UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended July 31, 2001

OR

Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period
from              to              .

Commission file number: 000-29365

VICINITY CORPORATION(Exact name of Registrant as Specified in its Charter)

DELAWARE

77-0414631(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)


370 San Aleso Avenue
Sunnyvale, California 94085(Address of Principal Executive Offices)

Registrant's telephone number, including area code: (408) 543-3000

Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value

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/A. / /

The
aggregate market value of the voting stock held by non-affiliates of the Registrant as of September 30, 2001 based on the closing sales price of the Company's
Common Stock, as reported on The Nasdaq National Market, was approximately $38,958,000. Shares of Common Stock held by each officer and director have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The
number of shares of Common Stock, par value $0.001 per share, of Vicinity Corporation outstanding as of September 30, 2001 was 28,417,700.

Portions
of the Proxy Statement for the annual stockholders' meeting are incorporated by reference into Part II and Part III.

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VICINITY CORPORATION

ANNUAL REPORT ON FORM 10-K

TABLE OF CONTENTS

|         |          |    |                                                                                       | PAGE
|-------- | -------- | -- | ------------------------------------------------------------------------------------- | ----
|PART I   |          | 1 
|         | ITEM 1.  |    | BUSINESS                                                                              |     
|         | ITEM 2.  |    | PROPERTIES                                                                            |     
|         | ITEM 3.  |    | LEGAL PROCEEDINGS                                                                     |     
|         | ITEM 4.  |    | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |     
|PART II  |          | 12
|         | ITEM 5.  |    | MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                 |     
|         | ITEM 6.  |    | SELECTED CONSOLIDATED FINANCIAL DATA                                                  |     
|         | ITEM 7.  |    | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |     
|         | ITEM 7A. |    | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |     
|         | ITEM 8.  |    | CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                              |     
|         | ITEM 9.  |    | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  |     
|PART III |          | 30
|         | ITEM 10. |    | DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT                                        |     
|         | ITEM 11. |    | EXECUTIVE COMPENSATION                                                                |     
|         | ITEM 12. |    | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                        |     
|         | ITEM 13. |    | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                        |     
|PART IV  |          | 31
|         | ITEM 14. |    | EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K                        |     

Certain Defined Terms

Unless the context otherwise requires, references herein to "we," "us," "the company" or "Vicinity" are to Vicinity Corporation, a Delaware corporation.
References in this Annual Report to fiscal years refer to the fiscal year of our company ended on July 31 of that year. We were incorporated as a California corporation in October 1995
and reincorporated as a Delaware corporation in January 2000. Vicinity, MapBlast! and GeoSearch are registered marks of our company. Each trademark, trade name or service mark of any other
company appearing in this Annual Report belongs to its holder.

Forward Looking Statements

The statements contained in this Annual Report that are not historical facts may be deemed to contain forward-looking statements. Such statements are indicated
by words or phrases such as "anticipate," "estimate," "projects," "believes," "intends," "expects" and similar words and phrases. Actual results may differ materially from those expressed or implied
in any forward-looking statement as a result of certain risks and uncertainties, including, without limitation, the risks and uncertainties detailed herein under "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of OperationsFactors That May Affect Future Results" and in our other filings with the Securities and Exchange Commission. We disclaim any
obligation to update any of the forward-looking statements contained herein to reflect future events or developments.

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PART I

ITEM 1. BUSINESS

OVERVIEW

We are a leading provider of Enterprise Location Services, or ELS, solutions to Global 2000 companies across Web, wireless and speech platforms. We unify and
enrich Web, wireless and speech inquiries in order to catalyze a fundamental improvement in the customer experience. We turn location information into a coherent, rich source of knowledge and embed
location intelligence into the fabric of the organization.

We
are an enterprise solution whose blue-chip customer base includes such well-known companies as Best Western International, CitiBank, FedEx, Ford Motor
Company and McDonald's. Our ELS solutions are available across the globe and in multiple languages. Historically, we have generated substantially all of our revenues from licensing our Web Business
Finder, Maps and Driving Directions services.

During
fiscal 2001, we reorganized our business and rebuilt our management team. In the second half of the year, we focused on the expansion and adoption of our wireless and speech
applications. We also realigned our staff to better focus on product development and expansion. During fiscal 2001, we experienced customer renewal rates of approximately 90% and a large portion of
our customers that renewed their annual license agreements with us also increased the value of their licensed services.

We
are currently focusing our efforts on expanding our ELS solutions to bring even more value to our customers. We expect that as we roll out new ELS solutions, our current and target
customers will recognize the importance of reaching their customers via multiple digital channels with dynamic, accurate local information.

INDUSTRY BACKGROUND

For many companies, physical locations remain the focal point for their business and the primary "face" of their companies to customers. In response to
competitive pressures, many businesses are now operating hundreds or even thousands of unique locations throughout the world. Simultaneously, the adoption of new digital technologies has fueled a
demand by many customers for personalized Web, wireless and speech access to information about these physical locations. The intersection of these two trends magnifies the problems of managing
location attributes and the importance of responding to larger volumes of digital interaction.

Today,
many organizations are ill-equipped to manage this increasingly important information asset. This intensifies the challenges for enterprises that are trying to
cost-effectively manage larger amounts of location attributes while responding to digital interactions demanded by customers across the world. The ability of a company to manage and
harness these information assets and put them to work is an opportunity for cost savings and technological advantage.

To
manage and harness this under-utilized information asset, a new category of information technology solutions has emerged called "Enterprise Location Services." Some of the
characteristics of these new solutions are:



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The
maturity of the Internet market and the resurgence of enterprise solutions create an opportunity for us to leverage our enterprise customer base and unique location technology to
take a leadership position in the ELS area.

OUR SOLUTION

Our solution allows our customers to manage location information as a corporate asset throughout the enterprise by delivering an enterprise platform. As such,
locations become a diverse source of information surrounded by digital streams of rich and valuable customer activity. We unify and enrich these digital interactions in order to catalyze a fundamental
improvement in the customer experience while turning location information into a coherent, rich source of knowledge. Our solution puts location assets to work for today's global businesses.

Our
services offer the following features and benefits to our clients:

Full lifecycle of servicescollect, manage and respond.We surround each location with a full lifecycle of
servicescollect, manage and respond. The core of our ELS solution, the Vicinity Location Server is a technology platform that captures, manages and transforms data into
geo-coded information, such as maps, driving directions and attributes about companies' stores, branches or offices. Built upon a patented spatial database, the Vicinity Location Server
supports an unlimited number of attributes, collected from a variety of sources. The Vicinity Location Server is scalable to the largest global enterprise and can handle a large volume of digital
interaction. We populate this database with mapping content that has been collected and optimized by our team of location technologists. Local and corporate content is aggregated from a variety of
data sources within the enterprise to compile a rich set of location information. We automate and streamline the process for managing location information and digital interactions. A fundamental
improvement in the process for populating, updating and maintaining location content across the world can lead to significantly reduced costs, while putting these valuable information assets to work.

Unified, 360-degree access.For many companies, the customer experience across the different digital media
is either not available and/or inconsistent. Our solution unifies Web, wireless and speech interactions, significantly improving the consistency and accuracy of location information from these new
channels.

Embed location intelligence into the organization.Our solution allows our customers to embed location intelligence
into the fabric of their organizations. Application services, advanced application programming interface, or API, capabilities and surrounding customization services integrate our solution into a
client's existing enterprise applications and business rules. With the Vicinity solution, businesses leverage their existing information technology and data investments and configure the service to
meet their specific needs.

It's a service: just turn it on!Unlike client server software, our service is delivered over the Internet; there is
nothing to install or maintain. Our "pay as you go" pricing can help to eliminate financial and implementation risks and offers immediate customer benefit.

Strategic benefits.For forward-thinking enterprises, location information can be an under-utilized asset and can
represent a new source of cost savings and competitiveness. As such, location information assets can become a significant opportunity for fundamentally improving the customer experience and reducing
the burden placed on customers that are digitally interacting with location information. Our solution enables a new way of doing business by turning location information into a coherent, rich source

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of customer knowledge and increasing the flow and availability of this information to improve the brand experience.

Clicks-and-Mortar Solution.Our services provide our clients a means of directing online
consumers who are interested in purchasing our clients' products to local brick-and-mortar stores where the overwhelming majority of transactions still occur.

Expanded Lead Generation.Our services extend the reach of our clients' Internet presence by providing a link through
major portals and search engines to consumers using the Internet to research products and services prior to making a purchase decision.

Multiple Platform Access.Our services enable potential customers to access information regarding our clients' products
and services not only over the Internet, but also via telephones, wireless telephones and other wireless devices, such as the Palm VII.

Local Web Marketing with Brand Integrity.Our services allow each of our clients' locations to create a unique Web
presence and extend local store specific promotions while maintaining national brand integrity.

Cost Efficient Outsourced Services.Our automated services provide our clients' customers with accurate and easy to use
location and product availability information on demand 24 hours per day, seven days per week.

Rapid Deployment.We are able to deploy our ELS solutions in an average of three to four weeks.

Reporting and Feedback.Our record keeping and reporting features allow our clients to refine their online marketing
approach and effectively coordinate and evaluate off-line marketing efforts.

Finally,
our location and product information provide consumers researching products and services with the information that they need to choose the most convenient means of purchasing
goods or services.

In
summary, the new nature of the old economy melds business and information technology strategies to achieve new levels of efficiency and sustained competitive advantage. Crisp
execution along the new digital platforms of Web, wireless and speech requires a new technology infrastructure and specialized expertise for generating value from locations. Our solution puts location
assets to work for today's global businesses.

STRATEGY

Key elements of our business strategy include:

Expand Our Client Base.We currently target large companies with established consumer brands that offer their products
or services in multiple locations. Our sales channels include our direct sales force and our channel partners. We intend to expand our direct sales force and our network of channel partners both to
refer business to us and to sell our services under private-label arrangements. We will also continue to maintain strong relationships with advertising, promotional and Web marketing agencies that
often incorporate our services into the projects they manage for their clients.

Execute to Profitability.We are focusing on positioning our company to become profitable. Our efforts in this
direction include the implementation of careful cost controls and a focus on acquiring new customers and increasing the value of the services that we sell to our current customers.

Invest in Sales and Marketing.We have recently rebuilt our marketing organization, which is currently focused on
rolling out our marketing plans. Product expansion plans are being executed with targeted product launches expected approximately every six months. In addition, we have implemented, and continue to
implement, direct marketing campaigns to new customers. Our sales team has also been

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recently reorganized geographically, rather than managed centrally as in the recent past. This effort has included the hiring of regional sales people. We believe that sales management from a regional
level will better serve our customer needs as well as having an economic benefit.

Expand Product & Service Offerings.Through internal product development and through partnerships, we have
implemented services that deliver our clients' data to potential customers through telephones, wireless telephones and through Internet-enabled wireless devices, such as the Palm VII and WAP
telephones. We intend to continue to develop additional products and services, tailored to the needs of large multi-location enterprises, by focusing on expanding our business intelligence, speech and
wireless and support services across a larger global coverage area. We intend to continue to develop new products internally and to build partnerships and work closely with alliance partners and other
strategic partners to offer our clients' data across any capable device or platform.

OUR SERVICES

Our services are designed to capture, manage and transform data into geo-coded information, such as maps, driving directions and attributes about a
company's stores, branches or offices.



We recently announced the creation of our ELS solution, the Vicinity Location Server. The Vicinity Location Server is a technology platform that captures,
manages and transforms data into geo-coded information, such as maps, driving directions and attributes about a company's stores, branches or offices. Built upon a patented, spatial
database, the Vicinity Location Server supports an unlimited number of attributes, collected from a variety of sources. Vicinity Location Server is scalable to large global enterprises and can handle
a large volume of digital interaction. We populate this database with mapping content that has been collected and optimized by our team of location technologists. Local
and corporate content is aggregated from a variety of data sources within the enterprise to compile a rich set of location information. We automate and streamline the process for managing location
information and digital interactions. A fundamental improvement in the process for populating, updating and maintaining location content across the world can lead to significantly reduced costs, while
putting these valuable information assets to work.

We
believe that the Vicinity Location Server, along with an accompanying array of function-specific modules, will form the nucleus of our services going forward. Our target markets
for sale of our ELS include:



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CLIENTS

As of July 31, 2001, our clients included many of the leading names in the retail, hospitality, food and beverage, shipping/transportation, automotive
and financial services industries, including:

| | Retailers               |  |  |  | Bed Bath & Beyond, Best Buy                                                                                                           
| | ----------------------- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------
| | Hospitality             |  |  |  | Best Western International, Starwood Hotels & Resorts Worldwide                                                                       
| | Food and Beverage       |  |  |  | Allied Domeqc (Baskin-Robbins, Dunkin' Donuts, Togo's), Domino's Pizza, McDonald's, Tricon Restaurants (KFC, Taco Bell and Pizza Hut),
| | Shipping/Transportation |  |  |  | DHL, FedEx, UPS                                                                                                                       
| | Automotive              |  |  |  | Equiva (Shell & Texaco), Ford Motor Company, Harley-Davidson, Honda, Renault, Royal Dutch Shell,                                      
| | Financial Services      |  |  |  | CitiBank, U.S. Bank, Wells Fargo                                                                                                      

Our
target markets for sale of our services include:



We
build awareness and demand for our services through marketing programs, including direct marketing, print and Internet advertising, trade shows and events, public relations,
international marketing, channel marketing and telemarketing. Our services are sold through an in-house direct sales team, as well as an outsourced telemarketing agency. We have
aggressively built our internal sales and marketing resources. The sales cycle, from identifying a prequalified lead to the signing of a services contract, is typically two to four months, though in
some cases this cycle is accelerated due to a client's desire to implement a solution quickly or meet a promotional or season deadline, such as the holiday shopping season.

TECHNOLOGY AND INFRASTRUCTURE

Our core competency is the ability to design, build, implement and manage projects involving large spatial databases that contain product, location and
attribute information. Our technical expertise spans many software development specialties including system-level programming, cross-platform solutions, user interface and template design, production
system operation and localization. Our most important skill is the development of high performance spatial databases that are used to manage our location-specific data and large amounts of client
information, including store location and product attribute data. Through an automated process, our customers update this data set based on their own business rules.

The
architectural model for our services is a general-purpose template-processing engine utilizing Java/JSP that handles user events, controls program flow and call component
sub-servers that manage our

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enterprise location services solutions to handle all content-specific transactions. The sub-servers handle service requests as socket-based stateless transaction processors. Since the
engine and the various sub-servers are all continuously running processes, it is not necessary to start-up any processes in order to handle a request. These processes are
adjusted to respond to system load as well as to recover from the occasional system error. This architecture allows maximum flexibility of resource deployment across multiple networked machines.

We
deliver our services to customers through either an application programming interface, or API, or through our web development organization that produces a specific template set for
an individual
customer. The API allows the customer to control the interface and provides the customer with maximum flexibility in terms of creative control. Whether delivered via templates generated by us or using
the API, the service is built around customer supplied data that may be updated in batch mode, net change, or on a transaction basis depending on customer needs. Our customer service organization
maintains contact with customers to help them work through any issues before, during and after deployment of their application.

The
usage and reporting data generated by the system are measured in gigabytes per day and are a valuable tool for customers to understand the effectiveness of their marketing
efforts. We report usage results through standard secure reports by customer, category, keyword, designated marketing area or other custom requirements.

We
have invested significant resources in the hardware systems that deliver our services with the objective of 99.9% availability in a fully scalable environment across multiple data
centers. Our front-end Web servers and database servers are Sun Enterprise systems designed for reliability, availability and serviceability to support the operation of our customer's
mission-critical applications. We have designed the servers to tolerate power, cooling, or storage failures without affecting system operation and to recover from most failures with minimal
disruption. These systems are optimized to provide extremely high throughput.

Our
services are monitored on a 24 hours per day, seven days per week basis. At the present time, our system is generally running at 50% of rated capacity at peak usage to
permit quick application response. Our production system is designed with excess capacity to ensure availability despite partial system failure. In addition, the system is protected by a high
performance firewall and balanced through a sophisticated load balancing solution.

We
currently operate two geographically separate data centers. A typical data center configuration has front-end servers processing requests from our customers through
switches connected to a load balancing solution. These front-end servers make specific requests to multiple back-end database machines as well as systems that process
geographic content, such as maps and driving directions. For security reasons, back-end systems cannot be accessed from the Internet and process only specially formed queries from the
front-end machines. Each of these sub-systems is fully redundant both in terms of software and hardware. In the event of a sub-system failure, the load is
automatically transferred to the next available machine. Monitoring software automatically notifies the on-duty operator of a problem so that immediate action can be taken.

COMPETITION

The market in which we compete is relatively new and our services are highly specialized. While competition exists for most of our service offerings, the
number of companies with which we compete is relatively small and we are unaware of any one company that competes against us across our full range
of services. We expect competition with our services to increase over time as the market for our services grows. Competition may also increase as a result of industry consolidation.

We
face competition from InfoNow Corporation, which provides outsourced Web-based inquiry management services, and Where 2 Get It, Inc., which provides an
Internet-based dealer locator services.

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In addition, we compete with InfoSpace, MapQuest, Switchboard and, to a lesser degree, with other smaller, location-based content providers and with companies that provide free or low cost web
creation and hosting services in conjunction with Internet service provider, or ISP, services. Finally, with many potential new clients, the initial competitor to our service offerings is the client's
own in-house information systems department which may initially believe that it can duplicate our services at a lower cost. In each competitive situation that we face, we believe the
factors that cause potential clients to consider our services include the depth of our service offerings, our ability to integrate our services into larger marketing initiatives, the quality and
reliability of our services, our speed of implementation and the overall quality of our technology and client service.

We
believe that our ability to compete depends upon many factors, including our ability to provide depth and accuracy of destination information, to increase our sales force and to
implement our sales and marketing initiatives, in addition to the introduction, acceptance and ease of use of new and enhanced products and services developed either by us or our competitors.

INTELLECTUAL PROPERTY

We currently hold two United States patents and have filed several applications for United States patents in order to protect proprietary intellectual property
that we believe is important to our business.

Vicinity,
MapBlast! and GeoSearch are registered service marks of our company. We are in the process of obtaining service marks on other marks used to describe our primary services.
We intend to seek protection for these marks in all markets where we anticipate providing our services.

Our
products and services rely on the availability and accuracy of geographic data. We have licensed a significant portion of our geographic data from a limited number of sources
through non-exclusive, short-term contractual arrangements. If any of these third parties were to merge or be acquired, the number of sources providing this geographic data
would be further reduced. Given the short terms of our geographic data licenses, we will have to renegotiate our contracts in the foreseeable future which may result in contractual terms that are not
as favorable to us as the existing data licenses. If we
cannot maintain these data licenses or any other third-party license arrangement on commercially reasonable terms, the accuracy of our services may suffer.

GOVERNMENT REGULATION

We are subject, both directly and indirectly, to various laws and governmental regulations relating to our business. There are currently few laws or
regulations directly applicable to commercial online services or the Internet. However, due to increasing popularity and use of commercial online services and the Internet, it is possible that a
number of laws and regulations may be adopted with respect thereto. These laws and regulations may cover issues such as user privacy, liability for information retrieved from or transmitted over the
Internet, online content regulation, user privacy, taxation and domain name registration. Moreover, the applicability to the Internet of existing laws governing issues such as intellectual property
ownership and infringement, copyright, patent, trademark, trade secret, obscenity, libel, employment and personal privacy is uncertain and developing. Any new legislation or regulation or the
application of existing laws and regulations to the Internet could have a material and adverse effect on our business.

