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                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

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

                                   FORM 10-K

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

    For the fiscal year ended December 31, 2000

                                      OR

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

    For the transition period from ___________ to ____________

                        Commission File Number 0-17920

                                METASOLV, INC.
            (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                          <C>
                  Delaware                                    75-2912166
          (State of Incorporation)                         (I.R.S. Employer
                                                         Identification No.)
</TABLE>

                             5560 Tennyson Parkway
                              Plano, Texas 75024
                   (Address of principal executive offices)

      Registrant's telephone number, including area code: (972) 403-8300

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

                                     None

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

                         Common Stock, Par Value $.005
                               (Title of class)

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

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

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

   The aggregate market value of the voting stock held by non-affiliates of
the Registrant, as of February 28, 2001 was approximately $255,000,000, based
upon the last reported sales price on such date. On February 28, 2001, there
were 36,039,462 shares of the Registrant's common stock outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE

   Portions of the Registrant's Proxy Statement for the Annual Meeting of
Stockholders scheduled to be held May 22, 2001 are incorporated by reference
into Part III of this report. The Proxy Statement is expected to be filed with
the Commission not later than April 18, 2001.

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                                 METASOLV, INC.

                                 2000 FORM 10-K

                               TABLE OF CONTENTS

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 Item                             Description                             Page
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 <C>  <S>                                                                 <C>
                                    PART I
  1   Business..........................................................    1

  2   Properties........................................................   20

  3   Legal Proceedings.................................................   20

  4   Submission of Matters to a Vote of Security Holders...............   20

                                    PART II

      Market for the Company's Common Equity and Related Stockholder
  5   Matters...........................................................   21

  6   Selected Financial Data...........................................   21

      Management's Discussion and Analysis of Financial Condition and
  7   Results of Operations.............................................   22

  7a  Quantitative and Qualitative Disclosures about Market Risk........   29

  8   Financial Statements and Supplementary Data.......................   30

  9   Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure..............................................   46

                                   PART III

 10   Directors and Executive Officers of the Registrant................   47

 11   Executive Compensation............................................   47

 12   Security Ownership of Certain Beneficial Owners and Management....   47

 13   Certain Relationships and Related Transactions....................   47

                                    PART IV

 14   Exhibits, Financial Statement Schedules and Reports on Form 8-K...   48
</TABLE>
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                                    PART I

ITEM 1. BUSINESS

General

   MetaSolv is a leading provider of software designed to make it easier for
communications service providers to take, manage and fulfill orders for
service from their customers. These communications service providers offer a
full array of communications services including local and long-distance voice
services, high-speed data services and Internet services, often as a bundled
offering. We derive substantially all of our revenue from the sale of
licenses, related professional services, and maintenance and support of our
MetaSolv Solution(TM) packaged software to these convergent communications
service providers.

   We are focused on creating open and flexible software to help
communications service providers automate the receipt and fulfillment of
requests for service more efficiently in today's complex communications
environment. These complexities result from both regulatory changes and
technological innovations. The regulated break-up of the communications
network beginning with the divestiture of AT&T and continuing with the
Telecommunications Act of 1996 enabled competition for access to long-distance
and local phone service. The rapid introduction of communications technologies
designed to bring faster, cheaper communications services to homes and
businesses has created additional complexities in service fulfillment. Demand
for faster, cheaper services is driven primarily by the unprecedented growth
in the Internet as a communications medium. Our software, which was developed
from the outset as a standardized package rather than a custom solution, is
designed to automate and simplify the fulfillment of all types of
communication services for use by a variety of communications providers across
diverse, interconnected networks.

   Deregulation and privatization, both domestically and abroad, and advances
in technology have necessitated extensive coordination in the order
fulfillment process--both coordination between communications service
providers whose networks must interconnect in order to establish service to
the customer, and between different communications technologies that must work
together to carry the communications service. Unlike the MetaSolv Solution,
traditional software systems were not designed to manage the complexities of a
variety of communications services delivered over a diverse network spanning
multiple communications service providers. Consequently, service providers
need innovative, flexible software systems like the MetaSolv Solution to
handle rapidly changing market and technology demands.

   We have become a leading provider of order processing, management and
fulfillment software by continually enhancing our product to manage the
complexities of providing multiple communications services over a diverse,
interconnected network. We currently have over 100 customers representing all
facets of the communications industry. Our customers include communications
service providers competing in local service markets, such as Allegiance
Telecom; operators of the large, high-speed networks that sell network
capacity to other service providers or sell high-speed communications services
directly to consumers, such as Qwest Communications; new service providers
that specialize in providing data-communications services, such as Pathnet,
Net2000, and XO Communications; incumbent communications service providers,
such as Verizon, Genuity and ALLTEL; and the long-distance operations of
companies such as BellSouth and Ameritech.

   MetaSolv, Inc. became the holding company of MetaSolv Software, Inc. on
January 1, 2001, upon completion of a corporate reorganization pursuant to
Section 251(g) of the General Corporation Law of the State of Delaware.
MetaSolv, Inc. was incorporated in Delaware on

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December 19, 2000. MetaSolv Software, Inc. was originally incorporated as
Omnicase, Inc. in Delaware on July 6, 1992. Our principal executive offices
are located at 5560 Tennyson Parkway, Plano, Texas 75024 and our telephone
number is (972) 403-8300. Our web site is www.metasolv.com. The information on
our web site is not incorporated by reference into this Form 10-K.

The Company's Products

   In early 2001, we changed our product name from Telecom Business
Solution(TM) (TBS(TM)) to the MetaSolv Solution(TM). This change reflects our
diverse customer base and supports our expanded business focus on next
generation communications providers and businesses. The MetaSolv Solution
addresses a service provider's needs and requirements with a flexible design
that can scale, or grow, along with its expanding business operations. As
shown in the diagram below, each subsystem supports a critical aspect of a
service provider's business from order management and customer care to service
provisioning, network inventory and design and trouble management. These
subsystems are coordinated by a common data management and workflow management
system. The entire set of systems is supported by a set of open application
programming interfaces and gateways that enable the electronic exchange of
information between MetaSolv and other systems.

                                   [DIAGRAM]

                               MetaSolv Solution

   A service provider can extend each subsystem by using add-on software
modules to tailor the MetaSolv Solution to support unique network technologies
and communications services. These modules support a variety of communications
services including resale or wholesale voice, data or Internet services, as
well as network technologies, such as broadband wireless, optical networks or
digital subscriber lines.

   One critical function supported by our software design is information
management. By making information more accessible and reliable, MetaSolv
enables a service provider to manage its business more efficiently, to provide
more services with the highest possible quality, and to deliver superior
customer care. The work management design allows work, or business processes
and information, to flow electronically across the service provider's
organization while providing ready access to performance and resource usage
information. Our integrated approach provides

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comprehensive support for current and emerging services, network technologies
and evolving business processes. The following paragraphs describe the major
components of MetaSolv in more detail.

 Order Management

   The order management subsystem enables the service provider to manage the
complete service delivery process, which often involves several kinds of
orders or transactions within a service provider's own organization, as well
as between different service providers. Our order management subsystem
supports resale, retail or wholesale orders for local or long-distance voice,
data and Internet services.

 Service Provisioning

   The service provisioning subsystem helps the service provider design,
configure and assign inventory to fulfill even the most complex services,
whether through currently owned or leased network inventory as well as future
communications network facilities. It includes automated circuit-design
capabilities to assure the fulfillment of services according to the service
provider's specifications. Through the service provisioning subsystem, the
service provider can deliver the wide range of services that today's
sophisticated customer requires, from traditional voice to high-speed data and
Internet-based technologies.

 Network Inventory and Design

   The network inventory and design subsystem enables service providers to
manage large communications networks, while also giving them the flexibility
to manage new as well as traditional technologies. This subsystem presents the
geographical, electrical, physical and logical dimensions of the network in a
single, cohesive view for service providers. In addition, this subsystem
supports the ability to manage past, present and future views of network
inventory--whether that inventory is owned or leased. A set of administration
and design modules work together to present this view, and these modules
provide an integrated tool for building and managing today's complex networks.

   The network inventory and design subsystem brings together three vital
functions--planning/development, intelligent routing, and inventory. Network
planning and development supports the design of network requirements (such as
plans, locations, architecture, technologies, hardware, and facilities) that
provide the required network platform for delivering target product and market
requirements. The Intelligent Routing functionality provides options that
enable the automation of important design and provisioning activities based
upon business rules and parameters, such as mileage and least-cost routing.
Diversity enables providers to validate customer's unique diversity
requirements in support of Quality of Service (QoS) standards and Service
Level Agreement (SLA) parameters.

 Customer Care

   One of the key aspects of our software design is that it provides a view of
the customer from numerous perspectives, all of which are important to
managing and strengthening the service provider's relationship with their
customer. For instance, bills are more accurate because the information passed
to the billing system is tightly integrated with information about other tasks
associated with the customer's service order. As each task is completed, the
relevant information goes automatically to the billing system. Because all
aspects of customer information are available in a single system, the people
who interact with the customer, such as the customer-service representative,
sales person, or repair technician, are able to see the entire customer
service history.

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 eService(TM)

   The newest addition to the MetaSolv Solution is our eService(TM) product, a
web-based customer self-care system. eService enables service providers to
conduct business with their customers online. The product enables service
providers to provide one-to-one marketing, online ordering and service status
information, electronic bill presentment and payment, and online trouble
ticket monitoring. The eService product provides leading edge, personalized
customer self-care capabilities that enable consumers to intuitively and
efficiently order and manage communications products and services themselves.

 Trouble Management

   Effective, proactive trouble management requires integrated information;
information about the service provider's network, about its customers and
about the services the network delivers to those customers. By integrating our
software's trouble management subsystem with the order management, service
provisioning and network design subsystems, we are able to give the service
provider a single comprehensive view of its customers, the services that each
receives and the way those services are provided. As a result, when a customer
service representative is dealing with a trouble incident, he can see
immediately a customer's past and current services, as well as services that
are in the process of being installed, along with the relevant technical
design details and trouble history.

 Work Management

   The work management system brings all of the MetaSolv subsystems together,
enabling information and business processes to flow electronically through the
service provider's organization. This flow makes it possible for service
providers to analyze how various business processes are being performed and
related resource utilization. The foundation of workflow management is the
ability to design customized service fulfillment plans detailing all the tasks
to satisfy the customer's request for service. These fulfillment plans
organize and manage the flow of tasks, both electronic and manual, according
to the service provider's business processes. The work management subsystem
coordinates related service requests, to achieve the most efficient completion
of the tasks across multiple fulfillment plans. By providing a comprehensive
look at where the customer's request for service is in the process, the
subsystem enables customer service representatives to deliver exceptional
customer care and service.

 Data Management

   The data management subsystem makes the information the service provider
needs to manage its entire operation more accessible and useful. This
subsystem maintains all industry, corporate and other reference data required
to assure quality and integrity throughout the business processes in a central
repository. Central data management means that service provider personnel
enter information only once, and that such information is accessible from all
appropriate areas of the MetaSolv Solution, including gateways and interfaces
with third-party systems.

 Application Programming Interface and Gateway Management

   Our software is based on an open design that allows the electronic exchange
of information with other systems within the service provider's organization
as well as with external trading or service partners' systems. This electronic
exchange of information occurs through our interfaces, commonly referred to as
application programming interfaces. In addition to open interfaces, we also
offer gateways. These gateways are interfaces that have been extended and
customized to perform a specific function such as pass information to a
billing system.

                                       4
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Technology

   The MetaSolv Solution is a multi-tier architecture incorporating an
application server and thin client graphical user interface. The various tiers
of our software design are as follows:

  . User Interface Tier: includes the client-based graphical user interface
    presentation services, which run on a browser or Windows, Windows NT, or
    Windows 95/98. Some client-side application logic also resides on this
    tier.

  . Application Server Tier: includes the business logic in components
    running on Microsoft Transaction Server. These business logic and
    database access objects enable us to build different graphical user
    interfaces with the same business logic code. In addition, application
    programming interfaces give our customers and partners access to these
    components. Open and fully-documented application programming interfaces
    make it possible to customize and integrate the MetaSolv Solution with
    existing customer, partner and third-party software applications. We
    introduced the Web Server, which allows our customers to offer self-
    service application interfaces via the Internet, in January 2000.

  . Data Tier: includes an Oracle relational database management system where
    all MetaSolv data is stored. We leverage the Oracle database features,
    and we support operations on any platform supported by Oracle.

   This three-tier technology design provides the following benefits to our
customers:

  . Flexibility: Multiple graphical user interfaces enable our customers to
    select the presentation platform of their choice, as well as to manage
    the upgrade and internal distribution of the software.

  . Scalability: The software grows easily, from dozens to thousands of
    users, while simultaneously maintaining high performance levels. Our
    customers can add multiple servers as needed to any level of the system,
    generally without service interruption.

  . Data Integrity: The database design preserves data integrity while
    ensuring fast, efficient transaction-oriented data retrieval methods. As
    a demonstration of resilience, the database design has remained constant
    during the life and evolution of other components of the software. This
    stability provides reusability of the business functionality as new,
    updated graphical user interfaces are developed.

  . Open Design: Our open, fully documented application programming
    interfaces allow our customers and alliance partners to integrate the
    MetaSolv Solution software with existing internal and external software
    systems.

Professional Services and Support

   We believe that our ability to provide high-quality customer service and
support is critical to ensuring long-term customer satisfaction. We have
developed a broad array of service offerings to assist our diverse customer
base:

 Professional Services

   Our professional services organization provides the expertise necessary to
implement our software in a production environment, educate users on best
practices for utilizing the software, and to provide maintenance and technical
support after the implementation. As of December 31, 2000, our professional
services organization consisted of 217 people in several cities in the United
States and in London, England. We supplement our expertise with that of our
systems integration partners who provide experience on large projects
typically involving multiple systems, extensive program management and the
development of custom interfaces. We currently have more than 680 external
consultants via our systems integration partners that are trained in the
installation and operation of MetaSolv's software.

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   Specific service offerings available from our professional services
organization include the following:

   Framework for Success(TM) is a set of tools and processes that enable a
successful implementation of the MetaSolv Solution and can be targeted to a
specific customer's needs. These tools and processes incorporate industry best
practices and techniques specific to MetaSolv's expertise and experience and
can be tailored on an ongoing basis as a customer's requirements change. By
shortening our customer's learning curve and streamlining the software
implementation cycle, our Framework for Success implementation methodology
saves time and money.

   QuickStart is a program designed to simplify and speed up the
implementation of the MetaSolv Solution software. This program consists of the
software database pre-loaded with data such as service fulfillment plans,
equipment specifications and products, along with a defined training
curriculum for the end user. As a result of this program, MetaSolv can be
implemented into a production environment in less than 90 days. Built from
knowledge acquired in previous MetaSolv implementations, the QuickStart
program makes maximum use of a customer's resources and shortens service-
delivery intervals.

   Rapid Results is a workshop designed to improve the skills of the
individuals on the customer implementation team and to streamline the MetaSolv
software implementation, primarily by improving business methods and
processes. The workshop provides in-depth exposure to the software concepts
and implementation requirements. Team members learn how and where information
is loaded in the MetaSolv software database, and they see demonstrations of
best practices for setting up and maintaining the software.

