<PAGE>

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

                                   FORM 10-K
                   FOR ANNUAL AND TRANSITION REPORTS PURSUANT
         TO SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
                             ---------------------

<Table>
<C>          <S>
 (Mark One)
    [X]      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934



             FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002



                                   OR



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



             FOR THE TRANSITION PERIOD FROM           TO
</Table>

                         COMMISSION FILE NUMBER 0-49710
                             ---------------------
                            PRINTCAFE SOFTWARE, INC.
             (Exact Name of Registrant as Specified in its Charter)

<Table>
<S>                                                 <C>
                     DELAWARE                                           25-1854529
          (State or Other Jurisdiction of                            (I.R.S. Employer
          Incorporation or Organization)                          Identification Number)
</Table>

               FORTY 24TH STREET, PITTSBURGH, PENNSYLVANIA 15222
          (Address of Principal Executive Offices, Including Zip Code)

                                 (412) 456-1141
              (Registrant's telephone number, including area code)

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<Table>
<Caption>
                TITLE OF EACH CLASS                      NAME OF EACH EXCHANGE ON WHICH REGISTERED
                -------------------                      -----------------------------------------
<S>                                                 <C>
                       None                                           Not applicable
</Table>

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                    COMMON STOCK, PAR VALUE $.0001 PER SHARE
                                (Title of Class)

     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 [ ]

     Indicate  by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best  of  registrant's  knowledge,  in  the  definitive  proxy  or   information
statements  incorporated  by reference  in Part  III  of this  Form 10-K  or any
amendment to this Form 10-K.  [X]

     Indicate by check mark whether the registration is an accelerated filer (as
defined in Exchange Act Rule 12b-2).  Yes [ ]     No [X]

     The aggregate market value  of common stock held  by non-affiliates of  the
registrant  on March 17, 2003 computed by reference to the closing price of such
stock, as  quoted on  the NASDAQ's  National Market  System, was  $8.8  million.
Shares  of common stock held by each  executive officer and director and by each
person who beneficially owns more than  5% of the outstanding common stock  have
been excluded from the computation.

     The number of shares of the registrant's common stock outstanding as of the
close of business on March 17, 2003 was 10,634,098.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Definitive Proxy Statement to be filed by the registrant in
connection  with its  2003 Annual  Meeting of  Stockholders are  incorporated by
reference into Items 10, 11, 12 and 13 of Part III.
--------------------------------------------------------------------------------
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<PAGE>

                                     INDEX

<Table>
<S>       <C>                                                           <C>
                                   PART I
Item 1    Business....................................................    3
Item 2    Property....................................................   10
Item 3    Legal Proceedings...........................................   10
Item 4    Submission of Matters to a Vote of Security Holders.........   11

                                  PART II
Item 5    Market for Registrant's Common Equity and Related
          Stockholder Matters.........................................   11
Item 6    Selected Consolidated Financial Data........................   12
Item 7    Management's Discussion and Analysis of Financial Condition
          and Results of Operations...................................   12
Item 7A   Qualitative And Quantitative Disclosures About Market
          Risk........................................................   29
Item 8    Financial Statements and Supplementary Data.................   30
Item 9    Changes In and Disagreements With Accountants on Accounting
          and Financial Disclosure....................................   31

                                  PART III
Item 10   Directors and Executive Officers of the Registrant..........   31
Item 11   Executive Compensation......................................   31
Item 12   Security Ownership of Certain Beneficial Owners and
          Management..................................................   31
Item 13   Certain Relationships and Related Transactions..............   31
Item 14   Controls and Procedures.....................................   31

                                  PART IV
Item 15   Exhibits, Financial Statement Schedules and Reports on Form
          8-K.........................................................   31
Signatures............................................................   33
Certifications........................................................   34
</Table>

                                        1
<PAGE>

               SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION

     This  Annual  Report on  Form 10-K  ("Form 10-K")  contains forward-looking
statements in  "Item 7  --  Management's Discussion  and Analysis  of  Financial
Condition  and Results of Operations," "Item  7A -- Quantitative and Qualitative
Disclosures About Market  Risk," and elsewhere.  These statements involve  known
and  unknown risks, uncertainties,  and other factors that  may cause our actual
results, performance, or achievements to be materially different from any future
results,  performances,   or   achievements   expressed  or   implied   by   the
forward-looking  statements.  In some  cases,  you can  identify forward-looking
statements by terms such as "may," "might," "will," "should," "could,"  "would,"
"plan,"   "expect,"  "intend,"  "believe,"   "goal,"  "estimate,"  "anticipate,"
"predict," "potential," or the negative of these terms, and similar  expressions
intended  to identify  forward-looking statements. These  statements reflect our
current views with  respect to future  events and are  based on assumptions  and
subject  to risks and  uncertainties. Given these  uncertainties, you should not
place  undue  reliance   on  these  forward-looking   statements.  Also,   these
forward-looking  statements represent our  estimates and assumptions  only as of
the date of this Form 10-K and we undertake no duty to update this  information.
You  should read this Form  10-K completely and with  the understanding that our
actual future results may be materially different from what we currently expect.
We qualify all of our forward-looking statements by these cautionary statements.
Factors that might cause  or contribute to such  a discrepancy include, but  are
not  limited to, those discussed under the heading "Risk Factors That May Affect
Future Results and Market Price of Stock" elsewhere in this Form 10-K.

                                        2
<PAGE>

                                     PART I

ITEM 1. BUSINESS.

OVERVIEW

     Printcafe Software,  Inc.  is  a leading  provider  of  software  solutions
designed  specifically for  the printing  industry supply  chain. Our enterprise
resource planning  and  collaborative  supply chain  software  solutions  enable
printers  and  print  buyers  to  lower  costs  and  improve  productivity.  Our
procurement applications,  which  are  designed  for  print  buyers,  facilitate
collaboration  between  printers and  print buyers  over  the Web.  Our software
solutions have  been  installed by  more  than  4,000 customers  in  over  8,000
facilities worldwide, including 24 of the 25 largest printing companies in North
America and over 50 businesses in the Fortune 1000.

     On  February 26, 2003, we entered  into a merger agreement with Electronics
for Imaging, Inc., or EFI. If the merger is completed, Printcafe would become  a
wholly-owned  subsidiary of EFI.  Under the terms of  the merger agreement, each
share of our common  stock will be converted  into $2.60 of consideration  which
will  be paid, at the  election of each of our  stockholders, in shares of EFI's
common stock or cash. EFI's common stock is traded on the NASDAQ National Market
under the symbol "EFII". Our board of directors has approved the merger with EFI
and has called a special meeting of our stockholders to vote on the merger.  The
merger will be adopted if the holders of a majority of our outstanding shares of
common stock vote for the proposed merger with EFI.

INDUSTRY BACKGROUND

     Based  on U.S. Department  of Commerce data and  other industry sources, we
estimate that the  printing industry  supply chain is  at least  a $240  billion
market  in the United States. We use  the term printing industry supply chain to
describe the supply chain consisting of printers, print buyers, who buy products
and services offered by printers, and print industry raw material suppliers, who
supply the raw materials used by printers in the printing process.

     Based on industry sources,  we believe that there  are an estimated  50,000
printing  facilities in  the United States.  Printers can be  divided into three
principal market  segments --  commercial  printers, publication  printers,  and
retail printers -- based on the type of their equipment, the size and complexity
of  their print  jobs, and  the nature  of their  customers. Commercial printing
includes the printing of brochures, direct mail materials, posters,  promotional
materials, business forms, customized packaging and labels. Publication printing
involves  the printing of  larger quantities of more  complex materials, such as
newspapers, catalogs,  magazines, books,  and  retail inserts.  Retail  printers
offer  customers many of the same products  as a small commercial printer offers
its customers but typically  also offer "walk up"  service where a customer  may
have a job produced on demand.

     Print  buyers  in nearly  all  markets require  a  wide variety  of printed
materials and  typically  place customized  orders  with short  lead  times  and
frequently request last minute changes. As a result, printers face unpredictable
demand,   making  it  difficult  to  sustain  high  equipment  utilization.  The
unforeseen customer requirements placed  on printers by  customers also make  it
difficult  for print  industry raw  material suppliers  to respond  to printers'
needs. These  characteristics  of  the  printing  industry  lead  to  production
inefficiencies throughout the printing industry supply chain.

     The  competitive environment in the printing industry requires printers and
print industry raw  material suppliers to  differentiate themselves by  offering
superior  quality, price, and customer service.  Printers and print industry raw
material suppliers  need  solutions  that increase  revenues,  reduce  operating
costs,  improve productivity,  and increase  customer satisfaction  and loyalty.
Print buyers also seek to interact efficiently with printers in order to  reduce
printing costs, improve productivity, and shorten production times.

                                        3
<PAGE>

THE TRADITIONAL PRINT PRODUCTION PROCESS

     The  production of printed  material is complex  and requires collaboration
among multiple parties throughout the process  to ensure that the final  product
accurately  reflects the print  buyer's design and meets  its quality, cost, and
delivery expectations.  Printing jobs  are  often highly  customized,  requiring
numerous  interactions  among print  buyers,  printers, and  print  industry raw
material suppliers.  The production  process itself  can be  divided into  three
separate  stages: design  and specification;  purchasing; and  manufacturing and
distribution.

     Design and specification.  A print buyer designs printed material through a
collaborative process involving  a print buyer's  in-house and external  design,
purchasing,  sales, marketing, and creative personnel. The print buyer must then
communicate the print job specifications to the printer, using industry-specific
terminology, so that the printer can evaluate the specifications. Typically, the
print buyer specifies the print job  manually and communicates it by  telephone,
facsimile,  or  e-mail.  The  traditional design  and  specification  process is
inherently inefficient. These inefficiencies result  from the manual process  of
data communication, input, and retrieval, the lack of appropriate error-checking
mechanisms,  and the need for print buyers  to understand the intricacies of the
print process  and  its industry-specific  terminology  in order  to  submit  an
accurate request for a quote.

     Purchasing.   Purchasing  a print job  begins with the  transmission of the
specifications to  one or  more  printers to  obtain  and evaluate  quotes  that
estimate  the cost, timing, and other elements  of the project. A printer cannot
estimate the  cost of  a  print job  until the  print  buyer has  completed  the
specification  phase, by  defining paper,  content, configuration,  binding, and
distribution requirements.  After  evaluating  the  specification  details,  the
printer will determine its selling price, either manually or by a computer-based
process, and prepare a quote for the job. Once the printer provides a quote, the
print  buyer then uses this information to modify job designs and specifications
and to select a printer. Without a  consistent means of specifying a print  job,
printers  may misinterpret and  inaccurately reply to  quote requests, and print
buyers may not  adhere to internal  corporate policies and  spending limits.  In
addition,  depending on a number of factors,  such as the equipment available to
produce the  print job,  the  cost of  producing the  same  print job  can  vary
significantly   from   printer   to   printer.   These   miscommunications   and
inefficiencies often lead to higher costs, delays, and customer dissatisfaction.

     Manufacturing and distribution.  This  stage encompasses management of  the
entire supply chain and production process, from purchasing and inventory of raw
materials  through order management,  preparation, printing, binding, finishing,
distribution,  invoicing,  and   payment  processing.   The  manufacturing   and
distribution  process  has  traditionally  required  manual  preparation  of job
instructions,  which   can  result   in   inconsistent  and   inaccurate   print
specifications,  errors in the production process, delays in project completion,
and an inability to track the current status of inventories and jobs, leading to
high  costs,  production  errors,  delays,  and  customer  dissatisfaction.   In
addition,  the difficulty  associated with implementing  customer change orders,
and a lack of integration between the  systems that are used to plan and  design
print projects, lead to further complications, inefficiencies, and errors in the
manufacturing and distribution processes.

THE IMPACT OF NEW TECHNOLOGIES ON THE PRINTING INDUSTRY SUPPLY CHAIN

     The  Web and  other new  technologies provide  opportunities for businesses
across all  industries  to  improve efficiency  by  extending  their  enterprise
software  applications to include customers, partners, and suppliers. Businesses
seek software  solutions  that  incorporate industry  best  practices,  standard
processes,  industry-specific terminology, and other functionality that has been
designed for their particular  industry. Most enterprise software  applications,
however,  are not designed  for the needs  of a particular  industry. We believe
that industry-specific  software  solutions  can  be  easier  to  implement  and
facilitate  deeper collaboration among supply chain participants. These software
solutions are particularly  in demand in  industries, such as  printing, with  a
complex production process and rapidly changing job specifications.

     The  printing process involves  a high degree of  customization to meet the
needs of participants  in the printing  industry supply chain,  causing them  to
utilize  industry-specific  enterprise  resource  planning  systems  to maximize
process efficiency. Some businesses have turned to in-house solutions to address
these needs.
                                        4
<PAGE>

More recently,  vendors  have  developed  a  variety  of  software  applications
designed  for  use  in  many industries,  including  procurement  and enterprise
resource planning systems. We believe  that these applications, which are  often
designed  for a standard  assembly process, utilizing  catalog-derived parts, do
not meet the complex needs of the printing industry with its job-specific custom
requirements. The complexities  and inefficiencies inherent  in the  traditional
print process create an opportunity for an integrated software solution specific
to  the  printing industry  supply chain  that  eliminates redundant  and manual
processes and enhances communication and collaboration.

THE PRINTCAFE SOLUTION

     We believe that we offer the only integrated software solutions that enable
printers and print buyers to increase  efficiency in each stage of the  printing
process   --   from   specification   and   purchasing   to   manufacturing  and
distribution -- by  providing enterprise resource  planning systems,  purchasing
systems,  and collaborative supply  chain planning and  execution systems. Since
our inception in 1987, we have  continually developed our software, targeted  to
the  specific needs  of the  printing industry supply  chain, by  drawing on our
years of experience in  the printing industry  and leveraging our  relationships
with our strategic partners and customers.

  Benefits to printers

     Our  software solutions enable printers  to maximize productivity, increase
revenues, improve production management, and increase customer satisfaction  and
loyalty. Printers use our software solutions to:

     - increase  responsiveness  by  automating the  quotation  process, quoting
       accurate prices, and receiving  and fulfilling orders electronically  for
       almost any type of print project;

     - automate   the  manufacturing   process  and   control  print  production
       equipment,  including  scheduling  the   execution  of  print  jobs   and
       collecting data on print jobs in process;

     - manage   inventory,  resource   planning,  purchasing,   accounting,  and
       invoicing;

     - communicate and collaborate with multiple parties throughout the printing
       process; and

     - leverage their technology leadership  to increase revenues by  increasing
       business   with   existing   customers   and   generating   new  customer
       opportunities.

  Benefits to print buyers

     Our software solutions  enable print  buyers to  increase productivity  and
reduce  costs in  the printing  industry supply  chain. By  automating the print
specification and  purchasing  processes, our  products  allow print  buyers  to
replace  inefficient  manual processes  with online  collaboration capabilities.
Print buyers use our software solutions to:

     - centrally manage and enforce company-wide print purchasing policies;

     - specify, estimate the cost of, order, and track changes to, virtually any
       type of print project by collaborating with printers of their choice;

     - purchase print more effectively by allowing the print buyer to select the
       most suitable printer for each print job;

     - reduce print job production time by communicating and collaborating  with
       multiple parties throughout the printing process; and

     - track the current status of a project from specification through delivery
       and reconcile invoices to orders and change orders.

                                        5
<PAGE>

PRODUCTS

     Our  software solutions  automate the print  production process; facilitate
collaboration, order fulfillment,  data collection and  analysis, and  inventory
management;  and  provide  financial  accounting  functions  for  printers.  Our
products, developed specifically  for the  printing industry  supply chain,  are
designed   to  reduce  costs,  increase   customer  satisfaction,  and  overcome
inefficiencies in the traditional print production process. Our products can  be
deployed  together as an integrated solution or purchased separately and used on
a stand-alone basis.

     We offer four categories of products:

     - enterprise resource planning  and supply chain  planning products,  which
       facilitate  efficient and  accurate fulfillment of  each print production
       job by automating purchasing, operations, and financial functions;

     - collaboration and  procurement products,  which  enable print  buyers  to
       communicate with printers at every stage of the print production process,
       thereby reducing errors, production time, and costs;

     - self-service  applications,  which  enable printers  to  establish  a Web
       storefront  and  provide  other  online  services  to  their   customers,
       facilitating  interaction with their customers and potential customers by
       improving collaboration and project management; and

     - manufacturing  and  supply   chain  execution   products,  which   enable
       commercial  and publication printers to  plan and adjust their production
       capacity by analyzing data collected from the production floor.

<Table>
<Caption>
PRODUCT TYPE          PRODUCT NAME             TARGET SEGMENT                  DESCRIPTION
------------         ---------------   ------------------------------   -------------------------
<S>                  <C>               <C>                              <C>
Enterprise Resource  Prograph          Publication printers             Software that automates
Planning and Supply  Hagen             Large commercial printers        the print production
Chain Planning       Logic             Mid-market commercial printers   process from planning and
                     PSI               Small commercial printers        quoting to inventory
                     PrintSmith        Retail printers                  management and financial
                                                                        reporting.

Collaboration and    EnterpriseSite    Fortune 1000 print buyers        Web-based purchasing
Procurement          Impresse Site     Fortune 1000 print buyers        software that expedites
                                                                        print purchases for print
                                                                        buyers through
                                                                        collaboration with
                                                                        printers and efficient
                                                                        project management tools.

                     Proteus           Publishers                       Software tool for
                                                                        magazines, catalogs,
                                                                        books, and directories
                                                                        that automates internal
                                                                        processes, including
                                                                        layout, cost estimating,
                                                                        optimization, and
                                                                        ordering.

Self-Service         PrinterSite       Commercial printers              Web-based software that
Applications         Printchannel      Commercial printers              facilitates the print
                     PrintSmith Site   Retail printers                  production process by
                                                                        providing an integrated
                                                                        storefront for online
                                                                        collaboration, file
                                                                        sharing, project
                                                                        management, and other
                                                                        print functions.
</Table>

                                        6
<PAGE>

<Table>
<Caption>
PRODUCT TYPE          PRODUCT NAME             TARGET SEGMENT                  DESCRIPTION
------------         ---------------   ------------------------------   -------------------------
<S>                  <C>               <C>                              <C>
Manufacturing and    Auto-Count        Commercial and publication       Production floor data
Supply Chain                           printers                         collection software with
Execution                                                               a direct machine
                                                                        interface for tracking
                                                                        count, waste, and
                                                                        performance statistics
                                                                        from press and bindery
                                                                        equipment.

                     PrintFlow         Commercial and publication       Software tool that
                                       printers                         automates and optimizes
                                                                        job scheduling of an
                                                                        individual printing
                                                                        facility or group of
                                                                        facilities.
</Table>

CUSTOMERS

     Our software solutions  for the  printing industry supply  chain have  been
installed  by  more  than  4,000  printer  customers  in  over  8,000 facilities
worldwide, including 24 of the 25 largest publication and commercial printers in
North America and more than 50 businesses  in the Fortune 1000. During 2002,  no
single customer accounted for ten percent or more of our revenue.

SALES AND MARKETING

     We sell our products and services through:

     - Our  43 person  sales force,  which currently  generates most  of our new
       sales;

     - sales representatives  of  Creo, one  of  our strategic  partners,  which
       currently generates less than 2% of our total sales;

     - co-marketing agreements with Accenture, AT Kearney and SMARTworks; and

     - the  sales forces  of some  of our  printer customers,  who recommend our
       products to their print buyer customers.

     Our marketing  programs are  designed  to promote  our brand,  educate  our
existing  and  potential  customers  about  the  features  and  benefits  of our
software, and  generate sales  leads. As  of December  31, 2002,  our sales  and
marketing  team consisted of 56  professionals. Our marketing activities include
participation in  industry trade  shows  and seminars,  hosting an  annual  user
conference  attended by over  700 participants, hosting  regional user meetings,
direct mailings, trade journal advertising, and public relations activities.

PROFESSIONAL SERVICES AND CUSTOMER SUPPORT

     Our customer  service professionals  configure and  implement our  software
solutions  and  provide  technical  support,  consulting,  and  training  to our
customers. As of December 31, 2002 we employed 126 professionals in our customer
service organization.  Our  customer  service  professionals  are  available  by
telephone,  over the Web, or by e-mail  to assist with customer support requests
24 hours a day, seven days a week.

     In addition to professional services,  we offer product maintenance to  our
customers.  Maintenance contracts are typically  subject to an annual, renewable
fee and are typically priced as a percentage of product license fees.  Customers
under  maintenance  service  contracts  receive  technical  product  support and
product upgrades as  they are released  throughout the life  of the  maintenance
contracts.

TECHNOLOGY AND PRODUCT ARCHITECTURE

     We  design  software  solutions  for participants  in  the  global printing
industry supply chain. Our products are designed to be easily adaptable, secure,
and scalable for global businesses, as well as capable of handling multiple data
sources and a large number of transactions. Our products are implemented through
two technology platforms:  client/server software applications  and hosted  Web-
based products. With our modular,
                                        7
<PAGE>

object-oriented  development  approach,  we  have  developed client/server-based
enterprise resource planning  systems and  supply chain  planning and  execution
software  that  work with  a  variety of  databases  and operating  systems. Our
Web-based products are developed  using readily-available Web development  tools
and  are  deployed on  an  Oracle database.  If we  are  unable to  maintain our
licenses with Oracle, we  could be required to  obtain substitute technology  of
lower  quality or performance standards, or at additional cost, and our business
could be harmed. We continually  refine our client/server software  applications
and  our Web-based  products in order  to improve their  interoperability and to
extend the reach of our products throughout the printing industry supply chain.

     Our product architecture  is designed to  support today's rapidly  changing
technology standards by providing the following features:

     Layered  architecture.  Our client/server software applications are written
using an object-oriented architecture, which enables our developers to construct
and modify discrete  applications efficiently and  cost-effectively. Our  hosted
Web-based  software  applications are  developed using  multi-tier architecture,
which provides  for ease  of deployment,  application management,  support,  and
scalability.

     Flexible,  open systems architecture.   Our open architecture benefits both
our internal  software  development  process  and  the  customers  who  use  our
solutions.  Our  developers are  able to  pre-configure  software to  address in
separate solutions the specialized needs of the different types of  participants
in  the printing  industry supply  chain, which  simplifies and  accelerates the
software  development  process.  We  are  able  to  offer  products  which   are
appropriate  for customers  ranging from  small, single-facility  print shops to
large, enterprise-wide implementations. In addition, our architecture supports a
number of different operating systems,  such as Windows, Macintosh, AS/400,  and
UNIX.

     Scalability.   We use a  distributed application framework, which leverages
separate applications working together, rather than a single, complex system, to
minimize product complexity and facilitate  product updates and maintenance.  We
ensure  optimal scalability  in our  Web-based products  by managing application
replication software on multiple servers, coupled with load management  software
and  hardware, which provides  redundancy and additional  peak use capacity. Our
multi-tier architecture  allows  for rapid  response  to demands  for  increased
capacity resulting in an environment that is highly scalable.

     Security.    Our  Web-based  products  are  protected  from  intrusion  and
compromise through multiple industry-standard security measures. Our  multi-tier
architecture isolates the major components of the system from one another -- the
publicly-accessible  tiers include user interface  components and business logic
modules, while the data  layer resides in a  separate, secure, private tier.  By
segregating  data from  the interface  and business  logic, we  protect the data
repository  from  infiltration  over   the  public  Web.   We  also  rely   upon
industry-standard  security protocols, such as  secure socket layer connections,
digital signatures,  and encryption,  to protect  essential customer  data  from
exposure and corruption.

INTELLECTUAL PROPERTY

     We  rely primarily on a combination  of copyright, trademark, trade secret,
and patent laws and contractual restrictions to protect the proprietary  aspects
of  our technology. These  legal protections afford  only limited protection for
our  technology.  We  seek  to  protect  the  source  code  for  our   software,
documentation,  and  other written  materials under  trade secret  and copyright
laws. We  license our  software  pursuant to  license agreements,  which  impose
restrictions  on the licensee's ability to utilize the software. We also require
employees and consultants with access to our proprietary information to  execute
confidentiality  agreements. We have obtained eight patents in the United States
on aspects of our technology and  business processes. Four of these patents  are
scheduled  to expire within  the next two  years and the  remaining four patents
expire at different times between 2005 and  2017. We do not view the  expiration
of  these patents to be material. We have also filed applications for additional
patents. We expect that, if  granted, the duration of  these patents will be  20
years  from the date of  filing the application. We  own various trademarks that
are used in  connection with our  business, some of  which have been  registered
with  the  United States  Patent  and Trademark  Office.  The duration  of those
trademarks is unlimited, subject to continuous use.

                                        8
<PAGE>

     We license several patents for our  Web-based solutions from the owners  of
the  respective patents. The license agreements grant us a non-exclusive license
to use in our  products the process  covered by U.S.  Patent No. 4,839,829,  No.
6,353,483, No. 6,362,895, and No. 6,429,947. The licenses remain in effect until
the  expiration of the  respective patents. We also  license technology owned by
Creo Inc. for use in  the Web-based solutions which  we offer to printers.  Creo
can  terminate this license agreement if a third party purchases more than fifty
percent of our outstanding stock or  our strategic alliance agreement with  Creo
is terminated.

     Despite our efforts to protect our proprietary rights, unauthorized parties
may  attempt to copy  aspects of our  products or to  obtain and use information
that we regard as proprietary.  In addition, the laws  of many countries do  not
protect  our proprietary  rights to  as great an  extent as  do the  laws of the
United States.  Litigation  may  be  necessary in  the  future  to  enforce  our
intellectual  property rights  and to  determine the  validity and  scope of the
proprietary rights of others. Our failure to adequately protect our intellectual
property could have  a material  adverse effect  on our  business and  operating
results.

COMPETITION

     Traditionally, both printers and print buyers would internally create their
own  methodologies to manage  their printing industry  supply chain needs, often
using manual  processes.  In  the  absence  of  commercially-available  printing
industry  supply chain software, some companies developed software for their own
internal use.  The market  for  software focused  specifically on  the  printing
industry supply chain is relatively new and is evolving rapidly.

     In  this market, we encounter competition from software application vendors
that specifically  target  the printing  industry,  which are  typically  small,
privately-owned  companies, and from  larger vendors who  currently offer or are
seeking to develop printer-focused  enterprise resource planning products,  such
as  Heidelberg and  SAP. We  are unaware  of any  competing integrated  suite of
software products  focused  specifically  on the  print  industry  supply  chain
similar  to  our  comprehensive  software solutions.  In  the  future,  we could
potentially  face  competition   from  other  software   vendors  with   related
functionality  in  enterprise resource  planning,  supply chain  management, and
procurement who decide  to target  the printing industry,  including Ariba,  i2,
Manugistics,  Microsoft,  Oracle,  and PeopleSoft,  and  other  software vendors
focused on specific  aspects of  supply chain  planning and  execution, such  as
Manhattan  Associates,  Retek,  and  Vastera.  We  believe  that  the  principal
competitive factors  affecting  our market  include  adoption by  a  significant
number  of print buyers and printers,  product quality and performance, customer
service, core technology, product features, price, and the value of services.

EMPLOYEES

     As of  December  31,  2002,  we  had  330  full-time  employees.  Of  these
employees, 56 were in sales and marketing, 108 were in research and development,
126 were in customer support, and 40 were in general and administrative services
and  operations. Our  employees are  not represented  by a  labor union,  and we
consider our employee relations to be good.

