<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 AUGUST 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)

                               2000 POWELL STREET
                                    SUITE 140
                              EMERYVILLE, CA 94608
                    (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 October 9, 2000 there were 27,171,466 shares of the registrant's
Common Stock outstanding.

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<S>                                                                                                                  <C>
PART I FINANCIAL INFORMATION..........................................................................................3

ITEM 1.        FINANCIAL STATEMENTS...................................................................................3

               BALANCE SHEETS.........................................................................................3

               STATEMENTS OF OPERATIONS...............................................................................4

               STATEMENTS OF CASH FLOWS...............................................................................5

               NOTES TO UNAUDITED INTERIM FINANCIAL INFORMATION.......................................................6

ITEM 2.        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS................10

               RISK FACTORS..........................................................................................17

ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK............................................26

PART II OTHER INFORMATION............................................................................................26

ITEM 1.        LEGAL PROCEEDINGS.....................................................................................26

ITEM 2.        CHANGES IN SECURITIES AND USE OF PROCEEDS.............................................................26

ITEM 3.        DEFAULTS UPON SENIOR SECURITIES.......................................................................27

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.................................................27

ITEM 5.        OTHER INFORMATION.....................................................................................27

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K......................................................................27

               SIGNATURES............................................................................................29
</TABLE>


                                       2

<PAGE>

PART I
FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                 INTRAWARE, INC.
                                 BALANCE SHEETS
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                             August 31, 2000  February 29, 2000
                                                                                             ---------------  -----------------
                                                                                                (unaudited)       (audited)
<S>                                                                                          <C>              <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                                    $  22,159         $  16,013
   Short-term investments                                                                           6,969            11,046
   Accounts receivable, net                                                                        25,331            35,381
   Prepaid licenses, services, and cost of deferred revenue                                        20,703            21,006
   Other current assets                                                                             2,657             2,477
                                                                                                ----------        ----------
      Total current assets                                                                         77,819            85,923
Long-term investments                                                                                --              19,826
Long-term cost of deferred revenue                                                                  7,885             7,500
Property and equipment, net                                                                        17,160             8,411
Intangible assets, net                                                                             26,564             9,050
Other assets                                                                                          494               402
                                                                                                ----------        ----------
                Total assets                                                                    $ 129,922         $ 131,112
                                                                                                ==========        ==========

LIABILITIES, MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK &
  STOCKHOLDERS' EQUITY
Current liabilities:
   Bank borrowings                                                                              $   4,232         $     500
   Accounts payable                                                                                10,233            43,436
   Accrued expenses                                                                                 4,895             4,489
   Deferred revenue                                                                                29,964            23,550
   Short-term obligations                                                                           1,934               384
                                                                                                ----------        ----------
      Total current liabilities                                                                    51,258            72,359
Long-term deferred revenue                                                                          8,700             7,751
Other long term obligations                                                                         3,948               399
                                                                                                ----------        ----------
                Total liabilities                                                                  63,906            80,509
                                                                                                ----------        ----------
Commitments and contingencies
Mandatorily Redeemable Convertible Preferred Stock, 10,000,000 shares authorized, $.0001
   par value; 1,708 and zero shares issued and outstanding at August 31, 2000 and
   February 29, 2000, respectively (aggregate liquidation preference of $17,297 at
   August 31, 2000)                                                                                13,023              --
Stockholders' equity:
   Common Stock, 250,000,000 shares authorized, $0.0001 par value; 27,386,472 and
      25,993,450 shares issued and outstanding at August 31, 2000 and February 29, 2000,
      respectively                                                                                      3                 3
   Additional paid-in-capital                                                                     132,140           107,037
   Unearned compensation                                                                           (6,396)           (6,954)
   Accumulated, other comprehensive gain (loss)                                                         2              (136)
   Accumulated deficit                                                                            (72,756)          (49,347)
                                                                                                ----------        ----------
           Total stockholders' equity                                                              52,993            50,603
                                                                                                ----------        ----------
                Total liabilities, mandatorily redeemable convertible preferred stock and
                stockholders' equity                                                            $ 129,922         $ 131,112
                                                                                                ==========        ==========
</TABLE>


              See notes to unaudited interim financial information.


                                       3

<PAGE>

                                 INTRAWARE, INC.
                            STATEMENTS OF OPERATIONS
                  (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                   For the Three Months Ended                    For the Six Months Ended
                                          ---------------------------------------------  -----------------------------------------
                                            August 31, 2000         August 31, 1999        August 31, 2000       August 31, 1999
                                          ---------------------  ----------------------  ------------------   --------------------
                                              (unaudited)             (unaudited)             (unaudited)           (unaudited)
<S>                                       <C>                    <C>                     <C>                  <C>
Revenues:
     Software product sales               $             26,108   $              16,291   $           62,615   $            30,275
     Online services and technology                      6,493                   2,999               11,450                 5,524
                                          ---------------------  ----------------------  -------------------  --------------------
          Total revenues                                32,601                  19,290               74,065                35,799
                                          ---------------------  ----------------------  -------------------  --------------------

Cost of revenues:
     Software product sales                             20,294                  13,993               52,222                26,371
     Online services and technology                      1,355                     280                2,221                   679
                                          ---------------------  ----------------------  -------------------  --------------------
          Total cost of revenues                        21,649                  14,273               54,443                27,050
                                          ---------------------  ----------------------  -------------------  --------------------
               Gross profit                             10,952                   5,017               19,622                 8,749
                                          ---------------------  ----------------------  -------------------  --------------------

Operating expenses:
     Sales and marketing                                10,772                   6,713               22,053                12,461
     Product development                                 4,762                   1,668                8,381                 2,971
     General and administrative                          4,131                   1,848                8,151                 2,991
     Stock option compensation                             795                     885                1,566                 1,755
     Merger and acquisition related costs
          including amortization of
          intangibles                                    2,238                      13                3,170                    17
                                          ---------------------  ----------------------  -------------------  --------------------
          Total operating expenses                      22,698                  11,127               43,321                20,195
                                          ---------------------  ----------------------  -------------------  --------------------
Loss from operations                                   (11,746)                 (6,110)             (23,699)              (11,446)

