As filed with the Securities and Exchange Commission on June 19, 2000

Registration No. 333-34378

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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Amendment No. 1

FORM S-1
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933

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MainControl, Inc.

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DELAWARE 7371 54-1798820
(State or other (Primary Standard Industrial (I.R.S. Employer
Jurisdiction of Incorporation) Classification Code Number) Identification Number)

7900 Westpark Drive
Suite T500
McLean, Virginia 22102
(703) 749-2308

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ALEX PINCHEV
Chairman/President & CEO

Copies to:

ABIGAIL ARMS, ESQ. WILLIAM J. GRANT, JR., ESQ.
Shearman & Sterling Willkie Farr & Gallagher
801 Pennsylvania Ave., N.W.,
Suite 900 787 Seventh Avenue
Washington, D.C. 20004-2604 New York, New York 10019
(202) 508-8000 (212) 728- 8000

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As soon as practicable after the effective date of this Registration
Statement.
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, as amended (the "Securities Act") check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) of the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]

CALCULATION OF REGISTRATION FEE

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Proposed Maximum Proposed Maximum Amount of
Title of Securities Amount to be Offering Price Per Aggregate Offering Registration
to be Registered Registered Share Price* Fee(1)
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Common Stock ($0.001 par
value)......................... $ $57,500,000 $15,180(2)
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(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(o) promulgated under the Securities Act.

(2) $15,180 was previously paid.

The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell the securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion

Preliminary Prospectus dated June 19, 2000

PROSPECTUS
Shares

[Logo]
MainControl, Inc.

Common Stock

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

This is MainControl's initial public offering of common stock.

We expect the public offering price to be between $ and $ per share.
Currently, no public market exists for our shares of common stock. After
pricing of the offering, we expect that our shares of common stock will trade
on the Nasdaq National Market under the symbol "MNCL."

Investing in our common stock involves risks that are described in the
"Risk Factors" section beginning on page 6 of this prospectus.

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

Per Share Total
--------- -----

Public offering price............................. $ $
Underwriting discount............................. $ $
Proceeds, before expenses, to MainControl......... $ $

The underwriters also may purchase from MainControl and some of our
stockholders up to an additional shares at the public offering price,
less the underwriting discount, within 30 days from the date of this prospectus
to cover over-allotments.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.

The shares of common stock will be ready for delivery on or about ,
2000.

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

Merrill Lynch & Co.

Banc of America Securities LLC

Dain Rauscher Wessels

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The date of this prospectus is June 19, 2000

[GRAPHIC: MAINCONTROL ORB (FOR INSIDE COVER)]

Title: COMPLETE E-INFRASTRUCTURE LIFE CYCLE MANAGEMENT

A multi-colored circle with four distinct quadrants.
. Upper left quadrant has an image of a globe.
. Upper right quadrant has an image of two people working at a PC.
. Lower left quadrant has an image of office workers, the @ sign and has
text super-imposed over it.
. Lower right quadrant has an image of a keyboard and the inside of a
computer.
. Super-imposed in the multi-colored circle is the text MC/EMpower i.series.

An outside circle with upper left, the word procurement is written over an arrow
leading towards 12 o'clock.
. At 12 o'clock, there is a circle with the words acquisition, delivery and
order in it with bullets.
. Continuing around the circle towards 3 o'clock, the word usage is written
over an arrow.
. At 3 o'clock, there is a circle with the words maintenance and deployment
in it with bullets.
. Continuing around the circle towards 6 o'clock, the word disposal is
written over an arrow.
. At 6 o'clock, there is a circle with the word retirement in it with a
bullet.
. Continuing around the circle towards 9 o'clock, the word demand is written
over an arrow.
. At 9 o'clock, there is a circle with the word planning in it with a
bullet.

Beneath the graphics is the following text:

Our MC/EMpower i.series software provides comprehensive e-infrastructure life
cycle management that enables organizations to maximize the value of their e-
infrastructure investments.

TABLE OF CONTENTS

Page
----

Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 17
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Consolidated Financial Data..................................... 22
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 24
Business................................................................. 39
Management............................................................... 51
Related Party Transactions and Certain Relationships .................... 58
Principal and Selling Stockholders....................................... 61
Description of Capital Stock............................................. 64
Shares Eligible for Future Sale.......................................... 67
Underwriting............................................................. 68
Legal Matters............................................................ 71
Experts.................................................................. 71
Where You Can Find More Information...................................... 71
Index to Consolidated Financial Statements............................... F-1

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

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not, and the
underwriters are not, making an offer to sell these securities in any
jurisdiction where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.

PROSPECTUS SUMMARY

This summary does not contain all of the information that you should
consider before investing in our common stock. You should read the entire
prospectus carefully, including the Consolidated Financial Statements and
related notes thereto, before making an investment decision.

We are a leading provider of e-infrastructure management software and
services that enable organizations to maximize the value of their e-
infrastructure through efficient planning and management processes. An
organization's e-infrastructure includes traditional technology assets such as
desktop and laptop computers, servers, software, network equipment,
telecommunications equipment and mobile devices, as well as technology assets
that are increasingly associated with today's Internet economy, such as Web
servers, Internet security software and e-commerce software. Our e-
infrastructure management software enables organizations to manage the complete
life cycle of their technology assets including the planning, procurement,
deployment, tracking, maintenance and disposal of those assets. In addition,
our software provides organizations with a single, comprehensive view of their
e-infrastructure by providing a consolidated repository of information that can
be accessed throughout the organization with a Web browser. Furthermore, our
software is highly flexible and scaleable and integrates with other existing
applications without requiring extensive customization. These features allow
organizations to efficiently manage their technology investments to meet
business objectives. Finally, we can either deliver our software modules
through on-site installation or as a standardized subscription service over the
Internet through our recently introduced application service provider, or ASP,
delivery method. Our subscription service allows organizations to use our
software without incurring license fees and implementation expenses, which we
believe will make our software more accessible to small and medium sized
organizations.

Global competitive pressures are driving organizations to continuously
seek innovative ways to develop, market and maintain their products and
services and to attract, serve and retain their customers. To enhance their
competitiveness, organizations are increasingly utilizing the Internet to
enable employees, customers, partners and vendors to communicate and conduct
business electronically, commonly referred to as e-business. Time-to-market
pressures, the increasing adoption of e-business activities and an ever
changing technology environment have placed a tremendous strain on the e-
infrastructures of many organizations and are driving the need for increased
investments in technology assets and alignment of these investments with
business objectives. To enable and support these objectives, organizations are
dependent upon, and investing significantly in, software and services to manage
their technology assets. Gartner Group, Inc. estimates that the combined market
for the U.S. and Europe for managing information technology assets will grow
from approximately $3.7 billion in 1999 to $7.0 billion in 2002. Furthermore,
META Group, Inc. projects that by 2002, more than 50% of organizations will
have implemented e-infrastructure management programs.

Our objective is to become the leading provider of e-infrastructure
management software and services. Key elements of our strategy include
expanding our customer base by offering subscription services, increasing our
global presence, extending the core functionality of our software by pursuing
strategic relationships or acquisitions, building upon our technological
leadership and developing business-to-business solutions.

We market and sell our software primarily through our direct sales force,
as well as a variety of strategic alliances including distributors, resellers,
outsourcers, and systems integrators. As of March 31, 2000, we had a direct
sales force of 27 account executives and pre-sales software engineers in seven
locations in North America and Europe. Our distributors are principally located
in Europe, specifically in Madrid, Milan, Munich and Paris. Our strategic
relationships include Amdahl Corporation, Computer Sciences Corporation, Compaq
Computer Corporation, KPMG Consulting LLC, PeopleSoft, Inc. and Unisys
Corporation. As of March 31, 2000, we had over 200 customers including Andersen
Consulting, Home Depot, Inc., HypoVereinsbank AG, Sears, Roebuck & Co.,
Southwest Airlines Co., Swisscom AG and Unilever PLC.

We were incorporated in Delaware on January 5, 1996. Our principal
executive offices are located at 7900 Westpark Drive, Suite T500, McLean,
Virginia 22102, and our telephone number is (703) 749-2308. Our Web site is
located at www.maincontrol.com. The information on our Web site is not
incorporated by reference into this prospectus.

THE OFFERING

Common stock offered by
MainControl................... shares

Shares outstanding after the
offering...................... shares

Use of proceeds............... We intend to use the net proceeds from the
offering for:

. the expansion of our international and North
American sales and marketing operations;

. investment in product development;

. working capital; and

. general corporate purposes.

Risk Factors.................. See "Risk Factors" and other information
included in this prospectus for a discussion of
factors you should carefully consider before
deciding to invest in shares of our common
stock.

Proposed Nasdaq National
Market symbol................. MNCL

The number of shares of common stock that will be outstanding after this
offering is based on shares outstanding as of March 31, 2000 adjusted for:

. the conversion of all of our outstanding convertible preferred stock
into 15,550,298 shares of common stock. If the initial public offering
price is less than $9.00 per share, an additional 632,419 shares of
common stock will be issued to the Series C preferred stockholders;
and

. the sale of shares of our common stock at an assumed initial
public offering price of $ per share and our receipt of the
estimated net proceeds of this offering (after deducting estimated
underwriting discounts and commissions and estimated offering
expenses).

The number of shares of our common stock that will be outstanding after
this offering does not include:

. 2,479,761 shares of common stock issuable upon the exercise of
outstanding stock options at a weighted-average exercise price of
$2.86 per share as of March 31, 2000;

. 1,956,007 shares of common stock reserved for issuance under our 1996
Stock Option Plan as of March 31, 2000, of which 253,335 stock options
were granted during the period from April 1, 2000 to June 15, 2000 at
a weighted-average exercise price of $7.59 per share;

. 4,000,000 shares of common stock reserved for issuance pursuant to an
amendment of our 1996 Stock Option Plan as of May 4, 2000;

. 4,000,000 shares of common stock reserved for issuance pursuant to our
Employee Stock Purchase Plan; and

. 2,000,000 shares of common stock reserved for issuance pursuant to our
401(k) Savings Plan.

Unless otherwise noted, all information in this prospectus assumes no
exercise of the underwriters' over-allotment option.

SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

Six
Nine Months
Year Ended Months Ended Year Ended Ended
December 31, September 30, September 30, March 31,
------------ ------------- --------------------------- ---------------------
1995 (/1/) 1996 (/2/) 1997 1998 1999 1999 2000
------------ ------------- ------- -------- -------- -------- -----------

Consolidated Statement
of Operations Data:
Total revenue........... $ 102 $ 155 $ 2,685 $ 8,530 $ 15,503 $ 5,587 $10,148
Gross profit............ 99 150 1,173 4,426 9,997 3,154 7,344
Operating loss.......... (570) (1,752) (5,016) (6,996) (9,668) (4,984) (6,540)
Net loss................ (582) (1,678) (4,872) (6,699) (10,474) (5,251) (7,117)
Net loss available for
common stockholders.... (582) (1,678) (5,150) (10,051) (14,157) (6,957) (14,253)
Basic and diluted net
loss per common share.. $(0.29) $ (0.38) $ (0.86) $ (1.49) $ (1.89) $ (0.96) $ (1.79)
Weighted average number
of common shares....... 2,000 4,453 5,980 6,744 7,506 7,236 7,959
- --------
(1) The consolidated statement of operations data for the year ended December
31, 1995 reflect the results of operations of our Israeli predecessor
company, which reported on a calendar year basis.

(2) In January 1996, we acquired all of the outstanding shares of our
predecessor company and changed our fiscal year for financial reporting
purposes from December 31 to September 30. As a result, the consolidated
statement of operations data for 1996 have been prepared for the nine
months ended September 30. Consequently, comparisons of this nine month
period with the subsequent and prior twelve month periods may provide
limited meaningful information about our business and results of
operations.

As of
March 31, 2000
---------------------
Pro Forma
Actual as Adjusted
-------- -----------

Consolidated Balance Sheet Data:
Cash and cash equivalents.................................................... $ 16,881 $
Working capital.............................................................. 18,824
Total assets................................................................. 29,131
Long-term debt............................................................... 1,179 1,179
Mandatorily redeemable preferred stock....................................... 62,265 --
Stockholders' (deficit) equity............................................... (41,452)

In the pro forma as adjusted column, we have adjusted the actual numbers
to reflect the events set forth on the previous page.

RISK FACTORS

An investment in MainControl involves a high degree of risk. You should
consider carefully the following discussion of risks together with the other
information and financial data contained in this prospectus before deciding to
invest in our common stock. Any of the following risks could harm our business,
operating results or financial condition. The trading price of our common stock
could decline due to any of these risks, and you may lose all or part of your
investment. Any reference to a fiscal year refers to our fiscal year ending on
September 30 of that calendar year.

Risks related to our business

We have a limited operating history, which makes it difficult to evaluate our
future prospects.

We began product development efforts in 1994, and commenced
commercialization of our software in 1996. You must evaluate us and our future
prospects in light of the risks, expenses and difficulties often encountered by
companies with limited operating histories and particularly by companies that
operate in new and rapidly evolving markets such as the market for e-
infrastructure management software and services. Some of these risks relate to
market acceptance of our software and our ability to:

. effectively market and sell our software;

. develop and offer new, reliable and cost effective software and
service offerings; and

. attract and retain qualified personnel.

If we are unable to successfully address these risks, our business will
be harmed. Also, because of our limited operating history, comparison of our
operating results and financial position over different periods may not
necessarily be meaningful, and you should not rely on these comparisons as
indications of future performance.

We have had operating losses, and expect to incur losses in the future.

Our revenue and net income potential is unproven and we cannot guarantee
that we will ever be profitable, or that our operating losses will not increase
in the future. Since we began doing business, we have generated significant
losses and negative cash flow from operations. These losses have been due
primarily to our product development efforts and, since the start of fiscal
year 1996, investments in marketing and sales resources. We may not experience
any revenue growth, and our revenue could decline. Moreover, we expect to incur
significant sales and marketing, research and development and general and
administrative expenses. In the future, we expect to incur substantial non-cash
costs relating to the amortization of deferred stock-based compensation which
will contribute to our net losses. We had operating losses of $5.0 million,
$7.0 million and $9.7 million for fiscal years 1997, 1998 and 1999; and $6.5
million for the six months ended March 31, 2000. At March 31, 2000, we had an
accumulated deficit of $40.1 million.

Our future operating expenses and capital expenditures will increase, which may
harm our operating results.

We have experienced significant personnel and internal infrastructure
growth since we began operations in 1994. This growth required us to incur
substantial operating expenses of approximately $19.7 million for fiscal year
1999 and $13.9 million for the six months ended March 31, 2000. We will
continue to incur significant operating expenses and capital expenditures as we
seek to:

. pursue strategic opportunities, including acquisitions, alliances and
relationships with other companies;

. expand our worldwide sales and marketing operations; and

. develop our software to address the e-infrastructure needs of new
markets such as the Internet business market.

If these expenditures do not lead to improved results, we may not earn
profits.

Our software is subject to long and uncertain sales cycles which make it
difficult to predict with any certainty our future revenue and cash flow from
operations.

The sales cycle for our software licenses has historically taken
approximately six to twelve months to complete. The length of the sales cycle
may vary depending on factors over which we have little or no control, such as
the size of the transaction, the internal activities of potential customers and
the level of competition which we encounter in selling our software. We
typically ship a majority of orders within a few days of receipt of the order
and, therefore, we may not have significant license revenue backlog at any
point in time. Consequently, we may be unable to predict with certainty the
amount and timing of future orders and thus our future operating revenue and
operating cash positions. Any delay in the sales cycle of a large license or a
number of small licenses could decrease our revenue and cash flow.

Our quarterly results may fluctuate and are difficult to predict; if we do not
meet the performance expectations of analysts or investors, the market price of
our stock may decline.

Our quarterly revenue and results have not been predictable, and will
likely remain unpredictable for the foreseeable future, largely as a result of
the impact of the timing of software sales, the efforts of our sales force to
meet their quarterly and annual sales quotas, and frequent attempts by our
customers to secure more favorable terms by timing their purchases late in the
quarter or fiscal year. As a result, we may at times fail to meet the
expectations of securities analysts or investors. Our failure to meet those
expectations likely would cause the market price of our stock to decline. Our
quarterly results may continue to vary significantly in the future depending
upon a number of factors, many of which are beyond our control, including:

. market demand for our software;

. the size, timing and contractual terms of orders;

. our ability to develop, introduce and market new software and
enhanced versions of existing software on a timely basis, including
our subscription service;

. actions taken by our competitors, including the timing and
significance of new product announcements or releases;

. changes in pricing policies of our competitors;

. budgeting cycles of potential customers and changes in those cycles;

. our ability to control operating expenses and other costs;

. increase in sales of software that includes third-party technology
resulting in higher royalty obligations;

. deferrals of customer orders in anticipation of software
enhancements, new software introductions or price reductions; and

. success in retaining and enhancing existing customer and distribution
relationships and developing new relationships with customers,
strategic partners and distributors.

We currently rely on sales of our MC/EMpower software, and in the future expect
to rely on sales of our MC/EMpower i.series software and our new subscription
service for our MC/EMpower i.series software, for a significant portion of our
revenue; if we are unable to successfully sell, or if organizations do not
accept, this software or our subscription service, our revenue will decrease.

We currently derive substantially all of our license revenue from the
sale of our MC/EMpower software, and we expect our new subscription service for
our next generation MC/EMpower i.series software to account for a significant
portion of our revenue for the foreseeable future. Our subscription service is
based on an unproven business model that we have little experience operating
and which may fail to gain market acceptance. As of March 31, 2000, we had not
derived any revenue from our MC/EMpower i.series software or from our
subscription service. As a result, the introduction of our new software and
subscription service will make it more difficult for you to evaluate our future
prospects. Our revenue may decrease and our ability to continue operating may
be harmed if demand for, or market share of, this software does not grow.

We currently rely on sales to a small number of customers; if we are unable to
maintain these customers and attract new customers, our business will suffer.

We currently derive a significant portion of our revenue from large sales
to a small number of customers per year. During the six months ended March 31,
2000, two customers accounted for 31% of our total revenue. In fiscal year
1999, three customers accounted for 40% of our total revenue. Our future sales
volume depends on our ability to expand our customer base and to obtain
additional sales of software and services to existing customers. In addition,
we have historically focused our sales efforts on sales to large organizations.
If we are unable to expand our software customer base or to attract small and
mid-sized organizations as customers, or if one or more major customers decide
not to purchase additional software and service from us, our revenue will not
grow at the rate we expect and our ability to continue operating may be harmed.

If we fail in our efforts to expand our distribution channels, or are unable to
maintain our existing distribution channels, our sales will suffer.

We historically have sold a substantial amount of our software through
marketing arrangements with distributors. A small number of such distributors
have accounted for a significant amount of our revenue. During fiscal year
1999, and the six months ended March 31, 2000, Interchip Distributed Systems
GmbH, or Interchip, a distributor and German affiliate of ours, accounted for
17.3% and 1.9% of our revenue, respectively. Our relationships with our
distributors are non-exclusive and these distributors may also carry competing
software lines. Furthermore, our distributors may cease to actively promote,
support and service our software, and the level of sales through these
distributors may decrease in the future.

We also are currently expanding our sales and marketing channels by
forming relationships with system integrators, original equipment manufacturers
and other distribution channels. If, despite these investments, we do not
attract and retain distribution channels that either have the capacity to
market our software effectively or are qualified to provide timely and cost-
effective customer support and service, our business, operating results and
financial condition could be harmed.

We are in the process of expanding our direct sales force to complement
our marketing arrangements with distributors. As we have only recently begun
this expansion, our direct sales force has limited experience selling our
software. If we are unable to successfully and rapidly train our direct sales
force, we may be unable to consummate the number of sales we anticipate making
through the direct sales force, which could harm our growth.

Some of our software is dependent upon our ValueSolution joint venture; any
change in the existing structure of our relationship could harm our business.

We and USU Softwarehaus Unternehmensberatung AG, or USU, which is one of
our stockholders, formed a joint venture that became effective in December
1998, called ValueSolution GmbH & Co. KG, or ValueSolution. The purpose of the
joint venture is to further develop, enhance and market software originally
developed by USU. Our next generation of software, the MC/EMpower i.series,
contains a portion of the ValueSolution software. The ValueSolution software
has in the past accounted, and is expected to continue to account, for a
significant percentage of our license revenue. During the six months ended
March 31, 2000, this software accounted for 41.8% of our license revenue. In
fiscal year 1999, it accounted for 41.4% of our license revenue. Under the
terms of the joint venture, ValueSolution owns the intellectual property rights
to the ValueSolution software and has granted to us the exclusive right to
market and sublicense the ValueSolution software worldwide except in Germany,
Austria and Switzerland. We cannot guarantee that the ValueSolution joint
venture will continue, that the terms of the joint venture arrangement will not
be renegotiated or that the terms of the joint venture agreement will be
sufficient to protect our exclusive marketing rights after the joint venture
has been terminated. A change in the terms or termination of the joint venture
might reduce our right to distribute the ValueSolution software, which would
seriously harm our business.

If we are unable to hire and retain key personnel, we will be unable to
effectively execute our business plan.

Our operations are dependent on the continued efforts of our executive
officers and senior management, particularly Alex Pinchev, our Chairman of the
board of directors, president, chief executive officer and founder. We have an
employment contract with Mr. Pinchev and a $4.0 million "key person" life
insurance policy on him, which provides for $2.0 million in benefits to
MainControl and $2.0 million in benefits to Mr. Pinchev's family. Nevertheless,
because of Mr. Pinchev's unique knowledge of our business as our founder, and
because of his numerous business relationships with potential clients, the loss
of Mr. Pinchev's services would seriously harm our business. In addition, while
our executive officers and senior management are subject to non-compete
restrictions and confidentiality provisions, such provisions may not be
effective in preventing these persons from working for a competitor. The
competition for experienced senior management is intense and there is no
guarantee that we could hire experienced individuals to replace our current
executive officers.

We also are dependent upon our ability to attract, hire and retain
information technology professionals who possess the skills and experience
necessary to meet the product development and service requirements of our
customers. We must continually identify, screen and retain qualified
information technology professionals to perform our business operations and to
satisfy customer needs. Competition with other providers of technical services,
systems integrators, providers of outsourcing services, computer systems
consultants, customers and temporary staffing companies for qualified
individuals with proven technical skills is highly intense. Companies in our
industry whose employees accept positions with competitors frequently claim
that their competitors have engaged in unfair hiring practices or trade secret
misappropriation. We cannot assure you that we will not receive claims of this
kind in the future based on past or future hires, or that those claims will not
result in material litigation. In addition, as with any suit, regardless of the
suit's merits, we could incur substantial costs defending ourselves and/or our
employees. Also, defending ourselves from such claims could divert the
attention of our management away from our operations. As a result, we may not
be able to attract, hire and retain a sufficient number of qualified
information technology professionals.

If we were to lose the services of one or more of our executive officers
or information technology professionals or were unable to hire and integrate
new personnel, we would be unable to effectively execute our business plan.

If we fail to manage our future growth effectively, and do not successfully
upgrade our internal management and reporting systems, our business may suffer.

Our growth will place a significant strain on our management and
operational and financial resources, including our existing internal management
and reporting systems. In particular, our internal management and

reporting systems are currently operating above their normal capacity, as a
result of which we are using additional, relatively time-consuming manual-entry
systems for some accounting and other functions. We are in the process of
evaluating various options for upgrading these internal management and
reporting systems; however, if we experience delays in the implementation of
these upgrades, or if the upgrades are not completed successfully, we may not
be able to manage our future growth successfully. Our failure to adequately
manage our growth or to successfully complete these upgrades would harm our
business.

We face significant competition, which may result in loss of market share and
reduced revenue.

The market for our software is highly competitive, fragmented and subject
to rapid technological change and frequent new software introductions and
enhancements. Competitors vary in size and in the scope and breadth of software
and services offered. While we believe that only one other company, Peregrine
Systems, Inc., positions itself as a direct competitor to us, we encounter
competition from a number of additional sources, including:

. providers of internal help desk software applications, such as Remedy
Corporation, that are developing new software to complement these
applications in order to broaden the scope of their e-infrastructure
management solutions;

. enterprise management software companies such as Microsoft
Corporation, Tivoli Systems, Inc., a subsidiary of IBM, Computer
Associates International, Inc. and Hewlett-Packard Company;

. point product offerings such as inventory management, software
distribution and other database application offerings from companies
such as Janus Technologies, Inc., Tally Systems Corporation and
Tangram Enterprise Solutions, Inc.; and

. internally developed software applications.

We believe that many of our existing competitors, as well as potential
new competitors, have significantly greater financial, technical and marketing
resources than we do. As a result, they may be able to allocate significantly
greater resources to the development, promotion or acquisition of products that
apply to e-infrastructure management. This could result in greater market
acceptance of competitor products, provide competitors with the ability to
respond more quickly to new or emerging technologies or changes in customer
requirements, or allow competitors to allocate greater resources than we can to
the development, marketing and sale of their products.

Current and future competitors may also make strategic acquisitions or
establish cooperative relationships among themselves or with others. By doing
so, they may increase their ability to meet the needs of our potential
customers. Our current or prospective distributors and resellers may establish
cooperative relationships with competitors. Such relationships may limit our
ability to sell our software through specific distribution channels. We also
expect software industry consolidation to continue in the future. Accordingly,
it is possible that new competitors or alliances among current and future
competitors may emerge and rapidly gain significant market share. These
developments could cause us to lose market share, which could cause our
revenues to decrease.

If we fail to successfully address technological changes and product
development risks, our business will suffer.

The market for technology and e-infrastructure management software and
services is characterized by rapidly changing technology, evolving industry
standards, frequent new product developments and changing customer demands. Our
future success requires that a large number of organizations recognize the
critical importance of managing the life cycle of e-infrastructure assets and
analyzing the total cost of ownership of each e-infrastructure asset in order
to compete successfully. Our success will further depend on our ability to:

. adapt to changing technologies and industry standards, including the
Internet;

. continually improve the performance, features, ease of use and
reliability of our software; and

. avoid the risk of technological obsolescence through our research and
development efforts.

Our product development efforts are expected to continue to require substantial
investments. We may not have sufficient resources to make the necessary
investments. We have not in the past experienced significant development
delays, but we may do so in the future. We may experience difficulties that
could delay or prevent the successful development, introduction or marketing of
new or enhanced software. In addition, our software may not achieve market
acceptance, or our current or future software may not conform to industry
requirements. If we do not succeed in introducing new technology on a timely
basis to meet customer and market demands and avoid technological obsolescence,
the acceptance of our software may decline or fail to grow, which would harm
our business.

Uncertainties regarding our current and future international operations could
harm our business.

We expect that the current and planned growth of our international
operations will lead to increased financial and administrative demands. For
example, expanded facilities will complicate operations, managing relationships
with new foreign partners will mean additional administrative burdens, and
managing foreign currency risks will require expanded treasury functions. We
also may need to expand and support our organization to develop our indirect
distribution channels in new and expanded markets and to accommodate growth in
our installed customer base. One or more of the following factors may reduce
our ability to successfully implement our international strategy, and may
therefore harm our ability to expand our business:

. changes in local regulatory requirements;

. difficulties in staffing and managing foreign operations;

. inability to customize software for local markets;

. seasonal fluctuations in purchasing patterns;

. longer accounts receivable payment patterns;

. fluctuations in currency exchange rates;

. lack of correlation between our revenue and expenses denominated in
foreign currencies;

. difficulties relating to the enforcement of contracts;

. unstable economic and political conditions in foreign markets;

. adverse changes in global financial markets, such as interest rates;

. adverse tax consequences; and

. the burdens of complying with a wide variety of foreign laws.

If we do not successfully manage future acquisitions, if any, our business may
be harmed.

As part of our business strategy, we may find it desirable to make
acquisitions of, or significant investments in, businesses that offer
complementary products, services and technologies. If we identify an
appropriate acquisition candidate, we may not be able to negotiate the terms of
the acquisition successfully or finance the acquisition. If we consummate one
or more significant acquisitions in which the consideration consists of stock
or other securities, your ownership percentage in MainControl could be
significantly diluted. If we were to proceed with one or more significant
acquisitions in which the consideration included cash, we could be required to
use a substantial portion of our available cash, including proceeds of this
offering. In addition, we may be required to amortize significant amounts of
goodwill and other intangible assets in connection with future acquisitions,
which could lower our net income. Risks associated with any future acquisitions
may be influenced by the following factors:

. difficulties in assimilating the technology, operations or personnel
of the acquired businesses into ours;

. potential disruption of our ongoing business;

. difficulties in maximizing our financial and strategic position
through the successful integration of acquired personnel, clients or
technologies;

. problems in maintaining uniform standards, controls, procedures and
policies;

. impairment of our relationships with our employees and clients as a
result of any integration of new businesses and management personnel;
and

. the diversion of our management's attention.

If we engage in acquisitions in the future, any failure by us to successfully
address these factors could harm our business.

Our software may suffer from defects or errors, which may harm our reputation
or subject us to product liability claims.

Our software is highly complex and sophisticated and may contain design
defects or software errors that are difficult to detect and correct. Errors,
defects or viruses may result in loss or delay in market acceptance or loss of
client data and could harm our reputation, credibility and relationships with
current and prospective customers and vendors. As a result, any errors in our
software could cause our business, operating results and financial condition to
suffer.

Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions contained in the
license agreements may not be effective under the laws of certain
jurisdictions. Although we have not experienced any product liability claims to
date, our sale and support of our software may expose us to such claims in the
future. A product liability claim brought against us could harm our business,
operating results and financial condition.

System failures or capacity constraints may diminish our ability to generate
revenue from our subscription service.

The hardware infrastructure on which our subscription service operates is
installed at the USinternetworking, Inc., or USi, data center in Annapolis,
Maryland. We cannot assure you that we will be able to manage this relationship
successfully to mitigate any risks associated with having our hardware
infrastructure maintained by USi. Unexpected events such as natural disasters,
power losses and vandalism could damage USi's systems. Telecommunications
failures, computer viruses, electronic break-ins or other similar disruptive
problems could harm the operation of USi's systems. Our insurance policies may
not adequately compensate us for any losses that may occur due to any damages
or interruptions in USI's systems. Accordingly, we could be required to make
capital expenditures in the event of damage. Periodically, we may experience
unscheduled system downtime that results in our subscription service being
inaccessible to customers. If these problems occur, our customers and business
relations could lose confidence in our services.

A substantial increase in the use of our subscription service could
strain the capacity of USi's systems, which could lead to slower response time
or system failures. System failures or slowdowns could reduce the speed and
responsiveness of our subscription service. As a result, our reputation could
be harmed. Given the limited history of our relationship, the ability of USi's
systems to manage a significantly increased volume of our transactions in a
production environment is unknown. As a result, we face risks related to USi's
ability to scale up to our expected transaction levels while maintaining
satisfactory performance. If our transaction volume increases significantly, we
may need to contract for additional servers and networking equipment for USi to
operate in order to maintain adequate data transmission speeds. The
availability of these products and related services may be limited or their
cost may be significant, which could cause our business to suffer.

Disputes regarding our intellectual property could harm our ability to sell our
software.

Our success is dependent, in large part, upon our proprietary technology,
which we attempt to protect by relying on trademark, service mark, copyright
and trade secret law, together with confidentiality arrangements which include
restrictions on disclosure and transfer of title. We seek to protect our
software, documentation and other written materials under trade secret and
copyright law, which provides only limited protection. Despite precautions
taken by us, it may be possible for unauthorized third parties to copy aspects
of our current or future software or to obtain and use information which would
harm our business. In addition, litigation may be necessary in the future to
enforce our property rights with no guarantee of outcome and the time and costs
of such litigation could cause our business, operating results and financial
condition to suffer.

There has been a substantial amount of litigation in the software
industry and the Internet industry regarding intellectual property rights. It
is possible that in the future, third parties may claim that we or our current
or potential future software and trademarks infringe on their intellectual
property. We expect that software product developers and providers of
electronic commerce solutions will increasingly be subject to infringement
claims as the number of products and competitors in our industry segment grows
and the functionality of products in different industry segments overlap. Any
claims, with or without merit, could be time-consuming, result in costly
litigation or injunctions, cause product shipment delays or require us to enter
into royalty or licensing agreements. Royalty or licensing agreements, if
required, may not be available on terms acceptable to us or at all, which could
seriously harm our business.

Some of our software is dependent on the marketing and distribution of
proprietary information from third parties and we are subject to compliance
with the terms of such marketing and distribution agreements. Despite
precautions taken by us, we cannot assure you that the terms of our license
agreements with third parties will not be breached. In addition, we cannot
assure you that our business activities will not infringe upon the proprietary
rights of vendors or others, or that other persons will not assert infringement
claims against us. Although to date we have not been subject to such claims,
any such claims in the future might subject us to significant liability for
damages. Also, even if we successfully defend such a claim, the time and cost
of such litigation could harm our business, operating results and financial
condition.