EXECUTIVE OFFICERS

     The following table shows information about our executive officers:

<Table>
<Caption>
NAME                              AGE                      POSITION(S)
----                              ---                      -----------
<S>                               <C>   <C>
Marc D. Olin....................        President, Chief Executive Officer, and Chairman
                                  38    of the Board
Joseph J. Whang.................        Chief Financial Officer and Chief Operating
                                  38    Officer
Ronald F. Hyland, Sr............        Senior Vice President and Chief Technology
                                  39    Officer
</Table>

     Marc D. Olin has served as our Chief Executive Officer since October  2001,
as  our Co-Chief  Executive Officer  from July  2000 to  September 2001,  as our
President and a director since  February 2000 and as  our chairman of the  board
from January 2003. Mr. Olin also served as our Co-Chairman from February 2000 to

                                        9
<PAGE>

March  2000, and as our Chief Operating  Officer from March 2000 to August 2001.
From April 1999 to  February 2000, Mr. Olin  served as the Chairman,  President,
and  Chief Executive Officer  of Prograph Systems, Inc.,  one of our predecessor
companies. From 1992  to April 1999,  Mr. Olin served  as President of  Prograph
Management  Systems, one  of our predecessor  companies, which  he co-founded in
1987. He  received  a B.S.  from  Carnegie Mellon  University.  Mr. Olin  was  a
director of the Graphic Arts Technical Foundation.

     Joseph  J. Whang has  served as our Chief  Financial Officer since February
2000 and as our Chief Operating Officer since August 2001. From October 1998  to
February  2000, Mr.  Whang was a  Managing Director of  McDonald Investments, an
investment banking firm. Mr. Whang was a founding partner of Carleton, McCreary,
Holmes & Co., an investment banking firm, and served as a Managing Director from
May 1996 to  October 1998.  Previously, Mr.  Whang was  President of  Practisys,
Inc.,  a  health care  company,  and a  Certified  Public Accountant  with Price
Waterhouse. He received  a B.S.  from the Wharton  School of  the University  of
Pennsylvania.

     Ronald  F. Hyland, Sr.   has served as our  Senior Vice President and Chief
Technology Officer since February 2000. Mr. Hyland was Chief Technology  Officer
of  Prograph Systems,  Inc. from  April 1999  to February  2000. Mr.  Hyland was
President of Prograph Bindery  Systems, one of  our predecessor companies,  from
1996  to  April 1999  and  the Vice  President  and Chief  Operating  Officer of
Prograph Bindery Systems from 1994  to 1996. From 1988  to 1994, Mr. Hyland  was
Manager of Advanced Technology for Time Warner.

ITEM 2.  PROPERTIES.

     Our  headquarters are located  in Pittsburgh, Pennsylvania,  where we lease
approximately 25,000 square feet of office space. The lease expires in  November
2003,  unless we  elect to extend  the term for  up to an  additional two years.
These facilities  are  used for  executive  office space,  including  sales  and
marketing,  finance and  administration, research  and design,  Web hosting, and
customer  support.  In  addition,  we  have  offices  in  Arizona,   California,
Connecticut,  Illinois, Minnesota, and  New Hampshire in  the United States, and
New Windsor in the United Kingdom.

     Our  principal  executive  offices  are  located  at  Forty  24th   Street,
Pittsburgh,  PA  15222,  and our  telephone  number  at that  location  is (412)
456-1141. Our Web site address  is www.printcafe.com. The information  contained
on  our Web site  is not a part  of this Form 10-K.  Unless the context requires
otherwise, references  in this  Form 10-K  to  "we," "our,"  and "us"  refer  to
Printcafe Software, Inc. and its subsidiaries.

ITEM 3.  LEGAL PROCEEDINGS.

     Legal  Proceedings.  On February 19, 2003,  Creo commenced an action in The
Court of  Chancery  of the  State  of Delaware  in  and for  New  Castle  County
captioned Creo, Inc. v. Printcafe Software, Inc., Electronics For Imaging, Inc.,
Marc  D. Olin, Charles  J. Billerbeck, Victor  A. Cohn and  Thomas J. Gill. Creo
requested  a  temporary  restraining  order  with  respect  to  (a)  triggering,
exercising  or  otherwise  giving effect  to  the stockholders'  rights  plan we
adopted, (b) enforcing any action taken or to be taken by us "with the intent or
effect of impeding the operation of market forces in an open bidding contest for
Printcafe," (c) taking any steps or actions  to enforce the fee provided for  in
the  letter agreement  we entered  into with  EFI, (d)  taking any  steps or any
actions to enforce the option we granted to EFI, (e) taking any steps or actions
to enforce the no solicitation provisions  of the standby credit letter that  we
entered  into with EFI, (f) engaging in any "conduct intended to cause or having
the effect of causing  Printcafe to forgo the  opportunity to explore and  enter
into  economically  more  favorable  transactions"  and  (g)  entering  into, or
purporting to enter into, a merger agreement between EFI and us before the court
finally rules  on the  action. On  February  21, 2003  the court  denied  Creo's
request  for a temporary restraining  order. The matter is  still pending in the
Delaware Chancery Court  with respect  to the other  relief sought  by Creo.  We
intend  to  vigorously  defend ourselves  in  this  matter. If  this  lawsuit is
resolved unfavorably  to  us, our  business  and financial  condition  could  be
adversely affected and we may not be able to complete the merger.

     From  time  to time,  we  may be  involved  in various  lawsuits  and legal
proceedings that arise in the ordinary course of business, including claims from
third parties  alleging that  our products  infringe their  proprietary  rights.
These  claims, with or without merit, could be time-consuming and costly, divert
management's
                                        10
<PAGE>

attention,  cause product shipment delays,  require us to develop non-infringing
technology, or enter into royalty or licensing agreements. Royalty or  licensing
agreements,  if required, may not  be available on acceptable  terms, if at all.
Based on our investigation to date, we do not believe that the ultimate  outcome
of  any of these  claims would have  a material adverse  effect on our business.
However, if any of these disputes  are resolved unfavorably to us, our  business
and financial condition could be adversely affected.

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

     None.

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Shares of our common stock have been traded on Nasdaq National Market under
the symbol "PCAF" since June 18, 2002, the date of our initial public offering.

     The  following table shows the  high and low sales  price for shares of our
common stock for the periods indicated:

<Table>
<Caption>
                                                               HIGH     LOW
                                                              ------   -----
<S>                                                           <C>      <C>
2002:
  Second Quarter............................................  $10.00   $4.70
  Third Quarter.............................................  $ 5.42   $1.18
  Fourth Quarter............................................  $ 2.00   $0.91
</Table>

     On March 17, 2003  the last reported  sale price for  shares of our  common
stock on the Nasdaq National Market was $2.55 per share.

     There were 112 holders of record of our common stock as of March 17, 2003.

     We  have not paid or declared any  cash dividends on our common stock since
inception and we do not currently intend to pay any cash dividends on our common
stock. We expect to retain future earnings, if any, to fund the development  and
operation  of  our  business.  Our  board  of  directors  will  determine future
dividends, if any.  Our existing loan  agreements contain restrictive  covenants
that limit our ability to pay cash dividends.

     The  following table  sets forth information  as of December  31, 2002 with
respect to compensation plans under  which our equity securities are  authorized
for issuance.

<Table>
<Caption>
                                               (I)                     (II)                      (III)
                                     -----------------------   --------------------   ----------------------------
                                                                                          NUMBER OF SECURITIES
                                     NUMBER OF SECURITIES TO     WEIGHTED AVERAGE       REMAINING AVAILABLE FOR
                                     BE ISSUED UPON EXERCISE    EXERCISE PRICE OF     FUTURE ISSUANCE UNDER PLANS
                                     OF OUTSTANDING OPTIONS,   OUTSTANDING OPTIONS,   (EXCLUDING SECURITIES LISTED
PLAN CATEGORY                          WARRANTS AND RIGHTS     WARRANTS AND RIGHTS           IN COLUMN (I))
-------------                        -----------------------   --------------------   ----------------------------
<S>                                  <C>                       <C>                    <C>
Equity compensation plans approved
  by stockholders..................         1,421,782                 $44.32                    704,051
Equity compensation plans not
  approved by stockholders.........                --                     --                         --
                                            ---------                 ------                    -------
          Total....................         1,421,782                 $44.32                    704,051
                                            =========                 ======                    =======
</Table>

     On  June 18, 2002, we  completed the initial public  offering of our common
stock. The managing underwriters in the offering were UBS Warburg LLC, Robertson
Stephens Inc., U.S. Bancorp Piper Jaffray Inc. and McDonald Investments Inc. The
shares of  the common  stock sold  in  the offering  were registered  under  the
Securities Act of 1933, as amended, on a Registration Statement on Form S-1 (No.
333-82646).  The Securities  and Exchange  Commission declared  the Registration
Statement effective on  June 18,  2002. The  initial public  offering price  was
$10.00 for an aggregate initial public offering of $37.5 million.

                                        11
<PAGE>

     We paid a total of $1.6  million in underwriting discounts and  commissions
and  approximately $2.2 million for costs  and expenses related to the offering.
None of the costs  and expenses related  to the offering  were paid directly  or
indirectly  to  any  of  our  directors,  officers,  general  partners  or their
associates, persons  owning  10 percent  or  more of  any  class of  our  equity
securities or any of our affiliates.

     After deducting the underwriting discounts and commissions and the offering
expenses,  we  received net  proceeds of  approximately  $33.0 million.  We used
approximately $17.8  million of  the net  proceeds from  the offering  to  repay
related  party debt. A portion of the remaining amount has been used for general
corporate purposes, to provide working capital to develop products and to expand
our operations and for the acquisition  of the assets and intellectual  property
of  printChannel, Inc. Funds that have not been used have been invested in money
market funds, certificate of deposits and other investment grade securities.  We
may  also use a  portion of the net  proceeds to acquire  or invest in business,
technologies, products or services.

                                        12
<PAGE>

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA.

     The  following  selected  consolidated  financial data  should  be  read in
conjunction with "Management's  discussion and analysis  of financial  condition
and results of operations" and our consolidated financial statements and related
notes appearing elsewhere in this Form 10-K.

<Table>
<Caption>
                                                         YEAR ENDED DECEMBER 31,
                                           ---------------------------------------------------
                                             2002       2001       2000        1999      1998
                                           --------   --------   ---------   --------   ------
                                                  (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                        <C>        <C>        <C>         <C>        <C>
CONSOLIDATED STATEMENT OF OPERATIONS
  DATA:
  Revenue:
     License and subscriptions...........  $ 21,119   $ 18,103   $   8,880   $  1,298   $2,228
     Maintenance.........................    21,701     20,601      15,239      1,090      907
     Professional services and other.....     3,701      3,164       1,215      2,023    2,107
                                           --------   --------   ---------   --------   ------
       Total revenue.....................    46,521     41,868      25,334      4,411    5,242
  Cost of revenue:
     License and subscriptions...........     3,650      3,936       2,684        129      267
     Maintenance.........................     5,091      6,088       7,337        320      160
     Professional services and other.....     1,636      1,572         637        966      675
                                           --------   --------   ---------   --------   ------
       Total cost of revenue.............    10,377     11,596      10,658      1,415    1,102
                                           --------   --------   ---------   --------   ------
  Gross profit...........................    36,144     30,272      14,676      2,996    4,140
  Operating expenses:
     Sales and marketing.................    16,989     19,113      20,542        848      397
     Research and development............    12,003     12,181      11,307      1,900    1,601
     General and administrative..........     6,193      7,645      24,525      2,704    1,651
     Depreciation........................     2,922      3,821       2,060        232      199
     Amortization(1).....................    29,511     49,052      39,481        774       --
     Stock-based compensation and
       warrants..........................     1,386      1,103       5,144      7,274      254
     Restructuring charge................       525      2,098       1,185         --       --
                                           --------   --------   ---------   --------   ------
       Total operating expenses..........    69,529     95,013     104,244     13,732    4,102
                                           --------   --------   ---------   --------   ------
  Income (loss) from operations..........   (33,385)   (64,741)    (89,568)   (10,736)      38
  Other expense, net.....................    (7,412)    (5,262)     (6,150)      (183)     (22)
                                           --------   --------   ---------   --------   ------
  Net income (loss)......................   (40,797)   (70,003)    (95,718)   (10,919)      16
Accretion of redeemable preferred
  stock..................................    (6,201)    (5,635)     (4,858)        --       --
                                           --------   --------   ---------   --------   ------
Net income (loss) attributable to common
  stock..................................  $(46,998)  $(75,638)  $(100,576)  $(10,919)  $   16
                                           ========   ========   =========   ========   ======
Net loss per share basic and diluted.....  $  (8.11)  $(468.67)  $ (687.66)  $ (96.36)  $   --
                                           ========   ========   =========   ========   ======
Weighted average shares basic and
  diluted................................     5,797        161         146        113       --
                                           ========   ========   =========   ========   ======
</Table>

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

(1) Effective  January  1, 2002,  we adopted  SFAS No.  142, Goodwill  and Other
    Intangible Assets. As a result, we  do not amortize goodwill after  December
    31, 2001. Goodwill amortization for the years ended December 31, 2002, 2001,
    2000,  1999 and 1998 was $0, $19,576, $16,653, $774 and $0, respectively, or
    $0.00, $121.30, $113.86, $6.83 and $0.00 per diluted common share.

                                        13
<PAGE>

<Table>
<Caption>
                                                              DECEMBER 31,
                                          ----------------------------------------------------
                                            2002       2001        2000        1999      1998
                                          --------   ---------   ---------   --------   ------
                                                             (IN THOUSANDS)
<S>                                       <C>        <C>         <C>         <C>        <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents...............  $  8,775   $   8,648   $  15,206   $     --   $   56
Working capital.........................     4,063        (985)     (4,209)    (4,109)    (566)
Total assets............................    53,673      79,503     135,958     11,840    2,025
Long term obligations, less current
  portion...............................    12,743      33,365      36,114        953       68
Obligations under capital leases, less
  current portion.......................        --          34         102         93       --
Redeemable preferred stock..............        --     132,676     104,230         --       --
Total stockholders' equity (deficit)....    21,959    (105,373)    (32,792)     4,858     (661)
</Table>

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

     The information in this discussion contains forward-looking statements that
involve risks  and uncertainties.  These statements  involve known  and  unknown
risks,  uncertainties,  and other  factors that  may  cause our  actual results,
performance, or achievements to be materially different from any future results,
performances, or  achievements  expressed  or  implied  by  the  forward-looking
statements.  In some cases, you can identify forward-looking statements by terms
such as "may,"  "might," "will," "should,"  "could," "would," "plan,"  "expect,"
"intend,"  "believe," "goal," "estimate,"  "anticipate," "predict," "potential,"
or the negative  of these terms,  and similar expressions  intended to  identify
forward-looking  statements.  These statements  reflect  our current  views with
respect to future events and are based  on assumptions and subject to risks  and
uncertainties. Given these uncertainties, you should not place undue reliance on
these   forward-looking  statements.  Also,   these  forward-looking  statements
represent our estimates and assumptions only as  of the date of this Form  10-K.
You  should read this Form  10-K completely and with  the understanding that our
actual future results may be materially different from what we currently expect.
We qualify all of our forward-looking statements by these cautionary statements.
Factors that might cause  or contribute to such  a discrepancy include, but  are
not  limited to, those discussed under the heading "Risk Factors That May Affect
Future Results and Market Price of Stock" elsewhere in this Form 10-K.

OVERVIEW

GENERAL

     We have focused on developing software solutions designed specifically  for
the  printing industry  supply chain  since our  inception in  1987. In February
2000, Prograph Systems, our predecessor company, changed its name to  printCafe,
Inc.,  and  we  launched our  Web-based  products to  complement  our enterprise
resource planning software. From February  through April 2000, we acquired  five
complementary  businesses for an aggregate purchase  price of $137.3 million. We
have also committed significant resources to develop, integrate, and market  our
products, expand our management team, and hire additional personnel. On June 18,
2002,  we completed our  initial public offering by  issuing 3,750,000 shares of
our common stock at a price of $10.00 per share. We incurred a net loss of $95.7
million, $70.0 million and $40.8 million in 2000, 2001 and 2002 respectively and
had an accumulated deficit of $234.7 million as of December 31, 2002.

     The acquisitions we  completed in  early 2000 generated  goodwill of  $57.7
million,  of which $22.5  million remained unamortized as  of December 31, 2002,
and other intangible  assets of $86.4  million, of which  $5.5 million  remained
unamortized  as of December 31,  2002. In accordance with  SFAS No. 142, we have
performed  the  required  impairment  tests  of  goodwill  and  indefinite-lived
intangible  assets  as  of January  1,  2002  and December  31,  2002,  and have
determined that  no impairment  loss is  required to  be recognized.  The  other
intangible  assets  are being  amortized over  a  three-year period,  Any future
write-off of goodwill or other intangible  assets as a non-cash charge could  be
significant and would likely harm our operating results. In addition, any future
impairment  loss recognition may adversely affect our ability to comply with the
financial covenants  in our  installment note  with National  City Bank.  As  of
December  31, 2002,  we were  not in compliance  with the  debt service coverage
covenants  of   the  installment   note.  We   have  received   a  waiver   with

                                        14
<PAGE>

respect  to this default from National City Bank, which expires January 1, 2004.
As of December 31, 2002, the outstanding principal balance of this note was $0.3
million.

     We acquired  substantially  all the  assets  and intellectual  property  of
printChannel,  Inc. in  October 2002. This  transaction did not  have a material
impact on  fourth quarter  financial results  or our  financial position  as  of
December 31, 2002.

     On  February 26, 2003,  we entered into  a merger agreement  with EFI. Upon
completion of the merger, we would become a wholly-owned subsidiary of EFI.  Our
board  of directors has  approved the merger  with EFI and  has called a special
meeting of our stockholders to vote on the merger. The merger will be adopted if
the holders of a majority of our outstanding shares of common stock vote for the
proposed merger with EFI.  We will incur significant  costs associated with  the
merger,  including legal, accounting, financial  printing and financial advisory
fees. Many  of these  fees must  be paid  regardless of  whether the  merger  is
completed.  We also  may incur significant  costs in defending  ourselves in the
lawsuit brought against us by Creo in February 2003 related to our  transactions
with EFI. In addition, our relationships with customers may be disrupted because
of  the diversion of management attention while  negotiating the merger and as a
result of any  perceived uncertainty  regarding the  outcome of  the merger.  If
customers  delay decisions to license our  products due to this uncertainty, our
results of operations would be adversely affected.

SOURCES OF REVENUE

     Our revenue is derived principally  from licenses and subscriptions of  our
products,  maintenance contracts, and professional and other services, including
implementation, consulting, and training.  Our products are typically  purchased
under either a perpetual license or a time-based or usage-based subscription. We
offer  our  enterprise resource  planning  and other  client/server  software to
printers and  print buyers  under  license agreements.  We offer  our  Web-based
products  to  printers and  print  buyers under  subscription  agreements, which
typically have  a  term  of  three  years.  Our  print  buyer  customers  pay  a
subscription  fee for our Web-based products based on the number of users of the
website. Our printer customers can purchase either an unlimited subscription  or
a  limited  subscription for  our Web-based  products. The  fee for  the limited
subscription is  based  on the  value  of  print orders  processed  through  the
customer's  website. Maintenance contracts are sold to customers, usually at the
time of sale  of a software  license, under annual  agreements that provide  for
automatic  renewal, unless  the customer  cancels. We  also provide professional
services, which are offered at an hourly rate.

     We have derived most of our revenue  from licenses of our software and  the
sale  of related maintenance to printers. In the first quarter of 2001, we began
to recognize revenue  from the sale  of our Web-based  products to printers  and
began to market our Web-based solutions for print buyers.

     For the years ended December 31, 2000, 2001 and 2002, revenues from foreign
customers approximated 5%, 11% and 15% respectively, of our total revenues.

CRITICAL ACCOUNTING POLICIES

     Our  discussion  and analysis  of our  financial  condition and  results of
operations are based upon our consolidated financial statements, which have been
prepared in  accordance with  accounting principles  generally accepted  in  the
United States. The preparation of these financial statements requires management
to  make  estimates and  judgments that  affect the  reported amount  of assets,
liabilities, revenues, and expenses, and related disclosure of contingent assets
and liabilities. Our actual results may differ from those estimates.

     The following critical accounting policies affect the significant judgments
and estimates we use in preparing our consolidated financial statements.

REVENUE RECOGNITION

     We recognize revenue on our software products in accordance with  Statement
of  Position  (SOP)  97-2,  Software  Revenue  Recognition,  which  provides for
recognition of  revenue  when  persuasive evidence  of  an  arrangement  exists,
delivery  of the product has occurred,  no significant obligations remain on our
part with
                                        15
<PAGE>

regard to implementation, the fee is fixed and determinable, and  collectibility
is probable. SOP 97-2 generally requires revenue earned on software arrangements
involving  multiple  elements  to be  allocated  to  each element  based  on the
relative fair value  of each element.  Revenue recognized from  multiple-element
arrangements  is allocated to  undelivered elements of  the arrangement, such as
maintenance and professional services, based on the relative fair value of  each
element.  Our  determination  of fair  value  of each  element  in multi-element
arrangements is based on vendor-specific objective evidence (VSOE). We limit our
assessment of VSOE for each  element to either the  price charged when the  same
element is sold separately or the price established by management for an element
not  yet sold separately. We have VSOE for maintenance services and professional
services.

     If evidence of fair value of  all undelivered elements exists but  evidence
does  not exist for one  or more delivered elements,  then revenue is recognized
using the residual  method. Under  the residual method,  the fair  value of  the
undelivered  elements is deferred and the remaining  portion of the total fee is
recognized as revenue. We generally recognize license revenue under the residual
method upon delivery  of our software  to the customer,  provided collection  is
probable.  Revenue  allocated  to  maintenance is  recognized  ratably  over the
maintenance term and revenue allocated to training and other service elements is
recognized as the  services are  performed. Revenue from  Web-based products  is
recognized ratably over the term of the subscription for unlimited subscriptions
and  is  recognized  based  on  usage, subject  to  a  fixed  term,  for limited
subscriptions. Many of our agreements include warranty provisions. Historically,
these provisions have not had a  significant impact on our revenue  recognition.
In  those instances  where customer acceptance  may be in  question, all revenue
relating to that arrangement is deferred until the warranty period has expired.

CONTINGENCIES

     We are  involved  in  disputes  and litigation  in  the  normal  course  of
business.  We are required to assess the  likelihood of any adverse judgments or
outcomes to these  matters as  well as potential  ranges of  probable losses.  A
determination   of  the  amount   of  reserves  required,   if  any,  for  these
contingencies are  made after  careful analysis  of each  individual issue.  The
required  reserves may  change in  the future  due to  new developments  in each
matter or changes in  insurance coverage or  our approach, such  as a change  in
settlement strategy.

STOCK-BASED COMPENSATION

     We  have  elected to  follow Accounting  Principles  Board Opinion  No. 25,
Accounting for Stock Issued  to Employees, and  related interpretations for  our
employee  stock options because  the alternative fair  value accounting provided
under SFAS No. 123, Accounting for Stock Based Compensation (SFAS 123), requires
use of valuation  models that  were not developed  for use  in valuing  employee
stock options.

     In the first quarter of 2002, we granted options to purchase 766,520 shares
of  common stock, with  an exercise price  of $4.21 per  share, to employees and
directors. As  a result,  we  recorded approximately  $4.4 million  of  deferred
compensation.  This amount represents the  difference between the exercise price
and the fair market value of our common stock on the date we granted these stock
options. We will record stock-based  compensation expense of approximately  $1.1
million  annually over the  vesting period of these  options, which is generally
four years. If the merger  with EFI is completed,  the vesting of these  options
will be accelerated by six months.

     In  April 2002,  we granted  options to  purchase 381,603  shares of common
stock, with an  exercise price of  $15.54 per  share, to employees.  We did  not
record  any stock-based  compensation expense  related to  these options  as the
exercise price was  above the then  current fair market  value. We also  granted
options  to purchase 92,910  shares of common  stock to employees  in June 2002,
with an  exercise  price  of $2.00  per  share.  As a  result,  we  will  record
approximately $0.2 million of stock-based compensation expense annually over the
vesting period of these options, which is three years.

     For  the years  ended December  31, 2000, 2001  and 2002,  we recorded $5.1
million,  $1.1   million  and   $1.4  million,   respectively,  of   stock-based
compensation expense.

                                        16
<PAGE>

WARRANTS

     We  account for equity  instruments issued to  nonemployees and pursuant to
strategic alliance agreements  in accordance  with the provisions  of SFAS  123,
Emerging Issues Task Force No. 96-18, Accounting for Equity Instruments that are
Issued  to Other  than Employees  for Acquiring  or in  Conjunction with Selling
Goods or  Services, and  Emerging Issues  Task Force  No. 01-9,  Accounting  for
Consideration  Given  by Vendor  to a  Customer  or a  Reseller of  the Vendor's
Product. Warrant  expense represents  charges associated  with the  issuance  of
warrants to purchase our common stock. To the extent that we derive revenue from
agreements  entered into in connection with  the issuance of warrants, we offset
this revenue  by the  expense  associated with  these  warrants. Any  amount  of
expense  that exceeds  revenue is recorded  in sales and  marketing, general and
administrative, or interest expense, based upon the nature of the agreement. The
amount of expense is equal to the fair value of vested warrants determined using
Black-Scholes pricing  models. The  following  table sets  forth the  amount  of
expense  and reduction to revenue associated with the issuance of these warrants
for  the  year  ended  December  31,  2000,  2001  and  2002,  respectively  (in
thousands):

<Table>
<Caption>
                                                               2000      2001    2002
                                                              -------   ------   ----
<S>                                                           <C>       <C>      <C>
Reduction in revenue........................................  $    --   $   47   $--
Increase in sales and marketing.............................    3,841    1,054    26
Increase in general and administrative......................      437       --    --
Increase in interest expense................................    1,943    1,161    --
</Table>

     As of December 31, 2002, we had unvested warrants to purchase 43,899 shares
of  common stock, which have exercise prices ranging from $266.40 to $592.07 and
vest upon attainment of  performance criteria. Upon the  vesting of warrants  to
purchase  13,119 of these shares of common stock, we will record warrant expense
based upon fair  value for each  warrant, and  upon the vesting  of warrants  to
purchase  30,780  of  these  shares  of common  stock,  we  will  reduce revenue
generated from the  warrant holder  during the  period when  vesting occurs.  We
cannot predict the timing or amount of this reduction in revenue and increase in
expense because the amount is calculated using the fair market value at the time
of vesting.

INCOME TAXES

     Deferred  income taxes are recognized for all temporary differences between
tax and financial bases of  our assets and liabilities,  using the tax laws  and
statutory  rates applicable to the periods in which the differences are expected
to affect  taxable income.  As of  December  31, 2002,  we had  significant  net
operating  loss carryforwards available to offset future taxable income. The net
operating loss carryforwards  will expire beginning  2015 through 2021.  Federal
and  state tax rules  impose substantial restrictions on  the utilization of net
operating loss and tax credit carryforwards in situations where changes occur in
the stock ownership of  a company. Utilization of  our carryforwards is  limited
because  of past ownership changes. In the event that we have a future change in
ownership, utilization of these carryforwards could be further limited.

     We have established a 100% valuation allowance against deferred tax  assets
due  to the uncertainty  that future tax  benefits can be  realized from our net
operating loss carryforwards and other deferred tax assets.

IDENTIFIED INTANGIBLE ASSETS, PURCHASED TECHNOLOGY AND GOODWILL

     Our identified  intangible assets,  purchased technology  and goodwill  are
related  mainly to our business  acquisitions. We amortize identified intangible
assets and  purchased technology  on a  straight-line basis  over the  estimated
useful   lives  (generally  three  years)  of  the  remaining  assets.  Goodwill
represents the  excess  of  cost over  the  fair  value of  net  intangible  and
identifiable  intangible  assets of  acquired  businesses. Effective  January 1,
2002, we adopted Statement of  Financial Accounting Standards No. 142,  Goodwill
and  Other Intangible Assets (SFAS No. 142).  Before we adopted SFAS No. 142, we
amortized goodwill over its estimated useful life of three years. Upon  adoption
of  SFAS No. 142,  we performed an  initial impairment analysis.  Under SFAS No.
142, goodwill is no longer amortized to  expense, but is instead subjected to  a
periodic  impairment test at  least annually. The impairment  test is a two-step
process, which analyzes  whether or  not goodwill  has been  impaired. Step  one
requires   that  the  fair  value  be  compared  to  book  value.  If  the  fair

                                        17
<PAGE>

value is higher than the book value, no impairment is indicated and there is  no
need  to perform the second step of the process. If the fair value is lower than
the book value, step two must be evaluated. Step two requires the fair value  to
be  allocated to assets and liabilities in  a manner similar to a purchase price
allocation in order to  determine the implied fair  value of the goodwill.  This
implied  fair value is  then compared with  the carrying amount,  and if it were
less, we  would  then  recognize  an  impairment  loss.  We  test  goodwill  for
impairment annually in the fourth quarter.

