<PAGE>

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

                             _____________________

                                   Form 10-Q

 [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

                             EXCHANGE ACT OF 1934

                 For the quarterly period ended July 31, 1999

                                      OR

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

                             EXCHANGE ACT OF 1934

                 For the transition period from _____ to _____

                       Commission File Number 333-81387

                          AGILE SOFTWARE CORPORATION
            (Exact name of registrant as specified in its charter)

                Delaware                             77-0397905
       (State of incorporation)        (IRS Employer Identification No.)


                One Almaden Boulevard  San Jose, Ca 95113-2253
         (Address of principal executive offices, including ZIP code)

                                (408) 975-3900
             (Registrant's telephone number, including area code)

                                     None
  (Former name, former address and former fiscal year, if changed since last
                                    report)

  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) Yes  X  No ___, and (2) has
                                                  ---
been subject to such filing requirements for the past 90 days. Yes ___ No X.
                                                                         ---

  The number of shares outstanding of the Registrant's Common Stock as of
July 31, 1999 was 4,574,683

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

                             AGILE SOFTWARE CORP.

                                     INDEX




                                                                        Page No.
                                                                        -------

Part I.  Financial Information

Item 1.  Financial Statements (unaudited)

             Condensed Consolidated Balance Sheets at July 31, 1999
             and April 30, 1999                                             1

             Condensed Consolidated Statements of Operations for the
             Three Months Ended July 31, 1999 and 1998                      2

             Condensed Consolidated Statements of Cash Flows for the
             Three Months Ended July 31, 1999 and 1998                      3

             Notes to Condensed Consolidated Financial Statements           4

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                          7


Part II. Other Information

Item 1.  Legal Proceedings                                                 28

Item 2.  Changes in Securities and Use of Proceeds                         28

Item 3.  Defaults Upon Senior Securities                                   28

Item 4.  Submission of Matters to a Vote of Security Holders               28

Item 5.  Other Information                                                 29

Item 6.  Exhibits and Reports on Form 8-K                                  29

Signature                                                                  30

Exhibit Index                                                              31
<PAGE>

Part 1 - Financial Information

Item 1.  Financial Statements

                          AGILE SOFTWARE CORPORATION

                     CONDENSED CONSOLIDATED BALANCE SHEETS
                   (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                         July 31,    April 30,
                                                           1999         1999
                                                        -----------  ----------
                                                        (unaudited)
<S>                                                     <C>          <C>
ASSETS
Current assets:
  Cash and cash equivalents...........................    $  9,639    $ 10,003
  Accounts receivable, net............................       3,131       4,980
  Other current assets................................         643         624
                                                          --------    --------
     Total current assets.............................      13,413      15,607
Property and equipment, net...........................       2,668       1,973
Other assets..........................................         341         368
                                                          --------    --------
                                                          $ 16,422    $ 17,948
                                                          ========    ========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable....................................    $  2,079    $  1,287
  Accrued expenses and other liabilities..............       3,653       3,618
  Deferred revenue....................................       5,353       5,107
  Current portion of capital lease obligations........         766         735
  Current portion of notes payable....................         937         686
                                                          --------    --------
     Total current liabilities........................      12,788      11,433

Capital lease obligations, noncurrent.................         811         871
Notes payable, noncurrent.............................       2,102       2,353
                                                          --------    --------
     Total liabilities................................      15,701      14,657
                                                          --------    --------

Stockholders' equity:
 Convertible Preferred Stock, $0.001 par value;
  31,176 shares authorized; 11,874 shares
  issued and outstanding..............................          12          12
 Common Stock, $0.001 par value; 100,000 authorized;
   4,575 shares and 4,200 shares
   issued and outstanding.............................           5           4
Additional paid-in capital............................      42,006      35,503
Notes receivable from stockholders....................      (1,701)       (748)
Unearned stock compensation...........................      (8,992)     (4,947)
Accumulated deficit...................................     (30,609)    (26,533)
                                                          --------    --------
     Total stockholders' equity.......................         721       3,291
                                                          --------    --------
                                                          $ 16,422    $ 17,948
                                                          ========    ========
</TABLE>

  See accompanying notes to these condensed consolidated financial statements.

                                       1
<PAGE>

                          AGILE SOFTWARE CORPORATION

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                     Three Months Ended July 31,
                                                                   -----------------------------
                                                                           1999         1998
                                                                   --------------  -------------
                                                                            (unaudited)
<S>                                                                <C>             <C>
Revenues:
   License..................................................              $ 3,654        $ 2,270
   Professional services....................................                1,159            655
   Maintenance..............................................                1,077            316
                                                                          -------        -------
       Total revenues                                                       5,890          3,241
                                                                          -------        -------


Cost of revenues:
   License..................................................                  223            165
   Professional services....................................                  921            756
   Maintenance..............................................                  482            237
                                                                          -------        -------
       Total cost of revenues                                               1,626          1,158
                                                                          -------        -------
Gross profit                                                                4,264          2,083
                                                                          -------        -------
Operating expenses:
   Sales and marketing......................................                4,546          2,756
   Research and development.................................                1,486          1,076
   General and administrative...............................                  753            431
   Amortization of stock compensation.......................                1,428            444
                                                                          -------        -------
       Total operating expenses.............................                8,213          4,707
                                                                          -------        -------

Loss from operations........................................               (3,949)        (2,624)

Interest and other income...................................                   90            102
Interest expense............................................                 (217)           (50)
                                                                          -------        -------
Net loss....................................................              $(4,076)       $(2,572)
                                                                          =======        =======

Net loss per share:
  Basic and diluted.........................................              $ (1.23)       $ (0.94)
                                                                          =======        =======
  Weighted average shares...................................                3,324          2,724
                                                                          =======        =======
</TABLE>

  See accompanying notes to these condensed consolidated financial statements.

                                       2
<PAGE>

                          AGILE SOFTWARE CORPORATION

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)


<TABLE>
<CAPTION>
                                                                         Three Months Ended July 31,
                                                                     ----------------------------------
                                                                            1999            1998
                                                                     ----------------  ----------------
                                                                                (unaudited)
<S>                                                                  <C>               <C>
 Cash flows from operating activities:
 Net loss..........................................................          $(4,076)          $(2,572)
 Adjustments to reconcile net loss to net cash
  provided by (used in)operating activities:
   Provision for doubtful accounts.................................               38                47
   Depreciation....................................................              357               212
   Amortization of stock compensation..............................            1,428               444
   Warrant expense.................................................               21                 -
   Changes in assets and liabilities:
    Accounts receivable............................................            1,811               567
    Other assets, current and non-current..........................              (13)             (200)
    Accounts payable...............................................              792              (413)
    Accrued expenses and other liabilities.........................               35               339
    Deferred revenue...............................................              246              (199)
                                                                             -------           -------
     Net cash provided by (used in)operating activities                          639            (1,775)
                                                                             -------           -------
Cash flows from investing activities:
 Acquisition of property and equipment.............................             (888)              (30)
                                                                             -------           -------
   Net cash used in investing activities...........................             (888)              (30)
                                                                             -------           -------
Cash flows from financing activities:
  Proceeds from bank line of credit................................                -               900
  Repayment of bank line of credit.................................                -            (1,900)
  Repayment of capital lease obligations                                        (193)             (134)
  Proceeds from issuance of Common Stock, net of
  repurchase.......................................................               64                 8
  Repayment of notes receivable from stockholders..................               14                 2
  Proceeds from issuance of Convertible Preferred
   Stock, net......................................................                -            11,977
                                                                             -------           -------
     Net cash provided by (used in)financing activities                         (115)           10,853
                                                                             -------           -------
Net increase (decrease)in cash and cash
 equivalents.......................................................             (364)            9,048

Cash and cash equivalents at beginning of period...................           10,003             2,160
                                                                             -------           -------
Cash and cash equivalents at end of period.........................          $ 9,639           $11,208
                                                                             =======           =======
Supplemental disclosure:
 Cash paid for interest............................................          $   114           $    40
                                                                             =======           =======
Noncash investing and financing activities:
 Common Stock issued in exchange for notes
  receivable.......................................................          $   967          $     66
                                                                             =======          ========
 Property and equipment acquired under capital
  lease............................................................          $   164          $     84
                                                                             =======          ========
</TABLE>

    See accompanying notes to these condensed consolidated financial statements.

                                       3
<PAGE>

                          AGILE SOFTWARE CORPORATION

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation

     The accompanying condensed consolidated financial statements as of July 31,
1999 and for the three months ended July 31, 1999 and 1998 are unaudited and
reflect all normal recurring adjustments which are, in the opinion of
management, necessary for their fair presentation. These condensed consolidated
financial statements should be read in conjunction with the Company's
consolidated financial statements and notes thereto included in the Company's
Registration Statement on Form S-1 for the fiscal year ended April 30, 1999. The
results of operations for the three months ended July 31, 1999 are not
necessarily indicative of results to be expected for the full year or any other
period.

2.   Revenue Recognition

     The Company derives revenues from the license of software products under
software license agreements and from the delivery of professional services and
maintenance services. When contracts contain multiple elements, and vendor
specific objective evidence exists for all undelivered elements, the Company
accounts for the delivered elements in accordance with the "Residual Method"
prescribed by Statement of Position ("SOP") 98-9. License revenues are
recognized when persuasive evidence of an arrangement exists, the fee is fixed
or determinable, collectibility is probable, and delivery and customer
acceptance, if required under the terms of the contract, of the software
products have occurred. In the event the Company grants its customers the right
to specified upgrades, license revenue is deferred until delivery of the
specified upgrade. If vendor-specific objective evidence of fair value exists
for the specified upgrade, then an amount equal to this fair value is deferred.
If vendor-specific objective evidence of fair value does not exist, then the
entire license fee is deferred until the delivery of the specified upgrade. A
provision for the estimated losses on fixed-price contracts is recognized in the
period in which the loss becomes known. Allowances for estimated returns are
provided upon product delivery. In instances where vendor obligations remain,
revenues are deferred until the obligation has been satisfied. Revenues from
professional services consist of implementation and training services. Training
revenues are recognized as the services are performed. Implementation services
are typically performed under fixed-price contracts and accordingly, revenues
are recognized upon customer acceptance. Maintenance contracts include the right
to unspecified upgrades on a when-and-if available basis, and ongoing support.
Maintenance revenues are recognized ratably over the term of the maintenance
contract, which is generally twelve months.

