<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

    / X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
                            ---- EXCHANGE ACT OF 1934

                   FOR THE QUARTERLY PERIOD ENDED MAY 31, 2000

   /----/ 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 000-25249

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

          DELAWARE                                          68-0389976
(STATE OR OTHER JURISDICTION OF                          (I.R.S. EMPLOYER
 INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NUMBER)

                                  25 ORINDA WAY
                                ORINDA, CA 94563
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

                                 (925) 253-4500
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

       Indicate by check (X) whether the registrant: (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                  Yes  X            No

        As of July 5, 2000 there were 26,229,674 shares of the registrant's
common stock outstanding.


<PAGE>



                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                                  <C>
PART I FINANCIAL INFORMATION..........................................................................................1

ITEM 1.        FINANCIAL STATEMENTS...................................................................................1

               Balance Sheets.........................................................................................1

               Statements of Operations...............................................................................2

               Statements of Cash Flows...............................................................................3

               NOTES TO UNAUDITED INTERIM FINANCIAL INFORMATION.......................................................4

ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.................7

               RISK FACTORS..........................................................................................13

ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................................23

PART II OTHER INFORMATION............................................................................................23

ITEM 1.        LEGAL PROCEEDINGS.....................................................................................23

ITEM 2.        CHANGES IN SECURITIES AND USE OF PROCEEDS.............................................................23

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES.......................................................................23

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.................................................23

ITEM 5.        OTHER INFORMATION.....................................................................................23

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K......................................................................23

               SIGNATURES............................................................................................24
</TABLE>

<PAGE>

PART I
FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                                  INTRAWARE, INC.
                                                  BALANCE SHEETS
                                                  (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                  May 31, 2000       February 29, 2000
<S>                                                                              <C>                 <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                     $      14,649         $      16,013
   Short term investments                                                                3,467                11,046
   Accounts receivable, net                                                             42,579                35,381
   Prepaid licenses, services, and cost of deferred revenue                             25,853                21,006
   Other current assets                                                                  2,937                 2,477
                                                                                 -------------         -------------
       Total current assets                                                             89,485                85,923

Long term investments                                                                       --                19,826
Long term cost of deferred revenue                                                       8,202                 7,500
Property and equipment, net                                                             11,183                 8,411
Intangible assets, net                                                                   8,061                 9,050
Other assets                                                                               619                   402
                                                                                 -------------         -------------
           Total assets                                                          $     117,550         $     131,112
                                                                                 =============         =============

LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
   Bank borrowings                                                               $         500         $         500
   Accounts payable                                                                     35,658                43,436
   Accrued expenses                                                                      2,945                 4,489
   Deferred revenue                                                                     27,592                23,550
   Short-term obligations                                                                  705                   384
                                                                                 -------------         -------------
       Total current liabilities                                                        67,400                72,359

Long term deferred revenue                                                               8,568                 7,751
Other long term obligations                                                                774                   399
                                                                                 -------------         -------------
           Total liabilities                                                            76,742                80,509
                                                                                 -------------         -------------
Stockholders' equity:
   Common Stock; $0.0001 par value; 250,000 shares authorized, 26,216 issued
       and outstanding; 250,000 shares authorized, 25,993 shares issued and
       outstanding                                                                           3                     3
   Additional paid-in-capital                                                          108,060               107,037
   Unearned compensation                                                                (6,108)               (6,954)
   Accumulated, other comprehensive loss                                                   (17)                 (136)
   Accumulated deficit                                                                 (61,130)              (49,347)
                                                                                 -------------         -------------
       Total stockholders' equity                                                       40,808                50,603
                                                                                 -------------         -------------
           Total liabilities and stockholders' equity                            $     117,550         $     131,112
                                                                                 =============         =============
</TABLE>

See notes to unaudited interim financial information.


                                       1
<PAGE>


                                                  INTRAWARE, INC.
                                             STATEMENTS OF OPERATIONS
                                   (in thousands, except for per share amounts)

<TABLE>
<CAPTION>
                                                                                      FOR THE THREE MONTHS ENDED
                                                                                  MAY 31, 2000         MAY 31, 1999
<S>                                                                              <C>                  <C>
Net revenues:
   Software product sales                                                        $       36,507       $       13,984
   Online services and technology                                                         4,957                2,525
                                                                                 --------------       --------------
            Total net revenues                                                           41,464               16,509
                                                                                 --------------       --------------
Cost of net revenues:
   Software product sales                                                                31,929               12,378
   Online services and technology                                                           866                  399
                                                                                 --------------       --------------
            Total cost of net revenues                                                   32,795               12,777
                                                                                 --------------       --------------
                  Gross profit                                                            8,669                3,732
                                                                                 --------------       --------------
Operating expenses:
   Sales and marketing                                                                   11,281                5,748
   Product development                                                                    3,620                1,303
   General and administrative                                                             4,020                1,143
   Stock option compensation                                                                770                  870
   Merger & acquisition related costs including amortization of intangibles                 932                    4
                                                                                 --------------       --------------
            Total operating expenses                                                     20,623                9,068
                                                                                 --------------       --------------
Loss from operations                                                                    (11,954)              (5,336)
Interest expense                                                                            (33)                 (35)
Interest and other income                                                                   241                  740
Provision for income taxes                                                                  (37)                  --
                                                                                 --------------       --------------
Net loss                                                                         $      (11,783)      $       (4,631)
                                                                                 ==============       ==============
Net loss per share:
   Basic and diluted                                                             $        (0.46)      $        (0.20)
                                                                                 ==============       ==============
   Weighted average shares - basic and diluted                                           25,407               23,213
                                                                                 ==============       ==============
</TABLE>

See notes to unaudited interim financial information.


                                       2
<PAGE>


                                                  INTRAWARE, INC.
                                             STATEMENTS OF CASH FLOWS
                                                  (in thousands)

<TABLE>
<CAPTION>
                                                                    FOR THE THREE MONTHS ENDED
                                                                 MAY 31, 2000        MAY 31, 1999
<S>                                                             <C>                 <C>
Cash flows from operating activities:
   Net loss                                                     $      (11,783)     $       (4,631)
   Adjustments to reconcile net loss to net cash used in
   operating activities:
       Depreciation and amortization                                     1,843                 290
       Amortization of unearned compensation                               846                 811
       Provision for doubtful accounts                                     459                  36
       Changes in assets and liabilities:
           Accounts receivable                                          (7,757)             (2,756)
           Prepaid licenses and services                                (5,328)              5,828
           Other current assets                                           (460)                198
           Other assets                                                   (117)                236
           Accounts payable                                             (7,778)             (8,765)
           Accrued expenses                                             (1,544)              1,168
           Deferred revenue                                              4,859               2,321
                                                                --------------      --------------
Net cash used in operating activities                                  (26,760)             (5,264)
                                                                --------------      --------------
Cash flows from investing activities:
   Purchase of property and equipment                                   (3,132)             (2,350)
   Proceeds from sales of investments                                   27,516                  --
                                                                --------------      --------------
Net cash provided by (used in) investment activities                    24,384              (2,350)
                                                                --------------      --------------
Cash flows from financing activities:
   Payments on bank borrowings                                              --                (871)
   Proceeds from initial public offering                                    --              59,520
   Proceeds from Common Stock                                            1,023               5,158
   Principal payments on capital lease obligation                          (11)                (36)
                                                                --------------      --------------
Net cash provided by financing activities                                1,012              63,771
                                                                --------------      --------------
Net increase (decrease) in cash and cash equivalents                    (1,364)             56,157
Cash and cash equivalents at beginning of period                        16,013               3,286
                                                                --------------      --------------
Cash and cash equivalents at end of period                      $       14,649      $       59,443
                                                                ==============      ==============
Supplemental disclosure of cash flow information:
   Cash paid for interest                                       $           21      $           35
Supplemental non-cash activity:
   Property and equipment leases                                $          486      $           --
   Prepaid maintenance leases                                   $          221      $           --
</TABLE>

See notes to unaudited interim financial information.