Interest expense                                           (79)                    (32)                (111)                  (67)

Interest and other income                                  238                     740                  479                 1,480
Provision for income taxes                                 (40)                      -                  (78)                    -
                                          ---------------------  ----------------------  -------------------  --------------------
Net loss                                               (11,627)                 (5,402)             (23,409)              (10,033)

Mandatorily redeemable convertible
  preferred stock accrued dividends                       (219)                      -                 (219)                    -
                                          ---------------------  ----------------------  -------------------  --------------------
Net loss attributable to
  common stockholders                     $            (11,846)  $              (5,402)  $          (23,628)  $           (10,033)
                                          =====================  ======================  ===================  ====================
Basic and diluted net loss per share
  attributable to common stockholders     $              (0.45)  $               (0.23)  $            (0.90)  $             (0.43)
                                          =====================  ======================  ===================  ====================
Weighted average shares - basic and
  diluted                                               26,305                  23,788               26,154                23,530
                                          =====================  ======================  ===================  ====================
</TABLE>


              See notes to unaudited interim financial information.


                                       4

<PAGE>

                                 INTRAWARE, INC.
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                               For the Six Months Ended
                                                                       ----------------------------------------
                                                                         August 31, 2000        August 31, 1999
                                                                       -------------------    -----------------
                                                                            (unaudited)          (unaudited)
<S>                                                                    <C>                    <C>
Cash flows from operating activities:
  Net loss                                                             $       (23,409)       $     (10,033)
  Adjustments to reconcile net loss to net cash used in
   operating activities:
     Depreciation and amortization                                               4,995                  652
     Amortization of unearned compensation                                       1,566                1,755
     Provision for doubtful accounts                                             1,150                   81
     Changes in assets and liabilities:
        Accounts receivable                                                      9,683               (6,507)
        Prepaid licenses and services                                              158                7,207
        Other current assets                                                       (86)                 457
        Other assets                                                               (92)                 250
        Accounts payable                                                       (33,376)              (5,817)
        Accrued expenses                                                          (728)               1,351
        Deferred revenue                                                         6,739                2,530
                                                                       ----------------       --------------
Net cash used in operating activities                                          (33,400)              (8,074)
                                                                       ----------------       --------------

Cash flows from investing activities:
     Purchase of property and equipment                                         (4,999)              (2,895)
     Cash from acquisition of Janus Technologies, Inc.                             187                    -
     Purchase of investments                                                    (9,535)                   -
     Proceeds from sales of investments                                         33,575              (46,976)
                                                                       ----------------       --------------
Net cash provided by (used in) investment activities                            19,228              (49,871)
                                                                       ----------------       --------------

Cash flows from financing activities:
     Payments on bank borrowings                                                 2,612                 (871)
     Proceeds from initial public offering                                           -               59,520
     Net proceeds from issuance of preferred stock and warrants                 24,935                    -
     Redemption of preferred stock                                              (7,920)                   -
     Proceeds from issuance of common stock                                      1,222                5,163
     Principal payments on capital lease obligations                              (531)                 (76)
                                                                       ----------------       --------------
Net cash provided by financing activities                                       20,318               63,736
                                                                       ----------------       --------------
Net increase in cash and cash equivalents                                        6,146                5,791
Cash and cash equivalents at beginning of period                                16,013                3,286
                                                                       ----------------       --------------
Cash and cash equivalents at end of period                             $        22,159        $       9,077
                                                                       ================       ==============

Supplemental disclosure of cash flow information:
  Cash paid for interest                                               $           111        $          67
Supplemental non-cash activity:
  Property and equipment leases                                        $         4,958        $           2
  Prepaid maintenance leases                                           $           240        $           -
  Common Stock issued in conjunction with acquisition
     of Janus Technologies, Inc.                                       $        20,600        $           -

</TABLE>


              See notes to unaudited interim financial information.


                                       5

<PAGE>

                                 INTRAWARE, INC.
                NOTES TO UNAUDITED INTERIM FINANCIAL INFORMATION

NOTE 1.  BASIS OF PRESENTATION

INTRAWARE

         The accompanying financial statements for the three months and six
months ended August 31, 2000 and 1999 are unaudited and reflect all normal and
recurring adjustments which are, in the opinion of the management of Intraware,
Inc., necessary for fair presentation of the balance sheets, results of
operations, and changes in cash flows for the periods presented.

         These financial statements should be read in conjunction with our
financial statements and notes thereto included in our Annual Report on Form
10-K for the fiscal year ended February 29, 2000 and the Form 10-Q for the
fiscal quarter ended May 31, 2000. The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Certain information and
footnote disclosures normally included in annual financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted as permitted by rules and regulations of the Securities and Exchange
Commission (the "SEC"). The results of operations for the interim period ended
August 31, 2000 are not necessarily indicative of results to be expected for the
full year.

NOTE 2.  NET LOSS PER SHARE

         We compute 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"). Basic net loss per common
share is computed by dividing the net loss for the period by the weighted
average number of common shares outstanding during the period. Diluted net
loss per common share is computed by dividing the net loss for the period by
the weighted average number of common and common equivalent shares
outstanding during the period. Common equivalent shares, composed of common
shares issuable upon the exercise of stock options and warrants and upon
conversion of convertible preferred stock, are included in the diluted net
loss per common share calculation to the extent these shares are dilutive. A
reconciliation of the numerator and denominator used in the calculation of
the basic and diluted net loss per common share follows:

                                       6

<PAGE>

<TABLE>
<CAPTION>
                                                       For the Three Months Ended                For the Six Months Ended
                                                 ---------------------------------------  ---------------------------------------
                                                  August 31, 2000      August 31, 1999     August 31, 2000     August 31, 1999
                                                 -------------------  ------------------  ------------------  -------------------
                                                                    (in thousands, except per share amounts)
<S>                                              <C>                  <C>                 <C>                 <C>
Numerator
     Net loss                                    $          (11,627)  $          (5,402)  $         (23,409)  $          (10,033)
     Mandatorily redeemable convertible
       preferred stock accruing dividend                       (219)                  -                (219)                   -
                                                 -------------------  ------------------  ------------------  -------------------
     Net loss attributable to common
       shareholders                              $          (11,846)  $          (5,402)  $         (23,628)  $          (10,033)
                                                 ===================  ==================  ==================  ===================

