UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 6-K REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13A-16 OR 15D-16 OF THE SECURITIES EXCHANGE ACT OF 1934 For the month of February, 2001 BROKAT AKTIENGESELLSCHAFT (Exact name of registrant as specified in its charter) Industriestrasse 3 D-70565 Stuttgart Federal Republic of Germany (Address of principal executive offices) Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F. Form 20-F [X] Form 40-F [ ] Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934. Yes [ ] No [X] If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-_______. On February 21, 2001, Brokat AG issued the press releases attached as Exhibits 99.1 and 99.2, which are incorporated by reference in this Form 6-K. Exhibit No. Description 99.1 Press release dated February 21, 2001 99.2 Press release dated February 21, 2001 The U.S. SEC encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. This Form 6-K or the exhibits to this Form 6-K contain such "forward-looking statements." Words such as "anticipate," "estimate," "expects," "projects," "intends," "plans," "believes" and words and terms of similar substance used in connection with any discussion of future operating or financial performance, or future transactions, identify forward-looking statements. All forward-looking statements are based on Brokat management's present expectations of future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Stockholders are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date they are made. Brokat is under no obligation, and expressly disclaims any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. For additional information about factors that could affect Brokat's future financial and operating results, see Brokat's other filings with the Securities and Exchange Commission, including the Form 6-K filed with the Commission on November 17, 2000 and the Registration Statement on Form F-4 filed with the Commission on September 8, 2000. This Form 6-K Report of Foreign Issuer is incorporated by reference into the Registration Statements on Form S-8 of Brokat (Registration Nos. 333-51806, 333-47866 and 333-45594). 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BROKAT AKTIENGESELLSCHAFT By: /s/ Stefan Roever --------------------------------------- Name: Stefan Roever Title: Chief Executive Officer Date: February 22, 2001 3

Page ---- BROKAT Aktiengesellschaft Report of Independent Public Accountants................................... F-3 Audited Financial Statements Consolidated Balance Sheets as of December 31, 1999, June 30, 1999, and June 30, 1998........................................................... F-4 Consolidated Statements of Operations for the six months ended December 31, 1999 and for the years ended June 30, 1999, June 30, 1998, and June 30, 1997................................................................ F-5 Consolidated Statements of Changes in Shareholders' Equity for the six months ended December 31, 1999 and for the three years ended June 30, 1999.................................................................... F-6 Consolidated Statements of Cash Flows for the six months ended December 31, 1999 and for the years ended June 30, 1999, June 30, 1998, and June 30, 1997................................................................ F-7 Notes to the Consolidated Financial Statements........................... F-8 Unaudited Financial Statements Consolidated Balance Sheets as of June 30, 2000.......................... F-38 Consolidated Statements of Cash Flows for the six months ended June 30, 2000 and June 30, 1999.................................................. F-39 Consolidated Statements of Operations for the three months ended June 30, 2000 and 1999 and for six months ended June 30, 2000 and 1999........... F-40 Notes to Condensed Consolidated Financial Statements..................... F-41 Transaction Software Technologies, Inc. Report of Independent Public Accountants................................... F-45 Consolidated Balance Sheets as of September 30, 1998 and 1997.............. F-46 Consolidated Statements of Operations for the years ended September 30, 1998 and 1997............................................................. F-47 Consolidated Statements in Shareholders' Equity for the years ended September 30, 1998 and 1997............................................... F-48 Consolidated Statements of Cash Flows for the years ended September 30, 1998 and 1997............................................................. F-49 Notes to the Financial Statements.......................................... F-50 MeTechnology AG Reports of Independent Public Accountants.................................. F-57 Consolidated Balance Sheets as of December 31, 1998 and 1997............... F-58 Consolidated Statements of Operations for the years ended December 31, 1998 and 1997.................................................................. F-59 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1998 and 1997.......................................... F-60 Consolidated Statements of Cash Flows for the years ended December 31, 1998 and 1997.................................................................. F-61 Notes to Consolidated Financial Statements................................. F-62

Page ----- Blaze Software, Inc. Report of Independent Accountants........................................ F-71 Audited Financial Statements Consolidated Balance Sheets as of March 31, 2000 and 1999.............. F-72 Consolidated Statements of Operations for the years ended March 31, 2000, 1999 and 1998................................................... F-73 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended March 31, 2000, 1999 and 1998................................... F-74 Consolidated Statements of Cash Flows for the years ended March 31, 2000, 1999 and 1998................................................... F-76 Notes to the Consolidated Financial Statements......................... F-77 Unaudited Financial Statements Condensed Consolidated Balance Sheets as of June 30, 2000 and March 31, 2000.................................................................. F-95 Condensed Consolidated Statements of Operations for the three months ended June 30, 2000 and 1999.......................................... F-96 Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2000 and 1999.......................................... F-97 Notes to Condensed Consolidated Financial Statements................... F-98 GemStone Systems, Inc. Report of Independent Auditors........................................... F-102 Consolidated Balance Sheets as of December 31, 1999 and 1998 and June 30, 2000.................................................................... F-103 Consolidated Statements of Operations for the years ended December 31, 1999 and 1998 and the six months ended June 30, 2000 and 1999........... F-104 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1999 and 1998 and the six months ended June 30, 2000.................................................................... F-105 Consolidated Statements of Cash Flows for the years ended December 31, 1999 and 1998 and the six months ended June 30, 2000 and 1999........... F-106 Notes to the Consolidated Financial Statements........................... F-107 Unauditied pro forma financial information............................... F-116

June 30, ---------------- December 31, Note 1998 1999 1999 ---- ------- ------- ------------ (DM in thousands) ASSETS Current assets: Cash and cash equivalents................. 1,832 7,141 6,963 Accounts receivable (less allowance for doubtful accounts of DM 1,575,000, DM 2,270,000 and DM 283,000 at December 31, 1999, June 30, 1999, and June 30, 1998, respectively)...................... 10,716 35,076 36,187 Cost and estimated earnings in excess of billings on uncompleted contracts........ (4) 1,806 2,499 1,965 Advances on purchase commitments.......... (19) 0 0 3,000 Prepaid expenses and other current assets................................... (5) 1,015 3,923 6,795 ------- ------- -------- Total current assets...................... 15,369 48,639 54,910 ------- ------- -------- Property and equipment, at cost............ Computer equipment......................... 3,941 9,696 12,813 Furniture and fixtures..................... 1,022 4,891 5,296 Less: accumulated amortization............. (1,502) (6,264) (8,607) ------- ------- -------- 3,461 8,323 9,502 ------- ------- -------- Goodwill................................... (6) 0 212,948 188,887 Other intangible assets.................... (6) 496 8,033 8,448 Less: accumulated amortization............. (6) (223) (4,320) (20,547) ------- ------- -------- 273 216,661 176,788 ------- ------- -------- Investments in associated companies........ (3) 0 0 4,139 Other long-term investments................ (3) 0 0 1,013 Deferred income taxes...................... (14) 577 1,447 2,333 ------- ------- -------- Total assets.............................. 19,680 275,070 248,685 ======= ======= ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt to banks.................. (7) 0 3,226 42,271 Other short-term debt..................... (8) 0 3,438 5,665 Accounts payable, trade................... 2,322 8,939 5,043 Payroll-related accruals.................. 1,935 4,229 5,296 Tax-related accruals...................... 501 847 2,150 Billings in excess of cost and estimated earnings on uncompleted contracts........ (4) 970 857 1,818 Other accrued expenses and current liabilities.............................. (9) 1,499 5,962 6,264 Deferred income........................... 1,107 3,430 3,579 Deferred income taxes..................... (14) 577 1,447 2,377 ------- ------- -------- Total current liabilities................. 8,911 32,375 74,463 ======= ======= ======== Long-term debt to banks.................... (10) 2,000 2,000 2,000 Long-term debt to shareholders............. (11) 4,555 4,000 0 Other long-term debt....................... (12) 7,005 18,356 1,850 ------- ------- -------- Total liabilities......................... 22,471 56,731 78,313 ------- ------- -------- Minority interest.......................... 0 400 426 ------- ------- -------- Shareholders' equity: (15) Common Stock.............................. 0 44,748 52,512 GmbH Capital.............................. 158 0 0 Additional paid-in capital................ 10,567 271,751 343,260 Accumulated deficit....................... (13,549) (57,587) (109,064) Deferred compensation..................... (16) 0 (39,261) (113,376) Accumulated other comprehensive income (loss)................................... 33 (1,712) (3,386) ------- ------- -------- Total shareholders' equity................ (2,791) 217,939 169,946 ------- ------- -------- Total liabilities and shareholders' equity................................... 19,680 275,070 248,685 ======= ======= ========

Six Months Year Ended Ended June 30, December 31, Note 1997 1998 1999 1999 -------- --------- --------------------------- ---------------- (DM in thousands, except share data and per share data) Revenue................. (18) 12,101 29,571 62,487 51,287 Cost of Sales (exclusive of DM 4,298.0 thousand and DM 6,794.0 thousand of non-cash charges from stock option grants in the six months ended December 31, 1999 and the year ended June 30, 1999)... (7,971) (15,493) (31,325) (22,937) --------- ---------- ------------- ------------- Gross profit............ 4,130 14,078 31,162 28,350 --------- ---------- ------------- ------------- Selling expenses (exclusive of DM 3,524.0 thousand and DM 6,070.0 thousand of non-cash charges from stock option grants in the six months ended December 31, 1999 and the year ended June 30, 1999).................. (3,118) (16,636) (38,848) (27,714) General and administrative expenses (exclusive of DM 1,552.0 thousand and DM 1,580.0 thousand of non-cash charges from stock option grants in the six months ended December 31, 1999, and the year ended June 30, 1999).................. (1,332) (4,305) (10,639) (12,643) Research and development expenses (exclusive of DM 2,866.0 thousand and DM 1,896.0 thousand of non-cash charges from stock option grants in the six months ended December 31, 1999, and the year ended June 30, 1999).................. (1,450) (4,917) (8,733) (12,769) Amortization of goodwill and other intangible assets from acquisitions........... 0 0 (3,686) (15,797) Non-cash charges associated with stock option grants.......... (16) 0 0 (16,340) (12,240) --------- ---------- ------------- ------------- Total operating expenses............... (5,900) (25,858) (78,246) (81,163) --------- ---------- ------------- ------------- Operating loss.......... (1,770) (11,780) (47,084) (52,813) --------- ---------- ------------- ------------- Interest income......... 5 150 1,528 35 Interest expense........ (157) (454) (960) (867) Other, net.............. 198 239 2,565 2,298 --------- ---------- ------------- ------------- Loss before income taxes and extraordinary items.................. (1,724) (11,845) (43,951) (51,347) --------- ---------- ------------- ------------- Income tax benefit (expense).............. (14) 10 0 (113) (104) Minority interest....... 0 0 90 (26) --------- ---------- ------------- ------------- Loss before extraordinary items.... (1,714) (11,845) (43,974) (51,477) Extraordinary loss on early extinguishment of debt................... 0 0 (64) 0 --------- ---------- ------------- ------------- Net loss................ (1,714) (11,845) (44,038) (51,477) ========= ========== ============= ============= Basic and diluted loss per share: Loss before extraordinary items.... (2.23) (1.92) Extraordinary loss...... (0.01) 0.00 Net loss................ (2.24) (1.92) ============= ============= Weighted average number of common shares outstanding............ 19,694,650 26,848,773 ============= =============

Other Compre- Total Compre- Preferred Stock Common Stock Additional Accumulated hensive Stock- hensive ------------------ ----------------- GMBH Paid-in Earnings Deferred Income holders Income Shares Amount Shares Amount Capital Capital (Deficit) Compensation (Loss) Equity (Loss) --------- ------- ---------- ------ ------- ---------- ----------- ------------ ------- ------- ------- (DM in thousands, except share data) Balance, June 30, 1996........ 0 0 0 0 62 0 107 0 0 169 Dividends....... 0 0 0 0 0 0 (97) 0 0 (97) Capital increases....... 0 0 0 0 65 591 0 0 0 656 Net income...... 0 0 0 0 0 0 (1,714) 0 0 (1,714) (1,714) ------- Comprehensive loss............ (1,714) --------- ----- ---------- ------ ---- ------- -------- -------- ------ ------- ------- Balance, June 30, 1997........ 0 0 0 0 127 591 (1,704) 0 0 (986) --------- ----- ---------- ------ ---- ------- -------- -------- ------ ------- Capital increases....... 0 0 0 0 31 9,976 0 0 0 10,007 Net loss........ 0 0 0 0 0 0 (11,845) 0 0 (11,845) (11,845) Foreign currency translation adjustment...... 0 0 0 0 0 0 0 0 33 33 33 ------- Comprehensive loss............ (11,812) --------- ----- ---------- ------ ---- ------- -------- -------- ------ ------- ------- Balance, June 30, 1998........ 0 0 0 0 158 10,567 (13,549) 0 33 (2,791) --------- ----- ---------- ------ ---- ------- -------- -------- ------ ------- Shares issued in connection with the conversion from GmbH to AG.............. 30,780 51 64,200 107 (158) 0 0 0 0 0 Conversion of preferred stock to common stock........... (30,780) (51) 30,780 51 0 0 0 0 0 0 Shares issued upon conversion of debt......... 0 0 1,419 2 0 7,484 0 0 0 7,486 Shares issued in IPO, net of issuance cost... 0 0 24,000,000 40,000 0 34,066 0 0 0 74,066 Shares issued after IPO....... 0 0 420,000 700 0 8,260 0 0 0 8,960 Shares issued for acquisition of MeTechnology.... 0 0 2,332,374 3,888 0 155,773 0 0 0 159,661 Non-cash compensation from issuance of stock options to employees....... 0 0 0 0 0 55,601 0 (55,601) 0 0 Amortization of deferred stock option compensation.... 0 0 0 0 0 0 0 16,340 0 16,340 Net loss........ 0 0 0 0 0 0 (44,038) 0 0 (44,038) (44,038) Foreign currency translation adjustment...... 0 0 0 0 0 0 0 0 (1,745) (1,745) (1,745) ------- Comprehensive loss............ (45,783) --------- ----- ---------- ------ ---- ------- -------- -------- ------ ------- ------- Balance, June 30, 1999........ 0 0 26,848,773 44,748 0 271,751 (57,587) (39,261) (1,712) 217,939 --------- ----- ---------- ------ ---- ------- -------- -------- ------ ------- Adjustment to reflect change in par value.... 0 0 0 7,764 0 (7,764) 0 0 0 0 Change in deferred compensation for variable stock options to employees on previous stock option grants... 0 0 0 0 0 35,431 0 (35,431) 0 0 Non-cash compensation on stock options granted to employees under ME-Plan......... 0 0 0 0 0 0 0 (7,082) 0 (7,082) Non-cash compensation from issuance of stock options to employees under 1999 Plan....... 0 0 0 0 0 43,842 0 (43,842) 0 0 Amortization of deferred stock option compensation.... 0 0 0 0 0 0 0 12,240 0 12,240 Net loss........ 0 0 0 0 0 0 (51,477) 0 0 (51,477) (51,477) Foreign currency translation adjustment...... 0 0 0 0 0 0 0 0 (1,674) (1,674) (1,674) ------- Comprehensive loss............ (53,151) --------- ----- ---------- ------ ---- ------- -------- -------- ------ ------- ------- Balance, December 31, 1999............ 0 0 26,848,773 52,512 0 343,260 (109,064) (113,376) (3,386) 169,946 ========= ===== ========== ====== ==== ======= ======== ======== ====== =======

Six Months Year Ended June 30, Ended ------------------------ December 31, 1997 1998 1999 1999 ------ ------- ------- ---------------- (DM in thousands) Cash flow from Operating Activities: Net loss......................... (1,714) (11,845) (44,038) (51,477) Adjustments to reconcile net loss to net cash used in operating activities: Extraordinary loss............... 0 0 64 0 Minority interest................ 0 0 (90) 26 Depreciation and amortization.... 734 1,374 6,705 18,892 Gain on disposal of property and equipment....................... 29 (1) (2) 0 Deferred income taxes............ (10) 0 0 44 Non-cash charges associated with stock option grants............. 0 0 16,340 12,240 Changes in operating assets and liabilities: Accounts receivable............. (3,113) (6,960) (23,377) (1,111) Net changes in cost and estimated earnings in excess of billings....................... (1,576) 740 3,718 1,495 Prepaid expenses and other current assets................. (148) (833) (1,442) (5,872) Accounts payable, trade......... 1,504 613 4,750 (3,896) Payroll and tax related accruals....................... 572 1,153 2,050 2,370 Other accrued expenses and liabilities.................... 348 1,363 (564) (340) Deferred income................. 160 947 200 149 ------ ------- ------- ------- Net cash used in operating activities...................... (3,214) (13,449) (35,686) (27,480) ------ ------- ------- ------- Cash flow from Investing Activities: Acquisitions of intangible assets.......................... (282) (159) (5,628) (443) Purchases of property and equipment....................... (1,466) (3,710) (5,207) (3,891) Purchases of investments......... 0 0 0 (4,526) Acquisitions, net of cash acquired........................ 0 0 (29,431) (30) Proceeds from sale of property and equipment................... 4 106 293 0 ------ ------- ------- ------- Net cash used in investing activities..................... (1,744) (3,763) (39,973) (8,890) ------ ------- ------- ------- Cash flow from Financing Activities: Net change in short-term debt.... 2,995 (1,129) 0 37,746 Proceeds from debt issuances..... 1,516 10,130 0 0 Issuances of share capital....... 551 10,007 83,025 0 Dividends paid................... (97) 0 0 0 ------ ------- ------- ------- Net cash provided by financing activities..................... 4,965 19,008 83,025 37,746 ------ ------- ------- ------- Effect of Exchange Rate Differences on Cash.............. 0 20 (2,057) (1,554) Increase (decrease) in Cash and Cash Equivalents................. 7 1,816 5,309 (178) Cash and Cash Equivalents: At the beginning of the period... 9 16 1,832 7,141 ------ ------- ------- ------- At the end of the period......... 16 1,832 7,141 6,963 ====== ======= ======= ======= Supplemental Disclosure of Cash flow Information: Cash paid for: Interest......................... 105 330 930 636 Income taxes..................... 9 0 0 240

