of accounts receivable against the
allowance for doubtful accounts totaled $650,000, $162,000 and
$102,000 for the years ended March 31, 2002, 2001 and 2000,
respectively.

|                                  |                                          |                |       |       |  |   |       |       | 
|--------------------------------- | ---------------------------------------- | -------------- | ----- | ----- |  | - | ----- | ----- | 
|                                  |                                          |               
|                                  |                                          | March 31,     
|                                  |                                          |               
|                                  |                                          | 2002           |       | 2001 
|                                  |                                          |                |       |      
|                                  |                                          |               
|                                  |                                          | (In thousands)
|Prepaid and Other Current Assets: |                                          |                |       |       |  |   |       |      
|                                  | Deposits                                 |                | $     | 38    |  |   | $     | 530   | 
|                                  | Prepaid expenses                         |                |       | 1,146 |  |   |       | 1,172 | 
|                                  | Interest receivable                      |                |       | 6     |  |   |       | 225   | 
|                                  | Due from former employee, net of reserve |                |       | 225   |  |   |       | 225   | 
|                                  | Other current assets                     |                |       | 576   |  |   |       | 297   | 
|                                  |                                          |                |       |       |  |   |       |      
|                                  |                                          | $              | 1,991 |       |  | $ | 2,449 |      
|                                  |                                          |                |       |       |  |   |       |      

F-22



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                             |                                                 |                |       |        |   |   |       |        |  
|---------------------------- | ----------------------------------------------- | -------------- | ----- | ------ | - | - | ----- | ------ | -
|                             |                                                 |               
|                             |                                                 | March 31,     
|                             |                                                 |               
|                             |                                                 | 2002           |       | 2001  
|                             |                                                 |                |       |       
|                             |                                                 |               
|                             |                                                 | (In thousands)
|Property and Equipment, Net: |                                                 |                |       |        |   |   |       |       
|                             | Computer equipment and software                 |                | $     | 3,732  |   |   | $     | 7,448  |  
|                             | Furniture, fixtures and leasehold improvements  |                |       | 430    |   |   |       | 1,033  |  
|                             |                                                 |                |       |        |   |   |       |       
|                             |                                                 |                | 4,162 |        |   |   | 8,481 |       
|                             | Less: accumulated depreciation and amortization |                |       | (3,944 | ) |   |       | (3,837 | )
|                             |                                                 |                |       |        |   |   |       |       
|                             |                                                 | $              | 218   |        |   | $ | 4,644 |       
|                             |                                                 |                |       |        |   |   |       |       

Depreciation and amortization expense for the
years ended March 31, 2002, 2001 and 2000 totaled
$1.6 million, $3.0 million and $1.9 million,
respectively. Property and equipment includes $29,000, $150,000
and $944,000 of computer and office equipment under capital
leases at March 31, 2002, 2001 and 2000, respectively.
Accumulated depreciation of assets under capital leases totaled
$23,000, $77,500 and $587,000 at March 31, 2002, 2001 and
2000, respectively.

|              |          |                |   |      |  |  |   |     | 
|------------- | -------- | -------------- | - | ---- |  |  | - | --- | 
|              |          |               
|              |          | March 31,     
|              |          |               
|              |          | 2002           |   | 2001
|              |          |                |   |     
|              |          |               
|              |          | (In thousands)
|Other Assets: |          |                |   |      |  |  |   |    
|              | Deposits |                | $ | 190  |  |  | $ | 190 | 
|              |          |                |   |      |  |  |   |    

Amortization expense for the years ended
March 31, 2002, 2001 and 2000 totaled $0,
$31.0 million and $6.6 million, respectively.

|                     |                                           |                |       |      |  |   |        |       | 
|-------------------- | ----------------------------------------- | -------------- | ----- | ---- |  | - | ------ | ----- | 
|                     |                                           |               
|                     |                                           | March 31,     
|                     |                                           |               
|                     |                                           | 2002           |       | 2001
|                     |                                           |                |       |     
|                     |                                           |               
|                     |                                           | (In thousands)
|Accrued Liabilities: |                                           |                |       |      |  |   |        |      
|                     | Accrued compensation and benefits         |                | $     | 224  |  |   | $      | 2,198 | 
|                     | Accrued commissions                       |                |       |     |  |   |        | 806   | 
|                     | Accrued trade liabilities                 |                |       | 301  |  |   |        | 4,292 | 
|                     | Employee stock purchase plan withholdings |                |       |     |  |   |        | 371   | 
|                     | Accrued restructuring costs               |                |       | 60   |  |   |        | 805   | 
|                     | Accrued professional service fees         |                |       | 246  |  |   |        | 287   | 
|                     | Accrued taxes                             |                |       | 227  |  |   |        | 689   | 
|                     | Other accrued liabilities                 |                |       |     |  |   |        | 1,739 | 
|                     |                                           |                |       |      |  |   |        |      
|                     |                                           | $              | 1,058 |      |  | $ | 11,187 |      
|                     |                                           |                |       |      |  |   |        |      

F-23



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 5  Borrowings:

Notes
Payable

Notes payable consisted of amounts payable to
equipment financing companies and banks. All were collateralized
by the underlying assets as follows:

|                                                                                                                     |  |                |   |      |  |   |        |  
|-------------------------------------------------------------------------------------------------------------------- |  | -------------- | - | ---- |  | - | ------ | -
|                                                                                                                     |  |               
|                                                                                                                     |  | March 31,     
|                                                                                                                     |  |               
|                                                                                                                     |  | 2002           |   | 2001
|                                                                                                                     |  |                |   |     
|                                                                                                                     |  |               
|                                                                                                                     |  | (In thousands)
|Bank prime (8.0% at March 31, 2001) plus
	0.5% note; principal and interest payable monthly; matured May
	2001       |  | $              |  |      |  | $ | 6      |  
|Bank prime (8.0% at March 31, 2001) plus
	0.5% note; principal and interest payable monthly; matured
	September 2001 |  |                |  |      |  |   | 49     |  
|Bank prime (8.0% at March 31, 2001) plus
	0.5% note; principal and interest payable monthly; paid November
	2001     |  |                |  |      |  |   | 107    |  
|Bank prime (8.0% at March 31, 2001) plus
	0.5% note; principal and interest payable monthly; paid November
	2001     |  |                |  |      |  |   | 556    |  
|Bank prime (8.0% at March 31, 2001) plus
	0.5% note; principal and interest payable monthly; paid November
	2001     |  |                |  |      |  |   | 467    |  
|Bank prime (8.0% at March 31, 2001) plus
	0.5% note; principal and interest payable monthly; paid November
	2001     |  |                |  |      |  |   | 238    |  
|Bank prime (8.0% at March 31, 2001) plus
	0.5% note; principal and interest payable monthly; paid November
	2001     |  |                |  |      |  |   | 400    |  
|8.8% note; principal and interest payable
	monthly; matured June 2001                                                |  |                |  |      |  |   | 6      |  
|                                                                                                                     |  |                |   |      |  |   |        |  
|                                                                                                                     |  |                |  |      |  |   | 1,829  |  
|Less: current portion of notes payable                                                                               |  |                |  |      |  |   | (1,826 | )
|                                                                                                                     |  |                |   |      |  |   |        |  
|Notes payable, non-current                                                                                           |  | $              |  |      |  | $ | 3      |  
|                                                                                                                     |  |                |   |      |  |   |        |  

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 under
this commitment bore interest at the banks prime rate plus
0.5% per year, with the principal to be repaid in 36 equal
monthly installments. As of March 31, 2000, the bank had
made three advances totaling $2.1 million under this
commitment, and advanced an additional $515,000 on June 30,
2000.

The Company was required to meet certain
quarterly financial tests, including minimum operating results
and certain liquidity, leverage and debt service ratios. At
March 31, 2001, the Company was not in compliance with all
of the financial covenants, due to larger than expected net
operating losses. The Company classified these notes payable as
current at March 31, 2001.

In March of 2001, the Company entered into an
agreement with this lender which required the Company to
maintain a money market cash balance of $750,000 as collateral
against the installment notes payable described above. These
notes were originally collateralized with equipment and
intellectual property that was subsequently sold in conjunction
with the Companys sale of its MarketMaker product line
(See Note 14  Sales of Product Lines). The cash
balance was classified as restricted cash at March 31, 2001.

In July 2001, the Company provided the bank with
$500,000 of additional cash to collateralize the loan, resulting
in the bank holding restricted cash in the amount of
$1.25 million to collateralize its obligations to them. As
a result of the Companys default on the financial
covenants concerning its quick ratio, minimum tangible net worth
and profitability, the bank had the right to accelerate payment
of all amounts outstanding

F-24



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

under the commitment on demand, including
outstanding interest and any penalties. The Company repaid these
notes in full in November 2001 and the restricted cash was
released.