IMPAIRMENT OF LONG-LIVED ASSETS

     Effective  January 1,  2002, we  adopted SFAS  No. 144,  Accounting for the
Impairment or  Disposal  of Long-Lived  Assets  (SFAS  No. 144).  SFAS  No.  144
supersedes  or amends existing  accounting literature related  to the impairment
and disposal of long-lived assets.

     Whenever events  or changes  in circumstances  indicate that  the  carrying
amount  of long-lived  assets may not  be recoverable, we  review our long-lived
assets for impairment by first comparing the carrying value of the assets to the
sum of the undiscounted cash flows expected to result from the use and  eventual
disposition  of the assets. If the carrying value exceeds the sum of the assets'
undiscounted cash flows, we estimate an impairment loss by taking the difference
between the carrying value  and fair value of  the assets. No impairment  charge
has been recorded in any of the periods presented.

RECENT ACCOUNTING PRONOUNCEMENTS

  DEBT EXTINGUISHMENT COSTS

     In  April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 62, Amendment of FASB Statement No. 13 and Technical  Corrections.
SFAS No. 145, which becomes effective for financial statements issued for fiscal
years   beginning  after  May  15,  2002   and  requires  gains  and  losses  on
extinguishment of  debt to  be  classified as  income  or loss  from  continuing
operations  rather than as extraordinary items  as previously required under the
provisions of Accounting Principles Board Opinion No. 30, Reporting the  Results
of  Operations -- Reporting the Effects of  Disposal of a Segment of a Business,
and Extraordinary, Unusual and  Infrequently Occurring Events and  Transactions.
As  of December  31, 2002,  we early  adopted SFAS  No. 145  and reclassified an
extraordinary loss of $1.1 million recognized  in the second quarter of 2002  as
other expense.

  EXIT AND DISPOSAL ACTIVITIES

     In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with  Exit or Disposal  Activities, which became effective  for exit or disposal
activities that are initiated  after December 31, 2002.  SFAS No. 146  addresses
financial  accounting and reporting  for costs associated  with exit or disposal
activities and requires that a liability for  a cost associated with an exit  or
disposal  activity be recognized  at fair value when  the liability is incurred,
rather than at the  date of an entity's  commitment to an exit  plan. We do  not
believe  that SFAS No. 146 will have a material impact on its financial position
and results of operations.

  STOCK-BASED COMPENSATION

     In December 2002, the FASB issued SFAS No. 148, Accounting for  Stock-Based
Compensation  -- Transition  and Disclosure. SFAS  No. 148 amends  SFAS No. 123,
Accounting for  Stock-Based  Compensation,  to provide  alternative  methods  of
transition  for a voluntary  change to the  fair value method  of accounting for
stock-based employee compensation. In  addition, SFAS No.  148 amends the  prior
disclosure  guidance  and  requires  prominent disclosures  in  both  annual and
interim financial  statements about  the method  of accounting  for  stock-based
employee compensation and the effect of the method used on reported results. For
entities  that voluntarily change  to the fair value  based method of accounting
for stock-based employee compensation,  the transition provisions are  effective
for  fiscal years ending after  December 15, 2002. For  all other companies, the
disclosure provisions are  effective for  interim and  annual periods  beginning
after December 15, 2002.

                                        18
<PAGE>

  GUARANTEES

     In  November  2002,  the  FASB issued  Interpretation  No.  45, Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees  of Indebtedness of Others (FIN 45).  FIN 45 clarifies and expands on
existing disclosure requirements for  guarantees, including loan guarantees.  It
also  would  require that,  at  the inception  of a  guarantee,  we may  need to
recognize a liability for the fair value of our obligation under that guarantee.
The initial fair value recognition and measurement provisions will be applied on
a prospective basis to  guarantees issued or modified  after December 31,  2002.
The  disclosure  provisions are  effective for  financial statements  of periods
ending after  December 15,  2002. The  adoption of  FIN 45  did not  impact  our
financial position, results of operations or cash flows.

RESTRUCTURING

     In  September 2000, we initiated a  restructuring plan that was designed to
reduce our cost structure  and eliminate redundant job  tasks that existed as  a
result  of the acquisitions made in early 2000. As part of this plan, we reduced
our workforce by  78 employees  through elimination  of some  positions and  the
consolidation  of other  redundant job  tasks. The  restructuring resulted  in a
charge for the  year ended December  31, 2000 of  $1.2 million, which  consisted
primarily  of severance and other benefits  related to the discharged employees.
Our cash flow from operations was  adversely impacted by these costs during  the
fourth quarter of 2000 and the first six months of 2001.

     In  May 2001,  we announced a  restructuring that primarily  related to the
consolidation of client support  operations into existing facilities,  resulting
in  a restructuring charge of $2.1 million. The plan included terminations of 45
employees and the  reduction of leased  office space. As  of December 31,  2002,
less than $0.1 million remained in the reserve related to lease obligations. All
remaining  cash expenditures relating to these  lease obligations will have been
made by March 31, 2003.

     In August 2002,  we announced a  restructuring effecting an  organizational
realignment   of  our  product  management  and  customer  service  and  support
operations. This  resulted in  a restructuring  charge of  $0.5 million  in  the
quarter  ended September 30, 2002. This  charge consisted primarily of severance
and benefits including involuntary termination and COBRA benefits,  outplacement
costs,  and payroll  taxes for the  approximately 40 employees  impacted by this
restructuring. As of December 31, 2002, we had expended substantially all of the
reserve.

     These restructuring  plans  focused  on reducing  our  cost  structure  and
improving  the  efficiency  of  our operations  to  respond  to  changing market
conditions and to realize the anticipated  benefits of the acquisitions made  in
early  2000.  We  believe  that  these actions  will  not  adversely  impact our
operations in the future  because we have undertaken  initiatives to manage  and
monitor  our client and  employee relations during the  execution of these plans
and subsequent to their completion.

                                        19
<PAGE>

RESULTS OF OPERATIONS

     The  following  table  presents  selected financial  data  for  the periods
indicated as a percentage of our total revenue:

<Table>
<Caption>
                                                              YEARS ENDED DECEMBER 31,
                                                              -------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS DATA                    2000      2001      2002
------------------------------------------                    -----     -----     -----
<S>                                                           <C>       <C>       <C>
Revenue:
  License and subscription..................................    35%       43%       45%
  Maintenance...............................................    60        49        47
  Professional services and other...........................     5         8         8
                                                              ----      ----      ----
     Total revenue..........................................   100       100       100
                                                              ----      ----      ----
Cost of revenue:
  License and subscription..................................    11         9         8
  Maintenance...............................................    29        15        11
  Professional services and other...........................     2         4         3
                                                              ----      ----      ----
     Total cost of revenue..................................    42        28        22
                                                              ----      ----      ----
Gross profit................................................    58        72        78
                                                              ----      ----      ----
Operating expenses:
  Sales and marketing.......................................    81        46        37
  Research and development..................................    45        29        26
  General and administrative................................    97        18        13
  Depreciation..............................................     8         9         6
  Amortization..............................................   156       117        63
  Stock-based compensation and warrants.....................    20         3         3
  Restructuring charge......................................     5         5         1
                                                              ----      ----      ----
     Total operating expenses...............................   412       227       149
                                                              ----      ----      ----
Loss from operations........................................  (354)     (155)      (71)
Other expense...............................................   (24)      (12)      (16)
                                                              ----      ----      ----
Net loss....................................................  (378)     (167)      (87)
Accretion of redeemable preferred stock.....................   (19)      (13)      (13)
                                                              ----      ----      ----
Net loss attributable to common stock.......................  (397)%    (180)%    (100)%
                                                              ====      ====      ====
</Table>

COMPARISON OF YEARS ENDED DECEMBER 31, 2001 AND DECEMBER 31, 2002

TOTAL REVENUE

     Total revenue increased  from $41.9  million in  2001 to  $46.5 million  in
2002,  an increase of 11%. The increase  in license and subscription revenue was
primarily due to increased sales of licenses of our enterprise resource planning
products, which represented 32% of our total revenue for the twelve months ended
December 31, 2002, resulting from an increase in sales and marketing initiatives
focusing on these products.  These sales and marketing  initiatives also led  to
additional  maintenance contracts  associated with  these new  license sales and
additional training and  consulting services.  An increase  in subscription  and
transaction  fees generated  by our  Web-based products  resulting from contract
renewals and  an  increase  in  transactional  volume  processed  through  these
products also contributed to the increase in revenue.

                                        20
<PAGE>

TOTAL COST OF REVENUE

     Cost of revenue includes  direct labor and other  direct costs relating  to
the  delivery of our products and services. The cost of license and subscription
revenue is  primarily  related to  third  party  licenses that  we  resell  with
licenses  and  subscriptions  of  our  products,  as  well  as  any  hosting and
communication costs. Cost  of revenue decreased  from $11.6 million  in 2001  to
$10.4  million in 2002, a decrease of 11%. This decrease was the result of lower
third party license  costs and a  reduction in  the number of  employees in  our
client  and  professional  services  area resulting  from  the  restructuring of
operations in the second quarter of 2001 and the third quarter of 2002. Cost  of
revenue  as a percentage of  revenue decreased from 28% in  2001 to 22% in 2002,
resulting from the increase in revenue and the reduction in costs.

OPERATING EXPENSES

     We classify our operating  expenses into six  general categories, based  on
the  nature of the  expenditure: sales and  marketing, research and development,
general  and   administrative,  depreciation,   amortization,  and   stock-based
compensation  and  warrants.  We  allocate  our  total  costs  for  overhead and
facilities to  each of  the functional  areas  of our  business that  use  these
services  based upon  estimated usage.  These allocated  charges include general
overhead items  such as  administrative  salaries, professional  fees,  building
rent, equipment leasing costs, and telecommunication charges.

     Sales  and marketing.   Sales and  marketing expenses  consist primarily of
costs related  to sales  and marketing,  employee compensation,  travel,  public
relations,  trade shows, and advertising. Sales and marketing expenses decreased
from $19.1 million in 2001  to $17.0 million in 2002,  a decrease of 11%.  Sales
and  marketing expenses as a percentage of revenue decreased from 46% in 2001 to
37% in 2002. The decrease in absolute  dollars was primarily due to a  reduction
in  the number of sales and marketing employees resulting from the restructuring
of  operations  in  the  second  quarter  of  2001  and  reductions  in  travel,
advertising, promotion, public relations, and general marketing expenses related
to initiatives that were focused on reducing expenses.

     Research  and  development.    Research  and  development  expenses consist
primarily of expenses  related to the  development and upgrade  of our  existing
proprietary  software and expenses  related to research  and development for new
product offerings. These expenses include employee compensation for research and
development expenses and  third-party contract development  costs. Research  and
development  expenses decreased from  $12.2 million in 2001  to $12.0 million in
2002, a decrease of 1%. The decrease was primarily due to a reduction in outside
consulting expenses.  Research  and  development expenses  as  a  percentage  of
revenue decreased from 29% in 2001 to 26% in 2002.

     General  and administrative.   General and  administrative expenses consist
primarily of  compensation for  executive and  administrative personnel,  travel
expenses, professional advisory fees, and general overhead expenses that are not
allocated  to  cost of  revenue, product  development,  or sales  and marketing.
General and administrative expenses decreased from $7.6 million in 2001 to  $6.2
million  in 2002, a  decrease of 19%.  General and administrative  expenses as a
percentage of revenue decreased from  18% in 2001 to  13% in 2002. The  decrease
was primarily due to a reduction in general and administrative employees.

     Depreciation.   Depreciation expense consists primarily of the depreciation
of equipment,  furniture,  fixtures, and  leasehold  improvements that  are  not
directly  related to the  generation of revenue.  Depreciation expense decreased
from $3.8  million in  2001 to  $2.9 million  in 2002,  a decrease  of 24%.  The
decrease   is  primarily  attributable  to  computer  equipment  becoming  fully
depreciated and new equipment being purchased at a slower rate compared to prior
periods.

     Amortization.    Amortization  expense  consists  of  the  amortization  of
intangible  assets such as  goodwill, purchased technology,  customer lists, and
patents. Amortization  expense decreased  from $49.1  million in  2001 to  $29.5
million in 2002, a decrease of 40%. The decrease was primarily the result of the
adoption  of Statement of  Financial Accounting Standards  No. 142, Goodwill and
Other Intangible  Assets,  effective January  1,  2002. We  have  performed  the
required   impairment   tests  of   goodwill  and   indefinite-lived  intangible

                                        21
<PAGE>

assets as of  January 1,  2002 and  December 31,  2002, and  determined that  no
impairment loss was required to be recognized.

     Stock-based  compensation and  warrants.   Stock-based compensation expense
relates to grants of employee stock options and issuances of stock with exercise
prices lower than the deemed fair value of the underlying shares at the time  of
grant  or issuance and issuance of stock in consideration of salary. Stock-based
compensation and warrants expense  increased from $1.1 million  in 2001 to  $1.4
million   in  2002.  The  increase  was  primarily  the  result  of  stock-based
compensation expense related  to options  to purchase 766,520  shares of  common
stock at an exercise price of $4.21 that were issued during the first quarter of
2002 to employees and directors.

OTHER INCOME (EXPENSE)

     Other  income (expense) consists  primarily of interest  expense related to
our borrowings and  amortization of  debt origination fees,  offset by  interest
income  received from the investment of  proceeds from our financing activities.
Interest expense decreased from $5.3 million in 2001 to $3.6 million in 2002,  a
decrease of 31%. The decrease is primarily due to the repayment of $17.8 million
of  indebtedness upon  completion of  our initial  public offering,  offset by a
higher weighted average  interest rate  on outstanding  indebtedness during  the
first two quarters of 2002 as compared to the same periods of 2001. During 2002,
amortization  of debt origination fees of $3.3  million was recorded as a result
of the restructuring of debt during the second quarter and the write-off of $1.1
million of debt origination fees associated  with a warrant issued to a  lender.
Amortization expense related to debt origination fees will be approximately $0.9
million  per quarter through  December 31, 2003. Other  income (expense) for the
twelve months ended December 31, 2002  also includes a fair value adjustment  to
reflect  a decline  in the  value of  the collateral  for notes  receivable from
stockholders.

INCOME TAXES

     During the twelve months ended December 31, 2001 and 2002, we incurred  net
losses  for  federal and  state tax  purposes  and have  not recognized  any tax
provision or benefits. At December 31, 2002, we had significant accumulated  net
operating loss carryforwards for federal and state tax purposes. The federal tax
carryforwards   expire  in  various  years   beginning  in  2015  through  2021.
Utilization of  net  operating loss  carryforwards  is subject  to  limitations.
Events which cause limitations on the amount of net operating losses that we may
use  in any  one year include,  but are  not limited to,  a cumulative ownership
change of more than 50% over a three-year period.

COMPARISON OF YEARS ENDED DECEMBER 31, 2000 AND DECEMBER 31, 2001

     The inclusion for the year 2001 of the results of the companies we acquired
in early 2000 had an incremental effect  on our results of operations. The  more
significant reasons for the changes year over year are described below.

TOTAL REVENUE

     Total  revenue increased  from $25.3  million in  2000 to  $41.9 million in
2001, an increase of 65%. The  increase in license and subscription revenue  was
primarily due to increased sales of licenses of our enterprise resource planning
products,  which represented 32% of our total revenue in 2001, resulting from an
increase in sales and  marketing initiatives focusing  on these products.  These
sales  and marketing  initiatives also  led to  additional maintenance contracts
associated with these new license  sales and additional training and  consulting
services.  To  a  lesser extent,  revenue  also  increased because  we  began to
recognize revenue from subscriptions for our Web-based products for printers  in
the first quarter of 2001.

TOTAL COST OF REVENUE

     Cost  of revenue increased from  $10.7 million in 2000  to $11.6 million in
2001, an increase of 9%.  Cost of revenue as  a percentage of revenue  decreased
from  42%  in 2000  to 28%  in 2001.  The  decrease as  a percentage  of revenue
primarily resulted from an increase in revenue  and a decrease in the number  of
customer and
                                        22
<PAGE>

professional  service employees as a result  of the restructurings of operations
in the third quarter of 2000 and the second quarter of 2001.

OPERATING EXPENSES

     Sales and marketing.   Sales  and marketing expenses  decreased from  $20.5
million  in 2000 to $19.1 million in 2001, a decrease of 7%. Sales and marketing
expenses as a percentage of revenue decreased  from 81% in 2000 to 46% in  2001.
The  decrease in absolute dollars was primarily due to a reduction in the number
of sales and marketing employees resulting from restructurings of operations  in
the  third quarter  of 2000  and the  second quarter  of 2001  and reductions in
travel, advertising, promotion, public relations, and general marketing expenses
related to initiatives that were focused on reducing expenses.

     Research and development.  Research and development expenses increased from
$11.3 million in 2000 to $12.2 million in 2001, an increase of 8%. The  increase
was primarily due to continued investment in the development of our software and
Web-based products. Research and development expenses as a percentage of revenue
decreased from 45% in 2000 to 29% in 2001.

     General  and administrative.  General and administrative expenses decreased
from $24.5 million in 2000 to $7.6  million in 2001, a decrease of 69%.  General
and  administrative expenses  as a percentage  of revenue decreased  from 97% in
2000 to 18% in 2001. The decrease was primarily due to a decrease in general and
administrative employees  and the  consolidation of  facilities as  a result  of
restructurings of operations in the third quarter of 2000 and the second quarter
of 2001. Also contributing to the decrease were expense reductions in travel and
professional  fees  as a  result of  initiatives that  were focused  on reducing
expenses.

     Depreciation.  Depreciation expense increased from $2.1 million in 2000  to
$3.8  million  in  2001.  The  increase is  primarily  due  to  the  purchase of
additional computer equipment  and software  related to the  development of  our
Web-based products.

     Amortization.  Amortization expense increased from $39.5 million in 2000 to
$49.1  million  in  2001,  an  increase  of  24%,  reflecting  a  full  year  of
amortization in 2001.

     Stock-based  compensation  and  warrants.    Stock-based  compensation  and
warrants  expense  was $5.1  million  in 2000  and  $1.1 million  in  2001. This
decrease is the result of a decrease in warrant expense and, to a lesser extent,
a reduction in the  number of stock  options being granted  in 2001 at  exercise
prices below their deemed fair value.

OTHER INCOME (EXPENSE)

     Other  expense decreased from $6.2 million in 2000 to $5.3 million in 2001,
a decrease  of 14%.  The decrease  is a  result of  a reduction  in  outstanding
indebtedness as well as a decrease in interest rates.

INCOME TAXES

     During  2001, we incurred net losses for federal and state tax purposes and
have not recognized any tax provisions or benefits.

LIQUIDITY AND CAPITAL RESOURCES

     As of December 31, 2002, we had $8.8 million in cash and cash  equivalents,
compared  to $8.6 million as of December  31, 2001. The change resulted from our
receipt of $33.0  million in net  proceeds from our  initial public offering  in
June  2002 offset by debt repayments of $17.8 million, principal prepayment fees
of $3.7 million and cash used by operations during the period.

     Net cash  used by  operating  activities totaled  $10.6 million  for  2002,
compared to $17.9 million of net cash used by operating activities for 2001. Net
cash  used in operating activities for 2002 is primarily attributable to the net
loss for  the period  (less non-cash  expenses) in  addition to  an increase  in
accounts   receivable  as  well  as   decreases  in  accounts  payable,  accrued
liabilities and the restructuring reserve. The

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<PAGE>

increase in accounts receivable is principally due to extended payment terms  in
agreements with significant customers.

     Net  cash  used  by investing  activities  totaled $1.0  million  for 2002,
compared to $2.5 million of net cash used by investing activities for 2001. Cash
used by  investing  activities during  2002  was  primarily the  result  of  the
purchase  of  computer  equipment  and  software  licenses  associated  with the
implementation  of  a  new  customer  relationship  management  system  and  the
acquisition  of substantially  all of  the assets  and intellectual  property of
printChannel, Inc. Cash used  by investing activities  in 2001 included  payment
for the license of a patent acquired in 2000, purchase of computer equipment and
software, and the acquisition of technology-related assets of another business.

     Net  cash  provided by  financing activities  was  $11.8 million  for 2002,
compared to $13.8 million of net cash provided by financing activities for 2001.
Cash from financing  activities during  2002 was primarily  attributable to  our
receipt  of $33.0 million  in net proceeds  from our initial  public offering in
June 2002 offset,  in part, by  debt repayments of  $17.8 million and  principal
prepayment  fees of  $3.7 million.  Cash from  financing activities  in 2001 was
primarily attributable to  the issuance of  shares of our  common and  preferred
stock, offset, in part, by the repayment of indebtedness.

     We  have a $2.0 million demand line  of credit with National City Bank, all
of which was drawn as of December  31, 2002. Borrowings under the facility  bear
interest, which is payable monthly, at the prime rate. We also have entered into
a  $0.9 million  commercial installment note  with National City  Bank, which is
payable monthly and matures  on July 1, 2004.  Borrowings under the  installment
note bear interest, which is payable monthly, at the annual rate of 7.62%. As of
December  31,  2002, the  outstanding principal  balance of  this note  was $0.3
million. The  installment  note  contains  restrictive  covenants,  including  a
limitation  on our  ability to incur  additional indebtedness  or grant security
interests in  our  assets, as  well  as  requirements that  we  satisfy  various
financial  conditions,  including minimum  tangible net  worth and  debt service
coverage. As of December  31, we were  not in compliance  with the debt  service
coverage  covenant  of the  installment  note. We  have  received a  waiver with
respect to this default from National City Bank, which expires January 1,  2004.
If we violate any of these financial covenants and are unable to obtain a waiver
from  National  City Bank,  then National  City Bank  could declare  all amounts
outstanding, together with accrued interest, to be immediately due and  payable.
Obligations  under the installment note and line of credit are secured by all of
our tangible and intangible personal property.

     On May 31, 2002 and June 10,  2002, we executed agreements with certain  of
our  debt holders to modify the terms  of related-party debt, effective upon the
completion of our initial public offering.  An amendment to the promissory  note
issued  to the  former shareholders of  M Data, Inc.  dated as of  May 31, 2002,
provided for an increase  in the principal  amount of the  note to $4.2  million
from  $4.0 million in return for a reduction in the annual interest rate to 8.0%
from 12.0%.  Principal  payments  are  due  in  24  equal  monthly  installments
commencing January 2003. Interest is payable monthly and commenced in June 2002.
Obligations  under the note are  secured by all of  the intellectual property of
our subsidiary, M Data, Inc.

     An amendment to the credit agreement  with Iris Graphics, dated as of  June
10,  2002: (i) reduced  the annual interest rate  to a fixed  rate of 4.0%; (ii)
provided for  the  payment  of a  total  of  $11.8 million  of  the  outstanding
principal  balance  of $23.6  million  at March  31,  2002 and  all  accrued and
deferred interest upon the completion of our initial public offering; and  (iii)
eliminated   the  financial  covenants.  In  return,  we  paid  a  $3.7  million
restructuring fee  upon completion  of the  initial public  offering. The  $11.8
million  remaining principal  balance is  due in  one installment  on January 2,
2004. Interest is payable  quarterly and commenced in  June 2002. The  agreement
includes restrictive covenants customary for agreements of this type. If we fail
to  comply with these  restrictive covenants, then the  lender could declare all
outstanding amounts, together with accrued  interest, to be immediately due  and
payable.  Obligations under this  agreement are secured  by substantially all of
our assets.

     Under an amendment to  the loan agreement with  the former shareholders  of
Hagen  Systems, dated as of  June 10, 2002, we were  not required to prepay $2.0
million of the $8.0  million otherwise due upon  an initial public offering  and
the  annual interest rate was reduced to 8.0%, in return for an increase of $0.4
million to the remaining principal balance of the loan. The remaining  principal
amount due under the restructured
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<PAGE>

agreement  is $2.4  million, which  is due  on January  2, 2004.  Interest at an
annual rate of 8.0% is payable monthly and commenced in June 2002. The agreement
includes restrictive covenants customary for agreements of this type. If we fail
to comply with these  restrictive covenants, then the  lender could declare  all
outstanding  amounts, together with accrued interest,  to be immediately due and
payable. Obligations under this  agreement are secured  by substantially all  of
our assets.

     We  believe that,  based on  current levels  of operations  and anticipated
growth, our cash from operations,  together with cash currently available,  will
suffice  to fund our operations for the  next 12 months. Poor financial results,
unanticipated expenses  or unanticipated  opportunities that  require  financial
commitments  could give rise to additional financing requirements sooner than we
expect. If  we  do not  complete  the merger  with  EFI or  complete  a  similar
transaction  with a  third party, we  do not  expect to have  sufficient cash to
repay the $14.2 million of our outstanding debt which becomes due and payable in
January 2004 without  securing additional debt  or equity financing;  we do  not
expect  that additional debt or equity financing would be available to us. If we
are unable to pay these amounts when due, the lenders could proceed against  the
collateral.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK

     In  addition to  other information  in this  Form 10-K,  the following risk
factors should be carefully considered  in evaluating our business because  such
factors  currently  may have  a significant  impact  on our  business, operating
results and financial condition. As a result of the risk factors set forth below
and elsewhere in this Form 10-K and in any other documents we file with the SEC,
actual  results   could  differ   materially  from   those  projected   in   any
forward-looking statements.

     IF  WE FAIL TO COMPLETE THE MERGER WITH  EFI, WE MAY BE UNABLE TO REPAY OUR
DEBT OBLIGATIONS AND OUR  STOCK PRICE MAY FALL.  WE WILL INCUR COSTS  ASSOCIATED
WITH THE MERGER.

     We  entered into a  merger agreement with  EFI in February  2003. Under the
terms of the  merger agreement,  if the  merger is  completed we  will become  a
wholly-owned  subsidiary  of  EFI  and  EFI  will  assume  all  our  outstanding
liabilities, including our debt obligations.  The merger is subject to  standard
closing  conditions, including the approval of the  holders of a majority of our
outstanding shares of common stock. If we do not complete the merger with EFI or
complete a similar  transaction with a  third party,  we do not  expect to  have
sufficient cash to repay the $14.2 million of our outstanding debt which becomes
due  and  payable in  January 2004  without securing  additional debt  or equity
financing; we do not expect that debt or equity financing would be available. In
addition, we will incur significant costs associated with the merger,  including
legal, accounting, financial printing and financial advisory fees; many of these
fees must be paid regardless of whether the merger is completed.

     Under  the terms of the EFI merger agreement, our stockholders will receive
$2.60 per share in cash or EFI common stock at the closing of the merger. If EFI
does not complete the merger  for any reason, our  stock price would decline  to
the  extent that the price of our stock prior to an announcement that the merger
is terminated reflects an assumption that the merger will be completed.

     OUR PROPOSED MERGER WITH EFI MAY ADVERSELY AFFECT OUR SALES DUE TO CONCERNS
OF OUR CUSTOMERS ABOUT OUR PRODUCT OFFERINGS AFTER COMPLETION OF THE MERGER.