Cash received/(expended) --------------------------------------------------- Existing New Bank Shareholders Shareholders Company ----------- ------------ ------------ ---------- Sale of rights to Paribas................ (67,500,000) 67,500,000 -- -- Exercise of rights by Paribas................ (12,500,000) -- -- 12,500,000 Exercise of rights by Existing Shareholders.. -- (67,500,000) -- 67,500,000 Sale of shares to new shareholders........... 80,000,0000 -- (80,000,000) -- ----------- ----------- ----------- ---------- -- -- (80,000,000) 80,000,000 =========== =========== =========== ==========

Six Months Ended December 31, -------------------------------- 1998 1999 --------------- -------------- (Unaudited) (Audited) (DM in thousands, except per share data) Revenue................................. 19,671 51,287 Cost of Sales........................... (10,371) (22,937) -------------- -------------- Gross Profit............................ 9,300 28,350 -------------- -------------- Other costs and expenses................ (21,745) (79,697) -------------- -------------- Loss before income taxes................ (12,445) (51,347) -------------- -------------- Income taxes............................ 0 (104) Minority Interest....................... 0 (26) Extraordinary loss on early extinguishment of debt................. (64) 0 -------------- -------------- Net loss................................ (12,509) (51,477) ============== ============== Basic and diluted loss per share before extraordinary items.................... (0.63) (1.92) ============== ============== Basic and diluted loss per share........ (0.63) (1.92) ============== ==============

Six months ended Fiscal year ended Fiscal year ended December 31, 1999 June 30, 1999 June 30, 1998 ------------------ ------------------ ------------------ KDM % of rev. KDM % of rev. KDM % of rev. ------- --------- ------- --------- ------- --------- Revenue Software licensing fees................. 19,141 37.3% 21,056 33.7% 7,231 24.5% Professional services fees................. 22,630 44.1% 21,913 35.1% 16,529 55.9% Customer support fees................. 5,709 11.1% 5,970 9.6% 1,397 4.7% Product sales......... 3,558 6.9% 13,492 21.6% 4,414 14.9% Other fees............ 249 0.5% 56 0.1% 0.0% ------- -------- ------- ------- ------- ------- Total revenue....... 51,287 100.0% 62,487 100.0% 29,571 100.0% ======= ======== ======= ======= ======= ======= Cost of sales Cost of software licensing fees....... (200) (1.0)% (200) (0.9)% (100) (1.4)% Cost of professional services fees........ (15,510) (68.5)% (14,770) (67.4)% (10,467) (63.3)% Cost of customer support fees......... (3,510) (61.5)% (4,198) (70.3)% (961) (68.8)% Cost of product sales................ (3,717) (104.5)% (12,157) (90.1)% (3,965) (89.8)% Cost of other fees.... 0 0.0% 0 0.0% ------- -------- ------- ------- ------- ------- Total cost of sales.............. (22,937) (44.7)% (31,325) (50.1)% (15,493) (52.4)% ======= ======== ======= ======= ======= ======= Gross Profit Gross Profit from software licensing fees................. 18,941 99.0% 20,856 99.1% 7,131 98.6% Gross Profit from professional service fees................. 7,120 31.5% 7,143 32.6% 6,062 36.7% Gross Profit from customer support fees................. 2,199 38.5% 1,772 29.7% 436 31.2% Gross Profit from product sales........ (159) (4.5)% 1,335 9.9% 449 10.2% Gross Profit from other fees........... 249 100.0% 56 100.0% ------- -------- ------- ------- ------- ------- Total gross profits............ 28,350 55.3% 31,162 49.9% 14,078 47.6% ======= ======== ======= ======= ======= =======

DM (in thousands) -------------- Current assets and other tangible assets...................... 5,345 Liabilities assumed........................................... (6,703) Customer list................................................. 4,015 Goodwill...................................................... 31,969 ------ 34,626 ======

DM (in thousands) -------------- Current assets and other tangible assets...................... 8,876 Liabilities assumed........................................... (30,324) Customer list................................................. 1,307 Goodwill...................................................... 180,980 ------- 160,839 =======

June 30, 1998 June 30, 1999 ------------- ------------- (unaudited) (unaudited) (DM in thousands, except per share data) Pro forma revenue.............................. 39,731 71,653 Pro forma net loss............................. (50,721) (94,887) Pro forma loss per share before extraordinary items......................................... -- (4.81) Pro forma loss per share....................... -- (4.82)

Year Ended Six Months June 30, Ended --------------- December 31, 1998 1999 1999 ------ ------- ------------ (DM in thousands) Costs incurred on uncompleted contracts........ 1,930 6,613 5,379 Estimated earnings............................. 3,147 8,082 6,161 ------ ------- ------- 5,077 14,695 11,540 ------ ------- ------- Less billings to date.......................... (4,241) (13,053) (11,393) ------ ------- ------- 836 1,642 147 ====== ======= =======

Year Ended Six Months June 30, Ended ------------ December 31, 1998 1999 1999 ----- ----- ------------ (DM in thousands) Costs and estimated earnings in excess of billings on uncompleted contracts............. 1,806 2,499 1,965 Billings in excess of cost and estimated earnings on uncompleted contracts............. (970) (857) (1,818) ----- ----- ------ 836 1,642 147 ===== ===== ======

Year Ended Six Months June 30, Ended ----------- December 31, 1998 1999 1999 ----- ----- ------------ (DM in thousands) Prepaid taxes....................................... 204 704 2,130 Deferred charges.................................... 413 478 917 Other............................................... 398 2,741 3,748 ----- ----- ----- 1,015 3,923 6,795 ===== ===== =====

Year Ended Six Months June 30, Ended ------------ December 31, 1998 1999 1999 ---- ------- ------------ (DM in thousands) Goodwill........................................... 0 209,406 170,095 Customer list...................................... 0 5,181 4,649 Software........................................... 273 2,074 2,044 --- ------- ------- 273 216,661 176,788 === ======= =======

Useful life --------- Goodwill........................................................... 7 years Customer list...................................................... 5 years Software........................................................... 3-5 years

Year Ended Six Months June 30, Ended ---------- December 31, 1998 1999 1999 ---- ----- ------------ (DM in thousands) tbg.................................................. 0 0 4,000 Short-term loan...................................... 0 1,773 0 Debt from purchase price commitments................. 0 1,665 1,665 ---- ----- ----- 0 3,438 5,665 ==== ===== =====

Year Ended Six Months June 30, Ended ----------- December 31, 1998 1999 1999 ----- ----- ------------ (DM in thousands) tbg................................................ 4,000 4,000 0 AET (at present value, imputed interest rate 5%)... 420 0 0 Other.............................................. 135 0 0 ----- ----- ---- 4,555 4,000 0 ===== ===== ====

Year Ended Six Months June 30, Ended ------------ December 31, 1998 1999 1999 ----- ------ ------------ (DM in thousands) Debt from purchase price commitment.............. 0 1,451 1,529 Silent participations............................ 0 9,950 0 Junior loan...................................... 0 3,530 0 Convertible debt................................. 7,000 3,425 0 Other (at present value, due March 2001, imputed interest rate 5%)............................... 5 0 321 ----- ------ ----- 7,005 18,356 1,850 ===== ====== =====

Year Ended June 30, Six Months Ended ------------------------------- December 31, 1998 1999 1999 --------------- --------------- ------------------- Carrying Fair Carrying Fair Carrying Fair Amount Value Amount Value Amount Value -------- ------ -------- ------ --------- -------- (DM in thousands) Financial Instruments Assets Long-term investments... 0 0 0 0 1,013 1,013 Liabilities Long-term debt.......... 13,560 17,362 24,356 28,271 3,850 3,850

Year Ended June 30, Six Months Ended ----------------------- December 31, 1997 1998 1999 1999 ------ ------ ------- ---------------- (DM in thousands) Current taxes Germany........................... 0 0 0 0 Foreign........................... 0 0 (113) (60) ------ ------ ------- ---- 0 0 (113) (60) ------ ------ ------- ---- Deferred taxes Germany........................... 0 0 0 0 Foreign........................... 10 0 0 (44) ------ ------ ------- ---- 10 0 0 (44) ------ ------ ------- ---- 10 0 (113) (104) ====== ====== ======= ====

Six Months Year Ended June 30, Ended ----------------------- December 31, 1997 1998 1999 1999 ------ ------ -------- ------------ (DM in thousands) Expected benefit for corporate income taxes............................... 996 6,763 23,208 27,074 Foreign tax rate differential........ 0 (898) (4,743) (1,520) Changes in valuation allowance on deferred tax assets................. (809) 7,955 (10,243) (12,848) Non-tax-deductible stock option expenses............................ 0 0 (8,611) (6,450) Amortization of non-tax-deductible goodwill............................ 0 0 (1,943) (8,325) Income not subject to tax............ 0 1,857 488 0 Deferred cost related to capital issuance............................ 0 0 2,845 691 Other................................ (177) 233 (1,114) 1,274 ----- ------ -------- ------- Actual benefit (provision) for income taxes............................... 10 0 (113) (104) ===== ====== ======== =======

Six Months Year Ended June 30, Ended --------------------- December 31, 1998 1999 1999 --------- ---------- ------------ (DM in thousands) Tax loss carryforwards................. 7,361 30,325 42,752 Unrecognized losses on foreign currency transactions.......................... 123 0 0 Inventories............................ 0 0 1,200 Convertible debt....................... 1,857 0 0 Valuation allowance.................... (8,764) (28,616) (41,472) --------- ---------- ------- Total deferred tax assets.............. 577 1,709 2,480 --------- ---------- ------- Other intangible assets................ 0 262 190 Unrecognized gains on foreign currency transactions.......................... 0 1,147 2,334 Inventories............................ 577 300 0 --------- ---------- ------- Total deferred tax liabilities......... 577 1,709 2,524 --------- ---------- ------- Net deferred tax assets (liabilities).. 0 0 (44) ========= ========== ======= Deferred tax assets and liabilities are reflected on the Company's consolidated balance sheets as follows: Six Months Year Ended June 30, Ended --------------------- December 31, 1998 1999 1999 --------- ---------- ------------ (DM in thousands) Noncurrent deferred tax assets......... 577 1,447 2,333 Current deferred tax liabilities....... (577) (1,447) (2,377) --------- ---------- ------- Net deferred tax assets (liabilities).. 0 0 (44) ========= ========== =======

Private 1998 Plan 1999 Plan Me-Plan Plan --------- --------- ------- ------- Outstanding at June 30, 1998........... 0 0 0 0 Granted.............................. 1,204,818 0 0 200,460 Exercised............................ 0 0 0 (50,115) Forfeited............................ 0 0 0 0 --------- --------- ------- ------- Outstanding at June 30, 1999........... 1,204,818 0 0 150,345 Granted.............................. 0 1,204,821 135,150 0 Exercised............................ 0 0 0 0 Forfeited............................ 0 0 0 (60,138) --------- --------- ------- ------- Outstanding at December 31, 1999....... 1,204,818 1,204,821 135,150 90,207 ========= ========= ======= =======

Options Outstanding Options Exercisable ----------------------------- --------------------- Weighted Weighted Average Average Weighted Remaining Exercise Average Range of Exercise Number Life Price Number Exercise Price ----------------- --------- ---------- -------- ------ -------------- 1998 Plan DM 21.33.............. 1,204,818 1.92 Years DM 21.33 0 0 1999 Plan DM 65.85.............. 1,204,821 3.42 Years DM 65.85 0 0 Me Plan DM 21.33.............. 135,150 1.92 Years DM 21.33 0 0 Private Plan DM 4.15.............. 90,207 1.17 Years DM 4.15 0 0

Asia- Germany UK Pacific USA Other Elimination Consolidated ------- ----- ------- ----- ----- ----------- ------------ (DM in thousands) Six months ended December 31, 1999 Revenue................ 35,472 8,331 4,808 5,405 5,796 (8,525) 51,287 Long-lived assets...... 208,701 1,090 535 2,614 304 (198,590) 14,654 Year ended June 30, 1999 Revenue................ 55,818 3,407 1,774 2,895 1,646 (3,053) 62,487 Long-lived assets...... 391,444 952 438 1,678 202 (198,539) 8,323 Year ended June 30, 1998 Revenue................ 27,149 3,709 1,566 -- 880 (3,733) 29,571 Long-lived assets...... 5,114 178 237 111 8 (2,187) 3,461 Year ended June 30, 1997 Revenue................ 12,101 -- -- -- -- -- 12,101 Long-lived assets...... 1,080 -- -- -- -- -- 1,080

Six Months Year Ended June 30, Ended ------------------- December 31, 1998 1999 1999 --------- --------- ------------ (DM in thousands) Professional services...................... 16,529 21,913 22,630 License revenues........................... 7,231 21,056 19,141 Sales of hardware.......................... 4,414 13,492 3,558 Customer support........................... 1,397 5,970 5,709 Other...................................... 0 56 249 --------- --------- ------ 29,571 62,487 51,287 ========= ========= ======

Six months ended Fiscal year ended Fiscal year ended December 31, 1999 June 30, 1999 June 30, 1998 ------------------ ------------------- ------------------ KDM % of rev. KDM % of rev. KDM % of rev. ------- --------- ------- --------- ------- --------- Cost of sales Cost of software licensing fees....... (200) (1.0)% (200) (0.9)% (100) (1.4)% Cost of professional service fees......... (15,510) (68.5)% (14,770) (67.4)% (10,467) (63.3)% Cost of customer support fees......... (3,510) (61.5)% (4,198) (70.3)% (961) (68.8)% Cost of product sales................ (3,717) (104.5)% (12,157) (90.1)% (3,965) (89.8)% Cost of other fees.... 0 0.0 % 0 0.0 % Total cost of sales... (22,937) (44.7)% (31,325)% (50.1)% (15,493) (52.4)% ======= ======== ======= ======= ======= =======

June 30, June 30, December 31, June 30, 1998 1999 1999 2000 (unaudited) (unaudited) (unaudited) (unaudited) ----------- ----------- ------------ ----------- (DM in thousands, except per share data) Pro forma revenue............ 39,731 93,738 62,442 90,019 Pro forma net loss........... (50,721) (95,195) (54,829) (79,572) Pro forma loss per share before extraordinary items.. (4.14) (2.03) (2.85) Pro forma loss per share..... (4.14) (2.03) (2.85)

Equity December 31, Net result 1999 1999 (in local (in local Share Local currency, in currency, in Name/seat of company as % Currency '000) '000) -------------------- ----- -------- ------------ ------------ Brokat Asia Pte. Ltd., Singapore................... 100.0 SGD (5,981) (1,339) Brokat Ltd., Hounslow, United Kingdom ............. 100.0 GBP (2,987) (772) Brokat Infosystems Inc., Alpharetta, USA........... 100.0 USD (9,164) (3,085) Brokat Systeme AG, Zurich, Switzerland ............ 100.0 CHF (1,418) (492) Brokat Infosystems Ges.m.b.H., Wien, Austria ...... 100.0 ATS (8,726) (5,195) GO-Solutions GmbH, Wilhelmshaven................... 51.0 DM 870 54 McTechnology AG, Leipzig........................... 100.0 DM 169,846 3,831 MeTechnology Europe GmbH, Dolzig................... 100.0 DM (6,689) 3,179 MeTechnology Kft., Budapest, Hungary .............. 100.0 HFT 16,652 7,716 Brokat Financial Systems Inc., Atlanta, USA (former: Transaction Software Technologies, Inc.).. 100.0 USD (2,571) (1,991) Brokat Australia Pty Ltd., Sydney, Australia....... 100.0 AUD (434) (434) Brokat Infosystems S.a.r.l., Luxembourg............ 100.0 LUF 757 257 GEKA Beteiligungs Aktiengesellschaft, Frankfurt a.M. ................................... 100.0 DM 99 0