As
our services are available over the Internet anywhere in the world, multiple jurisdictions may claim that we are required to qualify to do business as a foreign corporation in each
of those jurisdictions. Our failure to qualify to do business as a foreign corporation in a jurisdiction where we are required to do so could subject us to taxes and penalties. It is possible that
state and foreign governments might also attempt to regulate our transmissions of content on our Web site or on the Web sites of others or prosecute us for violations of their laws. We cannot assure
you that violations of local laws will not be alleged or charged by

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state or foreign governments, that we might not unintentionally violate these laws or that these laws will not be modified, or new laws enacted, in the future.

EMPLOYEES

As of July 31, 2001, we had 127 employees, including 15 employed in general and administrative functions, 51 in sales and marketing, 33 in research and
development, and 28 in operations. None of our employees is represented by a labor union, and we consider our relations with our employees to be good.

The
following table sets forth, as of July 31, 2001, the name, age and position of each of our directors and executive officers:

|Name                               |  | Age |  | Position                                                    
|---------------------------------- |  | --- |  | ------------------------------------------------------------
|Norman H. Nie                      |  | 58  |  | Executive Chairman of the Board of Directors                
|Ronald S. Smith (1), (2), (3), (4) |  | 60  |  | Director                                                    
|Timothy J. McMullen                |  | 44  |  | Senior Vice President and Chief Operating Officer           
|Maury Austin                       |  | 43  |  | Senior Vice President and Chief Financial Officer; Secretary
|Stephen D. Ackley                  |  | 41  |  | Vice President, Worldwide Sales                             
|Mary C. Gavin                      |  | 44  |  | Vice President, Engineering                                 
|Daniel M. Shapero                  |  | 40  |  | Vice President, Marketing                                   
|Scott P. Sullivan                  |  | 38  |  | Vice President, Human Resources                             
|Michael T. Torgersen               |  | 58  |  | Vice President, Operations and Chief Information Officer    
|Gerald R. Gallagher (1), (3)       |  | 60  |  | Director                                                    
|Douglas A. McIntyre (2)            |  | 46  |  | Director                                                    
|Michael E. Sears (2)               |  | 44  |  | Director                                                    

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Norman H. Niehas served as a Director since December 1998. From April 2001 to October 2001, Mr. Nie served
as our Executive Chairman of the Board of Directors. Since 1997, Mr. Nie has been a Technology Partner of Oak Investments, a venture capital firm. From 1975 to 1991, Mr. Nie was the
Chief Executive Officer of SPSS, Inc., a provider of statistical software and service solutions. Mr. Nie holds a Bachelor of Arts degree from the University of Washington and a Master of
Arts degree and a Ph.D from Stanford University. Mr. Nie is also a director of SPSS, Inc. and several private companies.

Timothy J. McMullenhas served as our Senior Vice President and Chief Operating Officer since April 2001. Prior to joining
Vicinity, Mr. McMullen was Executive Vice President of Business Development at MindArrow, Inc. Mr. McMullen is one of the founders and a prior executive of Platinum Software
Corporation (now Epicor.) Mr. McMullen received his Bachelor of Science degree from the University of Dayton. He has served on numerous boards of directors and advisors, including Alerio
Software, Captura Software and Omni Vista Software Corp.

Maury Austinhas served as our Senior Vice President, Chief Financial Officer and Secretary since December 2000. Prior to
joining Vicinity, Mr. Austin served as Chief Financial Officer at Symmetricom, a networking equipment supplier. Prior to joining Symmetricom, Austin was Chief Financial Officer and Chief
Operating Officer of Flashpoint Technology, a digital imaging operating software company. Mr. Austin also spent eight years at Apple Computer where, in his last position, he served as Vice
President/General Manager in the Imaging Division. He also held financial leadership positions at the

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General Electric Company. Mr. Austin earned his Master of Business Administration degree at Santa Clara University and his Bachelor of Science degree at the University of California at
Berkeley.

Stephen D. Ackleyhas served as our Vice President, Worldwide Sales since June 2001. From April 1997 to
May 2001, Mr. Ackley held various positions at Marimba, Inc., including most recently as a Regional Vice President of Sales. Prior to that, Mr. Ackley held senior sales
management positions at Tivoli Systems, Sun Microsystems Corp. and Honeywell. He received his Juris Doctorate degree from the Santa Clara
University School of Law and his Bachelor of Science degree from San Diego State University School of Business.

Mary C. Gavinhas served as our Vice President, Engineering since August 1999. From October 1997 to August 1999,
Ms. Gavin was our Director of Engineering Projects. From March 1997 to October 1997, Ms. Gavin was our Project Manager. In 1996, Ms. Gavin was a Marketing Manager of
NetRights, LLC, a start-up Internet company. In 1995, Ms. Gavin was a Support and Training Manager of Codman Research Group, a developer of decision support systems for the health
care industry. Ms. Gavin holds a Bachelor of Arts degree from Ripon College.

Daniel M. Shaperohas served as our Vice President, Marketing since April 2001. As a principal with Global Technology Group, he
advised companies such as Captura Software and MindArrow Systems on marketing, partnering and funding strategies. Mr. Shapero has also held executive positions with State of the Art (now Sage
UK) and Platinum Software Corporation (now Epicor.) In addition, he was an advisor to emerging companies at Ernst & Young. Mr. Shapero began his career in the area of financial
management at a Fortune 50 aerospace firm. A Certified Public Accountant, he holds a Bachelor of Arts degree in Economics from the University of California, San Diego and a Master's Degree in
Economics from San Diego State University.

Scott P. Sullivanhas served as our Vice President, Human Resources since October 2000. From 1994 to 2000, Mr. Sullivan
was a Managing Consultant at Towers Perrin and Diamond Technology Partners. Before that, he was in the Army Corp of Engineers and held various positions including Company Commander, Personnel Officer
and Leadership Instructor at West Point. Mr. Sullivan holds a Bachelor of Science degree from the United States Military Academy at West Point and a Master of Business Administration from
Harvard University.

Michael T. Torgersenhas served as our Vice President, Operations and Chief Information Officer since September 2000.
From August 1999 to September 2000, Mr. Torgersen was our Director of Information Technology. Prior to joining Vicinity in August 1999, he served as Vice President,
Operations at SocialNet from 1998 to 1999 and Communities.com from 1997 to 1998. In addition, he has held other senior positions at Fujitsu S/W Corp., Apple Computer and Hewlett-Packard Company.
Mr. Torgersen earned his Master of Business Administration degree at the University of Chicago and holds a Bachelor of Science degree from the University of Illinois.

Ronald S. Smithwas named a Director in August 2001 and has served as our Chairman of the Board of Directors since
October 2001. Mr. Smith is currently President and Chief Executive Officer and a member of the Board of Directors of Beyond.com. Prior to joining Beyond.com, Mr. Smith was
President of Merisel, North American Distribution from December 1999 to June 2000 and President of Merisel Canada from June 1998 to November 1999. Prior to joining Merisel,
Mr. Smith was Chief Executive Officer of Cygnet Storage Systems from November 1997 to June 1998. From 1994 through August 1997, Mr. Smith was President and Chief
Executive Officer of NCR Canada, Ltd., the Canadian affiliate of NCR Corporation. Mr. Smith holds a Bachelor of Science degree in Mathematics and Physics from Dalhousie University in
Nova Scotia and a Bachelor of Mechanical Engineering degree from the Technical University of Nova Scotia.

Gerald R. Gallagherwas named a Director in August 2001. Since 1987, Mr. Gallagher has been a General Partner of Oak
Investment Partners, a venture capital partnership. For 30 years Mr. Gallagher has

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been involved with the retail industry, holding positions as an analyst, manager and venture capitalist. Before joining Oak Investment Partners, Mr. Gallagher was Vice Chairman of Dayton Hudson
Corporation. Prior to 1977 Mr. Gallagher was the retail industry analyst at Donaldson, Lufkin & Jenrette. Mr. Gallagher received an undergraduate degree from Princeton University
and a Masters of Business Administration degree from the University of Chicago.

Douglas A. McIntyrewas named a Director in July 2001. Mr. McIntyre has been the President and Chief Executive Officer
and a Director of On2 Technologies, Inc. since April and May 2000, respectively. From 1998 to March of 2000, he served as President and Chief Executive Officer of FutureSource/Bridge
L.L.C. From 1996 to 1997, he served as President of Switchboard.com Inc. Mr. McIntyre also serves as a Director of TheStreet.com.

Michael E. Searshas served as a Director since June 1998. Mr. Sears is currently the President and Chief Executive
Officer of Black Pearl Software, Inc., a provider of Internet enterprise software tools. From 1997 to 1999, Mr. Sears was the General Manager of Spyglass, Inc., a provider of
Internet connectivity solutions. From 1996 to 1997, Mr. Sears was an independent consultant, and from 1990 to 1996, Mr. Sears was a General Manager of Sun Microsystems, Inc.
Mr. Sears holds a Bachelor of Science degree from the United States Naval Academy, and Juris Doctorate and Master of Business Administration degrees from Stanford University.

ITEM 2. PROPERTIES

Our headquarters facility is located in Sunnyvale, California and consists of approximately 53,000 square feet in a two-story building under a
lease expiring in September 2008. We currently occupy the first floor only of this building, or approximately 26,500 square feet. The second floor of the building is being subleased under a
sublease agreement expiring in March 2003. In addition, we occupy 11,500 square feet in a building that we own in New Hampshire that is used for engineering and product development. A small
portion of our building in New Hampshire is also leased to other tenants.

We
also currently lease approximately 2,200 square feet of office space in San Francisco, California under a lease expiring in August 2005 and approximately 12,000 square feet
in San Diego, California under a lease expiring in August 2003. We are not using these locations in our operations and, accordingly, we are attempting to minimize the cost to Vicinity by
exiting these facilities.

In
addition, we also lease space in a number of data centers in which we locate our equipment.

ITEM 3. LEGAL PROCEEDINGS

Our company and certain of our former officers and directors have been named as defendants in four lawsuits filed in the United States District Court for the
Southern District of New York. These lawsuits are purportedly being brought as class actions on behalf of individuals who purchased shares of our company's common stock between February 9, 2000
and December 6, 2000 in connection with and traceable to our initial public offering, although no class has been certified. These lawsuits allege that our company, certain of our former
officers and directors, and our securities underwriters violated various sections of the Securities Act of 1933 and the Securities Exchange Act of 1934, and related rules, by reason of alleged false
statements and omissions relating to underwriting discounts and market stabilization transactions. The plaintiffs seek unquantified actual damages, recissionary damages and other relief to compensate
losses allegedly incurred by purchasers of our common stock in connection with our initial public offering.

These
lawsuits are a small part of a large number of such actions brought against numerous securities underwriters and issuers of securities that appear to be related to an
investigation currently being conducted by the United States Securities and Exchange Commission of the conduct of certain securities underwriters. These lawsuits, including the four brought against
our company, have been transferred to a

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consolidated docket for coordination and decision of pre-trial motions, discovery and related matters other than trial.

At
present, discovery has not commenced and we have not responded to any of the complaints. We believe that the claims against our company and certain of our former officers and
directors are without merit and we intend to vigorously defend against them.

We
have received correspondence from Murex Licensing Corporation asserting that our services formerly known as Web, Telephone and Wireless Business Finder and our MapBlast! Web site
infringe various claims of patents owned by Murex Securities, Ltd. We believe that the patent infringement claims asserted in the correspondence from Murex are without merit, and we intend to defend
against them vigorously should Murex assert them against us in litigation. Murex has also asserted that it expects additional patents, including patent claims allegedly covering our services, to be
issued to Murex in the future. We are unable at this time to evaluate the merits of any patent infringement claims Murex may assert against our company in the future based on patent claims which have
not yet issued, or which otherwise have not been brought to our attention. Notwithstanding the existence of
meritorious defenses, any litigation over the scope and application of patents or similar intellectual property claims could involve significant costs of defense and would involve risks and
uncertainties, particularly in light of the fact that the products and technologies described above are material to our business.

In
May 1999, a former employee of our company filed a complaint against us and several of our officers in California Superior Court for reformation of contract alleging various
contract and tort causes of action and seeking declaratory relief. In November 1999, the court stayed the claim and granted our motion to compel arbitration. An arbitration hearing was
conducted in November 2000. Prior to the commencement of the arbitration hearing, the plaintiff agreed to dismiss all of his claims against our officers. During the arbitration hearing, the
judge hearing the arbitration dismissed all of the plaintiff's contract-based claims against us. In January 2001, the judge hearing the arbitration issued an arbitration award in favor of us
and dismissed all of the former employee's remaining claims. As part of the former employee's termination of employment, the former employee entered into a settlement and release agreement with us
providing that in the event of litigation, the losing party would pay the reasonable legal expenses of the winning party. In April 2001, the judge hearing the arbitration ruled that we are
entitled to recover attorneys' fees and costs incurred in defending against the former employee's claim. In August 2001, we collected $200,000 in such fees from the former employee.

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

We did not submit any matters to a vote of security holders during the fourth quarter of fiscal year 2001.

11

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PART II

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

Our common stock is quoted on The Nasdaq National Market under the symbol "VCNT." The following table lists the high and low bid prices of our common stock for
the periods indicated.

|                                 |                                            | High |   | Low  
|-------------------------------- | ------------------------------------------ | ---- | - | -----
|Fiscal year ending July 31, 2001 |                                            |      |   |      
|                                 | Fourth quarter                             |      | $ | 2.40 
|                                 | Third quarter                              |      | $ | 2.94 
|                                 | Second quarter                             |      | $ | 10.63
|                                 | First quarter                              |      | $ | 20.13
|Fiscal year ending July 31, 2000 |                                            |      |   |      
|                                 | Fourth quarter                             |      | $ | 28.50
|                                 | Third quarter (beginning February 9, 2000) |      | $ | 76.25

At
July 31, 2001, there were approximately 6,000 stockholders of record of our common stock, as shown in the records of our transfer agent.

We
have never declared or paid cash dividends on our common stock. We expect to retain future earnings, if any, for use in the operation of our business and do not currently
anticipate paying any cash dividends on our common stock.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations," our consolidated financial statements and the notes thereto included elsewhere in this Annual Report. The consolidated statement of operations data for the years ended
July 31, 2001, 2000, 1999, 1998 and 1997, and the consolidated balance sheet data as of July 31, 2001, 2000, 1999, 1998 and 1997, are derived from our audited consolidated financial
statements.

|                                                                                 |  | Year ended July 31, |        
|-------------------------------------------------------------------------------- |  | ------------------- | -------
|
|
|Consolidated Statement of Operations Data:                                       |  |                     |        
|Revenues                                                                         |  | $                   | 19,994 
|Operating expenses                                                               |  |                     | 37,547 
|Loss from operations                                                             |  |                     | (30,128
|Net loss                                                                         |  |                     | (27,284
|Net loss applicable to common stockholders                                       |  |                     | (27,284
|Basic and diluted net loss per share                                             |  | $                   | (0.97  
|Weighted average shares used in basic and diluted net loss per share calculation |  |                     | 28,181 

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|                                                     |  | As of July 31, |        
|---------------------------------------------------- |  | -------------- | -------
|
|Consolidated Balance Sheet Data:                     |  |                |        
|Cash and cash equivalents                            |  | $              | 12,439 
|Working capital                                      |  |                | 84,862 
|Total assets                                         |  |                | 113,782
|Capital lease obligations, excluding current portion |  |                |       
|Redeemable convertible preferred stock and warrants  |  |                |       
|Total stockholders' equity (deficit)                 |  |                | 100,598

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

The following discussion of the financial condition and results of operations of our company should be read in conjunction with our consolidated financial
statements and the notes thereto included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties.

Overview

Vicinity is a leading provider of Enterprise Location Services, or ELS, solutions to Global 2000 companies across Web, wireless and speech platforms. We unify
and enrich Web, wireless and speech inquiries in order to catalyze a fundamental improvement in the customer experience. We turn location information into a coherent, rich source of knowledge and
embed location intelligence into the fabric of the organization.

We
are an enterprise solution whose blue-chip customer base includes such well-known companies as McDonald's, Ford Motor Company, FedEx, Best Western
International and CitiBank. Our ELS solutions are available across the globe and in multiple languages.

Company history and evolution.Our company was formed in October 1995, and our initial revenues were derived
from providing maps, driving directions and directory services to regional telephone companies and large portal companies. Historically, we have generated substantially all of our revenues from our
product formerly known as Web Business Finder. Since then, we have focused our strategy on our ELS service and have recently expanded our product offerings to include the Vicinity Location Server. The
Vicinity Location Server is a technology platform that captures, manages and transforms data into geo-coded informationitems such as maps, driving directions and attributes
about companies' stores, branches or offices.

In
February 2000, we completed our initial public offering, or IPO. As a result, we issued 8,050,000 shares of common stock at a price of $17.00 per share and received
approximately $125.9 million in cash, net of underwriting discounts and other offering costs.

NetCreate acquisition.In October 2000, we acquired NetCreate Systems, Inc. ("NetCreate"), an Internet
products and services company providing tools and services to build or enhance the features and functionality of web sites, in a transaction that has been accounted for as a purchase business
combination. We paid $250,000 in cash and issued 441,405 shares of our common stock in exchange for all outstanding shares of NetCreate common stock. We also reserved an additional 90,513 shares of
our
common stock for issuance in connection with the assumption of NetCreate's outstanding stock options and warrants.

The
purchase price was allocated to the fair value of the acquired assets and assumed liabilities based on their fair values at the date of acquisition. The total purchase price of
$5.7 million included the issuance

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of stock and the assumption of stock options (together $5.2 million), cash of $0.3 million and direct acquisition costs of $0.3 million. Of the total purchase price, approximately
$0.3 million was allocated to tangible liabilities, $0.1 million was allocated to capitalized software, $0.2 million was allocated to deferred stock-based compensation,
$4.3 million was allocated to goodwill, $1.0 million was allocated to developed product technology and $0.4 million was allocated to the assembled workforce. Through the end of
fiscal 2001, we amortized our goodwill over its estimated life of five years. Capitalized software and developed product technology are intangible assets, which will be amortized over their estimated
lives of three years. In April 2001, we wrote off approximately $0.8 million of goodwill, developed product technology and assembled workforce related to the NetCreate acquisition,
reflecting our de-emphasis on providing custom Web development services going forward. Beginning in fiscal 2002, we will assess the impact of a newly released accounting standard,
Statement of Accounting Standards 142, "Goodwill and Other Intangible Assets" ("SFAS 142"), on our company. If we choose to adopt SFAS 142 in fiscal 2002, we may cease to amortize
goodwill beginning with our first quarter of fiscal 2002. We are not required to adopt SFAS 142 until the first quarter of our fiscal 2003.

Technology purchase.In September 2000, we entered into a Technology Purchase Agreement ("the BeeLine
Agreement") with BeeLine LLC ("BeeLine"), under which we agreed to pay up to $2.7 million dollars during fiscal 2001 to purchase technology and related consulting services from BeeLine. In
addition, the BeeLine Agreement specified an additional payment of $0.3 million to BeeLine upon the filing of a patent application related to the purchased BeeLine technology. As of
January 31, 2001, the entire $3.0 million of costs had been incurred under the Agreement and capitalized as an intangible asset. Amortization of these costs began during the three months
ended April 30, 2001 and will continue over the estimated three year life of the BeeLine technology.

Restructuring costs and other special charges.In November 2000, we approved a plan to restructure certain of
our operations in order to reduce expenses. In addition, during the three months ended January 31, 2001, we incurred severance-related expenses in conjunction with the departure of four of our
senior executives. In connection with these events, we reduced our worldwide headcount by approximately 15% and closed our German sales facility. Expenses associated with the restructuring plan and
executive severances were approximately $1.1 million.

In
February and April 2001, we approved plans to restructure certain of our operations in order to further reduce expenses. In connection with these restructurings, we reduced
our worldwide headcount by approximately 35%, significantly reduced the size of our French sales force and announced a plan to shut down our San Diego operations, which consisted mainly of Web
developers acquired as a result of
our purchase of NetCreate in October 2000. Expenses associated with this restructuring plan were approximately $2.2 million.

