<PAGE>   1
                       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 JUNE 30, 2001.

[ ] 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 1-10139

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

                DELAWARE                                      04-2911320
     (State or other jurisdiction of                       (I.R.S. Employer
     incorporation or organization)                       Identification No.)


                       52 SECOND AVENUE WALTHAM, MA 02451
               (Address of principal executive offices) (Zip Code)

                                 (781) 890-1700
                         (Registrant's Telephone Number)

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 other shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days [X] Yes No [ ]

As of August 6, 2001 there were 31,196,903 shares of Common Stock outstanding,
exclusive of Treasury stock.


<PAGE>   2



                                    FORM 10-Q

                                QUARTERLY REPORT

                                TABLE OF CONTENTS


Facing Sheet..............................................................    1

Table of Contents.........................................................    2

PART I. FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

         Consolidated Balance Sheets as of December 31, 2000 and
           June 30, 2001..................................................    3

         Consolidated Statements of Operations for the three months
           ended June 30, 2000 and 2001...................................    4

         Consolidated Statements of Operations for the six months
           ended June 30, 2000 and 2001...................................    5

         Consolidated Statements of Cash Flows for the six months
           ended June 30, 2000 and 2001...................................    6

         Notes to Consolidated Financial Statements.......................    7

Item 2.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations......................................    9

Item 3. Quantitative and Qualitative Disclosures About Market Risk........   19

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings................................................   20

Item 2.  Changes in Securities............................................   20

Item 3.  Defaults upon Senior Securities..................................   20

Item 4.  Submission of Matters to a Vote of Security Holders..............   20

Item 5.  Other Information................................................   20

Item 6.  Exhibits.........................................................   20

SIGNATURES................................................................   20


                                       2
<PAGE>   3

                         PART I. - FINANCIAL INFORMATION

                                 NETEGRITY, INC.
                           CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                    DECEMBER 31,      JUNE 30,
                                                       2000             2001
                                                                    (UNAUDITED)
                                                     ---------       ---------
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents ...................      $ 115,747       $ 112,333
  Accounts receivable-trade, net of allowances
   of $951 and $1,383 at December 31, 2000
   and June 30, 2001, respectively.............         15,758          21,408
  Prepaid expenses and other current assets ...          1,305           1,839
                                                     ---------       ---------
     Total current assets .....................        132,810         135,580
Property and equipment, net ...................          4,528           7,335
Long-term marketable securities................             --          10,640
Restricted cash ...............................            942             620
Other assets ..................................             99             157
                                                     ---------       ---------
     Total Assets .............................      $ 138,379       $ 154,332
                                                     =========       =========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Accounts payable-trade ......................          1,698           1,394
  Accrued compensation and benefits ...........          7,695           6,028
  Other accrued expenses ......................          2,608           4,965
  Deferred revenue ............................          8,479          11,243
                                                     ---------       ---------
     Total Current Liabilities ................         20,480          23,630

STOCKHOLDERS' EQUITY:
  Common stock, voting, $.01 par value;
    55,000 shares authorized; 30,184 shares
    issued and 30,147 shares outstanding at
    December  31, 2000; 31,170 shares issued
    and 31,132 outstanding at June 30, 2001 ...            302             312

  Additional paid-in capital ..................        139,886         146,128
  Accumulated other comprehensive income.......             --             101
  Accumulated deficit .........................        (22,075)        (15,625)
  Loan to officer .............................           (130)           (130)
                                                     ---------       ---------
                                                       117,983         130,786
Less -- Treasury stock, at cost: 38 shares ....            (84)            (84)
                                                     ---------       ---------
     Total Stockholders' Equity ...............        117,899         130,702
                                                     ---------       ---------
     Total Liabilities and Stockholders' Equity      $ 138,379       $ 154,332
                                                     =========       =========

               The accompanying notes are an integral part of the
                       consolidated financial statements.



                                       3
<PAGE>   4




                                 NETEGRITY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                 FOR THE THREE MONTHS ENDED JUNE 30,
                                                       2000           2001
                                                     --------       --------
<S>                                                  <C>            <C>
Revenues:
  SiteMinder software .........................      $  6,848       $ 16,054
  SiteMinder services .........................         2,699          7,913
  Other .......................................           949            793
                                                     --------       --------
  Total revenues ..............................        10,496         24,760
Cost of SiteMinder software ...................           483            482
Cost of SiteMinder services ...................         1,562          3,767
Cost of other .................................           606            447
                                                     --------       --------
  Total cost of revenues ......................         2,651          4,696
                                                     --------       --------
Gross profit ..................................         7,845         20,064
Selling, general and administrative
expenses.......................................         7,405         13,893
Research and development costs ................         1,862          4,053
                                                     --------       --------

Income (loss) from operations .................        (1,422)         2,118
Interest income ...............................         1,316          1,275
                                                     --------       --------
Income (loss) before provision for income taxes      $   (106)      $  3,393
Provision for income taxes ....................            --            292
                                                     --------       --------
Net income (loss) .............................      $   (106)      $  3,101
                                                     ========       ========
Net income (loss) per share attributable to
common stockholders:
  Basic .......................................      $   0.00       $   0.10
  Diluted .....................................      $   0.00       $   0.09
Weighted average shares outstanding:
  Basic .......................................        29,147         30,914
  Diluted .....................................        29,147         32,962
</TABLE>

               The accompanying notes are an integral part of the
                       consolidated financial statements.


                                       4
<PAGE>   5


                                 NETEGRITY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>

                                                  FOR THE SIX MONTHS ENDED JUNE 30,
                                                       2000           2001
                                                     --------       --------
<S>                                                  <C>             <C>
Revenues:
  SiteMinder software .........................      $ 11,611       $ 34,826
  SiteMinder services .........................         3,952         14,106
  Other .......................................         1,679          1,864
                                                     --------       --------
  Total revenues ..............................        17,242         50,796
Cost of SiteMinder software ...................           833          1,367
Cost of SiteMinder services ...................         2,322          7,648
Cost of other .................................           984          1,148
                                                     --------       --------
  Total cost of revenues ......................         4,139         10,163
                                                     --------       --------
Gross profit ..................................        13,103         40,633
Selling, general and administrative
 expenses......................................        13,328         28,342
Research and development costs ................         3,348          8,008
                                                     --------       --------