                                       3
<PAGE>


                                 INTRAWARE, INC.
                NOTES TO UNAUDITED INTERIM FINANCIAL INFORMATION

NOTE 1.  BASIS OF PRESENTATION

INTRAWARE

         The accompanying financial statements for the three months ended May
31, 2000 and 1999 are unaudited and reflect all normal recurring adjustments
which are, in the opinion of the management of Intraware, Inc. (the "Company"),
necessary for their fair presentation. These financial statements should be read
in conjunction with the Company's financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
February 29, 2000. The results of operations for the interim period ended May
31, 2000 are not necessarily indicative of results to be expected for the full
year.

NOTE 2.  NET LOSS PER SHARE

         The Company computes net loss per share in accordance with Statement
of Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share"
and SEC Staff Accounting Bulletin No. 98 (SAB 98). Under the provisions of
SFAS 128 and SAB 98, basic and diluted net loss per share is computed by
dividing the net loss available to common stockholders for the period by the
weighted average number of shares of common stock outstanding during the
period, excluding shares subject to repurchase and in escrow relative to
acquisition. Diluted net loss per share is computed by dividing the net loss
for the period by the weighted average number of common and potential common
shares outstanding during the period if the effect is antidilutive. Potential
common shares are composed of common stock subject to repurchase rights,
shares held in escrow, and incremental shares of common stock issuable upon
the exercise of stock options and warrants and upon conversion of Series A,
Series B, Series C and Series D convertible preferred stock.

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

<TABLE>
<CAPTION>
                                                                                      FOR THE THREE MONTHS ENDED
                                                                                   MAY 31, 2000         MAY 31, 1999
<S>                                                                                <C>                  <C>
Numerator
   Net loss                                                                         $  (11,783)          $   (4,631)
                                                                                    ----------           ----------
Denominator
   Weighted average shares                                                              26,117               25,213
   Weighted average unvested common shares subject to repurchase                          (710)              (2,000)
                                                                                    ----------           ----------
   Denominator for basic and diluted calculation                                        25,407               23,213
                                                                                    ==========           ==========
Net loss per share:
   Basic                                                                            $    (0.46)          $    (0.20)
                                                                                    ==========           ==========
   Diluted                                                                          $    (0.46)          $    (0.20)
                                                                                    ==========           ==========
</TABLE>


                                       4

<PAGE>

NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1999, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133--an amendment of FASB Statement 133" ("SFAS 137"). SFAS 137
defers for one year the application of Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes accounting and reporting standards of derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. The adoption of Statement of Financial
Accounting Standards No. 133 is not expected to have an impact on the results of
operations, financial position or cash flows of the Company.

         In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin ("SAB") 101, Revenue Recognition in Financial
Statements which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101 was effective the
first fiscal quarter of fiscal years beginning after December 15, 1999 and
requires companies to report any changes in revenue recognition as cumulative
change in accounting principle at the time of implementation in accordance
with Accounting Principles Board opinion 20, "Accounting Changes." In March
2000, the SEC issued SAB 101A "Amendment: Revenue Recognition in Financial
Statements," which delays implementation of SAB 101 until the Company's first
fiscal quarter of 2001. In June 2000, the SEC issued SAB 101B "Second
Amendment: Revenue Recognition in Financial Statements," which delays the
implementation of SAB 101 until the Company's fourth fiscal quarter of 2001.
The Company will adopt SAB 101 and is currently in the process of evaluating
the impact, if any, SAB 101 will have on its financial position or results of
operations.

         In March 2000, the FASB issued Interpretation No. 44, ("FIN 44"),
Accounting for Certain Transactions Involving Stock Compensation - an
Interpretation of APB 25. This Interpretation clarifies (a) the definition of
employee for purposes of applying Opinion 25, (b) the criteria for
determining whether a plan qualifies as a non compensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. This Interpretation is
effective July 1, 2000, but certain conclusions in this Interpretation cover
specific events that occur after either December 15, 1998, or January 12,
2000. To the extent that this Interpretation covers events occurring during
the period after December 15, 1998, or January 12, 2000, but before the
effective date of July 1, 2000, the effects of applying this Interpretation
are recognized on a prospective basis from July 1, 2000.

                                       5

<PAGE>

NOTE 4.  CHANGES IN STOCKHOLDERS' EQUITY

         During the three months ended May 31, 2000, the Company's stockholders'
equity changed as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                             Accumulated
                                                    Common Stock           Additional           Other
                                                ---------------------        Paid-In        Comprehensive
                                                  Shares      Amount         Capital             Loss
                                                ----------  ---------      ----------       -------------
<S>                                           <C>          <C>         <C>             <C>
Balance at February 29, 2000                      25,993      $   3        $ 107,037           $ (136)

Exercise of stock options                            153          -              202                -
Issuance of common stock for employee stock
  purchase program                                    70          -              897                -
Deferred stock-based compensation for options
  forfeited                                            -          -              (76)               -
Amortization of unearned compensation                  -          -                -                -
Unrealized investment gain (loss)                      -          -                -              119
Net loss                                               -          -                -                -

Other comprehensive income

                                                --------      -----        ---------           ------
Balance at May 31, 2000                           26,216      $   3        $ 108,060           $  (17)
                                                --------      -----        ---------           ------
                                                --------      -----        ---------           ------

                                                Unearned    Accumulated  Stockholders'    Comprehensive
                                              Compensation    Deficit       Equity           Income
                                              ------------  -----------  ------------     -------------

Balance at February 29, 2000                   $  (6,954)   $ (49,347)    $  50,603         $ (49,144)

Exercise of stock options                              -            -           202
Issuance of common stock for employee stock
  purchase program                                     -            -           897
Deferred stock-based compensation for options
  forfeited                                           76            -             -
Amortization of unearned compensation                770            -           770
Unrealized investment gain (loss)                      -            -           119               119
Net loss                                               -      (11,783)      (11,783)          (11,783)

Other comprehensive income
                                                                                            ---------
                                                                                            $ (60,808)
                                                                                            ---------
                                                                                            ---------
                                                --------    ---------     ---------
Balance at May 31, 2000                           (6,108)   $ (61,130)    $  40,808
                                                --------    ---------     ---------
                                                --------    ---------     ---------
</TABLE>


                                       6

<PAGE>

NOTE 5.  ACQUISITION OF JANUS TECHNOLOGIES, INC.

         On June 12, 2000, the Company announced that it had signed a
definitive agreement to acquire all outstanding shares of Janus Technologies,
Inc. The Company completed this transaction on July 12, 2000. The Company
issued approximately 1.4 million shares of its common stock to acquire Janus.
The Company intends to account for this transaction using the purchase method
of accounting and, accordingly, the purchase price will be allocated to the
tangible and intangible net assets acquired on the basis of their respective
fair values on the date of acquisition.