In
addition, during the three months ended April 30, 2001, we recorded approximately in $1.1 million in other special charges, including approximately
$0.8 million in expenses related to the write-off of goodwill, developed product technology and the assembled workforce related to the NetCreate acquisition, reflecting our
de-emphasis on providing custom Web development services going forward, and approximately $0.3 million in expenses for the write-off of software and other similar costs
related to the downsizing of our operations.

Executive management changes.During the second and third quarters of fiscal 2001, several of our senior executive
officers resigned. In particular, Emerick M. Woods, our President and Chief Executive Officer, resigned effective April 23, 2001, Howard A. Bain III, our Executive Vice President and Chief
Financial Officer, resigned effective November 17, 2000, Scott Young, our Senior Vice President, Products and Strategy and Chief Technology Officer resigned effective February 28, 2001,
and Dinesh Wadhawan, our Senior Vice President, Worldwide Sales, resigned effective January 31, 2001.

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In December 2000, we named Maury Austin as our Senior Vice President and Chief Financial Officer. In April 2001, we announced that Norman H. Nie, one of our directors
since 1998, would serve as our Executive Chairman. In addition, also in April 2001, we announced the addition of Tim McMullen as our Chief Operating Officer and subsequently announced the
hiring of Dan Shapero as our Vice President, Marketing and Steve Ackley as our Vice President, Worldwide Sales.

In
October 2001, we named Ronald S. Smith as our Chairman of the Board of Directors, replacing Norman H. Nie who continues to serve as one of our directors.

Stock repurchase program.In September 2001, we announced a stock repurchase program of up to $5.0 million. Under this
program, stock repurchases may be made from time to time in the open market, through block trades or otherwise. As of October 22, 2001, we had repurchased approximately 1,500,000 shares for an
aggregate purchase price equal to approximately $2.2 million under the stock repurchase program.

Results of Operations

Comparison of fiscal 2001 to fiscal 2000

License and hosting fees.Revenue from license and hosting fees is recognized ratably over the life of the contracts,
which typically have one-year, non-refundable terms.

In
fiscal 2001, we recognized $16.0 million of license and hosting fees revenue, an increase of $4.9 million, or 44%, compared to $11.1 million in fiscal 2000.
The increase in license and hosting fees revenue was generally attributable to the growth in our customer base over past fiscal years and to the approximately 90% contract renewal rate by our existing
customers, specifically for our Business Finder services.

Deferred
revenue consists of customer payments received and accounts receivable recorded in advance of recognizing revenue for license and hosting services. Deferred revenue as of
both July 31, 2001 and 2000 was $7.6 million.

Service and transaction fees.Revenue from service and transaction fees consists of revenue generated from
project-related professional services and, to a lesser degree, from advertising and other transactions. This revenue is recognized as the services are performed.

In
fiscal 2001, we recognized $4.0 million of service and transaction fees revenue, a decrease of $0.1 million, or 2%, from $4.1 million for fiscal 2000. This
slight decrease in service and transaction fees revenue is primarily attributable to a decrease in demand for, and our decreasing focus on providing, Web development services for our customers.

Cost of revenues.Cost of revenues includes salaries and benefits of our operations personnel, the cost of acquiring
data and content, leasing and depreciation costs for our computer hosting equipment and Internet connection and data center charges. Cost of revenues increased $3.5 million, or 39%, to
$12.6 million in fiscal 2001 compared to $9.1 million for fiscal 2000. The increase in cost of revenues is attributable to the increased number of personnel in fiscal 2001 when compared
to fiscal 2000, equipment costs related to our data centers and content fees paid to our content providers. Gross margin for fiscal 2001 was 37%, compared to 40% for fiscal 2000. The decrease in gross
margin for fiscal 2001 reflects the impact of the slower than expected growth of our revenues when compared to our cost of revenues over the period. We implemented certain cost reduction programs
during our third and fourth quarters of fiscal 2001 that resulted in overall improvement in our gross margin. As a result, we presently expect gross margin to improve slightly during fiscal 2002.

Product development.Product development expense consists primarily of salaries and benefits, consulting expenses and
equipment costs. Product development expense increased $3.5 million, or 104%,

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to $6.8 million for fiscal 2001 from $3.3 million for fiscal 2000. The increase in product development expense in fiscal 2001 was primarily attributable to increases in personnel and
personnel-related costs as well as the amortization of intangible assets related to our acquisition of NetCreate and the BeeLine technology purchase.

Sales and marketing.Sales and marketing expense consists primarily of salaries, commissions, promotion costs,
advertising and travel-related expenses. Sales and marketing expense increased $1.4 million, or 9%, to $17.6 million for fiscal 2001 from $16.1 million for fiscal 2000. The number
of sales and marketing personnel, and the corresponding amount of personnel costs increased during fiscal 2001 when compared to fiscal 2000, primarily to support the expansion of sales and marketing
efforts during the first half of fiscal 2001.

General and administrative.General and administrative expense consists primarily of salaries and related costs for our
executive, administrative, finance and human resources personnel as well as accounting, legal and other professional fees. General and administrative expense increased $3.6 million, or 76%, to
$8.3 million for fiscal 2001 from $4.7 million for fiscal 2000. These increases were caused mainly by the increase in personnel and personnel-related costs, primarily related to the need
to support the requirements related to the operation of our company as a publicly-traded company.

Stock-based compensation.As of July 31, 2000, we had recorded deferred stock-based compensation expense
aggregating $2.3 million in stockholders' equity for the difference at the date of grant between the exercise price and the fair value of the common stock underlying stock options granted in
fiscal 2000 and 1999. During fiscal 2001, we recorded an additional $0.2 million of deferred stock-based compensation in connection with the NetCreate acquisition. Of these amounts, we
recognized as expense a total of $0.5 million, 1.0 million and $0.2 million for the years ended July 31, 2001, 2000 and 1999, respectively. In addition, we expect to
recognize $0.1 million in fiscal 2002 and less than $0.1 million in fiscal 2003.

Other income/expense, net.Other income for fiscal 2001 and 2000 was comprised of approximately $6.2 million and
$3.7 million, respectively, of interest income earned on the cash proceeds received from our initial public offering in February 2000, offset by approximately $0.1 million in both
fiscal 2001 and 2000 of interest expense related to capital lease obligations. In addition, during fiscal 2001, we realized a loss of approximately $3.2 million related to the
write-down to fair market value of an investment in an equity fund made during the year.

Net loss.We have not achieved profitability on a quarterly or annual basis and expect to continue to incur net losses
through at least fiscal 2002.

Comparison of fiscal 2000 to fiscal 1999

License and hosting fees.In fiscal 2000, we recognized $11.1 million of license and hosting fees revenue, an
increase of $5.4 million, or 96%, compared to $5.7 million in fiscal 1999. The increase in license and hosting fees revenue was generally attributable to growth in our customer base and,
specifically, to growth in demand for Business Finder services. We grew the total number of our customers to 371 as of July 31, 2000 from 237 as of July 31, 1999, an increase of 57%.

Deferred
revenue as of July 31, 2000 was $7.6 million, compared to $5.0 million as of July 31, 1999, representing an increase of $2.7 million, or
54%.

Service and transaction fees.In fiscal 2000, we recognized $4.1 million of service and transaction fees
revenue, an increase of $3.4 million, or 438%, from $0.8 million for fiscal 1999. This increase in service and transaction fees revenue is primarily attributable to an increase in demand
for professional services, mostly web development services for our customers, as well as increased advertising and transaction revenue.

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Cost of revenues.Cost of revenues increased $5.1 million, or 130%, to $9.1 million in fiscal 2000
compared to $3.9 million for fiscal 1999. The increase in cost of revenues is attributable to increases in personnel to support our business growth, equipment costs related to the expansion of
our data centers and content fees as a result of additions to our set of content providers.

Product development.Product development expense increased $1.6 million, or 91%, to $3.3 million for
fiscal 2000 from $1.7 million for fiscal 1999. The increase in product development expense in fiscal 2000 was primarily attributable to increases in personnel and personnel-related costs due to
our expanded product offerings.

Sales and marketing.Sales and marketing expense increased $12.6 million, or 350%, to $16.1 million for
fiscal 2000 from $3.6 million for fiscal 1999. The number of sales and marketing personnel, and the
amount of personnel-related, promotion and advertising costs increased during fiscal 2000 to support our expanded sales and marketing efforts.

General and administrative.General and administrative expense increased $2.7 million, or 136%, to
$4.7 million for fiscal 2000 from $2.0 million for fiscal 1999. During fiscal 2000 personnel and personnel-related costs increased, primarily as a result of the need to support and grow
our business as well as to support the requirements related to the operation of our company as a publicly-traded company.

Stock-based compensation.As of July 31, 2000, we had recorded deferred stock-based compensation expense
aggregating $2.3 million in stockholders' equity (deficit) for the difference at the date of grant between the exercise price and the fair value of the common stock underlying stock options
granted in fiscal 2000 and 1999. Of this amount, we recognized as expense a total of $1.0 million and $0.2 million for fiscal 2000 and 1999, respectively.

Other income/expense, net.Other income/expense in fiscal 2000 was comprised of approximately $3.7 million of
interest income earned on the cash proceeds received from our initial public offering in February 2000, offset by less than $0.1 million of interest expense related to capital lease
obligations.



Overview.In February 2000, we completed our initial public offering and, as a result, issued 8,050,000 shares
of common stock at a price of $17.00 per share. We received approximately $125.9 million in cash from our initial public offering, net of underwriting discounts and other offering costs. We
have used a portion of these proceeds, and intend to continue to use these proceeds, to expand our sales and marketing efforts, to expand our international business, to develop new technologies and
products and improve our technology infrastructure, and for working capital and other general corporate purposes. Pending this use, we have invested these proceeds primarily in interest-bearing
securities, primarily government securities, municipal bonds, time deposits, Eurodollar deposits, certificates of deposit with approved financial institutions, commercial paper rated
A-1/P-1/F-1, corporate notes and bonds and other money market instruments of similar liquidity and credit quality. See "Item 3. Quantitative and Qualitative
Disclosures About Market Risk" for further information related to our investments.

Once
we factor in cost savings achieved from the restructurings that we announced in fiscal 2001, we intend to maintain spending levels relatively constant until such time as we
experience adequate growth rates in revenues. We are currently targeting the second half of calendar 2002 as the point at which we will become cash flow positive. This forecast is subject to change.

Future
capital requirements will depend upon many factors, including overall market conditions and the rate of growth of our revenues. We believe that our cash, cash equivalents and
short-term investments will be sufficient to satisfy our cash requirements for the next several years at our projected expense and revenue levels.

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Comparative cash flow information.The following table compares cash, cash equivalents and short-term
investment and working capital balances as well as sources and uses of cash as of and for the years ended, July 31, 2001, 2000 and 1999 (in millions):

|                                                  |  | Years ended July 31, |      
|------------------------------------------------- |  | -------------------- | -----
|
|
|Cash, cash equivalents and short-term investments |  | $                    | 93.7 
|Working capital                                   |  | $                    | 84.9 
|Cash used in operating activities                 |  | $                    | (15.1
|Cash used in investing activities                 |  | $                    | (20.5
|Cash provided by (used in) financing activities   |  | $                    | (0.2 

Cash
used in operating activities was $15.1 million for the year ended July 31, 2001 compared to $10.0 million for the year ended July 31, 2000. This
increase was primarily as a result of the increase in our net loss to $27.3 million for the year ended July 31, 2001 from $15.4 million for the year ended
July 31, 2000, partially offset by non-cash charges for depreciation, amortization and stock-based compensation, and the net change in operating assets and liabilities.

Cash
used in investing activities was $20.5 million for the year ended July 31, 2001. Cash used in investing activities was used primarily for purchases of investments,
purchases of property and equipment and for the NetCreate and technology purchases.

Cash
used in financing activities was $0.2 million for the year ended July 31, 2001. Cash used in financing activities reflects the offsetting impact of approximately
$1.2 million in cash received from employees for common stock issued pursuant to the Employee Stock Purchase Plan and as a result of stock option exercises, offset by payments on capital lease
obligations of $1.1 million and repurchases of unvested common stock of $0.3 million.

Disclosures About Market Rate Risk

The following discussion about our market rate risk involves forward-looking statements. Actual results could differ materially from those projected in the
forward-looking statements. We are exposed to market risk related to changes in interest rates, foreign currency exchange rates and equity security price risk.

Interest rate risk.The primary objective of our investment activities is to preserve principal and assure sufficient
liquidity to meet anticipated needs, while at the same time maximizing the income we receive from our investments within such constraints. Some of the securities that we invest in may be subject to
market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing rate and the prevailing interest rate later rises, the principal amount of our investment will probably decline. To minimize this risk in the future,
we intend to maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including government securities, municipal bonds, time deposits, Eurodollar
deposits, certificates of deposit, commercial paper, corporate notes and bonds and other specific money market instruments. We classify our cash equivalents and short-term investments as
"fixed-rate" if the rate of return on such instruments remains fixed over their term. We classify our cash equivalents and short-term investments as "variable rate" if the rate
of return on such investments varies based on the change in a predetermined index or set of indices during

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their term. The table below presents the amounts and related weighted interest rates of our investment portfolio at July 31, 2001 (dollars in thousands):

|                        |               | Average
Interest Rate |      | Cost |   | Fair
Value
|----------------------- | ------------- | --------------------- | ---- | ---- | - | ----------
|
|Cash equivalents:       |               |                       |      |      |   |           
|                        | Fixed rate    |                       | 3.84 | %    | $ | 7,929     
|                        | Variable rate |                       | 3.77 |      |   | 274       
|Short-term investments: |               |                       |      |      |   |           
|                        | Fixed rate    |                       | 5.24 |      |   | 57,259    
|                        | Variable rate |                       | 5.40 |      |   | 22,049    

Foreign Currency Exchange Rate Risk.We develop products in the United States and market our products in North America
and Europe. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Since all of our sales
are currently made in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets.

Equity Security Price Risk.In October 2000, we invested $5.0 million in a newly organized,
non-diversified, closed-end management investment company, or the Fund, that is subject to market price volatility. The Fund has an investment objective of
long-term capital appreciation and seeks to achieve its objective by investing in equity securities of small, medium and large capitalized United States and foreign companies considered to
significantly benefit from, or derive revenue from, the Internet. In addition, this fund may also invest in securities of private investment funds that invest primarily in venture capital companies.
Investments in technology companies and, in particular, venture capital companies, pose special risks. Due to an overall decline in equity prices over the last several months, particularly in the
technology sector, the value of this investment had declined by approximately $3.2 million to $1.8 million as of July 31, 2001. In an attempt to minimize future risk posed by
overall market declines, we offered
up our shares in the Fund for sale prior to July 31, 2001. In August 2001, we realized the sale of all of our shares in the Fund for approximately $1.8 million.

Recent Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 141, Business
Combinations. SFAS 141 requires that all business combinations be accounted for under the purchase method. Use of the pooling-of-interests method is no longer permitted.
SFAS 141 requires that the purchase method be used for business combinations initiated after June 30, 2001. We have not yet evaluated the effects of these changes on our consolidated
financial statements.

In
July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets. SFAS 142 requires that goodwill no longer be amortized to earnings, but instead
be reviewed for impairment. We will be required to implement SFAS 142 as of the beginning of our fiscal year 2003, however we may opt to implement it as of the beginning of our fiscal year
2002. We have not yet evaluated the effects of these changes on our consolidated financial statements.

In
October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 144 applies to all long-lived
assets (including discontinued operations). SFAS 144 develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS 144 requires that long-lived
assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, SFAS 144 expands the scope of discontinued operations to include all
components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing operations of the entity in a disposal
transaction. SFAS 144 will be effective for our company in fiscal 2003. We have not yet determined the exact impact this standard will have on our consolidated financial statements.

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Factors That May Affect Future Results

Current and potential stockholders should consider carefully each of the following factors in making their investment decisions. These factors should be
considered together with the other information included or incorporated by reference in this Annual Report.

Our business is difficult to evaluate because we have a limited operating history.

Our company was founded in October 1995, and our initial revenues were derived from providing maps, driving directions and directory services. We have a
limited operating history from which you can evaluate our present business and future prospects. As a relatively new entrant to the business of providing ELS services for companies on the Internet and
on wireless platforms, we face risks and uncertainties relating to our ability to implement our business plan successfully. Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in their early stage of development, particularly companies in new and rapidly evolving markets such as the Internet. If we are unsuccessful in
addressing these risks and uncertainties, our business, results of operations, financial condition and prospects will be materially adversely affected.

We have a history of losses and negative cash flows and anticipate continued net losses.

We have not generated enough revenues to exceed the substantial amounts we have spent to develop our business. We incurred net losses of approximately
$27.3 million for fiscal 2001, $15.4 million for fiscal 2000 and $5.5 million for fiscal 1999. We expect to continue to experience losses for the immediately foreseeable future.
Moreover, we base current and future expense levels on our operating plans and our estimates of future revenues. If our revenues grow at a slower rate than we anticipate, or if our spending exceeds
our expectations or cannot be adjusted to reflect such slower revenue growth, we may not generate sufficient revenues to achieve profitability. If we do achieve profitability, we may be unable in the
future to sustain or increase profitability on a quarterly or annual basis.

Our business is subject to quarterly fluctuations in operating results, which may negatively impact the price of our common stock.

You should not rely on quarter-to-quarter comparisons of our operating results as an indication of future performance. It is possible
that in future periods our quarterly operating results may fall below the expectations of public market analysts and investors. In this event, the price of our common stock is likely to fall.

Our
quarterly net loss was approximately $6.5 million for the three months ended July 31, 2001, $8.3 million for the three months ended April 30, 2001,
$7.3 million for the three months ended January 31, 2001 and $5.2 million for the three months ended October 31, 2000. We presently expect to continue to incur net losses
through at least fiscal 2002. However, our quarterly operating results may fluctuate significantly in the future due to a variety of factors. These factors include the following, which are generally
outside of our control:



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Other
factors that may cause our quarterly operating results to fluctuate significantly which are at least partially under our control include:



In
addition, our operating expenses are based on our expectations of our future revenues and some of our operating expenses are relatively fixed in the short term, including personnel
costs, data support expenses and the cost of licensing necessary information. We may be unable to reduce our expenses quickly enough to offset any additional future revenue shortfalls and may incur
costs, such as additional severance costs, imposed by any such additional expense reduction programs.

The market price of our common stock has been and may continue to be highly volatile.

The market price of our common stock has fluctuated widely and may continue to do so. For example, during the period following our initial public offering in
February 2000 through the period ended September 30, 2001, the trading price of our common stock has ranged from a high of $76.25 per share to a low of $1.19 per share. Many factors
could cause the market price of our common stock to rise and fall in the future. Some of these factors include:



The
overall financial markets have recently experienced significant price and volume fluctuations, and the market prices of technology companies, particularly Internet-related
companies, have been and continue to be adverse and extremely volatile. Volatility in the price of our common stock may be caused by factors outside of our control and may be unrelated or
disproportionate to our operating results. In the past, following periods of volatility in the market price of a public company's securities, securities class action litigation has often been
instituted against that company. Securities class action litigation could result in substantial costs and a diversion of our management's attention and resources.

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If demand for ELS services fails to develop or develops more slowly than we expect, we may not generate sufficient revenues to achieve profitability.