   Operational Assessment analyzes the strengths and weaknesses of a
customer's existing processes. MetaSolv studies processes within a customer's
organization to compare internal practices to current best practices of
companies with similar characteristics (including size and maturity) in the
areas of application performance and tuning, data integrity, and change
management among others. By analyzing these key areas of operations, MetaSolv
can recommend the organizational improvements needed to increase the benefit
received from the MetaSolv Solution.

 Educational Offerings

   We provide a comprehensive series of educational courses to our customers,
alliance partners, and employees so they acquire the knowledge and skills
necessary to deploy, use and maintain our software solutions. These classes
focus on the technical aspects of our products and on real-world business
issues and processes. Classes include lectures, demonstrations, discussions
and hands-on use of our software. Classes are held regularly at our training
centers in our Plano, Texas headquarters and in our Englewood, Colorado and
McLean, Virginia facilities, as well as at our customer sites. We also offer
Train-the-Trainer programs that enable our customers to conduct their own
internal end-user training.

 Maintenance and Technical Support

   Our maintenance and technical support services include help desk support,
problem resolution, software maintenance and scheduled software upgrades. We
provide technical support for our products from our headquarters and utilize
the Web, telephone and electronic mail to respond to and resolve customers'
technical questions. Our automated customer service system tracks each
customer's inquiry through complete resolution. With our MetaSolv Solution
software, we provide complete documentation, including system administration
guides and

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programming interface-integration guides, as well as online help. Our typical
software maintenance agreement has a 12-month renewable term.

Sales and Marketing

 Sales

   We market and sell our software directly through our sales force. To date,
we have concentrated our sales efforts on a range of service providers, from
small start-ups to large established communications providers that offer both
voice and data services, including Internet-based services.

   Our sales organization consisted of 56 employees as of December 31, 2000,
including 22 account executives with quota responsibility. Our direct sales
force is organized into two-person account teams, each with an account
executive and a sales analyst. After each sale, we assign account managers to
provide ongoing support and to identify additional sales opportunities. We
generate leads from contacts made through telemarketing, trade shows,
seminars, conferences, market research, our Web site, customers, partners and
our ongoing public relations program. We qualify each lead and assign an
account team to prospective customers. The account team initiates the sales
process, which generally involves multiple presentations and software
demonstrations to information technology and business users within the
prospective customer's organization. Our highly effective Executive Briefing
Center programs bring the prospective customer together with executive
management, product and service managers, and software architects at our
corporate headquarters. These meetings include in-depth software and business
discussions, and set the foundation for a comprehensive, close relationship
with the resulting new customer.

   We complement our direct sales force through alliances with systems
integrators, complementary software application vendors and hardware/software
platform vendors. These alliance partners give our direct sales force a global
reach and provide significant leads and referrals. We also believe these
relationships lend credibility to our solution and help to gain market
acceptance of our software and services.

   In addition to these marketing based relationships, we launched a Sales
Channel Partner Program in 2000. This program gives qualified third parties
the training and support needed to sell the MetaSolv Solution. Our Sales
Channel program is unique in that it includes a sales training and lead
generation phase that provide meaningful revenue opportunities for the partner
prior to the partner qualifying for full reseller status.

   Also in 2000 we expanded our sales and marketing efforts outside the United
States through a combination of direct sales in selected markets; continued
partnerships with systems integrators and the extension of our relationships
with existing customers to enter additional geographic markets. These efforts
resulted in eight international customers as of the end of year 2000, four in
Europe and four in Latin America.

   For our typical customer, the elapsed time between initial contact and
execution of a license agreement ranges from three to nine months.
Communications service providers usually go through lengthy bidding processes
before purchasing software applications such as ours.

 Marketing

   We continue to focus our marketing efforts on developing market strategies
and product plans, creating awareness for the MetaSolv Solution and generating
new sales opportunities. Our

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product management organization provides direction on target markets and their
business requirements. We base our product strategy on an analysis of market
requirements, competitive offerings and projected return on investment. Our
product enhancement plans are developed by our product management organization
in partnership with our customers, leveraging their communications experience
with our market and competitive knowledge. Our customer User Group maintains
an active enhancement-ranking process, by which members continually establish
priorities for software improvements and evaluate the enhancements we deliver.
In addition, our product managers are active in numerous technology and
industry forums. Through these domestic and international forums, we
participate in various projects that demonstrate our capability to support
world-class communications service fulfillment solutions.

   We rely on several marketing communications activities and programs to
create awareness of the MetaSolv Solution and to generate sales opportunities.
Through our product marketing and marketing communications functions, we
manage and maintain our Web site, publish product-related communications and
educational white papers, and conduct seminars and user-group conferences. We
also have an aggressive public-relations program and maintain relationships
with recognized industry analysts; both are part of an ongoing effort to
create awareness of order processing, management and fulfillment solutions in
general as well as specifically the MetaSolv Solution. In 2000 we initiated an
advertising campaign concentrated in communications trade publications. We are
an active sponsor of technology-related conferences and demonstrate our
product at trade shows targeted at providers of communications services. We
also focus on a range of joint marketing strategies and programs with our
alliance partners in order to leverage their respective market relationships
and resources.

 Alliances and Partnerships

   To optimize delivery of a comprehensive end-to-end solution for our
customers, we have established strategic relationships with organizations in
three general categories: systems integrators, complementary software
application vendors and hardware/software platform vendors.

   Systems Integrators. We use systems integration alliance partners to
provide, jointly or separately, a range of services to our customers. Among
our alliance partners are Accenture; ADC Telecommunications; Akili Systems
Group; American Management Systems; BusinessEdge Solutions; Cap Gemini Ernst &
Young; DMR Consulting Group; Encore Software and Stonebridge Technologies.
These partners assist in implementing our solution at the customer location
and often assist us in generating sales leads. Using our Framework for Success
tools and processes mentioned above, we have trained more than 680 consultants
in these organizations in the implementation and operation of our software.

   Complementary Software Application Vendors. We have joint marketing
relationships with several software vendors, which offer products and services
that complement the MetaSolv Solution. Together with these partners, we
provide our customers with superior software solutions that combine best-of-
breed applications and the efficiency/cost-effectiveness of commercial, off-
the-shelf interfaces. Our software partners provide solutions for the
operations support functions which our software does not address; including
billing, network management, fault management and electronic exchange of
information between service providers. In addition, we have alliances with
other application integration vendors that provide commercial interfaces
between our software and other third-party software systems. Our partners in
these areas include:

  . Customer Resource Management (CRM) and Billing Systems--Siebel Systems,
    Daleen and Portal Software;

  . Network Management Systems--Harris, Astracon, CoManage and Syndesis;

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  . Surveillance/Fault Management Systems--Micromuse;

  . Interconnection Gateway Systems--DSET and Quintessent Communications;

  . Enterprise Application Integration Systems--Vitria Technology, Tibco,
    webMethods and Crossworlds Software.

   Hardware/Software Platform Vendors. Our technology strategy is to focus
exclusively on our core order processing, management and fulfillment package,
the MetaSolv Solution. Accordingly, we have formed alliances with leading
hardware and software vendors, including Cisco, Microsoft, Oracle, Iona,
Merant and ESRI to provide underlying, supporting technologies. We intend to
establish additional alliances to support new platforms and functions.

Segment Information and Foreign and Domestic Operations

   The information set forth in Note 10 to the accompanying consolidated
financial statements is incorporated herein by reference.

Research and Development

   Teams of development engineers, software architects and product managers
are responsible for our research and development efforts. The organization
uses a software development process that includes planning and documenting
deliverables in advance; rigorously adhering to coding standards; and
performing significant performance and function tests. Involving all
functional groups at various levels within the company, this process provides
a framework for all the steps necessary to turn concepts into products and to
market those products cost-effectively and successfully. In addition, we have
recruited development engineers, architects and product managers with
experience in order processing, management and fulfillment solutions and other
facets of software, along with senior managers experienced in software used by
communications service providers.

   Our research and development expenditures totaled approximately:

  . $31.3 million for the year ended December 31, 2000

  . $17.0 million for the year ended December 31, 1999

  . $10.2 million for the year ended December 31, 1998

   As of December 31, 2000, 188 employees were engaged in research and
development activities.

Competition

   Competition in our markets is intense and involves rapidly changing
technologies and customer requirements, as well as evolving industry standards
and frequent product introductions. We believe several factors make MetaSolv a
strong competitor, including:

  . the breadth, depth and flexibility of our software;

  . the quality and performance of our product;

  . our high-quality customer service;

  . our proven ability to implement and integrate solutions;

  . the overall value of our software; and

  . the references of our customers.

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   Competitors vary in size and scope, in terms of products and services
offered. We encounter direct competition from several vendors, including Eftia
OSS Solutions, Granite Systems, Telcordia Technology, and Wisor Telecom. We
compete indirectly with large equipment vendors like Nortel Networks and ADC
Telecommunications, since their respective acquisitions of Architel and
CommTech Corp. We also compete with systems integrators and with the
information technology departments of large communications service providers.
Finally, we are aware of communications service providers, software
developers, and smaller entrepreneurial companies that are focusing
significant resources on developing and marketing products and services that
will compete with MetaSolv. We anticipate continued growth in the
communications industry and the entrance of new competitors in the order
processing, management and fulfillment software market, and that the market
for our products and services will remain intensely competitive.

Software Protection, Service Marks and Patents

   To establish and protect our intellectual property, we rely on a
combination of patent, copyright, trade secret and trademark laws, as well as
confidentiality procedures and contractual restrictions. MetaSolv Software,
the MetaSolv logo, Telecom Business Solution, MetaSolv Solution, MetaSolv
Solution QuickStart, eService, PowerFrame and Rapid Results are trademarks,
and MetaSolv is a registered trademark of MetaSolv, Inc. To maximize
protection of our technology, we have set up a patent-protection program. We
have filed for patent protection on certain aspects of our software, and we
will continue to file patent applications to establish exclusive rights to
certain technology we have developed. While we rely on patent, copyright,
trade secret and trademark law to protect our technology, we believe that the
technical and creative skills of our employees, frequent product enhancements
and improved product quality are greater factors in maintaining a technology-
leadership position.

   We generally enter into confidentiality and license agreements with our
employees, alliance partners and customers, and generally control access to
and distribution of our software, documentation and other proprietary
information. We license, rather than sell, our software and require our
customers to enter into license agreements that restrict the use of the
software.

   We cannot guarantee that the steps we have taken to protect our proprietary
rights will be adequate to deter misappropriation of our intellectual
property, and we may not be able to detect unauthorized use and take
appropriate steps to enforce our intellectual property rights. If third
parties infringe or misappropriate our copyrights, trademarks, trade secrets
or other proprietary information, our business could be seriously harmed. In
addition, although we believe that our proprietary rights do not infringe on
the intellectual property rights of others, other parties may assert
infringement claims against us or claim that we have violated their
intellectual property rights. Claims against us, either successful or
unsuccessful, could result in significant legal and other costs and may be a
distraction to management. We have primarily focussed on intellectual property
protection within the United States but have recently expanded that scope to
selected international markets. Protection of intellectual property outside of
the United States will sometimes require additional filings with local patent,
trademark, or copyright offices, as well as the implementation of contractual
or license terms different from those used in the United States. Protection of
intellectual property in many foreign countries is weaker and less reliable
than in the United States. If our business expands into foreign countries,
costs and risks associated with protecting our intellectual property abroad
will increase.

Holding Company Reorganization

   We completed our reorganization on January 1, 2001, which resulted in
MetaSolv, Inc. becoming the holding company of MetaSolv Software, Inc. The
reorganization was accomplished through a merger under Section 251(g) of the
General Corporation Law of the State of Delaware,

                                      10
<PAGE>

which permits the formation of a holding company structure without a
stockholders vote. As a result, MetaSolv Software, Inc. became our direct,
wholly owned subsidiary, and all of MetaSolv Software, Inc.'s outstanding
capital stock was converted, on a share-for-share basis, into capital stock of
MetaSolv, Inc. Except for the name of the corporation, the provisions of our
certificate of incorporation and MetaSolv Software, Inc.'s certificate of
incorporation prior to the effective time of the reorganization are identical.
Additionally, our authorized capital stock following the reorganization and
the designations, rights, powers and preferences of such capital stock, and
its qualifications, limitations and restrictions, are identical to those of
MetaSolv Software, Inc.'s capital stock prior to the effective time of the
reorganization. As a result of the reorganization, stockholders received
securities of the same class showing the same proportional interests in
MetaSolv, Inc., having the same designations, rights, powers and preferences,
and having the same qualifications, limitations and restrictions, as those
held in MetaSolv Software, Inc. prior to the reorganization.

Executive Officers

   The executive officers of MetaSolv and their ages as of December 31, 2000,
are as follows:

<TABLE>
<CAPTION>
            Name          Age                  Position
            ----          ---                  --------
   <C>                    <C> <S>
   James P. Janicki......  45 President and Chief Executive Officer
   Sidney V. Sack........  55 Chief Operating Officer
   Glenn A. Etherington..  46 Chief Financial Officer
   Jonathan K. Hustis....  45 Vice President--Business Services, General
                              Counsel and Corporate Secretary
   Joseph W. Pollard.....  44 Vice President--Sales
   Dana R. Brown.........  35 Vice President--Marketing
   Eleanor M. Luce.......  57 Vice President--Services
</TABLE>

   James P. Janicki co-founded the Company in July 1992 and since such time
has served in various capacities. Mr. Janicki was appointed Chief Executive
Officer in May 1999. He has served as President and a director of the Company
since April 1994. From June 1982 to July 1992, Mr. Janicki was at Texas
Instruments where he served in many capacities, including as manager of the
Texas Instruments' CASE consulting practice from July 1987 to August 1990 and
as manager of the Template software business from August 1990 until July 1992.
Texas Instruments develops and manufactures semiconductors and other products
in the electrical and electronics industry. Mr. Janicki is the husband of Dana
R. Brown, our Vice President-Marketing.

   Sidney V. Sack served as Chief Operating Officer of MetaSolv from March
1999 through December 2000. Mr. Sack also acted as MetaSolv's interim chief
financial officer from March 1999 until May 1999. From November 1998 until
March 1999, Mr. Sack provided financial and operational consulting services to
MetaSolv. From September 1990 to July 1997, Mr. Sack was the Chief Financial
Officer of XcelleNet, Inc., a developer of remote and mobile communications
management software. In addition, from September 1996 until July 1997, Mr.
Sack was the Executive Vice President and Chief Operating Officer of
XcelleNet. Mr. Sack retired as Chief Operating Officer of MetaSolv effective
January 1, 2001, and retired from the Company as an employee effective March
2, 2001.

   Glenn A. Etherington has served as Chief Financial Officer of MetaSolv
since May 1999. Mr. Etherington held various senior management positions at
Brite Voice Systems, a leading provider of enhanced communications products
and interactive information systems, from August 1988 to May 1999. He was
Chief Financial Officer from August 1988 to May 1999, Treasurer from August
1988 to May 1993 and Secretary from May 1993 to May 1999.

