CAPTURA SOFTWARE INC, S-1, 2000-10-12

CAPTURA SOFTWARE INC
S-1, 2000-10-12

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<PAGE>

As filed with the Securities and Exchange Commission on October 12, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
-------------------
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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CAPTURA SOFTWARE, INC.
(Exact name of Registrant as specified in its charter)
-------------------
<TABLE>
<C> <S> <C>
Delaware 7372 33-0639777
(State or other jurisdiction (Primary Standard (I.R.S. Employer
of incorporation or Industrial Identification No.)
organization) Classification Code
Number)
</TABLE>
6710 108th Avenue NE
Kirkland, Washington 98033
(425) 803-6000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
-------------------
Dan Vetras
President and Chief Executive Officer
Captura Software, Inc.
6710 108th Avenue NE
Kirkland, Washington 98033
(425) 803-6000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-------------------

Copies to:
<TABLE>
<S> <C>
Patrick J. Schultheis Tracy K. Edmonson
Robert F. Kornegay Keith Benson
Mark A. Callon Gabriel G. Gregg
Julia L. Harris Latham & Watkins
Wilson Sonsini Goodrich & Rosati 505 Montgomery Street
Professional Corporation Suite 1900
5300 Carillon Point San Francisco, California 94111
Kirkland, Washington 98033 (415) 391-0600
(425) 576-5800
</TABLE>
-------------------
Approximate date of commencement of proposed sale to the public: 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, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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(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. [_]

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CALCULATION OF REGISTRATION FEE

<TABLE>
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<CAPTION>
Proposed Maximum
Title of Each Class of Aggregate Amount of
Securities to be Registered Offering Price(1) Registration Fee
---------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.001 par value.......................... $70,000,000 $18,480
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</TABLE>
(1) Estimated solely for the purposes of computing the registration fee in
accordance with Rule 457(o).

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

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 of 1933, as amended, or until the
Registration Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to such Section 8(a), may determine.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+We will amend and complete the information in this prospectus. Although we +
+are permitted by US federal securities law to offer these securities using +
+this prospectus, we may not sell them or accept your offer to buy them until +
+the registration statement filed with the SEC relating to these securities +
+has been declared effective by the SEC. This prospectus is not an offer to +
+sell these securities, and we are not soliciting offers to buy these +
+securities in any jurisdiction where the offer or sale of these securities +
+would not be permitted or legal. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Prospectus (Not Complete)
Issued October 12, 2000

[LOGO OF CAPTURA SOFTWARE, INC.]

Common Stock

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

Captura Software, Inc. is offering shares of its common stock in an initial
public offering. No public market currently exists for our common stock. We
anticipate that the initial public offering price will be between $ and $
per share. After the offering, the market price for our common stock may be
outside of this range.

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

We have applied to have our common stock listed for quotation on the Nasdaq
National Market under the symbol "CPTR."

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

Investing in the common stock involves a high degree of risk. See "Risk
Factors" beginning on page 7.

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

<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Offering Price.................................................. $ $
Discounts and Commissions to Underwriters.......................
Offering Proceeds to Captura Software, Inc. ....................
</TABLE>

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.

Captura Software, Inc. has granted the underwriters a 30-day option to
purchase up to an additional shares of its common stock to cover over-
allotments. The underwriters can exercise this right at any time within 30 days
after the offering. Banc of America Securities LLC expects to deliver the
shares of common stock to investors on , 2000.

Banc of America Securities LLC

U.S. Bancorp Piper Jaffray

Wit SoundView

Pacific Crest Securities

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

, 2000
<PAGE>

Outside Front Gate
------------------

There are four large headings in bold letters and all caps running down the left
side of the page:

LEADING
DRIVING
INNOVATING
SOLVING

To the right of the first heading (LEADING), is text in smaller print that
reads: "Captura is a leading global provider of Web-based payment processing
solutions for Global 2000 companies."

To the right of the second heading (DRIVING), is text in smaller print that
reads: "We are driven to make our customers more profitable and productive
through reduced transaction processing costs, less employee and manager time
spent on these issues, minimal paper flow and the generation of powerful
business intelligence to make better, faster and more effective business
decisions."

To the right of the third heading (INNOVATING), is text in smaller print that
reads: "Captura's technology bridges the "last mile" of B2B payment processing,
using a transaction processing engine that supports a wide range of transaction
types (purchase, travel and entertainment and fleet) that are supported by
multiple transaction processing vehicles."

To the right of the fourth heading (SOLVING), is text in smaller print that
reads: "Captura solves a significant problem for global companies who have not
had a single, integrated solution to their corporate financial systems, and have
been manually processing a wide array of procurement transactions in a non-
integrated way lacking the ability to capture important data and trends."

The text in the "INNOVATING" and "SOLVING" paragraphs is arced around a circle
that is placed in the center-right of the page. Inside the circle is a picture
of a bridge with a missing middle panel.

Under the circle on the right-hand side of the page is a company logo that
reads: "Captura"

Under the logo is bold, italicized text that reads: "Captura's proven automated
payment processing infrastructure lets companies and their employees focus on
what they do best... grow their business and leave the transaction processing to
us."
<PAGE>

Inside Cover
------------

The page is landscape oriented with a black band running across the top of the
page.

Inside the band is white text that begins with the company logo "Captura". To
the right of the logo is italicized text that reads: "Our solution automates the
capturing and processing of a company's financial transactions throughout the
life cycle.

Under the band there are five graphic sprockets across the page from left to
right. Inside each sprocket is a word in bold text. The words, from left to
right, are: Capture, Validate, Reconcile, Integrate, and Analyze.

In between each sprocket is a column line dividing bulleted text that appears
underneath each sprocket.

Under the sprocket containing the word "Capture" is the following bulleted text:

. Capture financial transactions from multiple sources
- Corporate Cards
- Single Solution Cards
- p-cards
- Paper Forms
- Manual Entry

. Aggregate all transactions in one common format and location

Under the sprocket containing the word "Validate" is the following bulleted
text:

. Ensure that all of the necessary financial information is accurate
. Verify and compare information against existing ERP systems
. Request supplemental information from user alerts

Under the sprocket containing the word "Reconcile" is the following bulleted
text:

. Combine purchase information with supplemental receipts
. Compare orders with invoices; identify and handle discrepancies
. Ensure adherence to company policies
. Route for approval when required

Under the sprocket containing the word "Integrate" is the following bulleted
text:

. Provide to ERP financials complete transactions for accurate cost
accounting
<PAGE>

. Provide payment detail with information needed to reimburse the employee
or supplier electronically

Under the sprocket containing the word "Analyze" is the following bulleted text:

. Provide a consolidated transaction repository with complete historical
buyer information
. Determine purchasing behavior patterns
. Compare booked vs. actual and purchased vs. received data

At the bottom of the page is a gray band with words in each sprocket column.
From left to right, the words are: Transactions, Rules, Workflow, Data
Integration, and Business Intelligence.
<PAGE>

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. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of the
prospectus or any sale of the common stock.

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 7
Special Note Regarding Forward-Looking Statements........................ 18
Use of Proceeds.......................................................... 18
Dividend Policy.......................................................... 18
Corporate Information.................................................... 18
Capitalization........................................................... 19
Dilution................................................................. 20
Selected Consolidated Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 22
Business................................................................. 31
Management............................................................... 42
Certain Transactions..................................................... 52
Principal Stockholders................................................... 55
Description of Capital Stock............................................. 58
Shares Eligible for Future Sale.......................................... 63
Underwriting............................................................. 65
Legal Matters............................................................ 68
Experts.................................................................. 68
Where You Can Find Additional Information................................ 68
Index to Consolidated Financial Statements............................... F-1
</TABLE>

3
<PAGE>

PROSPECTUS SUMMARY

This prospectus contains forward-looking statements that involve risk and
uncertainties. Our actual results could differ materially from the results
anticipated in those forward-looking statements as a result of the factors
described under the heading "Risk Factors" and elsewhere in this prospectus.

We are a leading provider of automated payment processing solutions for
Global 2000 companies. Our technology platform automates the preparation,
approval and processing of procurement, travel, entertainment and fleet
transactions. At the core of our platform is a powerful rules-based engine that
can be customized to ensure full compliance with a client's purchasing policies
and that results in appropriate processing and treatment of transactions,
regardless of complexity or source. Our software solution is designed to allow
companies to create and modify business rules rapidly and easily, enabling
companies to respond quickly to changes in corporate policies, workflow
practices and user preferences. In addition, our software offers advanced
reporting and analytic tools to enable our clients to make better-informed
business decisions. We deliver our solution to our clients over the Internet
primarily from facilities hosted by third-party providers.

Historically, the processing of corporate procurement transactions has been
characterized by complex business rules, detailed forms, manual data entry,
multiple approvals, and manual reviews and audits. To date, organizations
seeking to automate their payment processes have relied largely upon internally
developed solutions or the limited functionality of enterprise applications,
such as enterprise resource planning, or ERP, and supply-chain management
software. More recently, organizations have begun to deploy procurement
applications as a means of streamlining and improving the efficiency of the
procurement process. These traditional solutions typically address only the
front-end procurement process, such as supplier aggregation, cataloging, and
requisitioning and lack the ability to effectively automate the order
processing, authorization, validation, payment and reconciliation functions.

Key benefits of our solution include:

Compelling Value Proposition. Our solution eliminates the need for our
clients to employ manual processes that are inefficient, error-prone, and time-
intensive and that limit consolidated transactional reporting and analysis.

Extensive Transactional Data Capturing Capability. Our solution supports a
broad range of transaction types, including procurement, travel, entertainment
and fleet, with full support for line-item detail.

Seamless Transaction Support. Our solution has been designed to integrate
with existing ERP and enterprise applications and supports a comprehensive
selection of transaction sources, including corporate credit cards, procurement
cards, also known as p-cards, and one-card solutions. Our solution supports
both employee-paid or company-paid cards.

Enhanced Decision-Making Capability. By capturing extensive data from
company transactions, we believe our solution enables companies to negotiate
more effectively with their suppliers.

Hosted Application Services Advantages. Delivery of our solution in a
third-party hosted environment provides our clients with scalable automated
payment processing services that are easy to implement and quick to deploy
globally.

Support for a Broad Range of Web-Enabled Devices. Our ultra-thin HTML
interface allows for full accessibility and functionability via a variety of
Web-based devices.

We currently have 50 clients, including Aetna, Booz-Allen & Hamilton,
Citibank N.A./General Motors, Compaq, Ericsson UK, Ford, Hercules, MasterCard,
Merrill Lynch and Shell Oil.

4
<PAGE>

The Offering

<TABLE>
<C> <S>
Common stock offered................................ shares
Common stock to be outstanding after this offering.. shares
Use of proceeds..................................... We intend to use the
offering proceeds for
working capital and
general corporate
purposes, including sales
and marketing, product
development and other
corporate expenses.
Proposed Nasdaq National Market symbol.............. CPTR
</TABLE>

Unless otherwise indicated, all information in this prospectus reflects the
number of shares of common stock outstanding on June 30, 2000, assuming:

. the conversion of all outstanding shares of preferred stock into shares
of common stock effective upon the closing of this offering, excluding
the issuance of 2,218,567 shares of Series E preferred stock issued in
September 2000, which will also convert into shares of common stock
effective upon the closing of the offering;

. the issuance of 65,595 shares upon the exercise of outstanding warrants
that would otherwise terminate upon the closing of this offering; and

. no exercise of the underwriters' over-allotment option to purchase up
to additional shares.

The number of shares of our common stock to be outstanding after this
offering excludes:

. 3,058,724 shares issuable upon exercise of options outstanding as of
June 30, 2000 at a weighted average exercise price of $5.54 per share;

. 3,762,948 shares issuable upon exercise of warrants that are expected
to remain outstanding after this offering at a weighted average
exercise price of $8.06 per share;

. 1,523,854 shares available for future grant under our 1997 stock option
plan;

. 200,000 shares of common stock available for future issuance under our
2000 director stock option plan; and

. 500,000 shares of common stock available for future issuance under our
2000 employee stock purchase plan.

5
<PAGE>

Summary Consolidated Financial Data
(in thousands, except share data)

The following summary consolidated financial data should be read in
conjunction with our consolidated financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus.

The pro forma column of the table below gives effect to the:

. conversion of all outstanding shares of our preferred stock into shares
of our common stock upon the closing of this offering, excluding the
issuance of 2,218,567 shares of Series E preferred stock in September
2000, which converts into common stock upon the closing of this
offering; and

. issuance of 65,595 shares upon the assumed exercise of outstanding
warrants that would otherwise terminate upon the closing of this
offering.

The pro forma as adjusted column also reflects the:

. sale in this offering of shares of common stock, based on an
assumed initial public offering price of $ per share and the
application of the net proceeds therefrom.

<TABLE>
<CAPTION>
As of June 30, 2000
-------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents..................... $ 11,991 $11,991
Working capital............................... 10,112 10,112
Total assets.................................. 19,309 19,309
Mandatorily redeemable convertible preferred
stock....................................... 55,664 --
Mandatorily redeemable convertible preferred
stock warrants.............................. 5,280 --
Total stockholders' equity (deficit).......... (48,381) 12,563
</TABLE>

6
<PAGE>

RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should carefully consider the following risks and the other information in this
prospectus before investing in our common stock. Our business and results of
operations could be seriously harmed if any of the following risks occur. 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. Additional risks not presently
known to us, or that may be currently considered by us to be immaterial, may
also impair our business operations.

Risks Related to Our Business

We have lost money in the past and expect to continue to experience operating
losses for the foreseeable future. We cannot predict our future operating
results with any significant degree of accuracy and cannot assure you that we
will ever become profitable.

If we do not become profitable, or if market analysts or investors do not
believe that we can become profitable in the near future, the trading price of
our common stock could decline, and you could lose all of your investment. We
have never had a profitable quarter, and prediction of our future operating
results is difficult, if not impossible. If we do not achieve or sustain
profitability in the future, we may be unable to continue our operations. We
incurred operating losses of $797,000 in 1995, $2.2 million in 1996,
$3.6 million in 1997, $12.2 million in 1998, $15.2 million in 1999, and $10.9
million for the six months ended June 30, 2000. As of June 30, 2000, we had an
accumulated deficit of $51.2 million. We cannot assure you that our revenues
will grow or that we will achieve or maintain profitability in the future. In
any event, we currently expect to experience operating losses for the
foreseeable future. In addition, we expect that our product development, sales
and marketing and administrative expenses will increase significantly in the
future. Accordingly, in order to achieve and maintain profitability, we will
need to significantly increase our revenues.

We have recently expanded the functionality and scope of our automated payment
processing solution, which could result in an adverse effect on our business
and results of operations if our expanded solution does not achieve customer
acceptance or if we are not successful in selling or implementing our solution.

Beginning in the first quarter of 2000, we expanded the functionality of
our automated payment processing solution, which we call Captura Expense, to
include management of corporate expenses other than travel and entertainment
expenses. We now offer a solution that addresses, in addition to travel and
entertainment, expenses related to corporate automobile and truck fleets,
procurement and telephone calls. To date, only General Motors has completed a
more comprehensive implementation of our automated payment processing solution.
General Motors is currently deploying Captura Expense, through an agreement
with Citicorp, to manage corporate expenditures through a single charge card
carried by certain General Motors employees based in North America. Because we
have a limited history marketing and selling Captura Expense in its more
comprehensive implementation, we cannot assure you that it will achieve market
acceptance. In addition, our implementation at General Motors included
significant marketing and sales efforts by Citicorp as the corporate charge
card provider. In the General Motors implementation, we act as a sub-contractor
to Citicorp and do not have a direct contractual relationship with General
Motors. In addition, we are continuing to develop the business rules associated
with non-travel expenses and increase the functionality of the product to cover
a broader array of expense types. We may encounter technical difficulties,
delays, and unforeseen expenses as we continue our product development and
technological integration efforts.

The market for automated payment processing solutions is newly emerging. If
this market does not grow as we anticipate, our revenues and client bookings
could decline.

If automated payment processing services fail to gain widespread
acceptance, our client bookings, revenues and results of operations will be
harmed. Companies have historically performed the processes addressed by
automated payment processing services internally. Accordingly, our future
success will depend on the willingness of companies to adopt third-party
applications like Captura Expense. In addition, companies

7
<PAGE>

that have already invested substantial resources in developing their own
internal methods of dealing with these expense management issues may be
reluctant to adopt a new strategy. Even if companies decide to purchase
automated payment processing services, they may still choose to manage
significant aspects of their payment processing internally.

Since late 1999, we have focused on providing our solution under a hosted
subscription-based model rather than a traditional software license model. We
may not be successful in developing, marketing and selling our solution in this
manner, which would cause our revenues or client bookings to decline.

In late 1999, we began to market Captura Expense as a subscription-based
service. In light of this model and our on-going efforts to expand Captura
Expense as a comprehensive automated payment processing solution, our
historical business differs from our existing business and from our business as
we expect it to evolve in the future. As a result, it may be difficult for you
to accurately evaluate our prospects or to compare our results of operations
with those of other software companies, including our competitors. We have
relatively limited experience selling our solution under this subscription
model, and our efforts to develop this business will require substantial
management time and attention. Current license clients and prospective clients
may not accept our subscription fee structure. In addition, many companies may
be reluctant to use subscription services for their operations and prefer to
purchase enterprise licenses and manage these functions internally. These
companies may not consider subscription services for these functions in the
near future, if at all. We have experienced reluctance from some prospective
clients, particularly European clients, to purchase our solution on a
subscription basis; in these cases, we have agreed to sell our solution on a
license basis. If companies determine that our subscription solution does not
provide adequate security, or is otherwise inadequate, or if for any other
reason companies fail to accept our solution on a subscription basis, our
business and operating results would be seriously harmed.

The strategic shift away from a software license revenue model to a
subscription revenue model could have an adverse effect on our operating
results and rates of revenue growth.

Our recent shift in focus toward a subscription revenue model could have an
adverse effect on our operating results and rates of revenue growth,
particularly relative to software companies operating under a traditional
license model. As a result, the subscription revenue model is potentially less
profitable for us. Historically, we sold our solution on a perpetual license
basis in exchange for an up-front license fee. In addition, our license clients
typically purchase continuing maintenance services from us on an annual basis.
Under the subscription revenue model, however, we will generally recognize
revenue, and receive payment, ratably over the term of the client's
subscription. As a result, our rates of revenue growth and operating profits,
if any, may be less than those of comparable companies operating under the
license model. In addition, the subscription revenue model could have an
adverse effect on our cashflows and financial condition relative to those of
comparable companies under the license model. If the subscription revenue model
proves less attractive than a license model, financially or otherwise, it may
be very difficult for us to change or refocus our business strategies quickly.
If our implementation of the subscription revenue model is not successful, or
if market analysts or investors do not believe that the model is attractive
relative to traditional license models, our business and our stock price could
decline dramatically.

In order to achieve profitability under the subscription revenue model, we
will be required to accurately predict our future expenses over the term of our
subscription contracts. We expect the typical term of our subscriptions to be
three years. The price of our services is fixed at the time of signing for the
term of the subscription. If we experience unanticipated increases in the costs
associated with servicing our subscription clients, as a result of inflation,
inaccurate internal cost projections, or other factors, our operating results
could be substantially harmed.

We believe that predicting our future revenues will be difficult for market
analysts, investors and our company. In particular, we do not believe that our
client bookings in any specific period or over multiple

8
<PAGE>

periods are a reliable indicator of our future revenues or operating results.
We do not have a substantial operating history with respect to our subscription
model and cannot predict what percentage, if any, of contractual subscription
commitments will actually result in recognized revenues. Some of our
subscription contracts contain cancellation provisions, and as a result, we may
recognize substantially less revenue than the aggregate value of those
contracts over their terms. Clients who enter subscription contracts without
cancellation provisions may nevertheless seek to terminate their contracts with
us, and we may be unwilling, for business or other reasons, to sue our clients
to enforce the contract terms. In addition, we will generally not be able to
recognize subscription revenue under a contract until our solution has been
implemented, and the implementation cycle for our solution can be long and
unpredictable. In particular, we may experience problems integrating our
solution with a client's existing systems or business practices, which could
substantially delay the implementation or result in a cancellation or attempted
cancellation of the subscription agreement.

Our revenues, client bookings and operating results are subject to significant
quarterly fluctuations that may cause our stock price to decline.

We have experienced, and expect to continue to experience, fluctuations in
our client bookings, revenues and operating results on both an annual and
quarterly basis. It is possible that in some future quarter our revenues,
client bookings, or operating results may not meet the expectations of market
analysts and investors and, as a result, the price of our common stock may
fall. Historically, most software companies operating under a license model
have tended to recognize their revenues during the last weeks or days of a
given quarter, as customers timed their negotiations at quarter-end in an
effort to improve their ability to negotiate more favorable pricing terms.
Based on our subscription model, we do not expect our quarter-to-quarter
revenues to be as dependent in future quarters on the completion of one or more
large licensing contracts. Nevertheless, we believe market analysts will
closely scrutinize our client bookings during a particular quarter in an effort
to project our revenues and operating results in future periods. Accordingly,
we anticipate our clients will have similar incentives to defer signing with us
until the last weeks or days of a quarter. If, in a particular quarter, our
revenues or our client bookings are less than market analysts or investors
estimate, our stock price could decline dramatically. In addition, a shortfall
in revenues in a particular period could result in our operating results being
impaired, and a shortfall in client bookings could result in future revenues
and operating results being impaired.

Fluctuations in our revenues, client bookings and current or future
operating results may be affected by one or more of the following:

. our ability to retain existing clients and attract new clients at a
steady rate;

. cancellations of existing subscription and license agreements;

. the timing, size, and contractual terms of sales of our solution,
including a delay in the timing of one or more large subscriptions;

. an inability of our resellers or channel partners to sell our products
and services;

. the announcement and introduction of new applications and application
enhancements by us or our competitors;

. the amount and timing of operating costs and capital expenditures
relating to the expansion of our business, operations and
infrastructure;

. changes in our pricing policies or our competitors' pricing policies;

. governmental regulation;

. our mix of domestic and international sales; and

. customer budgeting cycles and changes in those budgeting cycles.

9
<PAGE>

In an effort to broaden our product offering and increase our revenues, we
expect to incur significant sales and marketing, research and development, and
general and administrative expenses in future periods. These current expense
estimates are based, in large part, on our expectations of future revenue. Many
of these expenses are fixed and cannot be quickly changed. If our revenues fall
below our expectations and we are not able to quickly reduce our spending in
response, our business, operating results and financial condition would be
harmed.

We derive our revenues from a small number of clients and the loss of a major
client could harm our business.

The loss of a major client, or the deferral or loss of anticipated orders
from a small number of prospective clients could materially and adversely
impact our client bookings, revenues and operating results in any period or
over several periods. We licensed our first application in 1996 and have fully
implemented our solution for only a limited number of clients to date. Our
subscription-based solution has been implemented with a very small number of
clients, and only General Motors has implemented our solution with its most
comprehensive functionality. As of September 30, 2000, we had a total of 50
clients. During 1999 and the first six months of 2000, four clients accounted
for approximately 55% of our total revenues. We expect that we will continue to
derive a significant portion of our revenues from a relatively small number of
clients in the future.

We rely heavily on sales of our Captura Expense solution. Our revenues and
client bookings will not increase and our operating results will suffer if we
are unsuccessful in marketing and selling this solution.

We currently derive substantially all of our revenue from licenses of or
subscriptions for Captura Expense. We expect to continue to derive a major
portion of our revenue from Captura Expense for the foreseeable future. Our
future financial performance will depend in part upon the successful
development, introduction or acceptance of new and enhanced versions of Captura
Expense. For example, Captura Expense is designed for use only with Microsoft
NT servers. We believe that it is necessary to modify this application to be
compatible with UNIX-based servers in order to more cost-effectively scale our
solution and to accommodate more customers per server than is currently
possible. We are currently working to modify Captura Expense for use on UNIX
servers. These modifications may require substantial time and expense and
divert the attention of our research and development personnel from other
opportunities, including further development of the functionality of Captura
Expense. We may not introduce or deliver new or enhanced versions of Captura
Expense, or solutions addressing new automated payment processing applications,
on a timely basis or at all. For instance, our initial release of Captura
Expense was delayed several months from the originally anticipated release
date.

Our lengthy sales cycle could cause delays and unpredictability in client
bookings and revenue growth, any of which could cause our stock price to
decline.

Our clients' planning and purchase decisions involve a significant
commitment of resources and a lengthy evaluation and product qualification
process. The sales cycle for our applications requires us to engage the
prospective client in demonstrations, training, and negotiations that, if they
result in a sale, typically require six to nine months to complete. The length
of our sales cycle may be extended beyond six or nine months due to factors
over which we have little or no control, including the size and complexity of
the sale or implementation and the level of competition we experience. Many of
our clients are large, multinational corporations, where the decision-making
process can be particularly slow. In addition, because our subscription-based
services are new to many companies, we may need to extend our sales cycle in
order to educate those companies about this model. Delays and unpredictability
in new client orders resulting from our lengthy sales cycles could result in
client bookings or revenues being substantially below the expectations of
market analysts or investors, which could cause a decline in our stock price.
We may incur substantial sales and marketing expenses during a particular
period in an effort to sign new clients. If we are unsuccessful in signing new
clients, or otherwise in

10
<PAGE>

generating offsetting revenues during that period, our revenues and client
bookings could be substantially reduced, and our operating results could be
impaired.