Our future success is highly dependent on an increase in the use of the Internet and wireless platforms as marketing channels including, in particular, the
deployment and acceptance of wireless and broadband platforms. If significant demand for ELS services fails to develop or develops more slowly than we have planned for, we may not generate sufficient
revenues to achieve profitability. The market for ELS services is new and rapidly evolving, and it cannot yet be compared with traditional marketing media to gauge its effectiveness. Companies that
have historically relied on traditional marketing methods may be reluctant or slow to adopt online or wireless marketing. As a result, demand and market acceptance for Internet and wireless-based
marketing solutions cannot yet be determined. Many of our current and potential clients have little or no experience using the Internet or wireless platforms for marketing purposes and may allocate
only a limited portion of their marketing budgets to these platforms. Companies that have invested substantial resources in traditional methods of marketing may be reluctant to reallocate those
resources to online or wireless marketing. In addition, companies that have invested a significant portion of their marketing budget in online or wireless marketing may decide after a time to return
to more traditional methods if they find that online or wireless marketing is a less effective method of promoting their products and services than traditional marketing methods.

We have experienced turnover at our senior management levels, which could harm our business and operations.

During the second and third quarters of fiscal 2001, several of our senior executive officers resigned. In particular, Emerick M. Woods, our President and
Chief Executive Officer, resigned effective April 23, 2001, Howard A. Bain III, our Executive Vice President and Chief Financial Officer, resigned effective November 17, 2000, Scott
Young, our Senior Vice President, Products and Strategy and Chief Technology Officer resigned effective February 28, 2001, and Dinesh Wadhawan, our Senior Vice President, Worldwide Sales,
resigned effective January 31, 2001.

In
April 2001, we announced that Norman H. Nie, one of our directors since 1998, would serve as our Executive Chairman while we search for a replacement Chief Executive
Officer. In addition, also in April 2001, we announced the addition of Tim McMullen as our Chief Operating Officer and subsequently announced the hiring of Dan Shapero as our new Vice
President, Marketing and Steve Ackley as our Vice President, Worldwide Sales. In October 2001, we named Ronald S. Smith as our Chairman of the Board of Directors, replacing Norman H. Nie, who
continues to serve as one of our directors. It is possible that this high turnover at our senior management levels will continue and that other senior executive officers could also resign, creating
limited management continuity, recruitment costs and, in some cases, severance costs.

We have dedicated significant resources toward developing new clients internationally; any success in these efforts may prove not to have been worth the
associated expense.

Our business plan in the recent past has included the expenditure of significant resources internationally. During fiscal 2000, we opened sales offices in
France, Germany and the United Kingdom. During fiscal 2001, we announced the closure of our office in Germany and the downsizing of our office in France in order to centralize functions in the United
Kingdom office. To date, we have limited experience in marketing our services internationally, and we cannot predict our success in these international markets. In order to generate greater revenues
overseas, we intend to continue to enter into relationships with foreign businesses, and we cannot predict whether those relationships will be successful. Our international plans are subject to
inherent risks, including:



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We
cannot predict whether our international business operations will be successful. The results of our efforts may prove not to have been worth the associated expense and opportunity
cost.

We have experienced fluctuation in the number of our employees, and any inability to manage this fluctuation could harm our business.

The number of our employees has fluctuated significantly over the last two fiscal years in response to changing market conditions and the evolution of our
business. The number of our employees grew from 106 as of October 31, 1999 to 224 as of October 31, 2000, and then down to approximately 127 as of August 31, 2001. This
fluctuation has placed a significant strain on our management, systems and resources. We expect that we will need to continue to maintain close coordination among our technical, finance, sales and
marketing groups in order to successfully manage such fluctuations in personnel.

We will not be able to execute our business plan if we cannot increase our direct and indirect sales channels.

We will need to expand substantially our direct and indirect sales operations, both domestically and internationally, in order to increase market awareness and
sales of our products. Our services require a sophisticated sales effort targeted at several people within our prospective clients' organizations. Competition for qualified sales personnel is intense,
and we may not be able to hire the kind and number of sales personnel that we are targeting. Also, the decline in our stock price may significantly increase the difficulty in hiring new qualified
sales personnel. In addition, we believe that our future success is dependent upon establishing and maintaining productive relationships with a variety of distribution partners, resellers and joint
marketing partners. We cannot be sure that we will be successful in signing up desired partners or that our partners will devote adequate resources or have the technical and other sales capabilities
to sell our products.

Similarly,
the complexity of our products and the difficulty of installing them require highly trained customer service and support personnel. We currently have a small customer
service and support organization, and we may need to increase our staff to support new services, new customers and the expanding needs of existing customers. Competition for customer service and
support personnel is intense in our industry due to the limited number of people available with the necessary technical skills and understanding of the Internet.

Historically, we have depended on a limited number of services for most of our revenues.

Historically, we have derived most of our revenues from our Web Business Finder, maps, driving directions and directory services, which represented
approximately 74%, 65%, 86% and 91% of our revenue in fiscal 2001, 2000, 1999 and 1998, respectively. Our results of operations would be materially and adversely affected by a reduction in demand or a
change in the pricing structure for these services.

We have relied on our ability to sell existing customers additional services to generate revenue and the continued growth of our business depends on our
ability to continue to do so in the future.

Much of our past sales growth is the result of selling additional services to existing clients. Our growth strategy depends on the introduction of new services
that we hope to sell to our existing clients. We may not develop any of these new services in a cost-effective and timely manner, and we have insufficient experience with these new service
offerings to know whether they will be well received by our clients. Any new service we introduce that is not favorably received could damage our relationships with our clients. If

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our existing clients decide to maintain their current level of service and not upgrade to additional services, we might fall short of our projected sales and would have to cultivate other sales
opportunities, which might be expensive and might not materialize.

We may be unable to maintain our current pricing structure because our business is changing rapidly as are the services that we provide.

Our current business model is to provide ELS services to our business clients. We may not achieve an acceptable level of profitability, or become profitable at
all, if our clients' marketing executives do not perceive that the use of our services will improve the effectiveness of their marketing efforts or if they are otherwise unable to generate a
significant return on investment from using our services. ELS services are relatively new and unproven and may not achieve widespread customer acceptance. To be successful, we must adapt to our
rapidly changing market by continually enhancing the technologies used in our services and introducing new technology to address the changing needs of our clients. Under our current pricing structure,
clients pay for most of our services through set-up and annual fees. There is a risk that competition with respect to the services we provide will eventually result in very low prices for
our services. If we are unable to maintain an adequate pricing structure, we will not generate sufficient revenues to achieve and maintain profitability.

Our business is dependent on the continuous, reliable and secure operation of our databases and the related services that we provide, and a system
failure could negatively impact our business.

Our operations are dependent on our ability to maintain our databases, servers and communications equipment in effective working order and to protect them from
fire, natural disaster, sabotage, power loss, telecommunications failure, human error or similar events. Although we currently maintain two geographically dispersed data centers, a system failure or
natural disaster could significantly disrupt our
operations. Any system failure, including a network, software or hardware failure, that causes an interruption in the performance of our services or a decrease in responsiveness of our services could
result in lost clients, reduced revenue and harm to our reputation. Despite the implementation of security measures and standard operating procedures, our infrastructure may also be vulnerable to
computer viruses, hackers, human error or similar problems caused by our employees, clients or Internet users. A party who is able to circumvent our security measures could misappropriate proprietary
database information or cause interruptions in our operations. As a result, we may be required to expend significant capital and other resources to help protect against, or to alleviate problems
caused by, these security breaches. Our insurance may not adequately compensate us for any losses that may occur due to any failure in our system or interruption in our service. In addition, the
growth of our business may strain the capacity of our servers and telecommunications systems. If we are unable or otherwise fail to maintain or upgrade our systems, they could fail or suffer
degradation in performance. Any damage, failure or delay that causes significant interruption in our databases or other systems would adversely affect our operating results and could cause the price
of our common stock to decline.

Our current business plan depends in significant part on third party relationships, many of which are short-term or terminable.

We presently rely on our strategic partners to provide key services, marketing opportunities, technologies, clients and users. These arrangements can be
terminated by our partners in some circumstances. If our relationships with our strategic partners were terminated, we would have to adapt our operations or business plan, which may take time and may
interrupt the provision of the affected services. In addition, if we do not establish additional, and maintain existing, strategic relationships on commercially reasonable terms or if our strategic
relationships do not result in an increase in the number of users of our services, we may be unable to continue to offer existing products or to develop new products and we may not experience a
significant portion of the anticipated growth in our clients and the number of end-users of our

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services. As a result, we may not generate sufficient revenues to achieve profitability, and the price of our common stock is likely to fall. Finally, new strategic relationships that are entered into
may prove difficult to implement and may fail to provide some or all of the anticipated benefits.

We are dependent on a limited number of third parties for a significant portion of our geographic data.

Most of our services rely on the availability and accuracy of geographic data. We have licensed a significant portion of our geographic data from a limited
number of sources through non-exclusive, short-term contractual arrangements. If any of these third parties were to merge with or be acquired by another company, the number of
sources providing this geographic data could be further reduced. Given the short terms of our geographic data licenses, we will have to renegotiate our contracts in the foreseeable future, which may
result in contractual terms that are not as favorable to us as our existing
data licenses. If we cannot maintain these data licenses or any other third-party license arrangement on commercially reasonable terms, the scope and quality of our services may suffer.

If we are unable to generate fast and accurate responses to queries, the marketability of our services will be reduced.

If we are unable to generate responses quickly or if the responses we generate are not accurate, the marketability of our services will be reduced and we may
experience a decline in the number of users of our services. The accuracy of our services is substantially dependent on the accuracy of data that we license from third parties. We plan to update our
geographic databases periodically. However, in view of the complexity of updating multiple databases and revising software, and the need to obtain geographic data for address information from third
parties, we may not be able to perform these updates as planned. This could harm our business, financial condition and results of operations.

Acquisitions or strategic investments may disrupt or otherwise have a negative impact on our business.

In the future we may acquire or make investments in complementary businesses, technologies, services or products, or enter into strategic partnerships with
parties who can provide access to those assets, if appropriate opportunities arise. From time to time we have had discussions and negotiations with companies regarding our acquiring, investing in or
partnering with their businesses, products, services or technologies, and we regularly engage in these discussions and negotiations in the ordinary course of our business. Some of those discussions
also contemplate the other party making an investment in our company or a subsidiary of our company. We may not identify suitable acquisition, investment or strategic partnership candidates, or if we
do identify suitable candidates, we may not complete those transactions on commercially acceptable terms or at all. We could have difficulty in assimilating the personnel, operations, technology and
software of another company that we acquire. In addition, the key personnel of a company that we acquire may decide not to work for us. If we make acquisitions, we could have difficulty in integrating
the acquired products, services or technologies into our operations. These difficulties could disrupt our ongoing business, distract our management and employees and increase our expenses.
Furthermore, we may incur indebtedness or issue equity securities to pay for any future acquisitions. The issuance of equity securities would dilute the ownership interests of the holders of our
common stock.

We face competition and may face future competition from companies with different business strategies that could cause us to lower our prices or to lose
a significant portion of our market share.

We may be unable to compete successfully with current or future competitors. We face competition from many companies, both traditional and online, several of
which are affiliated with companies much larger than our own. Increased competition could result in price reductions for our services, reduced gross margins and loss of our market share.

Many
of our existing competitors, as well as potential future competitors, have longer operating histories, greater name recognition, larger customer bases and significantly greater
financial, technical and

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marketing resources than our company. These advantages may allow them to respond more quickly and effectively to new or emerging technologies and changes in customer requirements. It may also allow
them to engage in more extensive research and development, undertake farther-reaching marketing campaigns, adopt more aggressive pricing policies and make more attractive offers to potential employees
and strategic partners. One or more of these companies could adopt a different business strategy for achieving profitability that could allow them to charge fees that are lower than ours in order to
attract clients. In addition, current and potential competitors have established or may establish cooperative relationships among themselves or with third parties to increase the ability of their
products or services to address the needs of our current and prospective clients.

ELS
services is a rapidly developing industry, and new types of products and services may emerge that are more attractive to consumers and marketers than the types of services we
offer. As a result, it is possible that new competitors may emerge and rapidly acquire significant market share.

Without the continued growth in use of the Internet and wireless devices, we may not experience a significant portion of the growth currently
anticipated.

Our future success is substantially dependent upon continued growth and use of the Internet and wireless devices such as cellular telephones. Rapid growth in
the use of and interest in the Internet and wireless devices is a relatively recent phenomenon and may not continue to grow at its current rate. Internet usage may be inhibited for many reasons,
including the following:



Even
if the Internet and wireless services continue to experience significant growth in the number of users and level of use, the Internet and wireless services infrastructures may
not be able to support the
demands placed upon them by this growth. Our success and the viability of the Internet and wireless services as information media and commercial marketplaces will depend in large part upon the
development of robust telecommunications infrastructure for providing Internet access and carrying Internet and wireless traffic. If the use of the Internet and wireless services do not continue to
grow, if the necessary telecommunications infrastructure or complementary products are not developed or do not effectively support growth that may occur or if the Internet and wireless services do not
become viable information media and commercial marketplaces, we may not experience a significant portion of the growth currently anticipated and the price of our common stock is likely to fall.

We face a competitive labor market for highly skilled employees that we must attract, retain and motivate in order to execute our growth plan.

Our future success depends on our ability to attract, train, motivate and retain highly skilled employees. Competition for qualified employees among Internet
and software companies is intense, particularly in the Silicon Valley area in which our headquarters are located. Market wages for employees include expectations for significant stock-based
compensation and, in light of the disappointing performance of our stock price, we may be unable to offer attractive equity packages to potential employees, and may also be unable to retain and
motivate our existing employees whose stock options are out-of-the-money. These circumstances could require additional stock option grants or restructurings of
existing grants, either of which would be dilutive to holders of our common stock. We may be unable to retain our key employees or attract, assimilate or retain other highly qualified employees in the
future. We have from time to time in the past experienced, and we expect to continue to experience in the future, difficulty in hiring and retaining highly skilled employees with appropriate
qualifications. The inability to

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attract additional qualified personnel could disrupt the implementation of our growth strategy upon which the success of our business depends.

We are highly dependent on the acceptance and effectiveness of the Internet as a medium for consumer transactions and on the increased use of the
Internet by consumers to locate our clients' products.

The future success of a number of our services is dependent in large part on an increase in the use of the Internet for business transactions with consumers
and on the increased use of the Internet by consumers to locate our clients' products. The electronic commerce market is new and rapidly evolving and the extent of consumer acceptance of the Internet
cannot yet be determined. If a sufficiently broad base of consumers do not accept the use of the Internet for transacting business or do not use the Internet to locate our clients' products, our
business, financial condition and results of operations could be materially and adversely affected.

If we fail to protect our intellectual property rights or face a claim of intellectual property infringement by a third-party, we could lose our
intellectual property rights or be liable for significant damages.

Our success depends significantly upon our proprietary technology. We currently rely on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect our proprietary rights. Our employees are generally required to execute confidentiality and assignment agreements that transfer any
rights they may have in copyrightable works or patentable technologies to us. In addition, prior to entering into discussions with strategic partners, we generally require that these parties enter
into a non-disclosure agreement. If these discussions result in a license or other business relationship, we also generally require that the agreement setting forth the parties' respective
rights and obligations include provisions for the protection of our intellectual property rights. Our failure to enter into these agreements when appropriate or our inability to enforce our rights
under one or more of these agreements could jeopardize our ability to protect our intellectual property. This could materially and adversely affect our business.

We
have registered several service marks in the United States, including "Vicinity," "MapBlast!", "GeoSearch", "Powered by Vicinity", "Vicinity Telephone Business Finder" and
"Vicinity Wireless Business Finder". We have applied for registration of a number of additional service marks in the United States and in other countries and will seek to register additional service
marks and trademarks, as appropriate. We may be unsuccessful in obtaining the service marks and trademarks for which we have applied. We may not be granted certain patents with respect to our
technology, and any patent that is granted may be challenged or invalidated. We may not develop proprietary products or technologies that are patentable, and any issued patent may not provide us with
any competitive advantages or withstand challenges by third parties. In addition, the patents of others may adversely affect our ability to conduct our business. Despite our efforts to protect our
proprietary rights, unauthorized parties may copy aspects of our products or services or obtain and use information that we regard as proprietary. The laws of some foreign countries do not protect
proprietary rights to as great an extent as do the laws of the United States, and we do not currently have any patents or patent applications pending in any foreign country. Our means of protecting
our proprietary rights may not be adequate, and our competitors may independently develop similar technology or duplicate our products or design around patents issued to us or our other intellectual
property rights. Our failure to protect our proprietary rights adequately or our competitors' successful duplication of our technology could harm our operating results and cause the price of our
common stock to decline.

Litigation over intellectual property rights could disrupt or otherwise have a negative impact on our business.

There has been frequent litigation in the computer industry regarding intellectual property rights. Like others in our industry, we are from time to time
subject to claims regarding the alleged intellectual property rights of third parties. In fiscal 1999, we entered into a settlement agreement and agreed to pay

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$441,000 for a patent license with respect to an intellectual property rights claim. We have received, and expect in the future to receive, claims of infringement by us with respect to current or
future products, trademarks or other proprietary rights. Regardless of the merits, these claims could be time-consuming, result in costly litigation, divert our management's attention,
cause product or service release delays, require us to redesign our products or services or require us to enter into costly royalty or licensing agreements.

Privacy concerns may adversely affect our ability to implement our Internet solutions.

Web sites and Internet advertisement servers typically place a small file commonly known as a "cookie" on a user's hard drive, generally without the user's
knowledge or consent. We may introduce services or features that are dependent on the use of cookies to collect, sort and analyze information about Internet users. Most currently available Internet
browsers allow users to modify their browser settings to prevent cookies from being stored on their hard drive or to delete cookies at any time. In addition, some Internet commentators and privacy
advocates have suggested limiting or eliminating the use of cookies and the Federal Trade Commission is investigating these issues in response to recent publicity regarding Internet advertising
companies. The effectiveness of future services could be limited by a significant reduction or limitation in the use of cookies. In addition, privacy concerns may cause some Web users to be less
likely to visit Web sites that use cookies. If enough Web users choose not to visit sites that use cookies, our ability to sell our services or features that are dependent on the use of cookies would
be adversely affected and could require us to alter or adjust our business practices.

Legislation or regulations may be adopted that could affect our ability to generate or use information for profiles and may hinder our ability to
conduct business.

The legal and regulatory environment governing the Internet and the use of information about Internet users is constantly evolving. United States legislators
in the past have introduced a number of bills aimed at regulating the collection and use of personal data from Internet users and additional similar bills may be considered during any congressional
session. Although we believe no current legislation has had a material adverse effect on our business, it is possible that a bill may be enacted into law that negatively affects our ability to collect
and use data about Internet users or that otherwise affects our business. The European Union has adopted a directive addressing data privacy that may result in limitations on the collection and use of
specific personal information regarding Internet users. In addition, Germany has imposed its own laws protecting data that can become personally identifiable through subsequent processing. Other
countries may also enact limitations on the use of personal data.

To
date, these regulations have not materially restricted the use of our products. However, legislation or regulations may in the future be adopted which may limit our ability to
target advertising or collect and use information in one or more countries. Further, a number of laws and regulations have been and may be adopted covering issues such as pricing, acceptable content,
taxation and quality of products and services on the Internet. This legislation could dampen the growth in use of the Internet generally and decrease the acceptance of the Internet as a communications
and commercial medium. In
addition, due to the global nature of the Internet, it is possible that multiple federal, state or foreign jurisdictions might inconsistently regulate our activities or the activities of advertising
networks or Web sites.

The large number of shares eligible for public sale could cause our stock price to decline.

In February 2000, we issued 8,050,000 shares of common stock pursuant to our initial public offering. These shares are freely tradable with the
exception of those shares purchased by our affiliates. We had an aggregate of approximately 28.4 million shares of our common stock outstanding as of September 30, 2001, which includes
the shares sold in our IPO. The shares not registered as part of our initial public offering may be sold only pursuant to a registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act. The market price of our common stock could decline as a

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result of the sales of a large number of these shares or the perception that sales could occur. In addition, the large number of shares eligible for sale may make it more difficult for us to sell
common stock in the future at a time and at a price that we deem appropriate.