Income (loss) from operations .................        (3,573)         4,283
Interest income ...............................         2,532          2,774
                                                     --------       --------
Income (loss) before provision for income taxes      $ (1,041)      $  7,057
Provision for income taxes ....................            --            607
                                                     --------       --------
Net income (loss) .............................      $ (1,041)      $  6,450
                                                     ========       ========
Net income (loss) per share attributable to
common stockholders:
  Basic .......................................      $  (0.04)      $   0.21
  Diluted .....................................      $  (0.04)      $   0.19
Weighted average shares outstanding:
  Basic .......................................        28,187         30,670
  Diluted .....................................        28,187         33,124

</TABLE>

                                      5
<PAGE>   6

                                 NETEGRITY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                    FOR THE SIX MONTHS ENDED JUNE 30,
                                                         2000           2001
                                                      ----------      ---------
<S>                                                   <C>             <C>
OPERATING ACTIVITIES:
Net income (loss) ..............................      $  (1,041)      $   6,450
Adjustments to reconcile net loss to net cash
 provided by (used for) operating activities:
   Depreciation and amortization ...............            382           1,186
   Provision for doubtful accounts receivable ..            350             432
   Compensation expense related to warrant .....            292              --
 Changes in operating assets and liabilities:
   Accounts receivable .........................         (4,283)         (6,082)
   Prepaid expenses and other current assets ...           (545)           (534)
   Other assets ................................            (47)            (58)
   Accounts payable-trade ......................           (118)           (304)
   Accrued compensation and benefits ...........          3,340          (1,667)
   Other accrued expenses ......................            517           2,357
   Deferred revenue ............................          4,214           2,764
                                                      ---------       ---------
Net cash provided by (used for) operating
 activities.....................................          3,061           4,544
                                                      ---------       ---------

INVESTING ACTIVITIES:
Restricted cash.................................           (943)            322
Purchases of property and equipment.............         (1,982)         (3,987)
Purchases of marketable securities..............             --         (10,640)
                                                      ---------       ---------
Net cash used for investing activities .........         (2,925)        (14,305)
                                                      ---------       ---------

FINANCING ACTIVITIES:
Issuance of common stock under stock plans .....          4,959           6,252
                                                      ---------       ---------
Net cash provided by financing activities ......          4,959           6,252
Effect of exchange rate changes on cash and
cash equivalents................................             --              95
                                                      ---------       ---------
Net change in cash and cash equivalents ........          5,095          (3,414)
Cash and cash equivalents at beginning of period        102,879         115,747
                                                      ---------       ---------
Cash and cash equivalents at end of period .....      $ 107,974       $ 112,333
                                                      =========       =========
</TABLE>

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


                                       6
<PAGE>   7




                                 NETEGRITY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - The unaudited financial information furnished herein reflects all
adjustments which are of a normal recurring nature, which in the opinion of
management are necessary to fairly state the Company's financial position, cash
flows and results of operations for the periods presented. Certain information
and footnote disclosure normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. This information should be read in conjunction with the Company's
audited financial statements for the fiscal year ended December 31, 2000,
included in Form 10-K filed on February 28, 2001.

The results of operations for the six months ended June 30, 2001 are not
necessarily indicative of the results to be expected for the remainder of the
year ending December 31, 2001.

NOTE 2 - Cash equivalents are stated at cost plus accrued interest, which
approximates market value, and have maturities of three months or less at the
date of purchase.

Marketable securities are classified as held-to-maturity, as the Company has the
intent and ability to hold to maturity. Marketable securities are reported at
amortized cost. Cash equivalents and marketable securities are invested in
high-quality credit instruments, primarily U.S. Government obligations and
corporate obligations. As of June 30, 2001, the Company's marketable securities
have remaining contractual maturities ranging from 485 to 654 days.

NOTE 3 - The Company's revenues are primarily generated from the sale of its
proprietary SiteMinder products and services and from licensing the rights to
use software products developed by Checkpoint Software Technologies, Ltd. to end
users and resellers. The Company generates its services revenue from consulting
and training services performed for customers and from support (i.e.,
maintenance). Revenues from software license agreements are recognized upon
contract execution, provided all shipment obligations have been met, fees are
fixed or determinable and collection is reasonably assured. The Company does not
offer a right of return on its products. Revenues may include multiple software
products and services sold together; these are allocated to each element based
on the residual method in accordance with Statement of Position No. 98-9,
SOFTWARE REVENUE RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS. Under the
residual method, the fair value of the undelivered elements is deferred and
subsequently recognized when earned. The Company has established sufficient
vendor specific objective evidence for professional services, training and
maintenance and support services. Accordingly, software license revenue is
recognized under the residual method in arrangements in which software is
licensed with professional services, training and maintenance and support
services. Revenues for maintenance are recognized ratably over the term of the
support period. Revenues from consulting and training services are recognized as
the services are performed.

NOTE 4 - Basic net income (loss) per share is computed using the weighted
average number of shares of common stock outstanding. Diluted Earnings Per Share
(EPS) is based upon the weighted average number of common and common equivalent
shares outstanding during the period.

The following table sets forth basic and diluted income (loss) per share
computational data for the periods presented (in thousands, except per share
data):

                                                     (IN THOUSANDS)
                                            FOR THE THREE MONTHS ENDED JUNE 30,
                                            -----------------------------------
                                                 2000           2001
                                               ---------      --------
Net income (loss) attributable
to common stockholders ..................      $   (106)      $  3,101
                                               --------       --------

Weighted average shares outstanding
used in computing basic net income
(loss) per share ........................        29,147         30,914

Weighted average common equivalent
 shares outstanding:
  employee stock options and warrants ...            --          2,048
                                               --------       --------
Total weighted average common and
     common equivalent shares outstanding
     used in computing diluted net income
     (loss) per share ...................        29,147         32,962
                                               --------       --------
Basic net income (loss) per share .......      $   0.00       $   0.10
                                               ========       ========
Diluted net income (loss) per share .....      $   0.00       $   0.09
                                               ========       ========


                                       7
<PAGE>   8

                                                    (IN THOUSANDS)
                                           FOR THE SIX MONTHS ENDED JUNE 30,
                                           ---------------------------------
                                                 2000           2001
                                               --------       --------
Net income (loss) attributable
to common stockholders ..................      $ (1,041)      $  6,450
                                               --------       --------

Weighted average shares outstanding
used in computing basic net income
(loss) per share ........................        28,187         30,670

Weighted average common equivalent
 shares outstanding:
   employee stock options and warrants ..            --          2,454
                                               --------       --------
Total weighted average common and
     common equivalent shares outstanding
     used in computing diluted net income
     (loss) per share ...................        28,187         33,124
                                               --------       --------
Basic net income (loss) per share .......      $  (0.04)      $   0.21
                                               ========       ========
Diluted net income (loss) per share .....      $  (0.04)      $   0.19
                                               ========       ========

Options to purchase a total of 5.9 million weighted shares outstanding for the
three months ended June 30, 2000 and 6.0 million weighted shares outstanding for
the six months ended June 30, 2000 were outstanding but were not included in the
computation of diluted EPS because the options are anti-dilutive, as the Company
was in a net loss position. Options to purchase 3.3 million weighted shares
outstanding for the three months ended June 30, 2001 and 2.3 million weighted
shares outstanding for the six months ended June 30, 2001 were outstanding but
were not included in the computations of diluted EPS because the exercise price
of the options was greater than the average market price of the common stock for
the period reported.