Denominator
     Weighted average shares                                 26,860              25,230              26,775               25,080
     Weighted average unvested common shares
       subject to repurchase                                   (555)             (1,442)               (621)              (1,550)
                                                 -------------------  ------------------  ------------------  -------------------
     Denominator for basic and diluted
       calculation                                           26,305              23,788              26,154               23,530
                                                 ===================  ==================  ==================  ===================
Basic and diluted net loss per share
  attributable to common stockholders            $            (0.45)  $           (0.23)  $           (0.90)  $            (0.43)
                                                 ===================  ==================  ==================  ===================
</TABLE>

         The following table summarizes common stock equivalents that are not
included in the denominator used in the diluted net loss per share available to
common stockholders calculation above because to do so would be antidilutive for
the periods indicated:

<TABLE>
<CAPTION>

                                                       For the Three Months Ended                For the Six Months Ended
                                                  ------------------------------------     -----------------------------------
                                                  August 31, 2000      August 31, 1999     August 31, 2000     August 31, 1999
                                                  -----------------    ---------------     ---------------     ---------------
                                                                                (in thousands)
<S>                                               <C>                  <C>                 <C>                 <C>
WEIGHTED AVERAGE EFFECT OF COMMON STOCK
     EQUIVALENTS:
Series A mandatorily redeemable convertible
  preferred stock                                              559                   -                 559                    -
Series B mandatorily redeemable convertible
  preferred stock                                               48                   -                  48                    -
Series C mandatorily redeemable convertible
  preferred stock                                              304                   -                 304                    -
Options to purchase common stock                             5,525               2,584               5,525                2,584
Warrants to purchase common stock                              347                   -                 347                    -
Weighted average unvested common shares
       subject to repurchase                                   555               1,442                 621                1,550
                                                  ----------------     ---------------     ---------------     ----------------
     Total                                                   7,338               4,026               7,404                4,134
                                                  ----------------     ---------------     ---------------     ----------------
</TABLE>

         In our September 27, 2000 announcement of our results for the
three-month period ended August 31, 2000, we erroneously announced our basic and
diluted net loss per share for that period to be $(0.44). The correct basic and
diluted net loss per share for that period is $(0.45). Our erroneous
announcement on September 27, 2000 was due to our failure to include
dividends paid to our preferred stockholders in our computation of the
net loss attributable to common stockholders for the three months ending
August 31, 2000.

NOTE 3.  RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement No. 133 ("SFAS 133"), "Accounting for Derivative Instruments
and Hedging Activity," which was subsequently amended by Statement No. 137
("SFAS 137"), "Accounting for Derivative Instruments and Hedging Activities:
Deferral of Effective Date of FASB 133" and Statement No.138 ("SFAS 138"),
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities: an amendment of FASB Statement No. 133." SFAS 137 requires
adoption of SFAS 133 in years beginning after June 15, 2000. SFAS 138
establishes accounting and reporting standards for derivative instruments and
addresses a limited number of issues causing implementation difficulties for
numerous entities. The Statement requires us to recognize all derivatives on
the balance sheet at fair value. Derivatives that are not hedges must be
recorded at fair value through earnings. If the derivative qualifies as a
hedge, depending on the nature of the exposure being hedged, changes in the
fair value of derivatives are either offset against the change in fair value
of hedged assets, liabilities, or firm commitments through earnings or are
recognized in other comprehensive income until the hedged cash flow is
recognized in earnings. The ineffective portion of a derivative's change in
fair value is recognized in earnings. The Statement permits early adoption as
of the beginning of any fiscal quarter. SFAS 133 will become effective for
our first fiscal quarter of fiscal year 2002 and we do not expect adoption to
have a material effect on our financial statements.

         In December 1999, the SEC issued Staff Accounting Bulletin No. 101
("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes
certain aspects of the staff's views in applying generally accepted accounting
principles to revenue recognition in financial statements. On March 24, 2000 and
June 26, 2000, the SEC issued Staff Accounting Bulletin No. 101A and No. 101B,
respectively, which extend the transition provisions of SAB 101 until no later
than the fourth quarter of fiscal years beginning after December 15, 1999, which
would be December 1, 2000 for us. We chose to adopt the provisions of SAB 101
early, beginning with the fiscal year ended February 29, 2000.

         In March 2000, the FASB issued Interpretation No. 44, ("FIN 44"),
Accounting for Certain Transactions Involving Stock Compensation - an
Interpretation of Accounting Principles Board ("APB") No. 25, "Accounting for
Stock Issued to Employees". 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
consequences 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.


                                       7

<PAGE>

NOTE 4.  CHANGES IN STOCKHOLDERS' EQUITY

         During the six months ended August 31, 2000, our mandatorily
redeemable convertible preferred stock ("preferred stock") and stockholders'
equity changed as follows (in thousands):

<TABLE>
<CAPTION>
                                         Preferred Stock    *    Common Stock   Additional
                                        -----------------   *   ----------------   Paid-In
                                        Shares     Amount   *   Shares    Amount    Capital
                                        -------   --------  *   ------    ------  ---------
<S>                                     <C>       <C>       *   <C>       <C>     <C>
Balance at February 29, 2000                  -   $      -  *   25,993    $    3  $ 107,037
                                                            *
Exercise of stock options                     -          -  *      154         -        325
 Issuance of common stock for                               *
  employee stock purchase program             -          -  *       70         -        897
Issuance of common stock for Janus                          *
  Technologies, Inc. acquisition,                           *
  including deferred stock-based                            *
  compensation                                -          -  *    1,169         -     20,600
Issuance of preferred stock with                            *
  warrants, net of issuance costs                           *
  of $65                                      3     20,769  *        -         -      4,166
Redemption of Series B preferred stock       (1)    (7,920) *
Dividends for preferred                                     *
  stock                                       -          -  *        -         -       (219)
Accretion of convertible series A                           *
  preferred stock                             -        174  *        -         -       (174)
Deferred stock-based compensation                           *
  for options forfeited                       -          -  *        -         -       (492)
Amortization of unearned compensation         -          -  *        -         -          -
Unrealized investment gain                    -          -  *        -         -          -
Net loss                                      -          -  *        -         -          -
                                                            *
Other comprehensive income                                  *
                                        -------   --------  *   ------    ------  ---------
Balance at August 31, 2000                    2   $ 13,023  *   27,386    $    3  $ 132,140
                                        =======   ========  *   ======    ======  =========

