<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 January 31, 2002

                                       OR

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

                              EXCHANGE ACT OF 1934

                  For the transition period from _____ to _____

                       (Commission File Number) 000-27071

                           AGILE SOFTWARE CORPORATION

             (Exact name of registrant as specified in its charter)


            Delaware                                  77-0397905
     (State of incorporation)            (IRS Employer Identification Number)

                 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), and (2) has been subject to such filing
requirements for the past 90 days.

                                  Yes X  No ___
                                     ---

The number of shares outstanding of the Registrant's Common Stock as of January
31, 2002 was 48,229,057.

<PAGE>

                           AGILE SOFTWARE CORPORATION
                                      INDEX

<TABLE>
<CAPTION>
                                                                              Page No.
                                                                              --------
<S>                                                                           <C>
Part I.  Financial Information

Item 1.  Financial Statements (unaudited)


         Condensed Consolidated Balance Sheets at January 31, 2002
         and April 30, 2001                                                      3


         Condensed Consolidated Statements of Operations for the
         Three and Nine Months Ended January 31, 2002 and 2001                   4


         Condensed Consolidated Statements of Cash Flows for the
         Nine Months Ended January 31, 2002 and 2001                             5


         Notes to Condensed Consolidated Financial Statements                    6


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


Item 3.  Quantitative and Qualitative Disclosures about Market Risk             29


Part II. Other Information

Item 1.  Legal Proceedings                                                      30


Item 2.  Changes in Securities and Use of Proceeds                              31


Item 3.  Defaults Upon Senior Securities                                        31


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


Item 5.  Other Information                                                      31


Item 6.  Exhibits and Reports on Form 8-K                                       31


Signature                                                                       32
</TABLE>

                                        2

<PAGE>

Part 1 - Financial Information
Item 1.  Financial Statements

                           AGILE SOFTWARE CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                             January 31,        April 30,
                                                            -----------------------------
                                                                2002             2001
                                                            -----------       -----------
<S>                                                         <C>               <C>
ASSETS                                                                          (1)
Current assets:
    Cash and cash equivalents                               $   107,283       $   139,917
    Short-term investments                                      177,726           160,608
    Accounts receivable, net                                     13,583            22,626
    Other current assets                                         13,400            12,105
                                                            -----------       -----------
        Total current assets                                    311,992           335,256

Property and equipment, net                                      12,057            12,975
Intangible assets, net                                              631             1,198
Other assets                                                      4,928             5,762
                                                            -----------       -----------
                                                            $   329,608       $   355,191
                                                            ===========       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                        $     3,291       $    10,972
    Accrued expenses and other liabilities                       10,659            11,544
    Deferred revenue                                             12,761            18,542
    Current portion of capital lease obligations                     61               359
                                                            -----------       -----------
        Total current liabilities                                26,772            41,417

Capital lease obligations, noncurrent                                 -                95
Notes payable                                                        39                39
                                                            -----------       -----------
                                                                 26,811            41,551
                                                            -----------       -----------

Stockholders' equity:
    Common Stock                                                     48                48
    Additional paid-in capital                                  510,695           510,433
    Notes receivable from stockholders                             (250)             (628)
    Unearned stock compensation                                  (5,222)           (9,368)
    Accumulated other comprehensive income                          407               217
    Accumulated deficit                                        (202,881)         (187,062)
                                                            -----------       -----------
        Total stockholders' equity                              302,797           313,640
                                                            -----------       -----------
                                                            $   329,608       $   355,191
                                                            ===========       ===========
</TABLE>


1) The April 30, 2001 consolidated balance sheet information has been derived
from the audited financial statements at that date.

See accompanying notes to these condensed consolidated financial statements.

                                        3

<PAGE>

                           AGILE SOFTWARE CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                   Three Months Ended                      Nine Months Ended
                                                                       January 31,                            January 31,
                                                              --------------------------------------------------------------------
                                                                 2002              2001                2002               2001
                                                              ----------       -----------         -----------        ------------
<S>                                                           <C>              <C>                 <C>                <C>
Revenues:
    License                                                   $    9,914       $    19,058         $    38,984        $    45,754
    Professional services                                          2,132             2,291               6,517              6,556
    Maintenance                                                    6,001             3,676              17,079              8,729
                                                              ----------       -----------         -----------        ------------
        Total revenues                                            18,047            25,025              62,580             61,039
                                                              ----------       -----------         -----------        ------------

Cost of revenues:
    License                                                          871             1,184               2,523              2,706
    Professional services                                          1,792             1,526               6,492              4,731
    Maintenance                                                    1,390             1,545               4,026              3,490
    Stock compensation (recovery)                                    (63)              194                 (51)               574
                                                              ----------       -----------         -----------        ------------
        Total cost of revenues                                     3,990             4,449              12,990             11,501
                                                              ----------       -----------         -----------        ------------

Gross profit                                                      14,057            20,576              49,590             49,538
                                                              ----------       -----------         -----------        ------------

Operating expenses:
    Sales and marketing:
      Other sales and marketing                                   12,852            16,602              42,208             44,919
      Stock compensation (recovery)                                 (442)            1,939                  24              6,001
    Research and development:
      Other research and development                               8,691             7,202              25,007             17,589
      Stock compensation (recovery)                                (266)               893                (199)             3,232
    General and administrative:
      Other general and administrative                             1,375             1,641               5,425              4,482
      Stock compensation (recovery)                                   95               712                (197)             2,501
    Amortization of goodwill and other intangible assets             189             8,999                 567             27,065
    Merger related benefit                                             -                 -                (835)                 -
                                                              ----------       -----------         -----------        ------------
        Total operating expenses                                  22,494            37,988              72,000            105,789
                                                              ----------       -----------         -----------        ------------

Loss from operations                                              (8,437)          (17,412)            (22,410)           (56,251)

Interest and other income                                          2,254             4,993               8,448             15,027
Impairment of equity investments                                       -                 -              (1,446)                 -
Interest expense                                                     (41)             (174)               (168)              (380)
                                                              ----------       -----------         -----------        ------------

Loss before income taxes                                          (6,224)          (12,593)            (15,576)           (41,604)
Provision for income taxes                                            86                 -                 243                  -
                                                              ----------       -----------         -----------        ------------

Net loss                                                      $   (6,310)      $   (12,593)        $   (15,819)       $   (41,604)
                                                              ==========       ===========         ===========        ===========

Net loss per share:
    Basic and diluted                                         $     (.13)       $     (.27)        $      (.33)       $      (.92)
                                                              ==========       ===========         ===========        ===========
    Weighted average shares                                       47,664            46,014              47,270             45,464
                                                              ==========       ===========         ===========        ===========
</TABLE>

See accompanying notes to these condensed consolidated financial statements.

                                        4

<PAGE>

                           AGILE SOFTWARE CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                        Nine Months Ended January 31,
                                                                        -----------------------------
                                                                            2002             2001
                                                                        -----------       -----------
<S>                                                                     <C>               <C>
Cash flows from operating activities:
    Net loss                                                            $   (15,819)      $   (41,604)
    Adjustments to reconcile net loss to net cash
      provided by (used in) operating activities:
        Depreciation and amortization                                         7,661            30,943
        Stock compensation (recovery)                                          (423)           12,308
        Impairment of equity investments                                      1,446                 -
        Changes in operating assets and liabilities,
          net of acquisition:
             Accounts receivable, net                                         9,043           (11,734)
             Other assets, current and non-current                           (1,757)           (4,793)
             Accounts payable                                                (7,681)            4,183
             Accrued expenses and other liabilities                            (885)            3,586
             Deferred revenue                                                (5,781)            9,354
                                                                        -----------       -----------
               Net cash provided by (used in) operating activities          (14,196)            2,243
                                                                        -----------       -----------

Cash flows from investing activities:
    Purchases of investments                                               (267,515)         (117,703)
    Proceeds from maturities and sales of investments                       250,587           118,194
    Purchases of privately-held investments                                    (150)           (6,350)
    Acquisition of property and equipment, net of disposals                  (6,177)           (9,782)
                                                                        -----------       -----------
               Net cash used in investing activities                        (23,255)          (15,641)
                                                                        -----------       -----------

Cash flows from financing activities:
    Repayment of capital lease obligations                                     (393)             (538)
    Proceeds from issuance of common stock, net of repurchases                4,854             7,195
    Repayment of notes receivable from stockholders                             356               847
                                                                        -----------       -----------
               Net cash provided by financing activities                      4,817             7,504
                                                                        -----------       -----------

Net decrease in cash and cash equivalents                                   (32,634)           (5,894)

Cash and cash equivalents at beginning of period                            139,917           142,721
                                                                        -----------       -----------

Cash and cash equivalents at end of period                              $   107,283       $   136,827
                                                                        ===========       ===========

Non-cash investing and financing activities:
    Additions (reductions) in unearned stock compensation               $    (4,569)            5,358
                                                                        ===========       ===========
    DMI escrow shares retained                                          $         -               663
                                                                        ===========       ===========
</TABLE>

See accompanying notes to these condensed consolidated financial statements.

                                        5

<PAGE>

AGILE SOFTWARE CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Agile
Software Corporation and its subsidiaries ("Agile" or the "Company") have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"), and reflect all adjustments (all
of which are normal and recurring in nature) that, in the opinion of management,
are necessary for a fair presentation of the interim periods presented. The
results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for any subsequent quarter or for the
fiscal year ending April 30, 2002. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted in accordance with the SEC's rules and regulations. These
unaudited condensed consolidated financial statements and notes included herein
should be read in conjunction with the Company's audited consolidated financial
statements and notes thereto for the fiscal year ended April 30, 2001, included
in the Company's Annual Report on Form 10-K filed on July 25, 2001 with the
Securities and Exchange Commission.

Certain reclassifications have been made to prior year balances in order to
conform to the current year presentation.

2. Revenue Recognition

The Company recognizes revenues in accordance with SOP 97-2, "Software Revenue
Recognition," and SOP 98-9, "Modification of SOP 97-2, Software Revenue
Recognition, with Respect to Certain Transactions."