We do not currently plan to pay dividends to the holders of our common stock.

We do not currently anticipate paying cash dividends to the holders of our common stock. Accordingly, stockholders must rely on sales of their common stock
after price appreciation, which may never occur, as the only way to realize on their investment. Investors seeking cash dividends should not purchase our common stock.

A third party's ability to acquire us might be more difficult because of anti-takeover provisions in our Restated Certificate of
Incorporation and Bylaws.

We are authorized to issue five million shares of undesignated preferred stock. Our Board of Directors has the authority to issue the preferred stock in one or
more series and to fix the price, rights, preferences, privileges and restrictions thereof, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, redemption
prices, liquidation preferences and the number of shares constituting a series or the designation of any series, without any further vote or action by our stockholders. The issuance of preferred
stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of delaying, deferring or preventing a change in control of
our company without further action by our stockholders and may
adversely affect the market price of our common stock and the voting and other rights of our stockholders. The issuance of preferred stock with voting and conversion rights may adversely affect the
voting power of the holders of our common stock, including the loss of voting control to others. We have no current plans to issue any shares of preferred stock.

Provisions
of our Restated Certificate of Incorporation and Bylaws eliminate the right of stockholders to act by written consent without a meeting, eliminate the right of stockholders
to call a special meeting of stockholders, specify procedures for nominating directors and submitting proposals for consideration at stockholder meetings and provide for a staggered Board of
Directors, so that no more than approximately one-third of our directors could be replaced each year and it would take three successive annual meetings to replace all directors. These
provisions are intended to enhance the likelihood of continuity and stability in the composition of our Board of Directors and in the policies formulated by our Board of Directors and to discourage
some transactions that may involve an actual or threatened change of control of our company. These provisions are designed to reduce the vulnerability of our company to an unsolicited acquisition
proposal and, accordingly, could discourage potential acquisition proposals and delay or prevent a change in control of our company. These provisions are also intended to discourage tactics that may
be used in proxy fights but could, however, have the effect of discouraging others from making tender offers for our common stock and, consequently, may also inhibit fluctuations in the market price
of our common stock that could result from actual or rumored takeover attempts. These provisions may also have the effect of preventing changes in the management of our company.

Many corporate actions will be controlled by officers, directors and affiliated entities regardless of the opposition of other investors or the desire
of other investors to pursue an alternative course of action.

Our executive officers, directors and entities affiliated with them, in the aggregate, beneficially own a significant percentage of our outstanding common
stock. These stockholders, if acting together, would be able to significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of
mergers or other business combination transactions.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The information required by this item is set forth in the section of Item 7Management's Discussion and Analysis of Financial Condition and Results
of Operations captioned "Disclosures about Market Rate Risk."

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by this item is set forth in our consolidated financial statements and notes thereto beginning at page F-1 of this Annual
Report.

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

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by Item 10 is incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A under the
Securities Exchange Act in connection with our annual stockholders' meeting.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A under the
Securities Exchange Act in connection with our annual stockholders' meeting.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 12 is incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A under the
Securities Exchange Act in connection with our annual stockholders' meeting.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by Item 13 is incorporated by reference from our definitive proxy statement to be filed pursuant to Regulation 14A under the
Securities Exchange Act in connection with our annual stockholders' meeting.

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PART IV

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

The following are filed as a part of this Annual Report and included in Item 8:

(a) 1. Financial Statements

|Index to Consolidated Financial Statements                                                           |  | F-1
|---------------------------------------------------------------------------------------------------- |  | ---
|Independent Auditors' Report                                                                         |  | F-2
|Consolidated Balance Sheets                                                                          |  | F-3
|Consolidated Statements of Operations                                                                |  | F-4
|Consolidated Statements of Redeemable Convertible Preferred Stock and
Stockholders' Equity (Deficit) |  | F-5
|Consolidated Statements of Cash Flows                                                                |  | F-7
|Notes to Consolidated Financial Statements                                                           |  | F-8



Schedule IIValuation and Qualifying Accounts



|Exhibit
No. |  | Description of Exhibit                                                                                                                                                                                                                                                                                                                                                   
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |  | Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).                                                                                                                                                                                                                
|3.2         |  | Bylaws (Incorporated by reference to Exhibit 3.2 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).                                                                                                                                                                                                                                      
|4.1         |  | Specimen Common Stock certificate (Incorporated by reference to Exhibit 4.1 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).                                                                                                                                                                                                           
|10.1        |  | 1995 Stock Option Plan (Incorporated by reference to Exhibit 10.1 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).                                                                                                                                                                                                                     
|10.2        |  | 1996 Incentive Stock Option Plan (Incorporated by reference to Exhibit 10.2 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).                                                                                                                                                                                                           
|10.3        |  | 2000 Equity Participation Plan (Incorporated by reference to Exhibit 10.3 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).                                                                                                                                                                                                             
|10.4        |  | 2000 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.4 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).                                                                                                                                                                                                          
|10.5        |  | Amended and Restated Registration and Information Rights Agreement, dated as of December 9, 1998, by and among Vicinity Corporation, Rama Aysola, Eddie Babcock, Timothy Bacci, James DiSanto and the investors named on Schedule I thereto
(Incorporated by reference to Exhibit 10.5 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).
|10.6        |  | Amended and Restated Shareholders Agreement, dated as of December 9, 1998, by and among Vicinity Corporation, Rama Aysola, Eddie Babcock, Timothy Bacci, James DiSanto and the investors named in Schedule I thereto (Incorporated by reference
to Exhibit 10.6 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).                       

31

---

|10.7   |  | Voting Agreement, dated as of December 12, 1996, by and among Vicinity Corporation, Rama Aysola, Eddie Babcock, Timothy Bacci, James DiSanto and the investors named in Schedule I thereto (Incorporated by reference to Exhibit 10.7 of
the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.8   |  | Employment Agreement, dated June 17, 1998, by and between Vicinity Corporation and Emerick M. Woods (Incorporated by reference to Exhibit 10.8 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)
).                                                                                      
|10.9   |  | Loan Agreement, dated July 14, 1999, by and between Vicinity Corporation and Emerick M. Woods (Incorporated by reference to Exhibit 10.9 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)
).                                                                                            
|10.10  |  | Form of 1996 Incentive Stock Option Plan Stock Option Agreement (Incorporated by reference to Exhibit 10.10 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).                                                                                                                          
|10.11  |  | Amendment to Incentive Stock Option Plan Agreement dated August 19, 1998, by and between Vicinity Corporation and Scott Young (Incorporated by reference to Exhibit 10.11 of the Company's Registration Statement on Form S-1 (Registration
No. 333-90253)).                                                            
|10.12  |  | Amendment to Incentive Stock Option Plan Agreement dated August 19, 1998, by and between Vicinity Corporation and David Seltzer (Incorporated by reference to Exhibit 10.12 of the Company's Registration Statement on Form S-1
(Registration No. 333-90253)).                                                          
|10.13  |  | Amendment to Incentive Stock Option Plan Agreement dated August 19, 1998, by and between Vicinity Corporation and Mary Gavin (Incorporated by reference to Exhibit 10.13 of the Company's Registration Statement on Form S-1 (Registration
No. 333-90253)).                                                             
|10.14+ |  | Management Support Agreement dated June 11, 1999, by and between Vicinity Corporation and Aperto Multimedia GmbH (Incorporated by reference to Exhibit 10.14 of the Company's Registration Statement on Form S-1 (Registration
No. 333-90253)).                                                                         
|10.15  |  | Management Support Agreement dated July 27, 1999, by and between Vicinity Corporation and Invision AG (Incorporated by reference to Exhibit 10.15 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)
).                                                                                   
|10.16  |  | Master Lease and Financing Agreement dated July 27, 1999, by and between Vicinity Corporation and Compaq (Incorporated by reference to Exhibit 10.16 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)
).                                                                                
|10.17  |  | Capital Lease Agreement dated April 24, 1996, by and between Vicinity Corporation and Pacific Atlantic (Incorporated by reference to Exhibit 10.17 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)
).                                                                                  
|10.18+ |  | Joint Marketing Agreement dated June 23, 1999, by and between Vicinity Corporation and Prio, Inc. (Incorporated by reference to Exhibit 10.18 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)
).                                                                                       
|10.19+ |  | Service and Distribution Agreement, dated June 14, 1999, by and between Vicinity Corporation and Inktomi Corporation (Incorporated by reference to Exhibit 10.19 of the Company's Registration Statement on Form S-1 (Registration
No. 333-90253)).                                                                     

32

---

|10.20  |  | NaviSite Siteharbor Co-Location Services Agreement, dated June 30, 1998, by and between Vicinity Corporation and NaviSite Internet Services Corporation (Incorporated by reference to Exhibit 10.20 of the Company's Registration Statement on
Form S-1 (Registration No. 333-90253)).   
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.21  |  | Sublease Agreement, dated October 1, 1996, by and between Vicinity Corporation and Attachmate Corporation (Incorporated by reference to Exhibit 10.21 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)
).                                                
|10.22  |  | First Sublease Agreement Amendment, dated August 6, 1997, by and between Vicinity Corporation and Attachmate Corporation (Incorporated by reference to Exhibit 10.22 of the Company's Registration Statement on Form S-1 (Registration
No. 333-90253)).                                  
|10.23  |  | Second Sublease Agreement Amendment, dated September 22, 1998, by and between Vicinity Corporation and Attachmate Corporation (Incorporated by reference to Exhibit 10.23 of the Company's Registration Statement on Form S-1 (Registration
No. 333-90253)).                             
|10.24  |  | Sub-Sublease Agreement, dated August 1, 1999, by and between Vicinity Corporation and E*Trade Group, Inc. (Incorporated by reference to Exhibit 10.24 of the Company's Registration Statement on Form S-1 (Registration
No. 333-90253))                                                  
|10.25  |  | Lease Agreement, dated August 10, 1999, by and between Vicinity Corporation and Gordon E. and Blanche M. Bagley (Incorporated by reference to Exhibit 10.25 of the Company's Registration Statement on Form S-1 (Registration
No. 333-90253)).                                           
|10.26  |  | Vicinity Corporation Elaine Hamilton Non-Statutory Stock Option Agreement, dated October 13, 1999, by and between Vicinity Corporation and Elaine Hamilton (Incorporated by reference to Exhibit 10.26 of the Company's Registration Statement
on Form S-1 (Registration No. 333-90253)).
|10.27  |  | Form of Indemnification Agreement (Incorporated by reference to Exhibit 10.27 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).                                                                                                                         
|10.28+ |  | Master Agreement dated January 11, 2000, between Vicinity Corporation and AltaVista Company (Incorporated by reference to Exhibit 10.28 of the Company's Registration Statement on Form S-1 (Registration No. 333-90253)).                                                               
|10.29  |  | Lease Agreement, dated February 25, 2000, by and between Vicinity Corporation and San Aleso, LLC (Incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q for the quarterly period ended April 30,
2000).                                                                   
|10.30  |  | Second Amendment to Security Agreement, dated April 1, 2000, by and between Vicinity Corporation and Emerick M. Woods (Incorporated by reference to Exhibit 10.2 of the Company's Form 10-Q for the quarterly period ended April 30,
2000).                                              
|10.31  |  | Offer of Employment Letter, dated January 15, 2000, by and between Vicinity Corporation and Howard A. Bain III (Incorporated by reference to Exhibit 10.3 of the Company's Form 10-Q for the quarterly period ended April 30,
2000).                                                     
|10.32  |  | Separation Agreement, dated November 30, 2000, by and between Vicinity Corporation and Howard Bain (Incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q for the quarterly period ended October 31, 2000).                                                               
|10.33  |  | Separation Agreement, dated January 22, 2001, by and between Vicinity Corporation and Dinesh Wadhawan (Incorporated by reference to Exhibit 10.1 of the Company's Form 10-Q for the quarterly period ended January 31,
2001).                                                            

33

---

|10.34 |  | Third Amended and Restated Loan Agreement, dated January 31, 2001, by and between Vicinity Corporation and Dinesh Wadhawan (Incorporated by reference to Exhibit 10.2 of the Company's Form 10-Q for the quarterly period ended
January 31, 2001).
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.35 |  | Offer of Employment Letter, dated December 30, 2000, by and between Vicinity Corporation and Maury Austin (Incorporated by reference to Exhibit 10.3 of the Company's Form 10-Q for the quarterly period ended January 31,
2001).                 
|10.36 |  | Separation Agreement, dated January 26, 2001, by and between Vicinity Corporation and Eric Winkler (Incorporated by reference to Exhibit 10.4 of the Company's Form 10-Q for the quarterly period ended January 31, 2001).                        
|10.37 |  | Separation Agreement, dated April 23, 2001, by and between Vicinity Corporation and Emerick Woods (Incorporated by reference to Exhibit 10.5 of the Company's Form 10-Q for the quarterly period ended April 30, 2001).                           
|10.38 |  | Letter Agreement, dated April 24, 2001, by and between Vicinity Corporation and Norman Nie (Incorporated by reference to Exhibit 10.6 of the Company's Form 10-Q for the quarterly period ended April 30, 2001).                                  
|10.39 |  | Executive Employment Agreement, dated April 24, 2001, by and between Vicinity Corporation and Tim McMullen (Incorporated by reference to Exhibit 10.7 of the Company's Form 10-Q for the quarterly period ended April 30,
2001).                  
|10.40 |  | Executive Employment Agreement, dated April 30, 2001, by and between Vicinity Corporation and Daniel M. Shapero (Incorporated by reference to Exhibit 10.8 of the Company's Form 10-Q for the quarterly period ended April 30,
2001).             
|10.41 |  | Certificate of Amendment to the Bylaws of Vicinity Corporation, dated June 29, 2001.                                                                                                                                                              
|23.1  |  | Consent of Independent Auditors.                                                                                                                                                                                                                  
|24.1  |  | Power of Attorney (Included on signature page).                                                                                                                                                                                                   
|      |  |                                                                                                                                                                                                                                                   

---

(b) Reports on Form 8-K

None.

34

---



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report on
Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized as of this 25th day of October 2001.

| | VICINITY CORPORATION                                                                       
| | -------------------------------------------------------------------------------------------
| | /s/TIMOTHY J. MCMULLENTimothy J. McMullen
Senior Vice President and
Chief Operating Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Ronald S. Smith and Maury Austin and each
one of them, acting individually and without the other, as his attorney-in-fact, each with full power of substitution, for him in any and all capacities, to sign any and all
amendments to this report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant
to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant and in the
capacities and on the dated indicated.

|Signature                                 |  | Title                                                                                          |  | Date            
|----------------------------------------- |  | ---------------------------------------------------------------------------------------------- |  | ----------------
|                                          |  |                                                                                                |  |                 
|/s/RONALD S. SMITHRonald S. Smith         |  | Chairman of the
Board of Directors                                                             |  | October 25, 2001
|/s/TIMOTHY J. MCMULLENTimothy J. McMullen |  | Senior Vice President and
Chief Operating Officer
(Principal Executive Officer)                |  | October 25, 2001
|/s/MAURY AUSTINMaury Austin               |  | Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer) |  | October 25, 2001
|/s/GERALD R. GALLAGHERGerald R. Gallagher |  | Director                                                                                       |  | October 25, 2001
|/s/DOUGLAS A. MCINTYREDouglas A. McIntyre |  | Director                                                                                       |  | October 25, 2001
|/s/NORMAN H. NIENorman H. Nie             |  | Director                                                                                       |  | October 25, 2001
|/s/MICHAEL E. SEARSMichael E. Sears       |  | Director                                                                                       |  | October 25, 2001

35

---



VICINITY CORPORATION AND SUBSIDIARIES    INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                     |  | PAGE
|---------------------------------------------------------------------------------------------------- |  | ----
|Independent Auditors' Report                                                                         |  | F-2 
|Consolidated Balance Sheets                                                                          |  | F-3 
|Consolidated Statements of Operations                                                                |  | F-4 
|Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) |  | F-5 
|Consolidated Statements of Cash Flows                                                                |  | F-7 
|Notes to Consolidated Financial Statements                                                           |  | F-8 
|                                                                                                     |  |     

F1

---



INDEPENDENT AUDITORS' REPORT

The
Board of Directors and Stockholders
Vicinity Corporation:

We
have audited the accompanying consolidated balance sheets of Vicinity Corporation and subsidiaries (the Company) as of July 31, 2001 and 2000, and the related consolidated statements of
operations, redeemable convertible preferred stock and stockholders' equity (deficit) and cash flows for each of the years in the three-year period ended July 31, 2001. In
connection with our audits of the consolidated financial statements, we have also audited the related financial statement schedule. These consolidated financial statements and the 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 Vicinity Corporation and subsidiaries as of July 31,
2001 and 2000, and the results of their operations and their cash flows for each of the years in the three-year period ended July 31, 2001, 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.



Mountain
View, California
August 17, 2001, except as to Note 16,
  which is as of October 22, 2001

F2

---



VICINITY CORPORATION AND SUBSIDIARIES  CONSOLIDATED BALANCE SHEETS  (In thousands, except share and per share data)

|                                           |                                                                                                                                                         | July 31, |        
|------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------- | -------- | -------
|
|ASSETS                                     |                                                                                                                                                         |          |        
|CURRENT ASSETS                             |                                                                                                                                                         |          |        
|                                           | Cash and cash equivalents                                                                                                                               |          | $      
|                                           | Short-term investments                                                                                                                                  |          |        
|                                           | Accounts receivable, net                                                                                                                                |          |        
|                                           | Prepaid expenses and other current assets                                                                                                               |          |        
|                                           |                                                                                                                                                         |          |        
|Total current assets                       |                                                                                                                                                         |          | 97,626 
|PROPERTY AND EQUIPMENT, net                |                                                                                                                                                         |          | 9,229  
|INTANGIBLE ASSETS, net                     |                                                                                                                                                         |          | 6,610  
|OTHER ASSETS                               |                                                                                                                                                         |          | 317    
|                                           |                                                                                                                                                         |          |        
|Total Assets                               |                                                                                                                                                         | $        | 113,782
|                                           |                                                                                                                                                         |          |        
|LIABILITIES AND STOCKHOLDERS' EQUITY       |                                                                                                                                                         |          |        
|CURRENT LIABILITIES                        |                                                                                                                                                         |          |        
|                                           | Accounts payable                                                                                                                                        |          | $      
|                                           | Accrued liabilities                                                                                                                                     |          |        
|                                           | Deferred revenue                                                                                                                                        |          |        
|                                           | Capital lease obligations, current portion                                                                                                              |          |        
|                                           |                                                                                                                                                         |          |        
|Total current liabilities                  |                                                                                                                                                         |          | 12,764 
|CAPITAL LEASE OBLIGATIONS                  |                                                                                                                                                         |          |       
|OTHER LIABILITIES                          |                                                                                                                                                         |          | 420    
|                                           |                                                                                                                                                         |          |        
|Total liabilities                          |                                                                                                                                                         |          | 13,184 
|COMMITMENTS AND CONTINGENCIES              |                                                                                                                                                         |          |        
|STOCKHOLDERS' EQUITY                       |                                                                                                                                                         |          |        
|                                           | Preferred stock, $0.001 par value; 5,000,000 shares authorized; outstandingnone                                                                        |          |        
|                                           | Common stock, $0.001 par value; 100,000,000 shares authorized; issued and outstanding28,526,000 and 28,094,000 at July 31, 2001 and 2000, respectively |          |        
|                                           | Additional paid-in capital                                                                                                                              |          |        
|                                           | Deferred stock-based compensation                                                                                                                       |          |        
|                                           | Notes receivable from stockholders                                                                                                                      |          |        
|                                           | Accumulated other comprehensive income (loss)                                                                                                           |          |        
|                                           | Accumulated deficit                                                                                                                                     |          |        
|                                           |                                                                                                                                                         |          |        
|Total stockholders' equity                 |                                                                                                                                                         |          | 100,598
|                                           |                                                                                                                                                         |          |        
|Total Liabilities and Stockholders' Equity |                                                                                                                                                         | $        | 113,782
|                                           |                                                                                                                                                         |          |        

See
Notes to Consolidated Financial Statements.