<CAPTION>

                                         Accumulated
                                            Other
                                        Comprehensive      Unearned      Accumulated  Stockholders'    Comprehensive
                                          Gain (Loss)    Compensation      Deficit       Equity           Income
                                        -------------    ------------    -----------  -------------     ----------
<S>                                     <C>              <C>             <C>          <C>            <C>
Balance at February 29, 2000              $      (136)    $    (6,954)    $ (49,347)     $ 50,603

Exercise of stock options                          -               -             -           325
Issuance of common stock for
  employee stock purchase program                  -               -             -           897
Issuance of common stock for Janus
  Technologies, Inc. acquisition,
  including deferred stock-based
  compensation                                     -          (1,500)            -        19,100
Issuance of preferred stock with
  warrants, net of issuance costs
  of $65                                           -               -             -         4,166
Redemption of Series B preferred stock             -               -             -             -
Dividends for preferred stock                      -               -             -          (219)
Accretion of convertible series A
  preferred stock                                  -               -             -          (174)
Deferred stock-based compensation
  for options forfeited                            -             492             -             -
Amortization of unearned compensation              -           1,566             -         1,566
Unrealized investment gain                       138               -             -           138        $    138
Net loss                                           -               -       (23,409)      (23,409)        (23,409)
                                                                                                        ----------
Other comprehensive income                                                                              $(23,271)
                                                                                                        ==========
                                        -------------    ------------    -----------  -------------
Balance at August 31, 2000               $         2      $   (6,396)     $(72,756)      $52,993
                                        =============    ============    ===========  =============
</TABLE>


                                       8

<PAGE>

NOTE 5.  ACQUISITION OF JANUS TECHNOLOGIES, INC.

         On July 12, 2000, we acquired substantially all of the assets and
liabilities of Janus Technologies, Inc., in exchange for 1,169,000 shares of
our common stock with an estimated fair value of $20.6 million. These financial
statements include the results of Janus Technologies, Inc., since the date of
acquisition.

         The Janus Technologies, Inc., acquisition has been accounted for as
a purchase. The total purchase price of approximately $20.6 million was
assigned, based on independent appraisal, to the fair value of the assets
acquired, including $1.3 million of net tangible liabilities acquired, $12.0
million of identified intangible assets, and $1.5 million of unvested
deferred stock-based compensation, with the excess purchase price of $8.4
million assigned to goodwill. Amortization of the intangible assets acquired
and goodwill is computed using the straight-line method over the estimated
useful life of the assets, two to five years.

         The following unaudited pro forma consolidated financial information
reflects the results of operations for the six months ended August, 31, 2000
and 1999 as if the acquisition had occurred on March 1, 2000 and 1999,
respectively, and after giving effect to purchase accounting adjustments. The
pro forma net loss includes $3.8 million for stock option compensation and
merger and acquisition related costs including amortization of intangibles
for both periods presented. These pro forma results have been prepared for
comparative purposes only and do not purport to indicate what operating
results would have been had the acquisition actually taken place on March 1,
2000 and 1999 and may not be indicative of future operating results.

<TABLE>
<CAPTION>
                                                       Six months ended August 31,
                                            -------------------------------------------------
                                                    2000                      1999
                                            ---------------------  --------------------------
                                                 (in thousands, except per share amounts)
<S>                                         <C>                    <C>
Pro forma revenue                           $             75,148   $                  37,459

Pro forma net loss                                        27,566                      14,600

Pro forma basic and diluted (loss) per
share                                       $              (1.05)  $                   (0.62)
</TABLE>

NOTE 6.  MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK

         On June 30, 2000 we completed a preferred stock financing with
institutional investors. Through the issuance of preferred stock, we raised
$25,000,000.

         We issued three classes of preferred stock in connection with this
financing: 834 shares of Series A preferred stock for $8.34 million, 833
shares of Series B preferred stock for $8.33 million, and 833 shares of
Series C preferred stock for $8.33 million. All of the preferred stock is
convertible into our common stock. The preferred stock has a term of two
years, after which it must either be converted into common stock or redeemed,
at our option.

          The conversion prices for the three series of preferred stock were set
during three 20-trading day pricing periods, which occurred between July 5 and
September 5, 2000. The transaction was structured so that, if at any time during
a pricing period the average closing bid price of our common stock fell below
$12.50 per share, that pricing period would terminate. Upon termination of a
pricing period, we would be required to redeem approximately 41.7 shares of the
preferred stock we had issued, and repay approximately $416,800 to the preferred
stockholders, for each trading day that the pricing period had been shortened
due to


                                       9

<PAGE>

the early termination. The conversion price for each respective series of
preferred stock may be adjusted downward, and the number of shares of common
stock into which that preferred stock is convertible may increase
proportionally, to the extent the average closing bid price of our common stock
during the 20 trading days before June 30, 2002 is lower than the current
conversion price for each respective series of preferred stock, and in certain
other circumstances which are described more fully in the Form 8-K that we filed
with the SEC on July 3, 2000.

         In addition, we are required to make quarterly dividend payments on
the preferred stock, at an annual rate of 9%. The dividends are payable in
cash or registered common stock. We also issued warrants to purchase up to
346,967 shares of common stock at an exercise price of $12.68 in connection
with the financing. That exercise price may be adjusted downward in certain
circumstances which are described in the Form 8-K that we filed with the SEC
on July 3, 2000.

         In accordance with the pricing structure noted above, we redeemed
substantially all of the Series B preferred stock and repaid approximately $7.9
million to the preferred stockholders on August 17, 2000.