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 of fair value exists for all undelivered
elements, the Company accounts for the delivered elements in accordance with the
"Residual Method" prescribed by SOP 98-9. Multiple element arrangements
generally include post-contract customer support (PCS or maintenance), software
products, and in some cases, service. Vendor-specific objective evidence of fair
value is generally determined by sales of the same element or service to other
customers, or with respect to PCS, through a renewal rate specified in the
related arrangement.

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 (including the expiration of an acceptance
period), 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 and vendor-specific objective evidence of fair value exists
for such upgrades, license revenue in an amount equal to this fair value is
deferred until delivery of the specified upgrade. 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. 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. A provision for
estimated losses on fixed-price professional services contracts is recognized in
the period in which the loss becomes known.

Maintenance revenues are recognized ratably over the term of the maintenance
contract, which is generally twelve months. Maintenance contracts include the
right to unspecified upgrades on a when-and-if available basis, and ongoing
support.

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 the
same as basic net loss per share because the calculation of diluted net loss per
share excludes potential shares of Common Stock since their effect is
antidilutive. Potential shares of Common Stock consist of unvested restricted
Common Stock, incremental common shares issuable upon the exercise of stock
options and warrants.

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):

                                        6

<PAGE>

<TABLE>
<CAPTION>
                                                        Three Months Ended                     Nine Months Ended
                                                            January 31,                          January 31,
                                                  -----------------------------         -----------------------------
                                                      2002              2001                2002              2001
                                                  -----------       -----------         -----------       -----------
<S>                                               <C>               <C>                 <C>               <C>
Numerator:
    Net loss                                      $    (6,310)      $   (12,593)        $   (15,819)      $   (41,604)
                                                  ===========       ===========         ===========       ===========

Denominator:
    Weighted average shares                            48,100            47,109              47,878            46,797
    Weighted average unvested shares of
      Common Stock subject to repurchase                 (436)           (1,095)               (608)           (1,333)
                                                  -----------       -----------         -----------       -----------
    Denominator for basic and diluted
      calculation                                      47,664            46,014              47,270            45,464
                                                  ===========       ===========         ===========       ===========

Net loss per share:
    Basic and diluted                             $      (.13)      $      (.27)        $      (.33)      $      (.92)
                                                  ===========       ===========         ===========       ===========
</TABLE>

4. Segment Information

The Company identifies its operating segments based on business activities,
management responsibility and geographical location. During the three and nine
months ended January 31, 2002 and 2001, the Company operated in a single
business segment, primarily in the United States. Revenues from foreign
operations were approximately 17% and 12% of total revenues for the three and
nine months ended January 31, 2002, respectively. Revenues from foreign
operations were approximately 12% and 7% of total revenues for the three and
nine months ended January 31, 2001. Our international revenues were derived
primarily from sales in Europe, Asia Pacific, and Japan. Revenues are attributed
to geographic locations based upon the location of the customer.

5. Stock compensation

In connection with certain stock option grants to employees, stock compensation
expense is being recognized over the applicable vesting period of the options,
generally five years, consistent with the accelerated amortization method
prescribed by FASB Interpretation No. 28. Amortization of stock compensation for
employees was ($1.1) million and ($858,000) for the three and nine months ended
January 31, 2002, respectively, and $3.3 million and $10.4 million for the three
and nine months ended January 31, 2001, respectively. During the three and nine
months ended January 31, 2002 stock option cancellations exceeded the total
amortization expense for that period. The amounts credited represents the
reversal of the accelerated amortization recorded on such unvested and cancelled
options.

Stock compensation expense related to stock options granted to non-employee
consultants is recognized as earned over the applicable vesting period of the
options, generally five years, consistent with the accelerated amortization
method prescribed by FASB Interpretation No. 28. At each reporting date, the
Company re-values the stock compensation held by non-employee consultants using
the Black-Scholes option pricing model for unvested options. As a result, the
stock compensation expense will fluctuate as the fair market value of the
Company's common stock fluctuates. Amortization of stock compensation for
consultants was $413,000 and $435,000 for the three and nine months ended
January 31, 2002, respectively, and $441,000 and $1.9 million for the three and
nine months ended January 31, 2001, respectively.

6. Intangible Assets

In connection with the acquisition of Digital Market, Inc. in November 1999, the
Company recorded goodwill and other intangible assets of approximately $109.2
million, of which $1.3 million was immediately expensed as acquired in- process
technology. Goodwill and other intangible assets are presented at cost, net of
accumulated amortization. Amortization is computed using the straight-line
method over the estimated useful life of the assets, which is generally three
years. At each balance sheet date, the Company assesses the value of recorded
intangible assets for possible impairment based upon a number of factors
including turnover of the acquired workforce and the undiscounted value of
expected future operating cash flows.

During the fourth quarter ended April 30, 2001, the Company performed an
impairment assessment of the identifiable intangibles and goodwill recorded upon
the acquisition of DMI. This assessment was performed primarily as a result of
the decision by management in February 2001 to discontinue the further
development of the products acquired in the DMI acquisition. As a result of the
assessment, the Company recorded a $55.2 million impairment charge reflecting
the amount by which the carrying amount of the assets exceeded its fair value.
The charge was determined based upon the estimated discounted future cash flows
relating to the future cash flows from the specific products acquired using a
discount rate of 25%. The assumptions supporting

                                        7

<PAGE>

such cash flows including the discount rate were determined using management's
best estimates. The remaining identifiable intangibles balance of approximately
$1.2 million, consisting principally of workforce in place, will continue to be
amortized over its remaining useful life of 1.5 years which management considers
appropriate. Amortization of goodwill and other intangible assets was $189,000
and $567,000 for the three and nine months ended January 31, 2002, respectively
and $9.0 million and $27.1 million for the three and nine months ended January
31, 2001, respectively.

7.   Marketable Investments

The Company's investments comprise U.S., state, and municipal government
obligations; corporate debt securities; and foreign debt securities. Investments
with maturities of less than one year are considered short-term and are carried
at fair value. All investments are primarily held in the Company's name and
custodied with one major financial institution. The specific identification
method is used to determine the cost of securities disposed. At January 31, 2002
and April 30, 2001, all of the Company's investments were classified as
available for sale. Unrealized gains and losses on these investments are
included in other comprehensive income.

8.   Other Assets

Other assets include investments in equity instruments of privately held
companies which amounted to $3.5 million and $4.8 million as of January 31, 2002
and April 30, 2001, respectively. These investments, accounted for using the
cost method and consisting primarily of investments in preferred stock in
privately-held companies, are reviewed each reporting period for declines
considered other-than-temporary, and, if appropriate, written down to their
estimated fair value.

During the three months ended July 31, 2001, the Company determined that certain
of these investments had incurred a decline in value that was other than
temporary primarily due to the limited liquidity and poor prospects for
additional funding and reduced their carrying amounts to their estimated fair
value by a charge of $1.4 million to results of operations.

9.   Stockholders' Equity

On September 26, 2001, shareholders approved an amendment to the Company's
Certificate of Incorporation to increase the number of authorized common shares
from 100,000,000 to 200,000,000.

On October 18, 2001, the Company announced a voluntary stock option exchange
program for its employees. Under the program, the Company's option holders had
the opportunity to cancel outstanding options with an exercise price in excess
of $15.00 per share in exchange for new options to be granted at a future date
that is at least six months and one day after the date of cancellation, which
was November 19, 2001. The number of shares of common stock subject to the new
options will be equal to 75% of the number subject to the exchanged options.
Under the exchange program, options for 4.0 million shares of our common stock
were tendered and cancelled. The new options will vest at the same rate as the
exchanged options and will have an exercise price equal to the fair market value
of Agile's common stock at the new grant date, which is not expected to be later
than twenty days after May 20, 2002. Agile expects that there will be no
accounting charges as a result of this stock option exchange program.

10.  Recent Accounting Pronouncements

In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations completed
after June 30, 2001. SFAS No. 141 also specifies criteria for determining
intangible assets acquired in a purchase method business combination that must
be recognized and reported apart from goodwill. SFAS No. 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead be tested for impairment at least annually in accordance
with the provisions of SFAS No. 142. SFAS No. 142 will also require that
intangible assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company is
required to adopt the provisions of SFAS No. 141 immediately, and SFAS No.142
effective May 1, 2002. Furthermore, any goodwill and any intangible assets
determined to have indefinite useful lives that are acquired in a purchase
business combination completed after June 30, 2001 will not be amortized, but
will continue to be evaluated for impairment in accordance with the appropriate
pre-SFAS No. 142 accounting literature. Goodwill and intangible assets acquired
in business combinations completed before July 1, 2001 will continue to be
amortized prior to the adoption of SFAS No. 142. The Company does not believe
that adoption of SFAS No. 141 or SFAS No. 142 will have a material impact on its
financial position or results of operations.

On October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets". SFAS No. 144 supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." SFAS No. 144 applies to all long-lived assets (including
discontinued operations) and consequently amends Accounting Principles Board
Opinion No. 30. SFAS No. 144 develops one accounting model for long-lived assets
that are to be

                                        8

<PAGE>

disposed of by sale. SFAS No. 144 requires that long-lived assets that are to be
disposed of by sale be measured at the lower of book value or fair value less
cost to sell. Additionally, SFAS No. 144 expands the scope of discontinued
operations to include all components of an entity with operations that (1) can
be distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 is
effective for the Company for all financial statements issued in fiscal 2003.
The Company does not believe that the adoption of SFAS No. 144 will have a
material impact on its financial position or results of operations.

