<PAGE>   1
================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q



(Mark One)

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000.

                                            OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________TO _______.

                        COMMISSION FILE NUMBER 000-26797


--------------------------------------------------------------------------------
                         CONTINUUS SOFTWARE CORPORATION

             (Exact name of registrant as specified in its charter)
--------------------------------------------------------------------------------

               DELAWARE                               43-1070080
    (State or other jurisdiction of                (I.R.S. Employer
    incorporation or organization)                 Identification No.)


                               9401 Jeronimo Road
                            Irvine, California 92618
                    (Address of principal executive offices)
                                 (949) 830-8022
                (Registrant's phone number, including area code)

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

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS: YES [X] NO


The number of shares outstanding of the Registrant's Common Stock, $.001 par
value, was 10,569,249 as of March 31, 2000.

================================================================================


<PAGE>   2



                         CONTINUUS SOFTWARE CORPORATION

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
<S>     <C>                                                                                <C>
PART I  FINANCIAL INFORMATION

Item 1.    Financial Statements

        Consolidated Balance Sheets at March 31, 2000 (unaudited) and December 31, 1999     3
        Consolidated Statements of Operations and Comprehensive
        Operations for the Three Months Ended March 31, 2000 and 1999 (unaudited).....      4
        Consolidated Statements of Cash Flows for the Three Months Ended
           March 31,2000 and 1999 (unaudited).........................................      5
        Notes to Consolidated Financial Statements (unaudited)........................      6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of
           Operations.................................................................      8
        Risk Factors..................................................................     12

Item 3. Quantitative and Qualitative Disclosure About Market Risk......................    18

PART II    OTHER INFORMATION

Item 1.    Legal Proceedings...........................................................    19
Item 2.    Changes in Securities and Use of Proceeds...................................    19
Item 6.    Exhibits and Reports on Form 8-K............................................    19
           Signatures .................................................................    20
</TABLE>


                                       2.
<PAGE>   3
PART I     FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

                 CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                (IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                     MARCH 31,      DECEMBER 31,
                                                                                        2000           1999
                                                                                      --------       --------
<S>                                                                                  <C>            <C>
ASSETS .........................................................................     (unaudited)
Current assets:
Cash and cash equivalents ......................................................      $ 11,702       $ 11,570
Investments in securities available for sale ...................................         3,589          9,125
Accounts receivable, net of allowance for doubtful accounts of $452 (2000) .....         9,360          8,940
  and $430 (1999)
Notes receivable ...............................................................           687             --
                                                                                         1,410          1,321
                                                                                      --------       --------
Prepaid expenses and other current assets
  Total current assets .........................................................        26,748         30,956
Property, net ..................................................................         3,391          2,154
Intangibles, net ...............................................................        10,893            107
Other assets ...................................................................         1,417            757
                                                                                      --------       --------
  Total assets .................................................................      $ 42,449       $ 33,974
                                                                                      --------       --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ...............................................................      $  2,628       $  1,662
Accrued liabilities ............................................................         4,601          5,554
Deferred revenue ...............................................................         4,974          4,961
Current portion of capital lease obligations ...................................           378            488
                                                                                      --------       --------
   Total current liabilities ...................................................        12,581         12,665
Capital lease obligations, net of current portion ..............................           181            261
Convertible note payable .......................................................         6,000          6,000
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares authorized, no shares
  issued and outstanding .......................................................            --             --
Common stock $.001 par value; 30,000,000 shares authorized,10,569,249 and
  9,504,856 shares issued and outstanding at March 31, 2000 and December 31,
  1999..........................................................................            11             10
Additional paid-in capital .....................................................        48,765         38,137
Warrants to purchase common stock ..............................................            67             69
Accumulated other comprehensive operations .....................................            (1)            (5)
Accumulated deficit ............................................................       (25,155)       (23,163)
                                                                                      --------       --------
   Net stockholders' equity ....................................................        23,687         15,048
                                                                                      --------       --------
   Total liabilities and stockholders' equity ..................................      $ 42,449       $ 33,974
                                                                                      ========       ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       3.
<PAGE>   4
                 CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
       CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE OPERATIONS
                     (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED
                                                                   MARCH 31,
                                                            -----------------------
                                                              2000           1999
                                                            --------       --------
Revenues:                                                         (unaudited)
<S>                                                         <C>            <C>
  Software licenses ..................................      $  5,451       $  4,172
  Services ...........................................         4,432          4,067
                                                            --------       --------
         Total revenues ..............................         9,883          8,239
Cost of revenues:
  Software licenses ..................................           304            156
  Services ...........................................         2,631          1,945
                                                            --------       --------
         Total cost of revenues ......................         2,935          2,101
                                                            --------       --------
Gross profit .........................................         6,948          6,138
Operating expenses:
  Sales and marketing ................................         5,400          4,098
  Research and development ...........................         1,942          1,233
  General and administrative .........................         1,210            704
  Other compensation costs and other
      acquisition-related expenses ...................           298             41
                                                            --------       --------
         Total operating expenses ....................         8,850          6,076
                                                            --------       --------
Income (loss) from operations ........................        (1,902)            62
Other expense, net ...................................           (65)          (296)
                                                            --------       --------
Loss before income tax provision .....................        (1,967)          (234)
Income tax provision .................................            25              5
                                                            --------       --------
Net loss .............................................      $ (1,992)      $   (239)
                                                            ========       ========
Other comprehensive operations - Net
  unrealized loss on available for sale
  securities .........................................            (1)            --
                                                            --------       --------
Comprehensive loss ...................................      $ (1,993)      $   (239)
                                                            ========       ========

Net loss per share - basic and diluted ...............      $   (.20)      $  (0.15)
                                                            ========       ========
Weighted average common shares- basic and diluted ....        10,109          1,637
                                                            ========       ========
</TABLE>

   The accompanying notes are an integral part of these financial statements.


