UNITED STATES
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 November 30, 2006

OR

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

For the transition period from ________to _________

Commission file number 000-25249

Intraware, Inc.(Exact name of Registrant as Specified in its Charter)



|Delaware                                                       | 68-0389976                             
|-------------------------------------------------------------- | ---------------------------------------
|(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification Number)

25 Orinda Way
Orinda, California      94563

(925) 253-4500

---

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer      ̈ Accelerated filer     ̈ Non-accelerated filer    x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES     ̈ NO    x Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.Class

Outstanding at December 31, 2006Common Stock, $0.001 par value

6,131,598
Note:PDF provided as a courtesy
Intraware, Inc.Table of Contents

PART I.   FINANCIAL INFORMATION

Page No.Item 1.   Consolidated Financial Statements (unaudited):Consolidated Balance Sheets — at November 30, 2006 and February 28, 2006

2Consolidated Statements of Operations — for the Three and Nine Months Ended November 30, 2006 and November 30, 2005

3Consolidated Statements of Cash Flows — for the Nine Months Ended November 30, 2006 and November 30, 2005

4Notes to Unaudited Interim Consolidated Financial Statements

5Item 2.   Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

16Item 3.   Quantitative and Qualitative Disclosures About Market Risk

24Item 4.   Controls and Procedures

24PART II.  OTHER INFORMATIONItem 1.   Legal Proceedings

24Item 1A.  Risk Factors

25Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

31Item 3.   Defaults Upon Senior Securities

31Item 4.   Submission of Matters to a Vote of Security Holders

31Item 5.   Other Information

31Item 6.   Exhibits

31Signatures

32Part I -- FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

INTRAWARE, INC. 
                     CONSOLIDATED BALANCE SHEETS
                     (in thousands, except per share amounts)
                     (unaudited)

November 30, 2006


February 28, 2006ASSETSCurrent assets:Cash and cash equivalents

$
12,337

$
12,650Accounts receivable, net


1,800


1,682Costs of deferred revenue


502


393Other current assets


353


329Total current assets


14,992


15,054Costs of deferred revenue, less current portion


469


244Property and equipment, net


605


620Other assets


202


146Total assets

$
16,268

$
16,064LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK & STOCKHOLDERS' EQUITYCurrent liabilities:Notes payable

$
288

$
372Accounts payable


918


478Accrued expenses


836


804Deferred revenue


2,548


2,192Total current liabilities


4,590


3,846Deferred revenue, less current portion


755


136Notes payable, less current portion


52


158Total liabilities


5,397


4,140Commitments and Contingencies (Note 4)Redeemable convertible preferred stock; $0.0001 par value; 10,000 shares authorized:Series A; 28 shares issued and outstanding at November 30, 2006 andFebruary 28, 2006, (aggregate liquidation preference of $500at November 30, 2006 and February 28, 2006).


449


449Series B; 1 shares issued and outstanding at November 30, 2006 and February 28, 2006,(aggregate liquidation preference of $6,000 and $6,300 atNovember 30, 2006 and February 28, 2006, respectively).


5,701


5,701Total redeemable convertible preferred stock


6,150


6,150Stockholders' equity:Common stock; $0.0001 par value; 250,000 shares authorized; 6,132 and 6,113 sharesissued and outstanding at November 30, 2006 and February 28, 2006, respectively.


1


1Additional paid-in-capital


164,735


163,756Accumulated deficit


(160,015)


(157,983)Total stockholders' equity


4,721


5,774Total liabilities, redeemable convertible preferred stock and stockholders' equity

$
16,268

$
16,064See notes to unaudited interim consolidated financial statements.

2INTRAWARE, INC.
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share amounts)
                     (unaudited)

For the three months ended



For the nine months endedNovember 30, 2006


November 30, 2005



November 30, 2006


November 30, 2005Revenues:Online services and technology
$
2,803

$
2,320


$
7,998

$
7,128Alliance and reimbursement

-


203



-


1,308Total revenues

2,803


2,523



7,998


8,436Cost of revenues:Online services and technology

1,372


1,038



3,520


3,215Alliance and reimbursement

-


259



-


1,077Total cost of revenues

1,372


1,297



3,520


4,292Gross profit

1,431


1,226



4,478


4,144Operating expenses:Sales and marketing

853


712



2,327


1,989Product development

328


303



1,309


888General and administrative

1,082


1,040



3,425


2,886Restructuring

-


41



-


41Total operating expenses

2,263


2,096



7,061


5,804Loss from operations

(832)


(870)



(2,583)


(1,660)Interest expense

(9)


(12)



(30)


(47)Interest and other income and expenses, net

147


78



581


192Net loss
$
(694)

$
(804)


$
(2,032)

$
(1,515)Basic and diluted net loss per share
$
(0.11)

$
(0.13)


$
(0.33)

$
(0.25)Weighted average shares - basic and diluted

6,131


6,076



6,130


6,062See notes to unaudited interim consolidated financial statements.

3INTRAWARE, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                     (in thousands)
                     (unaudited)

For the nine months endedNovember 30, 2006


November 30, 2005Cash flows from operating activities:Net loss
$
(2,032)

$
(1,515)Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization

321


455Provision for (recovery of) doubtful accounts

(22)


4Stock-based compensation

866


-Amortization of discount on note payable

-


3Changes in assets and liabilities:Accounts receivable

(96)


350Costs of deferred revenue

(280)


(17)Other assets

(80)


(78)Accounts payable

385


94Accrued liabilities

31


53Deferred revenue

976


(328)Net cash provided by (used in) operating activities

69


(979)Cash flows from investing activities:Purchases of property and equipment

(252)


(323)Net cash used in investing activities

(252)


(323)Cash flows from financing activities:Proceeds from notes payable

137


176Principal payments on notes payable

(327)


(776)Proceeds from issuance of common stock

60


5,865Net cash provided by (used in) financing activities

(130)


5,265Net decrease in cash and cash equivalents

(313)


3,963Cash and cash equivalents at beginning of the period

12,650


9,463Cash and cash equivalents at end of the period
$
12,337

$
13,426Supplemental disclosure of cash flow information:Cash paid for interest
$
31

$
50Supplemental non-cash activity:Purchases of property and equipment included in accounts payable
$
79

$
85See notes to unaudited interim consolidated financial statements.

4INTRAWARE, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BASIS OF PRESENTATION
INTRAWARE
The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC").  Certain information and footnote disclosures normally included
in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have
been condensed or omitted under these rules and regulations.  However, management believes the disclosures are adequate to
ensure the information presented is not misleading.  The balance sheet at February 28, 2006 has been derived from the audited
financial statements, but does not include all disclosures required by generally accepted accounting principles.  These unaudited
interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and
accompanying notes in our annual report on Form 10-K for the fiscal year ended February 28, 2006 filed with the SEC on April 21,
2006.
In the opinion of management, all adjustments, consisting only of normal recurring items considered necessary for a fair statement,
have been included in the accompanying unaudited interim consolidated financial statements.  The results of operations for the
interim periods presented are not necessarily indicative of operating results to be expected for any subsequent interim period or for the
fiscal year ending February 28, 2007.
We have incurred losses and negative cash flow from operations during each fiscal year since inception. Net loss for the three
months ended November 30, 2006 decreased from our prior year loss for the corresponding period. Net loss for the nine months ended
November 30, 2006, increased from our prior year loss for the corresponding period. For the nine months ended November 30, 2006
we recorded cash provided from operating activities of $0.1 million, which was an increase from the corresponding period in the prior
year. Our cash balances may decline further, although we believe that the effects of our capital financing, strategic actions implemented
to improve revenue, and cost controls will be adequate to generate sufficient cash resources to fund our future operations.  If we
fail to generate sufficient revenues or adequately control spending, we may be unable to achieve key business objectives.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition


We recognize revenue when all of the following conditions are met:


There is persuasive evidence of an arrangement;
We have provided the service to the customer, made the software available for customer download through
our website, or shipped the software to the customer;
We believe collection of these fees is reasonably assured; and



Our online services and technology revenue results primarily from three types of arrangements. First, it results
from sales of our SubscribeNet digital delivery service to software vendors and other companies that distribute software as part of their
business. Second, it results from professional services that we provide to customize our SubscribeNet service for customers, to convert
data for customers, and to integrate our proprietary software. Third, it results from our resale of third-party services or licenses
complementary to our SubscribeNet service, one of which is e-commerce. In addition, if appropriate opportunities present themselves in
the future, we may generate online services and technology revenue from the sale of licenses to our proprietary software, and related
maintenance, to companies using those products internally or using those products to provide web-based services to their customers.

Alliance and reimbursement revenue primarily relates to our former alliance agreement with Software Spectrum
for sales and marketing services. This revenue consisted of a percentage of the gross profit derived from Software Spectrum's sales of
the third-party software and maintenance for which we provided sales and marketing services, and, prior to August 1, 2005,
reimbursement for the costs of maintaining a sales team dedicated to providing sales and marketing services to Software Spectrum for
that third-party software and maintenance. This revenue was recognized as we provided the services to Software Spectrum. On August
1, 2005, we signed an updated agreement with Software Spectrum. Under the updated agreement, Software Spectrum paid us a higher
percentage of the gross profit derived from its sales of Sun software licenses and maintenance. However, Software Spectrum stopped
reimbursing us for our direct costs in maintaining a team dedicated to sales of Sun software licenses and maintenance. We terminated
our alliance agreement with Software

5



---





Spectrum effective January 3, 2006, in connection with the sale of our Sun One customer list to
FusionStorm. That sale was completed on January 3, 2006. We ceased recognizing alliance and reimbursement revenue on that date.

We defer online services and technology revenues related to our SubscribeNet digital delivery service and
generally recognize them ratably over the term of the service arrangement. The typical subscription term is one year, although some
may be shorter or extend up to approximately 3 years. Our customer contracts are generally noncancelable, though customers usually
have the right to terminate their contracts for cause if we materially fail to perform. A majority of our SubscribeNet service
implementations for new customers involve customization essential to the functionality of the service. In these cases, we defer revenue
recognition until the service go-live date is reached, and then recognize the SubscribeNet revenue on a ratable basis over the
remaining contract term if the implementation is bundled. If the implementation fees are charged separately, then the associated
revenue is recognized in accordance with our professional services revenue recognition policy, as stated below. The go-live date is the
later of the date on which the essential functionality is delivered or the point at which no additional customization is required. Our
SubscribeNet contracts with customers normally give the customer a period of time (generally five days) to evaluate a SubscribeNet
implementation after we have completed it, and provide that the customer is deemed to have accepted the implementation if it has not
affirmatively rejected it within that period. We typically rely on such non-rejections by customers to indicate their acceptance of
implementations.

We also sell additional professional services related to SubscribeNet agreements. Generally, these services do
not provide stand-alone value to a customer and, accordingly, we defer recognition of this revenue until the go-live date for the
professional services, similar to the manner in which we treat SubscribeNet service revenues discussed above. Such professional
services revenues are recognized ratably over the longer of the remaining estimated customer life or the remaining contract term,
commencing with the acceptance of the professional services. Estimated customer life requires that we periodically estimate the
projected life of our existing customers based on historical information such as customer renewal rates. In some instances the
implementation of the SubscribeNet service and professional services are bundled into the initial agreement without specifically stating
the fees for each one. In these instances the professional services fees are recognized from acceptance to the end of the remaining
contract term on a ratable basis with the SubscribeNet fee.

Online services and technology revenues related to our resale of third-party services or software licenses complementary to our
SubscribeNet service are generally recognized as the service is provided. If the service or license resold involves customization
essential to the functionality of the underlying SubscribeNet service, the fees charged for the customization are recognized as revenue
in the same manner as professional services discussed above. Resold services or licenses are recognized as revenue based on the
gross fee charged to the customer, since we bear the credit risk for resold services or licenses, have latitude in establishing pricing, and
are primarily responsible for acceptability of the services or licenses delivered. In addition, costs paid to the third-party providers are
recorded as cost of revenues and recognized in the same manner as the related revenue.

Deferred Costs

We capitalize direct costs of revenues related to significant SubscribeNet service implementations and established
professional services contracts associated with our SubscribeNet services. Direct costs include compensation and payroll-related fringe
benefits directly related to the time spent on significant implementation and professional services activities. These costs are recognized
over the same period as the related revenue is recognized (see Revenue Recognition above). Costs associated with professional
services involving significant new functionality for the SubscribeNet service that are partially or fully funded by customers, but which do
not qualify as funded research and development activities, are expensed as cost of revenues as incurred until a working model is
delivered to the customer. Once a working model has been delivered, all additional direct costs are capitalized in the same manner
discussed above. Any change in our revenue recognition estimates could result in corresponding changes to our recognition of costs of
deferred revenues. A 10% increase in our estimated customer life during the three and nine months ended November 30, 2006 would
have caused a net increase in our net loss of approximately $6,000 and $18,000 respectively. At November 30, 2006, we had
approximately $1.0 million in capitalized costs relating to deferred revenues. We expense customer acquisition costs, including sales
commissions, as incurred. We also defer legal costs incurred in connection with patent applications. As of November 30, 2006 we had
$0.2 million in deferred legal costs. Upon issuance of a patent, the deferred legal costs for that patent are expensed ratably over the
patent's useful life.

Stock-Based Compensation

In March 2004, the Financial Accounting Standards Board ("FASB") issued a Statement, "Share-Based Payment, an
amendment of FASB Statements Nos. 123 and 95" ("SFAS 123 (R)"), that addresses the accounting for share-based payment
transactions in which a company receives employee services in exchange for either equity instruments of the company or liabilities that
are based on the fair value of the company's equity instruments, or that may be settled by the issuance of such equity instruments. The
statement eliminates the practice of accounting for share-based compensation transactions using the intrinsic value method, and
generally requires that such transactions be accounted for using a fair-value-based method and recognized as expense in the
consolidated statements of income. In March 2005, the SEC issued Staff Accounting Bulletin No. 107 ("SAB 107")
regarding the Staff's interpretation of SFAS 123 (R). This interpretation provides the Staff's views regarding interactions between SFAS
123 (R) and certain SEC rules and regulations and provides interpretations of the valuation of share-based payments for public
companies. The interpretive guidance is intended to assist companies in applying the provisions of SFAS 123 (R) and investors and
users of the financial statements in analyzing the information provided.

Following the guidance prescribed in SAB 107, on March 1, 2006 we adopted SFAS 123 (R) using the modified prospective method
and accordingly, have not restated the consolidated results of income from prior interim periods and fiscal years. Under SFAS 123 (R),
we are

6



---





required to measure compensation cost for all stock-based awards at fair value on date of grant and recognize compensation
expense on a straight-line basis over the service period that the awards are expected to vest. Stock options issued under our equity
plans, as well as stock purchases under our employee stock purchase plan, are subject to SFAS 123 (R). Stock options generally vest
over a three to four-year service period. Since our adoption of SFAS 123 (R), there have been no material changes to our equity plans
or modifications to outstanding stock-based awards.