In addition, MainControl, Ltd., our Israeli subsidiary, owns the
intellectual property rights to earlier versions of a portion of our MC/EMpower
software. We are under restrictions related to the transfer and use of this
technology outside of Israel because of funding in the total amount of $365,000
provided by the Office of the Chief Scientist of the State of Israel to
MainControl, Ltd. in 1994 and 1995. We have submitted an application to the
Office of the Chief Scientist to narrow the scope of these restrictions due to
the evolution and change in our technology since that time and to approve our
use of this technology. Although there are no guarantees that the Office of the
Chief Scientist will grant our application, we believe that, at a minimum, we
will be required to accelerate repayment to the Chief Scientist, possibly at a
rate of 300%, resulting in royalty payments of $1.1 million.

Our business may be harmed if we are unable to obtain future financing.

We expect that the net proceeds from the offering will be sufficient to
meet our anticipated needs for working capital, operating expenses and capital
expenditures for at least the next 12 months. We may need to raise additional
funds in the future to finance new or enhanced product development, increased
sales and marketing promotions, rapid geographic expansion, implementation of
new or enhanced services, and acquisition of complementary businesses,
technologies or services. While we currently have no arrangements to engage in
acquisition transactions, we could do so at any time in the future which could
result in the need to raise additional capital.

We cannot guarantee that additional financing will be available on terms
acceptable to us, or at all. If additional funds are not available, or are not
available on acceptable terms, we may not be able to fund our

expansion, take advantage of acquisition opportunities, or develop or enhance
products and services. This lack of funds could therefore diminish our ability
to successfully implement our business strategy and could consequently harm our
business and operations. In addition, we may issue additional equity to finance
our business, which could cause the market price of our common stock to decline
or have a dilutive effect on holders of outstanding shares of our common stock.

Our transactions with related parties may harm our marketing and sales efforts
and may result in our engaging in transactions on terms that are less favorable
than we might obtain from unrelated third parties.

We are a party to several significant agreements with related parties. We
are a party to an international marketing agreement with Interchip, a German
software distribution and consulting company based in Munich, Germany, owned by
Mr. Alex Pinchev and Mr. Dieter Riffel, both members of our board of directors,
together with relatives of Mr. Pinchev and Mr. Riffel. Interchip has a non-
exclusive right to market our software, other than the ValueSolution software,
in Germany, Switzerland and Austria. Interchip is obligated to pay us a
royalty, generally 50%, of the license and maintenance revenue realized from
each sale of our software. Our current strategy is to build up our direct sales
force in Europe, which will put our sales force in direct competition with
Interchip for sales of our software in Germany, Switzerland and Austria. We may
be unable to successfully manage the relationship between our direct sales
force and our distributor in those areas, which could lead to pricing
competition between us and our affiliates and the potential loss of customers,
all of which would harm our business.

Additionally, we have entered into agreements with USU and ValueSolution
and may continue to enter into agreements with related parties in the future.
If we are unable to continue our current, or enter into new, arrangements on an
arm's-length basis, we may engage in transactions with related parties on terms
that are less favorable to us than the terms we would obtain in negotiations
with unrelated third parties, which would cause our results of operations to
suffer.

Risks Related to our Industry

We depend on the continued use of the Internet as a medium for implementing
many of our software applications; if the Internet does not continue to be a
viable means to conduct and transact business, we may not be able to execute
our strategy.

Rapid growth in the use of the Internet has occurred only recently, and
many issues are not yet, and may never be, fully resolved. For example, we
cannot assure you that the Internet will continue to effectively support the
capacity, speed, and security demands placed upon it as it continues to
experience increased numbers of users, frequency of use and increased
requirements for data transmission by users. Even if the necessary
infrastructure or technologies are developed, we may incur considerable costs
to adapt our solutions accordingly. Also, the Web has experienced a variety of
outages and delays due to damage to portions of its infrastructure or attacks
by hackers. These outages and delays could impact our ability to offer our
software on a hosted basis. Acceptance and use of the Internet may not continue
to develop, and a sufficiently broad number of organizations may not adopt and
continue to use the Internet as a medium for transacting business operations.
If this were to occur, we would have difficulties implementing and marketing
our software, which would harm our business.

Internet-related laws could limit the market for our software, which would harm
our business.

Regulation of the Internet is largely unsettled. We cannot predict the
impact that any laws or regulations applicable to the conduct of business
operations over the Internet will have on our business. If the adoption of new
Internet laws or regulations causes organizations to conduct business by other
methods, the demand for our subscription service could decrease, which would
harm our business.

Risks Related to this Offering

Our stock has never been publicly traded so it is impossible to predict the
extent to which a trading market will develop for our common stock.

Prior to this offering, there has not been a public market for our common
stock. Even if our common stock trades on the Nasdaq National Market after the
offering, an active public market may not develop or be sustained. The initial
public offering price will be determined by negotiations between our
representatives and those of the underwriters and may not be indicative of
prices that will prevail in the trading market.

Our share price is likely to be highly volatile.

The market price of our shares after the offering may vary from the
initial public offering price; as a result, you may be unable to sell your
shares of our common stock at or above the offering price. The price of shares
sold in an initial public offering, particularly those traded on the Nasdaq
National Market, is frequently subject to significant volatility for a period
of time following the initial public offering. Moreover, the stock markets have
from time to time experienced significant price and volume fluctuations, which
have particularly affected the market prices of the stock of technology and
emerging growth companies and which may be unrelated to our operating
performance. The trading price of our shares could be subject to wide
fluctuations. These market fluctuations, as well as general economic, political
and market conditions, could adversely affect the market price of our shares.

Factors that may add to the volatility of our share price include:

. the introduction of new software or services by us or our
competitors;

. variations on our quarterly operating results;

. loss of a major customer or failure to complete significant
transactions;

. changes in securities analysts' estimates of our financial
performance;

. conditions or trends in the information technology industry;

. actual or expected announcements of technological innovations;

. announcements by us or our competitors of significant acquisitions or
strategic alliances;

. changes in partnerships or joint venture relationships;

. changes in the market valuation of information technology companies;

. changes in our capital commitments;

. changes in our key personnel;

. actual or expected sales of the shares of common stock; and

. rumors in the market about us or our competitors.

Many of these factors are beyond our control. These factors may decrease the
market price of our common stock, regardless of our operating performance.

Our management has broad discretion as to the use of proceeds from this
offering; if it does not use these proceeds effectively, our financial position
will be harmed.

Our management has broad discretion in how we use the net proceeds of
this offering. Investors rely on the judgment of our management regarding the
application of the proceeds from this offering. We currently expect to use the
net proceeds from this offering for the expansion of our international and
North American sales and marketing operations; investment in product
development; working capital; and general corporate purposes. A failure by our
management to apply these proceeds effectively would cause our financial
condition to suffer and could cause the market price of our common stock to
decline.

Future sales of our shares by our current stockholders may depress our share
price.

Sales of a substantial number of our shares in the public market
following this offering could depress the market price of our shares. After
this offering, shares of our common stock will be outstanding.
of the remaining shares outstanding after this offering will be
restricted as a result of securities laws and approximately restricted
shares are eligible for sale as of the date of this prospectus in accordance
with the provisions of Rule 144. For a description of the shares of our common
stock that are available for future sales, see "Shares Eligible for Future
Sale."

Investors in this offering will suffer immediate dilution.

The initial public offering price is substantially higher than the book
value of our outstanding shares of common stock. As a result, purchasers in
this offering will incur immediate and substantial dilution of $ per share
in net tangible book value per share from the offering price per share of
$ . To the extent outstanding options to purchase our shares are exercised,
there will be further dilution.

Our directors and officers influence our business and beneficially own a
substantial portion of our stock, and could therefore reject mergers or other
business combinations that a stockholder may believe are desirable.

We anticipate that our directors, officers and individuals or entities
affiliated with our directors will beneficially own approximately % of our
outstanding common stock as a group after this offering closes. Acting
together, these stockholders would be able to significantly influence all
matters that our stockholders vote upon, including the election of directors,
mergers or other business combinations and asset sales.

Our certificate of incorporation and bylaws, as well as Delaware law, may
prevent or delay a future takeover, thus preventing investors from realizing a
premium on our stock price.

Our certificate of incorporation provides for a classified board of
directors. In addition, our certificate of incorporation and bylaws contain
certain provisions that are intended to enhance the likelihood of continuity
and stability in the composition of our board of directors and in the policies
formulated by the board of directors. These provisions, together with certain
provisions of Delaware law, may hinder or delay an attempted takeover of
MainControl other than through negotiation with the board of directors. These
provisions could have the effect of discouraging certain attempts to acquire
our company or remove incumbent management even if some or a majority of our
stockholders were to deem such an attempt to be in their best interest,
including attempts that might result in stockholders' receiving a premium over
the market price for the shares of common stock held by stockholders. In
addition, these provisions may limit the ability of stockholders to approve
transactions that they may deem to be in their best interests. For a
description, please see "Description of Capital Stock--Anti-takeover Effects of
Certain Provisions of Delaware Law and our Restated Certificate of
Incorporation and Bylaws."

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "for instance,"
"may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential" or "continue," the negative of these terms or other
comparable terminology. These statements are only predictions. Actual events or
results may differ materially. In evaluating these statements, you should
specifically consider various factors, including the risks outlined in the Risk
Factors section. These factors may cause actual results to differ materially
from any forward-looking statement.

Although we believe that the expectations reflected in the forward-
looking statements are reasonable, we cannot guarantee future results, levels
of activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of the forward-
looking statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual results or to changes in our expectations.

USE OF PROCEEDS

We estimate that the net proceeds from this offering will be
approximately $ , or $ if the underwriters' over-allotment option is
exercised in full, after deducting estimated underwriting discounts and
commissions and estimated offering expenses.

The primary purposes of this offering are to obtain additional equity
capital, create a public market for our common stock and facilitate future
access to public markets. While we have no specific plan for the use of
proceeds, we expect to use the net proceeds from this offering for expansion of
our international and North American sales and marketing operations, investment
in product development, working capital and general corporate purposes. In
addition, we may use a portion of the net proceeds of the offering to acquire
or invest in complementary businesses, technologies, services or products,
although there are no current agreements or negotiations with respect to any
such acquisitions, investments or other transactions. Our management however,
will have broad discretion in the application of the net proceeds depending on
changes in its business. Pending their use, we plan to invest proceeds in
short-term, investment grade instruments.

DIVIDEND POLICY

We have never declared or paid any dividends. We currently intend to
retain all available earnings generated by operations for the development and
growth of our business and, therefore, do not anticipate paying any cash
dividends on our common or preferred stock for the foreseeable future. In
addition, our secured bank credit facility has restrictive covenants
prohibiting dividend payments.

CAPITALIZATION

The following table sets forth our capitalization as of March 31, 2000 on
an actual and a pro forma as adjusted basis and should be read in conjunction
with the Consolidated Financial Statements and related notes thereto, which are
included elsewhere in this prospectus.

In the pro forma as adjusted column, we have adjusted the actual numbers
to reflect the following events that have occurred or will occur upon the
closing of this offering:

. the conversion of all of our outstanding convertible preferred stock
into 15,550,298 shares of common stock. If the initial public
offering price is less than $9.00 per share, an additional 632,419
shares will be issued to the Series C preferred stockholders; and

In addition, this column does not include:

. 2,479,761 shares of common stock issuable upon the exercise of
outstanding stock options at a weighted-average exercise price of
$2.86 per share as of March 31, 2000;

. 1,956,007 shares of common stock reserved for issuance under our 1996
Stock Option Plan as of March 31, 2000 of which 253,335 stock options
were granted during the period from April 1, 2000 to June 15, 2000 at
a weighted-average exercise price of $7.59 per share;

. 4,000,000 shares of common stock reserved for issuance pursuant to an
amendment of our 1996 Stock Option Plan as of May 4, 2000;

. 4,000,000 shares of common stock reserved for issuance pursuant to
our Employee Stock Purchase Plan; and

. 2,000,000 shares of common stock reserved for issuance pursuant to
our 401(k) Plan.

As of
March 31, 2000
---------------------
Pro Forma
Actual as Adjusted
-------- -----------
(in thousands,
except per share
data)

Long-term debt........................................... $ 1,179 $ 1,179
Mandatorily redeemable preferred stock:
Convertible preferred stock, $0.001 par value;
16,182,717 shares authorized, issued and outstanding,
actual; none authorized, issued and outstanding, pro
forma as adjusted..................................... $ 62,265 $
Stockholders' (deficit) equity:
Common stock, $0.001 par value, 30,000,000 shares
authorized; 7,955,565 shares issued and outstanding,
actual; shares issued and outstanding, pro forma
as adjusted .......................................... 8
Additional paid-in capital............................. --
Deferred stock-based compensation...................... (1,286) (1,286)
Accumulated deficit.................................... (40,102) (40,102)
Accumulated other comprehensive loss................... (72) (72)
-------- --------
Total stockholders' (deficit) equity..................... (41,452)
-------- --------
Total capitalization................................. $ 21,992 $
======== ========

DILUTION

Dilution per share to new investors represents the difference between the
amount per share paid by the purchasers of our common stock in this offering
and the pro forma as adjusted net tangible book value per share of common stock
immediately after completion of this offering after giving effect to the
adjustments described in the bullet clauses below.

Our pro forma as adjusted net tangible book value as of March 31, 2000
was approximately $ million or $ per share of common stock. This
represents an immediate increase in net tangible book value on a pro forma as
adjusted basis of $ per share to existing stockholders and an immediate
dilution of $ per share to new investors. Pro forma as adjusted net
tangible book value per share represents the amount of total tangible assets
less total liabilities, divided by the number of shares of common stock
outstanding as of March 31, 2000, after giving effect to:

. the conversion of all of our outstanding convertible preferred stock
into 15,550,298 shares of common stock, assuming an initial public
offering price of at least $9.00 per share. If the initial public
offering price is less than $9.00 per share, an additional 632,419
shares of common stock will be issued to the Series C preferred
stockholders; and

The following table illustrates per share dilution:

Assumed initial public offering price per common share......... $
----
Pro forma net tangible book value per share of common stock
as of March 31, 2000, before giving effect to the
offering.................................................... $0.89
Increase per common share attributable to new investors......
-----
Pro forma as adjusted net tangible book value per share of
common stock after the offering.............................
----
Dilution per share of common stock to new investors............ $
====

The following table sets forth on a pro forma as adjusted basis as of
March 31, 2000 the number of common shares purchased from us, the total cash
consideration paid and the average price per common share paid by the existing
stockholders and by new investors based on an initial public offering price of
$ per share before deducting estimated underwriting discounts and
commissions and estimated offering expenses.

Shares Average Price
Purchased Total Consideration Per Share
-------------- ----------------------------------
Number % Amount % $
---------- --- ------------- --------------------

Existing stockholders... 23,505,863 % $ 50,355,431 % $2.14
New stockholders........
---------- --- ------------- ----- -----
Total................. 100% $ 100% $
========== === ============= ===== =====

The above discussion and tables exclude:

. 2,479,761 shares of common stock issuable upon the exercise of
outstanding stock options at a weighted-average exercise price of
$2.86 per share as of March 31, 2000;

. 1,956,007 shares of common stock reserved for issuance under our 1996
Stock Option Plan as of March 31, 2000, of which 253,335 stock
options were granted during the period from April 1, 2000 to June 15,
2000 at a weighted-average exercise price of $7.59 per share;

. 4,000,000 shares of common stock reserved for issuance pursuant to an
amendment of our 1996 Stock Option Plan as of May 4, 2000;

. 4,000,000 shares of common stock reserved for issuance pursuant to
our Employee Stock Purchase Plan; and

. 2,000,000 shares of common stock reserved for issuance pursuant to
our 401(K) Savings Plan.

To the extent that additional shares of common stock are issued, there
will be further dilution to new investors.

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated statement of operations and balance
sheet data should be read in conjunction with the Consolidated Financial
Statements and related notes thereto and Management's Discussion and Analysis
of Financial Condition and Results of Operations, which are included elsewhere
in this prospectus. The statement of operations data for each of the three
years in the period ended September 30, 1999 and the balance sheet data as of
September 30, 1998 and 1999 have been derived from our audited financial
statements included elsewhere in this prospectus. The statement of operations
data for the year ended December 31, 1995 and the nine months ended September
30, 1996 and the balance sheet data as of December 31, 1995 and as of September
30, 1996 and 1997 have been derived from our audited financial statements not
included in this prospectus. The interim data have been prepared on a basis
consistent with that of the audited financial statements and, in the opinion of
management, include all normal recurring adjustments necessary for a fair
presentation of the data for such periods. The historical results presented
below are not necessarily indicative of future results.

Nine Months Six Months
Year Ended Ended Ended
December 31, September 30, Year Ended September 30, March 31,
------------ ------------- --------------------------- -----------------
1995(/1/) 1996(/2/) 1997 1998 1999 1999 2000
------------ ------------- ------- -------- -------- ------- --------
(in thousands, except per share data)

Consolidated Statement
of Operations Data:
Revenue:
License................ $ 102 $ 155 $ 2,218 $ 5,465 $ 8,715 $ 3,005 $ 5,972
Maintenance............ -- -- 184 648 1,461 615 839
Professional
services.............. -- -- 283 2,417 4,218 1,724 2,414
Joint venture
development fees ..... -- -- -- -- 1,109 243 923
------ ------- ------- -------- -------- ------- --------
Total revenue........ 102 155 2,685 8,530 15,503 5,587 10,148
------ ------- ------- -------- -------- ------- --------
Cost of revenue:
License, exclusive of
non-cash stock-based
compensation of $0,
$0, $0, $0, $17, $8,
and $4................ 3 5 1,014 1,752 2,444 1,132 1,257
Maintenance, exclusive
of non-cash stock-
based compensation of
$0, $0, $0, $1, $2,
$1 and $2............. -- -- 334 668 1,104 492 555
Professional services,
exclusive of non-cash
stock-based
compensation of $0,
$0, $0, $1, $8, $5
and $7................ -- -- 164 1,684 1,958 809 992
------ ------- ------- -------- -------- ------- --------
Total cost of
revenue............. 3 5 1,512 4,104 5,506 2,433 2,804
------ ------- ------- -------- -------- ------- --------
Gross profit............ 99 150 1,173 4,426 9,997 3,154 7,344
------ ------- ------- -------- -------- ------- --------
Operating expenses:
Research and
development,
exclusive of non-cash
stock-based
compensation of $0,
$0, $81, $34, $177,
$88 and $70........... 620 1,050 2,503 3,586 6,026 2,826 4,829
Sales and marketing,
exclusive of non-cash
stock-based
compensation of $0,
$0, $121, $54, $143,
$71 and $107.......... -- 489 2,140 6,085 9,023 3,936 6,965
General and
administrative,
exclusive of non-cash
stock-based
compensation of $0,
$0, $13, $30, $95,
$47 and $45........... 49 363 1,331 1,631 4,174 1,156 1,855
Non-cash stock-based
compensation.......... -- -- 215 120 442 220 235
------ ------- ------- -------- -------- ------- --------
Total operating
expenses............ 669 1,902 6,189 11,422 19,665 8,138 13,884
------ ------- ------- -------- -------- ------- --------
Operating loss.......... (570) (1,752) (5,016) (6,996) (9,668) (4,984) (6,540)
Interest income........ (12) 74 144 297 263 112 205
Interest expense....... -- -- -- -- (15) -- (85)
------ ------- ------- -------- -------- ------- --------
Loss before income taxes
and equity in loss of
joint venture.......... (582) (1,678) (4,872) (6,699) (9,420) (4,872) (6,420)
Provision for income
taxes................. -- -- -- -- -- -- --
Equity in loss of
joint venture......... -- -- -- -- (1,054) (379) (697)
------ ------- ------- -------- -------- ------- --------
Net loss................ (582) (1,678) (4,872) (6,699) (10,474) (5,251) (7,117)
Accretion of
redeemable preferred
stock................. -- -- (278) (3,352) (3,683) (1,706) (7,136)
------ ------- ------- -------- -------- ------- --------
Net loss available for
common stockholders.... $ (582) $(1,678) $(5,150) $(10,051) $(14,157) $(6,957) $(14,253)
====== ======= ======= ======== ======== ======= ========
Basic and diluted net
loss per common share
....................... $(0.29) $ (0.38) $ (0.86) $ (1.49) $ (1.89) $ (0.96) $ (1.79)
====== ======= ======= ======== ======== ======= ========
Weighted average number
of common shares....... 2,000 4,453 5,980 6,744 7,506 7,236 7,959
====== ======= ======= ======== ======== ======= ========
Pro forma net loss
available for common
stockholders (3)....... $(10,474) $ (7,117)
======== ========
Pro forma basic and
diluted net loss per
common share (3)....... $ (0.57) $ (0.33)
======== ========
Pro forma weighted
average number of
common shares (3) ..... 18,447 21,255
======== ========

As of As of
December 31, As of September 30, March 31,
------------ ------------------------------------- ---------
1995(/1/) 1996(/2/) 1997 1998 1999 2000
------------ --------- ------- -------- -------- ---------
(in thousands)

Consolidated Balance
Sheet Data:
Cash and cash
equivalents............ $ 1 $ 4,145 $ 7,485 $ 1,769 $ 6,425 $ 16,881
Working capital......... (384) 3,586 6,527 2,497 7,425 18,824
Total assets............ 254 5,190 9,406 7,721 17,045 29,131
Long-term debt.......... -- -- -- -- 799 1,179
Mandatorily redeemable
preferred stock........ -- 6,237 14,233 19,814 37,439 62,265
Stockholders' deficit... (272) (1,941) (6,789) (16,130) (27,411) (41,452)

- --------
(1) The consolidated statement of operations data for the year ended December
31, 1995 and the balance sheet data as of December 31, 1995 reflect the
results of operations and financial position, respectively, of our Israeli
predecessor company, which reported on a calendar year basis.

(3) Pro forma net loss available for common stockholders, basic and diluted net
loss per common share and weighted average number of shares reflect the
impact of the conversion of our outstanding convertible preferred stock
into shares of common stock as if the conversions occurred at the beginning
of the periods presented or on the date of issuance, if later.

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

You should read the following discussion along with our Consolidated
Financial Statements and related notes thereto included in this prospectus. The
following discussion includes forward-looking statements that involve potential
risks and uncertainties, including those discussed under "Risk Factors." Our
future results could differ materially from results discussed in, or implied
by, these forward-looking statements.

Overview

We are a leading provider of e-infrastructure management software. Our
software allows organizations to manage the complete e-infrastructure life
cycle, including planning, procurement, deployment, tracking, maintenance and
disposal of technology assets. The recent introduction of our subscription
service allows organizations to use our software without incurring license fees
and implementation expenses.

Since our inception in 1994, we have focused on the development and sale
of our software. Our fiscal year end is September 30. All references to fiscal
years are to the years ended September 30. During fiscal year 1997, we released
MC/EMpower for general availability, began wide-scale marketing activities,
established direct sales capabilities in the United States and Europe,
completed our first sales, recorded revenue of $2.7 million and continued to
expand our research and development resources. On April 3, 2000, we introduced
an updated series of our software which we refer to as the MC/EMpower i.series.
We typically price our license fees based on the number of assets an
organization manages with our software. Depending on the size of the
organization and number of assets managed, license fees of a typical agreement
range from approximately $100,000 to $1.0 million. Since 1997, we have
continued to invest, expand and build resources in all areas, more than
tripling worldwide revenue to $8.5 million in fiscal year 1998, which then
nearly doubled to $15.5 million in fiscal year 1999. For the six months ended
March 31, 2000, we recorded revenue of $10.1 million, which represents growth
of 82% over the comparable period in the prior year. Finally, we have grown
from 33 employees on October 1, 1996 to 163 on March 31, 2000. We plan to
continue investing for future growth by:

. expanding our international and North American operations;
. increasing the number of partners who will resell or distribute our
software throughout the world under the name of MC/EMpower i.series
or on a private-label basis;

. offering subscription services in addition to product licenses; and

. developing business-to-business solutions.

Revenue. Our revenue is derived from the sale of software licenses,
including licenses of the ValueSolution software, to end-users, sublicenses
through resellers and distributors, and software development for customers,
business partners, and our ValueSolution joint venture. We also earn fees from
maintenance and professional services provided to customers.

We recognize revenue in accordance with the provisions of Statement of
Position Nos. 97-2 and 98-4, "Software Revenue Recognition," as modified by
Statement of Position No. 98-9, "Modification of Statement of Position No. 97-
2, with Respect to Certain Transactions." We adopted the provisions of
Statement of Position No. 98-9 effective October 1, 1998. License and
sublicense fees generally are due upon the granting of the license or
sublicense. We recognize license fees as revenue upon delivery, provided that
the fee is fixed and determinable, an arrangement exists, no significant
obligations remain and collection of the resulting receivable is probable. We
recognize sublicense fees from software sales through resellers and
distributors when the software is delivered to the end-user. Revenue from non-
refundable guaranteed minimum license payments for which a product master has
been delivered is recognized upon the earlier of receipt of payment or delivery
of the contractual minimum number of licenses to the end-user. In instances
where we provide substantial sales and customer support to a distributor, we
record the related revenue on a gross basis and include royalties retained by
the distributor in cost of revenue. In all other circumstances, we record
revenue derived from sales by distributors on a net basis. We expect that the
majority of our revenue in the future will be recognized on a net basis.
Notwithstanding the foregoing, if acceptance is uncertain, revenue recognition
is deferred until customer acceptance is achieved, which generally occurs upon
product delivery.

Revenue from our development contract with our joint venture,
ValueSolution, is recognized as services are performed under a time and
materials arrangement whereby development fees are billed based on pre-
established rates subject to a maximum total fee based on certain percentages
of the joint venture's annual sales (see "Related Party Transactions and
Certain Relationships" and Note 4 of the Notes to the Consolidated Financial
Statements). However, we are not limited in performing software development
activities in support of the joint venture's software and may incur expenses in
excess of amounts paid by the joint venture. To the extent that future joint
venture annual sales are available, costs incurred in excess of amounts paid by
the joint venture because of contractual payment limitations will be paid in
subsequent periods. Additionally, as we maintain distribution rights to the
joint venture's software, we recover research and development expenses incurred
in excess of amounts paid by the joint venture through revenues generated by
sales of the joint venture's software. Revenue from all other software
development contracts involving significant production, modification or
customization of software is recognized using the percentage-of-completion
method, based on the relationship of costs incurred to the total estimated
costs of the project.

Our license agreements typically include up to one year of maintenance
after which customers must pay an annual renewal fee. We recognize maintenance
revenue, including amounts allocated for the initial period, based on the fair
value of maintenance, as determined through contractual renewal rates, ratably
over the support period. We recognize professional services revenue as work is
performed.

We generate deferred revenue from maintenance, professional services and
licenses when customer payments are received in advance of performance of
maintenance or services or in advance of delivery of licenses. Deferred revenue
is recognized as the services are performed, generally within one year, or upon
delivery of the license.

To date, we have had no revenue from our subscription service. We
anticipate pricing our subscription service with a combination of set-up fees
and recurring monthly charges based on number of assets managed. To the extent
that we enter these types of arrangements in the future, our revenue is
expected to be recognized on a subscription basis over the related subscription
period.

A large portion of our revenue has been derived from a small number of
customers each year. However, we are not dependent on any single customer or
group of customers for revenue from year to year, as most revenue is generated
from new customers. See Note 2, "Concentrations of Credit Risk," of the Notes
to the Consolidated Financial Statements.

Because we offer payment terms to our customers which may extend over
several months and because we typically deliver software and execute contracts
for a significant portion of our quarterly revenue at the end of each quarter,
we may experience lengthened collection cycles of our accounts receivable.
However, in no instance do we offer payment terms in excess of one year and
substantially all of our receivables are from well-established, credit-worthy
companies.

Cost of revenue. Cost of license revenue includes royalties on sales of
the ValueSolution software, royalties retained by our distributors for sales of
our products and costs of software development performed under contract. Cost
of maintenance revenue includes the same type of royalties on maintenance and
labor costs of our technical support services group. Under contractual
obligations with ValueSolution and our distributors, including Interchip, we
owe royalty payments, which are generally 30% to 50% of our license and
maintenance sales. See "Related Party Transactions and Certain Relationships"
and Note 2, "Revenue Recognition," of the Notes to the Consolidated Financial
Statements. Cost of professional services revenue includes the labor and
related costs of our professional services organization and the costs of third
party consultants employed to perform services for our customers.

Research and development. Research and development expenses consist
primarily of salaries, benefits, equipment and allocable overhead for software
engineers, pre-production quality assurance personnel, program managers and
technical writers. Research and development expenses also include expenses
associated with independent contractors we use to augment our research and
development efforts. Research and development expenses relate to activities
performed prior to commercial production of a product. To date we

have not capitalized any development costs because our short development cycle
has historically resulted in only immaterial amounts of capitalized software
development costs.

Sales and marketing. Sales and marketing expenses consist primarily of
sales and marketing personnel compensation and benefits, direct expenditures
such as travel, trade shows, direct mail, online marketing, advertising and
promotion and allocable overhead.

General and administrative. General and administrative expenses consist
primarily of salaries, benefits and related costs for executive, finance,
administrative and human resource functions. General and administrative
expenses also include legal, other professional fees and allocable overhead.

Non-cash stock-based compensation. Non-cash stock-based compensation
reflects the amortization of deferred stock-based compensation over the vesting
period of options granted, generally four years. Deferred stock-based
compensation represents the difference between the exercise price of options
granted and the deemed fair market value of our common stock on the date of
grant. Aggregate unamortized deferred stock-based compensation of $1,286,000 as
of March 31, 2000 will be recognized as follows: $251,000 in fiscal year 2000;
$455,000 in fiscal year 2001; $427,000 in fiscal year 2002; $146,000 in fiscal
year 2003; and $7,000 in fiscal year 2004.

Joint venture accounting. During fiscal year 1999, we completed the
acquisition of a 50% interest in ValueSolution for approximately $2.7 million,
consisting of $603,000 in cash and $2.1 million related to stock-based
consideration. We have two types of recurring transactions with ValueSolution.
The first is a 30% royalty payable to ValueSolution for our exclusive right to
sell the ValueSolution software outside of Germany, Austria and Switzerland.
USU pays a 30% royalty to ValueSolution for the exclusive right to sell in
Germany, Austria and Switzerland. Our royalty payments are recorded in cost of
revenue in the period in which we record the related license and maintenance
revenue. The second is a development fee received from ValueSolution for our
ongoing development of the ValueSolution software. The development fee is
recognized as work is performed under a time and materials arrangement based on
hourly rates for time incurred, but is contractually limited to a pre-
determined percentage of ValueSolution's sales, which are comprised solely of
royalties. For further information, you should see the discussion in "Related
Party Transactions and Certain Relationships" and Note 4 of the Notes to the
Consolidated Financial Statements.

Because some significant management and operating decisions of
ValueSolution require the unanimous vote of MainControl and USU, we account for
our 50% interest in ValueSolution using the equity method of accounting. We
record amortization of the difference between our original investment in the
joint venture and our underlying equity in net assets of the joint venture, as
well as our 50% share of the income or loss of ValueSolution as equity in loss
of joint venture.

Results of operations

Statement of operations data

The following table sets forth the selected consolidated statement of
operations data as a percentage of total revenue for the periods presented.

Year Ended Six Months
September 30, Ended March 31,
------------------ ---------------
1997 1998 1999 1999 2000
---- ---- ---- ------- --------
(as a percentage of revenue)

Revenue:
License.......................... 83% 64% 56% 54% 59%
Maintenance...................... 7 8 9 11 8
Professional services............ 10 28 27 31 24
Joint venture development fees... -- -- 8 4 9
---- --- --- ------- --------
Total revenue.................. 100 100 100 100 100
---- --- --- ------- --------
Cost of revenue:
License.......................... 38 20 16 20 12
Maintenance...................... 12 8 7 9 6
Professional services............ 6 20 13 15 10
---- --- --- ------- --------
Total cost of revenue.......... 56 48 36 44 28
---- --- --- ------- --------
Gross profit....................... 44 52 64 56 72
---- --- --- ------- --------
Operating expenses:
Research and development......... 93 42 39 50 48
Sales and marketing.............. 80 71 58 70 69
General and administrative....... 50 19 27 21 18
Non-cash stock-based
compensation.................... 8 2 2 4 2
---- --- --- ------- --------
Total operating expenses....... 231 134 126 145 137
---- --- --- ------- --------
Operating loss..................... (187) (82) (62) (89) (65)
Interest income, net............. 6 3 1 2 2
---- --- --- ------- --------
Loss before income taxes and equity
in loss of joint venture.......... (181) (79) (61) (87) (63)
Equity in loss of joint venture.. -- -- (7) (7) (7)
---- --- --- ------- --------
Net loss........................... (181)% (79)% (68)% (94)% (70)%
==== === === ======= ========

Six Months Ended March 31, 1999 and 2000

Revenue

During the six months ended March 31, 1999 and 2000, total revenue was
$5.6 million and $10.1 million, respectively.