                                       4.
<PAGE>   5
                 CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                            THREE MONTHS ENDED
                                                                                                MARCH 31,
                                                                                          -----------------------
                                                                                            2000           1999
                                                                                          --------       --------
Cash flows from operating activities:                                                           (unaudited)
<S>                                                                                       <C>            <C>
Net loss ...........................................................................      $ (1,992)      $   (239)
Adjustments to reconcile net loss to net cash  provided by (used in)
  operating activities:
  Provision for doubtful accounts ..................................................            28             58
  Depreciation and amortization ....................................................           585            308
  Compensation expense related to stock option grants ..............................            57             41
  Changes in operating assets and liabilities (net of effects of acquisition):
    Accounts receivable ............................................................          (500)          (849)
    Prepaid expenses and other assets ..............................................        (1,349)           (17)
    Accounts payable ...............................................................           969            320
    Accrued liabilities ............................................................        (1,142)            71
    Deferred revenue ...............................................................            29            385
                                                                                          --------       --------
      Net cash provided by (used in) operating activities ..........................         3,315             78
Cash flows from investing activities:
Purchases of property ..............................................................        (1,552)           (29)
Purchase of investment securities ..................................................        (1,580)            --
Proceeds from sale of investment securities ........................................         7,120             --
Cash paid for acquisition, net of cash acquired.....................................          (973)            --
                                                                                          --------       --------
      Net cash provided by (used in) investing activities ..........................         3,015            (29)
Cash flows from financing activities:
Principal payments on obligations under capital leases .............................          (212)          (212)
Proceeds from issuance of common stock, net ........................................           619             68
                                                                                          --------       --------
      Net cash provided by (used in) financing activities ..........................           407           (144)
Effect of exchange rate changes on cash balances ...................................            25             --
                                                                                          --------       --------
Net increase (decrease) in cash and cash equivalents ...............................           132            (95)
Cash and cash equivalents, beginning of period .....................................        11,570          2,452
                                                                                          --------       --------
Cash and cash equivalents, end of period ...........................................      $ 11,702       $  2,357
                                                                                          ========       ========
Supplementary disclosures of cash flow information
  Cash paid during the year for:
    Interest .......................................................................      $    211       $    215
                                                                                          ========       ========
    Income taxes ...................................................................      $     88       $      5
                                                                                          ========       ========
Noncash items:
Acquisition of property through capital lease ......................................      $     --       $    141
                                                                                          ========       ========

See Note 4 for details of assets acquired and liabilities assumed in purchase transaction.
</TABLE>



   The accompanying notes are an integral part of these financial statements.


                                       5.
<PAGE>   6

                 CONTINUUS SOFTWARE CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2000
                                   (UNAUDITED)
              (IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE AMOUNTS)




1.  Basis of Presentation

The accompanying consolidated financial statements have been prepared by
Continuus Software Corporation (the "Company") without audit (except for balance
sheet information as of December 31, 1999) in accordance with generally accepted
accounting principles for interim financial information and with instructions to
Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. The accompanying consolidated financial
statements do not include certain footnotes and financial presentations normally
required under generally accepted accounting principles and, therefore, should
be read in conjunction with the audited consolidated financial statements
included in the Company's Annual Report on Form 10K for the year ended December
31, 1999. The accounting policies followed by the Company are set forth in Note
1 of the Notes to those Consolidated Financial Statements.

The results of operations for the interim period ended March 31, 2000 are not
necessarily indicative of the results to be expected for the entire fiscal year
ending December 31, 2000. For further information on additional factors that may
affect future results, please refer to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" under Item 2 and the Consolidated
Financial Statements and Notes thereto included in the Company's Annual Report
on Form 10K for the year ended December 31, 1999.

2.  Net Loss Per Share

The Company has adopted SFAS No. 128, Earnings per Share, which replaces the
presentation of "primary" earnings per share with "basic" earnings per share and
the presentation of "fully diluted" earnings per share with "diluted" earning
per share. Basic and diluted loss per share is computed by dividing net loss
available to common stockholders by the weighted average number of common shares
outstanding for the period.

3.  Recent Accounting Pronouncements:

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities, which the Company
is required to adopt effective in its fiscal year 2001. SFAS No. 133 will
require the Company to record all derivatives on the balance sheet at fair
value. The Company does not currently engage in hedging activities but will
continue to evaluate the effects of adopting SFAS No. 133. The Company will
adopt SFAS No. 133 in its fiscal year 2001.

4.  Pagoda Acquisition

On February 10, 2000, the Company completed the purchase of all the outstanding
common shares and stock options to purchase common shares of Pagoda Corporation
in exchange for approximately 820,000 shares of the Company's common stock
valued at $9,951 and $1,000 in cash, net of cash acquired of $27. The
acquisition was


                                       6.
<PAGE>   7
accounted for using the purchase method of accounting and the purchase price of
$11,072, which included $121 of direct acquisition costs, was allocated as
follows:

<TABLE>
<CAPTION>
<S>                                                          <C>
        Current assets......................             $   124
        Notes receivable....................                 187
        Property............................                  26
        Intangibles.........................              10,946
        Liabilities assumed.................                (211)
                                                         -------
             Total purchase price...........             $11,072
</TABLE>


5.  Segment Information (in thousands)

Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
Company's chief operating decision-maker, or decision-making group, in deciding
how to allocate resources and in assessing performance.