NOTE 6.  PREFERRED STOCK FINANCING

         On June 30, 2000, the Company issued an aggregate of 2,500 shares of
its Series A, B and C convertible preferred stock and related Warrants in a
private placement to institutional investors. The Company estimates the gross
proceeds of the offering to be approximately $25,000,000. The Preferred Stock
is convertible into the Company's common stock at a 120% premium to the
average closing bid price for the common stock during the three month-long
pricing periods beginning July 5, 2000. The Company may be required to redeem
portions of the preferred stock in the event that the price of the Company's
common stock falls below $12.50 per share during the pricing periods. The
preferred stock can be converted into common stock after two years and
entitles the investors to a 9% annual dividend, payable in cash or registered
stock, while the Preferred Stock remains outstanding. In addition, the
Company issued warrants to investors to purchase $10 million worth of common
stock at an exercise price of 120% over the average of the Company's closing
bid price during the three pricing periods. The Company filed a Form 8-K with
the SEC related to this financing on July 3, 2000.

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

         The following discussion of our financial condition and results of
operations should be read in conjunction with our financial statements and
related notes. This discussion contains forward-looking statements that involve
risks and uncertainties. Forward-looking statements include statements regarding
the extent and timing of future revenues and expenses and customer demand,
statements regarding the deployment of our products, and statements regarding
our reliance on third parties. All forward-looking statements included in this
document are based on information available to us as of the date hereof, and we
assume no obligation to update any such forward-looking statement. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including but not limited to, those
discussed in "Risk Factors" below and elsewhere in this quarterly report on Form
10-Q.

INTRAWARE OVERVIEW

         Intraware, Inc. was incorporated in Delaware on August 14, 1996. We
are the leading e-marketplace for web-based software and services targeted to
IT professionals. Our services allow IT professionals to control the business
software life cycle from their web browsers--starting with research and
evaluation, through purchase, training, and deployment, to updates and
management. We provide objective technical research; in-depth software
analysis; an extensive selection of software, training, and resources; and a
comprehensive software delivery, update and management system.

                                       7
<PAGE>


         Software product sales revenue results from the sale of third party
software products to customers and is recognized when there is evidence of an
arrangement for a fixed and determinable fee that is probable of collection and
the software is available for customer download through our web site. Software
maintenance revenue results from the sale of third-party software maintenance
agreements and is recognized ratably over the service period.

         Online services and technology revenue results primarily from
Intraware license revenue from large customers or OEM (Original Equipment
Manufacturer) partners, software maintenance outsourcing arrangements with
third-party software vendors delivered through INTRAWARE DELIVERY (formerly
SUBSCRIBNET) and from various fee-based subscription research and evaluation
services that we offer. Such revenues are generally recognized ratably over
the service period.

         We have a limited operating history upon which investors may evaluate
our business and prospects. Since inception, we have incurred significant
losses, and, as of May 31, 2000, had an accumulated deficit of approximately
$61.1 million. We intend to expend significant financial and management
resources on the development of additional services, sales and marketing,
technology and operations to support larger-scale operations and greater service
offerings. As a result, we expect to incur additional losses and continued
negative cash flow from operations for the foreseeable future. Such losses are
anticipated to increase significantly from current levels. There can be no
assurance that our sales will increase or continue at their current level. There
also can be no assurances that we will achieve or maintain profitability or
generate cash from operations in future periods. Our future must be considered
in light of the risks frequently encountered by companies in their early stage
of development, particularly companies in new and rapidly evolving markets such
as e-commerce. To address these risks, we must, among other things, maintain
existing and develop new relationships with software publishers, continue to
improve existing and develop new services, implement and successfully execute
our business and marketing strategy, continue to develop and upgrade our
technology and transaction-processing systems, provide superior customer
service, respond to competitive developments and attract, retain and motivate
qualified personnel. There can be no assurance that we will be successful in
addressing such risks and the failure to do so would have a material adverse
effect on our business, financial condition and results of operations. Our
current and future expense levels are based largely on our planned operations
and estimates of future sales. Sales and operating results generally depend on
the volume and timing of orders received, which are difficult to forecast. We
may be unable to adjust spending in a timely manner to compensate for any
unexpected revenue shortfall. Accordingly, any significant shortfall in sales
would have an immediate adverse effect on our business, financial condition and
results of operations. In view of the rapidly evolving nature of our business
and our limited operating history, we are unable to accurately forecast our
sales and believe that period-to-period comparisons of our operating results are
not necessarily meaningful and should not be relied upon as an indication of
future performance.

RESULTS OF OPERATIONS

TOTAL REVENUE

         Revenue increased to $41.5 million for the three months ended May
31, 2000 from $16.5 million for three months ended May 31, 1999. In addition,
for the three months ended May 31, 2000, product revenue accounted for $36.5
million or 88.0% of revenue, while online service and technology revenue
accounted for $5.0 million or 12.0% of revenue. For the three months ended
May 31, 1999, product revenue accounted for $14 million or 85% of revenue,
while online service and technology revenue accounted for $2.5 million or 15%
of revenue.

         Revenue growth was due to our broadband technology portfolio,
expanding vendor base, experienced sales force and increasing customer demand
for products and services.

                                       8
<PAGE>

COST OF NET REVENUES

         Total cost of net revenues increased to $32.8 million for the three
months ended May 31, 2000 from $12.8 million for the three months ended May 31,
1999. This increase in total cost of net revenues was primarily attributable to
increases in the volume of third-party software and maintenance products that we
sold.

         Our gross margin decreased to 20.9% for the three months ended May 31,
2000 from 22.6% for the three months ended May 31, 1999.

         Costs of revenue primarily consist of the cost of third-party products
sold, content development and acquisition, internet connectivity and allocated
overhead charges. We purchase third-party products at a discount to the
third-party's established list prices according to standard reseller terms. The
increase in the cost of revenue dollars was primarily due to higher product and
service sales. The margin percentage decrease primarily reflects the fact that
our product revenues and costs have grown at a faster rate than our online
services and technology sales.

SALES AND MARKETING EXPENSES

         For the three months ended May 31, 2000, sales and marketing expenses
were $11.3 million or 27.2% of net revenue, an increase from $5.7 million or
34.8% of net revenue for the three months ended May 31, 1999.

         Sales and marketing expenses consist primarily of employee salaries,
benefits and commissions, advertising, promotional materials and trade show
exhibit expenses. The increase is primarily the result of additional focused
advertising and marketing expenditures as well as the addition of personnel
and external sales offices throughout the United States, Canada and Europe.
We plan to make significant investments in sales and marketing, to expand the
direct sales force, increase marketing expenditures, and continue to develop
strategic relationships to drive traffic to our web site and generate leads
for products and services. The previous sentence is a forward-looking
statement and actual results could differ materially from those anticipated.

PRODUCT DEVELOPMENT EXPENSES

         For the three months ended May 31, 2000, product development expenses
were $3.6 million or 8.7% of net revenue, an increase from $1.3 million or 7.9%
of net revenue for the three months ended May 31, 1999.

         Product development expenses primarily consist of personnel,
consulting and equipment depreciation expenses. Costs related to research,
design and development of products and services have also been charged to
product development expense as incurred. The increase was primarily due to an
increase in the number of product development personnel employed to support
expansion of the Services online service offerings. We believe significant
investments in product development and technological infrastructure are
essential to our future success and expect that the amount of product
development expense will increase in future periods. The previous sentence is
a forward-looking statement and actual results could differ materially from
those anticipated.

                                      9
<PAGE>


GENERAL AND ADMINISTRATIVE EXPENSES

         For the three months ended May 31, 2000, general and administrative
expenses were $4.0 million or 9.7% of net revenue, an increase from $1.1 million
or 6.9% of net revenue for the three months ended May 31, 1999.