3.   Net Loss Per Share

     Basic net loss per share is computed by dividing the net loss available to
holders of Common Stock for the period by the weighted average number of shares
of Common Stock outstanding during the period. Diluted net loss per share is
computed by dividing the net loss for the period by the weighted average number
of shares of Common Stock number and potential shares of Common Stock. The
calculation of diluted net loss per share excludes potential shares of Common
Stock if their effect is antidilutive. Potential shares of Common Stock consist
of unvested restricted Common Stock, incremental shares of Common Stock issuable
upon the exercise of stock options and warrants and shares of Common Stock
issuable upon the conversion of the Company's Series A, Series B, Series C,
Series D and Series F Convertible Preferred Stock.

The following table sets forth the computation of basic and diluted net loss
per share for the periods indicated (in thousands, except per share amounts):

                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                                                 Three Months Ended July 31,
                                                                            ------------------------------------
                                                                                  1999                 1998
                                                                            ----------------     ---------------
                                                                                          (unaudited)
<S>                                                                         <C>                  <C>

Numerator
 Net loss.................................................................      $    (4,076)     $       (2,572)
                                                                                ============     ===============

Denominator
 Weighted average shares..................................................            4,397               4,015
 Weighted average unvested shares of Common Stock subject to repurchase...           (1,073)             (1,291)
                                                                                ------------     ---------------

 Denominator for basic and diluted calculation............................            3,324               2,724
                                                                                ============     ===============

Net loss per share:
 Basic and diluted........................................................      $     (1.23)     $        (0.94)
                                                                                ============     ===============
</TABLE>

     At July 31, 1999 14,374,000 potential common shares are excluded from the
determination of diluted net loss per share as the effect of such shares is
antidilutive.

4.   Comprehensive Income

     The Company reports components of comprehensive income (loss) in its annual
consolidated statement of stockholders' equity. Comprehensive income, as
defined, includes all changes in equity (net assets) during a period from non-
owner sources. To date, the Company has not had any significant transactions
that are required to be reported in comprehensive income.

5.   Segment Information

     The Company identifies its operating segments based on business activities,
management responsibility and geographical location. During the quarters ended
July 31, 1999 and 1998, the Company operated in a single business segment,
primarily in the United States. Through July 31, 1999, foreign operations were
not significant in either revenue or investment in long-lived assets.

6.   Initial Public Offering

     In August 1999, the Company completed its initial public offering of
3,450,000 shares of Common Stock (including the exercise of the underwriters'
overallotment option)at $21.00 per share. Net proceeds to the Company, before
offering expenses, were $67.4 million or $19.53 per share. Simultaneous with the
closing of the initial public offering, the Company sold an aggregate of 665,641
shares of Common Stock at $19.53 per share in private placements to Dell
Computer Corporation, Flextronics International Ltd., and Marshall Industries.

7.   Stock Option Grants

     During the period from August 1, 1999 through its initial public offering,
the Company granted options to purchase an aggregate of 639,500 shares of Common
Stock at exercise prices ranging from $10.00 to $19.00 per share. The Company
expects to record additional unearned stock compensation with respect to these
stock option grants of approximately $1.2 million. In addition, during August
1999, the Company granted 65,000 options to consultants. The Company will
account for these options under variable plan accounting and has calculated the
fair value of these options on the date of grant of at least $1.1 million using
the Black-Scholes option pricing model as prescribed by SFAS No. 123 with the
following underlying assumptions: expected volatility of 50%, risk-free interest
rate of 5.9% and option terms of ten years. The Company will record an expense
relating to these options each quarter over the five-year vesting period of the
options.

                                       5
<PAGE>

8.   Borrowings

     At July 31, 1999 the Company had $3.0 million outstanding of subordinated
notes payable which bear interest at an annual rate of 11.75% and are payable
through fiscal 2002. The Company used a portion of the proceeds from its initial
public offering to prepay these subordinated notes payable in their entirety on
August 31, 1999. At July 31, 1999, the Company had unamortized interest of
$232,000 related to warrants issued in connection with these subordinated notes
payable. As a result of the repayment of the subordinated notes payable, we will
recognize the unamortized interest balance as an expense in the quarter ended
October 31, 1999.

On July 17, 1999, the company renewed its existing line of credit through august
2000 and increased the line of credit to provide for borrowings of up to
$5,000,000, including $500,000 available for the issuance of letters of credit
and foreign currency exchange activity. Borrowings under the credit agreement
bear interest at an annual rate of 8.5%, subject to adjustment by the bank. The
interest rate was 8.5% at July 31, 1999. Borrowings under the line of credit are
secured by the assets of the Company. As of July 31, 1999 no amount was
outstanding under the line. In connection with this line-of-credit, the Company
is required to meet certain monthly financial tests, including a minimum
tangible net worth and a minimum quick ratio. At July 31, 1999, the Company was
in compliance with all financial covenants.

                                       6
<PAGE>

Item 2.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The information in this discussion contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Such statements
are based upon current expectations that involve risks and uncertainties. Any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Our actual results and the timing of
certain events may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such a discrepancy include,
but are not limited to, those discussed in "Other Factors Affecting Operating
Results" and "Liquidity and Capital Resources" below, as well as Risk Factors
included in the our Rule 424(b)(3) prospectus dated August 20, 1999, as filed
with the Securities and Exchange Commission. The following discussion should be
read in conjunction with the Condensed Consolidated Financial Statements and
notes thereto appearing elsewhere in this report.

Overview

     We develop and market product content management software for the use
within and among companies in a manufacturing supply chain over the Internet.
Our suite of software products is designed to improve the ability of all members
of the supply chain to communicate and collaborate with one another about new or
changing information concerning the manufacture, source or supply of products or
components. We were founded in March 1995 and in June 1996 we began selling our
first products and delivering related services. We currently license our
products in the United States through our direct sales force, and in Europe
through our direct sales force and distributors. To date, revenues from
international sales have not been material. We have derived our revenues
principally from the licenses of our products, the delivery of professional
services and from maintenance contracts.

     Customers who license our software products receive a license for our
application servers, one or more user licenses, and third-party provided
adapters to connect with the customer's other existing enterprise systems. Our
customers generally purchase a limited number of user licenses at the time of
the initial license of the software products and may purchase additional user
licenses as needed. Customers may purchase implementation services from us.
These professional services are generally provided on a fixed-price basis and
are often provided by third-party consulting organizations. We also offer fee-
based training services to our customers. As of July 31, 1999, over 98% of our
customers who licensed our products had purchased maintenance contracts, which
provide unspecified software upgrades, on a when-and-if available basis, and
technical support over a stated term, which is generally a twelve-month period,
and over 90% of our customers had renewed their maintenance contracts. We cannot
assure you that we will continue to experience these rates of purchases of
maintenance agreements or renewals.

     We recognize revenue under Statement of Position, or SOP, 97-2, Software
Revenue Recognition, and SOP 98-9, Modification of SOP 97-2, Software Revenue
Recognition, with Respect to Certain Transactions. When contracts contain
multiple elements and vendor-specific objective evidence exists for all
undelivered elements, we account for the delivered elements in accordance with
the "Residual Method" prescribed by SOP 98-9. Software licenses sold to new
customers are recognized as revenue upon installation and acceptance by the
customer. Software licenses sold to existing customers, or add-on sales, do not
include acceptance provisions and are recognized as revenue upon shipment of the
software product. In the event we grant our customers the right to specified
upgrades, license revenue is deferred until delivery of the specified upgrade.
If vendor-specific objective evidence of fair value exists for the specified
upgrade, then an amount equal to this fair value is deferred. If vendor-specific
objective evidence of fair value does not exist for the specified upgrade, then
the entire license fee is deferred until the delivery of the specified upgrade.

                                       7
<PAGE>

For the quarter ended July 31, 1999, 53% of our license revenue was generated
from new customers, with the remaining license revenues attributable to existing
customers. For the quarter ended July 31, 1998, 81% of our license revenue was
generated from new customers, with the remaining license revenues attributable
to existing customers. Our professional services revenues consist of
implementation services which are recognized upon customer acceptance and
training revenues which are recognized as the services are performed. Our
maintenance revenues are recognized ratably over the contract period, generally
twelve months.

     Our cost of license revenues includes royalties due to third parties for
integrated technology, the cost of manuals and product documentation, production
media used to deliver our products and packaging costs. Our cost of professional
services revenues includes salaries and related expenses for the implementation
and training services organizations, costs of third parties contracted to
provide implementation services to customers and an allocation of our overhead
expenses. Our cost of maintenance revenues includes salaries and related
expenses for the customer support organization and an allocation of our overhead
expenses. The cost of professional services can fluctuate depending upon whether
more or less of the professional services are provided to our customers by us
rather than by third-party service providers. We generally provide
implementation services to our customers on a fixed-price basis. If we have to
engage independent contractors or third parties to provide these services on our
behalf, it is generally at higher cost resulting in a lower gross margin than if
we had provided the services to our customers ourselves. Therefore, our gross
margin from professional services may fluctuate based on who performs the
services and the actual cost to provide these services. Although services
revenues may increase in absolute dollars if we increase the professional
services we provide, services revenues have lower gross margins than license
revenues. Our overall gross profit can therefore fluctuate based on the mix of
license revenues compared to professional services revenues and maintenance
revenues.