Prior to March 1, 2006, Intraware accounted for employee stock-based compensation using the intrinsic value method in
accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), as
permitted by "Accounting for Stock-Based Compensation" ("SFAS 123"), and "Accounting for Stock-Based Compensation - Transition
and Disclosure" ("SFAS 148"). Under the intrinsic value method, the difference between the market price on the date of grant and the
exercise price is charged to the results of operations over the vesting period on a straight-line method. For the three and nine months
ended November 30, 2005, had we accounted for all employee stock-based compensation based on the estimated grant date fair
values, as defined by SFAS 123, our net loss and net loss per share would have been adjusted to the following pro forma amounts (in
thousands, except per share data):

|                                                         |                                   | For the three  months ended      |                                  | For the nine  months ended       
|-------------------------------------------------------- | --------------------------------- | -------------------------------- | -------------------------------- | ---------------------------------
|                                                         |                                   | November 30, 2005                |                                  | November 30, 2005                
|Net loss                                                 | $                           (804) |                                  | $                        (1,515)
|Deduct:  Total stock-based employee compensation expense |                                   |                                  |                                  |                                  
|determined under fair value based method for all awards  |                                   | (629)                            |                                  | (1,825)                          
|                                                         |                                   |                                  |                                  |                                  
|Pro forma                                                |                                   | $                       (1,433)  |                                  | $                        (3,340) 
|                                                         |                                   |                                  |                                  |                                  
|Net loss per share -- basic and diluted                  |                                   |                                  |                                 
|As reported                                              |                                   | $                         (0.13) |                                  | $                          (0.25)
|                                                         |                                   |                                  |                                  |                                  
|Pro forma                                                |                                   | $                         (0.24) |                                  | $                          (0.55)

In the pro forma disclosures prior to the adoption of SFAS No. 123(R), we accounted for forfeitures upon occurrence
whereas we now estimate a forfeiture rate for those awards not expected to vest, and adjust for the actual forfeitures as incurred.

Upon adoption of SFAS 123(R) in the first quarter of fiscal 2007, we began to recognize the compensation expense associated with
awards granted on or after March 1, 2006, and the unvested portion of previously granted awards that remained outstanding as
of March 1, 2006, in our unaudited consolidated statement of operations.

The effect of recording stock-based compensation for the three and nine months ended November 30, 2006 was as follows:

|                                                  |  |  | Three Months      |        | Nine Months      
|------------------------------------------------- |  |  | ----------------- | ------ | -----------------
|                                                  |  |  | Ended             |        | Ended            
|                                                  |  |  | November 30, 2006 |        | November 30, 2006
|Stock-based compensation expense by type of award |  |  |                   |        |                  
|Employee stock options                            |  |  | $                 | 283    |                  
|Employee stock purchase plan                      |  |  |                   | 10     |                  
|Net effect on net loss                            |  |  | $                 | 293    |                  
|                                                  |  |  |                   |        |                  
|Effect on loss per share: - basic and diluted     |  |  | $                 | (0.05) |                  

Consistent with our valuation method for the disclosure-only provisions of SFAS 123, we are using the Black-Scholes model to
value the compensation expense associated with our stock-based awards under SFAS 123(R). In addition, we estimate forfeitures
when recognizing compensation expense, and we will adjust our estimate of forfeitures over the requisite service period based on the
extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be
recognized through a catch-up adjustment in the period of change and will also impact the amount of compensation expense to be
recognized in future periods.

The following weighted average assumptions were used in the estimated grant date fair value calculations for stock option awards:

7



---





|                                 |  | Three Months Ended |      | Nine Months Ended
|-------------------------------- |  | ------------------ | ---- | -----------------
|                                 |  | Nov 30             |      | Nov 30           
|                                 |  | 2006               |      | 2005             
|Stock option plans:              |  |                    |      |                  
|Five Year Grants:                |  |                    |      |                  
|Dividend yield                   |  |                    | N/A  |                  
|Expected stock price volatility  |  |                    | N/A  |                  
|Risk-free interest rate          |  |                    | N/A  |                  
|Average expected life (in years) |  |                    | N/A  |                  
|                                 |  |                    |      |                  
|Ten Year Grants:                 |  |                    |      |                  
|Dividend yield                   |  |                    | 0    | %                
|Expected stock price volatility  |  |                    | 99   | %                
|Risk-free interest rate          |  |                    | 5.2  | %                
|Average expected life (in years) |  |                    | 6.21 |                  
|                                 |  |                    |      |                  
|Stock purchase plans:            |  |                    |      |                  
|Dividend yield                   |  |                    | 0    | %                
|Expected stock price volatility  |  |                    | 62   | %                
|Risk-free interest rate          |  |                    | 4.98 | %                
|Average expected life (in years) |  |                    | 1.25 |                  

The expected stock price volatility rates are based on historical volatilities of our common stock. The risk-free interest rates are
based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The
average expected life represents the weighted average period of time that options granted are expected to be outstanding, giving
consideration to vesting schedules and our historical exercise patterns. For the quarter ended November 30, 2006, the average
expected life was determined using the historical approach, and for option types where we have limited historical data we used the
simplified method, described under SAB 107.

Net loss per share

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, excluding shares subject to repurchase. The terms of our redeemable convertible
preferred stock include the right to participate in dividends declared to common stockholders. Our redeemable convertible preferred
stock does not have a contractual obligation to share in the losses in any given period. As a result, this participating security will not be
allocated any losses in the periods of net losses, but will be allocated income in the periods of net income using the two-class method.
The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and
participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. Under the
two-class method, net income is reduced by the amount of dividends declared in the current period for each class of stock and by the
contractual amounts of dividends that must be paid for the current period. The remaining earnings are then allocated to common stock
and participating securities to the extent that each security may share in earnings, as if all of the earnings for the period had been
distributed. The total earnings allocated to each security are determined by adding together the amounts allocated for dividends and the
amounts allocated for a participation feature. The total earnings allocated to each security are then divided by the number of
outstanding shares of the security to which the earnings are allocated to determine the earnings per share.

Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of common and
potential common shares outstanding during the period if the effect is dilutive. Potential common shares are composed of common
stock subject to repurchase rights and incremental shares of common stock issuable upon the exercise of stock options and warrants
and upon the conversion of preferred stock. The dilutive effect of outstanding stock options and warrants is computed using the
treasury stock method.

The following table sets forth the computation of basic and diluted net loss per share, as well as securities not included in the
diluted net loss per share calculation because doing so would be antidilutive (in thousands, except per share amounts):

8



---





|                                        |   | For the three months ended |       | For the nine months ended
|--------------------------------------- | - | -------------------------- | ----- | -------------------------
|                                        |   | November 30, 2006          |       | November 30, 2005        
|                                        |   |                            |       |                          
|Numerator:                              |   |                            |       |                          
|Net loss                                |   | $                          | (694) |                          
|                                        |   |                            |       |                          
|Denominator:                            |   |                            |       |                          
|Weighted average shares                 |   |                            | 6,131 |                          
|                                        |   |                            |       |                          
|Basic and diluted net loss per share    | $ | (0.11)                     |       | $                        
|                                        |   |                            |       |                          
|Antidilutive securities not included in |   |                            |       |                          
|weighted average shares:                |   |                            |       |                          
|Redeemable convertible preferred stock  |   |                            | 1,028 |                          
|Warrants to purchase common stock       |   |                            | 84    |                          
|Employee stock options                  |   |                            | 1,374 |                          
|                                        |   |                            |       |                          
|                                        |   |                            | 2,486 |                          

Web Site Development Costs

Intraware accounts for web site development costs in accordance with the provisions of "Accounting for Web Site
Development Costs" Emerging Issues Task Force Issue No.00-2 or EITF 00-2, which requires that certain costs to develop web sites
be capitalized or expensed, depending on the nature of the costs. We amortize web site development costs using the straight-line
method over an estimated useful life of two years. The total capitalized web site development costs for the nine months ended
November 30, 2006 was approximately $10,500.

Recent Accounting Pronouncements

In September 2006, the SEC issued Staff Accounting Bulletin No. 108,"Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements" ("SAB 108"). SAB 108 provides interpretive
guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year
misstatement. The SEC staff believes that registrants should quantify errors using both a balance sheet and income statement
approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative
factors are considered, is material. SAB 108 is effective for fiscal years ending on or after November 15, 2006. We do not expect the
application of the guidance of SAB 108 in our fiscal year 2007 to have a material impact on our financial condition, results of operations
or cash flows.

In July 2006, the FASB issued Financial Interpretation No. 48, "Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109" ("FIN 48"), which is a change in accounting for income taxes. FIN 48 specifies how
tax benefits for uncertain tax positions are to be recognized, measured, and derecognized in financial statements; requires certain
disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified on the balance sheet; and
provides transition and interim period guidance, among other provisions. FIN 48 is effective for fiscal years beginning after
December 15, 2006 and as a result, is effective for Intraware in our first quarter of fiscal 2008. We are currently evaluating the
impact of FIN 48 on our consolidated financial position, results of operations, and cash flows.

NOTE 3. CHANGES IN STOCKHOLDERS' EQUITY

During the nine months ended November 30, 2006 our stockholders' equity changed as follows (in thousands):

|                                                             | Common stock |  | Additional paid-in |        | Accumulated |         | Stockholders' |         | Comprehensive
|------------------------------------------------------------ | ------------ |  | ------------------ | ------ | ----------- | ------- | ------------- | ------- | -------------
|                                                             | Shares       |  |                    | Amount |             | capital |               | deficit |              
|                                                             |              |  |                    |        |             |         |               |         |              
|Balance at February 28, 2006                                 | 6,113        |  | $                  | 1      |             | $       | 163,756       |         | $            
|Exercise of stock options                                    | 8            |  |                    | -      |             |         | 19            |         |              
|Issuance of common stock for employee stock purchase program | 11           |  |                    | -      |             |         | 41            |         |              
|Stock based compensation                                     |              |  |                    |        |             |         | 919           |         |              
|Net loss                                                     | -            |  |                    | -      |             |         | -             |         |              
|Other comprehensive loss                                     |              |  |                    |        |             |         |               |         |              
|Comprehensive loss                                           |              |  |                    |        |             |         |               |         |              
|                                                             |              |  |                    |        |             |         |               |         |              
|Balance at November 30, 2006                                 | 6,132        |  | $                  | 1      |             | $       | 164,735       |         | $            

9



---





NOTE 4. CONTINGENCIES

Indemnifications

In the course of our business, we have given indemnities and made commitments and guarantees under which we may be
required to make payments. These indemnities include:

- Intellectual Property Indemnities to Customers and Resellers
- Intellectual Property Indemnity to Acquiror of Asset Management Business
- Indemnities to Private Investors
- Indemnities to Directors and Officers

We historically have received only a very limited number of requests for indemnification under these agreements and have not
been required to make material payments under them. Accordingly, we believe that the fair value of each of these indemnification
agreements is minimal and therefore have not recorded a liability related to these indemnification provisions.

Legal Proceedings

In re Intraware, Inc. Initial Public Offering Securities Litigation

In October 2001, we were served with a summons and complaint in a purported securities class action lawsuit. On or
about April 19, 2002, we were served with an amended complaint in this action, which is now titled In re Intraware, Inc. Initial Public
Offering Securities Litigation, Civ. No. 01-9349 (SAS) (S.D.N.Y.), related to In re Initial Public Offering Securities Litigation, 21 MC 92
(SAS) (S.D.N.Y.). The amended complaint is brought purportedly on behalf of all persons who purchased our common stock from
February 25, 1999 (the date of our initial public offering) through December 6, 2000. It names as defendants Intraware, three of our
present and former officers and directors, and several investment banking firms that served as underwriters of our initial public offering.
The complaint alleges liability under Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, on the grounds that the registration statement for the offerings did not disclose that: (1) the underwriters had
agreed to allow certain customers to purchase shares in the offerings in exchange for excess commissions paid to the underwriters;
and (2) the underwriters had arranged for certain customers to purchase additional shares in the aftermarket at predetermined prices.
The amended complaint also alleges that the underwriters misused their securities analysts to manipulate the price of our stock. No
specific damages are claimed.

Lawsuits containing similar allegations have been filed in the Southern District of New York challenging over 300 other initial public
offerings and secondary offerings conducted in 1999 and 2000. All of these lawsuits have been consolidated for pretrial purposes
before United States District Court Judge Shira Scheindlin of the Southern District of New York. On July 15, 2002, an omnibus motion
to dismiss was filed in the coordinated litigation on behalf of the issuer defendants, of which Intraware and its three named current and
former officers and directors are a part, on common pleadings issues. On or about October 9, 2002, the Court entered and ordered a
Stipulation of Dismissal, which dismissed the three named current and former officers and directors from the litigation without prejudice.
On February 19, 2003, the Court entered an order denying in part the issuer-defendants' omnibus motion to dismiss, including those
portions of the motion to dismiss relating to Intraware.

In June 2004, a stipulation of settlement for the claims against the issuer-defendants, including us, was submitted to the Court. The
underwriter-defendants in the In re Initial Public Offering Securities Litigation (collectively, the "underwriter-defendants"), including the

10



---





underwriters of our initial public offering, are not parties to the stipulation of settlement.

The settlement provides that, in exchange for a release of claims against the settling issuer-defendants, the insurers of all of the
settling issuer-defendants will provide a surety undertaking to guarantee plaintiffs a $1 billion recovery from the non-settling defendants,
including the underwriter-defendants. The amount our insurers would be required to pay to the plaintiffs could range from zero to
approximately $3.5 million, depending on plaintiffs' recovery from the underwriter-defendants and from other non-settling parties. If the
plaintiffs recover at least $1 billion from the underwriter-defendants, our insurers would have no liability for settlement payments under
the terms of the settlement. If the plaintiffs recover less than $1 billion, we believe our insurance will likely cover our share of any
payments towards satisfying plaintiffs' $1 billion recovery deficit. Management estimates that its range of loss relative to this matter is
zero to $3.5 million. Presently there is no more likely point estimate of loss within this range. As a consequence of the uncertainties
described above regarding the amount we will ultimately be required to pay, if any, as of November 30, 2006, we have not accrued a
liability for this matter.

On August 31, 2005, the court granted preliminary approval of the settlement. A fairness hearing for the settlement took place in
April 2006. After the hearing, the court took the matter under submission and has not yet issued a final ruling. In addition, on December
5, 2006, the Court of Appeals for the Second Circuit reversed the class certification order of the district court judge, and concluded that
none of the six focus cases presented to the appellate court for consideration can be certified as a class action. It remains unclear as of
this date whether this new ruling will be reconsidered or appealed, or whether it will impact the settlement currently under consideration
by the district court.