The Company's reportable operating segments include software licenses and
services. The software licenses operating segment develops and markets the
Company's process-oriented software development management products. The
services segment provides after-sale support for software products and fee-based
training and consulting services related to the Company's products.

The Company does not allocate operating expenses to these segments, nor does it
allocate specific assets to these segments. Therefore, segment information
reported includes only revenues, cost of sales and gross profit.


Operating segment data for the three months ended March 31, 2000 and 1999 was as
follows:

<TABLE>
<CAPTION>
                                                              Software
                                                              Licenses   Services    Total
                                                              --------   --------    -----
<S>                                                           <C>        <C>        <C>
Three months ended March 31, 2000
    Revenues.........................................          $5,500     $4,400    $9,900
    Cost of revenues.................................             300      2,600     2,900
                                                               ------     ------    ------
       Gross profit..................................          $5,200     $1,800    $7,000
                                                               ======     ======    ======
Three months ended March 31, 1999
    Revenues.........................................          $4,200     $4,000    $8,200
    Cost of revenues.................................             200      1,900     2,100
                                                               ------     ------    ------
       Gross profit..................................          $4,000     $2,100    $6,100
                                                               ======     ======    ======
</TABLE>


Revenues are attributed to geographic areas based on the location of the entity
to which the products or services were sold. United States information is
derived from U.S. operations and includes revenues from sales to Canadian
entities of $133 and $700 for the three months ended March 31, 2000 and 1999,
respectively. No single country had a material amount of long-lived assets
except for such assets in the United Kingdom of $499 and $579 for the periods
ended March 31, 2000 and 1999, respectively.


                                       7.
<PAGE>   8
<TABLE>
<CAPTION>
                                         United States   International  Eliminations  Total
                                         -------------   -------------  ------------  -----
<S>                                      <C>             <C>            <C>           <C>
Three months ended March 31, 2000
    Revenues.......................           $5,800        $5,300      $(1,200)     $9,900
    Gross profit...................            4,100         2,900                    7,000
    Long-lived assets..............           16,000         1,100       (1,400)     15,700
Three months ended March 31, 1999
    Revenues.......................            5,300         4,300       (1,400)      8,200
    Gross profit...................            4,200         1,900                    6,100
    Long-lived assets..............            1,200         1,100                    2,300
</TABLE>


During the three months ended March 31, 2000 and 1999, no single customer
accounted for 10% or more of total revenue.

6.  Stock Option Plans

The following is a summary of stock option transactions under the Company's
stock option plans, including the Employee Stock Option Plan and 1997 Equity
Incentive Plan, for the three months ended March 31, 2000:

<TABLE>
<CAPTION>
                                                                 Weighted
                                                                 average
                                                                 exercise
                                                 Shares           price
                                                ----------       --------
<S>                                             <C>              <C>
Outstanding, December 31, 1999...........       3,200,767          $3.32
Granted..................................         121,299          10.63
Exercised................................       (148,797)           1.69
Canceled.................................        (77,635)           4.23
                                                ---------
Balance, March 31, 2000..................       3,095,634           3.62
                                                =========
Options exercisable at March 31, 2000....       1,266,828
                                                =========
</TABLE>


7.  Significant Agreement

On February 14, 2000, the Company signed a five year lease agreement for it's
new company headquarters. The total value to be paid over the life of the lease
is $4,424. Of this amount, $460 will be paid in 2000, $813 in 2001, $930 in
2002, $940 in 2003, $961 in 2004 and $320 in 2005.



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

        The following Management's Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements that
involve risks and uncertainties. These forward-looking statements include, but
are not limited to, statements about our plans, objectives, expectations and
intentions and other statements contained that are not historical facts. When
used in this Report, the words "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions are generally intended
to identify forward-looking statements. Because these forward-looking statements
involve risks and uncertainties, there are important factors that could cause
actual results to differ materially from those expressed or implied by these
forward-looking statements, including to differ materially from those expressed
or implied by these forward-looking statements, including the factors discussed
under "Risk Factors."


                                       8.
<PAGE>   9

OVERVIEW

We provide software products and services for eAsset management, an emerging
market segment that enables organizations to more effectively develop, enhance,
deploy and manage their Internet and enterprise software systems. We originally
incorporated in 1984 as a supplier of application software for the automotive
industry. In 1987, we sold our application software business to focus on the
development of a software change management product. In subsequent years, we
expanded our focus to encompass a fully integrated change management suite. In
1994, we released the 4.0 version of the Continuus Change Management Suite. In
1998, we began expanding our focus to include eAsset management. Since 1995, we
have licensed our products to over 500 customers worldwide.

Substantially all revenues have been derived from software licenses or from
related services. Software license revenues are primarily based on the number of
end-user seats and the number of copies of our server products that are licensed
by customers. Customers often obtain an initial license for small groups and may
later purchase additional licenses to cover more users. Software license
transactions generally average less than $100,000, although larger transactions
do occur. We recognize revenues in accordance with the American Institute of
Certified Public Accountants Statement of Position No. 97-2. License revenues
from sales to end users are recognized upon shipment of the product if a signed
contract exists, the fee is fixed and determinable and collection is deemed
probable. If an acceptance period is provided, revenue is recognized upon the
earlier of customer acceptance or the expiration of that period.

Service revenue includes consulting, training and maintenance services. We
recognize consulting and training service revenue when earned and maintenance
revenues ratably over the term of the agreement, generally 12 months. Consulting
and training revenues are dependent upon the number of new software licenses and
the number of employees and consultants available to staff engagements.
Maintenance revenues are also dependent upon new software licenses and the rate
at which existing customers renew their support agreements. The gross margins on
the software licenses are significantly higher than the gross margins achieved
for services. Total gross margins may be lower to the extent that service
revenues increase as a percentage of total revenues.