         General and administrative expenses consist primarily of compensation
for administrative and executive personnel, facility costs and fees for
professional services. The increase is primarily due to the use of outside
professional consulting services, including the ongoing implementation of sales
force automation and accounting software packages. In addition, we required
increased expenditures in accounting and legal functions for strategic
partnering arrangements and for compliance with reporting obligations as a
public company. Management expects general and administrative expenses to
increase in future periods. The previous sentence is a forward-looking statement
and actual results could differ materially from those anticipated.

STOCK-BASED COMPENSATION

         For the three months ended May 31, 2000, stock-based compensation
expenses were $770,000 or 1.9% of net revenue, a decrease from $870,000 or 5.3%
of net revenue for the three months ended May 31, 1999.

         Stock compensation expense is an ongoing charge through August 2002
that is related to employee stock options granted while we were not a public
company.

AMORTIZATION OF INTANGIBLES

         For the three months ended May 31, 2000, merger and acquisition related
costs including amortization of intangibles were $932,000 or 2.2% of net
revenue, an increase from $4,000 or 0.1% of net revenue for the three months
ended May 31, 1999.

         Merger and acquisition related costs including amortization of
intangibles is a charge related to our acquisitions of BITSource, Inc. and
Internet Image, Inc. This expense is an ongoing charge through September 2004.

INTEREST EXPENSE

         For the three months ended May 31, 2000, interest expenses were $33,000
or 0.1% of net revenue, a decrease from $35,000 or 0.2% of net revenue for the
three months ended May 31, 1999.

         Interest expense relates to obligations under capital leases and
borrowings under a bank line. The decrease in interest expense is primarily the
result of funds received in our initial public offering.

INTEREST AND OTHER INCOME, NET

         For the three months ended May 31, 2000, interest and other income,
net were $241,000 or 0.6% of net revenue, a decrease from $740,000 or 4.5% of
net revenue for the three months ended May 31, 1999.

         The decrease in interest income is primarily the result of the
reduction of our investment portfolio.

                                       10
<PAGE>


INCOME TAXES

         From inception through May 31, 2000, we incurred net losses for federal
and state tax purposes. We have recognized approximately $37,000 of state income
taxes for the three months ended May 31, 2000. There were no state or federal
taxes recognized for the three months ended May 31, 1999. As of May 31, 2000,
Intraware had approximately $42 million of federal and $26 million of state net
operating loss carryforwards available to offset future taxable income which
expire in varying amounts between 2005 and 2012. Given our limited operating
history, losses incurred to date and the difficulty in accurately forecasting
our future results, management does not believe that the realization of the
related deferred income tax asset meets the criteria required by generally
accepted accounting principles. Accordingly, we have recorded a 100% valuation
allowance against our deferred tax asset. Furthermore, as a result of changes in
our equity ownership from our convertible preferred stock financing and our
initial public offering, utilization of the net operating losses and tax credits
is subject to substantial annual limitations. This is due to the ownership
change limitations provided by the Internal Revenue Code of 1986, as amended,
and similar state provisions. The annual limitation may result in the expiration
of net operating losses and tax credits before utilization.

LIQUIDITY AND CAPITAL RESOURCES

         As of May 31, 2000, we had approximately $14.6 million of cash and
cash equivalents and $3.5 million in short-term marketable securities. Our
principal commitments consist of obligations outstanding under bank credit
lines, capital and operating leases, accounts payable and accrued expenses.
Although we have no material commitments for capital expenditures, we
anticipate an increase in the rate of capital expenditures consistent with
our anticipated growth in operations, infrastructure and personnel.

         On June 30, 2000 we issued approximately 2,500 shares of preferred
stock which resulted in gross proceeds of approximately $25,000,000. The
preferred stock was issued in three series. Each series will be convertible
at a conversion price equal to 120% of the average closing bid price of our
common stock determined during three separate month-long pricing periods,
with one pricing period for each series of preferred stock. We may be
required to redeem portions of the preferred stock in the event the price of
our common stock falls below $12.50 during the pricing periods.

         Including the proceeds from the issuance of the preferred stock, and
assuming we do not have to redeem any shares of the preferred stock, we
believe we have adequate resources for working capital and capital
expenditures for at least twelve (12) months from the date of this report.
Our future liquidity and capital requirements will depend upon numerous
factors. The pace of expansion of our operations will affect these
requirements. We may also have increased capital requirements in order to
respond to competitive pressures. Also, we may need additional capital to
fund acquisitions of complementary businesses and technologies. Our forecast
of the period of time through which our financial resources will be adequate
to support our operations is a forward-looking statement that involves risks
and uncertainties. Actual results could vary materially as a result of the
factors described above. If additional capital resources are required, we may
seek to sell additional equity, debt securities or increase our bank line of
credit. The sale of additional equity or convertible debt securities could
result in additional dilution to our stockholders. There can be no assurance
that any financing arrangements will be available in amounts or on terms
acceptable to us.

                                       11

<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1999, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 137, "Accounting for
Derivative Instruments and Hedging Activities--Deferral of the Effective Date
of FASB Statement No. 133--an amendment of FASB Statement 133" ("SFAS 137").
SFAS 137 defers for one year the application of Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which establishes accounting and reporting standards of
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. The adoption of Statement of
Financial Accounting Standards No. 133 is not expected to have an impact on
our results of operations, financial position or cash flows.

         In December 1999, the Securities and Exchange Commission issued
Staff Accounting Bulletin ("SAB") 101, Revenue Recognition in Financial
Statements which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101 was effective the
first fiscal quarter of fiscal years beginning after December 15, 1999 and
requires companies to report any changes in revenue recognition as cumulative
change in accounting principle at the time of implementation in accordance
with Accounting Principles Board opinion 20, "Accounting Changes." In March
2000, the SEC issued SAB 101A "Amendment: Revenue Recognition in Financial
Statements," which delays implementation of SAB 101 until the Company's first
fiscal quarter of 2001. In June 2000, the SEC issued SAB 101B "Second
Amendment: Revenue Recognition in Financial Statements," which delays the
implementation of SAB 101 until the Company's fourth fiscal quarter of 2001.
The Company will adopt SAB 101 and is currently in the process of evaluating
the impact, if any, SAB 101 will have on its financial position or results of
operations.

         In March 2000, the FASB issued Interpretation No. 44, ("FIN 44"),
Accounting for Certain Transactions Involving Stock Compensation - an
Interpretation of APB 25. This Interpretation clarifies (a) the definition of
employee for purposes of applying Opinion 25, (b) the criteria for
determining whether a plan qualifies as a non compensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. This Interpretation is
effective July 1, 2000, but certain conclusions in this Interpretation cover
specific events that occur after either December 15, 1998, or January 12,
2000. To the extent that this Interpretation covers events occurring during
the period after December 15, 1998, or January 12, 2000, but before the
effective date of July 1, 2000, the effects of applying this Interpretation
are recognized on a prospective basis from July 1, 2000.


                                       12
<PAGE>



                                  RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING A DECISION
TO INVEST IN INTRAWARE. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE
ONLY ONES FACING INTRAWARE. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY
KNOWN TO US OR THAT WE DO NOT CURRENTLY BELIEVE ARE IMPORTANT TO AN INVESTOR MAY
ALSO HARM OUR BUSINESS OPERATIONS. IF ANY OF THE EVENTS, CONTINGENCIES,
CIRCUMSTANCES OR CONDITIONS DESCRIBED IN THE FOLLOWING RISKS ACTUALLY OCCUR, OUR
BUSINESS, FINANCIAL CONDITION OR OUR RESULTS OF OPERATIONS COULD BE SERIOUSLY
HARMED. IF THAT OCCURS, THE TRADING PRICE OF INTRAWARE COMMON STOCK COULD
DECLINE, AND YOU MAY LOSE PART OR ALL OF YOUR INVESTMENT.