NOTE 5 - Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources, including foreign currency translation adjustments and
unrealized gains and losses on marketable securities. For the three and six
months ended June 30, 2000, the comprehensive loss does not differ from the
reported loss. For the three and six months ended June 30, 2001, the difference
between the comprehensive income of $3.2 million and $6.6 million, respectively,
and the net income is due to the effect of the Company's cumulative translation
adjustment.

NOTE 6 - In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101") as amended by SAB 101A and SAB 101B. SAB 101 summarizes the staff's
views in applying generally accepted accounting principles to selected revenue
recognition issues. The Company adopted SAB 101 in fiscal year 2000 without a
material impact on it's financial position or results of operations.

NOTE 7 - In July 2001, the FASB issued SFAS No. 141, Business Combinations, and
SFAS No. 142, Goodwill and Other Intangible Assets. Statement No. 141 requires
that all business combinations initiated after June 30, 2001, be accounted for
using the purchase method of accounting. Statement No. 142 discusses how
intangible assets that are acquired should be accounted for in financial
statements upon their acquisition and also how goodwill and other intangible
assets should be accounted for after they have been initially recognized in the
financial statements. Beginning on January 1, 2002, with the adoption of
Statement No. 142, goodwill and certain purchased intangibles existing on June
30, 2001, will no longer be subject to amortization over their estimated useful
life. Rather the goodwill and certain purchased intangibles will be subject to
an assessment for impairment. The provisions of Statement No. 142 are required
to be applied starting with fiscal years beginning after December 15, 2001. The
Company does not anticipate the adoption of these statements to have an impact
on its financial statements.

NOTE 8 - The Company considers that it has the following five reportable
operating segments based on differences in products and services. Operating
segments are defined as components of the enterprise about which separate
financial information is available that is reviewed regularly by the chief
operating decision maker, or decision-making group, in deciding how to allocate
resources and in assessing their performance. The Company evaluates the
performance of each reportable segment based on gross margins. Summarized
financial information is as follows (in thousands):

                                    FOR THE THREE MONTHS ENDED JUNE 30,
                                      2000                      2001
                               --------------------      --------------------
                                            GROSS                     GROSS
                               REVENUE      MARGIN       REVENUE      MARGIN
                               -------      -------      -------      -------
Operating Segments:
SiteMinder software .....      $ 6,848      $ 6,365      $16,054      $15,572
                               -------      -------      -------      -------
SiteMinder services:
  Maintenance ...........          636          636        3,185        2,607
  Training and consulting        2,063          501        4,728        1,539
                               -------      -------      -------      -------
                                 2,699        1,137        7,913        4,146
                               -------      -------      -------      -------
Other
  Software and related
    products ............          558          133          358           86
  Services ..............          391          210          435          260
                               -------      -------      -------      -------
                                   949          343          793          346
                               -------      -------      -------      -------
  Totals ................      $10,496      $ 7,845      $24,760      $20,064
                               =======      =======      =======      =======


                                       8
<PAGE>   9


                                      FOR THE SIX MONTHS ENDED JUNE 30,
                                       2000                      2001
                               --------------------      -------------------
                                GROSS                                  GROSS
                               REVENUE      MARGIN       REVENUE      MARGIN
                               -------      -------      -------      -------
Operating Segments:
SiteMinder software .....      $11,611      $10,778      $34,826      $33,459
                               -------      -------      -------      -------
SiteMinder services:
  Maintenance ...........          961          961        5,832        4,705
  Training and consulting        2,991          669        8,274        1,753
                               -------      -------      -------      -------
                                 3,952        1,630       14,106        6,458
                               -------      -------      -------      -------
Other
  Software and related
    products ............          863          246        1,071          257

  Services ..............          816          449          793          459
                               -------      -------      -------      -------
                                 1,679          695        1,864          716
                               -------      -------      -------      -------
  Totals ................      $17,242      $13,103      $50,796      $40,633
                               =======      =======      =======      =======

NOTE 9 - In July 2000, the Board of Directors approved a three for two stock
split of the Company's common stock in the form of a stock dividend which was
effective September 1, 2000 for all holders of record as of August 18, 2000. All
common share data presented in this 10-Q have been adjusted for the stock split.

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

                  FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

    This report and the documents incorporated in it by reference contain
forward-looking statements about our plans, objectives, expectations and
intentions. You can identify these statements by words such as "expect,"
"anticipate," "intend," "plan," "believe," "seek," "estimate," "may," "will" and
"continue" or similar words. You should read statements that contain these words
carefully. They discuss our future expectations, contain projections of our
future results of operations or our financial condition or state other
forward-looking information, and may involve known and unknown risks over which
we have no control. You should not place undue reliance on forward-looking
statements. We cannot guarantee any future results, levels of activity,
performance or achievements. Moreover, we assume no obligation to update
forward-looking statements or update the reasons actual results could differ
materially from those anticipated in forward-looking statements. The factors
discussed in the sections captioned "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business" in
this report and the documents incorporated in it by reference identify important
factors that may cause our actual results to differ materially from the
expectations we describe in our forward-looking statements.

    This report and the documents incorporated in it by reference contain data
related to the e-commerce market. These market data have been included in
studies published by the market research firms of Forrester Research and
International Data Corporation. These data include projections that are based on
a number of assumptions, including increasing worldwide business use of the
Internet, the growth in the number of web access devices per user, the absence
of any failure of the Internet, and the continued improvement of security on the
Internet. If any of these assumptions is incorrect, actual results may differ
from the projections based on those assumptions.