Note 6  Income Taxes:

The Companys pretax losses for the fiscal
years ended March 31, 2002, 2001 and 2000 consisted of the
following components:

|         |  |                |        |      |  |      |          |   |  |   |         |  
|-------- |  | -------------- | ------ | ---- |  | ---- | -------- | - |  | - | ------- | -
|         |  |               
|         |  | March 31,     
|         |  |               
|         |  | 2002           |        | 2001 |  | 2000
|         |  |                |        |      |  |     
|         |  |               
|         |  | (In thousands)
|Domestic |  | $              | (2,958 | )    |  | $    | (141,592 | ) |  | $ | (28,589 | )
|Foreign  |  |                | (996   | )    |  |      | 897      |   |  |   | 788     |  
|         |  |                |        |      |  |      |          |   |  |   |         |  
|         |  | $              | (3,954 | )    |  | $    | (140,695 | ) |  | $ | (27,801 | )
|         |  |                |        |      |  |      |          |   |  |   |         |  

The benefit for income taxes for the year ended
March 31, 2002 represents a reduction of previously
estimated taxes due on revenues generated in our foreign
locations. The provision for income taxes for the year ended
March 31, 2001 is comprised of international income taxes
on the Companys foreign sales subsidiaries.

|                |         |                |     |      |     |      |     |     |     |   |   |   |   | 
|--------------- | ------- | -------------- | --- | ---- | --- | ---- | --- | --- | --- | - | - | - | - | 
|                |         |               
|                |         | March 31,     
|                |         |               
|                |         | 2002           |     | 2001 |     | 2000
|                |         |                |     |      |     |     
|                |         |               
|                |         | (In thousands)
|Current:        |         |                |     |      |     |      |     |     |     |   |   |  
|                | Federal |                | $   |     |     |      | $   |    |     |   | $ |  |  
|                | State   |                |     |     |     |      |     |    |     |   |   |  |  
|                | Foreign |                |     | (36  | )   |      |     | 634 |     |   |   |  |  
|                |         |                |     |      |     |      |     |     |     |   |   |  
|                |         | Total current  |     | $    | (36 | )    |     | $   | 634 |   |   | $ |  | 
|                |         |                |     |      |     |      |     |     |     |   |   |  
|Deferred:       |         |                |     |      |     |      |     |     |     |   |  |  
|                | Federal |                | $   |     |     |      | $   |    |     |   | $ |  |  
|                | State   |                |     |     |     |      |     |    |     |   |   |  |  
|                | Foreign |                |     |     |     |      |     | 634 |     |   |   |  |  
|                |         |                |     |      |     |      |     |     |     |   |   |  
|                |         | Total deferred |     | $    |    |      |     | $   | 634 |   |   | $ |  | 
|                |         |                |     |      |     |      |     |     |     |   |   |  
|Total provision |         | $              | (36 | )    |     | $    | 634 |     |     | $ |  |  
|                |         |                |     |      |     |      |     |     |     |   |   |  

At March 31, 2002, the Company had
approximately $82 million of federal and $22 million
of state net operating loss carryforwards available to offset
future taxable income which expire in varying amounts beginning
in 2009 and 2003, respectively. At March 31, 2002, the
Company had approximately $2.4 million of federal research
and development carryforwards available to offset future taxable
income, some of which expire in varying amounts beginning in
2009. At March 31, 2002, the company had approximately
$2.4 million of state research and development credit
carryforwards available to offset future taxable income and will
expire indefinitely. Additionally, the Company has approximately
$1 million of other credit carryforwards which expire in
varying amounts beginning in 2003. 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.

F-25



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Deferred taxes are composed of the following:

|                          |                                             |                |        |         |   |      |        |         |   |   |        |         |  
|------------------------- | ------------------------------------------- | -------------- | ------ | ------- | - | ---- | ------ | ------- | - | - | ------ | ------- | -
|                          |                                             |               
|                          |                                             | March 31,     
|                          |                                             |               
|                          |                                             | 2002           |        | 2001    |   | 2000
|                          |                                             |                |        |         |   |     
|                          |                                             |               
|                          |                                             | (In thousands)
|Deferred tax assets:      |                                             |                |        |         |   |      |        |         |   |   |        |        
|                          | Depreciation and amortization               |                | $      | 690     |   |      | $      | 240     |   |   | $      | 694     |  
|                          | Other accruals and liabilities              |                |        | 4,313   |   |      |        | 3,799   |   |   |        | 4,480   |  
|                          | Net operating loss and credit carryforwards |                |        | 34,062  |   |      |        | 40,385  |   |   |        | 20,172  |  
|                          |                                             |                |        |         |   |      |        |         |   |   |        |        
|                          |                                             |                | 39,065 |         |   |      | 44,424 |         |   |   | 25,346 |        
|                          | Less: Valuation allowance                   |                |        | (39,065 | ) |      |        | (44,424 | ) |   |        | (22,054 | )
|                          |                                             |                |        |         |   |      |        |         |   |   |        |        
|                          |                                             | $              |       |         |   | $    |       |         |   | $ | 3,292  |        
|                          |                                             |                |        |         |   |      |        |         |   |   |        |        
|Deferred tax liabilities: |                                             |                |        |         |   |      |        |         |   |   |       |        
|                          | Non-deductible intangible assets            |                | $      |        |   |      | $      |        |   |   | $      | 3,292   |  
|                          | Depreciation                                |                |        |        |   |      |        |        |   |   |        |        |  
|                          |                                             |                |        |         |   |      |        |         |   |   |        |        
|                          |                                             | $              |       |         |   | $    |       |         |   | $ | 3,292  |        
|                          |                                             |                |        |         |   |      |        |         |   |   |        |        
|Net deferred tax          |                                             | $              |       |         |   | $    |       |         |   | $ |       |        
|                          |                                             |                |        |         |   |      |        |         |   |   |        |        

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, 2002, 2001 and 2000. The Companys operating
losses are generated domestically and amounts attributable to
its foreign operations have been insignificant for all periods
presented.

Reconciliation of the statutory federal income
tax rate to the Companys effective tax rate is as follows:

|                                                              |  |                      |     |      |  |      |     |    |  |  |     |   
|------------------------------------------------------------- |  | -------------------- | --- | ---- |  | ---- | --- | -- |  |  | --- | --
|                                                              |  |                     
|                                                              |  | Year Ended March 31,
|                                                              |  |                     
|                                                              |  | 2002                 |     | 2001 |  | 2000
|                                                              |  |                      |     |      |  |     
|Federal statutory rate                                        |  |                      | (34 | )%   |  |      | (34 | )% |  |  | (35 | )%
|State tax, net of federal impact                              |  |                      | (6  | )    |  |      | (6  | )  |  |  | (6  | ) 
|Book/tax basis difference on ConnectInc.com
	assets and stock |  |                      | (21 | )    |  |      | 14  |    |  |  |    |   
|Provision for valuation allowance on deferred tax
	assets     |  |                      | 47  |      |  |      | 16  |    |  |  | 26  |   
|Foreign loss not benefited                                    |  |                      | 11  |      |  |      |    |    |  |  |    |   
|Other permanent differences                                   |  |                      | 3   |      |  |      | 10  |    |  |  | 15  |   
|                                                              |  |                      |     |      |  |      |     |    |  |  |     |   
|                                                              |  |                      |    | %    |  |      |    | %  |  |  |    | % 
|                                                              |  |                      |     |      |  |      |     |    |  |  |     |   

Note 7  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

F-26



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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:

|                                  |  |               |               |        |  |          |        |            |  |               |      |  |  |   |        |  |  |  |      | 
|--------------------------------- |  | ------------- | ------------- | ------ |  | -------- | ------ | ---------- |  | ------------- | ---- |  |  | - | ------ |  |  |  | ---- | 
|                                  |  |               |               |        |  | Exercise |        | Estimated  |  | Fiscal Year  
|                                  |  | Date of Grant |               | Shares |  | Price    |        | Fair Value |  | of Expiration
|                                  |  |               |               |        |  |          |        |            |  |              
|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 | 

These warrants were converted into warrants to
purchase the Companys Common Stock on a one-for-one ratio
on October 6, 1999.

In connection with the acquisition of FirstFloor
in August 1998, the Company exchanged all outstanding 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 options to purchase
Common Stock of the Company on October 6, 1999. The options
expired upon the earlier of the termination of employment of the
optionee or 10 years from the grant date. As a result of
the termination of the Companys employee stock option
plans in February 2002, these options are no longer outstanding.

Note 8  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.

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 $81.7 million, after underwriting fees of
$3.9 million and $2.2 million of other estimated
offering expenses.

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 an
equipment lease financier. The fair value of the warrants had
been recognized as interest expense over the life of the
associated financing instrument. The warrants were immediately
vested and exercisable upon issuance and have a three year term.

In December 1999, the Company entered into
license, maintenance and services agreements with a business
partner. Concurrently with the license agreement, the Company
issued a Common Stock warrant to the business partner to
purchase 4,108 shares of the Companys Common Stock at 85%
of the average market price for the 20 consecutive business
days commencing 39 days before the date of grant, which was
$46.37. The warrant vested immediately and has a three year
term. The warrant was valued at $118,000.

In March 2000, the Company entered into further
license, maintenance and service agreements with this business
partner. Concurrently with the license agreement, the Company
issued a Common Stock warrant to the business partner to
purchase 5,475 shares of the Companys Common Stock at 85%
of the average market

F-27



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

price for the 20 consecutive business days
commencing 30 days before the date of grant, which was
$31.051. The warrant vested immediately and has a three year
term. The warrant was valued at $115,000.

In June 2000 and December 2000, in connection
with sales transactions, the Company issued warrants to purchase
5,395 and 100,000 shares, respectively, of Common Stock to
customers. These warrants were immediately exercisable after
issuance. The fair value of the warrants of $60,000 has been
recorded in the statement of operations as a reduction in
revenue in the year ended March 31, 2001.

The Company estimated the fair value of the
warrants the date of grant using the Black-Scholes option
pricing model and the following assumptions: Risk free rate of
5.50%-6.80%, no expected dividends and 75% volatility.

|               |  |        |        |          |  |            |       |               |  |   |         |  |  |  |      | 
|-------------- |  | ------ | ------ | -------- |  | ---------- | ----- | ------------- |  | - | ------- |  |  |  | ---- | 
|               |  |        |        | Exercise |  | Estimated  |       | Fiscal Year  
|Date of Grant  |  | Shares |        | Price    |  | Fair Value |       | of Expiration
|               |  |        |        |          |  |            |       |              
|September 1999 |  |        | 5,263  |          |  | $          | 9.50  |               |  | $ | 30,000  |  |  |  | 2003 | 
|December 1999  |  |        | 4,108  |          |  |            | 45.05 |               |  |   | 118,000 |  |  |  | 2003 | 
|March 2000     |  |        | 5,475  |          |  |            | 31.05 |               |  |   | 115,000 |  |  |  | 2003 | 
|June 2000      |  |        | 5,395  |          |  |            | 12.60 |               |  |   | 27,450  |  |  |  | 2004 | 
|December 2000  |  |        | 50,000 |          |  |            | 1.50  |               |  |   | 13,600  |  |  |  | 2004 | 
|December 2000  |  |        | 50,000 |          |  |            | 1.00  |               |  |   | 18,950  |  |  |  | 2004 | 

As of March 31, 2002, the Company had
reserved shares of Common Stock for future issuance as follows
(in thousands):

|                     |  |        |       | 
|-------------------- |  | ------ | ----- | 
|                     |  | Shares
|                     |  |       
|Exercise of options  |  |        | 3,549 | 
|Exercise of warrants |  |        | 253   | 
|                     |  |        |       | 
|                     |  |        | 3,802 | 
|                     |  |        |       | 

Note 9  Employee Benefit
Plans:



| |                    
| | -------------------
| | 401(k) Savings Plan

Prior to December 31, 2001, the Company
sponsored a 401(k) defined contribution plan covering eligible
employees who elected to participate. The Company could elect to
contribute matching and discretionary contributions to the plan;
however, no contributions were made by the Company since the
inception of the plan. The Plan was terminated effective
December 31, 2001.



| |                   
| | ------------------
| | 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 provided for the issuance of incentive and non-statutory
stock options to employees, officers, and directors of, and
consultants to the Company. The Company reserved 15,150,000
shares of Common Stock for issuance under the Plans. The shares
reserved were automatically 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. As a result of the sale of
PeopleSoft, all options outstanding and not yet exercised under
this stock option plan terminated on February 6, 2002 as
they were not assumed by PeopleSoft.

