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

The following discussion should be read in conjunction with our financial statements and related notes which appear elsewhere in this prospectus.

GENERAL

Eprise, originally named Inner Circle Technologies and then NovaLink, was founded in 1992 as a provider of online interactive games. Between 1994 and 1997, our principal business shifted to creating and hosting Web sites for corporate clients. During this period, we encountered recurring problems arising out of the inadequacy of software tools that were commercially available to build and maintain Web sites. Realizing that there was an opportunity to streamline and automate these processes, we began to develop a software product called Eprise Participant Server to facilitate the construction and updating of Web sites. We shipped our first commercial product in early 1998. Eprise now markets and sells version 2.5 of Eprise Participant Server.

We have completed three rounds of venture capital financing since December 1997, for over $38.0 million in gross proceeds, from investors including Prism Venture Partners, Alliance Technology Ventures and Brookside Capital Partners.

OVERVIEW

We changed our fiscal year end from August 31 to December 31 in 1997. Our financial information for the last eight months of the fiscal year ended August 31, 1997 and the four months ended December 31, 1997 contained in this prospectus has been combined in order to present a comparable accounting period for 1997 to the audited year ended December 31, 1998. Future references to the year 1997 or 1998 mean the twelve months ended December 31 unless otherwise indicated.

We generate revenues from two principal sources: (1) license fees for our software products and (2) professional services and technical support revenues derived from consulting, implementation, training and maintenance services related to our software products. In the year ended December 31, 1999, two customers accounted for 23% of our total revenues. In the year ended December 31, 1998, one customer accounted for 58% of our total revenues.

As our revenue generated from license sales has increased, our gross profit margins have improved. License revenue represented 73% of total revenue in the fourth quarter of 1999. License sales produce significantly higher margins than service sales due to nominal costs associated with licenses and their delivery.

Software licenses. Customers typically pay an up-front, one-time fee for a perpetual non-exclusive license of our software. Generally, the amount of the fee is based on the number of licensed servers. To date, software license revenues have principally come from direct sales to customers. The sales cycle for our products is typically three to six months. Although we have limited historical financial data, we believe that our quarterly operating results may experience seasonal fluctuations due to clients' fiscal year budgeting cycles and purchasing patterns. Because of our server-based licensing, we experience significant variation in the size of our licensing transactions.

We generally recognize license fee revenues upon delivery of the product. If the product is subject to acceptance and/or return and refund, we defer revenues until acceptance has occurred or the refund period has expired.

Services. Services revenues consist principally of revenues derived from professional services associated with the implementation and integration of our software products, training of customers' employees and ongoing customer support, which primarily includes customer technical support services and product enhancements. We deliver professional services on either a fixed price basis or a time and materials basis. We generally complete implementation and training services within three to six months following license contract signing.

We recognize revenues from professional services as such services are performed. We recognize maintenance revenues, which are invoiced annually in advance, ratably over the term of the maintenance agreement, which is generally 12 months. Our maintenance revenues currently account for less than 10% of total revenues. As part of these agreements, we provide product enhancements and technical support services to customers for an annual fee, which typically amounts to 20% of the license fee. While a 60-day warranty is included in the software license, maintenance agreements typically are entered into as of the date of the software license. Maintenance agreements are renewable at the discretion of the customer. As of December 31, 1999, there have been 31 customers who have entered into maintenance agreements with Eprise. Of the 31 contracts, to date two have expired, and have not currently been renewed. The remaining contracts have not yet come up for renewal.

Backlog. Delivery lead times for our products are very short and, consequently, substantially all of our license fee revenues in each quarter result from orders received in that quarter. Accordingly, we generally only maintain a backlog for our professional services and maintenance activities, and we believe that our backlog at any point in time is not a reliable indicator of future revenues and earnings.

Cost of revenues. The costs associated with software licenses, including CDs and packaging, arise primarily from the production of software products, and have not been significant in any period presented, nor are they expected to be significant in the foreseeable future. Cost of services revenues consists primarily of salaries and related personnel costs and other allocated expenses of our consulting, support and training organizations, as well as costs related to servicing our legacy products.

Research and development. We maintain a product development staff to enhance our existing products and to develop new products. Software costs are expensed as incurred until technological feasibility of the software is determined, after which any additional costs are capitalized. To date, we have expensed all software development costs because development costs incurred subsequent to the establishment of technological feasibility have been minimal.