     We receive a significant amount of our new sales from commercial  printers.
Although  EFI is a  leading provider of imaging  solutions for network printing,
EFI does not  have a substantial  base of customers  in the commercial  printing
industry.  The  announcement of  our merger  with EFI  may result  in commercial
printers delaying their  decision to  license our  enterprise resource  planning
software,  which  would adversely  impact our  sales  revenue. In  addition, our
relationships with employees, including  our ability to  attract and retain  key
employees  and our relationships  with customers and  suppliers may be disrupted
because of the diversion of management attention while the merger is pending.

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<PAGE>

     THE SLOWDOWN  IN  THE  ECONOMY  HAS AFFECTED  THE  MARKET  FOR  INFORMATION
TECHNOLOGY SOLUTIONS, INCLUDING DEMAND FOR OUR SOFTWARE PRODUCTS, AND OUR FUTURE
FINANCIAL RESULTS MAY DEPEND, IN PART, UPON WHETHER THIS SLOWDOWN CONTINUES.

     A  downturn in  the demand  for information  technology products  among our
current and potential  customers may  result in  decreased revenues  or a  lower
growth  rate for us. Potential customers may delay or forego the purchase of our
products or  may  demand lower  prices  in order  to  purchase our  products.  A
reduction  in the  demand for  our software products  or in  the average selling
price of our products  would reduce our operating  margins and adversely  affect
our operating results.

     IF OUR SOFTWARE PRODUCTS DO NOT ACHIEVE BROAD MARKET ACCEPTANCE, WE MAY NOT
BECOME PROFITABLE AND OUR STOCK PRICE COULD DECLINE.

     Most  print  buyers, printers,  and print  industry raw  material suppliers
currently coordinate the design,  specification, purchasing, and manufacture  of
print  orders either through a combination  of telephone, facsimile, e-mail, and
paperwork or  through proprietary  software  solutions. Web-based  products  are
relatively  new and rapidly evolving, and these products change the way in which
print buyers, printers, and print industry raw material suppliers interact  with
one  another.  Widespread commercial  acceptance  of our  Web-based  products is
important to our future  success. If the market  for Web-based print  management
products  fails  to grow  or  grows more  slowly  than we  anticipate,  then our
operating results could be adversely affected.  To date, most of our sales  have
been  to  printers, and  our  future growth  is  dependent upon  our  ability to
increase sales to print buyers. The growth  of our business also depends on  our
ability to enhance and develop our software products and to identify and develop
new  products  that  serve the  needs  of  our customers.  If  our  existing and
potential customers do  not adopt  our software products,  we may  be unable  to
continue to grow our business and increase our revenues. As a result, we may not
become profitable, or maintain profitability, and our stock price could decline.

     THE  SALES CYCLE FOR  MANY OF OUR  PRODUCTS IS LONG,  WHICH COULD CAUSE OUR
REVENUE AND OPERATING RESULTS TO VARY SIGNIFICANTLY AND INCREASE THE RISK OF  AN
OPERATING LOSS FOR ANY GIVEN FISCAL QUARTER.

     A  customer's decision to purchase and implement many of our products often
involves a  significant  commitment  of  its resources  and  a  lengthy  product
evaluation  and qualification process. Approval at a number of management levels
within a customer's organization is typical for many of our products.  Companies
often  consider  a  wide  range  of issues  before  committing  to  purchase our
software, including anticipated benefits and cost savings, ease of installation,
ability to work with existing computer systems, functionality, and  reliability.
Many  of our potential  customers may be  addressing these issues  for the first
time, and the use of  our products may represent  a significant change in  their
current  print management  practices. As a  result, we  often devote significant
time and resources to educate potential customers about the use and benefits  of
our  products.  The sales  process  for most  of  our products  frequently takes
several months to complete, which  may have an adverse  impact on the timing  of
our revenue, and our operating results could be adversely affected.

     AN  ADVERSE  RULING  IN  CREO'S  LAWSUIT AGAINST  US  COULD  RESULT  IN OUR
INABILITY TO CONSUMMATE THE MERGER WITH EFI, WHICH MAY HAVE AN ADVERSE EFFECT ON
OUR STOCK PRICE

     In February 2003 Creo commenced an action  in The Court of Chancery of  the
State  of Delaware in and for New  Castle County seeking a temporary restraining
order and other relief as further described in "Item 3 -- Legal Proceedings"  of
this  Form  10-K.  Although the  court  denied  Creo's request  for  a temporary
restraining order, the matter is still pending with respect to the other  relief
sought by Creo. We intend to defend ourselves vigorously in this matter. If this
lawsuit  is resolved  unfavorably to  us, our  business and  financial condition
could be adversely affected and we may  not be able to complete the merger  with
EFI.

     CREO'S  LAWSUIT AND THE PLANNED MERGER  WITH EFI COULD DIVERT THE ATTENTION
OF OUR KEY MANAGEMENT AND ADVERSELY AFFECT OUR OPERATING RESULTS

     Our  success  depends  on  the  services  of  our  current  key  management
personnel,  including Marc D. Olin, our  Chairman, President and Chief Executive
Officer, and Joseph J.  Whang, our Chief Financial  Officer and Chief  Operating
Officer.  The lawsuit filed by Creo and the planned merger with EFI could divert
the attention

                                        26
<PAGE>

of our management and resources from our business, which could adversely  affect
our  operating results. In addition, the litigation with Creo could be expensive
which would adversely impact our operating results.

     COMPETITION IN THE PRINTING INDUSTRY SUPPLY CHAIN FOR SOFTWARE PRODUCTS  IS
INTENSE, AND WE MAY NOT BE ABLE TO COMPETE SUCCESSFULLY.

     Our current and potential competitors include companies that offer software
products  and services to the printing industry supply chain, and companies that
offer  software  products  for   enterprise  resource  planning,  supply   chain
management,  and procurement that are not  customized for the printing industry.
We expect  competition  to  increase in  the  future.  Some of  our  current  or
potential  competitors have  longer operating histories,  larger customer bases,
greater brand recognition, and  significantly greater financial, marketing,  and
other  resources. As a result,  these competitors may be  able to devote greater
resources to the development, promotion, sale, and support of their products. In
addition, these companies  may adopt  aggressive pricing  policies and  leverage
their  customer bases to gain market  share. Moreover, our current and potential
competitors may  develop  software products  that  are superior  to  or  achieve
greater  market  acceptance than  ours. If  we are  unable to  offer competitive
software products and services, then our revenues will decline.

     UNPLANNED SYSTEM INTERRUPTIONS, CAPACITY CONSTRAINTS, OR SECURITY  BREACHES
COULD DISRUPT OUR BUSINESS AND DAMAGE OUR REPUTATION.

     We  must offer  customers of our  Web-based products  reliable, secure, and
continuous service to attract and retain customers and persuade them to increase
their reliance on our software  products. As the volume  of data traffic on  our
hosted  Web  sites  increases,  we  must  continually  upgrade  and  enhance our
technical infrastructure  to accommodate  the increased  demands placed  on  our
systems.  Our  operations also  depend in  part  on our  ability to  protect our
systems  against   physical  damage   from   fire,  earthquakes,   power   loss,
telecommunications   failures,  computer  viruses,   unauthorized  user  access,
physical break-ins, and similar events. Any interruption or increase in response
time of  our software  products  could damage  our reputation,  reduce  customer
satisfaction,  and  decrease  usage of  our  services  and the  purchase  of our
products. The  secure  transmission  of  confidential  information  over  public
networks   is   a  fundamental   requirement   for  online   communications  and
transactions. Third parties may  attempt to breach our  security or that of  our
customers.  Any  breach in  our  online security  could  make us  liable  to our
customers, damage our reputation,  and cause a decline  in our revenues. We  may
need  to spend significant resources to  license technologies to protect against
security breaches or to address problems caused by a security breach.

     IF OUR TECHNOLOGIES CONTAIN UNDETECTED  ERRORS OR DEFECTS, WHICH  INTERRUPT
OUR OPERATIONS OR THOSE OF OUR CUSTOMERS, OUR BUSINESS COULD BE HARMED.

     Our  technologies are highly technical  and may contain undetected software
code or other errors or suffer unexpected failures. Because of their nature, our
client/server-based enterprise resource planning and other products can only  be
fully  tested when deployed in our customers' networks. These errors or failures
may disrupt our operations or those of our customers, damage our reputation, and
result in loss of, or delay in,  market acceptance of our software products.  We
may  discover software  errors in  new releases  of our  software products after
their introduction. We  may experience delays  in release, legal  action by  our
customers, lost revenues, and customer frustration during the period required to
correct these errors. Any of these problems could adversely affect our operating
results.

     IF  WE FAIL  TO PROTECT OUR  INTELLECTUAL PROPERTY  RIGHTS, OUR COMPETITIVE
POSITION COULD BE HARMED.

     We  regard  our  patents,  copyrights,  service  marks,  trademarks,  trade
secrets,  and similar intellectual property as  critical to our success. We rely
on  patent,  trademark,  and  copyright   law,  trade  secret  protection,   and
confidentiality  and/or license  agreements with  our employees,  customers, and
strategic partners to protect our proprietary rights. These precautions may  not
prevent  misappropriation  or  infringement  of  our  intellectual  property. In
addition, the status of United States patent protection in the software and  Web
industries  is not well defined and will  evolve as the United States Patent and
Trademark Office grants additional patents. We do not know if any of our  future
patent applications will result in a patent being issued within the scope of the
claims  we  seek, if  at all,  or whether  any  patents we  may receive  will be
challenged or invalidated. In addition,

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<PAGE>

the laws in foreign countries may not protect our proprietary rights to the same
extent as laws in the United States.

     WE MAY FACE INTELLECTUAL PROPERTY CLAIMS THAT COULD BE COSTLY TO DEFEND AND
COULD PREVENT US FROM SELLING OUR SOFTWARE PRODUCTS

     Third parties may infringe or  misappropriate our intellectual property  or
assert  infringement claims  against us.  In addition,  because the  contents of
patent applications in the  United States are not  publicly disclosed until  the
patent  is issued, applications may have been filed by others that relate to our
software products.  From  time to  time  we receive  communications  from  third
parties  asserting that our products infringe, or may infringe, the intellectual
property rights of third parties. Intellectual property litigation is  expensive
and  time consuming  and could divert  management's attention  from our business
operations. This  litigation could  also require  us to  develop  non-infringing
technology or enter into royalty or license agreements with third parties. These
royalty  or  license  agreements, if  required,  may  not then  be  available on
acceptable terms, if  at all.  If we  cannot develop  or license  non-infringing
technology, then our operating results could be adversely affected.

     CREO COULD SUBSTANTIALLY INFLUENCE CORPORATE ACTIONS THAT CONFLICT WITH THE
INTERESTS  OF OUR PUBLIC  STOCKHOLDERS. WE ALSO  HAVE COMMERCIAL AGREEMENTS WITH
CREO THAT ARE IMPORTANT TO OUR BUSINESS.

     Creo Inc. is our largest stockholder, has two representatives on our  board
of  directors, and  is a  party to several  commercial agreements  with us. Creo
beneficially owns 4,736,135 shares of our common stock which represents 44.5% of
the voting power of our outstanding  common stock. In addition, the two  members
of  our board of directors appointed by  Creo, Amos Michelson and Judi Hess, are
executive officers of Creo. Creo could use its stock ownership or representation
on our  board of  directors to  substantially influence  corporate actions  that
conflict with the interests of our public stockholders.

     In  addition to the loan agreement we have with Iris Graphics, an affiliate
of Creo, we have a strategic alliance agreement and a software license agreement
with Creo.  Under the  strategic  alliance agreement,  we  agreed with  Creo  to
undertake  joint sales and  marketing efforts, not to  compete with each other's
business, and  not to  solicit  the employment  of  each other's  employees.  In
addition,  we granted Creo  an exclusive and  perpetual right to  provide, and a
right of first refusal to develop, any content management and workflow  products
for  us. Because we  have granted these  rights to Creo,  we may not  be able to
obtain terms as favorable as those that might otherwise be available if we  were
able  to  negotiate  freely  with  third  parties.  Under  the  software license
agreement, Creo licenses us software which  is used in our printChannel  Classic
product  and  which will  be  used in  our  printChannel I/O  product.  Creo may
terminate the software license agreement in certain circumstances, including the
termination of the strategic alliance agreement  and the acquisition by a  third
party  of more than fifty percent of our outstanding common stock. The strategic
alliance agreement does not specify a termination date. Creo may also  terminate
the  strategic alliance agreement or the software license agreement if we breach
any provision of the agreements and do not remedy that breach within a specified
period of time. If  the agreements were  to terminate, we  could lose access  to
Creo's  sales  force and  the other  benefits derived  from our  joint marketing
efforts, and Creo would be permitted to compete with us. Additionally, we  would
be  required to develop software to replace  the functionality licensed to us by
Creo in  our printChannel  Classic  product. The  termination of  the  strategic
alliance  agreement and  software license agreements  and the  resulting loss of
these benefits could, among other things, reduce our revenues and  significantly
harm our business.

     WE  MAY FAIL TO MEET QUARTERLY  FINANCIAL EXPECTATIONS, WHICH MAY CAUSE THE
MARKET PRICE OF OUR COMMON STOCK TO DECLINE.

     Our operating results are difficult  to predict and may vary  significantly
from  quarter to quarter in the future. Our historical financial results are not
indicative of our future results. Our quarterly operating results may  fluctuate
as a result of many factors, including, but not limited to:

     - the size and timing of sales and deployment of our products;

     - market acceptance of and demand for our products;

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<PAGE>

     - variation in capital spending budgets of our customers;

     - the mix of distribution channels through which our products are sold;

     - the impairment of goodwill related to our past acquisitions;

     - the costs of integrating acquired companies;

     - technical difficulties or system outages;

     - the  amount  and  timing  of  operating  costs  and  capital expenditures
       relating to expansion of our business;

     - the announcement  or introduction  of  new products  or services  by  our
       competitors;

     - changes in our pricing structure or that of our competitors; and

     - the relatively fixed nature of our operating expenses.

     As  a result of the above factors, our quarterly operating results may fall
below market analysts' expectations  in future quarters, which  could lead to  a
decline in the market price of our common stock.

     IF  OUR SOFTWARE  PRODUCTS DO  NOT INTEGRATE  WITH OUR  CUSTOMERS' EXISTING
SYSTEMS, ORDERS FOR  OUR SOFTWARE PRODUCTS  WILL BE DELAYED  OR CANCELED,  WHICH
WOULD HARM OUR BUSINESS.

     Many  of our  customers require that  our software products  be designed to
integrate with their existing systems. We may be required to modify our software
product designs to achieve  a sale, which  may result in  a longer sales  cycle,
reduced  operating margins, and  increased research and  development expense. In
some cases, we may be unable to  adapt or enhance our software products to  meet
these  challenges  in a  timely and  cost-effective  manner, or  at all.  If our
software products  do  not  integrate  with  our  customers'  existing  systems,
implementations  could be delayed  or orders for our  software products could be
canceled, which would  harm our  business, financial condition,  and results  of
operations.

     IF WE FAIL TO DEVELOP AND SELL NEW PRODUCTS THAT MEET THE EVOLVING NEEDS OF
OUR  CUSTOMERS, OR IF  OUR NEW PRODUCTS  FAIL TO ACHIEVE  MARKET ACCEPTANCE, OUR
BUSINESS AND RESULTS OF OPERATIONS WOULD BE HARMED.

     Our success depends on  our ability to  anticipate our customers'  evolving
needs  and to develop and  market products that address  those needs. The timely
development of  these  products, as  well  as  any additional  new  or  enhanced
products,  is  a  complex  and  uncertain  process.  We  may  experience design,
marketing, and other difficulties that  could delay or prevent our  development,
introduction,  or marketing of these and other new products and enhancements. We
may not have sufficient resources to anticipate technological and market trends,
or to  manage long  development  cycles. The  introduction  of new  or  enhanced
products  also requires that we manage  the transition from existing products to
these new  or enhanced  products in  order to  minimize disruption  in  customer
ordering  patterns. We are  currently in the process  of developing software for
print industry raw material suppliers. If we are unable to attract raw  material
suppliers  as customers, then our Web-based products may not be as attractive to
printers and print buyers and our business may be harmed. If we are not able  to
develop  new  products or  enhancements  to existing  products  on a  timely and
cost-effective basis, or  if our new  products or enhancements  fail to  achieve
market  acceptance, our ability  to continue to  sell our products  and grow our
business would be harmed.

     IF WE ARE UNABLE TO OBTAIN LICENSES OF THIRD-PARTY TECHNOLOGY ON ACCEPTABLE
TERMS, OUR BUSINESS WOULD BE HARMED

     We  integrate  third-party  licensed  technology  with  our  products.  For
example, our Web-based products are deployed on an Oracle database. From time to
time  we may be required to license  additional technology from third parties to
develop new products or  product enhancements. Third-party  licenses may not  be
available  or continue to be available to  us on acceptable terms. Our inability
to maintain  or  acquire  any  third-party  licenses  required  in  our  current
products,  including licenses from  Oracle, or required  to develop new products
and product enhancements  could require  us to obtain  substitute technology  of
lower  quality  or  performance standards  or  at additional  cost,  which could
seriously harm our business, financial condition, and results of operations.

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<PAGE>

     INCREASING GOVERNMENTAL REGULATION OF THE WEB AND LEGAL UNCERTAINTIES COULD
DECREASE DEMAND  FOR  OUR WEB-BASED  PRODUCTS  OR  INCREASE OUR  COST  OF  DOING
BUSINESS.

     In  addition  to regulations  applicable  to businesses  generally,  we are
subject to laws and regulations directly  applicable to the Web. Although  there
are currently few laws and regulations governing the Web, federal, state, local,
and  foreign governments are considering a  number of legislative and regulatory
proposals. As  a  result,  a  number  of laws  or  regulations  may  be  adopted
regarding:

     - the pricing and taxation of goods and services offered over the Web;

     - intellectual property ownership; and

     - the  characteristics and quality  of goods and  services offered over the
       Web.

     Existing laws regarding property ownership, copyright, trademark, and trade
secrets may be applied to the Web. The adoption of new laws or the adaptation of
existing laws to the Web  may decrease the growth in  the use of the Web,  which
could  in turn decrease the demand for our Web-based products, increase our cost
of  doing  business,  or  otherwise  adversely  impact  our  ability  to  become
profitable.

     The growth of Web-based commerce has been attributed by some to the lack of
sales  and value-added taxes on interstate sales  of goods and services over the
Web. Numerous state and local authorities have expressed a desire to impose such
taxes on sales to consumers and businesses in their jurisdictions. The  Internet
Tax  Non-Discrimination Act prevents  imposition of such  taxes through November
2003. If the federal  moratorium on state  and local taxes on  Web sales is  not
renewed,  or if it is terminated before  its expiration, then sales of goods and
services over the  Web could  be subject  to multiple  overlapping tax  schemes,
which  could substantially  hinder the  growth of  Web-based commerce, including
sales of subscriptions to our Web-based products.

     WE HAVE LIMITED  EXPERIENCE OPERATING  INTERNATIONALLY, WHICH  MAY MAKE  IT
DIFFICULT AND COSTLY TO EXPAND IN OTHER COUNTRIES

     To  date, we have derived almost all of our revenue from sales to customers
in North  America. As  part of  our business  strategy, we  plan to  expand  our
international  operations, focusing  initially on  the European  market. We face
many barriers to competing successfully internationally, including:

     - varying technology standards and capabilities;

     - insufficient or  unreliable  telecommunications  infrastructure  and  Web
       access;

     - difficulties staffing and managing foreign operations;

     - fluctuations in currency exchange rates;

     - reduced  protection for  intellectual property rights  in some countries;
       and

     - import and export restrictions and tariffs.

     As a result of these  factors, we may not  be able to successfully  market,
sell, or deliver our products in international markets.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

     For  the  twelve  months  ended December  31,  2002,  revenue  from foreign
customers approximated 15% of  our total revenue. We  have not had any  material
exposure  to  factors such  as  changes in  foreign  currency exchange  rates in
foreign markets. However,  in future  periods, we  expect to  increase sales  in
foreign  markets, including  Canada and  Europe. As our  sales are  made in U.S.
dollars, a strengthening of the U.S. dollar could cause our products to be  less
attractive  in foreign markets. At December 31, 2002, a total of $2.0 million of
outstanding debt accrues  interest based  on the prime  rate. Most  of our  cash
equivalents,  short-term investments, and capital lease obligations are at fixed
interest rates. Therefore, the  fair value of these  investments is affected  by
changes  in the market interest rates. However, because our investment portfolio
is primarily  composed  of investments  in  money market  funds  and  high-grade
commercial paper with short
                                        30
<PAGE>

maturities,  we do not believe an immediate  10% change in market interest rates
would have  a  material  effect on  the  fair  market value  of  our  portfolio.
Therefore,  we  would not  expect  our operating  results  or cash  flows  to be
affected to any significant degree  by the effect of  a sudden change in  market
interest rates on our investment portfolio.

                                        31
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

<Table>
<Caption>
                                                               PAGE
                                                              NUMBER
                                                              ------
<S>                                                           <C>
PRINTCAFE SOFTWARE, INC.
Report of Independent Auditors..............................   F-2
Consolidated Balance Sheets as of December 31, 2002 and
  2001......................................................   F-3
Consolidated Statements of Operations for the years ended
  December 2002, 2001 and 2000..............................   F-4
Consolidated Statements of Changes in Stockholders'
  (Deficit) Equity for the years ended December 31, 2002,
  2001 and 2000.............................................   F-5
Consolidated Statements of Cash Flows for the years ended
  December 31, 2002, 2001 and 2000..........................   F-8
Notes to Consolidated Financial Statements..................   F-9
</Table>

                                       F-1
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders
Printcafe Software, Inc.

     We  have audited the accompanying  consolidated balance sheets of Printcafe
Software, Inc. and its  subsidiaries as of  December 31, 2001  and 2002 and  the
related  consolidated statements of  operations, stockholders' (deficit) equity,
and cash flows  for each of  the three years  in the period  ended December  31,
2002.  These  financial  statements  are  the  responsibility  of  the Company's
management. Our  responsibility is  to  express an  opinion on  these  financial
statements based on our audits.

     We  conducted our  audits in  accordance with  auditing standards generally
accepted in the United States. Those standards require that we plan and  perform
the  audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit  also includes  assessing the  accounting principles  used and significant
estimates made  by  management, as  well  as evaluating  the  overall  financial
statement  presentation. We believe  that our audits  provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present  fairly,
in  all  material respects,  the  consolidated financial  position  of Printcafe
Software, Inc.  and its  subsidiaries at  December  31, 2001  and 2002  and  the
consolidated  results of their operations  and their cash flows  for each of the
three years in the period ended December 31, 2002 in conformity with  accounting
principles generally accepted in the United States.

     As  discussed in Note 1 to  the consolidated financial statements, in 2002,
the Company changed its method of  accounting for goodwill and other  intangible
assets.

                                                 /s/ ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
March 10, 2003

                                       F-2
<PAGE>

                            PRINTCAFE SOFTWARE, INC.

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2001        2002
                                                              ---------   ---------
                                                                 (IN THOUSANDS)
<S>                                                           <C>         <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $   8,648   $   8,775
  Accounts receivable, net of allowance for doubtful
    accounts of $570 at December 31, 2001, and $470 at
    December 31, 2002.......................................      7,146      12,896
  Other current assets......................................      1,897       1,361
                                                              ---------   ---------
    Total current assets....................................     17,691      23,032
                                                              ---------   ---------
Property and equipment, net.................................      4,699       2,706
Purchased technology, net...................................     17,078       2,806
Customer lists, net.........................................     16,725       2,487
Goodwill, net...............................................     22,480      22,480
Other intangibles, net......................................        830         162
                                                              ---------   ---------
    Total assets............................................  $  79,503   $  53,673
                                                              =========   =========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
  Line of credit............................................  $   2,000   $   2,000
  Accounts payable..........................................      2,492       2,099
  Accrued compensation and related taxes....................      1,047       1,470
  Accrued and other liabilities.............................      3,292       1,221
  Deferred revenue..........................................      9,109       9,653
  Restructuring reserve.....................................        487          67
  Current portion of long-term debt-related party...........         --       2,100
  Current portion of long-term debt.........................        184         326
  Current portion of capital lease obligations..............         65          33
                                                              ---------   ---------
    Total current liabilities...............................     18,676      18,969
                                                              ---------   ---------
Long-term debt-related party, net of debt origination costs
  of $2,561 at December 31, 2001, and $3,507 at December 31,
  2002).....................................................     33,039      12,743
Long-term debt..............................................        326          --
Obligations under capital leases............................         34          --
Stock purchase plan.........................................        125           2
Redeemable preferred stock..................................    132,676          --
Stockholders' (deficit) equity:
  Series A convertible preferred stock, $0.0001 par value;
    2,455,798 shares authorized at December 31, 2001 and no
    shares authorized at December 31, 2002; 2,455,798 shares
    issued and outstanding at December 31, 2001 and no
    shares issued and outstanding at December 31, 2002......         --          --
  Series A-1 convertible preferred stock, $0.0001 par value;
    10,090,707 shares authorized at December 31, 2001 and no
    shares authorized at December 31, 2002; 9,815,249 shares
    issued at December 31, 2001 and no shares issued at
    December 31, 2002; 9,609,558 shares outstanding at
    December 31, 2001 and no shares outstanding at December
    31, 2002................................................          1          --
  Class A common stock, $.0001 par value; 100,000,000 shares
    authorized at December 31, 2001 and December 31, 2002;
    162,970 and 10,643,608 shares issued at December 31,
    2001 and December 31, 2002, respectively; 156,548, and
    10,632,877 shares outstanding at December 31, 2001 and
    December 31, 2002, respectively.........................         --           1
  Additional paid-in capital................................     76,095     253,823
  Warrants..................................................      8,651       8,677
  Deferred compensation.....................................       (100)     (3,836)
Accumulated other comprehensive loss:
  Foreign translation adjustment............................        (50)        (46)
  Retained deficit..........................................   (187,692)   (234,690)
  Treasury stock, 6,422 and 10,731 shares of common stock at
    December 31, 2001 and December 31, 2002, respectively,
    205,691 and no shares of Series A-1 convertible
    preferred stock at December 31, 2001 and
  December 31, 2002, respectively...........................     (1,808)     (1,930)
  Notes receivable from stockholders........................       (470)        (40)
                                                              ---------   ---------
    Total stockholders' (deficit) equity....................   (105,373)     21,959
                                                              ---------   ---------
    Total liabilities and stockholders' (deficit) equity....  $  79,503   $  53,673
                                                              =========   =========
</Table>

                            See accompanying notes.
                                       F-3
<PAGE>
                            PRINTCAFE SOFTWARE, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                   YEARS ENDED DECEMBER 31,
                                                             ------------------------------------
                                                                2000        2001         2002
                                                             ----------   ---------   -----------
                                                             (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                                          <C>          <C>         <C>
Revenue:
  License and subscription.................................  $   8,880    $ 18,103    $   21,119
  Maintenance..............................................     15,239      20,601        21,701
  Professional services and other..........................      1,215       3,164         3,701
                                                             ---------    --------    ----------
     Total revenue.........................................     25,334      41,868        46,521
Cost of revenue:
  License and subscription.................................      2,684       3,936         3,650
  Maintenance..............................................      7,337       6,088         5,091
  Professional services and other..........................        637       1,572         1,636
                                                             ---------    --------    ----------
     Total cost of revenue.................................     10,658      11,596        10,377
                                                             ---------    --------    ----------
Gross profit...............................................     14,676      30,272        36,144
Operating expenses:
  Sales and marketing (exclusive of warrant expense of
     $3,841, $1,054 and $26 for the years ended December
     31, 2000, 2001 and 2002, respectively)................     20,542      19,114        16,989
  Research and development.................................     11,307      12,180        12,003
  General and administrative (exclusive of stock-based
     compensation expense of $866, $49 and $1,360 for the
     years ended December 31, 2000, 2001 and 2002,
     respectively).........................................     24,525       7,645         6,193
  Depreciation.............................................      2,060       3,821         2,922
  Amortization.............................................     39,481      49,052        29,511
  Stock-based compensation and warrants....................      5,144       1,103         1,386
  Restructuring charge.....................................      1,185       2,098           525
                                                             ---------    --------    ----------
     Total operating expenses..............................    104,244      95,013        69,529
                                                             ---------    --------    ----------
Loss from operations.......................................    (89,568)    (64,741)      (33,385)
Other income (expense):
  Amortization of debt origination fees -- related party...         --          --        (3,300)
  Interest income (expense), net...........................        336         127           (55)
  Interest expense -- related party........................     (6,253)     (5,434)       (3,588)
  Other....................................................       (233)         45          (469)
                                                             ---------    --------    ----------
     Total other expense...................................     (6,150)     (5,262)       (7,412)
                                                             ---------    --------    ----------
Net loss...................................................    (95,718)    (70,003)      (40,797)
Accretion of redeemable preferred stock....................     (4,858)     (5,635)       (6,201)
                                                             ---------    --------    ----------
Net loss attributable to common stock......................  $(100,576)   $(75,638)   $  (46,998)
                                                             =========    ========    ==========
Net loss per share, basic and diluted......................  $ (687.66)   $(468.67)   $    (8.11)
Weighted average shares used to compute basic and diluted
  loss per share...........................................    146,258     161,390     5,796,658
</Table>