Our reliance on third parties to deliver our automated payment processing
solution and risks associated with our use of the Internet may harm our
business, client bookings, revenues and operating results.

As part of our subscription revenue model, we engage Exodus Communications,
Intel Online Services and Qwest Cyber.Solutions, among others, as third-party
service providers to perform many necessary services such as managing the
application servers, maintaining communications equipment and managing network
data centers where our software and data are stored, as well as providing
client support and application maintenance. These third-party service providers
may not deliver adequate support or service to our clients, which may harm our
reputation and our business. Because these third-party service providers handle
the installation of the computer and communications equipment and software
needed for the day-to-day operations of our subscription-based application
services, we are also dependent on them to manage, maintain and provide
adequate security for our automated payment processing solution. We have
limited experience outsourcing these services and may have difficulties
managing this process. We will be required to monitor our third-party service
providers to ensure that they perform these services adequately. In addition,
our agreements with Exodus, Intel and Qwest are generally terminable without
cause upon prior notice. If we are unable to successfully maintain our
relationships with Exodus, Intel and Qwest, or if any of these companies were
unable to perform critical support functions for us, we would have to find
replacement third-party service providers or perform these functions ourselves.
We may not successfully obtain or perform these services on a timely or cost-
effective basis.

If our clients experience any delays in response time or performance
problems while using our hosted subscription-based solution, they may perceive
our solution as not functioning properly or as being unreliable, causing them
to use other methods to manage their expenses. If the volume of traffic on the
servers housing our applications, or on the Internet as a whole, substantially
increases, customers may be unable to connect to our servers, and could
experience slower response times or other technical problems. Users depend on
Internet service providers, telecommunications companies and the efficient
operation of their computer networks and other computer equipment for access to
our Internet-based application services. Many of these have experienced
significant outages in the past and could experience outages, delays and other
difficulties due to system failures unrelated to our systems. Further, the data
centers where our software and data are physically stored are susceptible to
damage from fire, power loss, water damage, earthquakes, telecommunications
failures, viruses, vandalism and other malicious acts, as well as similar
unexpected adverse events.

Intense competition in our industry could substantially impair our business and
our operating results.

The market for our solution is intensely competitive, subject to rapid
change and significantly affected by new product introductions and other market
activities of industry participants. If we are unable to compete effectively,
our revenues could decline, our expenses could increase, and we could
experience larger losses. Our primary source of direct competition is currently
from vendors of financial and expense management software applications. We also
face indirect competition from potential customers' internal development
efforts and their reluctance to move away from existing manual processes. Our
direct and indirect competitors include providers of expense management
application software and providers of enterprise resource planning and
procurement applications that include some of the functionality offered by our
products, including Ariba, Concur Technologies, Extensity, Gelco, IBM, Necho,
Oracle, PeopleSoft and SAP. Some major credit card companies have on occasion
partnered with our competitors to provide products and services linked to their
corporate cards, which include some of the benefits and features of our
solution. In addition, we may face competition from smaller, entrepreneurial
companies that may offer products and services that compete with our automated
payment processing solution.

Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources than we do, and have significantly greater name recognition.

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<PAGE>

In addition, many of our competitors have well-established relationships with
our current and potential customers as well as with systems integrators and
other vendors and service providers. Most of the major enterprise software
vendors have a significant installed customer base and have the opportunity to
offer additional applications as components of their application suites.
Further, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
the ability of their applications to address customer needs. Accordingly, it is
possible that new competitors or alliances among competitors may emerge and
rapidly acquire significant market share. We also expect that competition will
increase as a result of industry consolidations. Increased competition is
likely to result in price reductions, reduced gross margins and loss of market
share, any one of which could seriously harm our business.

We have experienced significant growth in our business in recent periods and
failure to manage our growth could strain our management and other resources.

We have increased, and plan to continue to increase, the scope of our
operations at a rapid rate. Future expansion efforts could be expensive and
could strain our management and resources. Our operating results could suffer
and our relationships with our customers could be harmed if we are unable to
manage this growth effectively. Our headcount has grown substantially,
increasing from 61 employees in January 1998 to 200 employees at September 30,
2000. In addition, we expect to hire a significant number of new employees in
the near future. To manage future growth effectively, we must maintain and
enhance our financial and accounting systems and controls, integrate new
personnel and manage expanded operations.

New versions and releases of our automated payment processing solution may
contain errors or defects, which could seriously harm our business.

The software applications underlying our automated payment processing
solution are complex and, accordingly, may contain undetected errors or
failures when first introduced or as new versions are released. If these
application errors or defects are substantial, this may result in loss of, or
delay in, market acceptance of our solution. We have in the past discovered
software errors in our new releases and new applications after their
introduction, and we may find errors in newly released applications in the
future. In the event that we experience significant software errors in future
releases, we could experience delays in application releases, client
dissatisfaction, and lost revenues while we try to correct these errors.

If we do not establish and maintain strategic relationships with financial
institutions and technology providers, our business may suffer.

We currently have strategic technology and business relationships with
MasterCard and Hewlett-Packard. If we are unable to maintain these existing
strategic relationships or enter into additional strategic relationships, it
may be necessary to devote substantially more resources to the development,
sales and marketing of our solution. In addition, we would not receive valuable
customer introductions and co-marketing benefits, and our business may suffer
as a result. Due to our emphasis on strategic relationships, our success will
depend in part on the ultimate success of the other parties in our
relationships.

Our existing strategic relationships do not, and any future strategic
relationships may not, provide us any exclusive rights. Many of the companies
with which we intend to establish strategic relationships have multiple
strategic relationships, and these companies may not regard their relationships
with us as significant for their own businesses, or they may reduce their
commitment to us at any time in the future. Additionally, these parties may
pursue other partnerships or relationships, or attempt to develop or acquire
applications or services that compete with our applications or services either
on their own or in collaboration with others, including our competitors.
Further, our existing strategic relationships may interfere with our ability to
enter into other desirable strategic relationships. Any future inability to
maintain our strategic relationships or to enter into additional strategic
relationships may materially harm our business, client bookings, results of
operations and financial condition.

12
<PAGE>

If we are unable to retain our current key personnel or hire additional key
personnel, particularly in the areas of sales, engineering and application
development, our ability to develop, introduce or sell our automated payment
processing solution could be harmed.

Our future performance depends on the continued service of our senior
management and our development and sales and marketing personnel. The loss of
the services of one or more of our key employees could seriously harm our
business. Our future success also depends on our continuing ability to attract,
hire, train and retain a substantial number of highly skilled managerial,
technical, sales, marketing and customer support personnel. There is currently,
and we expect there will continue to be, substantial competition for
experienced engineering, sales and consulting personnel in the software
industry. Many of the companies with which we compete for experienced personnel
have greater visibility and financial and other resources than we do. Even if
we can hire new personnel, new employees frequently require extensive training
before they achieve desired levels of productivity. Failure to retain our key
employees or to attract or retain other highly qualified personnel could have a
material adverse effect on our ability to increase our revenues. In addition,
it could have an adverse effect on our ability to update and improve our
current technologies or develop any new technologies.

If the protection of our intellectual property is inadequate, our competitors
may gain access to our technology and we may lose customers.

If we are unable to maintain the proprietary aspects of our technology, our
business may be harmed. To protect our proprietary technology, we rely
primarily on a combination of contractual provisions, confidentiality
procedures and trade secret, copyright and trademark laws. Trade secret and
copyright law offers limited protection for our software, documentation and
other written materials. Our proprietary rights may not be viable or of any
value in the future because the validity, enforceability and type of protection
of proprietary rights in Internet-related industries are uncertain and still
evolving. We presently have no patents or patent applications pending.

Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our software or to obtain and use information
that we regard as proprietary. Policing unauthorized use of our application
services is difficult. We cannot determine the extent to which piracy of our
software applications exists and software piracy can be expected to be a
persistent problem. In addition, the laws of some foreign countries do not
protect our proprietary rights to the same extent as do the laws of the United
States, and we expect that it will become more difficult to monitor use of our
products as we attempt to expand our international presence. Further, our
competitors may independently develop similar technologies and duplicate our
solutions or design around our intellectual property.

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
future applications or services infringe upon their intellectual property
rights. We expect that software product developers and providers of Internet-
based software applications 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 overlaps. Any claims,
with or without merit, could be time-consuming, result in costly litigation,
cause delays in our development efforts 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.

If we are unsuccessful in expanding our business internationally, our client
bookings, revenues and operating results could be harmed.

In order to grow our business, increase our revenues, and improve our
operating results, we believe we must expand internationally. If we expend
substantial resources pursuing an international strategy and are not
successful, our revenues would be less than market analysts or investors
anticipate, our operating results could suffer, and our stock price could
decline dramatically. Revenues from clients outside the United States were

13
<PAGE>

insignificant prior to 1998, represented 16.9% of total revenues in 1999, and
12.0% of total revenues for the six months ended June 30, 2000. To date, we
have established international sales offices in London, Paris, and Sydney.

International expansion will require significant management attention and
financial resources, and we may not be successful expanding our international
operations. In particular, we intend to establish additional international
sales offices, expand our international management, sales, and support
organizations, and enter into relationships with additional international
application service and hosting providers. Establishing strategic relationships
to host Captura Expense for our clients in Europe has proven more difficult
than in North America as fewer companies currently offer such services in
Europe. We are currently relying on our relationships with Intel, Exodus and
Qwest, among others, to host our services in Europe. We are also working to
establish a strategic hosting relationship in Australia and the Pacific Rim.
Intel, Exodus and Qwest are in the process of increasing the scope of their
international operations, particularly in Europe. As a result, our ability to
increase our revenues in Europe and other international markets may be affected
by limitations on our ability to establish local hosting relationships or the
ability of our existing hosting providers to establish and staff international
data centers. Even if we are successful in establishing sufficient hosting
relationships, we have experienced greater reluctance by European clients,
relative to clients in North America, to purchase our solution under our
subscription revenue model.

Marketing our solution overseas also requires that we develop customized
applications for local markets. In particular, our ability to expand
internationally will depend upon our ability to develop solutions that
incorporate the tax laws and accounting practices in local markets and to
develop applications that support additional currencies. Outside the major
European countries, we have limited experience in developing local versions of
our applications. As a result, entering each new market, particularly those in
smaller European countries or in Asia, will require a significant investment of
managerial, development, and administrative personnel to learn local laws and
practices, to integrate those laws and practices into our business rules, and
to develop local language versions of our products.

Conducting business internationally poses risks that could affect our operating
results.

Conducting business outside North America poses many risks that could
adversely affect our operating results, including the following:

. gains and losses resulting from fluctuations in currency exchange
rates, for which we do not currently engage in hedging activities;

. longer payment cycles;

. compliance with multiple, conflicting, and changing governmental laws
and regulations, including privacy laws;

. export license requirements;

. costs of customizing applications and services for foreign countries,
including translating our software interface into foreign languages;

. greater difficulty in collecting accounts receivable;

. tariffs, taxes, price controls, and other restrictions that impair
trade;

. difficulties staffing and managing foreign operations; and

. political and economic instability.

In the United Kingdom, we sell our products in pounds sterling, and in
continental Europe and Australia, we sell our products in United States
dollars. With respect to sales denominated in pounds sterling, in the event of
a devaluation of the pound sterling between the time that a payment is
established or due, and the time the

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<PAGE>

payment is received and converted by us into United States dollars, we may
suffer an exchange loss which could materially and adversely affect our results
of operations. The exchange rate risk will be more pronounced under our
subscription revenue model as revenue will be recognized, and payments
received, over a period of several years after the original client contract is
entered. In addition, to the extent we sell our products internationally in
United States dollars, adverse movements in local currencies relative to the
dollar, such as have recently been experienced with the Euro and local European
currencies, could have an adverse effect on our ability to sell our services in
markets with devalued currencies. We also incur some expenses in local
currencies related to our operating activities and sales offices in foreign
countries and could experience exchange losses in the future as a result of
adverse currency fluctuations. To date, we have not implemented any hedging
activities in order to mitigate our exchange rate risk. We intend to continue
to evaluate these risks, based on the relative size of our international
operations and management's analysis of the potential exchange rate risks. As a
result, we may at some point in the future determine it advisable to engage in
exchange rate hedging activities. We cannot ensure, however, that any such
hedging activities would adequately compensate us for exchange losses we may
incur.

Security breaches could diminish demand for our solution and expose us to
liability.

Our software applications may be vulnerable to break-ins, theft or other
improper activity that could jeopardize the security of information for which
we are responsible. Problems caused by security breaches could result in loss
of or delay in client bookings, revenues, loss of market share, failure to
achieve market acceptance, diversion of development resources, harm to our
reputation, increased insurance costs or increased service and warranty costs.
In addition, there may be privacy issues surrounding some of the information we
store on our data servers, such as credit card numbers and purchasing history,
and a security breach involving this type of data could be particularly
damaging to our business. We currently retain highly confidential purchasing
and credit card information regarding our customers and their employees in our
data warehouse. Any breach of our security could result in the misappropriation
of customer or customer employee confidential information and expose us to
potential liability. To address those problems, we may need to expend
significant capital and resources that may not have been budgeted.

Privacy regulations in Europe may restrict the use of our solution, which could
harm our business.

Our solution allows us to receive highly confidential information from our
clients and their employees over the Internet. Privacy regulations in Europe
may limit our ability to serve multi-national companies, which could cause us
to lose customers and prevent us from expanding internationally. The European
Union has adopted a directive addressing data privacy that may result in
limitations on the collection, use, and transfer of information that will
impact Internet users. The Directive on Data Protection, which became effective
on October 25, 1998, prohibits the transmission of personal data to a country
or territory outside of the European Union, such as the United States, unless
that country or territory ensures an adequate level of data protection. The
United States Department of Commerce and the European Commission have developed
a "safe harbor" framework that will allow United States organizations to
satisfy the Directive's requirements by complying with a set of principles
regarding the collection, use, transfer, and protection of personal data.
Compliance with these principles may limit our ability to serve multi-national
companies.

We may be subject to product liability claims in the future which may harm our
business.

Because clients rely on our solution for business-critical processes, any
significant defects or errors in our application services might depress future
sales or result in product liability or breach of warranty claims, either of
which could harm our business. It is possible that the limitation of liability
provisions in our contracts may not be effective as a result of existing or
future federal, state or local laws or ordinances or unfavorable judicial
decisions. We have not yet experienced these types of claims, but we could in
the future. Further, our errors and omissions insurance coverage may not be
adequate to cover us. Merely defending a suit like this, regardless of its
merits, could mean substantial expense and require the time and attention of
key management personnel.

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<PAGE>

We may need to make acquisitions in order to remain competitive in our market,
and our business could be adversely affected as a result of any of these future
acquisitions.

In order to remain competitive, we may find it necessary to acquire
additional businesses, products or technologies. If we identify an appropriate
acquisition candidate, we may not be able to negotiate the terms of the
acquisition successfully, finance the acquisition, or integrate the acquired
business, products or technologies into our existing business and operations.
Further, completing a potential acquisition and integrating an acquired
business will cause significant diversions of management time and resources. If
we consummate one or more significant acquisitions in which the consideration
consists of stock or other securities, your equity interest in our Company
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, to consummate the acquisition. Acquisition financing may not
be available on favorable terms, or at all. In addition, we may be required to
amortize significant amounts of goodwill and other intangible assets in
connection with future acquisitions, which would seriously harm our business.

Risks Related to Our Common Stock and this Offering

Our stock price may be volatile, which could negatively affect your investment
in our common stock.

The market price of common stock of software and Internet-based companies
has been highly volatile in recent years and you may be unable to sell your
shares of common stock at or above the offering price. Prior to this offering,
you could not buy or sell our common stock publicly. An active public market
for our common stock may not develop or be sustained after the offering. We
will negotiate and determine the initial public offering price with the
representatives of the underwriters based on several factors. This price may
vary from the market price of the common stock after the offering. The market
price of the common stock may fluctuate significantly in response to many
factors, including the following:

. demand for our solution;

. our ability to develop, introduce, and market new products and
enhancements on a timely basis;

. our ability to control costs;

. technological changes;

. variations in our quarterly operating results;

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

. changes in market valuations of similar companies;

. announcements by us or our competitors of significant contracts,
changes in pricing policies, acquisitions, strategic partnerships,
joint ventures or capital commitments;

. loss of a major customer;

. additions or departures of key personnel; or

. fluctuations in stock market price and volume.

Sales of our common stock into the public market following this offering could
cause the market price of our common stock to fall and harm our ability to
raise money through sales of equity securities.

The value of your investment in our common stock and our ability to raise
money through the sale of additional equity securities could be adversely
affected if our existing stockholders sell large amounts of their Captura
common stock into the public market. If significant volumes of our common stock
are sold into the public market, the market price of our common stock and
therefore the value of your investment could fall. This could impair our
ability to raise capital through the sale of additional equity securities.
Based on shares

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<PAGE>

outstanding as of September 30, 2000, upon completion of this offering, we will
have shares of common stock outstanding. The holders of substantially
all of our currently outstanding stock are subject to lock-up agreements
providing that, with limited exceptions, they will not sell or otherwise
dispose of any shares of our common stock for a period of 180 days after the
date of this prospectus without the prior written approval of Banc of America
Securities LLC. When these lock-up agreements expire, many of these shares and
the shares of common stock underlying any options held by these individuals
will become eligible for sale.

Investors in this offering will incur immediate, substantial dilution.

The initial public offering price of our common stock is substantially
higher than the book value per share of the outstanding common stock. As a
result, investors purchasing common stock in this offering will incur immediate
and substantial dilution. In the past, we issued options and warrants to
acquire capital stock at prices significantly below the initial public offering
price. To the extent these outstanding options are ultimately exercised, there
will be further dilution to investors in this offering. See "Dilution."

Our management will have broad discretion over the use of proceeds from this
offering.

Our management may spend the proceeds of this offering in ways with which
market analysts or investors may not agree. The primary purposes of this
offering are to increase the our equity capital, to create a public market for
our common stock and to facilitate future access to public capital markets. We
have not designated any significant portion of the anticipated net proceeds of
this offering for any specific use. We cannot predict that the proceeds of this
offering will be invested to yield a favorable return. See "Use of Proceeds."

We have implemented specific antitakeover provisions that could make it more
difficult for a third-party to acquire us, which could prevent you from
realizing a premium over the market price of our common stock in an
acquisition.

Provisions of our amended and restated certificate of incorporation and
bylaws, as well as provisions of Delaware and Washington law, could make it
more difficult for a third-party to acquire us, even if doing so would be
beneficial to our stockholders. Therefore, you may not be able to realize a
premium over the market price of our common stock in an acquisition. For a
detailed description of these antitakeover provisions, see "Description of
Capital Stock--Antitakeover Effects of Provisions of our Amended and Restated
Certificate of Incorporation and Delaware and Washington Law."

Control by our existing stockholders, officers, and directors may limit your
ability to influence matters requiring stockholder approval or prevent a change
of control, which could prevent you from realizing a premium in the market
price of our common stock.

Upon completion of this offering, our executive officers, directors and
principal stockholders will beneficially own, in the aggregate, approximately
% of our common stock. In addition, major stockholders such as Ford Motor
Company, Donaldson Lufkin & Jenrette, Oak Investment Partners, and Merrill
Lynch will each beneficially own in excess of % of our common stock. As a
result, any of these stockholders acting individually, or any combination of
two or more of these stockholders acting together, could exercise substantial
control over matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions. The influence and
voting control of one or more of these stockholders could have the effect of
delaying or preventing a third party from acquiring control of us, which could
prevent you from realizing a premium in the market price of our common stock.

17
<PAGE>

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 "may," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of such 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 under "Risk Factors."
These factors may cause our actual results to differ materially from any
forward-looking statement. We cannot guarantee future results, levels of
activity, performance or achievements.

USE OF PROCEEDS

Net proceeds from the sale of our shares of common stock at an assumed
initial offering price of $ per share are estimated to be approximately $
million. If the underwriters' over-allotment option is exercised in full, our
net proceeds will be approximately $ million.

The principal purposes of this offering are to obtain additional working
capital, to create a public market for our common stock and to facilitate
future access by Captura to public equity markets. We expect to use the net
proceeds for general corporate purposes, including sales and marketing, product
development and other corporate expenses. Pending these uses, the net proceeds
of this offering will be invested in short-term, investment grade, interest-
bearing instruments.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain future earnings, if any, to support the development
of our business and do not anticipate paying cash dividends for the foreseeable
future. Payment of future dividends, if any, will be at the discretion of our
board of directors after taking into account factors, such as our financial
condition, operating results and current and anticipated cash needs. Our
existing bank line of credit prohibits the payment of cash dividends.

CORPORATE INFORMATION

Captura Software, Inc. was incorporated in Delaware in November 1994. Our
principal executive office is located at 6710 108th Avenue NE, Kirkland, WA
98033, and our telephone number is (425) 803-6000. Captura is a registered
trademark of Captura Software, Inc. Every other trademark, tradename or service
mark of any other company appearing in this prospectus belongs to its
respective holder.

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<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2000:

. on an actual basis;

. on a pro forma basis giving effect to (i) the conversion of all
outstanding shares of preferred stock into common stock, excluding the
issuance of 2,218,567 shares of Series E preferred stock in September
2000, which will also convert into common stock upon the closing of
this offering; (ii) the issuance of 65,595 shares upon the assumed
exercise of outstanding warrants that otherwise terminate upon the
closing of this offering; and (iii) the reversal of cumulative
preferred stock dividends; and

. on a pro forma as adjusted basis giving effect to the sale in this
offering of shares of common stock at an assumed initial
public offering price of $ per share, less underwriting
discounts and commissions and estimated offering expenses payable by
Captura.

This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and related notes included elsewhere in this prospectus.

<TABLE>
<CAPTION>
As of June 30, 2000
--------------------------------
(in thousands, except share
data)
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
<S> <C> <C> <C>
Long term obligations.......................... $ 878 $ 878 $
Mandatorily redeemable convertible preferred
stock
Authorized 11,903,879 shares, issued and
outstanding 9,745,503 shares; none pro forma
or pro forma as adjusted.................... 55,664 --
Mandatorily redeemable convertible preferred
stock warrants............................... 5,280 --
Stockholders' equity (deficit):
Common stock, $.001 par value; 40,000,000
shares authorized, 2,677,802 shares issued
and outstanding; 12,488,900 shares issued
and outstanding--pro forma; shares
issued and outstanding--pro forma as
adjusted................................... 3 12
Additional paid in capital..................... 6,281 61,936
Note receivable from stockholders.............. (971) (971)
Unearned stock-based compensation.............. (2,439) (2,439)
Accumulated other comprehensive loss........... (67) (67)
Accumulated deficit............................ (51,188) (45,908)
-------- -------- -----
Total stockholders' equity (deficit).......... (48,381) 12,563
-------- -------- -----
Total capitalization......................... $ 13,441 $ 13,441 $
======== ======== =====
</TABLE>

This table excludes the following shares:

. 3,058,724 shares issuable upon exercise of options outstanding as of
June 30, 2000 at a weighted average exercise price of $5.54 per share;

. 3,762,948 shares issuable upon exercise of warrants that are expected
to remain outstanding after this offering at a weighted average
exercise price of $8.06 per share;

. 1,523,854 shares available for future grant under our 1997 stock
option plan;

. 200,000 shares of common stock available for issuance under our 2000
director stock option plan; and

. 500,000 shares of common stock available for issuance under our 2000
employee stock purchase plan.