NOTE 5.  NOTES PAYABLE

In August 2003, we issued a note payable to Silicon Valley Bank for proceeds of approximately $2.0 million. The note was
payable in fixed monthly principal installments plus interest through September 2005. In connection with the note payable, we issued a
warrant to purchase 4,173 shares of our common stock at an exercise price of $11.90 per share. The warrant was immediately
exercisable and expires in August 2010. We estimated the allocated fair value of such warrant at approximately $46,000 using the
Black-Scholes valuation model with the following assumptions: expected volatility of 136%, risk-free interest rate of 4.01%, expected life
of seven years and no dividends. The value of the warrant was recorded as a debt discount and was amortized as interest expense
using the effective interest method over the life of the note payable. The debt discount related to the warrant was fully amortized as of
November 30, 2006. As of November 30, 2006, the warrant had not been exercised.

In September 2004, we entered into an equipment advance agreement with Silicon Valley Bank.  The equipment
advance bears annual interest at the greater of 5.50% or 1.00% above the bank's prime rate.  This equipment advance allowed
us to borrow up to $500,000 through August 1, 2005, solely to finance equipment purchases.  As of November 30,
2006, we had borrowed approximately $493,000 under this agreement, and the interest rate at that date was
9.25%.  Monthly payments of interest only were payable through August 2005, after which fixed monthly principal
installments plus interest will be made through August 2007.

In November 2005, we entered into another equipment advance agreement with Silicon Valley Bank.  This new
equipment advance bears annual interest at the greater of 7.0% or 1.00% above the bank's prime rate.  This equipment advance
allows us to borrow up to $500,000 through November 30, 2006, solely to finance equipment purchases.  As of November
30, 2006, we had borrowed approximately $207,000 under this agreement, and the interest rate at that date was
9.25%.  Each advance is repayable over 24 monthly installments of principal plus interest, beginning the month after the
advance is made.

All of this debt is collateralized by a senior security interest in substantially all of our assets.  We are also required to maintain
compliance with certain financial covenants, all of which we were in compliance with at November 30, 2006.

Scheduled maturities of debt at November 30, 2006 are as follows (in thousands):

|Years ending:     |   |    
|----------------- | - | ---
|February 28, 2007 | $ | 87 
|February 29, 2008 |   | 227
|February 29, 2009 |   | 26 
|                  | $ | 340

NOTE 6. RELATED PARTY TRANSACTIONS

During the three and nine months ended November 30, 2006, we provided e-commerce solutions to our customers by using
managed e-commerce services that were provided by a wholly owned subsidiary of Digital River, Inc. ("Digital River"). As a result of
these transactions we recognized approximately $174,000 and $347,000 of online services and technology revenue and $129,000 and
$255,000 of related costs of revenue for the three and nine months ended November 30, 2006, respectively. Digital River owns
approximately 14% of our outstanding capital stock (on an as-converted to common stock basis).

11



---





NOTE 7. COMMON STOCK

Reverse Stock Split

At the close of business on September 26, 2005, we effected a one-for-ten reverse stock split of our common stock.  All
share and per share information included in these unaudited condensed consolidated financial statements has been retroactively
adjusted to reflect the reverse stock split.  Shares authorized and par value were not adjusted because they were not affected by
the reverse stock split.

Stock Option Plans

2006 Equity Incentive Plan

General

On August 9, 2006, we adopted our 2006 Equity Incentive Plan (the "2006 Plan"), which was approved by our shareholders on
October 10, 2006. The 2006 Plan replaces our 1996 stock option plan (1996 Plan), which expired in November 2006. The 2006 Plan
will expire on August 9, 2016.

The 2006 Plan is an "omnibus" equity plan consisting of a variety of equity vehicles to provide flexibility in using equity awards,
including incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units,
performance shares, performance units and dividend equivalents. Stock options granted under the 2006 Plan may be either incentive
stock options or nonqualified stock options. Incentive stock options (that is, options intended to qualify as incentive stock options under
the Internal Revenue Code, or "ISOs") may be granted only to our employees (including directors who are also employees).
Nonstatutory stock options (that is, options not intended to qualify as incentive stock options under the Internal Revenue Code, or
"NSOs") may be granted to our employees and consultants. At February 28, 2006, we had reserved approximately 0.4 million
shares of common stock for issuance under the 1996 Plan. The initial share reserve under the 2006 Plan equals 450,000 shares, plus
any shares that were subject to stock options outstanding under the 1996 Plan as of the annual meeting date (October 10, 2006) that
subsequently expire unexercised. If awards that were granted under the 1996 Plan expire, are cancelled or otherwise terminate without
being exercised, the shares subject to those awards will become available for grant under the new 2006 Plan up to a cap of one million
shares. In addition, to the extent (a) shares are surrendered in exercise of awards or payment of tax, or (b) awards are settled in cash,
such shares will not be deemed issued under the 2006 Plan. The 2006 Plan does not include any provision that would
increase the share reserves on an annual or other regular basis.

The 2006 Plan provides for earlier termination of an award due to the participant's cessation of service. Awards other than incentive
stock options generally may be granted to employees (including officers), directors and consultants of the Company, or certain related
entities or designated affiliates. An incentive stock option can be granted only to a person who, on the effective date of grant, is an
employee of the Company, a parent corporation or a subsidiary corporation. No incentive stock options may be granted under the 2006
Plan to any person who, at the time of the grant, owns (or is deemed to own) stock possessing more than 10% of the total combined
voting power of the Company, or any of its parent or subsidiary corporations, unless the option exercise price is at least 110% of the fair
market value of the stock subject to the option on the date of grant, and the term of the option does not exceed five years from the date
of grant. The aggregate fair market value of the shares of our common stock with respect to which incentive stock options granted
under the 2006 Plan are exercisable for the first time by an optionee during any calendar year (under all such plans of the Company)
may not exceed $100,000. For purposes of this limitation, fair market value is determined as of the time of grant.

Options and Stock Appreciation Rights

The maximum term of options and stock appreciation rights under the 2006 Plan is ten years, except that in certain cases
described below, the maximum term is five years. The exercise price of incentive stock options under the 2006 Plan may not be less
than the fair market value of the shares subject to the option on the date of the option grant, and in some cases (see "Eligibility" above),
may not be less than 110% of such fair market value. The exercise price of nonstatutory stock options and stock appreciation rights
may not be less than the fair market value of the stock subject to the award on the date of the option grant. The means of payment for
shares issued upon exercise of an option is specified in each option agreement and generally may consist of (i) cash; (ii) check; (iii)
promissory note; (iv) other shares of our common stock held by the participant (including by means of net exercise) having a fair market
value not less than the exercise price; (v) any other form of legal consideration acceptable to the Board; or (vi) any combination of the
above.

The 2006 Plan does not allow the Company to lower the exercise price of options or stock appreciation rights or to exchange
options or stock appreciation rights for awards with a lower exercise price without further stockholder approval.

Options and stock appreciation rights granted under the 2006 Plan may vest and become exercisable in cumulative increments as
determined by the Administrator provided that the participant's employment or service as a director or consultant to the Company or
certain related entities or designated affiliates continues from the date of grant until the applicable vesting date. Shares covered by
awards granted under the 2006 Plan may be subject to different vesting terms. The Administrator has the power to accelerate the time
during which an award may be exercised. Upon exercise of a stock appreciation right, the holder of the stock appreciation right shall be
entitled to receive payment in an amount equal to the product of (i) the difference between the fair market value of a share on the date
of exercise and the exercise price and

12



---





(ii) the number of shares for which the stock appreciation right is exercised. Payment to the
holder of a stock appreciation right will only be made in shares of our common stock. In order to permit awards to qualify as
"performance based compensation" under Section 162(m) of the Code, no employee may be granted more than 250,000 shares in any
fiscal year of the Company, except that up to 500,000 shares may be granted in the participant's first fiscal year of service.

Restricted Stock

Subject to the terms and conditions of the 2006 Plan, restricted stock may be granted to participants at any time, and from time
to time, at the discretion of the Administrator. The Administrator shall have complete discretion to determine (i) the number of shares
subject to a restricted stock award granted to any participant and (ii) the conditions for grant or for vesting that must be satisfied, which
typically will be based principally or solely on continued provision of services but may include a performance-based component.
However, no participant shall be granted a restricted stock award covering more than 250,000 shares in any of our fiscal years, except
that up to 500,000 shares may be granted on the participant's first fiscal year of service. Until the shares are issued, no right to vote or
receive dividends or any other rights as a stockholder shall exist with respect to the underlying shares.

Restricted Stock Units

Subject to the terms and conditions of the 2006 Plan, the Administrator may grant restricted stock units that represent a right to
receive shares of our common stock at a future date determined in accordance with the participant's award agreement. No monetary
payment is required for receipt of restricted stock units or the shares issued in settlement of the award, the consideration for which is
furnished in the form of the participant's services to the Company. The Administrator may grant restricted stock unit awards subject to
the attainment of one or more performance goals similar to those described below in connection with performance awards, or may
make the awards subject to vesting conditions similar to those applicable to restricted stock awards. However, no participant shall be
granted a restricted stock unit award covering more than 250,000 shares in any of our fiscal years, except that up to 500,000 shares
may be granted in the participant's first fiscal year of service. Unless otherwise provided by the Administrator, a participant will forfeit
any restricted stock units that have not vested prior to the participant's termination of service. Participants have no voting rights or rights
to receive cash dividends with respect to restricted stock unit awards until shares of common stock are issued in settlement of such
awards. However, the Administrator may grant restricted stock units that entitle their holders to receive dividend equivalents, which are
rights to receive additional restricted stock units for a number of shares whose value is equal to any cash dividends we pay. Each
restricted stock unit award shall be evidenced by an agreement that shall specify any other terms and conditions the Administrator
determines.

Performance Shares

Subject to the terms and conditions of the 2006 Plan, performance shares may be granted to participants at any time, and from
time to time, as determined at the discretion of the Administrator. The Administrator shall have complete discretion to determine (i) the
number of shares of our common stock subject to a performance share award granted to any service provider and (ii) the conditions
that must be satisfied for grant or for vesting, which typically will be based principally or solely on achievement of performance
milestones but may include a service-based component. Each performance share grant shall be evidenced by an agreement that shall
specify such other terms and conditions as the Administrator, in its sole discretion, shall determine. However, no participant shall be
granted a performance share award covering more than 250,000 shares in any of our fiscal years, except that up to 500,000 shares
may be granted in the participant's first fiscal year of service.

Performance Units

Performance units are similar to performance shares, except that they shall be settled in cash equivalent to the fair market
value of the underlying shares of our common stock, determined as of the vesting date. The shares available for issuance under the
2006 Plan shall not be diminished as a result of the settlement of a performance unit. Each performance unit award shall be evidenced
by an agreement that shall specify such terms and conditions as shall be determined at the discretion of the Administrator. However, no
participant shall be granted a performance unit award covering more than $250,000 in any of our fiscal years, except that a newly hired
participant may receive a performance unit award covering up to $500,000.

Dividend Equivalents

Dividend equivalents may be credited in respect of shares of common stock covered by an award granted under the 2006
Plan, as determined by the Administrator. At the sole discretion of the Administrator, such dividend equivalents may be converted into
additional shares of common stock in such manner as determined by the Administrator. Any additional shares covered by an award
credited by reason of such dividend equivalents will be subject to all the terms and conditions of the underlying award agreement to
which they relate.

Effect of Certain Corporate Events

Adjustment Upon Changes in Capitalization. In the event our capital stock is changed by reason of any stock split, reverse
stock split, stock dividend, combination or reclassification of our common stock or other increase or decrease in the number of issued
shares of common stock effected without receipt of consideration by us, appropriate proportional adjustments shall be made in the
number and class of shares of stock subject to the 2006 Plan, the individual fiscal year limits applicable to restricted stock, performance
share awards, stock appreciation rights and options, the number and class of shares of stock subject to any award outstanding under
the 2006 Plan, and the exercise

13



---





price of any such outstanding option or stock appreciation right or other award. Any such adjustment
shall be made by the Administrator, whose determination shall be conclusive.

Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Administrator in its
discretion may provide for a participant to have the right to exercise his or her option or stock appreciation right until ten (10) days prior
to such transaction, including shares as to which the award would not otherwise be exercisable. In addition, the Administrator may
provide that any Company repurchase option or forfeiture rights applicable to any award shall lapse in full, and that any award vesting
shall accelerate in full, provided the proposed dissolution or liquidation takes place at the time and in the manner contemplated. To the
extent it has not been previously exercised or vested, an award will terminate immediately prior to the consummation of such proposed
action.

Merger or Asset Sale. In the event of a merger or asset sale of all or substantially all of our assets, the successor
corporation (or its parent or subsidiary) will assume or substitute each outstanding award. If the successor corporation refuses to
assume the awards or to substitute equivalent awards, such awards shall become 100% vested. In that event, the Administrator shall
notify the participant that each award subject to exercise is fully exercisable for 30 days from the date of such notice, or such other
longer period as is determined by the Administrator, and that the award terminates upon expiration of such period. With respect to
options or stock appreciation rights granted to outside directors, each outstanding award held by such outside director shall become
fully vested and exercisable in the event that the outside director is required to terminate his or her position at the request of the
acquiring entity within 12 months following such merger or asset sale.

1998 Director Option Plan

In December 1998, we adopted the 1998 Director Option Plan (the "Director Plan"), which became effective in
February 1999. The Director Plan provides for the granting of stock options to Board members who are not employees of
Intraware. We have reserved approximately 17,000 shares of common stock for issuance under the Director Plan at February 28, 2006.
The option grants under the Director Plan are automatic and nondiscretionary, and the exercise price of the options must be 100% of
the fair market value of the common stock on the date immediately preceding the date of grant. We determine fair market value by the
closing price of the common stock on Nasdaq on the date immediately preceding the grant date. Each eligible Board member is granted
an option to purchase 1,500 shares ("First Option") on the date such person first becomes a director. Immediately following each
annual meeting of stockholders, each eligible Board member is automatically granted an additional option to purchase 750 shares
("Subsequent Option") if such director has served continuously as a member of the Board for at least the preceding six months. The
Director Plan provides that the options shall be exercisable over a period not to exceed ten years from the date of the grant; however,
the options terminate 3 months following the date the director ceases to be a member of the Board (12 months if the
director ceased to be a Board member because of death or disability). First Options vest as to 12.5% of the shares 6 months
after the grant date and as to remaining shares in equal installments over the next 42 months provided the optionee continues as
a member of the Board. Subsequent Options vest as to 25% of the shares 6 months after the grant date and as to the remaining
shares in equal installments over the next 18 months.

The 1998 Director Plan expires in December 2008.