                                  RISK FACTORS

    The Private Securities Litigation Reform Act of 1995 contains certain safe
harbors regarding forward-looking statements. In that context, the discussion in
this Item contains forward-looking statements which involve certain degrees of
risk and uncertainty, including statements relating to liquidity and capital
resources. Except for the historical information contained herein, the matters
discussed in this section are such forward-looking statements that involve risks
and uncertainties, including:

WE HAVE INCURRED SUBSTANTIAL LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.

    Until recently, we have incurred substantial losses. We cannot predict if
we will remain profitable for any substantial period of time. Failure to
maintain levels of profitability as expected by investors may adversely affect
the market price of our common stock. In the three months ended March 31, 2001,
we had net income of $3.3 million; in the six months ended June 30, 2001, we had
net income of $6.5 million. As a result of historical operating losses, at June
30, 2001, we

                                       9
<PAGE>   10


had an accumulated deficit of $15.6 million. We have continued to invest in all
areas, particularly in research and development and sales and marketing, in
order to execute our business plan. Although we have experienced revenue growth
in connection with SiteMinder in recent periods, the growth has been off of a
small base, and it is unlikely that the recent growth rates are sustainable.

DISAPPOINTING QUARTERLY RESULTS COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK
TO FALL SUBSTANTIALLY.

    Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter. If our quarterly revenues
or operating results fall below the expectations of investors, the price of our
common stock could fall substantially.

    Our quarterly revenues may fluctuate for several reasons, including the
following:

    -   customers choosing to push out their purchase commitment or purchase in
        smaller than expected quantities due to a general slowdown in the
        economy;

    -   market acceptance of our SiteMinder products;

    -   our success in obtaining follow-on sales to existing customers;

    -   the long sales and deployment cycle of SiteMinder;

    -   our ability to hire and retain personnel, particularly in development,
        services and sales and marketing;

    -   the release of new versions of SiteMinder or other products; and

    -   the development of our direct and indirect sales channels.

    In addition, because our revenues from services are largely correlated with
our SiteMinder software revenues, a decline in SiteMinder software revenues
could also cause a decline in our SiteMinder services revenues in the same
quarter or in subsequent quarters. Other factors, many of which are outside our
control, could also cause variations in our quarterly revenues and operating
results.

    Most of our expenses, such as employee compensation and rent, are relatively
fixed. Moreover, our expense levels are based, in part, on our expectations
regarding future revenue increases. As a result, any shortfall in revenues in
relation to our expectations could cause significant changes in our operating
results from quarter to quarter and could result in future losses.

OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO MARKET SITEMINDER AND RELATED
SERVICES SUCCESSFULLY.

    The sale of SiteMinder licenses and related services provides a substantial
majority of our total revenues. These sales accounted for 96% of our total
revenues for the six months ended June 30, 2001. We expect that our future
financial performance will depend on SiteMinder sales. Prior to the release of
SiteMinder 3.0 in June 1998, there had been very few commercial installations of
SiteMinder. Since June 1998, commercial deployments of SiteMinder have grown to
include not only business-to-business, e-business applications, but large
intranet and multi-million user business-to-consumer deployments, as well. Broad
market acceptance of SiteMinder will depend on the development of the market for
secure portal management, including usage of SiteMinder for business-to-consumer
applications, and customer demand for the specific functionality of SiteMinder.
We cannot be sure that either will occur. Like most technology products at an
early stage of development, SiteMinder may require extensive reengineering or
upgrading if it fails to meet the performance needs or expectations of our
customers when shipped or contains significant software defects or bugs. If we
fail in marketing SiteMinder products and services, for whatever reason, our
business would be harmed.

OUR SUCCESS IS DEPENDENT ON OUR ABILITY TO ENHANCE OUR SITEMINDER PRODUCT LINE
AND DEVELOP NEW PRODUCTS.

    We believe our success is dependent, in large part, on our ability to
enhance and broaden our SiteMinder product line to meet the evolving needs of
both the business-to-business and business-to-consumer market. We cannot be sure
that we will be able to respond

                                       10
<PAGE>   11

effectively to technological changes or new industry standards or developments.
In the past, we have been forced to delay introduction of several new product
versions. In the future, we could be adversely affected if we incur significant
delays or are unsuccessful in enhancing our SiteMinder product line or
developing new products, or if any of our enhancements or new products do not
gain market acceptance.

OUR PERFORMANCE DEPENDS ON OUR ABILITY TO OBTAIN FOLLOW-ON SALES.

    Customers typically place small initial orders for SiteMinder installations
to allow them to evaluate its performance. Our strategy is to pursue more
significant follow-on sales after these initial installations. Our financial
performance depends on successful initial deployments of SiteMinder that, in
turn, lead to follow-on sales. We cannot be sure that initial deployments of
SiteMinder by our customers will be successful, or that we will be able to
obtain follow-on sales.

WE FACE SIGNIFICANT COMPETITION FROM OTHER TECHNOLOGY COMPANIES AND WE MAY NOT
BE ABLE TO COMPETE EFFECTIVELY.

    The market for secure user management products and services is relatively
immature and highly competitive. We expect the level of competition to increase
as a result of the anticipated growth of e-commerce. Until recently, our primary
source of competition was from secure user management software developed
in-house. In addition, we have faced competition from web development
professional services organizations. Today our primary competitors include IBM,
Securant, Entrust, Open Network, Baltimore Technology, Oblix, Novell and many
early-stage companies. In addition, a number of other security and software
companies have indicated that they offer products which may compete with ours.
We expect that additional competitors will emerge in the future. Current and
potential competitors have established, or may in the future establish,
cooperative relationships with third parties to increase the availability of
their products to the marketplace. It is possible that new competitors or
alliances may emerge and rapidly acquire significant market share. Potential
competitors may have significantly greater financial, marketing, technical and
other competitive resources than we have. If, in the future, a competitor
chooses to bundle a competing secure user management product with other
e-commerce applications, the demand for our products might be substantially
reduced. Many of these factors are out of our control, and there can be no
assurance that we can maintain or enhance our competitive position against
current and future competitors.

OUR BUSINESS WILL BE ADVERSELY AFFECTED IF THE INTERNET DOES NOT BECOME A VIABLE
AND SUBSTANTIAL COMMERCIAL MEDIUM.