Equity December 31, Share 1999 Net results 1999 Name/seat of company as % (in Euro, in '000) (in Euro, in '000) -------------------- ----- ------------------ ------------------ Fernbach Financial Software S.A., Luxembourg............. 25.1 2,307 (27) Fernbach Software S.A., Luxembourg................... 25.1 (1,250) (1,081) Fernbach Software AG, Germany ............................. 25.1 106 43 Fernbach Software AG, Switzerland ................. 25.1 (511) (200)

Six Months Year Ended Ended June 30, December 31, 1999 1999 ---------- ------------ (DM in thousands) (56,611) (51,551) ======= ======= thereof non-cash charges associated with stock option grants (16,340) (12,240) ======= ======= Number of salaried employees (annual average) Six Months Year Ended Ended June 30, December 31, 1999 1999 ---------- ------------ 311 538 ======= ======= Income relating to other periods Six Months Year Ended Ended June 30, December 31, 1999 1999 ---------- ------------ (DM in thousands) 0 1,078 ======= =======

Acquisition and Manufacturing Cost Accumulated Depreciation Net Book Values ---------------------------------------- ---------------------------------------- --------------------- July 1, December 31, July 1, December 31, June 30, December 31, 1999 Additions Reversals 1999 1999 Additions Reversals 1999 1999 1999 ------- --------- --------- ------------ ------- --------- --------- ------------ -------- ------------ (DM in thousands) Intangible assets Goodwill........ 212,948 0 24,062 188,887 3,542 15,249 0 18,792 209,406 170,095 Customer list... 5,324 0 0 5,324 143 532 0 675 5,181 4,649 Software........ 2,709 443 28 3,124 635 507 62 1,080 2,074 2,044 ------- ----- ------ ------- ------ ------ --- ------ ------- ------- 220,980 443 24,090 197,335 4,320 16,288 62 20,547 216,661 176,788 Tangible assets Computer equipment, furnitures and fixtures........ 14,587 3,891 369 18,109 6,264 2,588 245 8,607 8,323 9,502 ------- ----- ------ ------- ------ ------ --- ------ ------- ------- 235,567 4,334 24,459 215,442 10,584 18,876 307 29,153 224,984 186,290 ======= ===== ====== ======= ====== ====== === ====== ======= ======= Financial assets Investment in associated companies....... 0 4,155 0 4,155 0 16 0 16 0 4,139 Other long-term investments..... 0 1,013 0 1,013 0 0 0 0 0 1,013 ------- ----- ------ ------- ------ ------ --- ------ ------- ------- 0 5,168 0 5,168 0 16 0 16 0 5,152 ======= ===== ====== ======= ====== ====== === ====== ======= =======

June 30, December 31, 2000 1999 (unaudited) Note TDM TDM ---- ----------- ------------ (in thousands of Deutsche Mark - TDM) ASSETS Current assets: Cash and cash equivalents....................... 163,856 6,963 Accounts receivable (less allowance for doubtful accounts of TDM 3,244 and TDM 1,575 at June 30, 2000 and December 31, 1999, respectively)...... 63,419 36,187 Cost and estimated earnings in excess of billings on uncompleted contracts.............. (3) 2,965 1,965 Advances on purchase commitments................ 0 3,000 Prepaid expenses and other current assets....... 21,781 6,795 -------- -------- Total current assets............................ 252,021 54,910 -------- -------- Property and equipment, at cost Computer equipment............................... 19,080 12,813 Furniture and fixtures........................... 9,699 5,296 Less: accumulated amortization................... (14,397) (8,607) -------- -------- 14,382 9,502 -------- -------- Goodwill......................................... 245,267 188,887 Other intangible assets.......................... 10,130 8,448 Less: accumulated amortization................... (36,627) (20,547) -------- -------- 218,770 176,788 -------- -------- Investments in associated companies.............. 0 4,139 Other long-term investments...................... 6,631 1,013 Deferred income taxes............................ 4,363 2,333 -------- -------- Total Assets.................................... 496,167 248,685 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term debt to banks........................ (3) 174 42,271 Other short-term debt........................... 0 5,665 Accounts payable, trade......................... 8,391 5,043 Payroll-related accruals........................ 8,852 5,296 Tax-related accruals............................ 4,096 2,150 Billings in excess of cost and estimated earnings on uncompleted contracts.............. (3) 5,546 1,818 Other accrued expenses and current liabilities.. 17,217 6,264 Deferred income................................. 4,853 3,579 Deferred income taxes........................... 4,025 2,377 -------- -------- Total current liabilities....................... 53,154 74,463 -------- -------- Long-term debt to banks.......................... 2,000 2,000 Other long-term debt............................. (3) 246,596 1,850 -------- -------- Total liabilities............................... 301,750 78,313 -------- -------- Minority interest............................... 326 426 -------- -------- Shareholders' equity: (3) Common Stock.................................... 53,416 52,512 Additional paid-in capital...................... 449,336 343,260 Accumulated deficit............................. (185,719) (109,064) Deferred compensation........................... (118,809) (113,376) Accumulated other comprehensive loss............ (4,133) (3,386) -------- -------- Total shareholders' equity...................... 194,091 169,946 -------- -------- Total liabilities and shareholders' equity...... 496,167 248,685 ======== ========

Six months ended Six months ended June 30, 2000 June 30, 1999 (unaudited) TDM (unaudited) TDM ---------------- ---------------- (in thousands of Deutsche Mark-- TDM) Cash flow from Operating Activities: Net loss.................................... (76,686) (25,394) Adjustments to reconcile net loss to net cash used in operating activities Minority interest........................... (99) (90) Depreciation and amortization............... 19,231 5,720 Gain on disposal of property and equipment.. 0 (2) Deferred income taxes....................... (381) 0 Non-cash charges associated with stock option grants.............................. 30,735 10,280 Changes in operating assets and liabilities: Accounts receivable........................ (23,963) (20,247) Net changes in cost and estimated earnings in excess of billings..................... 3,823 3,186 Prepaid expenses and other current assets.. (11,378) 790 Accounts payable, trade.................... 2,676 3,459 Payroll and tax related accruals........... 2,796 2,050 Other accrued expenses and liabilities..... 9,613 (3,123) Deferred income............................ (1,998) (319) ------- ------- Net cash used in operating activities....... (45,631) (23,690) ------- ------- Cash flow from Investing Activities Acquisitions of intangible assets............ (1,124) (4,745) Purchases of property and equipment......... (6,607) (2,694) Purchases of investments.................... (5,357) 0 Acquisitions, net of cash acquired.......... 1,132 (29,431) Proceeds from sale of property and equipment.................................. 0 293 ------- ------- Net cash used in investing activities...... (11,956) (36,577) ------- ------- Cash Flow from Financing Activities Net change in short-term debt............... (47,761) 0 Proceeds from debt issuances................ 244,744 0 Proceeds from sale of common stock, net of costs...................................... 18,244 219 ------- ------- Net cash provided by financing activities.. 215,227 219 ------- ------- Effect of Exchange Rate Differences on Cash.. (747) (1,650) Increase (Decrease) in Cash and Cash Equivalents................................. 156,893 (61,698) Cash and Cash Equivalents.................... 6,963 At the beginning of the period............... 68,839 ------- ------- At the end of the period..................... 163,856 7,141 ------- ------- Supplemental Disclosure of Cash Flow Information Cash paid for: Interest.................................... 867 616 Income taxes................................ 0 0

Three months ended Three months ended Six months ended June 30, June 30, June 30, Six months ended 2000 1999 2000 June 30, (unaudited) (unaudited) (unaudited) 1999 Note TDM TDM TDM (unaudited) TDM ---- ------------------ ------------------ ---------------- ---------------- (in thousands of Deutsche Mark--TDM) Revenues................ (5) 43,247 25,173 81,729 42,816 Cost of Sales (exclusive of TDM 3,055 TDM 2,222 TDM 9,503 and TDM 3,871 of non-cash charges from stock option grants in the three months ended June 30, 2000 and June 30, 1999 and the six months ended June 30, 2000 and June 30, 1999)............... (16,966) (15,462) (32,870) (20,954) ---------- ---------- ---------- ---------- Gross profit............ 26,281 9,711 48,859 21,862 ---------- ---------- ---------- ---------- Selling expenses (exclusive of TDM 3,724 TDM 1,923 TDM 10,489 and TDM 4,306 of non-cash charges from stock option grants in the three months ended June 30, 2000 and June 30, 1999 and the six months ended June 30, 2000 and June 30, 1999).......... (20,679) (13,379) (36,283) (23,313) General and administrative expenses (exclusive of TDM 1,559 TDM 582 TDM 4,546 and TDM 1,209 of non-cash charges from stock option grants in the three months ended June 30, 2000 and June 30, 1999 and the six months ended June 30, 2000 and June 30, 1999).......... (8,659) (4,046) (15,725) (6,547) Research and development expenses (exclusive of TDM 2,040 TDM 413 TDM 6,197 and TDM 894 of non-cash charges from stock option grants in the three months ended June 30, 2000 and June 30, 1999 and the six months ended June 30, 2000 and June 30, 1999)................... (11,328) (2,874) (21,437) (4,837) Amortization of goodwill and other intangible assets from acquisitions............ (8,026) (4,020) (15,184) (4,020) Non-cash charges associated with stock option grants........... (10,378) (5,140) (30,735) (10,280) ---------- ---------- ---------- ---------- Total operating expenses............... (59,070) (29,459) (119,364) (48,997) ---------- ---------- ---------- ---------- Operating loss.......... (32,789) (19,748) (70,505) (27,135) ---------- ---------- ---------- ---------- Financial Income, net... (5,582) (275) (6,410) 53 Other, net.............. (2,107) 2,156 460 1,711 ---------- ---------- ---------- ---------- Loss before income taxes.................. (40,478) (17,867) (76,455) (25,371) ---------- ---------- ---------- ---------- Income tax benefit (expense).............. 22 (113) (227) (113) Minority interest....... 36 59 99 90 Other taxes............. (92) 0 (103) 0 ---------- ---------- ---------- ---------- Net loss................ (4) (40,512) (17,921) (76,686) (25,394) ---------- ---------- ---------- ---------- Basic and diluted loss per share: Net loss................ (1.5) (0.91) (2.84) (1.29) ---------- ---------- ---------- ---------- Weighted average number of common shares outstanding............. 27,083,699 19,694,650 26,966,236 19,694,650

June 30, December 31, 2000 1999 TDM TDM ------- ------------ Costs incurred on uncompleted contracts.............. 12,723 5,379 Estimated earnings................................... 14,840 6,161 ------- ------- 27,563 11,540 ------- ------- Less billings to date................................ (30,144) (11,393) -- -- ------- ------- (2,581) 147 ======= =======

June 30, December 31, 2000 1999 TDM TDM -------- ------------ Cost and estimated earnings in excess of billings on uncompleted contracts......................... 2,965 1,965 Billings in excess of cost and estimated earnings on uncompleted contracts......................... (5,546) (1,818) ------ ------ (2,581) 147 ====== ======

Three months ended Three months ended Six months ended Six months ended June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 TDM TDM TDM TDM ------------------ ------------------ ---------------- ---------------- Net income (loss)....... (40,512) (17,921) (76,686) (25,394) Foreign currency translation adjustments............ 1,081 (1,650) (747) (1,650) Unrealized gain on available for sale securities............. 0 0 36 0 ------- ------- ------- ------- (39,431) (19,571) (77,433) (27,044) ======= ======= ======= =======

Three months ended Three months ended Six months ended Six months ended June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 TDM TDM TDM TDM ------------------ ------------------ ---------------- ---------------- License revenues........ 19,528 6,450 38,499 15,598 Professional services... 18,365 6,797 31,094 12,275 Customer support........ 4,945 1,752 8,891 3,440 Income from the sale of hardware............... 406 10,118 3,207 11,447 Other................... 3 56 38 56 ------ ------ ------ ------ 43,247 25,173 81,729 42,816 ====== ====== ====== ======

Assets 1998 1997 ------ ---- ---- Current assets: Cash and cash equivalents.......................... $ 720,111 $ 617,675 Accounts receivable, net of allowance for doubtful accounts of $121,349 and $134,188 in 1998 and 1997, respectively................................ 1,092,139 1,232,698 Prepaid expenses................................... 43,839 11,322 ---------- ---------- Total current assets.............................. 1,856,089 1,861,695 ---------- ---------- Property and equipment: Computer equipment................................. 978,094 901,004 Office furniture................................... 110,789 100,547 ---------- ---------- 1,088,883 1,001,551 Less accumulated depreciation...................... (813,830) (674,767) ---------- ---------- Property and equipment, net....................... 275,053 326,784 ---------- ---------- Total assets...................................... $2,131,142 $2,188,479 ========== ========== Liabilities and shareholders' equity 1998 1997 ------------------------------------ ---- ---- Current liabilities: Accounts payable................................... $ 62,827 $ 17,725 Accrued expenses................................... 106,666 178,035 Accrued income taxes............................... 19,447 0 Deferred income taxes.............................. 322,700 334,924 Current maturities of notes payable................ 290,518 85,121 Deferred revenue................................... 594,828 642,361 ---------- ---------- Total current liabilities......................... 1,396,986 1,258,166 ---------- ---------- Long-term liabilities: Notes payable, less current portion................ 29,816 280,074 Deferred income taxes.............................. 29,100 5,605 ---------- ---------- Total long-term liabilities....................... 58,916 285,679 ---------- ---------- Commitments and contingencies (Note 6) Shareholders' equity: Common stock, $1 par value; 10,000 shares authorized; 600 shares issued and outstanding in 1998 and 1997..................................... 600 600 Additional paid-in capital......................... 18,960 18,960 Retained earnings.................................. 655,680 625,074 ---------- ---------- Total shareholders' equity........................ 675,240 644,634 ---------- ---------- Total liabilities and shareholders' equity........ $2,131,142 $2,188,479 ========== ==========

1998 1997 ---------- ---------- Revenue: Contract revenue................................... $3,312,163 $2,843,150 Service revenue.................................... 1,186,715 1,053,792 ---------- ---------- Total revenue...................................... 4,498,878 3,896,942 ---------- ---------- Operating expenses: Cost of services................................... 1,500,410 1,427,210 General and administrative......................... 418,740 281,205 Sales and marketing................................ 632,099 625,248 Research and development........................... 1,841,363 1,873,673 ---------- ---------- Total operating expenses........................... 4,392,612 4,207,336 ---------- ---------- Operating income.................................... 106,266 (310,394) Other income (expense): Investment income.................................. 24,346 14,534 Interest expense................................... (12,936) (16,608) ---------- ---------- Income before income taxes.......................... 117,676 (312,468) Provision (benefit) for income taxes (Note 5)....... 47,070 (124,987) ---------- ---------- Net income (loss)................................... $ 70,606 $ (187,481) ========== ========== Net income (loss) per share: Basic.............................................. $ 117.68 $ (312.47) ========== ========== Diluted............................................ $ 117.68 $ (312.47) ========== ========== Weighted average shares: Basic.............................................. 600 600 ========== ========== Diluted............................................ 600 600 ========== ==========

Common Stock Additional Total ------------- Paid-in Retained Shareholders' Shares Amount Capital Earnings Equity ------ ------ ---------- -------- ------------- Balance, September 30, 1996.................... 600 $600 $18,960 $842,555 $862,115 Net loss................ 0 (187,481) (187,481) Dividends on common stock.................. 0 (30,000) (30,000) --- ---- ------- -------- -------- Balance, September 30, 1997.................... 600 600 18,960 625,074 644,634 Net income.............. 0 70,606 70,606 Dividends on common stock.................. 0 (40,000) (40,000) --- ---- ------- -------- -------- Balance, September 30, 1998.................... 600 $600 $18,960 $655,680 $675,240 === ==== ======= ======== ========

1998 1997 -------- --------- Cash flows from operating activities: Net income (loss)........................................ $ 70,606 $(187,481) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation............................................ 139,063 142,481 Deferred income taxes................................... 11,271 331,933 Changes in operating assets and liabilities: Accounts receivable..................................... 140,559 (415,533) Other current assets.................................... (32,517) 4,145 Accounts payable........................................ 45,102 (37,093) Accrued expenses........................................ (51,922) 161,350 Deferred revenues....................................... (47,533) 284,171 -------- --------- Cash provided by operating activities.................... 274,629 283,973 -------- --------- Cash flows from investing activities: Purchases of equipment and furniture..................... (87,332) (136,257) -------- --------- Cash flows from financing activities: Proceeds from issuance of notes payable.................. 22,500 245,000 Principal payments on notes payable...................... (67,361) (79,425) Dividends paid........................................... (40,000) (30,000) -------- --------- Cash provided by (used in) financing activities.......... (84,861) 135,575 -------- --------- Change in cash and cash equivalents....................... 102,436 283,291 Cash and cash equivalents, beginning of year.............. 617,675 334,384 -------- --------- Cash and cash equivalents, end of year.................... $720,111 $ 617,675 ======== ========= Supplemental disclosure of cash flow information: Cash paid for interest................................... $ 12,936 $ 16,608 ======== ========= Cash paid for taxes...................................... $ 7,315 $ 944 ======== =========