1999 Non-Qualified Acquisition Stock Option Plan

In October 1999, we adopted the Non-Qualified Acquisition Stock Option Plan (the "1999 Plan"). The 1999 Plan provides
for the granting of NSOs to our employees and consultants. Officers may only receive grants under the 1999 Plan in connection with
their initial service to us, and Board members may not receive any grants under the 1999 Plan. We reserved 350,000 shares of
common stock for issuance under the 1999 Plan at the time of its adoption. The standard form of Stock Option Agreement used under
the 1999 Plan provides that the options are exercisable over a period not to exceed ten years from the date of the grant. Options
granted under the 1999 Plan generally vest as to 25% of the shares one year after the date of grant and as to the remaining options in
equal monthly installments over the next 36 months. The exercise price of all options granted under the 1999 Plan has been the
fair market value of our common stock on the grant date, as determined by the closing price of the common stock on Nasdaq on that
date. During the year ended February 29, 2004, we ceased issuing options from this plan. All remaining options available for grant were
removed from the plan at that time, and we do not intend to grant options from this plan in the future.

The 1999 Plan expires in October 2009.

Employee Stock Purchase Plan

In December 1998, the Board adopted the 1998 Employee Stock Purchase Plan (the "Purchase Plan"), which became
effective February 1999, and was amended on November 6, 2006. The Purchase Plan reserves 60,000 shares of common stock
for issuance there under. On each March 1 beginning in 2000, the aggregate number of shares reserved for issuance under the
Purchase Plan is increased automatically by the lesser of 40,000 shares, 1% of the outstanding shares on such date, or a lesser
amount determined by the Board of Directors. Employees generally are eligible to participate in the Purchase Plan if they are
customarily employed by us for more than 20 hours per week and more than five months in a calendar year and are not (and
would not become as a result of being granted an option under the Purchase Plan) 5% stockholders. Under the Purchase Plan, eligible
employees select a rate of payroll deduction up to 15% of their W-2 cash compensation, subject to certain maximum purchase
limitations. Each offering period has a maximum duration of two years and consists of four six-month purchase periods. Depending on
the effective date, the first purchase period is approximately six months long. Offering Periods and purchase periods thereafter begin on
the first trading day on or after May 1 and November 1. The price at which the common stock is purchased under the

14



---





Purchase Plan is 85% of the lesser of the fair market value of our common stock on the first day of the applicable offering period or on
the last day of that purchase period. If the market price of the stock at the end of any six month purchase period is lower than the price
at the original grant date; then a new two year offering period is established using the then-current stock price. The Purchase Plan
expires in 2008.

Stock Options

As of November 30, 2006, we had an aggregate of 0.5 million shares available for grant under our equity plans. The equity
plans provide for the issuance of common shares pursuant to stock option exercises and other equity-based awards. Under the equity
plans, stock options can be issued to employees and to non-employee directors. Stock options are generally granted under the equity
plans with exercise prices equal to the fair market value of the common stock on the date of grant.

The following table presents a summary of Intraware's stock option activity for the nine months ended November 30, 2006:

|                                 |  |        |           |  |       |          |       |         |             | Weighted |          |           | 
|-------------------------------- |  | ------ | --------- |  | ----- | -------- | ----- | ------- | ----------- | -------- | -------- | --------- | 
|                                 |  |        |           |  |       |          |       |         |             | Average  |          |           | 
|                                 |  |        |           |  |       | Weighted |       |         | Remaining   |          |          | Aggregate
|                                 |  |        |           |  |       | Average  |       |         | Contractual |          |          | Intrinsic
|                                 |  |        |           |  |       | Exercise |       |         | Term        |          |          | Value    
|                                 |  | Shares |           |  | Price |          |       | (Years) |             |          | ($000's)
|Outstanding at February 28, 2006 |  |        | 1,119,649 |  |       | $        | 16.36 |         |             |          | 6.57     |           | 
|Granted                          |  |        | 129,300   |  |       |          | 6.42  |         |             |          |          |           | 
|Exercised                        |  |        | (3,344)   |  |       |          | 3.34  |         |             |          |          |           | 
|Forfeited                        |  |        | (88,081)  |  |       |          | 31.08 |         |             |          |          |           | 
|Outstanding at May 31, 2006      |  |        | 1,157,524 |  |       |          | 14.16 |         |             |          | 6.73     |           | 
|Granted                          |  |        | 242,800   |  |       |          | 3.74  |         |             |          |          |           | 
|Exercised                        |  |        | (3,250)   |  |       |          | 1.76  |         |             |          |          |           | 
|Forfeited                        |  |        | (31,314)  |  |       |          | 29.26 |         |             |          |          |           | 
|Outstanding at August 31, 2006   |  |        | 1,365,760 |  |       |          | 11.99 |         |             |          | 6.62     |           | 
|Granted                          |  |        | 30,000    |  |       |          | 4.29  |         |             |          |          |           | 
|Exercised                        |  |        | (902)     |  |       |          | 3.30  |         |             |          |          |           | 
|Forfeited                        |  |        | (20,624)  |  |       |          | 17.93 |         |             |          |          |           | 
|Outstanding at November 30, 2006 |  |        | 1,374,234 |  |       | $        | 11.74 |         |             |          | 6.08     |           | 
|                                 |  |        |           |  |       |          |       |         |             |          |          |           | 
|Exercisable at November 30, 2006 |  |        | 767,240   |  |       | $        | 16.33 |         |             |          | 5.87     |           | 

The aggregate intrinsic value is the sum of the amounts by which the quoted market price of our stock exceeded the exercise price
of the options at November 30, 2006, for those options for which the quoted market price was in excess of the exercise price ("in-the-
money options"). The aggregate intrinsic value of options exercised during the quarter ended November 30, 2006 was approximately
$1,000. The total cash received from employees as a result of stock option exercises for the three and nine months ended November
30, 2006 was approximately $3,000 and $20,000, respectively. The Company did not realize any tax benefits in connection with these
exercises due to the fact that a full valuation allowance relating to the deferred tax assets has been recorded.

The following table summarizes the information about all stock options outstanding and exercisable as of November 30, 2006 (in
thousands, except per share amounts and years):

15



---





|                         |         |             |  |                                          |  |                   |  |               |  | Options Vested    
|------------------------ | ------- | ----------- |  | ---------------------------------------- |  | ----------------- |  | ------------- |  | ------------------
|                         |         |             |  |                                          |  |                   |  |               |  | and Exercisable at
|                         |         |             |  | Options Outstanding at November 30, 2006 |  | November 30, 2006
|                         |         |             |  |                                          |  | Weighted          |  |               |  |                   
|                         |         |             |  |                                          |  | Average           |  |               |  |                   
|                         |         |             |  |                                          |  | Remaining         |  | Weighted      |  |                   
|                         |         |             |  | Number                                   |  | Contractual       |  | Average       |  | Number            
|Range of Exercise Prices |         | Outstanding |  | Life                                     |  | Exercise Price    |  | Exercisable   |  | Exercise Price    
|$                        | 1.25 -  | 3.20        |  | 5                                        |  | 6.81              |  | $        2.55 |  | 3                 
|                         | 3.30 -  | 3.30        |  | 142                                      |  | 3.66              |  | 3.30          |  | 50                
|                         | 3.50 -  | 3.60        |  | 7                                        |  | 9.2               |  | 3.56          |  | 1                 
|                         | 3.67 -  | 3.67        |  | 231                                      |  | 4.69              |  | 3.67          |  | -                 
|                         | 3.70 -  | 6.35        |  | 211                                      |  | 8.04              |  | 5.62          |  | 79                
|                         | 6.47 -  | 7.70        |  | 162                                      |  | 6.33              |  | 7.26          |  | 127               
|                         | 7.85 -  | 10.00       |  | 146                                      |  | 5.91              |  | 8.98          |  | 134               
|                         | 10.80 - | 13.49       |  | 123                                      |  | 6.76              |  | 11.62         |  | 99                
|                         | 14.10 - | 14.10       |  | 156                                      |  | 7.68              |  | 14.10         |  | 89                
|                         | 15.00 - | 662.50      |  | 191                                      |  | 5.5               |  | 39.16         |  | 185               
|                         |         |             |  |                                          |  |                   |  |               |  |                   
|                         |         |             |  | 1,374                                    |  | 6.09              |  | $      11.74  |  | 767               

The total compensation cost related to unvested awards is $2.2 million and will be recognized over a weighted
average period of 1.2 years.

NOTE 8. PREFERRED STOCK

We are authorized, subject to limitations prescribed by Delaware law, to provide for the issuance of preferred stock in one or
more series, to establish from time to time the number of shares included within each series, to fix the rights, preferences and privileges
of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon, and to increase or decrease the
number of shares of any such series (but not below the number of shares of such series then outstanding) without any further vote or
action by the stockholders.



During the nine months ended November 30, 2006 there was no activity in our redeemable convertible preferred stock.

NOTE 9. SUBSEQUENT EVENT

On December 13, 2006 we filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation. We
amended the total number of shares of all classes of stock that we have the authority to issue to 60 million, consisting of 50 million
shares of common stock and 10 million shares of preferred stock. Prior to the amendment, we had the authority to issue 260 million
shares, consisting of 250 million shares of common stock and 10 million shares of preferred stock. The amendment was approved by
our stockholders.

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

The following discussion of our financial condition and results of operations should be read in conjunction with our
consolidated financial statements and related notes included in our annual report on Form 10-K for the fiscal year ended February 28,
2006, which was filed with the SEC on April 21, 2006, and the unaudited consolidated financial statements and related notes contained
in this quarterly report on Form 10-Q.  This discussion contains forward-looking statements that involve risks and uncertainties.
Forward-looking statements include statements regarding trends in the marketplace, our future cash and liquidity position, the extent
and timing of future revenues and expenses and customer demand, the deployment of our products and services or the anticipated
performance of products or services, statements regarding the financial statement impact of SFAS 123(R), statements regarding future
economic conditions or performance, and statements regarding our anticipated interactions with third parties.  All forward-looking
statements included in this document are based on information available to us as of the date hereof, and we assume no obligation to
update any forward-looking statement except as required by law.  Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including without limitation those discussed in "Risk Factors" below
and elsewhere in this quarterly report on Form 10-Q.

Intraware Overview

Our goal is to become the de facto standard among digital delivery solution providers. We continue to pursue various strategy
objectives to achieve this goal. First, we are working to become a profitable, cash-generating company by growing our SubscribeNet
business and practicing stringent fiscal responsibility. Second, we are seeking to strengthen our technological advantage by further
improving our electronic software and licensing management solutions internally and with partners. Third, we are increasing our efforts
to reach additional

16



---





markets outside our existing enterprise software developer customer base. Fourth, we seek to continue extending
and strengthening our customer base by executing on our sales and marketing plan, and by providing exceptional customer service.

We currently see a number of trends in the marketplace that are potentially important for our business. First, growth in the
technology sector has improved over the past two years. We have benefited from this trend as technology companies experiencing
growth have been more willing to invest in technologies that support their own businesses. However, with this growth have come
inflationary pressures on our personnel costs, which is the most significant component of our cost structure. Second, the pace of
mergers and acquisitions in the enterprise software sector remains brisk. These consolidations pose both opportunities and risks for us,
potentially leading either to growth in our contracts with those customers if they grow larger, or to cancellation of customer contracts if
our customers merge or are acquired by companies that do not use our electronic software and licensing management service. Third,
technology companies continue the trend of outsourcing operational functions to reduce costs. Our services enable enterprise software
companies to outsource key operational functions in a manner we believe is financially compelling. Therefore, we may benefit from this
outsourcing trend. Fourth, the use of hosted web-based applications, which in the past has been limited by concerns about speed,
reliability and security, continues to gain acceptance among mainstream businesses, largely because of a desire for cost savings. This
trend may benefit us because our SubscribeNet service is a hosted web-based application. We also believe our customers and
potential customers are becoming increasingly focused upon legal and regulatory compliance obligations, which presents opportunities
for us. For example, our SubscribeNet service includes a number of features designed to help customers comply with various legal and
accounting requirements such as export control and proper revenue recognition. We believe these compliance features are of growing
importance in our market and offer an additional basis for marketing our service. With this opportunity comes risk, however, if our
service fails to meet compliance standards in any significant manner.

We also face a number of other key risks that are described in more detail below in the section entitled "Risk Factors."

We earn revenues and generate cash principally through recurring service fees charged for our SubscribeNet service, and
professional services fees charged for customization of our SubscribeNet service.

We have incurred losses and negative cash flow from operations during each fiscal year since inception. Net loss for the three
months ended November 30, 2006 decreased from our prior year loss for the corresponding period. Net loss for the nine months ended
November 30, 2006 increased from our prior year loss for the corresponding period. For the nine months ended November 30, 2006,
we recorded cash provided from operating activities of $0.1 million, which was an increase from the corresponding period in the prior
year.

We believe that the effects of our capital financings to date, our past and current strategic actions to improve revenue, and our
ongoing cost controls, will generate sufficient cash resources to fund our future operations. However, if we fail to adequately increase
our revenues or control spending, our business could suffer material adverse effects.

Critical Accounting Policies and Estimates

This Management's Discussion and Analysis ("MD&A") discusses our consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles in the United States. In preparing these financial statements, we
are required to make estimates and assumptions affecting the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates and judgments on historical
experience and on various other factors we believe reasonable under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

We consider accounting policies related to revenue recognition, costs of deferred revenue, stock-based compensation, website
development costs, allowance for doubtful accounts, and income taxes to be critical accounting policies due to the estimation process
involved in each.

Revenue Recognition

We recognize revenue when all of the following conditions are met:

- There is persuasive evidence of an arrangement;
- We have provided the service to the customer, made the software available for customer download
through our website, or shipped the software to the customer;
- We believe collection of these fees is reasonably assured; and
- The amount of fees to be paid by the customer is fixed or determinable.

Our online services and technology revenue results primarily from three types of arrangements. First, it results
from sales of our SubscribeNet digital delivery service to software vendors and other companies that distribute software as part of their
business. Second, it results from professional services that we provide to customize our SubscribeNet service for customers, to convert
data for customers, and to

17



---





integrate our proprietary software. Third, it results from our resale of third-party services or licenses
complementary to our SubscribeNet service, one of which is e-commerce. In addition, if appropriate opportunities present themselves in
the future, we may generate online services and technology revenue from the sale of our proprietary software licenses, and related
maintenance, to companies using those products internally or using those products to provide web-based services to their customers.
As a result of the sale of our Asset Management software business in May 2002, we are not currently deriving revenue from licenses,
maintenance or integration services for asset management software.

Alliance and reimbursement revenue primarily relates to our recently terminated alliance agreement with
Software Spectrum for sales and marketing services. This revenue consisted of a percentage of the gross profit derived from Software
Spectrum's sales of the third-party software and maintenance for which we provided sales and marketing services, and, prior to August
1, 2005, reimbursement for the costs of maintaining a sales team dedicated to providing sales and marketing services to Software
Spectrum for that third-party software and maintenance. This revenue was recognized as we provided the services to Software
Spectrum. On August 1, 2005, we signed an updated agreement with Software Spectrum. Under the updated agreement, Software
Spectrum paid us a higher percentage of the gross profit derived from its sales of Sun software licenses and maintenance. However,
Software Spectrum stopped reimbursing us for our direct costs in maintaining a team dedicated to sales of Sun software licenses and
maintenance. We terminated our alliance agreement with Software Spectrum effective January 3, 2006, and ceased recognizing
alliance and reimbursement revenue on that date.