License. License revenue for the six months ended March 31, 1999 was $3.0
million and increased 99% to $6.0 million for the six months ended March 31,
2000. The increase in license revenue reflects the results of our continued
investment, expansion and growth of our North American sales and marketing
effort, along with penetration of the growing market for e-infrastructure
management software solutions in the United States. This increased sales effort
and market penetration resulted in the expansion of our customer base and
larger volume of individual license sales.

Maintenance. Maintenance revenue for the six months ended March 31, 1999
was $615,000 and increased 36% to $839,000 for the six months ended March 31,
2000. As most customers renew maintenance, the growth in maintenance revenue
reflects the growth of cumulative license revenue with support

requirements. Some royalties and development fees included in license revenue
do not have support requirements and thus do not result in increased
maintenance revenue.

Professional services. Professional services revenue for the six months
ended March 31, 1999 was $1.7 million and increased 40% to $2.4 million for the
six months ended March 31, 2000. This increase reflects the demand for
implementation assistance from customers as sales of our software increased, as
well as the purchase of incremental professional services after the initial
implementation. The continued growth in professional services revenue will be
affected by the future availability of professional services resources.

Joint venture development fees. We recorded ValueSolution development
fees of $923,000 for the six months ended March 31, 2000. The joint venture
became effective in December 1998, and initial development fees from the joint
venture during the six months ended March 31, 1999 were $243,000.

Cost of Revenue and Gross Profit

During the six months ended March 31, 1999, total cost of revenue was
$2.4 million and increased 15% to $2.8 million for the three months ended March
31, 2000. During these same periods gross profit was $3.2 million and $7.3
million, representing 56% and 72% of total revenue, respectively.

License. Cost of license revenue for the six months ended March 31, 1999
was $1.1 million and increased 11% to $1.3 million for the six months ended
March 31, 2000. The related license gross profit for these six-month periods
was $1.9 million and $4.7 million, representing 62% and 79% of license revenue,
respectively.

There were two major components to our cost of license revenue in these
periods. The first was the royalty retained by distributors, generally 50%, in
instances where we provided substantial sales and customer support, which was
$692,000 for the six months ended March 31, 1999. There were no such
distributor sales and therefore no related royalties in cost of license revenue
during the six months ended March 31, 2000. The second was the royalty for
sales of the ValueSolution software. The royalty rate was 30%. The royalty was
payable to USU until January 1999, when the royalty became payable to
ValueSolution, a joint venture of USU and MainControl. The ValueSolution
software royalty was $161,000 and $748,000 for the six months ended March 31,
1999 and 2000, respectively. Cost of license revenue for these periods also
included labor costs of developers used to generate development fees and
royalties associated with revenue recognized from guaranteed minimum license
payments anticipated to become due to ValueSolution upon delivery of the
contractual minimum number of licenses to end-users.

The increase in the absolute amount of cost of license revenue and gross
profit reflects the increase in license revenue. The improvement in gross
profit percentage during the six months ended March 31, 2000 was due to the
absence of distributor royalty in this period compared to the six months ended
March 31, 1999, partially offset by the increase in the ValueSolution royalty
during this period.

Maintenance. Cost of maintenance revenue for the six months ended March
31, 1999 was $492,000 and increased 13% to $555,000 for the six months ended
March 31, 2000. The related maintenance gross profit for those six-month
periods was $123,000 in 1999 and $284,000 in 2000, representing 20% and 34% of
maintenance revenue, respectively. In addition to royalties on maintenance for
ValueSolution software and software sold by distributors, cost of maintenance
revenue reflects the labor cost of our technical support services group. Labor
cost was $264,000 and $388,000 for the six months ended March 31, 1999 and
2000, respectively. The gross profit percentage for the six months ended March
31, 2000 improved as a result of a decrease of $108,000 in royalties on
maintenance for software sold by distributors.

Professional services. Cost of professional services revenue for the six
months ended March 31, 1999 was $809,000 and increased 23% to $992,000 for the
six months ended March 31, 2000. The related professional services gross profit
for those six-month periods was $915,000 and $1.4 million, representing 53% and
59% of professional services revenue, respectively. We utilize trained
consultants who are either our employees or unaffiliated third party
consultants. The third party consultants generally cost significantly more

than the consultants employed by us. While the growth in the absolute amount of
the costs reflects the growth in professional services revenue, our gross
profit can fluctuate based upon the timing and degree of use of consultants. We
have continued to build our internal staff of consultants and to increase their
proportionate use relative to our use of third party consultants. Fees paid to
third party consultants were $440,000 and $410,000, representing 54% and 41% of
the cost of professional services revenue for the six months ended March 31,
1999 and 2000, respectively, resulting in the increase in professional services
gross profit percentage.

Operating Expenses

During the six months ended March 31, 1999, total operating expenses were
$8.1 million and increased 71% to $13.9 million for the six months ended March
31, 2000, representing 145% and 137% of total revenue, respectively. We expect
that research and development, sales and marketing and general and
administrative expenses will continue to increase in absolute dollars as we
continue to expand our operations.

Research and development. Research and development expense for the six
months ended March 31, 1999 was $2.8 million and increased 71% to $4.8 million
for the six months ended March 31, 2000. The increase in research and
development expense during the six months ended March 31, 2000 was primarily
comprised of $296,000 for higher salaries paid to developers, $488,000 for
developers we hired to work on development of the ValueSolution software and
our subscription service, and $1.0 million for third-party consultants used for
certain platform migration and documentation projects.

Sales and marketing. Sales and marketing expense for the six months ended
March 31, 1999 was $3.9 million and increased 77% to $7.0 million for the six
months ended March 31, 2000. This increase reflects a significant expansion of
our United States and United Kingdom direct sales force from 15 to 27 employees
at March 31, 1999 and 2000, respectively, along with continued increases in our
marketing personnel and programs. Increased labor costs, in equal parts due to
headcount and salary increases, accounted for $2.0 million of the increase in
sales and marketing expense. Increases in travel, advertising and promotions
accounted for $614,000 of the increase.

General and administrative. General and administrative expense for the
six months ended March 31, 1999 was $1.2 million and increased 60% to $1.9
million for the six months ended March 31, 2000. Approximately $423,000 of this
increase was attributable to increased labor costs for administrative
personnel, in equal parts due to headcount and salary increases. The remainder
of the increase was due to the expansion of our office space at our United
States headquarters and the increase in related infrastructure necessary to
support our rapid growth.

Non-cash stock-based compensation. Non-cash stock-based compensation
expense for the six months ended March 31, 1999 was $220,000 and increased 7%
to $235,000 for the six months ended March 31, 2000. Both periods include
compensation resulting from a 1997 amendment of our stock option plan and the
related remeasurement of compensation associated with then outstanding options
and additional non-cash charges for an estimated market price of the common
shares in excess of the exercise price for options granted.

Interest Income

Interest income for the six months ended March 31, 1999 was $112,000 and
increased 83% to $205,000 for the six months ended March 31, 2000. Interest
income results primarily from interest earned on money market account deposits
of funds obtained from equity financings. The increase is attributable to
earnings on the proceeds of our Series D preferred stock offering which closed
in January 2000.

Interest Expense

Interest expense for the six months ended March 31, 2000 was $85,000.
Interest expense results from outstanding balances of our credit facilities,
which totaled $2.0 million as of March 31, 2000. These facilities were not in
place for the six months ended March 31, 1999 and consequently we had no
interest expense.

Provision for Income Taxes

Through our operations and the operations of our subsidiaries, we are
subject to tax in the United States, the United Kingdom, Germany and Israel.
Since we have incurred losses since inception, we have not paid any income
taxes in any jurisdiction and we have net operating loss carryforwards for
United States federal and state, and German, Israeli and United Kingdom
purposes. Subject to certain limitations, these net operating loss
carryforwards are available to offset future taxable income. Due to
uncertainty surrounding the timing or realization of the benefits of using
these net operating loss carryforwards in future tax returns, we have placed a
full valuation allowance against these deferred tax assets.

Equity in Loss of Joint Venture

During the six months ended March 31, 2000, we recorded $697,000 as
equity in loss of joint venture. We amortize the difference of $2.7 million
between the original carrying amount of the joint venture and our underlying
equity in net assets of the joint venture. As the joint venture became
effective in December 1998, the equity in loss of joint ventures for the six
months ended March 31, 1999 was $379,000.

Fiscal Years Ended September 30, 1998 and 1999

Revenue

During fiscal years 1998 and 1999, total revenue was $8.5 million and
$15.5 million, respectively.

License. License revenue for fiscal year 1998 was $5.5 million and
increased 59% to $8.7 million for fiscal year 1999. The increase in license
revenue reflects the results of our continued investment, expansion and growth
of our North American sales and marketing effort, along with penetration of
the growing market for e-infrastructure management software solutions in the
United States. This increased sales effort and market penetration resulted in
the expansion of our customer base and larger volume of individual license
sales. License revenue also increased due to follow-on orders from existing
customers. License revenue increased despite the fact that the percentage of
distributor sales recognized on a gross basis declined from 40% to 18% of
license revenue in fiscal years 1998 and 1999, respectively. The decrease in
the percentage of distributor sales recognized on a gross basis is indicative
of the change in our roles and responsibilities as performed under individual
contracts and reflects the maturity of our relationship with our distributors,
who are assuming increasing involvement with our customers.

Maintenance. Maintenance revenue for fiscal year 1998 was $648,000 and
increased 125% to $1.5 million for fiscal year 1999. This increase reflects
the growth in our license revenue with support requirements.

Professional services. Professional services revenue for fiscal year
1998 was $2.4 million and increased 75% to $4.2 million for fiscal year 1999.
This increase reflects the demand for implementation assistance from customers
as sales of our software increased, as well as the purchase of incremental
professional services after the initial implementation. The continued growth
in professional services revenue will be affected by the future availability
of professional services resources.

Joint venture development fees. We recorded our initial ValueSolution
development fees of $1.1 million during fiscal year 1999. As the joint venture
became effective in December 1998, there were no development fees from the
joint venture in fiscal year 1998.

Cost of Revenue and Gross Profit

During fiscal year 1998, total cost of revenue was $4.1 million and
increased 34% to $5.5 million for fiscal year 1999. During these same periods
gross profit was $4.4 million and $10.0 million, representing 52% and 64% of
total revenue, respectively.

License. Cost of license revenue for fiscal year 1998 was $1.8 million
and increased 39% to $2.4 million for fiscal year 1999. The related license
gross profit for those fiscal years was $3.7 million and $6.3 million,
representing 68% and 72% of license revenue, respectively.

There were two major components of our cost of license revenue for fiscal
years 1998 and 1999. The first was the royalty retained by distributors,
generally 50%, in instances where we provided substantial sales and customer
support, which was $1.3 million and $914,000 for 1998 and 1999, respectively.
The second was the royalty for sales of the ValueSolution software. This
royalty rate was 35% until August 1998 when the royalty rate became 30%. The
royalty was payable to USU until January 1999 when the royalty became payable
to ValueSolution. The ValueSolution software royalty was $321,000 and $844,000
for 1998 and 1999, respectively. The majority of the remainder of cost of
license revenue for these years was the labor costs of developers used to
generate development fees.

The increase in the absolute amount of cost of license revenue and gross
profit reflects the increase in license revenue. The improvement in gross
profit percentage in fiscal year 1999 results from the decreasing proportion of
distributor sales, which we recorded on a gross basis, partially offset by the
larger proportion of sales of the ValueSolution software and development fees,
as discussed above.

Maintenance. Cost of maintenance revenue for fiscal year 1998 was
$668,000 and increased 65% to $1.1 million for fiscal year 1999. The related
maintenance gross profit for fiscal year 1998 was a loss of $20,000 and a
profit of $357,000 for fiscal year 1999, representing 3% and 24% of maintenance
revenue, respectively. In addition to royalties on maintenance, cost of
maintenance revenues reflects the labor cost of our technical support services
group. Labor cost was $419,000 and $548,000 for 1998 and 1999, respectively. In
1998, we invested in expanding our technical support services group in
anticipation of future software sales; therefore, gross profit was lower in
1998 than in 1999.

Professional services. Cost of professional services revenue for fiscal
year 1998 was $1.7 million and increased 16% to $2.0 million for fiscal year
1999. The related professional services gross profit for those fiscal years was
$733,000 and $2.3 million, representing 30% and 54% of professional services
revenue, respectively. During 1999 we began building our internal staff of
consultants with the intention of increasing their proportionate use relative
to our use of more costly third-party consultants. Fees paid to third party
consultants were $1.2 million and $1.0 million for 1998 and 1999, respectively,
resulting in the increase in professional services gross profit percentage.

Operating Expenses

During fiscal year 1998, total operating expenses were $11.4 million and
increased 72% to $19.7 million for fiscal year 1999, representing 134% and 126%
of total revenue, respectively.

Research and development. Research and development expense for fiscal
year 1998 was $3.6 million and increased 68% to $6.0 million for fiscal year
1999. The increase in research and development expense during 1999 was
comprised primarily of $561,000 for higher salaries paid to developers, $1.1
million for developers we hired to work on development of the ValueSolution
software, and $612,000 for third-party consultants used for certain platform
migration and documentation projects.

Sales and marketing. Sales and marketing expense for fiscal year 1998 was
$6.1 million and increased 48% to $9.0 million for fiscal year 1999. This
increase reflects a significant expansion of our United States and United
Kingdom direct sales force from 16 to 25 employees at September 30, 1998 and
1999, respectively, along with continued increases in our marketing personnel
and programs. The increase in sales and marketing expense during 1999 was
comprised primarily of $646,000 for salary increases, $1.2 million for new
employees we hired, and $570,000 for travel, advertising and promotions.

General and administrative. General and administrative expense for fiscal
year 1998 was $1.6 million and increased 156% to $4.2 million for fiscal year
1999. Fiscal year 1999 includes $1.5 million in non-recurring costs associated
with our securities offering in Germany that we withdrew prior to completion

because of adverse market conditions. The remainder of the increase was
primarily attributable to increased labor costs of $876,000 for new
administrative personnel.

Non-cash stock-based compensation. Non-cash stock-based compensation
expense for fiscal year 1998 was $120,000 and increased 268% to $442,000 for
fiscal year 1999. Both periods include compensation resulting from a 1997
amendment of our stock option plan and the related remeasurement of
compensation associated with then outstanding options. Non-cash stock-based
compensation expense for fiscal year 1999 includes additional non-cash charges
for an estimated market price of the common shares in excess of the exercise
price for options granted.

Interest Income

Interest income for fiscal year 1998 was $297,000 and decreased 11% to
$263,000 for fiscal year 1999. This decrease results from a declining average
available cash and cash equivalent balance between the two fiscal years.

Interest Expense

Interest expense for fiscal year 1999 was $15,000. At September 30,
1999, $1.2 million was outstanding under our credit facilities. These
facilities were not in place for fiscal year 1998 and consequently we had no
interest expense.

Provision for Income Taxes

As of September 30, 1999, we had United States federal and state net
operating loss carryforwards of $19.4 million, Israeli net operating loss
carryforwards of $5.3 million, United Kingdom net operating loss carryforwards
of $900,000 and German net operating loss carryforwards of $200,000. The
United States federal and state net operating loss carryforwards expire
between 2011 and 2019. The Israeli, United Kingdom and German net operating
loss carryforwards do not expire. Subject to certain limitations, these net
operating loss carryforwards are available to offset future taxable income.
Due to uncertainty surrounding the timing or realization of the benefits of
using these net operating loss carryforwards in future tax returns, we have
placed a full valuation allowance against these deferred tax assets.

Equity in Loss of Joint Venture

During fiscal year 1999, we recorded $1.1 million as equity in loss of
joint venture. As the joint venture became effective in December 1998, there
were no joint venture operations during fiscal year 1998.

Fiscal Years Ended September 30, 1997 and 1998

Revenue

During fiscal years 1997 and 1998, total revenue was $2.7 million and
$8.5 million, respectively.

License. Our first commercial license revenue was generated in fiscal
year 1997. License revenue was $2.2 million for fiscal year 1997 and increased
146% to $5.5 million for fiscal year 1998. As we tested our software at a
major German bank and focused on international distributors in 1997, a
significant portion of the license revenue in fiscal year 1997 was European-
based. The subsequent increases in license revenue for fiscal year 1998
reflect the results of our investment and growth of our North American sales
and marketing program, along with penetration of the growing market for e-
infrastructure management software in the United States. This increased sales
effort and market penetration resulted in the expansion of our customer base
and larger

volume of individual license sales. The increase in license revenue in fiscal
year 1998 also reflects royalties and development income from a private-label
agreement with a Year 2000 solution provider, which sold one of our products
under their own name, in the amount of $810,000.

Maintenance. Maintenance revenue was $184,000 for fiscal year 1997 and
increased 252% to $648,000 for fiscal year 1998. This increase reflects the
growth in our license revenue with support requirements.

Professional services. We established our professional services
organization and capabilities during fiscal year 1997. Professional services
revenue was $283,000 for fiscal year 1997 and increased 754% to $2.4 million
for fiscal year 1998. This increase reflects the creation and growth of the
Company's professional services organization to meet the growing demand for
implementation assistance as the number of customers buying our software
increased. The continued growth in professional services revenue will be
affected by the future availability of professional services resources.

Cost of Revenue and Gross Profit

During fiscal year 1997, total cost of revenue was $1.5 million and
increased 171% to $4.1 million for fiscal year 1998. During these same periods,
gross profit was $1.2 million and $4.4 million, representing 44% and 52% of
total revenue, respectively.

License. Cost of license revenue for fiscal year 1997 was $1.0 million
and increased 73% to $1.8 million for fiscal year 1998. The related license
gross profit for those years was $1.2 million and $3.7 million, representing
54% and 68% of license revenue, respectively.

There were two major components of our cost of license revenue for fiscal
years 1997 and 1998. The first was the royalty retained by distributors,
generally 50%, in instances where we provided substantial sales and customer
support, which was $791,000 and $1.3 million for 1997 and 1998, respectively.
The second was the royalty for sales of the ValueSolution software. This
royalty rate payable to USU was 35% until August 1998 when the royalty became
30%. The ValueSolution software royalty was $178,000 and $321,000 for 1997 and
1998, respectively. Cost of license revenue for fiscal year 1998 also included
the labor cost of developers used to generate development fees.

The increase in the absolute amount of cost of license revenue and gross
profit reflects the increase in license revenue. The improvement in fiscal year
1998 gross profit percentage results from the decreasing proportion of
distributor sales, which we recorded on a gross basis.

Maintenance. Cost of maintenance revenue for fiscal year 1997 was
$334,000 and increased 100% to $668,000 for fiscal year 1998. The related
maintenance gross loss for those fiscal years was a loss of $150,000 in 1997
and $20,000 in 1998. Cost of maintenance revenue is primarily comprised of the
labor cost of our technical support services group, which was $239,000 and
$419,000 for 1997 and 1998, respectively. During fiscal year 1997, we began
staffing the technical support services group in anticipation of software
sales, which increased our maintenance gross loss for fiscal year 1997. In
fiscal year 1998, we continued staffing in anticipation of sales but
maintenance revenue per technical support staff increased which positively
impacted our gross maintenance margins.

Professional services. Cost of professional services revenue was $164,000
in fiscal year 1997 and increased 927% to $1.7 million for fiscal year 1998.
The related professional services gross profit for those years was $119,000 and
$733,000, representing 42% and 30% of professional services revenue,
respectively. In

1998, we began significant use of third-party consultants to render
professional services. Fees paid to third party consultants were $1.2 million
in 1998. While the growth in the absolute amount of the costs reflects the
growth in professional services revenue, gross profit decreased because of the
increased use of third-party consultants, which are more expensive than our own
professional services staff.

Operating Expenses

During fiscal year 1997, total operating expenses for fiscal year 1997
were $6.2 million and increased 85% to $11.4 million for fiscal year 1998,
representing 231% and 134% of total revenue, respectively.

Research and development. Research and development expense for fiscal
year 1997 was $2.5 million and increased 43% to $3.6 million for fiscal year
1998. The increase in research and development expense during 1998 was
comprised primarily of $314,000 for higher salaries paid to developers and
$175,000 due to an increase in the number of developers working on new versions
of our software.

Sales and marketing. Sales and marketing expense was $2.1 million in
fiscal year 1997 and increased 184% to $6.1 million for fiscal year 1998. This
increase reflects a significant expansion of our United States and United
Kingdom direct sales force from 11 to 16 employees at September 30, 1997 and
1998, respectively, along with increases in marketing personnel and programs.
The increase in sales and marketing expense during 1998 was comprised primarily
of $242,000 for new employees, $1.6 million for salary increases, and $1.1
million for travel, advertising and promotions.

General and administrative. General and administrative expense for fiscal
year 1997 was $1.3 million and increased 23% to $1.6 million for fiscal year
1998. This increase was primarily attributable to increased labor costs of
$201,000 for new administrative personnel.

Non-cash stock-based compensation. Non-cash stock-based compensation
expense for fiscal year 1997 was $215,000 and decreased 44% to $120,000 for
fiscal year 1998. Both periods include compensation resulting from a 1997
amendment of our stock option plan and the related remeasurement of
compensation associated with outstanding options.

Interest Income

Interest income was $144,000 for fiscal year 1997 and increased 106% to
$297,000 for fiscal year 1998. This increase results from interest earned on a
higher average available cash and cash equivalent balance between the two
fiscal years.

Provision for Income Taxes

We have net operating loss carryforwards for United States federal and
state, and German, Israeli and United Kingdom purposes. Subject to certain
limitations, these net operating loss carryforwards are available to offset
future taxable income. Due to uncertainty surrounding the timing or realization
of the benefits of using these net operating loss carryforwards in future tax
returns, we have placed a full valuation allowance against these deferred tax
assets.

Quarterly Results of Operations

The following table sets forth the unaudited consolidated statement of
operations data for the six quarters in the period ended March 31, 2000. This
information has been derived from the unaudited interim consolidated financial
statements that, in our opinion, have been prepared on a basis consistent with
the Consolidated Financial Statements contained elsewhere herein, and include
all adjustments, consisting only of

normal recurring adjustments, necessary for a fair presentation of such
information when read in conjunction with the Consolidated Financial Statements
and related notes thereto. The results of operations for any quarter are not
necessarily indicative of results for any future period.

Three Months Ended
---------------------------------------------------------------------
December 31, March 31, June 30, September 30, December 31, March 31,
1998 1999 1999 1999 1999 2000
------------ --------- -------- ------------- ------------ ---------
(in thousands, except per share data)

Revenue:
License............... $ 1,751 $ 1,254 $ 1,691 $ 4,019 $ 2,623 $3,349
Maintenance........... 312 303 407 439 416 423
Professional
services............. 773 951 1,294 1,200 1,306 1,108
Joint venture
development fees .... -- 243 204 662 445 478
------- ------- ------- ------- ------- -------
Total revenue....... 2,836 2,751 3,596 6,320 4,790 5,358
------- ------- ------- ------- ------- -------
Cost of revenue:
License (1)........... 474 658 491 821 570 687
Maintenance (2)....... 248 244 305 307 277 278
Professional services
(3).................. 344 465 614 535 505 487
------- ------- ------- ------- ------- -------
Total cost of
revenue............ 1,066 1,367 1,410 1,663 1,352 1,452
------- ------- ------- ------- ------- -------
Gross profit............ 1,770 1,384 2,186 4,657 3,438 3,906
------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development (4)...... 1,092 1,734 1,556 1,644 2,248 2,581
Sales and marketing
(5).................. 2,022 1,914 1,996 3,091 3,318 3,647
General and
administrative (6)... 542 614 614 2,404 905 950
Non-cash stock-based
compensation......... 92 128 148 74 133 102
------- ------- ------- ------- ------- -------
Total operating
expenses........... 3,748 4,390 4,314 7,213 6,604 7,280
------- ------- ------- ------- ------- -------
Operating loss.......... (1,978) (3,006) (2,128) (2,556) (3,166) (3,374)
Interest income....... 15 97 73 78 47 158
Interest expense...... -- -- -- (15) (36) (49)
------- ------- ------- ------- ------- -------
Loss before income taxes
and equity in loss of
joint venture.......... (1,963) (2,909) (2,055) (2,493) (3,155) (3,265)
Provision for income
taxes................ -- -- -- -- -- --
Equity in loss of
joint venture........ -- (379) (394) (281) (371) (326)
------- ------- ------- ------- ------- -------
Net loss................ (1,963) (3,288) (2,449) (2,774) (3,526) (3,591)
Accretion of
redeemable preferred
stock................ (837) (869) (1,021) (956) (1,505) (5,631)
------- ------- ------- ------- ------- -------
Net loss available for
common stockholders.... $(2,800) $(4,157) $(3,470) $(3,730) $(5,031) $(9,222)
======= ======= ======= ======= ======= =======
Basic and diluted net
loss per common share.. $ (0.41) $ (0.55) $ (0.45) $ (0.48) $ (0.63) $ (1.16)
======= ======= ======= ======= ======= =======
Weighted average number
of common shares....... 6,860 7,611 7,735 7,816 7,958 7,960
======= ======= ======= ======= ======= =======

- --------

(1) Exclusive of non-cash stock-based compensation of $3, $5, $6, $3, $2 and
$2.

(2) Exclusive of non-cash stock-based compensation of $0, $1, $1, $0, $1 and
$1.

(3) Exclusive of non-cash stock-based compensation of $2, $3, $2, $1, $3 and
$4.

(4) Exclusive of non-cash stock-based compensation of $37, $51, $59, $30, $47
and $23.

(5) Exclusive of non-cash stock-based compensation of $30, $41, $48, $24, $55
and $52.

(6) Exclusive of non-cash stock-based compensation of $20, $27, $32, $16, $25
and $20.

Our revenue and related cost of revenue has been subject to fluctuations
from quarter to quarter. While there is a general trend of increasing revenue
over time, any one quarter can be significantly influenced by one or a few
software sales. Furthermore, our fourth quarter revenue tends to be larger than
other quarters as customers believe they can secure more favorable terms by
waiting until close to our year-end to finalize contract negotiations and as
our sales force increases efforts to achieve annual quota. We expect these
quarterly fluctuations to continue until greater volumes mitigate the effects
of large software sales. Nonetheless, we expect the fourth quarter to continue
to comprise a disproportionately large share of annual revenue. We also expect
revenue to continue to grow as the market for technology infrastructure
management software solutions develops and expands and as we continue to
invest, expand and grow our sales and marketing resources.

Consistent with our deliberate plan of investment, expansion and growth
in all areas of our operations, operating expenses have generally increased
quarter-to-quarter. We expect continued increases in quarterly operating
expenses as we expand our business and revenue base.

Liquidity and Capital Resources

Upon inception and prior to our first round of venture capital financing
in April 1996, we were funded by our founder, Interchip, a German technology
company, Formula Technologies, Ltd., an Israeli technology company, and by
Israeli governmental programs. The Israeli governmental program funds included
equity capital from Yozma Venture Capital Ltd. and development grants from the
Israeli Office of the Chief Scientist. Total equity capital raised during this
period amounted to $1.3 million. The development grants amounted to $365,000.

Beginning in April 1996 and through January 2000, we were funded with
four rounds of venture capital financing totaling $48.1 million. We raised $6.3
million with the first private placement of equity securities in April 1996. We
raised an additional $10.0 million with the second private placement of equity
securities in September and December 1997, and we raised another $14.0 million
with the third private placement of equity securities in December 1998, and
April and June 1999. Most recently, we raised $17.8 million with the fourth
private placement of equity securities in January 2000.

Net cash used in operating activities for fiscal years 1997, 1998 and
1999, and for the six months ended March 31, 1999 and 2000, amounted to $4.0
million, $8.1 million, $9.1 million, $4.1 million and $6.9 million,
respectively. This use of cash reflects our deliberate plan of investment,
expansion and growth in all areas of operations.

Net cash used in investing activities for fiscal years 1997, 1998 and
1999, and for the six months ended March 31, 1999 and 2000, amounted to
$446,000, $390,000, $1.8 million, $1.0 million and $1.1 million, respectively.
Most of this use of cash was for computers, furniture, office equipment and
leasehold improvements to support an increasing number of employees. During the
year ended September 30, 1999, $603,000 was used to complete the acquisition of
ValueSolution.

Net cash provided by financing activities for fiscal years 1997, 1998 and
1999, and for the six months ended March 31, 1999 and 2000, amounted to $7.8
million, $2.8 million, $15.5 million, $9.7 million and $18.5 million,
respectively. Net cash provided by financing activities was primarily the
result of the equity capital financings discussed in the first two paragraphs
of this section.

As of March 31, 2000, we had $16.9 million of cash and cash equivalents
and $7.9 million of accounts receivable.

Our principal commitments consist of our bank credit facility and our
operating lease for headquarters office space. We have a $6.1 million secured
bank credit facility, which provides us with a $3.0 million line of credit
supported by accounts receivable, a $2.5 million equipment loan commitment and
a $565,000 acquisition loan for ValueSolution. Pursuant to the terms of the
bank credit facility, we are restricted from paying any dividends or making any
other distributions in relation to our capital stock and we are required to
maintain quick ratio, tangible net worth and maximum quarterly net loss levels,
exclusive of non-cash charges. See Note 5 of the Notes to the Consolidated
Financial Statements. The bank credit facility is secured by all of our assets.
The line of credit portion of the bank credit facility renews annually. We have
borrowed a total of $1.7 million for equipment and we expect to borrow the
remainder of the equipment loan advance, or $825,000, during the balance of
fiscal year 2000. We have borrowed $565,000 for the ValueSolution acquisition.
We are utilizing $296,000 of the available line of credit to support a letter
of credit to secure the lease of our headquarters office space. The remaining
$2.7 million on our line of credit is unutilized. Under the terms of our non-
cancelable operating lease, we are committed to annual rent payments of
approximately $1.2 million through fiscal year 2004.

We plan to expand our world-wide sales and marketing operations by adding
employees and increasing the number of partners who resell or distribute our
software. Our priority will be the United States and Europe, followed by the
Pacific Rim and Latin America. We also plan to invest in product development in
the areas of our subscription services and business-to-business solutions as
well as routine product enhancements. Our priority will be our subscription
services. As a result, we currently anticipate that we will continue to
experience significant growth in our operating expenses for the foreseeable
future and that these expenses will be a material use of our cash resources,
particularly if planned revenue growth rates are not realized. We also expect
to experience increased capital expenditures during the next twelve months and
lease commitments commensurate with the anticipated growth in operations,
infrastructure and personnel. After considering anticipated cash collections
from customers and the bank credit facility, a portion of the net proceeds of
the offering and existing cash and cash equivalents, we believe that all our
cash resources, including the net proceeds of this offering, will be sufficient
to meet anticipated cash needs for at least the next twelve months. Thereafter,
we may need additional debt or equity financing. However, if we acquire any
complimentary businesses, technologies or services we may need additional
financing during the next twelve months. We currently have no arrangements to
engage in acquisition transactions, but could do so at anytime in the future.
In the event we are unable to receive sufficient funding, our contingency plans
would involve reducing the anticipated level of expenditures for lower priority
items.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133 (SFAS 133) "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133 establishes accounting
and reporting standards for derivative instruments, including derivative
instruments embedded in other contracts, and for hedging activities. SFAS 133,
as amended by SFAS 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133, an
Amendment of FASB Statement No. 133," is effective for all fiscal quarters of
the Company's fiscal year ending September 30, 2001. We do not engage or plan
to engage in the use of derivative instruments. Regarding embedded derivatives,
we do not expect SFAS 133 to have a material impact.

Staff Accounting Bulletin 101 (SAB 101), issued in December 1999,
provides guidance on the recognition and disclosure of revenue in financial
statements. Provided the registrant's former policy was not an improper
application of Generally Accepted Accounting Principles (GAAP), registrants may
adopt a change in accounting principle to comply with the SAB no later than the
first quarter of the fiscal year beginning after December 15, 1999. We have
assessed that our current revenue recognition policies are in accordance with
GAAP.