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<PAGE>

DILUTION

Our net tangible book value as of June 30, 2000 was $12.5 million or $1.00
per share of common stock. The net tangible book value per share of common
stock is determined by subtracting our total liabilities from the total book
value of our tangible assets and dividing the difference by the number of
shares of common stock deemed to be outstanding on the date as of which such
book value is determined, giving effect to the conversion of all outstanding
shares of preferred stock and the issuance of 65,595 shares upon the assumed
exercise of outstanding warrants that otherwise terminate upon the closing of
this offering. After giving effect to receipt of net proceeds from the sale of
the shares of common stock in this offering, assuming an initial
public offering price of $ per share and after deducting the estimated
underwriting discounts and commissions and offering expenses, payable by us,
our adjusted net tangible book value as of June 30, 2000 would have been $
million, or $ per share. This represents an immediate increase in net
tangible book value of $ per share to existing stockholders and an
immediate dilution of $ per share to new investors purchasing shares at the
initial public offering price. Dilution is defined as the reduction in the
proportion of income, or earnings per share, to which each share is entitled
due to additional shares being issued. The following table illustrates the per
share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $
Net tangible book value per share as of June 30, 2000.............. $1.00
Increase per share attributable to new investors...................
-----
Adjusted net tangible book value per share after this offering......
-----
Dilution per share to new investors................................. $
=====
</TABLE>

The following table sets forth as of June 30, 2000, the number of shares of
common stock purchased from us, the total consideration paid to us and the
average price per share paid by the existing shareholders and by the investors
purchasing shares of common stock in this offering (before deducting the
estimated underwriting discounts and commissions and offering expenses payable
by us):

<TABLE>
<CAPTION>
Average
Shares Purchased Total Consideration Price
------------------ ------------------- Per Share
Number Percent Amount Percent ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 12,488,900 $59,571,330 $4.77
New investors.................
---------- --- ----------- ---
Total....................... 100% 100%
========== === =========== ===
</TABLE>

This table excludes the following:

. 3,058,724 shares issuable upon exercise of options outstanding as of
June 30, 2000 at a weighted average exercise price of $5.54 per share;

. 3,762,948 shares issuable upon exercise of warrants that are expected
to remain outstanding after this offering at a weighted average
exercise price of $8.06 per share;

. 1,523,854 shares of common stock available for future grant under our
1997 stock option plan;

. 200,000 shares of common stock available for issuance under our 2000
director stock option plan;

. 500,000 shares of common stock available for issuance under our 2000
employee stock purchase plan; and

. 2,218,567 shares of Series E preferred stock issued in September 2000.

To the extent that any shares are issued upon exercise of options or
warrants that were outstanding on June 30, 2000, or granted after that date, or
reserved for future issuance under our stock plans, there will be further
dilution to new investors.

20
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except share data)

The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The consolidated statements of
operations data for the years ended December 31, 1995, 1996, 1997, 1998 and
1999, are derived from our consolidated financial statements. The 1997, 1998
and 1999 annual consolidated financial statements have been audited by Deloitte
& Touche LLP, independent auditors, and are included elsewhere in this
prospectus. The consolidated financial data for the year ended December 31,
1996 are derived from our audited financial statements not included in this
prospectus. The consolidated financial data for the year ended December 31,
1995 and for the six months ended June 30, 1999 and 2000 have not been audited.

We believe we have prepared the unaudited consolidated financial statements
on a basis consistent with our audited consolidated financial statements which
appear elsewhere in this prospectus and include all adjustments, consisting
only of normal recurring adjustments, that we consider necessary for a fair
statement of the financial position and results of operations as of such
periods and for such dates. The historical results do not necessarily indicate
the results you should expect in any future period.

<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
--------------------------------------------------- --------------------
1995 1996 1997 1998 1999 1999 2000
------- --------- --------- --------- --------- --------- ---------
Consolidated Statements of Operations Data:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License and services..... $ -- $ 13 $ 1,408 $ 2,093 $ 3,968 $ 1,778 $ 1,837
Subscription............. -- -- -- -- 262 89 369
------- --------- --------- --------- --------- --------- ---------
Total revenues.......... -- 13 1,408 2,093 4,230 1,867 2,206
Cost of revenues.......... -- -- 977 2,024 3,096 1,557 1,737
------- --------- --------- --------- --------- --------- ---------
Gross profit.............. -- 13 431 69 1,133 310 468
Operating expenses:
Sales and marketing...... 17 45 1,230 4,445 6,155 2,828 4,332
Research and
development............ 584 1,466 1,546 4,528 6,133 2,876 3,093
General and
administrative......... 196 678 1,185 3,205 3,442 1,611 2,621
Noncash stock-based
compensation........... -- -- 91 46 617 23 1,320
------- --------- --------- --------- --------- --------- ---------
Total operating
expenses.............. 797 2,189 4,052 12,223 16,348 7,337 11,367
------- --------- --------- --------- --------- --------- ---------
Operating loss............ (797) (2,177) (3,621) (12,154) (15,215) (7,027) (10,899)
Other income (expense),
net..................... (2) (59) (140) (191) (50) 9 233
------- --------- --------- --------- --------- --------- ---------
Net loss.................. (799) (2,236) (3,761) (12,345) (15,265) (7,019) (10,665)
Convertible preferred
stock dividends and
accretion............... -- -- (188) 84 (3,535) (2,076) (2,262)
------- --------- --------- --------- --------- --------- ---------
Net loss applicable to
common stockholders..... $ (799) $ (2,236) $ (3,949) $ (12,261) $ (18,801) $ (9,095) $ (12,927)
======= ========= ========= ========= ========= ========= =========
Basic and diluted net loss
per common share........ $ (1.52) $ (1.64) $ (2.51) $ (7.00) $ (10.44) $ (5.10) $ (5.08)
======= ========= ========= ========= ========= ========= =========
Weighted average number of
shares used for basic
and diluted per share
amounts................. 525,285 1,363,989 1,573,092 1,751,754 1,799,979 1,782,102 2,544,755
</TABLE>

<TABLE>
<CAPTION>
As of December 31,
------------------------------------------- June 30,
1995 1996 1997 1998 1999 2000
----- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Cash and cash
equivalents........... $ 12 $ 3 $ 4,437 $ 135 $ 2,602 $ 11,991
Working capital
(deficiency).......... (342) (2,222) 3,235 (5,245) 180 10,112
Total assets............ 138 246 5,727 2,912 7,668 19,309
Long-term obligations,
net of current
portion............... -- 106 292 842 980 878
Mandatorily redeemable
convertible preferred
stock................. -- -- 9,236 13,122 35,504 55,664
Mandatorily redeemable
convertible preferred
stock warrants........ -- -- 168 266 2,459 5,280
Total stockholders'
deficit............... (216) (2,091) (5,608) (17,805) (36,430) (48,381)
</TABLE>

21
<PAGE>

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

You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our consolidated
financial statements and the related notes. These financial statements and
notes are included as part of this prospectus beginning at page F-1. This
discussion and analysis contains forward-looking statements concerning future
events that involve risks and uncertainties. Our actual results could differ
materially from the descriptions contained in these forward looking statements
as a result of a number of factors. In particular, you should carefully review
the factors set forth under "Risk Factors" beginning on page 7.

Overview

Captura was incorporated in November 1994 to develop and market software
solutions for managing company expenses. Until March 1997, we focused on
designing and developing our products and building our corporate infrastructure
and in March 1997, we introduced our first commercially available product, an
enterprise software solution for managing travel and entertainment expenses.

In light of developing trends in the application software market,
particularly the emergence of hosted applications as an alternative to internal
network-based software solutions, we refocused our strategy in early 1999 to
develop solutions on a hosted basis. In addition, we expanded our product
offerings to include management of business expenses beyond travel and
entertainment. In September 1999, we introduced Captura Expense, a Web-based
automated payment processing solution for procurement, travel, entertainment
and fleet transaction processing.

We derive our revenues from licensing our solution or from subscriptions
for hosting our solution as well as from providing related support services.
Substantially all of our revenues for periods prior to this year were derived
from licensing an enterprise software solution and providing related services
and maintenance. We believe that a substantial majority of future deployments
of our products and services will be completed on a subscription basis, under
which clients subscribe to our application and infrastructure support services
for a fixed term. For the year ended December 31, 1999 and the six months ended
June 30, 2000, 6.2% and 16.7% of our total revenues related to subscription
fees.

Because we have refocused our marketing and sales efforts toward our
subscription services, we believe subscription fees will represent an
increasing percentage of our total revenues. For the six months ended June 30,
2000, our non-cancellable subscription client bookings totalled approximately
$1.5 million. Our "subscription client bookings" refer to the aggregate value
of the monthly subscription fees our clients have agreed to pay over the term
of their subscription agreement. Some of our subscription agreements permit the
client to cancel at any time, subject to payment of certain penalties. We do
not have a substantial operating history with respect to our subscription
service and cannot predict what percentage, if any, of contractual subscription
commitments will actually result in recognized revenues. Accordingly, we do not
believe that our subscription client bookings or non-cancellable subscription
client bookings are a reliable indicator of our future revenues or operating
results.

We recognize revenues in accordance with accounting principles generally
accepted in the United States of America. Software license and related
implementation revenues are recognized using percentage-of-completion method
because we provide significant customization during initial product
implementation. Percentage of completion is measured based on the number of
labor hours actually incurred relative to total estimated labor hours required
for implementation. Other professional service revenues are recognized as the
services are provided. Maintenance revenues are deferred and recognized ratably
over the maintenance period.

Beginning in the second quarter of 1999, we introduced our subscription-
based automated payment processing services. Revenues related to these services
are recognized ratably over the terms of the agreements,

22
<PAGE>

typically three years. Payments received in advance of permitted revenue
recognition are recorded as deferred revenues. Deferred revenues consist of
prepayments of license, subscription and implementation contracts and on-going
maintenance agreements.

Sales to customers outside the United States represented 2.0% and 16.9% of
our revenues in 1998 and 1999, and 12.0% of our revenues in the six months
ended June 30, 2000. Our international revenues to date have been principally
denominated in U.S. dollars with the remainder in pounds sterling, and we have
not engaged in any currency hedging activities. As we expand our international
operations, we expect that our exposure to international currency fluctuations
will increase, and we may in the future determine that our risk exposure
requires us to engage in hedging transactions.

Total cost of revenues consists of compensation and related overhead costs
for personnel engaged in consulting, maintenance and support services for our
clients. It also includes amounts paid to third parties for contract
professional services as well as for hardware and data center facilities. Under
our new subscription model, we incur a significant portion of the cost in the
earlier portion of the subscription term. However, because related revenues are
recognized ratably over the entire subscription term, during the transition
period to this new model we expect our gross margins will be lower.

Operating expenses include sales and marketing, research and development,
general and administrative and charges for noncash stock-based compensation.
Sales and marketing expenses consist primarily of salaries and commissions and
related costs for sales and marketing personnel, advertising, trade show costs,
public relations and marketing program costs. Research and development expenses
consist primarily of compensation and related personnel costs and fees
associated with employees and contractors. General and administrative expenses
consist primarily of compensation and related costs for our executive, finance
and administrative personnel and other related expenses.

We have granted stock options to our officers and employees, including
members of the board of directors, at prices subsequently deemed to be below
fair value of the underlying stock. Options granted to employees typically vest
over a four year period. Noncash stock-based compensation is recognized ratably
on a straight-line basis over the vesting period and has been determined as the
difference between the subsequently deemed fair value on the date the option
was granted and the applicable exercise price. When we issue options or
warrants to non-employees, we record an expense over the vesting period based
on the fair value of the option or warrant.

The basic and diluted loss per share includes the effects of dividends
accrued on our preferred stock. In 1997, the dividends on our preferred stock
accrued to the preferred stockholders; however, in 1998, these dividends were
made noncumulative and were reversed. In 1999, these dividends were again made
cumulative from the original date of issue and accrued to the preferred
stockholders. Our loss per share was also impacted by the accretion of a
discount to the mandatorily redeemable preferred stock. This discount was
created at issuance by the allocation of proceeds for warrants and issuance
costs.

23
<PAGE>

Results of Operations

The following table sets forth, for the periods indicated, certain
consolidated statements of operations data as well as such data expressed as a
percentage of our total revenues for the periods presented:

<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
----------------------------------------------------- ----------------------------------
1997 1998 1999 1999 2000
--------------- ---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License and services.. $ 1,408 100.0 % $ 2,093 100.0 % $ 3,968 93.8 % $ 1,778 95.2 % $ 1,837 83.3 %
Subscription.......... -- -- -- -- 262 6.2 89 4.8 369 16.7
------- ------ -------- ------ -------- ------ ------- ------ -------- ------
Total revenues....... 1,408 100.0 2,093 100.0 4,230 100.0 1,867 100.0 2,206 100.0
Cost of revenues....... 977 69.4 2,024 96.7 3,096 73.2 1,557 83.4 1,737 78.8
------- ------ -------- ------ -------- ------ ------- ------ -------- ------
Gross profit........... 431 30.6 69 3.3 1,133 26.8 310 16.6 468 21.2
Operating expenses:
Sales and marketing... 1,230 87.4 4,445 212.4 6,155 145.5 2,828 151.4 4,332 196.4
Research and
development......... 1,546 109.8 4,528 216.4 6,133 145.0 2,876 154.0 3,093 140.3
General and
administrative...... 1,185 84.2 3,205 153.1 3,442 81.4 1,611 86.2 2,621 118.8
Noncash stock-based
compensation........ 91 6.4 46 2.2 617 14.6 23 1.2 1,320 59.9
------- ------ -------- ------ -------- ------ ------- ------ -------- ------
Total operating
expenses........... 4,052 287.8 12,223 584.1 16,348 386.5 7,337 392.9 11,367 515.4
------- ------ -------- ------ -------- ------ ------- ------ -------- ------
Operating loss......... (3,621) (257.2) (12,154) (580.8) (15,215) (359.7) (7,027) (376.3) (10,899) (494.1)
Other income (expense),
net.................. (140) (9.9) (191) (9.1) (50) (1.2) 9 0.5 233 10.6
------- ------ -------- ------ -------- ------ ------- ------ -------- ------
Net loss............... $(3,761) (267.2)% $(12,345) (589.9)% $(15,265) (360.9)% $(7,019) (375.9)% $(10,665) (483.6)%
======= ====== ======== ====== ======== ====== ======= ====== ======== ======
</TABLE>

Six months ended June 30, 1999 and 2000

Revenues

Total Revenues. Total revenues increased 18.1% from $1.9 million for the
six months ended June 30, 1999 to $2.2 million in the six months ended June 30,
2000. The modest growth in revenues during the six months ended June 30, 2000
reflects our transition to a business model that emphasizes delivering our
solution on a subscription basis. Relative to our historical revenues
recognized under a license model, adoption of our subscription model may result
in less rapid revenue growth because revenues are recognized ratably over the
term of the agreement, typically three years.

License and Services. Our license and services revenues were $1.8 million
for each of the six months ended June 30, 1999 and 2000. These revenues
remained flat as we began to generate revenue from our subscription services.

Subscription. Our subscription revenues were $89,000 and $369,000, for the
six months ended June 30, 1999 and 2000, representing an increase of 312.4%.
This increase was attributable to the growth in sales of our subscription
services. We expect that, as a percentage of total revenues, subscription
revenues will continue to increase in future periods.

Cost of Revenues

Total Cost of Revenues. Total cost of revenues increased 11.5% from $1.6
million for the six months ended June 30, 1999 to $1.7 million for the six
months ended June 30, 2000. As a percentage of revenues, cost of revenues were
83.4% and 78.8% for the six months ended June 30, 1999 and 2000. The increase
in cost of revenues was primarily due to the addition of more experienced
personnel at higher levels of compensation in order to support anticipated
sales growth.

Operating Expenses

Sales and Marketing. Sales and marketing expenses increased 53.2% from $2.8
million for the six months ended June 30, 1999 to $4.3 million for the six
months ended June 30, 2000. As a percentage of

24
<PAGE>

revenues for the six months ended June 30, 1999 and 2000, sales and marketing
expenses increased from 151.4% to 196.4%. The increase was primarily
attributable to increased compensation, commissions and other related costs
associated with hiring additional sales representatives, management and
marketing personnel, as well as increased spending on marketing programs. We
expect that sales and marketing expenses will continue to increase in future
periods as we expand our domestic and international sales force and marketing
efforts.

Research and Development. Research and development expenses increased 7.6%
from $2.9 million for the six months ended June 30, 1999 to $3.1 million for
the six months ended June 30, 2000. As a percentage of revenues for the six
months ended June 30, 1999 and 2000, research and development expenses
decreased from 154.0% to 140.3%. The absolute dollar increase was primarily due
to the addition of research and development personnel coupled with increasing
consulting services as we continued to develop new products and new versions of
existing products, including the next release of Captura Expense version 4.15,
and the adoption and support for the wireless access protocol specification to
extend the benefits of our solution to a wide range of wireless devices. We
expect that research and development expenses will continue to increase as we
make additional investments in our technology and products.

General and Administrative. General and administrative expenses increased
62.8% from $1.6 million for the six months ended June 30, 1999 to $2.6 million
for the six months ended June 30, 2000. As a percentage of revenues for the six
months ended June 30, 1999 and 2000, general and administrative expenses
increased from 86.2% to 118.8%. The increases were primarily attributable to
hiring additional administrative and financial personnel as well as incurring
additional general expenses, such as consulting and professional services fees.
We expect that general and administrative expenses will continue to increase as
we expand our operations and incur the typical incremental costs of a public
company.

Noncash Stock-Based Compensation. Noncash stock-based compensation
increased 5,629.5% from $23,000 for the six months ended June 30, 1999 to $1.3
million for the six months ended June 30, 2000. The increase was primarily due
to an expense of $909,000 recognized for warrants issued to clients based on
meeting certain performance criteria. We have recorded amounts in stockholders'
equity of $87,000 and $2.4 million as of June 30, 1999 and 2000, which will be
expensed as services are performed. These amounts reflect the cumulative
difference between the fair value of the underlying stock at the date the
options were granted and their exercise prices. Our results from operations
will include annual amortization related to these amounts of at least $600,000
through 2003.

Interest and Other Income, Net. Net interest income increased from $9,000
for the six months ended June 30, 1999 to $233,000 for the six months ended
June 30, 2000. Net interest income for the six months ended June 30, 2000
resulted primarily from the interest generated from funds raised in our
February 2000 preferred stock financing, partially offset by interest expense
from our subordinated line of credit and capital equipment loans and leases.

Fiscal Years 1997, 1998 and 1999

Revenues

Total Revenues. Total revenues were $1.4 million, $2.1 million and $4.2
million in fiscal 1997, 1998 and 1999, increasing 48.7% from 1997 to 1998 and
102.1% from 1998 to 1999. These increases were due to the increased sales of
our automated payment processing solution.

License and Services. Our license and services revenues were $1.4 million,
$2.1 million and $4.0 million in fiscal 1997, 1998 and 1999, increasing 48.7%
from 1997 to 1998 and 89.6% from 1998 to 1999. These increases were due to the
increased market awareness of our solution and the implementation and
consulting fees associated with new client installations.

Subscription. Subscription revenue was $262,000 in 1999. This revenue was
due to the introduction of our subscription-based automated payment processing
solution in the second quarter of 1999.

25
<PAGE>

Cost of Revenues

Total Cost of Revenues. Total cost of revenues was $977,000, $2.0 million
and $3.1 million in fiscal 1997, 1998 and 1999, increasing 107.1% from 1997 to
1998 and 53.0% from 1998 to 1999. These increases were primarily due to the
addition of personnel to our professional services organization which increased
from 16 at December 31, 1997 to 28 at December 31, 1999 in order to support
anticipated sales growth.

Operating Expenses

Sales and Marketing. Sales and marketing expenses were $1.2 million, $4.4
million and $6.2 million in fiscal 1997, 1998 and 1999, increasing 261.4% from
1997 to 1998 and 38.5% from 1998 to 1999. These increases were primarily
attributable to increased compensation, commissions and other related costs
associated with hiring additional sales representatives, management and
marketing personnel, as well as increased spending on marketing programs. We
increased the number of sales and marketing employees from 17 at December 31,
1997 to 42 at December 31, 1999.

Research and Development. Research and development expenses were $1.5
million, $4.5 million and $6.1 million in fiscal 1997, 1998 and 1999,
increasing 192.9% from 1997 to 1998 and 35.5% from 1998 to 1999. These
increases were primarily due to the addition of personnel to our research and
development organization coupled with increasing consulting services as we
continued to develop new products and new versions of existing products. We
increased the number of research and development employees from 25 at December
31, 1997 to 54 at December 31, 1999.

General and Administrative. General and administrative expenses were $1.2
million, $3.2 million and $3.4 million in fiscal 1997, 1998 and 1999,
increasing 170.3% from 1997 to 1998 and 7.4% from 1998 to 1999. The increases
were primarily attributable to hiring additional executive and financial
personnel as well as incurring additional general expenses, such as consulting
and professional services fees. We increased the number of general and
administrative employees from 6 at December 31, 1997 to 18 at December 31,
1999.

Noncash Stock-Based Compensation. Noncash stock-based compensation was
$91,000, $46,000 and $617,000 in fiscal 1997, 1998 and 1999, decreasing 49.1%
from 1997 to 1998 and increasing 1,240.5% from 1998 to 1999. These increases
were primarily due to a greater difference between the fair value of the common
stock at the date the options were granted and their exercise price. In
addition, in 1999, some existing awards to employees were modified resulting in
new measurement dates and additional expense recognition.

Other Income, Net. Net other income was $140,000, $191,000 and $50,000 for
fiscal 1997, 1998 and 1999. The nominal net interest income for the year ended
December 31, 1999 resulted primarily from the interest expense incurred on our
subordinated line of credit and capital equipment loans and leases partially
offset by interest income generated from funds raised in our February 1999
preferred stock financing. Interest expense for the years ended December 31,
1998 and 1997 primarily resulted from these same debt facilities.

Income Taxes. Since inception, we have incurred net losses for federal and
state tax purposes and have not recognized any tax provision or benefit. As of
December 31, 1999, we had net operating loss carryforwards of approximately
$33.2 million for federal and state income tax purposes. The federal and state
net operating loss carryforwards, if not utilized, expire during the years 2009
through 2018. We also have research and development credit carryforwards of
approximately $804,000 as of December 31, 1999 for federal and state tax
purposes. Federal and state tax laws impose significant restrictions on the
utilization of net operating loss carryforwards in the event of a change in our
ownership, as defined in Section 382 of the Internal Revenue Code. See Note 11
of Notes to Consolidated Financial Statements for additional information
regarding these carryforwards.

We have placed a valuation allowance against our net deferred tax assets
due to the uncertainty of the realization of these assets. The allowance
totaled $12.4 million and $15.9 million at December 31, 1999 and June 30, 2000,
resulting in no net deferred asset. We evaluate on a quarterly basis the
recoverability of net

26
<PAGE>

deferred tax assets and the amounts of the valuation allowance. When we have
determined that it is more likely than not that the net deferred tax assets are
realizable, we will reduce the valuation allowance.

Quarterly Results of Operations

The following table sets forth unaudited quarterly results of operations
data for the eight quarters ended June 30, 2000, as well as such data expressed
as a percentage of our total revenues for the periods presented. This
information in the table below should be read in conjunction with our annual
audited consolidated financial statements and the related notes included
elsewhere in this prospectus. We have prepared this information on the same
basis as our audited consolidated financial statements and the information
includes all necessary adjustments, consisting only of normal recurring
adjustments that we consider necessary for a fair presentation of our financial
position and operating results for the quarters presented in accordance with
accounting principles generally accepted in the United States of America. Our
quarterly operating results have varied substantially in the past and may vary
substantially in the future. You should not draw any conclusions about our
future results for any period from the results of operations for any particular
quarter.

<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------------
Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31, June 30,
1998 1998 1999 1999 1999 1999 2000 2000
--------- -------- --------- -------- --------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License and services... $ 535 $ 527 $ 1,094 $ 684 $ 835 $ 1,355 $ 902 $ 935
Subscription........... -- -- -- 89 108 65 139 230
------- ------- ------- ------- ------- ------- ------- -------
Total revenues....... 535 527 1,094 773 943 1,420 1,041 1,165
Cost of revenues........ 860 630 791 766 803 736 763 975
------- ------- ------- ------- ------- ------- ------- -------
Gross profit (loss)..... (325) (103) 303 7 140 684 278 190
Operating expenses:
Sales and marketing.... 1,355 1,732 1,333 1,495 1,615 1,712 1,890 2,442
Research and
development.......... 1,370 1,255 1,400 1,475 1,644 1,614 1,510 1,584
General and
administrative....... 805 1,229 761 849 862 970 1,421 1,200
Noncash stock-based
compensation......... 11 11 12 12 12 583 796 524
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses........... 3,541 4,227 3,506 3,831 4,133 4,879 5,617 5,750
------- ------- ------- ------- ------- ------- ------- -------
Operating loss.......... (3,866) (4,330) (3,203) (3,824) (3,993) (4,195) (5,339) (5,560)
------- ------- ------- ------- ------- ------- ------- -------
Other income (expense),
net................... (60) (92) (56) 65 12 (71) 69 165
------- ------- ------- ------- ------- ------- ------- -------
Net loss................ $(3,926) $(4,422) $(3,259) $(3,759) $(3,981) $(4,266) $(5,270) $(5,395)
======= ======= ======= ======= ======= ======= ======= =======
<CAPTION>
As a Percentage of Total Revenues Three Months Ended
-------------------------------------------------------------------------------------
Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31, June 30,
1998 1998 1999 1999 1999 1999 2000 2000
--------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues:
License and services... 100.0 % 100.0 % 100.0 % 88.4 % 88.6 % 95.4 % 86.7 % 80.3 %
Subscription........... -- -- -- 11.6 11.4 4.6 13.3 19.7
------- ------- ------- ------- ------- ------- ------- -------
Total revenues....... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues........ 160.7 119.6 72.3 99.1 85.1 51.8 73.3 83.6
------- ------- ------- ------- ------- ------- ------- -------
Gross profit (loss)..... (60.7) (19.6) 27.7 0.9 14.9 48.2 26.7 16.4
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing.... 253.3 328.5 121.8 193.4 171.2 120.7 181.6 209.7
Research and
development.......... 256.0 238.0 128.0 190.9 174.3 113.7 145.1 136.0
General and
administrative....... 150.4 233.1 69.6 109.8 91.3 68.4 136.5 103.1
Noncash stock-based
compensation......... 2.2 2.2 1.1 1.5 1.2 41.1 76.5 45.0
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses........... 661.8 801.8 320.4 495.6 438.0 343.8 539.6 493.7
------- ------- ------- ------- ------- ------- ------- -------
Operating loss.......... (722.4) (821.4) (292.7) (494.7) (423.2) (295.7) (513.0) (477.3)
------- ------- ------- ------- ------- ------- ------- -------
Other income (expense),
net................... (11.2) (17.4) (5.2) 8.4 1.3 (5.0) 6.5 14.2
------- ------- ------- ------- ------- ------- ------- -------
Net loss................ (733.6)% (838.8)% (297.9)% (486.3)% (421.9)% (300.7)% (506.4)% (463.1) %
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

27
<PAGE>

Total Revenues. Total revenues declined for the three months ended June 30,
1999 as customer implementations were delayed in anticipation of the release of
Captura Expense 4.0, our Web-based service. Additionally, total revenues
declined for the three months ended March 31, 2000 as a result of a delay in
our sales cycle as we introduced our subscription-based model. We have
experienced fluctuations in revenues and may experience this in the future as
we continue to migrate from a license model to a subscription model.