We market our software and services in North America through a direct sales
organization. Since 1995, we have invested significant financial and management
resources to establish and grow our direct sales and support operations in
France, Germany, the United Kingdom, Ireland and Australia. Our foreign
subsidiaries bill customers and incur expenses in their local currencies, which
are translated into U.S. dollars for financial accounting purposes. Accordingly,
fluctuations in foreign currency exchange rates may cause fluctuations in our
reported operating results. In addition, fluctuations in foreign currency
exchange rates impact the dollar value of foreign currency-denominated accounts
receivable and other assets. We do not currently utilize foreign currency
hedging instruments; however, we believe that hedging may be utilized in the
future to manage risks associated with foreign currency fluctuations. We market
our software through distributors covering: Australia, Denmark, Finland, India,
Italy, Israel, the Netherlands, Norway, Spain and Sweden. The transactions with
our distributors are conducted in U.S. dollars. Total revenues from customers
located outside North America accounted for approximately 48.2% and 41.2% for
the three months ended March 31, 1999 and 2000, respectively.

RESULTS OF OPERATIONS

Software Licenses. Software license revenues were $5.5 million and $4.2 million
for the three months ended March 31, 2000 and 1999, respectively. This
represents an increase of 30.7%. Software license revenues in North America were
$3.2 million and $2.2 million for the three months ended March 31, 2000 and
1999, respectively. This represents an increase of 45.5%. Software license
revenues from international operations were $2.3 million and $2.0 million for
the three months ended March 31, 2000 and 1999, respectively. This represents an
increase of 15%. The increases in both North American and international sales
are a result of increased sales volume primarily due to increased sales to
Internet-related customers. These customers consist of relatively new
Internet-centric businesses as well as Internet and e-commerce operations within
global 1000 class businesses.


                                       9.
<PAGE>   10

Services. Service revenues were $4.4 million and $4.1 million for the three
months ended March 31, 2000 and 1999, respectively. This represents an increase
of 9.0%. The increase was primarily due to increased orders for maintenance
services from new and existing customers.

Cost of Software Licenses. The cost of software license revenues includes both
the royalty costs associated with third-party software, which is embedded in our
products and the costs associated with product documentation, packaging and
shipping. The cost of software license revenues was $304,000 and $156,000 for
the three months ended March 31, 2000 and 1999, respectively. This represents an
increase of 94.9%. The increase was primarily due to higher royalty costs
associated with third party software. Gross margins on software licenses were
94.4% and 96.3% for the three months ended March 31, 2000 and 1999,
respectively.

Cost of Services. The cost of service revenues consists primarily of salaries
and related expenses for consultants and technical support personnel. The cost
of service revenues were $2.6 million and $1.9 million for the three months
ended March 31, 2000 and 1999, respectively. This represents an increase of
35.3%. The increase was primarily due to increases in the size of our
professional services organization worldwide. Gross margins on service revenues
were 40.6% and 52.2% for the three months ended March 31, 2000 and 1999,
respectively. The decrease in gross margins on service revenues was primarily
due to increased utilization of third party consultants as well as decreased
utilization of employees as new employees train to become more productive
in future quarters.

Sales and Marketing. Sales and marketing expenses consist primarily of salaries,
commissions and bonuses earned by sales and marketing personnel, field office
expenses and travel and entertainment and promotional expenses. Sales and
marketing expenses were $5.4 million and $4.1 million for the three months ended
March 31, 2000 and 1999, respectively. This represents an increase of 31.8%. The
higher sales and marketing expense for the period ended March 31, 2000 is due to
an increase in sales personnel expenses, including commissions and compensation,
resulting from new hires, a larger sales force and increased sales. As a
percentage of total revenues, sales and marketing expenses were 54.6% and 49.7%
for the three months ended March 31, 2000 and 1999, respectively.

Research and Development. Research and development expenses consist primarily of
expenses related to software development personnel and other costs associated
with product development. All costs incurred in the research and development of
software products and enhancements to existing software products have been
expensed as incurred. Research and development costs were $1.9 million and $1.2
million for the three months ended March 31, 2000 and 1999, respectively. This
represents an increase of 57.5%. The increase was primarily due to staffing
increases to support the development of new products and the enhancement of
existing products. As a percentage of total revenues, research and development
expenses were 19.6% and 15.0% for the three months ended March 31, 2000 and
1999, respectively.

General and Administrative. General and administrative expenses consist
primarily of salaries, bonuses, payroll taxes and administrative costs,
including legal and accounting fees and bad debts. General and administrative
expenses were $1.2 million and $704,000 for the three months ended March 31,
2000 and 1999, respectively. This represents an increase of 71.9%. The increase
was due to increased personnel expenses, including salaries, bonuses and payroll
taxes resulting from new hires and increased legal and accounting fees and other
costs as a result of being a public company. As a percentage of revenue, general
and administrative expenses were 12.2% and 8.5% for the three months ended March
31, 2000 and 1999, respectively.


                                      10.
<PAGE>   11
Other Compensation Costs and Other Acquisition Related Costs. Other compensation
costs and other acquisition-related costs, including amortization of goodwill
and intangibles was $298,000 and $41,000 for the three months ended March 31,
2000 and 1999, respectively. Compensation costs are related to the grant of
options to purchase shares of common stock at exercise prices below the deemed
value of the company's common stock. These costs were $57,000 and $41,000 for
the three months ended March 31, 2000 and 1999, respectively. Goodwill and
intangible amortization related to acquisitions was $241,000 for the three
months ended March 31, 2000.