Selling and marketing. We license our products primarily through our direct sales force. Selling and marketing expenses consist primarily of costs associated with personnel, sales commissions, office facilities, travel and promotional events such as trade shows, seminars and technical conferences, advertising and public relations programs.

General and administrative. General and administrative expenses include salaries and related personnel expenses and other costs of the finance, human resources, information technology and administrative functions at Eprise.

Restatement. As discussed in Note 10 to the Consolidated Financial Statements, the 1999 Consolidated Financial Statements have been restated.

Subsequent to the issuance of the Company's 1999 consolidated financial statements, management determined that the Company had incorrectly accounted for the issuance of the Series C preferred stock in 1999. Because of the proximity of the issuance of the Series C to the commencement of the Company's proposed stock offering, the Company has concluded that a beneficial conversion feature was present in the preferred stock on the date of issuance. For purposes of evaluating this beneficial conversion feature, the Company considers that the

mid-point value implied in the preliminary range of prices for the proposed stock offering ($9.00) represents the fair value of the common stock on the date the Series C was issued.

In accordance with Emerging Issues Task Force Abstract No. 98-5, "Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios," the proceeds from the Series C financing were allocated between the conversion feature and the preferred stock; because the fair value of the common stock ($9.00) was significantly in excess of the conversion price implicit in the Series C stock ($3.93), the entire amount of net proceeds ($21,555,501) were allocated to the conversion feature. Because the preferred stock is immediately convertible into common stock, an immediate dividend or accretion of $21,555,501 was recorded from common stockholders' equity to the carrying value of the Series C preferred stock.

In addition, the Company had originally estimated that for grants of stock options in September and October 1999, the fair value of the underlying common stock was $3.93 per share. The Company has concluded that this estimate does not fully reflect the fair value of the common stock at such times. The Company has concluded that $9.00 more accurately represents the fair value of common stock during the period these grants were made and has adjusted its estimates of compensation cost related to those option grants accordingly.

See Note 10 to Notes to the Consolidated Financial Statements.

                                                                   FOUR       TWELVE
                                                 YEARS ENDED      MONTHS      MONTHS       YEARS ENDED
                                                  AUGUST 31,      ENDED       ENDED          DEC. 31,
                                                 ------------    DEC. 31,    DEC. 31,    ----------------
                                                 1996    1997      1997        1997        1998      1999
                                                 ----    ----    --------    --------    --------    ----
                                                               (AS A PERCENTAGE OF TOTAL REVENUES)
Revenues:
  Software licenses............................   --%      2%        21%          5%         43%       64%
  Services.....................................  100      98         79          95          57        36
                                                 ---     ---       ----        ----        ----      ----
         Total revenues........................  100     100        100         100         100       100
                                                 ---     ---       ----        ----        ----      ----
Cost of revenues...............................   48      37         94          47          57        31
                                                 ---     ---       ----        ----        ----      ----
Gross profit...................................   52      63         68          53          43        69
Operating expenses:
  Research and development.....................   11      13        108          38         266        65
  Selling and marketing........................   24      56        129          72         291       138
  General and administrative...................   28      35        120          58         154        55
                                                 ---     ---       ----        ----        ----      ----
         Total operating expenses..............   63     104        357         168         711       258
                                                 ---     ---       ----        ----        ----      ----
Operating loss.................................  (11)    (41)      (351)       (115)       (668)     (188)
Other income (expense), net....................   (2)    (11)       (33)        (17)         17         8
                                                 ---     ---       ----        ----        ----      ----
Net loss.......................................  (13)%   (52)%     (384)%      (132)%      (651)%    (180)%
                                                 ===     ===       ====        ====        ====      ====

YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998

Software licenses. Revenues from software licenses increased by 582.6% to approximately $2.4 million for the year ended December 31, 1999 compared to $345,000 for the year ended December 31, 1998. The increase in revenues from software licenses was primarily due to the release of version 2.0 of Eprise Participant Server in April 1999 and the resulting increases in license deliveries during 1999. All license revenues for the year ended December 31, 1999 were attributable to new customers compared to 30% attributable to new customers for the year ended December 31, 1998.

Services. Revenues from services increased by 182.3% to approximately $1.3 million for the year ended December 31, 1999 compared to $462,000 for the year ended December 31, 1998. Approximately 88% of the increase in revenues from services is attributable to consulting, 9% to training, and 3% to implementation revenue generated by new software license sales. Approximately 58% of services revenues for the year ended December 31, 1999 were attributable to new customers compared to 51% for the year ended December 31, 1998.