         At August 31, 2000, the conversion price of the Series A preferred
stock into common stock was $14.91 per share, which would allow that series of
preferred stock to be converted into 559,355 shares of common stock. The
conversion price of the Series B preferred stock into common stock was $8.51 per
share at August 31, 2000, which would allow that series of preferred stock to be
converted into 48,164 shares of common stock. The conversion price of the Series
C preferred stock into common stock was approximately $27.40 per share at August
31, 2000, which would allow that series of preferred stock to be converted into
approximately 303,976 shares of common stock. This initial conversion price for
the Series C preferred stock would adjust to equal 120% of the average closing
bid price during the Series C pricing period scheduled to begin on September 5,
2000.

         Subsequent to August 31, 2000 and in accordance with the pricing
structure noted above, we redeemed substantially all of the of the Series C
preferred stock and repaid approximately $7.9 million to the preferred
stockholders due to the early termination of the Series C pricing period on
September 5, 2000. Based on the average closing bid price during the Series C
pricing period, the conversion price of the Series C preferred stock into
common stock became $14.63 per share, which would allow that series of
preferred stock to be converted into 28,034 shares of common stock.

NOTE 7.  NON-MONETARY TRANSACTION

         During the quarter ended August 31, 2000 we entered into a
non-monetary exchange transaction for software with a related party, Commerce
One, Inc. Mark Hoffman, the Chairman and Chief Executive Officer of Commerce
One, is also the Chairman of our Board of Directors. We recorded revenue that
had an estimated fair value of approximately $1.2 million. The software
licenses received in this exchange are being deployed for internal use and
will be capitalized and amortized over their useful life.

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
our future cash and liquidity position, the extent and timing of future revenues
and expenses and customer demand, the deployment of our products, and 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


                                       10

<PAGE>

obligation to update any 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
a leading provider of information technology management solutions. Our services
allow information technology professionals to manage the business software life
cycle from their web browsers--starting with research and evaluation, through
purchase, training, and deployment, to updates and asset management. We provide
objective technical research; in-depth software analysis; an extensive selection
of software, training, and resources; and a comprehensive software delivery,
deployment, update, and asset management system.

         Software product revenue results from the licensing 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 three
types of arrangements. First, it results from the licensing of Intraware's
proprietary software products to companies that use those products to provide
web-based services to their customers or that use the products internally; such
revenue 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. Second, it results from 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. Third, it results from
professional services from proprietary software integration and data conversion;
such revenues are generally recognized as services are performed.

         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 August 31, 2000, had an accumulated deficit of approximately
$72.8 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. 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 which have negative cash flow and working capital constraints. To
address these risks, we must, among other things, maintain sufficient liquidity
to effectively manage our working capital and fund our operations, continue to
improve existing products and services, develop and acquire new products and
services, maintain existing and develop new relationships with software
publishers, 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 those 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
and collections. Sales and operating results generally depend on the volume and
timing of orders received, which are difficult to


                                       11

<PAGE>

forecast. Collections often depend on customers' internal financial conditions
and on their satisfaction with third-party software we have licensed to them,
both of which are difficult for us to control. We may be unable to adjust
spending in a timely manner to compensate for any unexpected revenue or
collections shortfall. Accordingly, any significant shortfall in sales or
collections 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 or collections and believe that period-to-period comparisons
of our operating results and days sales outstanding (DSO's) are not necessarily
meaningful and should not be relied upon as an indication of future performance.

RESULTS OF OPERATIONS

TOTAL REVENUE

         Revenue for the three months ended August 31, 2000 was $32.6 million,
which represents a 69.0% increase over revenue for the three months ended August
31, 1999 of $19.3 million. In addition, for the three months ended August 31,
2000, product revenue accounted for $26.1 million or 80.1% of revenue, while
online service and technology revenue accounted for $6.5 million or 19.9% of
revenue. For the three months ended August 31, 1999, product revenue accounted
for $16.3 million or 84.5% of revenue, while online service and technology
revenue accounted for $3.0 million or 15.5% of revenue.

         Revenue for the six months ended August 31, 2000 was $74.1 million,
which represents a 106.9% increase over revenue for the six months ended August
31, 1999 of $35.8 million. In addition, for the six months ended August 31,
2000, product revenue accounted for $62.6 million or 84.5% of revenue, while
online service and technology revenue accounted for $11.5 million or 15.5% of
revenue. For the six months ended August 31, 1999, product revenue accounted for
$30.3 million or 84.6% of revenue, while online service and technology revenue
accounted for $5.5 million or 15.4% of revenue.

         While revenue for the three-month and six-month periods ended August
31, 2000 grew substantially over the corresponding year-earlier periods, revenue
for the three-month period ended August 31, 2000 declined by 21% from the
preceding three-month period ended May 31, 2000. Revenue growth over the
prior-year periods was due to our expanding vendor base, experienced sales force
and increasing customer demand for products and services. The decline in revenue
from the preceding three-month period was due to our increased focus on selling
our proprietary products and services, which tend to generate lower total
revenue but higher gross margins than our sales of third-party software.

COST OF REVENUES

         Total cost of revenues increased to $21.6 million for the three
months ended August 31, 2000 from $14.3 million for the three months ended
August 31, 1999. Our gross margin increased to 33.6% for the three months ended
August 31, 2000 from 26.0% for the three months ended August 31, 1999.

         Total cost of revenues increased to $54.4 million for the six
months ended August 31, 2000 from $27.1 million for the six months ended August
31, 1999. Our gross margin increased to 26.5% for the six months ended August
31, 2000 from 24.4% for the six months ended August 31, 1999.

         Costs of revenue primarily consists 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 increase


                                       12

<PAGE>

primarily reflects our focus on the sale of our own services and technology, and
also reflects our focus on higher-margin sales of third-party software.

SALES AND MARKETING EXPENSES

         For the three months ended August 31, 2000, sales and marketing
expenses were $10.8 million or 33.0% of revenue, an increase from $6.7
million or 34.8% of revenue for the three months ended August 31, 1999.

         For the six months ended August 31, 2000, sales and marketing expenses
were $22.1 million or 29.8% of revenue, an increase from $12.5 million or
34.8% of revenue for the six months ended August 31, 1999.