                                      11
<PAGE>

   Jonathan K. Hustis has served as General Counsel and Corporate Secretary of
MetaSolv since April 1997. He was appointed Vice President--Business Services
of MetaSolv in August 1998. Mr. Hustis was at Texas Instruments where he
worked in its Corporate Finance Group from November 1995 until April 1997 and
as Manager--Business Services in its Information Technology Group (Advanced
Information Management and Enterprise Solutions divisions) from September 1989
to November 1995.

   Joseph W. Pollard has served as Vice President-Sales of MetaSolv since
February 1997. From July 1992 to February 1997, Mr. Pollard was the Director
of Sales, South-Central Region and Director of Sales, International for Tivoli
Systems, a provider of systems management software. From September 1989 to
July 1992 Mr. Pollard was Manager, International Sales and National Accounts,
for Visual Information Technologies, a provider of commercial image processing
systems.

   Dana R. Brown joined MetaSolv at its founding in July 1992 and since such
time has served in various capacities. She has served as Vice President-
Marketing of MetaSolv since August 1997. Ms. Brown was the business unit
manager of MetaSolv's object-oriented component software group from August
1992 to March 1996 and the Director of Marketing from April 1996 to August
1997. From April 1989 to July 1992, Ms. Brown held various consulting
positions with Texas Instruments, Advanced Information Management software
division. From May 1987 to April 1989, Ms. Brown was a Management Information
Systems Consultant with Arthur Andersen, a public accounting firm. Ms. Brown
is the wife of Mr. Janicki, our President and Chief Executive Officer.

   Eleanor M. Luce has served as Vice President-Services of MetaSolv since
February 1999. From February 1996 to February 1999, Ms. Luce was a Vice
President of Professional Services at Sybase, a database software company.
From June 1990 to February 1996, Ms. Luce was a Vice President at MCI Network
Systems, a developer of network management systems.

   On January 2, 2001, we announced that T. Curtis Holmes, Jr. was to become
MetaSolv's new president and chief operating officer on January 8, 2001. Mr.
Holmes has more than 16 years experience in the communications software
industry, and most recently led Lucent Technologies' Intelligent Network Unit.
Mr. Holmes replaced former chief operating officer Sid Sack, whose retirement
was announced in August 2000. As President and Chief Operating Officer, Mr.
Holmes leads and manages our sales, marketing, professional services and
product development departments.

Employees

   We believe that our growth and success is attributable in large part to our
high-caliber employees and an experienced management team, many members of
which have years of industry experience in building, implementing, marketing
and selling software applications critical to business operations. We maintain
a strong corporate culture and reinforce it by requiring employees to attend
an extensive 80-hour orientation program to learn our technology, the industry
we serve and our company values. We intend to continue teaching and promoting
our culture and believe such efforts provide us with a sustainable competitive
advantage. We offer a work environment that enables employees to make
meaningful contributions, as well as incentive programs to continue to
motivate and reward our employees. None of our employees is represented by a
labor union, and we have not experienced any work stoppages.

   As of December 31, 2000, we had 574 full-time employees of whom:

  . 217 were in professional services;

  . 92 were in sales and marketing;

                                      12
<PAGE>

  . 188 were in research and development; and

  . 77 were in finance, administration and operations.

Forward-Looking Statements

   From time to time, information provided by the Company, statements made by
its employees or information included in its filings with the Securities and
Exchange commission, including this form 10-K report, may contain certain
"forward-looking" information, as that term is defined by the Private
Securities Litigation Reform Act of 1995 (the "Act"). The words "expects,"
"anticipates" "believes" and similar words generally signify a "forward-
looking" statement. These forward-looking statements are made pursuant to the
safe harbor provisions of the Act. The reader is cautioned that all forward-
looking statements are necessarily speculative and that there are certain
risks and uncertainties that could cause actual events or results to differ
materially from those referred to in such forward-looking statements. Such
risks and uncertainties include those in the section below entitled "Certain
Factors That May Affect Future Results." The Company undertakes no obligation
to publicly revise any forward-looking statement due to changes in
circumstances after the date of this report, or to reflect the occurrence of
unanticipated events.

Certain Factors That May Affect Future Results

 The Communications Market is Changing Rapidly, and Failure to Anticipate and
 React to the Rapid Change Could Result in Loss of Customers or Wasteful
 Spending

   Over the last decade, the market for communications products and services
has been characterized by rapid technological developments, evolving industry
standards, dramatic changes in the regulatory environment, emerging companies
and frequent new product and service introductions. Our future success depends
largely on our ability to enhance our existing products and services and to
introduce new products and services that are capable of adapting to changing
technologies, industry standards, regulatory changes and customer preferences.
If we are unable to successfully respond to these changes or do not respond in
a timely or cost-effective way, our sales could decline and our costs for
developing competitive products could increase.

   New technologies, services or standards could require significant changes
in our business model, development of new products or provision of additional
services. New products and services may be expensive to develop and may result
in our encountering new competitors in the marketplace. Furthermore, if the
overall market for order processing, management and fulfillment software grows
more slowly than we anticipate, or if our products and services fail in any
respect to achieve market acceptance, our revenues would be lower than we
anticipate and operating results and financial condition could be materially
adversely affected.

 The Communications Industry is Experiencing Consolidation, Which May Reduce
 the Number of Potential Customers for Our Software

   The North American communications industry has experienced significant
consolidation. In the future, there may be fewer potential customers requiring
operations support systems and related services, increasing the level of
competition in the industry. In addition, larger, consolidated communications
companies have strengthened their purchasing power, which could create
pressure on the prices we charge and the margins we could realize. These
companies are also striving to streamline their operations by combining
different communications systems and the related operations support systems
into one system, reducing the number of vendors needed. Although we have
sought to address this situation by continuing to market our products and
services to new customers and by working with existing customers to provide
products and services that they need to remain competitive, we cannot be
certain that we will not lose customers as a result of industry consolidation.


                                      13
<PAGE>

 Our Customers' Financial Strength, and their Ability to Obtain Financing May
 Lead to Lower Sales and Decreased Profitability

   Many of our customers are small to medium sized Competitive Communications
Service Providers with limited operating histories. Some of these customers
are not profitable and highly dependent on private sources of venture capital
to fund their operations. During the last half of 2000, many Competitive
Communications Service Providers have been unable to access either the debt or
equity markets to continue the expansion of their business. The inability of
these companies to raise capital has resulted in a decrease in the number of
potential customers that are capable of purchasing our software. We cannot be
certain that market conditions will not continue to affect the ability of
these customers to obtain adequate financing for capital expenditures. Because
we currently derive all of our revenue from the licensing, related
professional services and maintenance and support of our MetaSolv Solution
software products, if our customers are unable to obtain adequate financing,
sales of our software could suffer. The failure to continue to increase
revenue related to our software would adversely affect our operating results
and financial condition. In addition, limitations on the ability of our
current customers to obtain adequate financing could adversely affect our
ability to collect outstanding accounts receivable resulting in increased bad
debt losses and a decrease in our overall profitability. During 2000, our bad
debt losses increased to $6.8 million compared to $1.8 million in 1999,
exceeding the rate of growth in our revenues. Additionally, any of our current
customers who cease to be viable business operations would no longer be a
source of maintenance revenue, or revenue from sales of additional MetaSolv
license or services products, and this could adversely affect our
profitability.

 We Rely on a Limited Number of Customers for a Significant Portion of Our
 Revenue

   A significant portion of revenue each quarter is derived from a relatively
small number of large sales. The amount of revenue we derive from a specific
customer is likely to vary from period to period, and a major customer in one
period may not produce significant additional revenue in a subsequent period.
During the year 2000, our top 10 customers accounted for 27% of our total
revenue, compared to 44% during the year 1999. Although no customer accounted
for more than 5% of our revenue in 2000, to the extent that any major customer
terminates its relationship with us, our revenue could be adversely affected.

 Competition from Larger, Better Capitalized or Emerging Competitors for the
 Communications Products and Services that We Offer Could Result in Price
 Reductions, Reduced Gross Margins and Loss of Market Share

   Competition in the communications products market is intense. Although we
compete against other companies selling communications software and services,
the in-house development efforts of our customers may also result in our
making fewer sales. We expect competition to persist and intensify in the
future. We cannot be certain that we will be able to compete successfully with
existing or new competitors, and increased competition could result in price
reductions, reduced gross margins and loss of market share.

   Competitors vary in size and scope, in terms of products and services
offered. We encounter direct competition from several vendors, including Eftia
OSS Solutions, Granite Systems, Telcordia Technology, and Wisor Telecom. We
compete indirectly with large equipment vendors like Nortel Networks and ADC
Telecommunications, since their respective acquisitions of Architel and
CommTech Corp. We also compete with systems integrators and with the
information technology departments of large communications service providers.
Finally, we are aware of communications service providers, software
developers, and smaller entrepreneurial companies that are focusing
significant resources on developing and marketing products and services that
will compete with MetaSolv. We anticipate continued growth in the
communications industry and the

                                      14
<PAGE>

entrance of new competitors in the order processing, management and fulfillment
software market, and that the market for our products and services will remain
intensely competitive.

   Some of our current competitors have longer operating histories, a larger
customer base, greater brand recognition and greater financial, technical,
marketing and other resources than we do. This may place us at a disadvantage
in responding to our competitors' pricing strategies, technological advances,
advertising campaigns, strategic alliances and other initiatives. In addition,
many of our competitors have well-established relationships with our current
and potential customers and have extensive knowledge of our industry. As a
result, our competitors may be able to respond more quickly to new or emerging
technologies and changes in customer requirements. They may also be able to
devote more resources to the development, promotion and sale of their products
and services than we can. To the extent that our competitors offer customized
products that are competitive with our more standardized product offerings, our
competitors may have a substantial competitive advantage, which may cause us to
lower our prices and realize lower margins.

   Current and potential competitors also have established or may establish
cooperative relationships among themselves or with others to increase their
ability to address customer needs. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. In addition, some of our competitors may develop
products and services that are superior to, or have greater market acceptance
than, the products and related services that we offer.

 If the Internet and Internet-Based Services Growth Slows, Demand for Our
 Products May Fall

   Our success depends heavily on the Internet being accepted and widely used
as a medium of commerce and communication. The growth of the Internet has
driven changes in the public communications network and has given rise to the
growth of the next-generation service providers who are our core customers.
Rapid growth in the use of the Internet and on-line services is a recent
phenomenon, and it may not continue. If use of the Internet does not continue
to grow or grows more slowly than expected, the market for software that
manages communications over the Internet may not develop and our sales would be
adversely affected. Consumers and businesses may reject the Internet as a
viable commercial medium for a number of reasons, including potentially
inadequate network infrastructure, slow development of technologies or
insufficient commercial support. The Internet infrastructure may not be able to
support the demands placed on it by increased Internet usage and bandwidth
requirements. In addition, delays in the development or adoption of new
standards and protocols required to handle increased levels of Internet
activity, or increased government regulation could cause the Internet to lose
its viability as a commercial medium. Even if the required infrastructure,
standards, protocols or complementary products, services or facilities are
developed, we may incur substantial expense adapting our solutions to changing
or emerging technologies.

 Changes in Communications Regulation Could Adversely Affect Our Customers and
 May Lead to Lower Sales

   Our customers are subject to extensive regulation as communications service
providers. Changes in legislation or regulation that adversely affect our
existing and potential customers could lead them to spend less on order
processing, management and fulfillment software, which would reduce our
revenues, which could seriously affect our business and financial condition.

 We Rely on Sales of Our MetaSolv Solution Products for Our Revenue

   We currently derive all of our revenue from the licensing, related
professional services and maintenance and support of our MetaSolv Solution
software products, previously known as

                                       15
<PAGE>

Telecom Business Solution. We expect that we will continue to depend on
revenue related to new and enhanced versions of our software for the
foreseeable future. We cannot be certain that we will be successful in
upgrading and marketing our software or that we will successfully develop and
market new products or services. Failure to continue to increase revenue
related to our software or to generate revenue from new products and services
would adversely affect our operating results and financial condition.

 If We Fail to Accurately Estimate the Resources Necessary to Complete Any
 Fixed-Price Contract, Or If We Fail to Meet Our Performance Obligations, We
 May Be Required to Absorb Cost Overruns and We May Suffer Losses On Projects

   In addition to time and materials contracts, we have periodically entered
into fixed-price contracts for software implementation, and we may do so in
the future. These fixed-price contracts involve risks because they require us
to absorb possible cost overruns. Our failure to accurately estimate the
resources required for a project or our failure to complete our contractual
obligations in a manner consistent with the project plan would likely cause us
to have lower margins or to suffer a loss on such a project, which would
negatively impact our operating results. On occasion we have been required to
commit unanticipated additional resources to complete projects. We may
experience similar situations in the future. In addition, for specific
projects, we may fix the price before the requirements are finalized. This
could result in a fixed price that turns out to be too low, which would cause
us to suffer a loss on the project that would negatively impact our operating
results.

 Our Quarterly Operating Results Have Varied Significantly and May Cause Our
 Stock Price to Fluctuate

   Our quarterly operating results have varied significantly and are difficult
to predict. As a result, we believe that period-to-period comparisons of our
results of operations are not a good indication of our future performance. It
is likely that in some future quarter or quarters our operating results will
be below the expectations of public market analysts or investors. In such an
event, the market price of our common stock may decline significantly. A
number of factors are likely to cause our quarterly results to vary,
including:

  . The overall level of demand for communications services by consumers and
    businesses and its effect on demand for our products and services by our
    customers;

  . Our customers' willingness to buy, rather than build, order processing,
    management and fulfillment software;

  . The timing of individual software orders, particularly those of our major
    customers involving large license fees that would materially affect our
    revenue in a given quarter;

  . The introduction of new communications services and our ability to react
    quickly compared to our competitors;

  . Our ability to manage costs, including costs related to professional
    services and support services;

  . The utilization rate of our professional services employees and the
    extent to which we use third party subcontractors to provide consulting
    services;

  . Costs related to possible acquisitions of other businesses;

  . Our ability to collect outstanding accounts receivable from very large
    product licenses;

                                      16
<PAGE>

  . Innovation and introduction of new technologies, products and services in
    the communications and information technology industries; and

  . Costs related to the expansion of our operations.

   We forecast the volume and timing of orders for our operational planning,
but these forecasts are based on many factors and subjective judgments, and we
cannot assure their accuracy. We have hired and trained a large number of
personnel in core areas, including product development and professional
services, based on our forecast of future revenues. As a result, significant
portions of our operating expenses are fixed in the short term. Therefore,
failure to generate revenue according to our expectations in a particular
quarter could have an immediate negative effect on results for that quarter.

   Our quarterly revenue is dependent, in part, upon orders booked and
delivered during that quarter. We expect that our sales will continue to
involve large financial commitments from a relatively small number of
customers. As a result, the cancellation, deferral, or failure to complete the
sale of even a small number of licenses for our products and related services
may cause our revenues to fall below expectations. Accordingly, delays in the
completion of sales near the end of a quarter could cause quarterly revenue to
fall substantially short of anticipated levels. Significant sales may also
occur earlier than expected, which could cause operating results for later
quarters to compare unfavorably with operating results from earlier quarters.