    Our future success depends heavily on the acceptance and wide use of the
Internet for e-commerce. If e-commerce does not continue to grow or grows more
slowly than expected, significant demand for SiteMinder and related services may
fail to develop. Consumers and businesses may reject the Internet as a viable
commercial medium for a number of reasons, including potentially inadequate
network infrastructure, slow development of enabling technologies, insufficient
commercial support or privacy concerns. In addition, delays in the development
or adoption of new standards and protocols required to handle increased levels
of e-commerce, or increased government regulation or taxation, could cause the
Internet to lose its viability as a commercial medium.

REGULATIONS OR CONSUMER CONCERNS REGARDING THE USE OF "COOKIES" ON THE INTERNET
COULD REDUCE THE FUNCTIONALITY OF SITEMINDER.

                                       11
<PAGE>   12

    SiteMinder uses cookies to support its single sign-on functionality. A
cookie is information keyed to a specific user that is stored on the hard drive
of the user's computer, typically without the user's knowledge. Cookies are
generally removable by the user, and can be refused by the user at the point at
which the information would be stored on the user's hard drive. A number of
governmental bodies and commentators in the United States and abroad have urged
passage of laws limiting or abolishing the use of cookies. The passage of laws
limiting or abolishing the use of cookies, or the widespread deletion or refusal
of cookies by web site users, could reduce or eliminate the effectiveness of
single sign-on and could reduce market demand for SiteMinder.

WE MUST HIRE AND RETAIN SKILLED PERSONNEL IN A TIGHT LABOR MARKET.

    Qualified personnel are in great demand throughout the software industry.
Our success depends, in large part, upon our ability to attract, train, motivate
and retain highly skilled employees, particularly software engineers,
professional services personnel, sales and marketing personnel, and other senior
personnel. Our failure to attract and retain the highly trained technical
personnel that are integral to our product development, professional services
and direct sales teams may limit the rate at which we can generate sales and
develop new products or product enhancements. This could have a material adverse
effect on our business, operating results and financial condition.

OUR SUCCESS DEPENDS ON OUR ABILITY TO DEVELOP OUR DIRECT SALES AND INDIRECT
DISTRIBUTION CHANNELS.

    To increase our revenues, we must develop our direct sales channel and
increase the number of our indirect channel partners. A failure to do so could
have a material adverse effect on our business, operating results and financial
condition. There is intense competition for sales personnel in our business, and
we cannot be sure that we will be successful in attracting, integrating,
motivating and retaining sales personnel. In addition, we must increase the
number of strategic partnerships and other third-party relationships with system
integrators, vendors of Internet-related systems and application software and
resellers. Our existing, or future, channel partners may choose to devote
greater resources to marketing and supporting the products of other companies.
In addition, we will need to resolve potential conflicts among our sales force
and channel partners. If we fail to develop these relationships, our revenue
could suffer.

OUR FAILURE TO EXPAND OUR PROFESSIONAL SERVICES RESOURCES COULD LIMIT THE
SUCCESS OF SITEMINDER.

    Our professional services organization and our system integrators provide
critical support to our customers' installation and deployment of SiteMinder. If
we fail to expand our professional services resources and or adequately develop
our system integrator relationships, our ability to increase sales of SiteMinder
may be limited. In addition, if we cannot adequately support SiteMinder
installations, our customers' use of our products may fail, which could harm our
reputation and hurt our business.

OUR LENGTHY SALES CYCLE MAKES IT DIFFICULT TO PREDICT OUR QUARTERLY OPERATING
RESULTS.

    We have a long sales cycle because we generally need to educate potential
customers regarding the use and benefits of SiteMinder. Our sales cycle varies
depending on the size and type of customer contemplating a purchase and whether
we have conducted business with a potential customer in the past. These
potential customers frequently need to obtain approvals from multiple decision
makers prior to making purchase decisions. Our long sales cycle, which can range
from several weeks to several months or more, makes it difficult to predict the
quarter in which sales will occur. Delays in sales could cause significant
variability in our revenues and operating results for any particular period.

OUR FAILURE TO MANAGE OUR RAPID GROWTH EFFECTIVELY COULD HURT OUR BUSINESS.

    Our failure to manage our rapid growth effectively could have a material
adverse effect on the quality of our products, our ability to retain key
personnel and our business, operating results and financial condition. We have
been experiencing a period of rapid growth that has been placing a significant
strain on all of our resources. From December 31, 2000 to June 30, 2001, the
number of our employees increased from 292 to 417. To manage future growth
effectively we must maintain and enhance our financial and accounting systems
and controls, integrate new personnel and manage expanded operations.

IF WE LOSE THE SERVICES OF BARRY BYCOFF OR ANY OTHER MEMBER OF OUR MANAGEMENT
TEAM, OUR

                                       12
<PAGE>   13


BUSINESS COULD SUFFER.

    Our future success depends, to a significant degree, on the skill,
experience and efforts of Barry Bycoff, our chief executive officer, and the
rest of our management team. The loss of any member of our management team could
have a material adverse effect on our business, operating results and financial
condition. We also depend on the ability of our officers and key employees to
work effectively as a team.

AS WE CONTINUE TO EXPAND OUR INTERNATIONAL OPERATIONS, WE WILL FACE CONTINUED
RISKS TO OUR SUCCESS.

    We intend to continue to expand our international operations in the future.
This expansion will require additional resources and management attention, and
will subject us to increased regulatory, economic and political risks. We have
very little experience in international markets. As a result, we cannot be sure
that our continued expansion into global markets will besuccessful. In addition,
we will face increased risks in doing business internationally. These risks
could reduce demand for our products and services, increase the prices at which
we can sell our products and services, or otherwise have an adverse effect on
our operating results. Among the risks we believe are most likely to affect us
are:

    -    longer decision making cycles

    -    longer payment cycles and problems in collecting accounts receivable;

    -    adverse changes in trade and tax regulations, including restrictions on
         the import and export of sensitive technologies, such as encryption
         technologies, that we use or may wish to use in our software products;

    -    the absence or significant lack of legal protection for intellectual
         property rights;

    -    difficulties in managing an organization spread over several countries,
         including complications arising from cultural, language and time
         differences that may lengthen sales and implementation cycles;

    -    currency risks, including fluctuations in exchange rates; and

    -    political and economic instability.

OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY RIGHTS.