1998 1997 ---- ---- Client A.......................... 21% 27% Client B.......................... 12% 13% Client C.......................... 11% * Client D.......................... 12% *

1998 1997 ------- --------- Numerator: Net income (loss)...................................... $70,606 $(187,481) ======= ========= Denominator: Weighted average shares outstanding--Basic ............ 600 600 Weighted average shares outstanding--Diluted........... 600 600

1998 1997 -------- -------- Note payable to vendor, noninterest-bearing, principal balance due in six equal monthly installments beginning December 22, 1998....................................... $232,500 $210,000 Note payable to bank, interest at 8.7%, principal and interest payable in monthly installments of $2,895 through December 1999; secured by computer equipment.... 41,137 70,781 Note payable to bank, interest at 7.8%, principal and interest payable in monthly installments of $1,212 through January 2001; secured by computer equipment..... 30,954 42,494 Note payable to bank, interest at 8.75%, principal and interest payable in monthly installments of $1,108 through December 1999; secured by computer equipment.... 15,743 27,127 Equipment loan, interest at 6.5%, principal and interest payable in monthly installments of $2,989 through February 1998........................................... 0 14,793 -------- -------- 320,334 365,195 Less current portion..................................... 290,518 85,121 -------- -------- $ 29,816 $280,074 ======== ========

1999................................ $290,518 2000................................ 26,831 2001................................ 2,985 -------- $320,334 ========

1998 1997 -------- --------- Current income tax provision ........................... $ 42,562 $ 7,786 Deferred income tax provision (benefit)................. 4,508 (132,773) -------- --------- $ 47,070 $(124,987) ======== =========

1998 1997 ---- ---- Statutory federal income tax rate............................... 34.0% 34.0% Effect of: State income tax............................................. 6.0 6.0 ---- ---- Pro forma income taxes.......................................... 40.0% 40.0% ==== ====

1998 1997 -------- -------- Current: Accrual basis financial statement income in excess of cash basis taxable income.............................. $322,700 $334,924 ======== ======== Long-term: Depreciation............................................ $ 29,100 $ 5,605 ======== ========

1999................................. $79,980 2000................................. 19,995 ------- $99,975 =======

December 31, December 31, 1998 1997 ------------ ------------ (DM in thousands) ASSETS FIXED ASSETS Intangible assets Software.......................................... 94 28 ------ ------ Property, plant and equipment Buildings on third party land..................... 30 16 Other equipment, factory and office equipment..... 832 428 ------ ------ 862 444 ------ ------ 956 472 ------ ------ CURRENT ASSETS Inventories Raw materials, consumables and supplies........... 47 74 Work in process................................... 719 263 ------ ------ 766 337 ------ ------ Receivables and other assets Trade receivables................................. 2,275 170 Other assets...................................... 588 117 ------ ------ 2,863 287 ------ ------ Other securities................................... 0 1,869 Cash, bank balances................................ 808 1,454 ------ ------ 808 3,323 ------ ------ 4,437 3,947 ------ ------ PREPAID ASSETS...................................... 10 73 ------ ------ ACCUMULATED DEFICIT FOR THE YEAR NOT COVERED BY EQUITY............................................. 15,046 8,175 ------ ------ 20,449 12,667 ====== ====== EQUITY AND LIABILITIES EQUITY Common Stock....................................... 1,000 GmbH capital....................................... 150 Additional paid-in capital......................... 417 1,000 Accumulated deficit covered by equity.............. (1,417) (1,150) ------ ------ 0 0 ------ ------ CONTRIBUTIONS FROM SILENT PARTNERS SUBORDINATED LOANS Contributions from silent partners................. 9,950 8,000 Subordinated loans................................. 3,530 3,530 ------ ------ 13,480 11,530 ------ ------ ACCRUALS Other accruals..................................... 939 231 ------ ------ LIABILITIES Convertible bonds.................................. 3,352 0 Liabilities to banks............................... 750 8 Payments received on account of orders............. 513 262 Trade payables..................................... 916 201 Other liabilities.................................. 460 435 ------ ------ 5,991 906 ------ ------ DEFERRED INCOME..................................... 39 0 ------ ------ 20,449 12,667 ====== ======

Year ended December 31, ------------------------- 1998 1997 ------------ ----------- (DM in thousands) Revenue............................................. 4,870 1,965 Increase (decrease) in inventories.................. 456 (25) Other operating income.............................. 240 84 Cost of materials Cost of raw materials, consumables and supplies and for purchased goods.......................... (238) (88) Cost of purchased services........................ (407) (210) Personnel expenses Wages and salaries................................ (5,481) (2,953) Social security and other pension payments........ (1,004) (554) -- thereof for pensions TDM 22 (prior year: TDM 20) Depreciation on intangible assets, and property, plant and equipment................................ (486) (177) Other operating expenses............................ (4,794) (2,579) Interest and similar income......................... 42 136 Interest and similar expenses....................... (309) (281) ------------ ----------- Loss before taxes................................... (7,111) (4,682) ------------ ----------- Income tax benefit.................................. 0 1 Other taxes......................................... (27) (1) ------------ ----------- Consolidated net loss............................... (7,138) (4,682) ------------ ----------- Accumulated deficit, beginning of year.............. (9,325) (4,643) ------------ ----------- Accumulated deficit, end of year.................... (16,463) (9,325) ============ =========== DM ------------ Loss per share...................................... (35.69)

Common Stock -------------- Additional Total GmbH Paid in Accumulated Shareholders Comprehensive Shares Amount Capital Capital loss Equity Income (Loss) ------- ------ ------- ---------- ----------- ------------ ------------- (DM in thousands) As of December 31, 1996................... 0 0 150 1,000 (4,643) (3,493) Net loss for the year... 0 0 0 0 (4,682) (4,682) (4,682) ------ Comprehensive Loss...... 0 0 0 0 0 0 (4,682) ------- ----- ---- ----- ------- ------- ------ As of December 31, 1997................... 0 0 150 1,000 (9,325) (8,175) ------- ----- ---- ----- ------- ------- Foundation of MeTechnology AG........ 20,000 100 0 0 0 100 Contribution in kind GmbH................... 180,000 900 (150) (750) 0 0 Recognition of discount on convertible bond.... 0 0 0 167 0 167 Net loss for the year... 0 0 0 0 (7,138) (7,138) (7,138) ------ Comprehensive Loss...... 0 0 0 0 0 0 (7,138) ------- ----- ---- ----- ------- ------- ====== As of December 31, 1998................... 200,000 1,000 0 417 (16,463) (15,046) ======= ===== ==== ===== ======= =======

Year ended December 31, -------------- 1998 1997 ------ ------ (DM in thousands) Cash flow from Operating Activities Net loss...................................................... (7,138) (4,682) Adjustments to reconcile net loss to net cash used in operat- ing activities Accretion of interest expense on noninterest bearing debt.... 19 0 Depreciation and amortization................................ 486 177 Changes in trade receivables................................. (2,105) 265 Changes in inventories....................................... (429) (44) Changes in prepaid expenses and other current assets......... (408) (121) Changes in trade payables.................................... 715 (122) Changes in other accruals.................................... 708 137 Changes in liabilities....................................... 315 (94) ------ ------ Net cash used in operating activities....................... (7,837) (4,484) ------ ------ Cash flow from Investing Activities Acquisitions of intangible assets............................ (90) (29) Purchases of property and equipment.......................... (880) (296) Proceeds from sale of property and equipment................. 0 36 ------ ------ Net cash used in investing activities....................... (970) (289) ------ ------ Cash flow from Financing Activities Net change in short-term bank debt........................... 742 8 Changes in securities classified as current assets........... 1,869 (1,869) Long-term borrowings......................................... 5,450 130 Issuances of share capital................................... 100 0 ------ ------ Net cash provided (used) by financing activities............ 8,161 (1,731) ------ ------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.............. (646) (6,504) CASH AND CASH EQUIVALENTS At the beginning of the period.............................. 1,454 7,958 ------ ------ At the end of the period.................................... 808 1,454 ====== ====== Supplemental Disclosure of Cash Flow Information Cash paid for: Interest..................................................... 366 205 Taxes........................................................ 27 1 ------ ------ 393 206 ====== ======

Method Years ------------- ----- Buildings on third party land............................... straight-line 3 Other equipment, office and factory equipment............... straight-line 4-5

December 31, ------------------ 1998 1997 -------- -------- (DM in thousands) Net loss per German generally accepted accounting princi- ples..................................................... (7,138) (4,682) Long-term projects for software adaptation................ (1,489) (23) Unrealized losses/gains on marketable securities.......... (20) 20 -------- -------- Net loss according to US generally accepted accounting principles............................................... (8,647) (4,685) ======== ========

December 31, --------------- 1998 1997 ------- ------ (DM in thousands) Equity per German generally accepted accounting principles... (16,463) (9,325) Long-term projects for software adaptation................... (1,326) 163 ------- ------ Equity according to US generally accepted accounting princi- ples........................................................ (17,789) (9,162) ======= ======

NET BOOK ACQUISITION AND MANUFACTURING COST ACCUMULATED DEPRECIATION VALUES -------------------------------------------- -------------------------------------------- ------------ Jan 1, 1997 Additions Reversals Dec 31, 1997 Jan 1, 1997 Additions Reversals Dec 31, 1997 Dec 31, 1997 ----------- --------- --------- ------------ ----------- --------- --------- ------------ ------------ (DM in thousands) INTANGIBLE AS- SETS Software........ 7 29 0 36 1 7 0 8 28 --- --- --- --- --- --- --- --- --- PROPERTY, PLANT AND EQUIPMENT Buildings on third party land........... 21 4 0 25 2 7 0 9 16 Other equipment, factory and office equipment...... 539 292 173 658 205 163 138 230 428 --- --- --- --- --- --- --- --- --- 560 296 173 683 207 170 138 239 444 --- --- --- --- --- --- --- --- --- FINANCIAL ASSETS Shares in affil- iated compa- nies........... 250 0 250 0 250 0 250 0 0 --- --- --- --- --- --- --- --- --- 817 325 423 719 458 177 388 247 472 === === === === === === === === ===

ACQUISITION AND MANUFACTURING COST ACCUMULATED DEPRECIATION -------------------------------------------- -------------------------------------------- Jan 1, 1998 Additions Reversals Dec 31, 1998 Jan 1, 1998 Additions Reversals Dec 31, 1998 ----------- --------- --------- ------------ ----------- --------- --------- ------------ (DM in thousands) INTANGIBLE AS- SETS Software........ 36 90 0 126 8 24 0 32 --- --- --- ----- --- --- --- --- PROPERTY, PLANT AND EQUIPMENT Buildings on third party land........... 25 28 0 53 9 14 0 23 Other equipment, factory and office equip- ment........... 658 852 208 1,302 230 448 208 470 --- --- --- ----- --- --- --- --- 683 880 208 1,355 239 462 208 493 --- --- --- ----- --- --- --- --- 719 970 208 1,481 247 486 208 525 === === === ===== === === === === NET BOOK VALUES ------------------------- Dec 31, 1998 Dec 31, 1997 ------------ ------------ INTANGIBLE AS- SETS Software........ 94 28 ------------ ------------ PROPERTY, PLANT AND EQUIPMENT Buildings on third party land........... 30 16 Other equipment, factory and office equip- ment........... 832 428 ------------ ------------ 862 444 ------------ ------------ 956 472 ============ ============

Result Participation Equity of the financial quota December 31, year Currency as % 1997 1997 -------- ------------- ------------ ---------------- (DM in thousands) ESD Information Technology Entwicklungsgesellschaft mbH, Dolzig.............. DEM 100 (8,313) (4,628)

Result Participation Equity of the financial quota December 31, year Currency as % 1998 1998 -------- ------------- ------------ ---------------- (DM in thousands) MeTechnology Europe GmbH, Bienitz.......... DEM 100 (11,890) (15,728)(/1/) MeTechnology Ltd., UK... GBP 100 0 0(/2/)

December 31, December 31, 1998 1997 -------------------------- -------------------------- thereof thereof with a residual term with a residual term of more than of more than Total 1 year Total 1 year ----- -------------------- ----- -------------------- (DM in thousands) Trade receivables......... 2,275 0 170 0 Other assets.............. 588 112 117 50 ----- --- --- --- 2,863 112 287 50 ===== === === ===

December 31, December 31, 1998 1997 ------------- ------------ up to up to Total 1 year Total 1 year ------ ------ ----- ------ (DM in thousands) Convertible bond..................................... 3,352 0 0 0 Liabilities to banks................................. 750 750 8 8 Payments received on account of orders............... 513 513 262 262 Trade payables....................................... 916 916 201 201 Other liabilities.................................... 460 460 435 435 - thereof taxes................................... 0 0 119 119 ------ ----- --- --- 5,991 2,639 906 906 ====== ===== === ===

Year ended December 31, 1997 ------------------------------ more than Total Up to on year one year amount ------------- --------- ------ (DM in thousands) Leases for buildings............................. 326 388 714 Car pool leases.................................. 61 35 96 Leases for telecommunications.................... 26 154 180 --- --- --- 413 577 990 === === ===

Year ended December 31, 1998 ------------------------------ More than Total Up to on year one year amount ------------- --------- ------ (DM in thousands) Leases for buildings............................. 558 558 1,116 Car pool leases.................................. 141 71 212 Leases for telecommunications.................... 29 135 164 --- --- ----- 728 764 1,492 === === =====

Year ended December 31, ----------------------- 1998 1997 ----------- ----------- (DM in thousands) Licenses................................................ 2,953 712 Bank applications....................................... 1,221 743 Other................................................... 696 510 ----------- ----------- 4,870 1,965 =========== ===========

Year ended December 31, ------------- 1998 1997 ------ ------ 76 46 ====== ======

March 31, ------------------ 2000 1999 -------- -------- ASSETS Current assets: Cash and cash equivalents............................... $ 57,295 $ 2,129 Short-term investments.................................. 11,998 -- Accounts receivable, net of allowance for doubtful accounts of $512 and $443, respectively................ 4,939 3,658 Prepaid expenses and other current assets............... 1,108 964 -------- -------- Total current assets................................... 75,340 6,751 Property and equipment, net............................... 1,933 786 Restricted cash........................................... 702 -- Deposits and other assets................................. 384 228 -------- -------- Total assets........................................... $ 78,359 $ 7,765 ======== ======== LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Bank borrowings......................................... $ -- $ 1,631 Bridge loan from related parties........................ -- 1,596 Current portion of capital lease obligations............ 176 81 Note payable............................................ -- 129 Accounts payable........................................ 1,972 1,526 Accrued expenses........................................ 7,446 2,873 Deferred revenue........................................ 2,728 3,231 -------- -------- Total current liabilities.............................. 12,322 11,067 Long-term liabilities: Capital lease obligations, net of current portion....... 256 19 Other long-term liabilities............................. 12 -- -------- -------- Total liabilities...................................... 12,590 11,086 -------- -------- Mandatorily Redeemable Preferred Stock: par value $0.0001 Authorized: none at March 31, 2000 Issued and outstanding: none at March 31, 2000 and 3,179 at March 31, 1999...................................... -- 20,882 -------- -------- Commitments and contingencies (Note 12) Stockholders' Equity (Deficit): Series B Convertible Preferred Stock: par value $0.0001 Authorized: none at March 31, 2000 Issued and outstanding: none at March 31, 2000 and 2,273 at March 31, 1999...................................... -- -- Preferred Stock: par value $0.0001 Authorized: 10,000 at March 31, 2000 Issued and outstanding: none at March 31, 2000 and 1999................................................... -- -- Common Stock, $0.0001 par value Authorized: 200,000 shares at March 31, 2000 Issued and outstanding: 22,020 at March 31, 2000 and 344 at March 31, 1999...................................... 2 -- Additional paid-in capital................................ 144,642 (1,842) Accumulated other comprehensive income.................... 489 290 Unearned stock-based compensation......................... (21,207) -- Accumulated deficit....................................... (58,157) (22,651) -------- -------- Total stockholders' equity (deficit)................... 65,769 (24,203) -------- -------- Total liabilities, mandatorily redeemable preferred stock and stockholders' equity (deficit).............. $ 78,359 $ 7,765 ======== ========