   Some contracts for software licenses may not qualify for revenue
recognition upon product delivery. Revenue may be deferred when there are
significant elements required under the contract that have not been completed,
there are express conditions relating to product acceptance, there are
deferred payment terms, or when collection is not considered probable. With
these uncertainties we may not be able to predict accurately when revenue from
these contracts will be recognized.

 In Order to Generate Increased Revenue, We Need to Expand Our Sales and
 Distribution Capabilities

   We must expand our direct and indirect sales operations to increase market
awareness of our products and to generate increased revenue. We cannot be
certain that we will be successful in these efforts. Our products and services
require a sophisticated sales effort targeted at the senior management of our
prospective customers. New hires will require training and take time to
achieve full productivity. We cannot be certain that our recent hires will
become as productive as necessary or that we will be able to hire enough
qualified individuals in the future. We also plan to expand our relationships
with systems integrators and other third-party resellers to build an indirect
sales channel. Failure to expand these sales channels could adversely affect
our revenues and operating results. In addition, we will need to manage
potential conflicts between our direct sales force and third-party reselling
efforts.

 We Depend on Certain Key Personnel, and the Loss of Any Key Personnel Could
 Affect Our Ability to Compete

   We believe that our success will depend on the continued employment of our
senior management team and key technical personnel. This dependence is
particularly important to our business because personal relationships are a
critical element of obtaining and maintaining business contacts with our
customers. Our senior management team and key technical personnel would be
very difficult to replace and the loss of any of these key employees could
seriously harm our business. In addition, we currently do not have non-compete
agreements in place, and if any

                                      17
<PAGE>

of these key employees were to join a competitor or form a competing company,
some of our customers might choose to use the products or services of that
competitor or of a new company instead of ours.

 Our Ability to Attract, Train and Retain Qualified Employees is Crucial to
 Results of Operations and Future Growth

   As a company focused on the development, sale and delivery of software
products and related services, our personnel are our most valued assets. Our
future success depends in large part on our ability to hire, train and retain
software developers, systems architects, project managers, communications
business process experts, systems analysts, trainers, writers, consultants and
sales and marketing professionals of various experience levels. Skilled
personnel are in short supply, and this shortage is likely to continue. As a
result, competition for these people is intense, and the industry turnover
rate for them is high. Any inability to hire, train and retain a sufficient
number of qualified employees could hinder the growth of our business.

 Our Future Success Depends on Our Continued Use of Strategic Relationships to
 Implement and Sell Our Products

   We have entered into relationships with third-party systems integrators, as
well as with hardware platform and software applications developers. We rely
on these third parties to assist our customers and to lend expertise in large
scale, multi-system implementation and integration projects, including overall
program management and development of custom interfaces for our product.
Should these third parties go out of business or choose not to provide these
services, we may be forced to develop those capabilities internally, incurring
significant expense and adversely affecting our operating margins. In
addition, we have derived and anticipate that we will continue to derive, a
significant portion of our revenues from customers that have established
relationships with our marketing and platform alliances. We could lose sales
opportunities if we fail to work effectively with these parties or fail to
grow our base of marketing and platform alliances.

 The Expansion of Our Products With New Functionality and to New Customer
 Markets May be Difficult and Costly

   We plan to invest significant resources and management attention to
expanding our products by adding new functionality and to expanding our
customer base by targeting customers in markets that we have not previously
served. We cannot be sure that expanding the footprint of our products or
selling our products into new markets will generate acceptable financial
results due to uncertainties inherent in entering new markets and in our
ability to execute our plans. Costs associated with our product and market
expansions may be more costly than we anticipate, and demand for our new
products and in new customer markets may be lower than we expect.

 Our Planned International Operations May Be Difficult and Costly

   We intend to devote significant management and financial resources for our
international expansion. In particular, we will have to attract experienced
management, technical, sales, marketing and support personnel for our
international offices. Competition for these people is intense and we may be
unable to attract qualified staff. International expansion may be more
difficult or take longer than we anticipate, especially due to language
barriers, currency exchange risks and the fact that the communications
infrastructure in foreign countries may be different than the communications
infrastructure in the United States. If we are unable to expand our
international operations successfully and in a timely manner, our expenses
could increase at a greater rate than our revenues, and our operating results
could be adversely affected.


                                      18
<PAGE>

   Moreover, international operations are subject to a variety of additional
risks that could adversely affect our operating results and financial
condition. These risks include the following:

  . Longer payment cycles;

  . Problems in collecting accounts receivable;

  . The impact of recessions in economies outside the United States;

  . Unexpected changes in regulatory requirements;

  . Variable and changing communications industry regulations;

  . Trade barriers and barriers to foreign investment, in some cases
    specifically applicable to the communications industry;

  . Barriers to the repatriation of capital or profits;

  . Fluctuations in currency exchange rates;

  . Restrictions on the import and export of certain technologies;

  . Lower protection for intellectual property rights;

  . Seasonal reductions in business activity during the summer months,
    particularly in Europe;

  . Potentially adverse tax consequences;

  . Increases in tariffs, duties, price controls or other restrictions on
    foreign currencies; and

  . Requirements of a locally domiciled business entity.

 Potential Future Acquisitions or Joint Business Ventures Could Be Difficult
 to Integrate, Disrupt Our Business, Dilute Stockholder Value and Adversely
 Affect Our Operating Results

   We may acquire other businesses in the future, which would complicate our
management tasks. We may need to integrate widely dispersed operations that
have different and unfamiliar corporate cultures. These integration efforts
may not succeed or may distract management's attention from existing business
operations. Our failure to successfully manage future acquisitions or other
joint business ventures could seriously harm our business. Also, our existing
stockholders would be diluted if we financed the acquisitions by issuing
equity securities.

 Our Failure to Meet Customer Expectations or Deliver Error-Free Software
 Could Result in Losses and Negative Publicity

   The complexity of our products and the potential for undetected software
errors increase the risk of claims and claim-related costs. Due to the
mission-critical nature of order processing, management and fulfillment
software, undetected software errors are of particular concern. The
implementation of our products, which we accomplish through our professional
services division and with our alliance partners, typically involves working
with sophisticated software, computing and communications systems. If our
software contains undetected errors or we fail to meet our customers'
expectations or project milestones in a timely manner, we could experience:

  . Delayed or lost revenues and market share due to adverse customer
    reaction;

  . Loss of existing customers;

  . Negative publicity regarding us and our products, which could adversely
    affect our ability to attract new customers;

  . Expenses associated with providing additional products and customer
    support, engineering and other resources to a customer at a reduced
    charge or at no charge;

                                      19
<PAGE>

  . Claims for substantial damages against us, regardless of our
    responsibility for any failure;

  . Increased insurance costs; and

  . Diversion of development and management time and resources.

   Our licenses with customers generally contain provisions designed to limit
our exposure to potential claims, such as disclaimers of warranties and
limitations on liability for special, consequential and incidental damages. In
addition, our license agreements usually cap the amounts recoverable for
damages to the amounts paid by the licensee to us for the product or services
giving rise to the damages. However, we cannot be sure that these contractual
provisions will protect us from additional liability. Furthermore, our general
liability insurance coverage may not continue to be available on reasonable
terms or in sufficient amounts to cover one or more large claims, or the
insurer may disclaim coverage as to any future claim. The successful assertion
of any large claim against us could adversely affect our operating results and
financial condition.

 Our Limited Ability to Protect Our Proprietary Technology May Adversely
 Affect Our Ability to Compete, and We May Be Found to Infringe on the
 Proprietary Rights of Others

   Our success depends in part on our proprietary software technology. We rely
on a combination of patent, trademark, trade secret and copyright law and
contractual restrictions to protect our technology. We cannot guarantee that
the steps we have taken to protect our proprietary rights will be adequate to
deter misappropriation of our intellectual property, and we may not be able to
detect unauthorized use and take appropriate steps to enforce our intellectual
property rights. If third parties infringe or misappropriate our copyrights,
trademarks, trade secrets or other proprietary information, our business could
be seriously harmed. In addition, although we believe that our proprietary
rights do not infringe on the intellectual property rights of others, other
parties may assert infringement claims against us or claim that we have
violated their intellectual property rights. Claims against us, either
successful or unsuccessful, could result in significant legal and other costs
and may be a distraction to management. We currently focus primarily on
intellectual property protection within the United States. Protection of
intellectual property outside of the United States will sometimes require
additional filings with local patent, trademark, or copyright offices, as well
as the implementation of contractual or license terms different from those
used in the United States and have only recently expanded that scope to
selected international markets. Protection of intellectual property in many
foreign countries is weaker and less reliable than in the United States. If
our business expands into foreign countries, costs and risks associated with
protecting our intellectual property abroad will increase.

ITEM 2. PROPERTIES

   We lease two buildings in an office park in Plano, Texas that total
approximately 160,000 square feet, and we own an adjacent, undeveloped lot
available for expansion. These buildings are used as our headquarters under a
lease that expires in 2010. In addition, we lease facilities and offices in
Englewood, Colorado; Chicago, Illinois; McLean, Virginia; Atlanta, Georgia;
London, England; and Nice, France. Lease terms for these locations expire at
various times through July 2006. We are evaluating expansion alternatives to
strengthen local support for our European and Latin American customers, and
also to provide space requirements as needed for growth of operations in
Plano, Texas.

ITEM 3. LEGAL PROCEEDINGS

   We are not a party to any material legal proceedings.

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

   No information is required in response to this Item, as no matter was
submitted to a vote of our security holders during the fourth quarter of the
fiscal year covered by this report.

                                      20
<PAGE>

                                    PART II

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

   The Company's common stock is traded on The Nasdaq Stock Market ("Nasdaq")
under the symbol MSLV. Prices per share reflected in the following table
represent the range of high and low sales prices reported by The Nasdaq Stock
Market for the quarters indicated.

<TABLE>
<CAPTION>
                                                                  High     Low
                                                                -------- -------
   <S>                                                          <C>      <C>
   2000
   March 31.................................................... $126.000 $45.875
   June 30.....................................................   60.000  30.250
   September 30................................................   55.500  29.500
   December 31.................................................   40.750   6.750
</TABLE>

   The Company has not paid cash dividends on its common stock, and does not
plan to pay cash dividends to its stockholders in the near future. The Company
is not bound by any contractual terms that prohibit or restrict the payment of
dividends; however, the Company presently intends to retain its earnings to
finance future growth of its business.

   As of February 28, 2001, the Company believes it had approximately 7,800
beneficial stockholders, including approximately 80 stockholders of record. On
February 28, 2001, the closing price of the Company's common stock on Nasdaq
was $17.00 per share.

ITEM 6. SELECTED FINANCIAL DATA

   The following table contains certain selected financial data that should be
read in conjunction with the Company's financial statements and notes thereto
and with Management's Discussion and Analysis of Financial Condition and
Results of Operations. The selected financial data have been derived from the
Company's audited financial statements.

<TABLE>
<CAPTION>
                                              Years Ended December 31,
                                      -----------------------------------------
                                        2000     1999    1998     1997    1996
                                      -------- -------- -------  ------- ------
                                       (In thousands, except per share data)
<S>                                   <C>      <C>      <C>      <C>     <C>
Statement of Operations Data:
  Total revenues..................... $131,877 $ 73,007 $42,576  $ 9,299 $3,822
  Gross profit.......................   93,140   46,073  26,475    6,717  3,185
  Income (loss) from operations......   18,388    3,718    (508)      65    581
  Net income (loss)..................   16,043    2,645    (186)     120    648
  Earnings (loss) per share of common
   stock:
    Basic............................ $   0.45 $   0.17 $ (0.02) $  0.01 $ 0.06
    Diluted.......................... $   0.40 $   0.08 $ (0.02) $  0.00 $ 0.03

Balance Sheet Data:
  Cash and cash equivalents.......... $ 93,695 $112,341 $ 7,984  $ 3,639 $2,983
  Working capital....................  130,650  108,917   9,761    2,393  3,482
  Total assets.......................  197,628  147,216  26,527   11,940  6,119
  Total current liabilities..........   48,403   28,291  11,935    5,346  1,806
  Redeemable convertible preferred
   stock.............................      --       --   12,610    2,610    --
  Total stockholders' equity.........  148,950  118,615   1,826    1,939  4,314
</TABLE>


                                      21
<PAGE>

<TABLE>
<CAPTION>
                                                    Quarters Ended
                                       ----------------------------------------
                                                                         March
                                       December 31 September 30 June 30   31
                                       ----------- ------------ ------- -------
                                         (In thousands except per share data)
<S>                                    <C>         <C>          <C>     <C>
Quarterly Financial Data:
2000:
  Total revenues......................   $37,804     $35,786    $32,297 $25,990
  Gross profit........................    27,333      25,959     21,933  17,915
  Income from operations..............     6,064       5,347      4,298   2,679
  Net income..........................     5,033       4,686      3,745   2,579
  Diluted earnings per share of common
   stock..............................   $   .13     $   .12    $   .09 $   .06

1999:
  Total revenues......................   $22,021     $18,849    $17,366 $14,771
  Gross profit........................    14,639      11,887     10,871   8,676
  Income from operations..............     1,737         878        644     459
  Net income..........................     1,466         463        359     357
  Diluted earnings per share of common
   stock..............................   $   .04     $   .01    $   .01 $   .01
</TABLE>

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

Overview

   Founded in 1992, we began development of order processing, management and
fulfillment software in early 1994. We have continually upgraded and expanded
our software product since that time, adding support for networks that combine
voice and data services in 1997, and supporting the creation and delivery of
services that utilize the Internet as a communications network in 1998 and
1999. During 2000, our product's footprint was expanded to allow our customers
to offer business online, including one-to-one marketing, online ordering,
customer self-care, and web-based solutions for qualifying and ordering DSL
services, and also to extend the reach of our product to field operations
through the Internet. We also expanded our product to address international
differences in data formats and language, and the needs of specific classes of
service providers such as cable and private corporate enterprises.
Enhancements were also introduced that further automate network design and
accelerate other aspects of our customers' processes to reduce their operating
costs and cycle times.

   To date, we have derived substantially all of our revenues from the license
of our software products and the sale of related services, including training,
consulting and software maintenance. Licensing and service terms are typically
covered by signed orders that reference our master agreement with the
customer.

   We generally recognize license revenues when our customer has signed a
license agreement, we have delivered the software product, product acceptance
is not subject to express conditions, the fees are fixed or determinable and
we consider collection to be probable. We allocate the agreed fees for
multiple products and services licensed or sold in a single transaction among
the products and services using the "residual method" as required by SOP 98-9,
deferring the fair market value of the undelivered elements and recognizing
the residual amount of the fees as revenue upon delivery of the software
license. On occasion we may enter into a license agreement with a customer
requiring development of additional software functions or services necessary
for the software's performance of specified functions. For those agreements,
we recognize revenue for the entire arrangement on a percentage-of-completion
basis as the development services are provided. We generally recognize service
revenues as the services are performed. We recognize revenues from maintenance
agreements ratably over the maintenance period, usually one year.