Other Expenses, Net. Other expenses consist primarily of interest income,
interest expense and foreign currency translation losses. Other expenses were
$65,000 and $296,000 for the three months ended March 31, 2000 and 1999,
respectively. The decrease for the three month period ended March 31, 2000 was
due to the increased interest income earned on the investment of the net
proceeds of our initial public offering of common stock in August 1999. As a
percentage of total revenues, other expenses were .7% and 3.6% for the three
months ended March 31, 2000 and 1999, respectively.

Income Tax Provision. The income tax provision for the three months ended March
31, 2000 and 1999 were $25,000 and $5,000, respectively.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2000, we had cash and cash equivalents of approximately $11.7
million, an increase of $100,000 from December 31, 1999. Investments in
securities were $3.6 million at March 31, 2000, down from $9.1 million at
December 31, 1999. In July 1999 we received net proceeds of $17.4 million from
our initial public offering. Prior to our initial public offering, we financed
our operations primarily through private placements of our equity securities,
which provided net proceeds totaling $18.4 million as of March 31, 1999. We also
borrowed $6.0 million through the issuance of a senior secured convertible
debenture in 1997. As of March 31, 2000, we had $559,000 outstanding under
capital equipment lease lines of credit and no other outstanding lines of
credit. In addition, we have entered into a $2,000,000 revolving line of credit
with a commercial bank, which expires in April 2001. We currently have not made
any draws on this line of credit.

Our operating activities used cash of $3.3 million for the three months ended
March 31, 2000 and generated cash of $78,000 for the three months ended March
31, 1999. The increase in cash used by operating activities is primarily due to
the increase in net loss. Net cash provided by investing activities was $3.0
million for the three months ended March 31, 2000 and net cash used in investing
activities was $29,000 for the three months ended March 31, 1999. Our financing
activities generated cash of approximately $407,000 in the three months ended
March 31, 2000 and used cash of approximately $144,000 for the three months
ended March 31, 1999.

Expenditures for property and equipment were $1.6 million for the three months
ended March 31, 2000 and $29,000 for the three months ended March 31, 1999. Of
the property acquired during the three months ended March 31, 2000, $567,000 was
related to the new facility costs and the remaining was for computer hardware
and software. Our expenditures for new property and equipment will increase as
we move into our new facilities on May 1, 2000. As of March 31, 2000 the Company
has outstanding the $6.0 million senior secured convertible debt.

We believe that our existing cash balances and cash from operations will be
sufficient to finance our operations through at least the next 12 months.


                                      11.
<PAGE>   12

EUROPEAN MONETARY UNION

Within Europe, the European Economic and Monetary Union introduced a new
currency, the euro, on January 1, 1999. The new currency is in response to the
European Union's policy of economic convergence to harmonize trade policy,
eliminate business costs associated with currency exchange and to promote the
free flow of capital, goods and services.

On January 1, 1999, the participating countries adopted the euro as their local
currency, initially available for currency trading on currency exchanges and
non-cash transactions such as banking. The existing local currencies, or legacy
currencies, will remain legal tender through January 1, 2002. Beginning on
January 1, 2002, euro-denominated bills and coins will be issued for cash
transactions. For a period of up to six months from this date, both legacy
currencies and the euro will be legal tender. On or before July 1, 2002, the
participating countries will withdraw all legacy currencies and exclusively use
the euro.

DISCLOSURE ABOUT FOREIGN CURRENCY RISK

A significant portion of our revenues have been derived from international
sources, with international customers accounting for approximately 45.5% of our
fiscal 1999 revenues and 51.8% fiscal 1998 revenues. We regularly pursue new
customers in various domestic and international locations. Changes in the value
of the U.S. Dollar versus the local currency in which our products are sold,
along with the economic and political conditions of such foreign countries,
could adversely affect our business, financial condition and results of
operations. In addition, the weakening of an international customer's local
currency and banking market may negatively impact such customer's ability to
meet their payment obligations to us. Although we currently believe that our
international customers have the ability to meet all of their obligations to
us, there can be no assurance that they will continue to be able to meet such
obligations. We regularly monitor the credit worthiness of our international
customers and make credit decisions based on both prior sales experience with
such customers as well as current financial performance and overall economic
conditions. We may decide in the future to offer certain foreign customers
extended payment terms.

Our transactions are recorded in both U.S. dollars and foreign currencies.
Future transactions may be recorded in the euro. We have not incurred and do not
expect to incur any significant costs from the continued implementation of the
euro. However, the currency risk of the euro could harm our business.

RISK FACTORS

Our business, financial condition or results of operations could be harmed by
any of the following risks.

OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY

Our quarterly revenues and operating results fluctuate significantly and may
cause the price of our stock to fall. Our revenues and operating results depend
primarily on the volume and timing of customer contracts we receive during a
given quarter and the percentage of each contract we can recognize as revenue
during each quarter. We have often recognized a substantial portion of our
revenues in the last month of a quarter, with a concentration of these revenues
in the last weeks or days of the third month. A delay in an anticipated sale
near the end of a quarter can seriously harm our operating results for that
quarter. Accordingly, our operating results may be below the expectations of
analysts and investors. In this event, the price of our common stock will likely
fall.

Our expense levels are relatively fixed in the short term and are based, in
part, on our expectations of our future revenues. As a result, any delay in
generating or recognizing revenues could cause significant variations in our
operating results from quarter to quarter and could result in increased
operating losses.