We defer online services and technology revenues related to our SubscribeNet digital delivery service and
generally recognize them ratably over the term of the service arrangement. The typical subscription term is one year, although some
may be shorter or extend up to approximately 3 years. Our customer contracts are generally noncancelable, though customers typically
have the right to terminate their contracts for cause if we materially fail to perform. A majority of our SubscribeNet service
implementations for new customers involve customization essential to the functionality of the service. In these cases, we defer revenue
recognition until the service go-live date is reached, and then recognize the SubscribeNet revenue on a ratable basis over the
remaining contract term if the implementation is bundled. If the implementation fees are charged separately, then the associated
revenue is recognized in accordance with our professional services revenue recognition policy, as stated below. The go-live date is the
later of the date on which the essential functionality is delivered or the point at which no additional customization is required. Our
SubscribeNet contracts with customers typically give the customer a period of time (generally five days) to evaluate a SubscribeNet
implementation after we have completed it, and provide that the customer is deemed to have accepted the implementation if it has not
affirmatively rejected it within that period. We typically rely on such non-rejections by customers to indicate their acceptance of
implementations. Any subsequent indications by our customers that their implementations have not been properly completed could
have a material adverse impact on our financial condition or results of operations.

We also sell additional professional services related to SubscribeNet agreements. Generally, these services do
not provide stand-alone value to a customer and, accordingly, we defer recognition of this revenue until the go-live date for the
professional services, similar to the manner in which we treat SubscribeNet service revenues discussed above. Such professional
services revenues are recognized ratably over the longer of the remaining estimated customer life or the remaining contract term,
commencing with the acceptance of the professional services. Estimated customer life requires that we periodically estimate the
projected life of our existing customers based on historical information such as customer renewal rates. Our estimated customer life has
increased over time due to relatively high customer retention rates. We expect the projected customer life to continue to increase as
customers lengthen and renew their service agreements. A 10% increase in our estimated customer life during the three and nine
months ended November 30, 2006, would have caused a net increase in our net loss of approximately $6,000 and $18,000
respectively. In some instances the implementation of the SubscribeNet service and professional services are bundled into the initial
agreement without specifically stating the fees for each one. In these instances the professional services fees are recognized from
acceptance to the end of the remaining contract term on a ratable basis with the SubscribeNet fee.

Online services and technology revenues related to our resale of third-party services or software licenses
complementary to our SubscribeNet service are generally recognized as the service is provided. If the service or license resold involves
customization essential to the functionality of the underlying SubscribeNet service, the fees charged for the customization are
recognized as revenue in the same manner as professional services discussed above. Resold services or licenses are recognized as
revenue based on the gross fee charged to the customer, since we bear the credit risk for resold services or licenses, have latitude in
establishing pricing, and are primarily responsible for acceptability of the services or licenses delivered. In addition, costs paid to the
third-party providers are recorded as cost of revenues and recognized in the same manner as the related revenue.

Deferred Costs

We capitalize direct costs of revenues related to significant SubscribeNet service implementations and established professional
services contracts associated with our SubscribeNet services. Direct costs include compensation and payroll-related fringe benefits
directly related to the time spent on significant implementation and professional services activities. These costs are recognized over the
same period as the related revenue is recognized (see Revenue Recognition above). Costs associated with professional services
involving significant new functionality for the SubscribeNet service that are partially or fully funded by customers but do not qualify as
funded research and development activities are expensed as costs of revenues as incurred until a working model is delivered to the
customer. Once a working model has been delivered, all additional direct costs are capitalized in the same manner discussed above.
Any change in our revenue recognition estimates could result in corresponding changes to our recognition of costs of deferred
revenues. A 10% increase in our estimated customer life during the three and nine months ended November 30, 2006, would have
caused a net increase in our net loss of approximately $6,000 and $18,000, respectively. At November 30, 2006, we had approximately
$1.0 million in capitalized costs relating to deferred revenues. We expense customer acquisition costs, including sales commissions, as
incurred. We also defer legal costs incurred in connection with patent applications.

18



---





As of November 30, 2006 we had $0.2 million in
deferred legal costs. Upon issuance of a patent, the deferred legal costs for that patent are expensed ratably over the patent's useful
life.

Stock-based Compensation

On March 1, 2006, Intraware adopted SFAS 123(R), which addresses the accounting for share-based payment
transactions in which a company receives employee services in exchange for either equity instruments of the company or liabilities that
are based on the fair value of the company's equity instruments or that may be settled by the issuance of such equity instruments.
Using the modified prospective method, we estimate the fair value of stock options using the Black-Scholes valuation model, consistent
with the provisions of "Share-Based Payment, an amendment of FASB Statements Nos.123 and 95" ("SFAS 123(R)"), Staff Accounting
Bulletin No. 107 ("SAB 107"), and "Accounting for Stock-Based Compensation" ("SFAS 123") for our prior period pro forma
disclosures of net earnings. Option-pricing models require the input of highly subjective assumptions, including the option's expected
life and the price volatility of the underlying stock. Judgment is also required in estimating the number of stock-based awards that are
expected to be forfeited. If actual results or future changes in estimates differ significantly from our current estimates, stock-based
compensation expense and our results of operations could be materially impacted. An increase in our stock volatility or a decrease in
the average expected life of our outstanding options could lead to an increase in our stock based compensation expense recognized
under SFAS 123(R). Furthermore, there are no means under applicable accounting principles to compare and adjust our expense if and
when we learn of additional information that may affect our previous estimates, with the exception of changes in expected forfeitures of
share-based awards. Over time, factors may arise that cause us to change our estimates and assumptions with respect to future share-
based compensation arrangements, resulting in variability in our share-based compensation expense. In addition, any future accounting
pronouncements, taxation rules, and new interpretations of existing accounting pronouncements or taxation rules, could have a
significant effect on our reported results, including our reporting of transactions completed before the effective date of the change.

Web Site Development Costs

We account for Web site development costs in accordance with the provisions of EITF 00-2, which requires that certain costs to
develop Web sites be capitalized or expensed, depending on the nature of the costs. We amortize web site development costs using
the straight-line method over an estimated useful life of two years.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts for estimated losses from our inability to collect required
payments from our customers. When evaluating the adequacy of this allowance, we analyze specific accounts receivable, historical bad
debts, customer credit-worthiness, current economic trends and changes in our customers' payment history. We may need to record
increases to our allowance balances in the future. At November 30, 2006, we had many accounts receivable balances. Any dispute,
early contract termination or other collection issue related to these receivable balances could have a material adverse impact on our
financial condition or result of operations.

Income Taxes

In conjunction with preparing our financial statements, we must estimate our income taxes in each of the
jurisdictions in which we operate. This process involves estimating our actual current tax expense together with assessing temporary
differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets
and liabilities. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the
extent we believe that recovery is not likely, we must establish a valuation allowance. Given that we have incurred losses since
inception and therefore have not been required to pay income taxes, we have fully reserved our deferred tax assets at November 30,
2006. In the event we are able to realize our deferred tax assets in the future, an adjustment to the deferred tax asset would increase
income in the period in which they are realized.

Results of Operations

Total Revenue

The following table sets forth the revenue, changes in revenue and percentage of total revenue for the periods indicated (in
thousands, except percentage amounts):

|                               |  | For the three months ended |       | For the nine months ended
|------------------------------ |  | -------------------------- | ----- | -------------------------
|                               |  | November 30, 2006          |       |                          
|                               |  | Total                      |       | Change                   
|Revenues:                      |  |                            |       |                          
|Online services and Technology |  | $                          | 2,803 |                          
|Alliance and Reimbursement     |  |                            | -     |                          
|                               |  | $                          | 2,803 |                          

19



---





Combined online services and technology revenue results primarily from sales of our SubscribeNet services.  The online
services and technology revenue increase during the three months ended November 30, 2006, as compared to the three months ended
November 30, 2005, is primarily due to three factors: first, approximately $0.6 million in revenue was recognized from both new
SubscribeNet customers whose go-live date was achieved between December 1, 2005, and November 30, 2006, and existing
customers who expanded their agreements; second, approximately $0.1 million in additional revenue was recognized as a result of
additional professional services provided to existing SubscribeNet customers; and third, receipt of a one-time payment of approximately
$0.1 million in relation to the termination of an e-commerce agreement with an existing SubscribeNet customer. These increases were
partially offset by a $0.2 million decrease in relation to customers who terminated their contracts and a $0.1 million decrease in revenue
related to the terminated Software Spectrum reseller agreement.

The online services and technology revenue increase during the nine months ended November 30, 2006, as compared to the nine
months ended November 30, 2005, is primarily due to two factors: first, approximately $1.7 million in revenue was recognized from both
new SubscribeNet customers whose go-live date was achieved between December 1, 2005, and November 30, 2006, and existing
customers who expanded their agreements; and second, approximately $0.4 million in additional revenue was recognized as a result of
professional services provided to existing SubscribeNet customers. These increases were partially offset by a $0.5 million decrease in
revenue related to the terminated Software Spectrum reseller agreement and a decrease of $0.7 million in relation to customers who
terminated their contracts. We expect our online services and technology revenue for our fourth quarter ending February 28, 2007, to
decrease from our third quarter, which ended November 30, 2006 due to the one-time fee received during our third quarter from
the termination of part of an e-commerce agreement with an existing SubscribeNet customer.

Alliance and reimbursement revenue relates to our alliance agreement with Software Spectrum for sales of Sun software licenses
and maintenance, which we terminated January 3, 2006. This revenue consisted of a percentage of the gross profit derived from the
sales of Sun software licenses and maintenance services, and reimbursement for the costs of maintaining a sales team dedicated to
selling Sun software for Software Spectrum. We ceased recognizing alliance and reimbursement revenue in our fiscal year ended
February 28, 2006.

Costs and Expenses

The following table sets forth the costs and expenses, changes in costs and expenses and percentage of total revenue for the
periods indicated (in thousands, except percentage amounts):

|                           |  | For the three months ended |  | For the nine months ended
|-------------------------- |  | -------------------------- |  | -------------------------
|                           |  | November 30, 2006          |  | November 30, 2005        
|                           |  | Total                      |  | Change                   
|                           |  |                            |  |                          
|Total cost of revenues     |  | $    1,372                 |  | $      75                
|Gross margin               |  | 1,431                      |  | 205                      
|Operating expenses:        |  |                            |  |                          
|Sales and marketing        |  | 853                        |  | 141                      
|Product development        |  | 328                        |  | 25                       
|General and administrative |  | 1,082                      |  | 42                       
|Restructuring              |  | -                          |  | -                        
|Total operating expenses   |  | $   2,263                  |  | $    208                 

Cost of Revenues

The increase in cost of revenues for the three months ended November 30, 2006 is primarily due to three factors: first,
approximately $0.1 million in additional expense related to increased time spent on cost of revenue activities by personnel; second,
$0.1 million related to stock based compensation expense; and third, a one time payment of approximately $0.1 million in relation to the
termination of an e-commerce agreement with an existing SubscribeNet customer. These increases were partially offset by a decrease
of approximately $0.2 million attributed to the alliance and reimbursement cost of revenues. The increase in the margin percentage for
the three months ended November 30, 2006 is primarily due to the termination of our agreement with Software Spectrum which
historically resulted in transactions with lower margins. The decrease in cost of revenues and increase in margin percentage for the
nine months ended November 30, 2006, is primarily due to a decrease of approximately $1.1 million that was attributed to the alliance
and reimbursement cost of revenues. This decrease was slightly offset by $0.2 million in additional expense related to increased
allocation of time spent on cost of revenue activities by personnel and their related stock based compensation expense, and an
increase of $0.1 million related to variable support costs and incremental investments in our existing infrastructure related to cost of
revenue activities.

Cost of revenues primarily consists of certain allocated costs related to our internet connectivity, assets supporting cost of
revenues, and customer support, and in the prior year, the costs associated with maintaining our team dedicated to helping Software
Spectrum sell Sun software. Cost of revenues also consists of professional services personnel costs and the cost of third-party
products and services sold.  We expect total cost of revenues for the current fiscal year to be lower than fiscal 2006. This
is primarily due to the termination of our agreement with Software Spectrum, whereby we are no longer recognizing any associated
costs previously recorded as alliance and reimbursement cost of

20



---





revenues. In addition, we expect our gross profit margin percentage to
improve from third quarter fiscal 2007 levels. Our quarterly cost of revenues may fluctuate based on multiple variables, including
without limitations, revenue mix fluctuations, levels of professional services activities, infrastructure costs, and variable external support
utilization rates. We expect our margins to fluctuate accordingly.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of employee salaries, benefits and commissions, advertising, consulting,
promotional materials, trade show expenses and certain allocated overhead costs.



The increase in sales and marketing expense for the three and nine months ended November 30, 2006, compared to the three and
nine months ended November 30, 2005, is primarily due to our increased efforts in marketing and advertising. We plan to increase our
overall sales and marketing expenses in the current fiscal year. There was also an increase of approximately $0.1 million and $0.2
million for the three and nine months ended November 30, 2006, respectively, related to stock-based compensation expense
recognized in accordance with SFAS 123(R).

Product Development Expenses

Product development expenses consist primarily of employee salaries and benefits, consulting, software and related
maintenance, equipment depreciation expense and allocated overhead costs. Costs related to research, design and development of
products and services have been charged to product development expense as incurred.

The increase in our product development expenses for the three months ended November 30, 2006, compared to those for the
three months ended November 30, 2005, is primarily due to increased personnel costs of approximately $0.2 million, including the
newly adopted bonus plan and stock-based compensation expense recognized in accordance with SFAS 123(R) of approximately
$0.05 million. These expenses were partially offset by decreases in expenses related to depreciation and maintenance totaling
approximately $0.1 million.

The increase in our product development expenses for the nine months ended November 30, 2006, compared to those for the nine
months ended November 30, 2005, is primarily due to increased personnel costs of approximately $0.4 million, including the newly
adopted bonus plan and stock-based compensation expense recognized in accordance with SFAS 123(R) of approximately $0.1million.
We also incurred increased expenditures that were a result of variable support costs and incremental investments in our infrastructure
in relation to product development activities of approximately $0.2 million. These expenses were partially offset by decreases in
expenses related to depreciation and maintenance totaling approximately $0.2 million.

We anticipate continued investment in additional functionality for our SubscribeNet service, the underlying proprietary software, and
new services related to this software. However, we expect those investments to fluctuate over time, and expect our product
development expenses to vary accordingly. We expect total product development expenditures to increase in our fiscal year ending
February 28, 2007. We cannot guarantee that our product development efforts will result in new or improved products, features or
functionality, or that the market will accept the improvements to existing or new products, features or functionality developed.