In March 2000, the Emerging Issues Task Force (EITF) issued EITF No. 00-3
(EITF 00-3), "Application of AICPA Statement of Position 97-2 to Arrangements
That Include the Right to Use Software Stored on Another Entity's Hardware."
EITF 00-3 provides that a software element covered by Statement of Position No.
97-2 is only present in a hosting arrangement if the customer has the
contractual right to take possession of the software at anytime during the
hosting period without significant penalty and it is feasible for the customer
to either run the software on its own hardware or contract with another party
unrelated to the vendor to host the software. We recently introduced our
software on a hosted, subscription basis. We have had no revenue from our
subscription service. We have evaluated EITF 00-3 and believe that Statement of
Position No. 97-2 will not apply to our planned subscription service and
believe revenue from subscription services will be recognized ratably over the
related subscription period.

Qualitative and Quantitative Disclosures about Market Risk

We report our financial results in United States dollars but conduct
business in a number of other currencies, principally the Deutsche Mark, Swiss
Franc, British Pound and Israeli Shekel. Most of our distributor agreements
require settlement in United States dollars, although some have been settled in
Deutsche Marks, Swiss Francs and British Pounds. We made expenditures in
Israeli Shekels but no revenue has been generated in this currency.
Substantially all of our sales are currently made in U.S. dollars. A
strengthening of the dollar could make our products less competitive in foreign
markets. Our interest income is sensitive to changes in the general level of
U.S. interest rates, particularly since the majority of our investments are in
short-term instruments. Due to the short-term nature of our investments, we
believe that there is no material risk exposure.

BUSINESS

The prospectus contains forward-looking statements that include risks and
uncertainties. Actual results may differ materially from those indicated in
such forward-looking statements.

Overview

We are a leading provider of e-infrastructure management software. Our
software enables organizations to manage the complete life cycle of their
technology assets from planning to disposal. It also provides a consolidated
repository of information to offer organizations a single, comprehensive view
of their e-infrastructure accessible via a Web browser. In addition, our
software is highly flexible and scaleable and integrates with other existing
applications without requiring extensive customization. We believe these
features allow organizations to efficiently plan and manage their e-
infrastructure while advancing their business objectives. Furthermore, we can
deliver our software modules either as an on-site installation or as a
standardized subscription service over the Internet through our recently
introduced ASP delivery method, which allows organizations to use our software
without incurring license fees and implementation expenses. We believe this
service will expand our customer base by adding many small and medium sized
organizations.

Industry Background

Global competitive pressures are driving organizations to seek innovative
ways to develop, market and maintain their products and services and to
attract, serve and retain their customers. To enhance their competitiveness,
organizations are increasingly utilizing the Internet to enable employees,
customers, partners and vendors to communicate and conduct business
electronically, commonly referred to as e-business. For example, enterprise
resource planning, or ERP, applications, once the exclusive domain of corporate
networks, are increasingly enabling customers to enter orders and view and pay
bills using the Internet. In addition, customer relationship management
applications, once internally focused on the individual organization, are now
utilizing the Internet to establish, maintain and improve relationships.
Furthermore, e-business is driving the emergence of whole new categories of
companies whose core offerings are dependent on the Internet. These companies
include online merchants, Web-hosting companies and ASPs, which are companies
that host software applications on behalf of their customers and offer related
services.

To enable and support these e-business initiatives, as well as
traditional business processes, organizations are dependent upon, and investing
significantly in, their e-infrastructure. According to the Gartner Group,
information technology, or IT, spending is expected to grow from $2.2 trillion
in 1999 to $3.3 trillion by 2002. In order to support e-business initiatives,
organizations have added new networks, systems and applications, effectively
layering new technologies on top of existing technologies and creating an
increasingly heterogeneous, complex and widely dispersed computing environment.
Time-to-market pressures and the increasing adoption of e-business activities
place a significant strain on an organization's e-infrastructure, and are
driving the need for investments in the infrastructure to enable it to interact
with the businesses of customers, partners and vendors. Gartner Group believes
that the speed, as well as accuracy, at which an organization can effectively
plan, decide, procure and manage its e-infrastructure will determine that
organization's success in an e-business environment. This environment is
further complicated by rapid and unpredictable technological changes dictated
by the emergence of new and more sophisticated products with shorter product
life cycles.

Since e-infrastructure is strategically important for organizations to
meet their business objectives, it is critical for them to effectively manage
their technology investments. Management of e-infrastructure aligns technology
assets with the business objectives of the organization to increase revenue and
achieve competitive differentiation. Effective management of this increasingly
sophisticated e-infrastructure is complex and

challenging. In many organizations, geographically dispersed computing
environments have decentralized decision-making regarding the control of
technology assets, creating a lack of uniform policies and a failure to keep
comprehensive and centralized information regarding these assets. The practical
impact of this is that organizations do not know what technology assets they
have across the organization or understand the manner in which each asset
contributes to the organization's overall business objectives. Furthermore,
organizations are often unaware of the potential e-infrastructure implications
resulting from new business objectives. This problem is compounded by merger
and acquisition activities that create increasingly mixed technology
environments and management policies of those environments. The lack of
comprehensive information regarding technology assets inhibits intelligent
decision-making at the corporate level throughout the organization and at the
operating level throughout the life cycle of each asset. This decentralized
process runs counter to the objective of e-infrastructure management of
delivering substantial cost savings through increased efficiencies in the
utilization of technology assets across the organization. Given the critical
importance of managing this complex environment, organizations are investing
significantly in management of e-infrastructure. Gartner Group believes that
the combined market for the U.S. and Europe for managing information technology
assets will grow from $3.7 billion in 1999 to $7.0 billion in 2002.
Furthermore, META Group estimates that while few IT organizations have
strategic asset management programs in place currently, over 50% of these
organizations will have such programs by 2002.

Existing software solutions fail to address the complete e-infrastructure
management needs of an organization. The four most prevalent approaches to
managing e-infrastructure are:

. Internal help desk software. This software focuses on assisting IT
help desks with service and maintenance of existing technology
assets. Internal help desk software lacks the ability to manage the
complete life cycle of technology assets and does not provide the
planning tools required to manage the development of e-infrastructure
to support business goals;

. Enterprise management software. This software is designed to automate
and centralize the management function of network, system and
application resources across an organization's e-infrastructure.
Enterprise management software functions on an operational level only
and does not enable business managers to understand, plan and manage
the total cost of their technology assets, nor does it empower
employees to self-service their technology needs by streamlining the
procurement, deployment, management and servicing of e-
infrastructure;

. Point products. This software is either focused on the physical
technology assets themselves, and delivers functionality such as
network device administration or software distribution, or it is
focused on a specific financial implication of these assets. This
software is not capable of addressing both the physical and financial
requirements of effective e-infrastructure management. Furthermore,
since this software is typically limited in scope and scale, it has
difficulty managing enterprise-wide assets on a global and
consolidated basis and is unable to provide a comprehensive view of
all of an organization's technology assets; and

. Internally developed software. This software is designed to address
an organization's particular e-infrastructure needs. This customized
software is often costly to develop, maintain and upgrade and does
not address the rapid change of an organization's e-infrastructure.

There exists an opportunity for intelligent e-infrastructure management
software that provides an end-to-end life cycle management solution. This
solution should provide an organization with a single, comprehensive view of
all its technology assets and deliver both a physical and business perspective
of these assets in order to manage costs and align its technology investments
with the organization's business objectives. Furthermore, the software must
integrate with existing products that manage various aspects of the
e-infrastructure and leverage the Internet to maximize access and ease of use
for the user.

The MainControl Solution

We offer a comprehensive suite of software and related professional
services that enable organizations to optimize the value of their
e-infrastructure. Our software and services provide organizations with the
ability to align technology investments with their business objectives.
Specifically, our software and services provide the following key benefits:

. Manage the complete e-infrastructure life cycle. Our software and
services provide organizations with complete e-infrastructure life
cycle management covering the processes of planning, acquiring,
deploying, tracking, managing and disposing of technology assets.
These management tasks can be quickly executed from one consolidated
repository of data, eliminating the need for costly, error-prone
integration of disparate databases and processes;

. Provide a single fully integrated view of the e-infrastructure. Our
software and services provide organizations with a single,
comprehensive view of their e-infrastructure. Our software and
services help organizations build a comprehensive, accurate and
dynamic repository, which includes all relevant information on the
technology environment, including physical asset inventory, which
assets are required or authorized, asset values, contract
specifications, ordering and procurement information. With this
information, organizations can ensure that their technology asset
values are updated as changes are made to each asset, which improves
the accuracy of corporate financial records and aids in budgeting and
planning for technology resources. In addition, our software is
scalable, which ensures the accuracy of this process as an
organization's e-infrastructure expands;

. Leverage the Internet. Our Internet-based software enables
organizations to use standard Internet browser technology and allows
universal access to delegate appropriate authority throughout a
globally dispursed organization while maintaining centralized
planning and control. For example, individuals can order a new PC
over the Internet under user-specific budgetary constraints and
preferred-vendor guidelines, or an office manager can report an
office move, initiating a new e-infrastructure planning cycle;

. Integrate with other software applications. Our software is flexible
and highly configurable, which enables organizations to continue to
use existing applications without costly software customization. Our
software is designed with functionality that allows our customers to
integrate all of our software with other applications used by our
customers, including Internet-based procurement, ERP, help desk and
enterprise management software. This flexibility enables our
customers to maximize the value derived from prior, current and
future investments in applications;

. Provide business intelligence. Our software provides reporting and
analysis functionality that aids decision-makers in managing the
development and deployment of their e-infrastructure to meet business
objectives. Our data extraction capabilities help users identify
business trends and potential problem areas, leading to a reduction
in support and service costs. Moreover, by maximizing the information
an organization has about its technology operations, it can better
align its technology investments with its business objectives. In so
doing, organizations can optimize revenue generating business
activities and improve their competitive positioning; and

. Identify total cost of ownership. Our software and services provide
users throughout an organization with the information they need to
understand and control the cost of e-infrastructure. In addition, our
software provides administrators and executive management with
comprehensive analytical, reporting and planning capabilities to
explain and allocate the cost of technology assets, plan for
additional technology investments and justify existing and planned
investment through return-on-investment calculations.

Strategy

Our objective is to become the leading provider of e-infrastructure
management software and services. Key elements of our strategy include:

. Expand our customer base by offering subscription services. We
recently introduced our e-infrastructure management software on a
subscription basis targeted at small and medium sized organizations.
This subscription service provides our software to customers over the
Internet through an Internet-based, externally-hosted service, which
is being provided by USinternetworking's data center. Through this
service, we allow organizations, regardless of size and level of
technological requirements, to take advantage of our software by
eliminating licensing and substantially reducing implementation costs
as well as shortening implementation time and service requirements.
We believe that the e-infrastructure management needs of small and
medium sized organizations are under-served and that our subscription
service delivers an innovative solution;

. Increase our presence worldwide. We believe that both the domestic
and international markets represent substantial growth opportunities
as e-business grows, the worldwide market for technology assets
expands and organizations recognize the need for solutions to manage
their e-infrastructure. We will expand our global presence by further
developing our international operations, distribution channels and
sales and marketing activities;

. Extend core functionality by pursuing strategic relationships or
acquisitions. We will continue to explore strategic opportunities in
the highly fragmented and rapidly evolving e-infrastructure
management market. We intend to forge technology and joint marketing
relationships with vendors that offer software with functionality
that complements or helps to maximize the benefit of our e-
infrastructure management software. Immediate areas of interest
include Internet-based market place, software compliance management
and telecommunications management. In addition, we may consider
acquiring companies that offer products and technologies that enable
us to enhance and expand our existing software offerings;

. Maintain and extend our technology leadership. We believe that our
software suite provides a complete, robust and scalable solution to
manage technology assets. We will continue to make substantial
investments in research and development to meet the changing
requirements of our customers and to remain at the forefront of e-
infrastructure management. Furthermore, our open architecture will
enable us to continue to forge technology relationships with major
enterprise application vendors and online procurement vendors to
facilitate the integration of our software with their offerings. In
so doing, we help our customers by reducing implementation times and
maximizing their existing IT investments; and

. Build our business-to-business solutions. We intend to build our
business-to-business solutions to address the e-infrastructure
management needs of the e-commerce environment. This includes
solutions and relationships that will facilitate business-to-business
e-commerce activities to address e-infrastructure planning,
procurement, management and retirement. We believe that this is an
opportunity to bring additional value to our customers, forge
business-to-business e-commerce relationships and generate
incremental revenue.

Products

Our existing MC/EMpower software suite and our next generation MC/EMpower
i.series software, which we have begun to release, provide an extensive set of
application modules that cover a variety of e-infrastructure management
functions including planning, Internet-based procurement, contract management,
financial management, service management, inventory management, software
management and electronic distribution, total cost of ownership management,
decision support and integration with different systems and

software. The MC/EMpower i.series represents an evolution of our previous
MC/EMpower software suite by enhancing functionality, scalability and
flexibility and by providing an Internet-based platform. We also recently
introduced our MC/EMpower i.series software suite on a subscription service
basis. The MC/EMpower i.series software family is summarized below:

The MC/EMpower i.series software suite and its intended benefits

We have recently released the following modules of the MC/EMpower
i.series software suite:

. i.advise. Provides business intelligence tools to plan e-
infrastructure management, financial management, contract monitoring
and vendor and procurement management. i.advise enables users to
quickly and easily analyze information about e-infrastructure
resources, including inventory information, vendor and procurement
data, budget/cost information, contract administration and service
management activity. Users are also able to perform multi-dimensional
analysis of this information, allowing for fast, cost effective
decisions;

. i.request. Allows authorized personnel to create, forward, track and
check on service requests and purchase requisitions automatically
through the Internet or an intranet. By providing this self-service
functionality, i.request streamlines both the service management and
procurement processes and increases service levels to users;

. i.receive. Establishes the link between the procurement process and
inventory management in order to service the full life cycle of the
technology assets. i.receive enables users to register these assets
directly and accurately from i.procure or from a third party vendor
procurement product and receive them into i.infrastructure manager,
minimizing deployment times;

. i.infrastructure manager. Delivers a repository of information on all
technology assets and their relationship with the user and corporate
community. i.infrastructure manager is a bundled business solution
made up of four core components: i.inventory, i.collect, i.track, and
i.retire;

. i.collect. Provides an Internet, Intranet and e-mail based, centrally
managed collection agent that is distributed to technology assets for
the purpose of collecting inventory and configuration information.
This agent can be centrally scheduled and automatically upgraded. It
delivers accurate inventory and configuration information to the
i.inventory repository over the Internet and e-mail. i.collect
reduces the heavy implementation and resource costs of taking manual
inventory and allows for centralized configuration, electronic
distribution and electronically scheduled inventory scans;

. i.track. Allows users to manage technology moves, additions and
changes throughout the e-infrastructure life cycle. i.track enables
users to easily reassign technology assets to different locations,
users or cost centers, as well as initiate a change process for
reassigning technology assets;

. i.audit. Offers business tools to compare planned technology assets
with the actual deployed resources. i.audit enables organizations to
compare deployed technology assets with corporate plans and check any
changes over the life cycle of these assets to maintain compliance
with corporate policies. i.audit also assists users in maintaining
accurate books and records with respect to their e-infrastructure;
and

. i.implement. Provides functionality that allows users to safely,
accurately and rapidly import technology asset related data to
initiate the management process. i.implement also has administration
capabilities that allow users to accelerate the adaptation of e-
infrastructure management practices to existing business processes.

We intend to release shortly the following MC/EMpower i.series modules:

. i.inventory. Creates a flexible enterprise-wide repository of
information by collecting information on all deployed technology
assets and storing the information in the repository. i.inventory
tracks modifications to all hardware and software throughout the
enterprise automatically, allowing organizations to develop a
comprehensive inventory of technology asset information;

. i.retire. Supports the ability to retire corporate technology assets
after their usable life has expired as designated by the
organization. i.retire permits users to reassign assets into
designated resale, donation or scrap bins;

. i.contract. Tracks and manages contracts of all types, including
purchase, lease, maintenance, software license, subscription and
service. i.contract enables payment management, including payment
audits, the process of receiving invoice amounts with contract
specifications, and payment scheduling. i.contract refines the
ability to monitor vendor compliance with contracts, strengthens
problem resolution ability by providing easy access to warranty and
maintenance contracts, enables corporate compliance with software
licensing agreements and reduces unnecessary spending on
contractually covered assets and services;

. i.finance. Gives users the ability to compare actual costs from
requisitions, orders and contracts with the planned budget and to
perform budget tracking by account, cost center and cost type.
i.finance enables better planning and control of expenses, increases
the accuracy of financial records and improves accountability for
technology budgets;

. i.chargeback. Provides users the ability to manage chargeback and
cost center allocation of individual technology assets purchased or
leased by an organization. i.chargeback allows bundles of technology
assets, as well as individual assets, to have internal chargeback
allocations, therefore enhancing internal accountability, fairness
and cost control; and

. i.integrate. Assists users in integrating information from other
system management tools to our comprehensive e-infrastructure
repository. i.integrate enables users to map fields from one database
to another, providing a simple and affordable means to exchange data
between different e-infrastructure and systems management tools.

The following MC/EMpower i.series modules are representative of the next
generation of MC/EMpower modules that are currently in development:

. i.procure. Delivers comprehensive, online management of technology
procurement. i.procure gives users the ability to choose from
standard configurations of prepackaged products or select individual
items from an organization-approved catalog and approve requests
electronically. i.procure integrates with ERP and Internet-based
procurement applications to interact with suppliers electronically.
i.procure streamlines and simplifies the technology procurement
process, increases utilization of organizational purchasing power and
reduces unnecessary purchases; and

. i.service. Provides the focal point for managing service requests,
such as requests for new hardware and software or moves, adds and
changes to current equipment. i.service offers a user-friendly
interface for entering and retrieving data on service requests
throughout the organization. i.service improves the ability to track
the status of service requests, enables better planning of change and
service activities, streamlines user support processes and improves
service level and responsiveness to users.

We offer our software as an enterprise application installed on-site,
which has been our primary organization revenue source to date. We have also
entered into a hosting agreement with USinternetworking to provide access
through its data centers to our i.infrastructure manager and i.implement
software over the Internet as a subscription service through our ASP delivery
method, which we began offering in April 2000. In addition, we intend to
provide complimentary ASP services through an alliance with Spirian
Technologies, Inc.

Our products give users the benefits of a flexible, integrated software
suite, where each module is capable of working either alone or in conjunction
with other modules. This enables an organization to determine its most critical
e-infrastructure management needs and implement a solution in accordance with
time and budget constraints. At a later date, an organization may expand this
solution by adding other software modules and targeted groups of modules as
corporate needs change or additional budget dollars become available.

Technology

Our software suite was built using a flexible architecture we developed
and have continually improved upon since our inception in 1994. Each component
within the software, including database, business logic and user interface, is
structured so that the components can be easily added, exchanged or removed as
new technologies emerge or as an organization's requirements change.

LOGO
In the technology section--

Title: MainControl MC/EMpower i.series Architecture

The first tier box contains the words "Standard Web Browser." Linked to this
first tier box and directly below it is a smaller box labeled "MC/EMpower
i.series Web Interface."

The second tier box contains the words "Standard Web Server." Linked to this
second tier box and directly below it is a smaller box labeled "Standard Web
Application Server." The first and second tier boxes are connected with a solid
line.

The third tier box contains the words "MC/EMpower i.series Applications."
Directly below this third tier box are nine individual boxes (3x3) labeled from
left to right, then top to bottom 1) Advise, 2) Plan, 3) Request, 4) Procure,
5) Deploy, 6) Manage, 7) Service, 8) Dispose, 9) Integrate. The third and
second tier boxes are connected with a solid line. The third tier box is also
connected to the box labeled "MC/EMpower i.series Web Interface" by a solid
line. Both the "MC/EMpower Web Interface" box and the "MC/EMpower i.series
Applications" box are connected to a circle labeled "Business Process Oriented
User Interface" on the right hand side of this diagram.

The fourth tier box contains the words "MC/EMpower i.series Repository."
Directly below this fourth tier box is a smaller box labeled "Standard
Relational Database." The third and fourth tier boxes are connected by a solid
line.

Running across the left side of the tiered boxes are the words "Standard
Internet Communication."

Our software supports multiple commercially available databases,
operating systems, Web servers and Internet browsers including:

. all Windows-based operating systems and the most widely used UNIX
operating systems, including Sun, HP, and IBM/AIX;

. standard relational databases, including Oracle, Microsoft
SQL/Server, Informix, IBM's DB2 and Sybase, which are shared by our
software and integrated third party applications;

. Microsoft Internet Explorer and Netscape Navigator Internet browsers;
and

. Web servers including Microsoft IIS, Netscape and Apache.

Our software architecture is designed to be reliable in large networks
and to support Internet technologies. The software is configurable to allow the
customers to modify the application to meet their specific business needs
without requiring additional development. In addition, we provide Java-based
integration tools that enable third party repositories or applications to be
easily integrated into our e-infrastructure management solution.

Most of our functionality is Web-enabled and can be accessed by using a
standard Internet browser. Also, several key modules have been converted to the
Java programming language to exploit new and future emerging capabilities,
while other modules have been developed using proven and robust technologies
such as C and C++.

Our software's architecture is designed for rapid integration with our
customers' existing systems and applications. As a result, we enable
organizations to leverage previous technology investments and implement a
comprehensive, enterprise-wide solution, without the requirement for systems
integrators. Integration can be accomplished at two levels:

. Database level: Integration at the database level can be achieved
through our Java-based integration module i.integrate, which we
anticipate releasing shortly. i.integrate provides an easy method for
integration with business and financial applications such as
Internet-based procurement. i.integrate also provides out-of-the-box
interfaces to network and systems administration software from
companies such as Microsoft and Tivoli Systems, a subsidiary of IBM,
Intel, Computer Associates, Tally Systems Corporation, Hewlett-
Packard and Compaq. Additionally, i.integrate provides integration
capabilities with systems from companies including SAP AG, Oracle
Corporation and PeopleSoft, and to Internet-based procurement
products from companies including Ariba, Inc., Intelisys Electronic
Commerce, Inc. and Commerce One, Inc.

. Application level: Integration is possible at the application level
through our published application programming interfaces, or APIs.
These APIs provide an easy method for data exchange and business
process integration between our software and external ERP
applications by producing an external application that can invoke our
screen and pass data to it while maintaining the business process and
role based integrity of the external application.

Customers

As of March 31, 2000, we had over 200 customers. The following is a
representative list of organizations in the United States and Europe that had
purchased licenses to manage their technology assets with our software.

The companies selected below are a representative cross-section of our
customers in the United States and Europe, based upon the number of technology
assets licensed. These customers accounted for an aggregate of 42% and 52% of
our revenues during fiscal year 1999 and the six months ended March 31, 2000,
respectively.

United States Europe

Andersen Consulting BG International

Computer Sciences Corporation Computacenter

Home Depot Deutsche Post

Sears, Roebuck & Co. HypoVereinsbank

Southwest Airlines Swisscom

Unilever Systems Capital

Customers comprising 10% or more of our revenues in fiscal year 1999
consisted of Computer Sciences Corporation, Swisscom and PricewaterhouseCoopers
LLP. These customers represented approximately 15%, 13% and 12%, respectively,
of our revenues in fiscal year 1999. Additionally, two different customers,
Andersen Consulting and Computacenter, represented approximately 20% and 11% of
our revenues, respectively, in the six months ended March 31, 2000.

Customer Case Study

Swisscom. Swisscom is Switzerland's leading telecommunications company,
offering a full range of voice and data communication services on fixed-line
and mobile networks. Swisscom has a large, distributed IT network with over
25,000 assets and 200,000 technology components. Due to the vast nature of its
e-infrastructure, Swisscom required a method to align its technology with its
business processes in order to

control costs and improve the return on its technology investment. Swisscom
also needed a solution that would help it ensure deployment of technology
assets according to corporate policies and standards. Our MC/EMpower software
provided Swisscom with an automated, centralized information repository for its
technology resources to help it centralize control of its large distributed
network. MC/EMpower enabled Swisscom to implement its planned chargeback for
use of PCs to each internal department. In addition, through integration with
Swisscom's SAP system, our software helped streamline procurement by allowing
baseline demographic and financial information to be shared among various
management systems, thus eliminating the need for duplicate data entry. As a
result, Swisscom has been able to significantly lower its cost of owning
technology and achieve a better return on its technology investments.

Sales and Marketing

Direct sales force. As of March 31, 2000, we had a direct sales force of
27 account executives and pre-sales software engineers in seven locations in
North America and Europe. We are expanding our sales force in North America and
Europe to achieve greater market penetration. The sales force is closely
supported by the marketing organization, through the creation of marketing
material, customer demonstrations and lead generation. Moreover, an integral
part of the sales team are the pre-sales software engineers, who are
responsible for educating the prospective customer about the technical features
of the products.

Strategic Alliances. We have established strategic relationships with
third parties to promote, market and service our software in the United States
and internationally. Resellers and distributors generally resell our software,
which may be bundled with their own existing solutions and services.
Outsourcers use our software in order to deliver services to manage the e-
infrastructure of their customers. Original equipment manufacturers, or OEMs,
integrate our technology with their own and may market the resulting software
under their own name. Services partners implement our software and provide
related consulting services. Our ASP subscription service will be sold directly
and through third parties. The third party may either refer us business, use
its own hardware infrastructure to host the ASP subscription service, or we may
host the service under the third party's name. Our strategic relationships
include:

Distributors/Resellers: Outsourcing/ASP:

Amdahl Computacenter

Computer Sciences Corporation
Arthur Andersen
USinternetworking
CIEME Informatique

Implementation and Technology Alliances:
Compaq

Aether
Inacom
Computer Associates
Interchip
Hewlett Packard
Selesta
Intelisys
Tethys
KPMG Consulting
Unisys
Microsoft
USU Softwarehaus

Tivoli
OEM:

PeopleSoft

Customer Services

We have a skilled team of professionals to help our customers analyze,
design, implement and support their technology requirements. We are committed
to delivering a range of high quality consulting, implementation, training and
support services. We further believe that providing superior services allows us
to form a working relationship with our customers to produce a long-term,
successful and effective solution. The

relationships we form as part of our customer service strategy will continue to
be a key source of loyalty as we develop and deliver solutions in the
technology marketplace.

Our service delivery is designed to accomplish the following goals:

. Professional services. As part of our software delivery, we provide
professional services to assist our clients in shortening the time
between the purchase of our applications and the realization of their
business value. Our professional services organization offers
training, implementation services and ongoing project management to
deliver a complete, fully-adapted and immediately useful solution to
a trained and prepared customer organization;

. Training services. Our training department provides a comprehensive
training program that covers the technology resource planning as well
as providing expert courses on all of our
software. We provide a full range of hands-on training courses
designed to give a comprehensive, practical understanding of the
capabilities and operation of the e-infrastructure software
solutions. Upon completion of certain levels of these courses,
students receive certification as user, administrator or specialist.
Training is provided both internally to our employees and externally
to customers and prospects;
. Effective problem solving. We work to identify the customer's problem
areas and prioritize them based on their impact to the company. As a
result, our solution will have the most impact and value for the
customer; and

. Customer competitive advantage. We believe that our customers gain
competitive advantage by creating efficient information technology
operational processes, which allows our customers to align their
technology investments with their business objectives, resulting in
enhanced productivity.

Research and Development

We have made substantial investments in product research and development.
We believe that our future performance will depend in large part on our ability
to maintain and enhance our current software, develop new products that achieve
market acceptance, maintain technological competitiveness and meet an expanding
range of customer requirements. As of March 31, 2000, our research and
development staff consisted of 48 employees.

Competition

. providers of internal help desk software applications, such as Remedy
Corporation, which are developing new software to complement these
applications in order to broaden the scope of their solutions;
. enterprise management software companies such as Microsoft
Corporation, Tivoli Systems, Inc., a subsidiary of IBM, Computer
Associates International, Inc. and Hewlett-Packard Company;
. point product offerings such as inventory management, software
distribution and other database application offerings from companies
such as Janus Technologies, Inc., Tally Systems Corporation and
Tangram Enterprise Solutions, Inc.; and
. internally developed software applications.

We believe that we are differentiated from our competitors by our
software's ability to combine the functions of these disparate solutions in one
integrated solution. We believe that none of our competitors provide all of
this functionality in a single solution. We believe that we also compete on our
software's ability to operate across multiple operating systems.

Some of our competitors have longer operating histories and significantly
greater financial, technical and marketing resources than we do. In addition,
we anticipate additional competition from other established and emerging
companies as the market for e-infrastructure management software expands. We
further expect software industry consolidation to continue in the future, and
it is possible that alliances among competitors may emerge and rapidly acquire
significant market share.

We believe that major competitive factors affecting the market for our
software include:

. product features including breadth of functionality, design,
performance, flexibility, scalability, ease of use and ability to
interface with other software products;

. effectiveness of marketing activities and distribution channels; and

. price.

We believe that our MC/EMpower i.series software compares favorably with
other products with respect to each of these factors. However, our market is
evolving rapidly and we may not be able to maintain our competitive position
against current and potential competitors.

Proprietary Rights and Licenses

Protection of proprietary information. Our success is dependent, in large
part, upon our proprietary technology, and our attempt to protect it by relying
on trademark, service mark, copyright and trade secret law, together with
confidentiality arrangements which include restrictions on disclosure and
transfer of title. While we currently have no patents or patents pending, we
consider the appropriateness of applying for patents from time to time. We
generally enter into confidentiality and related agreements with our employees
and consultants, and attempt to control access to and distribution of its
documentation and other proprietary information. Despite these precautions, it
may be possible for a third party to copy or otherwise obtain and use our
proprietary information without authorization or to develop similar technology
independently. See "Related Party Transactions and Certain Relationships."

Product licenses. We typically distribute our products under software
license agreements that grant customers non-exclusive licenses to use the
MC/EMpower suite of products. This license generally is restricted to internal
use on a designated number of computers, assets or users, as applicable, and is
subject to terms and conditions prohibiting unauthorized reproduction or
transfer of the software products. Exceptions have been made for outsourcing
providers. We authorize resellers and distributors to sublicense our software
under sublicense agreements on generally the same terms and conditions as the
our standard license agreement to the extent the terms and conditions are
recognized by local law. We routinely include third-party software programs and
tools in our software subject to the terms of license agreements with those
third parties. Under certain limited circumstances, we may make available the
source code for our software or technology under an escrow arrangement which
restricts access to, and use of, the source code. See "Related Party
Transactions and Certain Relationships" for a more detailed description of the
funding provided by the Office of the Chief Scientist of the State of Israel.

Intellectual property rights. The intellectual property rights to the
products sold by us generally fall into three categories:

. intellectual property rights owned by us;

. intellectual property rights relating to products developed and owned
by us which utilize the technology of third parties under non-
exclusive term license agreements; and

. intellectual property and development rights owned by ValueSolution,
our German joint venture with USU.

We generally retain intellectual property rights in agreements relating
to the provision of professional services, except for non-exclusive grants
solely for internal use provided to the particular customer.

Trademarks. We have registered and applied for registration of some of
the trademarks and service marks we use with the United States Patent and
Trademark Office and other appropriate agencies internationally, especially in
Europe. We will continue to analyze whether we should register additional
trademarks and service marks. This prospectus also makes reference to other
trademarks that we own, some of which we may seek registration for, and to
trademarks of other companies.

Effective trademark, service mark, copyright and trade secret protection
may not be available in every country in which our products and services are
delivered or made available through the Internet and policing unauthorized use
of our proprietary information is difficult. Although we are not aware of any
claims that our software, trademarks or other proprietary rights infringe on
the proprietary rights of third parties, there can be no assurance that third
parties will not assert infringement claims against us in the future with
respect to current or future products or that such assertion may not result in
costly litigation to defend. See "Risk Factors--Disputes regarding our
intellectual property could harm our ability to sell our software."

Employees

As of March 31, 2000, we had 163 full-time employees worldwide, of whom
48 were engaged in research and development, 50 in sales and marketing, 7 in
technical support, 29 in professional services, and 29 in administration.

None of our employees are represented by a labor union. We have not
experienced any work stoppages and consider our relations with our employees to
be good.

Legal Proceedings

As of the date of this prospectus, we are not a party in any litigation
or other legal proceeding that, in the opinion of management, could harm our
business, operating results or financial condition.

Facilities

United States. Our headquarters, which include administrative, research
and development, customer service, sales and marketing, training and general
corporate facilities, occupy approximately 40,000 square feet of leased space
in a single building in McLean, Virginia, U.S.A. The lease term extends through
September 30, 2004 and we have a limited right of first offer for additional
space that may become available in the building.

United Kingdom. Our United Kingdom subsidiary has leased full-service
office and meeting room facilities of approximately 1,500 square feet until May
27, 2001.

Germany. We have incorporated a German subsidiary and expect to lease
office space in or near Munich.