In March 2000, the Board of Directors adopted the
2000 Non-Officer Stock Option Plan, which provided for the
issuance of non-statutory stock options to employees of the
Company who were not executive officers

F-28



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

or directors. The Plan provided 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 reserved 3,000,000
shares of Common Stock for issuance under this Plan. As a result
of the sale of all of the Companys intellectual property
and significantly all of its operating assets to PeopleSoft, 25%
of the options outstanding under this plan accelerated and
became vested and exercisable immediately prior to the closing
of the sale to PeopleSoft. In addition, as a result of the sale
of all of the Companys intellectual property and
significantly all of its operating assets to PeopleSoft, all
options outstanding and not yet exercised as of February 6,
2002 terminated as of that date, as they were not assumed by
PeopleSoft.

Options under the Plans were generally for
periods not to exceed ten years, and must have been 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 owned greater than 10% of the outstanding
stock were for periods not to exceed five years, and must have
been 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 plans provided for grants of immediately exercisable
options, however, the Company had the right to repurchase any
unvested Common Stock upon termination of employment at the
original exercise price. Options became exercisable at such
times and under such conditions as determined by the Board of
Directors. Options generally vested over two to four years.

In July 2001, Mr. James B. Weil replaced
Mr. Alan P. Naumann as the Companys Chief Executive
Officer and Mr. Gary J. Sbona was appointed to the Board of
Directors. In addition, the Company entered into an agreement
with Regent Pacific Management Corporation (Regent
Pacific), a management firm of which Mr. Sbona is the
Chief Executive Officer and Mr. Weil is a principal,
pursuant to which Regent Pacific has provided management
services to the Company, including the services of
Messrs. Sbona and Weil, and other Regent Pacific personnel.
As part of the original engagement, and in connection with a
separate employment agreement that Mr. Sbona has entered
into with the Company, Mr. Sbona was granted options to
purchase 3,548,777 shares of the Companys Common Stock at
an exercise price of $0.18 per share. Vesting on all of these
options accelerated as a result of the sale to PeopleSoft, and
these options are now fully vested and exercisable and remain
outstanding.

Immediately prior to the closure of the sale to
PeopleSoft, options to purchase 543,345 shares of Common
Stock were exercised at a weighted average exercise price of
$0.175 per share, and options to purchase 2,064,406 shares
were terminated and cancelled. Except for the options
outstanding to Mr. Sbona, the Company no longer has any
options outstanding under its stock option plans, and has
terminated all of its stock option plans.



| |                             
| | ----------------------------
| | 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 were
750,000 shares of Common Stock reserved for issuance under
the Purchase Plan, of which 3,000 were issued on
October 31, 2001, 68,191 were issued on April 30,
2001, 122,017 were issued on April 30, 2000 and
137,787 shares were issued on October 31, 2000.
Employees generally were eligible to participate in the Purchase
Plan if they were 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 could
select a rate of payroll deduction up to 15% of their
compensation, but could 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, ran for approximately 24 months,
divided into four consecutive purchase periods of approximately
six months. Offering Periods and Purchase Periods thereafter
began on May 1 and November 1 of each year. The price at which
the Common Stock was purchased under the Purchase Plan is 85% of
the lower of the fair

F-29



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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. The Employee Stock Purchase
Plan was terminated on October 31, 2001.

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

|                          |                                       |                     |        |            |   |          |       |         |   |   |      |       | 
|------------------------- | ------------------------------------- | ------------------- | ------ | ---------- | - | -------- | ----- | ------- | - | - | ---- | ----- | 
|                          |                                       |                    
|                          |                                       | Options Outstanding
|                          |                                       |                    
|                          |                                       | Options             |        |            |   | Weighted
|                          |                                       | Available           |        |            |   | Average 
|                          |                                       | for                 |        | Number     |   | Exercise
|                          |                                       | Grant               |        | of Options |   | Price   
|                          |                                       |                     |        |            |   |         
|Balance at March 31, 1999 |                                       |                     | 4,702  |            |   |          | 3,497 |         |   | $ | 4.47 |      
|                          | Additional shares authorized          |                     |        | 3,292      |   |          |       |        |   |   |      |      | 
|                          | 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 |                                       |                     | 5,106  |            |   |          | 6,289 |         |   |   | 9.28 |      
|                          | Additional shares authorized          |                     |        | 3,800      |   |          |       |        |   |   |      |      | 
|                          | Options granted                       |                     |        | (7,761     | ) |          |       | 7,761   |   |   |      | 7.89  | 
|                          | Repurchase of restricted Common Stock |                     |        | 274        |   |          |       |        |   |   |      | 0.78  | 
|                          | Options exercised                     |                     |        |           |   |          |       | (354    | ) |   |      | 4.36  | 
|                          | Options cancelled                     |                     |        | 5,520      |   |          |       | (5,520  | ) |   |      | 9.96  | 
|                          |                                       |                     |        |            |   |          |       |         |   |   |      |      
|Balance at March 31, 2001 |                                       |                     | 6,939  |            |   |          | 8,176 |         |   |   | 7.75 |      
|                          | Additional shares authorized          |                     |        |           |   |          |       |        |   |   |      |      | 
|                          | Options granted                       |                     |        | (6,399     | ) |          |       | 6,399   |   |   |      | 0.18  | 
|                          | Repurchase of restricted Common Stock |                     |        | 35         |   |          |       |        |   |   |      | 2.95  | 
|                          | Options exercised                     |                     |        |           |   |          |       | (545    | ) |   |      | 0.18  | 
|                          | Options expired                       |                     |        | (2         | ) |          |       |        |   |   |      |      | 
|                          | Options cancelled                     |                     |        | 10,481     |   |          |       | (10,481 | ) |   |      | 6.06  | 
|                          |                                       |                     |        |            |   |          |       |         |   |   |      |      
|Balance at March 31, 2002 |                                       |                     | 11,054 |            |   |          | 3,549 |         |   | $ | 0.18 |      
|                          |                                       |                     |        |            |   |          |       |         |   |   |      |      

All option plans have been terminated and the
Company will not make future grants of options under the Plans.

The following table summarizes the information
about stock options exercisable as of March 31, 2002
(shares in thousands):

|                         |  |             |       |          |  |   |      | 
|------------------------ |  | ----------- | ----- | -------- |  | - | ---- | 
|                         |  |             |       | Weighted
|                         |  |             |       | Average 
|                         |  | Number      |       | Exercise
|Range of Exercise Prices |  | Outstanding |       | Price   
|                         |  |             |       |         
|$0.18 - $0.18            |  |             | 3,549 |          |  | $ | 0.18 | 

F-30



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##### Table of Contents



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:

|                    |                                                |                      |   |                |   |      |   |      |   |      |   |      |   |  |   |      |   |  |   |      |   |  |   |      |  
|------------------- | ---------------------------------------------- | -------------------- | - | -------------- | - | ---- | - | ---- | - | ---- | - | ---- | - |  | - | ---- | - |  | - | ---- | - |  | - | ---- | -
|                    |                                                |                      |   |               
|                    |                                                | Stock Option Plans   |   | Employee Stock
|                    |                                                | Year Ended March 31, |   | Purchase Plan 
|                    |                                                |                      |   |               
|                    |                                                | 2002                 |   | 2001           |   | 2000 |   | 2002 |   | 2001 |   | 2000
|                    |                                                |                      |   |                |   |      |   |      |   |      |   |     
|Stock option plans: |                                                |                      |   |                |   |      |   |      |   |      |   |      |   |  |   |      |   |  |   |      |   |  |   |     
|                    | Dividend yield                                 |                      |   |               | % |      |   |     | % |      |   |     | % |  |   |     | % |  |   |     | % |  |   |     | %
|                    | Expected volatility                            |                      |   | 220            | % |      |   | 198  | % |      |   | 75   | % |  |   | 220  | % |  |   | 198  | % |  |   | 75   | %
|                    | Average risk free interest rate                |                      |   | 3.95           | % |      |   | 4.46 | % |      |   | 6.33 | % |  |   | 3.95 | % |  |   | 4.46 | % |  |   | 6.33 | %
|                    | Expected life (in years)                       |                      |   | 5              |   |      |   | 3    |   |      |   | 4    |   |  |   | 2    |   |  |   | 2    |   |  |   | 2    |  
|                    | Weighted average fair value of options granted |                      | $ | 0.19           |   |      | $ | 7.61 |   |      | $ | 5.05 |   |  | $ | 0.17 |   |  | $ | 3.84 |   |  | $ | 4.06 |  



| |                                
| | -------------------------------
| | Pro Forma Net Loss
	(Unaudited)

For purposes of pro forma disclosures, the
estimated fair value of the options are amortized into expense
over the options vesting period using the accelerated
vesting method. 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,
2002, 2001 and 2000, respectively, (in thousands, except per
share amounts):

|                                         |  |                      |        |      |  |      |          |   |  |   |         |  
|---------------------------------------- |  | -------------------- | ------ | ---- |  | ---- | -------- | - |  | - | ------- | -
|                                         |  |                     
|                                         |  | Year Ended March 31,
|                                         |  |                     
|                                         |  | 2002                 |        | 2001 |  | 2000
|                                         |  |                      |        |      |  |     
|                                         |  |                     
|                                         |  | (Unaudited)         
|Net loss as reported                     |  | $                    | (3,918 | )    |  | $    | (141,329 | ) |  | $ | (27,801 | )
|Pro forma net loss                       |  |                      | (4,129 | )    |  |      | (162,507 | ) |  |   | (34,044 | )
|Net loss per share as reported           |  |                      | (0.11  | )    |  |      | (4.09    | ) |  |   | (1.36   | )
|Pro forma net loss per share as reported |  |                      | (0.12  | )    |  |      | (4.71    | ) |  |   | (1.66   | )

All option plans have been terminated and the
Company will not make future grants of options under the Plans.



| |                                   
| | ----------------------------------
| | Unearned Stock-Based
	Compensation

Amortization of unearned compensation totaled
$7,000, $218,000 and $1,551,000 for the years ended
March 31, 2002, 2001 and 2000, respectively. There is no
outstanding unearned stock-based compensation as of
March 31, 2002.