    Our success depends to a significant degree upon the protection of our
software and other proprietary technology. The unauthorized reproduction or
other misappropriation of our proprietary technology could enable third parties
to benefit from our technology without paying us for it. This could have a
material adverse effect on our business, operating results and financial
condition. We depend upon a combination of trademark, trade secret and copyright
laws, license agreements and non-disclosure and other contractual provisions to
protect proprietary and distribution rights in our products. In addition, we
attempt to protect our proprietary information and the proprietary information
of our vendors and partners through confidentiality and/or license agreements
with our employees and others. Although we have taken steps to protect our
proprietary technology, they may be inadequate. Existing trade secret, copyright
and trademark laws offer only limited protection. Moreover, the laws of other
countries in which we market our products may afford little or no effective
protection of our intellectual property. If we resort to legal proceedings to
enforce our intellectual property rights, the proceedings could be burdensome
and expensive, even if we were to prevail.

CLAIMS BY OTHER COMPANIES THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD
HURT OUR FINANCIAL CONDITION.

    If we discover that any of our products violated third party proprietary
rights, there can be no assurance that we would be able to reengineer our
product or to obtain a license on commercially reasonable terms to continue
offering the product without substantial reengineering. We do not conduct
comprehensive patent searches to determine whether the technology used in our
products infringes patents held by third parties. In addition, product
development is inherently uncertain in a rapidly evolving technology environment
in which there may be numerous patent applications pending, many of which are
confidential when filed, with regard to similar technologies. Any claim of
infringement could cause us to incur substantial costs defending against the
claim, even if the claim is invalid, and could distract our management from our
business. Furthermore, a party making such a claim could secure a judgment that
requires us to pay substantial damages. A judgment could also include an
injunction or other court order that could prevent us from

                                       13
<PAGE>   14

selling our products. Any of these events could have a material adverse effect
on our business, operating results and financial condition.

OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR PRODUCTS CONTAIN ERRORS.

    Software products as complex as ours may contain undetected errors or "bugs"
that result in product failures. The occurrence of errors could result in loss
of, or delay in, revenues, loss of market share, failure to achieve market
acceptance, diversion of development resources, injury to our reputation, or
damage to our efforts to build brand awareness, any of which could have a
material adverse effect on our business, operating results and financial
condition.

WE COULD INCUR SUBSTANTIAL COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS
RELATING TO OUR CUSTOMERS' USE OF OUR PRODUCTS.

    Many of the e-commerce applications supported by our products are critical
to the operations of our customers' businesses. Any failure in a customer's web
site or application caused or allegedly caused by our products could result in a
claim for substantial damages against us, regardless of our responsibility for
the failure. Although we maintain general liability insurance, including
coverage for errors and omissions, there can be no assurance that our existing
coverage will continue to be available on reasonable terms or will be available
in amounts sufficient to cover one or more large claims, or that the insurer
will not disclaim coverage as to any future claim.

IF WE ACQUIRE OTHER COMPANIES OR BUSINESSES, WE WILL BE SUBJECT TO RISKS THAT
COULD HURT OUR COMPANY.

    In the future, we may pursue acquisitions to obtain complementary products,
services and technologies. An acquisition may not produce the revenues, earnings
or business synergies that we anticipated, and an acquired product, service or
technology might not perform as we expected. If we pursue any acquisition, our
management could spend a significant amount of time and effort in identifying
and completing the acquisition. If we complete an acquisition, we would probably
have to devote a significant amount of management resources to integrate the
acquired business with our existing business.

    To pay for an acquisition, we might use our stock or cash. Alternatively, we
might borrow money from a bank or other lender. If we use our stock, our
stockholders would experience dilution of their ownership interests. If we use
cash or debt financing, our financial liquidity will be reduced.

THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN AND MAY CONTINUE TO BE VOLATILE.

    Our stock price, like that of other technology companies, has been extremely
volatile. The announcement of new products, services, technological innovations
or distribution partners by us or our competitors, quarterly variations in our
operating results, changes in revenues or earnings estimates by securities
analysts and speculation in the press or investment community are among the
factors affecting our stock price.

    The stock market in general, and the market prices for Internet-related
companies in particular, have experienced extreme volatility that often has been
unrelated to the operating performance of these companies. These broad market
and industry fluctuations may adversely affect the market price of our common
stock, regardless of our operating performance. Recently, when the market price
of a stock has been volatile, holders of that stock have often instituted
securities class action litigation against the company that issued the stock. If
any of our stockholders brought a lawsuit against us, we could incur substantial
costs defending the lawsuit. The lawsuit could also divert the time and
attention of our management.

WE MAY LOSE MONEY ON FIXED-PRICE CONSULTING CONTRACTS.

    In the future, an increased portion of our SiteMinder services revenues may
be derived from fixed-price contracts. We work with complex technologies in
compressed time frames and it can be difficult to judge the time and resources
necessary to complete a project. If we miscalculate the resources or time we
need to complete work under fixed-price contracts, our operating results could
be materially harmed.

CERTAIN PROVISIONS OF OUR CHARTER AND OF DELAWARE LAW MAKE A TAKEOVER OF OUR
COMPANY MORE

                                       14
<PAGE>   15

DIFFICULT.

    Our corporate documents and Delaware law contain provisions that might
enable our management to resist a takeover of our company. These provisions
might discourage, delay or prevent a change in the control of Netegrity or a
change in our management. These provisions could also discourage proxy contests
and make it more difficult for you and other stockholders to elect directors and
take other corporate actions. The existence of these provisions could limit the
price that investors might be willing to pay in the future for shares of our
common stock.

RESULTS OF OPERATIONS

The following information should be read in conjunction with the consolidated
financial statements and notes thereto:

<TABLE>
<CAPTION>

                                                  % OF TOTAL REVENUES        PERIOD TO PERIOD %
                                              -------------------------      INCREASE (DECREASE)
                                                                             THREE MONTHS ENDED
        FOR THE THREE MONTHS                                                     JUNE 30,
        ENDED JUNE 30, 2001                     2000             2001          2000 VS. 2001
        --------------------                  -------           -------      ------------------
<S>                                           <C>               <C>              <C>
Revenues:
  SiteMinder software ..............              65%               65%             134%
  SiteMinder services ..............              26                32              193
  Other ............................               9                 3              (16)
                                              ------            ------           ------
     Total revenues ................             100               100              136
                                              ------            ------           ------
Cost of Revenues:
  Cost of SiteMinder software ......               5                 2               --
  Cost of SiteMinder services ......              14                15              141
  Cost of other ....................               6                 2              (26)
                                              ------            ------           ------
     Total cost of revenues ........              25                19               77
                                              ------            ------           ------
Gross profit .......................              75                81              156

Selling, general and administrative
expenses (including non-cash stock
compensation of 1% and 0% of revenue
for the three months ended June 30,
2000 and 2001, respectively ........              71                56               88

Research and development costs .....              18                16              118
                                              ------            ------           ------
Income (loss) from operations ......             (14)                9              249

Interest income ....................              13                 5               (3)
                                              ------            ------           ------
Income (loss) before provision for
income taxes .......................              (1)               14            3,301
                                              ------            ------           ------
Provision for income taxes .........              --                 1              N/A
                                              ------            ------           ------

Net income (loss) ..................              (1)%              13%           3,025%
                                              ======            ======           ======
</TABLE>

    Revenues. Total revenues increased by $14.3 million, or 136%, to $24.8
million in the three months ended June 30, 2001, from $10.5 million in the three
months ended June 30, 2000.