General and Administrative Expenses

General and administrative expenses consist primarily of compensation for administrative and executive personnel, fees for
professional services and certain overhead costs.

The increase in our general and administrative expense for the three and nine months ended November 30, 2006, compared to the
three and nine months ended November 30, 2005, is primarily due to approximately $0.2 million and $0.5 million, respectively, for
stock-based compensation expense recognized in accordance with SFAS 123(R). We also had an increase in personnel expenses
related to compensation and recruiting fees of approximately $0.1 million and $0.2 million, respectively. These increases were partially
offset by a decrease in consulting, accounting and legal expenses of approximately $0.2 million for each of the three and nine month
periods ending November 30, 2006.



We expect total general and administrative expenditures in fiscal year 2007 to increase from our fiscal year 2006 levels due
primarily to increased personnel costs and external fees.

Interest Expense

For the three months ended November 30, 2006, interest expense was approximately $9,000, a decrease from $12,000 for the
three months ended November 30, 2005.  For the nine months ended November 30, 2006, interest expense was approximately
$30,000, a decrease from $47,000 for the nine months ended November 30, 2005.

Interest expense primarily relates to obligations under capital leases and notes payable.  The decrease in interest expense
for the three and nine months ended November 30, 2006 is primarily due to the reduction of the principal balance on our notes payable,
slightly offset by higher interest rates.

21



---





Interest and Other Income and Expenses, Net

For the three months ended November 30, 2006, interest and other income and expenses, net was approximately $147,000 of
income, an increase from $78,000 of income for the three months ended November 30, 2005. For the nine months ended
November 30, 2006, interest and other income and expenses, net was approximately $581,000 of income, an increase from $192,000
of income for the nine months ended November 30, 2005.



Interest and other income and expenses, net, primarily relates to interest earned on our investment balances.  The increase
in interest and other income and expenses, net for the three months ended November 30, 2006 is primarily the result of: (1) increased
investment balances, resulting from the $6 million investment in our Series B Convertible Preferred Stock by Digital River in November
2005; and (2) an increase in the interest rates in the investment account.

The increase in interest and other income and expenses, net for the nine months ended November 30, 2006 is also the result of the
settlement of a litigation matter entitled Leon Segen v. ComVest Venture Partners, LP et al, from which we received $152,366.
The complaint alleged that between August 2001 and January 2002 various ComVest Defendants owned more than 10% of our
common stock, bought and sold our equity securities within a 6-month period, and failed to disgorge to us the profits allegedly realized
in those trades, thereby violating Section 16(b) of the 1934 Act. Certain of the ComVest Defendants were members of our Board of
Directors between April 2001 and May 2002. The complaint demanded repayment to Intraware of the profits allegedly realized and
retained in violation of Section 16(b) of the 1934 Act, together with interest and legal costs. In April 2006, the parties entered into a
settlement agreement under which the ComVest Defendants paid us approximately $152,366, net of estimated attorney fees and costs,
in settlement of all claims.

Income Taxes

As of February 28, 2006, we had approximately $90 million of federal and $45 million of state net operating loss carryforwards
available to offset future taxable income, which expire in varying amounts between fiscal years 2007 and 2026. The Tax Reform Act of
1986 limits the use of net operating losses and tax credit carryforwards in certain circumstances where changes occur in the stock
ownership of a company. Because of cumulative ownership changes in the past, the federal and state loss carryforwards have
been reduced by the amount of the net operating loss carryforwards that will expire. Because of these cumulative ownership changes,
federal loss carry forwards totaling approximately $42 million and state loss carry forwards totaling approximately $19 million are
subject to limitation. At February 28, 2006, $48 million and $26 million of federal and state net operating losses, respectively, are
available without limitation to offset future taxable income. Should there be a future change of ownership, the available net operating
losses may be further limited.  Based upon our limited operating history and losses incurred to date, management does not
believe the realization of the related deferred tax assets meets the recognition criteria required by generally accepted accounting
principles and accordingly, a full valuation allowance has been recorded to reduce the carrying value of the deferred tax assets to
zero.

Liquidity and Capital Resources

The following table presents our liquidity position at November 30, 2006 and 2005 (in thousands):

|                                                    |  | For the nine months ended
|--------------------------------------------------- |  | -------------------------
|                                                    |  | November 30, 2006        
|                                                    |  |                          
|Cash and cash equivalents                           |  | $                        
|Working capital                                     |  | $                        
|Net cash provided by (used in) operating activities |  | $                        
|Net cash provided by (used in) financing activities |  | $                        
|Net cash used in investing activities               |  | $                        

At November 30, 2006 we had $12.3 million in cash and cash equivalents. At November 30, 2006 our working capital was $10.4
million.

Our net cash provided by operations was $0.1 million for the nine months ended November 30, 2006, which was an increase from
the cash used in operations for the nine months ended November 30, 2005. In the first nine months of fiscal 2007 our positive operating
cash flow was primarily due to increased collection efforts that were the result of increased billings from items for which a portion of
revenue was deferred, and due to our receipt of $152,366 from our ComVest Venture Partners legal settlement in the first quarter of
fiscal 2007. Our ability to improve our uses of cash and generate continued positive cash flows in future periods will largely depend on
our ability to increase the number of customers of our SubscribeNet service while increasing existing subscriptions through strong
contract renewals. We expect our cash balances to fluctuate from time to time due to the timing of customer collections and vendor
payments in the ordinary course of business.

Our net cash used in financing activities was approximately $130,000 for the nine months ended November 30, 2006. 
This primarily resulted from principal payments of approximately $327,000 on notes payable offset by additional borrowings under our
equipment advance agreement (see below) of approximately $137,000, and by our issuance of approximately 19,000 shares of
common stock in connection with

22



---





our stock option and employee stock purchase plans for proceeds of approximately $60,000.

As of November 30, 2006, we have two equipment advance agreements with Silicon Valley Bank, under which we have four
equipment advances outstanding.  The equipment advances bear annual interest rates of the greater of 1% in excess of the
bank's prime rate (8.25% at November 30, 2006) or rates of 5.50% for the first agreement and 7% for the three advances outstanding
under the second agreement. The first agreement is payable in fixed monthly installments through September 2007. The advances
under the second agreement are payable in fixed monthly installments through March 2008, June 2008 and September 2008.  
At November 30, 2006, the interest rate for each of the equipment advances was 9.25%.

Under the agreements, all borrowings are collateralized by a senior security interest in substantially all of our assets. The
agreements also require us to comply with financial covenants, with which we were in compliance as of November 30, 2006. The
agreements further restrict us from incurring or assuming additional indebtedness outside of the note payable and equipment advances,
excluding trade payables and certain other liabilities incurred in the ordinary course of business.

Our net cash used in investing activities during the nine months ended November 30, 2006 was approximately $0.3 million. This
amount was comprised of our purchases of fixed assets. We paid for these equipment purchases from our cash and cash equivalents,
but later drew down approximately $0.1 million under the above-mentioned equipment advance agreement to finance these purchases.
We used these fixed asset purchases primarily to upgrade and expand our SubscribeNet infrastructure and corporate information
systems.

We believe our existing cash and cash equivalents, together with any cash generated from future operations, will be sufficient to
fund our operating activities, capital expenditures and financing arrangements for the foreseeable future. However, if our SubscribeNet
business fails to grow significantly or declines from its current level, we could be forced to seek additional capital.

At November 30, 2006, we had no relationships with unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-
balance sheet arrangements or other contractually narrow or limited purposes.

The following table summarizes our debt and lease obligations at November 30, 2006, and the effect such obligations are expected
to have on our liquidity and cash flow in future periods (in thousands). This table provides information through our year ending
February 28, 2010, as we do not have any debt or lease obligations beyond that point.

|                 |  |   | Payments due by period
|---------------- |  | - | ----------------------
|                 |  |   | Total                 
|Long-term debt   |  | $ | 359                   
|Operating leases |  |   | 1,453                 
|                 |  | $ | 1,812                 

(a)   Includes payments from December 1, 2006 through November 30, 2007.

(b)   Includes payments from December 1, 2007 through February 28, 2010.

(c)   This amount includes approximately $19,000 in interest.

As of November 30, 2006, our Series A and Series B redeemable convertible preferred stock entitled holders to liquidation
preferences of $0.5 million and $6.0 million, respectively, in the event of certain liquidation events with respect to Intraware.

Recent Accounting Pronouncements

In September 2006, the SEC issued Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year
Misstatements when Quantifying Misstatements in Current Year Financial Statements" ("SAB 108"). SAB 108 provides interpretive
guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year
misstatement. The SEC staff believes that registrants should quantify errors using both a balance sheet and income statement
approach and evaluate whether either approach results in quantifying a misstatement that, when all relevant quantitative and qualitative
factors are considered, is material. SAB 108 is effective for fiscal years ending on or after November 15, 2006. We do not expect the
application of the guidance of SAB 108 in our fiscal year 2007 to have a material impact on our financial condition, results of operations
or cash flows.

In July 2006, the FASB issued Financial Interpretation No. 48, "Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109" ("FIN 48"), which is a change in accounting for income taxes. FIN 48 specifies how
tax benefits for uncertain tax positions are to be recognized, measured, and derecognized in financial statements; requires certain
disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified on the balance sheet; and
provides transition and interim period

23



---





guidance, among other provisions. FIN 48 is effective for fiscal years beginning after
December 15, 2006 and as a result, is effective for Intraware in our first quarter of fiscal 2008. We are currently evaluating the
impact of FIN 48 on our consolidated financial position, results of operations, and cash flows.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At November 30, 2006, we had cash and cash equivalents of $12.3 million. We place our investments with high quality
issuers, by policy, in an effort to limit the amount of credit exposure to any one issue or issuer.

Our exposure to market risk for changes in interest rates relates primarily to our cash and cash equivalents portfolio, note payable
and lines of credit. We have not used derivative financial instruments during fiscal 2006 or the nine months ended November 30, 2006.
The effect of changes in interest rates of +/-10% over a six-month horizon would not materially affect the fair value of the portfolio or our
debt. Declines in interest rates will, over time, decrease the interest income from our portfolio.  Increases in interest rates will
increase the interest we pay on our credit facilities.

ITEM 4. CONTROLS AND PROCEDURES

(a)  Evaluation of Disclosure Controls and Procedures. Our principal executive officer and principal financial
officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period covered by
this quarterly report, have concluded that our disclosure controls and procedures are effective based on their evaluation of the controls
and procedures required by paragraph (b) of the Exchange Act Rules 13a-15 or 15d-15.

(b)  Changes in Internal Controls over Financial Reporting. No changes in our internal controls over financial reporting
identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 occurred
during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial
reporting.

PART II-OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In re Intraware, Inc. Initial Public Offering Securities Litigation

In October 2001, we were served with a summons and complaint in a purported securities class action lawsuit. On or
about April 19, 2002, we were served with an amended complaint in this action, which is now titled In re Intraware, Inc. Initial Public
Offering Securities Litigation, Civ. No. 01-9349 (SAS) (S.D.N.Y.), related to In re Initial Public Offering Securities Litigation, 21 MC 92
(SAS) (S.D.N.Y.). The amended complaint is brought purportedly on behalf of all persons who purchased our common stock from
February 25, 1999 (the date of our initial public offering) through December 6, 2000. It names as defendants Intraware, three of our
present and former officers and directors, and several investment banking firms that served as underwriters of our initial public offering.
The complaint alleges liability under Sections 11 and 15 of the Securities Act of 1933 and Sections 10(b) and 20(a) of the Securities
Exchange Act of 1934, on the grounds that the registration statement for the offerings did not disclose that: (1) the underwriters had
agreed to allow certain customers to purchase shares in the offerings in exchange for excess commissions paid to the underwriters;
and (2) the underwriters had arranged for certain customers to purchase additional shares in the aftermarket at predetermined prices.
The amended complaint also alleges that the underwriters misused their securities analysts to manipulate the price of our stock. No
specific damages are claimed.

Lawsuits containing similar allegations have been filed in the Southern District of New York challenging over 300 other initial public
offerings and secondary offerings conducted in 1999 and 2000. All of these lawsuits have been consolidated for pretrial purposes
before United States District Court Judge Shira Scheindlin of the Southern District of New York. On July 15, 2002, an omnibus motion
to dismiss was filed in the coordinated litigation on behalf of the issuer defendants, of which Intraware and its three named current and
former officers and directors are a part, on common pleadings issues. On or about October 9, 2002, the Court entered and ordered a
Stipulation of Dismissal, which dismissed the three named current and former officers and directors from the litigation without prejudice.
On February 19, 2003, the Court entered an order denying in part the issuer-defendants' omnibus motion to dismiss, including those
portions of the motion to dismiss relating to Intraware.

In June 2004, a stipulation of settlement for the claims against the issuer-defendants, including us, was submitted to the Court. The
underwriter-defendants in the In re Initial Public Offering Securities Litigation (collectively, the "underwriter-defendants"), including the
underwriters of our initial public offering, are not parties to the stipulation of settlement.

The settlement provides that, in exchange for a release of claims against the settling issuer-defendants, the insurers of all of the
settling issuer-defendants will provide a surety undertaking to guarantee plaintiffs a $1 billion recovery from the non-settling defendants,
including the underwriter-defendants. The amount our insurers would be required to pay to the plaintiffs could range from zero to
approximately $3.5 million, depending on plaintiffs' recovery from the underwriter-defendants and from other non-settling parties. If the
plaintiffs recover at least $1 billion from the underwriter-defendants, our insurers would have no liability for settlement payments under
the terms of the settlement. If the plaintiffs recover less than $1 billion, we believe our insurance will likely cover our share of any
payments towards satisfying plaintiffs' $1

24



---





billion recovery deficit. Management estimates that its range of loss relative to this matter is
zero to $3.5 million. Presently there is no more likely point estimate of loss within this range. As a consequence of the uncertainties
described above regarding the amount we will ultimately be required to pay, if any, as of November 30, 2006, we have not accrued a
liability for this matter.

On August 31, 2005, the court granted preliminary approval of the settlement. A fairness hearing for the settlement took place in
April 2006. After the hearing, the court took the matter under submission and has not yet issued a final ruling. On December 5, 2006,
the Court of Appeals for the Second Circuit reversed the class certification order of the district court judge, and concluded that none of
the six focus cases presented to the appellate court for consideration can be certified as a class action. It remains unclear as of this
date whether this new ruling will be reconsidered or appealed, or whether it will impact the settlement currently under consideration by
the district court.

ITEM 1A. RISK FACTORS

You should carefully consider the risks described below before making a decision to invest in our common stock. The
risks and uncertainties described below are not the only ones facing Intraware. Additional risks and uncertainties presently unknown 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 and results
of operations could be seriously harmed. If that occurs, the trading price of our common stock could decline, and you may lose part or
all of your investment.