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, and we
undertake no obligation to publicly release any revisions to the forward-looking
statements or reflect events or circumstances after the date of this report. Any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. For example, words such as "may,"
"will," "should," "estimates," "predicts," "potential," "continue," "strategy,"
"believes," "anticipates," "plans," "expects," "intends," and similar
expressions are intended to identify forward-looking statements. Our actual
results and the timing of certain events may differ materially from those
reflected in the forward-looking statements. Factors that might cause or
contribute to 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 our Annual Report
on Form 10-K filed on July 25, 2001 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 collaborative manufacturing commerce solutions that speed
the "build" and "buy" process across the virtual manufacturing network. We
believe that our products improve time-to-volume, customer responsiveness and
cost of goods sold. Our solutions manage product content and critical
communication, collaboration and commerce transactions among original equipment
manufacturers, electronic manufacturing services providers, customers and
suppliers in real-time. 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
and Asia through our direct sales force and distributors. 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 adapters provided by third
parties 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 January 31, 2002, 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. Over 90% of our customers had renewed their maintenance contracts as of
January 31, 2002. We may not be able to maintain or continue these rates of
purchases or renewals of maintenance agreements.

We have incurred quarterly and annual losses in each of the years since we were
formed and we expect to continue to incur quarterly and annual losses in the
near term. We incurred losses of $6.3 million and $15.8 million for the three
and nine months ended January 31, 2002, respectively, and $12.6 million and
$41.6 million for the three and nine months ended January 31, 2001,
respectively. As of January 31, 2002 we had an accumulated deficit of
approximately $202.9 million. We intend to continue to incur significant sales
and marketing, research and development, general and administrative expenses and
stock compensation expenses. For example, we had 486 full-time employees at
January 31, 2002, compared to 436 at January 31, 2001. 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 be sure that we will ever attain or maintain profitability.

Critical Accounting Policies
----------------------------

In preparing our financial statements, we make estimates, assumptions and
judgments that can have a significant impact on our net revenue, operating
income and net income, as well as on the value of certain assets on our balance
sheet. While there are a number of accounting policies, methods and estimates
affecting our financial statements, areas that are particularly significant
include revenue recognition and the impairment of long-lived assets.

                                        9

<PAGE>

Revenue Recognition
-------------------

We recognize revenue in accordance with 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." We
recognize license revenues when all of the following criteria are met:
persuasive evidence of an arrangement exists, the fee is fixed or determinable,
collectibility is probable, delivery of the product has occurred and the
customer has accepted the product (including the expiration of an acceptance
period), if the terms of the contract include an acceptance requirement. In the
event that we grant a customer the right to specified upgrades and
vendor-specific objective evidence of fair value exists for such upgrades, we
defer license revenue in an amount equal to this fair value until we have
delivered the specified upgrade. If vendor-specific objective evidence of fair
value does not exist, then we defer recognition of the entire license fee until
we deliver the specified upgrade. We provide allowances for estimated returns at
the time we deliver the product. When we still have significant obligations with
regard to implementation of the product, we defer recognition of the revenue
until we have satisfied all of the obligations.

Probability of collection is based upon the assessment of the customer's
financial condition through review of their current financial statements or
credit reports. For follow-on sales to existing customers, prior payment history
is also used to evaluate probability of collection.

When our software licenses contain multiple elements, we must allocate revenue
to each element based on the relative fair values of the elements. Multiple
element arrangements generally include post-contract support (PCS or support),
software products, and in some cases, service. Revenue recognized from
multiple-element arrangements is allocated to undelivered elements of the
arrangement, such as post-contract support, software based on the relative fair
values of the elements specific to us. Our determination of fair value of each
element in multi-element arrangements is based on vendor-specific objective
evidence, which is generally determined by sales of the same element or service
to third parties or by reference to a renewal rate specified in the related
arrangement.

Where vendor-specific objective evidence of fair-value exists for all
undelivered elements, but evidence does not exist for one or more delivered
elements, we account for the delivered elements in accordance with the "Residual
Method" prescribed by SOP 98-9. Under the residual method, the fair value of the
undelivered elements is deferred and the remaining portion of the arrangement
fee is recognized as revenue. In most cases, the bundled multiple elements
include PCS and the software product. In such cases, when vendor-specific
objective evidence of fair value exists for all of the undelivered elements
(most commonly PCS), the residual amount is recognized as revenue and the PCS is
recognized ratably over the PCS term, which is typically one year.

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. A provision for
estimated losses on fixed-price professional services contracts is recognized in
the period in which the loss becomes known.

Maintenance revenues are recognized ratably monthly over the term of the
maintenance contract, which is generally twelve months. Maintenance contracts
include the right to unspecified upgrades on a when-and-if available basis, and
ongoing support.

Deferred revenues include amounts received from customers for which revenue has
not yet been recognized that generally results from deferred maintenance,
consulting or training services not yet rendered and license revenue deferred
until all requirements under SOP 97-2 are met. Deferred revenue is recognized
upon delivery of our products, as services are rendered, or as other
requirements requiring deferral under SOP 97-2 are satisfied.

Cost of Revenues
----------------

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.

Operating Expenses
------------------

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

                                       10

<PAGE>

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.

Impairment of Long-lived Assets
-------------------------------

We are required to regularly review all of our long-lived assets, including
goodwill and other intangible assets, for impairment whenever events or changes
in circumstances indicate that the carrying value may not be recoverable.
Management assesses the impairment of identifiable intangibles and related
goodwill periodically in accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of. Impairment of
enterprise level goodwill is also assessed periodically in accordance with the
provision of Accounting Principles Board (APB) Opinion No. 17, Intangible
Assets. We perform an impairment review whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Factors
we consider important which could trigger an impairment review include, but are
not limited to, significant underperformance relative to expected historical or
projected future operating results, significant changes in the manner of use of
the acquired assets or the strategy for our overall business, significant
negative industry or economic trends, a significant decline in our stock price
for a sustained period, or a significant decline in our market capitalization
relative to net book value. When we determine an impairment review is necessary
based upon the existence of one or more of the above indicators of impairment,
any impairment is measured based on a projected discounted cash flow method
using a discount rate commensurate with the risk inherent in our current
business model. We must use significant judgment in the development of projected
cash flows for this purpose including assumptions regarding the appropriate
level of aggregation of cash flows, their term and discount rate as well as the
underlying forecasts of expected future revenue and expense. We have recorded
significant impairment charges for goodwill and intangible assets in the past
and to the extent that events or circumstances cause our assumptions to change,
additional charges may be required which could be material.

Acquisitions
------------

On November 23, 1999, we acquired Digital Market, Inc. ("DMI") in a transaction
accounted for as a purchase business combination. We paid $20.0 million in cash
and issued 1,202,018 shares of our Common Stock valued at $75.7 million or
$62.95 per share based upon the average price of our Common Stock two days
before, day of and two days after the transaction measurement date. In addition,
we also assumed all unvested outstanding stock options granted by DMI. The
estimated fair value of the assumed options was $5.6 million, and was included
as a component of the purchase price. The fair value of the options was
estimated using the Black-Scholes option pricing model with the following
weighted-average assumptions: risk-free rate of 5.96%, expected life of 2 to 4
years, expected dividend rate of 0%, and volatility of 85%. We incurred $1.2
million in acquisition expenses, including financial advisory and legal fees and
other direct transaction costs resulting in an adjusted aggregate purchase price
of $102.5 million.

The total acquisition price of $102.5 million was allocated to the assets
acquired, including tangible and intangible assets, and liabilities assumed
based upon the fair value of such assets and liabilities on the date of the
acquisition. The total acquisition price of the acquisition was allocated to
assets and liabilities based on management's estimates of their fair value and
an independent appraisal of certain intangible assets, with the excess costs
over the net assets acquired allocated to goodwill. The aggregate purchase price
was allocated as follows (in thousands):

         Net tangible liabilities ...................  $ (6,659)
         In-process technology ......................     1,300
         Existing technology ........................     1,850
         Trademark ..................................       150
         Assembled workforce ........................     2,100
         Goodwill ...................................   103,776
                                                       --------
                                                       $102,517
                                                       ========

The net tangible liabilities consisted primarily of cash and cash equivalents,
accounts receivable, property and equipment, accounts payable and other
liabilities and notes payable. Because the in-process technology had not reached
the stage of technological feasibility at the acquisition date and had no
alternative future use, the amount was immediately charged to operations. The
amount allocated to existing technology, trademark and assembled workforce was
being amortized over the estimated useful lives of three years. The purchase
price in excess of identified tangible and intangible assets was allocated as
goodwill. As a result of the rapid technological changes occurring in the
software and Internet industries, goodwill was being amortized over the
estimated useful life of three years. The valuation of the intangible assets was
been determined using management's assumptions and a valuation report from an
independent appraiser.

                                       11

<PAGE>

During the three months ended April 30, 2001, management performed an impairment
assessment of the identifiable intangibles and goodwill recorded upon the
acquisition of DMI. This assessment was performed primarily as a result of the
decision by management in February 2001 to discontinue the further development
of the products acquired in the DMI acquisition. As a result of the assessment,
an impairment charge of $55.2 million was recorded to reduce the carrying value
of developed technology and goodwill. The charge was determined based upon our
estimated discounted cash flows using a discount rate of 25%. The assumptions
supporting such cash flows including the discount rate were determined using
management's best estimates. The remaining identifiable intangibles balance of
approximately $1.2 million, consisting principally of workforce in place, will
continue to be amortized over its remaining useful life of 1.5 years which
management considers appropriate.

Stock Options and Warrants
--------------------------

In the third quarter of fiscal 2000, we granted options below market price to
purchase 269,144 shares of our common stock to certain DMI employees who
remained our employees after the acquisition. We recorded additional deferred
stock compensation of approximately $11.7 million associated with these stock
option grants, which was amortized over their expected term of 18 months.