         Sales and marketing expenses consist primarily of employee salaries,
benefits and commissions, advertising, promotional materials and trade show
expenses. The increase is primarily the result of additional advertising and
marketing expenditures and the addition of personnel and external sales offices.
A significant part of those increased expenses stems from our acquisition of
Janus Technologies, Inc. We plan to continue investing in sales and marketing,
and continue developing strategic relationships to sell our products and
services directly to our customer base as well as through our growing network of
distributor relationships. 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 August 31, 2000, product development
expenses were $4.8 million or 14.6% of revenue, an increase from $1.7
million or 8.6% of revenue for the three months ended August 31, 1999.

         For the six months ended August 31, 2000, product development expenses
were $8.4 million or 11.3% of revenue, an increase from $3.0 million or 8.3%
of revenue for the six months ended August 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 the
integration of Janus Technologies, Inc. and the associated growth of our
development team in Pittsburgh, Pennsylvania. We believe significant investments
in product development and technological infrastructure are essential to our
future success and expect that the amount of product development expenses will
increase in future periods. The previous sentence is a forward-looking statement
and actual results could differ materially from those anticipated.

GENERAL AND ADMINISTRATIVE EXPENSES

         For the three months ended August 31, 2000, general and administrative
expenses were $4.1 million or 12.7% of revenue, an increase from $1.9
million or 9.6% of revenue for the three months ended August 31, 1999.

         For the six months ended August 31, 2000, general and administrative
expenses were $8.2 million or 11.0% of revenue, an increase from $3.0
million or 8.4% of revenue for the six months ended August 31, 1999.


                                       13

<PAGE>

         General and administrative expenses consist primarily of compensation
for administrative and executive personnel, facility costs and fees for
professional services. A significant part of our increased general and
administrative expenses in the three months ended August 31, 2000, stems from
our acquisition of Janus Technologies, Inc. Also included in general and
administrative expenses is bad debt expense of $516,000 and $1.1 million for
the three and six month periods ended August 31, 2000, respectively, which is
a result of our continued focus on and assessment of the collectibility of
outstanding accounts receivable. We expect general and administrative
expenses to remain at or near these levels for the next few quarters. 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 August 31, 2000, stock-based compensation
expenses were $795,000 or 2.4% of revenue, a decrease from $885,000 or 4.6%
of revenue for the three months ended August 31, 1999.

         For the six months ended August 31, 2000, stock-based compensation
expenses were $1.6 million or 2.1% of revenue, a decrease from $1.8 million
or 4.9% of revenue for the six months ended August 31, 1999.

         Stock compensation expense is an ongoing charge through April 2005
that is related to employee stock options granted to our employees before we
became a public company, as well as to unvested employee stock options
granted by non-public companies we have acquired.

AMORTIZATION OF INTANGIBLES

         For the three months ended August 31, 2000, merger and acquisition
related costs including amortization of intangibles were $2.2 million or 6.9% of
revenue, an increase from $13,000 or 0.1% of revenue for the three
months ended August 31, 1999.

         For the six months ended August 31, 2000, merger and acquisition
related costs including amortization of intangibles were $3.2 million or 4.3% of
revenue, an increase from $17,000 or 0.1% of revenue for the six months
ended August 31, 1999.

         Merger and acquisition related costs including amortization of
intangibles is a charge related to our acquisitions of BITSource, Inc., Internet
Image, Inc., and Janus Technologies, Inc. This expense is an ongoing charge
through June 2005.

INTEREST EXPENSE

         For the three months ended August 31, 2000, interest expenses were
$79,000 or 0.2% of revenue, an increase from $32,000 or 0.2% of revenue
for the three months ended August 31, 1999.

         For the six months ended August 31, 2000, interest expenses were
$111,000 or 0.1% of revenue, an increase from $67,000 or 0.2% of revenue
for the six months ended August 31, 1999.

         Interest expense relates to obligations under capital leases and
borrowings on a bank line. The increase in interest expense is primarily the
result of increased borrowings on a bank line of credit as well as new lease
agreements.


                                       14

<PAGE>

INTEREST AND OTHER INCOME, NET

         For the three months ended August 31, 2000, interest and other income,
net were $238,000 or 0.7% of revenue, a decrease from $740,000 or 3.8% of
revenue for the three months ended August 31, 1999.

         For the six months ended August 31, 2000, interest and other income,
net were $479,000 or 0.6% of revenue, a decrease from $1.5 million or 4.1%
of revenue for the six months ended August 31, 1999.

         The decrease in interest income is primarily the result of a reduction
in our invested cash so that we could use that cash in our operations.

INCOME TAXES

         From inception through August 31, 2000, we incurred net losses for
federal and state tax purposes. We have recognized approximately $78,000 of
state income taxes for the six months ended August 31, 2000. There were no state
or federal taxes recognized for the six months ended August 31, 1999. As of
August 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 August 31, 2000, we had approximately $22.2 million of cash and
cash equivalents and $7.0 million in short-term marketable securities. On
September 6, 2000, we repaid $7.9 million to our preferred stockholders in
connection with our redemption of substantially all of the Series C preferred
stock. For additional information on this redemption and on our convertible
preferred stock financing, please see "Note 4. Convertible Preferred Stock"
under "Notes to Unaudited Interim Financial Information," as well as our Form
8-K filed with the SEC on July 3, 2000.

         Our principal cash 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.

         We believe we have adequate resources for working capital and capital
expenditures for at least 12 months from the date of this report. This forecast
is based on certain assumptions regarding our operations over the next 12
months. Those assumptions concern the future performance of and our ability to
manage our business in several areas, including but not limited to our
working capital, especially the timeliness of collections of our accounts
receivable; our online services and technology revenue; our software product
revenue; our gross margins on both of those lines of revenue; and our operating
expenses. 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. Factors that could cause actual
results to differ materially from that forecast include our failure to negotiate
sufficiently favorable payment terms or to collect


                                       15

<PAGE>

receivables in a sufficiently timely manner, lack of sufficient demand for our
products and services to maintain adequate online services and technology
revenue growth and adequate gross margins on that revenue, lack of sufficient
demand for our third-party vendors' software to maintain adequate software
product revenue growth or gross margins on that revenue, failure to meet
contractual or internal product or service delivery deadlines or quality
standards in a timely fashion, and the factors described in the section titled
"Risk Factors" below. The above assumptions will also prove to be incorrect if
we need to significantly expand our operations, substantially increase
investment in product development, or acquire complementary businesses or
technologies, in order to respond to competitive pressures. Any of the factors
in the preceding sentence will require us to raise additional capital.