F-31



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Note 10  Net Loss Per
Share:

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

|                                                |                                                                         |                      |   |        |   |      |   |          |   |  |   |         |  
|----------------------------------------------- | ----------------------------------------------------------------------- | -------------------- | - | ------ | - | ---- | - | -------- | - |  | - | ------- | -
|                                                |                                                                         |                     
|                                                |                                                                         | Year Ended March 31,
|                                                |                                                                         |                     
|                                                |                                                                         | 2002                 |   | 2001   |   | 2000
|                                                |                                                                         |                      |   |        |   |     
|Numerator:                                      |                                                                         |                      |   |        |   |      |   |          |   |  |   |        
|                                                | Net income (loss)                                                       |                      | $ | (3,918 | ) |      | $ | (141,329 | ) |  | $ | (27,801 | )
|                                                |                                                                         |                      |   |        |   |      |   |          |   |  |   |        
|Denominator:                                    |                                                                         |                      |   |        |   |      |   |          |   |  |   |        
|                                                | Weighted average shares                                                 |                      |   | 35,381 |   |      |   | 35,160   |   |  |   | 22,352  |  
|                                                | Weighted average unvested shares of Common Stock
	subject to repurchase |                      |   | (189   | ) |      |   | (635     | ) |  |   | (1,902  | )
|                                                |                                                                         |                      |   |        |   |      |   |          |   |  |   |        
|                                                | Denominator for basic calculation                                       |                      |   | 35,192 |   |      |   | 34,525   |   |  |   | 20,450  |  
|                                                |                                                                         |                      |   |        |   |      |   |          |   |  |   |        
|Weighted average effect of dilutive securities: |                                                                         |                      |   |        |   |      |   |          |   |  |   |        
|                                                | Weighted average common shares subject to
	repurchase                   |                      |   |       |   |      |   |         |   |  |   |        |  
|                                                | Incremental shares from employee stock options                          |                      |   |       |   |      |   |         |   |  |   |        |  
|                                                |                                                                         |                      |   |        |   |      |   |          |   |  |   |        
|                                                | Denominator for diluted calculation                                     |                      |   | 35,192 |   |      |   | 34,525   |   |  |   | 20,450  |  
|                                                |                                                                         |                      |   |        |   |      |   |          |   |  |   |        
|Net earnings per share:                         |                                                                         |                      |   |        |   |      |   |          |   |  |   |        
|                                                | Basic                                                                   |                      | $ | (0.11  | ) |      | $ | (4.09    | ) |  | $ | (1.36   | )
|                                                |                                                                         |                      |   |        |   |      |   |          |   |  |   |        
|                                                | Diluted                                                                 |                      | $ | (0.11  | ) |      | $ | (4.09    | ) |  | $ | (1.36   | )
|                                                |                                                                         |                      |   |        |   |      |   |          |   |  |   |        

During 2002, 2001 and 2000, there were
3.8 million, 8.3 million and 7.8 million,
respectively, weighted average potential common shares that were
excluded from the determination of diluted net earnings per
share, as the effect of such shares was anti-dilutive.

Note 11  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 bore simple interest at various
rates ranging from 5.54% to 6.65% per annum. The notes, which
were collateralized by the underlying shares of Common Stock,
were full recourse and matured on various dates through fiscal
2002.

During fiscal 2001, two of these notes were
renegotiated and portions of the notes forgiven. One note
receivable in the amount of $65,000, including accrued interest,
was renegotiated for a cash payment of $10,000 which was
received in June 2001. The remaining $55,000 of the note was
forgiven and recorded as an expense in fiscal year 2001. The
second note renegotiated was in the amount of $404,000,
including accrued interest. The note holder agreed to perform
services without compensation in exchange for reducing the note
principal. The remaining $388,000 of the note was forgiven and
recorded as an expense in fiscal year 2001. In addition, a third
shareholder note in the amount of $309,000, including accrued
interest, was forgiven during fiscal 2001. The entire amount of
the note was recorded as an expense for the year ended
March 31, 2001. In July 2001, as part of a separation
agreement and release with its former President and Chief
Executive Officer, the Company agreed to forgive the remaining
principal balance and all unpaid interest due, totaling
approximately $607,000, related to notes received in exchange
for the issuance of Common Stock in lieu of compensation for
services performed subsequent to the date of the separation
agreement. This amount was recorded as compensation expense over
the period the services were performed. The Company repurchased
all

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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

unvested shares related to these notes, and
offset the purchase price of such repurchase against the amounts
due on the notes.

In July 2001, Mr. James B. Weil replaced
Mr. Alan P. Naumann as the Companys Chief
Executive Officer and Mr. Gary J. Sbona was appointed
to the Board of Directors. In addition, the Company entered into
an agreement with Regent Pacific Management Corporation
(Regent Pacific), a management firm of which
Mr. Sbona is the Chief Executive Officer and Mr. Weil
is a principal, pursuant to which Regent Pacific has provided
management services to the Company, including the services of
Messrs. Sbona and Weil, and other Regent Pacific personnel. The
initial agreement had a 6 month term commencing July 2001
with a minimum cash compensation to Regent Pacific of
$1.3 million for that period. As of December 31, 2001
the Company had recorded all $1.3 million of management
fees related to this agreement. In December 2001, the Company
amended the agreement with Regent Pacific to extend the
noncancellable term of the agreement to May 2002, and in
connection herewith, paid to Regent Pacific $750,000 as fees due
for the noncancellable portion of the agreement, which will be
amortized over the remaining term of the agreement as services
are rendered. In April 2002, the Company further amended the
agreement with Regent Pacific to provide that after May 5,
2002, Regent Pacific will continue to provide management
services to the Company indefinitely at a rate of $15,000 per
week, cancelable at the Companys option. In addition, as
part of the original engagement and in connection with a
separate employment agreement that Mr. Sbona has entered
into with the Company, Mr. Sbona was granted an option to
purchase 3,548,777 shares of the Companys Common Stock at
an exercise price of $0.18 per share. Vesting on all of the
shares underlying the option accelerated as a result of the sale
to PeopleSoft, and the option is now fully vested and
exercisable. The option will terminate on July 15, 2006,
although it may terminate sooner if Mr. Sbonas
employment with Calico is terminated. The option will terminate
immediately if Mr. Sbonas employment is terminated
for cause. If Mr. Sbonas employment terminates as a
result of his death, the option will terminate 18 months
after such termination of service (but in no event later than
July 15, 2006). If Mr. Sbonas employment
terminates for any reason other than cause or death, the option
will terminate one year after his employment with Calico ceases
(but in no event later than July 15, 2006).

Separately, in connection with entering into the
agreement with Regent Pacific, in July 2001, the Company also
entered into an employment agreement with Mr. Sbona under
which the Company has agreed to pay him $500 per week for so
long as the agreement with Regent Pacific remains in effect.

In addition, at the time of the original
engagement, the Company entered into Indemnification Agreements
with Mr. Weil, Mr. Sbona and H. Michael
Hogan III, a Vice-President of the Company and a principal
of Regent Pacific, that requires the Company to indemnify them
for certain potential liabilities arising out of the performance
of services under the agreement.

In September of 1999, the Company entered into an
agreement with Accenture to procure consulting services.
Mr. Joel P. Friedman, a member of the Companys
board of directors, is a director of this professional services
company. Under this purchase agreement, the Company agreed to
engage Accenture to provide a minimum of $1.0 million of
consulting services over the following 18 month period,
ending March 2001. The services provided to the Company were
priced reflecting a customary discount from the providers
standard rates. As of March 31, 2002, there was $165,000
remaining under this purchase obligation. This amount is
included in liabilities subject to compromise on the
Companys balance sheet as of March 31, 2002.

On February 22, 2001, the Company entered
into an engagement letter with David Powell, Inc. (the
David Powell Agreement) pursuant to which it agreed
to pay David Powell, Inc. a monthly fee, plus a bonus payable
quarterly on meeting performance obligations, in return for
retaining Leslie E. Wright as the Companys Interim
Chief Financial Officer for an initial two month noncancellable
term, and thereafter terminable upon 30 days written notice
by the Company or David Powell. The agreement was later changed
to provide for a monthly fee with the bonus eliminated. In
accordance with the agreement with David Powell, the Company
granted Mr. Wright an option to purchase 33,750 shares of
the Companys Common Stock at a per

F-33



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

share exercise price of $0.1875. The shares
underlying the option were fully vested and exercisable, and
Mr. Wright exercised this option during the fiscal year
ended March 31, 2001. Also, in accordance with the terms of
the agreement with David Powell, and as a result of the sale to
PeopleSoft, 1% of the purchase price payable by PeopleSoft,
minus the value of the option granted to Mr. Wright, was
paid to David Powell, Inc. as a bonus relating to services
rendered by Mr. Wright. In February 2002, the Company
amended the agreement to David Powell to reduce the monthly fee
under the agreement through April 30, 2002. The Company
also entered into an Indemnification Agreement with
Mr. Wright pursuant to which the Company agreed to
indemnify Mr. Wright for certain potential liabilities
arising out of his performance of services under the agreement.