                                      22
<PAGE>

   We normally ship our software and perform services shortly after we receive
orders. As a result, our quarterly revenues are largely dependent on orders
booked and delivered during that quarter. Our sales for a given period
typically involve large financial commitments from a relatively small number
of customers. Accordingly, delays in the completion of sales near the end of a
quarter could negatively impact revenues in that quarter. Consistent with
industry practice, we sometimes agree to bill our license fees in more than
one installment. Extended payment terms that do not exceed six months are
considered fixed obligations. In these situations, amounts not billed
immediately are recorded as unbilled receivables. Obligations that extend
beyond six months from shipment of software are deferred and recorded as
revenue when billed.

   We have structured the pricing of our software to meet the needs of each of
our target market segments, from start-up resellers to large, facility-based
incumbent service providers. We charge a base price for the core subsystems,
coupled with additional license fees for add-on modules. In addition, we
charge a per-user license fee, with customary volume discounts on purchases of
large numbers of user licenses. We price annual maintenance and support
contracts as a percentage of the license fee that is current for the product
being maintained. For a new customer, our initial sale of licenses and
associated services, including maintenance and support, generally ranges from
$750,000 to several millions of dollars.

   Service revenues consist principally of software implementation, consulting
and customer training, as well as software maintenance agreements that include
both customer support and the right to product updates. We use our own
employees and subcontract with our alliance partners to provide implementation
consulting services to our customers. We offer services on both an hourly and
a fixed-price basis. We offer and expect to continue to offer the majority of
our services on an hourly basis.

   We anticipate that future revenues will be generated from five principal
sources:

  . License fees from new customers;

  . License fees for additional products to existing customers;

  . License fees for additional users in our existing customer base;

  . Implementation and other service fees related to product license sales;
    and

  . Maintenance fees from both existing and new customers.

   We occasionally include complementary software developed by third parties
to extend the capabilities of our software, accelerate product introductions
and to otherwise utilize proprietary intellectual property. In July 2000 we
entered into a one-year agreement with Cygent, Inc., which is renewable for
two additional annual periods at our option. Under this agreement we are
incorporating Cygent's eBusiness solutions within the MetaSolv Solution
software under our own brand to enable our customers to offer business online,
including one-to-one marketing, online shopping and ordering, electronic bill
presentment and payment, customer self-care, and provide a web-based solution
for pre-qualification and ordering of DSL services. Our contract with Cygent
includes royalty payments to Cygent for each license we sell that contains
embedded Cygent software, with a minimum payment of $10 million for the
contractual year. From time to time we also evaluate opportunities to provide
a broader solution to our customers by acquiring complementary software
technology.


                                      23
<PAGE>

Percentage of Revenues and Year over Year Growth

   The following table sets forth, for the periods indicated, the percentage
of total revenues represented by certain line items in the Company's
statements of operations.

<TABLE>
<CAPTION>
                                            Year Ended
                                           December 31,      % of Dollar Changes
                                          ----------------   -------------------
                                          2000  1999  1998   1999-2000 1998-1999
                                          ----  ----  ----   --------- ---------
<S>                                       <C>   <C>   <C>    <C>       <C>
Revenues:
  License................................  54%   53%   55%       85%        66%
  Service................................  46%   47%   45%       76%        79%
                                          ---   ---   ---
    Total revenues....................... 100%  100%  100%       81%        71%
                                          ===   ===   ===
Cost of revenues:
  License................................   4%    2%    3%      198%        32%
  Service................................  25%   35%   35%       33%        70%
                                          ---   ---   ---
    Total cost of revenues...............  29%   37%   38%       44%        67%
                                          ===   ===   ===
Gross profit.............................  71%   63%   62%      102%        74%
                                          ===   ===   ===
Operating expenses:
  Research and development...............  24%   23%   24%       85%        67%
  Sales and marketing....................  19%   20%   27%       71%        23%
  General and administrative.............  14%   15%   12%       71%       114%
                                          ---   ---   ---
    Total operating expenses.............  57%   58%   63%       76%        57%
                                          ===   ===   ===
Income (loss) from operations............  14%    5%   (1)%     395%        n.m.
Interest and other income, net...........   6%    1%    1%      932%       149%
                                          ---   ---   ---
Income before taxes......................  20%    6%    0%      484%        n.m.
Income tax expense.......................   8%    2%    0%      451%        n.m.
                                          ---   ---   ---
Net income...............................  12%    4%    0%      507%        n.m.
                                          ===   ===   ===
</TABLE>
n.m. - not meaningful

Revenues

   Total revenues in 2000 were $131.9 million, compared to $73.0 million in
1999 and $42.6 million in 1998 and representing year over year increases in
2000 and 1999 of 81% and 71%, respectively. The increase in revenues is
primarily related to an increase in the number of sales of software and
related services to new customers, and also to higher follow-on sales of
software modules, user licenses and related services to our existing customer
base. Our active customer base increased from 39 at December 31, 1998, to 69
at December 31, 1999, and to 109 at December 31, 2000.

   License fees. License fee revenues increased to $71.6 million in 2000 from
$38.8 million in 1999 and $23.4 million in 1998, representing year over year
increases in 2000 and 1999 of 85% and 66%, respectively. The growth in license
fee revenues during 2000 is primarily due to:

  . A 33% increase in the number of customers using MetaSolv as their
    operational support software for managing and fulfilling their customer
    orders,

  . A 57% increase in the average size of license sales to new customers, and

  . A 40% increase in follow-on sales of additional software modules and user
    licenses to existing customers.

   There were no price increases during these periods.

                                      24
<PAGE>

   We believe the increase in the number and value of license sales was made
possible by our customers' awareness of the potential value of our software in
their efficient management of a broad range of communications services,
coupled with our track record in successful software implementations and
follow-on support. Our license revenue growth has also been facilitated by our
implementation partners, who generate sales leads for us as they capture the
related implementation consulting business.

   Services. Revenues from services increased to $60.2 million in 2000 from
$34.2 million in 1999 and $19.1 million in 1998, representing year over year
increases in 2000 and 1999 of 76% and 79%, respectively. The growth in service
revenues was due to growth in the number of customers subscribing to
maintenance agreements, and to a lesser extent, higher implementation
consulting and training services associated with the growth in license
revenues.

   Post-contract customer support, or maintenance revenues, increased to $26.3
million in 2000 from $10.5 million in 1999, and $4.7 million in 1998,
representing year over year increases in 2000 and 1999 of 150% and 125%,
respectively. The increases in maintenance revenue are due to a continued
increase in the number of software licenses sold and a high percentage of
maintenance agreement renewals.

   Consulting and training revenue increased to $34.0 million in 2000 from
$23.7 million in 1999 and $14.5 million in 1998, representing year over year
increases of 43% and 64%, respectively. The relatively slower growth of
consulting and training revenue, as compared to maintenance and license
revenues, reflect the increasing ability of alliance partners to provide
consulting services directly to our customers, and also to shortened software
implementation times that have reduced consulting costs for our customers.

   We expect our overall services revenue to continue to increase as more
customers subscribe to maintenance support, and as we support an expected
larger number of new implementations and existing customers. We expect the
maintenance component of service revenues will continue to increase faster
than the company's consulting revenue due to the high level of maintenance
contract renewals we have experienced from our growing customer base, and also
due to the continuing trend of third party consulting firms contracting
directly with our customers to provide implementation services.

   Concentration of Revenues. In 2000, our top five customers represented 16%
of our total revenue, with no one customer accounting for more than 5% of
revenue. However, in any given quarter, we generally derive a significant
portion of our revenue from a small number of relatively large sales. While we
believe that the loss of any one of these customers would not seriously harm
our overall business or financial condition, our inability to consummate one
or more substantial sales in any future period could seriously harm our
operating results for that period.

   International Revenues. We recognized $4.3 million of revenue during 2000
from sources outside the United States and Canada, representing 3% of total
revenue. We expect our international revenues to increase by a substantially
higher percentage than domestic sales during the next twelve months as our
product enhancements and language options expand our potential market, and
also as we strengthen our customer support capabilities in overseas markets.
We cannot be certain that our investments in international operations will
produce desired levels of revenues or profitability.

                                      25
<PAGE>

Cost of Revenues

   License Costs. License costs consist primarily of royalties for third party
software that is used to develop or is embedded in our products, and for
product features that were originally developed for specific customers. These
software components are now included in our software and payments are made to
the original companies that funded the development of those components. Cost
of license revenues also includes costs of packaging materials and the
production of software media and documentation.

   License costs were $5.1 million in 2000, $1.7 million in 1999 and $1.3
million in 1998, representing 7%, 4% and 6% of license revenues in each year,
respectively. The increases in license costs were due to an increase in
license revenues on which royalty payments are based. In 2000, license costs
also include royalty expense of $2.4 million for use of third party e-commerce
software that we are embedding in our products. We have reduced our reliance
on customer-funded development to introduce new software functionality, but
expect to continue use of third party software where it provides an advantage
for our customers, and where it lowers our overall product development cost.
Most of our royalty agreements provide for payment caps or time limitations.
We expect our future license costs as a percent of license revenue will be
higher than in recent years as we continue to supplement our own product
development with royalty-bearing third party products to accelerate revenue
growth by incorporating best-in-class products within the MetaSolv Solution
software. In addition, license costs are expected to increase in absolute
terms due to minimum purchase commitments contained in our agreement with
Cygent.

   Service Costs. Service costs consist primarily of costs associated with
providing consulting, training and customer support services. These costs
include compensation and related expenses for MetaSolv employees and fees for
third-party consultants who provide services for our customers.

   Service costs were $33.6 million in 2000, $25.2 million in 1999 and $14.8
million in 1998, representing 56%, 74% and 77% of service revenues in each
year, respectively. These increases in service costs resulted from the
significant expansion of our professional services resources across all
categories, including consulting, training and customer support. The decrease
in service costs as a percentage of service revenues in 1999 and 2000,
compared to 1998, was primarily due to efficiencies derived from the
development of repeatable implementation processes and standard, customizable
tools that have reduced implementation times and costs for tasks such as data
migration. Additionally, the decrease in service costs as a percentage of
revenue was also due to proportionately less reliance on third-party
subcontractors and the relatively faster growth of revenues from maintenance
agreements.

   We expect future service costs to increase due to growth in staffing to
meet demand for services related to supporting our growing customer base and
increases in software-related consulting and training. Services costs are also
expected to increase as we strengthen product support for overseas customers.

Operating Expenses

   Research and Development Expenses. Research and development expenses
consist primarily of costs related to our staff of software developers,
contracted development costs, and the associated infrastructure costs required
to support product development. Product research and development expenses
increased to $31.3 million in 2000 from $17.0 million in 1999 and $10.2
million in 1998, representing year over year increases in 2000 and 1999 of 85%
and 67%, respectively. Research and development expenses were 24%, 23% and 24%
of total revenues in

                                      26
<PAGE>

each year, respectively. The increase in expenses was due to an increase in
research and development personnel and contracted development expenses to meet
market demand for new features, functionality and advances in product
architecture. The new functionality includes enhancements for high-speed
Internet and data communications networks, Internet commerce, and adapting our
software for international differences in data formats, standards and
language. Our product architecture advances also included the capability for
our product to more quickly address future functional requirements to provide
an enduring competitive advantage for our current and future customers.

   We expect that our future investment in product development will continue
to increase as we address additional emerging technologies to enable
communications providers and businesses to manage their next generation
networks and services worldwide.

   Our product development methodology generally establishes technological
feasibility near the end of the process, when we have a working model.
Accordingly, we have not capitalized any software development costs.

   Sales and Marketing Expenses. Sales and marketing expenses consist
primarily of salary, commission, travel, trade show and other related expenses
required to sell our software in our targeted markets. Sales and marketing
expenses were $24.5 million in 2000, $14.3 million in 1999 and $11.6 million
in 1998, representing 19%, 20% and 27% of revenues in each year, respectively.
Sales and marketing expenses increased each year primarily due to the
expansion of our sales and marketing staff, increased commission expense, and
increased travel costs. The decline in sales and marketing expenses as a
percentage of revenues was due to increased productivity of our sales staff
and a larger revenue base over which to spread the fixed costs of sales and
marketing administration. We expect that our sales and marketing expenses will
continue to increase, particularly as we increase our presence in Europe and
Latin America. Sales commission expense is also expected to increase as we
increase sales through partners who help generate orders for our software
through our lead referral programs.

   General and Administrative Expenses. General and administrative expenses
consist of costs related to information systems infrastructure, facilities,
finance and accounting, legal, human resources and corporate management, that
have not been allocated to other departments. General and administrative
expenses were $18.9 million in 2000, $11.1 million in 1999 and $5.2 million in
1998, representing 14%, 15% and 12% of revenues in each year, respectively.
The increase in general and administrative expenses resulted primarily from a
higher provision for doubtful accounts which increased to $6.8 million in 2000
from $1.8 million in 1999 and $510,000 in 1998, and also due to staff
increases in information systems, finance and administrative functions to
support the increased scale of our operations. We expect general and
administrative expenses to continue to increase to support business growth,
including costs to strengthen our international operations. In addition,
limitations on the ability of our current customers to obtain adequate
financing could adversely affect our ability to collect outstanding accounts
receivable resulting in increased bad debt losses and a decrease in our
overall profitability.

   Interest and Other Income, Net. Interest and other income consisting of
interest income, interest expense, and gains and losses on disposition of
assets, was $7.7 million in 2000, $0.7 million in 1999 and $0.3 million in
1998. The increase in 2000 was primarily the result of interest and dividends
earned on higher cash and marketable securities balances resulting from the
company's initial public offering in November 1999.

   Income Tax Expense (Benefit). Income tax expense was $10.0 million in 2000,
$1.8 million in 1999 and a benefit of $24,000 in 1998. As a percentage of
income before taxes, income tax expense was 38.4% in 2000 and 40.7% in 1999.
Tax expense as a percentage of pre-tax income

                                      27
<PAGE>

differs from the federal statutory rate primarily due to state taxes,
partially offset by estimated research and development tax credits in 2000,
including recovery of credits for prior years. The higher 1999 tax expense
rate also includes a non-recurring state tax adjustment.

   Liquidity and Capital Resources. At December 31, 2000, our primary sources
of liquidity were cash, cash equivalents and marketable securities totaling
$142.5 million and representing 72% of total assets. The Company generated
$100.4 million in net proceeds from our initial public stock offering on
November 17, 1999. The company has invested its cash in excess of current
operating requirements in short and intermediate term investment grade
securities that are available for sale as needed to finance future company
growth.

   Our operating activities generated $36.1 million in cash during 2000,
compared to $10.4 million in 1999 and use of cash of $2.3 million in 1998. In
2000, the increase in cash from operating activities was due primarily to
profits of the company, an increase in deferred revenues, and tax benefits
from disqualifying dispositions of company stock options, partially offset by
higher receivables.

   Deferred revenue consists primarily of customer payments that we have
received and have outstanding services to perform, and also includes prepaid
maintenance revenue that we recognize on a pro-rata basis over the term of the
agreement. Deferred revenues were $24.0 million as of December 31, 2000,
compared to $11.7 million at December 31, 1999, reflecting an increase in
prepaid maintenance contracts due to a larger customer base, and deferrals of
software and consulting revenues that depend on our future performance.