    SiteMinder software revenues increased by $9.2 million, or 134%, to $16.1
million in the three months ended June 30, 2001, from $6.8 million in the three
months ended June 30, 2000. This increase is due to the continued increase in
market awareness and the acceptance of the SiteMinder product and expansion of
our sales organization.

    SiteMinder services revenues increased by $5.2 million, or 193%, to $7.9
million in the three months ended June 30, 2001, from $2.7 million in the three
months ended June 30, 2000. This increase reflects the continued growth in the
installed base of SiteMinder software licenses and the increasing demand to
provide installation and integration services for customers.

    Other revenues decreased by $156,000, or 16%, to $793,000 in the three
months ended June 30, 2001, from $949,000 in the three months ended June 30,
2000.

    Cost of revenues. Total cost of revenue increased by $2.0 million or 77%, to
$4.7 million in three months ended June 30, 2001,

                                       15
<PAGE>   16

from $2.7 million in the three months ended June 30, 2000.

    Cost of SiteMinder software decreased by $1,000 to $482,000 in the three
months ended June 30, 2001 from $483,000 in the three months ended June 30,
2000. This variance is primarily due to the proportional increase in software
revenues for the same period offset by lower proportional royalty and production
costs.

    Cost of SiteMinder services increased by $2.2 million or 141%, to $3.8
million in the three months ended June 30, 2001 from $1.6 million in the three
months ended June 30, 2000. The increase is primarily due to growth in personnel
related expenses for our consulting and education organizations as a result of
increased SiteMinder service revenues.

    Cost of other decreased by $159,000 or 26%, to $447,000 in the three months
ended June 30, 2001 from $606,000 in the three months ended June 30, 2000. This
decrease is primarily due to the proportional decrease in other revenues for the
same period, coupled with lower costs associated with reselling third party
products.

    Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $6.5 million, or 88%, to $13.9 million in
the three months ended June 30, 2001, from $7.4 million in the three months
ended June 30, 2000. This increase is primarily a result of our continuing to
build our sales and marketing infrastructure to support planned growth in sales
of our SiteMinder product and services.

    Research and development costs. Research and development costs increased by
$2.2 million, or 118%, to $4.1 million in the three months ended June 30, 2001,
from $1.9 million in the three months ended June 30, 2000. The increase was
primarily due to our continued development of SiteMinder, Secure Reverse Proxy,
TransactionMinder and AffiliateMinder and our increase in research and
development personnel.

    Interest income. Interest income decreased by $41,000, to $1.3 million in
the three months ended June 30, 2001, from $1.3 million in the three months
ended June 30, 2000. This decrease is mainly attributable to a lower average
interest rate in the three months ended June 30, 2001.

    Provision for income taxes. Provision for income taxes for the three months
ended June 30, 2001 was $292,000. The provision is lower than the statutory rate
due to a reduction in the valuation allowance related to federal net operating
loss carryforwards. The resulting provision relates primarily to state and
foreign taxes. For the three months ended June 30, 2000 we had no provision for
income taxes due to the Company's loss position for the period.


                                       16

<PAGE>   17

RESULTS OF OPERATIONS

The following information should be read in conjunction with the consolidated
financial statements and notes thereto:

<TABLE>
<CAPTION>

                                               % OF TOTAL REVENUES      PERIOD TO PERIOD %
                                              ---------------------    INCREASE (DECREASE)
                                                                        SIX MONTHS ENDED
          FOR THE SIX MONTHS                                                JUNE 30,
         ENDED JUNE 30, 2001                   2000           2001        2000 VS. 2001
         -------------------                  ------          -----    -------------------
<S>                                           <C>             <C>            <C>
Revenues:
  SiteMinder software ..............            67%             69%           200%
  SiteMinder services ..............            23              28            257
  Other ............................            10               3             11
                                              ----            ----           ----
     Total revenues ................           100             100            195
                                              ----            ----           ----
Cost of Revenues:
  Cost of SiteMinder software ......             5               3             64
  Cost of SiteMinder services ......            13              15            229
  Cost of other ....................             6               2             17
                                              ----            ----           ----
     Total cost of revenues ........            24              20            146
                                              ----            ----           ----
Gross profit .......................            76              80            210

Selling, general and administrative
expenses (including non-cash stock
compensation of 2% and 0% of revenue
for the three months ended June 30,
2000 and 2001, respectively ........            78              56            113

Research and development costs .....            19              16            139
                                              ----            ----           ----
Income (loss) from operations ......           (21)              8            220

Interest income ....................            15               6             10
                                              ----            ----           ----
Income (loss) before provision for
income taxes .......................            (6)             14            778
                                              ----            ----           ----
Provision for income taxes .........            --               1            N/A
                                              ----            ----           ----

Net income (loss) ..................            (6)%            13%           720%
                                              ====            ====           ====
</TABLE>

    Revenues. Total revenues increased by $33.6 million, or 195%, to $50.8
million in the six months ended June 30, 2001, from $17.2 million in the six
months ended June 30, 2000.

    SiteMinder software revenues increased by $23.2 million, or 200%, to $34.8
million in the six months ended June 30, 2001, from $11.6 million in the six
months ended June 30, 2000. This increase is due to the continued increase in
market awareness and the acceptance of the SiteMinder product and expansion of
our sales organization.

    SiteMinder services revenues increased by $10.2 million, or 257%, to $14.1
million in the six months ended June 30, 2001, from $4.0 million in the six
months ended June 30, 2000. This increase reflects the continued growth in the
installed base of SiteMinder software licenses and the increasing demand to
provide installation and integration services for customers.

    Other revenues increased by $185,000, or 11%, to $1.9 million in the six
months ended June 30, 2001, from $1.7 million in the six months ended June 30,
2000.