SEASONAL TRENDS IN SALES OF OUR SOFTWARE PRODUCTS MAY AFFECT OUR QUARTERLY
OPERATING RESULTS

We have experienced and expect to continue to experience seasonality in sales of
our software products. These seasonal trends materially affect our
quarter-to-quarter operating results. We may experience weaker demand for our
products and services in our third quarter each year, particularly in
international markets, as a result of reduced sales activities during the summer
months. As a result of customer buying patterns, we may also realize lower
revenues in the first quarter of each year than in the preceding fourth quarter.


                                      12.
<PAGE>   13


WE MAY INCUR FUTURE LOSSES

We may not be able to achieve profitability. We incurred a net loss of $1.9
million for the three months ended March 31, 2000. As of March 31, 2000, we had
an accumulated deficit of $25.1 million. We expect to continue to increase our
sales and marketing, product development and administrative expenses. As a
result, we will need to generate significant additional revenues to achieve
profitability.

Although our revenues have grown in recent quarters, we cannot be certain that
revenue growth will continue or that we will achieve sufficient revenues for
profitability. If we do achieve profitability in any period, we cannot be
certain that we will sustain or increase profitability on a quarterly or annual
basis.

A REDUCTION IN REVENUES FROM THE CONTINUUS CHANGE MANAGEMENT SUITE WOULD HARM
OUR BUSINESS

A decline in the demand for the Continuus Change Management Suite and the
revenues associated with licenses of the Continuus Change Management Suite would
reduce our total revenues and harm our business. We expect that the Continuus
Change Management Suite will continue to account for a substantial portion of
our total revenues for the foreseeable future. The following events may reduce
the demand for the Continuus Change Management Suite:

-       competition from other products;

-       significant flaws in our software products or incompatibility with
        third-party hardware or software products;

-       negative publicity or evaluation; or

-       obsolescence of the hardware platforms or software environments in which
        our systems run.

SINCE OUR FUTURE REVENUES PARTIALLY DEPEND ON OUR NEW INTERNET PRODUCTS, OUR
REVENUES MAY SUFFER IF WE CANNOT SUCCESSFULLY MARKET THESE NEW PRODUCTS

A substantial portion of our revenues in the future may be derived from new
Internet products and related services. A decline in the price of, or demand
for, new Internet products, or our failure to achieve broad market acceptance of
new Internet products, may reduce our revenues.

WE MAY NOT BE ABLE TO RECRUIT AND RETAIN THE PERSONNEL WE NEED TO ACHIEVE
SIGNIFICANT REVENUE GROWTH

We may not be able to recruit and retain the personnel we need to achieve
significant revenue growth. Our future success depends upon our ability to
recruit, train and retain additional sales and technical support personnel. We
sell our products primarily through our direct sales force and we support our
customers with our internal technical support staff. In the past, we have had
difficulty recruiting and retaining qualified personnel, and we cannot guarantee
that we will not experience similar difficulties in the future. Factors that may
affect our ability to recruit and retain personnel include:

-       our ability to effectively manage an expansion of our sales and
        technical support personnel and retain this personnel; and

-       competition for qualified personnel from larger, more established
        companies who have greater financial resources than we do.


                                      13.
<PAGE>   14

In 1996 and 1998, we suffered a material decline in sales growth due to turnover
in our sales force. If we experience turnover in our sales force in the future,
our operating results will suffer. Newly hired sales personnel generally do not
become fully productive until they have worked for at least two quarters.
Because of the time required to recruit new sales personnel and for them to
become fully productive, we cannot quickly and easily expand our sales force in
response to unanticipated events.

THE SALES CYCLE FOR OUR PRODUCTS IS LONG AND MAY HARM OUR OPERATING RESULTS

The period of time between initial customer contact and an actual sales order
may span six months or more. This long sales cycle increases the risk that we
will not forecast our revenue accurately and adjust our expenditures
accordingly. The longer the sales cycle lasts, the more likely a customer is to
decide not to purchase our products or to scale down its order of our products
for various reasons, including:

-       changes in our customers' budgets and purchasing priorities;

-       actions by competitors, including introduction of new products and price
        reductions; and

-       diversion of resources and management's attention to other information
        technology issues.

In addition, we often must provide a significant level of education to our
prospective customers regarding the use and benefit of our products, which may
cause additional delays during the evaluation process.

IF WE DO NOT CONTINUE TO RECEIVE REPEAT BUSINESS FROM EXISTING CUSTOMERS, OUR
REVENUE WILL SUFFER

In the three months ended March 31, 2000, we generated approximately 52% of our
software license revenues from repeat business from existing customers. If we
fail to generate repeat and expanded business from our customers, our revenues
will suffer. Our ability to generate repeat business from current customers
depends on many factors. Most of our current customers initially purchase a
limited number of licenses as they implement and adopt our products. Even if the
customer successfully uses our products, customers may not purchase additional
licenses to expand the use of our products. Purchases of expanded licenses by
these customers will depend on their success in deploying our products, their
satisfaction with our products and support services and their perception of
competitive alternatives. A customer's decision whether to widely deploy our
products and purchase additional licenses may also be affected by factors that
are outside of our control or which are not related to our products or services.
In addition, as we deploy new versions of our products or introduce new product
suites, our current customers may not require the functionality of our new
products and may not ultimately license these products.

INTENSE COMPETITION MAY CAUSE US TO REDUCE PRICES OR LOSE CUSTOMERS

The markets for integrated Internet and enterprise software asset management
solutions are intensely competitive, subject to rapid change and sensitive to
new product introductions or enhancements and marketing efforts by industry
participants. We expect to experience significant and increasing levels of
competition in the future. Competition may result in price reductions, reduced
margins or loss of customers which in turn could harm our profitability.