     Our operating expenses are classified as sales and marketing, research and
development and general and administrative. We classify all charges to these
operating expense categories based on the nature of the expenditures. Although
each category includes expenses that are unique to the category type, there are
common recurring expenditures that are typically included in all operating
expenses categories, such as salaries, employee benefits, incentive
compensation, bonuses, travel costs, telephone, communication, rent and
allocated facilities costs and professional fees. The sales and marketing
category of operating expenses includes additional expenditures specific to the
marketing group, such as public relations and advertising, trade shows,
marketing collateral materials, and customer user group meetings and
expenditures specific to the sales group, such as commissions. To date, all
software development costs in research and development have been expensed as
incurred. Also included in our operating expenses is the amortization of stock
compensation described below.

     In connection with the granting of stock options to our employees, we have
recorded unearned stock compensation totaling approximately $13.6 million
through July 31, 1999, of which approximately $5.5 million was recorded in the
quarter ended July 31, 1999. As of July 31, 1999, approximately $9.0 million of
total unearned compensation expense recorded to date remains to be amortized. In
addition, we expect to record approximately $5.9 million of unearned stock
compensation in connection with the granting of stock options to our employees
from August 1, 1999 through the date of our initial public offering. Unearned
stock compensation represents the difference between the exercise price and the
current estimated fair value of our common stock on the date these stock options
were granted. This amount is included as a component of stockholders' equity and
is being amortized by charges to operations over the vesting period of the
options, consistent with the method described in Financial Accounting Standards
Board, or FASB, Interpretation No. 28. We recognized amortization of unearned
stock compensation of $1.4 million for the quarter ended July 31, 1999 and
$444,000 for the quarter ended July 31, 1998. The amortization of the remaining
unearned stock compensation at July 31, 1999 will result in additional charges
to operations through fiscal 2005.

                                       8
<PAGE>

In addition, we granted options to consultants in August 1999 to purchase 65,000
shares of common stock. We expect to record at least $1.1 million in expense
related to the options over their related vesting period. We calculated the
minimum fair value of options granted to consultants on the date of grant using
the Black-Scholes option pricing model as prescribed by SFAS No. 123 with the
following underlying assumptions: expected volatility of 50%, risk-free interest
rate of 5.9% and option terms of ten years. We are accounting for options
granted to consultants under variable plan accounting. The expense associated
with these options may fluctuate significantly from quarter to quarter through
fiscal 2005 based upon the fluctuation of our common stock price. The
amortization of stock compensation, both to employees and consultants, is
classified as a separate component of operating expenses in our consolidated
statement of operations.

     Although our total revenues have increased from quarter to quarter, we have
incurred significant costs to develop our products and to recruit and train
personnel for our engineering, sales, marketing, professional services and
administration departments. We intend to continue to incur significant sales and
marketing, research and development and general and administrative expenses. We
had 170 full-time employees as of July 31, 1999 compared to 156 full-time
employees as of April 30, 1999. We expect to continue to incur operating losses
for the foreseeable future. In order to achieve profitability, we will need to
increase our revenues significantly. Therefore, we cannot assure you that we
will ever attain or maintain profitability. Our expansion will also place
significant demands on our management and operational resources. To manage this
rapid growth and increased demands, we must improve existing and implement new
operational and financial systems, procedures and controls. We must also hire,
train, manage, retain and motivate qualified personnel. We expect future
expansion to continue to challenge our ability to hire, train, manage, retain
and motivate our employees.

     In view of the rapidly changing nature of our market and our limited
operating history, we believe that period-to-period comparisons of our revenues
and other operating results are not necessarily meaningful and should not be
relied upon as indications of future performance. Our historic revenue growth
rates are not necessarily sustainable or indicative of our future growth.

Results of Operations
For the three months ended July 31, 1999 and 1998

     The following table sets forth selected consolidated financial data for the
periods indicated, expressed as a percentage of total revenues:

<TABLE>
<CAPTION>
                                                      Three Months Ended July 31,
                                                ------------------------------------
                                                      1999               1998
                                                -----------------   ----------------
<S>                                             <C>                 <C>
Revenues:
  License.....................................         62 %                70 %
  Services....................................         20                  20
  Maintenance.................................         18                  10
                                                    ------              ------
    Total revenues............................        100                 100
                                                    ------              ------
Cost of revenues:
  License.....................................          4                   5
  Services....................................         16                  23
  Maintenance.................................          8                   8
                                                    ------              ------
    Total cost of revenues....................         28                  36
                                                    ------              ------
Gross profit..................................         72                  64
                                                    ------              ------
</TABLE>


                                       9
<PAGE>

<TABLE>
<S>                                                 <C>                 <C>
Operating expenses:
  Sales and marketing.........................         77                  85
  Research and development....................         25                  33
  General and administrative..................         13                  13
  Amortization of stock compensation..........         24                  14
                                                    ------              ------
    Total operating expenses..................        139                 145
                                                    ------              ------
Loss from operations..........................        (67)                (81)
Interest income (expense), net................         (2)                  2
                                                    ------              ------
Net loss......................................        (69)%               (79)%
</TABLE>

Revenues

Our total revenues were $5.9 million for the quarter ended July 31, 1999
compared to $3.2 million for the quarter ended July 31, 1998, representing an
increase of $2.7 million or 82%. We had no customer that accounted for more than
10% of our total revenues for the quarter ended July 31, 1999 or 1998.

     License Revenues. Our license revenues were $3.7 million for the quarter
ended July 31, 1999 compared to $2.3 million for the quarter ended July 31,
1998, representing an increase of $1.4 million or 61%. The increase in our
license revenues from the prior year's quarter was due to increased market
acceptance of our suite of products, including new versions of our products.
During the quarter ended July 31, 1999, we offered specified upgrade rights to
certain customers. As a result of offering these specified upgrade rights, we
deferred $238,000 of license revenue at July 31, 1999.

     Professional Services Revenues. Our professional services revenues were
$1.2 million for the quarter ended July 31, 1999 compared to $655,000 for the
quarter ended July 31, 1998, representing an increase of $504,000 or 77%.
Professional services revenues as a percentage of total revenues was 20% in each
of the quarters ended July 31, 1999 and 1998. The absolute dollar increase in
professional services revenues is due to increased license revenues and an
increased range of services, consisting of additional data migration and
integration services. To date, a portion of our professional services revenues
relates to our invoicing for services provided by third parties. In the future,
we anticipate that an increasing percentage of professional services will be
provided by third parties who will invoice the customer directly. As a result,
we anticipate that professional services revenues will decline as a percentage
of total revenues.

     Maintenance Revenues. Our maintenance revenues were $1.1 million for the
quarter ended July 31, 1999 compared to $316,000 for the quarter ended July 31,
1998, representing an increase of $761,000 or 240%. Maintenance revenues as a
percentage of total revenues were 18% for the quarter ended July 31, 1999 and
10% for the quarter ended July 31, 1998. The increase in maintenance revenues
and maintenance revenues as a percentage of total revenues for the quarter ended
July 31, 1999 compared to the quarter ended July 31, 1998 was attributed to
increased licenses for our products.

     Cost of Revenues

     Cost of License Revenues. Cost of license revenues were $223,000 for the
quarter ended July 31, 1999 compared to $165,000 for the quarter ended July 31,
1998, representing an increase of $58,000 or 35%.

                                       10
<PAGE>

     Cost of license revenues increased for the quarter ended July 31, 1999
compared to the quarter ended July 31, 1998 due to increased expenses associated
with the sub-licensing of third-party software used in our products.
Cost of license revenues as a percentage of total license revenues have
decreased as add-on licenses, which have a higher gross margin than initial
customer licenses, have increased as a percentage of total license revenues.

     Cost of Professional Services Revenues. Cost of professional services
revenues were $921,000 for the quarter ended July 31, 1999 compared to $756,000
for the quarter ended July 31, 1998, representing an increase of $165,000 or
22%. The increase in cost for the quarter ended July 31, 1999 compared to the
quarter ended July 31, 1998 was due to an increase in third-party professional
services personnel to support the increased customer base. In certain periods in
the past, and potentially in the future, our cost of professional services
revenues exceeded our professional services revenues, primarily because the
actual cost of providing the services, whether provided internally or through
third parties, exceeded the fixed price payment received from some of our
customers. In addition, as we increase the size of our professional services
staff, costs are incurred for new personnel before they become fully productive.

     Cost of Maintenance Revenues. Cost of maintenance revenues were $482,000
for the quarter ended July 31, 1999 compared to $237,000 for the quarter ended
July 31, 1998, representing an increase of $245,000 or 103%. Cost of maintenance
revenues as a percentage of maintenance revenues were 45% for the quarter ended
July 31, 1999 and 75% for the quarter ended July 31, 1998. The decrease in cost
of maintenance revenues as a percentage of maintenance revenues for the quarter
ended July 31, 1999 compared to the quarter ended July 31, 1998 was due to
economies of scale realized as a result of increased management personnel and
experienced maintenance personnel.

     Operating Expenses

     Sales and Marketing. Sales and marketing expenses were $4.6 million for the
quarter ended July 31, 1999 compared to $2.5 million for the quarter ended July
31, 1998, representing an increase of $2.1 million or 84%. Sales and marketing
expenses as a percentage of total revenues were 77% for the quarter ended July
31, 1999 and 85% for the quarter ended July 31, 1998. The increase in sales and
marketing expenses for the quarter ended July 31, 1999 compared to the quarter
ended July 31, 1998 reflect significant personnel-related expenses such as
salaries, benefits and commissions, recruiting fees, travel expenses and related
costs of hiring sales management, sales representatives, sales engineers and
marketing personnel. We anticipate that our sales and marketing expenses will
increase in absolute dollars for the foreseeable future as we expand our
domestic and international sales force.

     Research and Development. Research and development expenses were $1.5
million for the quarter ended July 31, 1999 compared to $1.1 million for the
quarter ended July 31, 1998, representing an increase of $410,000 or 38%.
Research and development expenses as a percentage of total revenues were 25% for
the quarter ended July 31, 1999 and 33% for the quarter ended July 31, 1998. The
increase in research and development expenses for the quarter ended July 31,
1999 compared to the quarter ended July 31, 1998 was due to the increase in the
number of our software developers, quality assurance personnel and outside
contractors to support our product development, documentation and testing
activities related to the development and release of the latest versions of our
products. We anticipate that research and development expenses will continue to
increase in absolute dollars for the foreseeable future as we continue to add to
our research and development staff.