                            See accompanying notes.
                                       F-4
<PAGE>

                            PRINTCAFE SOFTWARE, INC.
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
<Table>
<Caption>
                              SERIES A         SERIES A-1                            CLASS A           CLASS C
                              PREFERRED         PREFERRED       COMMON STOCK      COMMON STOCK      COMMON STOCK     ADDITIONAL
                           ---------------   ---------------   ---------------   ---------------   ---------------    PAID-IN
                           SHARES   AMOUNT   SHARES   AMOUNT   SHARES   AMOUNT   SHARES   AMOUNT   SHARES   AMOUNT    CAPITAL
                           ------   ------   ------   ------   ------   ------   ------   ------   ------   ------   ----------
                                                                      (IN THOUSANDS)
<S>                        <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Balance at December 31,
  1999...................   2,456    $--      9,725    $ 1       58      $--         --    $--       --      $--      $ 18,055
Reclassification of
  common stock...........      --     --         --     --      (58)      --         58     --       --       --            --
Repurchase of 190,948
  shares of Series A-1
  preferred stock........      --     --         --     --       --       --         --     --       --       --            --
Issuance of common stock
  for acquisitions.......      --     --         --     --       --       --         79     --       --       --        43,571
Issuance of common
  stock..................      --     --         --     --       --       --          4     --       17       --        11,928
Issuance of common stock
  for services...........      --     --         --     --       --       --          5     --       --       --         1,174
Exercise of stock
  options................      --     --         31     --       --       --         --     --       --       --            40
Sale of stock to 401(k)
  plan...................      --     --         53     --       --       --         --     --       --       --           306
Accretion of 401(k)
  plan...................      --     --         --     --       --       --         --     --       --       --          (229)
Repurchase of 14,653
  shares of Series A-1
  preferred stock from
  401(k) plan............      --     --         --     --       --       --         --     --       --       --            --
Stock-based
  compensation...........      --     --         --     --       --       --         --     --       --       --         1,015
Amortization of
  stock-based
  compensation...........      --     --         --     --       --       --         --     --       --       --            --
Issuance of warrants.....      --     --         --     --       --       --         --     --       --       --            --
Interest on note
  receivable.............      --     --         --     --       --       --         --     --       --       --            --
Repayment of note
  receivable, net of
  interest...............      --     --         --     --       --       --         --     --       --       --            --
Accretion of redeemable
  preferred stock........      --     --         --     --       --       --         --     --       --       --            --
Net loss.................      --     --         --     --       --       --         --     --                --            --
Foreign currency
  translation
  adjustment.............      --     --         --     --       --       --         --     --       --       --            --
    Total comprehensive
      loss...............      --     --         --     --       --       --         --     --       --       --            --
                           ------    ---     ------    ---      ---      ---     ------    ---      ---      ---      --------
Balance at December 31,
  2000...................   2,456     --      9,809      1       --       --        146     --       17       --        75,860

<Caption>
                                                      ACCUMULATED                              NOTES
                                                         OTHER                               RECEIVABLE
                                        DEFERRED     COMPREHENSIVE   RETAINED    TREASURY       FROM
                           WARRANTS   COMPENSATION       LOSS         DEFICIT     STOCK     STOCKHOLDERS     TOTAL
                           --------   ------------   -------------   ---------   --------   ------------   ---------
                                                                (IN THOUSANDS)
<S>                        <C>        <C>            <C>             <C>         <C>        <C>            <C>
Balance at December 31,
  1999...................  $    --      $    --          $ --        $ (11,478)  $    --      $(1,721)     $   4,857
Reclassification of
  common stock...........       --           --            --               --        --           --             --
Repurchase of 190,948
  shares of Series A-1
  preferred stock........       --           --            --               --    (1,107)          --         (1,107)
Issuance of common stock
  for acquisitions.......       --           --            --               --        --           --         43,571
Issuance of common
  stock..................       --           --            --               --        --           --         11,928
Issuance of common stock
  for services...........       --           --            --               --        --           --          1,174
Exercise of stock
  options................       --           --            --               --        --           --             40
Sale of stock to 401(k)
  plan...................       --           --            --               --        --           --            306
Accretion of 401(k)
  plan...................       --           --            --               --        --           --           (229)
Repurchase of 14,653
  shares of Series A-1
  preferred stock from
  401(k) plan............       --           --            --               --       (59)          --            (59)
Stock-based
  compensation...........       --       (1,015)           --               --        --           --             --
Amortization of
  stock-based
  compensation...........       --          866            --               --        --           --            866
Issuance of warrants.....    6,220           --            --               --        --           --          6,220
Interest on note
  receivable.............       --           --            --               --        --          (86)           (86)
Repayment of note
  receivable, net of
  interest...............       --           --            --               --        --          335            335
Accretion of redeemable
  preferred stock........       --           --            --           (4,858)       --           --         (4,858)
Net loss.................       --           --            --          (95,718)       --           --        (95,718)
Foreign currency
  translation
  adjustment.............       --           --           (33)              --        --           --            (33)
                                                                                                           ---------
    Total comprehensive
      loss...............       --           --            --               --        --           --        (95,751)
                           -------      -------          ----        ---------   -------      -------      ---------
Balance at December 31,
  2000...................    6,220         (149)          (33)        (112,054)   (1,166)      (1,472)       (32,793)
</Table>

                                       F-5
<PAGE>

                            PRINTCAFE SOFTWARE, INC.
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY -- (CONTINUED)

<Table>
<Caption>
                              SERIES A         SERIES A-1                            CLASS A           CLASS C
                              PREFERRED         PREFERRED       COMMON STOCK      COMMON STOCK      COMMON STOCK     ADDITIONAL
                           ---------------   ---------------   ---------------   ---------------   ---------------    PAID-IN
                           SHARES   AMOUNT   SHARES   AMOUNT   SHARES   AMOUNT   SHARES   AMOUNT   SHARES   AMOUNT    CAPITAL
                           ------   ------   ------   ------   ------   ------   ------   ------   ------   ------   ----------
                                                                      (IN THOUSANDS)
<S>                        <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Reclassification of
  common stock...........      --    $--         --    $--       --      $--         17    $--      (17)     $--      $     --
Issuance of common stock
  as legal settlement....      --     --         --     --       --       --         --     --       --       --            15
Exercise of warrants for
  redeemable preferred
  stock..................      --     --         --     --       --       --         --     --       --       --            --
Repurchase of 6,422
  shares of common
  stock..................      --     --         --     --       --       --         --     --       --       --            --
Interest on notes
  receivable.............      --     --         --     --       --       --         --     --       --       --            --
Exercise of stock
  options................      --     --          7     --       --       --         --     --       --       --            11
Accretion of 401(k)
  plan...................      --     --         --     --       --       --         --     --       --       --           209
Amortization of
  stock-based
  compensation...........      --     --         --     --       --       --         --     --       --       --            --
Issuance of warrants.....      --     --         --     --       --       --         --     --       --       --            --
Repayment (issuance) of
  note receivable........      --     --         --     --       --       --         --     --       --       --            --
Accretion of redeemable
  preferred stock........      --     --         --     --       --       --         --     --       --       --            --
Net loss.................      --     --         --     --       --       --         --     --       --       --            --
Foreign currency
  translation
  adjustment.............      --     --         --     --       --       --         --     --       --       --            --
    Total comprehensive
      loss...............      --     --         --     --       --       --         --     --       --       --            --
                           ------    ---     ------    ---      ---      ---     ------    ---      ---      ---      --------
Balance at December 31,
  2001...................   2,456     --      9,816      1       --       --        163     --       --       --        76,095

<Caption>
                                                      ACCUMULATED                              NOTES
                                                         OTHER                               RECEIVABLE
                                        DEFERRED     COMPREHENSIVE   RETAINED    TREASURY       FROM
                           WARRANTS   COMPENSATION       LOSS         DEFICIT     STOCK     STOCKHOLDERS     TOTAL
                           --------   ------------   -------------   ---------   --------   ------------   ---------
                                                                (IN THOUSANDS)
<S>                        <C>        <C>            <C>             <C>         <C>        <C>            <C>
Reclassification of
  common stock...........  $    --      $    --          $ --        $      --   $    --      $    --      $      --
Issuance of common stock
  as legal settlement....       --           --            --               --        --           --             15
Exercise of warrants for
  redeemable preferred
  stock..................   (2,283)          --            --               --        --           --         (2,283)
Repurchase of 6,422
  shares of common
  stock..................       --           --            --               --      (642)          --           (642)
Interest on notes
  receivable.............       --           --            --               --        --         (110)          (110)
Exercise of stock
  options................       --           --            --               --        --           --             11
Accretion of 401(k)
  plan...................       --           --            --               --        --           --            209
Amortization of
  stock-based
  compensation...........       --           49            --               --        --           --             49
Issuance of warrants.....    4,714           --            --               --        --           --          4,714
Repayment (issuance) of
  note receivable........       --           --            --               --        --        1,112          1,112
Accretion of redeemable
  preferred stock........       --           --            --           (5,635)       --           --         (5,635)
Net loss.................       --           --            --          (70,003)       --           --        (70,003)
Foreign currency
  translation
  adjustment.............       --           --           (17)              --        --           --            (17)
                                                                                                           ---------
    Total comprehensive
      loss...............       --           --            --               --        --           --        (70,020)
                           -------      -------          ----        ---------   -------      -------      ---------
Balance at December 31,
  2001...................    8,651         (100)          (50)        (187,692)   (1,808)        (470)      (105,373)
</Table>

                                       F-6
<PAGE>

                            PRINTCAFE SOFTWARE, INC.
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY -- (CONTINUED)

<Table>
<Caption>
                              SERIES A         SERIES A-1                            CLASS A           CLASS C
                              PREFERRED         PREFERRED       COMMON STOCK      COMMON STOCK      COMMON STOCK     ADDITIONAL
                           ---------------   ---------------   ---------------   ---------------   ---------------    PAID-IN
                           SHARES   AMOUNT   SHARES   AMOUNT   SHARES   AMOUNT   SHARES   AMOUNT   SHARES   AMOUNT    CAPITAL
                           ------   ------   ------   ------   ------   ------   ------   ------   ------   ------   ----------
                                                                      (IN THOUSANDS)
<S>                        <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Interest on note
  receivable.............      --    $--         --    $--       --      $--         --    $--       --      $--      $     --
Valuation adjustment to
  shareholder notes
  receivable.............      --     --         --     --       --       --         --     --       --       --            --
Stock-based compensation,
  net of forfeitures.....      --     --         --     --       --       --         --     --       --       --         5,096
Amortization of
  stock-based
  compensation, net of
  forfeitures............      --     --         --     --       --       --         --     --       --       --            --
Repayment of note
  receivable.............      --     --         --     --       --       --         --     --       --       --            --
Accretion of redeemable
  preferred stock........      --     --         --     --       --       --         --     --       --       --            --
Repurchase of 1,222
  shares of common stock
  from 401(k) plan.......      --     --         --     --       --       --         --     --       --       --           122
Issuance of warrants.....      --     --         --     --       --       --         --     --       --       --            --
Conversion of preferred
  stock into common stock
  at IPO.................  (2,456)    --     (9,816)    (1)      --       --      6,692      1       --       --       139,530
Issuance of common stock
  for IPO................      --     --         --     --       --       --      3,750     --       --       --        32,935
Issuance of shares in
  employee stock purchase
  plan...................      --     --         --     --       --       --         38     --       --       --            45
Net loss.................      --     --         --     --       --       --         --     --       --       --            --
Foreign currency
  translation
  adjustment.............      --     --         --     --       --       --         --     --       --       --            --
    Total comprehensive
      loss...............      --     --         --     --       --       --         --     --       --       --            --
                           ------    ---     ------    ---      ---      ---     ------    ---      ---      ---      --------
Balance at December 31,
  2002...................      --    $--         --    $--       --      $--     10,643    $ 1       --      $--      $253,823
                           ======    ===     ======    ===      ===      ===     ======    ===      ===      ===      ========

<Caption>
                                                      ACCUMULATED                              NOTES
                                                         OTHER                               RECEIVABLE
                                        DEFERRED     COMPREHENSIVE   RETAINED    TREASURY       FROM
                           WARRANTS   COMPENSATION       LOSS         DEFICIT     STOCK     STOCKHOLDERS     TOTAL
                           --------   ------------   -------------   ---------   --------   ------------   ---------
                                                                (IN THOUSANDS)
<S>                        <C>        <C>            <C>             <C>         <C>        <C>            <C>
Interest on note
  receivable.............  $    --      $    --          $ --        $      --   $    --      $   (18)     $     (18)
Valuation adjustment to
  shareholder notes
  receivable.............       --           --            --               --        --          393            393
Stock-based compensation,
  net of forfeitures.....       --       (5,096)           --               --        --           --             --
Amortization of
  stock-based
  compensation, net of
  forfeitures............       --        1,360            --               --        --           --          1,360
Repayment of note
  receivable.............       --           --            --               --        --           55             55
Accretion of redeemable
  preferred stock........       --           --            --           (6,201)       --           --         (6,201)
Repurchase of 1,222
  shares of common stock
  from 401(k) plan.......       --           --            --               --      (122)          --             --
Issuance of warrants.....       26           --            --               --        --           --             26
Conversion of preferred
  stock into common stock
  at IPO.................       --           --            --               --        --           --        139,530
Issuance of common stock
  for IPO................       --           --            --               --        --           --         32,935
Issuance of shares in
  employee stock purchase
  plan...................       --           --            --               --        --           --             45
Net loss.................       --           --            --          (40,797)       --           --        (40,797)
Foreign currency
  translation
  adjustment.............       --           --             4               --        --           --              4
                                                                                                           ---------
    Total comprehensive
      loss...............       --           --            --               --        --           --        (40,793)
                           -------      -------          ----        ---------   -------      -------      ---------
Balance at December 31,
  2002...................  $ 8,677      $(3,836)         $(46)       $(234,690)  $(1,930)     $   (40)     $  21,959
                           =======      =======          ====        =========   =======      =======      =========
</Table>

                            See accompanying notes.

                                       F-7
<PAGE>

                            PRINTCAFE SOFTWARE, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                 YEARS ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000       2001       2002
                                                              --------   --------   --------
                                                                      (IN THOUSANDS)
<S>                                                           <C>        <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss....................................................  $(95,718)  $(70,003)  $(40,797)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Depreciation and amortization.............................    41,541     52,873     32,433
  Provision for doubtful accounts...........................       935        576        592
  Valuation adjustment to stockholder note receivable.......        --         --        393
  Common stock issued for services..........................     1,174         15         --
  Issuance of warrants......................................     6,220      2,431         26
  Stock-based compensation..................................       866         49      1,360
  Interest expense on note receivable from stockholders.....       (86)      (110)       (18)
  Interest accretion on related party debt discount.........        --         --      3,300
Changes in assets and liabilities, net of effects from
  acquisition of business:
  Accounts receivable.......................................       520     (1,642)    (6,353)
  Receivables from related parties..........................       335         --         --
  Other assets..............................................       138       (237)       536
  Accounts payable..........................................       665     (3,114)      (393)
  Accrued liabilities.......................................     1,796       (115)    (1,645)
  Restructuring reserve.....................................       638       (151)      (420)
  Deferred revenue..........................................     1,256      1,565        337
                                                              --------   --------   --------
    Net cash used in operating activities...................   (39,720)   (17,863)   (10,649)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired.............   (23,705)        --       (307)
Issuance of note receivable to management...................        --       (642)        --
Proceeds from notes receivable repayment by stockholder.....        --      1,112         55
Intellectual property acquisition costs.....................    (1,200)      (950)        --
Purchase of property, plant, and equipment..................    (5,100)    (1,539)      (734)
                                                              --------   --------   --------
    Net cash used in investing activities...................   (30,005)    (2,019)      (986)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt--related party...........................        --     23,600         --
Principal payments on debt--related party...................    (3,920)   (30,099)   (17,800)
Principal payments on debt..................................      (891)      (170)      (184)
Net proceeds from line of credit............................     1,500         --         --
Principal payments on capital lease obligations.............      (238)      (268)       (66)
Repurchase of employee stock under 401(k) plan..............        --         --       (122)
Proceeds from issuance of shares under employee stock
  purchase plan.............................................        --         --         45
Repurchase of common and preferred stock....................    (1,166)        --         --
Issuance of common stock....................................    12,234         --     32,935
Net proceeds from bridge loans..............................    15,000         --         --
Issuance of redeemable preferred stock......................    62,372     20,527        654
Debt origination costs--related party.......................        --       (277)    (3,700)
Exercise of stock options...................................        40         11         --
                                                              --------   --------   --------
    Net cash provided by financing activities...............    84,931     13,324     11,762
                                                              --------   --------   --------
Increase (decrease) in cash and cash equivalents............    15,206     (6,558)       127
Cash and cash equivalents--beginning of year................        --     15,206      8,648
                                                              --------   --------   --------
Cash and cash equivalents--end of year......................  $ 15,206   $  8,648   $  8,775
                                                              ========   ========   ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
  Cash paid for interest....................................  $  4,571   $  4,713   $  3,500
NONCASH INVESTING AND FINANCING ACTIVITIES:
Assets recorded under capital leases........................       411         --         --
Common stock issued for acquisitions........................    43,571         --         --
Warrants attached to debt...................................        --      2,283         --
Accretion of redeemable preferred stock.....................     4,858      5,635      6,201
Accretion of 401(k) plan....................................       229       (209)        --
Common stock received in satisfaction of receivable from
  related party.............................................        --        642         --
</Table>

                            See accompanying notes.
                                       F-8
<PAGE>

                            PRINTCAFE SOFTWARE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

  NATURE OF BUSINESS

     Printcafe Software, Inc. (the Company) provides software solutions designed
specifically  for the printing industry  supply chain. The Company's procurement
applications, which are designed for  print buyers, integrate with its  software
solutions  designed for printers, and  facilitate collaboration between printers
and print buyers over  the Web. The Company's  enterprise resource planning  and
collaborative  supply chain software  solutions are designed  to enable printers
and print buyers to lower costs and improve productivity.

  BASIS OF PRESENTATION

     The consolidated financial statements include  the accounts of the  Company
and  its  wholly-owned subsidiaries  after  the elimination  of  all significant
intercompany balances and transactions. Amounts within the financial  statements
and  footnote disclosures have  been recorded in thousands  except for the share
and per share data.

  REVENUE RECOGNITION

     The Company's  revenue  recognition  policy is  governed  by  Statement  of
Position  (SOP)  97-2,  Software  Revenue Recognition,  issued  by  the American
Institute of  Certified  Public Accountants  (AICPA).  The Company  derives  its
revenues  from licenses and subscriptions  for its products as  well as from the
provision of related services, including installation and training,  consulting,
customer  support, and  maintenance contracts.  Revenues are  recognized only if
persuasive  evidence  of  an  agreement  exists,  delivery  has  occurred,   all
significant  vendor obligations are  satisfied, the fee  is fixed, determinable,
and collectible  and  there  is vendor-specific  objective  evidence  (VSOE)  to
support  the allocation  of the  total fee  to a  multi-element arrangement. The
Company does  not  have  VSOE for  the  license  component or  the  fixed  price
installation  component and these  have historically been  sold bundled together
with post-contract support. Therefore, the  Company follows the residual  method
as  outlined in SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition
with Respect to Certain  Transactions, under which revenue  is allocated to  the
undelivered  elements and the  residual amounts of revenue  are allocated to the
delivered  elements.  Many   of  the  Company's   agreements  include   warranty
provisions.  Historically, these provisions have not had a significant impact on
the Company's revenue recognition. In those instances where customer  acceptance
may  be in question, all revenue relating  to that arrangement is deferred until
the warranty  period has  expired. Additional  revenue recognition  criteria  by
revenue type are listed below.

  License and subscription revenue

     License  and subscription revenue includes  fees for perpetual licenses and
periodic subscriptions. The Company recognizes revenues on license fees after  a
license  agreement has been signed,  the product has been  delivered, the fee is
fixed, determinable and collectible, and there is VSOE to support the allocation
of the total fee to a  multielement arrangement (if applicable). If VSOE  cannot
be obtained for certain elements of the contract, the Company recognizes revenue
using  the residual method  under which revenue is  allocated to the undelivered
elements and the  residual amounts  of revenue  are allocated  to the  delivered
elements.  The Company  recognizes revenues  on periodic  subscriptions over the
subscription term for unlimited subscriptions and  based on the value of  orders
processed  for  its  customers  through the  system  for  limited subscriptions.
Revenue is recognized for subscription  orders processed through resellers  over
the subscription term of the underlying agreement, beginning upon installation.

  Maintenance revenue

     Maintenance  revenue is  derived from the  sale of  maintenance and support
contracts, which  provide  customers  with  the  right  to  receive  maintenance
releases of the licensed products and access to customer
                                       F-9
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

support  staff. Maintenance revenue is recognized  on a straight-line basis over
the term of the contract, which is typically one year. Payments for  maintenance
revenue are normally received in advance and are nonrefundable.

  Professional services and other revenue

     Professional  services and other revenue is  derived from variable fees for
installation, training, and consulting.  Revenue for professional services  such
as  installation and  training, system  integration projects,  and consulting is
primarily recognized as the services are  performed. If these services are  part
of  a  multielement contract  under which  VSOE cannot  be obtained  for certain
elements, they may be deferred either  until acceptance of any related  software
or over the license period.

  SHIPPING AND HANDLING COSTS

     Shipping  and handling costs  are expensed as incurred  and are included in
license and subscription cost of revenue.

  CASH AND CASH EQUIVALENTS

     Cash and cash  equivalents include cash  and interest-bearing money  market
deposits  with financial institutions  having original maturities  of 90 days or
less. The balance  at December 31,  2001 included approximately  $7,200 of  cash
received  on  January  2, 2002  in  connection  with the  issuance  of  Series F
preferred  stock  (Note  12).  Cash  equivalents  are  stated  at  cost,   which
approximates  market value. The amounts held by major financial institutions may
exceed the amount  of insurance provided  on such deposits.  These deposits  may
generally be redeemed upon demand and, therefore, are subject to minimal risk.

  FAIR VALUE OF FINANCIAL INSTRUMENTS

     For  certain financial  instruments, including  cash and  cash equivalents,
accounts receivable, accounts payable, and accrued liabilities, recorded amounts
approximate fair value  due to the  relative short maturity  period. On May  31,
2002  and June 10, 2002, the Company entered into new agreements for its related
party debt (Note 9). As a result, the carrying amount of this debt  approximates
market  value as  of fiscal year  end 2002. The  carrying amount of  the line of
credit approximates market  value because it  has an interest  rate that  varies
with  market interest  rates. The fair  values of the  obligations under capital
leases are estimated based  on current interest rates  available to the  Company
for  debt  instruments  with  similar  terms,  degrees  of  risk,  and remaining
maturities.  The  carrying  values   of  these  obligations  approximate   their
respective  fair values. The estimated fair  values may not be representative of
the actual values of these financial  instruments that could have been  realized
as of the period end or that will be realized in the future.

  PROPERTY AND EQUIPMENT

     Property  and equipment are stated at  cost. Depreciation is computed using
the straight-line and accelerated methods over the estimated useful lives of the
related assets  (generally  three to  five  years). Leasehold  improvements  are
amortized  over the lesser  of their useful  lives or the  remaining term of the
lease. Amortization  of assets  recorded  under capital  leases is  included  in
depreciation expense. Upon disposal, assets and related accumulated depreciation
are  removed from the Company's  accounts and the resulting  gains or losses are
reflected in the statement of operations.

  IDENTIFIED INTANGIBLE ASSETS, PURCHASED TECHNOLOGY AND GOODWILL

     Identified intangible assets, purchased technology and goodwill are related
mainly to  the  business  acquisitions  discussed in  Note  3.  Amortization  of
identified   intangible  assets  and  purchased  technology  is  recorded  on  a
straight-line basis over the estimated  useful lives (generally three years)  of
the remaining assets. Goodwill represents the excess of cost over the fair value
of net intangible and identifiable intangible assets of
                                       F-10
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

acquired businesses. Effective January 1, 2002, the Company adopted Statement of
Financial  Accounting Standards  No. 142,  Goodwill and  Other Intangible Assets
(SFAS No. 142). Prior  to the adoption  of SFAS No.  142, the Company  amortized
goodwill  over its estimated useful  life of three years.  Upon adoption of SFAS
No. 142, the Company  performed an initial impairment  analysis. Under SFAS  No.
142,  goodwill is no longer amortized to  expense, but is instead subjected to a
periodic impairment test at  least annually. The impairment  test is a  two-step
process,  which analyzes  whether or  not goodwill  has been  impaired. Step one
requires that the fair  value be compared  to book value. If  the fair value  is
higher  than the book value, no impairment is  indicated and there is no need to
perform the second step of the process. If the fair value is lower than the book
value, step  two must  be evaluated.  Step two  requires the  fair value  to  be
allocated  to its assets and liabilities in a manner similar to a purchase price
allocation in order to  determine the implied fair  value of the goodwill.  This
implied  fair value is  then compared with  the carrying amount,  and if it were
less, the  Company  would  then  recognize an  impairment  loss.  Annually,  the
goodwill is tested for impairment in the fourth quarter.

  IMPAIRMENT OF LONG-LIVED ASSETS

     Effective January 1, 2002, the Company adopted SFAS No. 144, Accounting for
the  Impairment or Disposal of Long-Lived  Assets (SFAS No. 144). This Statement
supercedes or amends  existing accounting literature  related to the  impairment
and disposal of long-lived assets.

     In   accordance  with  SFAS   No.  144,  whenever   events  or  changes  in
circumstances indicate that the carrying amount of long-lived assets may not  be
recoverable,  the Company reviews its long-lived  assets for impairment by first
comparing the carrying value of the assets  to the sum of the undiscounted  cash
flows expected to result from the use and eventual disposition of the assets. If
the  carrying value exceeds the sum of  the assets' undiscounted cash flows, the
Company estimates  an  impairment loss  by  taking the  difference  between  the
carrying  value and  fair value  of the  assets. No  impairment charge  has been
recorded in any of the periods presented.