We have a history of losses and negative cash flow, and we have yet to achieve sustained profitability or positive cash
flow.

We have incurred significant losses since we were formed in 1996, totaling approximately $160 million, and have yet to
achieve sustained profitability or positive cash flow. Also, with the exception of our quarters ended November 30, 2002, August 31,
2005, August 31, 2006 and November 30, 2006, we have not achieved positive cash flow from operations since our formation in 1996.
We may not have positive cash flows from operations for our 2007 fiscal year. We cannot predict whether or when we will be able to
achieve sustained profitability or positive cash flow in the future.

The market for our SubscribeNet electronic software and license delivery and management service is immature and volatile. If
the market for our service does not develop, or develops more slowly than we expect, our business will be harmed.

The market for hosted digital delivery services is relatively unproven, and it is uncertain whether these services will achieve
and sustain high levels of demand and market acceptance. Our success will depend to a substantial extent on the willingness of
companies, large and small, to increase their use of hosted digital delivery services. If companies do not increase their use of hosted
digital delivery services, our operating results will suffer. In addition, in this unproven market, we have limited insight into trends that
may develop and affect our business. We may make errors in predicting and reacting to relevant business trends, which could harm our
business.

We market our SubscribeNet electronic software and license delivery and management service principally to software companies.
However, many software companies have invested substantial personnel and financial resources in developing their own electronic
software and/or license delivery systems, and therefore may be unwilling to migrate to and pay for an outsourced service. In addition,
some software companies have adopted automatic update, or "phone home," technology for delivering software updates, whereby an
end-user's computer automatically contacts the software company's server to check whether updates are available and, if so,
downloads and installs those updates. While SubscribeNet supports such an approach, this method for delivering software updates
could be viewed by our potential and existing customers as an alternative to our digital delivery technology, and therefore any increased
adoption of this automatic update technology could hurt our business and results of operations.

Further, some companies may be reluctant to use our SubscribeNet delivery services because they are concerned about the
security capabilities of these services.

Competition from other electronic delivery and licensing providers, and potential customer development of in-house electronic
delivery and/or licensing systems, could limit our revenue growth and reduce our gross margins.

The market for selling electronic delivery and licensing services is highly competitive. Some of our competitors have longer
operating histories, greater financial, technical, marketing and other resources, broader product and service offerings, better name
recognition, and a larger installed base of customers than we do. Some of our competitors also have well-established relationships with
our potential customers and with third-party information technology or consulting firms that help market our competitors' services. We
expect competition to intensify as current competitors expand and improve their service offerings and new competitors enter the
market. In addition, our current and potential customers are primarily information technology companies with strong software
development expertise. When considering their alternatives for implementing a system for electronic delivery of software or license
keys, these companies sometimes elect to develop such systems in-house. While we believe our competitive position is strong against
both external competitors and in-house development, we have at times experienced reduced prices, reduced gross margins and lost
sales as a result of such competitive factors. Such competition is likely to intensify, which could limit the growth of our revenues and
gross margins.

The loss of one or more of our key customers could cause our revenue growth to slow or cause our revenues to decline.

A substantial portion of the revenues from our SubscribeNet service comes from a relatively small number of customers. Our
contracts with most of these customers are subject to renewal or cancellation annually. If any of these customers elected to cancel their
agreements with us, our revenue growth would likely slow and our revenues could decline.

25



---





Mergers and acquisitions in the technology sector could harm us by causing cancellation of customer contracts where our
customers are acquired, or by strengthening our competitors.

In recent years, there has been an increase in mergers and acquisitions among technology companies. This trend poses risks
for us. First, our customers are technology companies, and any acquisitions of our customers could lead to cancellation of our contracts
with those customers by the acquiring companies. Second, our competitors also are technology companies. Any acquisitions of other
companies by our competitors, or acquisitions of our competitors by other companies, are likely to result in larger and stronger
companies competing against us. Either of these types of events could reduce our revenue through loss of existing customers, or
reduce our margins through increased price competition.

Our current strategy includes the use of strategic marketing relationships, which may prove unsuccessful.

We currently have marketing relationships in place with Digital River, Inc., Hewlett Packard, Corp., On Demand Delivery, Inc.
dba Nextra, and Zomax, Inc. We also have a reseller relationship with Akamai Technologies, Inc., under which we resell the Akamai
service to our SubscribeNet customers. Of particular importance to us is our joint marketing relationship with Digital River. We believe
this relationship could help further expand our electronic delivery service into the consumer software market, where Digital River has a
much larger presence than we do, while at the same time enabling us to offer e-commerce services to our existing installed base and to
other prospective customers in the enterprise software market. We believe that gaining a greater presence in the consumer software
market, and enhancing our offering to include e-commerce services can play an important role in our future growth. Our relationships
with Zomax, On Demand Delivery, and Hewlett Packard have yet to produce significant revenue, however, and it is possible our more
recent relationships with Digital River and Akamai Technologies will prove less beneficial than we currently expect, in which case our
business could suffer.

Although our subscription-based sales model for our SubscribeNet service limits the volatility of our online services and
technology revenue, other factors may cause our operating results, and therefore our stock price, to fluctuate.

Our SubscribeNet service fees, which comprise most of our online services and technology revenues, are recognized ratably
over contract terms of generally one year, thereby limiting the quarter-to-quarter volatility of those revenues. Nevertheless, certain
factors may cause our online services and technology revenues to fluctuate. In addition to the other risk factors described in this
section, factors that could cause such fluctuation include:

- Deferral of SubscribeNet revenue recognition due to delays by customers in implementing the SubscribeNet service, due to new
sales involving extensive implementations, or due to contract modifications adding significant future deliverables;
- Unexpected increases in customer cancellations, which could result from service deficiencies, or from external conditions or
circumstances beyond our control;
- Lengthening of the sales cycle for our SubscribeNet service due to macroeconomic or other factors;
- Actual events, circumstances, outcomes, and amounts differing from judgments, assumptions, and estimates used in determining
the values of certain assets (including the amounts of related valuation allowances), liabilities and other items reflected in our
consolidated financial statements or unaudited interim consolidated financial statements; and
- Changes in accounting rules, such as recording expenses for employee stock option grants.

Consequently, operating results for a particular future period are difficult to predict, and prior results are not necessarily indicative of
results to be expected in future periods. Any of these factors could materially adversely affect our results of operations and stock
price.

The technological and functional requirements we must meet to stay competitive are subject to rapid change. If we are unable
to quickly adapt to these changes and meet the demands of our current and potential customers, we will likely lose sales and market
share and our revenue growth will be limited.

We market primarily to software publishers, who generally demand that a service like ours meet high technological and
functional standards. To remain competitive in this market and meet the demands of current and prospective customers, we must
continually adapt and upgrade our technology and functionality. We are a small company with limited resources available for enhancing
and expanding our services. If we do not respond quickly enough to changing industry standards or the increased demands of
customers and potential customers, we will likely lose sales and market share to competitors and our growth prospects will be limited.
In addition, we could incur substantial costs to modify our services or infrastructure in order to adapt to changing standards and
demands. If we incur such costs and our sales fail to increase commensurately, we may not be able to achieve sustained profitability
and positive operating cash flow.

Defects in our SubscribeNet service could diminish demand for the service and subject us to substantial liability.

Our service is complex, and may have errors or defects that users identify after they begin using it, which could harm our
reputation and our business. Internet-based services frequently contain undetected errors when first introduced or when new versions
or enhancements are released. Despite taking precautions to avoid errors, we have found defects in our service from time to time, and
we may find new errors in our existing service in the future. Because our customers use our service for important aspects of their
business, any errors, defects or other performance problems with our service could hurt our reputation and may damage our customers'
businesses. If that occurs, customers could

26



---





elect not to renew their agreements with us, could be eligible for credits under our service
level agreements, and could delay or withhold payment to us. We also could lose future sales, or customers may make warranty claims
against us, which could result in an increase in our provision for doubtful accounts, an increase in collection cycles for accounts
receivable, or the expense and risk of litigation.

Interruptions or delays in service from our third-party Web hosting facilities, or in our relationships with third party hardware and
software vendors, could impair the delivery of our service and harm our business.

We provide our service through computer hardware that is currently located in third-party Web hosting facilities in Santa Clara,
California operated by SAVVIS Communications, and in Ireland operated by Data Electronics. We do not control the operation of these
facilities, and they are subject to damage or interruption from earthquakes, floods, fires, power loss, telecommunications failures and
similar events. While physical security measures are in place, they are also subject to break-ins, sabotage, intentional acts of vandalism
and similar misconduct. Despite precautions taken at the facilities, the occurrence of a natural disaster, a decision to close a facility
without adequate notice, or other unanticipated problems at a facility, could result in lengthy interruptions in our service. In addition, the
failure by either facility to provide our required data communications capacity could result in interruptions in our service. We have an
agreement with SBC E-Services, an affiliate of SBC Communications, Inc., to provide access to a geographically remote disaster
recovery facility that would provide us access to hardware, software and Internet connectivity in the event the SAVVIS facility becomes
unavailable. Even with this disaster recovery arrangement, however, our service would be interrupted during the transition. Any damage
to, or failure of, our systems could result in interruptions in our service. Interruptions in our service may reduce our revenue, cause us to
issue credits or pay penalties, cause customers to terminate their subscriptions and adversely affect our renewal rates. Our business
will be harmed if our customers and potential customers believe our service is unreliable.

In addition, to a significant degree, we rely on various third-party software applications and hardware to deliver our service. If we
experience disruptions in those vendor relationships and those software and hardware components become unavailable to us, or
unavailable on commercially reasonable terms, our service could be interrupted and/or damaged, causing harm to our customer
relationships, our reputation, and our overall business.

The market for our Digital Fastball service is unproven.

We continue to develop a production release of a new service called Digital Fastball, which we hope will leverage our digital
delivery expertise to enable small and medium-sized businesses, as well as consumers, to send, receive and manage many types and
sizes of digital files over the Internet quickly, easily and securely. We plan to market our Digital Fastball service principally to small and
medium-sized companies that need to send large digital files as part of their businesses. However, many systems are already available
for sharing files over the Internet, in some cases at little or no cost. In addition, some such systems have been the targets of widely
publicized litigation by copyright holders, which may make some companies reluctant to use Internet-based digital delivery services
such as Digital Fastball.

If our development or marketing efforts prove unsuccessful with respect to Digital Fastball, we may not generate any profit or even
recover our investments in the Digital Fastball service, in which case our business could suffer.

We may raise additional capital to fund acquisitions, product development or general operations. Any such capital financing
would dilute our shareholders' investments.

We may raise additional capital in the future through private or public offerings of stock, or through other means. The purposes
of any such financing would be to increase our cash reserves for potential use in acquiring other businesses, product development
activities, funding our operations and generally strengthening our balance sheet. Any such additional financing would likely dilute the
investments of our current shareholders and may not be available on favorable terms, if at all.

Our operating results could vary due to the methods, estimates and judgments we use in applying our accounting policies,
particularly SFAS No. 123(R).

The methods, estimates and judgments we use in applying our accounting policies significantly impact our results of
operations. Those methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions,
and factors may arise over time that lead us to change our methods, estimates and judgments. In particular, the calculation of
share-based compensation expense under SFAS No. 123(R)-which we adopted as of the fiscal quarter beginning March 1, 2006-requires
that we use valuation methodologies and a number of assumptions, estimates and conclusions regarding matters such as expected
terms, expected forfeitures, expected volatility of our share price, the expected dividend rate with respect to our common stock and the
exercise behavior of our employees. Furthermore, there are no means, under applicable accounting principles, to compare and adjust
our expense if and when we learn of additional information that may affect our previous estimates, with the exception of changes in
expected forfeitures of share-based awards. Over time, factors may arise that cause us to change our estimates and assumptions with
respect to future share-based compensation arrangements, resulting in variability in our share-based compensation expense. In
addition, any future accounting pronouncements, taxation rules, and new interpretations of existing accounting pronouncements or
taxation rules, could also have a significant effect on our reported results, including our reporting of transactions completed before the
effective date of the change.

27



---





Our new independent auditing firm may interpret accounting rules differently than our old independent auditing firm, which could
require changes in the presentation of our financial data and/or cause us to restate prior financial reports.

In September of 2006, we dismissed our prior independent accounting firm and engaged a new one to serve in that
role.  Consequently, our new independent auditor will be reviewing our financial reporting in the future, and also will be
reviewing our financial reports from earlier periods that previously were reviewed by our old auditing firm.  Given the
complexities of public-company accounting rules and the differences in how those rules are interpreted by various accounting
firms, it is possible that our new independent auditor will require us to characterize certain transactions and/or present financial
data differently than was approved by our former auditor.  Similarly, it is possible that our new auditor will disagree with the
way we have presented financial results in prior periods, in which case we may be required to restate those financial results.  In
either case, these changes could negatively impact our future financial results and/or previously reported financial results,
could subject us to the expense and other consequences of restating our prior financial statements, and could lead to
government investigation and/or shareholder litigation.

Provisions of our charter documents could make it more difficult for a third party to acquire us, even if the offer may be
considered beneficial by our stockholders, which could depress the trading price of our common stock.

Our charter documents, as well as our Amended and Restated Preferred Stock Rights Agreement, contain provisions that
could depress the trading price of our common stock by acting to discourage, delay or prevent a change in control of our company or
changes in our management that the stockholders of our company may deem advantageous. Among other things, these provisions:

- trigger certain shareholder rights in the event a person or entity acquires more than fifteen percent of our voting securities (or up to
twenty percent in the case of Crosslink Capital, Inc.);
- establish a classified board of directors so that not all members of our board are elected at one time;
- require super-majority voting to amend some provisions in our amended and restated certificate of incorporation and bylaws;
- authorize the issuance of "blank check" preferred stock that our board could issue to increase the number of outstanding shares
and to discourage a takeover attempt;
- prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;
- provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and
- establish advance notice requirements for nominations for election to our board or for proposing matters that can be acted upon by
stockholders at stockholder meetings.

In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of
our company. Section 203 imposes certain restrictions on merger, business combinations and other transactions between us and
holders of 15 percent or more of our common stock.

Viruses may hinder acceptance of Internet-based digital delivery, which could in turn limit our revenue growth.

The proliferation of software viruses is a key risk that could inhibit acceptance by information technology professionals of Web-
based delivery of digital goods. Any well-publicized transmission of a computer virus by us or another company using digital delivery
could deter information technology professionals from using, and deter software providers from outsourcing, digital delivery, thereby
adversely affecting our business. Our SubscribeNet service enables our customers to upload their software products directly onto our
systems for downloading by their end-users. Our systems automatically scan our customers' software products for known computer
viruses on an ongoing basis while they are on our systems. However, it is possible that in spite of these periodic virus scans, our
system could transmit the virus to one or more end-users. Any such virus transmission could result in disputes, litigation and negative
publicity that could adversely affect our business and our stock price.