WE HAVE A HISTORY OF LOSSES, WE EXPECT FUTURE LOSSES AND WE MAY NOT EVER BECOME
PROFITABLE.

         We have not achieved profitability, expect to incur net losses in
the foreseeable future and may not ever become profitable in the future. We
incurred net losses of $28.0 million for the year ended February 29, 2000,
$15.0 million for the year ended February, 28, 1999, $6.0 million for the
year ended February 28, 1998 and $1.5 million for the period from August 14,
1996 through February 28, 1997. In addition, we incurred net losses of $11.8
million for the three months ended May 31, 2000. As of May 31, 2000, we had
an accumulated deficit of approximately $61.1 million. Net losses have
increased for each of our quarters since inception and this trend may
continue. We expect to continue to increase our sales and marketing, product
development and administrative expenses. As a result we will need to generate
significant additional revenues to achieve and maintain profitability.

         We were founded in August 1996, and are an early stage company. We have
a limited operating history that makes it difficult to forecast our future
operating results. Although our revenues have grown in recent quarters, we
cannot be certain that such growth will continue or that we will achieve
sufficient revenues for profitability. If we do achieve profitability in any
period, we cannot be certain that we will sustain or increase such profitability
on a quarterly or annual basis. For more detailed information regarding our
operating results and financial condition, please see "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

WE ARE SUBSTANTIALLY DEPENDENT ON THE SUN/NETSCAPE ALLIANCE AND THE TERMINATION
OF THIS RELATIONSHIP WOULD HAVE A SUBSTANTIAL, IMMEDIATE ADVERSE EFFECT ON OUR
BUSINESS.

         For the three months ended May 31, 2000, we generated approximately
79% of our software product revenues from the sale of the Sun/Netscape
Alliance's iPlanet software, and approximately 57% of our online service
revenues from the outsourcing of INTRAWARE DELIVERY services to the
Sun/Netscape Alliance. As a result, transactions with the Sun/Netscape
Alliance and the sale of iPlanet products accounted for approximately 71% of
our total net revenues in the three months ended May 31, 2000. We cannot
assure you that the Sun/Netscape Alliance will continue to sell its software
through us. If the Sun/Netscape Alliance limited or discontinued selling its
software through us, or if demand for Sun/Netscape software decreased, our
business would be adversely affected.

         We provide online software update and license management services to
Sun/Netscape Alliance customers through our INTRAWARE DELIVERY service under
an agreement that expires on June 30, 2001. We cannot assure you that this
agreement will be extended. Substantially all of our INTRAWARE DELIVERY
revenues

                                       13
<PAGE>


to date have been generated through this Sun contract, and our failure to
extend this contract at the end of its current term could have a material
adverse effect on our INTRAWARE DELIVERY revenues and on our business as a
whole.

         If Sun and/or Netscape chose to offer its own electronic software
delivery, tracking, maintenance or other services, which it is permitted to do
under the current agreement, it would have a substantial and immediate adverse
effect on our business, results of operations and financial condition.

THE LOSS OF ONE OR MORE OF OUR KEY CUSTOMERS COULD ADVERSELY AFFECT OUR
REVENUES.

         We believe that a substantial amount of revenue from software product
sales in any given future period may come from a relatively small number of
customers. If one or more major customers were to substantially cut back
software purchases or stop using our products or services, our operating results
could be materially adversely affected. We do not have long-term contractual
relationships with any of these customers because our customers purchase
software on a transaction by transaction basis. As a result, we cannot assure
you that any of our customers who purchase software through us will purchase
from us in future periods.

OUR QUARTERLY FINANCIAL RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS BECAUSE
OF MANY FACTORS AND ANY OF THESE COULD ADVERSELY AFFECT OUR STOCK PRICE.

         We believe that quarter-to-quarter comparisons of our operating results
are not a good indication of our future performance. It is likely that in some
future quarter our operating results may be below the expectations of public
market analysts and investors and as a result, the price of our common stock may
fall. Our operating results have varied widely in the past, and we expect that
they will continue to vary significantly from quarter to quarter due to a number
of risk factors, including:

- demand for our online services and the products of our software vendors;

- the timing of sales of our online services and the products of our software
  vendors;

- loss of strategic relationships with major software vendors;

- the mix of our proprietary online services vs. software
  products sold;

- delays in introducing our online services or our vendors' software products
  according to planned release schedules;

- our ability to retain existing customers and attract new customers;

- changes in our pricing policies or the pricing policies of our software
  vendors;

- changes in the growth rate of Internet usage and acceptance by customers of
  electronic software delivery for large software purchases, particularly for
  international customers;

- technical difficulties, system failures or Internet downtime;

- the mix of domestic and international sales;


                                       14
<PAGE>


- certain government regulations;

- our ability to upgrade and develop our information technology systems and
  infrastructure;

- costs related to acquisitions of technology or businesses; and

- general economic conditions as well as those specific to the Internet and
  related industries.

         We have experienced declining gross margins on revenues derived from
software product sales and anticipate that such declines may continue. Also,
as we shift a larger proportion of our sales and marketing resources toward
our more recently introduced online services, such as INTRAWARE DEPLOYMENT,
INTRAWARE VOLUME LICENSING and INTRAWARE E-LEARNING, we may experience one or
more quarters of reduced software product sales. Any shortfall in our
revenues would directly adversely affect our operating income or loss, and
these fluctuations could affect the market price of our common stock.

         We plan to significantly increase our operating expenses to expand our
sales and marketing operations, broaden our customer support capabilities, and
fund greater levels of product development. Our operating expenses, which
include sales and marketing, product development and general and administrative
expenses, are based on our expectations of future revenues and are relatively
fixed in the short term. If revenues fall below our expectations and we are not
able to quickly reduce our spending in response, our operating results would be
adversely affected.

OUR NEWLY INTRODUCED ONLINE SERVICES MAY NOT BE ABLE TO GENERATE ANTICIPATED
REVENUES.

         We have only recently started selling a number of online services such
as INTRAWARE DEPLOYMENT, INTRAWARE VOLUME LICENSING and INTRAWARE E-LEARNING. We
cannot assure you that these online services will result in additional customers
and customer loyalty, significant additional revenues or improved operating
margins in future periods. Additionally, we cannot assure you that software
vendors will continue to find it strategically or economically justifiable for
us to deliver the INTRAWARE DELIVERY service to their customers.

         We had no significant online services and technology revenues until
the quarter ended November 30, 1998, and for the three months ended May 31,
2000, revenues from online services and technology totaled only $5.0 million,
which constituted 12.0% of our total revenues for that period. We do not
expect these online services to increase substantially as a portion of our
total revenue for at least the next three quarters. This projection, however,
is a forward-looking statement and our actual results could differ materially
from those anticipated as a result of a number of factors, including demand
for our online services and the competitive service offerings of others.
These online services are not only important to improving our operating
results but also to continuing to attract and retain both our software vendor
and corporate information technology professional customers, and in
differentiating our online service offerings from those of our competitors.

OUR INDUSTRY IS HIGHLY COMPETITIVE AND WE CANNOT ASSURE YOU THAT WE WILL BE ABLE
TO EFFECTIVELY COMPETE.