                                       11
<PAGE>

     General and Administrative. General and administrative expenses were
$753,000 for the quarter ended July 31, 1999 compared to $431,000 for the
quarter ended July 31, 1998, representing an increase of $322,000 or 75%.
General and administrative expenses as a percentage of total revenues were 13%
for each of the quarters ended July 31, 1999 and July 31, 1998. The increase in
general and administrative expense for the quarter ended July 31, 1999 compared
to the quarter ended July 31, 1998 was due to hiring additional finance,
executive and administrative personnel to support the growth of our business
during that period. We expect that general and administrative expenses will
increase in absolute dollars for the foreseeable future as we expand our
operations and incur the normal costs of a public company.

     Amortization of Stock Compensation. We recognized amortization of stock
compensation of approximately $1.4 million for the quarter July 31, 1999
compared to $444,000 for the quarter ended July 31, 1998.

     Interest Income(Expense), Net

     Interest income (expense), net, was $(127,000)for the quarter ended July
31, 1999 compared to $52,000 for the quarter ended July 31, 1998. This decrease
was due primarily to higher interest expense generated from the increase in
notes payable during late fiscal 1999. At July 31, 1999, we had unamortized
interest of $232,000 related to warrants issued in connection with the
subordinated notes payable. We used a portion of the proceeds from our initial
public offering to repay these subordinated notes payable in their entirety on
August 31, 1999. As a result, we will recognize the remaining unamortized
interest balance as an expense in the quarter ended October 31, 1999.

     Provision for Income Taxes

     The Company's operating losses are generated domestically, and amounts
attributable to its foreign operations have been insignificant for all periods
presented. No provision for income taxes has been recorded since our inception
because we have incurred net losses in all periods.

     Liquidity and Capital Resources

     In August 1999, we completed an initial public offering of 3,450,000 shares
of Common Stock (including the exercise of the underwriters' overallotment
option) at $21.00 per share. Net proceeds to us, before offering expenses, were
$67.4 million or $19.53 per share. Simultaneous with the closing of the initial
public offering, we sold an aggregate of 665,641 shares of common stock at
$19.53 per share in a private placement to Dell Computer Corporation,
Flextronics International Ltd., and Marshall Industries. Net proceeds from sales
of stock in the private placement were $13.0 million. The primary purposes of
the initial public offering were to obtain additional equity capital, create a
public market for our common stock, and facilitate future access to public
markets. We have used, and continue to expect to use the proceeds from the
offering for general corporate purposes, including working capital and note
payable repayment. A portion of the proceeds may also be used for the
acquisition of businesses that are complimentary to ours, although we do not
currently have any commitments or agreements with respect to any acquisitions.
Pending such uses, we have invested the net proceeds of the offering in
investment grade, interest-bearing securities. Prior to our initial public
offering, we raised $26.2 million of equity capital from the sale of preferred
stock, net of issuance costs, which was the primary source of financing for our
operations.

     As of July 31, 1999, we had cash and cash equivalents of $9.6 million,
compared to $10.0 million of cash and cash equivalents held as of April 30,
1999. Our working capital at July 31, 1999 was $625,000, compared to working
capital of $4.2 million at April 30, 1999.

                                       12
<PAGE>

     In July 1999 we amended our senior line of credit facility with a bank that
bears interest at 8.5% to increase the available borrowing amount from $2.0
million to $5.0 million and extended the expiration date to August 31, 2000. At
July 31, 1999, no balance was outstanding under this line of credit. This line
of credit is secured by accounts receivable and certain other assets. At July
31, 1999 we also had $3.0 million outstanding of subordinated notes payable
which bear interest at an annual rate of 11.75% and are payable through fiscal
2002. These notes were paid in full on August 31, 1999. In addition, capital
lease obligations including both short-term and long-term portions, were $1.6
million at July 31, 1999, and are payable through fiscal 2003. Our senior line
of credit requires us to maintain certain monthly financial covenants, including
a minimum tangible net worth and a minimum quick ratio. We were in compliance
with all of our financial covenants at July 31, 1999.

     We also have noncancelable operating leases for office space and equipment
of approximately $2.2 million at July 31, 1999 which are payable through fiscal
2003.

     Our operating activities resulted in cash generated for the quarter ended
July 31, 1999 of $639,000 and net cash outflows of $1.8 million for the quarter
ended July 31, 1998.

     Investing activities consisted of capital expenditures of $888,000 for the
quarter ended July 31, 1999 and for $30,000 the quarter ended July 31, 1998.
These expenditures were primarily for property and equipment. We expect that
capital expenditures will continue to increase to the extent we continue to
increase our headcount or expand our operations.

     Financing activities used cash of $115,000 for the quarter ended July 31,
1999 through repayments of capital lease obligations offset by proceeds from the
issuance of common stock. Financing activities provided cash of $10.9 million
for the quarter ended July 31, 1998, primarily through proceeds from the
issuance of preferred and common stock and net proceeds from debt and capital
lease borrowings.

     We anticipate that our current cash, cash equivalents and available credit
facilities will be sufficient to meet our anticipated cash needs for working
capital and capital expenditures for at least the next 12 months. However, we
may need to raise additional funds in future periods through public or private
financing, or other sources, to fund our operations and potential acquisitions,
if any, until we achieve profitability, if ever. We may not be able to obtain
adequate or favorable financing at that time. Failure to raise capital when
needed could harm our business. If we raise additional funds through the
issuance of equity securities, the percentage of ownership of our stockholders
would be reduced. Furthermore, these equity securities might have rights,
preferences or privileges senior to our common stock.

     Recent Accounting Pronouncement

     In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard or SFAS No. 133, "Accounting for
Derivatives and Hedging Activities" and in June 1999 the FASB issued SFAS No.
137, "Accounting for Derivatives and Hedging Activities - Deferral of the
Effective Date of SFAS No. 133" SFAS 133 establishes accounting and reporting
standards of derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities. We will adopt SFAS 133
in its quarter ending July 31, 2000 as allowed under SFAS 137 and do not expect
such adoption to have a material impact on our results of operations, financial
position or cash flows.

                                       13
<PAGE>

     Year 2000 Readiness

     Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates or have been programmed with default
dates ending in 99, the common two-digit reference for 1999. As a result, as we
transition from the 20th century to the 21st century, computer systems and
software used by many companies and organizations in a wide variety of
industries will produce erroneous results or fail unless they have been modified
or upgraded to process date information correctly. Significant uncertainty
exists in the software industry and other industries concerning the scope and
magnitude of problems associated with the year 2000 issue.

     State of Readiness. We have completed our initial assessment of the
potential overall impact of the impending century change on our business. Based
on our current assessment, we believe the current versions of our software
products are year 2000 compliant. By year 2000 compliant, we mean that our
software products, when used with accurate date data and in accordance with
their associated documentation, are capable of properly processing date data
from, into and between the 20th and 21st centuries, including the years 1999,
2000 and leap years, provided that all other products, e.g., hardware, software
and firmware, used with our products properly exchange date data with them.
However, our products are generally integrated into enterprise systems involving
sophisticated hardware and complex software products that we cannot adequately
evaluate for year 2000 compliance. We may face claims based on year 2000
problems in other companies' products, or issues arising from the integration of
multiple products within an overall system even if our products are otherwise
year 2000 compliant. Although we have not been a party to any litigation or
arbitration proceeding involving our products or services related to year 2000
compliance issues, we may in the future be required to defend our products or
services in these proceedings, or to negotiate resolutions of claims based on
year 2000 issues. The costs of defending and resolving year 2000-related
disputes, regardless of the merits of these disputes, and any liability we have
for year 2000-related damages, including consequential damages, could
substantially harm our business.

     In addition, we believe that the purchasing patterns of customers and
potential customers may be affected by year 2000 issues, as companies expend
significant resources to correct or upgrade their current software systems for
year 2000 compliance and as they delay purchase of new systems that may not be
year 2000 compliant. These expenditures may result in reduced funds available to
purchase software products such as those we offer. To the extent year 2000
issues cause a significant delay in, or cancellation of, decisions to purchase
our products or services, our business would be substantially harmed.

     We are currently reviewing our internal management information and other
computer systems to identify any year 2000 problems, and are beginning to
communicate with the external vendors that supply us with material software and
information systems and with our significant suppliers to determine their year
2000 readiness. We have not completed our year 2000 investigation and overall
compliance initiative.

     Costs. To date, we have not incurred any material costs directly associated
with our year 2000 compliance efforts, except for compensation expenses
associated with our salaried employees who have devoted some of their time to
our year 2000 assessment and remediation efforts. We do not expect the total
cost of year 2000 problems to be material to our business. However, during the
months prior to the century change, we will continue to evaluate new versions of
our software products, new software and information systems provided to us by
third parties and any new infrastructure systems that we acquire to determine
whether they are year 2000 compliant. Despite our current assessment, we may not
identify and correct all significant year 2000 problems on a timely basis. Year
2000 compliance efforts may involve significant time and expense and
unremediated problems could substantially harm our business. We currently have
no contingency plans to address the risks associated with unremediated year 2000
problems.

                                       14
<PAGE>

     Risks. We are not currently aware of any year 2000 readiness problems
relating to our internally-developed proprietary systems that would
substantially harm our business. We may discover year 2000 readiness problems in
these systems that will require substantial revision. In addition, third-party
software, hardware or services incorporated into our material systems may need
to be revised or replaced, all of which could be time-consuming and expensive.
Our failure to fix or replace our internally developed proprietary software or
third-party software, hardware or services on a timely basis could result in
lost revenues, increased operating costs, the loss of customers and other
business interruptions, any of which could substantially harm our business.
Moreover, our failure to adequately address year 2000 readiness issues in our
internally developed proprietary software could result in claims of
mismanagement, misrepresentation or breach of contract and related litigation,
which could be costly and time-consuming to defend.