F3

---



VICINITY CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF OPERATIONS  (In thousands, except per share data)

|                                                                                 |                                               | Years Ended July 31, |        
|-------------------------------------------------------------------------------- | --------------------------------------------- | -------------------- | -------
|
|REVENUES                                                                         |                                               |                      |        
|                                                                                 | License and hosting fees                      |                      | $      
|                                                                                 | Service and transaction fees                  |                      |        
|                                                                                 |                                               |                      |        
|                                                                                 |                                               |                      | 19,994 
|COST OF REVENUES (1)                                                             |                                               |                      | 12,575 
|                                                                                 |                                               |                      |        
|                                                                                 | Gross profit                                  |                      |        
|OPERATING EXPENSES                                                               |                                               |                      |        
|                                                                                 | Product development (1)                       |                      |        
|                                                                                 | Sales and marketing (1)                       |                      |        
|                                                                                 | General and administrative (1)                |                      |        
|                                                                                 | Stock-based compensation                      |                      |        
|                                                                                 | Restructuring costs and other special charges |                      |        
|                                                                                 |                                               |                      |        
|                                                                                 |                                               |                      | 37,547 
|                                                                                 |                                               |                      |        
|LOSS FROM OPERATIONS                                                             |                                               |                      | (30,128
|OTHER INCOME (EXPENSE)                                                           |                                               |                      |        
|                                                                                 | Interest income                               |                      |        
|                                                                                 | Interest expense                              |                      |        
|                                                                                 | Loss on investment                            |                      |        
|                                                                                 | Other                                         |                      |        
|                                                                                 |                                               |                      |        
|                                                                                 |                                               |                      | 2,844  
|                                                                                 |                                               |                      |        
|NET LOSS                                                                         |                                               |                      | (27,284
|Accretion on redeemable convertible preferred stock and warrants                 |                                               |                      |       
|                                                                                 |                                               |                      |        
|NET LOSS APPLICABLE TO COMMON STOCKHOLDERS                                       |                                               | $                    | (27,284
|                                                                                 |                                               |                      |        
|BASIC AND DILUTED NET LOSS PER SHARE                                             |                                               | $                    | (0.97  
|                                                                                 |                                               |                      |        
|WEIGHTED AVERAGE SHARES USED IN BASIC AND DILUTED NET LOSS PER SHARE CALCULATION |                                               |                      | 28,181 
|                                                                                 |                                               |                      |        
|                                                                                 |                                               |                      |        
|(1) Excludes stock-based compensation of:                                        |                                               |                      |        
|Cost of revenues                                                                 |                                               | $                    | 107    
|Product development                                                              |                                               |                      | 63     
|Sales and marketing                                                              |                                               |                      | 205    
|General and administrative                                                       |                                               |                      | 115    
|                                                                                 |                                               |                      |        
|                                                                                 |                                               | $                    | 490    
|                                                                                 |                                               |                      |        

See
Notes to Consolidated Financial Statements.

F4

---

VICINITY CORPORATION AND SUBSIDIARIES

Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)

(In thousands)

|                                                              |                                | Redeemable
convertible
preferred stock                                                |   |   |         |   |        |   |   |    |   |   |         |   |   |        |   |   |      |   |  
|------------------------------------------------------------- | ------------------------------ | ------------------------------------------------------------------------------------- | - | - | ------- | - | ------ | - | - | -- | - | - | ------- | - | - | ------ | - | - | ---- | - | -
|
|
|
|Balances, July 31, 1998                                       |                                | 7,137                                                                                 |   | $ | 7,972   |   | 3,760  |   | $ | 3  |   | $ | (672    | ) | $ |       |   | $ | (2   | ) |  
|Net loss                                                      |                                |                                                                                      |   |   |        |   |       |   |   |   |   |   |        |   |   |       |   |   |     |   | $
|                                                              |                                |                                                                                       |   |   |         |   |        |   |   |    |   |   |         |   |   |        |   |   |      |   |  
|Issuance of preferred stock and warrants                      |                                | 4,080                                                                                 |   |   | 12,393  |   |       |   |   |   |   |   |        |   |   |       |   |   |     |   |  
|Accretion on redeemable preferred stock and warrants          |                                |                                                                                      |   |   | 1,038   |   |       |   |   |   |   |   | (1,038  | ) |   |       |   |   |     |   |  
|Issuance of common stock for cash and note receivable         |                                |                                                                                      |   |   |        |   | 1,528  |   |   | 2  |   |   | 198     |   |   |       |   |   | (96  | ) |  
|Deferred compensation related to option grants                |                                |                                                                                      |   |   |        |   |       |   |   |   |   |   | 1,211   |   |   | (1,211 | ) |   |     |   |  
|Amortization of stock-based compensation                      |                                |                                                                                      |   |   |        |   |       |   |   |   |   |   |        |   |   | 167    |   |   |     |   |  
|                                                              |                                |                                                                                       |   |   |         |   |        |   |   |    |   |   |         |   |   |        |   |   |      |   |  
|Balances, July 31, 1999                                       |                                | 11,217                                                                                |   | $ | 21,403  |   | 5,288  |   | $ | 5  |   | $ | (301    | ) | $ | (1,044 | ) | $ | (98  | ) |  
|Comprehensive loss                                            |                                |                                                                                       |   |   |         |   |        |   |   |    |   |   |         |   |   |        |   |   |      |   |  
|                                                              | Net loss                       |                                                                                       |  |   |         |  |        |  |   |    |  |   |         |  |   |        |  |   |      |  |  
|                                                              | Other comprehensive loss       |                                                                                       |   |   |         |   |        |   |   |    |   |   |         |   |   |        |   |   |      |   |  
|                                                              |                                | Unrealized loss on available-for-sale securities, net of reclassification adjustments |   |   |         |   |        |   |   |    |   |   |         |   |   |        |   |   |      |   |  
|                                                              |                                |                                                                                       |   |   |         |   |        |   |   |    |   |   |         |   |   |        |   |   |      |   |  
|                                                              | Total other comprehensive loss |                                                                                       |   |   |         |   |        |   |   |    |   |   |         |   |   |        |   |   |      |   |  
|                                                              |                                |                                                                                       |   |   |         |   |        |   |   |    |   |   |         |   |   |        |   |   |      |   |  
|Comprehensive loss                                            |                                |                                                                                       |   |   |         |   |        |   |   |    |   |   |         |   |   |        |   |   |      |   | $
|                                                              |                                |                                                                                       |   |   |         |   |        |   |   |    |   |   |         |   |   |        |   |   |      |   |  
|Issuance of preferred stock and warrants                      |                                | 1,302                                                                                 |   |   | 3,750   |   |       |   |   |   |   |   |        |   |   |       |   |   |     |   |  
|Accretion on redeemable preferred stock and warrants          |                                |                                                                                      |   |   | 1,049   |   |       |   |   |   |   |   | (1,049  | ) |   |       |   |   |     |   |  
|Issuance of common stock for cash and note receivable         |                                |                                                                                      |   |   |        |   | 1,655  |   |   | 2  |   |   | 689     |   |   |       |   |   | (134 | ) |  
|Conversion of preferred stock into common stock               |                                | (12,519                                                                               | ) |   | (26,202 | ) | 13,116 |   |   | 13 |   |   | 26,189  |   |   |       |   |   |     |   |  
|Issuance of common stock through initial public offering, net |                                |                                                                                      |   |   |        |   | 8,050  |   |   | 8  |   |   | 125,901 |   |   |       |   |   |     |   |  
|Repurchase of unvested common stock                           |                                |                                                                                      |   |   |        |   | (15    | ) |   |   |   |   | (9      | ) |   |       |   |   |     |   |  
|Deferred compensation related to option grants                |                                |                                                                                      |   |   |        |   |       |   |   |   |   |   | 1,133   |   |   | (1,133 | ) |   |     |   |  
|Amortization of stock-based compensation                      |                                |                                                                                      |   |   |        |   |       |   |   |   |   |   |        |   |   | 1,017  |   |   |     |   |  
|Other                                                         |                                |                                                                                      |   |   |        |   |       |   |   |   |   |   | 12      |   |   |       |   |   |     |   |  
|                                                              |                                |                                                                                       |   |   |         |   |        |   |   |    |   |   |         |   |   |        |   |   |      |   |  

F5

---

|                                                                                  |                                  | Redeemable
convertible
preferred stock                                                |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   |  
|--------------------------------------------------------------------------------- | -------------------------------- | ------------------------------------------------------------------------------------- |  | - | - |  | ------ | - | - | -- |  | - | ------- | - | - | ------ | - | - | ---- | - | -
|
|
|
|Balances, July 31, 2000                                                           |                                  |                                                                                      |  | $ |  |  | 28,094 |   | $ | 28 |  | $ | 152,565 |   | $ | (1,160 | ) | $ | (232 | ) |  
|Comprehensive loss                                                                |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   |  
|                                                                                  | Net loss                         |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   |  
|                                                                                  | Other comprehensive income       |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   |  
|                                                                                  |                                  | Unrealized loss on available-for-sale securities, net of reclassification adjustments |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   |  
|                                                                                  |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   |  
|                                                                                  | Total other comprehensive income |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   |  
|                                                                                  |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   |  
|Comprehensive loss                                                                |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   | $
|                                                                                  |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   |  
|Issuance of common stock for cash                                                 |                                  |                                                                                       |  |   |   |  | 142    |   |   |   |  |   | 56      |   |   |        |   |   |      |   |  
|Issuance of common stock under the ESPP plan                                      |                                  |                                                                                       |  |   |   |  | 231    |   |   |   |  |   | 1,122   |   |   |        |   |   |      |   |  
|Common stock exchanged and options assumed in the NetCreate purchase              |                                  |                                                                                       |  |   |   |  | 441    |   |   | 1  |  |   | 5,323   |   |   |        |   |   |      |   |  
|Common stock issued for services                                                  |                                  |                                                                                       |  |   |   |  | 50     |   |   |   |  |   | 139     |   |   |        |   |   |      |   |  
|Repurchase and cancellation of notes receivable for unvested common stock         |                                  |                                                                                       |  |   |   |  | (432   | ) |   |   |  |   | (417    | ) |   |        |   |   | 143  |   |  
|Deferred compensation related to option grants                                    |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   | (185   | ) |   |      |   |  
|Reversal of deferred compensation associated with canceled unvested stock options |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   | (592    | ) |   | 592    |   |   |      |   |  
|Amortization of stock-based compensation                                          |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   | 490    |   |   |      |   |  
|Repayment of note receivable                                                      |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   |  
|Allowance for doubtful notes receivable                                           |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   | 50   |   |  
|Stock-based compensation associated with the modification of option grants        |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   | 172     |   |   |        |   |   |      |   |  
|Other                                                                             |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   | (5      | ) |   |        |   |   |      |   |  
|                                                                                  |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   |  
|Balances, July 31, 2001                                                           |                                  |                                                                                      |  | $ |  |  | 28,526 |   | $ | 29 |  | $ | 158,364 |   | $ | (263   | ) | $ | (39  | ) |  
|                                                                                  |                                  |                                                                                       |  |   |   |  |        |   |   |    |  |   |         |   |   |        |   |   |      |   |  

See Notes to Consolidated Financial Statements.

F6

---



VICINITY CORPORATION AND SUBSIDIARIES  CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands)

|                                                    |                                                                             | Years Ended July 31, |                                                      
|--------------------------------------------------- | --------------------------------------------------------------------------- | -------------------- | -----------------------------------------------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES                |                                                                             |                      |                                                      
|                                                    | Net loss                                                                    |                      | $                                                    
|                                                    | Adjustments to reconcile net loss to net cash used in operating activities: |                      |                                                      
|                                                    |                                                                             |                      | Depreciation and amortization                        
|                                                    |                                                                             |                      | Provision for doubtful accounts                      
|                                                    |                                                                             |                      | Stock-based compensation                             
|                                                    |                                                                             |                      | Loss on investment                                   
|                                                    |                                                                             |                      | Provision for note receivable from stockholder       
|                                                    |                                                                             |                      | Impairment of fixed assets                           
|                                                    |                                                                             |                      | Impairment of intangible assets                      
|                                                    |                                                                             |                      | Changes in operating assets and liabilities:         
|                                                    |                                                                             |                      |                                                      
|                                                    |                                                                             |                      |                                                      
|                                                    |                                                                             |                      |                                                      
|                                                    |                                                                             |                      |                                                      
|                                                    |                                                                             |                      |                                                      
|                                                    |                                                                             |                      |                                                      
|                                                    |                                                                             |                      |                                                      
|                                                    | Net cash used in operating activities                                       |                      |                                                      
|                                                    |                                                                             |                      |                                                      
|CASH FLOWS FROM INVESTING ACTIVITIES                |                                                                             |                      |                                                      
|                                                    | Investments of excess cash:                                                 |                      |                                                      
|                                                    |                                                                             |                      | Purchases of available-for-sale securities           
|                                                    |                                                                             |                      | Sales and maturities of available-for-sale securities
|                                                    | Purchases of property and equipment                                         |                      |                                                      
|                                                    | Purchase of technology                                                      |                      |                                                      
|                                                    | Purchase of NetCreate                                                       |                      |                                                      
|                                                    | Sublease deposit received                                                   |                      |                                                      
|                                                    | Building lease deposits                                                     |                      |                                                      
|                                                    |                                                                             |                      |                                                      
|                                                    | Net cash used in investing activities                                       |                      |                                                      
|                                                    |                                                                             |                      |                                                      
|CASH FLOWS FROM FINANCING ACTIVITIES                |                                                                             |                      |                                                      
|                                                    | Proceeds from issuance of common stock, net                                 |                      |                                                      
|                                                    | Proceeds from issuance of redeemable preferred stock, net                   |                      |                                                      
|                                                    | Repurchase of unvested common stock                                         |                      |                                                      
|                                                    | Principal payments on capital leases                                        |                      |                                                      
|                                                    | Proceeds from bank note                                                     |                      |                                                      
|                                                    | Payment of bank note                                                        |                      |                                                      
|                                                    |                                                                             |                      |                                                      
|Net cash provided by (used in) financing activities |                                                                             |                      | (182                                                 
|                                                    |                                                                             |                      |                                                      
|Increase (decrease) in cash and cash equivalents    |                                                                             |                      | (35,756                                              
|CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR      |                                                                             |                      | 48,195                                               
|                                                    |                                                                             |                      |                                                      
|CASH AND CASH EQUIVALENTS AT END OF YEAR            |                                                                             | $                    | 12,439                                               
|                                                    |                                                                             |                      |                                                      
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:   |                                                                             |                      |                                                      
|                                                    | Cash paid for interest                                                      |                      | $                                                    
|                                                    |                                                                             |                      |                                                      
|NONCASH INVESTING AND FINANCING ACTIVITIES:         |                                                                             |                      |                                                      
|                                                    | Equipment purchased under capital lease                                     |                      | $                                                    
|                                                    |                                                                             |                      |                                                      
|                                                    | Reclassification of long-term investments to short-term                     |                      | $                                                    
|                                                    |                                                                             |                      |                                                      
|                                                    | Accretion on redeemable preferred stock and warrants                        |                      | $                                                    
|                                                    |                                                                             |                      |                                                      
|                                                    | Common stock issued for notes receivable                                    |                      | $                                                    
|                                                    |                                                                             |                      |                                                      
|                                                    | Deferred compensation related to stock option grants                        |                      | $                                                    
|                                                    |                                                                             |                      |                                                      
|                                                    | Reversal of deferred compensation related to stock option grants            |                      | $                                                    
|                                                    |                                                                             |                      |                                                      
|                                                    | Conversion of redeemable preferred stock into common stock                  |                      | $                                                    
|                                                    |                                                                             |                      |                                                      
|                                                    | Unrealized gain (loss) on available for sale securities                     |                      | $                                                    
|                                                    |                                                                             |                      |                                                      
|                                                    | Common stock and options assumed in purchase business combination           |                      | $                                                    
|                                                    |                                                                             |                      |                                                      
|                                                    | Cancellation of notes receivable for repurchase of unvested common stock    |                      | $                                                    
|                                                    |                                                                             |                      |                                                      

See Notes to Consolidated Financial Statements.

F7

---



VICINITY CORPORATION AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1Description of Business and Summary of Significant Accounting Policies

Description of Business.Vicinity Corporation (the "Company") was formed in 1995. A leading provider of enterprise
location services solutions to Global 2000 companies across Web, wireless and speech platforms. The Company's enterprise solutions, available across the globe and in multiple languages, turn location
information into a coherent, rich source of knowledge and embed location intelligence into the fabric of the organization.

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

Principles of Consolidation.The consolidated financial statements include the accounts of the Company and its wholly
owned subsidiaries in the United Kingdom, France and Germany. All material intercompany balances and transactions have been eliminated in consolidation.

Foreign Currency Translation.For foreign operations with the local currency as the functional currency, assets and
liabilities are translated at year-end exchange rates, and statements of operations are translated at the exchange rates during the year. Exchange gains or losses arising from translation
of such foreign entity financial statements are included as a component of comprehensive loss. Through July 31, 2001, the Company's exchange gains or losses from translation of foreign entity
financial statements have not been significant.

Revenue Recognition.The Company derives its revenues from license and hosting fees and service and transaction fees.
Revenues from license and hosting fees consists of annual recurring fees for hosting services and are recognized ratably over the life of the contracts, which typically have one-year,
non-refundable terms. Our services provide customers and their end users rights to access applications, customer service, and upgrades and updates as provided by the Company. Our customers
generally do not have the right to take possession of the software at any time during the hosting agreement. Contracts also often include monthly or quarterly minimum volume limits which, when
exceeded result in additional fees for actual volume usage. Actual volume usage that exceeds designated minimums is recognized as transaction revenue when amounts due are earned by the Company.
Service and transaction revenue includes revenues from implementation services, project-related professional services, training, volume usage, and, to a lesser degree, from fees derived from
advertising and e-commerce transactions. These revenues are recognized as the services are performed.

The
Company has no barter agreements, and no revenues have been derived from barter transactions to date. Accounts receivable consists of amounts due from customers under signed
contracts where performance on the contract has commenced. Deferred revenue consists of customer payments received and accounts receivable recorded in advance of recognizing revenue for license and
hosting fees.

Cost of Revenues.Cost of revenues includes salaries and benefits of the Company's operations personnel, the cost of
acquiring data and content, the leasing and depreciation cost of the Company's computer hosting equipment and Internet connection and data center charges.

Concentration of Credit Risk.Financial instruments that subject the Company to concentration of credit risk consist
primarily of cash and cash equivalents, short-term investments and trade accounts receivable. The Company places its cash and cash equivalents primarily in depository accounts and money
market accounts of recognized financial institutions. The Company's short-term investments consist

F8

---

primarily of interest-bearing securities, including government securities, municipal bonds, time deposits, Eurodollar deposits, certificates of deposit with approved financial institutions, commercial
paper rated A-1/P-1/F-1, corporate notes and bonds and other money market instruments of similar liquidity and credit quality. To reduce credit risk with trade
accounts receivable, the Company performs evaluations of the credit worthiness of its customers on an ongoing basis. The Company does not generally require collateral or other security. As of
July 31, 2001 no customers comprised greater than 10% of the Company's trade accounts receivable balance. As of July 31, 2000, one customer comprised 17% of the Company's trade accounts
receivable balance. As of July 31, 2001 and 2000, the allowance for doubtful accounts was approximately $299,000 and $134,000, respectively.