MANAGEMENT

Executive Officers and Directors

Our executive officers and directors, and their respective ages and
positions as of May 31, 2000, are as follows:

Name Age Position
---- --- --------

Alex Pinchev......................... 50 Chairman, Chief Executive Officer and
President
David J. Piper....................... 43 Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
Zack Margolis........................ 49 Senior Vice President Marketing and
Operations
Marty Babst.......................... 54 Vice President Business Services
Wayne Monk........................... 40 Vice President North American Sales
John Griffin......................... 52 Vice President Europe, Middle East and
Africa Sales
Werner Knoblich...................... 35 Vice President Global Services
Christopher Germann.................. 37 Vice President Corporate Strategy
David G. Basil....................... 32 Vice President Strategic Alliances
Yair Granek.......................... 44 Vice President Research and Technology
Gregg B. Schor....................... 35 Vice President and General Counsel
Meir Barel........................... 49 Director
Jon Bayless.......................... 60 Director
J. Carter Beese...................... 43 Director
John Burton.......................... 48 Director
Dennis J. Gorman..................... 41 Director
Carl H. Hahn......................... 73 Director
Dieter Riffel........................ 56 Director

Alex Pinchev, one of our original founders, has served as chairman, chief
executive officer and president since our inception in 1996. From 1987 to 1996,
Mr. Pinchev was president and chief executive officer of Interchip, a German
company founded by Mr. Pinchev that provides software development, marketing
and integration services for large corporations in Germany, Austria and
Switzerland. Mr. Pinchev received a Bachelor of Science in Applied Mathematics
and Computer Science from the University of St. Petersburg in 1973 and a
Masters in Computer Science from Tel Aviv University in 1974.

David J. Piper has served as our senior vice president since October 1999
and as chief financial officer since June 1997. Prior to joining us, Mr. Piper
spent 17 years with Price Waterhouse LLP, including 5 years as a partner in its
high technology practice in Northern Virginia. More recently, he was a
consultant providing CFO services to public and pre-IPO technology companies,
including MainControl in 1996 and 1997. Mr. Piper is a Certified Public
Accountant and received a Bachelor of Science in Accounting from the University
of Maryland in 1978.

Zack Margolis joined us in 1996 as vice president of marketing and has
served as senior vice president of marketing and operations since March 2000.
Prior to that, Mr. Margolis spent 17 years in various engineering, sales and
marketing executive positions with IBM. Mr. Margolis received a Bachelor of
Science in Engineering from Tel Aviv University in 1978.

Marty Babst joined us in June 1999 as vice president of business
services. Mr. Babst is responsible for developing our application service
provider Web-enabled software subscription services. Prior to joining us,
Mr. Babst was a vice president of Computer Sciences Corporation. Mr. Babst
received a Bachelor of Science in Mathematics from the University of Maryland
in 1967.

Wayne Monk joined us in September 1998 as director of North America
channels and has served as vice president of North American sales since October
1999. From June 1995 to September 1998, Mr. Monk served as a vice president of
Savoir Technology Group, Inc. Mr. Monk received a Bachelor of Science in
Computer Science from Virginia Polytechnic Institute and State University in
1982.

John Griffin joined us in November 1999 as vice president of Europe,
Middle East and Africa sales. From 1996 to 1999, Mr. Griffin was vice president
of Europe, Middle East and Africa for Centura Software Corporation. Prior to
that, Mr. Griffin spent 15 years with IBM, including as regional manager of
channel marketing. Mr. Griffin received an Economics and Law degree from Keele
University in 1968.

Werner Knoblich joined us in 1997 as product manager and has served as
vice president of customer service delivery since September 1999. Mr. Knoblich
has been involved with asset management implementations in Germany and the
United States and, since April 1999, has been responsible for implementation of
the MC/EMpower software suite on a worldwide basis. Prior to joining us, Mr.
Knoblich was a project manager and consultant for USU from 1992 to 1997. Mr.
Knoblich received a Diplom Okonom from the University of Stuttgart Hohenheim in
1991.

Christopher Germann joined us in July 1999 as vice president of corporate
strategy. Prior to joining us, he was a research director for Gartner Group,
Inc., where he focused on IT asset management tools, asset management
implementation strategies, and software license management technologies. Mr.
Germann received a Bachelor of Science in Computer Science and International
Relations from Brigham Young University in 1988.

David G. Basil joined us in April 1997 as director of professional
services and has served as vice president of product development since March
1998 and vice president of strategic alliances since March 2000. From 1993 to
1997, Mr. Basil was the director of information technology consulting services
and manager of software development and business process engineering at GE
Capital Information Technology Solutions. Mr. Basil received a Bachelor of
Science in Computer Science and Business from Siena College in 1990.

Yair Granek joined our predecessor Israeli company in August 1994 as vice
president of research and development and has served as vice president of
research and technology since March 2000. Prior to joining us, he worked for
four years at PC Soft International Ltd. as general and development manager.
Mr. Granek received a Diploma from the Mamran Software Programming School of
the Israel Defense Forces in 1976.

Gregg B. Schor has served as our general counsel since January 1998 and
has served as a vice president since October 1999. Prior to joining us, he held
various positions at Softworks, Inc., most recently as deputy general counsel
and director of European operations. Mr. Schor received a Juris Doctor degree
from St. John's University School of Law in 1990, and a Bachelor of Arts degree
in Political Science from Queens College in 1987.

Meir Barel, Ph.D., has served as a member of our board of directors since
1998. Dr. Barel is the founder and managing partner of the STAR entities, a
venture capital firm which has been investing in Israel related companies since
1992. From 1986 to 1992, Dr. Barel was an investment manager and later a
managing partner of TVM Techno Venture Management GmbH & Co. KG, a large
venture capital company based in Germany. He currently serves on the board of
Advanced Vision Technology Ltd., BreezeCOM Ltd., Chiaro Networks Ltd., Floware
Wireless Systems Ltd., Mutek Solutions Ltd., RT-Set Ltd., Orckit Communications
Ltd and SunGard Data Systems, Inc. Dr. Barel holds a Master's Degree and Ph.D.
in Electrical Engineering from the Department of Data Communications at the
Technical University in Aachen, Germany.

Jon Bayless, Ph.D., has served as a member of our board of directors
since 1998. Dr. Bayless has been a partner in Sevin Rosen Funds since 1981.
Prior to joining Sevin Rosen Funds, Dr. Bayless held management and engineering
positions with Arthur A. Collins, Inc., Defense Communications Agency, E-
Systems, and

Motorola, Inc. Dr. Bayless received a Bachelor of Science in Electrical
Engineering from the University of Oklahoma, a Master's Degree in Electrical
Engineering from the University of Alabama and a Ph.D. in Electrical
Engineering from Arizona State University.

J. Carter Beese has served as a member of our board of directors since
January 2000. Mr. Beese has served as president of Riggs Capital Partners, a
division of Riggs National Corporation, since July 1998. From September 1997
until July 1998, he served as vice chairman of the Global Banking Group of BT
Alex. Brown. Prior to the mergers of Bankers Trust and Alex. Brown, Mr. Beese
was chairman of Alex. Brown International. From February 1992 until November
1994, Mr. Beese served as a Commissioner of the U.S. Securities and Exchange
Commission. Mr. Beese also serves as a senior advisor to the Center for
Strategic and International Studies. He is a member of the board of directors
of Aether Systems, Inc., China.com Corporation, Internet Securities, Inc. and
Natural Solutions, Inc.

John Burton has served as a member of our board of directors since May
1997. Mr. Burton is currently a managing director of Updata Capital, Inc., an
investment banking firm specializing in mergers and acquisitions in the
information technology industry. From 1989 to 1995, Mr. Burton was president
and later CEO of Legent Corporation. He currently serves on the board of
directors of Banyan Systems, Inc., Axent Technologies, Inc. and SAGA Software,
Inc. Mr. Burton graduated from Boston College.

Dennis J. Gorman has served as a member of our board of directors since
April 1996. Mr. Gorman currently sits on the board of other high-tech
companies. From 1984 to 1998, Mr. Gorman was a general partner in Sevin Rosen
Funds. Prior to his time at Sevin Rosen Funds, Mr. Gorman was employed at the
Central Research Laboratory of Texas Instruments, Inc. Mr. Gorman received a
Bachelor of Science, a Master of Science and a Master in Business from the
Massachusetts Institute of Technology.

Carl H. Hahn, Ph.D., was chairman of the board of management of
Volkswagen AG from 1982 to 1992. He served as chairman of the board of
management of Continental Gummi-Werke Hannover, a global tire manufacturer,
from 1972 to 1982. Prior to that time, Dr. Hahn served in a variety of senior
management positions for Volkswagen, including chief executive officer of
Volkswagen of America and as a member of its board of management. He is also a
member of the board of directors of Gerling Global Group, HAWESKO, Sachsenring
Automobiltechnik AG and Perot Systems Corporation and of the international
advisory boards of Timken Company and Textron, Inc. In addition, he is an
advisor to the board of TRW, Inc.

Dieter Riffel has been a member of our board of directors since January
1996. Mr. Riffel is our co-founder and served as a director of MainControl,
Ltd., our Israeli predecessor. Mr. Riffel has served as the president and CEO
of Interchip, since 1987. Mr. Riffel received his Master's Degree in
Electronics from the Technical University in Munich, Germany, in 1968.

Board of Directors

Our board of directors currently consists of eight positions. The
directors have a term of twelve months. Effective upon the offering, and
subject to shareholders' approval, our board of directors will be divided into
three classes. Directors of each class will be elected at the annual meeting of
stockholders held in the year in which the term for such class expires and will
serve thereafter for three years. The terms of John Burton, Dennis J. Gorman
and Carl H. Hahn will expire in 2001; the terms of Meir Barel, J. Carter Beese
and Dieter Riffel will expire in 2002; and the terms of Alex Pinchev and Jon
Bayless will expire in 2003.

Independent directors not affiliated with investors are reimbursed for
their reasonable out-of-pocket expenses incurred in attending board of director
meetings. In addition, upon election to the board of directors, each director
is automatically granted 60,000 non-qualified stock options to purchase our
common stock pursuant to the 2000 Equity Plan. Such options will vest at a rate
of 25% on the first anniversary of the date of grant and will vest monthly at
an annual rate of 25% thereafter.

Executive Compensation

The following table sets forth information concerning compensation of our
chief executive officer and our other most highly compensated executive
officers whose aggregate cash compensation exceeded $100,000 during fiscal year
1999, or named executive officers.

Summary Compensation Table

Annual
Compensation (1)
-----------------
Bonus
Name and Principal Position Salary (2)
--------------------------- -------- --------

Alex Pinchev................................................. $375,000 $385,000
Chairman of the Board, Chief Executive
Officer and President
David J. Piper............................................... $150,000 $ 50,450
Senior Vice President, Chief Financial Officer,
Treasurer and Secretary
John de Wit (3).............................................. $150,000 $115,500
Vice President Worldwide Sales
Zack Margolis................................................ $150,000 $ 75,450
Senior Vice President Marketing and Operations
Yair Granek.................................................. $145,000 $ 50,450
Vice President Research and Technology

- --------
(1) With respect to each of the named executive officers, the aggregate amount
of perquisites and other personal benefits, securities, or property
received was less than either $50,000 or 10% of the total annual salary
and bonus reported for such named executive officer.
(2) Includes bonus amounts earned in fiscal year 1999 and paid in fiscal year
2000.

(3) As of January 31, 2000, John de Wit ceased to be an executive officer of
MainControl.

Aggregate Option Exercises in Fiscal Year 1999 and Year-end Option Values

The following table sets forth information concerning exercises of stock
options during fiscal year 1999 by each of our named executive officers and the
number and value of their option holdings.

Number of
Securities Underlying Value of In-the-Money
Unexercised Options Unexercised Options at
Shares at September 30, 1999 September 30, 1999 (1)
Acquired on Value ---------------------- ------------------------
Name Exercise Realized Vested Unvested Vested Unvested
---- ----------- -------- ---------- ----------- ----------- ------------

Alex Pinchev............ -- -- -- -- $ -- $ --
David J. Piper.......... 50,000 $130,000 -- 50,000 -- 196,500
John de Wit............. -- -- 27,083 72,917 106,438 286,563
Zack Margolis........... -- -- 18,958 51,042 74,506 200,594
Yair Granek............. -- -- 13,542 36,458 53,219 143,281

- --------

(1) The value of "in-the-money" options represents the positive difference
between the exercise price of stock options and the deemed fair value of
our common stock as of September 30, 1999.

During the last completed fiscal year, the executive committee of our
board of directors, consisting of Jon Bayless, Dennis J. Gorman and John
Burton, participated in deliberations regarding compensation for Alex Pinchev,
our chairman, president and chief executive officer. Compensation for the
remaining executive officers was set by Alex Pinchev in his capacity as chief
executive officer.

1996 Stock Option Plan

As of March 31, 2000, our 1996 Stock Option Plan had a total of 6,000,000
shares of common stock reserved for issuance. The 1996 Stock Option Plan, which
is administered by our board of directors, provides for the granting of either
incentive stock options or non-qualified stock options to purchase shares of
our common stock to employees, non-employee members of our board of directors
and consultants. Stock options granted under the 1996 Stock Option Plan
generally have a ten-year contractual life and are exercisable on the date of
grant. Unvested shares of common stock issued upon exercise of the options are
subject to a repurchase right in favor of MainControl, which expires at the
rate of 25 percent on the one year anniversary of the date of grant and ratably
thereafter over the following three-year period as the optionee becomes vested
in the issued shares. As of March 31, 2000, there were 2,479,761 options
outstanding pursuant to the 1996 Stock Option Plan and 1,956,007 additional
shares available for grant under the plan. In May 2000, the 1996 Stock Option
Plan was amended, subject to shareholder approval, to increase total shares of
common stock reserved for issuance to 10,000,000.

2000 Equity Plan

Our 2000 Equity Plan, which will become effective upon the closing of
this offering, will replace our 1996 Stock Option Plan. The 2000 Equity Plan
will be administered by a committee of our board of directors and will have a
total of 10,000,000 shares of common stock reserved for issuance. However, the
maximum number of shares issuable under the 2000 Equity Plan will equal the
remaining shares available for issuance under the 1996 Plan.

The 2000 Equity Plan is intended to promote the interests of MainControl
and our stockholders by enhancing our ability to attract and retain key
employees and officers and to provide a means to encourage stock ownership and
proprietary interest in MainControl by officers and key employees upon whose
judgment, initiative and efforts the financial success and growth of
MainControl largely depend.

Awards under the 2000 Equity Plan may be made in the form of incentive
stock options, non-qualified stock options, stock appreciation rights, stock
awards, restricted stock units and performance units, other awards and options
for non-employee directors. Awards may be made to officers and employees of
MainControl at the committee's discretion.

Awards granted under the 2000 Equity Plan and shares of common stock
acquired pursuant thereto will be subject to a number of rights and
restrictions, including provisions relating to the termination of employment or
service of the grantee. The committee may, without stockholder approval,
suspend, discontinue, revise or amend the 2000 Equity Plan at any time;
however, stockholder approval is required for any amendment for which such
approval is required by Section 422 of the Internal Revenue Code of 1986, as
amended, or by other provisions of applicable law. Unless sooner terminated by
the committee, the provisions of the 2000 Equity Plan relating to the grant of
incentive stock options will terminate in 10 years. All awards made under the
2000 Equity Plan prior to its termination shall remain in effect until they are
satisfied or terminated.

The committee will be authorized to construe, interpret and implement the
provisions of the 2000 Equity Plan, to select the persons to whom awards will
be granted, to determine the terms and provisions of such awards, including the
vesting schedule and purchase price per share payable upon exercise of an
option, to amend outstanding awards and to determine the effect, if any, of a
change in control on the vesting and exercisability of any award.

2000 Executive Incentive Plan

The 2000 Executive Incentive Plan, which will become effective upon the
closing of this offering, is intended to attract, retain, motivate and reward
executives and key employees. The plan offers executives and key employees the
opportunity to earn incentive compensation that is directly linked to our
performance. The compensation committee of the board of directors will
determine whether any executive officer, senior officer or other employee of
MainControl will earn incentive compensation under the 2000 Executive Incentive
Plan during a performance period. The 2000 Executive Incentive Plan will be
administered by the board of directors or the committee.

Employee Stock Purchase Plan

Our Employee Stock Purchase Plan, which will become effective upon the
closing of this offering, will be administered by the board or a committee of
the board and is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code. Under the Employee Stock Purchase
Plan, the board of directors or the committee administering the plan may grant
options to eligible employees to purchase shares of common stock through
payroll deductions. The purchase price of shares of our common stock purchased
under the Employee Stock Purchase Plan will be 85% of the lesser of the fair
market value of the shares of common stock on the date the option was granted
or the date the option is exercised. A total of 4,000,000 shares of common
stock will be reserved for issuance under the Employee Stock Purchase Plan. The
Employee Stock Purchase Plan is intended to help us attract and retain
outstanding employees through the incentives of stock ownership.

401(k) Plan

Our 401(k) Savings Plan is intended to encourage and facilitate employee
preparation for retirement. The plan allows us to provide matching
discretionary contributions of cash or MainControl common stock up to 100% of
participant contributions. Effective January 1, 2000, our board of directors
approved a matching contribution by us of 50% for the first 6% contributed by
each employee. The 401(k) Savings Plan is designed to qualify under Section 401
of the Code, so that contributions by employees or by us to the plan, and
income earned on the plan contributions, are not taxable to employees until
withdrawn from the plan, and so that contributions by us, if any, will be
deductible by us when made. A total of 2,000,000 shares of common stock have
been reserved for issuance under the 401(k) Savings Plan.

Employment Agreements

We are a party to an employment agreement with Alex Pinchev, our chief
executive officer, the terms of which include annual salary, profit sharing
bonus, reimbursement for automobile, cellular phone and work-related
entertainment expenses, medical insurance, stock options, and noncompetition
and nondisclosure provisions. We also are required to procure $4.0 million
worth of term life insurance for Mr. Pinchev, $2.0 million to be payable to us
and $2.0 million to be payable to Mr. Pinchev's estate. If we terminate Mr.
Pinchev's agreement without cause, we are required to make a single lump sum
payment of $206,244 to Mr. Pinchev.

Limitation of Liability and Indemnification Matters

Our restated certificate of incorporation provides that, except to the
extent prohibited by the Delaware General Corporate Law, or DGCL, our directors
shall not be personally liable to MainControl or its stockholders for monetary
damages for any breach of fiduciary duty as directors of MainControl. Section
145 of the DGCL allows a corporation to indemnify its directors and officers
and to purchase insurance with respect to liability arising out of their
capacity or status as directors and officers. However, this provision does not
eliminate or limit the liability of a director:

. for any breach of the director's duty of loyalty to the corporation
or its stockholders;

. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

. for arising under Section 174 of the DGCL; and

. for any transaction from which the director derived an improper
personal benefit. The DGCL provides further that the indemnification
may be supplemented by any other rights which the directors and
officers have under the corporation's bylaws, any agreement, a vote
of stockholders or otherwise.

Our bylaws provide that we shall, to the fullest extent permitted by the
DGCL, indemnify any person who was or is a party or is threatened to be made a
party to any proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that such person is or was a director,
officer, employee or agent of MainControl, or is or was serving at the request
of MainControl as a director, officer, employee or agent of another entity,
against expenses, judgments, fines and amounts paid in settlement incurred by
such person in connection with such proceeding, if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of MainControl. However, indemnification is not generally
available if such person is found to be liable for negligence or misconduct in
the performance of his or her duties to MainControl.

Our bylaws also permit us to secure insurance on behalf of any person who
is or was a director, officer, employee or agent of MainControl, or is or was
serving at the request of MainControl as a director, officer, employee or agent
of another entity, for any liability arising out of his or her actions in such
capacity or his or her status as such, regardless of whether the Bylaws or the
DGCL would permit indemnification. We have obtained liability insurance for our
officers and directors.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted. We are not aware of any threatened litigation or
proceeding that may result in a claim for such indemnification.

RELATED PARTY TRANSACTIONS AND CERTAIN RELATIONSHIPS

Related Party Transactions

We are a party to an international marketing agreement with Interchip,
which is owned by MainControl's chief executive officer, Alex Pinchev, and
Dieter Riffel, both of whom are members of our board of directors. The original
term of the agreement extended through December 2000 but has been amended to
extend through April 2001, subject to specified conditions. Under the marketing
agreement, Interchip has a non-exclusive right to market our products, other
than the ValueSolution software, in Germany, Austria and Switzerland. Interchip
is generally entitled to retain 50% of license and maintenance revenue.
Instances where sales and maintenance revenue are not split equally between
Interchip and MainControl include revenue from Interchip's sale of
ValueSolution software within the exclusive territory of our joint venture
partner, USU, which is split equally between MainControl, Interchip and USU.
Additionally, Interchip subcontracts implementation services from MainControl
at rates equivalent to those charged to non-affiliated distributors. During the
years ended September 30, 1997, 1998, 1999 and during the six months ended
March 31, 2000, we recognized revenues of $1.1 million, $2.2 million, $2.7
million and $198,000, respectively, and distributor expense of $557,000, $1.4
million, $1.3 million and $64,000, respectively, from sales to end-users in
which Interchip acted as the distributor. Accounts receivable due from
Interchip at September 30, 1998, 1999 and at March 31, 2000 was $1.2 million,
$174,000 and $125,000, respectively.

In December 1998, the joint venture formed by MainControl and USU, a
stockholder of MainControl, became effective. The joint venture, ValueSolution,
is a limited partnership organized under the laws of Germany for the purpose of
developing, enhancing and marketing information technology asset management
software, including the ValueSolution software, which was contributed to
ValueSolution by USU. We purchased a 50% interest, with a two-vote majority, in
the joint venture for approximately $2.7 million, consisting of $603,000 in
cash and $2.1 million related to stock-based consideration.

In August 1998, we issued 750,000 shares of common stock to USU for
$465,000. The shares of common stock were subject to repurchase until
ValueSolution was formed in December 1998. Additionally, in conjunction with
the formation of ValueSolution with USU, we entered into a consulting agreement
with Karin Strehl, a member of the board of directors of USU, for the provision
of advice and counsel to us regarding the legal and procedural aspects of
operating a business in Germany. As consideration for these services, Ms.
Strehl was issued 50,000 shares of our common stock. The $2.1 million value for
the stock portion of the consideration was determined as the difference between
the estimated market price of $2.6 million of our common stock on the date of
formation for the 800,000 shares issued and the $465,000 cash received from
USU.

While under the terms of the partnership agreement we maintain a two-vote
majority, specialized matters require the consent of all stockholders' thus
eliminating our ability to exercise control over matters other than the
development and enhancement of the software. The specialized matters requiring
the consent of all stockholders include significant decisions that impact the
entire organization, such as the acquisition or discontinuance of divisions,
branches or fields of operation; the disposition of real property or equivalent
rights; the modification of partnership, distribution, affiliate or licensing
rights; and matters affecting budgeting, pricing, financial accounting and
auditing.

In connection with the joint venture, we entered into a marketing and
distribution agreement with ValueSolution, pursuant to which we have the
exclusive right to market and sublicense to customers the ValueSolution
software worldwide except in Germany, Austria and Switzerland. USU has also
entered into an identical marketing and distribution agreement with
ValueSolution except that USU has the exclusive right to market and sublicense
to customers the ValueSolution software in Germany, Austria and Switzerland.
MainControl and USU maintain these exclusive software distribution rights in
exchange for royalty payments to the joint venture equal to 30% of product
sales and maintenance fees. Additionally, we provide product

development support to the joint venture in exchange for development fees.
Software development expense in support of the joint venture is recorded as
research and development expenses in the period incurred. Development fees from
our development contract with the joint venture are recognized as work is
performed under a time and materials arrangement whereby development fees are
billed based on pre-established rates subject to a maximum total fee based on
certain percentages of annual sales, which consist solely of royalties.
Currently, this percentage is equal to 95% of such royalties through fiscal
year 2000. The percentage will decrease to 90% for fiscal years 2001 and 2002
and further decreases to 70% in years thereafter. However, we are not limited
in performing software development activities in support of the joint venture's
software and may incur expenses in excess of amounts paid by the joint venture.
To the extent that future joint venture annual sales are available, costs
incurred in excess of amounts paid by the joint venture because of contractual
payment limitations will be paid in subsequent periods. Additionally, as we
maintain distribution rights to the joint venture's software, we recover
research and development expenses incurred in excess of amounts paid by the
joint venture through revenues generated by sales of the joint venture's
software.

During the year ended September 30, 1999, and the six months ended March
31, 2000, we recognized approximately $1.1 million and $923,000, respectively,
in product development revenue in connection with joint venture product
development activities. During fiscal year 1999 and the six months ended March
31, 2000, we incurred approximately $548,000 and $1.1 million, respectively, in
expenses related to research and development expenses in excess of amounts paid
by the joint venture. Additionally, during the year ended September 30, 1999
and the six months ended March 31, 2000, we incurred approximately $778,000 and
$836,000, respectively, in royalty expense in connection with software sales.

Each party may terminate the joint venture agreement for cause at any
time and may terminate it without cause at any time after September 30, 2008
upon one year's notice. In the event that a party elects to terminate its
participation, the other party may continue the joint venture upon the payment
of certain compensation to the terminating party. If either party withdraws
from the joint venture, it is entitled to compensation determined by its pro
rata partnership value based upon the joint venture's balance sheet at the
time. However, this payment may not exceed $10.0 million or three times the net
proceeds of the joint venture during the prior twelve months, whichever is
higher. If no agreement is reached on the amount of compensation, an expert
named by the Stuttgart Chamber of Industry and Commerce will decide as
arbitrator. The parties may not produce or distribute products which compete
with ValueSolution's products until one year after their withdrawal from the
joint venture.

Additionally, we have entered into agreements with USU and may continue
to enter into agreements with related parties in the future. It is our policy
to enter into arrangements with related parties on an arm's-length basis, which
means that the terms of the arrangements with related parties are no less or
more favorable than the terms with non-affiliates.

From time to time we engage USU's consultants for professional services
and development work. During the years ended September 30, 1997, 1998 and 1999
and the six months ended March 31, 2000, we incurred expenses of approximately
$8,000, $267,000, $451,000 and $141,000, respectively, in connection with the
engagement of USU consultants. In connection with the sale and distribution of
certain of USU's products during the years ended September 30, 1997, 1998 and
1999 and the six months ended March 31, 2000, we incurred royalty expense of
approximately $185,000, $384,000, $169,000 and $0, respectively. During the
years ended September 30, 1997, 1998 and 1999 and the six months ended March
31, 2000, we performed certain development activities for USU in exchange for
development fees of $0, $83,000, $280,000 and $0, respectively. At September
30, 1998 and 1999 and at March 31, 2000, we had net accounts payable to USU of
approximately $240,000, $90,000 and $0, respectively.

Certain Relationships

MainControl, Ltd. obtained from the Office of the Chief Scientist, an
agency of the Israeli Government, funds which were used to develop Enterprise
Explorer and Software Jet software through March 31, 1996. MainControl, Ltd. is
obligated to pay royalties to the Office of the Chief Scientist for worldwide
sales and maintenance fees related to MainControl, Ltd. software developed
using the Office of the Chief Scientist funding. Generally, royalties must be
paid for product sales at varying rates, calculated as a percentage of sales
price. For

example, during the first three years after repayment begins, royalties are 3%
to 4%; from the fourth year to the sixth year, 4% to 5%; and from the seventh
year, 5% to 6%. Royalty obligations begin on the first sale and continue up to
the amount of the grant received.

Under applicable Israeli laws and regulations, the "know-how" related to
this software may not be transferred out of MainControl, Ltd. or Israel without
approval. We have applied to the Office of the Chief Scientist for transfer of
manufacturing rights from MainControl, Ltd. to the U.S. parent company. An
approved transfer abroad of manufacturing rights will result in an increased
royalty ceiling based on the amount of manufacturing activities transferred.
When 90% or more is transferred outside of Israel, as we have applied for, then
the royalty ceiling is increased to 300% of the grant received; if 50% or more
is transferred, the royalty ceiling is increased to 150%; and for up to 50%
transferred, the royalty ceiling is increased to 120%.

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the shares of our common stock as of June 15, 2000 and reflects
the sale of the shares of common stock in this offering by:

. each stockholder known by us to own beneficially more than 5% of the
outstanding shares of our common stock;

. each of our directors;

. each of our executive officers listed in the Summary Compensation
Table above; and

. all of our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares of common
stock beneficially owned by an organization or individual and the percentage
ownership of that organization or individual, shares of common stock subject to
options or warrants held by that organization or individual which are currently
exercisable or exercisable within 60 days of June 15, 2000 are deemed
outstanding. Such shares of common stock, however, are not deemed outstanding
for the purposes of computing the percentage ownership of any other
organization or individual. This table lists ownership based on 23,526,517
shares of common stock outstanding as of June 15, 2000, assuming the conversion
of our convertible preferred stock into 15,550,298 shares of common stock. The
percentage beneficially owned after the offering reflects the sale of
shares of common stock in this offering. Unless otherwise indicated, each
person has sole voting and sole investment power with respect to the shares of
common stock listed.

In the event the over-allotment option is exercised, the selling
stockholders may sell some of their shares of common stock and therefore own
fewer shares of common stock after the offering than indicated in the table
below.

Percentage of
Shares
Number of Beneficially
Shares Beneficially Owned Owned
------------------------- -----------------
Before After
Name of Beneficial Owner Number Offering Offering
- ------------------------ ------------------------- -------- --------

Evergreen Canada Israel Management
Ltd.
96 Rothschild Blvd., Tel Aviv
65224, Israel (1)................. 1,335,796 5.68%
Private Equity Bridge Invest Ltd.
P.O. Box 30846 SMB,
The Grand Pavillion Commercial
Center, West Bay Road,
Grand Cayman, Cayman Islands,
B.W.I. (2)........................ 1,289,209 5.48%
JAFCO America Ventures, Inc.
505 Hamilton Ave., Suite 310, Palo
Alto, CA 90301 (3)................ 1,179,241 5.01%
Sevin Rosen Fund V L.P.
Two Galleria Tower, 13455 Noel
Road, Suite 1670, Dallas, TX 75240
(4)............................... 2,540,010 10.77%
SVM Star Ventures Management GmbH
Nr. 3
Possartstr 9, D-81679 Munchen,
Germany (5)....................... 3,150,951 13.36%
Formula Ventures L.P.
39 Hagalim Boulevard, P.O. Box
2062, Herzliya, Israel 46120 (6).. 2,501,802 10.63%
Charles River Partnership VII, L.P.
1000 Winter Street, Suite 3300,
Waltham, MA 02154 (7)............. 2,166,078 9.21%
Alex Pinchev (8)................... 1,931,541 8.21%
David J. Piper..................... 200,000 * *
John de Wit (9).................... 97,917 * *
Zack Margolis...................... 200,000 * *
Yair Granek........................ 200,000 * *
Dieter Riffel (10)................. 1,110,231 4.72%
Meir Barel (11).................... 3,150,951 13.36%
Jon Bayless (12)................... 2,540,010 10.77%
J. Carter Beese.................... 60,000 * *
John Burton........................ 60,000 * *
Dennis J. Gorman................... 163,298 * *
Carl H. Hahn....................... 60,000 * *
All executive officers and
directors as a group (18
persons).......................... 10,895,135 43.60%

- --------
* Less than 1% of outstanding shares of common stock.

(1) Includes: (a) 22,144 shares of common stock owned by Evergreen Canada
Israel Management Ltd.; (b) 525,230 shares of common stock owned by
Evergreen Partners U.S. Direct Fund III, L.P.; (c) 58,359 shares of
common stock owned by EPF3 (Overseas) Ltd.; (d) 197,491 shares of common
stock owned by First Union Financial Co. Ltd.; (e) 205,485 shares of
common stock owned by IJT Technologies Ltd.; (f) 66,725 shares of common
stock owned by AB Shaked Lavan Ltd.; and (g) 260,362 shares of common
stock owned by Periscope I Fund L.P. All are part of an affiliated group
of investment entities. Mssrs. Ofer Ne'eman, George Horesh and Moti Hoss
have voting and dispositive power over the shares held by these entities.

(2) Mr. Clive Munyard has voting and dispositive power over the shares held
by this entity.