Years Ended March 31, -------------------------- 2000 1999 1998 -------- ------- ------- Net revenues: Product licenses................................. $ 8,486 $ 3,722 $ 3,559 Services and maintenance......................... 9,710 5,332 803 -------- ------- ------- Total revenues................................. 18,196 9,054 4,362 -------- ------- ------- Cost of revenues: Product licenses................................. 67 40 74 Services and maintenance......................... 6,808 2,892 512 -------- ------- ------- Total cost of revenues......................... 6,875 2,932 586 -------- ------- ------- Gross profit....................................... 11,321 6,122 3,776 -------- ------- ------- Operating expenses: Research and development (excluding $3,651 stock- based compensation expense)..................... 5,079 3,843 1,938 Sales and marketing (excluding $4,300 stock-based compensation expense)........................... 12,226 5,586 3,702 General and administrative (excluding $8,449 stock-based compensation expense)............... 3,785 2,205 1,106 Stock-based compensation......................... 16,400 -- -- -------- ------- ------- Total operating expenses....................... 37,490 11,634 6,746 -------- ------- ------- Operating loss..................................... (26,169) (5,512) (2,970) Interest expense................................... (377) (300) (692) Other income and (expense), net.................... 275 51 99 -------- ------- ------- Net loss from continuing operations before income taxes............................................. (26,271) (5,761) (3,563) Provision for income taxes......................... (153) (87) (68) -------- ------- ------- Net loss from continuing operations................ (26,424) (5,848) (3,631) Discontinued operations (Note 3): Income (loss) from operations of discontinued user interface business (net of income taxes)... 2,657 248 (2,174) -------- ------- ------- Net loss........................................... (23,767) (5,600) (5,805) Accretion of mandatorily redeemable preferred stock to redemption value............................... (442) (1,258) (1,040) Beneficial conversion feature...................... (11,739) -- -- -------- ------- ------- Net loss attributable to common stockholders....... (35,948) (6,858) (6,845) Other comprehensive income (loss), net of tax: Unrealized loss on investments................... (20) -- -- Translation adjustments.......................... 219 180 (20) -------- ------- ------- Comprehensive loss................................. $(35,749) $(6,678) $(6,865) ======== ======= ======= Basic and diluted net loss per common share attributable to common stockholders: Loss from continuing operations.................. $ (6.68) $(19.15) $(37.37) Earnings/(loss) from discontinued operations..... 0.46 0.66 (17.39) -------- ------- ------- Basic and diluted net loss per common share attributable to common stockholders............... $ (6.22) $(18.49) $(54.76) ======== ======= ======= Number of shares used in the calculation of basic and diluted net loss per share.................... 5,781 371 125 ======== ======= =======

Mandatorily Series B Series AA Series BB Redeemable Convertible Convertible Convertible Preferred Preferred Preferred Preferred Stock Stock Stock Stock Common Stock -------------- ------------- ------------- ------------- ------------- Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount ------ ------- ------ ------ ------ ------ ------ ------ ------ ------ Balances at April 1, 1997..................................... 2,013 $ 9,684 2,272 $ -- -- $-- -- $ -- 232 $-- Issuance of Common Stock pursuant to exercise of options...................................... -- -- -- -- -- -- -- -- 172 -- Repurchase of Common Stock....................... -- -- -- -- -- -- -- -- (1) -- Issuance of Series F Preferred Stock, net of issuance costs.................................. 972 7,400 -- -- -- -- -- -- -- -- Conversion of bridge loan to Series F Preferred Stock.................................. 194 1,500 -- -- -- -- -- -- -- -- Issuance of Series B Preferred Stock pursuant to exercise of options.......................... -- 1 -- -- -- -- -- -- -- Accretion of Mandatorily Redeemable Preferred Stock to redemption value....................... -- 1,040 -- -- -- -- -- -- -- -- Net Loss......................................... -- -- -- -- -- -- -- -- -- -- Cumulative translation adjustment................ -- -- -- -- -- -- -- -- -- -- ----- ------- ----- ---- --- --- --- ---- ---- --- Balances at March 31, 1998........................ 3,179 $19,624 2,273 $ -- -- $-- -- $ -- 403 $-- Issuance of Common Stock pursuant to exercise of options...................................... -- -- -- -- -- -- -- -- 98 -- Issuance of Common Stock......................... -- -- -- -- -- -- -- -- 1 -- Repurchase of Common Stock....................... -- -- -- -- -- -- -- -- (158) -- Accretion of Mandatorily Redeemable Preferred Stock to redemption value....................... -- 1,258 -- -- -- -- -- -- -- -- Net loss......................................... -- -- -- -- -- -- -- -- -- -- Cumulative translation adjustment................ -- -- -- -- -- -- -- -- -- -- ----- ------- ----- ---- --- --- --- ---- ---- --- Balances at March 31, 1999........................ 3,179 $20,882 2,273 $ -- -- $-- -- $ -- 344 $-- -------------------------------------------------- ===== ======= ===== ==== === === === ==== ==== === Notes Accumulated Total Additional Receivable Other Stockholders' Paid-In from Comprehensive Unearned Accumulated Equity Capital Stockholders Income Compensation Deficit (Deficit) ---------- ------------ ------------- ------------ ----------- ------------- Balances at April 1, 1997......................... $ 391 $(70) $130 $-- $(11,246) $(10,795) Issuance of Common Stock pursuant to exercise of options........................................ 97 -- -- -- -- 97 Repurchase of Common Stock...................... (1) -- -- -- -- (1) Issuance of Series F Preferred Stock, net of issuance costs................................. -- -- -- -- -- -- Conversion of bridge loan to Series F Preferred Stock.......................................... -- -- -- -- -- -- Issuance of Series B Preferred Stock pursuant to exercise of options......................... 1 -- -- -- -- 1 Accretion of Mandatorily Redeemable Preferred Stock to redemption value...................... (1,040) -- -- -- (1,040) Net Loss........................................ -- -- -- -- (5,805) (5,805) Cumulative translation adjustment............... -- -- (20) -- -- (20) ---------- ------------ ------------- ------------ ----------- ------------- Balances at March 31, 1998....................... $ (552) $(70) $110 $-- $(17,051) $(17,563) Issuance of Common Stock pursuant to exercise of options........................................ 56 -- -- -- -- 56 Issuance of Common Stock........................ -- -- -- -- -- -- Repurchase of Common Stock...................... (88) 70 -- -- -- (18) Accretion of Mandatorily Redeemable Preferred Stock to redemption value...................... (1,258) -- -- -- (1,258) Net loss........................................ -- -- -- -- (5,600) (5,600) Cumulative translation adjustment............... -- -- 180 -- -- 180 ---------- ------------ ------------- ------------ ----------- ------------- Balances at March 31, 1999....................... $ (1,842) $ -- $290 $-- $(22,651) $(24,203) ------------------------------------------------- ========== ============ ============= ============ =========== =============

Series B Series AA Series BB Mandatorily Convertible Convertible Convertible Redeemable Preferred Preferred Preferred Preferred Stock Stock Stock Stock Common Stock ---------------- -------------- -------------- -------------- -------------- Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount ------ -------- ------ ------ ------ ------ ------ ------ ------ ------ Balances at March 31, 1999................ 3,179 $ 20,882 2,273 $ -- -- $ -- -- $ -- 344 $ -- Issuance of Common Stock pursuant to exercise of options..................... -- -- -- -- -- -- -- -- 1,486 -- Issuance of Common Stock pursuant to conversion of warrants.................. -- -- -- -- -- -- -- -- 362 -- Accretion of Mandatorily Redeemable Preferred Stock to redemption value..... -- 442 -- -- -- -- -- -- -- -- Beneficial Conversion Feature............ -- -- -- -- -- -- -- -- -- -- Adjustment of Mandatorily Redeemable Preferred Stock Series C per anti-dilution provision................. 20 -- -- -- -- -- -- -- -- -- Conversion of Mandatorily Redeemable Preferred Stock to Common Stock......... (3,199) (21,324) -- -- -- -- -- -- 3,199 1 Conversion of Series B Stock to Common Stock................................... -- -- (2,273) -- -- -- -- -- 2,273 -- Issuance of Series AA Preferred Stock, net of issuance costs....................... -- -- -- -- 8,416 1 -- -- -- -- Issuance of Series BB Preferred Stock.... -- -- -- -- -- -- 1,953 -- -- -- Conversion of Series AA Preferred Stock to Common Stock............................ -- -- -- -- (8,416) (1) -- -- 8,416 1 Conversion of Series BB Preferred Stock to Common Stock............................ -- -- -- -- -- -- (1,953) -- 1,953 -- Issuance of Common Stock pursuant initial public offering......................... -- -- -- -- -- -- -- -- 4,000 -- Unearned compensation.................... -- -- -- -- -- -- -- -- -- -- Amortization of unearned compensation.... -- -- -- -- -- -- -- -- -- -- Repurchase of Common Stock............... -- -- -- -- -- -- -- -- (13) -- Net loss................................. -- -- -- -- -- -- -- -- -- -- Unrealized loss on investments........... -- -- -- -- -- -- -- -- -- -- Cumulative translation adjustment........ -- -- -- -- -- -- -- -- -- -- ------ -------- ------ ---- ------ ---- ------ ---- ------ ---- Balances at March 31, 2000................ -- $ -- -- $-- -- $ -- -- $ -- 22,020 $ 2 ====== ======== ====== ==== ====== ==== ====== ==== ====== ==== Accumulated Total Additional Other Stockholders' Paid-In Comprehensive Unearned Accumulated Equity Capital Income Compensation Deficit (Deficit) ---------- ------------- ------------ ----------- ------------- Balances at March 31, 1999................ $ (1,842) $290 $ -- $(22,651) $(24,203) Issuance of Common Stock pursuant to exercise of options..................... 755 -- -- -- 755 Issuance of Common Stock pursuant to conversion of warrants.................. 67 -- -- -- 67 Accretion of Mandatorily Redeemable Preferred Stock to redemption value...... (442) -- -- -- (442) Beneficial Conversion Feature............ 11,739 -- -- (11,739) -- Adjustment of Mandatorily Redeemable Preferred Stock Series C per anti-dilution provision................. -- -- -- -- -- Conversion of Mandatorily Redeemable Preferred Stock to Common Stock......... 21,323 -- -- -- 21,324 Conversion of Series B Stock to Common Stock................................... -- -- -- -- -- Issuance of Series AA Preferred Stock, net of issuance costs................... 4,403 -- -- -- 4,404 Issuance of Series BB Preferred Stock.... 13,943 -- -- -- 13,943 Conversion of Series AA Preferred Stock to Common Stock......................... -- -- -- -- -- Conversion of Series BB Preferred Stock to Common Stock......................... -- -- -- -- -- Issuance of Common Stock pursuant initial public offering......................... 57,090 -- -- -- 57,090 Unearned compensation.................... 37,607 -- (37,607) -- -- Amortization of unearned compensation.... -- -- 16,400 -- 16,400 Repurchase of Common Stock............... (1) -- -- -- (1) Net loss................................. -- -- -- (23,767) (23,767) Unrealized loss on investments........... -- (20) -- -- (20) Cumulative translation adjustment........ -- 219 -- -- 219 -------- ---- ------------ ----------- ------------- Balances at March 31, 2000................ $144,642 $489 $(21,207) $(58,157) $ 65,769 ======== ==== ============ =========== =============

Years Ended March 31, -------------------------- 2000 1999 1998 -------- ------- ------- Cash flows from operating activities: Net loss........................................... $(23,767) $(5,600) $(5,805) Add (deduct) loss (income) from discontinued operations........................................ (2,657) (248) 2,174 -------- ------- ------- Loss from continuing operations.................... (26,424) (5,848) (3,631) Adjustments to reconcile net loss to net cash used in operating activities: Bridge loan interest converted to equity.......... -- 96 -- Depreciation and amortization..................... 597 899 868 Amortization of stock-based compensation.......... 16,400 -- -- Loss on write-off of equipment.................... 71 129 -- Capital lease for construction-in-progress........ 40 -- -- Changes in assets and liabilities: Accounts receivable............................. (1,779) (557) (1,579) Income taxes refund receivable.................. -- 27 (4) Prepaid expenses and other...................... (144) (533) 417 Accounts payable................................ 492 7 (31) Accrued expenses................................ 4,573 (757) (255) Deferred revenue................................ (503) (95) (569) Deposits and other assets....................... (156) 260 Other long-term liabilities..................... 12 -- -- -------- ------- ------- Net cash used in continuing operations............. (6,821) (6,372) (4,784) Net cash provided by (used in) discontinued operations........................................ 3,109 2,061 (294) -------- ------- ------- Net cash used in operating activities......... (3,712) (4,311) (5,078) -------- ------- ------- Cash flows from investing activities: Capital expenditures............................... (1,388) (779) (140) Purchases of short-term investments................ (12,018) -- -- -------- ------- ------- Net cash used in investing activities......... (13,406) (779) (140) -------- ------- ------- Cash flows from financing activities: Proceeds from note payable......................... -- 129 -- Repayment of note payable.......................... (129) -- -- Payments of principal under capital lease financing......................................... (136) (172) (442) Bank borrowings, net............................... (1,631) (1,047) 1,327 Repayment of note payable to stockholder........... -- -- (310) Proceeds from issuance of Common Stock............. 57,847 56 96 Repurchase of Common Stock......................... (1) (18) (1) Proceeds from issuance of Preferred Stock, Series B (net of issuance costs)........................... -- -- 1 Proceeds from issuance of Preferred Stock, Series D and Series E warrants (net of issuance costs)..... 67 -- -- Proceeds from issuance of Preferred Stock, Series F (net of issuance costs)........................... -- -- 7,400 Proceeds from issuance of Preferred Stock, Series AA (net of issuance costs)........................ 2,807 -- -- Proceeds from issuance of Preferred Stock, Series BB................................................ 13,943 -- -- Proceeds from bridge loan.......................... -- 1,500 1,500 Increase in restricted cash........................ (702) -- -- -------- ------- ------- Net cash provided by financing activities..... 72,065 448 9,571 -------- ------- ------- Effect of exchange rate changes in cash............ 219 180 (20) -------- ------- ------- Net increase (decrease) in cash and cash equivalents....................................... 55,166 (4,462) 4,333 Cash and cash equivalents at beginning of year..... 2,129 6,591 2,258 -------- ------- ------- Cash and cash equivalents at end of year........... $ 57,295 $ 2,129 $ 6,591 ======== ======= ======= Supplemental disclosures of cash flow information: Cash paid during the year: Interest................ $ 313 $ 202 $ 692 Cash paid during the year: Income taxes............ $ 11 $ 49 $ 19 Supplemental non-cash investing and financing activities: Cancellation of stockholder note in exchange for Common Stock...................................... $ -- $ 70 $ -- Assets acquired under capital lease obligations.... $ 468 $ -- $ -- Accretion of cumulative dividends on Preferred Stock............................................. $ 442 $ 1,258 $ 1,040 Unearned compensation related to stock option grants............................................ $ 37,607 $ -- $ -- Conversion of bridge loan to Preferred Stock....... $ 1,596 $ -- $ 1,500 Conversion of Mandatorily Redeemable Preferred Stock to Common Stock............................. $ 20,882 $ -- $ -- Beneficial conversion feature...................... $ 11,739 $ -- $ -- Write-off of property and equipment................ $ 776 $ 3,761 $ --

Years Ended March 31, -------------------------- 2000 1999 1998 -------- ------- ------- Basic and diluted net loss per share: Numerator: Net loss from continuing operations........... $(26,424) $(5,848) $(3,631) Accretion of mandatorily redeemable preferred stock to redemption value.................... (442) (1,258) (1,040) Beneficial conversion feature of preferred stock........................................ (11,739) -- -- -------- ------- ------- Net loss from continuing operations attributable to common stockholders.......... (38,605) (7,106) (4,671) Income (loss) from operations of discontinued user interface business...................... 2,657 248 (2,174) -------- ------- ------- Loss attributable to common stockholders...... $(35,948) $(6,858) $(6,845) ======== ======= ======= Denominator: Weighted average common shares outstanding.... 5,913 444 283 Weighted average unvested common shares subject to repurchase........................ (132) (73) (158) -------- ------- ------- Denominator for basic and diluted calculation.................................. 5,781 371 125 ======== ======= ======= Basic and diluted net loss per share attributable to common stockholders.......... $ (6.22) $(18.49) $(54.76) ======== ======= ======= Antidilutive securities including options, warrants and preferred stock not included in net loss per share calculations.............. 4,479 7,392 7,502 ======== ======= =======

As of March 31, ------------ 2000 1999 ---- ------ Current assets................................................. $615 $1,183 Current liabilities............................................ (24) (70) ---- ------ Net assets of discontinued operations.......................... $591 $1,113 ==== ======

Years Ended March 31, -------------------------- 2000 1999 1998 ------- ------- -------- Revenues........................................ $ 5,013 $ 9,094 $ 18,313 Costs and expenses.............................. (2,356) (8,846) (20,487) ------- ------- -------- Income (loss) from discontinued operations...... $ 2,657 $ 248 $ (2,174) ======= ======= ========

Years Ended March 31, ------------------- 2000 1999 1998 ------ ------ ----- Net cash provided by (used in) discontinued operations.......................................... $3,109 $2,061 $(294) ====== ====== =====

Gross Gross Estimated Amortized Unrealized Unrealized Fair Cost Gains Losses Value --------- ---------- ---------- --------- Municipal bonds.................. $12,000 $ -- $ -- $12,000 Commercial paper................. 35,869 -- (20) 35,849 Money market funds............... 17,346 -- -- 17,346 ------- ---- ---- ------- $65,215 $ -- $(20) $65,195 ======= ==== ==== ======= Included in cash and cash equivalents..................... $53,197 Included in short-term investments..................... 11,998 ------- $65,195 =======