Options granted under the Companys 2000
Non-Officer Stock Option Plan were subject to acceleration upon
a change of control of the Company. As a result of the sale to
PeopleSoft, 25% of the options outstanding under this plan
accelerated and became vested and exercisable. In addition, as a
result of the sale of PeopleSoft, all options outstanding and
not yet exercised under the Companys stock option plans
terminated as they were not assumed by PeopleSoft. Accordingly,
immediately prior to the closure of the sale to PeopleSoft,
options to purchase 543,345 shares of Common Stock were
exercised at a weighted average exercise price of $0.175 per
share, and options to purchase 2,064,406 shares were terminated
and cancelled. Except for the option outstanding to
Mr. Sbona, the Company no longer has any options
outstanding under its stock option plans and the plans have been
terminated.

The Company has also initiated litigation against
a former Calico employee. On March 2, 2000, the Company
issued a loan in the amount of $450,000 to the former employee,
Mr. Leahy. Pursuant to a promissory note and security
agreement executed contemporaneously with the loan, repayment of
the loan was to occur on or before November 30, 2000.
Mr. Leahy ceased employment thereafter, and the Company has
not received repayment on the outstanding loan. On or about
March 15, 2002 the Company filed and served a complaint in
the Bankruptcy Court as Adversary Proceeding No. 02-5111
against Mr. and Mrs. Leahy. Mr. and Mrs. Leahy have
not served an answer to this proceeding. The Company intends to
aggressively pursue its claim against Mr. and Mrs. Leahy.

Note 12  Commitments And
Contingencies:

Capital
Leases

At March 31, 2002 and 2001, the Company was
obligated under various capital leases for equipment which were
capitalized at the present value of future minimum lease
payments. Interest in connection with these leases was
approximately $4,000, $31,000 and $64,000 for the years ended
March 31, 2002, 2001, and 2000, respectively.

For capital leases that the Company intends to
reject, the Company reclassified $83,000 from accrued capital
lease obligations to liabilities subject to compromise, for the
estimated maximum amount of allowable claims under the
Bankruptcy Code.

F-34



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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Future minimum payments under capital leases at
March 31, 2002, before and after giving effect to leases
which the Company intends to reject, are as follows (in
thousands):

|                                           |  |         |    |           |  |         |     |   |  |   |   | 
|------------------------------------------ |  | ------- | -- | --------- |  | ------- | --- | - |  | - | - | 
|                                           |  |         |    | Estimated |  |        
|                                           |  |         |    | Effect of |  | Net    
|                                           |  | Minimum |    | Rejected  |  | Minimum
|Year                                       |  | Rentals |    | Leases    |  | Rentals
|                                           |  |         |    |           |  |        
|2003                                       |  | $       | 83 |           |  | $       | (83 | ) |  | $ |  | 
|2004                                       |  |         |   |           |  |         |    |   |  |   |  | 
|2005                                       |  |         |   |           |  |         |    |   |  |   |  | 
|2006                                       |  |         |   |           |  |         |    |   |  |   |  | 
|2007                                       |  |         |   |           |  |         |    |   |  |   |  | 
|                                           |  |         |    |           |  |         |     |   |  |   |   | 
|Total minimum lease obligations            |  |         | 83 |           |  |         | (83 | ) |  |   |  | 
|Less: Amount representing interest         |  |         | 4  |           |  |         | (4  | ) |  |   |  | 
|                                           |  |         |    |           |  |         |     |   |  |   |   | 
|Present value of minimum lease obligations |  | $       | 79 |           |  | $       | (79 | ) |  | $ |  | 
|                                           |  |         |    |           |  |         |     |   |  |   |   | 

Operating
Leases

The Company leases office space and equipment
under certain non-cancelable operating leases expiring through
the year 2006. Total rent expense was $2.3 million,
$3.8 million and $1.4 million for the years ended
March 31, 2002, 2001 and 2000, respectively. As part of its
restructuring plans (See Note 15  Restructuring
of Operations), the Company has subleased a portion of its
excess space in three locations. These subleases range from
terms of one to four years.

As part of its bankruptcy filing, the Company has
rejected certain of its leases as allowed by the Bankruptcy
Code. Certain of the facility leases that the Company rejected
had been previously vacated and the estimated future sub-lease
losses through the term of the leases were accrued under the
restructuring plans. Accordingly, the Company reduced the
restructuring related accruals for these leases by $351,000 in
the three months ended December 31, 2001, and reclassified
the amount to liabilities subject to compromise.

For leases that the Company intends to reject,
for which an accrual had not been previously made under a
restructuring plan, the Company recorded an accrual in fiscal
2002, of $2.5 million for the estimated maximum amount of
allowable claims under the Bankruptcy Code. The accrual is
included in liabilities subject to compromise in the
accompanying consolidated balance sheets. The charge has been
classified as a Chapter 11 related reorganization item in
the accompanying consolidated statement of operations.

Future minimum payments under non-cancelable
operating leases at March 31, 2002, before and after giving
effect to leases which the Company has rejected, are as follows
(in thousands):

|     |                                 |         |       |           |  |                 |        |         |   |   |        |        |   |   |     |     | 
|---- | ------------------------------- | ------- | ----- | --------- |  | --------------- | ------ | ------- | - | - | ------ | ------ | - | - | --- | --- | 
|     |                                 |         |       | Estimated |  | Estimated       |        | Net    
|     |                                 | Minimum |       | Sublease  |  | Effect of       |        | Minimum
|Year |                                 | Rentals |       | Rentals   |  | Rejected Leases |        | Rentals
|     |                                 |         |       |           |  |                 |        |        
|2003 |                                 | $       | 2,867 |           |  | $               | (1,341 | )       |   | $ | (1,246 | )      |   | $ | 280 |    
|2004 |                                 |         | 2,687 |           |  |                 | (373   | )       |   |   | (2,214 | )      |   |   | 100 |    
|2005 |                                 |         | 2,661 |           |  |                 | (285   | )       |   |   | (2,302 | )      |   |   | 74  |    
|2006 |                                 |         | 1,190 |           |  |                 | (214   | )       |   |   | (959   | )      |   |   | 17  |    
|2007 |                                 |         |      |           |  |                 |       |         |   |   |       |        |   |   |    |    
|     |                                 |         |       |           |  |                 |        |         |   |   |        |        |   |   |     |    
|     | Total minimum lease obligations |         | $     | 9,405     |  |                 | $      | (2,213  | ) |   | $      | (6,721 | ) |   | $   | 471 | 
|     |                                 |         |       |           |  |                 |        |         |   |   |        |        |   |   |     |    

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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Letter Of
Credit

At March 31, 2002, the Company maintained a
$600,000 letter of credit to collateralize a portion of the
lease security deposit on its corporate headquarters. As of
March 31, 2002, this letter of credit was classified as
long-term restricted cash. The Company expects that the maximum
amount of the allowable claim for rejection of the lease on its
corporate headquarters will be offset against this letter of
credit and the cash portion of the security deposit of
approximately $184,000, subject to approval by the Bankruptcy
Court.

Purchase
Commitments

In September 1999, the Company entered into an
agreement with Accenture to procure consulting services.
Mr. Joel P. Friedman, a member of the Companys board
of directors, is a director of this professional services
company. Under this purchase agreement, the Company agreed to
engage Accenture to provide a minimum of $1.0 million of
consulting services over the following 18 month period,
ending March 2001. The services provided to the Company were
priced reflecting a customary discount from the providers
standard rates. As of March 31, 2002, there was $165,000
remaining under this purchase obligation. This amount is
included in liabilities subject to compromise on the
Companys balance sheet as of March 31, 2002.

Agreement
with David Powell, Inc. and Leslie E. Wright

On February 22, 2001, the Company entered
into an engagement letter with David Powell, Inc. (the
David Powell Agreement) pursuant to which it agreed
to pay David Powell, Inc. a monthly fee, plus a bonus payable
quarterly on meeting performance obligations in return for
retaining Leslie E. Wright as the Companys Interim
Chief Financial Officer for an initial two month noncancellable
term, and thereafter terminable upon 30 days written notice
by the Company or David Powell. The agreement was later changed
to provide for a monthly fee with the bonus eliminated. In
accordance with the terms of the David Powell Agreement, the
Company granted Mr. Wright an option to purchase 33,750
shares of its Common Stock at an exercise price of $0.1875 per
share. The shares underlying the option were fully vested and
exercisable, and Mr. Wright exercised this option during
the fiscal year ended March 31, 2002. In addition, as a
result of the sale to PeopleSoft, 1% of the purchase price
payable by PeopleSoft, minus the value of the vested options
granted to Mr. Wright as of the date the sale closed, was paid
to David Powell, Inc. as a bonus relating to services rendered
by Mr. Wright. In February 2002, the Company amended the
agreement with David Powell to reduce the monthly fee under the
agreement through April 30, 2002. The Company does not
expect to continue to engage David Powell after April 30,
2002. The Company also entered into an Indemnification Agreement
with Mr. Wright pursuant to which the Company agreed to
indemnify Mr. Wright for certain liabilities arising out of
the performance of services under the agreement.

Agreement
with Regent Pacific Management Corporation and Gary J.
Sbona

In July 2001, Mr. James B. Weil replaced
Mr. Alan P. Naumann as the Companys Chief Executive
Officer and Mr. Gary J. Sbona was appointed to the
Board of Directors. In addition, the Company entered into an
agreement with Regent Pacific Management Corporation
(Regent Pacific), a management firm of which
Mr. Sbona is the Chief Executive Officer and Mr. Weil
is a principal, pursuant to which Regent Pacific has provided
management services to Calico, including the services of Messrs.
Sbona and Weil, and other Regent Pacific personnel. The initial
agreement had a 6 month term commencing July 2001 with
compensation to Regent Pacific of $1.3 million for that
period. The agreement requires that the Company indemnify Regent
Pacific and Mr. Sbona for certain liabilities arising out
of the performance of services under the agreement. In December
2001, the Company amended the agreement with Regent Pacific to
extend the noncancellable term of the agreement to May 2002, and
in connection thereto, paid to Regent Pacific $750,000 as fees
due for the noncancellable portion of the agreement. In April
2002, the Company further amended its agreement with

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CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Regent Pacific to provide that after May 5,
2002, Regent Pacific will continue to provide management
services to the Company indefinitely at a rate of $15,000 per
week, cancelable at the Companys option.