   Accounts receivable, net, increased from $16.8 million at the end of 1999
to $24.0 million as of December 31, 2000. This 43% increase in receivables
resulted primarily from a 72% increase in revenues between the quarter ended
December 31, 2000, and the year-ago quarter.

   Net cash used for investing activities was $60.2 million in 2000 including
$48.8 million in purchases of marketable securities. Also included in cash
used for investing activities were $7.3 million in capital expenditures for
computer hardware and software, furniture and leasehold improvements, and $4.0
million in equity investments in companies with whom we have strategic
relationships. Net cash used for investing activities in 1999 and 1998 was
$7.1 million and $3.3 million, respectively. We have no unusual capital
commitments at December 31, 2000, and believe our principal commitments
consist of obligations under operating leases. See Note 8 of Notes to
Consolidated Financial Statements.

   We believe that our cash flows generated by operations, together with
current cash and marketable security balances, will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for at
least the next 12 months. From time to time, we evaluate potential
acquisitions of complementary businesses, products and technologies. Should
cash balances be insufficient to complete one of these acquisitions, we may
seek to sell additional equity or debt securities. The decision to sell
additional equity or debt securities could be made at any time and could
result in additional dilution to our stockholders.

New Accounting Standards

   In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. The provisions of
this statement, as amended, require that an entity recognize all derivatives
as either assets or liabilities measured at fair value. The accounting for
changes in the fair value of a derivative depends on the use of the
derivative. The adoption of this standard on January 1, 2001, did not have a
material impact on our results of operations or financial position.


                                      28
<PAGE>

ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   Our exposure to market risks principally relates to changes in interest
rates that may affect our fixed income investments. Our excess cash is
invested in debt securities issued by U.S. government agencies and corporate
debt securities. We place our investments with high quality issuers and limit
our credit exposure by restricting the amount of securities that may be placed
with any single issuer. Our general policy is to limit the risk of principal
loss and assure the safety of invested funds by limiting market and credit
risk. All highly liquid investments with original maturities of three months
or less are considered to be cash equivalents. At December 31, 2000, the
weighted average pre-tax interest rate on the investment portfolio is
approximately 6.8%. Market risk related to these investments can be estimated
by measuring the impact of a near-term adverse movement of 10% in short-term
market interest rates. If these rates average 10% more in 2001 than in 2000,
there would be no material adverse impact on our results of operations or
financial position. During 2000, had short-term market interest rates averaged
10% more than in 1999, there would have been no material adverse impact on our
results of operations or financial position.

   Our exposure to adverse movements in foreign exchange rates is
insignificant. Therefore, we do not hedge our foreign currency exposure, nor
do we use derivative financial instruments for speculative trading purposes.
Market risk related to foreign currency exchange rates can be estimated by
measuring the impact of a near-term adverse movement of 10% in foreign
currency exchange rates against the U.S. dollar. If these rates averaged 10%
more in 2001 than in 2000, there would be no material adverse impact on our
results of operations or financial position. During 2000, had these rates
averaged 10% more than in 1999, there would have been no material impact on
our results of operations or financial position.

                                      29
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

<TABLE>
<CAPTION>
                                                                          Page
                                                                          ----
<S>                                                                       <C>
Independent Auditors' Report.............................................  31

Consolidated Balance Sheets as of December 31, 2000 and 1999.............  32

Consolidated Statements of Operations for the Years Ended December 31,
 2000, 1999 and 1998.....................................................  33

Consolidated Statements of Stockholders' Equity for the Years Ended
 December 31, 2000, 1999 and 1998........................................  34

Consolidated Statements of Cash Flows for the Years Ended December 31,
 2000, 1999 and 1998.....................................................  35

Notes to Consolidated Financial Statements...............................  36

Supplemental Schedule:

Schedule II--Valuation and Qualifying Accounts...........................  46
</TABLE>

Note: Schedules not listed above have been omitted because the information
      required to be set forth therein is not applicable.

                                      30
<PAGE>

                         INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
MetaSolv, Inc.:

   We have audited the accompanying consolidated balance sheets of MetaSolv,
Inc. and subsidiary as of December 31, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended December 31, 2000. In
connection with our audits of the consolidated financial statements, we also
have audited the related financial statement schedule. These consolidated
financial statements and financial statement schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedule based
on our audits.

   We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

   In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of MetaSolv,
Inc. and subsidiary as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 2000 in conformity with accounting principles generally
accepted in the United States of America. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.

                                          KPMG LLP

Dallas, Texas
January 30, 2001

                                      31
<PAGE>

                                 METASOLV, INC.

                          CONSOLIDATED BALANCE SHEETS
                           December 31, 2000 and 1999
                 (In thousands except share and per share data)

<TABLE>
<CAPTION>
                                                              December 31,
                                                            ------------------
                                                              2000      1999
                                                            --------  --------
<S>                                                         <C>       <C>
                          ASSETS
                          ------
Current assets:
  Cash and cash equivalents................................ $ 93,695  $112,341
  Marketable securities....................................   48,843       --
  Trade accounts receivable, less allowance for doubtful
   accounts of $5,200 in 2000 and $1,523 in 1999...........   23,994    16,755
  Unbilled receivables.....................................    1,510     4,064
  Prepaid expenses.........................................    6,090     1,845
  Other current assets.....................................    4,921     2,203
                                                            --------  --------
    Total current assets...................................  179,053   137,208
Property and equipment, net................................   14,491     9,950
Equity investments.........................................    4,000       --
Other assets...............................................       84        58
                                                            --------  --------
    Total assets........................................... $197,628  $147,216
                                                            ========  ========

           LIABILITIES AND STOCKHOLDERS' EQUITY
           ------------------------------------
Current liabilities:
  Accounts payable......................................... $  7,910  $  5,503
  Accrued expenses.........................................   16,468    11,094
  Deferred revenue.........................................   24,025    11,694
                                                            --------  --------
    Total current liabilities..............................   48,403    28,291
Deferred income taxes......................................      275       310
Stockholders' equity:
  Preferred stock, $.01 par value, 10,000,000 shares
   authorized,
   no shares issued or outstanding.........................      --        --
  Common stock, $.005 par value, 100,000,000 shares
   authorized, 35,930,345 shares issued and outstanding at
   December 31, 2000, and 34,504,334 issued at December 31,
   1999....................................................      180       172
  Additional paid-in capital...............................  130,522   116,508
  Deferred compensation....................................     (300)     (556)
  Treasury stock at cost, 24,000 shares at December 31,
   1999....................................................      --        (14)
  Retained earnings........................................   18,548     2,505
                                                            --------  --------
    Total stockholders' equity.............................  148,950   118,615
                                                            --------  --------
    Total liabilities and stockholders' equity............. $197,628  $147,216
                                                            ========  ========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       32
<PAGE>

                                 METASOLV, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                  Years Ended December 31, 2000, 1999 and 1998
                     (In thousands, except per share data)

<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                                      ------------------------
                                                        2000    1999    1998
                                                      -------- ------- -------
<S>                                                   <C>      <C>     <C>
Revenues:
  License............................................ $ 71,632 $38,788 $23,432
  Service............................................   60,245  34,219  19,144
                                                      -------- ------- -------
    Total revenues...................................  131,877  73,007  42,576
                                                      -------- ------- -------
Cost of revenues:
  License............................................    5,124   1,719   1,298
  Service............................................   33,613  25,215  14,803
                                                      -------- ------- -------
    Total cost of revenues...........................   38,737  26,934  16,101
                                                      -------- ------- -------
Gross profit.........................................   93,140  46,073  26,475
                                                      -------- ------- -------
Operating expenses:
  Research and development...........................   31,304  16,952  10,170
  Sales and marketing................................   24,545  14,331  11,634
  General and administrative.........................   18,903  11,072   5,179
                                                      -------- ------- -------
    Total operating expenses.........................   74,752  42,355  26,983
                                                      -------- ------- -------
Income (loss) from operations........................   18,388   3,718    (508)
Interest and other income, net.......................    7,659     742     298
                                                      -------- ------- -------
Income (loss) before taxes...........................   26,047   4,460    (210)
Income tax expense (benefit).........................   10,004   1,815     (24)
                                                      -------- ------- -------
Net income (loss).................................... $ 16,043 $ 2,645 $  (186)
                                                      ======== ======= =======
Earnings (loss) per share of common stock:
  Basic.............................................. $   0.45 $  0.17 $ (0.02)
                                                      ======== ======= =======
  Diluted............................................ $   0.40 $  0.08 $ (0.02)
                                                      ======== ======= =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       33
<PAGE>

                                METASOLV, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 Years Ended December 31, 2000, 1999 and 1998
                      (In thousands except share amounts)

<TABLE>
<CAPTION>
                   Class A Convertible
                     Preferred stock      Common stock    Treasury stock   Additional                           Retained
                   ------------------- ------------------ ---------------   paid-in   Common stock   Deferred   earnings
                      Shares    Amount   Shares    Amount Shares   Amount   capital   subscription compensation (deficit)
                   ------------ ------ ----------- ------ -------  ------  ---------- ------------ ------------ ---------
<S>                <C>          <C>    <C>         <C>    <C>      <C>     <C>        <C>          <C>          <C>
Balance, December
31, 1997.........     6,650,000 $  18   11,409,360  $ 57      --   $ --     $  1,818     $ --         $ --       $    46
 Exercise of
 stock options...           --    --       237,220     1      --     --           72       --           --           --
 Net loss........           --    --           --    --       --     --          --        --           --          (186)
                   ------------ -----  -----------  ----  -------  -----    --------     -----        -----      -------
Balance, December
31, 1998.........     6,650,000    18   11,646,580    58      --     --        1,890       --           --          (140)
 Exercise of
 stock options...           --    --       862,448     4      --     --          775       (47)         --           --
 Purchase of
 treasury stock..           --    --           --    --    24,000    (14)        --        --           --           --
 Issuance of
 common stock....           --    --     5,750,000    29      --     --      100,374       --           --           --
 Conversion of
 redeemable
 convertible
 preferred
 stock...........           --    --     9,595,306    48      --     --       12,562       --           --           --
 Conversion of
 convertible
 preferred
 stock...........   (6,650,000)  (18)    6,650,000    33      --     --         (58)       --           --           --
 Tax benefit from
 disqualifying
 dispositions....           --    --           --    --       --     --          356       --           --           --
 Deferred
 compensation....           --    --           --    --       --     --          656       --          (656)         --
 Amortization of
 deferred
 compensation....           --    --           --    --       --     --          --        --           100          --
 Net income......           --    --           --    --       --     --          --        --           --         2,645
                   ------------ -----  -----------  ----  -------  -----    --------     -----        -----      -------
Balance, December
31, 1999.........           --    --    34,504,334   172   24,000    (14)    116,555       (47)        (556)       2,505
 Exercise of
 stock options...           --    --     1,212,662     7      --     --        1,655       --           --           --
 Repayment of
 subscription
 note............           --    --           --    --       --     --          --         23          --           --
 Purchase of
 treasury stock..           --    --           --    --     1,440     (1)        --        --           --           --
 Reissuance of
 treasury stock..           --    --           --    --   (25,440)    15         374       --           --           --
 Issuance of
 common stock....           --    --       213,349     1      --     --        3,348       --           --           --
 Tax benefit from
 disqualifying
 dispositions....           --    --           --    --       --     --        8,614       --           --           --
 Amortization of
 deferred
 compensation....           --    --           --    --       --     --          --        --           256          --
 Net income......           --    --           --    --       --     --          --        --           --        16,043
                   ------------ -----  -----------  ----  -------  -----    --------     -----        -----      -------
Balance, December
31, 2000.........           --  $ --    35,930,345  $180      --   $ --     $130,546     $ (24)       $(300)     $18,548
                   ============ =====  ===========  ====  =======  =====    ========     =====        =====      =======
<CAPTION>
                    Total
                   ---------
<S>                <C>
Balance, December
31, 1997.........  $  1,939
 Exercise of
 stock options...        73
 Net loss........      (186)
                   ---------
Balance, December
31, 1998.........     1,826
 Exercise of
 stock options...       732
 Purchase of
 treasury stock..       (14)
 Issuance of
 common stock....   100,403
 Conversion of
 redeemable
 convertible
 preferred
 stock...........    12,610
 Conversion of
 convertible
 preferred
 stock...........       (43)
 Tax benefit from
 disqualifying
 dispositions....       356
 Deferred
 compensation....       --
 Amortization of
 deferred
 compensation....       100
 Net income......     2,645
                   ---------
Balance, December
31, 1999.........   118,615
 Exercise of
 stock options...     1,662
 Repayment of
 subscription
 note............        23
 Purchase of
 treasury stock..        (1)
 Reissuance of
 treasury stock..       389
 Issuance of
 common stock....     3,349
 Tax benefit from
 disqualifying
 dispositions....     8,614
 Amortization of
 deferred
 compensation....       256
 Net income......    16,043
                   ---------
Balance, December
31, 2000.........  $148,950
                   =========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                       34
<PAGE>

                                 METASOLV, INC

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                  Years Ended December 31, 2000, 1999 and 1998
                                 (In thousands)

<TABLE>
<CAPTION>
                                                    2000      1999      1998
                                                  --------  ---------  -------
<S>                                               <C>       <C>        <C>
Cash flows from operating activities:
 Net income (loss)............................... $ 16,043  $   2,645  $  (186)
 Adjustments to reconcile net income (loss) to
  net cash provided by (used in) operating
  activities:
  Depreciation and amortization..................    3,016      1,841      763
  Loss on asset disposal.........................       26        180      --
  Deferred tax benefit...........................   (2,577)      (583)    (524)
  Tax benefit for disqualifying dispositions.....    8,614        356      --
  Changes in operating assets and liabilities:
   Restricted cash...............................      --         --       689
   Trade accounts receivable, net................   (7,239)    (5,677)  (9,050)
   Unbilled receivables..........................    2,554     (3,107)     (60)
   Other assets..................................   (4,447)    (1,642)    (679)
   Accounts payable and accrued expenses.........    7,781      7,310    6,942
   Deferred revenue..............................   12,331      9,046     (234)
                                                  --------  ---------  -------
    Net cash provided by (used in) operating
     activities..................................   36,102     10,369   (2,339)
                                                  --------  ---------  -------
Cash flows from investing activities:
 Purchases of property and equipment.............   (7,327)    (7,133)  (3,296)
 Purchase of equity investments..................   (4,000)       --       --
 Purchase of marketable securities...............  (48,843)       --       --
                                                  --------  ---------  -------
    Net cash used in investing activities........  (60,170)    (7,133)  (3,296)
                                                  --------  ---------  -------
Cash flows from financing activities:
 Proceeds from sale of redeemable preferred
  stock..........................................      --         --    10,000
 Borrowing from bank.............................      --       1,866    1,000
 Payments on debt................................      --      (1,866)  (1,093)
 Proceeds from initial public offering...........      --     100,403      --
 Proceeds from issuance of common stock..........    5,034        732       73
 Purchase of treasury stock......................       (1)       (14)     --
 Reissuance of treasury stock....................      389        --       --
                                                  --------  ---------  -------
    Net cash provided by financing activities....    5,422    101,121    9,980
                                                  --------  ---------  -------
Increase (decrease) in cash and cash
 equivalents:....................................  (18,646)   104,357    4,345
Cash and cash equivalents, beginning of year.....  112,341      7,984    3,639
                                                  --------  ---------  -------
Cash and cash equivalents, end of year........... $ 93,695  $ 112,341  $ 7,984
                                                  ========  =========  =======
Supplemental disclosures of cash flow
 information--
 Cash paid during the year for:
  Interest....................................... $     48  $     155  $    26
                                                  ========  =========  =======
  Income taxes................................... $  6,010  $     868  $    33
                                                  ========  =========  =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       35
<PAGE>