     In addition, governmental agencies, utility companies, Internet access
companies, third-party service providers and others outside of our control may
not be year 2000 ready. The failure by these entities to be year 2000 ready
could result in a systemic failure beyond our control, such as a prolonged
Internet, telecommunications or electrical failure, which could also prevent us
from delivering our services to our customers, decrease the use of the Internet
or prevent users from accessing web sites.

     Contingency Plan. As discussed above, we are engaged in an ongoing year
2000 assessment and have not yet developed any contingency plans. The results of
our year 2000 simulation testing and the responses received from third-party
vendors and service providers will be taken into account in determining the
nature and extent of any contingency plans we adopt.


     Qualitative and Quantitative Disclosures About Market Risk

     We develop products in the United States and market our products in North
America, and to a lesser extent in the Europe and Asia Pacific regions. As a
result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
Because all of our revenues are currently denominated in U.S. dollars, a
strengthening of the dollar could make our products less competitive in foreign
markets. Our interest income is sensitive to changes in the general level of
U.S. interest rates, particularly since the majority of our investments are in
short-term instruments. Due to the short-term nature of our investments, we
believe that there is not a material risk exposure.

     Other Factors Affecting Operating Results

     Risks Related to Our Operations

     Because We Have a Limited Operating History, It Is Difficult to Evaluate
Our Business and Prospects

     We are still in the early stages of our development, so evaluating our
business operations and our prospects is difficult. We incorporated in 1995 and
began shipping our first product in June 1996. The revenues and income potential
of our business and market are unproven. We will encounter risks and
difficulties frequently encountered by early-stage companies in new and rapidly
evolving markets. These risks include the following:

     .  we have only one product suite, and will need to successfully introduce
        new products and enhance existing products to this suite, including
        Agile Anywhere, a new version which has been available only since July
        1999;

     .  we need to increase sales to achieve profitability, requiring us to sell
        additional licenses and software products to our existing customers and
        expand our customer base outside of the electronics and medical device
        industries;

                                       15
<PAGE>

     .  we need to expand our sales and marketing, customer support and
        professional services organizations, build strategic relationships and
        expand our international operations in order to increase sales; and

     .  we need to effectively manage our anticipated growth which could lead to
        management distractions and increased operating expenses, and will
        require us to attract and retain key personnel.

     Our business strategy may not be successful and we may not be able to
successfully address these risks. In addition, because of our limited
operating history, we have limited insight into trends that may emerge and
affect our business.

     We Have a History of Losses, We Expect to Incur Losses in the Future and We
     May Not Achieve or Maintain Profitability

     We incurred net losses of approximately $4.1 million for the quarter ended
July 31, 1999, $11.4 million for fiscal 1999, $8.9 million for fiscal 1998 and
$4.8 million for fiscal 1997. As of July 31, 1999, we had an accumulated deficit
of approximately $30.6 million. Moreover, we expect to continue to incur
significant sales and marketing, research and development and general and
administrative expenses. We have incurred and expect to continue to incur
substantial non-cash costs relating to the amortization of deferred compensation
which will contribute to our net losses. We expect to incur losses for the
foreseeable future. We will need to generate significant increases in revenues
to achieve and maintain profitability, and we may not be able to do so. Even if
we do achieve profitability, we may not be able to sustain or increase
profitability on a quarterly or annual basis in the future.

     Our Quarterly Operating Results Fluctuate and Are Difficult to Predict and,
     if Our Future Results Are Below the Expectations of Public Market Analysts
     or Investors, the Price of Our Common Stock May Decline

     Our quarterly operating results have varied significantly in the past and
are likely to vary significantly in the future, which makes it difficult for
us to predict our future operating results. This quarter-to-quarter
fluctuation is due to a number of factors, including the following:

     .  fluctuations in demand for Internet product content management software;

     .  size and timing of sales and installations of our products;

     .  entry of new competitors into our market, or the announcement of new
        products or product enhancements by competitors;

     .  our ability to successfully expand our direct sales force and our
        international sales organization;

     .  changes in our sales force incentives;

     .  unexpected delays in developing or introducing new and enhanced
        products;

     .  unexpected decline in purchases by our existing customers, including
        purchases of additional licenses and maintenance contracts;

     .  delays in our customers' orders due to their year 2000 priorities;

     .  variability in the mix of our license and professional service revenues;

     .  our ability to accurately price fixed-priced professional services
        projects;

     .  variability in the mix of professional services that we perform versus
        those performed for our customers by others; and

                                       16
<PAGE>

     .  our ability to establish and maintain relationships with our third-party
        implementation partners.

     License revenues in any quarter can be difficult to forecast because they
depend on orders shipped or installed in that quarter. Moreover, we typically
recognize a substantial percentage of revenues in the last month of each
quarter; for example, in fiscal 1999, revenues generated each quarter that was
recognized in the last month of the quarter ranged from 35% to 51%. This
increase in revenues earned in the last month of each quarter is driven
primarily by quarter-end commissions payable and the time required to implement
software installations. A high percentage of our operating expenses are
essentially fixed in the short term and we may be unable to adjust spending to
compensate for an unexpected shortfall in our revenues. In addition, we expect
our operating expenses to increase as we expand our engineering and sales and
marketing operations, broaden our customer support capabilities, develop new
distribution channels and strategic alliances, fund increased levels of research
and development and build our operational infrastructure. As a result, if we
experience delays in recognizing revenue, or if our revenues do not grow faster
than the increase in these expenses, we could experience significant variations
in operating results from quarter to quarter.

     If, in response to market pressures or other demands, we introduce new
pricing structures for our existing products, we could experience customer
dissatisfaction and loss of sales. In addition, if we introduce products that
are sold in a manner different from how we currently market our products, or we
could recognize revenue differently than under our current accounting policies.
Depending on the manner in which we sell existing or future products, this could
have the effect of extending the length of time over which we recognize
revenues. Furthermore, our quarterly revenues could be significantly affected
based on how applicable accounting standards are amended or interpreted over
time.

     Due to these and other factors, we believe that period-to-period
comparisons of our results of operations are not meaningful and should not be
relied upon as indicators of our future performance. It is possible that in some
future periods our results of operations may be below the expectations of public
market analysts and investors. If this occurs, the price of our common stock may
decline.

     We May Not Achieve Anticipated Revenues if the Introduction and Customer
     Acceptance of Our New Release, Agile Anywhere, or Any Upgrades or
     Enhancements to Our Products, Is Unsuccessful

     Our future financial performance will depend on the successful introduction
and customer acceptance of Agile Anywhere and any upgrades or enhancements that
we may make to our products in the future. We have generated substantially all
of our revenues from licenses and services related to current and prior versions
of our product suite. Agile Anywhere, the latest version of our product suite,
has only been available since July 1999. We believe that revenues from Agile
Anywhere, together with revenues from maintenance and support contracts from
Agile Anywhere and prior versions of our suite, will account for a substantial
portion of our revenues for the foreseeable future. If we are unable to ship or
implement any upgrades or enhancements when planned, or if the introduction of
upgrades or enhancements causes customers to defer orders for our existing
products, we may not achieve anticipated revenues.

                                       17
<PAGE>

     Year 2000 Considerations Among Our Customers and Potential Customers May
     Reduce Our Sales

     We may experience reduced sales of products as customers and potential
customers put a priority on correcting year 2000 problems and therefore defer
purchase decisions for software products until later in 2000. Accordingly,
demand for our products may be particularly volatile and unpredictable for the
remainder of 1999 and early 2000.

     Implementation of Our Products By Large Customers May Be Complex and
     Customers Could Become Dissatisfied if Implementation of Our Products
     Proves Difficult, Costly or Time-Consuming

     Our products must integrate with many existing computer systems and
software programs used by our customers. Integrating with many other computer
systems and software programs can be complex, time consuming and expensive and
cause delays in the deployment of our products. Because we are one of the first
companies to offer products designed for product content management, many
customers will be facing these integration issues for the first time in the
context of collaborating with supply chain partners. Customers could become
dissatisfied with our products if implementations prove to be difficult, costly
or time-consuming.

     We Currently Perform Most of Our Implementations on a Fixed-Price Basis,
     Which Could Cause Us to Incur More Costs Than We Expect

     When we install our products or when we have a third party install them, we
typically charge customers a fixed fee for these services. At the time of a
product sale and prior to agreeing to an installation price, we estimate the
amount of work involved for a particular installation project. We have at times
in the past underestimated and may in the future underestimate the amount of
time or resources required to install our products. If we do not correctly
estimate the amount of time or resources required for a large number of
installations, our gross margins could decline.

     If We Do Not Sell Additional Licenses or Enhanced Versions or Upgrades of
     Our Products to Existing Customers, We May Not Achieve Revenue Growth

     The size of a new customer's initial order is relatively small and may
include a limited number of user licenses. In later orders, customers often add
user licenses or additional products designed for specific functions, such as
the AML Server targeted at manufacturers. In order to grow revenues, we depend
on sales of additional user licenses to our existing customers as well as sales
of new licenses to new customers. Therefore, it is important that our customers
are satisfied with their initial product implementations and that they believe
that expanded use of the product they purchased will provide them with
additional benefits. Customers could choose not to purchase any new products or
expand the use of our products. If we do not increase sales to existing
customers, we may not be able to achieve revenue growth.

     If We Do Not Establish and Maintain Relationships With Key Partners, We May
     Encounter Difficulty in Providing Implementation and Customer Support of
     Our Products

     We rely heavily on our relationships with consulting and integration
partners to implement our software, provide customer support services and
endorse our products during the evaluation stage of the sales cycle. Currently,
only three companies provide implementation services for our products in North
America. We expect to increasingly rely on these types of partners in the
future. These companies are not contractually obligated to continue to provide
implementation services for us or to otherwise promote our products. Although we
seek to develop and maintain relationships with these types of service
providers, they may have similar or more

                                       18
<PAGE>

established relationships with our competitors. If these service providers do
not increase this segment of their business, or reduce or discontinue their
relationships with us or their support of our products, our business could be
harmed. We will need to develop new third party relationships if sales of our
products increase and our current partners cannot fulfill the need for
implementation and customer support services. Without these third parties we
would have to expand our services organization to increase the consulting and
professional services that we provide to our customers and divert resources from
other areas of our business. If we are required to expand our professional
services capabilities, we may not be able to do so on a timely basis.