Many of our existing competitors, as well as a number of potential competitors,
have larger technical staffs, more established and larger marketing and sales
organizations, and significantly greater financial resources than we do.
Moreover, we have limited proprietary barriers to entry that could keep our
competitors from developing similar products or selling competing products in
our markets. We may not



                                      14.
<PAGE>   15

be able to maintain our competitive position against current or future
competitors, especially those with greater resources.

IF THE EMERGING MARKET FOR EASSET MANAGEMENT SOLUTIONS DOES NOT DEVELOP AS WE
ANTICIPATE, OUR REVENUES MAY SUFFER

We are expanding beyond our traditional software change management solution to
provide our customers with eAsset management, which provides a more
comprehensive, integrated solution to support broader needs. Potential customers
may not fully appreciate the value of our comprehensive and integrated eAsset
management solution as compared to traditional change management software. As a
result, the eAsset management market generally may not develop and continue or
grow as we anticipate. Any failure of this market to develop or grow would harm
our revenues.


CHANGES IN INTERNET TECHNOLOGY AND STANDARDS MAY IMPEDE MARKET ACCEPTANCE OF OUR
INTERNET PRODUCTS

Rapidly changing Internet technology and standards may impede market acceptance
of new Internet products. The success of Internet products will require us to
develop and introduce new technologies and product suites and to offer
functionality that we do not currently provide. New Internet products have been
designed and the full eAsset management solution will be designed based upon
prevailing Internet technology. If Internet technologies emerge that are
incompatible with new Internet products we develop, our products may become
obsolete and existing and potential new customers may seek alternatives to them.
We may not be able to quickly adapt our products to new Internet technology.

THE COSTS ASSOCIATED WITH OUR INTERNATIONAL OPERATIONS MAY NEGATIVELY IMPACT OUR
OPERATING MARGINS

During the three months ended March 31, 2000, we derived approximately 41% from
sales outside North America, principally in Europe. Our international operations
require and will continue to require significant management attention and
financial resources. If we fail to expand international sales in a timely and
cost-effective manner, our operating margins will decrease. We believe that our
growth and profitability will depend in part on additional expansion of sales in
foreign markets.

IF WE CANNOT MANAGE THE ADDITIONAL CHALLENGES PRESENTED BY OUR INTERNATIONAL
OPERATIONS, OUR REVENUES AND PROFITABILITY MAY SUFFER

We face additional challenges from our continued operations in foreign
countries. Our revenues and profitability could suffer if we cannot manage these
challenges, which include:

-       longer payment cycles;

-       difficulties in staffing and managing foreign operations;

-       increased sales and marketing and research and development expenses;

-       costs and risks of relying upon distributors;

-       various and changing regulatory requirements;

                                      15.
<PAGE>   16

-       export restrictions and availability of export licenses;

-       tariffs and other trade barriers;

-       political and economic instability; and

-       potentially adverse tax laws.

Foreign laws also govern a certain number of our customer purchase agreements,
which may differ significantly from U.S. laws. Therefore, we may be limited in
our ability to enforce our rights under foreign agreements and to collect
payments should any customer refuse to pay us.

FLUCTUATIONS IN THE VALUE OF FOREIGN CURRENCIES COULD RESULT IN CURRENCY
TRANSACTION LOSSES

Our international customers pay us in their local currencies. For the three
months ended March 31, 2000, we derived approximately 36% of our revenues in
foreign local currencies. Consequently, any gains and losses on the conversion
to U.S. dollars of accounts receivable and accounts payable arising from
international operations may contribute to fluctuations in our operating
results. Although we may utilize some hedging in the future, we currently do not
utilize foreign currency hedging instruments. Historically foreign currency
gains and losses have not been material to our financial performance. We cannot
guarantee that fluctuations in currency rates will not harm our business,
operating results and financial condition in the future.

FAILURE TO MANAGE OUR GROWING OPERATIONS COULD INCREASE COSTS AND CAUSE DELAYS
IN MEETING OUR BUSINESS OBJECTIVES

We plan to increase business opportunities through an expansion of our
distribution network in the United States and internationally. However, we
cannot guarantee that the efforts and funds directed towards expanding our
distribution network will succeed. Our failure to implement new operational and
financial control systems to accommodate growth could increase costs and cause
delays in meeting our objectives. Any future growth will also depend on, among
other things, our ability to gain market acceptance for our products in new
geographic areas and to monitor and control the additional costs and expenses
associated with expansion. We cannot guarantee that we can successfully manage
these aspects of our business.

Any business opportunities will increase demands on our systems and controls. To
deal with these concerns, we will need to implement a variety of new and
upgraded operational and financial systems, procedures and controls and to hire
additional administrative personnel. We cannot be sure that we can complete the
implementation of these systems, procedures and controls or hire needed
personnel in a timely manner.

OUR PRODUCTS MAY BECOME OBSOLETE AND UNMARKETABLE

The introduction of products utilizing new technologies and the emergence of new
industry standards could render our existing products and products currently
under development obsolete and unmarketable.

The following factors characterize the markets for our products:

-       rapid technological advances;

-       evolving industry standards;


                                      16.
<PAGE>   17

-       changes in end-user requirements; and

-       frequent new product introductions and enhancements.

As a result, our future success depends upon our ability to enhance our current
products and successfully develop, introduce and sell new products that
incorporate new technology and respond to evolving end-user requirements. Any
failure to anticipate or adequately respond to technological developments or
end-user requirements, any significant delays developing or introducing new
products, or any failure of new products or features to provide the benefits
expected or to achieve market acceptance could damage our competitive position
in the marketplace and reduce revenues. We cannot guarantee that we will succeed
in developing and marketing new products or enhancements on a timely basis or
that we will not experience significant delays in the future.