Cash, Cash Equivalents and Short-Term Investments.The Company considers all highly liquid investments
purchased with original maturities of three months or less at the date of acquisition to be cash equivalents. The Company considers investments with original maturities of more than three months but
less than one year at the date of acquisition to be short-term investments. Where the original maturity is more than one year, the investments are classified as short-term as
the Company's intention is to convert them into cash for operations. Short-term investments are classified as available-for-sale and are carried at fair value.

Securities Available-for-Sale.Marketable equity securities and debt securities are classified
as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses, net of tax, reported as a
component of comprehensive loss. The amortized cost of debt securities in this category is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included
in interest income. Realized gains and losses and declines in value judged to be other-than-temporary on available-for-sale securities are included in
other income (expense). The cost of securities sold is based on the specific identification method. Interest on securities classified as available-for-sale is included in
interest income. The Company has not realized significant gains or losses on the sale of available-for-sale marketable securities. However, during the fourth quarter of fiscal
2001, the Company determined that the decline in value of a $5.0 million investment was other than temporary and the cost basis of the investment was written down to its fair value of
$1.8 million, resulting in a realized loss of $3.2 million.

Fair Value of Financial Instruments.The carrying amount of the Company's financial instruments, which include cash,
cash equivalents, short-term investments, accounts receivable, accounts payable, accrued liabilities and capital lease obligations, approximate their fair values as of July 31, 2001
and 2000.

Property and Equipment.Property and equipment are stated at cost less accumulated depreciation. Depreciation is
calculated using the straight-line method over the estimated useful lives of the equipment, generally three to five years. Leasehold improvements are amortized over the lesser of the
remaining life of the lease, or five years. Depreciation on the building is calculated using the straight-line method over the estimated useful life of the building, which is
30 years.

Income Taxes.The Company accounts for income taxes using the asset and liability method. In accordance with this
method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the 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 recognized in income in
the period that includes the enactment date.

F9

---

Software Development Costs.The Company capitalizes certain costs of computer software developed or obtained for
internal use. These costs generally include external direct costs of materials and services consumed in the project, and internal costs such as payroll and benefits of those employees directly
associated with the development of the software. During the years ended July 31, 2001 and 2000, the Company capitalized approximately $0.4 million and $0.3 million, respectively,
which will be amortized over the estimated useful life of the software developed, which is generally three years.

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. 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 these assets are considered to be impaired, the impairment to be recognized is 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 cost or fair value less costs to sell.

Intangible Assets.The purchase price of businesses acquired, accounted for as purchase business combinations, is
allocated to the tangible and identifiable intangible assets acquired based on their estimated fair values with any amount in excess of such allocations being designated as goodwill. Intangible assets
are amortized on a straight-line basis over their estimated useful lives, which range from three to five years. As of July 31, 2001, the Company had $7.9 million of
intangible assets, with accumulated amortization of $1.3 million. Management periodically reviews intangible assets for impairment indicators. At the time management determines the existence of
such indicators, the Company uses discounted cash flows of the acquired business over the remaining amortization period to initially determine whether impairment should be recognized. The Company then
performs a subsequent calculation to measure the amount of the impairment loss based on the excess of the carrying value over the fair value of the impaired assets. If quoted market prices for the
assets are not available, the fair value is calculated using the present value of estimated expected future cash flows. The cash flow calculation would be based on management's best estimates, using
appropriate assumptions and projections at the time. The carrying value of identifiable intangible assets is reviewed in a manner consistent with the policy for reviewing impairment of property and
equipment, as described above.

Advertising Expense.The cost of advertising is expensed as incurred. Advertising costs totaled approximately $829,000,
$2,079,000 and $287,000 for the years ended July 31, 2001, 2000 and 1999, respectively.

Reclassifications.Certain prior period amounts have been reclassified to conform to the current period presentation.

Per Share Computations.Basic net loss per share is computed by dividing net loss applicable to common stockholders by
the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing net loss applicable to common stockholders by the weighted-average number of
common and, when dilutive, potential common equivalent shares outstanding during the period. Common equivalent shares include the effect of outstanding redeemable convertible preferred stock,
warrants, common stock subject to repurchase and stock options. All potential common shares have been excluded from the computation of diluted net loss per share for all periods presented because the
effect would be anti-dilutive.

F10

---

Diluted net loss per share does not include the effect of the following anti-dilutive common equivalent shares (in thousands):

|                                              |  | Years Ended July 31,
|--------------------------------------------- |  | --------------------
|
|Stock options                                 |  | 2,623               
|Shares of common stock subject to repurchase  |  | 40                  
|Convertible preferred warrants                |  |                    
|Convertible preferred stock (as if converted) |  |                    
|                                              |  |                     
|                                              |  | 2,663               
|                                              |  |                     

The
weighted-average exercise price of outstanding stock options was, $4.72, $10.63 and $0.22 as of July 31, 2001, 2000 and 1999, respectively. The weighted-average exercise
price of shares of common stock subject to repurchase was $0.68, $0.48 and $0.15 as of July 31, 2001, 2000 and 1999, respectively.

Stock-Based Compensation.The Company accounts for its stock-based compensation arrangements for employees using the
intrinsic-value method for stock-based awards to employees. Compensation expense is recorded for the Company's stock options on the date of grant, to the extent the fair value of the underlying common
stock exceeds the exercise price for stock options or the purchase price for common stock. Options granted to consultants and other non-employees are considered compensatory and are
accounted for at fair value. The Company amortizes deferred stock-based compensation using an accelerated method.

Comprehensive Loss.The following table sets forth the calculation of comprehensive loss for the years ended
July 31, 2001, 2000 and 1999 (in thousands):

|                                                          |  | Years Ended July 31, |        
|--------------------------------------------------------- |  | -------------------- | -------
|
|Net loss                                                  |  | $                    | (27,284
|Unrealized gain/(losses) on available-for-sale securities |  |                      | 601    
|                                                          |  |                      |        
|Comprehensive loss                                        |  | $                    | (26,683
|                                                          |  |                      |        

The
Company recorded a reclassification adjustment of $2.7 million for a loss on investment included in net loss.

F11

---

Note 2Balance Sheet Components

|                             |                                                       | July 31, |       
|---------------------------- | ----------------------------------------------------- | -------- | ------
|
|
|Cash and cash equivalents:   |                                                       |          |       
|                             | Cash                                                  |          | $     
|                             | Money market funds                                    |          |       
|                             | Commercial paper                                      |          |       
|                             |                                                       |          |       
|                             |                                                       | $        | 12,439
|                             |                                                       |          |       
|Property and equipment, net: |                                                       |          |       
|                             | Furniture and fixtures                                |          | $     
|                             | Computer equipment                                    |          |       
|                             | Software                                              |          |       
|                             | Equipment under capital lease                         |          |       
|                             | Leasehold improvements                                |          |       
|                             | Land and building                                     |          |       
|                             |                                                       |          |       
|                             |                                                       |          | 14,688
|                             | Accumulated depreciation and amortization             |          |       
|                             |                                                       |          |       
|                             |                                                       | $        | 9,229 
|                             |                                                       |          |       
|Intangible assets, net:      |                                                       |          |       
|                             | BeeLine purchased technology                          |          | $     
|                             | Goodwill                                              |          |       
|                             | Developed product technology                          |          |       
|                             |                                                       |          |       
|                             |                                                       |          | 7,900 
|                             | Accumulated amortization                              |          |       
|                             |                                                       |          |       
|                             |                                                       | $        | 6,610 
|                             |                                                       |          |       
|Accrued liabilities:         |                                                       |          |       
|                             | Accrued compensation                                  |          | $     
|                             | Accrued expenses                                      |          |       
|                             | Accrued restructuring costs and other special charges |          |       
|                             |                                                       |          |       
|                             |                                                       | $        | 4,054 
|                             |                                                       |          |       

Accumulated
amortization on equipment under capital lease totaled approximately $2,065,000 and $1,035,000 as of July 31, 2001 and 2000, respectively. Amortization of assets
under capital leases is included in depreciation and amortization expense.

F12

---

Note 3Financial Instruments

The following is a summary of available-for-sale debt and marketable equity securities (in thousands):

|                                                        |                       |   |        | Available-for-Sale
Securities |   |    
|------------------------------------------------------- | --------------------- | - | ------ | ----------------------------- | - | ---
|
|July 31, 2001                                           |                       |   |        |                               |   |    
|U.S. treasury securities                                |                       | $ | 3,010  |                               | $ | 6  
|Commercial paper, corporate bonds and medium-term notes |                       |   | 62,181 |                               |   | 330
|Municipal bonds                                         |                       |   | 21,852 |                               |   | 16 
|                                                        |                       |   |        |                               |   |    
|                                                        | Total debt securities |   | $      | 87,043                        |   | $  
|U.S. marketable equity securities                       |                       |   | 1,831  |                               |   |   
|                                                        |                       |   |        |                               |   |    
|                                                        |                       | $ | 88,874 |                               | $ | 352
|                                                        |                       |   |        |                               |   |    
|Amounts included in cash and cash equivalents           |                       | $ | 7,929  |                               | $ |   
|Amounts included in short-term investments              |                       |   | 80,945 |                               |   | 352
|                                                        |                       |   |        |                               |   |    
|                                                        |                       | $ | 88,874 |                               | $ | 352
|                                                        |                       |   |        |                               |   |    
|July 31, 2000                                           |                       |   |        |                               |   |    
|U.S. treasury securities                                |                       | $ | 3,036  |                               | $ |   
|Commercial paper, corporate bonds and medium-term notes |                       |   | 63,281 |                               |   |   
|Municipal bonds                                         |                       |   | 15,188 |                               |   |   
|                                                        |                       |   |        |                               |   |    
|Total debt securities                                   |                       | $ | 81,505 |                               | $ |   
|                                                        |                       |   |        |                               |   |    
|Amounts included in cash and cash equivalents           |                       | $ | 7,634  |                               | $ |   
|Amounts included in short-term investments              |                       |   | 73,871 |                               |   |   
|                                                        |                       |   |        |                               |   |    
|                                                        |                       | $ | 81,505 |                               | $ |   
|                                                        |                       |   |        |                               |   |    

Maturities
of debt securities at market value at July 31, 2001 are as follows (in thousands):

|Mature in one year or less               |  | $ | 46,895
|---------------------------------------- |  | - | ------
|Mature after one year through five years |  |   | 17,402
|Mature after five years                  |  |   | 23,085
|                                         |  |  
|                                         |  | $ | 87,382
|                                         |  |  

Note 4Stockholders' Equity

Common Stock.In February 2000, the Company completed its initial public offering ("IPO"), which resulted in the
sale by the Company of 8,050,000 shares of common stock at $17.00 per share. The Company's net proceeds from the IPO, after deducting underwriting discounts and offering expenses, were approximately
$125.9 million.

F13

---

Warrants.In July 1999, the Company entered into an agreement with a business partner whereby the Company agreed
to issue warrants for the purchase of common stock contingent upon the attainment of performance milestones.This agreement provides for the issuance of warrants exercisable for up to 275,000 shares of
common stock, contingent upon the attainment of performance milestones and expires in July 2002. The exercise price for these warrants shall be determined as of the date when a specific
milestone is achieved and shall be equal to the price per share received by the Company in the most recent private equity financing round of the Company or, following an IPO, the average trading price
of the Company's common stock over the five trading days immediately prior to the date of issuance of these warrants. Upon issuance of the warrants, any difference between the fair value and the
exercise price at the date of achievement of the performance milestone will be recorded as an expense. At July 31, 2001, no performance milestones under this agreement had been met or
determined to be probable and, accordingly, no warrants have been issued or related expense recorded.

Redeemable convertible preferred stock.The Company had issued and outstanding 12,519,000 shares of
Series AF redeemable convertible preferred stock and warrants, all of which converted into shares of the Company's common stock as of the date of the Company's initial public
offering in February 2000. These shares were redeemable at a redemption premium per annum from the date of issuance of these shares, plus all declared but unpaid dividends. The redemption
premium was charged to the statements of operations as accretion on redeemable convertible preferred stock.

Note 5Employee Benefit Plans

Retirement Plan

The Company has a qualified 401(k) plan (the Plan) available to all employees who meet the Plan's eligibility requirements. Participants may elect to
contribute a percentage of their compensation to the Plan up to a statutory maximum amount. The Company may make matching contributions to the Plan on a discretionary basis. The Company did not make
any contributions to the Plan in fiscal 2001, 2000 or 1999.

Option Plans

1995 Stock Option Plan.In October 1995, the Company's Board of Directors approved the 1995 Stock Option Plan
(1995 Plan) and reserved 1,000,000 shares of common stock for issuance under the Plan. In fiscal 1996, an additional 1,000,000 shares of common stock were approved by the Board of Directors and
reserved for issuance under the 1995 Plan. The Board of Directors elected to reduce the number of shares of common stock reserved under the 1995 Plan and 296,448 and 28,281 shares were retired from
the 1995 Plan in fiscal 1998 and 1999, respectively. The 1995 Plan provides for stock options to be granted to employees, consultants, officers, and directors. Options may be granted at an exercise
price not less than 100% of the estimated fair market value, as determined by the Company's Board of Directors, for incentive stock options, and 85% of the estimated fair market value at the date of
grant for nonqualified stock options. All options are granted at the discretion of the Company's Board of Directors and have a term not greater than ten years from the date of grant. Options issued
generally vest ratably over four years (25% one year after the grant date and at a rate of 1/48 per month thereafter). As of July 31, 2001, 1,688,442 shares were available for grant
under the 1995 Plan.

1996 Incentive Stock Option Plan.In November 1996, the Company's Board of Directors approved the 1996 Incentive
Stock Option Plan (1996 Plan), which is effective for a term of ten years. The Board of Directors reserved 809,132 shares of common stock for issuance under the 1996 Plan at that time. During fiscal
1998 and 1999, additional shares of common stock of 2,482,185 and 600,000, respectively, were

F14

---

approved by the Board of Directors and reserved for issuance under the 1996 Plan. Options may be granted at an exercise price not less than 100% of the estimated fair market value, as determined by
the Company's Board of Directors, for incentive stock options, and 85% of the estimated fair market value at the date of grant for nonqualified stock options. All options are granted at the discretion
of the Company's Board of Directors and have a term not greater than ten years from the date of grant. Options issued generally vest ratably over four years (25% one year after the grant date and at a
rate of 1/48 per month thereafter). As of July 31, 2001, 844,392 shares were available for grant under the 1996 Plan.

2000 Equity Participation Plan.In December 2000, the Company's Board of Directors approved the 2000 Equity
Participation Plan (2000 Plan), which is effective for a term of ten years. The 2000 Plan is a successor equity plan to the Company's 1996 Incentive Stock Option Plan. As a result, shares that become
available for issuance as a result of stock options expiring or becoming exercisable under the 1996 Plan may be issued under the 2000 Plan. As of July 31, 2001, there were outstanding under the
1996 Plan stock options to purchase an aggregate of 211,350 shares which, if expire or become unexercisable, may be issued under the 2000 Plan. Options may be granted at an exercise price not less
than 100% of the estimated fair market value, as determined by the Company's Board of Directors, for incentive stock options, and 85% of the estimated fair market value at the date of grant for
nonqualified stock options. With respect to any participant who owns stock possessing more than 10% of the
voting power of all classes of our outstanding capital stock, the exercise price of any incentive stock option granted must be at least equal 110% of the fair market value on the grant date and the
term must not exceed five years. All options are granted at the discretion of the Company's Board of Directors and have a term not greater than ten years from the date of grant. Options issued
generally vest ratably over four years (25% one year after the grant date and at a rate of 1/48 per month thereafter), however the Plan does allow for different vesting terms and therefore some
options granted by the Company have deviated from the four year vesting term that is generally used by the Company. In addition, the 2000 Plan provides that, in the event of a merger of the Company
with or into another corporation, the administrator will have the authority, but not the obligation to accelerate the vesting of each outstanding option and other award, except that options issued to
non-employee directors will vest in full upon the closing of a merger transaction. As of July 31, 2001, 897,537 shares were available for grant under the 2000 Plan.

NetCreate Employee Stock Option Plan.In October 2000, in conjunction with the Company's acquisition of NetCreate
Systems, Inc., the Company assumed 90,513 options under the NetCreate Employee Stock Option Plan (NetCreate Plan.) The NetCreate Plan provided for stock options to be granted to employees, officers,
and directors at an exercise price not less than 100% of the estimated fair market value for incentive stock options, and 85% of the estimated fair market value at the date of grant for nonqualified
stock options. All options have a term not greater than ten years from the date of grant. Options issued generally vest ratably over five years (20% one year after the grant date and at a rate of 20%
per year thereafter).

F15

---

The following is a summary of activity for all stock option plans for the three years ended July 31, 2001:

|                                 |  | Options
outstanding |   | Weighted-
average
exercise
price
|-------------------------------- |  | ------------------- | - | --------------------------------
|Balances as of July 31, 1998     |  | 2,872,637           |   | $                               
|Options granted at fair value    |  | 349,000             |   |                                 
|Options granted below fair value |  | 822,500             |   |                                 
|Options exercised                |  | (1,527,586          | ) |                                 
|Options canceled                 |  | (452,551            | ) |                                 
|                                 |  |                     |   |                                 
|Balances as of July 31, 1999     |  | 2,064,000           |   |                                 
|Options granted at fair value    |  | 1,644,500           |   |                                 
|Options granted below fair value |  | 338,250             |   |                                 
|Options exercised                |  | (1,655,317          | ) |                                 
|Options canceled                 |  | (179,596            | ) |                                 
|                                 |  |                     |   |                                 
|Balances as of July 31, 2000     |  | 2,211,837           |   |                                 
|Options granted at fair value    |  | 2,586,025           |   |                                 
|Options assumed                  |  | 90,513              |   |                                 
|Options exercised                |  | (194,392            | ) |                                 
|Options canceled                 |  | (2,071,063          | ) |                                 
|                                 |  |                     |   |                                 
|Balances as of July 31, 2001     |  | 2,622,920           |   | $                               
|                                 |  |                     |   |                                 

There
were 273,531 and 870,493 options exercisable as of July 31, 2001 and 2000, respectively. The weighted-average fair value of employee stock options granted at fair value
during fiscal 2001, 2000 and 1999 was $2.36, $11.73 and $0.03, respectively. The weighted average fair value of employee stock options granted below fair value during fiscal 2000 and 1999 was $4.10
and $1.51, respectively. The fair value of employee options granted was estimated on the date of grant using the Black-Scholes option-pricing model.

Several
of the Company's stock option plans allow for the issuance of stock options, which may be exercised by full recourse note or by cash to purchase common stock at any time
subsequent to issuance. These shares of common stock may be subject to vesting. The Company has the right to repurchase all unvested shares at the original exercise price in the event of employee
termination. The number of shares subject to the repurchase right decreases as the shares vest under the original option terms, generally four years. As of July 31, 2001, there were 40,000
shares subject to repurchase at prices ranging from $0.10 to $5.00, with a weighted-average repurchase price of $0.68 per share.