     To meet customer demand, we might have to outsource services to more costly
independent contractors and other third parties. In addition, if our
implementation partners do not adequately perform implementation services, our
customers could become dissatisfied with our products. In order to avoid
dissatisfaction, we may need to provide supplemental implementation services at
no additional cost to the customer. Although we could experience an increase in
services revenues if our service partners are not successful, services revenues
have lower gross margins than license revenues. We could also experience delays
in revenue recognition if customer implementation projects fall behind schedule.

     We May Experience Customer Dissatisfaction and Lost Sales if Our Products
     Do Not Scale to Accommodate Substantial Increases in the Number of
     Concurrent Users

     Our strategy requires that our software be highly scalable, or able to
accommodate substantial increases in the number of users concurrently using the
product. To date, however, only a limited number of our customers have deployed
our software to manage the manufacturing process across their entire
organization. While we have performed product testing on the scalability of our
products, these products have not been tested in the context of a customer
implementation. If our customers cannot successfully implement large-scale
deployments, or if they determine that our products cannot accommodate large-
scale deployments, we could experience customer dissatisfaction and find it more
difficult to obtain new customers or to sell additional products to our existing
customers.

     We May Not Be Able to Increase Sales of Our Products if We Do Not Expand
     Our Direct Sales Organization

     We sell our products primarily through our direct sales force. Our ability
to increase our sales will depend on our ability to recruit, train and retain
top quality sales people with the advanced sales skills and technical knowledge
we need. There is a shortage of the sales personnel we need, and competition for
qualified personnel is intense in our industry. In addition, it takes time for
our new sales personnel to become productive, particularly our senior sales and
services personnel, who could take up to nine months to become fully productive.
If we are unable to hire or retain qualified sales personnel, or if newly hired
personnel fail to develop the necessary skills or reach productivity more slowly
than anticipated, it would be more difficult for us to sell our products, and we
may experience a shortfall in revenues.

     Our Lengthy and Variable Sales Cycle Makes it Difficult For Us to Predict
     When or if Sales Will Be Made

     Our products have an unpredictable sales cycle that contributes to the
uncertainty of our future operating results. Our product content management
software is a new category of products, and customers often view the purchase of
our products as a significant and strategic decision. As a result, customers may
take time to evaluate our products, resulting in a sales cycle that has
historically ranged from approximately four to seven months. The sale of our
products may be subject to delays due to the lengthy internal budgeting,
approval and evaluation processes of our customers.

                                       19
<PAGE>

     We may expend significant sales and marketing expenses during this
evaluation period before the customer places an order with us. Customers may
initially purchase a smaller number of user licenses before expanding the order
to allow a greater number of users to benefit from the application. Larger
customers may purchase our products as part of multiple simultaneous purchasing
decisions, which may result in additional unplanned administrative processing
and other delays in our product sales. If sales forecasted from a specific
customer for a particular quarter are not realized, we may experience an
unplanned shortfall in revenues. As a result, we have only a limited ability to
forecast the timing and size of sales of our products.

     The Success of Our Business Depends on Our Key Personnel, Whose Knowledge
     of Our Business and Technical Expertise Would Be Difficult to Replace

     Our success depends largely on the continued contributions of our key
senior management, particularly Bryan D. Stolle, our Chief Executive Officer,
who is not bound by an employment agreement, as well as of our key engineering
and sales and marketing personnel. We do not have key-man life insurance on Mr.
Stolle. If one or more members of our senior management or any of our key
employees were to resign, the loss of personnel could result in delays to
product development, loss of sales, and diversion of management resources. See
"Management" for additional information on our key personnel.

     Because of Competition for Additional Qualified Personnel, We May Not Be
     Able to Recruit or Retain Necessary Personnel, Which Could Impact
     Development or Sales of Our Products

     Our success depends on our ability to attract and retain qualified,
experienced employees. There is substantial competition for experienced
engineering, sales and marketing personnel in our industry. If we are unable to
retain our existing key personnel, or attract and retain additional qualified
personnel, we may from time to time experience inadequate levels of staffing to
perform services for our customers. As a result, our growth could be limited due
to our lack of capacity to develop and market our products to our customers, or
we could experience deterioration in service levels or decreased customer
satisfaction.

     Our Efforts to Expand Sales of Our Products to Other Industries May Not
     Succeed

     We have historically sold our products primarily to companies in the
electronics and medical device manufacturing industries. We intend to market
products to customers in additional industries. Although we have targeted
enterprises in other markets as potential customers, these potential customers
may not be as willing to purchase products like ours as have other technology-
based industries such as the electronics and medical device manufacturing
industries.

     The Market For Our Products Is Newly Emerging and Customers May Not Accept
     Our Products

     The market for software products that allow companies to collaborate with
suppliers on product information and change is newly emerging. Companies have
not traditionally automated this product content management process throughout
the supply chain. We cannot be certain that this market will continue to develop
and grow or that companies will elect to utilize our products rather than
attempt to develop applications internally or through other sources. In
addition, the use of the Internet, as well as corporate intranets, has not been
widely adopted for sharing product information as well as for collaboration
among supply chain participants. Companies that have already invested
substantial resources in other methods of sharing product information during the
manufacturing and supply process may be reluctant to adopt a new approach that
may replace, limit or compete with their existing systems or methods.

                                       20
<PAGE>

     We expect that we will continue to need to pursue intensive marketing and
sales efforts to educate prospective customers about the uses and benefits of
our products. Therefore, demand for and market acceptance of our products will
be subject to a high level of uncertainty.

     Competition Among Providers of Software Enabling Collaboration in a
     Manufacturing Supply Chain May Increase, Which Could Cause Us to Reduce
     Prices, and Result in Reduced Gross Margins or Loss of Market Share

     The market for products that enable companies to interactively manage and
share information relating to the manufacture and supply of products is new,
highly fragmented, rapidly changing and increasingly competitive. We expect
competition to intensify, which could result in price reductions for our
products, reduced gross margins and loss of market share. Competitors vary in
size and in the scope and breadth of the products and services offered. We face
potential competition from in-house development efforts by potential customers
or partners, vendors of software designed for management of engineering
information, and developers of general purpose groupware software addressing
only limited technology components involved in managing data generated by
changes to the engineering process. We also face potential competition from
providers of enterprise software.

     Many of our actual or potential competitors have a number of significant
advantages over us, including:

     .  longer operating histories;

     .  significantly greater financial, technical, marketing and other
        resources;

     .  significantly greater name recognition and a larger installed base of
        customers; and

     .  well-established relationships with our actual and potential customers
        as well as with systems integrators and other vendors and service
        providers.

     These competitors may also be able to respond more quickly to new or
emerging technologies and changes in customer requirements, or to devote greater
resources to the development, promotion and sale of their products, than we can.
Some of our actual or potential competitors may also bundle their products in a
manner that may discourage potential customers from purchasing our products.
Accordingly, we may not be able to maintain or expand our sales if competition
increases and we are unable to respond effectively.

     We May Experience Difficulties in Introducing New Products and Upgrades
     Which Could Result in Negative Publicity, Loss of Sales, Delay in Market
     Acceptance or Customer Dissatisfaction

     Our future financial performance depends on our successful and timely
development, introduction and market acceptance of new and enhanced products.
The life cycles of our products are difficult to predict because the market for
our products is new and emerging, and is characterized by rapid technological
change, changing customer needs and evolving industry standards. The
introduction of products or computer systems employing new technologies and
emerging industry standards could render our existing products obsolete and
unmarketable. For example, portions of our software are written in the Java
computer programming language. If a new software language becomes standard in
our industry or is considered more robust than Java, we may need to rewrite
portions of our products in another computer language in order to remain
competitive. The introduction of enhancements to our suite of products may also
cause customers to defer orders for our existing products. We may experience
difficulties that could delay or prevent the successful development,
introduction or marketing of new or enhanced products in the future. In
addition, those products may not meet the requirements of the marketplace and
achieve market acceptance.

                                       21
<PAGE>

     We expect to add new products to our supply chain applications by
acquisition or internal development and by developing enhancements to our
existing products. We have in the past experienced delays in the planned release
dates of our software products and upgrades, and we have discovered software
defects in new products after their introduction. New products or upgrades may
not be released according to schedule, or may contain defects when released.
Either situation could result in negative publicity, loss of sales, delay in
market acceptance of our products or customer claims against us.

     Our Products Might Not Be Compatible With All Major Platforms, Which Could
     Inhibit Sales

     We must continually modify and enhance our products to keep pace with
changes in computer hardware and software and database technology, as well as
emerging technical standards in the software industry. For example, we have
designed our products to work with databases and servers such as Oracle and
Microsoft SQL Server. Any changes to these platforms could require us to modify
our products, and could cause us to delay releasing a product until the updated
version of that platform has been released. Furthermore, third parties develop
adapters to integrate our products with other design, manufacture, finance and
supply chain systems used by our customers. We rely on these third parties to
update the adapters to reflect changes to our products as well as to the
targeted platform in order to maintain the functionality provided by our
products. As a result, uncertainties related to the timing and nature of new
product announcements, introductions or modifications by vendors of operating
systems, back-office applications and browsers and other Internet-related
applications could hurt our business, as customers may not be certain as to how
our product will operate with their existing systems.

     In addition, although portions of our products are based upon the Java
programming language, the Java language does not offer all of the features
available in Windows. Accordingly, certain features available to products that
run on Windows may not be available in the non-Windows version of our products,
and this could result in reduced customer demand. Furthermore, some of our
products do not run on certain types of popular server computers, such as those
that utilize the UNIX operating system. If another platform becomes more widely
used, we could be required to convert, or "port," our product to that platform.
We may not succeed in these efforts, and even if we do, potential customers may
not choose our product.