Sales and Marketing. Sales and marketing expenses increased for the three
months ended March 31, 1998. These increases were due to one-time promotional
and advertising expenses incurred during the period.

Research and Development. Research and development expenses increased for
the three months ended September 30, 1999 and December 31, 1999 due to
increased contract development and professional services incurred during the
periods.

General and Administrative. General and administrative expenses increased
in the three months ended December 31, 1998 and in the three months ended March
31, 2000 due to increased professional services and consulting fees incurred
during the period.

Noncash Stock-Based Compensation. Noncash stock-based compensation
increased as a percentage of total revenues beginning with the three months
ended December 31, 1999. These increases were primarily due to expense of
$504,000 and $148,000 recognized for the three months ended December 31, 1999
and March 31, 2000, respectively, as vesting on certain existing awards was
accelerated for employees upon termination resulting in new measurement dates.
In addition, we recognized expense of $545,000 and $363,000 for the three
months ended March 31, 2000 and June 30, 2000, respectively, for warrants to
purchase Series E preferred stock issued to customers based on meeting certain
performance criteria.

Our quarterly and annual revenue, expenses, and operating results have
fluctuated in the past and are likely to fluctuate significantly in the future
due to a variety of factors, many of which are beyond our control. Because of
these fluctuations, we believe that period-to-period comparisons are not a good
indication of our future financial performance. You should not rely on quarter-
to-quarter comparisons of our results of operations because, among other
factors, we have a limited operating history and face numerous business risks
associated with our transition to a subscription-based business model. In
addition, the market for automated payment processing solutions is still new
and evolving, and our quarterly and annual revenues and operating results will
depend on a relatively small number of new and existing clients. These risks,
as well as additional risks associated with our business, are described under
the caption "Risk Factors" beginning on page 7. We encourage you to review
these factors carefully. If in some future period, our operating results are
below the expectations of public market analysts and investors, the price of
our common stock could decline substantially.

Liquidity and Capital Resources

Since inception, we have financed our operations and funded our capital
expenditures through the private sale of equity securities, supplemented by
loan facilities and equipment leases. Aggregate net proceeds as of June 30,
2000 from the issuance of preferred stock total $54.0 million. As of June 30,
2000, we had $12.0 million in cash and cash equivalents and $10.1 million in
working capital. In September 2000, we received an additional $20.6 million
through the issuance of Series E preferred stock and warrants.

Net cash used in operating activities for the six months ended June 30,
1999 and 2000 was $8.0 million, which was comprised of a net loss of $7.0
million and other working capital changes, and $10.2 million, which was
comprised of a net loss of $10.7 million and other working capital changes. Net
cash used in operating activities was $4.2 million in 1997, $10.4 million in
1998 and $14.9 million in 1999. For these periods, net cash used in operating
activities was primarily used to fund ongoing operations.

Net cash used in investing activities for the six months ended June 30,
1999 and 2000 was $338,000 and $456,000. Net cash used in investing activities
was $269,000 in 1997, $469,000 in 1998 and $350,000 in 1999. Investing
activities consisted primarily of capital expenditures.

28
<PAGE>

Net cash provided by financing activities for the six months ended June 30,
1999 and 2000 was $17.6 million and $20.1 million. Net cash provided by
financing activities was $8.9 million in 1997, $6.6 million in 1998 and $17.7
million in 1999. Net cash provided by financing activities consisted primarily
of proceeds from the issuance of preferred stock and proceeds from loans offset
by repayments on loans and capital leases. During 1998, we entered into a loan
and security agreement with a commercial bank that provided a $1.5 million line
of credit. The line of credit was increased to $3.0 million during 1999 and is
limited by an available borrowing base related to eligible accounts receivable.
The line of credit bears interest at the prime rate plus 1%. As of June 30,
2000 the interest rate was 10.5% and we had borrowed $309,000 against the line
of credit. We have also entered into capital lease agreements with two leasing
companies to finance up to $2.5 million of capital expenditures. Interest
accrues under the terms of these agreements at an average of approximately 8.5%
per annum based on the outstanding utilized capital lease line. Each borrowing
under the capital lease line shall has a term of up to three years, with
interest and principal payable monthly. As of June 30, 2000, we had drawn
approximately $2.2 million on these capital lease lines.

As we execute our strategy, we expect significant increases in our
operating expenses, especially in sales, marketing and research and
development. Presently, we anticipate that our existing capital resources and
the proceeds from this offering will meet our operating and investing needs for
at least the next 24 months. After that time, we cannot be certain that
additional funding will be available on acceptable terms or at all. If we
require additional capital resources to grow our business, execute our
operating plans, or acquire complementary technologies or businesses at any
time in the future, we may seek to sell additional equity or debt securities or
secure additional lines of credit, which may result in additional dilution to
our stockholders.

Recent Accounting Pronouncements

In June of 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities, or
Statement of Financial Accounting Standards, or SFAS, No. 133, as amended by
SFAS Nos. 137 and 138, which established accounting and reporting standards for
derivative instruments and hedging activities. The statement requires
recognition of all derivatives at fair value in the financial statements. We
will adopt this statement effective January 1, 2001 and do not believe that
implementation will have a significant effect on our financial statements.

In December 1999, Staff Accounting Bulletin, or SAB, No. 101, Revenue
Recognition in Financial Statements, was issued. SAB No. 101 summarizes the
Securities and Exchange Commission staff's views in applying accounting
principles generally accepted to the United States of America to revenue
recognition. We will implement SAB No. 101 in the fourth quarter 2000. We
believe that the adoption of SAB No. 101 will not have a material impact on our
revenue recognition.

Inflation

Our operating results may be affected by changes in rates of inflation.
Inflation to date has not materially affected our operating results, although
it may in the future.

Quantitative and Qualitative Disclosures About Market Risk

The Company is subject to the risk of fluctuating interest rates in the
normal course of business, primarily as a result of its line of credit and
investment activities which generally bear interest at variable rates.
Accordingly, adverse changes in interest rates could result in increased net
losses. As of June 30, 2000, only approximately five percent of our outstanding
liabilities were exposed to interest rate risk. In general, our interest
expense is not sensitive to the general level of U.S. interest rates because
all of our debt arrangements with the exception of the line of credit were
based on fixed interest rates.

Due to the operations of our wholly-owned subsidiaries in the United
Kingdom, Australia and France, our results of operations, financial position,
and cash flows can be materially affected by changes in the relative

29
<PAGE>

values of the respective currencies to the U.S. dollar. We could experience
exchange losses in the future related to our operating activities as a result
of adverse currency fluctuations. Due to the recent relative stability of the
British pound, Australian dollar, and French franc in relation to the U.S.
dollar, our past results of operations have not been materially affected by
fluctuations in exchange rates.

We do not purchase derivatives or other financial instruments for trading
or speculative purposes. To date, we have not implemented any hedging
activities in order to mitigate our exchange rate risk. We intend to continue
to evaluate these risks, based on the relative size of our international
operations and management's analysis of the potential exchange rate risks. As a
result, we may at some point in the future determine it advisable to engage in
exchange rate hedging activities. We cannot ensure, however, that any such
hedging activities would adequately compensate us for exchange losses we may
incur.

30
<PAGE>

BUSINESS

Overview

We have recently commenced offering our solution to our clients as a
subscription service using third party hosting providers. We believe that the
delivery of our applications on a subscription basis allows our clients to
reduce up front and ongoing transaction processing costs and focus on their
core competencies. Additionally, we believe that a hosted solution is easier to
implement and maintain, quicker to deploy and provides greater accessibility to
users.

We have sold our solution to customers in the technology, financial,
manufacturing, telecommunications and healthcare industries. We provide our
solution to 50 customers, including Aetna, Booz-Allen & Hamilton, Citibank
N.A./General Motors, Compaq, Ericsson UK, Ford, Hercules, MasterCard, Merrill
Lynch and Shell Oil.

Industry Background

Technological advances and the adoption of the Internet by businesses have
enabled companies to increase internal productivity as well as improve
communication and collaboration with business partners, customers and
suppliers. These improvements have allowed organizations to adopt more
sophisticated operational processes, such as just-in-time inventory, build-to-
order manufacturing and more efficient supply-chain management techniques.
Although offering important improvements in productivity and reductions in
cost, these technological innovations have also led to a dramatic increase in
the number and complexity of the procurement transactions a company must
process. For example, a manufacturer that has adopted real time inventory
management will order manufacturing supplies more frequently and in smaller
amounts when compared to prior procurement patterns. In addition, transaction
velocity has increased because the Internet improves access to buyers and
sellers and gives businesses more choices among suppliers and vendors.

In addition to the dramatic increase in the number and speed of procurement
transactions, the complexity of the internal processing requirements of these
transactions has substantially increased. With transactions now originating
from a variety of sources, including multiple credit card types and electronic
invoices, data is being transferred in many different forms such as eXtensible
mark-up language, or XML, and electronic data interchange, or EDI. Moreover, a
single procurement transaction will typically include an entire cycle of
smaller steps, such as buyer authorization, approval routing, order processing,
validation, payment and reconciliation. Each of these steps has multiple
processing rules that are based on an organization's particular corporate
policies. Additionally, as companies enter new geographic markets, transactions
become even more complex as a result of factors such as currency conversion,
value-added taxes, local language support and country-specific business
policies and remittance requirements.

The increasing volume and complexity of procurement transactions pose
substantial challenges to traditional payment processes which remain largely
unautomated. Historically, the processing of corporate procurement transactions
has been characterized by complex business rules, detailed forms, manual data
entry, multiple approvals and hand-offs, and manual reviews and audits. Most
organizations manage these processes in-house and use paper-based or partially
automated processes. More importantly, these processes are complex, time
consuming and costly and often require the re-keying of information, resulting
in inaccuracies, lengthy approval cycles and significant involvement of
financial and administrative personnel. In addition to

31
<PAGE>

unnecessary costs, these existing processes result in management distraction
and an inefficient deployment of scarce internal resources. As a result, many
companies are seeking to automate these processes in an effort to focus
internal resources on their core competencies. According to International Data
Corporation, an independent research firm, the market for the indirect
materials and services applications is expected to grow from $289 million in
2000 to more than $1.1 billion in 2003.

To date, organizations seeking to automate their transactional payment
processes have relied largely upon internally developed solutions or the
limited functionality of enterprise applications, such as ERP and supply-chain
management software. More recently, organizations have begun to deploy
procurement applications as a means of streamlining and improving the
efficiency of the procurement process. While these applications primarily
address the front-end procurement process, such as supplier aggregation,
cataloging, and requisitioning, they do not effectively automate the order
processing, authorization, payment, validation and reconciliation functions.
For example, these applications cannot process disparate transaction types and
sources and have limited capabilities to integrate with an organization's
legacy accounting, human resource, project management and payroll systems.

We believe that organizations that have implemented various generations of
technology now seek additional benefits beyond the partial automation available
today. Organizations are seeking a solution that integrates with existing
legacy and ERP applications yet provides deeper payment processing
functionality. Increasingly, they are demanding a solution that will not only
automate their payment processing but provides decision support functionality
to analyze corporate spending patterns and aid in supplier negotiations. In
addition, given the increased globalization of today's corporations, they are
seeking a solution that is fast and easy to deploy across multiple geographies
and easily accessible by a mobile workforce.

The Captura Solution

We provide our clients with a technology platform to fully automate their
payment processing on a global basis. Key benefits of our solution include:

Compelling Value Proposition. We believe that our clients can realize
significant cost savings through the automation of their payment processing.
Our solution eliminates the need for our clients to employ manual processes
that are inefficient, error-prone, time-intensive and that limit consolidated
transactional reporting and analysis. By automating these functions, our
solution reduces reliance on costly administrative labor and streamlines
payment processing.

Robust, Flexible Rules Engine. Our automated payment processing engine,
developed to incorporate established best practices, allows our clients to set
and enforce business rules while maintaining the flexibility to easily modify
these rules to meet specific business or country requirements. Our engine
captures purchase transaction information, automates the complex hierarchical
routing process and approves those transactions clearly within business policy.
Purchases that do not comply with pre-defined rules are automatically routed
based on predetermined criteria to the appropriate supervisor for quick
electronic approval.

Extensive Transactional Data Capturing Capability. Our solution supports a
broad range of transaction types, including procurement, travel, entertainment,
and fleet, with full support for line-item detail.

Seamless Transaction Support. Our solution has been designed to integrate
with existing ERP and enterprise applications as well as front-end procurement
applications. By sharing data with these systems automatically, we eliminate
the need for manual intervention during the transaction payment process,
increasing productivity and reducing cost. Additionally, our solution supports
transactions that originate from a variety of sources, including corporate
credit cards, p-cards, and one-card solutions. Our solution supports both
employee-paid or company-paid cards.

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<PAGE>

Enhanced Decision-Making Capability and Increased Leverage in Negotiating
Vendor Rates. By capturing extensive data from company transactions and
providing standard, customizable reports, our solution enables clients to
identify trends in total spending and helps determine appropriate changes to
corporate or procurement policy. We believe the ability to more effectively
track historical and current vendor transactional information enables companies
to negotiate more effectively with their suppliers. In addition, embedded
online analytical tools and support for third-party data analysis tools allow
for more comprehensive reporting.

Hosted Application Services Advantages. The delivery of our applications in
a third-party hosted environment provides our clients with scalable payment
processing solutions that are easy to implement and quick to deploy and that
provide widely accessible global services. Our hosted solution requires lower
initial investment and does not require a company's internal resources to
install, maintain or upgrade, as these functions are performed by the third-
party hosting partner. As a result, we believe that hosted application services
result in lower costs for our clients.

Support for a Broad Range of Web-Enabled Devices for Mobile Users. Our
ultra-thin HTML interface allows for full accessibility and functionality via a
variety of Web-based devices.

Our Growth Strategy

Our objective is to be the leading platform for automated payment
processing. Key elements of our strategy include:

Expand Our Automated Payment Processing Solution. To date, we have focused
on providing expense management solutions for procurement, travel,
entertainment and fleet transactions. We believe our payment processing engine
is ideally suited for automating the processing of other types of transactions,
including but not limited to those purchases made through e-procurement
software platforms, trading exchanges, and supplier web sites. Historically,
purchases that are made through these sources have been manually processed by
the purchaser and do not provide data capture and analysis capabilities. We
intend to broaden the application of our platform to include payment processing
for these transactions. Our objective is to provide fully integrated services
to enable companies to effectively manage their entire range of corporate
expenses.

Continue to Target Global Corporations Across a Wide Range of
Industries. We believe that global organizations represent the largest and most
complex transactional payment processing challenges. These organizations
require functional support in multiple countries with unique language, currency
and compliance requirements, and our solution includes specific features that
support these multinational operations. As a result, these organizations can
provide strong references to their own customers, suppliers and partners that
reinforce Captura as an automated payment processing solution.

Develop New and Expanded Strategic Relationships. We believe strategic
relationships allow us to accelerate our growth and expand the breadth of our
solution. We recently entered into a relationship with MasterCard encompassing
joint development and joint sales and marketing initiatives. We currently have
relationships with Qwest Cyber.Solutions, Intel Online Services and Exodus
Communications, allowing us to offer our solution on a subscription basis.
Finally, we have development and marketing agreements with Hewlett-Packard
providing us with participation in Hewlett-Packard's E-services Portal and
support for Hewlett-Packard's eSpeak Internet brokering architecture. We intend
to develop and broaden these and other strategic relationships, as we believe
these alliances will provide valuable new sales and marketing channels for our
products and offer technological opportunities.

Continue to Expand Our Global Market Presence. We plan to significantly
expand our global market presence in order to promote awareness of our products
and capitalize on the market opportunity for payment processing solutions. We
intend to accomplish this by leveraging our existing global client base, the
global functionality of our solution, and relationships with third-party system
integrators and consultants to supplement our domestic and international sales
efforts. We also intend to establish new international sales offices in
addition to our current offices in London, Paris and Sydney.

33
<PAGE>

Extend Technological Leadership. We believe that the robust functionality
of our automated processing engine provides us with a distinct competitive
advantage. Our comprehensive and flexible rules engine allows for a broad range
of data imports and exports while processing the most complex purchase
transactions in a hosted environment. We believe that our adoption of the
Wireless Access Protocol, or WAP, architecture will allow us to become the
first company to allow transactional processing, submission and approval via
wireless cellular devices. We intend to continue to extend the development of
our data capturing capability, enabling our clients to analyze transactional
data on a variety of time, attribute and category dimensions.

Products and Services

We currently offer Captura Expense, our automated payment processing
solution for procurement, travel, entertainment and fleet transaction
processing. Additionally, we provide a suite of administrative tools, training
and comprehensive support services to provide end-to-end solutions for managing
all business expenses.

Our payment processing engine allows our clients to automate purchase
authorization by flagging exceptions for approval, thereby enhancing policy
enforcement. It provides companies with the ability to set and enforce
corporate policies and the flexibility to easily change the established rules
to meet their specific business or country requirements.

Our automated payment processing solution captures transactional data from
a variety of external data sources, such as corporate credit cards, p-cards,
and one-card solutions and supports both employee-paid or company-paid cards.
Our engine processes this data, flags expenditures that do not comply with
established rules, forwards exceptions for approval, integrates the data into
the client's accounting, human resources, project management and payroll
systems, and then can electronically remit payment to the supplier or employee.
As part of our service, we also offer embedded online analytical processing and
reporting capabilities, providing accurate and timely information to managers,
thus enabling them to identify trends and negotiate better rates with
suppliers.

34
<PAGE>

The following table summarizes key features of Captura Expense:

<TABLE>
<CAPTION>
Feature Benefits
-------------------------------------------------------------------------------
<C> <S>
Capture . Capture financial transactions from multiple
sources (corporate cards, p-cards, one card
solutions, paper forms, manual entry) via a
variety of Web-based devices
. Aggregate transactions in one common format
and location
. Support the complete invoice (or level III
data) transmitted via card data feeds
-------------------------------------------------------------------------------
Validate . Validate and error-check incoming data
. Ensure that necessary financial information is
accurate and complete
. Verify information against existing ERP
systems
. Request supplemental information from users
via alerts and Web applications
-------------------------------------------------------------------------------
. Combine purchase information with supplemental
Reconcile receipts
. Compare orders with credit card invoices and
identify and handle discrepancies
. Ensure adherence with company policies
. Route for approval when required by policy
. Allocate expenses across multiple projects or
cost centers
. Over 100 industry best practice rules pre-
loaded
. Drive exception-only approvals
. Support value-added and local tax reporting
-------------------------------------------------------------------------------
Integrate . Integrate human resource, accounting, project
management and payroll systems with complete
financial transactions for accurate cost
accounting
. Provide payment detail needed to reimburse the
employee or supplier electronically
-------------------------------------------------------------------------------
Analyze . Provide a consolidated transaction repository
with comprehensive historical buyer
transaction detail
. Determine purchasing behavior patterns
. Compare booked vs. actual and purchased vs.
received data
. Generate more than 60 pre-loaded
administrative, management and analysis
reports
-------------------------------------------------------------------------------
Other Features . Support multiple currencies
. Support multiple languages, currently French,
Italian and Spanish; other European languages
in development
. Ultra-thin HTML interface that requires no
desktop software installation
. Comprehensive administration tools
. Context-sensitive help and Web-based training
program
</TABLE>

35
<PAGE>

Support Services

Implementation and Integration Services. We provide consultation and
assistance for best practices and process improvement, project management,
implementation, integration and service deployment. In working with our
clients, we have established a database of predefined business rules and
interfaces to many of the most common financial and enterprise resource
planning systems in use today. In addition, we work with our clients to
integrate our solution with their existing applications.

Application Hosting and Management Services. We offer our services through
third-party application service providers and hosting service companies, which
provide turnkey data centers, operations, equipment, system maintenance,
physical and electronic security, and Internet access for our clients. In
conjunction with our hosting service providers, we may provide application
management, including inbound data conversion, transmission verification, data
validation, database administration, and system monitoring, as well as managing
companies' specific requirements and policies.

Maintenance and Customer Support. We provide clients with periodic updates
and upgrades to our applications, either as part of the hosting fee or for an
annual maintenance fee. Additionally, technical support is available through
telephone and e-mail as well as via Web-based self-service. Our standard
support agreement provides local business hours support, with options for
premium support and extended hours.

Training. We support our services with training tailored to the customer's
specific needs. Our training includes system administrator training designed to
enable our clients to establish, modify, organize, and configure rules to
reflect the company's policies. Our help desk training is designed to assist
the system administrator or technical support contact in learning our
troubleshooting techniques and tools. For end user training, we provide Web-
based training offerings.

Customers

We currently have 50 customers and have licensed our solution for use by
more than 550,000 employees of these companies. The following is a list of our
customers that have contracts valued in excess of $300,000:

<TABLE>
<S> <C> <C>
Aetna Discovery MasterCard
Booz-Allen & Hamilton Ericsson UK Merrill Lynch
Carlson Wagonlit Ford Qwest
Citibank, N.A./General Motors Hercules Corporation Shell Oil
Compaq Jones Lang Lasalle Sherwin Williams
Crompton Labor Ready William Blair
</TABLE>

Ford accounted for 18.9% of our total revenue for the six months ended June
30, 2000 and 15.3% of our total revenue for fiscal 1999. General Motors,
through an agreement between Captura and Citicorp, accounted for 14.0% of our
total revenue for the six months ended June 30, 2000 and 16.1% of our total
revenue for fiscal 1999. Merrill Lynch accounted for 11.0% of our total revenue
for the six months ended June 30, 2000, 12.0% for fiscal 1999, 52.0% for fiscal
1998, and 50.0% for fiscal 1997. Compaq accounted for 11.1% of our total
revenue for the six months ended June 30, 2000 and 11.6 % of our total revenue
for fiscal 1999. Aetna accounted for 12.4% of our revenue in fiscal 1998, and
Carlson Wagonlit accounted for 22.2% of our revenue in fiscal 1997.

The following case studies illustrate how two companies are using our
products.

Ericsson UK

Ericsson is a leading vendor of telecommunications equipment with over
110,000 employees worldwide in 132 countries.

36
<PAGE>

Business Challenge. Ericsson UK is Ericsson's British subsidiary with over
2,200 employees. Ericsson UK used to manually prepare over 30,000 expense
claims each year at five different locations, a time-consuming and costly
procedure. Ericsson UK was looking to provide staff with more timely
reimbursements while reducing costs and maximizing resources by centralizing
and automating its expense payment processing.

Solution. Ericsson UK selected Captura Expense to streamline its entire
expense reporting procedure and enable automated processing of expenses in
compliance with corporate policies. By implementing our Web-based solution,
Ericsson UK estimates that it will reduce its processing costs per expense
report from (Pounds)10 to (Pounds)2. Expense claims are automatically
transferred to the general ledger and the bank clearing system for posting and
payment, reducing the approval and reimbursement cycle from an average of 10
days to 2 days. Ericsson UK currently deploys Captura Expense to manage
approximately 24,000 expense claims per year for over 1,600 employees. It
anticipates deploying to the remaining 600 employees upon release of the next
version of Captura Expense.

Citibank and Affiliates/General Motors

Citibank N.A., or Citibank, is a global financial institution and, through
its various affiliates and subsidiaries, is one of the world's largest
providers of credit cards. General Motors is the world's largest industrial
corporation (measured in 1999 revenues).

Business Challenge. General Motors currently provides corporate credit
cards to approximately 50,000 North American employees. Currently, these
corporate credit card users are required to carry up to four separate cards for
travel, indirect purchasing, fleet expenses and telephony. General Motors'
vision is to consolidate all of its charges on a single card and to streamline
its expense management processes.