In addition, as part of the original engagement,
Mr. Sbona was granted an option to purchase 3,548,777
shares of the Companys Common Stock at an exercise price
of $0.18 per share. Vesting on all of the shares underlying the
option accelerated as a result of the sale to PeopleSoft, and
the option is now fully vested and exercisable. The option will
terminate on July 15, 2006, although it may terminate if
Mr. Sbonas employment with Calico is terminated. The
option will terminate immediately if Mr. Sbonas
employment is terminated for cause. If Mr. Sbonas
employment terminates as a result of his death, the option will
terminate 18 months after such termination of service (but
in no event later than July 15, 2006). If
Mr. Sbonas employment terminates for any reason other
than cause or death, the option will terminate one year after
his employment with Calico ceases (but in no event later than
July 15, 2006).

Separately, in connection with entering into the
agreement with Regent Pacific, in July 2001, the Company also
entered into an employment agreement with Mr. Sbona under
which the Company has agreed to pay him $500 per week for so
long as the agreement with Regent Pacific remains in effect.

In addition, at the time of the original
engagement, the Company entered into Indemnification Agreements
with Mr. Weil, Mr. Sbona and H. Michael
Hogan III, a Vice-President of the Company and a principal
of Regent Pacific, that requires the Company to indemnify them
for certain liabilities arising out of the performance of
services under the agreement.

Employee
Retention Program

In connection with the sale of assets to
PeopleSoft, the purchase price payable by PeopleSoft could have
been reduced by $1.0 million if specified numbers of key
employees did not accept employment positions with PeopleSoft.
The Company established a retention program in the aggregate
amount of $160,000, payable equally to 8 key employees, provided
that they remain in PeopleSofts employ for six months
after the closing of the sale of assets to PeopleSoft. This
commitment was included as a cost of the sale and therefore
reduced the gain on the sale. The commitment is included in
accrued liabilities as of March 31, 2002 on the
Companys consolidated balance sheet.

Contingencies

Securities
Class Actions

On or around March 27, 2001, a class action
lawsuit was filed on behalf of all holders of the Companys
securities in the Southern District of New York against Calico,
its former chief executive officer Alan P. Naumann, directors
William D. Unger and Bernard J. Lacroute, and former
director William G. Paseman, SDR Investors, LP
v. Calico Commerce, Inc. et al., 01CIV 2601. Plaintiffs
allege, among other things, that the investment banks which
underwrote the Companys initial public offering of
securities, and others, received commissions and made agreements
which were not disclosed, but should have been disclosed in the
initial public offering prospectus, and which affected the price
of Calico securities. Plaintiffs attempt to state claims under
Sections 11, 12 and 15 of the Securities Act of 1933, and
under Section 10(b) and 20(a) of the Securities Exchange
Act of 1934, and Rule 10b-5 promulgated by the Securities
Exchange Commission. Other class action lawsuits on behalf of
essentially the same putative class, making substantially the
same allegations and making some or all of the same claims, have
been filed in the same jurisdiction by different lawyers.
Several of these lawsuits also name the Companys former
chief financial officer Arthur F. Knapp, Jr. All of the
Calico actions have been consolidated for pre-trial purposes
before Judge Shira A. Scheindlin, United States District
Judge for the Southern District of New York, together with more
than one thousand actions making virtually identical allegations
against the same and additional investment banks, approximately
310 other issuers of securities which conducted initial public
offerings in 1998-2000, and numerous individuals

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CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

associated with such issuers. The consolidated
litigation is known as the Initial Public Offering
Securities Litigation (the IPO Litigation). No
specific amount of damages is sought against the Calico
defendants in the litigation, and no time has been set for the
Calico defendants to respond to the complaints. On April 4,
2002, the lead defendant in the Calico IPO Litigation filed a
Proof of Claim with the Bankruptcy Court purporting to state a
claim in excess of $62 million. On April 17, 2002,
plaintiffs filed a further amended, consolidated class action
complaint regarding Calico in the IPO Litigation. While that
complaint names the Calico individual defendants, it does not
name the Company as a defendant. The Company believes that the
allegations against the Calico defendants in the litigation are
without merit, and intends to vigorously defend the litigation.

Litigation

From time to time, the Company may be involved in
litigation arising out of claims in the normal course of
business. The Company is currently subject to some such claims,
none of which management believe will materially impact its
results.

Note 13  Information Concerning
Business Segments:

The Company operates in a single industry
segment. The Company does not prepare reports for, or measure
the performance of, its individual software applications and,
accordingly, the Company has not presented revenues or any other
related financial information by individual software product.
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.
For geographic reporting, revenues are attributed to the
geographic location in which the customer is located. Long-lived
assets consist primarily of property, plan and equipment, and
are attributed to the geographic location in which they are
located.

Information regarding geographic areas for the
years ended March 31, 2002, 2001 and 2000 is as follows:

|          |                                   |                      |       |       |  |      |        |        |  |   |        |        | 
|--------- | --------------------------------- | -------------------- | ----- | ----- |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|          |                                   |                     
|          |                                   | Year Ended March 31,
|          |                                   |                     
|          |                                   | 2002                 |       | 2001  |  | 2000
|          |                                   |                      |       |       |  |     
|Revenues: |                                   |                      |       |       |  |      |        |        |  |   |        |       
|          | United States                     |                      | $     | 2,067 |  |      | $      | 22,049 |  |   | $      | 31,155 | 
|          | European countries                |                      |       | 1,580 |  |      |        | 6,650  |  |   |        | 3,594  | 
|          | Japan and other foreign countries |                      |       | 1,949 |  |      |        | 1,035  |  |   |        | 875    | 
|          |                                   |                      |       |       |  |      |        |        |  |   |        |       
|          |                                   | $                    | 5,596 |       |  | $    | 29,734 |        |  | $ | 35,624 |       
|          |                                   |                      |       |       |  |      |        |        |  |   |        |       

|                   |               |           |     |      |  |      |       |       |  |   |       |       | 
|------------------ | ------------- | --------- | --- | ---- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|                   |               |          
|                   |               | March 31,
|                   |               |          
|                   |               | 2002      |     | 2001 |  | 2000
|                   |               |           |     |      |  |     
|Long-Lived Assets: |               |           |     |      |  |      |       |       |  |   |       |      
|                   | United States |           | $   | 218  |  |      | $     | 4,023 |  |   | $     | 4,408 | 
|                   | International |           |     |     |  |      |       | 621   |  |   |       | 54    | 
|                   |               |           |     |      |  |      |       |       |  |   |       |      
|                   |               | $         | 218 |      |  | $    | 4,644 |       |  | $ | 4,462 |      
|                   |               |           |     |      |  |      |       |       |  |   |       |      

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##### Table of Contents



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:

|         |   |                      |  |      |   |      |  |   |   |  |  |    |  
|-------- | - | -------------------- |  | ---- | - | ---- |  | - | - |  |  | -- | -
|         |   |                     
|         |   | Year Ended March 31,
|         |   |                     
|         |   | 2002                 |  | 2001 |   | 2000
|         |   |                      |  |      |   |     
|Customer |   |                      |  |      |   |      |  |   |   |  |  |   
|         | A |                      |  |     | % |      |  |  | % |  |  | 17 | %
|         | B |                      |  |     |   |      |  |  |   |  |  | 14 |  
|         | C |                      |  |     |   |      |  |  |   |  |  |   |  
|         | D |                      |  |     |   |      |  |  |   |  |  |   |  

Note 14  Sales Of Product
Lines:

On February 6, 2002, the Company completed
the sale of all of its intellectual property and significantly
all of its operating assets to PeopleSoft for $5.0 million
in cash. At the closing, PeopleSoft paid the Company
$4.5 million and $500,000 was deposited into escrow to be
held for six months as a non-exclusive remedy to satisfy any
claims that PeopleSoft may have against the Company under the
asset purchase agreement.

The total proceeds from the sale of $5,000,000,
less the book value of transferred equipment, intangible assets,
deferred revenue, and transaction costs, based on their
respective estimated fair values at the sale date, were recorded
as a gain on sale of assets in the quarter ended March 31,
2002.

The calculation of the gain on the sale was
determined as follows (in thousands):

|                                                                 |              |   |       |       | 
|---------------------------------------------------------------- | ------------ | - | ----- | ----- | 
|Total consideration                                              |              | $ | 5,000 |      
|Book value of equipment, intangible assets and
	deferred revenue |              |   | (53   | )    
|Transaction costs                                                |              |   | (256  | )    
|                                                                 |              |   |       |      
|                                                                 | Gain on sale |   | $     | 4,691 | 
|                                                                 |              |   |       |      

On March 20, 2001, the Company completed the
sale of its intangible and capital assets related to its
MarketMaker product line to Digital River, Inc. The Market Maker
product had been acquired by the Company in January 2000 via the
Companys acquisition of ConnectInc.com.

The calculation of the loss on the sale was
determined as follows (in thousands):

|                                                                 |              |   |         |         |  
|---------------------------------------------------------------- | ------------ | - | ------- | ------- | -
|Fair value of marketable securities received                     |              | $ | 8,160   |        
|Book value of equipment, intangible assets and
	deferred revenue |              |   | (56,807 | )      
|Transaction costs                                                |              |   | (706    | )      
|                                                                 |              |   |         |        
|                                                                 | Loss on sale |   | $       | (49,353 | )
|                                                                 |              |   |         |        

Under the terms of the asset purchase agreement
between the Company and Digital River, the Company received
1.6 million shares of Digital River Common Stock, valued at
$7.9 million on the date of sale.