If our security measures are breached and unauthorized access is obtained to a customer's data, our service may be perceived
as not being secure and customers may curtail or stop using our service.

Our service involves the storage and transmission of customers' proprietary information, and security breaches could expose
us to a risk of loss of this information, litigation and possible liability. If our security measures are breached as a result of third-party
action, employee error, malfeasance or otherwise, and, as a result, someone obtains unauthorized access to one of our customers'
data, our reputation will be damaged, our business may suffer and we could incur significant liability. Because techniques used to
obtain unauthorized access or to sabotage systems change frequently and generally are not recognized until launched against a target,
we may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of
our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose sales and
customers. Some companies may be reluctant to use either our SubscribeNet or Digital Fastball hosted digital delivery services
because they are concerned about the security capabilities of these services.

28



---





Additional government regulations may harm demand for our services and increase our costs of doing business.

Our business has benefited from the tax laws of states in which purchases of software licenses are not taxable if the software
is received only electronically. Some such states are considering whether to change their laws to broaden the taxability of transactions
fulfilled over the Internet. Any new imposition of taxes on sales of software licenses, where the software is received electronically, could
substantially harm demand for our services and thereby materially adversely affect our business, operating results and financial
condition. We also have benefited from implementing our services in Ireland, which offers tax advantages to software companies
distributing software from Ireland. Any regulatory change in Ireland or elsewhere that diminishes those advantages could harm our
business. Other changes in government regulations, in areas such as privacy and export compliance, could also require us to
implement changes in our services or operations that increase our cost of doing business and thereby hurt our financial
performance.

Claims by third parties for intellectual property infringement could force us to stop selling our services, force us to pay royalties,
and force us to indemnify our customers.

Our business involves a high risk that we will be the target of intellectual property infringement claims. These claims could take
a number of forms, including:

- Claims by other technology companies alleging that current or future components of our digital delivery service or related services
infringe their intellectual property rights;
- Claims by our customers' competitors alleging that our customers' software, which we store and electronically deliver for our
customers, infringes those competitors' intellectual property rights (our customers would typically be required to defend and indemnify
us against such claims, but the claims could nevertheless disrupt our business);
- Claims that our use of the name Intraware violates the rights of other entities that are using the same name. We are aware that
certain other companies are using 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 these companies
may not claim superior rights to "Intraware" or to other marks we use; or
- Claims by our customers that we delivered their software to unauthorized third parties, thereby infringing our customers' intellectual
property rights.

Industry consolidation is increasing the risk that we will become a target of the types of infringement claims described in the first
two bullets above. Consolidation among companies providing digital delivery, licensing, e-commerce and related technologies is
resulting in more direct competition among the surviving companies in that segment, heightening the risk of intellectual property
infringement claims among those companies, including us. Similarly, consolidation in the enterprise software industry heightens the risk
of intellectual property infringement claims among the companies remaining in that industry, including most of our customers.

These intellectual property claims could be made for patent, copyright or trademark infringement or for misappropriation of trade
secrets. They could be made directly against us, or indirectly through our contractual indemnification obligations to our customers and
channel partners. Any claims could result in costly litigation and be time-consuming to defend, divert management's attention and
resources, or cause delays in releasing new or upgrading existing services. Royalty or licensing agreements, if required, may be
available only on onerous terms, if at all. 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 believe we own the rights in, or have the rights required to use, our SubscribeNet technology. However, there can be no
assurance that this technology does not infringe the rights of third parties. In addition, we take steps to verify that end-users who
download our customers' software through our SubscribeNet service 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, our customers
whose software is downloaded.

If our export compliance system fails to prevent unauthorized exports of our customers' software, we could be sanctioned by
the U.S. government.

Through our SubscribeNet service, we globally distribute software containing encryption technology and other technologies
restricted by U.S. laws and regulations from exportation to certain countries, certain types of recipients, and certain specific end-users.
Our SubscribeNet solution incorporates automated procedures to help ensure that the software we deliver electronically is not
downloaded in violation of U.S. export laws and regulations. However, these procedures may not prevent unauthorized exports of
restricted software in every case. If an unauthorized export of software occurs through the SubscribeNet service and the U.S.
government determines that we have violated U.S. export laws or regulations, we could be sanctioned under those laws or regulations.
Sanctions include fines, suspension or revocation of export privileges, and imprisonment.

If our key personnel left the company, our product development, sales, and corporate management could suffer.

Our future success depends upon the continued service of our executive officers and other key technology, sales, marketing
and support personnel. None of our officers or key employees is bound by an employment agreement for any specific term. We do not
maintain life insurance on any of our officers or key employees. If we lost the services of one or more of our key employees, or if one or
more of our

29



---





executive officers or key employees decided to join a competitor or otherwise compete directly or indirectly with us, this
could significantly harm our business.

Financial and securities laws, especially the Sarbanes-Oxley Act of 2002, require that we evaluate our internal control
structure. While we believe we currently have adequate internal controls in place, this exercise has no precedent available by which to
measure the adequacy of our compliance, and in addition it may cause our operating expenses to increase.

The Sarbanes-Oxley Act of 2002 and newly proposed or enacted rules and regulations of the SEC and the Nasdaq Stock
Market impose new duties on us and our executives, directors, attorneys and independent registered public accounting firms. In order
to comply with the Sarbanes-Oxley Act and such new rules and regulations, we are evaluating our internal control over financial
reporting to allow management to report on, and our independent registered public accounting firm to attest to, our internal control over
financial reporting. We are performing the system and process evaluation and testing (and any necessary remediation) required in an
effort to comply with the management certification and independent registered public accounting firm attestation requirements of
Section 404 of the Sarbanes-Oxley Act. As a result, we are incurring additional expenses and diversion of management's time, and we
may be required to hire additional personnel and engage additional outside legal, accounting and advisory services. Any of these
developments could materially increase our operating expenses and accordingly reduce our net income or increase our net loss. While
we anticipate being able to fully implement the requirements relating to internal control over financial reporting and all other aspects of
Section 404 in a timely fashion, we cannot be certain as to the outcome of our testing and resulting remediation actions or the impact of
the same on our operations since there is little precedent available by which to measure compliance adequacy. If we are unable to
implement the requirements of Section 404 in a timely manner or with adequate compliance, we may be subject to sanctions or
investigation by regulatory authorities, such as the SEC or the Nasdaq Stock Market, and our reputation may be harmed. Any such
action could adversely affect our financial results and the price of our common stock.

Moreover, our management, including our CEO and CFO, does not expect that our disclosure controls or our internal controls over
our financial reporting will eliminate all risk of error or fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met. Our disclosure controls or procedures could
be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control.
Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be
detected.

Our sales and marketing services arrangement with Software Spectrum, Inc. terminated on January 3, 2006. As a result, we
stopped recognizing alliance and reimbursement revenues after January 3, 2006.

Until January 3, 2006, we provided sales and marketing services to Software Spectrum to assist in its resale and marketing of
Sun Java Enterprise System and Sun One software licenses and maintenance, under a Sales Alliance Agreement between us and
Software Spectrum. Under that agreement, Software Spectrum shared with us a portion of its gross profit from resales of licenses and
maintenance for that Sun software, and paid us a SubscribeNet service fee for electronic delivery of that Sun software. This agreement
accounted for substantially all of our alliance and reimbursement revenues, a significant portion of our online services and technology
revenues, and more than 10% of our total revenues in our 2006 fiscal year.

Effective January 3, 2006, we terminated our Sales Alliances Agreement with Software Spectrum. We have signed a two-year
SubscribeNet service agreement with FusionStorm to provide electronic software and license management services for their SunOne
product sales, which we expect will partially offset the decline in our online services and technology revenues. We do not expect to offer
sales and marketing services in the future to other customers as part of the SubscribeNet offering. We ceased recognizing any alliance
and reimbursement revenues after January 3, 2006.

If we acquire any companies or technologies in the future, they could prove difficult to integrate, disrupt our business, dilute
stockholder value and adversely affect our operating results.

We may acquire or make investments in complementary companies, services and technologies in the future. We are
considerably smaller now than we were when we made our past acquisitions, and therefore any new acquisitions or investments could
be more disruptive to our organization than in the past. Acquisitions and investments involve numerous risks, including:

- difficulties in integrating operations, technologies, services and personnel;
- diversion of financial and managerial resources from existing operations;
- risk of entering new markets;
- potential write-offs of acquired assets;
- potential loss of key employees;
- inability to generate sufficient revenue to offset acquisition or investment costs; and
- delays in customer purchases due to uncertainty.

30



---





In addition, if we finance acquisitions by issuing convertible debt or equity securities, our existing stockholders may be diluted which
could affect the market price of our stock. As a result, if we fail to properly evaluate and execute acquisitions or investments, our
business and prospects may be seriously harmed.

We could face claims in relation to our Employee Stock Purchase Plan ("ESPP").

We have maintained an ESPP program for the benefit of our employees since 1999. We recently determined that beginning in
late 2001, we issued shares that were authorized under our ESPP plan but which exceeded the number of shares we had registered
with the SEC on Form S-8. In October 2006, we registered additional ESPP shares with the SEC, but it is possible we could face claims
for rescission of past purchases or other damages by former employees who lost money selling their ESPP shares. It is difficult to
predict the overall size of these potential claims because we do not have data showing the extent to which employees or former
employees continue to hold their shares or have sold them, or data showing any resulting losses. While we believe the aggregate
amount of potential claims is small, we cannot assure you of this. We also believe we have valid defenses against any such claims,
including without limitation applicable statutes of limitation, but the cost of litigating these issues could be expensive and we cannot
assure you we would prevail on all of our defenses or avoid rescinding certain purchases under the ESPP and/or paying damages.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

On October 10, 2006, we held our Annual Meeting of Stockholders. Below are the results of matters submitted to a vote at that
meeting.

Proposal No. 1:     The stockholders elected the following persons as Class II
Directors to hold office until the 2009 Annual Meeting of Stockholders, or until earlier resignation or removal.

|Director's Name        |  | Votes For |  | Votes Withheld | 
|---------------------- |  | --------- |  | -------------- | 
|                       |  |           |  |                | 
|Brendan A. McLoughlin  |  | 6,647,231 |  | 194,857        | 
|                       |  |           |  |                | 
|Raymond L. Ocampo, Jr. |  | 6,647,331 |  | 194,757        | 

The following directors were not subject to re-election at the Annual Meeting, and each such director's term continued after the
Annual Meeting:  Peter H. Jackson, Peter F. Pervere, Bradley M. Shuster. In addition, as previously reported on our Form 8-K
dated September 12, 2006, our Board of Directors appointed Robert F. Kleiber to serve as a Class III Director, effective
September 11, 2006. The Board appointed Mr. Kleiber in accordance with our November 9, 2005 Series B Preferred Stock Purchase
Agreement with Digital River. Under that agreement, and upon our entering into a strategic alliance agreement with Digital River on
June 22, 2006, Digital River became entitled to have our Board of Directors appoint or nominate, as applicable, a representative to a
seat on our Board. Digital River will continue to have these rights so long as it owns ten percent or more of our outstanding common
stock (on an as-converted to common stock basis).

Proposal No. 2:  The stockholders voted to approve a new 2006 Equity Incentive Plan to replace our 1996
Equity Incentive Plan that expired in November of this year. There were 3,748,997 votes for the proposal, 185,132 votes against the
proposal, 8,061 votes abstaining, and 2,899,898 broker non-votes.

Proposal No. 3:  The stockholders approved the amendment of our Certificate of Incorporation to decrease the
number of shares of capital stock we have authorized to issue from 260,000,000 (250,000,000 shares of common stock and 10,000,000
shares of preferred stock), par value $0.0001, to 60,000,000 (50,000,000 shares of common stock and 10,000,000 shares of preferred
stock), par value $0.001. There were 6,729,661 votes for the proposal, 108,994 votes against the proposal, 3,433 votes abstaining, and
no broker non-votes.

ITEM 5. OTHER INFORMATION

[None.]

ITEM 6. EXHIBITS

Exhibits

31



---





|Exhibit
Number | Description                                                                                                                                                                                                                                                                                               
|-------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1(1)         | Amended and Restated Certificate of Incorporation of Intraware, Inc.                                                                                                                                                                                                                                      
|3.2            | Certificate of Amendment to Amended and Restated Certificate of Incorporation of Intraware, Inc.     
PDF provided as a courtesy                                                                                                                                                                          
|3.3(2)         | Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock                                                                                                                                                                                                               
|3.4(3)         | Certificate of Designations, Preferences and Rights of Series B Convertible Preferred Stock                                                                                                                                                                                                               
|3.5(1)         | Certificate of Designations, Preferences and Rights of the Series D Convertible Preferred Stock                                                                                                                                                                                                           
|3.6(4)         | Amended and Restated Bylaws of Intraware, Inc.                                                                                                                                                                                                                                                            
|4.1(5)         | Amended and Restated Preferred Stock Rights Agreement, dated as of June 22, 2006 between Intraware, Inc.
and Computershare Investor Services LLC, including the Certificate of Designation, the form of Rights Certificate and the Summary of
Rights attached thereto as Exhibits A, B and C, respectively
|31.1           | Certification pursuant to Section 302 of the Sarbanes-Oxley Act - Peter H. Jackson                                                                                                                                                                                                                        
|31.2           | Certification pursuant to Section 302 of the Sarbanes-Oxley Act - Wendy A. Nieto                                                                                                                                                                                                                          
|32.1           | Certification pursuant to Section 906 of the Sarbanes-Oxley Act                                                                                                                                                                                                                                           

_______________

(1)	Incorporated by reference to Intraware's Quarterly Report on Form 10-Q for the quarter ended August 31, 2005 (File
No. 000-25249), filed with the SEC on October 5, 2005.

(2)	Incorporated by reference to Intraware's Current Report
on Form 8-K dated April 2, 2001 (File No. 000-25249), filed with the SEC on April 13, 2001.

(3)	Incorporated by reference to Intraware's Current Report on Form 8-K dated November 9, 2005 (File No. 000-25249),
filed with the SEC on November 15, 2005.

(4)	Incorporated by reference to Intraware's Current Report on Form 8-K dated September 12, 2005 (File No. 000-25249),
filed with the SEC on September 12, 2005.

(5)	Incorporated by reference to Intraware's Current Report on Form 8-K dated June 22, 2006 (File No. 000-25249), filed
with the SEC on June 27, 2006.

SIGNATURE

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.

|                       |                                                                                                                                  
|---------------------- | ---------------------------------------------------------------------------------------------------------------------------------
|Date: January 16, 2007 | By: /s/ WENDY A. NIETO
               
    Wendy A. Nieto
Chief Financial Officer and Executive Vice President of Intraware, Inc.

32



---