(3) Includes: (a) 36,558 shares of common stock owned by JAFCO America
Ventures, Inc.; (b) 26,410 shares of common stock owned by JAFCO Co.,
Ltd.; (c) 943,394 shares of common stock owned by U.S. Information
Technology No. 2 Investment Enterprise Partnership; (d) 48,700 shares of
common stock owned by JAFCO G-6(A) Investment Enterprise Partnership; (e)
48,700 shares of common stock owned by JAFCO G-6(B) Investment Enterprise
Partnership; (f) 43,012 shares of common stock owned by JAFCO R-3
Investment Enterprise Partnership; (g) 25,806 shares of common stock
owned by JAFCO JS-2 Investment Enterprise Partnership; and (h) 6,661
shares of common stock owned by JAFCO JS-3 Investment Enterprise
Partnership. All are part of an affiliated group of investment entities.
Mr. Barry J. Schiffman has voting and dispositive power over the shares
held by these entities.

(4) Includes: (a) 2,369,606 shares of common stock owned by Sevin Rosen Fund
V L.P.; (b) 101,304 shares of common stock owned by Sevin Rosen V
Affiliates Fund L.P.; and (c) 9,100 shares of common stock owned by Sevin
Rosen Bayless Management Company. All are part of an affiliated group of
investment entities. In addition, includes 60,000 stock options owned by
Dr. Bayless. All of the shares of common stock indicated are owned of
record by Seven Rosen Fund V L.P., Sevin Rosen V Affiliates Fund L.P. and
Sevin Rosen Bayless Management Company. Dr. Bayless is a director of
MainControl and disclaims beneficial ownership of the shares of common
stock held by such entities except to the extent of his proportionate
interest therein. Dr. Bayless has voting and dispositive power over the
shares held by these entities.

(5) Includes: (a) 480,963 shares of common stock owned by SVM STAR Ventures
Management GmbH Nr. 3; (b) 178,700 shares of common stock owned by JUSTY
LTD.; (c) 182,756 shares of common stock owned by Star Management of
Investments (1993) Limited Partnership; (d) 601,456 shares of common
stock owned by SVE Star Ventures Enterprises No. III GbR; (e) 50,233
shares of common stock owned by SVE Star Ventures Enterprises No. IIIA
GbR; (f) 264,631 shares of common stock owned by SVM STAR Ventures
Managementgesellschaft mbH Nr. 3 & Co. Beteiligungs KG; (g) 542,245
shares of common stock owned by SVE STAR Ventures Enterprises No. V GbR;
and (h) 789,967 shares of common stock owned by Star Growth Enterprise.
All are part of an affiliated group of investment entities. In addition,
includes 60,000 stock options owned by Dr. Barel. All of the shares of
common stock indicated are owned of record by SVM STAR Ventures
Management GmbH Nr. 3, JUSTY LTD., Star Management of Investments (1993)
Limited Partnership, SVE Star Ventures Enterprises No. III GbR, SVE Star
Ventures Enterprises No. IIIA GbR, SVM STAR Ventures
Managementagesellschaft mbH Nr. 3 & Co. Beteiligungs KG, SVE STAR
Ventures Enterprises No. V GbR, and Star Growth Enterprise. Dr. Barel,
who is affiliated with these entities, is one of our directors and
disclaims beneficial ownership of the shares of common stock held by such
entities except to the extent of his proportionate interest therein. Dr.
Barel has voting and dispositive power over the shares held by these
entities.

(6) Includes: (a) 991,791 shares of common stock owned by Formula Ventures
L.P.; (b) 432,302 shares of common stock owned by Formula Ventures
(Israel) L.P.; (c) 429,708 shares of common stock owned by FV-PEH L.P.;
(d) 408,000 shares of common stock owned by Dan Goldstein; (e) 168,000
shares of common stock owned by Gad Goldstein; and (f) 72,000 shares of
common stock owned by Shem Basum Ltd. These entities are part of an
affiliated group of investment entities and the individuals are
affiliated with those entities. Mssrs. Shai Beilis and Reuben Ben-Arie
have joint voting and dispositive power over the shares held by these
entities.

(7) Mr. Michael Zak has voting and dispositive power over the shares held by
this entity.

(8) Mr. Pinchev is the Chairman of the Board of Directors, Chief Executive
Officer and President of MainControl. Includes: (a) 1,731,541 shares of
common stock owned by Mr. Pinchev; (b) 100,000 shares of common stock
held by Mr. Pinchev as custodian for his daughter under the Virginia
Uniform Gifts to Minors Act; and (c) 100,000 shares of common stock held
by Mr. Pinchev as custodian for his son under the Virginia Uniform Gifts
to Minors Act. Plethora is an affiliate of Interchip in which Mr. Pinchev
has an ownership interest. Mr. Pinchev disclaims beneficial ownership of
all shares of common stock not held by him personally.

(9) As of January 31, 2000, John de Wit ceased to be an executive officer of
MainControl.

(10) Mr. Riffel is a director of MainControl. Includes: (a) 910,231 shares of
common stock owned by Mr. Riffel; and (b) 200,000 shares of common stock
owned by Mr. Riffel's son. Mr. Riffel disclaims beneficial ownership of
the shares of common stock owned by his son.

(11) Dr. Barel is a director of MainControl. Also included are shares of
common stock beneficially owned by Star Ventures entities with which Dr.
Barel is affiliated. Dr. Barel disclaims beneficial ownership of such
shares of common stock except to the extent of his proportionate interest
therein.

(12) Dr. Bayless is a director of MainControl. Also included are shares of
common stock beneficially owned by Sevin Rosen entities with which Dr.
Bayless is affiliated. Dr. Bayless disclaims beneficial ownership of such
shares of common stock except to the extent of his proportionate interest
therein.

DESCRIPTION OF CAPITAL STOCK

The following description of our securities summarizes certain provisions
of our restated certificate of incorporation and our bylaws. Our authorized
capital stock currently consists of 30,000,000 shares of $0.001 par value
common stock and 20,000,000 shares of $0.001 par value preferred stock.

Common Stock

Based upon the number of shares of common stock outstanding as of March
31, 2000 and giving effect to the issuance of the shares of common stock in
this offering (assuming no exercise of the underwriters' over-allotment option)
and the conversion of all of our outstanding shares of convertible preferred
stock into 15,550,298 shares of common stock, there will be shares of
common stock outstanding upon the consummation of this offering. If the
offering price is less than $9.00 per share, an additional 632,419 shares of
common stock will be outstanding. In addition, as of March 31, 2000, there were
outstanding stock options to purchase an aggregate of 2,479,761 shares of
common stock and there were 1,956,007 options available for grant. During the
period from April 1, 2000 to June 15, 2000, an additional 253,335 stock options
were granted.

Except as described below under "Anti-takeover Effects of Certain
Provisions of Delaware Law and our Restated Certificate of Incorporation and
Bylaws," holders of common stock are entitled to one vote for each share held
on all matters submitted to a vote of stockholders, and do not have cumulative
voting rights. Holders of shares of common stock are entitled to receive
ratably such dividends, if any, as may be declared by the board of directors
out of funds legally available therefore subject to any preferential dividend
rights of any outstanding preferred stock. Upon the liquidation, dissolution or
winding up of MainControl, the holders of common stock are entitled to receive
ratably the net assets of MainControl available after the payment of all debts
and other liabilities of MainControl, subject to the prior rights of any
outstanding preferred stock. Holders of common stock have no preemptive,
subscription, redemption or conversion rights, nor are they entitled to the
benefit of any sinking fund. The outstanding shares of common stock are, and
the shares offered by us in this offering will be, when issued and paid for,
validly issued, fully paid and nonassessable. The rights, powers, preferences
and privileges of holders of shares are subject to, and may be adversely
affected by, the rights of the holders of shares of common stock of any series
of preferred stock which we may designate and issue in the future.

Preferred Stock

All of the outstanding shares of our Series A preferred stock, Series B
preferred stock, Series C preferred stock and Series D preferred stock will
convert into 6,300,000, 2,688,171, 3,056,646 and 3,505,481 shares of common
stock, respectively. If the offering price is less than $9.00 per share, an
additional 632,419 shares will be issued to the Series C preferred
stockholders.

Registration Rights

Beginning on the earlier of January 2003 or one year after the closing of
an initial public offering, the holders of our preferred stock immediately
prior to the closing of this offering (which will convert into common stock
upon consummation of this offering) or their transferees will have rights to
cause us to register these shares under the Securities Act of 1933. We may be
required to effect up to two demand registrations, at our expense. We will not
be required to effect a demand registration if the anticipated aggregate
offering price net of commissions, if any, or discounts of the shares to be
registered are expected to be less than $20.0 million. In addition, the holders
of these shares will have the right to cause us to register these shares, at
our expense, on a Form S-3, provided that we are eligible to use this form. We
may also be required to effect up to six "piggy-back" registrations. We will
not be required to effect a "piggy-back" registration if the aggregate price of
the shares to be registered are expected to be less than $1.0 million. If we
propose to register any of our securities under

the Securities Act, either for our own account or for the account of other
security holders, other than in connection with an employee stock benefit plan
or certain business combinations involving us, these holders will be entitled
to notice of the registration and will be entitled to include, at our expense,
some or all of their shares of common stock. All of these registration rights
will terminate on the earlier of the fifth anniversary of the closing of this
offering or when a holder is able to sell all of its shares pursuant to Rule
144 under the Securities Act in any 90-day period. These registration rights
are subject to customary conditions and limitations, including the right of the
underwriters of an offering to limit the number of shares included in any such
registration.

Anti-takeover Effects of Certain Provisions of Delaware Law and our Restated
Certificate of Incorporation and Bylaws

We are subject to Section 203 of the Delaware General Corporation Law,
which, subject to various exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that the stockholder became an
interested stockholder. This restriction applies unless:

. the transaction is approved by the board of directors prior to the
date the stockholder became an interested stockholder;

. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned
at least 85% of the voting stock of the corporation outstanding at
the time the transaction commenced, excluding for purposes of
determining the number of shares outstanding those shares owned by
(a) persons who are directors and also officers and (b) employee
stock plans in which employee participants do not have the right to
determine individually whether shares held subject to the plan will
be tendered in a tender or exchange offer; or

. on or subsequent to the date the business combination is approved by
the board of directors and authorized at an annual or special meeting
of stockholders, and not by written consent, by the affirmative vote
of at least 66 2/3% of the outstanding voting stock that is not owned
by the interested stockholder.

Section 203 defines business combination to include:

. any merger or consolidation involving the corporation and the
interested stockholder;

. any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;

. any transaction that results in the issuance or transfer by the
corporation of any stock of the corporation in the interested
stockholder, subject to various exceptions;

. any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock of any class or
series of the corporation beneficially owned by the interested
stockholder; or

. the receipt by the interested stockholder of the benefit of any
loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation.

In general, Section 203 defines an interested stockholder as any entity
or person who owns 15% or more of the outstanding voting stock of the
corporation, and any entity or person affiliated with or controlling or
controlled by the entity or person.

In addition, certain provisions of the certificate and bylaws may be
deemed to have an antitakeover effect and may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares of common stock held by stockholders.

Transfer Agent and Registrar

The Transfer Agent and Registrar for the common stock is

Nasdaq National Market Listing

We have applied for the listing of our common stock on the Nasdaq
National Market, subject to official notice of issuance, under the symbol
"MNCL."

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no market for our common stock.
Therefore, future sales of substantial amounts of our common stock in the
public market could adversely affect market prices prevailing from time to
time. Furthermore, because only a limited number of shares will be available
for sale shortly after this offering due to existing contractual and legal
restrictions on resale as described below, sales of substantial amounts of our
common stock in the public market after the restrictions lapse could adversely
affect the prevailing market price and our ability to raise equity capital in
the future.

Upon completion of this offering, we will have shares of common
stock outstanding, assuming no exercise of options outstanding as of March 31,
2000. shares sold in this offering will be freely transferable without
restriction or registration under the Securities Act, except for any shares
purchased by one of our existing "affiliates," as that term is defined in Rule
144 under the Securities Act. The remaining shares of common stock
outstanding are "restricted shares" as defined in Rule 144. Restricted shares
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144 or 701 of the Securities Act.
Taking into account the contractual restrictions described in "Underwriting"
and the provisions of Rules 144 and 701, additional shares will be available
for sale in the public market as follows:

. none of the restricted shares will be eligible for immediate sale on
the date of the prospectus; and

. the restricted shares will be eligible for sale upon expiration of
lock-up agreements 180 days after the date of this prospectus
subject to Rule 144 holding periods and manner of sale restrictions.

Rule 144

In general, under Rule 144 as currently in effect, beginning 90 days
after this offering, a person, or persons whose shares are aggregated, who owns
shares that were purchased from us, or any affiliate, at least one year
previously, is entitled to sell within any three-month period a number of
shares that does not exceed the greater of 1% of our then-outstanding shares of
common stock, which will be approximately shares immediately after this
offering, or the average weekly trading volume of our common stock on the
Nasdaq National Market during the four calendar weeks preceding the filing of a
notice of the sale on Form 144. Sales under Rule 144 are also subject to manner
of sale, provisions, notice requirements and the availability of current public
information about us. Any person, or persons whose shares are aggregated, who
is not deemed to have been one of our affiliates at any time during the three
months preceding a sale, and who owns shares that are "restricted securities"
under Rule 144 that were purchased from us, or any affiliate, at least two
years previously, would be entitled to sell the shares under Rule 144 (k)
without regard to the volume limitations, manner of sale provisions, public
information requirements or notice requirements.

Rule 701

Our employees, directors, officers, consultants or advisers who purchased
common stock from us prior to the date we become subject to the reporting
requirements of the Securities Exchange Act of 1934, or the Exchange Act, under
written compensatory benefit plans or written contracts relating to the
compensation of these persons may rely on Rule 701 with respect to the resale
of that stock. Rule 701 also will apply to stock options we granted before we
became subject to the reporting requirements of the Exchange Act, along with
the shares acquired upon exercise of the options, including exercises after the
date of this prospectus. Shares of common stock we issued in reliance on Rule
701 are restricted securities and, subject to the contractual restrictions
described above, beginning 90 days after the date of this prospectus, persons
other than affiliates may sell those shares subject only to the manner of sale
provisions of Rule 144. Persons who are affiliates under Rule 144 may sell
those shares without compliance with its minimum holding period requirements.

UNDERWRITING

We intend to offer the shares of common stock through a number of
underwriters. Merrill Lynch, Pierce, Fenner & Smith Incorporated, Banc of
America Securities LLC and Dain Rauscher Incorporated are acting as
representatives of the underwriters named below. Subject to the terms and
conditions described in a purchase agreement among us, the selling stockholders
and the underwriters, we and the selling stockholders have agreed to sell to
the underwriters, and the underwriters severally have agreed to purchase from
us and the selling stockholders, the number of shares of common stock listed
opposite their names below.

Underwriter Number of Shares
----------- ----------------

Merrill Lynch, Pierce, Fenner & Smith
Incorporated.........................................
Banc of America Securities LLC............................
Dain Rauscher Incorporated................................
Total................................................

The underwriters have agreed to purchase all of the shares of common
stock sold under the purchase agreement if any of these shares of common stock
are purchased. If an underwriter defaults, the purchase agreement provides that
the purchase commitments of the non-defaulting underwriters may be increased or
the purchase agreement may be terminated.

We and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act, or
to contribute to payments the underwriters may be required to make in respect
of those liabilities.

The underwriters are offering the shares of common stock, subject to
prior sale, when, as and if issued to and accepted by them, subject to approval
of legal matters by their counsel, including the validity of the shares of
common stock, and other conditions contained in the purchase agreement, such as
the receipt by the underwriters of officer's certificates and legal opinions.
The underwriters reserve the right to withdraw, cancel or modify offers to the
public and to reject orders in whole or in part.

Commissions and Discounts

The representatives have advised us and the selling stockholders that the
underwriters propose initially to offer the shares of common stock to the
public at the initial public offering price on the cover page of this
prospectus and to dealers at that price less a concession not in excess of $
per share. The underwriters may allow, and the dealers may re-allow, a discount
not in excess of $ per share to other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.

The following table shows the public offering price, underwriting
discount and proceeds before expenses to MainControl and the selling
stockholders. The information assumes either no exercise or full exercise by
the underwriters of their over-allotment option.

Per Share Without Option With Option
--------- -------------- -----------

Public offering price............... $ $ $
Underwriting discount............... $ $ $
Proceeds, before expenses, to
MainControl........................ $ $ $
Proceeds, before expenses, to the
selling stockholders............... $ $ $

The expenses of the offering, not including the underwriting discount,
are estimated at $ and are payable by MainControl. The selling stockholders
will pay their out-of-pocket expenses incurred in connection with the offering.

Over-allotment Option

We and the selling stockholders have granted an option to the
underwriters to purchase up to additional shares of common stock at the public
offering price less the underwriting discount. The underwriters may exercise
this option for 30 days from the date of this prospectus solely to cover any
over-allotments. If the underwriters exercise this option, each will be
obligated, subject to conditions contained in the purchase agreements, to
purchase a number of additional shares of common stock proportionate to that
underwriter's initial amount reflected in the above table.

Reserved Shares

At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares of common stock offered by this
prospectus for the sale to some of our directors, officers, employees,
distributors, dealers, business associates and related persons. If these
persons purchase reserved shares of common stock, this will reduce the number
of shares of common stock available for sale to the general public. Any
reserved shares of common stock that are not orally confirmed for purchase
within one day of the pricing of this offering will be offered by the
underwriters to the general public on the same terms as the other shares of
common stock offered by this prospectus.

No Sales of Similar Securities

We, our executive officers and directors, the selling stockholders and
certain other existing stockholders have agreed, with certain exceptions, not
to sell or transfer any common stock for 180 days after the date of this
prospectus without first obtaining the written consent of Merrill Lynch.
Specifically, we and these other individuals have agreed not to directly or
indirectly:

. offer, pledge, sell or contract to sell any common stock,

. sell any option or contract to purchase any common stock,

. purchase any option or contract to sell any common stock,

. grant any option, right or warrant for the sale of any common stock,

. lend or otherwise dispose of or transfer any common stock,

. request or demand that we file a registration statement related to
the common stock, or

. enter into any swap or other agreement that transfers, in whole or in
part, the economic consequence of ownership of any common stock
whether any such swap or transaction is to be settled by delivery of
shares of common stock or other securities, in cash or otherwise.

This lockup provision applies to common stock and to securities
convertible into or exchangeable or exercisable for or repayable with common
stock. It also applies to common stock owned now or acquired later by the
person executing the agreement or for which the person executing the agreement
later acquires to power of disposition.

Quotation on the Nasdaq National Market

We expect the shares of common stock to be approved for quotation on the
Nasdaq National Market, subject to notice of issuance, under the symbol "MNCL."

Before this offering, there has been no public market for our common
stock. The initial public offering price will be determined through
negotiations among us, the selling stockholders and the representatives. In
addition to prevailing market conditions, the factors to be considered in
determining the initial public offering price are:

. the valuation multiples of publicly traded companies that the
representatives believe to be comparable to us;

. our financial information;

. the history of, and the prospects for, our company and the industry
in which we compete;

. an assessment of our management, its past and present operations, and
the prospects for, and timing of, our future revenue;

. the present state of our development; and

. the above factors in relation to market values and various valuation
measures of other companies engaged in activities similar to ours.

An active trading market for the shares may not develop. It is also
possible that after the offering the shares will not trade in the public market
at or above the initial public offering price.

The underwriters do not expect to sell more than 5% of the shares of
common stock in the aggregate to accounts over which they exercise
discretionary authority.

Price Stabilization, Short Positions and Penalty Bids

Until the distribution of the shares of common stock is completed, SEC
rules may limit underwriters and selling group members from bidding for and
purchasing our common stock. However, the representatives may engage in
transactions that stabilize the price of the common stock, such as bids or
purchases to peg, fix or maintain that price.

If the underwriters create a short position in the common stock in
connection with the offering, i.e., if they sell more shares of common stock
than are listed on the cover of this prospectus, the representatives may reduce
that short position by purchasing shares of common stock in the open market.
The representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option described above. Purchases of the
common stock to stabilize its price or to reduce a short position may cause the
price of the common stock to be higher than it might be in the absence of such
purchases.

The representatives may also impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares
of common stock in the open market to reduce the underwriter's short position
or to stabilize the price of such shares of common stock, they may reclaim the
amount of the selling concession from the underwriters and selling group
members who sold those shares of common stock. The imposition of a penalty bid
may also affect the price of the shares of common stock in that it discourages
resales of those shares of common stock.

Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the common stock. In addition, neither
we nor any of the underwriters makes any representation that the
representatives will engage in these transactions or that these transactions,
once commenced, will not be discontinued without notice.

LEGAL MATTERS

The validity of the shares of common stock offered hereby will be passed
upon for us by Shearman & Sterling, Washington, D.C. Certain legal matters
relating to the offering will be passed upon for the underwriters by Willkie
Farr & Gallagher, New York, New York.

EXPERTS

The consolidated financial statements of MainControl, Inc. as of
September 30, 1998 and 1999, and for the years ended September 30, 1997, 1998
and 1999, included in this prospectus have been so included in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 with respect to the common stock offered by this
prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the
registration statement or the exhibits and schedules which are part of the
registration statement. For further information with respect to us and our
common stock, see the registration statement and the exhibits and schedules
thereto. Any document we file may be read and copied at the Commission's public
reference room at 450 Fifth Street, N.W., in Washington, D.C. 20549. Please
call the Commission at 1-800-SEC-0330 for further information about the public
reference room. Our filings with the Commission are available to the public
from the Commission's Web site at http://www.sec.gov.

Upon completion of this offering, we will become subject to the
information and periodic reporting requirements of the Securities Exchange Act
and, accordingly, will file annual reports containing consolidated financial
statements audited by an independent public accounting firm, quarterly reports
containing unaudited consolidated financial data, current reports, proxy
statements and other information with the Commission. You will be able to
inspect and copy such periodic reports, proxy statements and other information
at the Commission's public reference room, and the Web site of the Commission
referred to above.

MAINCONTROL, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page
----

Report of Independent Accountants........................................ F-2

Consolidated Balance Sheets as of September 30, 1998 and 1999 and March
31, 2000 (unaudited).................................................... F-3

Consolidated Statements of Operations for the years ended September 30,
1997, 1998 and 1999 and the six months ended March 31, 1999 (unaudited)
and 2000 (unaudited).................................................... F-4

Consolidated Statements of Changes in Stockholders' (Deficit) Equity for
the years ended September 30, 1997, 1998 and 1999 and the six months
ended March 31, 2000 (unaudited)........................................ F-5

Consolidated Statements of Cash Flows for the years ended September 30,
1997, 1998 and 1999 and the six months ended March 31, 1999 (unaudited)
and 2000 (unaudited).................................................... F-6

Notes to Consolidated Financial Statements............................... F-7

F-1

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of MainControl, Inc.

In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of changes in stockholders'
(deficit) equity and of cash flows present fairly, in all material respects,
the financial position of MainControl, Inc. and its subsidiaries at September
30, 1998 and 1999, and the results of their operations and their cash flows for
each of the three years in the period ended September 30, 1999 in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.

PricewaterhouseCoopers LLP

McLean, Virginia
January 31, 2000

F-2

MAINCONTROL, INC.

CONSOLIDATED BALANCE SHEETS

September 30, Pro Forma at
-------------------------- March 31, March 31,
1998 1999 2000 2000
------------ ------------ ------------ ------------
(unaudited)

ASSETS
Current assets:
Cash and cash
equivalents........... $ 1,769,082 $ 6,424,786 $ 16,881,345
Accounts receivable,
net of allowance for
doubtful accounts of
$0, $0 and $50,000.... 3,605,897 6,425,167 7,855,290
Other current assets... 978,905 749,119 1,220,209
------------ ------------ ------------
Total current
assets.............. 6,353,884 13,599,072 25,956,844
Fixed assets, net...... 953,875 1,475,684 2,197,523
Investment in joint
venture............... -- 1,660,416 963,005
Other non-current
assets................ 412,838 309,979 13,722
------------ ------------ ------------
Total assets......... $ 7,720,597 $ 17,045,151 $ 29,131,094
============ ============ ============
LIABILITIES, MANDATORILY REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable....... $ 807,570 $ 978,913 $ 1,014,992
Accrued payroll........ 1,022,826 2,171,197 1,800,308
Accrued expenses....... 474,248 1,068,485 874,750
Accrued royalties...... 175,272 399,374 475,657
Deferred revenue....... 1,277,467 916,050 2,002,871
Current portion of
long-term debt........ -- 433,931 807,949
Other current
liabilities........... 99,725 206,037 156,534
------------ ------------ ------------
Total current
liabilities......... 3,857,108 6,173,987 7,133,061
Non-current portion of
long-term debt........ -- 799,377 1,178,851
Other non-current
liabilities........... 179,634 43,643 5,866
------------ ------------ ------------
Total liabilities.... 4,036,742 7,017,007 8,317,778
Commitments and
contingencies (Note
13).................... -- -- --
------------ ------------ ------------
Mandatorily redeemable
preferred stock:
Convertible preferred
stock, $0.001 par
value; 8,988,171,
12,677,236 and
16,182,717 (unaudited)
shares authorized,
issued and
outstanding, actual;
none authorized,
issued and
outstanding, pro
forma................. 19,814,326 37,439,026 62,265,709 $ --
------------ ------------ ------------ ------------
Stockholders' (deficit)
equity:
Common stock, $0.001
par value; 30,000,000
shares authorized;
7,558,218, 7,957,029
and 7,955,565
(unaudited) shares
issued and
outstanding, actual;
23,505,863 shares
issued and
outstanding, pro
forma................. 7,558 7,957 7,956 23,506
Additional paid-in
capital............... -- -- -- 62,250,159
Deferred stock-based
compensation.......... (1,234,316) (1,351,728) (1,285,708) (1,285,708)
Accumulated deficit.... (14,913,804) (26,031,300) (40,102,379) (40,102,379)
Accumulated other
comprehensive income
(loss)................ 10,091 (35,811) (72,262) (72,262)
------------ ------------ ------------ ------------
Total stockholders'
(deficit) equity.... (16,130,471) (27,410,882) (41,452,393) $ 20,813,316
------------ ------------ ------------ ============
Total liabilities,
mandatorily
redeemable preferred
stock and
stockholders'
(deficit) equity.... $ 7,720,597 $ 17,045,151 $ 29,131,094
============ ============ ============

The accompanying notes are an integral part of these consolidated financial
statements.

F-3

MAINCONTROL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Six Months Ended
Year Ended September 30, March 31,
--------------------------------------- -------------------------
1997 1998 1999 1999 2000
----------- ------------ ------------ ----------- ------------
(unaudited)

Revenue:
License................ $ 2,217,776 $ 5,464,894 $ 8,715,024 $ 3,004,270 $ 5,972,312
Maintenance............ 184,206 647,461 1,461,127 615,562 838,747
Professional
services.............. 283,427 2,417,147 4,217,955 1,724,462 2,413,583
Joint venture
development fees ..... -- -- 1,109,170 243,000 923,330
----------- ------------ ------------ ----------- ------------
Total revenue........ 2,685,409 8,529,502 15,503,276 5,587,294 10,147,972
----------- ------------ ------------ ----------- ------------
Cost of revenue:
License, exclusive of
non-cash stock-based
compensation of $0,
$0, $17,324, $8,608
(unaudited), and
$3,863 (unaudited).... 1,013,499 1,752,434 2,443,772 1,132,742 1,256,991
Maintenance, exclusive
of non-cash stock-
based compensation of
$0, $951, $2,361,
$1,173 (unaudited)
and $1,773
(unaudited)........... 334,414 667,784 1,104,080 492,033 555,535
Professional services,
exclusive of non-cash
stock-based
compensation of $0,
$632, $7,779, $3,866
(unaudited) and
$6,782 (unaudited).... 164,051 1,683,410 1,958,237 808,381 991,659
----------- ------------ ------------ ----------- ------------
Total cost of
revenue............. 1,511,964 4,103,628 5,506,089 2,433,156 2,804,185
----------- ------------ ------------ ----------- ------------
Gross profit............ 1,173,445 4,425,874 9,997,187 3,154,138 7,343,787
----------- ------------ ------------ ----------- ------------
Operating expenses:
Research and
development,
exclusive of non-cash
stock-based
compensation of
$81,754, $34,501,
$177,540, $88,226
(unaudited) and
$69,895 (unaudited)... 2,503,290 3,586,088 6,025,657 2,826,501 4,829,397
Sales and marketing,
exclusive of non-cash
stock-based
compensation of
$120,996, $53,787,
$142,630, $70,878
(unaudited) and
$107,326
(unaudited)........... 2,139,350 6,085,351 9,023,321 3,936,444 6,964,496
General and
administrative,
exclusive of non-cash
stock-based
compensation of
$13,081, $30,129,
$94,825, $47,122
(unaudited) and
$45,342 (unaudited)... 1,331,251 1,630,551 4,173,958 1,155,728 1,854,523
Non-cash stock-based
compensation.......... 215,831 120,000 442,459 219,873 234,981
----------- ------------ ------------ ----------- ------------
Total operating
expenses............ 6,189,722 11,421,990 19,665,395 8,138,546 13,883,397
----------- ------------ ------------ ----------- ------------
Operating loss.......... (5,016,277) (6,996,116) (9,668,208) (4,984,408) (6,539,610)
Interest Income........ 144,704 296,821 263,288 112,713 204,925
Interest Expense....... -- -- (15,486) -- (85,182)
----------- ------------ ------------ ----------- ------------
Loss before income taxes
and equity in loss of
joint venture.......... (4,871,573) (6,699,295) (9,420,406) (4,871,695) (6,419,867)
Provision for income
taxes................. -- -- -- -- --
Equity in loss of
joint venture......... -- -- (1,053,455) (379,043) (697,411)
----------- ------------ ------------ ----------- ------------
Net loss................ (4,871,573) (6,699,295) (10,473,861) (5,250,738) (7,117,278)
Accretion of
redeemable preferred
stock................. (278,519) (3,351,462) (3,682,750) (1,706,403) (7,135,414)
----------- ------------ ------------ ----------- ------------
Net loss available for
common stockholders.... $(5,150,092) $(10,050,757) $(14,156,611) $(6,957,141) $(14,252,692)
=========== ============ ============ =========== ============
Basic and diluted net
loss per common share.. $ (0.86) $ (1.49) $ (1.89) $ (0.96) $ (1.79)
=========== ============ ============ =========== ============
Weighted average number
of common shares used
in computing basic and
diluted net loss per
common share........... 5,979,535 6,743,791 7,505,515 7,235,627 7,958,892
=========== ============ ============ =========== ============

The accompanying notes are an integral part of these consolidated financial
statements.

F-4

MAINCONTROL, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY

Accumulated Total
Common Stock Additional Deferred Other Stockholders'
----------------- Paid-In Stock-Based Accumulated Comprehensive (Deficit)
Shares Amount Capital Compensation Deficit Income (Loss) Equity
--------- ------ ----------- ------------ ------------- ------------- -------------

Balance, September 30,
1996................... 5,800,000 $5,800 $ 1,245,265 $ -- $ (3,199,680) $ 7,616 $ (1,940,999)
Exercise of stock
options............... 942,281 942 93,286 -- -- -- 94,228
Deferred compensation
related to stock
option grants......... -- -- 432,477 (432,477) -- -- --
Non-cash stock-based
compensation.......... -- -- -- 215,831 -- -- 215,831
Accretion of redeemable
preferred stock....... -- -- (278,519) -- -- -- (278,519)
Comprehensive loss:
Net loss............... -- -- -- -- (4,871,573) --
Foreign currency
translation........... -- -- -- -- -- (7,722)
Total comprehensive
loss.................. (4,879,295)
--------- ------ ----------- ----------- ------------- -------- ------------
Balance, September 30,
1997................... 6,742,281 6,742 1,492,509 (216,646) (8,071,253) (106) (6,788,754)
Issuance of common
stock................. 750,000 750 464,250 -- -- -- 465,000
Exercise of stock
options............... 207,604 208 127,802 -- -- -- 128,010
Purchase of common
stock subject to
repurchase rights..... (141,667) (142) (14,025) -- -- -- (14,167)
Deferred compensation
related to stock
option grants......... -- -- 1,137,670 (1,137,670) -- -- --
Non-cash stock-based
compensation.......... -- -- -- 120,000 -- -- 120,000
Accretion of redeemable
preferred stock....... -- -- (3,208,206) -- (143,256) -- (3,351,462)
Comprehensive (loss)
income:
Net loss............... -- -- -- -- (6,699,295) --
Foreign currency
translation........... -- -- -- -- -- 10,197
Total comprehensive
loss.................. (6,689,098)
--------- ------ ----------- ----------- ------------- -------- ------------
Balance, September 30,
1998................... 7,558,218 7,558 -- (1,234,316) (14,913,804) 10,091 (16,130,471)
Issuance of common
stock on joint venture
formation............. 50,000 50 2,110,950 -- -- -- 2,111,000
Exercise of stock
options............... 364,561 365 370,893 -- -- -- 371,258
Purchase of common
stock subject to
repurchase rights..... (15,750) (16) (2,599) -- -- -- (2,615)
Deferred compensation
related to stock
option grants......... -- -- 559,871 (559,871) -- -- --
Non-cash stock-based
compensation.......... -- -- -- 442,459 -- -- 442,459
Accretion of redeemable
preferred stock....... -- -- (3,039,115) -- (643,635) -- (3,682,750)
Comprehensive loss:
Net loss............... -- -- -- -- (10,473,861) --
Foreign currency
translation........... -- -- -- -- -- (45,902)
Total comprehensive
loss.................. (10,519,763)
--------- ------ ----------- ----------- ------------- -------- ------------
Balance, September 30,
1999................... 7,957,029 7,957 -- (1,351,728) (26,031,300) (35,811) (27,410,882)
Exercise of stock
options (unaudited)... 49,786 50 -- -- 22,926 -- 22,976
Purchase of common
stock subject to
repurchase rights..... (51,250) (51) -- -- (10,274) -- (10,325)
Deferred compensation
related to stock
option grants
(unaudited)........... -- -- 168,961 (168,961) -- -- --
Non-cash stock-based
compensation
(unaudited)........... -- -- -- 234,981 -- -- 234,981
Accretion of redeemable
preferred stock
(unaudited)........... -- -- (168,961) -- (6,966,453) -- (7,135,414)
Comprehensive loss:
Net loss (unaudited)... -- -- -- -- (7,117,278) --
Foreign currency
translation
(unaudited)........... -- -- -- -- -- (36,451)
Total comprehensive
loss (unaudited)...... (7,153,729)
--------- ------ ----------- ----------- ------------- -------- ------------
Balance, March 31, 2000
(unaudited)............ 7,955,565 $7,956 $ -- $(1,285,708) $(40,102,379) $(72,262) $(41,452,393)
========= ====== =========== =========== ============= ======== ============

The accompanying notes are an integral part of these consolidated financial
statements.