Cost of revenues. Cost of revenues, which primarily relate to services because costs of licenses are insignificant, increased by 144.6% to approximately $1.1 million for the year ended December 31, 1999 compared to $460,000 for the year ended December 31, 1998. However, as a percentage of total revenues, cost of revenues decreased to 31% for the year ended December 31, 1999 from 57% for the year December 31, 1998. This was primarily due to a larger percentage of total revenues being derived from software license fees (which have significantly higher gross profit margins) in the year ended December 31, 1999 compared to the year ended December 31, 1998, more efficient implementation of our products and better utilization of service personnel.

Research and development. Research and development expenses increased by 9.8% to approximately $2.4 million for the year ended December 31, 1999 compared to approximately $2.1 million for the year ended December 31, 1998. The increase was primarily attributable to

employee-related expenses incurred in the year ended December 31, 1999 for the continued development of Version 2.0 of Eprise Participant Server and future product releases.

Selling and marketing. Selling and marketing expenses increased by 115.2% to approximately $5.1 million for the year ended December 31, 1999 compared to approximately $2.3 million for the year ended December 31, 1998. Approximately 72% of the increase in selling and marketing expenses was attributable to an increase in the number of sales and sales support personnel as we expanded our direct sales force. In addition, approximately 19% of the increase was attributable to significant cost increases in marketing programs and public relations activities as we expanded our presence in the market and further developed our brand.

General and administrative. General and administrative expenses increased by 61.0% to approximately $2.0 million for the year ended December 31, 1999 compared to $1.2 million for the year ended December 31, 1998. The increase in general and administrative expenses primarily reflects personnel increases and the related costs associated with supporting our recent and anticipated revenue growth.

Compensation cost for stock options. Options were granted during 1999 at exercise prices which were the best estimate of our board of directors as to the fair value of the underlying common stock on the date of grant. However, subsequent to the grant date, management concluded that for grants after the release of the new version of Eprise Participant Server, these estimates may not have fully reflected the impact of this release. Management has determined that for grants made from May to August 1999, $3.93 is a more reliable estimate of the fair value of the common stock during this period. For grants subsequent to August 1999, management determined that the mid-point of the preliminary price range for our anticipated public offering represented the best estimate of the fair value of the common stock during this period. For grants during 1999, compensation cost aggregated approximately $6.8 million, which will be amortized to expense over the four year vesting period of the option grants. For the year ended December 31, 1999, compensation expense recorded related to these grants aggregated $524,000.

Other income (expense). Other income and expense consisted primarily of interest income on invested cash balances and interest expense on borrowings. The increase in other income between the two periods was the result of higher cash balances generated from our second round of venture capital financing in August 1998 and our private placement financing in November 1999.

Income taxes. During the years ended December 31, 1999 and 1998, we reported losses for both financial and income tax purposes. No provision or benefit for income taxes was recorded in either period. At December 31, 1999, we had net operating loss carry forwards for federal and state income tax purposes aggregating $13.5 million available to offset future taxable income. These loss carry forwards expire in varying amounts through 2014. At December 31, 1999, we had federal and state tax credits aggregating $319,000 available to reduce future taxes payable, expiring through 2014. Because of changes in ownership that have occurred, including the proposed offering, our ability to fully utilize these carry forwards is likely to be limited.

SUPPLEMENTAL DISCUSSION OF YEAR ENDED DECEMBER 31, 1998 AND TWELVE MONTHS ENDED
DECEMBER 31, 1997

Software licenses. Revenues from software licenses increased by 430.8% to $345,000 for the year ended December 31, 1998 compared to $65,000 for the twelve months ended December 31, 1997. The increase in revenues from software licenses was primarily due to the first commercial release of Eprise Participant Server in February 1998 and an increase in the number of licenses delivered. Revenues from software license fees for the twelve months ended

December 31, 1997 resulted from a limited number of license sales of a preliminary version of the product.

Approximately 30% of license revenues for the year ended December 31, 1998 were attributable to new customers compared to 100% for the year ended December 31, 1997.

Services. Revenues from services decreased by 60.1% to $462,000 for the year ended December 31, 1998 compared to approximately $1.2 million for the twelve months ended December 31, 1997. The decrease in revenues from services was attributable to the fact that prior to the first commercial release of Eprise Participant Server in February 1998, we derived the majority of our revenues from Web site development; supporting and operating, or hosting, customer Web sites; and online interactive games. During these periods, these revenues decreased as we focused on development and marketing of Eprise Participant Server.