F16

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The following table summarizes information about stock options under the plans as of July 31, 2001:

|             |  | Options Outstanding |  | Options Exercisable
|------------ |  | ------------------- |  | -------------------
|
|$0.100.75   |  | 55,846              |  | 7.3                
|$1.372.00   |  | 1,275,583           |  | 9.7                
|$2.385.00   |  | 731,520             |  | 9.3                
|$6.8210.13  |  | 103,654             |  | 8.5                
|$10.8817.00 |  | 355,890             |  | 8.0                
|$18.8824.19 |  | 80,927              |  | 8.8                
|$32.1356.63 |  | 19,500              |  | 8.6                
|             |  |                     |  |                    
|             |  | 2,622,920           |  | 9.2                
|             |  |                     |  |                    

Employee Stock Purchase Plan

In December 1999, the Company's Board of Directors adopted the Vicinity Corporation 2000 Employee Stock Purchase Plan ("2000 ESPP"). A total of 800,000
shares of common stock may be sold under the 2000 ESPP. The 2000 ESPP permits participants to purchase common stock through payroll deductions of up to 15% of the participant's base compensation. Base
compensation is defined as the participant's total compensation that he or she receives on each payday as compensation for services to the Company. The purchase plan, which is intended to qualify
under Section 423 of the Internal Revenue Code, contains consecutive offer periods that are generally 12 months in duration. The offer periods start on March 1 and end on the last
day of February of each year. Each offer period is comprised of two consecutive six-month purchase periods. The price of Common Stock purchased under the 2000 ESPP is 85% of the lesser of
the fair market value of the Common Stock (1) the first day of the purchase period or (2) the last day of the purchase period in which an eligible employee participates. As of
July 31, 2001 and 2000, approximately 231,000 and no shares, respectively, had been issued under the 2000 ESPP.

Stock-Based Compensation

The Company uses the intrinsic-value method in accounting for its stock-based compensation arrangements with employees. Stock- based compensation expense is
recognized for employee stock option grants in those instances in which the fair value of the underlying common stock exceeds the exercise price of the stock options at the date of grant. The Company
recorded deferred stock-based compensation expense before taxes of $185,000, $1,133,000 and $1,211,000 during the years ended July 31, 2001, 2000 and 1999, respectively. Compensation expense is
amortized in accordance with Financial Accounting Standards Board (FASB) Interpretation No. 28. Approximately $490,000, $1,017,000 and $167,000 of stock-based compensation expense was
recognized in the years ended July 31, 2001, 2000 and 1999, respectively.

The
fair value of the Company's stock-based awards to employees was estimated using a Black-Scholes option-pricing model. The following weighted-average assumptions were used in these
calculations: (i) Option Plansa risk-free interest rate of 4.7%, 6.4% and 5.2% for the years ended July 31, 2001, 2000 and 1999, respectively; an expected life
of 3.25 years, 4 years and 4 years for the years ended July 31, 2001, 2000 and 1999, respectively; dividend yield of 0%; and volatility of 130%, 100% and 0% for the years

F17

---

ended July 31, 2001, 2000 and 1999, respectively; (ii) ESPPa risk-free interest rate of 4.6%, an expected life of six months and volatility of 130% for the years
ended July 31, 2001 and 2000.

Had
compensation cost for the Company's stock-based compensation plans been determined consistent with the fair value method, the Company's net losses for the years ended
July 31, 2001, 2000 and 1999 would have been as follows:

|                                                       |  | Years Ended July 31, |        
|------------------------------------------------------ |  | -------------------- | -------
|
|Net loss applicable to common stockholdersas reported |  | $                    | (27,284
|Pro forma stock-based compensation expense             |  |                      | (6,897 
|                                                       |  |                      |        
|Net loss applicable to common stockholderspro forma   |  | $                    | (34,181
|                                                       |  |                      |        
|BASIC AND DILUTED NET LOSS PER SHAREas reported       |  | $                    | (0.97  
|                                                       |  |                      |        
|BASIC AND DILUTED NET LOSS PER SHAREpro forma         |  | $                    | (1.21  
|                                                       |  |                      |        

Note 6Income Taxes

The Company incurred no income tax expense for the years ended July 31, 2001, 2000 and 1999. The income tax expense differed from the amounts computed
by applying the U.S. federal income tax rate of 34% to pretax income as a result of the following:

|                                                                                                   |  | Years Ended July 31, |       
|-------------------------------------------------------------------------------------------------- |  | -------------------- | ------
|
|
|Computed expected tax (benefit)                                                                    |  | $                    | (9,277
|Stock-based compensation                                                                           |  |                      | 116   
|Current year net operating losses and temporary differences for which no tax benefit is recognized |  |                      | 9,668 
|Other                                                                                              |  |                      | (507  
|                                                                                                   |  |                      |       
|                                                                                                   |  | $                    |      
|                                                                                                   |  |                      |       

The
effects of temporary differences that give rise to significant portions of deferred tax assets as of July 31 are as follows:

|                     |                                              | July 31,                                                   |        
|-------------------- | -------------------------------------------- | ---------------------------------------------------------- | -------
|
|
|Deferred tax assets: |                                              |                                                            |        
|                     | Net operating loss carryforwards and credits |                                                            | $      
|                     | Deferred revenue                             |                                                            |        
|                     | Accruals and reserves                        |                                                            |        
|                     | Other                                        |                                                            |        
|                     |                                              |                                                            |        
|                     |                                              | Total gross deferred tax assets before valuation allowance |        
|Valuation allowance  |                                              |                                                            | (20,781
|                     |                                              |                                                            |        
|                     |                                              | $                                                          |       
|                     |                                              |                                                            |        

F18

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As of July 31, 2001, the Company has available net operating losses for federal and state income tax purposes of $39,926,000 and $23,961,000, respectively. The federal net
operating loss carryforward will expire, if not utilized, in the years 2011 through 2021. The California net operating loss carryforwards will expire, if not utilized, in the years 2004 through 2006.
The Company has research credit carryforwards for federal income tax purposes of $525,000, which, if not utilized, will expire beginning in the year 2012. The Company has a valuation allowance for the
full amount of the deferred tax assets as of July 31, 2001 and 2000, as management does not believe it is more likely than not that the value of the assets is recoverable.

Federal
and state tax laws impose substantial restrictions on the utilization of net operating loss carryforwards in the event of an "ownership change" as defined in
Section 382 of the Internal Revenue Code. The Company has not yet determined whether an ownership change occurred due to significant stock transactions in each of the reporting years disclosed.
If an ownership change has occurred, utilization of the net operating loss carryforwards could be significantly deferred and/or reduced.

Note 7Restructuring Costs and Other Special Charges

During the year ended July 31, 2001, the Company recorded restructuring costs and other special charges of $4.4 million, including restructuring
costs of $2.8 million and other special charges of $1.6 million.

In
November 2000, the Company approved a plan to restructure certain of its operations in order to reduce expenses. In connection with this restructuring, the Company reduced
its worldwide headcount by approximately 15% and approved the closure of the Company's German sales facility. Expenses associated with this restructuring plan were approximately $0.6 million.
Essentially all of this restructuring charge was severance and benefits, which represented the reduction of approximately 30 employees from a variety of functional areas, including substantially all
of our German sales employees. Facility closure and other expenses recorded were less than $0.1 million. In addition, during the three months ended January 31, 2001, the Company recorded
$0.5 million of severance-related special charges in conjunction with the departure of four senior executives, including $0.3 million of stock-based compensation.

In
February and April 2001, the Company approved plans to further restructure certain of its operations in order to reduce expenses. In connection with these restructurings,
the Company reduced its worldwide headcount by approximately 35%, significantly reduced the size of its sales force in France and announced a plan to shut down its San Diego operations, which
consisted mainly of Web developers acquired as a result of the Company's purchase of NetCreate Systems, Inc. ("NetCreate") in October 2000. Expenses
associated with this restructuring plan were approximately $2.2 million, of which approximately $1.3 million was for severance and employment related costs and $0.9 million was
for the closure of facilities and equipment costs associated with the termination of employees. In addition, during the three months ended April 30, 2001, the Company recorded approximately in
$1.1 million in other special charges, including approximately $0.8 million in expenses related to the write-off of goodwill, developed product technology and the assembled
workforce related to the NetCreate acquisition, reflecting the Company's de-emphasis on providing custom Web development services going forward, and approximately $0.3 million in
expenses for the write-off of software and other similar costs related to the downsizing of the Company's operations.

F19

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The following analysis sets forth the significant components of total restructuring costs and other special charges recorded by the Company during fiscal 2001 (in thousands):

Restructuring costs
and other
special
charges

Payments/
Charges

Accrual
balance
at July 31,
2001Severance and employment costs

$
2,528

$
(2,271
)
$
257Facility and equipment costs


1,118


(328
)

790Impairment of intangible assets


754


(754
)

$
4,400

$
(3,353
)
$
1,047


It
is anticipated that most of the payments related to the remaining $0.3 million accrued for severance and employment costs will be made by October 31, 2001, with the
exception of payments to one employee whose severance period runs through December 2001. Payments on the remaining facility costs of $0.8 million extend through approximately
July 2003.

Note 8Business Combination

In October 2000, the Company acquired NetCreate, an Internet products and services company providing tools and services to build or enhance the features
and functionality of web sites. In connection with the acquisition, the Company paid $250,000 in cash and issued 441,405 shares of its common stock in exchange for all outstanding shares of NetCreate
common stock. In addition, the Company reserved an additional 90,513 shares of the Company's common stock for issuance in connection with the assumption of NetCreate's outstanding stock options and
warrants. The acquisition was accounted for using the purchase method of accounting and results of NetCreate have been included in the Company's consolidated financial statements from
October 18, 2000. A summary of the purchase price for the acquisition is as follows (in thousands):

Stock and stock options, net of issuance costs

$
5,169Cash


250Direct acquisition costs


253Total

$
5,672


The
purchase price was allocated as follows:

Tangible liabilities acquired

$
(262
)Capitalized software


66Deferred stock-based compensation


185Intangible assets acquired:Goodwill


4,313Developed product technology


990Assembled workforce


380Total

$
5,672


Through
July 31, 2001, the Company began to amortize Goodwill over its estimated life of five years. However, if the Company chooses to adopt Statement of Financial Accounting
Standards ("SFAS") 142,Goodwill and Other Intangible Assetsin fiscal 2002, the Company may cease to amortize goodwill (See

F20

---

Note 12Recent Accounting Pronouncements.) Capitalized software and developed product technology are intangible assets, which will be amortized over their estimated lives of three
years. As discussed in Note 7, during the year ended July 31, 2001, the Company wrote off approximately $0.8 million of goodwill, developed product technology and assembled
workforce related to the NetCreate acquisition, reflecting the Company's de-emphasis on providing custom Web development services. Pro forma comparative combined financial information has
not been shown, as the results of NetCreate are not significant.

Note 9Technology Purchase

In September 2000, the Company entered into a Technology Purchase Agreement (the "BeeLine Agreement") with BeeLine LLC ("BeeLine"), under which the
Company agreed to pay up to $2.7 million dollars during fiscal 2001 to purchase technology and related consulting services from BeeLine. In addition, the BeeLine Agreement specifies an
additional payment of $0.3 million to BeeLine upon the filing of a patent application related to the purchased BeeLine technology. The technology was purchased for internal use.

As
of July 31, 2001, $3.0 million of costs had been incurred under the BeeLine Agreement and capitalized as an intangible asset. The Company is amortizing such costs
over the estimated economic life of the services into which such technology is incorporated, generally three years, beginning in March 2001, the date on which such services were made available
to customers. For the year ended July 31, 2001, the Company recorded $0.4 million of amortization expense related to such costs.

Note 10Commitments

Leases.The Company leases equipment and its facilities under non-cancelable operating and capital leases
with expiration dates through 2008. Future minimum lease payments under the Company's non-cancelable operating and capital leases as of July 31, 2001 are as follows (in thousands):

Capital
Leases

Operating
LeasesYear ending July 31,2002

$
231

$
1,8642003





1,9452004





1,8792005





1,9052006





1,816thereafter





4,090Total minimum lease payments


231

$
13,499Less: amount representing interest


(4
)Present value of minimum lease payments


227


Rental
expense amounted to approximately $2,105,000, $1,616,000 and $1,142,000 for the years ended July 31, 2001, 2000 and 1999, respectively. Rental expense of approximately
$0, $47,000 and $142,000 was paid to a related company for the years ended July 31, 2001, 2000 and 1999, respectively.

During
fiscal 2001, the Company entered into a sublease agreement for approximately 50% of the rentable square footage of its headquarters facility. The future minimum rentals to be
received under this agreement total approximately $1.5 million and $1.0 million for the years ending July 31, 2002 and 2003, respectively.

F21

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License Fees.The Company has entered into agreements with several content providers. Some of these agreements call for
fixed annual payments. Other agreements contain fixed annual minimum payments as well as variable components that require additional payments if certain content usage thresholds are
exceeded by the Company. As of July 31, 2001, the terms of such agreements include the following future minimum license fees (in thousands):

2002

$
9872003


5852004


100$
1,672


Note 11Segment Information

The Company's chief operating decision maker (CODM) is considered to be the Company's Chief Executive Officer or, in the event that the Company's Chief
Executive Officer position is vacant, the Company's Chairman of the Board of Directors will act as CODM. The CODM evaluates performance, makes operating decisions and allocates resources based on
financial data consistent with the presentation in the accompanying consolidated financial statements. Therefore, the Company operates in a single segment.

Revenue
information by geographic area is summarized below for the years ended July 31, 2001, 2000 and 1999:

Years Ended July 31,2001

2000

1999(In thousands)North America

$
16,860

$
13,888

$
6,424Europe


3,134


1,302


$
19,994

$
15,190

$
6,424


The
Company makes allocations of revenue to geographic areas depending on the location of the country where the order is placed or the service is delivered. For the years ended
July 31, 2001 and 2000, no customer accounted for 10% or more of the Company's revenues. For the year ended July 31, 1999, one customer accounted for 11% of the Company's revenues.

Essentially
all of the Company's long-lived assets are located in the United States.

Note 12Recent Accounting Pronouncements

In July 2001, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 141, Business Combinations. SFAS 141 requires that
all business combinations be accounted for under the purchase method. Use of the pooling-of-interests method is no longer permitted. SFAS 141 requires that the purchase
method be used for business combinations initiated after June 30, 2001. The Company has not yet evaluated the effects of these changes on its consolidated financial statements.

In
July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets. SFAS 142 requires that goodwill no longer be amortized to earnings, but instead
be reviewed for impairment. The Company will be required to implement SFAS 142 as of the beginning of its fiscal year 2003, however the

F22

---

Company may opt to implement it as of the beginning of its fiscal year 2002. The Company has not yet evaluated the effects of these changes on its consolidated financial statements.

In
October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. SFAS 144 applies to all
long-lived assets (including discontinued operations). SFAS 144 develops one accounting model for long-lived assets that are to be disposed of by sale. SFAS 144
requires that long-lived assets that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally, SFAS 144 expands the scope
of discontinued operations to include all components of an entity with operations that (1) can be distinguished from the rest of the entity and (2) will be eliminated from the ongoing
operations of the entity in a disposal transaction. SFAS 144 will be effective for the Company in fiscal 2003. The Company has not yet determined the exact impact this standard will have on its
results of operations and financial position.

Note 13Litigation

The Company and certain of its former officers and directors have been named as defendants in four lawsuits filed in the United States District Court for the
Southern District of New York. These lawsuits are purportedly being brought as class actions on behalf of individuals who purchased shares of the Company's common stock between February 9, 2000
and December 6, 2000 in connection with and traceable to the Company's initial public offering, although no class has been certified. These lawsuits allege that the Company, certain of its
former officers and directors, and its securities underwriters violated various sections of the Securities Act of 1933 and the Securities Exchange Act of 1934, and related rules, by reason of alleged
false statements and omissions relating to underwriting discounts and market stabilization transactions. The plaintiffs seek unquantified actual damages, recissionary damages and other relief to
compensate losses allegedly incurred by purchasers of the Company's common stock in connection with the Company's initial public offering.

These
lawsuits are a small part of a large number of such actions brought against numerous securities underwriters and issuers of securities that appear to be related to an
investigation currently being conducted by the United States Securities and Exchange Commission of the conduct of certain securities underwriters. These lawsuits, including the four brought against
the Company, have been transferred to a consolidated docket for coordination and decision of pre-trial motions, discovery and related matters other than trial.

At
present, discovery has not commenced and the Company has not responded to any of the complaints. The Company believes that the claims against the Company and certain of its former
officers and directors are without merit and the Company intends to vigorously defend against them.

The
Company has received correspondence from Murex Licensing Corporation asserting that the Company's services formerly known as Web, Telephone and Wireless Business Finder and the
Company's MapBlast! Web site infringe various claims of patents owned by Murex Securities, Ltd. The Company
believes that the patent infringement claims asserted in the correspondence from Murex are without merit, and it intends to defend against them vigorously should Murex assert them against the Company
in litigation. Murex has also asserted that it expects additional patents, including patent claims allegedly covering the Company's services, to be issued to Murex in the future. The Company is unable
at this time to evaluate the merits of any patent infringement claims Murex may assert against the Company in the future based on patent claims which have not yet issued, or which otherwise have not
been brought to the Company's attention. Notwithstanding the existence of meritorious defenses, any litigation over the scope and application of patents or similar intellectual property claims could
involve significant costs of defense

F23

---

and would involve risks and uncertainties, particularly in light of the fact that the products and technologies described above are material to the Company's business.

Note 14Related Party Transactions

During the years ended July 31, 2001 and 2000, the Company recognized license and hosting revenue of $97,100 and $62,500 related to a contract with a
related party.

The
Company paid approximately $40,000 and $49,000 during the years ended July 31, 2000 and 1999, respectively, to a related party for data center services. In addition, as of
July 31, 1998, the Company had a noninterest bearing payable to the same related party for $163,686, relating to the lease of computer equipment that was paid during fiscal 1999.

Note 15Quarterly Results of Operations (Unaudited)

|                                                                                 |  | Fiscal Year Ended July 31, 2001 |       
|-------------------------------------------------------------------------------- |  | ------------------------------- | ------
|
|
|Revenues                                                                         |  | $                               | 5,430 
|Operating expenses                                                               |  | $                               | 9,302 
|Loss from operations                                                             |  | $                               | (7,102
|Net loss                                                                         |  | $                               | (5,184
|Net loss applicable to common stockholders                                       |  | $                               | (5,184
|Basic and diluted net loss per share                                             |  | $                               | (0.19 
|Weighted average shares used in basic and diluted net loss per share calculation |  |                                 | 27,311

|                                                                                 |  | Fiscal Year Ended July 31, 2000 |       
|-------------------------------------------------------------------------------- |  | ------------------------------- | ------
|
|
|Revenues                                                                         |  | $                               | 2,531 
|Operating expenses                                                               |  | $                               | 3,847 
|Loss from operations                                                             |  | $                               | (2,927
|Net loss                                                                         |  | $                               | (2,872
|Net loss applicable to common stockholders                                       |  | $                               | (3,374
|Basic and diluted net loss per share                                             |  | $                               | (0.71 
|Weighted average shares used in basic and diluted net loss per share calculation |  |                                 | 4,745 

Note 16Subsequent Events

On September 18, 2001, the Company announced that its Board of Directors had authorized a stock repurchase program of up to $5.0 million. As of
October 22, 2001, the Company had repurchased for retirement approximately 1,500,000 shares of its common stock for approximately $2.2 million.

F24

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VICINITY CORPORATION    SCHEDULE II    VALUATION AND QUALIFYING ACCOUNTS

|                          |                                 | Balance
at
Beginning
of Year |   | Additions
Charged
to
Costs and
Expenses |  | Write-Offs |     | Balance
at
End
of Year
|------------------------- | ------------------------------- | ---------------------------- | - | --------------------------------------- |  | ---------- | --- | ----------------------
|
|Year ended July 31, 1999: |                                 |                              |   |                                         |  |            |     |                       
|                          | Allowance for doubtful accounts |                              | $ |                                        |  | $          | 80  |                       
|                          |                                 |                              |   |                                         |  |            |     |                       
|Year ended July 31, 2000: |                                 |                              |   |                                         |  |            |     |                       
|                          | Allowance for doubtful accounts |                              | $ | 80                                      |  | $          | 54  |                       
|                          |                                 |                              |   |                                         |  |            |     |                       
|Year ended July 31, 2001: |                                 |                              |   |                                         |  |            |     |                       
|                          | Allowance for doubtful accounts |                              | $ | 134                                     |  | $          | 350 |                       
|                          |                                 |                              |   |                                         |  |            |     |                       

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