Amortized Estimated Cost Fair Value --------- ---------- Due in 1 year or less.................................. $47,869 $47,849 ======= =======

As of March 31, ---------------- 2000 1999 ------- ------- Computer equipment......................................... $ 2,636 $ 1,626 Furniture and fixtures..................................... 463 337 Leasehold improvements..................................... 316 412 ------- ------- 3,415 2,375 Less: accumulated depreciation and amortization............ (1,482) (1,589) ------- ------- $ 1,933 $ 786 ======= =======

As of March 31, ---------------- 2000 1999 ------- ------- Computer equipment......................................... $ 705 $ 268 Less: accumulated amortization............................. (322) (206) ------- ------- $ 383 $ 62 ======= =======

As of March 31, ------------- 2000 1999 ------ ------ Accrued compensation.......................................... $1,622 $ 617 Sales and income tax payable.................................. 1,276 975 Other accrued liabilities..................................... 4,548 1,281 ------ ------ $7,446 $2,873 ====== ======

Common Stock Warrants ------------------------- Exercise Shares Price Amount ------ -------- -------- Balance, April 1, 1997............................ 5,000 28,000 Warrants granted.................................. 1,005 $5.60 5,625 ------ -------- Balance, March 31, 1998 and 1999.................. 6,005 $ 33,625 Warrants exercised................................ (5,000) $5.60 (28,000) ------ -------- Balance, March 31, 2000........................... 1,005 $ 5,625 ------ --------

Options Outstanding -------------------------- Weighted Average Exercise Shares Number Price Available of per for Grant Shares Share --------- ------ -------- Options outstanding at April 1, 1997.............. 253 1,231 $0.56 Granted........................................... (673) 673 $0.62 Exercised......................................... -- (173) $0.56 Canceled.......................................... 425 (425) $0.57 ------ ------ ----- Options outstanding at March 31, 1998............. 5 1,306 $0.59 Additional shares reserved........................ 104 -- -- Granted........................................... (625) 625 $0.80 Exercised......................................... -- (98) $0.57 Canceled.......................................... 637 (637) $0.59 ------ ------ ----- Options outstanding at March 31, 1999............. 121 1,196 $0.70 Additional shares reserved........................ 5,706 -- -- Granted........................................... (4,970) 4,970 $1.83 Exercised......................................... -- (1,486) $0.51 Canceled.......................................... 202 (202) $1.42 ------ ------ ----- Options outstanding at March 31, 2000............. 1,059 4,478 $1.98 ====== ====== =====

Options Outstanding and Exercisable ------------------------------------ Weighted- Average Remaining Weighted- Contractual Average Number of Life Exercise Range of Exercise Price Shares (Years) Price ----------------------- -------------- ----------- --------- (in thousands) $0.10.................................. 2,368 9.43 $ 0.10 $0.56.................................. 116 6.79 $ 0.56 $0.80.................................. 618 8.33 $ 0.80 $1.00-$2.00............................ 394 9.61 $ 1.16 $6.00.................................. 613 9.83 $ 6.00 $8.00-$16.00........................... 369 9.96 $10.67 ----- 4,478 9.32 $ 1.98 =====

Year Ended March 31, 2000 ---------- Research and development.......................................... $ 3,651 Selling and marketing............................................. 4,300 General and administrative........................................ 8,449 ------- $16,400 =======

Years Ended March 31, ----------------------- 2000 1999 1998 ------- ------- ------- Risk-free interest rate.............................. 5.7% 4.7% 5.3% Expected life........................................ 5 years 5 years 5 years Dividend yield....................................... -- -- -- Expected volatility.................................. 0% 0% 0%

Years ended March 31, -------------------------- 2000 1999 1998 -------- ------- ------- Net loss attributable to common stockholders... $(35,948) $(6,858) $(6,845) ======== ======= ======= Net loss--FAS 123 adjusted..................... $(36,119) $(6,896) $(6,896) ======== ======= ======= Net loss per share--as reported Basic and diluted............................ $ (6.22) $(18.49) $(54.76) ======== ======= ======= Net loss per share--FAS 123 adjusted Basic and diluted............................ $ (6.25) $(18.59) $(55.17) ======== ======= =======

As of March 31, ---------- 2000 1999 ---- ---- Cumulative translation adjustments............................... $509 $290 Unrealized gain/(loss) on investments............................ (20) -- ---- ---- Accumulated other comprehensive income........................... $489 $290 ==== ====

Capital Operating Leases Leases ------- --------- Year Ended March 31, 2001....................................................... $ 265 $2,191 2002....................................................... 238 1,846 2003....................................................... 80 1,772 2004....................................................... -- 1,675 2005....................................................... -- 1,367 ----- ------ Total minimum lease payments............................. 583 $8,851 ====== Less: amount representing interest......................... (151) ----- Present value of capital lease obligations................. 432 Current portion............................................ (176) ----- Long-term portion.......................................... $ 256 =====

Years ended March 31, ----------------- 2000 1999 1998 ----- ----- ----- Current: Federal................................................. $ -- $ -- $ -- Foreign................................................. 149 82 68 State................................................... 4 5 -- Deferred--federal and state............................... -- -- -- ----- ----- ----- Income tax expense...................................... $ 153 $ 87 $ 68 ===== ===== =====

As of March 31, ----------------- 2000 1999 -------- ------- Accrued liabilities....................................... $ 846 $ 576 Deferred revenue.......................................... 20 12 Net operating loss carryforwards.......................... 7,906 6,702 Credit carryforwards and other............................ 2,099 1,428 -------- ------- 10,871 8,718 Valuation allowance....................................... (10,871) (8,718) -------- ------- Net deferred tax assets................................. $ -- $ -- ======== =======

Years ended March 31, --------------------- 2000 1999 1998 ----- ----- ----- "Expected" income benefit.................. (34.0)% (34.0)% (34.0)% Net operating loss not benefited................ 10.5 34.0 34.0 Foreign income and withholding taxes........ 1.0 1.6 1.4 Stock compensation........ 23.5 -- -- ----- ----- ----- Effective tax rate...... 1.0 % 1.6 % 1.4 % ===== ===== =====

Geographic Area Americas Europe Pacific Rim Eliminations Total --------------- -------- ------- ----------- ------------ -------- March 31, 2000 and for the year then ended: Sales to unaffiliated customers............. $ 15,112 $ 2,137 $ 947 $ -- $ 18,196 -------- ------- ------- -------- -------- Operating (loss) income................ (24,446) (335) (1,388) -- (26,169) -------- ------- ------- -------- -------- Liabilities--continued operations............ 15,679 6,981 4,487 (14,533) 12,614 Liabilities-- discontinued operations............ (24) -- -- -- (24) -------- ------- ------- -------- -------- Total Liabilities.... 15,655 6,981 4,487 (14,533) 12,590 -------- ------- ------- -------- -------- Identifiable assets-- continued operations.. 84,962 6,053 1,610 (14,881) 77,744 Identifiable assets-- discontinued operations............ 209 223 183 -- 615 -------- ------- ------- -------- -------- Total Identifiable assets.............. $ 85,171 $ 6,276 $ 1,793 $(14,881) $ 78,359 ======== ======= ======= ======== ======== March 31, 1999 and for the year then ended: Sales to unaffiliated customers............. $ 6,933 $ 1,563 $ 558 $ -- $ 9,054 -------- ------- ------- -------- -------- Operating (loss) income................ (4,944) (603) 35 -- (5,512) -------- ------- ------- -------- -------- Liabilities--continued operations............ 13,718 5,764 3,838 (12,164) 11,156 Liabilities-- discontinued operations............ (70) -- -- -- (70) -------- ------- ------- -------- -------- Total Liabilities.... 13,648 5,764 3,838 (12,164) 11,086 -------- ------- ------- -------- -------- Identifiable assets-- continued operations.. 11,233 5,408 2,320 (12,379) 6,582 Identifiable assets-- discontinued operations............ 417 416 350 -- 1,183 -------- ------- ------- -------- -------- Total Identifiable assets.............. $ 11,650 $ 5,824 2,670 $(12,379) $ 7,765 ======== ======= ======= ======== ======== March 31, 1998 and for the year then ended: Sales to unaffiliated customers............. $ 3,492 $ 808 $ 62 $ -- $ 4,362 -------- ------- ------- -------- -------- Operating (loss) income................ (1,452) (1,713) 195 -- (2,970) -------- ------- ------- -------- -------- Liabilities--continued operations............ 15,041 4,502 3,307 (11,498) 11,352 Liabilities-- discontinued operations............ 441 -- -- -- 441 -------- ------- ------- -------- -------- Total Liabilities.... 15,482 4,502 3,307 (11,498) 11,793 -------- ------- ------- -------- -------- Identifiable assets-- continued operations.. 16,472 4,034 1,453 (11,714) 10,245 Identifiable assets-- discontinued operations............ 1,643 927 1,039 -- 3,609 -------- ------- ------- -------- -------- Total Identifiable assets.............. $ 18,115 $ 4,961 $ 2,492 (11,714) 13,854 ======== ======= ======= ======== ========

June 30, March 2000 31, 2000 ----------- -------- (unaudited) (a) ASSETS ------ Current assets: Cash and cash equivalents............................... $ 45,099 $ 57,295 Short-term investments.................................. 22,821 11,998 Accounts receivable, net................................ 5,444 4,939 Prepaid expenses and other current assets............... 1,973 1,108 -------- -------- Total current assets.................................. 75,337 75,340 Property and equipment, net............................... 3,223 1,933 Restricted cash........................................... 716 702 Deposits and other assets................................. 369 384 -------- -------- Total assets.......................................... $ 79,645 $ 78,359 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable........................................ $ 914 $ 1,972 Current portion of capital lease obligations............ 173 176 Accrued expenses........................................ 6,261 7,446 Deferred revenue........................................ 2,485 2,728 -------- -------- Total current liabilities............................. 9,833 12,322 Long-term liabilities: Capital lease obligations, net of current portion....... 211 256 Other long-term liabilities............................. 34 12 -------- -------- Total liabilities..................................... 10,078 12,590 -------- -------- Commitments and contingencies Stockholders' equity: Preferred stock......................................... -- -- Common stock............................................ 2 2 Additional paid-in capital.............................. 153,385 144,642 Accumulated other comprehensive income.................. 318 489 Unearned stock-based compensation....................... (16,876) (21,207) Accumulated deficit..................................... (67,262) (58,157) -------- -------- Total stockholders' equity............................ 69,567 65,769 -------- -------- Total liabilities and stockholders' equity................ $ 79,645 $ 78,359 ======== ========

Three Months Ended June 30, ---------------- 2000 1999 ------- ------- Net revenues: Product licenses........................................... $ 3,320 $ 1,394 Services and maintenance................................... 3,914 1,926 ------- ------- Total revenues........................................... 7,234 3,320 ------- ------- Cost of revenues: Product licenses........................................... 10 10 Services and maintenance................................... 3,194 1,187 ------- ------- Total cost revenues...................................... 3,204 1,197 ------- ------- Gross profit................................................. 4,030 2,123 ------- ------- Operating expenses: Research and development................................... 1,902 1,260 Sales and marketing........................................ 5,959 1,894 General and administrative................................. 1,838 638 Stock-based compensation................................... 4,330 -- ------- ------- Total operating expenses................................. 14,029 3,792 ------- ------- Operating loss............................................... (9,999) (1,669) Interest expense............................................. (28) (112) Other income and (expense), net.............................. 1,050 10 ------- ------- Net loss from continuing operations before income taxes...... (8,977) (1,771) Provision for income taxes................................... (6) (12) ------- ------- Net loss from continuing operations.......................... (8,983) (1,783) Discontinued operations: Income (loss) from operations of discontinued user interface business (net of income taxes).................. (121) 652 ------- ------- Net loss..................................................... (9,104) (1,131) Accretion of mandatorily redeemable preferred stock to redemption value............................................ -- (442) ------- ------- Net loss attributable to common stockholders................. (9,104) (1,573) Other comprehensive income (loss), net of tax: Unrealized loss on investments............................. (35) -- Translation adjustments.................................... (136) (111) ------- ------- Comprehensive loss........................................... $(9,275) $(1,684) ======= ======= Basic and diluted net loss per common share attributable to common stockholders: Loss from continuing operations............................ $ (0.41) $ (1.01) Earnings/(loss) from discontinued operations............... (0.01) 0.30 ------- ------- Basic and diluted net loss per common share attributable to common stockholders......................................... $ (0.42) $ (0.71) ======= ======= Number of shares used in the calculation of basic and diluted net loss per share.......................................... 21,864 2,211 ======= =======

Three Months Ended June 30, ----------------- 2000 1999 -------- ------- Cash flows from operating activities: Net loss.................................................... $ (9,104) $(1,131) Add (deduct) loss (income) from discontinued operations..... 121 (652) -------- ------- Loss from continuing operations............................. (8,983) (1,783) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization............................. 232 119 Amortization of stock-based compensation.................. 4,330 -- Changes in assets and liabilities: Accounts receivable...................................... (1,062) 242 Prepaid expenses and other............................... (865) (54) Accounts payable......................................... (1,034) (441) Accrued expenses ........................................ (1,185) 452 Deferred revenue......................................... (243) (608) Deposits and other assets................................ 15 213 Other long-term liabilities.............................. 22 -- -------- ------- Net cash used in continuing operations...................... (8,773) (1,860) Net cash provided by discontinued operations................ 412 674 -------- ------- Net cash used in operating activities.................. (8,361) (1,186) -------- ------- Cash flows from investing activities: Capital expenditures........................................ (1,522) (20) Purchases of short-term investments, net.................... (10,858) -- -------- ------- Net cash used in investing activities.................. (12,380) (20) -------- ------- Cash flows from financing activities: Repayment of note payable................................... -- (43) Payments of principal under capital lease financing......... (48) (31) Bank borrowings, net........................................ -- 102 Proceeds from issuance of Common Stock...................... 8,769 15 Repurchase of Common Stock.................................. (26) -- Proceeds from issuance of Preferred Stock warrants, Series D and Series E (net of issuance costs)....................... -- 36 Proceeds from issuance of Preferred Stock, Series AA (net of issuance costs)............................................ -- 2,860 Increase in restricted cash................................. (14) -- -------- ------- Net cash provided by financing activities.............. 8,681 2,939 -------- ------- Effect of exchange rate changes in cash..................... (136) (111) -------- ------- Net increase (decrease) in cash and cash equivalents........ (12,196) 1,622 Cash and cash equivalents at beginning of period............ 57,295 2,129 -------- ------- Cash and cash equivalents at end of period.................. $ 45,099 $ 3,751 ======== ======= Supplemental non-cash investing and financing activities: Assets acquired under capital lease obligations............. $ -- $ 22 Accretion of cumulative dividends on Preferred Stock........ $ -- $ 442 Conversion of bridge loan to Preferred Stock................ $ -- $ 1,596 Conversion of Mandatorily Redeemable Preferred Stock to Common Stock............................................... $ -- $20,882 Write-off of property and equipment......................... $ -- $ 3,761

Three Months Ended June 30, ---------------- 2000 1999 ------- ------- Basic and diluted net loss per share: Numerator: Net loss from continuing operations........................ $(8,983) $(1,783) Accretion of mandatorily redeemable preferred stock to redemption value.......................................... -- (442) ------- ------- Net loss from continuing operations attributable to common stockholders.............................................. (8,983) (2,225) Income (loss) from operations of discontinued user interface business........................................ (121) 652 ------- ------- Loss attributable to common stockholders................... $(9,104) $(1,573) ======= ======= Denominator: Weighted average common shares outstanding................. 22,497 2,211 Weighted average unvested common shares subject to repurchase................................................ (633) -- ------- ------- Denominator for basic and diluted calculation.............. 21,864 2,211 ======= ======= Basic and diluted net loss per share attributable to common stockholders.............................................. $ (0.42) $ (0.71) ======= ======= Antidilutive securities including options, warrants and preferred stock not included in net loss per share calculations.............................................. 4,660 9,520 ======= =======