Cost of revenues. Cost of revenues, which primarily relate to services because costs of licenses are not significant, decreased by 20.6% to $460,000 for the year ended December 31, 1998 compared to $579,000 for the twelve months ended December 31, 1997. Cost of services revenues for the twelve months ended December 31, 1997 included data communication costs associated with our hosting of customers' Web sites. The decrease in services revenues between the two periods was due to a decrease in services revenues associated with Web site hosting and development.

Research and development. Research and development expenses increased by 368.2% to approximately $2.1 million for the year ended December 31, 1998 compared to $459,000 for the twelve months ended December 31, 1997. Approximately 80% of the increase was due to increased payroll and related expenses associated with the expansion of our product development staff, which was required for the continued development of Eprise Participant Server. In addition, approximately 19% of the increase was due to consulting and contract programmer expenses incurred in the year ended December 31, 1998 to supplement our product development staff in the development of version 2.0 of Eprise Participant Server.

Selling and marketing. Selling and marketing expenses increased by 167.2% to approximately $2.3 million for the year ended December 31, 1998 compared to $879,000 for the twelve months ended December 31, 1997. Approximately 75% of the increase in selling and marketing expenses was due to an increase in the number of sales and sales support personnel as we developed and expanded our direct sales force in 1998. Additionally, with the first commercial release of Eprise Participant Server in February 1998, approximately 25% of the increase was due to marketing expenses incurred for market awareness programs associated with the product launch.

General and administrative. General and administrative expenses increased by 75.5% to approximately $1.2 million for the year ended December 31, 1998 compared to $710,000 for the twelve months ended December 31, 1997.
Approximately 60% of the increase in general and administrative expenses was due to costs associated with the recruitment and hiring of our Chief Executive Officer and other executive management staff in 1998 following the first round of venture financing and approximately 40% of the increase was due to costs associated with the move to our new facilities in October 1997.

Other income (expense). Other income, consisting of interest income, increased to $164,000 for the year ended December 31, 1998 compared to $6,000 for the twelve months ended December 31, 1997. The increase in interest income resulted from interest earned on invested cash balances generated from our first round of venture capital financing in December 1997. Other expense, consisting of interest expense, decreased to $28,000 for the year ended December 31, 1998 compared to $216,000 for the year ended December 31, 1997. The majority of interest expense incurred in 1997 was associated with borrowings from a financial institution under an accounts receivable factoring arrangement.

Income taxes. During the year ended December 31, 1998 and the twelve months ended 1997, we reported losses for both financial and income tax purposes. No provision or benefit for income taxes was recorded in either year.

FOUR MONTHS ENDED DECEMBER 31, 1997

Software licenses. Revenues from software licenses for the four months ended December 31, 1997 were $65,000. The increase in software license revenues compared to the full year ended August 31, 1997, was primarily attributable to the release of the preliminary version of Eprise Participant Server and the initial deliveries of the product to customers.

Services. Revenues from services totaled $238,000 for the four months ended December 31, 1997. These revenues primarily related to consulting services provided for initial installations of Eprise Participant Server and, on a monthly basis, were reduced from levels realized in the year ended August 31, 1997. This decrease in revenues was attributable to the fact that prior to the release of Eprise Participant Server, we derived a majority of our revenues from Web site development, Web site hosting and online interactive games.

Cost of revenues. Costs of revenues, which primarily relate to services because costs of licenses are not significant, totaled $285,000 for the four months ended December 31, 1997. As a percentage of revenues, cost of services revenues was 94.1%, compared to 36.5% in the year ended August 31, 1997. The increase in cost of services and other revenues as a percentage of revenues is attributable to the decrease in revenues discussed above, as we began to exit our original lines of business.

Research and development. Research and development expenses totaled $327,000 for the four months ended December 31, 1997. As a percentage of revenues, research and development expenses were 107.9%, compared to 12.7% for the year ended August 31, 1997. This increase in research and development expenses as a percentage of revenues is attributable primarily to increased salaries, benefits, and recruiting expenses associated with an increase in product development personnel during the four months ended December 31, 1997.

Selling and marketing. Selling and marketing expenses totaled $392,000 for the four months ended December 31, 1997. Spending in this category, on a monthly basis compared to monthly spending during the year ended August 31, 1997, rose due to an increase in the number of sales and sales support personnel during the period.