In connection with the granting of stock options to our employees (including the
DMI employees who remained our employees after the acquisition) and non-employee
consultants, we have recorded unearned stock compensation totaling approximately
$35.8 million through January 31, 2002, of which $5.2 million remains to be
amortized. This amount is included as a component of stockholders' equity and is
being amortized by charges to operations over the applicable vesting period of
the options, consistent with the accelerated amortization method described in
Financial Accounting Standards Board, or FASB, Interpretation No. 28. We
recognized amortization of unearned stock compensation of ($676,000) and
$(423,000) in the three and nine months ended January 31, 2002, respectively,
and $3.7 million and $12.3 million in the three and nine months ended January
31, 2001, respectively. During the three and nine months ended January 31, 2002
stock option cancellations exceeded the total amortization expense for those
periods. The amounts credited represents the reversal of the accelerated
amortization recorded on such unvested and cancelled options. The amortization
of the remaining unearned stock compensation at January 31, 2002 will result in
additional charges to operations through fiscal 2005. We calculated the fair
value of options to purchase 130,000 shares of our common stock granted to
non-employee consultants, which totals $827,000 as of January 31, 2002, using
the Black-Scholes option pricing model as prescribed by SFAS No. 123 with the
following underlying assumptions: expected volatility of 100%, risk-free
interest rate of 4.25% and option terms of two to four years. We are accounting
for these options under variable plan accounting and therefore the expense
associated with these options may fluctuate significantly from quarter to
quarter through fiscal 2005.

In September 2000, in connection with a marketing alliance with a third party,
we issued a warrant to purchase 50,000 shares of our common stock at an exercise
price of $67.05 per share, the fair value of our common stock on the date of the
agreement. We recorded a charge of $2.0 million representing the fair value of
the warrant, estimated using the Black-Scholes option pricing model with the
following weighted-average assumptions: risk-free rate of 5.75%, expected life
of 3.0 years, expected dividend rate of 0%, and volatility of 80%. Such amount
is presented as a reduction of stockholders' equity and is being amortized to
sales and marketing expense over the three-year life of the marketing alliance.

The warrant was granted on a non-contingent basis and vests immediately. The
warrant is not subject to repurchase, nor does it require substantial
performance for the third party to exercise. The marketing alliance is a
three-year non-exclusive cooperative agreement, which is designed to enhance our
and the third party's potential revenues in their respective areas, and
credibility in collaborative manufacturing commerce without constraining each
other's business. We will each be responsible for our own cost and expenses in
performing joint marketing sales activities.

On October 18, 2001, we announced a voluntary stock option exchange program for
our employees. Under the program, Agile's option holders had the opportunity to
cancel outstanding options with an exercise price in excess of $15.00 per share
in exchange for new options to be granted at a future date that is at least six
months and one day after the date of cancellation, which was November 19, 2001.
The number of shares of common stock subject to the new options will be equal to
75% of the number subject to the exchanged options. Under the exchange program,
options for 4.0 million shares of our common stock were tendered and cancelled.
The new options will vest at the same rate as the exchanged options and will
have an exercise price equal to the fair market value of Agile's common stock at
the new grant date, which is not expected to be later than twenty days after May
20, 2002. We do not expect to incur accounting charges as a result of this stock
option exchange program.

Although our total revenues have increased from year to year, 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. As a result, we have incurred significant losses since inception,
and, as of January 31, 2002, had an accumulated deficit of $202.9 million.

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

                                       12

<PAGE>

indications of future performance. Our historic revenue growth rates are not
necessarily sustainable or indicative of our future growth.

Results of Operations

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                    Nine Months Ended
                                                                          January 31                         January 31
                                                               -----------------------------        ----------------------------
                                                                 2002               2001              2002               2001
                                                               ----------         ----------        ---------          ---------
<S>                                                            <C>                <C>               <C>                <C>
Revenues:
    License                                                           55 %               76 %              62 %               75 %
    Professional services                                             12                  9                11                 11
    Maintenance                                                       33                 15                27                 14
                                                               ---------          ---------         ---------          ---------
        Total revenues                                               100                100               100                100
                                                               ---------          ---------         ---------          ---------

Cost of revenues:
    License                                                            5                  5                 4                  4
    Professional services                                             10                  6                11                  8
    Maintenance                                                        8                  6                 6                  6
    Stock compensation (recovery)                                     (1)                 -                 -                  1
                                                               ---------          ---------         ---------          ---------
        Total cost of revenues                                        22                 17                21                 19
                                                               ---------          ---------         ---------          ---------

Gross profit                                                          78                 83                79                 81
                                                               ---------          ---------         ---------          ---------

Operating expenses:
    Sales and marketing:
      Other sales and marketing                                       71                 66                67                 74
      Stock compensation (recovery)                                   (2)                 8                 -                 10
    Research and development:
      Other research and development                                  48                 29                40                 29
      Stock compensation (recovery)                                   (1)                 4                 -                  5
    General and administrative:
      Other general and administrative                                 8                  7                 9                  7
      Stock compensation (recovery)                                    -                  3                 -                  4
    Amortization of goodwill and other intangible assets               1                 36                 1                 44
    Merger related benefit                                             -                  -                (1)                 -
                                                               ---------          ---------         ---------          ---------
        Total operating expenses                                     125                153               116                173
                                                               ---------          ---------         ---------          ---------

Loss from operations                                                 (47)               (70)              (37)               (92)

Interest income (expense)                                             12                 20                13                 24
Impairment of equity investments                                       -                  -                (2)                 -
                                                               ---------          ---------         ---------          ---------

Loss before income taxes                                             (35)               (50)              (26)               (68)
Provision for income taxes                                             -                  -                 -                  -
                                                               ---------          ---------         ---------          ---------

Net loss                                                             (35)%              (50)%             (26)%              (68)%
                                                               =========          =========         =========          =========
</TABLE>

                                       13

<PAGE>

COMPARISON OF THREE MONTHS ENDED JANUARY 31, 2002 AND JANUARY 31, 2001

Revenues

Our total revenues for the three months ended January 31, 2002 were $18.0
million, representing a decrease of $7.0 million, or 28%, from the revenues of
$25.0 million in the quarter ended January 31, 2001. During the three months
ended January 31, 2002, one customer, accounted for more than 10% of our total
revenues, and during the three months ended January 31, 2001, no customer
accounted for more than 10% of our total revenues. Revenues from foreign
operations were approximately 17% of total revenues for the three months ended
January 31, 2002 and approximately 12% of total revenues for the three months
ended January 31, 2001. Our international revenues were derived primarily from
sales in Europe, Asia Pacific and Japan.

License Revenues. Our license revenues for the three months ended January 31,
2002 were $9.9 million, representing a decrease of $9.1 million, or 48%, from
the license revenues of $19.1 million in the three months ended January 31,
2001. License revenues as a percentage of total revenues were 55% and 76% for
the three months ended January 31, 2002 and 2001, respectively. The decrease in
license revenues from the prior year period was due to the lower number of
license sales due to the current economic slowdown and the significant decline
in information technology spending. The current economic slowdown and reduction
in technology spending may impact our business for the next quarter and possibly
longer.

Professional Services Revenues. Our professional services revenues for the three
months ended January 31, 2002 were $2.1 million, representing a decrease of
$159,000 or 7%, from the professional services revenues of $2.3 million for the
three months ended January 31, 2001. Professional services revenues, as a
percentage of total revenues, were 12% and 9% for the three months ended January
31, 2002, and 2001, respectively. The decrease in professional services revenues
in absolute dollars from the prior year period was due to a decrease in license
revenues due to the current economic slowdown, which may continue to impact
professional services revenues for the next few quarters. The increase in
professional services revenues as a percentage of total revenue resulted from
the higher proportionate decrease in license revenues in the current period.

Maintenance Revenues. Our maintenance revenues for the three months ended
January 31, 2002 were $6.0 million, representing an increase of $2.3 million, or
63%, from the maintenance revenues of $3.7 million for the three months ended
January 31, 2001. Maintenance revenues as a percentage of total revenues were
33% and 15% for the three months ended January 31, 2002, and 2001, respectively.
The increase in maintenance revenues in absolute dollars from the prior year
period was due to our increased customer base. The increase in maintenance
revenue as a percentage of total revenue resulted from the higher proportionate
decrease in license revenues.

Cost of Revenues

Cost of License Revenues. Cost of license revenues, excluding stock
compensation, was $871,000 for the three months ended January 31, 2002,
representing a decrease of $313,000, or 26%, from the cost of license revenues
of $1.2 million for the three months ended January 31, 2001. Cost of license
revenues as a percentage of license revenues was 9% for the three months ended
January 31, 2002, compared to 6% for the three months ended January 31, 2001.
The decrease in cost of license revenues in absolute dollars was due primarily
to a decrease in royalties paid to third parties on third-party software
integrated into our products as a result of the overall decrease in our license
revenues in the current period. We expect the cost of license revenues in
absolute dollars to track the increase or decrease in our overall license
revenues.

Cost of Professional Services Revenues. Cost of professional services revenues,
excluding stock compensation, was $1.8 million for the three months ended
January 31, 2002, representing an increase of $266,000, or 17%, from the cost of
professional services revenues of $1.5 million for the three months ended
January 31, 2001. Cost of professional services revenues as a percentage of
professional services revenues was 84% for the three months ended January 31,
2002, compared to 67% for the three months ended January 31, 2001. The increase
in cost of professional services revenues as a percentage of professional
services revenue for the three months ended January 31, 2002, compared to the
prior year period, was due to lower employee utilization during the current
three month period. The increase in cost of professional services revenues in
absolute dollars from the prior year period was due to increased professional
services personnel necessary to support our increased customer base. We expect
the cost of professional services revenues to remain high as a percentage of
revenues while the economic slowdown continues until our overall level of new
license revenues increase.

Cost of Maintenance Revenues. Cost of maintenance revenues, excluding stock
compensation, was $1.4 million for the three months ended January 31, 2002,
representing a decrease of $155,000, or 10%, from the cost of maintenance
revenues of $1.5 million for the three months ended January 31, 2002. Cost of
maintenance revenues as a percentage of maintenance revenues was 23% for the
three months ended January 31, 2002, compared to 42% for the three months ended
January 31, 2001. The decrease in cost of maintenance revenues as a percentage
of maintenance revenue for the nine months ended January 31, 2002, compared to
the prior year period, was due to higher employee utilization resulting from the
high renewal rate within our existing customer base. The slight decrease in cost
of revenue in absolute dollars over the prior year periods was due to a
reduction in discretionary

                                       14

<PAGE>

spending.