  STOCK-BASED COMPENSATION AND WARRANTS

     The  Company  has  adopted  SFAS   No.  148,  Accounting  for   Stock-Based
Compensation--Transition  and Disclosure (SFAS No.  148) and the disclosure-only
provisions of SFAS No.  123, Accounting for  Stock-Based Compensation (SFAS  No.
123).  SFAS No. 123  permits the Company to  continue accounting for stock-based
compensation as set forth in APB Opinion No. 25, Accounting for Stock Issued  to
Employees, provided the Company discloses the pro forma effect on net income and
earnings per share of adopting the full provisions of SFAS No. 123. Accordingly,
the  Company continues to account for stock-based compensation under APB Opinion
No. 25 and has provided the required pro forma disclosures. The Company accounts
for equity instruments issued to nonemployees and pursuant to strategic alliance
arrangements in accordance with the provisions of SFAS No. 123, Emerging  Issues
Task  Force (EITF) No. 96-18, Accounting  for Equity Instruments that are Issued
to Other than Employees  for Acquiring or in  Conjunction with Selling Goods  or
Services,  and  Emerging  Issues  Task Force  (EITF)  No.  01-9,  Accounting for
Consideration Given  by Vendor  to a  Customer  or a  Reseller of  the  Vendor's
Product.

                                       F-11
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The  following table illustrates the effect on  net loss and loss per share
if the Company had applied the fair value recognition provisions of SFAS No. 123
to employee stock-based awards (Note 13).

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                         ----------------------------
                                                           2000      2001      2002
                                                         --------   -------   -------
<S>                                                      <C>        <C>       <C>
Reported net loss attributable to common stock.........  $100,576   $75,638   $46,998
Eliminate: Stock-based compensation expense included in
  reported net loss....................................       866        49     1,360
Apply: Total stock-based compensation expense
  determined under fair value method for all awards....     3,067     4,557     5,766
                                                         --------   -------   -------
Pro Forma net loss.....................................  $102,777   $80,146   $51,404
                                                         ========   =======   =======
Basic and diluted loss per share:
  Basic and diluted, as reported.......................  $ 687.66   $468.67   $  8.11
  Basic and diluted, pro forma.........................  $ 702.71   $496.60   $  8.87
</Table>

  SOFTWARE DEVELOPMENT COSTS

     Costs  for  the  development  of  new  software  products  and  substantial
enhancements  to  existing  software  products are  expensed  as  incurred until
technological feasibility has  been established,  at which  time any  additional
costs  would be capitalized in accordance with SFAS No. 86, Computer Software to
be Sold, Leased or Otherwise Marketed. Because the Company believes its  current
process  for developing software is  essentially completed concurrently with the
establishment of technological  feasibility, no costs  have been capitalized  to
date,  with the exception of the technology acquired from acquisitions (Note 3).
The value of the purchased technology was capitalized and is being amortized  on
a straight-line basis over three years (its estimated useful life).

  INCOME TAXES

     The  Company follows  the liability method  of accounting  for income taxes
pursuant to SFAS No. 109, Accounting for Income Taxes.

     Under SFAS  No. 109,  deferred tax  assets and  liabilities are  determined
based  on differences  between financial reporting  and tax bases  of assets and
liabilities and are measured using the enacted tax laws and rates applicable  to
the  periods  in which  the  differences are  expected  to reverse.  The Company
provides for  a valuation  allowance  to reduce  deferred  tax assets  to  their
estimated realizable value.

  CONCENTRATION OF CREDIT RISK

     For  the  years ended  December  31, 2000,  2001,  and 2002,  revenues from
foreign customers approximated 5%, 11%, and 15%, respectively, of the  Company's
total revenues.

     The  Company does not require collateral  from its customers. Credit losses
related to such customers historically have been minimal and within management's
expectations.

  ADVERTISING

     Advertising and  promotion  costs  are expensed  as  incurred  and  totaled
approximately  $1,829, $1,437, and $1,146 for the years ended December 31, 2000,
2001, and 2002, respectively.

  FOREIGN CURRENCY TRANSLATION

     The functional currency of the Company's foreign subsidiaries is the  local
currency.  The Company translates all assets  and liabilities to U.S. dollars at
the current exchange rates as of the applicable balance

                                       F-12
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

sheet date. Revenue and expenses are translated at the average of the  beginning
and  ending  exchange  rate  prevailing  during  the  period.  Gains  and losses
resulting from the translation of the foreign subsidiaries' financial statements
are reported  as a  separate  component of  total  other comprehensive  loss  in
stockholder's  equity.  Net gains  and  losses resulting  from  foreign exchange
transactions, which are recorded in  the consolidated statements of  operations,
were not significant during any of the periods presented.

  COMPREHENSIVE LOSS

     The  Company reports  comprehensive income or  loss in  accordance with the
provisions of SFAS No. 130, Reporting Comprehensive Income. Comprehensive income
or loss, as defined, includes all changes in equity (net assets) during a period
from nonowner sources. Tax effects of other comprehensive income or loss are not
considered material for any period.

  RECENT ACCOUNTING PRONOUNCEMENTS

  Debt extinguishment costs

     In April 2002, the FASB issued SFAS No. 145, Rescission of FASB  Statements
No.  4, 44 and 62, Amendment of  FASB Statement No. 13 and Technical Corrections
(SFAS No. 145). SFAS No. 145,  which becomes effective for financial  statements
issued  for fiscal  years beginning  after May 15,  2002 and  requires gains and
losses on  extinguishments of  debt to  be  classified as  income or  loss  from
continuing  operations rather than as extraordinary items as previously required
under the provisions of  Accounting Principles Board  Opinion No. 30,  Reporting
the Results of Operations -- Reporting the Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual and  Infrequently  Occurring  Events and
Transactions. As of December  31, 2002, the Company  early adopted SFAS No.  145
and  reclassified  an  extraordinary loss  of  $1,143 recognized  in  the second
quarter of 2002 to other expense.

  Exit and disposal activities

     In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or  Disposal Activities (SFAS  No. 146), which  becomes effective  for
exit or disposal activities that are initiated after December 31, 2002. SFAS No.
146  addresses financial accounting and reporting for costs associated with exit
or disposal activities and requires that a liability for a cost associated  with
an  exit or disposal activity be recognized  at fair value when the liability is
incurred, rather than at the date of an entity's commitment to an exit plan. The
Company does not believe that  SFAS No. 146 will have  a material impact on  its
financial position and results of operations.

  Stock-Based Compensation

     In  December  2002,  the  FASB  issued  Statement  of  Financial Accounting
Standards No. 148,  Accounting for  Stock-Based Compensation  -- Transition  and
Disclosure  (SFAS  No.  148).  SFAS  No.  148  amends  FASB  Statement  No. 123,
Accounting for  Stock-Based  Compensation,  to provide  alternative  methods  of
transition  for a voluntary  change to the  fair value method  of accounting for
stock-based employee compensation. In  addition, SFAS No.  148 amends the  prior
disclosure  guidance  and  requires  prominent disclosures  in  both  annual and
interim financial  statements about  the method  of accounting  for  stock-based
employee compensation and the effect of the method used on reported results. For
entities  that voluntarily change  to the fair value  based method of accounting
for stock-based employee compensation,  the transition provisions are  effective
for  fiscal years ending after  December 15, 2002. For  all other companies, the
disclosure provisions are  effective for  interim and  annual periods  beginning
after December 15, 2002. The Company has complied with the disclosure provisions
of this standard in the consolidated financial statements.

                                       F-13
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Guarantees

     In  November  2002,  the  FASB issued  Interpretation  No.  45, Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees  of Indebtedness  of Others  (FIN No. 45).  FIN No.  45 clarifies and
expands on  existing  disclosure  requirements for  guarantees,  including  loan
guarantees.  It also would  require that, at  the inception of  a guarantee, the
Company may need to recognize a liability for the fair value, of its  obligation
under  that  guarantee.  The  initial  fair  value  recognition  and measurement
provisions will be applied on a  prospective basis to certain guarantees  issued
or modified after December 31, 2002. The disclosure provisions are effective for
financial  statements of periods ending after December 15, 2002. The adoption of
FIN No. 45 did not have a  material impact on the Company's financial  position,
results of operations or cash flows.

  LOSS PER SHARE

     Basic  and diluted  loss per  share have  been computed  using the weighted
average number  of  shares  of  common  stock  outstanding  during  the  period.
Potential  common  shares from  conversion  of convertible  preferred  stock and
exercise of stock options and warrants are excluded from historical diluted  net
loss  per share because they  would be antidilutive. The  total number of shares
excluded from  diluted net  loss  per share  relating  to these  securities  was
5,037,288,  6,892,403, and  2,125,833 shares  for the  years ended  December 31,
2000, 2001, and 2002, respectively.

  USE OF ESTIMATES

     The preparation  of  financial  statements in  conformity  with  accounting
principles  generally accepted in the United  States requires management to make
estimates and  assumptions  that  affect  the reported  amounts  of  assets  and
liabilities  and disclosures of contingent assets and liabilities at the date of
the financial statements and  reported amounts of  revenues and expenses  during
the reporting period. Actual results could differ from those estimates.

2. INITIAL PUBLIC OFFERING

     In  June 2002, the Company issued 3,750,000 shares of its common stock at a
price of $10.00 per share in  its initial public offering. The company  received
approximately  $32,950 in proceeds, net  of underwriting discounts, commissions,
and offering expenses.  Simultaneously with  the closing of  the initial  public
offering,  each outstanding share of preferred stock was automatically converted
into common stock based upon the  applicable conversion ratio (see Note 12).  In
connection  with  the  offering,  the Company  repaid  approximately  $17,800 of
related party debt (see Note 9)

3. ACQUISITIONS

     The number of shares of common  stock and the valuations thereof,  included
in the acquisition information presented below, has been adjusted to reflect the
one-for-thirty  reverse split and the 1-for-2.22  reverse split that occurred in
January 2002 and  May 2002,  respectively, and certain  share calculations  have
been rounded.

  Programmed Solutions, Inc.

     On  February 9, 2000, the Company  acquired the outstanding common stock of
Programmed Solutions,  Inc.  (PSI), a  provider  of software  for  the  printing
industry.  The aggregate purchase price  of $25,130 (including transaction costs
of $130) consisted of 25,887 shares of common stock valued at $386.28 per  share
and  $15,000  in cash.  This  transaction was  accounted  for as  a  purchase in
accordance with APB 16. The excess of the purchase price over the fair value  of
assets  acquired  and  liabilities  assumed  in  the  acquisition  of  $6,309 is
classified as goodwill.

                                       F-14
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The estimated fair value of the assets acquired and liabilities assumed  of
PSI are as follows:

<Table>
<Caption>
                                                               AMOUNT
                                                               -------
<S>                                                            <C>
Current assets (including cash of $398).....................   $ 2,517
Property and equipment......................................       649
Purchased technology........................................     9,569
Customer list...............................................     7,947
Goodwill....................................................     6,309
Other long-term assets......................................        81
Current liabilities.........................................    (1,942)
                                                               -------
                                                               $25,130
                                                               =======
</Table>

  A.H.P. Systems, Inc.

     On  March 8,  2000, the  Company acquired  the outstanding  common stock of
A.H.P. Systems, Inc. (AHP),  a provider of software  for the printing  industry.
The  aggregate purchase  price of $4,446  (including transaction  costs of $144)
consisted of 5,954 shares of common stock  valued at $588.08 per share and  $800
in cash. This transaction was accounted for as a purchase in accordance with APB
16.  The excess of the purchase price over the fair value of assets acquired and
liabilities assumed in the acquisition of $4,429 is classified as goodwill.

     The estimated fair value of the assets acquired and liabilities assumed  of
AHP are as follows:

<Table>
<Caption>
                                                               AMOUNT
                                                               -------
<S>                                                            <C>
Current assets (including cash of $27)......................   $   412
Property and equipment......................................        23
Purchased technology........................................       632
Customer list...............................................       307
Goodwill....................................................     4,429
Other long-term assets......................................         3
Current liabilities.........................................    (1,360)
                                                               -------
                                                               $ 4,446
                                                               =======
</Table>

  Hagen Systems, Inc.

     On  March 9,  2000, the  Company acquired  the outstanding  common stock of
Hagen Systems, Inc. (Hagen), a provider  of software for the printing  industry.
The  aggregate purchase price  of $40,561 (including  transaction costs of $161)
consisted of 34,689 shares  of common stock valued  at $588.08 per share,  notes
payable  of $12,000 and $8,000 in cash.  This transaction was accounted for as a
purchase in accordance with APB  16. The excess of  the purchase price over  the
fair  value of  assets acquired  and liabilities  assumed in  the acquisition of
$15,406 is classified as goodwill.

                                       F-15
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The estimated fair value of the assets acquired and liabilities assumed  of
Hagen are as follows:

<Table>
<Caption>
                                                               AMOUNT
                                                               -------
<S>                                                            <C>
Current assets (including cash of $1,401)...................   $ 2,660
Property and equipment......................................       440
Purchased technology........................................    13,163
Customer list...............................................    11,857
Goodwill....................................................    15,406
Current liabilities.........................................    (2,965)
                                                               -------
                                                               $40,561
                                                               =======
</Table>

  M Data, Inc. d/b/a PrintSmith

     On  March 10, 2000, the Company acquired  the outstanding common stock of M
Data, Inc.  (M Data),  a provider  of software  for the  printing industry.  The
aggregate  purchase  price  of  $11,174 (including  transaction  costs  of $124)
consisted of 2,555 shares of common stock valued at $782.55 per share, $7,000 in
notes payable  and $2,050  in cash.  This  transaction was  accounted for  as  a
purchase  in accordance with APB  16. The excess of  the purchase price over the
fair value of  assets acquired  and liabilities  assumed in  the acquisition  of
$2,669 is classified as goodwill.

     The  estimated fair value of the assets acquired and liabilities assumed of
M Data are as follows:

<Table>
<Caption>
                                                               AMOUNT
                                                               -------
<S>                                                            <C>
Current assets (including cash of $57)......................   $   492
Property and equipment......................................       108
Purchased technology........................................     4,088
Customer list...............................................     4,491
Goodwill....................................................     2,669
Current liabilities.........................................      (674)
                                                               -------
                                                               $11,174
                                                               =======
</Table>

  Logic Associates, Inc.

     On April 7,  2000, the  Company acquired  the outstanding  common stock  of
Logic  Associates,  Inc.  (Logic),  a  provider  of  software  for  the printing
industry. The aggregate purchase price  of $55,991 (including transaction  costs
of  $223) consisted of 9,800 shares of  common stock valued at $782.55 per share
and $48,099 in notes payable. This  transaction was accounted for as a  purchase
in  accordance with APB 16. The excess of the purchase price over the fair value
of assets acquired  and liabilities  assumed in  the acquisition  of $19,824  is
classified as goodwill.

                                       F-16
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The  estimated fair value of the assets acquired and liabilities assumed of
Logic are as follows:

<Table>
<Caption>
                                                               AMOUNT
                                                               -------
<S>                                                            <C>
Current assets (including cash of $1,045)...................   $ 3,000
Property and equipment......................................     2,445
Purchased technology........................................    16,155
Customer list...............................................    17,816
Goodwill....................................................    19,824
Other long-term assets......................................         4
Current liabilities.........................................    (2,281)
Long-term debt..............................................      (972)
                                                               -------
                                                               $55,991
                                                               =======
</Table>

     Had these acquisitions  taken place  at the  beginning of  fiscal 2000  the
unaudited  pro forma results  of operations would  have been as  follows for the
year ended December 31, 2000.

<Table>
<Caption>
                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                                   2000
                                                               ------------
<S>                                                            <C>
Revenue.....................................................    $  32,727
Operating loss..............................................      (81,750)
Net loss....................................................      (89,139)
Net loss attributable to common stock.......................      (93,997)
Pro forma loss per share, basic and diluted.................      (579.55)
Weighted average shares, basic and diluted..................      162,191
</Table>

     The unaudited  pro forma  results  are not  necessarily indicative  of  the
results  of  operations, which  would have  been  reported had  the acquisitions
occurred prior  to the  beginning of  the periods  presented, and  they are  not
intended to be indicative of future results.

4.  ALLOWANCE FOR DOUBTFUL ACCOUNTS

     Activity in the allowance for doubtful accounts is as follows:

<Table>
<Caption>
                                                               BALANCE
                                                               -------
<S>                                                            <C>
Balance, December 31, 1999..................................    $ 250
Net charge to expense.......................................      935
Amounts written off.........................................     (500)
                                                                -----
Balance, December 31, 2000..................................    $ 685
Net charge to expense.......................................      576
Amounts written off.........................................     (691)
                                                                -----
Balance, December 31, 2001..................................      570
Net charge to expense.......................................      592
Amounts written off.........................................     (692)
                                                                -----
Balance, December 31, 2002..................................    $ 470
                                                                =====
</Table>

                                       F-17
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5.  RECEIVABLES

     Receivables consist of the following:

<Table>
<Caption>
                                                                DECEMBER 31,
                                                              ----------------
                                                               2001     2002
                                                              ------   -------
<S>                                                           <C>      <C>
Billed receivables..........................................  $6,087   $11,948
Unbilled receivables........................................   1,629     1,418
                                                              ------   -------
                                                               7,716    13,366
Allowance for doubtful accounts.............................    (570)     (470)
                                                              ------   -------
                                                              $7,146   $12,896
                                                              ======   =======
</Table>

     Unbilled  receivables represent  recorded revenue  that is  billable by the
Company at future dates based on contractual payment terms.

6.  PROPERTY AND EQUIPMENT

     Property and equipment consist of the following:

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              ------------------
                                                               2001       2002
                                                              -------   --------
<S>                                                           <C>       <C>
Buildings and leasehold improvements........................  $ 1,734   $  1,739
Equipment and fixtures......................................   12,602     13,545
                                                              -------   --------
                                                               14,336     15,284
Less accumulated depreciation...............................   (9,637)   (12,578)
                                                              -------   --------
                                                              $ 4,699   $  2,706
                                                              =======   ========
</Table>

7.  IDENTIFIED INTANGIBLE ASSETS, PURCHASED TECHNOLOGY AND GOODWILL

     Identified intangible  assets,  purchased technology  and  goodwill  relate
mainly  to the business acquisitions consummated  in early 2000. Amortization is
recorded on a  straight-line basis  over the estimated  useful lives  (generally
three  years)  of the  remaining  assets and  consists  of the  following  as of
December 31, 2001 and 2002:

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                              --------------------
                                                                2001       2002
                                                              --------   ---------
<S>                                                           <C>        <C>
Customer list...............................................  $ 42,713   $  42,713
Purchased technology........................................    43,708      44,023
Patent......................................................     2,047       2,065
Goodwill....................................................    58,730      58,730
                                                              --------   ---------
                                                               147,198     147,531
Less accumulated depreciation...............................   (90,085)   (119,596)
                                                              --------   ---------
                                                              $ 57,113   $  27,935
                                                              ========   =========
</Table>

     Effective July 1, 2001  and January 1, 2002,  the Company adopted SFAS  No.
141,  Business Combinations (SFAS No. 141), and SFAS No. 142, Goodwill and Other
Intangible Assets (SFAS No. 142),  respectively. SFAS No. 141 requires  business
combinations  initiated  after  June 30,  2001  to  be accounted  for  using the
purchase  method  of  accounting.  It  also  specifies  the  types  of  acquired
intangible  assets that are required to be recognized and reported separate from
goodwill. SFAS No. 142 requires that goodwill and

                                       F-18
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

certain intangibles no longer be amortized, but instead tested for impairment at
least annually. There was  no impairment of goodwill  upon adoption of SFAS  No.
142 in 2002.

     As  required by  SFAS 142,  prior year  results have  not been  restated. A
reconciliation of the previously reported net loss and loss per common share for
the years ended December 31, 2000 and 2001, as if SFAS No. 142 had been  adopted
as of January 1, 2000, is as follows:

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                         ----------------------------
                                                           2000      2001      2002
                                                         --------   -------   -------
<S>                                                      <C>        <C>       <C>
Net loss:
  Reported net loss attributable to common stock.......  $100,576   $75,638   $46,998
  Goodwill amortization................................    16,653    19,576        --
                                                         --------   -------   -------
Adjusted net loss......................................  $ 83,923   $56,062   $46,998
                                                         ========   =======   =======
Basic and diluted loss per share:
  Reported net loss per share..........................  $ 687.66   $468.67   $  8.11
  Goodwill amortization................................    113.86    121.30        --
                                                         --------   -------   -------
Adjusted basic and diluted net loss per share..........  $ 573.80   $347.37   $  8.11
                                                         ========   =======   =======
</Table>

8.  LINE OF CREDIT

     The  Company's line of credit agreement has a maximum borrowing capacity of
$2,000. The line  of credit  accrues interest at  prime (4.25%  at December  31,
2002).  Interest is due monthly and the  principal balance is due on demand. The
line of credit is collateralized by  substantially all of the Company's  assets.
As of December 31, 2001 and 2002, the entire $2,000 was outstanding.

                                       F-19
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9.  DEBT AND RELATED PARTY DEBT

     Long-term debt consists of the following:

<Table>
<Caption>
                                                                DECEMBER 31,
                                                              -----------------
                                                               2001      2002
                                                              -------   -------
<S>                                                           <C>       <C>
DEBT:
Note payable to bank, payable in monthly installments of $18
  through July 2004 including interest at 7.62%,
  collateralized by substantially all of the Company's
  assets....................................................  $   510   $   326
Less current portion........................................      184       326
                                                              -------   -------
                                                              $   326   $    --
                                                              =======   =======
RELATED PARTY DEBT:
Notes payable to stockholders in connection with the
  acquisition of Hagen Systems, Inc.........................  $ 8,000   $    --
Notes payable to stockholders in connection with the
  acquisition of M Data, Inc................................    4,000        --
Notes payable to stockholders in connection with Certain
  debt refinancings which occurred in December 2001.........   23,600        --
Notes payable to stockholders in connection with the
  acquisition of M Data, Inc., due in twenty-four successive
  monthly installments of $175 commencing January 1, 2003,
  plus interest at 8%.......................................       --     4,200
Notes payable to stockholders in connection with the
  acquisition of Hagen Systems, Inc. due in January 2004.
  Current interest is due and payable at 8% and is payable
  in monthly installments Collateralized by substantially
  all of the Company's assets...............................       --     2,350
Note payable to stockholder due in January 2004. Current
  interest is due and payable at 4% and is payable in
  quarterly installments commencing September 2002.
  Collateralized by substantially all of the Company's
  assets....................................................       --    11,800
                                                              -------   -------
                                                               35,600    18,350
Less current portion........................................       --     2,100
Less debt origination costs.................................    2,561     3,507
                                                              -------   -------
                                                              $33,039   $12,743
                                                              =======   =======
</Table>

     The  note payable to the bank includes various restrictive covenants, which
among other  things require  the  Company to  maintain  a certain  debt  service
coverage ratio. At December 31, 2001 and 2002, the Company was not in compliance
with  this  covenant.  The bank  waived  compliance with  this  covenant through
January 1, 2004.

     During 2001, the Company received bridge loans in the amount of $4,500 from
certain Series B, C,  D, and E-1 preferred  stockholders. The bridge loans  bore
interest  at 12%  and converted  into $2,250  of long-term  stockholder debt and
562,500 shares of Series F  preferred stock at $4.00  per share on December  31,
2001.  The Company issued warrants to purchase  9,382 shares of common stock and
75,000 shares of  Series E-1 preferred  stock shares in  conjunction with  these
bridge  loans which  were valued  at $1,161,  using the  Black-Scholes valuation
model with the following  assumptions: volatility of  1.0; no expected  dividend
yield;  risk-free interest  rate of  5.09%; and an  estimated life  of ten years
(Note 14). The estimated fair value  of these warrants was recorded as  interest
expense in 2001.

                                       F-20
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     At the close of business on December 31, 2001, the Company entered into new
agreements  for its related-party debt. Notes  payable to stockholders issued in
connection with the acquisition of Logic totaling $23,604 were repaid along with
$4,000 of the  outstanding notes  payable to stockholders  issued in  connection
with  the acquisition  of Hagen. In  addition, new agreements  were entered into
with the  former stockholders  of Hagen  and M  Data. Accordingly,  new  payment
periods and interest rates related to the remaining $8,000 of debt for Hagen and
$4,000  of debt for M  Data were established as  disclosed above. Funds used for
the repayments  were  obtained  from  a $23,600  note  payable  issued  to  Iris
Graphics, a subsidiary of one of the Company's stockholders, and the issuance of
3,722,096  shares of  Series F preferred  stock at  $4 per share  (Note 12). The
financial statements  reflect these  transactions as  of December  31, 2001,  in
accordance  with the terms  of the agreements described  above. The related cash
transfers occurred on January 2, 2002. The Iris Graphics note included financial
covenants based on cash  flows and revenues. At  December 31, 2001, the  Company
was  not in compliance with  the quarterly cash flow  covenant, which would have
resulted in  an additional  3% of  interest until  the default  was cured.  Iris
Graphics  waived  compliance  with  this covenant  through  March  31,  2002. In
conjunction with incurrence of the debt, Iris Graphics was also issued a warrant
to purchase 570,874 shares of Series F  preferred stock at an exercise price  of
$.01  per share.  The estimated  fair value  of this  warrant of  $2,283 will be
recorded to interest expense over the term of the related debt (Note 14).

     On May 31,  2002 and June  10, 2002, the  Company executed agreements  with
certain  of its debt holders to modify  the terms of certain related-party debt,
effective upon  the completion  of  the Company's  initial public  offering.  An
amendment  to the promissory note  issued to the former  shareholders of M Data,
dated as of May 31,  2002, provided for an increase  in the principal amount  of
the  note to $4,200 from $4,000 in return for a reduction in the annual interest
rate to 8.0%  from 12.0%. Principal  payments are due  in 24 equal  installments
commencing  January 2003. Interest  is payable monthly  beginning June 2002. The
$200 increase in principal  was accounted for as  deferred interest and will  be
amortized  as interest  expense in  addition to  the 8.0%  stated rate  over the
remaining term of the  loan (resulting in an  effective annual interest rate  of
approximately 11.1%).

     An  amendment to the credit agreement with  Iris Graphics, dated as of June
10, 2002: (i) reduced  the annual interest  rate to a fixed  rate of 4.0%;  (ii)
provided  for the  payment of  a total of  $11,800 of  the outstanding principal
balance of $23,600 at  December 31, 2001 and  all accrued and deferred  interest
upon  the  completion  of  the  Company's  initial  public  offering;  and (iii)
eliminated the financial condition covenants associated with the original  loan.
In  return, the Company agreed to pay a $3,700 restructuring fee upon completion
of the Company's initial  public offering. The  restructuring fee was  accounted
for  as deferred interest and will be  amortized as interest expense in addition
to the stated 4.0%  rate over the  remaining term of the  loan (resulting in  an
effective  annual interest rate  of approximately 23.8%).  The $11,800 remaining
principal balance is  due in  one installment on  January 2,  2004. Interest  is
payable  quarterly  beginning  in June  2002.  The covenants  under  the amended
agreement provide certain limitations on  the Company's product development  and
capital expenditures, future investments and certain other financial criteria.

     In  connection with  this amendment  and subsequent  repayment, the Company
wrote off approximately $1,143 of debt origination fees associated with the fair
value of the  Iris Graphic warrant.  This write-off has  been included in  other
expense.

     Additionally,  under an  amendment to  the loan  agreement with  the former
shareholders of Hagen Systems, dated  as of June 10,  2002, the Company was  not
required  to prepay $2,000  of the $8,000  otherwise due upon  an initial public
offering and the  annual interest rate  was reduced  to 8.0%, in  return for  an
increase  of $350 to the remaining principal  balance of the loan. The remaining
principal amount due under the  restructured agreement, after the prepayment  of
$6,000,  is $2,350, which is due on January  2, 2004. Interest at an annual rate
of 8.0%  is  payable  monthly beginning  in  June  2002. The  $350  increase  in
principal  was  accounted for  as  deferred interest  and  will be  amortized as
interest expense in addition to the stated 8.0% rate over the remaining term  of
the  loan  (resulting  in an  effective  annual interest  rate  of approximately
17.4%).

                                       F-21
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Future  minimum  debt  payments  at  December  31,  2002  are  as  follows:
2003 -- $2,299 and 2004 -- $16,377.