Geographic Area Americas Europe Pacific Rim Eliminations Total --------------- -------- ------ ----------- ------------ ----- June 30, 2000 and for the three months then ended: Sales to unaffiliated customers.............. $ 5,497 $1,191 $ 546 $ -- $ 7,234 ------- ------ ------ -------- ------- Operating (loss) income................. (9,657) (1) (341) -- (9,999) ------- ------ ------ -------- ------- Liabilities--continued operations............. 12,564 8,551 5,154 (16,191) 10,078 Liabilities-- discontinued operations............. -- -- -- -- -- ------- ------ ------ -------- ------- Total Liabilities..... 12,564 8551 5,154 (16,191) 10,078 ------- ------ ------ -------- ------- Identifiable assets-- continued operations... 87,327 6,887 1,622 (16,191) 79,645 Identifiable assets-- discontinued operations............. -- -- -- -- -- ------- ------ ------ -------- ------- Total Identifiable assets............... $87,327 $6,887 $1,622 $(16,191) $79,645 ======= ====== ====== ======== ======= June 30, 1999 and for the three months then ended: Sales to unaffiliated customers.............. $ 2,884 $ 423 $ 13 $ -- $ 3,320 ------- ------ ------ -------- ------- Operating (loss) income................. (1,236) 12 (445) -- (1,669) ------- ------ ------ -------- ------- Liabilities--continued operations............. 12,279 6,085 3,516 (12,870) 9,010 Liabilities-- discontinued operations............. (68) -- -- -- (68) ------- ------ ------ -------- ------- Total Liabilities..... 12,211 6,085 3,516 (12,870) 8,942 ------- ------ ------ -------- ------- Identifiable assets-- continued operations... 13,362 5,913 1,603 (12,870) 8,008 Identifiable assets-- discontinued operations............. 388 230 254 -- 872 ------- ------ ------ -------- ------- Total Identifiable assets............... $13,750 $6,143 $1,857 $(12,870) $ 8,880 ======= ====== ====== ======== =======

December 31, ------------------ June 30, 1998 1999 2000 -------- -------- ----------- (unaudited) ASSETS Current assets: Cash and cash equivalents.................... $ 1,209 $ 25 $ 158 Accounts receivable, less allowance for doubtful accounts of $92 in 1998 and $113 in 1999, and $212 at June 30, 2000............. 4,468 5,633 4,615 Prepaid expenses and other current assets.... 334 480 391 -------- -------- -------- Total current assets........................... 6,011 6,138 5,164 Property and equipment: Office and computer equipment................ 2,400 1,662 1,676 Furniture and fixtures....................... 660 613 548 Leasehold improvements....................... 391 382 200 -------- -------- -------- 3,451 2,657 2,424 Accumulated depreciation..................... 1,811 1,635 1,490 -------- -------- -------- Property and equipment, net.................... 1,640 1,022 934 Other Assets: Deposits and other assets...................... 277 211 261 -------- -------- -------- Total assets................................... $ 7,928 $ 7,371 $ 6,359 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Accounts payable............................. $ 2,597 $ 2,235 $ 3,102 Accrued compensation and related expenses.... 1,930 2,113 1,628 Accrued expenses............................. 988 1,165 1,132 Deferred revenue............................. 4,069 4,586 4,672 Current portion of capital lease obligations................................. 324 268 183 Notes payable to affiliated companies........ -- 2,075 6,825 Notes payable................................ -- 1,173 1,072 -------- -------- -------- Total current liabilities...................... 9,908 13,615 18,614 Capital lease obligations, less current portion....................................... 336 114 67 Commitments Stockholders' equity (deficit): Convertible preferred stock, $0.01 par value: Authorized shares--10,000,000 Issued and outstanding shares--7,312,294... 37,972 37,972 37,972 Common stock, $0.01 par value: Authorized shares--15,000,000 Issued and outstanding shares--5,406,400 in 1998 and 5,920,978 in 1999 and 7,409,828 at June 30, 2000 ......................... 5,406 5,923 32,814 Employee Stock Trust......................... -- -- (26,856) Foreign currency translation adjustment...... 3 (20) (39) Accumulated deficit.......................... (45,697) (50,233) (56,213) -------- -------- -------- Total stockholders' equity (deficit)........... (2,316) (6,358) (12,322) -------- -------- -------- Total liabilities and stockholders' equity (deficit)..................................... $ 7,928 $ 7,371 $ 6,359 ======== ======== ========

Six months ended Year ended December 31, June 30, ------------------------ ---------------- 1998 1999 1999 2000 ----------- ----------- ------- ------- (unaudited) Revenues: Licenses......................... $ 10,563 $ 12,160 $ 6,099 $ 4,918 Services......................... 10,536 11,480 5,084 7,166 ----------- ----------- ------- ------- Total revenues................. 21,099 23,640 11,183 12,084 Cost of revenues: Licenses......................... 539 704 267 337 Services......................... 6,146 6,394 3,132 4,131 ----------- ----------- ------- ------- Total cost of revenues......... 6,685 7,098 3,399 4,468 ----------- ----------- ------- ------- Gross profit....................... 14,414 16,542 7,784 7,616 Operating expenses: Research and development......... 5,175 5,691 2,703 3,733 Sales and marketing.............. 7,841 10,308 4,722 6,406 General and administrative....... 5,285 4,696 2,211 3,013 ----------- ----------- ------- ------- Total operating expenses....... 18,301 20,695 9,636 13,152 ----------- ----------- ------- ------- Loss from operations............... (3,887) (4,153) (1,852) (5,536) Interest income.................... 30 36 21 9 Interest expense................... (82) (253) (91) (326) ----------- ----------- ------- ------- Loss before income taxes........... (3,939) (4,370) (1,922) (5,853) Provision for income taxes......... (77) (166) (69) (127) ----------- ----------- ------- ------- Net loss........................... $ (4,016) $ (4,536) $(1,991) $(5,980) =========== =========== ======= =======

Convertible Foreign Total Preferred Stock Common Stock Employee Currency Stockholders' ----------------- ----------------- Stock Translation Accumulated Comprehensive Equity Shares Amount Shares Amount Trust Adjustment Deficit Loss (Deficit) --------- ------- --------- ------- -------- ----------- ----------- ------------- ------------- Balances at December 31, 1997............. 7,312,294 $37,972 5,354,400 $ 5,354 $ -- $(26) $(41,681) $ 1,619 Exercise of common stock options....... -- -- 52,000 52 -- -- -- -- 52 Comprehensive loss: Net loss............ -- -- -- -- -- -- (4,016) $(4,016) (4,016) Foreign currency translation adjustment......... -- -- -- -- -- 29 -- 29 29 ------- Total comprehensive loss............... $(3,987) --------- ------- --------- ------- -------- ---- -------- ======= -------- Balances at December 31, 1998............. 7,312,294 37,972 5,406,400 5,406 -- 3 (45,697) (2,316) Exercise of common stock options....... -- -- 514,578 517 -- -- -- -- 517 Comprehensive loss: Net loss............ -- -- -- -- -- -- (4,536) $(4,536) (4,536) Foreign currency translation adjustment......... -- -- -- -- -- (23) -- (23) (23) ------- Total comprehensive loss............... -- $(4,559) --------- ------- --------- ------- -------- ---- -------- ======= -------- Balances at December 31, 1999............. 7,312,294 37,972 5,920,978 5,923 -- (20) (50,233) (6,358) Exercise of common stock options (unaudited)......... -- -- 35,600 35 -- -- -- -- 35 Issuance of common stock to Rabbi trust (unaudited)......... -- -- 1,453,250 26,856 (26,856) -- -- -- -- Comprehensive loss: Net loss (unaudited)........ -- -- -- -- -- -- (5,980) (5,980) (5,980) Foreign currency translation adjustment (unaudited)........ -- -- -- -- -- (19) -- (19) (19) ------- Total comprehensive loss (unaudited)... $(5,999) ======= --------- ------- --------- ------- -------- ---- -------- -------- Balances at June 30, 2000 (unaudited)..... 7,312,294 $37,972 7,409,828 $32,814 $(26,856) $(39) $(56,213) $(12,322) ========= ======= ========= ======= ======== ==== ======== ========

Year ended Six months ended December 31, June 30, ---------------- ------------------ 1998 1999 1999 2000 ------- ------- -------- -------- (unaudited) Operating activities Net loss................................ $(4,016) $(4,536) $ (1,991) $ (5,980) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization......... 1,104 913 499 368 Changes in operating assets and liabilities: Accounts receivable................. (450) (1,165) (319) 1,018 Prepaid expenses and other current assets............................. (75) (146) 31 89 Deposits and other assets........... 79 66 (84) (50) Accounts payable.................... 2,029 (362) (759) 867 Accrued compensation and related expenses........................... 299 183 287 (485) Accrued expenses.................... (81) 177 (415) (33) Deferred revenue.................... 1,277 517 768 86 ------- ------- -------- -------- Net cash provided by (used in) operating activities............. 166 (4,353) (1,983) (4,120) Investing activities Purchases of property and equipment..... (145) (231) (100) (268) Proceeds from sale of property and equipment.............................. 19 -- -- -- ------- ------- -------- -------- Net cash used in investing activities....................... (126) (231) (100) (268) Financing activities Reduction in capital lease obligations.. (359) (342) (183) (144) Proceeds from exercise of common stock options................................ 52 517 507 35 Payment on notes payable................ -- (6,414) (1,084) (6,372) Proceeds from issuance of notes payable................................ -- 9,662 3,198 11,021 ------- ------- -------- -------- Net cash (used in) provided by financing activities............. (307) 3,423 2,438 4,540 Effect of exchange rate changes on cash and cash equivalents................... 29 (23) (35) (19) ------- ------- -------- -------- Net (decrease) increase in cash and cash equivalents............................ (238) (1,184) 320 133 Cash and cash equivalents at beginning of year................................ 1,447 1,209 1,209 25 ------- ------- -------- -------- Cash and cash equivalents at end of year................................... $ 1,209 $ 25 $ 1,529 $ 158 ======= ======= ======== ======== Supplemental disclosures Interest paid........................... $ -- $ 125 $ 66 $ 187 ======= ======= ======== ======== Supplemental disclosures of noncash investing and financing activities Capital lease obligations incurred...... $ 431 $ 64 $ 65 $ 12 ======= ======= ======== ========

Capital Operating Leases Leases ------- --------- 2000....................................................... $295 $ 832 2001....................................................... 90 604 2002....................................................... 22 51 2003....................................................... 12 -- ---- ------ Total minimum lease payments............................... 419 $1,487 ====== Less interest.............................................. (37) ---- Present value of minimum lease payments.................... 382 Less current portion....................................... 268 ---- Capital lease obligations, less current portion............ $114 ====

Outstanding Options -------------------- Weighted- Average Exercise Number of Price per Shares Share --------- --------- Balance at December 31, 1997............................ 1,414,478 $1.76 Granted............................................... 10,000 8.00 Canceled.............................................. (94,800) 2.76 Exercised............................................. (52,000) 1.00 --------- ----- Balance at December 31, 1998............................ 1,277,678 1.77 Canceled.............................................. (75,100) 3.26 Exercised............................................. (514,578) 1.00 --------- ----- Balance at December 31, 1999............................ 688,000 $2.17 ========= =====

Options Outstanding Options Exercisable -------------------------------------------- -------------------------- Weighted- Weighted- Average Weighted- Average Remaining Average Number Exercise Contractual Number Exercise Exercise of Price per Life of Price per Price Shares Share (Years) Shares Share -------- ------ --------- ----------- ------- --------- $1.00 550,500 $1.00 4.76 496,900 $1.00 5.00 51,500 5.00 6.84 27,500 5.00 8.00 86,000 8.00 7.53 40,400 8.00 ------- ----- ------- ----- 688,000 $2.17 5.26 564,800 $1.70 ======= ===== ======= =====

Year Ended December 31, ------------ 1999 1998 ---- ------- Expected dividend yield......................................... -- 0% Risk-free interest rate......................................... -- 5.67% Expected life of the option..................................... -- 6 years

Year Ended December 31, -------------------------- 1999 1998 ------------ ------------ Deferred tax assets: Net operating loss carryforwards............... $ 44,189,000 $ 42,515,000 Deferred revenue............................... 1,579,000 1,562,000 Other.......................................... 390,000 398,000 ------------ ------------ Total deferred tax assets........................ 46,158,000 44,475,000 Valuation allowance.............................. (46,158,000) (44,475,000) ------------ ------------ Net deferred tax assets.......................... $ -- $ -- ============ ============

Total Pro Forma Pro Forma Pro Forma Pro Forma Brokat(1) Gemstone Adjustments Notes Combined Blaze Adjustments Notes Combined --------- -------- ----------- ----- --------- -------- ----------- ----- --------- (DM) (DM) (DM) (DM) (DM) (DM) (DM) ASSETS: Currents Assets: Cash and cash equivalents............. 163,856 324 -- 164,180 92,408 -- 256,588 Short term investments.. -- -- -- -- 46,760 -- 46,760 Accounts receivable (less pro forma allowance for doubtful accounts of DM 3,456 at June 30, 2000).......... 63,419 9,456 -- 72,875 11,155 -- 84,030 Cost and estimated earning in excess of billings on uncompleted contracts............... 2,965 -- -- 2,965 -- -- 2,965 Prepaid expenses and other current assets.... 21,781 801 -- 22,582 4,043 -- 26,625 -------- -------- ------- --------- -------- --------- --------- Total Current Assets.... 252,021 10,581 -- 262,602 154,366 -- 416,968 -------- -------- ------- --------- -------- --------- --------- Property and equipment, net..................... 14,382 1,914 -- 16,296 6,604 -- 22,900 -------- -------- ------- --------- -------- --------- --------- Goodwill................ 245,267 -- 524,772 (6d) 770,039 -- 871,637 (6d) 1,641,676 Other intangible assets.................. 10,130 -- -- 10,130 -- -- 10,130 Less accumulated amortization............ (36,627) -- -- (36,627) -- -- (36,627) -------- -------- ------- --------- -------- --------- --------- 218,770 -- 524,772 743,542 -- 871,637 1,615,179 -------- -------- ------- --------- -------- --------- --------- Other long-term investments............. 6,631 -- -- 6,631 -- -- 6,631 Deferred income taxes... 4,363 -- -- 4,363 -- -- 4,363 Restricted cash......... -- -- -- 1,467 -- 1,467 Deposits and other assets.................. -- 535 -- 535 756 -- 1,291 -------- -------- ------- --------- -------- --------- --------- Total assets............ 496,167 13,030 524,772 1,033,969 163,193 871,637 2,068,799 ======== ======== ======= ========= ======== ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY: Current Liabilities: Short-term debt to banks................... 174 -- -- 174 -- -- 174 Current portion of capital lease obligations............. -- 375 -- 375 354 -- 729 Notes payable to affiliated companies.... -- 13,984 (13,984) (6b) -- -- -- -- Notes payable........... -- 2,197 -- 2,197 -- -- 2,197 Accounts payable, trade................... 8,391 6,356 5,000 (6d) 19,747 1,873 5,000 (6d) 26,620 Payroll-related accruals................ 8,852 3,336 -- 12,188 -- -- 12,188 Tax-related accruals.... 4,096 -- -- 4,096 -- -- 4,096 Billings in excess of cost and estimated earnings on uncompleted contracts............... 5,546 -- -- 5,546 -- -- 5,546 Other accrued expenses and current liabilities............. 17,217 2,319 -- 19,536 12,829 -- 32,365 Deferred income......... 4,853 9,573 -- 14,426 5,092 -- 19,518 Deferred income taxes... 4,025 -- -- 4,025 -- -- 4,025 -------- -------- ------- --------- -------- --------- --------- Total current liabilities............. 53,154 38,140 (8,984) 82,310 20,148 5,000 107,458 Long-term debt to banks................... 2,000 -- -- 2,000 -- -- 2,000 Capital lease obligations, net of current portion......... -- 137 -- 137 432 -- 569 Other long-term debt.... 246,596 -- -- 246,596 70 -- 246,666 -------- -------- ------- --------- -------- --------- --------- Total liabilities....... 301,750 38,277 (8,984) 331,043 20,650 5,000 356,693 -------- -------- ------- --------- -------- --------- --------- Minority interest....... 326 -- -- 326 -- -- 326 Shareholders' equity (deficit): Common Stock............ 53,416 67,236 4,351 (6a) 57,767 4 8,748 (6a) 66,515 (67,236) (6c) (4) (6c) Convertible preferred stock................... -- 77,805 (77,805) (6c) -- -- -- -- Additional paid-in capital................. 449,336 -- 523,303 (6a) 972,639 314,286 1,078,879 (6a) 2,051,518 (314,286) (6c) Accumulated deficit..... (185,719) (115,180) 115,180 (6c) (185,719) (137,820) 137,820 (6c) (185,719) Deferred compensation... (118,809) -- (19,145) (7) (137,954) (34,579) (78,447) (7) (216,401) 34,579 (6c) Employee Stock Trust.... -- (55,028) 55,028 (6c) -- -- -- -- Accumulated other comprehensive income (loss).................. (4,133) (80) 80 (6c) (4,133) 652 (652) (6c) (4,133) -------- -------- ------- --------- -------- --------- --------- Total shareholders' equity (deficit)........ 194,091 (25,247) 533,756 702,600 142,543 866,637 1,711,780 -------- -------- ------- --------- -------- --------- --------- Total liabilities and shareholders' equity.... 496,167 13,030 524,772 1,033,969 163,193 871,637 2,068,799 ======== ======== ======= ========= ======== ========= =========