         We intend to seek additional capital financing. If any of our
assumptions underlying our forecast in the first sentence of the preceding
paragraph proves incorrect, and we cannot raise additional funds in a timely
manner, we will be required to implement contingency plans involving substantial
reduction of our expenses or our expense growth. A failure to raise additional
capital on reasonable terms or the implementation of our contingency plans would
have a material adverse effect on our business and prospects for growth.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 1998, the FASB issued SFAS 133, "Accounting for Derivative
Instruments and Hedging Activity," which was subsequently amended by SFAS 137,
"Accounting for Derivative Instruments and Hedging Activities: Deferral of
Effective Date of FASB 133" and Statement No.138, "Accounting for Certain
Derivative Instruments and Certain Hedging Activities: an amendment of FASB
Statement No. 133." SFAS 137 requires adoption of SFAS 133 in years beginning
after June 15, 2000. SFAS 138 establishes accounting and reporting standards for
derivative instruments and addresses a limited number of issues causing
implementation difficulties for numerous entities. The Statement requires us to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not hedges must be recorded at fair value through earnings. If the
derivative qualifies as a hedge, depending on the nature of the exposure being
hedged, changes in the fair value of derivatives are either offset against the
change in fair value of hedged assets, liabilities, or firm commitments through
earnings or are recognized in other comprehensive income until the hedged cash
flow is recognized in earnings. The ineffective portion of a derivative's change
in fair value is recognized in earnings. The Statement permits early adoption as
of the beginning of any fiscal quarter. SFAS 133 will become effective for our
first fiscal quarter of fiscal year 2002 and we do not expect adoption to have a
material effect on our financial statements.

         In December 1999, the SEC issued SAB 101, "Revenue Recognition in
Financial Statements." SAB 101 summarizes certain aspects of the staff's views
in applying generally accepted accounting principles to revenue recognition in
financial statements. On March 24, 2000 and June 26, 2000, the SEC issued Staff
Accounting Bulletin No. 101A and No. 101B, respectively, which extend the
transition provisions of SAB 101 until no later than the fourth quarter of
fiscal years beginning after December 15, 1999, which would be December 1, 2000
for us. We chose to adopt the provisions of SAB 101 early beginning with the
fiscal year ended February 29, 2000.

         In March 2000, the FASB issued FIN 44, Accounting for Certain
Transactions Involving Stock Compensation - an Interpretation of APB No. 25,
"Accounting for Stock Issued to Employees". 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 consequences 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.


                                       16

<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 NEGATIVE CASH FLOW AND MAY NOT HAVE SUFFICIENT CASH TO EFFECTIVELY
MANAGE OUR WORKING CAPITAL REQUIREMENTS AND FUND OUR OPERATIONS FOR THE PERIOD
REQUIRED TO ACHIEVE PROFITABILITY

         We have limited cash and credit available, and may be unable to raise
additional financing or establish additional lines of credit. As of August 31,
2000, we had approximately $22.2 million of cash and cash equivalents and $7.0
million in short-term marketable securities, before our repayment of $7.9
million to our preferred stockholders in September 2000. As of August 31, 2000,
our available credit under existing lines of credit was $1.7 million. There can
be no assurance that we will be able to achieve the revenue and gross margin
objectives necessary to achieve profitability without either obtaining
additional financing or substantially reducing our expenses or our expense
growth. Any substantial reduction in our expenses or expense growth could impair
our future revenue growth by cutting product development, sales, marketing
and/or support resources. Any such impairment of revenue growth could slow or
prevent our transition to profitability and have a material adverse effect on
our business.

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 $11.6 million and $23.4 million
for the three months and six months ended August 31, 2000, respectively. As of
August 31, 2000, we had an accumulated deficit of approximately $72.8 million.
Net losses have increased for most of our quarters since inception and we cannot
assure you this trend will not 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 and an evolving business model that make it
difficult to forecast our future operating results. Although our revenues
have grown in most of our 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."

                                       17

<PAGE>

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 August 31, 2000, we generated approximately
84.3% of our software product revenues from the sale of the Sun/Netscape
Alliance's iPlanet software, and approximately 37.7% 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 67.5% of our total revenues
in the three months ended August 31, 2000. Our agreement for resale of iPlanet
products will expire on October 31, 2000, and we cannot assure you that the term
of that agreement will be extended or that a replacement agreement will be
executed. If the existing agreement for resale of iPlanet products were not
extended or replaced, or the Sun/Netscape Alliance otherwise limited or
discontinued selling its software through us, our business would be materially
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
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 agreements, 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 most of these customers because they 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 will be below the expectations of public
market analysts and investors and as a result, the price of our common stock
will 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 technology and the products of
              our software vendors;

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


                                       18

<PAGE>

         -    aggressive cost management in the sales, marketing, product
              development and support areas;

         -    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;

         -    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.

         While we have recently experienced increasing gross margins on revenues
derived from software product sales, there can be no assurance that such
increases will continue. Also, as we have shifted a larger proportion of our
sales and marketing resources toward our more recently introduced online
services, such as INTRAWARE DEPLOYMENT, INTRAWARE E-LEARNING, and INTRAWARE
ASSET MANAGEMENT, we have experienced and may continue to 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 AND TECHNOLOGY 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, INTRAWARE E-LEARNING and
INTRAWARE ASSET MANAGEMENT. We cannot assure you that these online services and
products will result in additional customers and customer loyalty, significant
additional revenues or improved operating margins in


                                       19

<PAGE>

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 revenues until the quarter ended
November 30, 1998, and for the three months ended August 31, 2000, revenues from
online services and technology totaled only $6.5 million, which constituted
19.9% of our total revenues for that period. 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 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,
maintenance and management 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;


                                       20

<PAGE>

         -    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 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


                                       21

<PAGE>

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. 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 will 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.