General and administrative. General and administrative expenses totaled $363,000 for the four months ended December 31, 1997. Spending in this category, on a monthly basis compared to monthly spending during the year ended August 31, 1997, rose due to an increase in the number of personnel during the period to support our anticipated growth.

Other income (expense). Other expense for the four months ended December 31, 1997 totalled $99,000 and consisted principally of interest expense related to outstanding borrowings during the period under an accounts receivable factoring arrangement.

Income taxes. During the four months ended December 31, 1997, we reported a loss for both financial and income tax purposes. No provision or benefit for income taxes was recorded during the period.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO THE YEAR ENDED AUGUST 31, 1997

Software licenses. Revenues from software licenses were $345,000 for the year ended December 31, 1998 compared to $33,000 for the year ended August 31, 1997. The increased revenues from software licenses were the result of the first commercial release of Eprise Participant Server in February 1998. In the year ended August 31, 1997, revenues from software licenses were derived from the sale of a preliminary version of Eprise Participant

Server. Eprise derived the majority of its revenues during the year ended August 31, 1997 from Web site development, Web site hosting and online interactive games.

Services. Revenues from services decreased by 66.7% to $462,000 for the year ended December 31, 1998 compared to approximately $1.4 million for the year ended August 31, 1997. The decrease in revenues from services was attributable to the fact that for the year ended August 31, 1997, prior to the release of Eprise Participant Server, Eprise derived the majority of its revenues from Web site development, Web site hosting and online interactive games.

Cost of revenues. Cost of revenues, which primarily relate to services as costs of licenses are not significant, decreased by 11.2% to $460,000 for the year ended December 31, 1998 compared to $518,000 for the year ended August 31, 1997. The decrease in cost of revenues was primarily due to the significant reduction of data communications expenses associated with the operation of online interactive games and Web site hosting.

Research and development. Research and development expenses increased by 1,093.9% to approximately $2.1 million for the year ended December 31, 1998 compared to $180,000 for the year ended August 31, 1997. Approximately 73% of the increase was due to increased salaries, benefits and recruiting expenses associated with an increase in the number of research and development personnel. In addition, approximately 16% of the increase was due to consulting and contract programmer expenses incurred in the year ended December 31, 1998 to supplement our research and development staff in the development of version 2.0 of Eprise Participant Server.

Selling and marketing. Selling and marketing expenses increased by 193.6% to approximately $2.3 million for the year ended December 31, 1998 compared to $800,000 for the year ended August 31, 1997. Approximately 40% of the increase in selling and marketing expenses was due to the hiring of sales and sales support personnel as Eprise developed and expanded its direct sales force in 1998. Additionally, with the first commercial release of Eprise Participant Server in February 1998, approximately 60% of the increase was due to increased marketing expenses for market awareness programs associated with the product launch.

General and administrative. General and administrative expenses increased by 148.7% to approximately $1.2 million for the year ended December 31, 1998 compared to $501,000 for the year ended August 31, 1997. Approximately 88% of the increase in general and administrative expenses was due to costs associated with the recruitment and hiring of our Chief Executive Officer and other executive management staff in 1998 following the first round of venture financing and approximately 12% of the increase was due to costs associated with our move to new facilities in October 1997.

Other income (expense). Interest income increased to $164,000 for the year ended December 31, 1998 compared to $3,000 for the year ended August 31, 1997. The increase in interest income resulted from interest earned on invested cash balances generated from our two rounds of venture capital financing in December 1997 and August 1998. Interest expense decreased to $28,000 for the year ended December 31, 1998 compared to $157,000 for the year ended August 31, 1997. The majority of interest expense incurred in 1997 was associated with borrowings from a financial institution under an accounts receivable factoring arrangement.

Income taxes. During the years ended December 31, 1998 and August 31, 1997, we reported losses for both financial and income tax purposes. No provision for or benefit from income taxes was recorded in either year.

QUARTERLY RESULTS OF OPERATIONS

The following table presents our unaudited results of operations for each of our last eight quarters up to and including the quarter ended December 31, 1999, and also presents such

information as a percentage of our total revenue for the periods indicated. The unaudited results of operations have been prepared on substantially the same basis as the audited statements of operations contained in this prospectus and include all adjustments, consisting of normal recurring accruals, that we consider necessary to present this information fairly when read in conjunction with our financial statements and accompanying notes appearing elsewhere in this prospectus. The operating results in any quarter are not necessarily indicative of the results that may be expected for any future period.