     If We Are Unable to Timely Expand Our International Operations, We May Not
     Achieve Anticipated Revenue Growth

     We believe that expansion of our international operations will be necessary
for our future success, and a key aspect to our business strategy is to expand
our sales and support organizations internationally. Therefore, we believe that
we will need to commit significant resources to expand our international
operations. We employ sales professionals in Europe and are in the early stages
of expanding into the Asia Pacific market. If we are unable to successfully
enter into and expand these international markets on a timely basis, we may not
be able to achieve anticipated revenue growth. This expansion may be more
difficult or take longer than we anticipate, and we may not be able to
successfully market, sell, deliver and support our products internationally.

     If successful in our international expansion, we will be subject to a
number of risks associated with international business activities. These risks
include:

     .  difficulty in providing customer support for our software in multiple
        time zones;

                                       22
<PAGE>

     .  need to develop our software in multiple foreign languages;

     .  longer sales cycles associated with educating foreign customers on the
        benefits of using our products;

     .  greater difficulty in collecting accounts receivable from customers
        located abroad;

     .  political and economic instability, particularly in Asia;

     .  difficulties in enforcing agreements through foreign legal systems; and

     .  unexpected changes in regulatory requirements that may limit our ability
        to export our software or sell into particular jurisdictions or impose
        multiple conflicting tax laws and regulations.

     To date, most of our revenues have been denominated in United States
dollars. If we experience an increase in the portion of our revenues denominated
in foreign currencies, we may incur greater risks in currency fluctuations,
particularly since we translate our foreign currency revenues once at the end of
each quarter. In the future, our international revenues could be denominated in
the Euro, the currency of the European Union. The Euro is an untested currency
and may be subject to economic risks that are not currently contemplated. We
currently do not engage in foreign exchange hedging activities, and therefore
our international revenues and expenses are currently subject to the risks of
foreign currency fluctuations.

     We Depend on Licensed Technology and the Loss or Inability to Maintain
     These Technology Licenses Could Result in Increased Cost or Delays in Sales
     of Our Products

     We license technology on a non-exclusive basis from several businesses for
use with our products, including licenses from RSA Data Security, Inc. for
security and encryption technology software, Actuate Corporation for reporting
capability and from Cimmetry Systems Inc. for our viewers. We anticipate that we
will continue to license technology from third parties in the future. Some of
the software we license from third parties would be difficult to replace. This
software may not continue to be available on commercially reasonable terms, if
at all. The loss or inability to maintain any of these technology licenses could
result in delays in the licensing of our products until equivalent technology,
if available, is identified, licensed and integrated. In addition, the effective
implementation of our products depends upon the successful operation of third-
party licensed products in conjunction with our products, and therefore any
undetected errors in these licensed products may prevent the implementation or
impair the functionality of products, delay new product introductions and or
injure our reputation. The increased use of third-party software could require
us to enter into license agreements with third parties, which could result in
higher royalty payments and a loss of product differentiation.

     Defects in Our Software Products Could Diminish Demand For Our Products

     Our software products are complex and may contain errors, including year
2000 related errors, that may be detected at any point in the life of the
product. We have in the past discovered software errors in certain of our
products and as a result have experienced delays in shipment of products during
the period required to correct these errors. We cannot assure you that, despite
testing by us, our implementation partners and our current and potential
customers, errors will not be found in new products or releases after shipment,
resulting in loss of revenue, delay in market acceptance and sales, diversion of
development resources, injury to our reputation or increased service and
warranty costs.

                                       23
<PAGE>

     Further, our products are generally used in systems with other vendors'
products, and as a result, our products must integrate successfully with these
existing systems. System errors, whether caused by our products or those of
another vendor, could adversely affect the market acceptance of our products,
and any necessary revisions could cause us to incur significant expenses.

     If We Become Subject to Product Liability Litigation, It Could Be Time
     Consuming and Costly to Defend

     Since our products are used for mission critical applications in the supply
chain, errors, defects or other performance problems could result in financial
or other damages to our customers. For example, our products are designed to
communicate information relating to changes in product specifications during the
manufacturing process. If a supplier or other participant receives inaccurate or
erroneous data, it is possible that it could claim it incurred damages based on
its reliance on that data. Although our license agreements generally contain
provisions designed to limit our exposure to product liability litigation,
existing or future laws or unfavorable judicial decisions could negate such
limitation of liability provisions. Product liability litigation, even if
unsuccessful, would be time-consuming and costly to defend and could harm our
business.

     In Order to Manage Our Growth and Expansion, We Will Need to Improve and
     Implement New Systems, Procedures and Controls

     We have recently experienced a period of rapid growth and expansion that
has placed a significant strain on our management information systems and our
administrative, operational and financial resources. For example, we have grown
from 65 employees at April 30, 1997 to 156 employees at April 30, 1999 and to
170 employees for July 31, 1999. If we are unable to manage our growth and
expansion in an efficient or timely manner, our business will be seriously
harmed. In addition, we have recently hired a significant number of employees
and plan to further increase our total headcount. We also plan to expand the
geographic scope of our operations. This expansion has resulted and will
continue to result in substantial demands on our management resources. To
accommodate continued anticipated growth and expansion, we will be required to:

     .  improve existing and implement new operational and financial systems,
        procedures and controls;

     .  hire, train, manage, retain and motivate qualified personnel; and

     .  enter into relationships with strategic partners.

     These measures may place additional burdens on our management and our
internal resources.

     If We Are Unable to Protect Our Intellectual Property We May Lose a
     Valuable Asset, Experience Reduced Market Share or Incur Costly Litigation
     to Protect Our Rights

     Our success and ability to compete depend upon our proprietary technology,
including our brand and logo and the technology underlying our products. We rely
on trademark, trade secret and copyright laws to protect our intellectual
property. Despite our efforts to protect our intellectual property, a third
party could copy or otherwise obtain our software or other proprietary
information without authorization, or could develop software competitive to
ours. Our means of protecting our proprietary rights may not be adequate and our
competitors may independently develop similar technology, duplicate our products
or design around patents that may be issued to us or our other intellectual
property.

                                       24
<PAGE>

     In addition, the laws of some foreign countries do not protect our
proprietary rights to as great an extent as do the laws of the United States,
and we expect that it will become more difficult to monitor the use of our
products if we increase our international presence.

     We may have to resort to litigation to enforce our intellectual property
rights, to protect our trade secrets or know-how or to determine their scope,
validity or enforceability. Enforcing or defending our proprietary technology is
expensive, could cause the diversion of our resources, and may not prove
successful. Our protective measures may prove inadequate to protect our
proprietary rights, and any failure to enforce or protect our rights could cause
us to lose a valuable asset.

     We May Be Subject to Intellectual Property Infringement Claims That, With
     or Without Merit, Could Be Costly to Defend or Settle

     We may from time to time be subject to claims of infringement of other
parties' proprietary rights or claims that our own intellectual property rights
are invalid. There has been a substantial amount of litigation in the software
and Internet industries regarding intellectual property rights. It is possible
that, in the future, third parties may claim that we or our current or potential
future products infringe their intellectual property. We expect that software
product developers and providers of electronic commerce solutions will
increasingly be subject to infringement claims as the number of products and
competitors in our industry segment grows and the functionality of products in
industry segments overlaps. Any infringement claims made against us, with or
without merit, could be time-consuming, result in costly litigation, cause
product shipment delays or negative publicity. In addition, if our products were
found to infringe a third party's proprietary rights, we could be required to
enter into royalty or licensing agreements in order to continue to be able to
sell our products. Royalty or licensing agreements, if required, may not be
available on terms acceptable to us or at all.

     Year 2000 Compliance Costs and Risks Are Difficult to Assess and Could
     Result in Delay or Loss of Revenue, Diversion of Development Resources,
     Damage to Our Reputation or Increased Service, Warranty or Litigation Costs

     Our products are generally integrated into computer systems involving
sophisticated hardware and complex software products, which may not be year 2000
compliant. The failure of our customers' systems to be year 2000 compliant could
impede the success of applications that we have developed for them. Accordingly,
known or unknown defects that affect the operation of our software, including
any defects or errors in applications that include our products, could result in
delay or loss of revenue, diversion of development resources, damage to our
reputation or increased service, warranty or litigation costs, any of which
could harm our business.

     In addition, earlier versions of our products may not be year 2000
compliant, and we do not intend to make them year 2000 compliant. We also need
to ensure year 2000 compliance of our own internal computer and other systems,
to continue testing our software products, and to audit the year 2000 compliance
status of our suppliers and business partners. We have not completed our year
2000 investigation and overall compliance initiative, and the total cost of our
year 2000 compliance may be substantial and may harm our business.

     Future Acquisitions May Be Difficult to Integrate, Disrupt Our Business,
     Dilute Stockholder Value or Divert Management Attention

     As part of our business strategy, we may seek to acquire or invest in
businesses, products or technologies that we feel could complement or expand our
business, augment our market coverage, enhance our technical capabilities or
that may otherwise offer growth opportunities. Acquisitions could create risks
for us, including:

                                       25
<PAGE>

     .  difficulties in assimilation of acquired personnel, operations,
        technologies or products;

     .  unanticipated costs associated with the acquisition;

     .  diversion of management's attention from other business concerns;

     .  adverse effects on our existing business relationships with suppliers
        and customers; and

     .  use of substantial portions of our available cash, including the
        proceeds of this offering, to consummate the acquisition.

     In addition, if we consummate acquisitions through an exchange of our
securities, our stockholders could suffer significant dilution. Any future
acquisitions, even if successfully completed, may not generate any additional
revenue or provide any benefit to our business.