         The market for selling software products and related online services
is highly competitive. We expect competition to intensify as current
competitors expand their product offerings and new competitors enter the
market. We have recently experienced, and expect to continue to experience,
price competition on our software sales, particularly on large sales
transactions. We cannot assure you that we will be able to compete

                                       15
<PAGE>


successfully against current or future competitors, or that competitive
pressures faced by us will not adversely affect our business and results of
operations.

         Our current competitors include a number of companies offering one or
more solutions for the researching, evaluation, purchase, deployment and
maintenance of and training on business software. Because there are relatively
low barriers to entry in the software and Internet services markets, we expect
additional competition from other established and emerging companies. Increased
competition is likely to result in price reductions, reduced gross margins and
loss of market share, any of which could have a significant adverse effect on
our business and results of operations.

         Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, better name recognition, and a larger installed base of customers
than we do. Many of our competitors may also have well-established relationships
with our existing and prospective customers.

         Our current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase the
ability of their products to address customer needs and compete with our
products. We also expect that the competition will increase as a result of
software industry consolidations. As a result, we may not be able to effectively
compete for customers.

WE ARE DEPENDENT ON MARKET ACCEPTANCE OF ELECTRONIC SOFTWARE DELIVERY, AND IF IT
DOES NOT ACHIEVE WIDESPREAD ACCEPTANCE, OUR BUSINESS WILL BE ADVERSELY AFFECTED.

         Our success will depend in large part on acceptance by information
technology professionals of electronic software delivery as a method of buying
business software. If electronic software delivery does not achieve widespread
market acceptance, our business will be adversely affected. Electronic software
delivery is a relatively new method of selling software products and the growth
and market acceptance of electronic software delivery is highly uncertain and
subject to a number of risk factors. These factors include:

- the potential for state and local authorities to levy taxes on Internet
  transactions;

- the availability of sufficient network bandwidth to enable purchasers to
  rapidly download software;

- the number of software packages that are available for purchase through
  electronic software delivery as compared to those available through
  traditional delivery methods;

- the level of customer confidence in the process of downloading software; and

- the relative ease of such a process and concerns about transaction security.

         Even if electronic software delivery achieves widespread acceptance, we
cannot be sure that we will


                                       16
<PAGE>


overcome the substantial technical challenges associated with electronically
delivering software reliably and consistently on a long-term basis. Furthermore,
the proliferation of software viruses poses a risk to market acceptance of
electronic software delivery. Any well-publicized transmission of a computer
virus by us or another company using electronic software delivery could deter
information technology professionals from utilizing electronic software delivery
technology and our business could be adversely affected.

CONTINUED ADOPTION OF THE INTERNET AS A METHOD OF CONDUCTING BUSINESS IS
NECESSARY FOR OUR FUTURE GROWTH.

         The widespread acceptance and adoption of the Internet by traditional
businesses for conducting business and exchanging information is likely only in
the event that the Internet provides these businesses with greater efficiencies
and improvements. The failure of the Internet to continue to develop as a
commercial or business medium would adversely affect our business.

FAILURE TO EXPAND INTERNET INFRASTRUCTURE COULD LIMIT OUR FUTURE GROWTH.

         The recent growth in Internet traffic has caused frequent periods of
decreased performance, and if Internet usage continues to grow rapidly, its
infrastructure may not be able to support these demands and its performance and
reliability may decline. If outages or delays on the Internet occur frequently
or increase in frequency, overall web usage including usage of our web site in
particular could grow more slowly or decline. Our ability to increase the speed
and scope of our services to customers is ultimately limited by and dependent
upon the speed and reliability of both the Internet and our customers' internal
networks. Consequently, the emergence and growth of the market for our services
is dependent on improvements being made to the entire Internet as well as to our
individual customers' networking infrastructures to alleviate overloading and
congestion.

INCREASED SECURITY RISKS OF ONLINE COMMERCE MAY DETER FUTURE USE OF OUR
SERVICES.

         Concerns over the security of transactions conducted on the Internet
and the privacy of users may also inhibit the growth of the Internet and other
online services generally, and online commerce in particular. Our failure to
prevent security breaches could significantly harm our business and results of
operations. We cannot be certain that advances in computer capabilities, new
discoveries in the field of cryptography, or other developments will not result
in a compromise or breach of the algorithms we use to protect our customers'
transaction data or our software vendors' products. Anyone who is able to
circumvent our security measures could misappropriate proprietary information or
cause interruptions in our operations. We may be required to incur significant
costs to protect against security breaches or to alleviate problems caused by
breaches. Any well-publicized compromise of security could deter people from
using the web to conduct transactions that involve transmitting confidential
information or downloading sensitive materials.

WE HAVE EXPERIENCED SIGNIFICANT GROWTH IN OUR BUSINESS IN RECENT PERIODS AND OUR
ABILITY TO MANAGE THIS GROWTH WILL AFFECT OUR BUSINESS.

         Our ability to successfully offer products and services and
implement our business plan in a rapidly evolving market requires an
effective planning and management process. We have increased, and plan to
continue to increase, the scope of our operations domestically and
internationally. These expansion efforts could be expensive and put a strain
on management, and if we do not manage growth properly, it could adversely
affect our business. Our headcount has grown and may continue to grow
substantially. In particular, we will need to expand our technology
infrastructure, which will include making certain key employee hires in
product development. These hires historically have been difficult and we can
not assure you that we will be able to successfully attract and retain a
sufficient number of qualified personnel.

                                       17
<PAGE>


WE NEED TO EXPAND OUR MANAGEMENT SYSTEMS AND CONTROLS IN ORDER TO SUPPORT OUR
ANTICIPATED GROWTH.

         Our growth has placed, and our anticipated future growth will continue
to place, a significant strain on our management systems and controls. We cannot
assure you that we will be able to adequately expand our technology resources to
support our anticipated growth. We expect that we will need to continue to
improve our financial and managerial controls and reporting systems and
procedures. Furthermore, we expect that we will be required to manage multiple
relationships with various software vendors, customers and other third parties.

WE MAY NOT BE ABLE TO HIRE AND RETAIN SUFFICIENT SALES, MARKETING AND SUPPORT
PERSONNEL THAT WE NEED TO SUCCEED.

         If we fail to hire and retain sufficient numbers of sales, marketing
and support personnel, our business and results of operations would be adversely
affected. Competition for qualified sales and marketing and support personnel is
intense, and we might not be able to hire and retain sufficient numbers of
qualified sales and marketing and support personnel. We need to substantially
expand our sales operations and marketing efforts, both domestically and
internationally, in order to increase market awareness and sales of the products
and services we offer. These products and services require a sophisticated sales
effort targeted at several people within the information technology departments
of our prospective customers. We have recently expanded our direct sales force
and plan to hire additional sales personnel.

         We currently have a small customer service and support organization and
will need to increase our staff to support new customers and the expanding needs
of existing customers. Hiring customer service and support personnel is very
competitive in our industry due to the limited number of people available with
the necessary technical skills and understanding of the Internet. We cannot
assure you that we will be able to hire and retain sufficient numbers of
qualified customer service and support personnel.

OUR EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS
AND THESE OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE.

         Our future success depends upon the continued service of our
executive officers and other key technology, sales, marketing and support
personnel and none of our officers or key employees is bound by an employment
agreement for any specific term. If we lost the services of one or more of
our key employees, or if one or more of our executive officers or employees
decided to join a competitor or otherwise compete directly or indirectly with
us, this could have a significant adverse effect on our business. In
particular, the services of Peter Jackson, Chief Executive Officer, Paul
Martinelli, Chief Technology Officer, James Brentano, Executive Vice
President of Technology, and Mark Long, Executive Vice President of Strategic
Development, would be difficult to replace.