Operating Expenses

Sales and Marketing. Sales and marketing expenses, excluding stock compensation,
were $12.9 million for the three months ended January 31, 2002, representing a
decrease of $3.8 million, or 23%, from the sales and marketing expenses of $16.6
million for the three months ended January 31, 2001. The decrease in sales and
marketing expenses on an absolute basis for the three months ended January 31,
2002, compared to the prior year period, was due primarily to lower incentive
compensation due to lower license revenues and lower travel and entertainment
expenses. The increase in sales and marketing expenses as a percentage of
revenue for the three months ended January 31, 2002 was due primarily to a lower
revenue base. We anticipate that our sales and marketing expenses will increase
in absolute dollars as we continue to selectively expand our domestic and
international sales force.

Research and Development. Research and development expenses, excluding stock
compensation, were $8.7 million for the three months ended January 31, 2002,
representing an increase of $1.5 million, or 21%, from the research and
development expenses of $7.2 million for the three months ended January 31,
2001. The increase in research and development expenses for the three months
ended January 31, 2002, compared to the prior year periods, was due to the
increase in the number of our software developers, quality assurance personnel
and outside contractors needed to support our product development, documentation
and testing activities related to the development and release of the latest
versions of our products. The increase in research and development expenses as a
percentage of revenue for the three months ended January 31, 2002 was due
primarily to a lower revenue base. We anticipate that research and development
expenses will remain at current levels on an absolute basis as we continue to
invest in new product development through the economic downturn.

General and Administrative. General and administrative expenses, excluding stock
compensation, were $1.4 million for the three months ended January 31, 2002,
representing a decrease of $266,000, or 16%, from the general and administrative
expenses of $1.6 million for the three months ended January 31, 2001. The
decrease in general and administrative expenses in absolute dollars for the
three months ended January 31, 2002, compared to the prior year periods, was due
primarily to lower discretionary spending and lower bad debt expense. The
increase in general and administration as a percentage of revenue for the three
months ended January 31, 2002 was due primarily to a lower revenue base.

Amortization of Stock Compensation. We recognized amortization of stock
compensation of approximately ($676,000) and $3.7 million for the three months
ended January 31, 2002 and 2001, respectively. During the three months ended
January 31, 2002 stock option cancellations exceeded the total amortization
expense for that period. The amounts credited represents the reversal of the
accelerated amortization recorded on such invested and cancelled options. As of
January 31, 2002, we had an aggregate of $5.2 million of deferred stock
compensation remaining to be amortized.

Amortization of Goodwill and Purchased Intangible Assets. In connection with our
acquisition of Digital Market, Inc. in November 1999, $103.8 million was
allocated to goodwill and $4.1 million was allocated to other intangible assets,
all of which were being amortized over a period of 3 years. Amortization of
goodwill and intangibles was $189,000 and $9.0 million for the three months
ended January 31, 2002,and 2001, respectively. The decrease in amortization of
goodwill and purchased intangible assets for the three months ended January 31,
2002 from the comparable prior year periods was due primarily to the impairment
charge taken in the fourth quarter ended April 30, 2001 to reduce the carrying
value of goodwill and other intangible assets by $55.2 million. See Note 6 of
Notes to Condensed Consolidated Financial Statements for more detailed
information.

Interest income (expense) was $2.2 million for the three months ended January
31, 2002 compared to $4.8 million for the three months ended January 31, 2001.
This decrease in interest income was due principally to declining interest rates
and lower average cash and investment balances.

Provision for Income Taxes. The Company incurred operating losses for the three
months ended January 31, 2002 and January 31, 2001. Management has recorded a
valuation allowance for the full amount of the net deferred tax assets, as
sufficient uncertainty exists that it is more likely than not that the deferred
tax assets will not be realized. During the three months ended January 31, 2002,
the Company incurred income tax expense of $86,000 primarily attributable to its
international subsidiaries.

COMPARISON OF NINE MONTHS ENDED JANUARY 31, 2002 AND JANUARY 31, 2001

Our total revenues for the nine months ended January 31, 2002 were $62.5
million, representing an increase of $1.5 million, or 3%, from the revenues of
$61.0 million for the nine months ended January 31, 2001. During the nine months
ended January 31, 2002 and 2001, no customers accounted for more than 10% of our
total revenues. Revenues from foreign operations were approximately 12% and 7%
of total revenues for the nine months ended January 31, 2002 and 2001,
respectively. Our international revenues were derived primarily from sales in
Europe, Asia Pacific, and Japan.

                                       15

<PAGE>

License Revenues. Our license revenues for the nine months ended January 31,
2002 were $39.0 million, representing a decrease of $6.8 million, or 15%, from
the revenues of $45.8 million for the nine months ended January 31, 2001.
License revenues as a percentage of total revenues were 62% for the nine months
ended January 31, 2002, and 75% for the nine months ended January 31, 2001. The
decrease in license revenues from the prior year period was due to lower number
of license sales due to the current economic slowdown and the significant
decline in information technology spending.

Professional Services Revenues. Our professional services revenues for the nine
months ended January 31, 2002 were $6.5 million, representing a decrease of
$39,000, or 1%, from the professional services revenues of $6.6 million in the
nine months ended January 31, 2001. Professional services revenues, as a
percentage of total revenues were 10% for nine months ended January 31, 2002,
and 11% nine months ended January 31, 2001. The slight decrease in professional
services revenues for the nine months ended January 31, 2002 from the prior year
period was the result of lower license revenues.

Maintenance Revenues. Our maintenance revenues for the nine months ended January
31, 2002 were $17.1 million, representing an increase of $8.4 million, or 96%,
from the maintenance revenues of $8.7 million for the nine months ended January
31, 2001. Maintenance revenues as a percentage of total revenues were 27% for
the nine months ended January 31, 2002, and 14% for the nine months ended
January 31, 2001. The increase in maintenance revenues in absolute dollars and
as a percentage of total revenues was due to our increased customer base.

Cost of Revenues

Cost of License Revenues. Cost of license revenues, excluding stock
compensation, was $2.5 million for the nine months ended January 31, 2002,
representing a decrease of $184,000, or 7%, from the cost of license revenues of
$2.7 million for the nine months ended January 31, 2001. Cost of license
revenues as a percentage of license revenues for the nine months ended January
31, 2002 and 2001 were 7% and 6%, respectively. The decrease in cost of license
revenues in absolute dollars was due primarily to a decrease in royalties paid
to third parties on third-party software integrated into our products as a
result of the overall decrease in our license revenues in the current nine-month
period.

Cost of Professional Services Revenues. Cost of professional services revenues,
excluding stock compensation, was $6.5 million for the nine months ended January
31, 2002, representing an increase of $1.8 million, or 37%, from the cost of
professional services revenues of $4.7 million for the nine months ended January
31, 2001. Cost of professional services revenues as a percentage of professional
services revenues was 100% for the nine months ended January 31, 2002, compared
to 72% for the nine months ended January 31, 2001. The increase in cost of
professional services revenues as a percentage of professional services revenue
for the nine months ended January 31, 2002, compared to the prior year period,
was due to lower employee utilization and higher fixed costs during the first
two quarters of fiscal 2002. The increase in cost of professional services
revenues in absolute dollars from the prior period was due to increased
professional services personnel necessary to support our increased customer
base. In the current period, as well as in certain periods in the past, 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 for such services. It is possible that in future
periods our cost of professional services revenues will again exceed our
professional services revenues.

Cost of Maintenance Revenues. Cost of maintenance revenues, excluding stock
compensation, was $4.0 million for the nine months ended January 31, 2002,
representing an increase of $536,000, or 15%, from the cost of maintenance
revenues of $3.5 million for the nine months ended January 31, 2001. Cost of
maintenance revenues as a percentage of maintenance revenues was 24% for the
nine months ended January 31, 2002, and 40% for the nine months ended January
31, 2001. The decrease in cost of maintenance revenues as a percentage of
maintenance revenue for the nine months ended January 31, 2002, compared to the
prior year period, was due to higher employee utilization resulting from our
high renewal rate within our existing customer base. The increase in cost of
revenue, on an absolute basis, over the prior year periods was due to hiring and
training additional personnel needed to support our increased customer base.

Operating Expenses

Sales and Marketing. Sales and marketing expenses, excluding stock compensation,
were $42.2 million for the nine months ended January 31, 2002, representing a
decrease of $2.7 million, or 6%, from the sales and marketing expenses of $44.9
million for the nine months ended January 31, 2001. The decrease in sales and
marketing expenses on an absolute basis and as a percentage of sales for the
nine months ended January 31, 2002, compared to the prior year period, was due
primarily to lower incentive compensation due to lower license revenues and the
cancellation of Agile's 2001 user group conference and lower travel and
entertainment expenses in response to the terrorist attacks of September 11,
2001.

Research and Development. Research and development expenses, excluding stock
compensation, were $25.0 million for the nine months ended January 31, 2002,
representing an increase of $7.4 million, or 42%, from the research and
development expenses of $17.6 million for the nine months ended January 31,
2001. The increase in research and development expenses on an absolute

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basis and as a percentage of sales for the nine months ended January 31, 2002,
compared to the prior year period, was due to the increase in the number of our
software developers, quality assurance personnel and outside contractors needed
to support our product development, documentation and testing activities related
to the development and release of the latest versions of our products.

General and Administrative. General and administrative expenses, excluding stock
compensation, were $5.4 million for the nine months ended January 31, 2002,
representing an increase of $944,000, or 21%, from the general and
administrative expenses of $4.5 million for the nine months ended January 31,
2001. The increase in general and administrative expenses in absolute dollars
and as a percentage of sales for the nine months ended January 31, 2002,
compared to the prior year period, was due to hiring additional finance, legal
and administrative personnel to support the growth of our business during that
period.

Amortization of Stock Compensation. We recognized amortization of stock
compensation of approximately ($423,000) for the nine months ended January 31,
2002, compared to $12.3 million for the nine months ended January 31, 2001.
During the nine months ended January 31, 2002 stock option cancellations
exceeded the total amortization expense for that period. The amounts credited
represents the reversal of the accelerated amortization recorded on such
unvested and cancelled options.