F-5

MAINCONTROL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six months ended
Year Ended September 30, March 31,
-------------------------------------- ------------------------
1997 1998 1999 1999 2000
----------- ----------- ------------ ----------- -----------
(unaudited)

Cash flows from
operating activities:
Net loss.............. $(4,871,573) $(6,699,295) $(10,473,861) $(5,250,738) $(7,117,278)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation.......... 190,847 377,386 586,204 221,739 344,077
Bad Debt.............. -- -- -- -- 50,000
Non-cash stock-based
compensation......... 215,831 120,000 442,459 219,873 234,981
Equity in loss of
joint venture........ -- -- 1,053,455 379,043 697,411
Loss on sale of fixed
assets............... -- 1,751 18,180 -- --
Changes in assets and
liabilities:
Accounts receivable.. (534,828) (2,969,392) (2,818,841) 499,123 (1,483,343)
Other current
assets.............. (112,797) (431,961) 224,864 102,512 (472,478)
Other non-current
assets.............. (2,564) (350,149) 96,003 1,863 296,257
Accounts payable..... (9,780) 586,322 175,445 (415,134) 37,213
Accrued payroll...... 301,689 523,287 1,165,385 344,145 (368,932)
Accrued expenses..... 123,630 53,563 596,232 (36,537) (193,906)
Accrued royalties.... 205,097 (24,879) 239,522 (30,934) 66,998
Deferred revenue..... 433,061 543,466 (361,417) (219,491) 1,086,821
Other current
liabilities......... 8,671 78,760 108,696 46,316 (50,046)
Other non-current
liabilities......... 23,699 69,384 (121,962) (9,213) (39,357)
----------- ----------- ------------ ----------- -----------
Net cash used in
operating
activities......... (4,029,017) (8,121,757) (9,069,636) (4,147,433) (6,911,582)
----------- ----------- ------------ ----------- -----------
Cash flows from
investing activities:
Purchases of fixed
assets............... (445,596) (574,941) (1,181,712) (407,179) (1,068,017)
Investment in joint
venture.............. -- -- (602,871) (602,871) --
Proceeds from sale of
fixed assets......... -- 2,754 33,354 -- --
Restricted cash....... -- 182,000 -- -- --
----------- ----------- ------------ ----------- -----------
Net cash used in
investing
activities......... (445,596) (390,187) (1,751,229) (1,010,050) (1,068,017)
----------- ----------- ------------ ----------- -----------
Cash flows from
financing activities:
Proceeds from long-
term debt............ -- -- 1,250,429 -- 989,553
Repayment of long-term
debt................. -- -- (17,121) -- (236,061)
Net proceeds from sale
of common stock and
exercise of stock
options.............. 94,228 593,010 371,258 3,199 22,976
Purchase of stock
subject to repurchase
rights............... -- (14,167) (2,615) (854) (10,325)
Net proceeds from sale
of Series B preferred
stock................ 7,717,219 2,229,659 -- -- --
Net proceeds from sale
of Series C preferred
stock................ -- -- 13,941,950 9,654,826 --
Net proceeds from sale
of Series D preferred
stock................ -- -- -- -- 17,691,269
----------- ----------- ------------ ----------- -----------
Net cash provided by
financing
activities......... 7,811,447 2,808,502 15,543,901 9,657,171 18,457,412
----------- ----------- ------------ ----------- -----------
Effect of exchange rate
changes on cash....... 2,352 (12,153) (67,332) (30,179) (21,254)
----------- ----------- ------------ ----------- -----------
Net increase (decrease)
in cash and cash
equivalents........... 3,339,186 (5,715,595) 4,655,704 4,469,509 10,456,559
Cash and cash
equivalents, beginning
of period............. 4,145,491 7,484,677 1,769,082 1,769,082 6,424,786
----------- ----------- ------------ ----------- -----------
Cash and cash
equivalents, end of
period................ $ 7,484,677 $ 1,769,082 $ 6,424,786 $ 6,238,591 $16,881,345
=========== =========== ============ =========== ===========
Supplemental disclosure
of non-cash investing
and financing
activities:
Investment in joint
venture (Note 4)..... $ -- $ -- $ 2,111,000 $ 2,111,000 $ --
=========== =========== ============ =========== ===========
Accretion of
redeemable preferred
stock (Note 6)....... $ 278,519 $ 3,351,462 $ 3,682,750 $(1,706,403) $ 7,135,414
=========== =========== ============ =========== ===========

The accompanying notes are an integral part of these consolidated financial
statements.

F-6

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The Company

MainControl, Inc. (the Company or MainControl), a Delaware corporation,
provides e-infrastructure management software and services that enable
organizations to manage their e-infrastructure. E-infrastructure includes
traditional technology assets of an organization, such as desktop and laptop
computers, servers, software, network equipment, telecommunications equipment
and mobile devices, as well as technology assets such as web servers, Internet
security software and e-commerce software.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements, which were prepared using
generally accepted accounting principles in the United States (U.S. GAAP),
include the accounts of the Company and its wholly-owned subsidiaries and are
presented in U.S. dollars. Intercompany accounts and transactions have been
eliminated. The Company accounts for its joint venture investment under the
equity method of accounting (Note 4).

MainControl Ltd. (MCL), a wholly-owned subsidiary organized under the
laws of Israel, performs certain of the Company's research and development
activities (Note 13).

MainControl Ltd. (MCUK), a wholly-owned subsidiary organized under the
laws of the United Kingdom, sells the Company's software in the United Kingdom
and manages the Company's European and Middle East distribution channels.

MainControl GmbH (MCDE), a wholly-owned German subsidiary organized under
the laws of Germany, was formed in June 1999 and is not yet operational.

Revenue Recognition

The Company recognizes revenue in accordance with the provisions of
Statement of Position (SoP) No. 97-2, "Software Revenue Recognition," as
amended by SoP 98-4, "Deferral of the Effective Date of a Provision of SoP 97-
2," and SoP 98-9, "Modification of SoP 97-2, with Respect to Certain
Transactions." The Company generates revenue from licenses and sublicenses,
software development, maintenance and post contract customer support and
professional services. Revenue from licenses is recognized upon delivery,
provided that the fee is fixed and determinable, an arrangement exists, no
significant obligations remain and collection of the resulting receivable is
probable. Sublicense fees from software sales through distributors, resellers
and original equipment manufacturers are recorded as revenue when the related
software is delivered to the end-user. Revenue from non-refundable guaranteed
minimum license payments for which a product master has been delivered is
recognized in the earliest of the period received or the period in which the
contracted minimum number of licenses are delivered to end-users.
Notwithstanding the foregoing, if acceptance is uncertain, revenue recognition
is deferred until customer acceptance is achieved, which generally occurs upon
product delivery.

Revenue from the Company's development contract with its joint venture,
ValueSolution, is recognized as work is performed under a time and materials
arrangement whereby development fees are billed based on pre-established rates
subject to a maximum total fee based on certain percentages of the joint
venture's annual

F-7

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

sales (see Note 4). Revenue from all other software development contracts
involving significant production, modification or customization of software is
recognized using the percentage-of-completion method, based on the relationship
of costs incurred to the total estimated costs of the project.

Maintenance and post contract customer support revenue is recognized
ratably over the term of the support period. Professional services revenue,
which consists primarily of training and consulting, is recognized as work is
performed. For contracts with multiple elements, including licenses,
maintenance and post contract customer support and services, the fair value of
maintenance and post contract customer support, based on contractual renewal
rates, is recorded as deferred revenue and is recognized ratably over the term
of the respective agreement. The fair value of services, based on our standard
hourly billing rates when services are sold separately, is deferred and
recognized over the period that the services are performed. The Company does
not provide for specific upgrades on new software products.

Under distribution agreements between the Company and its distributors,
MainControl is generally entitled to royalties calculated as 50% of the sales
price of license and maintenance revenues to end-users. In instances where the
Company provides substantial sales and customer support to a distributor, the
related revenue is presented on a gross basis in the Company's statement of
operations, with the proceeds from the sale retained by the distributor
presented as a distributor commission in the Company's cost of revenue. The
amount of distributor commissions related to license and maintenance, which is
included in cost of revenue for fiscal years 1997, 1998 and 1999 was
approximately $873,000, $1,420,000 and $1,369,000, respectively.

Deferred revenue relates primarily to maintenance, professional services
and licenses and is recorded when customer payments are received in advance of
the performance of the related maintenance or service or in advance of delivery
of the license. This revenue is recognized as the services are performed,
generally within one year, or upon delivery of the license.

Software Development Costs

The Company has charged all costs for the development and enhancement of
its software products to research and development expense as incurred.
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs
of Computer Software to be Sold, Leased or Otherwise Marketed", requires
capitalization of certain software development costs incurred subsequent to
technological feasibility and prior to general release of the software. Based
upon the Company's development process, technological feasibility is
established upon completion of a working model. The period between
technological feasibility and general release is relatively short and the costs
incurred during this period have been insignificant for capitalization.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP
requires the Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results may differ
from the recorded estimates.

Cash Equivalents

The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents. Cash
equivalents consist primarily of money market accounts with commercial banks.

F-8

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to a
concentration of credit risk consist principally of temporary cash investments
and accounts receivable. The Company restricts placement of investments to
financial institutions evaluated as highly creditworthy. Substantially all of
the Company's receivables are from well-established companies. The Company
considers its accounts receivable to be fully collectible. During fiscal years
1997, 1998 and 1999 the Company recorded no bad debt expense, and during the
six months ended March 31, 2000, the Company recorded $50,000 (unaudited) in
bad debt expense. There were no write-offs of accounts receivable during these
same periods.

Revenues and receivables were concentrated with the following customers
(amounts represent percentage of total revenue and accounts receivable,
respectively):

Revenue
-------------------------------
Six Months
Year Ended Ended
September 30, March 31,
---------------- -------------
1997 1998 1999 1999 2000
---- ---- ---- ----- -----
(unaudited)

Customer A................................. 47% 18% * * *
Customer B................................. 23 * * * *
Customer C................................. 22 * * * *
Customer D................................. * 33 15% 10% *
Customer E................................. * 12 13 24 *
Customer F................................. * 11 * * *
Customer G................................. * * 12 * *
Customer H................................. * * * * 20%
Customer I................................. * * * * 11

--------
*Represents less than 10% of total.

Accounts Receivable
---------------------------------
at September
30, at
---------------- March 31,
1997 1998 1999 2000
---- ---- ---- -----------
(unaudited)

Customer A.................................. 22% 21% * *
Customer B.................................. 48 * * *
Customer C.................................. 18 * * *
Customer D.................................. * 24 23% 17%
Customer E.................................. * 14 * *
Customer F.................................. * * * *
Customer G.................................. * * 32 11
Customer H.................................. * * * 27
Customer I.................................. * * * 15

--------
*Represents less than 10% of total.

F-9

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable
and accounts payable approximate their fair values due to the relatively short
maturity of those instruments. The carrying amount of long-term debt
approximates fair value because the interest rates on these instruments change
with market interest rates. The carrying amount of Series B and Series C
preferred stock outstanding approximates fair value. The estimated fair value
of Series A preferred stock outstanding at September 30, 1999 was $23.9 million
(Note 6).

Fixed Assets

Fixed assets are stated at historical cost, net of accumulated
depreciation and amortization. Depreciation and amortization are computed using
the straight-line method over estimated useful lives of three to five years for
computers and equipment, five to seven years for furniture and equipment, the
shorter of five years or the term of the underlying lease for leasehold
improvements and seven years for automobiles.

The Company periodically reviews fixed assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recovered. No such impairment has been identified to date.

Translation of Foreign Currencies

The functional currencies of the Company's foreign subsidiaries are the
local currencies. Accordingly, all assets and liabilities are translated into
U.S. dollars, the reporting currency, at current exchange rates as of the
respective balance sheet date. Revenues and expenses are translated at the
average rates prevailing during the reporting period. Cumulative translation
gains and losses are reported as a separate component of accumulated other
comprehensive income (loss) in stockholders' equity (deficit).

Receivables Denominated in Foreign Currencies

At September 30, 1998 and 1999, the Company had approximately $1,216,000
and $306,000, respectively, of receivables denominated in foreign currencies.
The net gain or loss on foreign currency remeasurement and exchange rate
changes for fiscal years 1997, 1998 and 1999 was approximately $142,000, $6,000
and $90,000, respectively.

Mandatorily Redeemable Preferred Stock

The Company carries its mandatorily redeemable preferred stock at
original issue price with periodic adjustments to accrete the carrying value to
its redemption value by the earliest possible date of stockholder initiated
redemption (Note 6).

Earnings per Share

Basic earnings per share is calculated using the weighted average number
of common shares outstanding during the period. Diluted earnings per share is
computed using the weighted average number of common and potential common
shares outstanding during the period, except if anti-dilutive. Potential common
shares used in the diluted earnings per share calculation consist of (i) the
incremental common shares issuable upon conversion of the mandatorily
redeemable preferred stock (using the if-converted method) and (ii) shares
issuable upon the exercise of stock options and warrants (using the treasury
stock method).

Non-Cash Stock-Based Compensation

The Company accounts for non-cash stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25
(APB 25), "Accounting for Stock Issued to

F-10

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Employees", and related interpretations. Under APB 25, compensation cost is
measured as the excess, if any, of the market price of the Company's common
stock at the date of grant over the exercise price of the option granted.
Compensation cost for stock options, if any, is recognized over the vesting
period. The Company provides additional pro forma disclosures as required
under Statement of Financial Accounting Standards No. 123 (SFAS 123),
"Accounting for Stock-Based Compensation" (Note 7).

Income Taxes

The Company provides for income taxes using an asset and liability
approach. The asset and liability approach requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences
of temporary differences between the carrying amounts and the tax bases of the
assets and liabilities. A valuation allowance is recorded if, based on the
evidence available, it is more likely than not that some portion or all of the
deferred tax asset will not be realized.

Comprehensive Income

In 1999, the Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income", which establishes standards for
reporting and disclosure of comprehensive income and its components (revenues,
expenses, gains and losses). In accordance with the requirements of this
statement, financial statements of earlier periods have been reclassified for
comparative purposes.

Reclassifications

Certain prior period information has been reclassified to conform with
current period presentation.

New Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting
for Derivative Instruments and Hedging Activities." SFAS 133 establishes
accounting and reporting standards for derivative instruments, including
derivative instruments embedded in other contracts, and for hedging
activities. SFAS 133, as amended by SFAS 137, "Accounting for Derivative
Instruments and Hedging Activities--Deferral of the Effective Date of FASB
Statement No. 133, an Amendment of FASB Statement No. 133," is effective for
all fiscal quarters of the Company's fiscal year ending September 30, 2001.
The Company currently does not engage or plan to engage in the use of
derivative instruments. Regarding embedded derivatives, the Company does not
expect SFAS 133 to have a material impact.

The SEC issued Staff Accounting Bulletin 101 (SAB 101) in December 1999.
SAB 101 provides guidance on the recognition and disclosure of revenue in
financial statements. Provided the registrant's former policy was not an
improper application of Generally Accepted Accounting Principles (GAAP),
registrants may adopt a change in accounting principle to comply with the SAB
no later than the first quarter of the fiscal year beginning after December
15, 1999. The Company has assessed that its current revenue recognition
policies are in accordance with GAAP.

In March 2000, the Emerging Issues Task Force (EITF) issued Issue No.
00-3 (EITF 00-3), "Application of AICPA Statement of Position 97-2 to
Arrangements That Include the Right to Use Software Stored on Another Entity's
Hardware." EITF 00-3 provides that a software element covered by SoP 97-2 is
only present in a hosting arrangement if the customer has the contractual
right to take possession of the software at anytime during the hosting period
without significant penalty and it is feasible for the customer to either run
the software on its own hardware or contract with another party unrelated to
the vendor to host the software. The Company recently introduced its software
on a hosted, subscription basis. The Company has had no revenue from its
subscription service. The Company has evaluated EITF 00-3 and believes that
SoP 97-2 will not apply to its planned subscription service and expects
revenue from subscription services to be recognized ratably over the related
subscription period.

F-11

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Pro Forma Balance Sheet (Unaudited)

The accompanying unaudited pro forma balance sheet data at March 31, 2000
reflects (a) the issuance of 3,505,481 shares of Series D preferred stock at a
price of $5.0635 per share in January 2000 and (b) the conversion of the Series
A, Series B, Series C and Series D redeemable preferred stock into 15,550,298
shares of common stock upon closing of the Company's initial public offering,
assuming an offering price of at least $9.00 per share (Note 6). If the
offering price is less than $9.00 per share, an additional 632,419 shares of
common stock will be issued to the Series C stockholders.

3. Fixed Assets

Fixed assets consist of the following amounts at:

September 30,
----------------------
1998 1999
---------- ----------

Computer equipment................................ $ 917,162 $1,525,791
Office furniture and equipment.................... 408,038 643,199
Leasehold improvements............................ 41,964 45,834
Automobiles and other............................. 123,419 25,707
---------- ----------
1,490,583 2,240,531
Less: Accumulated depreciation and amortization... (536,708) (764,847)
---------- ----------
$ 953,875 $1,475,684
========== ==========

4. Joint Venture

In December 1998, the Company consummated the formation of a joint
venture, ValueSolution GmbH & Co. KG (ValueSolution), a limited partnership
organized under the laws of Germany, for the purpose of developing, enhancing
and marketing information technology asset management software. ValueSolution's
primary asset is software contributed by the joint venture partner, USU
Softwarehaus Unternehmensberatung AG ("USU"). The Company purchased from USU a
50% interest, with a two-vote majority in the joint venture, for approximately
$603,000. Additionally, in August 1998 the Company issued 750,000 shares of
common stock for $465,000 to USU. These shares were subject to repurchase until
ValueSolution was formed in December 1998 (Note 8). In addition, in April 1999
the Company issued 50,000 shares of common stock to a consultant in exchange
for services performed in connection with the establishment of the joint
venture.

The carrying amount of the joint venture investment was determined as the
total of the net cash consideration paid, plus an amount for the total shares
issued related to the investment at an estimated market price of the Company's
common stock as follows:

800,000 shares of common stock............................... $2,576,000
Less cash received for common stock.......................... (465,000)
----------
Total value of common stock contributed...................... 2,111,000
Cash payment................................................. 603,000
----------
Total consideration paid..................................... 2,714,000
50% interest in cash contributed by USU...................... (30,000)
----------
Difference between cost and net assets in joint venture on
date of acquistion.......................................... $2,684,000
==========

F-12

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The difference of approximately $2,684,000 between the carrying amount of
the joint venture investment and the Company's underlying equity in net assets
of the joint venture was assigned to software and is being amortized over the
estimated software life of approximately two years. Amortization of
approximately $1,150,000 and $767,000 (unaudited) of this difference is
included in equity in loss of the joint venture for fiscal year 1999 and for
the six months ended March 31, 2000, respectively.

Under the terms of the joint venture agreement, certain matters and key
decisions such as operating decisions and appointment and removal of managing
directors require the consent of all partners, thus eliminating the Company's
ability to exercise control over matters other than the development and
enhancement of the software contributed to the joint venture by USU. The
Company accounts for its interest in the joint venture in accordance with the
equity method of accounting.

The Company and USU maintain exclusive software distribution rights in
exchange for royalty payments to the joint venture equal to 30% of net software
sales and maintenance fees. Additionally, the Company provides software
development support to the joint venture in exchange for monthly software
development fee payments from the joint venture based on pre-established rates
under a time and materials arrangement. Software development expense in support
of the joint venture's software development is recorded as research and
development expense in the period incurred. Payments to the Company from the
joint venture for software development are limited to certain percentages of
the joint venture's annual sales, which are comprised solely of royalties.
However, the Company is not limited in performing software development
activities in support of the joint venture's software and may incur expenses in
excess of amounts paid by the joint venture. To the extent that future joint
venture annual sales are available, costs incurred in excess of amounts paid by
the joint venture because of contractual payment limitations will be paid in
subsequent periods. Additionally, as the Company maintains distribution rights
to the joint venture's software, the Company recovers research and development
expenses incurred in excess of amounts paid by the joint venture through
revenues generated by sales of the joint venture's software.

During fiscal year 1999 and the six months ended March 31, 2000, the
Company recognized approximately $1,109,000 and $923,000 (unaudited) in
software development revenue in connection with joint venture software
development activities. During fiscal year 1999 and the six months ended March
31, 2000, the Company incurred approximately $548,000 and $1,085,000 in
research and development expenses in excess of amounts paid by the joint
venture. Additionally, during fiscal 1999 and the six months ended March 31,
2000, the Company incurred approximately $778,000 and $836,000 (unaudited) in
royalty expense payable to the joint venture in connection with software sales.
(See Note 12).

5. Debt Financing

During April 1999, the Company entered into a debt agreement in the form
of a $2,000,000 revolving line of credit, a $1,000,000 equipment term loan and
a $565,000 note payable (collectively, the Debt Agreement). Debt obligations
are collateralized by the Company's assets. Borrowings under the revolving line
of credit are limited to a borrowing base equal to eighty percent of eligible
accounts receivable, as defined in the agreement. Under the terms of the
agreement, as amended, the Company is restricted from paying any dividends or
making any other distributions in relation to the Company's capital and the
Company is required to maintain a quick ratio of at least 1.5 to 1.0, tangible
net worth of at least $6,000,000, quarterly net loss levels exclusive of non-
cash charges not to exceed $3,200,000, $3,000,000, $2,800,000 and $250,000 for
the quarters ended and ending December 31, 1999, March 31, 2000, June 30, 2000,
and September 30, 2000, respectively, and quarterly net income exclusive of
non-cash charges not less that $1,000,000 thereafter. Interest on the
outstanding equipment term loan and note payable accrues at the bank's prime
rate plus 1% and is payable monthly. Interest on amounts outstanding under the
revolving line of credit accrues at the bank's prime rate plus .5% and is
payable monthly. At September 30, 1999, the bank's prime rate was 8.25%.

F-13

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Amounts outstanding under the Debt Agreement consist of the following at:

September 30,
------------------
1998 1999
------- ----------

Note payable--Principal due in equal monthly
installments through May 2002. Interest due
monthly............................................. $ -- $ 547,879
Equipment term loan--Principal due in equal monthly
installments through May 2002, beginning December
1999. Interest due monthly, beginning November
1999................................................ -- 685,429
------- ----------
-- 1,233,308
Less current portion................................. -- (433,931)
------- ----------
$ -- $ 799,377
======= ==========

During October 1999, the Company obtained a $296,000 irrevocable standby
letter of credit, which guarantees the Company's performance to its landlord
(Note 13). The letter of credit reduces the line of credit available to the
Company to $1,704,000 and expires in 2002.

During November 1999, the Company drew down the remaining $314,571
balance available under its $1,000,000 equipment term loan.

During December 1999, the Company amended the Debt Agreement to increase
the line of credit and equipment term loan facilities to $3,000,000 and
$2,500,000, respectively.

During November and December 1999, the Company's tangible net worth fell
below the $6,000,000 minimum covenant requirement. The Company obtained a
waiver of the tangible net worth covenant requirement for this period, and
additionally, in connection with the closing of the Company's Series D
preferred stock private equity placement in January 2000 (Note 6), the
shortfall was subsequently cured.

6. Mandatorily Redeemable Preferred Stock

In April 1996, the Company completed a private placement of 6,300,000
shares of Series A preferred stock at a price of $1.00 per share. Net proceeds
to the Company after issuance costs were approximately $6,237,000. In September
1997 and December 1997, the Company completed a private placement of 2,086,982
and 601,189 shares, respectively, of Series B preferred stock at a price of
$3.72 per share. Net proceeds to the Company after issuance costs were
approximately $7,717,000 and $2,230,000, respectively. During the period of
December 1998 through June 1999, the Company issued 3,689,065 shares of Series
C preferred stock at a price of $3.795 per share. Net proceeds to the Company
after issuance costs were approximately $13,942,000. In January 2000, the
Company completed a private placement of 3,505,481 shares of Series D preferred
stock at a price of $5.0635 per share. Net proceeds to the Company after
issuance costs were $17,691,000.

Upon liquidation, (i) holders of Series D preferred stock in preference
to holders of Series A, Series B and Series C preferred stock and holders of
common stock, (ii) holders of Series C preferred stock in preference to holders
of Series A and Series B preferred stock and holders of common stock, and (iii)
holders of Series A and Series B preferred stock in preference to holders of
common stock are entitled to receive an amount equal to the original issue
price paid per share, as adjusted for certain defined recapitalization events,
plus accrued dividends, if any.

Upon the affirmative vote of holders of 67% of the outstanding Series A
preferred stock, each outstanding share of Series A preferred stock is
mandatorily redeemable by the Company at the greater of the original issue
price paid per share plus accrued dividends or fair value plus accrued
dividends. At any time after January 1, 2002, up to 50% of the Series A
preferred stock are redeemable upon such vote; up to 100%

F-14

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

are redeemable at any time after January 1, 2004. In September 1997, the Series
A preferred stock redemption price was adjusted based upon the fair market
value of the Series B preferred stock of $3.72 per share and was later adjusted
in December 1998, to the fair market value of the Series C preferred stock of
$3.795 per share. During fiscal years ended 1998 and 1999, the Company recorded
accretion on preferred stock of approximately $3,351,000 and $3,683,000,
respectively.

Upon the affirmative vote of holders of 67% of the outstanding Series B,
Series C and Series D preferred stock, each outstanding share of Series B,
Series C and Series D preferred stock is mandatorily redeemable by the Company,
respectively, at the original issue price paid per share plus accrued
dividends. At any time after July 1, 2003, in the case of the Series B
preferred stock, October 1, 2004, in the case of Series C preferred stock, and
December 1, 2005, in the case of Series D preferred stock, up to 50% of the
Series B, Series C and Series D preferred stock are redeemable upon such vote.
Up to 100% of the shares are redeemable at any time after July 1, 2005, in the
case of Series B preferred stock, October 1, 2006, in the case of Series C
preferred stock, and December 1, 2007, in the case of Series D preferred stock.

Each outstanding share of Series A, Series B, Series C and Series D
preferred stock (collectively, "convertible preferred stock") is convertible
into common stock at the option of the holder thereof. All outstanding shares
of convertible preferred stock automatically convert into common stock upon the
earlier of (i) the Company's sale of its common stock in a qualified public
offering, subject to certain minimum amounts; or (ii) the majority vote of the
holders of convertible preferred stock voting together as a single class. Upon
conversion, each share of convertible preferred stock shall convert into one
share of common stock, subject to certain adjustments.

In the event the Company issues additional shares of common stock or
securities convertible into common stock, subject to certain exclusions, for
consideration less than the original issue price paid for the outstanding
convertible preferred stock, then the convertible preferred stock conversion
price shall be reduced in accordance with anti-dilution provisions. Further, in
the event prior to December 1, 2000 (i) the Company sells common stock which
becomes publicly traded, or (ii) the Company is acquired by another entity, or
(iii) substantially all assets of the Company are sold, and the price per share
received by holders of the common stock is at least $9 per share, the Series C
preferred stock conversion ratio changes such that each share of Series C
preferred stock converts into 0.8285691 shares of common stock.

Each holder of convertible preferred stock is entitled to vote on all
matters on an "as if converted" basis. Dividends, if declared by the Board of
Directors, are in preference to any dividends declared on common stock at the
rate of 8% of the original issue price paid per share per annum and are not
cumulative. No dividends have been declared through September 30, 1999 or
December 31, 1999.

Before taking certain actions, the Company must obtain the majority
approval of the holders of certain outstanding convertible preferred shares.
Depending upon the action, the convertible preferred stockholders may vote
separately for each series or together as a single class. Furthermore, such
approval for certain actions is not required if there is approval by at least
75% of the members of the Board of Directors. These actions include making
loans or advances to employees and guaranteeing the indebtedness of any other
party, other than in the ordinary course of business, the sale of all or
substantially all of the Company's property or business, mergers with any other
corporation, acquisitions of other businesses, issuance of senior equity
securities and the declaration and payment of dividends on common stock.

7. Stockholders' Equity

Common Stock

The Company has 30,000,000 shares of common stock, $0.001 par value,
authorized at September 30, 1999. The voting, dividend and liquidation rights
of commons stockholders are subject to, and qualified by, the

F-15

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

rights of preferred stockholders. Common stockholders are entitled to one vote
on all matters brought before the stockholders for each share of common stock
held. Common stockholders are entitled to receive dividends when, as and if,
declared by the Company, and subject to preferential dividend rights of
preferred stockholders. Upon liquidation, dissolution or winding up of the
Company, common stockholders will be entitled to receive all assets of the
Company available for distribution to stockholders, subject to preferential
rights of preferred stockholders.

Preferred Stock

The Company has 15,000,000 shares of preferred stock, $0.001 par value,
authorized at September 30, 1999. In January 2000, the authorized shares of
preferred stock were increased to 20,000,000 shares.

Stock Options

In March 1996, the Company granted an option to purchase up to 800,000
shares of common stock to an executive officer at an exercise price of $0.01
per share. The option was immediately exercisable and was exercised in full in
March 1996. The unvested shares issued upon exercise of the option are subject
to a repurchase right in favor of the Company; however, such repurchase right
lapses over a four-year period as the optionee becomes vested in the issued
shares. At September 30, 1999, 100,000 of such shares were subject to the
Company's repurchase right.

In March 1996, the Company established the 1996 Stock Option Plan (the
1996 Plan) which allows for up to 6,000,000 shares of the Company's authorized
but unissued common stock to be issued under the 1996 Plan. The 1996 Plan is
administered by the Company's Board of Directors, and options may be granted to
employees, non-employee members of the Board of Directors and independent
consultants and contractors who provide services to the Company. Options
granted under the 1996 Plan may be either incentive stock options or non-
qualified stock options, and the terms of any such options are determined by
the Board of Directors. However, no option shall have a contractual life in
excess of ten years from the date of grant.

Stock options granted under the 1996 Plan generally have a ten-year
contractual life and are exercisable on the date of grant. Unvested shares
issued upon exercise of the options are subject to a repurchase right in favor
of the Company, which expires at the rate of 25 percent on the one year
anniversary of the grant and ratably thereafter over the following three-year
period as the optionee becomes vested in the issued shares. At September 30,
1999, 391,143 shares exercised under the 1996 Plan are subject to the Company's
repurchase right at a weighted average per share price of $0.66.

In September 1997, the 1996 Plan was amended to include accelerated
vesting provisions in the event of a change in control of the Company. In
accordance with APB 25, and concurrent with this amendment, a new measurement
date was established and non-cash stock-based compensation for previous grants
under the 1996 Plan was determined based on the difference between the
estimated current market value and the exercise price and recognized over the
remaining vesting period of the grants.

During fiscal year 1999, stock options were granted under the 1996 Plan
at an exercise price below the estimated market price of the Company's common
stock at the date of grant. In accordance with APB 25, non-cash stock-based
compensation was determined and is being recognized over the vesting period of
the grants.