WE INTEND TO EXPAND INTERNATIONAL OPERATIONS, AND UNCERTAINTY OF INTERNATIONAL
SALES EFFORTS COULD ADVERSELY AFFECT OUR BUSINESS.


         We may not be able to successfully market, sell, deliver and support
our services and our vendors' software products internationally. Our planned
international expansion will require significant management attention and
financial resources. If we are unable to expand our international operations
successfully and in a timely manner, our business and operating results could be
adversely affected.


                                       18
<PAGE>


         To date, we have not had substantial revenues from sales to
international customers. We intend to expand the scope of sales to
international customers in future periods. In January 2000 we opened an
office in the United Kingdom, and in March 2000 we opened an office in
Canada. We have only limited experience in marketing, selling and supporting
our services and our vendors' software products abroad. Additionally, we do
not have any experience in developing foreign language versions of our
services. This may be more difficult or take longer than we anticipate
especially due to international problems, such as language barriers or
currency exchange, and the fact that the Internet infrastructure in such
foreign countries may be less advanced than the domestic Internet
infrastructure and may result in longer response time and less accurate or
consistent electronic software delivery.

         In addition, our contracts with the Sun/Netscape Alliance currently
allow us to market iPlanet products in the United States, Canada and the United
Kingdom only (except in connection with our INTRAWARE DELIVERY service).
Revenues from European customers may not be able to grow as planned unless we
can obtain the rights to market iPlanet products in continental Europe.

OUR ACQUISITIONS COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS, DILUTE
STOCKHOLDER VALUE AND ADVERSELY AFFECT OUR OPERATING RESULTS.

         We have just completed and currently intend to make additional
investments in complementary companies, services and technologies. These
acquisitions and investments could disrupt our ongoing business, distract our
management and employees and increase our expenses. We could face
difficulties in assimilating our acquired company's personnel and operations.
In addition, the key personnel of the acquired company may decide not to work
for us. Acquisitions of additional services or technologies also involve
risks of incompatibility and the need for integration into our existing
services and marketing, sales and support efforts. We may be required to
spend additional time or money on integration which would otherwise be spent
on developing our business and services. If we do not integrate our
technology effectively or if management and technical staff spend too much
time on integration issues, it could harm our business, financial condition
and operating results. Also, if we finance the acquisitions by incurring debt
or issuing equity securities, this could dilute our existing stockholders.
Any amortization of goodwill or other assets, or other charges resulting from
the costs of such acquisitions, could adversely affect our operating results.

WE FACE RISKS OF CLAIMS FROM THIRD PARTIES FOR INTELLECTUAL PROPERTY
INFRINGEMENT THAT COULD ADVERSELY AFFECT OUR BUSINESS.

         Our services operate in part by making software products and other
content available to our customers. This creates the potential for claims to be
made against us, either directly or through contractual indemnification
provisions with vendors. Any claims could result in costly litigation and be
time-consuming to defend, divert management's attention and resources, cause
delays in releasing new or upgrading existing services or require us to enter
into royalty or licensing agreements. These claims could be made for defamation,
negligence, copyright or trademark infringement, personal injury, invasion of
privacy or other legal theories based on the nature, content or copying of these
materials.

         Litigation regarding intellectual property rights is common in the
Internet and software industries. We expect that Internet technologies and
software products and services may be increasingly subject to third-party
infringement claims as the number of competitors in our industry segment grows
and the functionality of products in different industry segments overlaps. There
can be no assurance that our services do not infringe on the intellectual
property rights of third parties.

         In addition, we may be involved in litigation involving the software of
third party vendors that we electronically distribute. Royalty or licensing
agreements, if required, may not be available on acceptable


                                       19
<PAGE>


terms, if at all. A successful claim of infringement against us and our
failure or inability to license the infringed or similar technology could
adversely affect our business. Although we carry general liability insurance,
our insurance may not cover all potential claims or may not be adequate to
protect us from all liability that may be imposed.

         We take steps to verify that our INTRAWARE DEPLOYMENT customers that
download third-party software from our web site are entitled to deploy and use
that software. However, there can be no assurance that this verification
procedure will help us defend against claims by, or protect us against liability
to, the owners of copyrights in that third-party software.

         Our success and ability to compete are substantially dependent upon our
internally developed technology, which we protect through a combination of
patent, copyright, trade secret and trademark law. We are aware that certain
other companies are using or may have plans to use the name "Intraware" as a
company name or as a trademark or service mark. While we have received no notice
of any claims of trademark infringement from any of those companies, we cannot
assure you that certain of these companies may not claim superior rights to
"Intraware" or to other marks we use. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy or otherwise obtain
and use our services or technology and we cannot be certain that the steps we
have taken will prevent misappropriation of our technology.

WE MAY BE REQUIRED TO REDEEM A PORTION OF THE SERIES A, B AND C PREFERRED IF
THE PRICE OF OUR COMMON STOCK FALLS BELOW $12.50 PER SHARE DURING THE NEXT
SEVERAL MONTHS.

         The terms of the series A, B and C preferred stock may require us to
redeem a portion of the preferred stock if the price of our common stock
falls below $12.50 per share during the next several months. If we are
required to redeem a portion of the preferred stock our cash resources will
be depleted which may require us to scale back our plans and operations.
This would materially and adversely affect our business.

THE CONVERSION OF THE SERIES A, B AND C PREFERRED SHARES AND THE EXERCISE OF
THE RELATED WARRANTS WOULD RESULT IN SUBSTANTIAL NUMBERS OF ADDITIONAL SHARES
BEING ISSUED.

         To the extent the series A, B and C preferred shares are converted
or dividends on the series A, B and C preferred shares are paid in shares of
common stock rather than cash, a significant number of shares of common stock
may be sold into the market, which could decrease the price of our common
stock and encourage short sales by holders of the series A, B and C preferred
shares or others. Short sales could place further downward pressure on the
price of our common stock.

         The conversion of and the payment of dividends in shares of common
stock in lieu of cash on the series A, B and C preferred shares may result in
substantial dilution to the interests of other holders of our common stock.
In addition, the conversion price of the series A, B and C preferred stock
may be adjusted downward if the price of our common stock does not
substantially increase or if we issue additional securities by June 30, 2002.
Any of these downward adjustments could result in substantial additional
dilution to our common stockholders.

                                      20

<PAGE>

WE MAY BE REQUIRED TO REDEEM OR PAY SUBSTANTIAL PENALTIES TO THE HOLDERS OF
THE SERIES A, B AND C PREFERRED STOCK AND RELATED WARRANTS IF SPECIFIC
EVENTS OCCUR.

         In accordance with the terms of the documents relating to the
issuance of the series A, B and C preferred stock and the related warrants,
we are required to redeem or pay substantial penalties to a holder of the
series A, B and C preferred shares under specific circumstances, including,
among others:

         -  nonpayment of dividends on the series A, B and C preferred
            shares in a timely manner;

         -  failure to deliver shares of our common stock upon conversion
            of the series A, B and C preferred shares or upon exercise of the
            related warrants after a proper request;

         -  nonpayment of the redemption price at maturity of the series
            A, B and C preferred shares;

         -  failure to hold a meeting of our stockholders on or before
            September 30, 2000 to approve the issuance of the shares of common
            stock issuable upon conversion of and in lieu of cash dividends
            on the series A, B and C preferred stock and upon exercise of the
            related warrants;

         -  failure to comply with financial covenants regarding cash
            balances and cash burn rates; or

         -  failure to have a registration statement relating to the
            series A, B and C preferred shares and related warrants declared
            effective by the SEC on or before November 10, 2000, or after
            being declared effective, the unavailability of the registration
            statement to cover the resale of the shares of common stock
            underlying such securities.