SIGNIFICANT LIABILITY CLAIMS FROM OUR CUSTOMERS COULD REDUCE OUR REVENUES,
INCREASE OUR COSTS AND DELAY MARKET ACCEPTANCE OF OUR PRODUCTS

Because our software products are complex, they often contain errors or "bugs"
that can be detected at any point in a product's life cycle. These defects are
most frequently found during the period immediately following the introduction
of new products or enhancements to existing products and may be discovered in
the future. Software defects discovered after we ship our products could result
in loss of revenues or delays in market acceptance. Although we do from time to
time incur costs in correcting software defects, to date, no errors in our
software products have materially affected our results of operations. Because we
rely on our own products in connection with developing our software, any
software errors or defects could make it more difficult for us to develop
software in the future.

We typically design our customer license agreements to contain provisions which
limit our exposure to potential product liability claims. Specifically, in
agreements with our customers we attempt to limit our liability for special and
indirect damages, as well as damages related to the loss of data, revenue or
profits. We also attempt to limit our liability to the contract price or the
replacement cost of the software. However, we cannot guarantee that contractual
limitations of liability would be enforceable or would otherwise protect us from
liability for damages to a customer resulting from a defect in one of our
products, or associated with the professional services we render. Although we
maintain insurance which covers damages arising from the implementation and use
of our products, we are not certain that our insurance would cover or be
sufficient to cover any product liability claims against us. Moreover, we incur
risks of professional and other liability stemming from our training and
consulting services. Any product liability or other claims against us, if
successful and of sufficient magnitude, could harm our profitability and future
sales.

FUTURE ACQUISITIONS MAY DECREASE OUR PROFIT MARGINS BY CONSUMING RESOURCES

Acquisitions can be expensive and time-consuming transactions. If we acquire
businesses or technologies in future acquisitions, our resources may be diverted
to completing the acquisitions and assimilating the acquired businesses or
technologies. Our profit margins could be negatively affected by this
consumption of resources.

THE VALUE OF AN ACQUIRED BUSINESS OR TECHNOLOGY MAY DIMINISH FOLLOWING AN
ACQUISITION

We do not have significant experience at evaluating or completing acquisitions.
If the value of a business or technology we acquire diminishes following an
acquisition, our profitability could be harmed. The following occurrences may
cause the value to diminish:


                                      17.
<PAGE>   18

-       we might lose the key employees and customers of an acquired business;

-       the technology acquired may prove to be unproductive or may infringe on
        the rights of another;

-       a newly-acquired business may not perform as well as we expected; and

-       we may assume unknown liabilities.

OUR STOCK PRICE IS VOLATILE

The stock market in general, and the Nasdaq National Market and the stock of
software companies in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to a company's
operating performance. The trading prices of many software companies' stocks are
at or near historical highs and these trading prices and multiples are
substantially above historical levels. The trading price of our common stock has
also fluctuated and may continue to fluctuate in response to factors described
elsewhere in this report and due to:

-       general market conditions;

-       announcements of technological innovations or new products;

-       publicity regarding actual or potential results with respect to
        technologies or products under development;

-       changes in recommendations of securities analysts; and

-       other events or factors, many of which are beyond our control.

These broad market and industry factors may reduce our stock price, regardless
of our actual operating performance.

WE MAY BE SUBJECT TO LITIGATION DUE TO THE VOLATILITY OF OUR STOCK PRICE

In the past, following periods of volatility in the market price of a company's
securities, securities class-action litigation has often been instituted against
volatile companies. Securities class-action litigation, if instituted, could
result in substantial costs and a diversion of management's attention and
resources, which would harm our profitability.

SUBSTANTIAL FUTURE SALES OF OUR COMMON STOCK IN THE PUBLIC MARKET COULD CAUSE
OUR STOCK PRICE TO FALL

If our stockholders sell substantial amounts of our common stock in the public,
the market price of our common stock could fall. Such sales also might make it
more difficult for us to sell equity or equity-related securities in the future
at a time and price that we deem appropriate.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

Our financial instruments include cash and long-term debt. At March 31, 2000,
the carrying values of our financial instruments approximated their fair values
based on current market prices and our incremental borrowing rate.

We currently do not have any material debt with variable interest rates, so we
do not have interest rate risk from a liability perspective. We do have cash and
cash equivalents and short-term investments. This cash portfolio exposes us to
interest rate risk as short-term investment rates can be volatile. Given the
short-term maturity structure of our investment portfolio, and the high-grade
investment quality of our portfolio, we believe that we are not subject to
principal fluctuations and the effective interest rate of our portfolio tracks
closely to various short-term money market interest rate benchmarks.

                                      18.
<PAGE>   19

We have not invested in derivative financial instruments. We have foreign
currency exposure since we transact business in foreign currencies. However,
foreign currency translation and transaction gains and losses have not been
significant. A significant change in foreign currency values could harm our
financial position and results of operations.


PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        A)     EXHIBITS:

               27.1   Financial Data Schedule

        B)     REPORTS ON FORM 8-K:

               None



                                      19.
<PAGE>   20
                                   SIGNATURES

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


                               CONTINUUS SOFTWARE CORPORATION


Date:   May 15, 2000           By: /s/ John R. Wark
                                   --------------------------------------------
                                   John R. Wark
                                   President, Chief Executive Officer
                                   and Chairman of the Board of Directors
                                   (Principal Executive Officer)



Date:   May 15, 2000           By: /s/ Steven L. Johnson
                                   --------------------------------------------
                                   Steven L. Johnson
                                   Vice President, Finance, Chief
                                   Financial Officer and Secretary
                                   (Principal Financial and Accounting Officer)


                                      20.