                                METASOLV, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 Years ended December 31, 2000, 1999 and 1998

1) Organization and Summary of Significant Accounting Policies

   MetaSolv, Inc. (the "Company"), a Delaware corporation headquartered in
Plano, Texas, develops, delivers and supports software designed to make it
easier for communications service providers to take, manage and fulfill orders
for service from their customers. These communications service providers offer
a full array of communications services including local and long distance
telephone services, high-speed data services and Internet services, often as a
bundled offering. The Company derives substantially all if its revenue from
the sale of licenses, related professional services and maintenance and
support of its MetaSolv Solution(TM) packaged software products to these
competitive communications service providers.

 a) Principles of Consolidation

   The consolidated financial statements include the financial statement of
MetaSolv, Inc. and its wholly owned subsidiaries. All intercompany balances
and transactions have been eliminated in consolidation.

 b) Revenue Recognition

   The Company's software products are licensed to customers primarily through
the Company's direct sales force. The Company's software licensing
arrangements typically include multiple elements, such as software products,
post-contract customer support, consulting, and training. On January 1, 2000,
the Company adopted the residual method of revenue recognition for these
arrangements. The adoption of this method of revenue recognition did not have
a material impact on the Company's financial position or results of operation.
Under the residual method, the aggregate arrangement fee is allocated to each
of the undelivered elements in an amount equal to their fair value, with the
residual of the arrangement fee allocated to the delivered elements. Fair
values are based upon vendor specific objective evidence. Fees allocated to
each software element of the arrangement are recognized as revenue when the
following criteria have been met: (a) a written contract for the license of
software has been executed, (b) the Company has delivered the product to the
customer, (c) the license fee is fixed or determinable, and (d) collectibility
of the resulting receivable is deemed probable. If evidence of fair value of
the undelivered elements of the arrangement does not exist, all revenue from
the arrangement is deferred until such time that evidence of fair value does
exist, or until all elements of the arrangement are delivered. Fees allocated
to post-contract customer support are recognized as revenue ratably over the
support period. Fees allocated to other services are recognized as revenue as
the service is performed.

   The Company is frequently engaged to provide consulting and implementation
services in connection with the licensing of its software. In situations where
such services include significant modification or customization of the
software or are otherwise essential to the functionality of the software,
revenues relating to the software license and services are aggregated and the
combined revenues are recognized using the percentage-of-completion method.
Revenue earned using the percentage-of-completion method is based on
management's estimate of progress towards completion. Changes to estimates of
progress towards completion, if any, are accounted for as a change in estimate
in the period of the change. Of total deferred revenues, $2,800,695 and
$703,416 as of December 31, 2000 and 1999, respectively, represent billings in
excess of costs and related profits on certain contracts accounted for under
the percentage-of-completion method. Of total unbilled receivables, $1,203,526
as of December 31, 2000, represent costs and related profits in excess of
billings on contracts accounted for under the percentage-of-completion method.

                                      36
<PAGE>

                                METASOLV, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Accounts receivable include only those amounts due from customers for which
revenue has been recognized. Deferred revenue includes amounts received from
customers for which revenue has not been recognized. Accounts receivable at
December 31, 1999, includes $408,854, which has not been paid in accordance
with the retainage provisions of a long-term contract with a customer.

 c) Cash and Cash Equivalents

   Cash equivalents consist of investments in an interest-bearing money market
account and commercial paper with maturities of three months or less. For
purposes of the statements of cash flows, the Company considers all highly
liquid investments with remaining maturities of three months or less at the
date of purchase to be cash equivalents.

 d) Marketable Securities

   Marketable securities at December 31, 2000, consist of commercial paper of
$19.4 million, with remaining contractual maturities of 60 days or less, and
debt securities issued by U.S. government agencies of $29.4 million, with
remaining contractual maturities of 15 months or less. Marketable securities
are classified as available-for-sale and recorded at fair value. Unrealized
holding gains and losses are immaterial.

 e) Property and Equipment

   Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the assets or, for
leasehold improvements, the term of the lease, if shorter. The estimated
useful lives are as follows:

<TABLE>
<CAPTION>
                                                                         Years
                                                                         -----
        <S>                                                              <C>
        Furniture and fixtures..........................................    7
        Computer equipment..............................................    3
        Other equipment.................................................  3-7
</TABLE>

 f) Fair Value of Financial Instruments

   The carrying values of cash equivalents, accounts receivable, accounts
payable and accrued expenses approximate fair value due to their short
maturities.

 g) Research and Development Costs

   Research and development costs incurred prior to the establishment of
technological feasibility of the product are expensed as incurred. After
technological feasibility is established, any additional software development
costs are capitalized. The Company believes its process for developing
software was essentially completed concurrently with the establishment of
technological feasibility and, accordingly, no software development costs have
been capitalized to date.

 h) Accounting for Impairment of Long-Lived Assets

   The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable.

                                      37
<PAGE>

                                METASOLV, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Recoverability of assets held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the impairments to
be recognized are measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of their carrying amount or fair value less cost to
sell.

 i) Income Taxes

   Income taxes are accounted for using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the amounts of existing
assets and liabilities recorded for financial reporting purposes and their
respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is reflected in income tax expense in the
period that includes the enactment date.

 j) Use of Estimates

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

 k) Stock Option Plan

   The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations, in accounting for
its fixed plan stock options. As such, compensation expense is recorded only
if the fair value of the underlying stock exceeded its exercise price on the
date of grant.

 l) Comprehensive Income

   Comprehensive income includes all changes in equity during a period except
those resulting from investments by and distributions to owners. Net income
(loss) as reported in the consolidated statements of operations is the
Company's only component of comprehensive income during all periods presented.

 m) Earnings (Loss) Per Share of Common Stock

   Basic earnings (loss) per share is computed by dividing income or loss
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted earnings (loss) per share
reflects the incremental increase in common shares outstanding assuming the
exercise of all stock options and conversion of all preferred stock that would
have had a dilutive effect on earnings per share.

                                      38
<PAGE>

                                METASOLV, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


2) Property and equipment

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

<TABLE>
<CAPTION>
                                                                December 31,
                                                               ----------------
                                                                2000     1999
                                                               -------  -------
   <S>                                                         <C>      <C>
   Property and equipment at cost:
     Land..................................................... $ 3,671  $ 3,665
     Computer equipment and software..........................   8,129    4,790
     Furniture and fixtures...................................   3,134    1,875
     Leasehold improvements...................................   3,006    1,020
     Other equipment..........................................   1,281      781
     Construction in progress.................................     668      501
                                                               -------  -------
                                                                19,889   12,632
   Less accumulated depreciation..............................  (5,398)  (2,682)
                                                               -------  -------
   Property and equipment, net................................ $14,491  $ 9,950
                                                               =======  =======
</TABLE>

3) Income Taxes

   Income tax expense (benefit) for the years ended December 31, 2000, 1999
and 1998 consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                            December 31,
                                                        ----------------------
                                                         2000     1999   1998
                                                        -------  ------  -----
   <S>                                                  <C>      <C>     <C>
   Current income tax expense:
     Federal........................................... $10,676  $2,055  $ 434
     Foreign...........................................     135     --     --
     State.............................................   1,770     343     66
                                                        -------  ------  -----
                                                         12,581   2,398    500
                                                        -------  ------  -----
   Deferred income tax expense (benefit):
     Federal...........................................  (2,294)   (489)  (462)
     State.............................................    (283)    (94)   (62)
                                                        -------  ------  -----
                                                         (2,577)   (583)  (524)
                                                        -------  ------  -----
   Total expense (benefit)............................. $10,004  $1,815  $ (24)
                                                        =======  ======  =====
</TABLE>

   During 2000, income before income taxes included approximately $451,000 of
non-U.S. income. Income tax expense (benefit) differed from the amounts
computed by applying the U.S. federal income tax rate of 35 percent to income
(loss) before taxes in the year ended December 31, 2000, and 34 percent in the
years ended December 31, 1999 and 1998, as follows (in thousands):

<TABLE>
<CAPTION>
                                                            December 31,
                                                         --------------------
                                                          2000     1999  1998
                                                         -------  ------ ----
   <S>                                                   <C>      <C>    <C>
   Computed "expected" tax expense (benefit)............ $ 9,116  $1,516 $(71)
   Expenses not deductible for tax purposes.............     167      73   42
   Effect of state and local taxes, net of federal
    benefit.............................................     932     177    2
   Other................................................    (211)     49    3
                                                         -------  ------ ----
     Income tax expense (benefit)....................... $10,004  $1,815 $(24)
                                                         =======  ====== ====
</TABLE>


                                      39
<PAGE>

                                METASOLV, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below (in
thousands):

<TABLE>
<CAPTION>
                                                                  December 31,
                                                                  -------------
                                                                   2000   1999
                                                                  ------ ------
   <S>                                                            <C>    <C>
   Deferred tax assets:
   Accrued expenses.............................................  $1,351 $  809
   Allowance for doubtful accounts..............................   2,006    573
   R&D credit carryforward......................................     567    --
                                                                  ------ ------
   Total gross deferred tax assets..............................   3,924  1,382
   Deferred tax liability - property and equipment, due to
    differences in depreciation.................................   (275)  (310)
                                                                  ------ ------
       Net deferred tax asset...................................  $3,649 $1,072
                                                                  ====== ======
</TABLE>

   The ultimate realization of deferred tax assets is dependent upon the
generation of future taxable income during the periods in which those
temporary differences become deductible. Based upon the level of historical
taxable income and projections for future taxable income over the periods
which the deferred tax assets are deductible, management believes it is more
likely than not the Company will realize the benefits of these deductible
differences.

4) Accrued Expenses

   Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                                 December 31,
                                                                ---------------
                                                                 2000    1999
                                                                ------- -------
   <S>                                                          <C>     <C>
   Employee compensation....................................... $ 5,682 $ 4,755
   Income taxes payable........................................     190   1,636
   Sales tax payable...........................................   1,145   1,093
   Other expenses..............................................   9,451   3,610
                                                                ------- -------
                                                                $16,468 $11,094
                                                                ======= =======
</TABLE>

5) Convertible Preferred Stock and Redeemable Convertible Preferred Stock

   In 1996, the Company issued 6,458,480 shares of Class B redeemable
convertible preferred stock for net cash proceeds of $2,475,400. In 1997, the
Company issued 279,680 additional shares of Class B redeemable convertible
preferred stock for cash proceeds of $110,400. In 1998, the Company issued
2,857,146 shares of Class C redeemable convertible preferred stock for cash
proceeds of $10,000,011. In November 1999, effective with the company's
initial public offering, each share of outstanding convertible preferred stock
and redeemable convertible preferred stock was converted to one share of
common stock. These share amounts have been adjusted for stock splits in June
1998 and October 1999.

6) Stock Option Plan and Employee Stock Purchase Plan

   In 1992, the Company adopted a stock option plan pursuant to which the
Board of Directors may grant stock options to officers and employees. In
August 1999, the Company adopted the MetaSolv Software, Inc. Long-Term
Incentive Plan which was subsequently merged with the existing stock option
plan. The plan at its adoption authorized grants of options to purchase up to
9,320,000 shares of common stock.

                                      40
<PAGE>

                                METASOLV, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   At December 31, 2000, there were 2,644,382 additional shares available for
grant under the plan. The per share weighted-average fair value of stock
options granted for the years ended December 31, 2000, 1999 and 1998 was
$21.13, $.99 and $.415, respectively, as estimated using the Black-Scholes
option-pricing model with the following assumptions: expected dividend yield
of 0%, risk-free interest rate of 6%, an expected life of five years, and
volatility of 80% for 2000 and 0% for 1999 and 1998 prior to the Company's
initial public offering.

   The number of shares issuable under the plan increases by 5% of the
Company's outstanding common stock as of January 1 of each of the first five
calendar years following the plan merger. Accordingly, as of January 1, 2001,
the number of shares authorized under the plan increased to 12,840,534.
Generally, stock options are granted with an exercise price equal to the
stock's fair market value at the date of grant. All options have terms of ten
years or less, and most options vest in four or five equal cumulative
installments beginning on the first anniversary of the grant date.

   The Company applies APB Opinion No. 25 in accounting for stock options
granted to employees and non-employee directors under its stock option plans.
The Company recorded $656,400 of deferred compensation during 1999 as a result
of granting stock options with exercise prices below the estimated fair value
per share of the Company's common stock at the date of grant. Deferred
compensation has been recorded as a component of stockholders' equity and is
being amortized as a charge to operations over the vesting period of the
applicable options. Amortization of deferred compensation of $256,000 was
recognized in 2000 and $100,000 was recognized in 1999.

   Had the Company determined compensation cost based on the fair value at the
grant date for its stock options and activity under the Employee Stock
Purchase Plan under SFAS No. 123, Accounting for Stock Based Compensation, the
Company's net income (loss) would have been changed to the pro forma amounts
indicated below (in thousands):

<TABLE>
<CAPTION>
                                                          Year ended December
                                                                  31,
                                                         ---------------------
                                                          2000    1999   1998
                                                         ------- ------ ------
   <S>                                                   <C>     <C>    <C>
   Net income (loss):
       As reported...................................... $16,043 $2,645 $ (186)
       Pro forma........................................  10,921  2,194   (278)
   Earnings (loss) per share of common stock:
     Basic:
       As reported...................................... $  0.45 $ 0.17 $(0.02)
       Pro forma........................................ $  0.31 $ 0.14 $(0.02)
     Diluted:
       As reported...................................... $  0.40 $ 0.08 $(0.02)
       Pro forma........................................ $  0.27 $ 0.07 $(0.02)
</TABLE>

   Pro forma net income (loss) reflects only stock options granted after
December 31, 1995. Therefore, the full impact of calculating compensation cost
for stock options under SFAS No. 123 is not reflected in the pro forma amounts
presented above because compensation cost is reflected over the options'
vesting periods of five years and compensation expense pertaining to stock
options granted in prior periods is not considered.