Brokat MeTechnology TST Gemstone ---------- ------------ ------------ ---------- Year Ended July 1, 1998 July 1, 1998 Total Year Ended June 30, thru May 21, thru May 9, Pro Forma Pro June 30, Pro Forma Pro Forma 1999 1999 1999 Adjustments Notes Forma 1999 Adjustments Notes Combined ---------- ------------ ------------ ----------- ----- -------- ---------- ----------- ----- ---------- (DM) (DM) (DM) (DM) (DM) (DM) (DM) (DM) Revenue......... 62,487 4,544 8,375 (3,753) (2) 71,653 41,942 -- 113,595 Cost of Sales... (31,325) (2,619) (2,989) -- (36,933) (12,515) -- (49,448) ---------- ------- ------ ------- -------- ------- --------- ---------- Gross profit.... 31,162 1,925 5,386 (3,753) 34,720 29,427 -- 64,147 ---------- ------- ------ ------- -------- ------- --------- ---------- Selling expenses........ (38,848) (4,960) (862) -- (44,670) (17,017) -- (61,687) General and administrative expenses........ (10,639) (5,833) (1,450) -- (17,922) (10,145) -- (28,067) Research and development expenses........ (8,733) (3,180) (3,206) -- (15,119) (10,144) -- (25,263) Amortization of goodwill and other intangible assets from acquisitions.... (3,686) -- -- (27,802) (3) (31,488) -- (74,967) (3) (106,455) Non-cash charges associated with stock option grants.......... (16,340) -- -- -- (16,340) -- (8,368) (7) (24,708) ---------- ------- ------ ------- -------- ------- --------- ---------- Total operating expenses........ (78,246) (13,973) (5,518) (27,802) (125,539) (37,306) (83,335) (246,180) ---------- ------- ------ ------- -------- ------- --------- ---------- Operating loss.. (47,084) (12,048) (132) (31,555) (90,819) (7,879) (83,335) (182,033) Interest expense......... 568 (390) (86) (28,579) (4) (28,487) -- -- (28,487) Other income, net............. 2,565 -- -- -- 2,565 (186) -- 2,379 ---------- ------- ------ ------- -------- ------- --------- ---------- Loss before income taxes and minority interests....... (43,951) (12,438) (218) (60,134) (116,741) (8,065) (83,335) (208,141) Income tax expense......... (113) (17) (80) -- (210) (235) -- (445) Minority interest........ 90 -- -- -- 90 -- -- 90 ---------- ------- ------ ------- -------- ------- --------- ---------- Net loss before extraordinary item............ (43,974) (12,455) (298) (60,134) (116,861) (8,300) (83,335) (208,496) Extraordinary loss on early extinguishment of debt......... (64) -- -- -- (64) -- -- (64) ---------- ------- ------ ------- -------- ------- --------- ---------- Net loss from continuing operations...... (44,038) (12,455) (298) (60,134) (116,925) (8,300) (83,335) (208,560) ========== ======= ====== ======= ======== ======= ========= ========== Basic and diluted loss per share: Loss before extraordinary items........... (2.23) (9.51) Extraordinary loss............ (0.01) (0.00) ---------- ---------- Net loss from continuing operations...... (2.24) (9.51) ========== ========== Weighted average number of common shares outstanding..... 19,694,650 2,219,983 (6e) 21,914,633 ========== ========= ========== Blaze ---------- Year Ended Total June 30, Pro Forma Pro Forma 1999 Adjustments Notes Combined ---------- ----------- ----- ----------- (DM) (DM) (DM) Revenue......... 19,754 -- 133,349 Cost of Sales... (6,540) -- (55,988) ---------- ----------- ----------- Gross profit.... 13,214 -- 77,361 ---------- ----------- ----------- Selling expenses........ (10,950) -- (72,637) General and administrative expenses........ (4,334) -- (32,401) Research and development expenses........ (7,669) -- (32,932) Amortization of goodwill and other intangible assets from acquisitions.... -- (124,520) (3) (230,975) Non-cash charges associated with stock option grants.......... -- (25,442) (7) (50,150) ---------- ----------- ----------- Total operating expenses........ (22,953) (149,962) (419,095) ---------- ----------- ----------- Operating loss.. (9,739) (149,962) (341,734) Interest expense......... (623) -- (29,110) Other income, net............. -- -- 2,379 ---------- ----------- ----------- Loss before income taxes and minority interests....... (10,362) (149,962) (368,465) Income tax expense......... (169) -- (614) Minority interest........ -- -- 90 ---------- ----------- ----------- Net loss before extraordinary item............ (10,531) (149,962) (368,989) Extraordinary loss on early extinguishment of debt......... -- -- (64) ---------- ----------- ----------- Net loss from continuing operations...... (10,531) (149,962) (369,053) ========== =========== =========== Basic and diluted loss per share: Loss before extraordinary items........... (13.99) Extraordinary loss............ (0.00) ----------- Net loss from continuing operations...... (13.99) =========== Weighted average number of common shares outstanding..... 4,463,246 (6e) 26,377,879 =========== ===========

Pro Forma Total Pro Forma Pro Forma Pro Forma Brokat Adjustments Notes Pro Forma Gemstone Adjustments Notes Combined Blaze Adjustments Notes ---------- ----------- ----- --------- -------- ----------- ----- ---------- ------- ----------- ----- (DM) (DM) (DM) (DM) (DM) (DM) (DM) (DM) Revenue......... 51,287 -- 51,287 21,251 -- 72,538 14,793 -- Cost of Sales .. (22,937) -- (22,937) (6,492) -- (29,429) (5,591) -- ---------- ------- ------- ------- -------- ---------- ------- Gross profit.... 28,350 -- 28,350 14,759 -- 43,109 9,202 -- ---------- ------- ------- ------- -------- ---------- ------- --------- Selling expenses ................ (27,714) -- (27,714) (9,779) -- (37,493) (8,148) -- General and administrative expenses ....... (12,643) -- (12,643) (4,272) -- (16,915) (2,754) -- Research and development expenses ....... (12,769) -- (12,769) (5,244) -- (18,013) (3,910) -- Amortization of goodwill and other intangible assets from acquisitions.... (15,797) -- (15,797) -- (37,484) (3) (53,281) -- (62,260) (3) Non-cash charges associated with stock option grants.......... (12,240) -- (12,240) -- (4,184) (7) (16,424) (21,148) (12,721) (7) ---------- ------- ------- ------- -------- ---------- ------- --------- Total Operating expenses........ (81,163) -- (81,163) (19,295) (41,668) (142,126) (35,960) (74,981) ---------- ------- ------- ------- -------- ---------- ------- --------- Operating loss.. (52,813) -- (52,813) (4,536) (41,668) (99,017) (26,758) (74,981) Interest expense......... (832) (13,777) (5) (14,609) -- -- (14,609) (202) -- Other income, net............. 2,298 -- 2,298 (321) -- 1,977 -- -- ---------- ------- ------- ------- -------- ---------- ------- --------- Loss before income taxes and minority interests....... (51,347) (13,777) (65,124) (4,857) (41,668) (111,649) (26,960) (74,981) Income tax expense......... (104) -- (104) (170) -- (274) (168) -- Minority interest........ (26) -- (26) -- -- (26) -- -- ---------- ------- ------- ------- -------- ---------- ------- --------- Net loss from continuing operations...... (51,477) (13,777) (65,254) (5,027) (41,668) (111,649) (27,128) (74,981) ========== ======= ======= ======= ======== ========== ======= ========= Basic and diluted loss per share; Net loss from continuing operations...... (1.92) (3.84) ========== ========== Weighted average number of common shares outstanding..... 26,848,773 2,219,985 (6e) 29,068,758 4,463,244 (6e) ========== ======== ========== ========= Total Pro Forma Combined ----------- (DM) Revenue......... 87,331 Cost of Sales .. (35,020) ----------- Gross profit.... 52,311 ----------- Selling expenses ................ (45,641) General and administrative expenses ....... (19,669) Research and development expenses ....... (21,923) Amortization of goodwill and other intangible assets from acquisitions.... (115,541) Non-cash charges associated with stock option grants.......... (50,293) ----------- Total Operating expenses........ (253,067) ----------- Operating loss.. (200,756) Interest expense......... (14,811) Other income, net............. 1,977 ----------- Loss before income taxes and minority interests....... (213,590) Income tax expense......... (442) Minority interest........ (26) ----------- Net loss from continuing operations...... (214,058) =========== Basic and diluted loss per share; Net loss from continuing operations...... (6.38) =========== Weighted average number of common shares outstanding..... 33,532,002 ===========

Pro Forma Total Pro Forma Pro Forma Pro Forma Brokat Adjustments Notes Pro Forma Gemstone Adjustments Notes Combined Blaze Adjustments Notes ---------- ----------- ----- --------- -------- ----------- ----- ---------- ------- ----------- ----- (DM) (DM) (DM) (DM) (DM) (DM) (DM) (DM) Revenue......... 81,729 -- 81,729 24,639 -- 106,368 27,896 -- Cost of Sales... (32,870) -- (32,870) (9,110) -- (41,980) (11,614) -- ---------- ------- -------- ------- --------- ---------- ------- --------- Gross profit.... 48,859 -- 48,859 15,529 -- 64,388 16,282 -- ---------- ------- -------- ------- --------- ---------- ------- --------- Selling expenses........ (36,283) -- (36,283) (13,062) -- (49,345) (23,750) -- General and administrative expenses........ (15,725) -- (15,725) (6,144) -- (21,869) (6,965) -- Research and development expenses ....... (21,437) -- (21,437) (7,612) -- (29,049) (7,122) -- Amortization of goodwill and other intangible assets from acquisitions.... (15,184) -- (15,184) -- (37,504) (3) (52,688) -- (62,260) (3) Non-cash charges associated with stock option grants.......... (30,735) -- (30,735) -- (4,184) (7) (34,919) (17,699) (12,721) (7) ---------- ------- -------- ------- --------- ---------- ------- --------- Total Operating expenses........ (119,364) -- (119,364) (26,818) (41,688) (187,870) (55,536) (74,981) ---------- ------- -------- ------- --------- ---------- ------- --------- Operating loss.. (70,505) -- (70,505) (11,289) (41,688) (123,482) (39,254) (74,981) Interest expense, net.... (6,410) (13,777) (5) (20,187) (646) -- (20,833) (253) -- Other income, net............. 460 -- 460 -- -- 460 2,571 -- ---------- ------- -------- ------- --------- ---------- ------- --------- Loss before income taxes and minority interests....... (76,455) (13,777) (90,232) (11,935) (41,688) (143,855) (36,936) (74,981) Income tax expense......... (330) -- (330) (259) -- (589) (104) -- Minority interest........ 99 -- 99 -- -- 99 -- -- ---------- ------- -------- ------- --------- ---------- ------- --------- Net loss from continuing operations...... (76,686) (13,777) (90,463) (12,194) (41,688) (144,345) (37,040) (74,981) ========== ======= ======== ======= ========= ========== ======= ========= Basic and diluted loss per share; Net loss from continuing operations...... (2.84) (4.89) ========== ========== Weighted average number of common shares outstanding..... 26,966,236 2,219,983 (6e) 29,538,219 4,463,246 (6e) ========== ========= === ========== ========= === Total Pro Forma Combined ----------- (DM) Revenue......... 134,264 Cost of Sales... (53,594) ----------- Gross profit.... 80,670 ----------- Selling expenses........ (73,095) General and administrative expenses........ (28,834) Research and development expenses ....... (36,171) Amortization of goodwill and other intangible assets from acquisitions.... (114,948) Non-cash charges associated with stock option grants.......... (65,339) ----------- Total Operating expenses........ (318,387) ----------- Operating loss.. (237,717) Interest expense, net.... (21,086) Other income, net............. 3,031 ----------- Loss before income taxes and minority interests....... (255,772) Income tax expense......... (693) Minority interest........ 99 ----------- Net loss from continuing operations...... (256,366) =========== Basic and diluted loss per share; Net loss from continuing operations...... (7.62) =========== Weighted average number of common shares outstanding..... 33,649,465 ===========

MeTechnology ------------------------------------------------ (Less) (Add) January 1, January 1, January 1, July 1, 1998 thru 1998 thru 1999 thru 1998 thru July 1, 1998 December 31, June 30, May 21, May 21, Reconciliation thru 1998 1998 1999 1999 German GAAP to May 21, 1999 German GAAP German GAAP German GAAP German GAAP US GAAP US GAAP ------------ ----------- ----------- ----------- -------------- ------------ Revenue................. 4,870 2,922 1,400 3,348 1,196 4,544 Cost of sales........... (1,874) (625) (1,223) (2,472) (147) (2,619) ------ ------ ------ ------- ----- ------- Gross profit (loss)..... 2,996 2,297 177 876 1,049 1,925 ------ ------ ------ ------- ----- ------- Selling expenses........ (3,514) (1,171) (2,617) (4,960) -- (4,960) General and administrative expenses............... (4,100) (1,367) (3,100) (5,833) -- (5,833) Research and development expenses............... (2,226) (742) (1,696) (3,180) -- (3,180) ------ ------ ------ ------- ----- ------- Total operating expenses............... (9,840) (3,280) (7,413) (13,973) -- (13,973) ------ ------ ------ ------- ----- ------- Operating loss.......... (6,844) (983) (7,236) (13,097) 1,049 (12,048) ------ ------ ------ ------- ----- ------- Interest expense........ (267) (75) (198) (390) -- (390) ------ ------ ------ ------- ----- ------- Loss before income taxes.................. (7,111) (1,058) (7,434) (13,487) 1,049 (12,438) ------ ------ ------ ------- ----- ------- Income taxes............ (27) (13) (3) (17) -- (17) ------ ------ ------ ------- ----- ------- Net loss................ (7,138) (1,071) (7,437) (13,504) 1,049 (12,455) ====== ====== ====== ======= ===== =======

TST --------------------------------------------------------------- (Less) (Add) October 1, 1997 October 1, 1998 July 1, 1998 Year ended to to to September 30, 1998 June 30, 1998 May 9, 1999 May 9, 1999 ------------------ --------------- --------------- ------------ Revenue................. 7,896 5,219 5,698 8,375 Cost of sales........... (2,633) (2,168) (2,524) (2,989) ------ ------ ------ ------ Gross profit............ 5,263 3,051 3,174 5,386 ------ ------ ------ ------ Selling expenses........ (1,109) (802) (555) (862) General and administrative expenses............... (735) (470) (1,185) (1,450) Research and development expenses............... (3,232) (1,917) (1,891) (3,206) ------ ------ ------ ------ Total operating expenses............... (5,076) (3,189) (3,631) (5,518) ------ ------ ------ ------ Operating income (loss)................. 187 (138) (457) (132) ------ ------ ------ ------ Interest income......... 43 33 37 47 Interest expense........ (23) (15) (125) (133) ------ ------ ------ ------ Income before taxes..... 207 (120) (545) (218) ------ ------ ------ ------ Income taxes............ (83) (1) 2 (80) ------ ------ ------ ------ Net income (loss)....... 124 (121) (543) (298) ====== ====== ====== ======

Amortization Included in already June 30, Six Months Annual included in 1999 report Estimated Amortization amortization June 30, pro forma Useful Intangible Asset Total total 1999 figures Adjustments Life ---------------- ------------ ------------ ------------ ----------- --------- MeTechnology Customer list..... 131 261 29 232 5 years Goodwill.......... 12,927 25,854 2,905 22,949 7 years ------- ------- ----- ------- 13,058 26,115 2,934 23,181 ------- ------- ----- ------- TST Customer list..... 402 803 112 691 5 years Goodwill.......... 2,284 4,567 637 3,930 7 years ------- ------- ----- ------- 2,686 5,370 749 4,621 ------- ------- ----- ------- Blaze Goodwill.......... 62,260 124,520 -- 124,520 7 years ------- ------- ----- ------- GemStone Goodwill.......... 37,484 74,967 -- 74,967 7 years ------- ------- ----- ------- TOTAL............. 115,488 230,972 3,683 227,289 ======= ======= ===== =======

MeTechnology TST Blaze GemStone ------------ ------ --------- -------- Current assets and other tangible assets.............................. 8,876 5,345 163,193 13,030 Liabilities assumed.................. (30,324) (6,703) (20,650) (38,277) Customer list........................ 1,307 4,015 -- -- Goodwill (see Note 6)................ 180,980 31,969 871,637 524,772 ------- ------ --------- ------- Purchase Price..................... 160,839 34,626 1,014,180 499,525 ======= ====== ========= =======

Six Months Year Ended Ended Six Months June 30, December 31, Ended June 20000 1999 30, 2000 ---------- ------------ ---------- Net loss.................................... (635,036) (347,049) (322,861) Basic and diluted net loss per share........ (24.07) (10.35) (9.59)

Six Months Year Ended Ended June 30, December 31, 1999 1999 ---------- ------------ Financing the acquisition of TST....................... 52 -- Interest expense on the notes.......................... 28,115 14,058 Amortization of deferred note issuance costs........... 880 440 Decrease in interest expense through the repayment of indebtedness with the proceeds from the offering...... (468) (721) ------ ------ Total................................................ 28,579 13,777 ====== ======

Filing Compare · BROKAT TECHNOLOGIES AKTIENGESELLSCHAFT