Amortization of Goodwill and Purchased Intangible Assets. In connection with our
acquisition of Digital Market, Inc. in November 1999, $103.8 million was
allocated to goodwill and $4.1 million was allocated to other intangible assets,
all of which were being amortized over a period of 3 years. Amortization of
goodwill and intangibles was $567,000 for the nine months ended January 31,
2002, compared to $27.1 million for the nine months ended January 31, 2001. The
decrease in amortization of goodwill and purchased intangible assets for the
nine months ended January 31, 2002 from the comparable prior year periods was
due primarily to the impairment charge taken in the fourth quarter ended April
30, 2001 to reduce the carrying value of goodwill and other intangible assets by
$55.2 million. See Note 6 of Notes to Consolidated Financial Statements for more
detailed information.

Merger related benefit. In the fourth quarter of fiscal 2001, we accrued $5.0
million for financial advisory and professional fees resulting from the
terminated merger with a third party. The accrual was management's best estimate
of its obligation at the time. As of July 31, 2001, we had incurred actual costs
of $4.2 million and we had no remaining liability related to the terminated
merger. As a result, we recorded a reduction of merger related expenses of
$835,000 during the three months ended July 31, 2001, which was included in the
statement of operations.

Interest income (expense) was $8.3 million for the nine months ended January 31,
2002 compared to $14.6 million for the nine months ended January 31, 2001. This
decrease in interest income was due principally to declining interest rates and
lower average cash and investment balances.

Impairment of Equity Investments. During the three months ended July 31, 2001,
we determined that certain equity investments of privately held companies had
incurred a decline in value that was considered other than temporary. We
recorded a charge of $1.4 million during the three months ended July 31, 2001,
in our results of operations to write down the investments to their estimated
fair values. See Note 8 of Notes to Condensed Consolidated Financial Statements
for more detailed information.

Provision for Income Taxes. The Company incurred operating losses for the nine
months ended January 31, 2002 and January 31, 2001. Management has recorded a
valuation allowance for the full amount of the net deferred tax assets, as
sufficient uncertainty exists that it is more likely than not that the deferred
tax assets will not be realized. During the nine months ended January 31, 2002,
the Company incurred income tax expense of $243,000, primarily attributable to
its international subsidiaries.

Liquidity and Capital Resources

As of January 31, 2002, we had cash, cash equivalents and short-term investments
of $285.0 million, a decrease of $15.5 million from the cash, cash equivalents
and short-term investments held as of April 30, 2001. Our working capital at
January 31, 2002 was $285.2 million.

Net cash used in operating activities for the nine months ended January 31, 2002
was $14.2 million, resulting from our net loss (less non-cash expenses) and
decreases in accounts payable, deferred revenue and an increase in other assets,
partially offset by decreases in accounts receivable. Net cash used in operating
activities for the nine months ended January 31, 2001 was $2.2 million resulting
from our net loss (less non-cash expenses) and increases in accounts receivable
and other assets, partially offset by increases in deferred revenue, accounts
payable and accrued expenses.

Net cash used in investing activities for the nine months ended January 31, 2002
was $23.3 million resulting primarily of net purchases of marketable investments
and purchases of property and equipment. Net cash used in investing activities
for the nine months ended January 31, 2001 was $15.6 million consisting
primarily of purchases of property and equipment and purchases of privately-held
investments. Purchases of property and equipment were approximately $6.2 million
and $9.8 million in the nine

                                       17

<PAGE>

months ended January 31, 2002 and 2001, respectively. These capital expenditures
were primarily for computer hardware and software and furniture and fixtures. We
expect that capital expenditures will remain at the current levels over the
short term.

Net cash provided by financing activities for the nine months ended January 31,
2002 and 2001 was $4.8 million and $7.5 million, respectively, resulting
primarily from the sale of common stock under employee stock option plans.

Capital lease obligations, including both short-term and long-term portions,
were $61,000 at January 31, 2002, and are payable through fiscal 2003.

We expect to experience growth in our operating expenses, particularly research
and development and sales and marketing expenses, for the foreseeable future in
order to execute our business plan. As a result, we anticipate that such
operating expenses, as well as planned capital expenditures, will constitute a
material use of our cash resources. In addition, we may utilize cash resources
to fund acquisitions of investments in complementary businesses, technologies or
product lines. We believe that our existing cash and cash equivalents and our
anticipated cash flow from operations will be sufficient to meet our working
capital and operating resource expenditure requirements for at least the next
twelve months. Thereafter, we may find it necessary to obtain additional equity
or debt financing. In the event additional financing is required, we may not be
able to raise it on acceptable terms or raise it at all, and the issuance of any
additional securities would result in ownership dilution to our existing
stockholders.

Recent Accounting Pronouncements

In July 2001, the FASB issued SFAS No. 141, Business Combinations, and SFAS No.
142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations completed
after June 30, 2001. SFAS No. 141 also specifies criteria for determining
intangible assets acquired in a purchase method business combination that must
be recognized and reported apart from goodwill. SFAS No. 142 will require that
goodwill and intangible assets with indefinite useful lives no longer be
amortized, but instead be tested for impairment at least annually in accordance
with the provisions of SFAS No. 142. SFAS No. 142 will also require that
intangible assets with definite useful lives be amortized over their respective
estimated useful lives to their estimated residual values, and reviewed for
impairment in accordance with SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The Company is
required to adopt the provisions of SFAS No. 141 immediately, and SFAS No.142
effective May 1, 2002. Furthermore, any goodwill and any intangible assets
determined to have indefinite useful lives that are acquired in a purchase
business combination completed after June 30, 2001 will not be amortized, but
will continue to be evaluated for impairment in accordance with the appropriate
pre-SFAS No. 142 accounting literature. Goodwill and intangible assets acquired
in business combinations completed before July 1, 2001 will continue to be
amortized prior to the adoption of SFAS No. 142. The Company does not believe
that adoption of SFAS No. 141 or SFAS No. 142 will have a material impact on its
financial position or results of operations.

On October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets". SFAS No. 144 supercedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." SFAS No. 144 applies to all long-lived assets (including
discontinued operations) and consequently amends Accounting Principles Board
Opinion No. 30. SFAS No. 144 develops one accounting model for long-lived assets
that are to be disposed of by sale. SFAS No. 144 requires that long-lived assets
that are to be disposed of by sale be measured at the lower of book value or
fair value less cost to sell. Additionally, SFAS No. 144 expands the scope of
discontinued operations to include all components of an entity with operations
that (1) can be distinguished from the rest of the entity and (2) will be
eliminated from the ongoing operations of the entity in a disposal transaction.
SFAS No. 144 is effective for the Company for all financial statements issued in
fiscal 2003. The Company does not believe that the adoption of SFAS No. 144 will
have a material impact on its financial position or results of operations.

Other Factors Affecting Operating Results

In addition to other information set forth in this report, the following risk
factors should be carefully considered in evaluating our business because these
factors may have a significant impact on our business, operating results and
financial condition.

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

Since inception, we have funded our business primarily through selling our
stock, not from cash generated from our business. We have incurred quarterly and
annual losses in each of the years since we were formed and we expect to
continue to incur quarterly and annual losses in the near term. We incurred
losses of $6.3 million and $15.8 million for the three and nine months ended
January 31, 2002, respectively, and $12.6 million and $41.6 million for the
three and nine months ended January 31, 2001, respectively. As of January 31,
2002 we had an accumulated deficit of approximately $202.9 million. 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 intangible
assets and stock compensation which will contribute to our net losses. We expect
to incur losses for the foreseeable future. We will need to generate significant

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<PAGE>

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.

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

We are still in the early stages of 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 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;

.. 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.

  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 collaborative manufacturing commerce
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 priorities;

.. variability in the mix of our license and professional services 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

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

Furthermore, we typically receive and fulfill most of our orders within the same
quarter, with the substantial majority of our orders typically received in the
last month of each fiscal quarter. Recently, because declining economic
conditions have caused our customers to delay and reduce spending on information
technology, our sales cycle has lengthened and orders are being pushed to the
last day of the quarter. As a result, we may not learn of revenue shortfalls
until late in a fiscal quarter, after which it is too late to adjust expenses
for that quarter.

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Moreover, recent adverse economic conditions in the United States, particularly
those related to the technology industry, may increase the likelihood that
customers will unexpectedly delay or cancel orders causing us to fail to achieve
anticipated revenues for the quarter, and we did experience such delays or
cancellations in the quarter ended January 31, 2002. A number of technology
companies, particularly software companies that, like Agile, sell
enterprise-wide software solutions, have recently announced that adverse
economic conditions have negatively affected their business and results of
operations. Any revenue shortfall below our expectations could have an immediate
and significant adverse effect on our results of operations.

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, we could 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.

In addition, we have accounted for options to purchase common stock granted to
consultants under variable plan accounting. The expenses associated with these
options may fluctuate significantly from quarter to quarter through fiscal 2006
if the price of our stock fluctuates and could cause our operating results to
vary significantly from quarter to quarter.

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.

  The Impact of Changes in Global Economic Conditions on Our Customers
  May Cause Us to Fail to Meet Expectations, Which Would Negatively
  Impact the Price of Our Stock

Our operating results can vary significantly based upon the impact of changes in
global economic conditions on our customers, and our business has been adversely
affected by the economic slowdown the industry is currently facing. More
specifically, the macro-economic environment that we are facing in fiscal 2002
is more uncertain than in recent periods and has materially and adversely
affected us and our operating results. The revenue growth and profitability of
our business depends on the overall demand for enterprise-level software
services, particularly in the areas in which we compete. Because our sales are
primarily to major corporate customers whose business fluctuates with general
economic and business conditions, a softening of demand for computer software
caused by a weakening economy may result in decreased revenues and lower growth
rates. We may be especially prone to this as a result of the relatively large
license transactions we have historically relied upon. Customers are deferring
and may continue to defer or reconsider purchasing products as a result of the
downturn in the general economy and reduction in information technology
spending. We expect this economic slowdown to continue to adversely impact our
business for at least the new few quarters and possibly significantly longer.
The adverse impacts from the slowdown include longer sales cycles, lower average
selling prices and reduced bookings and revenues.