10.  COMMITMENTS AND CONTINGENCIES

  LEASE OBLIGATIONS

     The  Company leases  office equipment,  vehicles, and  office facilities in
various locations.  Rental  expense under  these  operating leases  was  $1,373,
$1,670,  and  $1,388 for  the years  ended  December 31,  2000, 2001,  and 2002,
respectively. At December 31, 2002,  future commitments under all  noncancelable
operating leases are as follows :

<Table>
<Caption>
                                                              THIRD    RELATED
                                                              PARTY     PARTY
                                                              ------   -------
<S>                                                           <C>      <C>
2003........................................................  $  920   $  469
2004........................................................     468      443
2005........................................................     474      444
2006........................................................     448      364
Thereafter..................................................     145       27
                                                              ------   ------
                                                              $2,455   $1,747
                                                              ======   ======
</Table>

     The  Company leases equipment  under various capital  leases. These capital
leases expire  in various  years through  2003 and  may be  renewed for  periods
ranging  from one to  five years. Amortization  of leased assets  is included in
depreciation and amortization expense.

     Future minimum payments under capital leases with initial terms of one year
or more consisted of the following at December 31, 2002:

<Table>
<Caption>
                                                               CAPITAL LEASES
                                                               --------------
<S>                                                            <C>
2003........................................................        $34
                                                                    ---
Total minimum lease payments................................         34
Amounts representing interest...............................         (1)
                                                                    ---
Present value of net minimum lease payments.................        $33
                                                                    ===
</Table>

  LEGAL PROCEEDINGS

     The Company is involved in disputes and litigation in the normal course  of
business.  In  the  opinion of  management,  the ultimate  disposition  of these
matters is  not expected  to have  a material  adverse effect  on the  Company's
business, financial condition, or results of operations. The Company has accrued
for  estimated losses in the accompanying financial statements for those matters
where it believes that the likelihood that  a loss has occurred is probable  and
the  amount  of  loss  is reasonably  estimable.  Although  management currently
believes the  outcome  of  other  outstanding  legal  proceedings,  claims,  and
litigation  involving the Company will not have a material adverse effect on its
business,  financial  condition,  or   results  of  operations,  litigation   is
inherently  uncertain  and there  can be  no assurance  that existing  or future
litigation will not have  a material adverse effect  on the Company's  business,
financial condition, results of operations or cash flows.

                                       F-22
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11.  INCOME TAXES

     The reconciliation of the effective income tax rate is as follows:

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                              2000    2001    2002
                                                              -----   -----   -----
<S>                                                           <C>     <C>     <C>
Federal income tax statutory rate...........................   34.0%   34.0%   34.0%
Increases (decreases):
  Nondeductible items, including goodwill amortization......   (8.0)  (12.0)   (3.3)
  State income taxes, net of federal benefit................    6.0     6.0     6.0
  Change in valuation allowance.............................  (32.0)  (28.0)  (36.7)
                                                              -----   -----   -----
Total income tax expense....................................    0.0%    0.0%    0.0%
                                                              =====   =====   =====
</Table>

     Significant components of the Company's deferred tax assets and liabilities
are as follows :

<Table>
<Caption>
                                                                DECEMBER 31,
                                                              -----------------
                                                               2001      2002
                                                              -------   -------
<S>                                                           <C>       <C>
Deferred tax assets:
  Net operating loss carryforwards..........................  $29,363   $30,565
  Deferred revenue..........................................    1,581     1,471
  Bad debt expense..........................................      228       186
  Depreciation/amortization.................................      842     1,048
  Accrued expenses..........................................    2,994     2,836
  Stock-based compensation..................................       --       531
  Other.....................................................        3         6
                                                              -------   -------
     Total deferred tax assets..............................   35,011    36,643
Deferred tax liabilities:
  Identified intangibles....................................   13,481     1,998
  Tax accounting change.....................................      104        27
                                                              -------   -------
     Total deferred tax liabilities.........................   13,585     2,025
  Valuation allowance.......................................   21,426    34,618
                                                              -------   -------
     Net deferred tax asset.................................  $    --   $    --
                                                              =======   =======
</Table>

     A  valuation allowance has been recorded on  the amount of the net deferred
tax asset at  December 31, 2001  and 2002, based  on management's  determination
that the recognition criteria for realization of the net deferred tax assets has
not been met.

     At  December  31,  2002, the  Company  had accumulated  net  operating loss
carryforwards for  tax  purposes of  approximately  $76,413, which  will  expire
beginning  in  2011  through 2022.  Utilization  of certain  net  operating loss
carryforwards is  subject  to limitations  under  Section 382  of  the  Internal
Revenue  Code. Additionally,  certain state tax  restrictions will  apply to the
utilization amount and timing of the net operating loss carryforwards.

12.  STOCKHOLDERS' EQUITY

     At December 31, 2002, the number  of authorized shares of common stock  and
preferred  stock was 100,000,000  shares and 1,000,000  shares, respectively, of
which 10,632,877 and 0, respectively were

                                       F-23
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

outstanding, 10,731 and 0, respectively, were held in treasury and 2,125,833 and
0, respectively, were reserved for future issuance.

     On January 2,  2002, the  Company effected a  one-for-thirty reverse  stock
split  of its issued and outstanding common  stock. On May 31, 2002, the Company
affected a 1-for-2.22 reverse stock split  of its issued and outstanding  common
stock.  All common  stock prices  and amounts impacted  by the  splits have been
retroactively adjusted.  Certain  share  calculations  resulting  in  fractional
amounts have been rounded to the nearest whole number.

  PREFERRED STOCK

     At   December  31,  2001  the  following  Redeemable  preferred  stock  was
authorized and outstanding:

<Table>
<Caption>
                                                           NUMBER OF          NUMBER OF
                                                             SHARES             SHARES
                                                           AUTHORIZED        OUTSTANDING
                                                        ----------------   ----------------
<S>                                                     <C>                <C>
Redeemable preferred stock:
  Series B............................................     31,186,312         31,186,312
  Series C............................................      1,915,080          1,915,080
  Series D............................................        283,125            283,125
  Series E-1..........................................     20,333,333         17,375,000
  Series F............................................      4,525,602          4,292,970
</Table>

     On February  9, 2000,  the Company  issued 31,186,312  shares of  Series  B
preferred stock for consideration of $25,011.

     On  February  15, 2000,  the Company  issued 1,915,080  shares of  Series C
preferred stock for consideration of $11,107.

     On March  8,  2000, 190,948  shares  of  Series A-1  preferred  stock  were
repurchased by the Company for consideration of $1,107.

     On  March 8, 2000, the Company issued  283,125 shares of Series D preferred
stock for consideration of $2,500.

     On October 30, 2000 and March 1, 2001, the Company issued 15,625,000 shares
and  1,750,000  shares,  respectively,  of   Series  E-1  preferred  stock   for
consideration of $62,500 and $7,000, respectively.

     On  December  31, 2001,  the Company  issued 3,722,096  shares of  Series F
preferred stock for consideration of $14,888. Additionally on December 31, 2001,
warrants to purchase 570,874 shares of  Series F preferred stock were  exercised
for $6.

     On  January  31,  2002,  the  Company issued  188,736  shares  of  Series F
preferred stock for consideration of $755.

     The Company  paid  $2,807 in  transaction  costs in  conjunction  with  the
issuance of Series B, C, D, E-1, and F preferred stock.

  LIQUIDATION AND REDEMPTION

     Prior  to  the  conversion  of  all  preferred  stock  to  common  stock in
connection with the Company's initial public offering (Note 2), Series B, C,  D,
E-1,  and F preferred stock  had the right to request  the Company to redeem all
shares. The redemption price for all  series of preferred stock would have  been
the  higher  of (i)  the liquidation  preference of  a share  of such  series of
preferred stock plus unpaid declared dividends,  and (ii) the fair market  value
of a share of preferred stock as determined by an independent appraiser plus all
dividends declared that remain unpaid. During 2000, 2001 and 2002, approximately
$4,858, $5,635 and $6,201,

                                       F-24
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

respectively,  were accreted as dividends utilizing the interest method so that,
at the redemption date, the accreted amount would equal the redemption amount.

  CONVERSION

     In connection  with the  Company's initial  public offering  (see Note  2),
67,512,270  shares of preferred stock converted  into 6,691,652 shares of common
stock. The  outstanding  shares  of  preferred  stock  were  multiplied  by  the
following conversion ratio:

<Table>
<S>                                                            <C>
Series A....................................................   .015
Series A-1..................................................   .015
Series B....................................................   .015
Series C....................................................   .016
Series D....................................................   .017
Series E-1..................................................   .271
Series F....................................................   .291
</Table>

  COMMON STOCK

     On  February 7, 2000, the  Company issued 3,822 shares  of common stock for
$585 of software services.

     On March 9, 2000, the Company issued 1,000 shares of common stock for  $589
of advertising services.

     On  March 10, 2000,  the Company issued  20,396 shares of  common stock for
consideration of $11,928.

     In connection with its  initial public offering (see  Note 2), on June  18,
2002,  the Company issued 3,750,000 shares  of common stock for consideration of
approximately $32,950, net of  underwriting discounts, commissions and  offering
expenses.

13.  STOCK OPTION PLANS

  1999 STOCK OPTION PLAN

     During 1999, the Company adopted a stock option plan (the 1999 Plan), which
provides  for the issuance of stock  options for officers, directors, employees,
and consultants. A total of 9,831 options to purchase the Company's common stock
have been granted pursuant to  the 1999 Plan at an  exercise price equal to  the
estimated  grant  date fair  value,  as determined  by  the board  of directors.
Options under the 1999  Plan will generally  expire ten years  from the date  of
grant.  Options granted under the plan vested immediately in March 2000 upon the
Company's filing of a registration statement on Form S-1. A new measurement date
did not occur since the accelerated  vesting was included in the original  grant
agreement.  As of December 31, 2002,  the weighted average remaining contractual
life on the 1999 Plan options outstanding was 6.73 years.

  STOCK INCENTIVE PLANS

     Effective February 10, 2000, the  Company adopted the 2000 stock  incentive
plan  (the 2000  Plan), which  provides for  the issuance  of stock  options for
officers, directors, employees, and  consultants. A total  of 112,526 shares  of
common  stock may be  issued pursuant to  the 2000 Plan.  Options generally vest
over a four-year period in  equal annual amounts, or  over such other period  as
the  board  of directors  determines, and  may  be accelerated  in the  event of
certain transactions such as a  merger or a sale  of the Company. These  options
generally  expire ten years after the date of grant. As of December 31, 2002, no
additional shares have been granted pursuant to this Plan. The weighted  average
remaining  contractual life on the 2000 Plan options outstanding at December 31,
2002 was 7.84 years.

     During 2000, the Company granted  stock options to certain employees  below
fair  value and to nonemployees for professional services, which resulted in the
recognition of $1,016 of deferred stock-based

                                       F-25
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

compensation. The deferred stock-based compensation is being amortized over  the
remaining  vesting  period. The  employee grants  were determined  utilizing the
intrinsic value method under APB Opinion No. 25. The nonemployee grants were for
professional services at  exercise prices  that approximated fair  value at  the
date  of grant. The average  fair value of these  options was estimated at $6.66
per share on the date of grant using the Black-Scholes option pricing model with
the following assumptions: volatility of 1.00, dividend yield of 0.0%, risk-free
interest rate of 6.0%, and an expected life of four years. During 2000, 2001 and
2002, the Company recognized compensation expense of approximately $866, $49 and
$32, respectively, related to these grants.

     Effective February  5, 2002,  the Company  adopted the  2002 key  executive
stock  incentive plan  (the 2002 Executive  Plan) under which  766,520 shares of
common stock  were  reserved for  grants  to senior  management,  officers,  and
directors.  As of December 31, 2002, the Company had granted options to purchase
766,520 shares  of common  stock, with  an exercise  price of  $4.21 per  share.
Options  to  purchase 10,307  and 756,213  shares vest  over one-  and four-year
periods, respectively. As these  options were granted  below fair market  value,
$4,433  of deferred  stock-based compensation was  recorded. For  the year ended
December 31, 2002,  $1,148 of  stock-based compensation  expense was  recognized
with  respect to these  options. As of  December 31, 2002,  the weighted average
remaining contractual life on  the 2002 Executive  Plan options outstanding  was
9.1 years.

     Effective  March 5, 2002, the Company adopted the 2002 Stock Incentive Plan
(the 2002 Plan), which provides for the issuance of stock options for  officers,
directors,  employees, and consultants. The  Company has reserved 765,765 shares
of common stock for  grants under the  plan. The options  generally vest over  a
four-year period in equal annual amounts, or over such other period as the board
of  directors  determines,  and  may  be accelerated  in  the  event  of certain
transactions such as a merger or a sale of the Company. These options  generally
expire  ten years  after the  date of  grant. During  2002, the  Company granted
92,910 options  to  employees  below  fair  value at  the  date  of  grant.  The
transaction  resulted in $743 and $179  of deferred stock-based compensation and
compensation expense,  respectively. The  deferred stock-based  compensation  is
being  amortized over the remaining vesting period. As of December 31, 2002, the
weighted average remaining contractual life on the 2002 Plan options outstanding
was 9.34 years.

                                       F-26
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The  following  table summarizes  option activity  for options  to purchase
common stock for the 1999 Plan, the  2000 Plan, the 2002 Executive Plan and  the
2002 Plan for the years ended December 31, 2000, 2001 and 2002:

<Table>
<Caption>
                                           COMMON STOCK    OPTION PRICE        WEIGHTED
                                             OPTIONS         RANGE PER         AVERAGE
                                           OUTSTANDING         SHARE        EXERCISE PRICE
                                           ------------   ---------------   --------------
<S>                                        <C>            <C>               <C>
Options outstanding, December 31, 1999...       7,850              $79.92      $ 79.92
Options granted..........................       5,719              $76.59      $ 76.59
Options granted..........................      46,635     $199.80-$266.40      $265.07
Options granted..........................      19,015     $386.28-$782.55      $510.16
Options exercised........................         498       $76.59-$79.92      $ 79.67
Options forfeited........................       1,867      $76.59-$782.55      $273.78
                                            ---------     ---------------      -------
Options outstanding, December 31, 2000...      76,854      $76.59-$782.55      $206.96
Options granted..........................      72,114      $99.90-$266.40      $103.23
Options exercised........................         144       $76.59-$79.92      $ 79.56
Options forfeited........................      22,047      $79.92-$266.40      $159.58
                                            ---------     ---------------      -------
Options outstanding, December 31, 2001...     126,777      $76.59-$782.55      $203.13
Options granted..........................   1,241,033        $2.00-$15.54      $  7.53
Options exercised........................          --                  --           --
Options forfeited........................      79,382       $2.00-$782.55      $ 33.09
                                            ---------     ---------------      -------
Options outstanding, December 31, 2002...   1,288,428       $2.00-$782.55      $ 23.90
                                            =========     ===============      =======
</Table>

     The  options to purchase  common stock outstanding as  of December 31, 2002
have been segregated into ranges for additional disclosure as follows:

<Table>
<Caption>
                                               COMMON STOCK                              COMMON STOCK
                                           OPTIONS OUTSTANDING                       OPTIONS EXERCISABLE
                              ----------------------------------------------   --------------------------------
                                                 WEIGHTED
                                  OPTIONS         AVERAGE
                              OUTSTANDING AS     REMAINING       WEIGHTED      EXERCISABLE AS       WEIGHTED
RANGE OF                      OF DECEMBER 31,   CONTRACTUAL      AVERAGE       OF DECEMBER 31,      AVERAGE
EXERCISE PRICES                    2002            LIFE       EXERCISE PRICE        2002         EXERCISE PRICE
---------------               ---------------   -----------   --------------   ---------------   --------------
<S>                           <C>               <C>           <C>              <C>               <C>
$  2.00-$ 15.54.............     1,175,950          9.18         $  7.21           819,599          $  4.77
$ 76.59-$ 99.90.............        66,978          7.92         $ 97.02            36,104          $ 94.80
$199.80-$266.40.............        31,108          7.70         $264.47            18,762          $264.21
$386.28-$782.55.............        14,392          7.17         $526.67            10,096          $523.06
                                 ---------          ----         -------           -------          -------
                                 1,288,428          9.06         $ 23.90           884,561          $ 19.86
                                 =========          ====         =======           =======          =======
</Table>

     The Company applies  APB Opinion  No. 25,  Accounting for  Stock Issued  to
Employees, and related interpretations in accounting for its stock option plans.
Had compensation cost for the Company's stock option plans been determined based
upon  the fair value at  the grant date for  awards under these plans consistent
with the methodology prescribed under  SFAS No. 123, Accounting for  Stock-Based
Compensation,  the Company's  net loss  and net loss  per share  would have been
increased by approximately $2,201, $4,508, and $4,406 or $15.05, $27.93 and $.76
per share, in 2000, 2001, and 2002, respectively. The following weighted average
assumptions were used in  the Black-Scholes pricing  model: volatility of  1.58,
1.0  and 1.17, dividend yield of 0.0%, an expected life of three and four years,
and average risk-free interest rates of  6.50%, 4.05% and 3.63% for 2000,  2001,
and  2002, respectively. The effects of applying  SFAS No. 123 in this pro forma
disclosure are not likely  to be representative of  the effects on reported  net
income for future years.

                                       F-27
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  EMPLOYEE STOCK PURCHASE PLAN

     Effective  March  5,  2002, the  Company  adopted the  2002  Employee Stock
Purchase  Plan,  which  became  effective  upon  the  Company's  initial  public
offering.  The Company has reserved 337,837  shares of common stock for issuance
under the plan. Under the Plan, employees participating in the Plan may purchase
shares of common stock at the lower of (i) 85% of the price of a share of common
stock at the  beginning of an  offering period and  (ii) 85% of  the price of  a
share  of common stock on the purchase date.  An offering period is defined as a
two-year period consisting of four (4)  purchase dates, April 30 and October  31
of  each year. Employees are eligible to  join the plan and begin their offering
period on May  1 and  November 1  of each calendar  year. On  October 31,  2002,
employees  purchased 38,986 shares for  $.99 (85% of $1.16  on October 31, 2002)
resulting in cash proceeds of approximately $38.

14. WARRANTS

  STRATEGIC

     In early 2000, the  Company entered into two  agreements pursuant to  which
the  Company  develops private  label  Web sites.  The  Company is  permitted to
disclose these  agreements  in sales  and  marketing publications.  The  Company
generates  no revenues under  these agreements. In  return for certain marketing
related services during  2000, the  Company issued warrants  to purchase  29,603
shares  of common  stock with exercise  prices ranging from  $386.28 to $592.07.
Warrants to purchase  6,723 shares of  common stock vested  immediately and  the
remaining   warrants  vest   dependent  upon  various   installation  and  usage
milestones, which vary by agreement. During 2000 and 2001, the Company  recorded
$2,903  and $324, respectively, as warrant  expense related to the warrants that
vested. The remaining warrants to  purchase 22,880 shares, which vest  dependent
upon  installation and usage milestones, will  be recorded as warrant expense at
the fair value on the dates the milestones are achieved in accordance with  EITF
No. 96-18.

  CUSTOMERS AND RESELLERS

     During March 2000, the Company issued a warrant to purchase 1,501 shares of
common  stock at  an exercise  price of  $386.28 per  share to  a customer. This
warrant was immediately  exercisable and  expires four  years from  the date  of
grant.  It is  exercisable for a  period of four  years. The fair  value of this
warrant of $437 has been recorded as warrant expense in 2000 in accordance  with
EITF  No. 96-18, because no revenue was  generated from the related customer. In
March 2000,  the Company  also granted  a warrant  to purchase  3,753 shares  of
common  stock to a potential customer at  an exercise price of $999. The warrant
is exercisable upon entering into a private label site agreement. The warrant is
not currently exercisable.

     In January 2001, the Company granted a warrant to purchase 37,537 shares of
common  stock  to  a  reseller  of  the  Company's  products.  This  warrant  is
exercisable  until the earlier  of 12 months after  termination of the agreement
with the  reseller or  the closing  date of  a merger  or consolidation  of  the
Company  with or into  any other entity.  The warrant was  exercisable for 3,753
shares as of the date of grant. The Company has recorded $647 as warrant expense
related to this warrant. The remaining 33,784 shares of common stock are to vest
based on performance  targets. As  of December  31, 2001,  warrants to  purchase
3,002  of  the remaining  shares had  vested,  resulting in  a $47  reduction in
revenue and $83 of warrant expense. To the extent the Company generates  revenue
under  the agreement  with this reseller,  the fair  value of the  warrant as it
vests will continue  to be recorded  as a reduction  of revenue. These  warrants
will be recorded at fair value on the date the performance targets are met.

  DEBT

     In conjunction with certain bridge loans issued in July and August of 2000,
the  Company issued  warrants to  purchase 11,257 shares  of common  stock at an
exercise price of $266.40 per share. The fair value of these warrants of  $1,942
was initially recorded as a debt discount and then amortized as interest expense
upon the conversion of the notes to equity in October 2000.
                                       F-28
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     In  conjunction with the  bridge loans issued in  September and November of
2001 (Note 6), the  Company issued warrants to  purchase 9,382 shares of  common
stock  and 75,000  shares of  Series E-1 preferred  stock at  exercise prices of
$39.96 per share  and $4.00  per share, respectively.  The fair  value of  these
warrants  of $1,161 was initially recorded as a debt discount and then amortized
as interest expense upon the conversion of the notes to equity in December 2001.

     On December  31, 2001,  the  Company issued  warrants to  purchase  570,874
shares  of Series F preferred  stock to Iris Graphics  in connection with a note
payable (Note 8). The fair value of  these warrants of $2,283 has been  recorded
as  a debt discount and will be amortized as interest expense over the repayment
term using the interest method.

  OTHER

     In March 2000,  the Company issued  warrants to purchase  1,250 shares  and
1,501  shares  of  common  stock  to  an  advertising  agency  and  a  law firm,
respectively, for services. These warrants vested immediately at exercise prices
of $999 and  $386.28, respectively. They  are exercisable for  a period of  four
years.  In accordance with EITF No. 96-18,  the fair values of these warrants of
$501 and  $437 were  recorded to  sales and  marketing expense  and general  and
administrative expense, respectively, in 2000.

     In  April 2000, the Company also issued  warrants to purchase 375 shares of
common stock to an equipment manufacturer in return for equipment discounts  and
a  comarketing  agreement. These  warrants became  exercisable upon  the initial
public offering (Note 2) of the  Company's stock at the initial public  offering
price  per  share. The  Company  recognized $1  of  sales and  marketing expense
associated with this transaction.

     In March 2001, the  Company granted warrants to  purchase 50,000 shares  of
Series E-1 preferred stock to a broker in connection with the issuance of Series
E-1  preferred stock. The fair value of these warrants of $168 has been recorded
as stock issuance cost.

     On February 5, 2002, the Company granted a warrant to purchase 3,378 shares
of common stock to a software provider. The warrant became exercisable upon  the
initial  public offering  of the  Company's common  stock at  the initial public
offering price per  share. The  Company recognized  $25 of  sales and  marketing
expense associated with this transaction.

  FAIR VALUE

     The  fair values of  all the warrants described  above were estimated using
the Black-Scholes valuation model with the following assumptions: volatility  of
1.0, no expected dividend yield, risk-free interest rates of 3.22% to 5.09%, and
an estimated life of three to ten years.

     The  following table summarizes common stock warrant activity for the years
ended December 31, 2000, 2001 and 2002:

                                       F-29
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                            WARRANTS      WARRANT PRICE
                                                           OUTSTANDING   RANGE PER SHARE
                                                           -----------   ---------------
<S>                                                        <C>           <C>
Balance, December 31, 1999...............................         --                  --
Warrants granted.........................................     37,481     $266.40-$386.28
Warrants granted.........................................     11,759     $ 592.07-999.00
                                                             -------     ---------------
Balance, December 31, 2000...............................     49,240     $266.40-$999.00
Warrants granted.........................................     33,817     $          6.66
Warrants granted.........................................      9,382     $         39.96
Warrants granted.........................................     37,537     $        266.40
                                                             -------     ---------------
Balance, December 31, 2001...............................    129,976     $ 39.96-$999.00
Warrants granted.........................................      3,378     $         10.00
                                                             -------     ---------------
Balance, December 31, 2002...............................    133,354     $  6.66-$999.00
                                                             =======     ===============
</Table>

     During 2001, the Company also  granted warrants to purchase 125,000  shares
and  570,874 shares of Series E-1 and Series F preferred stock, respectively, at
exercise prices  of  $4.00  and  $.01 per  share,  respectively.  All  Series  F
preferred  stock warrants  were exercised during  2001. In  association with the
initial public offering (Note 2), the 125,000 Series E-1 warrants were converted
into 33,817 common shares.

15.  DEFINED CONTRIBUTION PLAN

     The  Company  has  a  401(k)  Retirement  Plan  (the  Plan)  which   covers
substantially  all eligible employees. The Plan is a defined contribution profit
sharing plan in which all eligible  participants may elect to have a  percentage
of  their compensation  contributed to the  Plan, subject  to certain guidelines
issued by the Internal Revenue Service.  The Company may contribute to the  Plan
at  the discretion of the Board of Directors.  As of December 31, 2000 and 2001,
the Plan held 83,385  shares and 83,294 shares,  respectively, of the  Company's
Series A-1 preferred stock. The holder of the stock under the Plan had an option
to put the stock to the Company at the then current fair value during August and
February  of each year. However, the Company  reserves the right not to purchase
any shares of  Series A-1  preferred stock if  the purchase,  in the  reasonable
discretion  of  the  Company, could  have  an  adverse affect  on  the Company's
financial position. As of  December 31, 2001, the  Company had recorded a  stock
purchase  plan liability of $125,  equal to the fair value  of the stock held by
the Plan.  In  association  with  the initial  public  offering  (Note  2),  the
outstanding  shares of  Series A-1  preferred stock  were converted  into common
stock. During 2002,  the Company  purchased 1,222  shares for  a total  purchase
price of $122. As of December 31, 2002, the Plan held 29 shares of the Company's
common stock. As of December 31, 2002, the remaining liability related to shares
in  the  Plan  is  immaterial.  To  date, the  Company  has  not  made  any cash
contributions to the Plan.

16.  RESTRUCTURING CHARGE

     In September  2000,  the Company  announced  a strategic  restructuring  to
consolidate certain redundant tasks related to the acquisitions completed during
2000. The plan of restructuring approved by the board of directors resulted in a
restructuring charge of $1,185. This restructuring charge consisted primarily of
severance  benefits and costs related to  the termination of 78 employees during
the period from September through December 2000.

     In May 2001, the Company  announced a restructuring that primarily  related
to  the  consolidation  of  certain  client  support  operations  into  existing
facilities, resulting in  a restructuring  charge of $2,098.  The plan  included
terminations of 45 employees and the reduction of leased office space.

     In  August  2002,  the  Company  announced  a  restructuring  effecting  an
organizational realignment  of  its  product  management  customer  service  and
support  operations.  This resulted  in a  restructuring charge  of $525  in the
quarter ended September 30, 2002.  This charge consisted primarily of  severance
and benefits, including

                                       F-30
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

involuntary  termination  and COBRA  benefits,  outplacement costs,  and payroll
taxes for the approximately 40 employees impacted by this restructuring.

     Activity in the restructuring reserve is as follows (in thousands):

<Table>
<Caption>
                                                        EMPLOYEE
                                                        SEVERANCE        LEASE
                                                      AND BENEFITS    OBLIGATIONS    TOTAL
                                                      -------------   -----------   -------
<S>                                                   <C>             <C>           <C>
Balance, December 31, 1999..........................     $    --         $  --      $    --
Restructuring charge................................       1,185            --        1,185
Amounts paid against the reserve....................        (547)           --         (547)
                                                         -------         -----      -------
Balance, December 31, 2000..........................         638            --          638
Restructuring charge................................       1,468           630        2,098
Amounts paid against the reserve....................      (2,106)         (143)      (2,249)
                                                         -------         -----      -------
Balance, December 31, 2001..........................          --           487          487
Restructuring charge................................         525            --          525
Amounts paid against the reserve....................        (511)         (434)        (945)
                                                         -------         -----      -------
Balance, December 31, 2002..........................     $    14         $  53      $    67
                                                         =======         =====      =======
</Table>

     The remaining restructuring reserve of approximately $67 is expected to  be
paid during 2003.