Solutions. Citibank (South Dakota) N.A., a Citibank affiliate, was selected
to be the provider of corporate credit cards to General Motors' North American
employees. In order to satisfy General Motors' business objectives, Citicorp
North America, Inc., another Citibank affiliate, agreed to establish a
relationship with Captura to provide an automated payment processing solution
that could be easily integrated both with its affiliate's credit card and also
with General Motors' internal accounting and payment systems. General Motors
anticipates deploying Captura Expense to 50,000 North American employees by the
end of 2000. Our solution is designed to permit General Motors to streamline
its entire expense management process, from submission to reimbursement, making
it easier to provide that corporate policies are enforced. In addition, our
system should enable General Motors to collect data to monitor spending
patterns and potentially negotiate better rates with suppliers. At the time it
announced its intent to implement our solution, General Motors estimated annual
savings in excess of $3.7 million from using Captura Expense in conjunction
with the credit card provided by Citibank (South Dakota) N.A.

Strategic Relationships

In order to expand the market acceptance and functionality of our automated
payment process solution, we have entered into strategic relationships with
organizations that we believe provide complementary services and technology.
These relationships are intended to help us provide complete automated payment
processing services to our clients. We have also established relationships with
financial institutions, hosting and application services providers, and
technology providers. We intend to expand these relationships and enter into
relationships with additional organizations in the future.

Financial Institutions. In cooperation with MasterCard, we developed a
comprehensive credit card processing solution that provides customers with a
global streamlined process for automated payment processing. Additionally, our
joint marketing initiatives with MasterCard include requirements for co-funding
direct marketing and global educational seminars. These development and market
initiatives allow us to jointly market our automated payment processing
services and the MasterCard corporate card services to member

37
<PAGE>

banks such as Citibank, Chase, GE Capital and Wells Fargo. Finally, MasterCard
promotes Captura as one of its eCommerce Solutions alliances.

Hosting and Application Service Providers. Qwest Cyber.Solutions sells,
hosts and implements our automated payment processing services utilizing its
Captura-trained and certified staff. Additionally, we have recently entered
into a relationship with Intel that provides us with a global hosting partner.
We are one of six charter strategic alliances in their application service
provider program and the only automated payment processing service provided by
Intel.

Technology Providers. Relationships with technology providers enable us to
ensure that our services are compatible with industry-standard operating
systems and databases and to enhance our automated payment processing services
by including advanced software components developed by third parties. To date,
we have established a relationship with Hewlett-Packard that provides us with
participation in Hewlett-Packard's Corporate E-services Portal. Our automated
payment processing service will be the only service of its kind on this portal.
Additionally, we are a member of Hewlett-Packard's eSpeak product program,
which is designed to allow Internet services to successfully interact with each
other regardless of the technology platform on which they are built.

Sales and Marketing

We sell and market our automated payment processing solution primarily
through a global direct sales organization. We have domestic sales offices in
the metropolitan areas of Boston, Chicago, Dallas, New York, Portland, San
Francisco, St. Louis and Seattle. We have international sales offices in
London, Paris and Sydney, and reseller and hosting relationships in Milan and
Copenhagen. As of September 30, 2000, we had 45 employees in our sales
organization. Our sales development organization provides lead development and
sales support through Web seminars and presentations. We are currently
expanding the size of our sales organization.

We are also implementing a channel distribution strategy to broaden
distribution and increase market awareness of our products. Our channel
strategy will focus on entering co-marketing and co-sales agreements with
complementary application service providers and financial services companies.
In addition, our clients actively assist in new product development, sales lead
generation and marketing efforts. We intend to develop relationships with
third-party system integrators and consultants to supplement our domestic and
international sales and implementation efforts.

We attempt to focus our strategic marketing efforts on the key financial
and travel decision-makers in Global 2000 companies, including chief executive
officers, chief financial officers and other financial professionals, board
members and information technology professionals. Our marketing objectives
include collecting data on our target markets; educating our target markets;
generating new sales and market opportunities; and creating awareness of our
automated payment processing solution. Our global marketing initiatives include
alliance training programs, Web-based and traditional business seminars, trade
shows, public relations and industry analyst programs, niche advertising and
advisory conferences.

Technology

Our technology is built on an open architecture that is currently
deployable on Windows NT. We are developing a UNIX based version of our
solution that we expect to be released in the first half of 2001. Our
technology is based on a modular architecture. By emphasizing reusable
processes, separation of application logic, and business rules and data, our
technology provides us with an efficient architecture to build, modify,
integrate and control applications for our clients.

The Data Flow of the Expense Engine. Our expense engine, which forms the
core of our payment processing solution, allows for the automation of routing
and purchase authorization. The expense engine captures data from external
sources, such as credit card feeds and accounting systems, validates and
monitors

38
<PAGE>

data flows, reconciles and analyzes data and exceptions as needed, and then
performs appropriate tasks and responses including integration into payment
systems. The technology components used to achieve the data flow steps are:

. Capturing Data from Purchase Systems. We have created common business
object schema that can accommodate business information such as people
data, project data, expense data and invoice data. Our goal is to
acquire as much information from corporate purchase mechanisms as
possible. Today, we capture all types of procurement, travel,
entertainment and fleet transaction information from corporate credit
cards. We intend to capture purchase information from requisitioning
applications and invoicing systems.

. Capturing Data from Individual Users. The automated payment processing
engine has the ability to capture "out of pocket' expense transactions
from a user, and is designed to prompt a user for missing data from a
card or automated purchase. To achieve this functionality, we have
created a multi-tier Web delivery for HTML to allow easy access for
users from any Internet browser. We support true browser functionality
without Active X or java applets, which allows us to maintain a high
level of deployability at low support costs.

. Validating Data. Our rules engine has a data-driven design that stores
all aspects of business policies as data attributes in a database
management system. These aspects include:

. Rule parameters--the attributes of the rule;

. Rule activity--describing whether the rules are active and the
effective data range;

. Rule exceptions--the exceptions that are generated by rule logic;

. Rule actions--the actions that are generated by rules;

. Workflow plan--the workflow action plan that is generated by the
rule;

. Workflow comments--all comments that are captured from the
transaction approvers.

. Reconciling Data. Our technology also includes advanced reconciliation
functionality that can check the status of any single transaction
providing clients with a complete view of their transactional workflow.
In addition, we intend to enhance our reconciliation capabilities to
enable clients to automatically match orders with invoices and payment
confirmations the reconciliation function.

. Integrating Data. We provide a common set of financial object schema
that enables our clients to seamlessly integrate transactional data
with their internal systems and allow clients to easily process the
settlement and reimbursement of transactions.

Product Development

In order to compete effectively in the market for automated payment
processing services, we will continue to invest in the development of new and
existing services, products and supporting technology. We have designed our
service infrastructure to yield significant benefits to our clients in
performance, scalability, availability and reliability. We are continually
focused on expanding and upgrading our services through design and
technological improvements.

Our product development and technology organization employs a defined
product life cycle development methodology, which includes technological and
architectural roadmaps, product planning, requirement specifications,
prototyping, design specifications, code review and beta testing. Each group
within our product development and technology organization regularly shares
resources and collaborates with other groups on code development, quality
assurance and documentation.

Our research and development expenses totaled $1.5 million in 1997, $4.5
million in 1998 and $6.1 million in 1999, and $3.1 million for the six months
ended June 30, 2000. As of September 30, 2000, we

39
<PAGE>

had 74 employees in research and development functions, including product
development, customization, quality assurance and advanced system architecture.
We intend to continue to invest in development of new applications as well as
in the enhancement of existing applications.

Competition

We believe that the principal competitive factors in our market are:

. application functionality;

. ability to provide a hosted service;

. scalability;

. integration with existing back-office software systems;

. an installed referenceable base of international customers;

. support for a broad range of Web-enabled devices for mobile users; and

. ease of implementation and deployment.

We believe that we compete effectively with respect to these factors. In
particular, we believe that the functionality of our automated payment
processing solution and our referenceable installed base of global clients are
competitive advantages.

The market for our services is intensely competitive, subject to rapid
change and significantly affected by new product introductions and other market
activities of industry participants. Our primary source of direct competition
is currently from vendors of financial and expense management software
applications. We also face indirect competition from potential customers'
internal development efforts and their reluctance to move away from existing
manual processes. Our direct and indirect competitors include providers of
expense management application software and providers of enterprise resource
planning and procurement applications that include some of the functionality
offered by our products, including Ariba, Concur Technologies, Extensity,
Gelco, IBM, Necho, Oracle, PeopleSoft and SAP. Some major credit card companies
have on occasion partnered with our competitors to provide products and
services linked to their corporate cards, which include some of the features
and benefits of our services. In addition, we may face competition from
smaller, entrepreneurial companies that may offer products and services that
compete with our automated payment processing solution.

Intellectual Property

We rely primarily on a combination of copyright and trademark laws, trade
secrets, confidentiality procedures and contractual provisions to protect our
proprietary technology. Although we have taken steps to avoid disclosure of our
trade secrets, including adopting a corporate policy on confidentiality that
applies to all employees, requiring non-employees with access to proprietary
information to enter into written confidentiality agreements with us, and
contractually restricting client access to our source code, this policy may not
always have been strictly followed or may not be adequate.

We presently have no patents or patent applications pending. Despite our
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy aspects of our products or to obtain and use information that we regard as
proprietary. Policing unauthorized use of our products is difficult, and while
we are unable to determine the extent to which unauthorized use of our software
products exists, such unauthorized use can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect our
proprietary rights to as great an extent as do the laws of the United States,
and we expect that it will become more difficult to monitor use of our products
as we attempt to expand our international presence. There can be no assurance
that our means of protecting our proprietary rights, even if followed, will be
adequate, nor that our competitors will not independently develop similar
technology.

40
<PAGE>

There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. It is possible that
in the future third parties may claim that we or our current or potential
future products infringe upon their intellectual property. We expect that
software product developers and providers of Internet-based software
applications 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 overlaps. Any claims, with or
without merit, could be time consuming, result in costly litigation, cause
delays in our development efforts 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 available at all, which could seriously
harm our business.

Employees

As of September 30, 2000, we had a total of 200 employees, including 61 in
sales and marketing, 74 in research and development, 38 in professional
services and 27 in administrative functions.

We do not have a collective bargaining agreement with any of our employees,
and we consider our employee relations to be good.

Facilities

Our primary sales, marketing, research and development facilities are
located in two buildings totaling approximately 46,000 square feet of space in
Kirkland, Washington pursuant to leases which expire in 2007. We also lease
office space in seven other cities in the United States, as well as in London,
Paris and Sydney. We believe our existing facilities meet our current needs and
that we will be able to obtain additional commercial space as needed.

41
<PAGE>

MANAGEMENT

The following table sets forth information concerning the Company's
executive officers and directors as of October 5, 2000.

<TABLE>
<CAPTION>
Name Age Position
------------------------ --- -----------------------------------------------------------------------
<S> <C> <C>
Dan Vetras.............. 42 Director, President and Chief Executive Officer
Corey Mandell........... 41 Chief Technology Officer and Co-Founder
Bob Colliton............ 44 Chief Financial Officer, Secretary and Treasurer
Gary Tidd............... 42 Executive Vice President, North American Sales and Business Development
Jim O'Farrell........... 46 Executive Vice President, Marketing and Product Management
Tom Patton.............. 49 Vice President, Product Development
Bruce Volkens........... 47 Executive Vice President, Services
Tony Audino............. 42 Director
Mike Brochu............. 47 Director
Bob Finzi............... 46 Director
Fred Harman............. 40 Director
Tim McMullen............ 43 Director
Norman Nie.............. 57 Director
</TABLE>

Dan Vetras has served as our President since December 1998, as our Chief
Executive Officer since January 1999 and as a Director since March 1999. From
April 1998 to December 1998, Mr. Vetras served as our Chief Operating Officer.
From February 1997 to April 1998, Mr. Vetras was Vice President of Sales and
Services of IntraNets.com, Inc., an intranet applications provider. From 1992
to February 1997, Mr. Vetras served as Vice President of World Wide Consumer
Software Sales in Channel Marketing for the Edmark division of IBM. Mr. Vetras
received a B.A. from American International College in Springfield,
Massachusetts.

Corey Mandell is a co-founder of Captura and has served as our Chief
Technology Officer since we were incorporated in 1994. From 1993 to November
1994, he served as Director of Development at Platinum Software, a provider of
enterprise financial software. Prior to that, Mr. Mandell co-founded MultiNet
Data Systems, a provider of client/server software, in 1991, and served as its
Technology Officer until May 1993. Mr. Mandell received a B.S. from California
State University-Chico.

Bob Colliton has served as our Chief Financial Officer, Secretary and
Treasurer since April 1997. From June 1990 to April 1997, Mr. Colliton was Vice
President, Finance and Operations, for Pinnacle Publishing, Inc., a publisher
of software development tools and technical newsletters. Mr. Colliton received
a B.A. from Eastern Washington University.

Gary Tidd has served as our Executive Vice President, North American Sales
and Business Development since September 2000. From March 2000 to September
2000, Mr. Tidd served as our Executive Vice President, North American Sales.
From December 1997 to February 2000, Mr. Tidd was a regional sales manager for
Oracle Corporation, a provider of information management software. From October
1995 to November 1997, Mr. Tidd was a territory sales manager for Oracle. Mr.
Tidd received a B.A. from the University of Puget Sound.

Jim O'Farrell has served as our Executive Vice President, Marketing and
Product Management since March 2000 and served in various executive marketing
and business development positions with Captura from August 1998 until March
2000. From July 1997 to July 1998, Mr. O'Farrell served as Vice President of
Business Development, Marketing and Services at SuperCede, Inc., a provider of
software development tools. From October 1995 to July 1997, Mr. O'Farrell
served as Director of Marketing for Asymetrix, a provider of software
development tools. Mr. O'Farrell received a B.S. from Central Washington
University.

Tom Patton has served as our Vice President of Development since June 2000.
Mr. Patton was an independent technology consultant from 1998 to 2000. From
1994 to 1997, Mr. Patton served as Vice President of Product Development for
Platinum Software Corporation. Mr. Patton attended Weber State University.

42
<PAGE>

Bruce Volkens has served as our Executive Vice President, Services since
October 1998. From October 1996 to April 1998, he was President and Chief
Operating Officer at PrimeSource Technologies, a technology consulting firm.
From December 1993 to August 1995, Mr. Volkens was a regional senior practice
director at Oracle Corporation, a provider of information management software.
Mr. Volkens received a B.S. from the University of Texas at Dallas and an
M.B.A. from Southern Methodist University.

Tony Audino has served as a director of Captura since December 1997. Mr.
Audino co-founded Voyager Capital, a venture capital investment firm, in 1996
and serves as a managing director of the firm. Prior to founding Voyager,
Mr. Audino worked for Microsoft Corporation from 1987 to 1994, where he held
positions as director of marketing for MS-DOS and director of business
development and strategic relations for Microsoft's systems software division.
Mr. Audino also serves on the board of directors of Primus Knowledge Solutions,
Inc., a provider of customer relationship management software. Mr. Audino
received a B.A. and B.S. from Creighton University.

Mike Brochu has served as a director of Captura since October 2000. Mr.
Brochu has served as President and Chief Executive Officer of Primus Knowledge
Solutions since November 1997 and was named its Chairman in December 1998. From
June 1994 until October 1997, Mr. Brochu was President and Chief Operating
Officer of Sierra On-Line, Inc., an interactive software publisher. Mr. Brochu
also serves on the board of directors of OnHealth Network Company, an Internet
content provider of public-health information. Mr. Brochu received a B.B.A.
from the University of Texas at El Paso.

Bob Finzi has served as a director of Captura since February 1999. Since
May 1991, Mr. Finzi has been a General Partner of the Sprout Group, a venture
capital investment firm. He also serves on the board of directors of Edison
Schools, Inc. and Interdent, Inc. Mr. Finzi received a B.S. and M.S. from
Lehigh University, and an MBA from Harvard University.

Fred Harman has served as a director of Captura since October 1997. Since
July 1994, Mr. Harman has been a managing member of the general partners of
venture capital investment funds affiliated with Oak Investment Partners. Mr.
Harman also serves on the boards of ILOG, S.A., Inktomi Corporation, Primus,
InterNAP Network Services, Quintus Corporation, ClickSoftware Technologies,
Ltd. and Avenue A, Inc. Mr. Harman received a B.S. and M.S. from Stanford
University and an M.B.A. from Harvard University.

Tim McMullen has served as a director of Captura since September 1997. Mr.
McMullen was a co-founder of Platinum Software, where he served as Chief
Technology Officer and Vice President of Product Marketing from 1984 to 1998.
Mr. McMullen received a B.S. from the University of Dayton.

Norman Nie has served as a director of Captura since May 1998. Mr. Nie has
served as a technology partner at Oak Investment Partners since 1997 and as
Director of the Stanford Institute for the Quantitative Study of Society at
Stanford University since 1998. Mr. Nie also serves as chairman of the board of
directors of SPSS Inc., a provider of analytical software, where he served as
chief executive officer from 1975 to 1991. Mr. Nie also serves on the board of
directors of Vicinity Corporation. He received a B.A. from Washington
University in St. Louis, and an M.A. and Ph.D. from Stanford University.

Board of Directors

Our board of directors consists of seven members. Our bylaws provide that
the authorized number of directors may be changed by resolution of the board of
directors. During his or her term, a director may only be removed by
stockholders for cause.

43
<PAGE>

Upon completion of this offering, our board of directors will be divided
into three classes, each serving staggered three year terms. The terms of
office for each class are as follows:

<TABLE>
<CAPTION>
Class Directors Term of Office
----- ---------------------------------------- ------------------------------------------
<C> <C> <S>
Class I Fred Harman and Bob Finzi . expires at the annual meeting of
stockholders in 2001 and at each third
succeeding annual meeting thereafter
Class II Tony Audino and Norman Nie . expires at the annual meeting of
stockholders in 2002 and at each third
succeeding annual meeting thereafter
Class III Dan Vetras, Tim McMullen and Mike Brochu . expires at the annual meeting of
stockholders in 2003 and at each third
succeeding annual meeting thereafter
</TABLE>

Committees of the Board of Directors

Our board of directors has an audit committee and a compensation committee.
The audit committee consists of Messrs. Audino, Brochu and Harman. The audit
committee makes recommendations to the board of directors regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by our independent auditors, reviews our financial
statements, and reviews and evaluates our internal control functions.

The compensation committee consists of Messrs. Audino, Finzi, McMullen and
Nie. The compensation committee makes recommendations to the board of directors
concerning the salaries and incentive compensation for our executive officers.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of the board of directors
or compensation committee of any entity that has one or more executive officers
serving as a member of our board of directors or compensation committee.

Director Compensation

We do not currently compensate our directors in cash for their service as
members of our board of directors although we reimburse them for reasonable
travel expenses incurred to attend board or committee meetings. Directors who
are employees of Captura are eligible to receive grants under our 1997 stock
plan and to participate in our 2000 employee stock purchase plan. Directors who
are not employees of Captura are eligible to receive grants under our 1997
stock plan and our 2000 director option plan. See "Benefit Plans."

In August 1997, we granted Mr. McMullen an option to purchase 7,500 shares
of common stock at an exercise price of $0.25 per share. The shares subject to
this option were immediately vested. We granted Mr. McMullen an additional
option in August 1997 to purchase 30,000 shares of common stock at an exercise
price of $0.25 per share. Twenty-five percent of the shares subject to this
option vest 12 months from the date of grant, and the remaining shares subject
to the option vest in equal monthly installments over the succeeding three
years. In March 2000, we granted Mr. McMullen an option to purchase 100,000
shares of common stock at an exercise price of $8.00 per share. One-half of the
shares subject to this option were immediately vested, and the remaining shares
vest in equal monthly installments over four years. We granted each of these
options under our 1997 stock plan.

In January 1999, we granted Mr. Audino an option to purchase 30,000 shares
of common stock under our 1997 stock plan at an exercise price of $1.92 per
share. The shares subject to this option vest in equal monthly installments
over four years.

44
<PAGE>

In May 1998, we granted Mr. Nie an option to purchase 30,000 shares of
common stock under our 1997 stock plan at an exercise price of $0.62 per share.
The shares subject to this option vest in equal monthly installments over four
years.

In October 2000, we granted Mr. Brochu an option to purchase 30,000 shares
of common stock under our 1997 stock plan at an exercise price of $8.00 per
share. The shares subject to this option vest in equal monthly installments
over four years.

Our 2000 director option plan provides for the automatic grant of non-
statutory stock options to purchase 30,000 shares of our common stock to non-
employee directors who join us after this offering. The shares subject to these
initial option grants will vest in equal monthly installments over three years.
At each annual meeting of our stockholders beginning in 2001, non-employee
directors who have served as members of our board for at least six months will
also receive an automatic grant to purchase 10,000 shares of common stock under
the 2000 director option plan. The shares subject to these subsequent options
will vest in equal monthly installments over one year. The exercise price for
any options granted under our 2000 director option plan will equal the fair
market value of our common stock on the date of grant. For further information
regarding the provisions of the 2000 director option plan, see "Benefit Plans--
2000 Director Option Plan."

Limitation of Liability and Indemnification Matters

Delaware law provides that a corporation's certificate of incorporation may
contain a provision eliminating or limiting the personal liability of directors
for monetary damages for breach of their fiduciary duties as directors, except
liability for:

. any breach of their duty of loyalty to the corporation or its
stockholders;

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

. unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or

. any transaction from which the director derived an improper personal
benefit.

Our certificate of incorporation limits the liability of our directors to
the maximum extent permitted by Delaware law and requires us to indemnify our
directors and officers to the maximum extent permitted by Delaware law. Our
bylaws also provide that we shall indemnify our directors and officers and may
indemnify our employees and agents to the full extent permitted by Delaware
law. We believe that indemnification under our bylaws covers at least
negligence on the part of indemnified parties. We have entered into agreements
to indemnify our directors and executive officers in addition to the
indemnification provided for in our bylaws. These agreements, among other
things, indemnify our directors and officers for all expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by them in
any action or proceeding arising out of their services as a director or
officer. We believe that these agreements are necessary to attract and retain
qualified directors and officers.

The limitation on liability and indemnification provisions in our
certificate of incorporation and bylaws may discourage stockholders from
bringing a lawsuit against our directors for breach of their fiduciary duties
and may reduce the likelihood of derivative litigation against our directors
and officers, even though a derivative action, if successful, might otherwise
benefit us and our stockholders. A stockholder's investment in us may be
adversely affected to the extent we pay the costs of settlement or damage
awards against our directors and officers under these indemnification
provisions.

45
<PAGE>

Executive Compensation

The following table sets forth the compensation paid by us to our Chief
Executive Officer and to our four next most highly compensated executive
officers who earned more than $100,000 during 1999.

Summary Compensation Table

<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
---------------------- ------------
Securities
Name and Principal Underlying All Other
Position Salary Bonus (1) Options (#) Compensation
------------------ ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Current Officers
Dan Vetras.............. $ 182,748 $ 25,531 325,000 $55,648(2)
President and Chief
Executive Officer
Bruce Volkens .......... 150,000 29,350 60,000 --
Executive Vice
President, Products
and Services
Corey Mandell........... 132,500 16,911 170,000 --
Chief Technology
Officer & Co-Founder
Bob Colliton............ 125,000 17,579 70,000 --
Chief Financial Officer
Former Officers
Katarina Bonde (3)...... 131,250 18,098 40,000 --
Executive Vice
President,
Global Sales and
Marketing
</TABLE>
--------
(1) Excludes bonuses earned in 1998 and paid in 1999. In 1999, we paid the
following bonuses earned in 1998: $17,500 to Mr. Vetras; $4,375 to Mr.
Volkens; $10,938 to Mr. Mandell; $10,425 to Mr. Colliton; and $7,875 to Ms.
Bonde.

(2) Consists of $54,955 in reimbursement of relocation expenses and $693 in
life insurance premiums.

(3) Ms. Bonde resigned effective as of February 4, 2000.

Option Grants in Last Fiscal Year

The following table sets forth grants of stock options to each of the
executive officers named in the compensation table above for the fiscal year
ended December 31, 1999. All options granted to these executive officers in the
last fiscal year were granted under our 1997 stock plan with an exercise price
equal to the fair market value of our common stock as determined by our board
of directors on the date of grant. The shares subject to options expiring on
January 26, 2009, vest and become exercisable on a monthly basis over four
years. One-quarter of the shares subject to the options expiring on November 4,
2009 vest and become exercisable on the first anniversary of the date of grant,
and the remaining shares will vest and become exercisable on a monthly basis
over the succeeding three years. The percent of the total options set forth
below is based on an aggregate of 1,418,710 options granted to employees during
1999.

Potential realizable value represents hypothetical gains that could be
achieved for the options if exercised at the end of the option term assuming
that our common stock appreciates at the annual rate shown, compounded
annually, from the date of grant until the expiration of the option term. The
assumed 5% and 10% rates of stock price appreciation are provided in accordance
with rules of the SEC and do not represent our estimate or projection of our
future common stock price. Actual gains, if any, on stock option exercises will
depend on the future performance of our common stock.