A Decline in Revenues May Have a Disproportionate Impact on Operating Results
and Require Reductions in Our Operating Expense Levels.

Because expense levels are relatively fixed in the near term for a given quarter
and are based in part on expectations of our future revenues, any decline in our
revenues to a level that is below our expectations would have a
disproportionately adverse impact on our operating results for that quarter. If
revenues decline significantly, we may be required to incur restructuring
charges in connection with efforts to contain and reduce costs.

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

Our future financial performance will depend on customer acceptance of our
products 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. We
believe that revenues from our products, together with revenues from maintenance
and support contracts from our products 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.

  The Market Price of our Common Stock Has Been and May Continue to Be
  Volatile, Which Could Result in Substantial Losses for Individual
  Security Holders

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<PAGE>

The market price for our common stock has been, and is likely to continue to be,
highly volatile and subject to wide fluctuations in response to factors
including the following, some of which will be beyond our control:

.. actual or anticipated variations in our quarterly results of operations;

.. announcements of technological innovations, increased cost of operations or
new products or services by us or our competitors;

.. changes in financial estimates by securities analysts;

.. conditions or trends in the Internet and/or software industries;

.. changes in the economic performance and/or market valuations of other
providers of collaborative supply chain software;

.. volatility in the stock markets, particularly with respect to Internet and
software stocks, and decreases in the availability of capital for
Internet-related businesses;

.. announcements by us or our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital commitments;

.. additions or departures of key personnel; and

.. pending and potential litigation.

In the past, following periods of volatility in the market price of their
securities, many companies have been the subject of securities class action
litigation. If, in addition to the pending litigation discussed elsewhere in
which we are currently involved, we are involved in any additional securities
class action suits, it could result in further, significant costs and diversion
of our management's attention and resources, and could cause the prices of our
securities to fall.

  We May Need to Make Additional Future Acquisitions to Remain
  Competitive. Our Business Could be Adversely Affected as a Result of
  These Acquisitions

As part of our business strategy, we may in the future seek to acquire or invest
in additional businesses, joint venture arrangements, products or technologies
that we believe could complement or expand our business, augment our market
coverage, enhance our technical capabilities or that may otherwise offer growth
opportunities. We may encounter risks to our business during our integration of
acquisitions including:

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

.. unanticipated costs associated with acquisitions. For example, in fiscal 2001
we recorded a $55.2 million impairment charge relating to goodwill and other
intangible assets as a result of management's decision in February 2001 to
discontinue the further development of the products acquired in the DMI
acquisition;

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

.. adverse effects on our existing business relationships with our customers or
the customers of any acquisitions we make; and

.. inability to retain employees of acquisitions we make.

If we are unable to fully integrate an acquired business, product or technology
or train, retain and motivate personnel from the acquired business, we may not
receive the intended benefits of that acquisition. Future acquisitions could
cause us to issue dilutive equity securities, incur debt or contingent
liabilities, amortize goodwill and other intangibles, write off in-process
research and development and other acquisition-related expenses that could
seriously harm our financial condition and operating results.

Recent volatility in the stock markets has made it more difficult to value
acquired businesses where the consideration payable as the purchase price is
stock. We may reach agreement to buy another company using our stock as
consideration. Thereafter, prior to closing the acquisition the relative values
of the capital stock of the acquired company could change, causing the purchase
price to increase. As a result, in periods of market volatility as we are
experiencing, acquisitions are difficult to complete, and we may be unable to
complete beneficial acquisitions of complementary businesses or technologies at
an acceptable price.

  Implementation of Our Products By Large Customers May Be Complex and
  Customers Could Become Dissatisfied if Implementation of Our
  Products Proves Difficult,

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<PAGE>

  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, causing delays
in the deployment of our products. Because we are one of the first companies to
offer products designed for collaborative manufacturing commerce solutions, 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 subsequent 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, a limited
number of companies provide implementation services for our products. 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 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 all of
our needs 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.

We are implementing larger deployments of our products together with third
parties. If we are not successful with these joint deployments, we may incur
increased costs and customer dissatisfaction and may not achieve increased sales
and market acceptance of our products.

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 customers. 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 recognition of license revenue 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 Users

Our strategy requires that our software be highly scalable, or able to
accommodate substantial increases in the number of users. 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.

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  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. Competition for qualified personnel remains 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. Recent volatility in our stock price could
decrease our ability to hire and retain qualified personnel. 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 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. With the recent economic
uncertainties facing our customers, and the decline in the business that they
face, our sales cycle has lengthened. Customers are taking longer to evaluate
our product, and orders have been delayed or postponed, and in some cases
cancelled. Our collaborative manufacturing commerce 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, intensive marketing and sales
efforts may be necessary to educate prospective customers regarding the uses and
benefits of our products. Customers may take time to evaluate our products, and
with the reduction in overall information technology spending and reduced
budgets faced by many of our customers, we are finding that the evaluation
period and sales cycle of our products has lengthened further. The sale of our
products may be subject to delays due to the lengthy internal budgeting,
approval and evaluation processes of our customers. 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 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.

We Must Recruit and Retain Necessary Personnel to Effectively Develop and Sell
Products

Our success depends on our ability to attract and retain qualified and
experienced employees. Historically there has been substantial competition for
experienced engineering, sales and marketing personnel in our industry, and
competition may increase again once the economy recovers. The volatility and
current market price of our common stock may make it more difficult for us to
recruit, hire and retain qualified personnel, or cause us to incur higher salary
costs. 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 our products as our customers in the electronics and medical
device industries have been.

  The Market For Our Products Is Still Developing 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 still developing. Companies have
not traditionally automated collaborative manufacturing commerce solutions like
we offer throughout the supply chain. We cannot be certain that this market will
continue to develop and grow or that companies will elect

                                       23

<PAGE>

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. 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 highly
fragmented, rapidly changing and increasingly competitive. We expect competition
to continue to intensify, which could result in price reductions for our
products, reduced 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 resource planning software and supply-chain 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, 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.

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 Platforms, Which Could
  Inhibit Sales

                                       24

<PAGE>

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 such as Oracle. Any changes to these platforms
could require us to modify our products, and could cause us to delay releasing
product enhancements 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 products will operate with their
existing systems.

In addition, portions of our products are based upon a programming language that
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 or offers greater scalability, 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. As we extend the functionality of our products to run on additional
platforms, we may incur increased development costs and increased development
lifecycles.

  Terrorist attacks against the United States and related U.S.
  military action could adversely affect our business.

The September 11, 2001 terrorist attacks in the United States and resulting
military actions and future developments occurring in connection with these
events including, without limitation, actual or threatened future terrorist
attacks against the United States or other countries, may adversely affect our
business. Although it is difficult to predict the effect of these world events,
they could cause:

.. a further softening of U.S. and foreign economies that could cause sales of
our products and services to decline;

.. the reduced ability to do business in the ordinary course as it is customarily
conducted, resulting from a variety of factors, including changes or disruptions
in movement and sourcing of materials, goods and components or the possible
interruption in the flow of information or monies;

.. a lengthening of our sales cycles and implementations, which might result from
a number of factors, including among others changes in security measures for
passenger air travel and reductions in available commercial flights which may
make it more difficult for our sales force to schedule face-to-face meetings
with prospects and to negotiate and consummate transactions;

.. general uncertainty in the capital markets that could make it more difficult
for us to raise debt or equity financing in the future; and

.. possible reductions, delays or postponements, if any, in capital expenditures
as a result of changes in priorities and approval processes.

These outcomes, and other unforeseen outcomes of these world events, would
adversely affect our revenues, results of operations and financial condition.

  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 has been and is to
expand our sales and support organizations internationally. Therefore, we
believe that we will need to commit additional significant resources to expand
our international operations. We employ sales professionals in Europe and the
Asia-Pacific market. If we are unable to successfully expand further in 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.

Our international expansion will subject us 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;

.. the need to develop our software in multiple foreign languages;

                                       25

<PAGE>

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

.. greater difficulty and longer time 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 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 and lower product gross margins.

  Defects in Our Software Products Could Diminish Demand For Our Products

Our software products are complex and may contain 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 be sure 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.

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.

  We Are the Target of a Securities Class Action Complaint and are at
  Risk of Securities Class Action Litigation, Which Could Result in
  Substantial Costs and Divert Management Attention and Resources

On or around October 25, 2001, a stockholder class action complaint was filed in
the United States District Court for the Southern District of New York against
us, several of our officers and directors, and the underwriters of our initial
public offering,

                                       26

<PAGE>

Rennel Trading Corp. et al. v. Agile Software Corp. et al., Index No. 01-CV-9801
(SAS). The class action has been consolidated for pre-trial purposes with more
than one thousand other actions, filed against more than 345 other issuers of
securities, affiliated individuals, and dozens of underwriters of the securities
offerings in In Re Initial Public Offering Securities Litigation, 21 MC 92
(SAS).

The plaintiffs allege that the prospectus for the initial public offering of
Agile securities, incorporated in the Registration Statement on Form S-1 filed
with the Securities and Exchange Commission, was materially false and misleading
because it failed to disclose, among other things, that the underwriters had
made secret arrangements for aftermarket purchases of the securities, and made
arrangements for excessive and improper underwriters' compensation in the form
of increased brokerage commissions. The plaintiffs recently filed an amended
complaint alleging also that the prospectus for a secondary offering of Agile
securities, conducted on December 13, and incorporated into a Registration
Statement on Form S-1 filed with the Securities and Exchange Commission, also
was materially false and misleading for the same alleged reasons. The plaintiffs
allege that the Company's stock price was artificially inflated as a result of
the alleged underwriter practices. Plaintiffs attempt to state and claim
violations by the Company, the individuals and the underwriters of Section 11 of
the Securities Act of 1933, violations by the individual defendants and
underwriters of Section 12(a)(2) of the Securities Act, and violations by the
underwriters of Section 10(b) the Securities Exchange Act of 1934 and Rule 10b-5
promulgated thereunder by the Securities Exchange Commission. The litigation is
in an early phase, and no substantive rulings have been issued by the Court. We
intend to defend against the complaint vigorously. Securities class action
litigation could result in substantial costs and divert our management's
attention and resources, which could seriously 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 436 employees at January 31, 2001 to 486 employees at January 31, 2002. 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 continues 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 patent, 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. 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 patents, 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

                                       27

<PAGE>

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 acceptable at all.