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 FUND THE HIRING AND RETENTION OF SALES, MARKETING AND
SUPPORT PERSONNEL THAT WE NEED TO SUCCEED.

         If we lack the funds 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. If we are
unable to fund the hiring and retention of a sufficient number of qualified
sales and marketing personnel, our business and growth prospects will be
materially adversely affected.

         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. Because of our financial constraints and the limited availability
of such personnel, 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 most of our officers and key employees are not bound by an
employment agreement for any specific term. If we lost the services of one or
more of our key employees, or

                                       22

<PAGE>

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, Mark Long,
Executive Vice President of Strategic Development, Don Freed, Executive Vice
President and Chief Financial Officer, and Frost Prioleau, Executive Vice
President for Products and Services, would be difficult to replace.

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

         We 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. If we acquire another company, we could face difficulties in
assimilating that 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 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 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.


                                       23

<PAGE>

         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 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 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 filed with the SEC
              on or before November 10, 2000 and effective by January 10, 2001,
              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.


                                       24

<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 offices 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. 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. We must also
comply with U.S. export controls on software generally and encryption technology
in particular. 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


                                       25

<PAGE>

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 above and
elsewhere in this quarterly report.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Our exposure to market risk for changes in interest rates relate
primarily to our investment portfolio. We have not used derivative financial
instruments in our investment portfolio. We place our investments with high
quality issuers and, by policy, limit the amount of credit exposure to any one
issue or issuer. At August 31, 2000 $22.2 million of our cash, cash equivalents
and investment portfolio carried maturity dates of less than 90 days, $7.0
million carried maturity dates of less than one year. We have the ability to
hold the portfolio to maturity, if deemed necessary. 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 our initial public offering of
4,600,000 shares of common stock, including 600,000 shares subject to an
overallotment option on our behalf and on behalf of certain selling
stockholders. 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 were used for general
corporate purposes, principally working capital, capital expenditures, potential
acquisitions and additional sales and marketing efforts. From the closing of the
offering through the three months ended August 31, 2000, we used all net cash
from the offering.

         On June 30, 2000, we issued 834 shares of Series A preferred stock, 833
shares of Series B preferred stock and 833 shares of Series C preferred stock to
certain institutional investors in return for $25,000,000. On the same date, we
also issued to those investors warrants to purchase a number of shares of our
common stock that was indeterminable at that date. In issuing the preferred
stock and the warrants, we relied on the exemption provided by Section 4(2) of
the Securities Act based on the limited number of investors and on
representations of such investors. Pursuant to the terms of the preferred stock,
we subsequently redeemed 791 shares of each of the Series B and Series C
preferred stock for a total of approximately $15.8 million. After that
redemption, the number of common stock shares for which the warrants are
exercisable was set at 346,967 shares. Please see Note 6 of Notes to Unaudited
Interim Financial Information for a description of the conversion and dividend
provisions of the preferred stock and the exercise terms of the warrants.


                                       26

<PAGE>

         On July 12, 2000, we issued approximately 1,400,000 shares of our
common stock to complete the acquisition of Janus Technologies, Inc. The shares
of common stock were issued to the stockholders of Janus Technologies, Inc. We
relied on the exemption provided by Regulation D issued pursuant to the
Securities Act. Our reliance on this exemption was based on the limited number
or stockholders of Janus Technologies, Inc. and representations of Janus
Technologies, Inc. and of the stockholders of Janus Technologies, Inc. as to the
accredited nature of those stockholders.

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>
    2.1***      Agreement and Plan of Reorganization, dated as of June 9,
                2000, by and among Intraware, Inc., Steelers Acquisition
                Corp., Janus Technologies, Inc. and the Shareholders named
                therein.
    3.1*        Certificate of Incorporation of Intraware, Inc.
    3.2**       The Series A Certificate of Designations, Preferences and Rights.
    3.3**       The Series B Certificate of Designations, Preferences and Rights.
    3.4**       The Series C Certificate of Designations, Preferences and Rights.
    3.5         Amended and Restated Bylaws of Intraware, Inc.
    4.1**       Form of Warrant issued in connection with the sale of Series A,
                B and C Preferred Stock.
   10.1**       Securities Purchase Agreement dated as of June 29, 2000 among
                Intraware, Inc. and the buyers of the Series A, B and C
                Preferred Stock.
   10.2**       Registration Rights Agreement dated as of June 29, 2000 among
                Intraware, Inc. and the buyers of the Series A, B and C
                Preferred Stock.
   10.3***      Registration Rights and Lock-Up Agreement dated as of June 9,
                2000 among Intraware, Inc. and the Shareholders of Janus
                Technologies, Inc.
   27.1         Financial Data Schedules.
</TABLE>
-------------------

*        Incorporated by reference to Intraware's Registration Statement on Form
         S-1 (File No. 333-69261) declared effective on February 25, 1999.

**       Incorporated by reference to exhibits filed with Registrant's Form 8-K
         as filed with the Securities and Exchange Commission on July 3, 2000.


                                       27

<PAGE>

***      Incorporated by reference to exhibits filed with Registrant's Form 8-K
         (File No. 000-25249) as filed with the Securities and Exchange
         Commission on July 27, 2000.

         b)       Reports on Form 8-K

         On July 3, 2000, we filed a Form 8-K dated June 29, 2000 reporting
under Item 5 - Other Events, the issuance of our Series A, B and C Preferred
Stock. In addition, on July 27, 2000, we filed a Form 8-K dated June 9, 2000
reporting under Item 2 Acquisition or Disposition of Assets, the Acquisition
of Janus Technologies, Inc., in exchange for approximately 1,400,000 shares
of our common stock.

                                       28

<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: October 16, 2000                By: /s/ Donald M. Freed
                                          -------------------------------------
                                          Donald M. Freed
                                          EXECUTIVE VICE PRESIDENT AND
                                          CHIEF FINANCIAL OFFICER


                                       29