    Cost of revenues. Total cost of revenue increased by $6.0 million or 146%,
to $10.2 million in six months ended June 30, 2001, from $4.1 million in the six
months ended June 30, 2000.

    Cost of SiteMinder software increased by $534,000 or 64% to $1.4 million in
the six months ended June 30, 2001 from $833,000 in the six months ended June
30, 2000. This variance is primarily due to the proportional increase in
software revenues for the same period offset by lower proportional royalty and
production costs.

    Cost of SiteMinder services increased by $5.3 million or 229%, to $7.6
million in the six months ended June 30, 2001 from $2.3 million in the six
months ended June 30, 2000. The increase is primarily due to growth in personnel
related expenses for our consulting

                                       17
<PAGE>   18

and education organizations as a result of increased SiteMinder service
revenues.

    Cost of other increased by $164,000 or 17%, to $1.1 million in the six
months ended June 30, 2001 from $984,000 in the six months ended June 30, 2000.
This decrease is primarily due to the proportional decrease in other revenues
for the same period, coupled with lower costs associated with reselling third
party products.

    Selling, general and administrative expenses. Selling, general and
administrative expenses increased by $15.0 million, or 113%, to $28.3 million in
the six months ended June 30, 2001, from $13.3 million in the six months ended
June 30, 2000. This increase is primarily a result of our continuing to build
our sales and marketing infrastructure to support planned growth in sales of our
SiteMinder product and services.

    Research and development costs. Research and development costs increased by
$4.7 million, or 139%, to $8.0 million in the six months ended June 30, 2001,
from $3.3 million in the six months ended June 30, 2000. The increase was
primarily due to our continued development of SiteMinder, Secure Reverse Proxy,
TransactionMinder and AffiliateMinder and our increase in research and
development personnel.

    Interest income. Interest income increased by $242,000, to $2.8 million in
the six months ended June 30, 2001, from $2.5 million in the six months ended
June 30, 2000. This increase is mainly attributable to a higher average cash
balance in the six months ended June 30, 2001.

    Provision for income taxes. Provision for income taxes for the six months
ended June 30, 2001 was $607,000. The provision is lower than the statutory rate
due to a reduction in the valuation allowance related to federal net operating
loss carryforwards. The resulting provision relates primarily to state and
foreign taxes. For the six months ended June 30, 2000 we had no provision for
income taxes due to the Company's loss position for the period.

LIQUIDITY AND CAPITAL RESOURCES

Cash provided by operating activities in the six months ended June 30, 2001 was
$4.5 million, primarily due to net income and increases in other accrued
expenses and deferred revenue and partially offset by an increase in accounts
receivable and a decrease in accrued compensation and benefits.

Cash used for investing activities was $14.3 million in the six months ended
June 30, 2001. Investing activities for the period consisted primarily of the
purchases of equipment and software, consisting largely of computer servers,
workstations, networking equipment and business application software coupled
with the purchase of long-term marketable securities.

Cash provided by financing activities in the six months ended June 30, 2001 was
$6.3 million which primarily related to the exercise of stock options.

    As of June 30, 2001, our primary financial commitments consisted of
obligations outstanding under operating leases.

    As of June 30, 2001, we had cash and cash equivalents totaling $112.3
million and working capital of $112.0 million. The Company also had $10.6
million in long-term marketable securities.

    In recent years, we have significantly increased our operating expenses. In
the foreseeable future, we expect to maintain our current levels of operating
expenses. These operating expenses and capital expenditures will constitute a
material use of our cash resources. In addition, we may utilize cash resources
to fund acquisitions or investments in businesses, technologies, products or
services that are complementary to our business.

                                       18
<PAGE>   19

We believe that our existing cash and cash equivalents will be sufficient to
meet our anticipated cash requirements for working capital and capital
expenditures for at least the next twelve months.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable

                                       19
<PAGE>   20
                          PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

From time to time, the Company is involved in litigation relating to claims
arising out of its operations in the normal course of business. The Company is
not presently a party to any legal proceedings, the adverse outcome of which, in
management's opinion, would have a material adverse effect on the Company's
results of operations or financial position.

ITEM 2.  CHANGES IN SECURITIES

Not Applicable

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Not Applicable

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

     On May 30, 2001, the Company held its Annual Meeting of Stockholders. At
the meeting, Barry N. Bycoff, Paul F. Deninger, Eric R. Giler, Lawrence D.
Lenihan, Jr., Michael L. Mark, Ralph B. Wagner were re-elected as Directors to
serve in accordance with the bylaws and until their successors are duly chosen
and qualify. The voting results were as follows:

     Barry N. Bycoff           For 27,476,832       Withheld  1,844,347
     Paul F. Deninger          For 29,311,796       Withheld      9,383
     Eric R. Giler             For 29,311,196       Withheld      9,383
     Lawrence D. Lenihan, Jr.  For 29,312,048       Withheld      9,131
     Michael L. Mark           For 29,311,448       Withheld      9,731
     Ralph B. Wagner           For 29,311,196       Withheld      9,983

     At the meeting, the stockholders approved an amendment of the 2000 Stock
Option Plan increasing the number of shares of common stock reserved issuance
thereunder to 2,300,000 shares. The vote was as follows:

     For 12,803,757            Against 12,316,758        Abstain 29,709

     The Stockholders did not approve an amendment of the 2000 Stock Option Plan
which would have increased automatically on an annual basis the number of shares
of common stock reserved for issuance thereunder. The vote was as follows:

     For 12,094,498            Against 13,026,599        Abstain 29,127

     The Stockholders also approved an amendment of the Certificate of
Incorporation of the Company increasing the number of shares of common stock
which the Company has the authority to issue from 55,000,000 shares to
135,000,000 shares. The vote was as follows:

     For 21,244,065            Against  8,057,067        Abstain 20,047

ITEM 5.  OTHER INFORMATION

Not Applicable.

ITEM 6.  EXHIBITS

Not Applicable

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.

                                 NETEGRITY, INC.


Date: August 9, 2001                     By: /s/ Barry N. Bycoff
                                            ------------------------------------
                                         Barry N. Bycoff
                                         President, Chief Executive Officer,
                                         Director and Chairman of the Board


Date: August 9, 2001                     By: /s/ James E. Hayden
                                            ------------------------------------
                                         James E. Hayden
                                         Vice President, Finance and
                                         Administration, and Chief Financial
                                         Officer




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