The asset purchase agreement restricted the
percentage of shares that could be sold by the Company during
certain periods. The Company was restricted to selling no
greater than 40% of the total shares during the period of
March 20, 2001 to June 20, 2001 and 80% from the
period of March 20, 2001 to September 20, 2001. The
Company was also limited to selling no more than 175,000 shares
within a consecutive five-day trading period.

The agreement with Digital River included a
contingent earnout whereby the Company was eligible to receive
additional shares of Digital Rivers Common Stock based
upon the revenue generated by the MarketMaker product, from
sales by Digital River or by the Company, over the
13 months following

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CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

March 21, 2001. According to the terms of
the contingent earnout, as of September 30, 2001, based
upon revenue generated by the MarketMaker product, the Company
received notice on October 23, 2001 from Digital River that
it was eligible for issuance of and did receive approximately
60,000 additional shares of Digital River Common Stock. The
Company commenced sales of Digital River stock on
October 23, 2001. As of December 31, 2001, the Company
had sold all 1.69 million shares of Common Stock for net
proceeds of approximately $24.4 million, and realized a
gain of approximately $16.3 million.

Note 15  Restructuring Of
Operations:

In January 2001, the Company announced its first
strategic restructuring plan, designed to reduce operating
expenses. In connection with the restructuring, the Company
reduced its workforce by 36 employees, and significantly reduced
its use of outside contract labor. The Company also made
provisions for reductions in office space and the disposal of
related assets. The total amount of the restructuring charge was
$1.4 million and was comprised of $590,000 in
employee-related expenses for employee terminations, $749,000 of
estimated expenses for facilities-related charges, and $24,000
for the disposal of certain excess capital equipment. Of these
amounts, $1.3 million were cash-related charges, and
$24,000 were non-cash charges. As of March 31, 2002, the
Company had incurred costs totaling $968,000 related to this
restructuring, which required $944,000 in cash expenditures.
During the three months ended June 30, 2001, the Company
decreased this provision by $43,000 as a result of
lower-than-anticipated payroll taxes. As part of the
Chapter 11 Filing, the Company intends to reject certain of
the leases and contracts accrued in its first restructuring plan
as allowed under the terms of the United States Bankruptcy Code.
Consequently, the Company reduced the related accrual by
approximately $351,000 in the quarter ended December 31,
2001. The reduction has been classified as a Chapter 11
related reorganization item in the accompanying consolidated
statement of operations.

In April 2001, the Company undertook further
restructuring designed to reduce operating expenses. In
connection with this second restructuring, the Company reduced
its workforce by another 77 employees and affected headcount in
all functional areas. All employees were notified of this
termination during the quarter that ended June 30, 2001.
The total amount of the restructuring charge from this second
restructuring was $753,000, was comprised entirely of
employee-related expenses for employee terminations and was a
cash-related charge. As of March 31, 2002, the Company had
recorded a net decrease to the provision of $54,000, due to
lower than anticipated severance costs, and had incurred all
remaining costs related to the restructuring, all of which were
cash-related.

In July 2001, the Company announced a third
strategic restructuring plan, designed to further reduce
operating expenses. In connection with the restructuring, the
Company further reduced its workforce by approximately 80
full-time positions and closed its operations in India. This
restructuring affected headcount in all functional areas. The
total amount of the restructuring charge was approximately
$1.1 million, was comprised of $985,000 in employee-related
expenses for employee terminations, and $162,000 of estimated
expenses for facilities-related charges, and all are
cash-related charges. As of March 31, 2002 the Company had
incurred costs totaling approximately $995,000 related to the
restructuring, all of which were cash-related, and had recorded
a net decrease to the provision of $128,000 due to lower than
anticipated international severance costs. The remaining reserve
for this restructuring is approximately $24,000, which is
included in accrued liabilities.

In connection with the sale to PeopleSoft,
approximately 40 of the Companys employees became
employees of PeopleSoft, leaving the Company with approximately
8 employees to perform the remaining tasks necessary to conclude
its bankruptcy proceedings and other administrative matters. In
anticipation of this sale and pending Bankruptcy filing, the
Company further reduced its workforce by approximately 9
full-time positions in December and reduced its workforce again
as of the end of March 31, 2002 by another 5 employees. The
Company has 3 remaining employees and will reduce its workforce
as appropriate going

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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

forward consistent with administration of its
Chapter 11 Case and plan of reorganization. The total
amount of the related restructuring charge was approximately
$248,000, all of which consisted of employee-related expenses
for employee terminations, and all are cash-related charges. The
Company recorded an increase to the provision of $25,000, during
the three months ended March 31, 2002 related to higher
than anticipated expenses related to international severance. As
of March 31, 2002, the Company had incurred costs totaling
approximately $237,000 related to the restructuring. The
remaining reserve for this restructuring is approximately
$36,000, which is included in accrued liabilities.

The following table lists the components of the
January, April, July and December 2001 restructuring charges for
fiscal 2002 (in thousands):

|                              |                                             |          |     |            |   |       |     |      |   |   |     |       |  
|----------------------------- | ------------------------------------------- | -------- | --- | ---------- | - | ----- | --- | ---- | - | - | --- | ----- | -
|                              |                                             |          |     | Excess     |   |      
|                              |                                             |          |     | Facilities |   |      
|                              |                                             | Employee |     | and        |   |      
|                              |                                             | Costs    |     | Equipment  |   | Total
|                              |                                             |          |     |            |   |      
|Balance at March 31, 2001     |                                             | $        | 217 |            |   | $     | 588 |      |   | $ | 805 |      
|                              | Adjustment to reserve                       |          |     | (37        | ) |       |     | (6   | ) |   |     | (43   | )
|                              | Reserve established, April restructuring    |          |     | 753        |   |       |     |     |   |   |     | 753   |  
|                              | Reserve utilized                            |          |     | (777       | ) |       |     | (185 | ) |   |     | (962  | )
|                              |                                             |          |     |            |   |       |     |      |   |   |     |      
|Balance at June 30, 2001      |                                             |          | 156 |            |   |       | 397 |      |   |   | 553 |      
|                              | Adjustment to reserve                       |          |     | (121       | ) |       |     |     |   |   |     | (121  | )
|                              | Reserve established, July restructuring     |          |     | 985        |   |       |     | 162  |   |   |     | 1,147 |  
|                              | Reserve utilized                            |          |     | (875       | ) |       |     | (57  | ) |   |     | (932  | )
|                              |                                             |          |     |            |   |       |     |      |   |   |     |      
|Balance at September 30, 2001 |                                             |          | 145 |            |   |       | 502 |      |   |   | 647 |      
|                              | Adjustment to reserve                       |          |     | (27        | ) |       |     |     |   |   |     | (27   | )
|                              | Adjustment for rejected leases              |          |     |           |   |       |     | (351 | ) |   |     | (351  | )
|                              | Reserve established, December restructuring |          |     | 248        |   |       |     |     |   |   |     | 248   |  
|                              | Reserve utilized                            |          |     | (225       | ) |       |     | (95  | ) |   |     | (320  | )
|                              |                                             |          |     |            |   |       |     |      |   |   |     |      
|Balance at December 31, 2001  |                                             |          | 141 |            |   |       | 56  |      |   |   | 197 |      
|                              | Adjustment to reserve                       |          |     | (23        | ) |       |     | 13   |   |   |     | (10   | )
|                              | Reserve utilized                            |          |     | (82        | ) |       |     | (45  | ) |   |     | (127  | )
|                              |                                             |          |     |            |   |       |     |      |   |   |     |      
|Balance at March 31, 2002     |                                             | $        | 36  |            |   | $     | 24  |      |   | $ | 60  |      
|                              |                                             |          |     |            |   |       |     |      |   |   |     |      

Note 16  Impairment of Long-Lived
Assets:

In fiscal 2002, due to the large amount of excess
computer equipment and software on hand at September 30,
2001, primarily resulting from the Companys reductions in
force announced in April and July 2001, an assessment of the
carrying value of property and equipment was performed. All
excess (i.e. no longer in service) capital equipment, software,
and furniture and fixtures were reduced to their residual value
based on published resale information. The carrying value of
assets determined not to have any significant resale value and
abandoned leasehold improvements were reduced to zero. As a
result, the Company recorded an impairment charge of $985,000.
In the third quarter of fiscal 2002, an adjustment of $75,000
was made to this impairment charge as the Company was able to
realize greater than anticipated resale values for some of these
assets.

In the fourth quarter of fiscal 2002, primarily
as a result of further reductions in our workforce from December
2001 through March 2002, the closure and impending closure of
the Companys international offices, the sale of
substantially all of the Companys operating assets to
PeopleSoft, and the anticipated

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##### Table of Contents



CALICO COMMERCE, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

auction of substantially all of the
Companys remaining capital assets on May 22, 2002 by
DoveBid, Inc., another assessment of the carrying value of
property and equipment was performed. All excess (i.e. no longer
in service) capital equipment, software, and furniture and
fixtures were reduced to their residual value based on published
resale information. The carrying value of assets determined not
to have any significant resale value was reduced to zero. As a
result, the Company recorded an impairment charge of $824,000.

In addition, during the third quarter of fiscal
2002, the Company determined that certain of its investments had
suffered an other-than temporary decline in value and
accordingly recognized a loss of $390,000 for the write-down of
those investments to their fair value.

In fiscal 2001, as part of the Companys
review of its fourth quarter financial results, an impairment
assessment of its long-lived assets was performed. The
assessment was performed primarily due to the significant
decline in the Companys stock price, the overall decline
in industry growth rates and the Companys lower fourth
quarter and projected fiscal 2002 operating results. As a
result, the Company determined that the carrying value of
goodwill and other intangible assets identified below would not
be recoverable based upon the existence of one or more of these
indicators of impairment, and recorded an impairment charge
aggregating $3.8 million in the fourth quarter of fiscal
2001, as described below.