Risks Related to the Internet on Our Business and Prospects

     If Use of the Internet Does Not Continue to Develop and Reliably Support
     the Demands Placed on It by Electronic Commerce, We May Experience Loss of
     Sales

     Our success depends upon continued growth in the use of the Internet as a
medium of commerce. Although the Internet is experiencing rapid growth in the
number of users, this growth is a recent phenomenon and may not continue.
Furthermore, despite this growth in usage, the use of the Internet for commerce
is relatively new. As a result, a sufficiently broad base of companies and their
supply chain partners may not adopt or continue to use the Internet as a medium
of exchanging product content information. Our business would be seriously
harmed if:

     .  use of the Internet does not continue to increase or increases more
        slowly than expected;

     .  the infrastructure for the Internet does not effectively support
        enterprises and their supply chain partners;

     .  the Internet does not create a viable commercial marketplace, inhibiting
        the development of electronic commerce and reducing the demand for our
        products; or

     .  concerns over the secure transmission of confidential information over
        public networks inhibit the growth of the Internet as a means of
        conducting commercial transactions.

     Capacity Restraints May Restrict the Use of the Internet as a Commercial
     Marketplace, Resulting in Decreased Demand For Our Products

     The Internet infrastructure may not be able to support the demands placed
on it by increased usage or the limited capacity of networks to transmit large
amounts of data. Other risks associated with commercial use of the Internet
could slow its growth, including:

     .  outages and other delays resulting from the inadequate reliability of
        the network infrastructure;

     .  slow development of enabling technologies and complementary products;
        and

     .  limited availability of cost-effective, high-speed access.

                                       26
<PAGE>

     Delays in the development or adoption of new equipment standards or
protocols required to handle increased levels of Internet activity, or increased
governmental regulation, could cause the Internet to lose its viability as a
means of communication between manufacturers and their supply chain partners. If
these or any other factors cause use of the Internet for commerce to slow or
decline, the Internet may not prove viable as a commercial marketplace,
resulting in decreased demand for our products.

     Increasing Governmental Regulation of the Internet Could Limit the Market
     for Our Products

     As Internet commerce continues to evolve, we expect that federal, state and
foreign governments will adopt laws and regulations covering issues such as user
privacy, taxation of goods and services provided over the Internet, pricing,
content and quality of products and services. It is possible that legislation
could expose companies involved in electronic commerce to liability, taxation or
other increased costs, any of which could limit the growth of electronic
commerce generally. Legislation could dampen the growth in Internet usage and
decrease its acceptance as a communications and commercial medium. If enacted,
these laws and regulations could limit the market for our products.

                                       27
<PAGE>

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

     We are currently involved in litigation with Facilities Management
International, a Southern California based systems integration company that
filed a complaint against us in the Superior Court for the State of California,
County of Orange, on February 19, 1999. The court has set the case for a bench
trial on February 7, 2000. The complaint alleges our interference with
prospective economic advantage and unfair business practices in connection with
our quote for services to one of our customers. We have responded by filing an
answer that denies all allegations. The lawsuit seeks unspecified compensatory
and punitive damages as well as injunctive relief. We intend to defend ourselves
vigorously, and after consideration of the nature of the claims do not believe
that resolution of this matter will harm our business. However, due to the
inherently uncertain nature of litigation and the fact that discovery has yet to
take place, we cannot determine the possible loss, if any, that we may
ultimately incur either in the context of a trial or as a result of a negotiated
settlement. Our defense of this litigation, regardless of its outcome, could
result in the expenditure of significant financial and managerial resources.

Item 2.  Changes in Securities and Use of Proceeds.

     The effective date of the Registration Statement for the Company's initial
public offering, filed on Form S-1 under the Securities Act of 1933 (File No.
333-81387), was August 19, 1999. The class of securities registered was Common
Stock. The offering commenced and completed on August 20, 1999.

     Pursuant to the Registration Statement, the Company registered and sold
3,450,000 shares of its Common Stock to an underwriting syndicate at an initial
public offering price of $21.00 per share for aggregate gross proceeds of $72.5
million. The managing underwriters for the offering were Morgan Stanley Dean
Witter, Deutsche Banc Alex. Brown, and Hambrecht & Quist. The Company incurred
expenses of approximately $6.5 million, of which approximately $5.1 million
represented underwriting discounts and commissions and approximately $1.4
million represented other expenses related to the offering. The net proceeds to
the Company after total expenses was approximately $66.0 million. Simultaneous
with the closing of the initial public offering, the Company sold an aggregate
of 665,641 shares of common stock at $19.53 per share in a private placement to
Dell Computer Corporation, Flextronics International Ltd., and Marshall
Industries.

     We have used, and continue to expect to use, the proceeds from the sale of
stock for general corporate purposes, including working capital. A portion of
the proceeds may also be used or the acquisition of businesses that are
complimentary to ours. Pending such uses, we have invested the net proceeds from
the sale of stock in investment grade, interest-bearing securities.

Item 3.  Defaults Upon Senior Securities.

     None.

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

     Agile solicited the written consent of its stockholders as of July 27, 1999
to approve the following:

     (1)  An amendment to its 1995 Stock Option Plan to increase the number of
shares reserved for issuance under the Option Plan from shares of our common
stock to 5,375,000 shares of our common stock, subject to automatic increase on
the first day of each fiscal year beginning May 1, 2000 by the lesser of 500,000
shares per year, 5% of the number of shares f common stock issued and
outstanding on the last day of the preceding fiscal year, or a lesser number of
shares determined by the board of directors.

              For               Against             Abstain
              ---               -------             -------
          14,229,367               0                   0

                                       28
<PAGE>

     (2)  The 1999 Employee Stock Purchase Plan with a share reserve of 500,000
shares of our common stock, subject to automatic increase on the first day of
each fiscal year beginning May 1, 2000 by the lesser of 500,000 shares per year,
2% of the number of shares f common stock issued and outstanding on the last day
of the preceding fiscal year, or a lesser number of shares determined by the
board of directors.

              For               Against             Abstain
              ---               -------             -------
          14,229,367               0                   0

     (3)  Our reincorporation into the state of Delaware.

              For               Against             Abstain
              ---               -------             -------
          14,229,367               0                   0

     (4)  The form of Indemnity agreement to be entered into by Agile and each
of our officers and directors.

              For               Against             Abstain
              ---               -------             -------
          14,229,367               0                   0

Item 5.  Other Information.

     None.

Item 6.  Exhibits and Reports on Form 8-K.

(a)  Exhibits.

Exhibit
-------
No.                           Description
---                           -----------
2.1          Agreement and Plan of Merger dated as of August 17, 1999 by and
             between Agile Software Corporation and Delaware Agile Software
             Corporation
3.1*         Certificate of Incorporation of Agile Software Corporation, as
             amended to date.
3.2*         Certificate of Elimination and Certificate of Amendment.
3.3*         Bylaws of Agile Software Corporation.
10.1*        Amended and Restated 1995 Stock Option Plan
10.2*        1999 Employee Stock Purchase Plan
10.3*        Form of Indemnity Agreement between Agile Software Corporation and
             its directors and officers
10.6*        Revolving Credit Loan and Security Agreement (Accounts and
             Inventory) dated December 11, 1996 between Comerica Corporation, as
             modified Bank--California and Agile Software through July 19, 1999.
10.15        Sixth Amended and Restated
             Investor Rights Agreement dated as of August 16, 1999 by and among
             Agile Software Corporation and the investors listed on Schedule A
             thereto.
10.16        Common Stock Purchase Agreement dated August 2, 1999 between Agile
             Software Corporation, Dell U.S.A. L.P., a Texas Limited
             Partnership, and Flextronics International Ltd.
10.17        Common Stock Purchase Agreement dated August 16, 1999 between Agile
             Software Corporation and Marshall Industries.
27.1         Financial Data Schedule (filed only with the electronic submission
             of Form 10-Q in accordance with the Edgar requirements)

____________
*  Incorporated herein by reference to the exhibit of the same number in the
   Registrant's Registration Statement on Form S-1 (File No. 333-81387) declared
   effective on August 19, 1999

(b)  Reports on Form 8-K

        No reports on Form 8-K were filed by the Company during the three months
        ended July 31, 1999.

                                       29
<PAGE>

                          AGILE SOFTWARE CORPORATION
                                   SIGNATURE

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

                                        AGILE SOFTWARE CORPORATION

Date: September 14, 1999


                                        By: /s/ Thomas P. Shanahan
                                            ---------------------------------
                                            Thomas P. Shanahan
                                            Chief Financial Officer,
                                            Executive Vice President

                                       30
<PAGE>

                                 EXHIBIT INDEX


Exhibit No.                             Description
-----------                             -----------

2.1    Agreement and Plan of Merger dated as of August 17, 1999 by and between
       Agile Software Corporation and Delaware Agile Software Corporation
3.1*   Certificate of Incorporation of Agile Software Corporation, as amended to
       date.
3.2*   Certificate of Elimination and Certificate of Amendment.
3.3*   Bylaws of Agile Software Corporation.
10.1*  Amended and Restated 1995 Stock Option Plan
10.2*  1999 Employee Stock Purchase Plan
10.3*  Form of Indemnity Agreement between Agile Software Corporation and
       its directors and officers
10.6*  Revolving Credit Loan and Security Agreement (Accounts and Inventory)
       dated December 11, 1996 between Comerica Bank--California and Agile
       Software Corporation, as modified through July 19, 1999.
10.15  Sixth Amended and Restated Investor Rights Agreement dated as of August
       16, 1999 by and among Agile Software Corporation and the investors listed
       on Schedule A thereto.
10.16  Common Stock Purchase Agreement dated August 2, 1999 between Agile
       Software Corporation, Dell U.S.A. L.P., a Texas Limited Partnership, and
       Flextronics International Ltd.
10.17  Common Stock Purchase Agreement dated August 16, 1999 between Agile
       Software Corporation and Marshall Industries.
27.1   Financial Data Schedule (filed only with the electronic submission of
       Form 10-Q in accordance with the Edgar requirements)
--------------------------------------------------------------------------------

*      Incorporated herein by reference to the exhibit of the same number in the
Registrant's   Registration Statement on Form S-1 (File No. 333-81387) declared
effective on August 19, 1999

                                      31