46
<PAGE>

<TABLE>
<CAPTION>
Potential
Individual Grants Realizable Value
--------------------------------------------- at Assumed Annual
Number of % of Total Rates of Stock
Securities Options Price Appreciation
Underlying Granted to for Option Term
Options Employees Exercise Expiration ------------------
Name Granted in Fiscal Year Price Date 5% 10%
---- ---------- -------------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Current
Officers
Dan Vetras.... 250,000 17.6% $1.92 1/26/09 $301,869 $ 764,996
75,000 5.3 5.80 11/04/09 586,317 1,191,277
Bruce
Volkens..... 60,000 4.2 5.80 11/04/09 469,054 953,021
Corey
Mandell..... 130,000 9.2 1.92 1/26/09 156,972 397,798
40,000 2.8 5.80 11/04/09 312,702 635,347
Bob Colliton.. 30,000 2.1 1.92 1/26/09 36,224 91,800
40,000 2.8 5.80 11/04/09 312,702 635,347
Former
Officers
Katarina
Bonde....... 40,000 2.8 5.80 11/04/09 312,702 635,347
</TABLE>

Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values

The following table provides summary information concerning stock options
held as of December 31, 1999 by each of the executive officers named in the
summary compensation table. None of these executive officers exercised options
in fiscal 1999. In January 2000, Mr. Vetras exercised options to acquire
475,000 shares of common stock. See "Certain Transactions." The value of
unexercised in-the-money options at the end of fiscal 1999 is based on a value
of $8.36 per share, the fair value of our common stock, as subsequently
determined, minus the per share exercise price, multiplied by the number of
shares issuable upon exercise of the options.

<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at Fiscal Year- In-the-Money Options at
End Fiscal Year-End ($)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Current Officers
Dan Vetras.................. 119,792 355,208 $868,335 $2,132,165
Bruce Volkens............... 11,667 88,333 86,336 363,264
Corey Mandell............... 121,458 78,542 832,798 350,610
Bob Colliton................ 26,875 73,125 206,475 332,425
Former Officers
Katarina Bonde.............. 37,500 62,500 293,031 274,669
</TABLE>

Employment and Change of Control Agreements

We are currently party to management continuity agreements with each of Mr.
Vetras, Mr. Tidd, Mr. Colliton, and Mr. Volkens. These agreements are effective
through March 15, 2004. In addition, we entered into a management continuity
agreement with Ms. Bonde which was subsequently superseded as discussed below.
The continuity agreements provide for payment of severance in the amount of six
months base salary in the event of an involuntary termination. The agreements
also provide for accelerated vesting of 50% of unvested options upon a change
of control of Captura and for accelerated vesting of all unvested options in
the event of an involuntary termination within twelve months of any such change
of control. A change of control is defined in the agreements as (i) any person
becoming the beneficial owner of more than 50% of our voting stock; (ii) a
merger or consolidation in which our existing stockholders do not control 50%

47
<PAGE>

or more of the voting stock of the surviving entity; (iii) a liquidation or
sale of all or substantially all of our assets; or (iv) a change in the
composition of our board of directors such that a majority of the directors are
elected in connection with any of the foregoing transactions. Subsequently, we
entered into amendments to the continuity agreements with Messrs. Vetras,
Colliton and Volkens. Under these amendments, the 50% vesting acceleration on a
change of control does not apply to options granted on March 8, 2000 if there
is a change of control within 12 months of such date of grant. We also entered
into separate agreements with Messrs. Mandell and O'Farrell under which their
March 2000 option grants will automatically become vested with respect to one-
half of the then unvested shares in the event of a change of control occurring
on or after March 8, 2001. In addition, Messrs. Mandell and O'Farrell's March
2000 option grants would become fully vested in the event of an involuntary
termination within twelve months of a change of control.

In connection with Ms. Bonde's resignation as an officer of Captura in
February 2000, we agreed to continue to pay Ms. Bonde's base salary through
February 4, 2001. In addition, we agreed to permit continued vesting with
respect to options to acquire 62,500 shares of our common stock through
February 4, 2001 and to permit Ms. Bonde to exercise these options through
March 4, 2001. As a result of this agreement, as of February 4, 2001, Ms. Bonde
will hold exercisable options to acquire 28,750 shares of our common stock at a
weighted average price of $2.86 per share. In addition, we agreed that in the
event of a merger, acquisition, or other change of control of Captura occurring
on or before February 1, 2001, Ms. Bonde's vesting would be further accelerated
with respect to 7,500 additional shares at a price of $5.80 per share.

In connection with Mr. Tidd's becoming an officer of Captura, we agreed to
pay him an annual base salary of $150,000, under the terms of his employment
offer letter. We also agreed to continue to pay Mr. Tidd's base salary for a
period of one year in the event we terminate his employment without cause. In
March 2000, we granted Mr. Tidd an option under our 1997 stock plan to acquire
200,000 shares of our common stock at an exercise price of $8.00 per share.

Benefit Plans

1997 Stock Plan

Our 1997 stock plan, referred to as our 1997 plan, provides for the grant
of incentive stock options, which may provide for preferential tax treatment,
to our employees. In addition, under the 1997 plan, we may grant nonstatutory
options and stock purchase rights to our employees, consultants and directors.

We have reserved a total of 5,550,000 shares of our common stock for
issuance under the 1997 plan. As of June 30, 2000, 3,058,724 shares were
subject to outstanding options, 967,422 shares had been issued upon exercise of
options previously granted, and 523,854 shares were available for future grants
of options and stock purchase rights under the 1997 Plan. Subsequent to June
30, 2000, we increased the available reserve under our option plan by 1,000,000
shares. In addition, on the first day of each fiscal year, beginning on January
1, 2002, the first day of our 2002 fiscal year, the number of shares of common
stock available for issuance under the 1997 plan will automatically increase by
a number of shares equal to the least of the following:

. five percent of our total outstanding shares of common stock on the
last day of the immediately preceding fiscal year;

. 2,000,000 shares; or

. a lesser amount determined by our board of directors.

Our board of directors currently administers the 1997 plan but may delegate
these obligations to a committee. The committee may consist of two or more
"outside directors," as defined in the Internal Revenue Code, to satisfy
requirements of applicable tax and securities laws. The administrator has the
power to determine the terms of options or stock purchase rights granted,
including the exercise price, the number of shares subject to the option or
stock purchase right, the exercisability of the options, and the form of
consideration payable upon exercise.

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<PAGE>

Although the administrator determines the exercise price of options and
stock purchase rights granted under the 1997 plan, in order to qualify an
option grant as an incentive stock option, the exercise price must be at least
equal to the fair market value of our common stock on the date of grant. In
addition, the term of the incentive stock option may not exceed ten years.
Incentive stock options granted to employees who hold ten percent or more of
our outstanding common stock must be granted at an exercise price equal to at
least 110% of the fair market value of our common stock on the date of grant
and must terminate within five years of that date.

Under the 1997 plan, no optionee may be granted an option to purchase more
than 750,000 shares of our common stock in any fiscal year. In connection with
his or her initial employment or service, however, an optionee may be granted
an option to acquire up to 1,500,000 shares. Following a termination of his or
her relationship with us, an optionee must exercise any vested options during
the time period specified in the option agreement, which is generally three
months. If a termination results from the optionee's death, however, the
optionee's estate or heir may exercise the option, to the extent vested on the
date of death, for a period of up to 12 months. If a termination results from
the optionee's disability, optionees will generally have six months from the
date of termination to exercise their options to the extent they were vested on
the date of termination. In no case may an option be exercised later than the
expiration of its term. Under the 1997 plan, options and stock purchase rights
are generally not transferable and may be exercised only by the optionee during
his or her lifetime.

In the event of a merger or acquisition of our company, if the acquiror or
successor corporation does not assume outstanding options and stock purchase
rights under the 1997 plan, all options and stock purchase rights will become
immediately fully vested. If, however, the acquiror or successor corporation
assumes outstanding options and stock purchase rights, no acceleration of
vesting will occur unless the acquiror or successor corporation terminates an
optionee's relationship, without cause, at any time within twelve months of the
date of the merger or acquisition. In that case, the optionee will be given
vesting credit for an additional twelve months of continued service, and
outstanding options or stock purchase rights will remain exercisable for at
least six months from the date of termination (unless the option or stock
purchase right would otherwise terminate sooner in accordance with its terms).
These provisions of the 1997 plan could have the effect of deterring an
acquisition or merger involving our company. See "Description of Capital
Stock."

The 1997 plan will automatically terminate in 2007, unless we terminate it
sooner. In addition, our board of directors has the authority to amend, suspend
or terminate the 1997 plan so long as it does not adversely affect the rights
of any optionee holding options previously granted under the 1997 plan.

2000 Employee Stock Purchase Plan

Our 2000 Employee Stock Purchase Plan, referred to as our 2000 ESPP, was
adopted by our board of directors and approved by our stockholders in October
2000 and will become effective contemporaneously with this offering. We have
reserved 500,000 shares of our common stock under the 2000 ESPP.

In addition, on the first day of each fiscal year, beginning on January 1,
2002, the first day of our 2002 fiscal year, the number of shares of common
stock available for issuance under the 2000 ESPP will automatically increase by
a number of shares equal to the least of the following:

. two percent of our total outstanding shares of common stock on the
last day of the immediately preceding fiscal year;

. 750,000 shares; or

. a lesser amount determined by our board of directors.

Our board of directors or a committee of our board will administer the 2000
ESPP. All of our employees will be eligible to participate if they are
customarily employed by us or any participating subsidiary for at least

49
<PAGE>

20 hours per week and more than five months in any calendar year. An employee
may not participate in the 2000 ESPP, however, if either:

. the employee holds five percent or more of the total combined voting
power or value of all classes of our capital stock (after giving
effect to the grant of purchase rights under the 2000 ESPP); or

. the employee's right to purchase our common stock under all employee
stock purchase plans would accrue at a rate in excess of $25,000 worth
of our common stock in any calendar year.

The 2000 ESPP is intended to qualify for preferential tax treatment and
contains consecutive, overlapping twelve month offering periods. Each offering
period includes four three-month purchase periods. The offering periods
generally start on the first trading day on or after February 1 and November 1
of each year, except that the first offering period will commence on the
effective date of this offering and will end on the last trading day ending on
or before January 31, 2002.

The 2000 ESPP permits participants to purchase our common stock through
payroll deductions of up to ten percent of their eligible compensation, which
includes a participant's base straight time gross earnings and commissions but
excludes all other compensation. A participant may purchase no more than 10,000
shares of our common stock during any six month period.

Amounts deducted and accumulated by the participant are used to purchase
shares of our common stock at the end of each six month period. The price is
85% of the lower of the fair market value of our common stock at the beginning
of the applicable offering period or the end of the applicable purchase period.
Participants may end their participation at any time during an offering period
and will be paid their payroll deductions through the date of termination.
Participation ends automatically upon a termination of employment.

A participant may not transfer rights granted under the 2000 ESPP other
than by will, the laws of descent and distribution, or as otherwise permitted
by the plan.

In the event of our merger with or acquisition by another corporation where
our stockholders do not control the resulting entity or a sale of all or
substantially all of our assets, a successor corporation may assume or
substitute each outstanding purchase right. If the successor corporation
refuses to assume or substitute for the outstanding purchase rights, the
offering period then in progress will be shortened, and a new exercise date
will be set.

Our 2000 ESPP will terminate in 2010. Our board of directors may, however,
amend or terminate the plan except that, subject to certain exceptions
described in our plan, no such action may adversely affect any outstanding
rights to purchase stock under the plan.

2000 Director Option Plan

Our 2000 Director Option Plan, referred to as our director plan, was
adopted by our board of directors and approved by our stockholders in October
2000. The director plan provides for the grant of nonstatutory stock options to
directors who are not also employees. We have reserved a total of 200,000
shares for issuance under the director plan. In addition, on the first day of
each fiscal year, beginning on January 1, 2002, the first day of our 2002
fiscal year, the number of shares of common stock available for issuance under
the 2000 ESPP will automatically increase by a number of shares equal to:

. the number of shares needed to restore the maximum number of shares
then available for grant to 200,000 shares; or

. a lesser amount determined by our board of directors.

As of the effectiveness of this offering, no options to acquire our common
stock will be outstanding under our director plan. Upon becoming a member of
our board of directors, each new director will receive an

50
<PAGE>

option under the director plan to acquire 30,000 shares of our common stock.
Directors serving on our board on the date of this prospectus will not receive
this initial option grant, however. At each annual meeting thereafter,
beginning with our 2001 annual meeting, each non-employee director who has
served on our board of directors for at least six months will receive an option
to acquire 10,000 shares of our common stock. The exercise price of all option
grants under the director plan will equal the fair market value of our common
stock on the date of grant. All options granted under the director plan will
have a term of ten years. Initial option grants to new directors will vest
monthly over 36 months, and follow-on grants to existing directors will vest
monthly over 12 months.

Upon a termination of an eligible director's membership on our board, he or
she must exercise any outstanding vested options under the director plan during
the time period specified in the option agreement, which is generally three
months. If a termination results from the director's death, however, the
director's estate or heir may exercise the option, to the extent vested on the
date of death, for a period of up to 12 months. If a termination results from
the director's disability, the director will generally have six months from the
date of termination to exercise the options to the extent they were vested on
the date of termination. In no case may an option be exercised later than the
expiration of its term, however. Under the director plan, options are generally
not transferable and may be exercised only by the director during his or her
lifetime.

Unless terminated earlier, the director plan will automatically terminate
in 2010. Our board of directors has the authority to amend, alter, suspend or
discontinue the director plan, however, but no such action may adversely affect
any grant made under the director plan.

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<PAGE>

CERTAIN TRANSACTIONS

Relationships Among Officers or Directors with Specific Investors

Four of our directors are associated with entities that each own more than
five percent of our capital stock. Mr. Harman is a general partner of Oak
Investment Partners, Mr. Nie is a technology partner at Oak Investment
Partners, Mr. Audino is a managing partner of Voyager Capital, and Mr. Finzi is
a general partner of the Sprout Group, which is also an affiliate of Donaldson,
Lufkin & Jenrette, another holder of more than five percent of our capital
stock. No other officer or director of Captura has any material relationship
with any other principal stockholder.

Preferred Stock Financings

Since our inception, we have issued, in private placement transactions,
shares of preferred stock as follows: an aggregate of 1,000,000 shares of
Series A preferred stock at $2.50 per share in July 1997; an aggregate of
1,891,892 shares of Series B preferred stock at $3.70 per share in October and
December 1997; an aggregate of 695,651 shares of Series C preferred stock at
$5.75 per share in August 1998; an aggregate of 3,881,767 shares of Series D
preferred stock at $5.75 per share in February 1999; and an aggregate of
4,493,673 shares of Series E preferred stock at $9.29 per share in February and
September 2000. The following table summarizes the shares of preferred stock
purchased by executive officers, directors and 5% stockholders of Captura and
persons and entities associated with them in the private placement
transactions.

<TABLE>
<CAPTION>
Series A Series B Series C Series D Series E
Preferred Preferred Preferred Preferred Preferred
Stock (1) Stock Stock Stock (2) Stock (3)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Oak Investment Partners..... -- 1,337,838 170,271 434,783 484,392
Donaldson, Lufkin &
Jenrette, Inc............. -- -- -- 1,739,131 484,392
Merrill Lynch & Co., Inc.... 1,000,000 270,270 175,834 112,201 247,578
Ford Motor Company.......... -- -- -- -- 1,614,639
Voyager Capital............. -- 270,270 347,826 173,913 53,821
U.S. Trust Corp............. -- -- -- 695,652 86,114
Tudor Investment Corp....... -- -- -- 695,652 53,821
Norman Nie.................. -- 13,514 1,720 4,348 3,847
Tim McMullen................ -- -- -- 26,087 --
</TABLE>
--------
(1) In connection with the issuance of Series A preferred stock, we granted
warrants to purchase 111,280 shares of Series A preferred stock to entities
affiliated with Merrill Lynch & Co., Inc.

(2) In connection with the issuance of Series D preferred stock, we granted
warrants to purchase shares of Series D preferred stock, as follows:
108,695 to entities affiliated with Oak Investment Partners; 434,781 to
entities affiliated with Donaldson, Lufkin & Jenrette, Inc.; 28,049 to
entities affiliated with Merrill Lynch & Co., Inc.; 43,478 to entities
affiliated with Voyager Capital; 173,913 to entities affiliated with U.S.
Trust Corp.; 187,367 to entities affiliated with Tudor Investment Corp.;
1,087 to Norman Nie; and 6,521 to Tim McMullen.

(3) In connection with the issuance of Series E preferred stock, we granted
warrants to purchase shares of Series E preferred stock, as follows: 80,732
to entities affiliated with Oak Investment Partners; 80,733 to entities
affiliated with Donaldson, Lufkin & Jenrette, Inc.; 61,895 to entities
affiliated with Merrill Lynch & Co., Inc.; 403,659 to Ford Motor Company;
13,455 to entities affiliated with Voyager Capital; 21,529 to entities
affiliated with U.S. Trust Corp.; 13,455 to entities affiliated with Tudor
Investment Corp.; and 962 to an entity affiliated with Norman Nie.

The shares of our Series D preferred stock identified above include shares
issued upon conversion of convertible subordinated promissory notes issued in
November and December 1998 in the aggregate principal amount of $1,885,881. Of
this aggregate principal amount, entities associated with Oak Investment
Partners

52
<PAGE>

purchased $1,000,000, entities associated with Merrill Lynch purchased
$634,185, and entities associated with Voyager Capital purchased $251,696.
These convertible promissory notes bore interest at the rate of 8.0% per year.
Outstanding principal and interest were subsequently converted into an
aggregate of 333,007 shares of Series D preferred stock. In connection with
purchasing these convertible notes, we issued the Oak Investment Partners
entities warrants to purchase 34,782 shares of Series D preferred stock, the
Donaldson, Lufkin & Jenrette entities warrants to acquire 22,058 shares of
Series D preferred stock, and the Voyager Capital entities warrants to acquire
8,755 shares of Series D preferred stock. The exercise price applicable to each
of these warrants is $5.75 per share.

Business Relationships with Merrill Lynch & Co.

Concurrently with the issuance and sale of our Series A preferred stock to
entities affiliated with Merrill Lynch & Co. in July 1997, we entered into a
letter agreement with Merrill Lynch granting Merrill Lynch a right of first
refusal on all investment banking services for which we choose to hire an
outside advisor. The right is subject to the provision of services on terms at
least as favorable to Captura as offered by any other nationally recognized
investment bank. In October 2000, Merrill Lynch agreed to waive the application
of its right of first refusal with respect to this offering.

In November 1999, we entered into a separate letter agreement with Merrill
Lynch in which Merrill Lynch agreed to act as our exclusive financial advisor
in connection with any proposed business combination or strategic investment. A
business combination is defined as a merger or consolidation of Captura, a sale
of all or substantially all of our assets or revenues, or a disposition of more
than 50% of our outstanding capital stock. A strategic investment is defined as
a sale of less than 50% of our outstanding capital stock. Under the terms of
the agreement, we are obligated to pay Merrill Lynch a fee of $1,500,000 or
1.5% of the purchase price, whichever is greater, for the consummation of any
business combination, and a fee of 6% of the purchase price for the
consummation of any strategic investment. We are also obligated to reimburse
Merrill Lynch for up to a maximum $60,000 in reasonable, out-of-pocket expenses
incurred in connection with its services under the agreement. The agreement may
be terminated upon written notice by either party. For a period of one year
following termination, we will continue to be obligated to pay Merrill Lynch
fees, subject to business exceptions, for any business combination or strategic
investment. In connection with our Series E preferred stock and warrant
financing, which first closed in February 2000, we paid Merrill Lynch a fee of
$1,264,909. In connection with our Series D preferred stock and warrant
financing, which closed in February 1999, we paid Merrill Lynch a fee of
$1,153,245.

In May 1997, we entered agreements to license our software and to provide
technical support to Merrill Lynch. We recognized license and services revenues
from Merrill Lynch in the amounts of $700,773 in 1997, $1,013,783 in 1998, and
$507,657 in 1999.

Agreements with Tim McMullen

In February 1999, we entered into agreements with Tim McMullen, one of our
directors, to compensate him for past consulting services and to secure future
consulting services. We paid Mr. McMullen $200,000 in compensation for
consulting services previously rendered, and $50,000 to secure additional
services relating to software development. The consulting relationship
terminated in May 1999. In connection with these agreements, Mr. McMullen also
purchased 26,087 shares of our Series D preferred stock and warrants to
purchase 6,521 shares of our Series D preferred stock.

Agreements with Dan Vetras

In January 2000, Dan Vetras, our president and chief executive officer,
borrowed $1,000,000 from us on an unsecured, full-recourse basis. The loan
bears interest at an annual rate of 6.12%, and is due on January 21, 2004.

53
<PAGE>

In January 2000, three of Mr. Vetras' stock option agreements were amended
to allow him to exercise options to purchase common stock that were not yet
vested, provided that he entered into a restricted stock purchase agreement.
Mr. Vetras subsequently paid $970,500 in cash to exercise options to purchase
475,000 shares of common stock. We have a right to repurchase any unvested
shares in the event of termination of Mr. Vetras' employment at a purchase
price equal to the original purchase price. Our repurchase option lapses
monthly with respect to one-forty-eighth (1/48) of the shares and will lapse
with respect to all 475,000 shares in November 2003.

In July 2000, our board of directors approved a $1,000,000 loan to Mr.
Vetras. When fully consummated, the loan will accrue interest at an annual rate
of 6.4%, will be secured by a second mortgage on Mr. Vetras' home and will be
payable in full upon the earlier of his termination of employment or ten years
from the date of the loan. As of September 30, 2000, we had advanced to Mr.
Vetras $100,000 of the approved amount. This advance has not yet been secured.

Business Relationship with Ford Motor Company

In August 1998, we entered into license and service agreements with Ford
Motor Company, which beneficially owns more than five percent of our capital
stock. These agreements provide Ford with a license to our automated payment
processing solution as well as with deployment and support services. Ford is
obligated to pay us approximately $750,000 during the course of these
agreements.

In September 2000, we entered into a hosting and service agreement with
Ford. Under this agreement, we will provide hosting and support services for
Ford's online travel and expense reporting system, and Ford will pay us
approximately $1.7 million over the two-year term.

In September 2000, we issued Ford a warrant to purchase 1,210,980 shares of
Series E preferred stock at $9.29 per share. The warrant is exercisable upon
the earlier of five years from the date of issuance or the satisfaction of
specific conditions, including joint marketing efforts, client generation and
full integration of our solution.

Business Relationship with Donaldson, Lufkin & Jenrette

In June 2000, we entered into subscription and service agreements with
Donaldson, Lufkin & Jenrette, Inc., which beneficially owns more than five
percent of our capital stock. These agreements provide Donaldson, Lufkin &
Jenrette with a one-year subscription to our automated payment processing
solution for which we are to be paid approximately $120,000 over the
subscription term.

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<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of our outstanding common stock as of September 30, 2000, for each of
the following:

. each person or entity that we know beneficially owns more than five
percent of our common stock;

. each of our directors;

. each of our executive officers named in the summary compensation table
elsewhere in this prospectus; and

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

Except as otherwise indicated, we believe that the beneficial owners of the
common stock listed below, based on information furnished by such owners, have
sole voting and investment power with respect to such shares.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. The percentage ownership of each person or
entity identified in the table includes shares of common stock subject to
options or warrants held by that person that are currently exercisable or will
become exercisable within 60 days. These shares are not deemed outstanding for
purposes of computing the percentage ownership of any other person, however.
Percentage of ownership is based upon 14,680,904 shares of common stock
outstanding on September 30, 2000, the issuance of 65,595 shares in connection
with the assumed exercise for cash of warrants that would otherwise expire upon
this offering and the issuance of shares in connection with this
offering. This table assumes no exercise of the underwriters' over-allotment
option and gives effect to the conversion of all outstanding shares of
preferred stock.