  We Rely on Third Parties to Manage System and Network Environments
  for Hosted Customers

We rely on third parties to manage system and network environments running our
products and related solutions for customers requiring hosting. Services
provided by these third parties include managing the hosted servers, maintaining
communications lines and managing network data centers, which are the locations
where the Agile solutions reside. Since the hosting of the Agile solutions for
certain customers will depend on these third parties, it is possible that these
third parties may not be able to meet our and our customers' service level
requirements. Dissatisfaction or problems with our service or the service of the
third parties that host our solutions or delays or interruptions or other
problems with service due to mechanical failure, human error, security breaches,
power loss and other facility failures, natural disasters, sabotage, vandalism,
or other similar events could result in a reduction of business generated by the
hosted environment. In the event that we choose to use alternative hosting
sources, this may result in a temporary degradation of the service level for
hosting services that may be unacceptable to our customers.

  We Are Subject to Employer Payroll Taxes When Our Employees Exercise
  Their Stock Options That Could Adversely Affect Our Results of
  Operations

Employer payroll taxes are assessed on each employee's gain on the sale of stock
received upon exercise of options, which is the difference between the price of
our common stock on the date of exercise and the exercise price. During a
particular period, these payroll taxes could be material. These employer payroll
taxes are recorded as an expense and are assessed at tax rates that vary
depending upon the employee's taxing jurisdiction in the period such options are
exercised based on actual gains realized by employees. However, because we are
unable to predict how many stock options will be exercised, at what price and in
which country during any particular period, we cannot predict the amount, if
any, of employer payroll expense that will be recorded in a future period or the
impact on our future financial results.

  Some of Our Customers are Small Emerging Growth Companies that May
  Represent Credit Risks

We have expanded our customer base to include licenses to small emerging growth
companies. Many of these companies have limited operating histories, are
operating at a loss and have limited access to capital. With the significant
slowdown in U.S. economic growth in the past months and uncertainty relating to
the prospects for near-term U.S. economic growth, some of these customers may
represent a credit risk. If our customers experience financial difficulties or
fail to experience commercial success, we may have difficulty collecting on our
accounts.

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 collaboration and 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 for collaboration for 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 collaborative manufacturing commerce and reducing the
demand for our products;

.. concerns over the secure transmission of confidential information over public
networks and general disruption could inhibit the growth of the Internet as a
means of conducting commercial transactions; or

.. concerns about third parties using the Internet to create interference with
the use of our products over the Internet.

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<PAGE>

  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.

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.

  Provisions Contained in Our Charter Documents May Delay or Prevent a
  Change in Our Control

Provisions of our Delaware certificate of incorporation and bylaws and of
Delaware law could make it more difficult for a third party to acquire us, even
if a change in control would be beneficial to our stockholders. These provisions
also may prevent changes in our management. We are subject to the provision of
Section 203 of the Delaware General Corporation Law, which restricts certain
business combinations with interested stockholders. The combination of these
provisions may inhibit a non-negotiated merger or other business combination.

  We Have Adopted Certain Anti-Takeover Measures That May Make it More
  Difficult For a Third Party to Acquire Us

Our board of directors has the authority to issue up to 10,000,000 shares of
preferred stock and to determine the price, rights, preferences and privileges
of those shares without any further vote or action by the stockholders. The
rights of the holders of common stock will be subject to, and may be adversely
affected by, the rights of the holders of any preferred stock that may be issued
in the future. The issuance of shares of preferred stock, while potentially
providing desirable flexibility in connection with possible acquisitions and for
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of our outstanding voting stock. We have no
present intentions to issue shares of preferred stock. Further, on March 2001,
our board of directors adopted a preferred stock purchase rights plan intended
to guard against certain takeover tactics. The adoption of this plan was not in
response to any proposal to acquire us, and the board is not aware of any such
effort. The existence of this plan could also have the effect of making it more
difficult for a third party to acquire a majority of our outstanding voting
stock. In addition, certain provisions of our certificate of incorporation may
have the effect of delaying or preventing a change of control, which could
adversely affect the market price of our common stock.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Currency Risk

We develop products in the United States and market our products in North
America, and to a lesser extent in Europe and Asia. 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 nearly
all of our revenue is currently denominated in U.S. dollars, an increase in the
value of the U.S. dollar relative to foreign currencies could make our products
less competitive in foreign markets. Although we will continue to monitor our
exposure to currency fluctuations, and, where appropriate, may use financial
hedging techniques in the future to minimize the effect of these fluctuations,
we cannot assure you that exchange rate fluctuations will not harm our business
in the future.

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<PAGE>

Interest Rate Risk

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. The primary objective of our investment activities is to
preserve principal while at the same time maximizing the income we receive from
our investments without significantly increasing risk. Some of the securities
that we have invested in may be subject to market risk. This means that a change
in prevailing interest rates may cause the principal amount of the investment to
fluctuate. For example, if we hold a security that was issued with a fixed
interest rate at the then-prevailing rate and the prevailing interest rate later
rises, the principal amount of our investment will probably decline. To minimize
this risk, we maintain the majority of our portfolio of cash in money market
funds and short-term investments classified as "available for sale." In general,
money market funds and short-term investments are not subject to market risk
because the interest paid on such funds fluctuates with the prevailing interest
rate. Because some of our debt arrangements are based on variable rates of
interest, our interest expense is sensitive to changes in the general level of
U.S. interest rates. Since these obligations represent a small percentage of our
total capitalization, we believe that there is not a material risk exposure.

The table below represents principal (or notional) amounts and related
weighted-average interest rates of our investment portfolio by year of maturity.

(in thousands, except              Maturing
interest rates)                     within
                                  12 months      Thereafter     Total
                                  ---------      ----------   ---------

Cash equivalents                   $ 39,943          -         $ 39,943
Average interest rate                  1.89%         -             1.89%
Investments                        $177,726          -         $177,726
Average interest rate                  3.30%         -             3.30%
Total investment securities        $217,669          -         $217,669


Other Investments

We invest in equity instruments of privately-held companies for business and
strategic purposes. These investments are included in other long-term assets and
are accounted for under the cost method when ownership is less than 20% and we
do not have the ability to exercise significant influence over operations. As of
January 31, 2002, we had $3.5 million invested in privately-held companies, some
of which are business partners. For these investments, our policy is to
regularly review the assumptions underlying the operating performance and cash
flow forecasts in assessing the carrying values. We identify and record
impairment losses when events and circumstances indicate that such assets might
be impaired.

During the three months ended July 31, 2001, we determined that these
investments had incurred a decline in value that was other-than-temporary and
reduced their carrying amounts to estimated fair value by a charge of $1.4
million to results of operations.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

On or around October 25, 2001, a stockholder class action complaint was filed in
the United States District Court for the Southern District of New York against
us, several of our officers and directors, and the underwriters of our initial
public offering, Rennel Trading Corp. et al. v. Agile Software Corp. et al.,
Index No. 01-CV-9801 (SAS). The class action has been consolidated for pre-trial
purposes with more than one thousand other actions, filed against more than 345
other issuers of securities, affiliated individuals, and dozens of underwriters
of the securities offerings in In Re Initial Public Offering Securities
Litigation, 21 MC 92 (SAS). The plaintiffs allege that the prospectus for the
initial public offering of Agile securities, incorporated in the Registration
Statement on Form S-1 filed with the Securities and Exchange Commission, was
materially false and misleading because it failed to disclose, among other
things, that the underwriters had made secret arrangements for aftermarket
purchases of the securities, and made arrangements for excessive and improper
underwriters' compensation in the form of increased brokerage commissions. The
plaintiffs recently filed an amended complaint alleging also that the prospectus
for a secondary offering of Agile securities, conducted on December 13, and
incorporated into a Registration Statement on Form S-1 filed with the Securities
and Exchange Commission, also was materially false and misleading for the same
alleged reasons. The plaintiffs allege that the Company's stock price was
artificially inflated as a result of the alleged underwriter practices.
Plaintiffs attempt to state and claim violations by the Company, the individuals
and the underwriters of Section 11 of the Securities Act of 1933, violations by
the individual defendants and underwriters of Section 12(a)(2) of the Securities
Act, and violations by the underwriters of Section 10(b) the Securities Exchange
Act of 1934 and Rule 10b-5 promulgated thereunder by the Securities Exchange
Commission. The

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<PAGE>

litigation is in an early phase, and no substantive rulings have been issued by
the Court. We believe that we have meritorious defenses against these actions
and we intend to vigorously defend them.

We are also subject to various other claims and legal actions arising in the
ordinary course of business. In the opinion of management, after consultation
with legal counsel, the ultimate disposition of these matters is not expected to
have a material effect on our business, financial condition or results of
operations.

Item 2. Changes in Securities and Use of Proceeds.

(a) Modification of Constituent Instruments

Not applicable.

(b) Change in Rights

Not applicable.

(c) Issuances of Securities

Not applicable.

Item 3. Defaults Upon Senior Securities.

Not applicable.

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

Not applicable.

Item 5. Other Information.

Not applicable.

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

(a) Exhibits.

Not applicable.

(b) Reports on Form 8-K

No reports on Form 8-K were filed for the three months ended January 31, 2002.

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<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: March 13, 2002                      /s/ Richard J. Browne
                                          -------------------------------------
                                          By: Richard J. Browne
                                          Vice President, Finance
                                          and Interim Chief Financial Officer
                                          (Principal Accounting Officer)

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