17.  RELATED PARTY TRANSACTIONS

     On  November 8, 1999 and December 22,  1999, promissory notes in the amount
of $1,714 were received by  the Company in conjunction  with the sale of  58,678
shares of common stock. The notes bear interest at the annual rate of 6% and are
due  on November 7, 2004. In the event the value of the stock is insufficient to
pay the full amount due under the notes, the Company may seek reimbursement from
the borrower for any deficiency  up to 30% of the  original balance of the  note
plus accrued interest. The notes receivable are included in stockholders' equity
on the accompanying balance sheet. During 2000, $335 (including interest of $86)
was  repaid in exchange for cash of $61 and a note payable of $274. During 2001,
$1,112 (including interest of $63) was  repaid by a Company executive  utilizing
proceeds  he received  from the  sale of his  common stock  to certain preferred
stockholders. Additionally, during 2000, 2001  and 2002, approximately $86,  $90
and  18, respectively, was recorded as interest income. As of December 31, 2002,
the Company recorded a valuation adjustment of approximately $393 to adjust  the
fair value of the non-recourse portion of the notes receivable balance.

     On  April 26, 2001, the Company entered into a secured promissory note with
a Company executive for $642 plus interest at the annual rate of 4.58%. The note
matured October 5, 2001 and was secured by 6,422 shares of common stock owned by
the executive.  During 2001,  the Company  took possession  of these  shares  in
satisfaction  of this note.  The fair value of  the shares on  the date that the
loan was provided and the date that the loan matured was approximately $642.  In
addition,  the Company  repaid an unsecured  promissory note issued  to the same
executive in April 2001 in the original principal amount of $99.

     The Company has also issued notes  to related parties (Note 9) and  entered
into various leases with related parties (Note 10).

     In  February 2000, the Company entered into a strategic alliance agreement,
which was restated in  December 2001, with Creo,  Inc (Creo), a stockholder.  As
part  of the  alliance, the Company  signed a  comprehensive services agreement.
During 2001 and 2002, $61 and  $1, respectively, were paid as commissions  under
the agreement.

                                       F-31
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

18.  SUBSEQUENT EVENTS

     On January 21, 2003,  the Company received notification  from Creo, one  of
its  stockholders, that  Creo had  entered into  private, binding  agreements to
acquire an additional  2.6 million  shares of the  Company's outstanding  common
stock  ("Common  Stock")  for  $1.30 per  share  increasing  its  ownership from
approximately 30%  to approximately  55%  of the  outstanding Common  Stock.  In
connection  with these transactions,  Creo presented the  Company an unsolicited
offer to purchase all  of the remaining outstanding  shares of Common Stock  for
$1.30 per share.

     On  January  22,  2003,  the Company  received  an  unsolicited  offer from
Electronics for Imaging, Inc.  ("EFI"), an unrelated party,  to purchase all  of
the outstanding shares of Common Stock for $2.60 per share.

     Also,  on  January 22,  2003, the  Company's  Board of  Directors ("Board")
appointed a Special Committee ("Special Committee") of the Board to consider its
strategic alternatives, including the two outstanding offers for the acquisition
of the Company.  On January  31, 2003, the  Special Committee  announced it  had
selected  a  financial  advisor  to  assist  in  their  review  of  the  various
alternatives.

     On February 13, 2003, the  Special Committee adopted a Stockholders  Rights
Agreement  (the "Rights Agreement")  pursuant to which  dividend distribution of
one Right on  each outstanding share  of Common Stock  was declared. The  Rights
become  exercisable if  a person  or group  of affiliated  or associated persons
acquires beneficial ownership of 30% or more of the outstanding shares of Common
Stock and other voting  securities (the "Voting Securities")  of the Company  or
announces  a  tender offer  or  exchange offer  for 15  percent  or more  of the
outstanding Voting Securities. The Board of Directors is entitled to redeem  the
Rights at $.001 per Right at any time before any such person or affiliated group
thereafter  acquires  beneficial ownership  of 30%  or  more of  the outstanding
Voting Securities. If a person or affiliated group hereafter acquires beneficial
ownership of 30% or more of the outstanding Voting Securities of the Company (an
"Acquiring Person"),  each  Right  will  entitle its  holder,  except  any  such
Acquiring  Person whose Rights  shall become null  and void, to  purchase, at an
exercise price of $6.80 per share  (subject to adjustment in certain events),  a
number of shares of Common Stock having a market value at that time of twice the
Right's  exercise price.  Subject to  certain exceptions,  existing stockholders
that would  otherwise  become Acquiring  Persons  upon adoption  of  the  Rights
Agreement  are  considered "Grandfathered  Stockholders"  and are  not Acquiring
Persons, unless after such date they acquire beneficial ownership of  additional
Voting  Securities or exercise a contractual  right to acquire Voting Securities
or enter into a new agreement to acquire or vote Voting Securities  beneficially
owned  by them.  Before any  such Acquiring  Person shall  become the beneficial
owner of 75% or more of the total voting power of the aggregate of all shares of
Voting Securities then  outstanding, the  Board may exchange  each Right  (other
than  Rights that previously have become void as described above) in whole or in
part, at an exchange ratio  of one share of Common  Stock per Right (subject  to
adjustment  in certain events). If the Company  is acquired in a merger or other
business combination  transaction  after a  Person  or group  of  affiliated  or
associated Persons acquires beneficial ownership of 30% or more of the Company's
outstanding  Voting Securities, each  Right (except Rights  that previously have
been voided as  described above)  will entitle its  holder to  purchase, at  the
Right's  then-current exercise price, a number of  shares of the common stock or
other equity interest of the ultimate  parent of such acquiring entity having  a
market value at that time of twice the Right's exercise price.

     The  dividend distribution is payable to stockholders of record on February
14, 2003. The Rights will expire in ten years.

     On February  13,  2003,  the  Company  entered  into  the  following  three
agreements  with EFI: a letter agreement that places certain restrictions on the
Company's ability to take actions in order to facilitate a business  combination
with  an entity other than EFI; a  stock option agreement granting EFI an option
to purchase up to 2,126,574 shares of Common Stock at a purchase price equal  to
$2.60  per share; and a standby credit facility  in the amount of $11,000 plus a
working capital facility  which will provide  up to an  additional $3,000  under
certain circumstances.

                                       F-32
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Printcafe entered into the EFI letter agreement and the option agreement in
order  to  induce EFI  to provide  Printcafe with  the standby  credit facility.
Subject to certain conditions, the Company has agreed under the terms of the EFI
agreement not to, among other things, solicit any takeover proposal, participate
in any discussions or negotiate regarding  any takeover proposal, or enter  into
any  merger agreement, acquisition agreement, option or similar agreement with a
third party.  The agreement  specifies  that the  Company cannot  solicit  other
offers  but may respond to a bona fide written offer that is superior to the EFI
proposal.

     The Company has also granted to EFI  an option to purchase up to  2,126,574
shares  of Common Stock at  a purchase price equal  to $2.60 per share. Provided
that EFI is not in breach of its obligations under the standby credit agreement,
EFI may exercise the option  at any time, in whole  or in part. The option  will
terminate on December 31, 2007. Subject to certain conditions, the option shares
must  be repurchased by the Company, at the  request of EFI, at a price equal to
the aggregate purchase price paid for  such shares by EFI. In addition,  subject
to  certain conditions, the Company may repurchase from EFI the option shares at
a price equal to the price paid by EFI for those shares.

     Under the  terms  of the  standby  credit  facility, EFI  is  obligated  to
disburse  up to $11,000 to  the Company in the  event that certain amounts under
the Company's existing credit facilities become  due and payable as a result  of
any  action taken by  the Company in  order to facilitate  the proposed business
combination with  EFI or  certain  other criteria.  All  loans made  under  this
facility  bear interest at the rate of 8%  per annum payable on January 2, 2004.
With a certain exception, the maturity  date would be accelerated if a  business
combination  with EFI is not consummated on or  before June 30, 2003 or upon the
termination of the agreement. Subject to certain conditions, the credit facility
also provides the  Company with a  working capital facility  up to an  aggregate
amount  of $3,000  to be disbursed  in the  event that, among  other things, the
Company's cash balance as of the close  of business on the date notice is  given
by the Company is less than $1,000. The Company is obligated to use the proceeds
of  any exercise of the  option agreement to pay  down outstanding amounts under
the standby credit facility. All loans  under the working capital facility  bear
interest  at a rate per annum equal to the prime rate as published, from time to
time, by Citibank, plus two percent payable on the maturity date of the loans.

     On February 19, 2003 Creo initiated  legal action in the State of  Delaware
against  the Special  Committee and  certain members  of the  Company's Board of
Directors. Creo initially sought a  temporary restraining order with respect  to
the  Rights Agreement and the  three Agreements with EFI.  On February 21, 2003,
the  temporary  restraining  order  was  denied  by  the  Delaware  court.  This
litigation  is still pending and the Company cannot predict the eventual outcome
at this time.

     On February 26, 2003  the Company and EFI  entered into a merger  agreement
providing  for EFI's  acquisition of  the Company for  $2.60 per  share for each
outstanding share of the  Company's stock. The merger  is subject to  regulatory
review and stockholder approval by the Company's stockholders.

19.  SUPPLEMENTARY QUARTERLY DATA (UNAUDITED)

     A  summary of the Company's quarterly financial results for the years ended
December 31, 2001 and 2002 follows (in thousands):

<Table>
<Caption>
                                                             FOR THE QUARTER ENDED
                                    -----------------------------------------------------------------------
                                    MARCH 31, 2001   JUNE 30, 2001   SEPTEMBER 30, 2001   DECEMBER 31, 2001
                                    --------------   -------------   ------------------   -----------------
<S>                                 <C>              <C>             <C>                  <C>
Revenue...........................     $  9,561        $ 10,315           $ 10,734            $ 11,258
Loss from operations..............      (18,625)        (19,221)           (13,885)            (13,009)
Net loss..........................      (19,542)        (20,345)           (15,685)            (14,431)
Net loss attributable to
  common stock....................      (23,147)        (24,425)           (19,929)             (8,137)
Net loss per share, basic and
  diluted.........................     $(142.15)       $(149.98)          $(122.31)           $ (50.42)
</Table>

                                       F-33
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                             FOR THE QUARTER ENDED
                                    -----------------------------------------------------------------------
                                    MARCH 31, 2002   JUNE 30, 2002   SEPTEMBER 30, 2002   DECEMBER 31, 2002
                                    --------------   -------------   ------------------   -----------------
<S>                                 <C>              <C>             <C>                  <C>
Revenue...........................     $ 11,715        $ 12,206           $ 11,281            $ 11,319
Loss from operations..............       (8,084)         (8,067)            (8,960)             (8,274)
Net loss..........................       (9,880)        (11,133)           (10,285)             (9,499)
Net loss attributable to
  common stock....................      (13,221)        (13,993)           (10,285)             (9,499)
Net loss per share, basic and
  diluted.........................     $ (81.12)       $  (9.00)          $  (0.97)           $  (0.89)
</Table>

     The quarters  ended  June  30,  2001  and  September  30,  2002  include  a
restructuring  charge  of $2,098  and  $575, respectively  (Note  15). Effective
January 1,  2002,  the  Company  adopted  SFAS  No.  142,  "Goodwill  and  Other
Intangible  Assets." As a  result, the Company does  not amortize goodwill after
December 31,  2001.  Goodwill  amortization was  approximately  $4,900  in  each
quarter of 2001.

                                       F-34
<PAGE>
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL.

     None.

                                       F-35
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The  information required by this  item concerning directors and concerning
compliance with  Section  16(a)  of  the Securities  Exchange  Act  of  1934  is
incorporated  by reference to Printcafe's proxy statement to be filed within 120
days after the end of the fiscal year covered by this Form 10-K. The information
required by this item concerning executive officers is set forth in Part I, Item
1 of this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION.

     The information  required by  this  item is  incorporated by  reference  to
Printcafe's  proxy statement for  the 2003 annual meeting  of stockholders to be
filed within 120  days after the  end of the  fiscal year covered  by this  Form
10-K.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The  information  required by  this item  is  incorporated by  reference to
Printcafe's proxy statement for  the 2003 annual meeting  of stockholders to  be
filed  within 120  days after the  end of the  fiscal year covered  by this Form
10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     The information  required by  this  item is  incorporated by  reference  to
Printcafe's  proxy statement for  the 2003 annual meeting  of stockholders to be
filed within 120  days after the  end of the  fiscal year covered  by this  Form
10-K.

ITEM 14. CONTROLS AND PROCEDURES.

     Within   90  days  before   filing  this  report,   an  evaluation  of  the
effectiveness of the design and  operation of the Company's disclosure  controls
and procedures was conducted under the supervision and with the participation of
the  Company's management, including  the Company's chief  executive officer and
chief financial officer.  Based on  that evaluation,  the Company's  management,
including  its chief  executive officer  and chief  financial officer, concluded
that the Company's disclosure controls and  procedures were effective as of  the
date  of the evaluation. Since the date of the evaluation described above, there
have been no significant changes in the Company's internal controls or in  other
factors that could significantly affect these controls.

                                    PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a) DOCUMENTS FILED AS PART OF THIS ANNUAL REPORT

          1. Financial Statements.

             The information required by this item is included in Item 8 of Part
        II of this report.

          2. Financial Statement Schedules.

             All  schedules have been omitted because they are not applicable or
        are not required or  the information required to  be set forth in  those
        schedules is included in the financial statements or notes thereto.

          3. Exhibits.

             The  exhibits listed in  the Exhibit Index  attached to this report
        are filed or incorporated by reference as part of this annual report

                                       F-36
<PAGE>

     (b) REPORTS ON FORM 8-K

          None.

                                       F-37
<PAGE>

                                   SIGNATURES

     Pursuant  to  the requirements  of Section  13 or  15(d) 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.

                                          PRINTCAFE SOFTWARE, INC.

                                                   /s/ MARC D. OLIN
                                          --------------------------------------
                                                       MARC D. OLIN
                                          President and Chief Executive Officer

                                                  /s/ JOSEPH J. WHANG
                                          --------------------------------------
                                                     Joseph J. Whang
                                            Chief Financial Officer and Chief
                                                    Operating Officer
                                                (Chief Accounting Officer)

Date:  March 20, 2003

     Pursuant to the requirements of the  Securities Exchange Act of 1934,  this
report  has been signed by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:

<Table>
<Caption>
                   SIGNATURE                                    CAPACITY                     DATE
                   ---------                                    --------                     ----
<C>                                                <C>                                  <S>



                /s/ MARC D. OLIN                   President, Chief Executive Officer   March 20, 2003
------------------------------------------------       and Chairman of the Board
                  Marc D. Olin




              /s/ JOSEPH J. WHANG                     Chief Financial Officer and       March 20, 2003
------------------------------------------------   Chief Operating Officer (Principal
                Joseph J. Whang                    Financial and Accounting Officer)




           /s/ CHARLES J. BILLERBECK                            Director                March 20, 2003
------------------------------------------------
             Charles J. Billerbeck




               /s/ VICTOR A. COHN                               Director                March 20, 2003
------------------------------------------------
                 Victor A. Cohn




               /s/ THOMAS J. GILL                               Director                March 20, 2003
------------------------------------------------
                 Thomas J. Gill
</Table>

                                       F-38
<PAGE>

                                 CERTIFICATIONS

     I, Marc D. Olin, certify that:

     1. I have reviewed this annual  report on Form 10-K of Printcafe  Software,
Inc.;

     2.  Based on my knowledge,  this annual report does  not contain any untrue
statement of a material fact or omit to state a material fact necessary to  make
the  statements made, in light of  the circumstances under which such statements
were made, not  misleading with  respect to the  period covered  by this  annual
report;

     3.  Based on  my knowledge, the  financial statements,  and other financial
information included  in this  annual  report, fairly  present in  all  material
respects  the financial condition,  results of operations and  cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4. The registrant's  other certifying  officers and I  are responsible  for
establishing  and maintaining disclosure controls  and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a) Designed such  disclosure controls  and procedures  to ensure  that
     material information relating to the registrant, including its consolidated
     subsidiaries,  is  made  known  to  us  by  others  within  those entities,
     particularly during  the  period  in  which this  annual  report  is  being
     prepared;

          b) Evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

          c)   Presented  in  this  annual  report  our  conclusions  about  the
     effectiveness of  the  disclosure  controls and  procedures  based  on  our
     evaluation as of the Evaluation Date;

     5.  The registrant's other certifying officers  and I have disclosed, based
on our  most recent  evaluation,  to the  registrant's  auditors and  the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

          a) All significant deficiencies in the design or operation of internal
     controls which could adversely affect  the registrant's ability to  record,
     process,  summarize and report  financial data and  have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) Any fraud,  whether or  not material, that  involves management  or
     other  employees who have  a significant role  in the registrant's internal
     controls; and

     6. The registrant's other certifying officers and I have indicated in  this
annual  report whether there were significant changes in internal controls or in
other factors that  could significantly affect  internal controls subsequent  to
the  date of our  most recent evaluation, including  any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  March 20, 2003

                                          /s/ MARC D. OLIN
                                          --------------------------------------
                                          Marc D. Olin
                                          Chief Executive Officer

                                       F-39
<PAGE>

     I, Joseph J. Whang, certify that:

     1. I have reviewed this annual  report on Form 10-K of Printcafe  Software,
Inc.;

     2.  Based on my knowledge,  this annual report does  not contain any untrue
statement of a material fact or omit to state a material fact necessary to  make
the  statements made, in light of  the circumstances under which such statements
were made, not  misleading with  respect to the  period covered  by this  annual
report;

     3.  Based on  my knowledge, the  financial statements,  and other financial
information included  in this  annual  report, fairly  present in  all  material
respects  the financial condition,  results of operations and  cash flows of the
registrant as of, and for, the periods presented in this annual report;

     4. The registrant's  other certifying  officers and I  are responsible  for
establishing  and maintaining disclosure controls  and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

          a) Designed such  disclosure controls  and procedures  to ensure  that
     material information relating to the registrant, including its consolidated
     subsidiaries,  is  made  known  to  us  by  others  within  those entities,
     particularly during  the  period  in  which this  annual  report  is  being
     prepared;

          b) Evaluated the effectiveness of the registrant's disclosure controls
     and procedures as of a date within 90 days prior to the filing date of this
     annual report (the "Evaluation Date"); and

          c)   Presented  in  this  annual  report  our  conclusions  about  the
     effectiveness of  the  disclosure  controls and  procedures  based  on  our
     evaluation as of the Evaluation Date;

     5.  The registrant's other certifying officers  and I have disclosed, based
on our  most recent  evaluation,  to the  registrant's  auditors and  the  audit
committee  of  registrant's  board  of  directors  (or  persons  performing  the
equivalent functions):

          a) All significant deficiencies in the design or operation of internal
     controls which could adversely affect  the registrant's ability to  record,
     process,  summarize and report  financial data and  have identified for the
     registrant's auditors any material weaknesses in internal controls; and

          b) Any fraud,  whether or  not material, that  involves management  or
     other  employees who have  a significant role  in the registrant's internal
     controls; and

     6. The registrant's other certifying officers and I have indicated in  this
annual  report whether there were significant changes in internal controls or in
other factors that  could significantly affect  internal controls subsequent  to
the  date of our  most recent evaluation, including  any corrective actions with
regard to significant deficiencies and material weaknesses.

Date:  March 20, 2003

                                          /s/ JOSEPH J. WHANG
                                          --------------------------------------
                                          Joseph J. Whang
                                          Chief Financial Officer

                                       F-40
<PAGE>

                                 EXHIBIT INDEX

<Table>
<Caption>
 NUMBER                            DESCRIPTION
 ------                            -----------
<C>        <S>
 3.1       Registrant's   Amended   and    Restated   Certificate    of
           Incorporation  (incorporated by reference  to Exhibit 3.1(d)
           to the registrant's Registration Statement on Form S-1, File
           No. 333-82646 (the "Form S-1"))
 3.2       Registrant's Amended and Restated Bylaws
 4.1(a)    Stockholders Rights  Agreement,  dated as  of  February  13,
           2003,  between the  registrant and  Mellon Investor Services
           LLC as Rights  Agent (incorporated by  reference to  Exhibit
           4.1 of Current Report on Form 8-K filed February 13, 2003)
 4.1(b)    Amendment  to  Stockholders  Rights Agreement,  dated  as of
           February 26, 2003 (incorporated by reference to Exhibit  4.1
           of Current Report on Form 8-K filed February 26, 2003)
 4.2       Form  of  Rights Certificate  (incorporated by  reference to
           Exhibit 4.2 of Current Report on Form 8-K filed February 13,
           2003)
10.1       Registrant's  1999  Stock   Option  Plan  (incorporated   by
           reference to Exhibit 10.1 of the Form S-1).
10.2       Registrant's  2000  Stock  Incentive  Plan  (incorporated by
           reference to Exhibit 10.2 of the Form S-1).
10.3       Registrant's 2002 Employee Stock Purchase Plan (incorporated
           by reference to Exhibit 10.3 of the Form S-1).
10.4       Registrant's  2002  Key   Executive  Stock  Incentive   Plan
           (incorporated by reference to Exhibit 10.4 of the Form S-1).
10.5       Registrant's    2002    Employee   Stock    Incentive   Plan
           (incorporated by reference to Exhibit 10.5 of the Form S-1).
10.6       Employment Agreement effective January  1, 2002 between  the
           registrant  and  Marc  Olin  (incorporated  by  reference to
           Exhibit 10.6 of the Form S-1).
10.7       Employment Agreement effective January  1, 2002 between  the
           registrant and Joseph J. Whang (incorporated by reference to
           Exhibit 10.7 of the Form S-1).
10.8       Employment  Agreement effective January  1, 2002 between the
           registrant  and  Ronald  F.  Hyland,  Sr.  (incorporated  by
           reference to Exhibit 10.8 of the Form S-1)
10.9       Amended  and  Restated  Strategic  Alliance  Agreement dated
           December 31, 2001 between the registrant and Creo  Products,
           Inc.  (incorporated by reference to Exhibit 10.9 of the Form
           S-1)
10.10      2002 Sales Channel  Agreement dated  as of  January 1,  2002
           between  the registrant, Creo  Products Inc., and CreoScitex
           America, Inc. (incorporated by reference to Exhibit 10.10 of
           the Form S-1)
10.11      IP Purchase  and License  Agreement dated  October 31,  2002
           between the registrant and Creo Inc.
10.12(a)   Credit   Agreement  dated  December  31,  2001  between  the
           registrant and Iris Graphics Inc (incorporated by  reference
           to Exhibit 10.12(a) of the Form S-1).
10.12(b)   Waiver  dated May 18,  2002 between the  registrant and Iris
           Graphics Inc. (incorporated by reference to Exhibit 10.39 of
           the Form S-1)
10.12(c)   Prepayment Agreement dated as of March 25, 2002 between  the
           registrant  and Iris Graphics Inc (incorporated by reference
           to Exhibit 10.36 of the Form S-1).
10.12(d)   Amendment No. 1, dated  as of June 10,  2002, to the  Credit
           Agreement  between  the  registrant  and  Iris  Graphics Inc
           (incorporated by reference to  Exhibit 10.22(b) of the  Form
           S-1).
10.13      Form of Indemnification Agreement between the registrant and
           its  directors and certain of  its officers (incorporated by
           reference to Exhibit 10. of the Form S-1).
10.14      Fifth Amended and Restated Investors' Rights Agreement dated
           December 31,  2001  (incorporated by  reference  to  Exhibit
           10.15 of the Form S-1).
10.15      Secured Promissory Note dated as of November 8, 1999 between
           the  registrant,  as  lender,  and  Marc  Olin,  as borrower
           (incorporated by  reference to  Exhibit  10.18 of  the  Form
           S-1).
10.16      Pledge  Agreement dated as  of November 8,  1999 between the
           registrant and  Marc  Olin  (incorporated  by  reference  to
           Exhibit 10.19 of the Form S-1).
</Table>

                                       F-41
<PAGE>

<Table>
<Caption>
 NUMBER                            DESCRIPTION
 ------                            -----------
<C>        <S>
10.17      Secured  Promissory  Note  dated  as  of  December  22, 1999
           between the registrant, as lender,  and Joseph J. Whang,  as
           borrower  (incorporated by reference to Exhibit 10.21 of the
           Form S-1).
10.18      Pledge Agreement dated as of  December 22, 1999 between  the
           registrant and Joseph J. Whang (incorporated by reference to
           Exhibit 10.22 of the Form S-1).
10.19      Secured Promissory Note dated as of November 8, 1999 between
           the  registrant, as  lender, and  Ronald F.  Hyland, Sr., as
           borrower (incorporated by reference to Exhibit 10.24 of  the
           Form S-1).
10.20      Pledge  Agreement dated as  of November 8,  1999 between the
           registrant  and  Ronald  F.  Hyland,  Sr.  (incorporated  by
           reference to Exhibit 10.25 of the Form S-1).
10.21+     License Agreement effective March 9, 2000 by and between the
           registrant  and Henry B. Freedman (incorporated by reference
           to Exhibit 10.31 of the Form S-1).
10.22      Marketing Alliance Agreement  dated January 4,  2001 by  and
           between  A.T.  Kearney  Procurement  Solutions,  Inc. (f/k/a
           CoNext Holdings, Inc.) (incorporated by reference to Exhibit
           10.35 of the Form S-1).
10.23(a)   Agreement dated  December  31, 2001  among  the  registrant,
           printCafe  Systems,  Inc., Steven  R. Peterson,  Patricia J.
           Peterson, and Richard J. Hagen (incorporated by reference to
           Exhibit 10.40(a) of the Form S-1).
10.23(b)   Amendment No. 1, dated as of June 10, 2002, to the Agreement
           among the  registrant, printCafe  Systems, Inc.,  Steven  R.
           Peterson,   Patricia  J.  Peterson,  and  Richard  J.  Hagen
           (incorporated by reference to  Exhibit 10.40(b) of the  Form
           S-1).
10.24      Guarantee  and Collateral Agreement  dated December 31, 2001
           made by the  registrant and certain  of its subsidiaries  in
           favor  of  Steven  R. Peterson,  Patricia  J.  Peterson, and
           Richard J. Hagen (incorporated by reference to Exhibit 10.41
           of the Form S-1).
10.25(a)   Amended and Restated Subordinated Non-Negotiable  Promissory
           Note dated December 31, 2001 between printCafe Systems, Inc.
           and  Michael T. Miller  and Neil G.  Miller (incorporated by
           reference to Exhibit 10.42(a) of the Form S-1).
10.25(b)   Amendment No. 1, dated  as of May 31,  2002, to the  Amended
           and  Restated  Subordinated  Non-Negotiable  Promissory Note
           between printCafe Systems,  Inc. and Michael  T. Miller  and
           Neil   G.  Miller  (incorporated  by  reference  to  Exhibit
           10.42(b) of the Form S-1).
21.1       Subsidiaries of the registrant.
23.1       Consent of Ernst & Young LLP.
99.1       Certification of  Chief  Executive Officer  Pursuant  to  18
           U.S.C.  Section 1350, as Adopted  Pursuant to Section 906 of
           the Sarbanes-Oxley Act of 2002
99.2       Certification of  Chief  Financial Officer  Pursuant  to  18
           U.S.C.  Section 1350, as Adopted  Pursuant to Section 906 of
           the Sarbanes-Oxley Act of 2002
</Table>

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

+ Portions of this exhibit have been omitted based on a request for confidential
  treatment by the Commission.  The omitted portions of  this exhibit have  been
  filed separately with the Commission.

                                       F-42