55
<PAGE>

<TABLE>
<CAPTION>
Percentage of Shares
Total Number --------------------
Options of Shares Outstanding
Number of or Beneficially Before After
Name of Beneficial Owner Shares Warrants Owned Offering Offering
------------------------ --------- --------- ------------ ----------- --------

<S> <C> <C> <C> <C> <C>
Principal Stockholders

Oak Investment Partners
(1)................... 2,579,784 264,575 2,844,359 18.9%
525 University Avenue,
Suite 1300
Palo Alto, California
94301
Donaldson, Lufkin &
Jenrette Inc. (2)..... 2,223,523 555,878 2,779,401 18.2
c/o Sprout Group
3000 Sand Hill Road,
Suite 170, Bldg. 3
Menlo Park, California
94025
Merrill Lynch & Co.,
Inc. (3).............. 1,805,883 223,282 2,029,165 13.6
250 Vesey Street
New York, New York
10281
Ford Motor Company...... 1,614,639 403,659 2,018,298 13.3
The American Road
Dearborn, Michigan
48121
Tudor Investment Corp.
(4)................... 908,223 187,367 1,095,590 7.3
40 Rowes Wharf
Boston, Massachusetts
02110
U.S. Trust Corp. (5).... 781,766 195,442 977,208 6.6
114 West 47th Street
New York, New York
10036
Voyager Capital (6)..... 845,830 79,438 925,268 6.2
800 Fifth Avenue, Suite
4100
Seattle, Washington
98104

Directors and Officers

Dan Vetras (7).......... 445,000 50,000 495,000 3.3
Bruce Volkens........... -- 52,500 52,500 *
Corey Mandell........... 64,500 121,250 185,750 1.2
Bob Colliton............ -- 58,958 58,958 *
Katarina Bonde (8)...... 87,500 28,750 116,250 *
Tony Audino (9)......... 845,830 79,438 925,268 6.2
Mike Brochu............. -- -- -- *
Bob Finzi (10).......... 2,223,523 555,878 2,779,401 18.2
Fred Harman (11)........ 2,579,784 264,575 2,844,359 18.9
Tim McMullen............ 86,087 55,063 141,150 *
Norman Nie (12)......... 37,016 7,212 44,228 *
All directors and
executive officers as
a group (13 persons).. 6,281,740 1,282,733 7,564,473 47.2
</TABLE>
--------
* Indicates beneficial ownership of less than one percent of the total
outstanding common stock.

(1) Includes 2,516,834 shares held by Oak Investment Partners VII, L.P., and
warrants to purchase 258,093 shares of common stock. Also includes 62,950
shares held by Oak VII Affiliate Fund, L.P., and warrants to purchase
6,482 shares of common stock. Fred Harman, one of our directors, is a
general partner of Oak Investment Partners. Mr. Harman disclaims
beneficial ownership of the shares held by entities affiliated with Oak
Investment Partners except to the extent of his pecuniary interest in the
shares.

(2) Includes 16,676 shares held by DLJ Capital Corporation and warrants to
purchase 4,168 shares of common stock. Also includes 171,398 shares held
by DLJ ESC II, L.P., and warrants to purchase 42,849 shares of common
stock. Also includes 1,924,263 shares held by Sprout Capital VIII, L.P.
and warrants to purchase 481,065 shares of common stock. Also includes
111,186 shares held by Sprout Venture Capital, L.P., and warrants to
purchase 27,796 shares of common stock. Bob Finzi, one of our directors,
is a general

56
<PAGE>

partner of the Sprout Group, which is affiliated with Donaldson, Lufkin &
Jenrette, Inc. Mr. Finzi disclaims beneficial ownership of the shares held
by entities affiliated with Donaldson, Lufkin & Jenrette, Inc., except to
the extent of his pecuniary interest in the shares.

(3) Includes 902,942 shares held by Merrill Lynch KECALP L.P. 1994 and
warrants to purchase 111,641 shares of common stock. Also includes
753,671 shares held by Merrill Lynch KECALP L.P. 1997 and warrants to
purchase 91,078 shares of common stock. Also includes 133,001 shares held
by KECALP, Inc., and warrants to purchase 13,298 shares of common stock.
Also includes 16,269 shares held by Merrill Lynch KECALP International,
L.P. 1997, and warrants to purchase 7,265 shares of common stock.

(4) Includes 771,990 shares held by Tudor Private Equity Fund, L.P., and
warrants to purchase 159,263 shares of common stock. Also includes
136,233 shares held by The Raptor Global Portfolio, Ltd., and warrants to
purchase 28,104 shares of common stock.

(5) Represents shares and warrants held by Excelsior Private Equity Fund II,
Inc.

(6) Includes 787,498 shares held by Voyager Capital Fund I, L.P. and warrants
to purchase 62,305 shares of common stock. Also includes 58,332 shares
held by Voyager Capital Founders Fund, L.P., and warrants to purchase
3,383 shares of common stock. Also includes 13,750 shares held by Mr.
Audino, a managing partner of Voyager Capital, in the form of options to
purchase common stock. Mr. Audino disclaims beneficial ownership of the
shares held by entities affiliated with Voyager Capital except to the
extent of his pecuniary interest in the shares.

(7) Includes 280,208 shares of common stock subject to repurchase as of
September 30, 2000, by Captura upon termination of employment.

(8) Ms. Bonde's beneficial ownership reflects shares permitted to be
purchased by March 4, 2001, pursuant to the Agreement and Release of
February 2000. See "Management--Employment and Change of Control
Agreements."

(9) Includes shares held by persons and entities affiliated with Voyager
Capital. See note 6 above.

(10) Includes 2,779,401 shares held by entities affiliated with Donaldson,
Lufkin & Jenrette, Inc. See note 2 above.

(11) Includes 2,844,359 shares held by entities affiliated with Oak Investment
Partners. See note 1 above.

(12) Includes 37,016 shares held by National Information Enterprises, LP I and
warrants to purchase 962 shares of common stock. Also includes 6,250
shares held by Mr. Nie in the form of options to purchase common stock.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon completion of this offering, we will be authorized to issue up to
100,000,000 shares of our common stock, par value $0.001 per share, and
5,000,000 shares of our preferred stock, par value $0.001 per share.
Immediately after this offering, based on shares outstanding as of September
30, 2000, we estimate there will be approximately shares of common
stock outstanding, 7,025,754 shares of common stock issuable upon exercise of
outstanding options and warrants assuming there are no additional option or
warrant grants after September 30, 2000, and no shares of preferred stock
issued and outstanding.

The figure for outstanding shares of common stock upon completion of this
offering reflects the issuance and conversion into common stock of 65,595
shares of our Series C preferred stock in connection with the assumed exercise
for cash of warrants which would otherwise terminate upon the closing of this
offering.

The following summary of some provisions of our common stock and preferred
stock does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the provisions of our certificate of incorporation,
which is included as an exhibit to the registration statement of which this
prospectus is a part, and by the provisions of applicable law.

Common Stock

The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Holders of
common stock do not have cumulative voting rights, and therefore, holders of a
majority of the shares voting for the election of directors can elect all of
the directors. If this occurs, the holders of the remaining shares will not be
able to elect any directors.

Subject to preferences that may be applicable to any then outstanding
preferred stock, holders of common stock are entitled to receive ratably such
dividends as may be declared by our board of directors out of funds legally
available therefor and shall be noncumulative. We have never declared or paid
cash dividends on our common stock or other securities and do not currently
anticipate paying cash dividends in the future. In the event of our
liquidation, dissolution or winding up, holders of common stock are entitled to
share ratably in all assets remaining after payment of liabilities and subject
to the prior rights of any holders of preferred stock then outstanding. Holders
of common stock have no preemptive rights and no right to convert their common
stock into any other securities. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are fully paid and nonassessable, and the shares of common stock to be
issued upon completion of this offering will be fully paid and nonassessable.

Preferred Stock

Our certificate of incorporation authorizes 5,000,000 shares of preferred
stock. Our board of directors has the authority, without further action or
authorization by the stockholders, to issue the preferred stock in one or more
series and to fix the rights, preferences, privileges and restrictions thereof,
including dividend rights, dividend rates, conversion rights, voting rights,
terms of redemption, redemption prices, liquidation preferences, and the number
of shares constituting any series or the designation of the series. Our board
of directors, without stockholder approval, can issue preferred stock with
voting, conversion or other rights that could adversely affect the voting power
and other rights of the holders of common stock. Preferred stock could thus be
issued quickly with terms calculated to delay or prevent a change of control or
make removal of management more difficult. Additionally, the issuance of
preferred stock may have the effect of decreasing the market price of the
common stock, and may adversely affect the voting and other rights of the
holders of common stock. At present we have no plans to issue any preferred
stock.

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<PAGE>

Warrants

As of September 30, 2000, the following warrants to purchase a total of
3,762,948 shares of our capital stock were outstanding, excluding warrants to
purchase 65,595 shares of stock that we have assumed will be exercised before
the offering:

. A warrant to purchase 12,000 shares of our common stock at an exercise
price of $2.50 per share , which expires in September 2001;

. Warrants to purchase 127,280 shares of our Series A preferred stock at
an exercise price of $2.50 per share, which expire in July 2002;

. Warrants to purchase 13,592 shares of our Series A preferred stock at
an exercise price of $2.50 per share, which expire on the earlier of
three years after the closing date of this offering or November 2004;

. A warrant to purchase 5,405 shares of our Series B preferred stock at
an exercise price of $3.70 per share, which expires in November 2002;

. Warrants to purchase 14,865 shares of our Series B preferred stock at
an exercise price of $3.70 per share, which expire on the earlier of
five years after the closing date of this offering or March 2008;

. A warrant to purchase 6,957 shares of our Series C preferred stock at
an exercise price of $5.75 per share, which expires in August 2003;

. Warrants to purchase 969,349 shares of our Series D preferred stock at
an exercise price of $5.75 per share, which expire in February 2004;

. Warrants to purchase 10,000 shares of our Series D preferred stock at
an exercise price of $5.75 per share, which expire in March 2009;

. Warrants to purchase 568,778 shares of our Series E preferred stock at
an exercise price of $9.29 per share, which expire in February 2002;

. Warrants to purchase 554,635 shares of our Series E preferred stock at
an exercise price of $9.29 per share, which expire in September 2002;

. Warrants to purchase 269,107 shares of our Series E preferred stock at
an exercise price of $9.29 per share, which expire in June 2002; and

. A warrant to purchase 1,210,980 shares of our Series E preferred stock
at an exercise price of $9.29 per share, which expires in March 2006.

The warrants may be exercised on a cash or cashless basis. In order to
effect a cashless exercise, the warrant holder would surrender the right to
acquire that number of shares under the warrant with a fair market value equal
to the aggregate exercise price of the shares received.

We have assumed throughout this prospectus the pre-offering cash exercise
of warrants to purchase a total of 65,595 shares of our Series C preferred
stock at $5.75 per share. These warrants expire upon the closing of this
offering.

Registration Rights

After this offering, the holders of 15,792,613 shares of common stock and
warrants to purchase common stock will be entitled to registration rights. 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 exercising
registration rights, we must notify these securityholders and these
securityholders may be entitled to include all or part of their shares in the
registration. Additionally, holders of 15,742,156 shares of common stock and
warrants to purchase common stock have demand registration rights under which
they may require us to use our best efforts to

59
<PAGE>

register shares of their common stock. Further, the holders of these demand
rights may require us to file additional registration statements on Form S-3.
All of these registration rights are subject to some conditions and
limitations, including the right of underwriters to limit the number of shares
included in a registration and our right to not effect a requested registration
within six months following an offering of our securities including this
offering.

Antitakeover Effects of Provisions of Our Charter Documents

Some of the provisions of our certificate of incorporation and bylaws that
will become effective upon the completion of this offering could make the
following more difficult:

. acquisition of Captura by means of a tender offer;

. acquisition of Captura by means of a proxy contest or otherwise; or

. the removal of our incumbent officers and directors.

These provisions, summarized below, are generally expected to discourage
coercive takeover practices and inadequate takeover bids. These provisions are
also designed to encourage persons seeking to acquire control of Captura to
first negotiate with our board. We believe that the benefits of increased
protection resulting from our potential ability to negotiate with the proponent
of an unfriendly or unsolicited proposal to acquire or restructure Captura
outweigh the disadvantages of discouraging these proposals because we believe
that the negotiation of these proposals could result in an improvement of their
terms.

Election and Removal of Directors. Our board of directors will be divided
into three classes. The directors in each class will serve for a three-year
term, one class being elected each year by our stockholders. This system of
electing and removing directors may tend to discourage a third party from
making a tender offer or otherwise attempting to obtain control of Captura
because it generally makes it more difficult for stockholders to replace a
majority of the directors. See "Management--Board of Directors" for further
discussion of the structure of the board of directors.

Requirements for Advance Notification of Stockholder Nominations and
Proposals. Our bylaws contain notice procedures with respect to stockholder
proposals and the nomination of candidates for election as directors, other
than nominations made by or at the direction of the board of directors or a
committee of the board.

Elimination of Cumulative Voting. Upon completion of this offering, our
certificate of incorporation and bylaws will not provide for cumulative voting
in the election of directors.

Undesignated Preferred Stock. Our board of directors, without stockholder
approval, has the authority under our certificate of incorporation to issue
preferred stock with rights superior to the rights of the holders of common
stock. As a result, preferred stock could be issued quickly and easily, could
adversely affect the rights of holders of common stock and could be issued with
terms calculated to delay or prevent a change of control or make removal of
management more difficult.

Stockholder Meetings. Under our bylaws, our stockholders do not have a
right to call a special meeting of stockholders. Only the board of directors,
the chairman of the board, the president or the chief executive officer may
call special meetings of stockholders.

Amendment of Charter Provisions. The amendment of the above provisions
relating to the election and removal of directors and stockholder meetings will
require approval by holders of at least 66 2/3% of our outstanding common
stock.

Delaware Statute. We are subject to Section 203 of the Delaware General
Corporation law, which, with some exceptions, prohibits a publicly held
Delaware corporation from engaging in any business combination

60
<PAGE>

with an interested stockholder for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless:

. prior to such date, the board of directors of the corporation approves
either the business combination or the transaction that resulted in
the stockholder becoming an interested stockholder;

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

. on or after the consummation date, the business combination is
approved by the board of directors and by the affirmative vote at an
annual or special meeting of stockholders 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;

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

. 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 beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.

Washington Statute. The laws of the State of Washington, where our
principal executive offices are located, also impose restrictions on certain
transactions between certain foreign corporations and significant stockholders.
Chapter 23B.19 of the Washington Business Corporation Act, or the WBCA,
prohibits a target corporation, with some exceptions, from engaging in
particular significant business transactions with a person or group of persons
who beneficially own 10% or more of the voting securities of the target
corporation (an acquiring person) for a period of five years after such
acquisition unless the transaction or acquisition of shares is approved by a
majority of the members of the target corporation's board of directors prior to
the time of acquisition.

Such prohibited transactions include, among other things:

. a merger or consolidation with, disposition of assets to, or issuance
or redemption of stock to or from, the acquiring person;

. termination of 5% or more of the employees of the target corporation
as a result of the acquiring person's acquisition of 10% or more of
the shares; or

. allowing the acquiring person to receive any disproportionate benefit
as a stockholder.

After the five-year period, a significant business transaction may take
place as long as it complies with certain fair price provisions of the statute.

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<PAGE>

A target corporation includes a foreign corporation if:

. the corporation has a class of voting stock registered pursuant to
Section 12 or 15 of the Securities Exchange Act of 1934;

. the corporation's principal executive office is located in Washington;

. any of:

. more than 10% of the corporation's stockholders of record are
Washington residents;

. more than 10% of its shares of record are owned by Washington
residents; or

. 1,000 or more of its stockholders of record are Washington
residents;

. a majority of the corporation's employees are Washington residents or
more than 1,000 Washington residents are employees of the corporation;
and

. a majority of the corporation's tangible assets are located in
Washington or the corporation has more than $50 million of tangible
assets located in Washington.

A corporation may not opt out of this statute and, therefore, we anticipate
this statute will apply to us. If we meet the definition of a target
corporation, Chapter 23B.19 of the WBCA may have the effect of delaying,
deferring or preventing a change of control of the Company.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is . The
transfer agent's address is , and its telephone number is .

62
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Immediately prior to this offering, there was no public market for our
common stock. Future sales of substantial amounts of our common stock in the
public market could adversely affect the market price of the common stock.

Upon completion of this offering, we will have outstanding
shares of common stock, assuming the issuance of shares of common
stock offered hereby, the exercise for cash of warrants to purchase 65,595
shares of our capital stock that would otherwise expire upon this offering and
no exercise of options or warrants after September 30, 2000. Of these shares,
the shares sold in the offering, plus any shares issued upon
exercise of the underwriters' overallotment option, will be freely tradeable
without restriction or further registration under the Securities Act. If any
affiliate of Captura, as that term is defined in Rule 144 under the Securities
Act, purchases shares in this offering, sales of those shares would be subject
to certain limitations and restrictions that are described below.

We issued and sold the remaining shares of our common stock in
reliance on exemptions from the registration requirements of the Securities
Act. As a result, these shares are restricted securities under applicable
federal securities laws and they may not be sold or transferred unless
registered under the Securities Act or unless an exemption covering the sale or
transfer is otherwise available. These exemptions may include those found in
Rule 144, Rule 144(k), or Rule 701 under the Securities Act, which are
described in detail below. In addition, each of our officers and directors,
substantially all holders of our common stock, and substantially all holders of
all outstanding options and warrants to acquire our common stock have agreed
with our underwriters and/or Captura not to sell or transfer any securities of
Captura for a period of 180 days from the date of this prospectus. Banc of
America Securities LLC may, however, in its sole discretion, at any time, with
or without notice, release all or any portion of the shares subject to these
lock-up agreements.

Based on applicable securities law restrictions and lock up agreements, we
believe the following table summarizes the number of shares of our common stock
that may become available for sale at various times after the effective date of
this offering.

<TABLE>
<CAPTION>
Approximate
Shares Eligible
Days After Date of this Prospectus for Future Sale Comment
---------------------------------- --------------- ----------------------------------------
<C> <C> <S>
On Effectiveness............... Shares sold in the offering and shares
saleable under Rule 144(k)
90 Days after Effective Date... Shares saleable under Rule 144
180 Days after Effective Date.. Lock-up on remaining shares released;
shares saleable under Rules 144 and 701
</TABLE>

As of September 30, 2000, there were a total of 3,262,806 shares of common
stock subject to outstanding options under our 1997 stock plan, all of which
are subject to lock-up agreements. On the date 180 days after the date of this
prospectus, when the lock-up agreements are no longer applicable, a total of
1,320,594 shares of common stock subject to outstanding options will be vested
and exercisable. Immediately after the completion of this offering, we intend
to file a registration statement on Form S-8 under the Securities Act to
register all of the shares of common stock issued or reserved for future
issuance under our 1997 stock plan, our 2000 employee stock purchase plan and
our 2000 director option plan. After the effective dates of the registration
statement on Form S-8, shares purchased upon exercise of options granted
pursuant to the 1997 stock plan, the 2000 employee stock purchase plan and 2000
director option plan generally would be immediately available for resale in the
public market.

In addition, from time to time after the effective date of this offering,
holders of outstanding warrants to acquire up to 3,762,948 shares of our common
stock may exercise these warrants. Holders of warrants to acquire
shares of our common stock have entered into lock-up agreements with the
underwriters and/or Captura. If these holders exercise their warrants on a net
issuance basis, and at least two years have

63
<PAGE>

elapsed from the date the warrant was issued, these shares may be resold
immediately under Rule 144(k), which is described below. If at least one year,
but less than two years, have elapsed from the date the warrant was issued, the
shares issued on a net issuance exercise may be sold under Rule 144 subject to
certain limitations and restrictions that are described below.

Rule 144

All of the securities we have issued prior to the completion of this
offering are restricted securities which cannot be freely sold or transferred.
In general, under Rule 144 as currently in effect, beginning 90 days after the
effective date of the registration statement of which this prospectus is a
part, a person who has beneficially owned restricted shares of our common stock
for at least one year would be entitled to sell, within any three-month period,
a number of shares that does not exceed the greater of:

. one percent of the number of shares of common stock then outstanding,
which will equal approximately shares immediately after this
offering; or

. the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of
a notice on Form 144 with respect to such sale.

Sales under Rule 144 are also subject to certain other requirements
regarding the manner of sale, notice filing and the availability of current
public information about Captura.

Rule 144(k)

Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the 90 days preceding a sale, and who has
beneficially owned the shares proposed to be sold for at least two years,
including the holding period of any prior owner other than an affiliate, is
entitled to sell such shares without complying with the manner of sale, notice
filing, volume limitation or notice provisions of Rule 144. Therefore, unless
otherwise restricted, these shares may be sold immediately upon the completion
of this offering.

Rule 701

In general, under Rule 701, any of our employees, directors, officers,
consultants or advisors who purchases restricted shares from us in connection
with a compensatory stock or option plan or other written agreement before the
effective date of the offering is entitled to resell such shares 90 days after
the effective date of this offering in reliance on Rule 144, without having to
comply with certain restrictions, including the holding period, contained in
Rule 144.

The SEC has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of such options, including exercises after the date of this
prospectus. Securities 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 may be sold by persons other than affiliates,
as defined in Rule 144, subject only to the manner of sale provisions of Rule
144 and by affiliates under Rule 144 without compliance with its one year
minimum holding period requirement.

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<PAGE>

UNDERWRITING

We are offering the shares of common stock described in this prospectus
through a number of underwriters. Banc of America Securities LLC, U.S. Bancorp
Piper Jaffray Inc., Wit SoundView Corporation and Pacific Crest Inc. are the
representatives of the underwriters and will negotiate on behalf of the
underwriters and will enter into an underwriting agreement with us. Subject to
the terms and conditions of the underwriting agreement, we have agreed to sell
to the underwriters, and each of the underwriters has agreed to purchase, the
number of shares of common stock listed next to its name in the following
table:

<TABLE>
<CAPTION>
Number Of
Underwriters: Shares
------------- ---------
<S> <C>
Banc of America Securities LLC.......................................
U.S. Bancorp Piper Jaffray Inc. .....................................
Wit SoundView Corporation............................................
Pacific Crest Inc. ..................................................

Total..............................................................
</TABLE>

The underwriting agreement provides that the underwriters' obligations to
purchase shares of common stock depend on the satisfaction of the conditions
contained in the underwriting agreement. The conditions contained in the
underwriting agreement include, among others, the requirements that:

. the representations and warranties made by us to the underwriters are
true;

. there is no material change in the financial markets;

. we deliver to the underwriters customary closing documents such as
various certificates and opinions of counsel; and

. this registration statement has been declared effective by the SEC.

The underwriting agreement also provides that the underwriters are
obligated to purchase all of the shares of common stock in the offering if any
are purchased, other than those shares covered by the over-allotment option
described below.

The underwriters initially will offer shares to the public at the price
specified on the cover page of this prospectus. The underwriters may allow to
some dealers a concession of not more than $ per share. The underwriters
also may allow, and any other dealers may reallow, a concession of not more
than $ per share to some other dealers. If all the shares are not sold at
the initial public offering price, the underwriters may change the offering
price and the other selling terms. The common stock is offered under a number
of conditions, including:

. receipt and acceptance of our common stock by the underwriters; and

. the right to reject orders in whole or in part.

We have granted an option to the underwriters to buy up to
additional shares of common stock. These additional shares would cover sales of
shares by the underwriters which exceed the number of shares specified in the
table above. The underwriters may exercise this option at any time within 30
days of the date of this prospectus. If the underwriters exercise this option,
they will each purchase additional shares approximately in proportion to the
amounts specified in the table above, subject to a number of terms and
conditions.

65
<PAGE>

The following table shows the per share and total underwriting discounts
and commissions to be paid by us to them. The amounts are shown assuming no
exercise and full exercise of the underwriters' option to purchase additional
shares.

<TABLE>
<CAPTION>
No Exercise Full Exercise
----------- -------------
<S> <C> <C>
Per share underwriting discounts and commissions.... $ $
Total underwriting discounts and commissions to be
paid by us........................................
</TABLE>

The expenses of the offering, not including underwriting discounts and
commissions are estimated to be approximately $ and will be paid by us.

On September 13, 2000, BAS Capital Funding Corporation, an affiliate of
Banc of America Securities LLC purchased 207,216 units from the Company at a
purchase price of $9.29 per unit. Each unit consisted of one share of the
Company's Series E preferred stock and a warrant to purchase an additional 1/4
share of the Company's Series E preferred stock (exercisable for $9.29 per
share of Series E preferred stock). BAS Capital Funding Corporation purchased
these units at the same price and on the same terms as all other purchasers at
that time. On August 29, 2000, Wit SoundView Internet Infrastructure Fund 2000,
LLC and Wit SoundView Employee Fund 2000, LLC, both affiliates of Wit SoundView
Corporation, respectively purchased 22,500 and 7,500 shares of common stock
from Dan Vetras, our President and Chief Executive Officer, at $8.00 per share.
BAS Capital Funding Corporation and the two affiliates of Wit SoundView
Corporation have entered into lock-up agreements under which they each have
agreed not to sell, transfer, assign, pledge or hypothecate their respective
securities until the date 180 days after the effective date of this offering,
except for any transfer of such shares by operation of law or by reason of
reorganization of the issuer.

We, our officers and directors and substantially all of our stockholders,
warrant holders and option holders have entered into lock-up agreements with
the underwriters. Under those agreements, we and those holders of stock,
options and warrants may not dispose of or hedge any common stock or securities
convertible into or exchangeable for shares of common stock. These restrictions
will be in effect for a period ending 180 days after the date of this
prospectus. At any time and without notice, Banc of America Securities LLC may,
in its sole discretion, release all or some of the securities from these lock-
up agreements.

We have agreed to indemnify the underwriters against liabilities, including
liabilities for misstatements and omissions under the Securities Act of 1933
and liabilities arising from breaches of the representations and warranties
contained in the underwriting agreement, and to contribute to payments that the
underwriters may be required to make for these liabilities.