                                      41
<PAGE>

                                 METASOLV, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Stock option activity during the periods indicated is as follows:

<TABLE>
<CAPTION>
                                                                    Weighted-
                                                       Number        average
                                                      of shares   exercise price
                                                     -----------  --------------
   <S>                                               <C>          <C>
   Balance as of December 31, 1997 .................   3,378,560      $ 0.31
     Granted........................................   1,693,700        1.79
     Exercised......................................    (237,220)       0.31
     Forfeited......................................    (404,600)       1.36
                                                     -----------
   Balance as of December 31, 1998..................   4,430,440        0.78
     Granted........................................   3,209,200        3.93
     Exercised......................................    (862,448)       0.86
     Forfeited......................................    (462,080)       1.97
                                                     -----------
   Balance as of December 31, 1999..................   6,315,112        2.28
     Granted........................................   1,493,665       31.62
     Exercised......................................  (1,214,262)       1.37
     Forfeited......................................    (518,170)       8.51
                                                     -----------
   Balance as of December 31, 2000..................   6,076,345      $ 9.14
                                                     ===========
</TABLE>

   At December 31, 2000, the range of exercise prices and weighted-average
remaining contractual life of outstanding options was $0.24 to $97.75 and 6.73
years, respectively. The following table presents information about outstanding
stock options as of December 31, 2000:

<TABLE>
<CAPTION>
                                                              Options vested and
                                   Weighted average               exercisable
                            ------------------------------- -----------------------
 Range of
 Exercise                                     Remaining     Number of   Weighted
 Prices   Number of options Exercise price contractual life  options  average price
 -------- ----------------- -------------- ---------------- --------- -------------
<S>       <C>               <C>            <C>              <C>       <C>
 $  .24-.60         1,910,260         $ 0.37           5.95       1,221,780    $ 0.34
   1.75-9.75        2,719,390           3.77           8.28         352,467      3.70
  11.69-19.94         742,145          16.92           5.13          10,480     13.00
  33.25-46.38         667,800          42.91           4.52             --        --
  58.00-97.75          36,750          91.95           4.12           3,950     97.75
                    ---------                                     ---------
 Totals             6,076,345                                     1,588,677
                    =========                                     =========
</TABLE>


                                       42
<PAGE>

                                METASOLV, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   At December 31, 2000, 1999 and 1998, 1,588,677, 1,532,362 and 1,232,080
options were vested and exercisable at a weighted-average exercise price of
$1.41, $0.56 and $0.30 respectively.

   In August 1999, the Company adopted the MetaSolv Software, Inc. Employee
Stock Purchase Plan. The plan is authorized to issue 600,000 shares of common
stock, and shares issuable under the plan will increase annually during the
first five years following adoption of the plan by 1% of the Company's
outstanding common stock. Accordingly, as of January 1, 2001, the number of
shares authorized under the plan increased to 1,304,107. The plan allows
employees to purchase common stock at a 15% discount from the lower of the
fair market value of the common stock at the beginning of the enrollment
period or the purchase date. During 2000, there were 213,349 shares of common
stock issued under the plan.

7) 401(k) Plan and Trust Agreement

   The Company has a 401(k) Plan and Trust Agreement under which employees are
entitled to contribute up to 15% of their salary, subject to certain
regulatory limitations. In 2000, 1999 and 1998 the Company made profit sharing
contributions of $667,017, $594,143, and $337,084, respectively, to the plan.

8) Commitments and Contingencies

 Leases

   The Company leases its offices under operating leases which expire through
2010. Future minimum annual rent payments for leases having initial or
remaining noncancelable lease terms in excess of one year are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                             Total minimum lease
        Years ending December 31,                                 payments
        -------------------------                            -------------------
        <S>                                                  <C>
        2001................................................       $ 3,362
        2002................................................         3,434
        2003................................................         3,502
        2004................................................         3,394
        2005................................................         2,973
        Thereafter..........................................        12,774
                                                                   -------
                                                                   $29,439
                                                                   =======
</TABLE>

   Rent expense for the years ended December 31, 2000, 1999 and 1998 amounted
to $3,378,785, $1,675,390 and $1,175,047, respectively.

 Legal Proceedings

   The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position, results of operations, or liquidity.

 Letter of Credit

   The Company had a standby letter of credit (in lieu of a security deposit)
totaling $1,300,000 as of December 31, 2000 and 1999.

                                      43
<PAGE>

                                METASOLV, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


9) Earnings per Share

   The following table sets forth the computation of basic and diluted
earnings per share (in thousands, except per share data):
<TABLE>
<CAPTION>
                                                         Year ended December
                                                                 31,
                                                        ---------------------
                                                         2000    1999   1998
                                                        ------- ------ ------
   <S>                                                  <C>     <C>    <C>
   Numerator:
     Net income (loss)                                  $16,043 $2,645 $ (186)
                                                        ======= ====== ======
   Denominator:
     Denominator for basic earnings (loss) per share--
      weighted average common shares outstanding.......  35,430 15,582 11,472
     Effect of dilutive securities.....................
       Preferred stock.................................     --  13,538    --
       Employee stock options..........................   4,759  4,042    --
                                                        ------- ------ ------
     Denominator for diluted earnings (loss) per
      share-- weighted average common shares
      outstanding......................................  40,189 33,162 11,472
                                                        ======= ====== ======
   Earnings (loss) per common share:
     Basic............................................. $  0.45 $ 0.17 $(0.02)
                                                        ======= ====== ======
     Diluted........................................... $  0.40 $ 0.08 $(0.02)
                                                        ======= ====== ======
</TABLE>

   Securities that were not included in the computation of diluted earnings
per share because their effect was antidilutive consist of options to purchase
1,479,695 shares of common stock in 2000 and 4,430,440 shares of common stock
in 1998, and 16,245,306 shares of preferred stock in 1998.

10) Segment Information and Concentration of Credit Risk

   SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, establishes standards for the way that public business
enterprises report information about operating segments in annual financial
statements and requires those enterprises to report selected information about
operating segments in interim financial reports issued to stockholders. The
method for determining what information to report is based on the way
management organizes the operating segments within the Company for making
operating decisions and assessing financial performance.

   The Company's chief operating decision-maker is considered to be the Chief
Executive Officer ("CEO"). The CEO reviews financial information presented on
a company-wide basis accompanied by disaggregated information about revenues
by product and service line for purposes of making operating decisions and
assessing financial performance. The financial information reviewed by the CEO
is identical to the information presented in the accompanying statements of
operations. Therefore, the Company operates in a single operating segment:
communications software and related services.

                                      44
<PAGE>

                                METASOLV, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Revenue information regarding operations for different products and
services is as follows (in thousands):

<TABLE>
<CAPTION>
                                                       Year ended December 31,
                                                       ------------------------
                                                         2000    1999    1998
                                                       -------- ------- -------
   <S>                                                 <C>      <C>     <C>
   Revenues:
     Software license fees............................ $ 71,632 $38,788 $23,432
     Professional services............................   33,995  23,710  14,472
     Post-contract customer support...................   26,250  10,509   4,672
                                                       -------- ------- -------
   Total revenues..................................... $131,877 $73,007 $42,576
                                                       ======== ======= =======
</TABLE>

   The Company has derived most of its revenues from the United States. Total
revenue derived from non-U.S. locations was approximately $9,996,000 during
2000. No individual country accounted for more than 10% of total revenues.

   The Company licenses its communications software products to a broad range
of communication service providers. The Company performs ongoing credit
evaluations of its customers' financial condition but does not require
collateral or other security to support its trade accounts receivable. The
table below presents the portion of the Company's revenues derived from
customers whose revenue exceeded 10% of total revenues in any of the years
presented and the portion of accounts receivable as of December 31, 2000 and
1999 related to those customers:

<TABLE>
<CAPTION>
                                                    Accounts
                                                   Receivables         Revenues
                                                  ---------------   --------------
                                                   Year ended         Year ended
                                                  December 31,       December 31,
                                                  ---------------   --------------
                                                   2000     1999    2000 1999 1998
                                                  ------   ------   ---- ---- ----
<S>                                               <C>      <C>      <C>  <C>  <C>
Customers
A................................................      2%      12%   3%  13%   22%
B................................................    --       --     1%   1%   11%
</TABLE>

11) Stock Split

   On October 28, 1999, the Company consummated a 2 for 1 split of all classes
of its common and preferred stock. The financial statements have been adjusted
to give retroactive effect to the stock split.

                                      45
<PAGE>

                                                                    SCHEDULE II

                                METASOLV, INC.

                       VALUATION AND QUALIFYING ACCOUNTS
                                (In thousands)

<TABLE>
<CAPTION>
                                     Balance at Charged to             Balance
                                     beginning  costs and             at end of
Description                          of period   expenses  Deductions  period
-----------                          ---------- ---------- ---------- ---------
<S>                                  <C>        <C>        <C>        <C>
Allowance for doubtful accounts:
  Year ended December 31, 2000......   $1,523     $6,847     $3,170    $5,200
  Year ended December 31, 1999......   $  600     $1,750     $  827    $1,523
  Year ended December 31, 1998......   $   90     $  510     $  --     $  600
</TABLE>

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

   Not applicable.

                                      46
<PAGE>

                                   PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors

   The information concerning Directors of the Company required by Item 401 of
Regulation S-K will be contained in the Company's 2001 Proxy Statement under
the heading "Election of Directors," and is incorporated herein by reference.

Executive Officers

   The information concerning executive officers of the Company required by
this Item is set forth in Item 1 hereof under the heading "Executive
Officers."

ITEM 11. EXECUTIVE COMPENSATION

   The information required by Item 402 of Regulation S-K will be contained in
the Company's 2001 Proxy Statement under the headings "Directors'
Compensation," "Compensation Committee Interlocks and Insider Participation,"
" Compensation Committee Report," "Management Compensation" and "Stock
Performance Graph," and is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

   The information required by Item 403 of Regulation S-K will be contained in
the Company's 2001 Proxy Statement under the heading "Stock Ownership of
Certain Beneficial Owners and Management," and is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

   The information required by Item 404 of Regulation S-K will be contained in
the Company's 2001 Proxy Statement under the heading "Compensation Committee
Interlocks and Insider Participation," and is incorporated herein by
reference.

                                      47
<PAGE>

                                    PART IV

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 financial statements, notes and
  independent auditors' report described in Item 8, to which reference is
  hereby made.

     (2) Financial Statement Schedule. The financial statement schedule
  described in Item 8, to which reference is hereby made.

     (3) Exhibits. The following exhibits:

                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
 Exhibit No. Description
 ----------- -----------
 <C>         <S>
      *2     Agreement and Plan of Reorganization dated as of December 27, 2000
             and effective as of January 1, 2001 by and among MetaSolv
             Software, Inc., MS Merger, Inc., and the Registrant.

     *3.1    Certificate of Incorporation of the Registrant.

     *3.2    Bylaws of the Registrant.

      4.1    Investors' Rights Agreement, dated June 2, 1998, among the
             Registrant and the shareholders named therein, as amended.
             Incorporated by reference to exhibits to the Company's
             Registration Statement on form S-1 filed on September 10, 1999,
             registration number 333-86937.

      4.2    Specimen Certificate of the Registrant's common stock.
             Incorporated by reference to exhibits to the Company's
             Registration Statement on form S-1 filed on September 10, 1999,
             registration number 333-86937.

     10.1    Form of Indemnification Agreement entered into between the
             Registrant and its directors and executive officers. Incorporated
             by reference to exhibits to the Company's Registration Statement
             on form S-1 filed on September 10, 1999, registration number 333-
             86937.

     10.2    1992 Stock Option Plan. Incorporated by reference to exhibits to
             the Company's Registration Statement on form S-1 filed on
             September 10, 1999, registration number 333-86937.

     10.3    Long-Term Incentive Plan. Incorporated by reference to exhibits to
             the Company's Registration Statement on form S-1 filed on
             September 10, 1999, registration number 333-86937.

     10.4    Employee Stock Purchase Plan. Incorporated by reference to
             exhibits to the Company's Registration Statement on form S-1 filed
             on September 10, 1999, registration number 333-86937.

     10.5    Mutual Release between the Registrant and Michael J. Watters,
             dated November 20, 1998. Incorporated by reference to exhibits to
             the Company's Registration Statement on form S-1 filed on
             September 10, 1999, registration number 333-86937.
</TABLE>

                                       48
<PAGE>

<TABLE>
<CAPTION>
 Exhibit No. Description
 ----------- -----------
 <C>         <S>
    10.6     Commercial Lease Agreement between the Registrant and CrownInvest
             I, L.P., dated April 1, 1997, as amended to date. Incorporated by
             reference to exhibits to the Company's Registration Statement on
             form S-1 filed on September 10, 1999, registration number 333-
             86937.

    10.7     Commercial Lease Agreement between the Registrant and William R.
             Cooper and Craig A. Cooper, dated August 21, 1998, as amended to
             date. Incorporated by reference to exhibits to the Company's
             Registration Statement on form S-1 filed on September 10, 1999,
             registration number 333-86937.

    10.8     Master Software License and Service Agreement entered into between
             Registrant and Qwest Communications Corporation, dated May 30,
             1997. Incorporated by reference to exhibits to the Company's
             Registration Statement on form S-1 filed on September 10, 1999,
             registration number 333-86937.

    10.9     Master License, Development and Service Agreement entered into
             between Registrant and Time Warner Communications Holdings, Inc.,
             dated May 7, 1998. Incorporated by reference to exhibits to the
             Company's Registration Statement on form S-1 filed on September
             10, 1999, registration number 333-86937.

    10.10    Master Software License and Services Agreement entered into
             between Registrant and Allegiance Telecom, Inc., dated December
             19, 1997. Incorporated by reference to exhibits to the Company's
             Registration Statement on form S-1 filed on September 10, 1999,
             registration number 333-86937.

    21       Subsidiaries of the Company

             (a) MetaSolv Software, Inc., a Delaware corporation

             (b) MetaSolv Software S.A.S., a French corporation

   *23.1     Consent of KPMG LLP, independent auditors.
</TABLE>
--------
*  Filed herewith

   (b) Current Report on Form 8-K of MetaSolv, Inc., (formerly MetaSolv
Software, Inc.) dated October 5, 2000, reporting the filing of a press
release.

                                      49
<PAGE>

                                  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.

                                          MetaSolv, Inc.

Dated: March 28, 2001

                                                   /s/ James P. Janicki
                                          By: _________________________________
                                                      James P. Janicki
                                                  Chief Executive Officer

                                                 /s/ Glenn A. Etherington
                                          By: _________________________________
                                                    Glenn A. Etherington
                                                  Chief Financial Officer

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

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

<S>                                    <C>                        <C>
        /s/ John W. White              Chairman of the Board        March 28, 2001
______________________________________
            John W. White

       /s/ James P. Janicki            Chief Executive Officer      March 28, 2001
______________________________________ and
           James P. Janicki            Director

      /s/ Lawrence J. Bouman           Director                     March 28, 2001
______________________________________
          Lawrence J. Bouman

       /s/ Barry F. Eggers             Director                     March 28, 2001
______________________________________
           Barry F. Eggers

       /s/ Royce J. Holland            Director                     March 28, 2001
______________________________________
           Royce J. Holland

       /s/ David R. Semmel             Director                     March 28, 2001
______________________________________
           David R. Semmel

       /s/ John D. Thornton            Director                     March 28, 2001
______________________________________
           John D. Thornton
</TABLE>


                                      50