Non-cash stock-based compensation expense during fiscal years 1997, 1998,
1999 and for the six months ended March 31, 2000 was approximately $216,000,
$120,000, $442,000 and $235,000 (unaudited), respectively. Total unamortized,
deferred stock-based compensation expense at September 30, 1999 and March 31,
2000 was approximately $1,352,000 and $1,286,000 (unaudited), respectively.

F-16

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Options Outstanding and Exercisable

The following table summarizes stock option activity:

Weighted
Average
Number of Exercise
Options Price
--------- --------

Balance at September 30, 1996......................... 616,000 $0.10
Granted............................................. 472,500 0.11
Exercised........................................... (942,281) 0.10
Canceled............................................ (13,219) 0.10
---------
Balance at September 30, 1997......................... 133,000 0.14
Granted............................................. 1,442,750 0.62
Exercised........................................... (207,604) 0.62
Canceled............................................ (109,646) 0.60
---------
Balance at September 30, 1998......................... 1,258,500 0.57
Granted............................................. 1,529,147 3.04
Exercised........................................... (364,561) 1.02
Canceled............................................ (345,896) 0.79
---------
Balance at September 30, 1999......................... 2,077,190 2.28
Granted (unaudited)................................. 609,015 4.38
Exercised (unaudited)............................... (49,786) .46
Canceled (unaudited)................................ (156,658) 1.81
---------
Balance at March 31, 2000 (unaudited)................. 2,479,761 $2.86
=========
Available for grant at September 30, 1999............. 2,408,364
=========
Available for grant at March 31, 2000 (unaudited)..... 1,956,007
=========

The following table summarizes information about stock options
outstanding and exercisable at September 30, 1999:

Options Outstanding and Exercisable
--------------------------------------------------------------------
Weighted-Average
Range of Number Remaining Contractual Weighted-Average
Exercise Prices Outstanding Average Life in Years Exercise Price
--------------- ----------- --------------------- ----------------

$0.10 92,000 7.1 $0.10
$0.62 951,543 8.8 0.62
$1.40 38,000 9.6 1.40
$3.80 797,147 9.8 3.80
$5.30 198,500 9.8 5.30
---------
2,077,190 9.2
=========

F-17

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The fair value of each employee option grant is estimated on the date of
grant using the Black-Scholes option pricing model. The weighted-average
assumptions included in the Company's fair value calculations are as follows:

Year Ended
September 30,
----------------
1997 1998 1999
---- ---- ----

Expected life (years).................................... 4 4 4
Risk-free interest rate.................................. 6.41% 5.60% 5.47%
Volatility............................................... -- -- --
Dividend yield........................................... -- -- --

Had the Company determined compensation costs for stock option awards in
accordance with SFAS No. 123, the Company's pro forma net loss would have been
approximately $4,850,000, $6,640,000 and $10,170,000 for the fiscal years ended
September 30, 1997, 1998 and 1999, respectively. Net loss per share would have
been $0.87, $1.57 and $1.85 for the fiscal years ended September 30, 1997, 1998
and 1999, respectively. Compensation cost calculated under the fair value
approach is recognized over the vesting period of the respective stock options.

8. Earnings per Share

The following table sets forth the calculation for loss (numerator) and
shares (denominator) for earnings per share:

Year Ended Six Months Ended
September 30, March 31,
--------------------------------------- -------------------------
1997 1998 1999 1999 2000
----------- ------------ ------------ ----------- ------------
(unaudited)

Basic and diluted net
loss per common share:
Loss (numerator):
Net loss............. $(4,871,573) $ (6,699,295) $(10,473,861) $(5,250,738) $ (7,117,278)
Less: Accretion of
redeemable preferred
stock............... (278,519) (3,351,462) (3,682,750) (1,706,403) (7,135,414)
----------- ------------ ------------ ----------- ------------
Net loss available for
common stockholders.... $(5,150,092) $(10,050,757) $(14,156,611) $(6,957,141) $(14,252,692)
=========== ============ ============ =========== ============
Shares (denominator):
Weighted average
number of common
shares used in
computing basic and
diluted net loss per
common share........ 5,979,535 6,743,791 7,505,515 7,235,627 7,958,892
----------- ------------ ------------ ----------- ------------
Basic and diluted net
loss per common
share............... $ (0.86) $ (1.49) $ (1.89) $ (0.96) $ (1.79)
=========== ============ ============ =========== ============

At September 30, 1997, 1998, 1999 and March 31, 2000, preferred stock was
convertible into 8,386,982, 8,988,171, 12,677,236 and 16,182,717 (unaudited)
common shares, respectively, but is not included in the earnings per share
computation because it is anti-dilutive. At September 30, 1997, 1998, 1999 and
March 31, 2000, options to purchase 133,000, 1,258,500, 2,077,190 and 2,479,761
(unaudited) common shares, respectively, were outstanding, but are not included
in the computation because they are anti-dilutive. At September 30, 1998,
750,000 shares of common stock issued in connection with the Company's
formation of a joint venture were outstanding, but are not included in the
earnings per share computation because the shares were issued contingent upon
the successful formation of the joint venture and were subject to repurchase by
the Company (Note 4).

F-18

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9. Employee Savings Plan

The Company has a 401(k) Savings Plan (the Savings Plan) in which all
employees are eligible to participate. The Company may, at its discretion,
match up to 100% of participant contributions. No contributions to the Savings
Plan were made by the Company during the periods presented. Effective
January 1, 2000, the Company will match 50% of participant contributions, up to
the first 6% of participant compensation, as approved by the Board of
Directors.

10. Income Taxes

Income tax (expense) benefit is as follows:

Year Ended September 30,
-------------------------------------
1997 1998 1999
----------- ----------- -----------

Deferred:
Federal................................ $ 1,230,261 $ 2,014,227 $ 3,121,573
State and local........................ 217,105 355,452 550,866
Foreign................................ 466,552 146,590 836,114
Increase in valuation allowance.......... (1,913,918) (2,516,269) (4,508,553)
----------- ----------- -----------
Total................................ $ -- $ -- $ --
=========== =========== ===========

Deferred income taxes consist of the following amounts at:

September 30,
-------------------------
1998 1999
----------- ------------

Net operating loss carryforwards................ $ 5,312,538 $ 9,656,035
Capitalized start-up costs...................... 117,711 76,166
Other........................................... 159,920 366,522
----------- ------------
Gross deferred tax asset, net................... 5,590,169 10,098,723
Valuation allowance............................. (5,590,169) (10,098,723)
----------- ------------
Net deferred taxes.............................. $ -- $ --
=========== ============

The Company provides deferred taxes for temporary differences between the
book and tax return basis of assets and liabilities. A full valuation allowance
has been recorded against the deferred tax asset as of September 30, 1998 and
1999 because in management's judgment it is more likely than not that all or a
portion of the deferred tax asset will not be realized.

As of September 30, 1999, the Company has net operating loss
carryforwards for both U.S. federal and state income tax reporting purposes of
approximately $19.4 million. These carryforwards expire between 2011 and 2019.
The Company's ability to utilize the net operating loss carryforwards in future
years may be limited in some circumstances, including significant changes in
ownership interests, due to certain provisions of the Internal Revenue Code of
1986. As of September 30, 1999, MCL had net operating loss carryforwards in
Israel of approximately $5.3 million which do not have an expiration period. As
of September 30, 1999, MCUK had net operating loss carryforwards in the UK of
approximately $900,000 which do not have an expiration period. As of September
30, 1999, the Company also had net operating loss carryforwards of $200,000 in
Germany. These losses are related to the newly formed MCDE subsidiary and the
joint venture, and do not have an expiration period.

F-19

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In 1997, the Company made an election under United States tax laws to
domesticate its Israeli subsidiary, MCL. As a result of this election, on
January 1, 1997, MCL is treated as transferring all of its assets to a domestic
corporation. For tax purposes the Israeli Subsidiary is treated as a taxable
subsidiary in both Israel and Delaware from January 1, 1997 forward.

The provision for income taxes differed from that which would be computed
by applying the U.S. Federal income tax rate to income before income taxes as
follows:

Year Ended September 30,
------------------------------------
1997 1998 1999
----------- ---------- -----------

Federal tax at statutory rate....... 34.0% 34.0% 34.0%
State tax, net of federal benefit... 4.0 4.0 4.0
Change in valuation allowance....... (32.0) (36.8) (37.7)
Other............................... (6.0) (1.2) (0.3)
----------- ---------- -----------
Provision for income taxes.......... -- % -- % -- %
=========== ========== ===========

11. Segment Information

During fiscal year 1999, the Company adopted Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an
Enterprise and Related Information", which establishes standards for the manner
in which public companies report information about operating segments, products
and services, geographic areas and major customers.

The Company classifies its operations into one industry segment, software
development and related services. The Company's revenues by country or
geographic region of customer location were as follows:

Year Ended September 30,
------------------------------------

1997 1998 1999
----------- ---------- -----------
United States....................... $ 793,651 $5,637,602 $ 9,457,607
Germany............................. 1,257,281 1,579,910 2,246,282
Switzerland......................... -- 1,018,113 2,027,370
United Kingdom...................... -- 8,222 1,659,034
Denmark............................. 595,682 80,637 78,086
Rest of world....................... 38,795 205,018 34,897
----------- ---------- -----------
$ 2,685,409 $8,529,502 $15,503,276
=========== ========== ===========

The Company's long-lived assets by country or geographic region consist
of the following at:

September 30,
------------------------------------
1997 1998 1999
----------- ---------- -----------

United States....................... $ 713,033 $ 995,518 $ 1,717,697
Germany............................. -- -- 1,660,416
United Kingdom...................... -- 38,546 52,968
Israel.............................. 323,584 332,649 14,998
----------- ---------- -----------
$ 1,036,617 $1,366,713 $ 3,446,079
=========== ========== ===========

F-20

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

12. Related-Party Transactions

The Company is a party to an international marketing agreement with a
software distributor, Interchip Distributed Systems GmbH (Interchip), which is
owned by the Company's Chief Executive Officer and another member of the
Company's Board of Directors. The original term of the agreement extends
through December 2000, subject to certain conditions. Under the marketing
agreement, Interchip had an exclusive right, which was amended to a non-
exclusive right effective in April 1999, to market certain of the Company's
products in Germany, Austria and Switzerland. In return, the Company is
entitled to royalties generally calculated as 50% of the sales price of license
and maintenance revenues to end-users. (See Note 2 regarding the Company's
revenue and cost of revenue accounting policies in instances where the Company
provides substantial sales and customer support to its distributors.) During
fiscal years 1997, 1998, 1999 and the six months ended March 31, 2000, the
Company recognized revenue of approximately $1,114,000, $2,515,000, $2,688,000
and $198,000 (unaudited), respectively, and distributor expense of
approximately $557,000, $1,359,000, $1,280,000, and $64,000 (unaudited),
respectively, under this agreement. In addition, the Company had accounts
receivable due from Interchip of approximately $1,200,000, $174,000 and
$125,000 (unaudited) at September 30, 1998 and 1999 and March 31, 2000,
respectively.

The Company from time-to-time engages in transactions with a software
developer, USU, which is a stockholder in the Company and the Company's joint
venture partner (See Note 4). During fiscal years 1997, 1998, 1999, and during
the six months ended March 31, 2000, the Company incurred fees of approximately
$8,000, $267,000, $451,000 and $141,000 (unaudited), respectively, for
professional services and development work provided by USU. In connection with
the sale and distribution of certain of USU's products, during fiscal years
1997, 1998, 1999, and during the six months ended March 31, 2000, the Company
incurred royalty expense of approximately $185,000, $384,000, $169,000 and $0
(unaudited), respectively. During fiscal year 1997, 1998, 1999 and the six
months ended March 31, 2000, the Company performed certain development
activities for USU in exchange for development fees of $0, $83,000, $280,000
and $0 (unaudited), respectively. At September 30, 1998 and 1999 and at March
31, 2000, the Company had net accounts payable to USU of approximately
$240,000, $90,000 and $0 (unaudited), respectively.

The Company's Israeli subsidiary sub-leased its office space from a
stockholder. The subsidiary was charged for a proportion of part of the rental
based on floor space occupied. The unwritten sub-lease agreement ran month-to-
month and was terminated in May 1999. The Company incurred approximately
$113,000, $121,000 and $84,000 of rent expense under the sub-lease agreement
during fiscal years 1997, 1998 and 1999, respectively.

F-21

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The following is a summary of related-party transactions:

Year Ended Six months ended
September 30, March 31,
-------------------------------- ---------------------
1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ----------
(unaudited)

Related party revenue:
License:
Interchip............. $ 980,000 $2,172,000 $1,592,000 $1,237,000 $ --
USU................... -- 83,000 280,000 280,000 --
---------- ---------- ---------- ---------- ----------
980,000 2,255,000 1,872,000 1,517,000 --
---------- ---------- ---------- ---------- ----------

Maintenance:
Interchip............. 134,000 218,000 665,000 279,000 198,000
---------- ---------- ---------- ---------- ----------

Professional services:
Interchip............. -- 125,000 431,000 176,000 --
---------- ---------- ---------- ---------- ----------

Joint venture
development fees:
ValueSolution......... -- -- 1,109,000 243,000 923,000
---------- ---------- ---------- ---------- ----------

Total related party
revenue........... $1,114,000 $2,598,000 $4,077,000 $2,215,000 $1,121,000
========== ========== ========== ========== ==========

Related party cost of
revenue:
License:
Interchip............. $ 490,000 $1,260,000 $ 914,000 $ 692,000 $ --
USU................... 178,000 321,000 139,000 139,000 --
ValueSolution......... -- -- 705,000 22,000 748,000
---------- ---------- ---------- ---------- ----------
668,000 1,581,000 1,758,000 853,000 748,000
---------- ---------- ---------- ---------- ----------

Maintenance:
Interchip............. 67,000 99,000 366,000 156,000 64,000
USU................... 7,000 63,000 30,000 26,000 --
ValueSolution......... -- -- 73,000 16,000 88,000
---------- ---------- ---------- ---------- ----------
74,000 162,000 469,000 198,000 152,000
---------- ---------- ---------- ---------- ----------

Professional services:
USU................... 8,000 267,000 321,000 105,000 22,000
---------- ---------- ---------- ---------- ----------

Total related party
cost of revenue... $ 750,000 $2,010,000 $2,548,000 $1,156,000 $ 922,000
========== ========== ========== ========== ==========
Related party research
and development
expense:
USU................... $ -- $ -- $ 130,000 $ 4,000 $ 119,000
---------- ---------- ---------- ---------- ----------
$ -- $ -- $ 130,000 $ 4,000 $ 119,000
========== ========== ========== ========== ==========

F-22

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

September 30,
--------------------- March 31,
1998 1999 2000
----------- --------- -----------

(unaudited)
Related party assets:
Accounts receivable:
Interchip.............................. $1,200,000 $ 174,000 $ 125,000
----------- --------- ----------- ---

Other Assets:
Interchip.............................. 322,000 105,000 19,000
USU.................................... 16,000 -- --
ValueSolution.......................... -- 83,000 131,000
----------- --------- -----------
338,000 188,000 150,000
----------- --------- -----------

Total related party assets............... $ 1,538,000 $ 362,000 $ 275,000
=========== ========= ===========

Related party liabilities:
Accounts payable and accrued
liabilities:
USU.................................... $ 240,000 $ 90,000 $ --
----------- --------- -----------

Deferred revenue:
Interchip.............................. 569,000 225,000 61,000
ValueSolution.......................... -- -- 311,000
----------- --------- -----------
569,000 225,000 372,000
----------- --------- -----------

Total related party liabilities.......... $ 809,000 $ 315,000 $ 372,000
=========== ========= ===========

13. Commitments and Contingent Liabilities

Research and Development Contracts with the Chief Scientist

MCL previously entered into research and development contracts with the
Chief Scientist of the Israeli Ministry of Industry and Trade (the Chief
Scientist). Under the agreements, MCL received grants from the Chief Scientist
for use in certain approved research and development projects. Such amounts are
recorded as an offset
to research and development expenses. In return, the Chief Scientist is
entitled to receive royalties on sales of the product for which the research is
being undertaken. Such royalties are limited to as much as 300% of total grants
received at the rate of up to 5% to 6% of qualifying sales. MCL had received
approximately $365,000 from the Chief Scientist through September 30, 1996.
There were no grants from the Chief Scientist subsequent to September 30, 1996.
Through September 30, 1999, the Company had accrued related royalty expense of
approximately $278,000.

In March 1999, the Company made an application to the Chief Scientist to
transfer from MCL to MainControl the manufacturing rights of products developed
under contract with the Chief Scientist. Upon approval of this election,
maximum royalties to the Chief Scientist will total approximately $1,095,000.

F-23

MAINCONTROL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Operating Lease Commitments

The Company has certain minimum obligations under noncancelable operating
leases, principally in connection with its office space. At September 30, 1999,
future minimum lease payments are as follows:

Year Ending September 30,
------------------------- ---

2000.................................. $ 1,227,000
2001.................................. 1,257,000
2002.................................. 1,128,000
2003.................................. 1,148,000
2004.................................. 1,180,000
-----------
$ 5,940,000
===========

Rent expense was approximately $296,000, $410,000 and $526,000 for fiscal
years 1997, 1998 and 1999, respectively. The Company's lease for its U.S.
headquarters expires during fiscal year 2004 and is renewable thereafter for a
period of five additional years. During the lease term, the Company is required
to maintain a $296,000 security deposit with the landlord in the form of either
a cash deposit or irrevocable letter of credit (Note 5).

14. Subsequent events (unaudited)

1996 Stock Option Plan

In May 2000, the Company amended the 1996 Stock Option Plan, subject to
shareholder approval, to increase the number of shares reserved for issuance to
10,000,000.

2000 Equity Plan

In May 2000, the Board of Directors approved the 2000 Equity Plan (the
2000 Plan). The 2000 Plan, which is subject to stockholder approval and
effective upon the closing of an initial public offering, provides for the
award of stock options, stock appreciation rights, stock awards, and restricted
stock units and performance units from the Company's authorized but unissued
common stock. The maximum number of shares issuable under the 2000 Plan, which
will replace the 1996 Plan, will equal the remaining shares available for grant
under the 1996 Plan.

Employee Stock Purchase Plan

In May 2000, the Board of Directors approved an employee stock purchase
plan (Stock Purchase Plan). The Stock Purchase Plan, which is effective upon
the closing of an initial public offering, allows Company employees to purchase
up to 4,000,000 shares of the Company's authorized but unissued common stock
through payroll deductions. The price of shares of common stock purchased under
the Stock Purchase Plan will be 85% of the lesser of the fair market value of
the shares of common stock on the date the option was granted or the date the
option is exercised.

F-24

Back Inside Cover--

Title: MC/EMpower i.series: SOFTWARE COVERING THE E-INFRASTRUCTURE LIFE CYCLE

On the left is a circle with the words Enterprise Technology Repository written
in it. There are five separate arrows circling the inside circle graphic and
the arrows move in a clockwise direction.

. Starting at 12 o'clock, the first arrow has the word "deployment" written
in it.
. The next arrow has the word "management" written in it.
. The next arrow has the word "retirement" written in it.
. The next arrow has the word "planning" written in it.
. The next arrow has the word "procurement" in it.

To the right of the graphic is a chart that is intended to describe the modules
and intended benefits of each stage of the life cycle:

Column one contains the following text listed vertically and separated by lines:
planning, procurement, deployment, management.

Column two is headed with the text MODULES. In the planning row is i.advise; in
the procurement row is i.request, i.procure and i.receive, listed vertically; in
the deployment row is i.infrastructure manager, i.implement, i.integrate,
i.collect, i.track, i.audit, listed vertically; in the management row is
i.service, i.contract, i.inventory, i.finance, i.chargeback, listed vertically;
in the retirement row is i.retire.

Column three is headed with the text INTENDED BENEFITS. In the planning row,
with bullets, is plan e-infrastructure resources; build standards and policies;
identify business trends; project necessary budget/resources. In the
procurement row, with bullets, is streamline procurement process; improve vendor
negotiations; procure according to corporate policy; automate budget allocation;
compare ordered items to delivery. In the deployment row, with bullets, is
standardize deployment; automate software distribution; track license usage;
automate inventory collection. In the management row, with bullets, is develop
enterprise asset repository; monitor and manage changes; compare installed
resources to plan; identify and solve user problems; maintain accurate financial
records; manage vendor/service contracts. In the retirement row, with bullets,
is cascade/retire assets, terminate lease agreements; modify inventory/financial
records; remove software/files before disposal; update license information.

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

Through and including , 2000 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in this offering, may be required to deliver a prospectus.
This is in addition to the dealers' obligation to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

MainControl, Inc.

Common Stock

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

PROSPECTUS

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

Merrill Lynch & Co.

Banc of America Securities LLC

Dain Rauscher Wessels

June , 2000

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

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth all expenses payable by MainControl in
connection with the sale of the common stock being registered. All of the
amounts shown are estimates, except for the SEC registration fee, the NASD
filing fee and the Nasdaq National Market application fee.

Amount
to be
Paid
-------

Registration fee....................................................... $15,180
NASD filing fee........................................................ $ 6,250
Nasdaq National Market listing application fee.........................
Printing and engraving expenses........................................ *
Legal fees and expenses................................................ *
Accounting fees and expenses........................................... *
Transfer agent and registrar fees...................................... *
Miscellaneous.......................................................... *
-------
Total................................................................ $ *
=======

- --------
* Estimated.

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Company's bylaws require that directors and officers be indemnified
to the maximum extent permitted by Delaware law.

The Delaware General Corporation Law (the "Delaware GCL") provides that a
director or officer of a corporation (i) shall be indemnified by the
corporation for all expenses of litigation or other legal proceedings when he
is successful on the merits, (ii) may be indemnified by the corporation for the
expenses, judgments, fines and amounts paid in settlement of such litigation
(other than a derivative suit), even if he is not successful on the merits, if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation (and, in the case of a
criminal proceeding, had no reason to believe his conduct was unlawful), and
(iii) may be indemnified by the corporation for expenses of a derivative suit
(a suit by a stockholder alleging a breach by a director or officer of a duty
owed to the corporation), even if he is not successful on the merits, if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, provided that no such
indemnification may be made in accordance with this clause (iii) if the
director or officer is adjudged liable to the corporation, unless a court
determines that, despite such adjudication but in view of all of the
circumstances, he is entitled to indemnification of such expenses. The
indemnification described in clauses (ii) and (iii) above shall be made upon
order by a court or a determination by (i) a majority of disinterested
directors, (ii) if there are no such directors or if such directors so direct,
by independent legal counsel in a written opinion or (iii) the stockholders
that indemnification is proper because the applicable standard of conduct is
met. Expenses incurred by a director or officer in defending an action may be
advanced by the corporation prior to the final disposition of such action upon
receipt of an undertaking by such director or officer to repay such expenses if
it is ultimately determined that he is not entitled to be indemnified in
connection with the proceeding to which the expenses relate. MainControl's
amended and restated certificate of incorporation includes a provision
eliminating, to the fullest extent permitted by Delaware law, director
liability for monetary damages for breaches of fiduciary duty.

II-1

MainControl expects to enter into indemnity agreements (the "Indemnity
Agreements") with each director or officer designated by the board of
directors. The Indemnity Agreements require that the Company indemnify
directors and officers who are parties thereto in all cases to the fullest
extent permitted by Delaware law. Under the Delaware GCL, except in the case of
litigation in which a director of officer is successful on the merits,
indemnification of a director or officer is discretionary rather than
mandatory. Consistent with MainControl's Bylaw provision on the subject, the
Indemnity Agreements require MainControl to make prompt payment of litigation
expenses at the request of the director or officer in advance of litigation
provided that he undertakes to repay the amounts if it is ultimately determined
that he is not entitled to indemnification for such expenses. The advance of
litigation expenses is mandatory; under the Delaware GCL such advance would be
discretionary. Under the Indemnity Agreements, the director or officer is
permitted to bring suit to seek recovery of amounts due under the Indemnity
Agreements and is entitled to recover the expenses of seeking such recovery
unless a court determines that the action was not made in good faith or was
frivolous. Without the Indemnity Agreements, the Company would not be required
to pay the director or officer for his expenses in seeking indemnification
recovery against the Company. Under the Indemnity Agreements, directors and
officers are not entitled to indemnity or advancing of expenses (i) if such
director or officer has recovered payment under an insurance policy for the
subject claim, or has otherwise been indemnified against the subject claim,
(ii) for actions initiated or brought by the director or officer and not by way
of defense (except for actions seeking indemnity or expenses from the Company),
(iii) if the director or officer violated section 16(b) of the Exchange Act or
similar provisions of law or (iv) if a court of competent jurisdiction
determines that the director or officer failed to act in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
Company or, with respect to any proceeding which is of a criminal nature, had
reasonable cause to believe his conduct was unlawful. Absent the Indemnity
Agreements, indemnification that might be made available to directors and
officers could be changed by amendments to MainControl's Certificate of
Incorporation or Bylaws.

At present, there is no pending litigation or proceeding involving a
director or officer of MainControl as to which indemnification is being sought
nor is MainControl aware of any threatened litigation that may result in claims
for indemnification by any officer or director.

MainControl intends to apply for an insurance policy covering the
officers and directors of MainControl with respect to certain liabilities,
including liabilities arising under the Securities Act or otherwise.

ITEM 15. RECENT SALE OF UNREGISTERED SECURITIES

(1) In April 1996 MainControl completed a private placement of 6,300,000
shares of Series A preferred stock to 17 accredited investors for cash in
the aggregate amount of $6.3 million. The aggregate net proceeds to
MainControl after issuance costs were approximately $6.2 million.
MainControl sold these shares in transactions exempt from registration
under the Securities Act in reliance upon Section 4(2) of the Securities
Act ("Section 4(2)"), as transactions not involving a public offering.

(2) In September 1997 and December 1997 MainControl completed a private
placement of 2,688,171 shares of Series B preferred stock to 28 accredited
investors for cash in the aggregate amount of $10.0 million. The aggregate
net proceeds to MainControl after issuance costs were approximately $9.9
million. MainControl sold these shares in transactions exempt from
registration under the Securities Act in reliance upon Section 4(2), as
transactions not involving a public offering.

(3) During the period of December 1998 through June 1999, MainControl
completed a private placement of 3,689,065 shares of Series C preferred
stock to 24 accredited investors for cash in the aggregate amount of $14.0
million. The aggregate net proceeds to MainControl after issuance costs
were approximately $13.9 million. MainControl sold these shares in
transactions exempt from registration under the Securities Act in reliance
upon Section 4(2), as transactions not involving a public offering.

(4) In January 2000, MainControl completed a private placement of 3,505,481
shares of Series D preferred stock to 25 accredited investors for cash in
the aggregate amount of $17.8 million. The aggregate net proceeds

II-2

to MainControl after issuance costs were approximately $17.7 million.
MainControl sold these shares in transactions exempt from registration under
the Securities Act in reliance upon Section 4(2), as transactions not
involving a public offering.

(5) As of March 31, 1999, MainControl granted options to purchase an aggregate
of 4,669,412 shares of its common stock to its employees, non-employee
members of the board of directors and consultants. MainControl granted the
options and sold the underlying shares pursuant to its 1996 Stock Option
Plan in transactions exempt from registration under the Securities Act in
reliance upon Rule 701 promulgated under Section 3(b) of the Securities
Act ("Rule 701").

(6) As of March 31, 1999 MainControl granted options of purchase an aggregate
of 934,106 shares of its common stock to 8 accredited investors.
MainControl issued these shares in transactions exempt from registration
under the Securities Act in reliance upon Rule 506 of Regulation D
promulgated under Section 4(2) of the Securities Act, as transactions not
involving a public offering.

No underwriters were involved in any of the transactions described above. Each
recipient of securities in each of the transactions described above represented
the recipient's intention to acquire the securities for investment purposes
only and not with a view to, or for sale in connection with, any distribution
thereof.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

(a) Exhibits.

Exhibit
Number Description of Document
------- -----------------------

1.1 Form of Purchase Agreement
3.1 Amended and Restated Certificate of Incorporation, as currently
in effect
3.2 Bylaws, as currently in effect
3.3 Amended and Restated Certificate of Incorporation, as will be in
effect after the offering
3.4 Bylaws, as will be in effect after the offering
4.1 Specimen of Stock Certificate, as will be in effect after the
offering
4.2 MainControl, Inc. Fourth Amended and Restated Investors' Rights
Agreement dated as of January 26, 2000
5.1** Opinion of Shearman and Sterling
10.1 Form of Indemnity Agreement
10.2 Employment Agreement between the Registrant and its chief
executive officer
10.3 MainControl, Inc. Amended and Restated 1996 Stock Option Plan
Document
10.4 MainControl, Inc. Employee Stock Purchase Plan
10.5 MainControl, Inc. 2000 Executive Incentive Plan
10.6 MainControl, Inc. 2000 Equity Plan
22.1** Subsidiaries of the Registrant
23.1 Consent of PricewaterhouseCoopers LLP
23.2** Consent of Shearman & Sterling (included in Exhibit 5.1)
24.1* Power of Attorney (included on signature page)
27.1 Financial Data Schedule

* Previously filed.

** To be filed by amendment.

(b) Financial Statement Schedules.

All schedules are omitted because they are not required, are not
applicable or the information is included in our financial statements or notes
thereto.

II-3

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the
Underwriter at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required by
the Underwriter to permit prompt delivery to each purchaser.

Insofar as indemnification by the Registrant for liabilities arising
under the Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to provisions referenced in Item
14 or otherwise, this Registration Statement or otherwise, the Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered hereunder, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement (I) to include any prospectus required by Section 10 (a)
(3) of the Securities Act of 1933; (ii) to reflect in the
prospectus any facts or events arising after the effective date of
the registration statement (or the most recent post-effective
amendment thereto, which, individually or in the affregate,
represent a fundamental change in the information set forth in the
registration statement; and (iii) to include any material
information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement.

(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new
registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of this offering.

(4) That, for purposes of determining any liability under
the Securities Act of 1933, the information omitted from the form
of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497
(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant has duly caused this Amendment No. 1 to the Registration
Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of McLean, State of Virginia, on the 19th day of
June , 2000.

MainControl, Inc.

/s/ David J. Piper
By: _________________________________

David J. Piper

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

Signature Date Title
--------- ---- -----

Alex Pinchev* June 19, 2000 President and Chief
______________________________________ Executive Officer and
Alex Pinchev Chairman of the Board

/s/ David J. Piper June 19, 2000 Chief Financial Officer
______________________________________ (Principal Financial
David J. Piper Officer) (Principal
Accounting Officer)

Meir Barel* June 19, 2000 Director
______________________________________
Meir Barel

Jon Bayless* June 19, 2000 Director
______________________________________
Jon Bayless

J. Carter Beese* June 19, 2000 Director
______________________________________
J. Carter Beese

John Burton* June 19, 2000 Director
______________________________________
John Burton

Dennis J. Gorman* June 19, 2000 Director
______________________________________
Dennis J. Gorman

II-5

Signature Date Title
--------- ---- -----

Carl H. Hahn* June 19, 2000 Director
______________________________________
Carl H. Hahn

Dieter Riffel* June 19, 2000 Director
______________________________________
Dieter Riffel
/s/ David J. Piper June 19, 2000
______________________________________
David J. Piper
*Attorney-in-fact

II-6

EXHIBIT INDEX

Exhibit
Number Item Page
------- ---- ----

1.1 Form of Purchase Agreement
3.1 Amended and Restated Certificate of Incorporation, as currently
in effect
3.2 Bylaws, as currently in effect
3.3 Amended and Restated Certificate of Incorporation, as will be
in effect after the offering
3.4 Bylaws, as will be in effect after the offering
4.1 Specimen of Stock Certificate, as will be in effect after the
offering
4.2 MainControl, Inc. Fourth Amended and Restated Investors' Rights
Agreement dated as of January 26, 2000
5.1** Opinion of Shearman and Sterling
10.1 Form of Indemnity Agreement
10.2 Employment Agreement between the Registrant and its chief
executive officer
10.3 MainControl, Inc. Amended and Restated 1996 Stock Option Plan
Document
10.4 MainControl, Inc. Employee Stock Purchase Plan
10.5 MainControl, Inc. 2000 Executive Incentive Plan
10.6 MainControl, Inc. 2000 Equity Plan
22.1** Subsidiaries of the Registrant
23.1 Consent of PricewaterhouseCoopers LLP
23.2** Consent of Shearman & Sterling (included in Exhibit 5.1)
24.1* Power of Attorney (included on signature page)
27.1 Financial Data Schedule

* Previously filed.

** To be filed by amendment.