                                                           QUARTER ENDED
                       -------------------------------------------------------------------------------------
                       MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31,
                         1998       1998       1998       1998       1999       1999       1999       1999
                       --------   --------   --------   --------   --------   --------   --------   --------
                                                          (IN THOUSANDS)
STATEMENT OF
  OPERATIONS DATA:
  Revenues:
  Software licenses..  $    76    $   101    $    --    $   168    $   108    $   223    $   524    $ 1,500
  Services...........       95        148        104        115         53        305        399        547
                       -------    -------    -------    -------    -------    -------    -------    -------
      Total
        revenues.....      171        249        104        283        161        528        923      2,047
                       -------    -------    -------    -------    -------    -------    -------    -------
Cost of revenues.....      149         94        101        116        126        161        415        423
                       -------    -------    -------    -------    -------    -------    -------    -------
Gross profit.........       22        155          3        167         35        367        508      1,624
                       -------    -------    -------    -------    -------    -------    -------    -------
Operating expenses:
  Research and
    development......      421        473        624        631        568        545        558        689
  Selling and
    marketing........      571        605        550        623        765      1,099      1,203      1,989
  General and
    administrative...      249        301        344        352        364        410        444        788
                       -------    -------    -------    -------    -------    -------    -------    -------
      Total operating
        expenses.....    1,241      1,379      1,518      1,606      1,697      2,054      2,205      3,466
                       -------    -------    -------    -------    -------    -------    -------    -------
Operating loss.......   (1,219)    (1,224)    (1,515)    (1,439)    (1,662)    (1,687)    (1,697)    (1,842)
Other income
  (expense), net.....       19          7         28         82         55         33         18        182
                       -------    -------    -------    -------    -------    -------    -------    -------
Net loss.............  $(1,200)   $(1,217)   $(1,487)   $(1,357)   $(1,607)   $(1,654)   $(1,679)   $(1,660)
                       =======    =======    =======    =======    =======    =======    =======    =======

                                                           QUARTER ENDED
                       -------------------------------------------------------------------------------------
                       MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEP. 30,   DEC. 31,
                         1998       1998       1998       1998       1999       1999       1999       1999
                       --------   --------   --------   --------   --------   --------   --------   --------
                                                (AS A PERCENTAGE OF TOTAL REVENUES)
PERCENT OF TOTAL
  REVENUES:
  Revenues:
  Software licenses..       44%        41%        --%        59%        67%        42%        57%        73%
  Services...........       56         59        100         41         33         58         43         27
                       -------    -------    -------    -------    -------    -------    -------    -------
      Total
        revenues.....      100        100        100        100        100        100        100        100
                       -------    -------    -------    -------    -------    -------    -------    -------
Cost of revenues.....       87         38         97         41         78         30         45         21
                       -------    -------    -------    -------    -------    -------    -------    -------
Gross profit.........       13         62          3         59         22         70         55         79
                       -------    -------    -------    -------    -------    -------    -------    -------
Operating expenses:
  Research and
    development......      247        190        600        223        353        103         60         34
  Selling and
    marketing........      333        243        529        220        475        208        130         97
  General and
    administrative...      146        121        331        124        226         79         48         38
                       -------    -------    -------    -------    -------    -------    -------    -------
      Total operating
        expenses.....      726        554      1,460        567      1,054        390        238        169
                       -------    -------    -------    -------    -------    -------    -------    -------
Operating loss.......     (713)      (492)    (1,457)      (508)    (1,032)      (320)      (183)       (90)
Other income
  (expense), net.....       11          3         27         29         34          6          2          8
                       -------    -------    -------    -------    -------    -------    -------    -------
Net loss.............     (702)%     (489)%   (1,430)%     (479)%     (998)%     (314)%     (181)%      (82)%
                       =======    =======    =======    =======    =======    =======    =======    =======

Our quarterly operating results have varied in the past and may vary significantly in the future depending on many factors including, among others:

- demand for our products and services;

- the timing of sales of our products and services;

- the timing of customer orders and product implementation;

- unexpected delays in introducing new products and services;

- increased expenses, whether related to selling and marketing, product development or general administration;

- changes in the rapidly evolving market for Web content management solutions;

- the mix of product license and service revenue; and

- the timing and size of sales derived through our strategic partners.

Furthermore, we believe that the purchase of our products is relatively discretionary and generally involves a significant commitment of capital. As a result, purchases of our products may be deferred or canceled in the event of a downturn in any potential customer's business or the economy in general.