The Company recorded a $1.4 million
impairment charge to adjust goodwill and other intangible assets
and deferred costs associated with our acquisition of First
Floor Software, Inc. to $0, which approximated its estimated
fair value. The estimate of fair value was based upon the
discounted estimated cash flows for the succeeding three years
using a discount rate of 25%. The assumption supporting the
estimated cash flows, including the discount rate and an
estimated terminal value, reflects managements best
estimates. The discount rate was primarily based upon the
weighted average cost of capital for comparable companies.

Due to the large amount of excess computer
equipment on hand at March 31 2001, primarily resulting
from the Companys reduction in force announced in January
2001, an assessment of the carrying value of property and
equipment was performed. All excess capital equipment (i.e. no
longer in service) was reduced to its residual value based on
published resale information. The carrying value of assets
determined not to have any significant resale value were reduced
to zero. As a result, an impairment charge of $1.1 million
was recorded in the fourth quarter of fiscal 2001.

In addition, during the fourth quarter of fiscal
2001, the Company determined that certain of its investments had
suffered an other-than temporary decline in value and
accordingly recognized a loss of $1.3 million on the
write-down of those investments to their fair value.

Note 17  Loss on Disposal of
Long-Lived Assets:

During fiscal 2002, the Company sold and disposed
of approximately $2.3 million of excess furniture and fixtures
and computer equipment with a net book value of approximately
$1.2 million. The Company incurred a net loss of
approximately $1.0 million on the sale of those assets.

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##### Table of Contents



EXHIBIT INDEX

|    |           |             |  |                                                                                                                                                                                                                                                                           
|--- | --------- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No. |           | Description
|    |           |            
|    | 2.1(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(1)    |             |  | Form of Agreement and Plan of Merger between
	Calico Technology, Inc., a California corporation, and Calico
	Commerce, Inc., a Delaware corporation                                                                                                                       
|    | 2.3(2)    |             |  | Agreement and Plan of Merger dated as of
	November 19, 1999 by and between Calico Commerce, Inc.,
	ConnectInc.com, Co., and Calico Acquisition, Inc.                                                                                                                      
|    | 2.4(3)    |             |  | Asset Purchase Agreement, dated March 20,
	2001, by and between Calico, ConnectInc.com, Co. and Digital
	River, Inc.                                                                                                                                                      
|    | 2.5(4)    |             |  | Asset Purchase Agreement dated as of
	December 12, 2001 by and between Registrant and PeopleSoft,
	Inc.                                                                                                                                                                   
|    | 3.1(1)    |             |  | Certificate of Incorporation                                                                                                                                                                                                                                              
|    | 3.2(1)    |             |  | Bylaws                                                                                                                                                                                                                                                                    
|    | 10.1(1)   |             |  | Office Lease between Metropolitan Life Insurance
	Company and Calico Commerce, Inc. dated as of August 18,
	1999                                                                                                                                                          
|    | 10.2(1)   |             |  | 1997 Stock Option Plan and forms of agreements
	thereunder                                                                                                                                                                                                                
|    | 10.3(1)   |             |  | 1995 Stock Option Plan and forms of agreements
	thereunder                                                                                                                                                                                                                
|    | 10.4(1)   |             |  | 1999 Employee Stock Purchase Plan                                                                                                                                                                                                                                         
|    | 10.5(1)   |             |  | Form of Indemnity Agreement for directors and
	officers                                                                                                                                                                                                                   
|    | 10.6(1)   |             |  | 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(1)   |             |  | Loan Agreement dated as of January 21, 1997
	between Calico Technology, Inc. and Venture Lending and Leasing,
	Inc.                                                                                                                                                       
|    | 10.8(1)   |             |  | Four Variable Rate Installment Notes between
	Calico Technology, Inc. and Comerica Bank  California                                                                                                                                                                      
|    | 10.9(1)   |             |  | Common Stock Purchase Agreement dated
	September 3, 1999 between Calico Commerce, Inc. and Dell
	U.S.A., L.P.                                                                                                                                                             
|    | 10.10(1)  |             |  | Letter Agreement between Andersen Consulting LLP
	and Calico Commerce, Inc. dated September 17, 1999                                                                                                                                                                      
|    | 10.11(1)  |             |  | Common Stock Purchase Agreement dated
	September 29, 1999 between Calico Commerce, Inc. and
	AC II Technology (ACT II) B.V.                                                                                                                                               
|    | 10.12(1)  |             |  | Amendment Number Nine to Investors Rights
	Agreement dated September 28, 1999                                                                                                                                                                                            
|    | 10.13(5)  |             |  | Amended and Restated Loan and Security Agreement
	dated October 15, 1999 between Calico Commerce, Inc. and
	Comerica Bank  California                                                                                                                                    
|    | 10.14(6)  |             |  | 2000 Non-officer Stock Option Plan                                                                                                                                                                                                                                        
|    | 10.15(7) |             |  | Software License Agreement dated April 27,
	1999, as amended October 28, 1999, between Calico Commerce, Inc.
	and WebXpress, A BEA Company                                                                                                                                
|    | 10.16(8) |             |  | Second Amendment, dated April 28, 2000, and
	Third Amendment, dated March 15, 2001, to Software License
	Agreement between Calico Commerce, Inc. and WebXpress, A BEA
	Company                                                                                            
|    | 10.17(9)  |             |  | Security Agreement by and between Calico
	Commerce, Inc. and Comerica Bank  California, dated
	March 16, 2001                                                                                                                                                            
|    | 10.18(10) |             |  | Common Stock Warrant issued to Anjes, Inc. dated
	December 28, 2000                                                                                                                                                                                                       
|    | 10.19(11) |             |  | Common Stock Warrant issued to Hefei Xin Hua Hai
	Electronics Limited dated December 28, 2000                                                                                                                                                                             



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##### Table of Contents



|    |            |             |  |                                                                                                                                                
|--- | ---------- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|No. |            | Description
|    |            |            
|    | 10.20 (12 | )           |  | Letter of Agreement Regarding Financial Services
	Proposal by and between Calico Commerce, Inc. and David Powell,
	Inc. dated February 22, 2001
|    | 10.21(13)  |             |  | Separation Agreement and Release by and between
	Alan P. Naumann and Calico Commerce, Inc., dated July 16,
	2001                               
|    | 10.22(14)  |             |  | Independent Contractor Agreement by and between
	Alan P. Naumann and Calico Commerce, Inc., dated July 16,
	2001                               
|    | 10.23(15)  |             |  | Retainer Agreement by and between Regent Pacific
	Management Corporation and Calico Commerce, Inc., dated
	July 13, 2001                       
|    | 10.24(16)  |             |  | Employment Agreement by and between Gary J. Sbona
	and Calico Commerce, Inc. dated July 16, 2001                                               
|    | 10.25(17)  |             |  | Stock Option Agreement by and between Gary J.
	Sbona and Calico Commerce, Inc. dated July 16, 2001                                             
|    | 10.25(18)  |             |  | First Amendment to Management Services Agreement
	between Regent Pacific Management Corporation and Registrant,
	dated December 6, 2001        
|    | 10.26(19)  |             |  | First Amendment to Financial Services Arrangement
	between David Powell, Inc. and Registrant, dated
	December 6, 2001                          
|    | 21.1       |             |  | List of Subsidiaries                                                                                                                           



---



| |     |                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated herein by reference to Calicos
	Registration Statement on Form S-1, as amended (File
	No. 333-82907)
|
| | (2) | Incorporated herein by reference to Calicos
	Current Report on Form 8-K filed November 29, 1999                  
|
| | (3) | Incorporated herein by reference to Calicos
	Current Report on Form 8-K filed April 4, 2001                      
|
| | (4) | Incorporated herein by reference to Calicos
	Quarterly Report on Form 10-Q filed February 19, 2002               
|
| | (5) | Incorporated herein by reference to Calicos
	Quarterly Report on Form 10-Q filed November 16, 1999               
|
| | (6) | Incorporated herein by reference to
	Exhibit 10.13 on Calicos Annual Report on
	Form 10-K filed June 29, 2000    
|
| | (7) | Incorporated herein by reference to
	Exhibit 10.14 on Calicos Annual Report on
	Form 10-K filed June 29, 2000    
|
| | (8) | Incorporated herein by reference to
	Exhibit 10.15 on Calicos Annual Report on
	Form 10-K filed July 13, 2001    
|
| | (9) | Incorporated herein by reference to
	Exhibit 10.16 on Calicos Annual Report on
	Form 10-K filed July 13, 2001    



|     |                                                                                                                    
|---- | -------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated herein by reference to
	Exhibit 10.17 on Calicos Annual Report on
	Form 10-K filed July 13, 2001     
|    
|(11) | Incorporated herein by reference to
	Exhibit 10.18 on Calicos Annual Report on
	Form 10-K filed July 13, 2001     
|    
|(12) | Incorporated herein by reference to
	Exhibit 10.19 on Calicos Annual Report on
	Form 10-K filed July 13, 2001     
|    
|(13) | Incorporated herein by reference to
	Exhibit 10.15 on Calicos Quarterly Report on
	Form 10-Q filed August 14, 2001
|    
|(14) | Incorporated herein by reference to
	Exhibit 10.16 on Calicos Quarterly Report on
	Form 10-Q filed August 14, 2001
|    
|(15) | Incorporated herein by reference to
	Exhibit 10.17 on Calicos Quarterly Report on
	Form 10-Q filed August 14, 2001



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##### Table of Contents





|     |                                                                                                                      
|---- | ---------------------------------------------------------------------------------------------------------------------
|(16) | Incorporated herein by reference to
	Exhibit 10.18 on Calicos Quarterly Report on
	Form 10-Q filed November 14, 2001
|    
|(17) | Incorporated herein by reference to
	Exhibit 10.19 on Calicos Quarterly Report on
	Form 10-Q filed November 14, 2001
|    
|(18) | Incorporated herein by reference to
	Exhibit 10.20 on Calicos Quarterly Report on
	Form 10-Q filed February 19, 2002
|    
|(19) | Incorporated herein by reference to
	Exhibit 10.21 on Calicos Quarterly Report on
	Form 10-Q filed February 19, 2002



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