POTENTIAL YEAR 2000 PROBLEMS WITH OUR INTERNAL OPERATING SYSTEMS OR THE SOFTWARE
PRODUCTS THAT WE RESELL COULD ADVERSELY AFFECT OUR BUSINESS.

         Although to date we have not experienced any material problems
attributable to the year 2000 problem with respect to our software products and
internal systems, it is possible that software we distribute could contain
undetected errors or defects associated with year 2000 date functions that may
result in material costs or liabilities to us in the future. Moreover, the
software we distribute interacts directly and indirectly with a large number of
third-party hardware and software systems, each of which may contain or
introduce undetected errors or defects. We are unable to predict to what extent
our business may be affected if the software we distribute or the systems that
operate in conjunction with that software experience a material year 2000
related failure. Any year 2000 defect in the software we distribute, or the
software and hardware systems with which it operates, as well as any year 2000
errors caused by older non-current products that were not upgraded by our
customers, could expose us to litigation that could require us to incur
significant costs in defending the litigation or expose us to the risk of
significant damages. The risks of this litigation may be particularly acute due
to the mission-critical applications for which many of the products we
distribute are used.


                                      21

<PAGE>

OUR MARKET MAY UNDERGO RAPID TECHNOLOGICAL CHANGE AND OUR FUTURE SUCCESS WILL
DEPEND ON OUR ABILITY TO MEET THE CHANGING NEEDS OF OUR INDUSTRY.

         Our market is characterized by rapidly changing technology, evolving
industry standards and frequent new product announcements. To be successful, we
must adapt to our rapidly changing market by continually improving the
performance, features and reliability of our services. We could incur
substantial costs to modify our services or infrastructure in order to adapt to
these changes. Our business could be adversely affected if we incur significant
costs without adequate results, or find ourselves unable to adapt rapidly to
these changes.

A DISASTER COULD SEVERELY DAMAGE OUR OPERATIONS.

         We do not have a complete disaster recovery plan in effect and do
not have fully redundant systems for our service at an alternate site. A
disaster could severely damage our business and results of operations because
our service could be interrupted for an indeterminate length of time. Our
operations depend upon our ability to maintain and protect our computer
systems, all of which are located in our principal headquarters in Orinda,
California and at an offsite location managed by a third party in Santa
Clara, California. Orinda and Santa Clara exist on or near known earthquake
fault zones. Although the outside facility, which hosts our primary web and
database servers, is designed to be fault tolerant, the system is vulnerable
to damage from fire, floods, earthquakes, power loss, telecommunications
failures, and similar events. Although we maintain insurance against fires,
floods, earthquakes and general business interruptions, there can be no
assurance that the amount of coverage will be adequate in any particular case.

ADDITIONAL GOVERNMENT REGULATIONS MAY INCREASE OUR COSTS OF DOING BUSINESS.

         The law governing Internet transactions remains largely unsettled, even
in areas where there has been some legislative action. The adoption or
modification of laws or regulations relating to the Internet could adversely
affect our business by increasing our costs and administrative burdens. It may
take years to determine whether and how existing laws such as those governing
intellectual property, privacy, libel and taxation apply to the Internet.

         Laws and regulations directly applicable to communications or commerce
over the Internet are becoming more prevalent. In its last two sessions, the
United States Congress adopted Internet laws regarding children's privacy,
copyrights and taxation. It appears that additional laws and regulations
regarding protection of privacy on the Internet will be adopted at the state and
federal levels in the United States. The European Union has enacted its own data
protection and privacy directive, which required all 15 European Union Member
States to implement laws relating to the processing and transmission of personal
data by October 25, 1998. We must comply with these new regulations in both
Europe and the United States, as well as any other regulations adopted by other
countries where we may do business. The growth and development of the market for
online commerce may prompt calls for more stringent consumer protection laws,
both in the United States and abroad. Compliance with any newly adopted laws may
prove difficult for us and may negatively affect our business.

YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY
UNCERTAIN.

         You should not rely on forward-looking statements in this quarterly
report. This quarterly report also contains forward-looking statements that
involve risks and uncertainties. We use words such as "anticipates,"
"believes," "plans," "expects," "future," "intends" and similar expressions
to identify such forward-looking statements. You should not place undue
reliance on these forward-looking statements, which apply only as of the date
of this quarterly report. Our actual results could differ materially from
those anticipated in these forward-looking statements for many reasons,
including the risks faced by us described below and elsewhere in this
quarterly report.


                                       22

<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company's exposure to market risk for changes in interest rates
relate primarily to the Company's investment portfolio. The Company has not
used derivative financial instruments in its investment portfolio. The
Company places its investments with high quality issuers and, by policy,
limits the amount of credit exposure to any one issue or issuer. At May 31,
2000 $14.6 million of the Company's cash, cash equivalents and investment
portfolio carried maturity dates of less than 90 days, $3.5 million carried
maturity dates of less than one year. The effect of changes in interest rates
of +/- 10% over a six-month horizon would not have a material effect on the
fair market value of the portfolio.

PART II
OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         As of the date hereof, there is no material litigation pending against
us. From time to time, we may be a party to litigation and claims incident to
the ordinary course of our business. Although the results of litigation and
claims cannot be predicted with certainty, we believe that the final outcome of
such matters will not have a material adverse effect on the results of
operations, financial condition or prospects.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

         On February 25, 1999, we commenced the initial public offering of
4,600,000 shares of common stock, including 600,000 shares subject to an
overallotment option on behalf of certain selling stockholders pursuant to a
registration statement on Form S-1 (Commission File No. 333-69261) declared
effective on February 25, 1999. The managing underwriters of the public offering
were Credit Suisse First Boston Corporation, BancBoston Robertson Stephens Inc.,
and Hambrecht & Quist LLC.

         The 4,350,000 shares registered on our behalf and 250,000 shares
registered on the behalf of certain selling stockholders were sold at a price
per share of $16.00. The aggregate-offering price of the shares we offered
was $69,600,000, less underwriting discounts and commissions of $4,872,000
and expenses of approximately $1,300,000. The proceeds are to be used for
general corporate purposes, principally working capital, capital
expenditures, potential acquisitions and additional sales and marketing
efforts. Through May 31, 2000, net cash used from the offering for operating
activities totaled $37.4 million.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         None.

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

         None.

ITEM 5.  OTHER INFORMATION

         None.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         a)       Exhibits

<TABLE>
<CAPTION>
     EXHIBIT
     NUMBER
<S>                <C>
     27.1          Financial Data Schedules.
</TABLE>

         b)  Reports on Form 8-K

         None.



                                       23
<PAGE>



                                   SIGNATURES

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

                                            INTRAWARE, INC.

Dated: July 17, 2000                        By:  /s/ Donald M. Freed
                                                 -------------------------------
                                                 Donald M. Freed
                                                 EXECUTIVE VICE PRESIDENT AND
                                                 CHIEF FINANCIAL OFFICER




                                       24

<PAGE>

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No.        Exhibit Title
-----------        -------------
<S>                <C>
   27.1            Financial Data Schedules.
</TABLE>






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