Prior to this offering, there has been no public market for our common
stock. The initial public offering price was negotiated between us and the
underwriters. The primary factors to be considered in such negotiations were:

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

. our past and present financial performance;

. an assessment of our management;

. the present state of our development;

. our prospects for future earnings;

. the prevailing market conditions of the applicable U.S. securities
market at the time of this offer;

. market valuations of publicly traded companies that we and the
representatives believe to be comparable to us; and

. other factors deemed relevant, such as the evaluation of the above
factors in relation to the market valuation of companies in related
businesses.

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<PAGE>

We have applied to have our common stock listed for quotation on the Nasdaq
National Market under the symbol "CPTR."

Rules of the SEC may limit the ability of the underwriters to bid for or
purchase shares before the distribution of the shares is completed. However,
the underwriters may engage in the following activities in accordance with the
rules:

. Stabilizing transactions--The representatives may make bids or
purchases for the purpose of pegging, fixing or maintaining the price
of the shares, so long as stabilizing bids do not exceed a specified
maximum.

. Over-allotments and syndicate covering transactions--The underwriters
may create a short position in the shares by selling more shares than
are set forth on the cover page of this prospectus. If a short position
is created in connection with the offering, the representatives may
engage in syndicate covering transactions by purchasing shares in the
open market. The representatives may also elect to reduce any short
position by exercising all or part of the over-allotment option.

. Penalty bids--Penalty bids occur when a particular underwriter repays
to the other underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold
by or for the account of such underwriter in stabilizing or covering
transactions.

. Passive market making--Market makers in the shares who are underwriters
or prospective underwriters may make bids for or purchases of shares,
subject to certain limitations, until the time, if ever, at which a
stabilizing bid is made.

Stabilization and syndicate covering transactions may cause the price of
the shares to be higher than it would be in the absence of such transactions.
The imposition of a penalty bid might also have an effect on the price of the
shares if it discourages resales of the shares.

A prospectus in electronic format may be made available on the Web sites
maintained by one or more underwriters or securities dealers. The
representatives of the underwriters may agree to allocate a number of shares to
underwriters for sale to their online brokerage account holders. Internet
distribution will be allocated by the representatives to underwriters that may
make Internet distributions on the same basis as other allocations. In
addition, shares may be sold by the underwriters to securities dealers who
resell shares to online brokerage account holders.

67
<PAGE>

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Kirkland,
Washington. Various legal matters will be passed upon for the underwriters by
Latham & Watkins, San Francisco, California.

EXPERTS

The consolidated financial statements as of December 31, 1998 and 1999 and
for each of the three years in the period ended December 31, 1999 included in
this prospectus have been audited by Deloitte & Touche llp, independent
auditors, as stated in their report appearing herein and has been so included
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 in connection with this offering. While the information
contained in this prospectus is materially complete, this prospectus does not
contain all the information set forth in the registration statement and its
exhibits and schedules. For further information with respect to Captura and our
common stock please refer to the registration statement and to its exhibits and
schedules. A copy of the registration statement and its exhibits and schedules
may be inspected without charge at the public reference facilities maintained
by the SEC in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the SEC's regional offices located at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the registration statement may be obtained from such offices upon payment of
the fees prescribed by the SEC. Information on the operation of the public
reference room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC
maintains a World Wide Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC. The address of the site is http://www.sec.gov.

Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities Exchanges Act of 1934 and
will file periodic reports, proxy statements and other information with the
SEC. Such periodic reports, proxy statements and other information will be
available for inspection and copying at the regional offices, public reference
facilities and web site of the SEC referred to above.

68
<PAGE>

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Operations..................................... F-4
Consolidated Statements of Changes in Stockholders' Equity (Deficit)...... F-5
Consolidated Statements of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors
Captura Software, Inc.
Kirkland, Washington

We have audited the accompanying consolidated balance sheets of Captura
Software, Inc. and subsidiaries (the Company) as of December 31, 1998 and 1999,
and the related consolidated statements of operations, changes in stockholders'
equity (deficit), and cash flows for each of the three years in the period
ended December 31, 1999. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards 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. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Captura Software, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1999, in conformity with accounting principles generally accepted
in the United States of America.

/s/ Deloitte & Touche LLP

Seattle, Washington
January 25, 2000
(October 11, 2000, as to Note 17)

F-2
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999, AND JUNE 30, 2000 (unaudited)

<TABLE>
<CAPTION>
Pro forma
December 31, stockholders'
-------------------------- June 30, equity
1998 1999 2000 June 30, 2000
ASSETS ------------ ------------ ------------ -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents.............. $ 134,754 $ 2,601,701 $ 11,990,610
Accounts receivable, net... 764,404 1,792,482 3,122,534
Prepaid expenses........... 183,789 795,374 813,611
Other current assets....... 158,127 144,794 52,669
------------ ------------ ------------
Total current assets.... 1,241,074 5,334,351 15,979,424
PROPERTY AND EQUIPMENT, net.. 1,468,646 1,960,429 2,285,300
OTHER ASSETS, net............ 202,547 373,054 1,044,400
------------ ------------ ------------
TOTAL................... $ 2,912,267 $ 7,667,834 $ 19,309,124
============ ============ ============

<CAPTION>
LIABILITIES, MANDATORILY
REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND WARRANTS,
AND STOCKHOLDERS' EQUITY
(DEFICIT)

<S> <C> <C> <C> <C>
CURRENT LIABILITIES:
Line of credit............. $ 334,073 $ 308,696 $ 308,696
Accounts payable and
accrued expenses......... 2,668,490 2,475,049 2,880,348
Deferred revenue........... 274,314 1,678,145 1,839,068
Short-term obligations..... 1,000,000 -- --
Notes payable to
stockholders............. 1,838,238 -- --
Current portion of long-
term obligations......... 371,206 692,850 839,279
------------ ------------ ------------
Total current
liabilities........... 6,486,321 5,154,740 5,867,391
CAPITAL LEASE OBLIGATIONS,
net of current portion..... 811,433 975,499 878,466
LONG-TERM DEBT, net of
current portion............ 31,054 4,755 --

COMMITMENTS (Note 12)

MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED
STOCK, Authorized,
11,903,879 shares; issued
and outstanding 3,587,544,
7,469,311, and 9,745,503
shares (aggregate
liquidation value of
$14,316,249, $38,664,258
and $61,326,629
(unaudited))............... 13,122,209 35,503,537 55,663,903
MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK
WARRANTS................... 265,807 2,459,421 5,280,332
STOCKHOLDERS' EQUITY
(DEFICIT):
Common stock, $.001 par
value--Authorized,
40,000,000 shares;
issued and outstanding,
1,777,704, 1,868,315,
2,677,802 (unaudited),
and 12,488,900
(unaudited) pro forma
shares................... 1,777 1,868 2,678 $ 12,489
Additional paid-in
capital.................. 1,789,524 3,771,599 6,280,606 61,935,649
Note receivable from
stockholder.............. (970,500) (970,500)
Unearned stock-based
compensation............. (136,277) (1,889,902) (2,439,491) (2,439,491)
Accumulated other
comprehensive loss....... (53,498) (66,724) (66,724)
Accumulated deficit........ (19,459,581) (38,260,185) (51,187,537) (45,908,156)
------------ ------------ ------------ ------------
Stockholders' equity
(deficit)............. (17,804,557) (36,430,118) (48,380,968) $ 12,563,267
------------ ------------ ------------ ============
TOTAL................... $ 2,912,267 $ 7,667,834 $ 19,309,124
============ ============ ============
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1997, 1998, 1999,
AND SIX MONTHS ENDED JUNE 30, 1999 AND 2000 (unaudited)

<TABLE>
<CAPTION>
December 31, June 30,
--------------------------------------- -------------------------
1997 1998 1999 1999 2000
----------- ------------ ------------ ----------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES................ $ 1,407,690 $ 2,092,723 $ 4,229,643 $ 1,867,359 $ 2,205,575
COST OF REVENUES........ 977,110 2,023,759 3,096,193 1,557,300 1,737,137
----------- ------------ ------------ ----------- ------------
Gross profit....... 430,580 68,964 1,133,450 310,059 468,438
OPERATING EXPENSES:
Sales and marketing... 1,229,979 4,444,644 6,155,481 2,828,022 4,332,230
Research and
development......... 1,545,847 4,527,803 6,133,158 2,875,748 3,093,380
General and
administrative...... 1,185,420 3,204,583 3,442,373 1,610,524 2,621,232
Noncash stock-based
compensation
(Note 10)........... 90,506 46,043 617,199 23,041 1,320,132
----------- ------------ ------------ ----------- ------------
Total operating
expenses......... 4,051,752 12,223,073 16,348,211 7,337,335 11,366,974
----------- ------------ ------------ ----------- ------------
Operating loss........ (3,621,172) (12,154,109) (15,214,761) (7,027,276) (10,898,536)
OTHER INCOME (EXPENSE):
Interest expense...... (189,635) (276,041) (374,804) (208,842) (167,082)
Interest income....... 42,387 63,789 359,298 217,422 399,987
Other income
(expense), net...... 7,218 21,027 (34,938) -- 166
----------- ------------ ------------ ----------- ------------
Total other income
(expense)........ (140,030) (191,225) (50,444) 8,580 233,071
----------- ------------ ------------ ----------- ------------
NET LOSS................ (3,761,202) (12,345,334) (15,265,205) (7,018,696) (10,665,465)
MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED
STOCK DIVIDENDS AND
ACCRETION............. (187,500) 84,039 (3,535,399) (2,076,247) (2,261,887)
----------- ------------ ------------ ----------- ------------
NET LOSS APPLICABLE TO
COMMON STOCKHOLDERS... $(3,948,702) $(12,261,295) $(18,800,604) $(9,094,943) $(12,927,352)
=========== ============ ============ =========== ============
Basic and diluted net
loss per common
share................. $ (2.51) $ (7.00) $ (10.44) $ (5.10) $ (5.08)
=========== ============ ============ =========== ============
Weighted average number
of common shares used
for basic and diluted
per share amounts..... 1,573,092 1,751,754 1,799,979 1,782,102 2,544,755
=========== ============ ============ =========== ============
Pro forma basic and
diluted net loss per
share................. $ (1.72) $ (0.91)
============ ============
Weighted average number
of shares used for pro
forma per share
amounts............... 8,859,548 11,708,463
============ ============
</TABLE>

See notes to consolidated financial statements.

F-4
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999,
AND SIX MONTHS ENDED JUNE 30, 2000 (unaudited)

<TABLE>
<CAPTION>
Note Accumulated
Common stock Additional receivable Unearned other
------------------ paid-in from stock-based comprehensive Accumulated
Shares Amount capital stockholder compensation loss deficit Total
---------- ------ ---------- ----------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1997.................. 144,189 $1,442 $1,156,668 $ -- $ -- $ -- $ (3,249,584) $ (2,091,474)
Common stock split.... 1,297,701 -- -- -- -- --
Issuance of common
stock................ 223,490 223 353,927 -- -- -- -- 354,150
Repurchase of common
stock................ (5,000) (5) (12,288) -- -- -- -- (12,293)
Issuance of common
stock for
compensation......... 50,000 50 74,950 -- -- -- -- 75,000
Unearned compensation
related to the
issuance of stock
options.............. -- -- 98,701 -- (98,701) -- -- --
Amortization of
unearned stock-based
compensation......... -- -- -- -- 15,506 -- -- 15,506
Mandatorily redeemable
convertible preferred
stock dividends...... -- -- -- -- -- -- (156,250) (156,250)
Mandatorily redeemable
convertible preferred
stock accretion...... -- -- -- -- -- -- (31,250) (31,250)
Net loss.............. -- -- -- -- -- -- (3,761,202) (3,761,202)
---------- ------ ---------- --------- ----------- -------- ------------ ------------
Balance, December 31,
1997.................. 1,710,380 1,710 1,671,958 (83,195) (7,198,286) (5,607,813)
Issuance of common
stock................ 67,324 67 18,441 -- -- -- -- 18,508
Unearned compensation
related to the
issuance of stock
options.............. -- -- 99,125 -- (99,125) -- -- --
Amortization of
unearned stock-based
compensation......... -- -- -- -- 46,043 -- -- 46,043
Mandatorily redeemable
convertible preferred
stock dividends...... -- -- -- -- -- -- (351,603) (351,603)
Mandatorily redeemable
convertible preferred
stock accretion...... -- -- -- -- -- -- (72,211) (72,211)
Reversal of
mandatorily
redeemable
convertible preferred
stock dividends...... -- -- -- -- -- -- 507,853 507,853
Net loss.............. -- -- -- -- -- -- (12,345,334) (12,345,334)
---------- ------ ---------- --------- ----------- -------- ------------ ------------
Balance, December 31,
1998.................. 1,777,704 1,777 1,789,524 -- (136,277) -- (19,459,581) (17,804,557)
Issuance of common
stock................ 90,611 91 71,851 -- -- -- -- 71,942
Unearned compensation
related to the
issuance of stock
options.............. -- -- 1,866,429 -- (1,866,429) -- -- --
Amortization of
unearned stock-based
compensation......... -- -- -- -- 112,804 -- -- 112,804
Stock-based
compensation related
to accelerated
vesting of stock
options.............. -- -- 43,795 -- -- -- -- 43,795
Mandatorily redeemable
convertible preferred
stock dividends...... -- -- -- -- -- -- (2,824,097) (2,824,097)
Mandatorily redeemable
convertible preferred
stock accretion...... -- -- -- -- -- -- (711,302) (711,302)
Comprehensive loss:
Net loss............. -- -- -- -- -- -- (15,265,205) (15,265,205)
Other comprehensive
loss--Foreign
currency
translation......... -- -- -- -- -- (53,498) -- (53,498)
-------- ------------ ------------
Total comprehensive
loss............... -- -- -- -- -- (53,498) (15,265,205) (15,318,703)
---------- ------ ---------- --------- ----------- -------- ------------ ------------
Balance, December 31,
1999.................. 1,868,315 1,868 3,771,599 -- (1,889,902) (53,498) (38,260,185) (36,430,118)
Issuance of common
stock................ 334,487 335 577,909 -- -- -- -- 578,244
Exercise of stock
options in exchange
for note............. 475,000 475 970,025 (970,500) -- -- -- --
Unearned compensation
related to the
issuance of stock
options.............. -- -- 812,749 -- (812,749) -- -- --
Amortization of
unearned stock-based
compensation......... -- -- -- -- 263,160 -- -- 263,160
Stock-based
compensation related
to accelerated
vesting of stock
options.............. -- -- 148,324 -- -- -- -- 148,324
Mandatorily redeemable
convertible preferred
stock dividends...... -- -- -- -- -- -- (1,546,636) (1,546,636)
Mandatorily redeemable
convertible preferred
stock accretion...... -- -- -- -- -- -- (715,251) (715,251)
Comprehensive loss:
Net loss............. -- -- -- -- -- -- (10,665,465) (10,665,465)
Other comprehensive
loss--Foreign
currency
translation......... -- -- -- -- -- (13,226) -- (13,226)
-------- ------------ ------------
Total comprehensive
loss............... -- -- -- -- -- (13,226) (10,665,465) (10,678,691)
---------- ------ ---------- --------- ----------- -------- ------------ ------------
Balance, June 30, 2000
(unaudited)........... 2,677,802 $2,678 $6,280,606 $(970,500) $(2,439,491) $(66,724) $(51,187,537) $(48,380,968)
========== ====== ========== ========= =========== ======== ============ ============
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999,
AND SIX MONTHS ENDED JUNE 30, 1999 AND 2000 (unaudited)

<TABLE>
<CAPTION>
December 31, June 30,
--------------------------------------- -------------------------
1997 1998 1999 1999 2000
----------- ------------ ------------ ----------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss............. $(3,761,202) $(12,345,334) $(15,265,205) $(7,018,696) $(10,665,465)
Adjustments to
reconcile net loss
to net cash used by
operating
activities:
Impairment of
acquired
technology....... -- 225,908 -- -- --
Depreciation and
amortization..... 143,665 435,283 773,738 310,851 532,669
Noncash interest
expense.......... -- -- 61,260 61,260 --
Gain (loss) on
disposal of
assets........... (5,602) -- 38,661 1,846 --
Noncash stock-
based
compensation..... 90,506 46,043 617,199 23,041 1,320,132
Issuance of
warrants to
nonemployees..... 23,803 97,500 15,821 15,821 --
Cash provided
(used) by changes
in operating
assets and
liabilities, net
of acquisition:
Accounts
receivable..... (230,937) (479,666) (1,071,034) (511,274) (1,337,140)
Prepaid
expenses....... (166,294) (17,495) (612,557) (226,625) (18,740)
Other current
assets......... (10,565) (147,562) 13,333 103,213 92,125
Other assets.... (83,159) 35,577 (213,890) (220,260) (700,700)
Accounts payable
and accrued
expenses....... (563,874) 1,933,993 (644,249) (1,226,322) 404,187
Deferred
revenue........ 352,022 (227,708) 1,403,831 655,766 160,923
----------- ------------ ------------ ----------- ------------
Net cash used
by operating
activities... (4,211,637) (10,443,461) (14,883,092) (8,031,379) (10,212,009)
INVESTING ACTIVITIES:
Purchase of property
and equipment....... (269,325) (132,747) (350,005) (338,205) (456,290)
Purchase of Workflow
Solutions, Inc...... -- (336,500) -- -- --
----------- ------------ ------------ ----------- ------------
Net cash used
by investing
activities... (269,325) (469,247) (350,005) (338,205) (456,290)
FINANCING ACTIVITIES:
Net borrowings
(repayments) on line
of credit........... (24,943) 334,073 (25,377) (175,377) --
Proceeds from notes
payable to
stockholders........ 100,000 1,838,238 -- -- --
Payments on notes
payable to
stockholders........ (259,624) (81,400) -- -- --
Proceeds from short-
term obligations.... -- 1,000,000 1,000,000 -- --
Payments on long-term
debt and short-term
obligations......... -- (169,819) (2,026,299) (1,013,016) (13,732)
Payments on capital
lease obligations... (139,667) (300,109) (428,576) (177,554) (317,081)
Repurchase of common
stock............... (12,293) -- -- -- --
Issuance of common
stock............... 59,150 18,508 71,942 6,615 578,244
Issuance of
mandatorily
redeemable
convertible
preferred stock,
net................. 9,192,774 3,970,478 19,108,932 18,958,932 19,810,742
----------- ------------ ------------ ----------- ------------
Net cash
provided by
financing
activities... 8,915,397 6,609,969 17,700,622 17,599,600 20,058,173
EFFECT OF EXCHANGE RATE
CHANGES ON CASH....... -- -- (578) (1,461) (965)
----------- ------------ ------------ ----------- ------------
NET INCREASE (DECREASE)
IN CASH AND
CASH EQUIVALENTS...... 4,434,435 (4,302,739) 2,466,947 9,228,555 9,388,909
CASH AND CASH
EQUIVALENTS:
Beginning of period.. 3,058 4,437,493 134,754 134,754 2,601,701
----------- ------------ ------------ ----------- ------------
End of period........ $ 4,437,493 $ 134,754 $ 2,601,701 $ 9,363,309 $ 11,990,610
=========== ============ ============ =========== ============
SUPPLEMENTAL
DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid for
interest............ $ 106,275 $ 270,010 $ 297,621 $ 134,447 $ 150,411
</TABLE>

See notes to consolidated financial statements.

F-6
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999,
AND SIX MONTHS ENDED JUNE 30, 1999 AND 2000 (unaudited)

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of business: Captura Software, Inc. (the Company) was
incorporated November 22, 1994, in the state of Delaware. The Company is a
provider of automated payment processing solutions for Global 2000 companies.
The Company's technology automates the preparation, approval and processing of
procurement, travel, entertainment and fleet transactions.

Principles of consolidation: In June 1998, the Company established a
subsidiary, Captura Software International Limited in the United Kingdom
(Captura UK). The consolidated financial statements as of and for the year
ended December 31, 1998, include the accounts of the Company and Captura UK. In
July 1999, the Company established a new subsidiary, Captura Software SARL in
France (Captura France). The consolidated financial statements as of and for
the year ended December 31, 1999, and the six months ended June 30, 2000,
include the accounts of the Company, Captura UK, and Captura France. All
significant intercompany accounts and transactions have been eliminated.

Unaudited interim financial statements: The financial statements as of June
30, 1999 and 2000, and for the six-month period then ended are unaudited and
reflect all adjustments (consisting of normal recurring adjustments) which are,
in the opinion of the Company's management, necessary for a fair presentation
of financial position, results of operations, and cash flows. All financial
statement disclosures related to the six-month period ended June 30, 1999 and
2000 are unaudited.

Unaudited pro forma stockholders' equity: If the initial public offering
(IPO) is consummated as presently anticipated (Note 17), each share of the
Series A, Series B, Series C, Series D and Series E mandatorily redeemable
convertible preferred stock will automatically convert into one share of common
stock. The unaudited pro forma stockholders' equity reflects the subsequent
conversion of Series A, Series B, Series C, Series D and Series E (exclusive of
the September 13, 2000, issuance) preferred shares into common stock at a one-
for-one conversion ratio as if such conversion had occurred as of June 30, 2000
and the assumed exercise of 65,595 warrants to purchase Series C preferred
stock that would otherwise terminate upon the closing of an initial public
offering.

Use of estimates: The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management 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
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Fair values of financial instruments: The Company has financial
instruments, such as cash and cash equivalents, a line of credit, notes payable
to stockholders, long-term debt, and capital lease obligations. The carrying
value of cash and cash equivalents and notes payable to stockholders
approximates fair value because of the short-term maturity of these
instruments. The fair value of the line of credit, long-term debt, and capital
lease obligations approximates carrying value based on the market interest
rates available to the Company for debt of similar risk and maturities.

F-7
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Concentration of credit risk and certain business risks: The Company is
subject to certain business risks that could affect future operations and
financial performance. These risks include changes in technology and related
delivery of products and increased competition. Revenues from customers
representing 10% or more of the total revenue are as follows:

<TABLE>
<CAPTION>
Six months
Year ended ended
December 31, June 30,
---------------- -------------
Customer 1997 1998 1999 1999 2000
-------- ---- ---- ---- ----- -----
(unaudited)
<S> <C> <C> <C> <C> <C>
A............................................ 50% 52% 12% 22% 11%
B............................................ 22 8 2 3 --
C............................................ -- 12 3 5 1
D............................................ -- -- 16 26 14
E............................................ -- 2 15 13 19
F............................................ -- -- 12 -- 11
</TABLE>

Accounts receivable as of December 31, 1998 and 1999, and June 30, 2000,
include 52%, 11%, and 17%, respectively, of accounts receivable from these
major customers.

Cash and cash equivalents: The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to be cash
equivalents. As of December 31, 1999, and June 30, 2000, cash of $2,446,709 and
$11,641,386, respectively, is being held in a money market account at an
affiliate of a stockholder. Interest income of $246,716 and $369,676 was earned
on this cash during the year ended December 31, 1999, and the six months ended
June 30, 2000, respectively.

Accounts receivable: Accounts receivable is primarily composed of amounts
contractually due for license and implementation revenue. Accounts receivable
includes $240,830, $718,453, and $1,086,947 of unbilled receivables at December
31, 1998 and 1999, and June 30, 2000, respectively. The allowance for doubtful
accounts as of December 31, 1998 and 1999, and June 30, 2000, is $-0-, $72,602,
and $29,848, respectively.

Prepaid expenses: As of December 31, 1999, and June 30, 2000, prepaid
expenses include $440,222 and $231,558, respectively, in nonrefundable license
fees paid as part of original equipment manufacturer (OEM) agreements and
reseller agreements with other parties. Under these agreements, the Company
received nonexclusive rights to copy, manufacture, distribute, and sublicense
software developed by the other parties in exchange for license fees. The
nonrefundable license fees are being expensed according to the terms of the
agreements. The agreements expire on varying dates throughout 2000.

Other current assets: Other current assets is composed primarily of
employee advances and deferred costs on contracts in process. Deferred costs on
contracts in process include all identifiable incurred costs related to
contracts being accounted for under the percentage-of-completion method. Such
costs include labor and related overhead. Deferred costs on contracts in
process as of December 31, 1998 and 1999, and June 30, 2000, are $41,854,
$142,294, and $14,971, respectively.

Property and equipment: Property and equipment is stated at cost.
Depreciation expense is recorded using the straight-line method over the
estimated useful lives of the assets, which range from three to seven years,
or, if applicable, the term of the related lease, if shorter. Expenditures for
major renewals and improvements that extend the useful lives of property and
equipment are capitalized. Expenditures for maintenance and repairs are charged
to expense as incurred. When equipment is retired or otherwise disposed

F-8
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

of, the cost and related accumulated depreciation is removed from the accounts
and the resulting gain or loss is recognized.

Internally developed software: Effective for fiscal years beginning after
December 15, 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) No. 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use. SOP No. 98-1
requires all costs related to the development of internal use software other
than those incurred during the application development stage to be expensed as
incurred. Costs incurred during the application development stage are required
to be capitalized and amortized over the estimated useful life of the software.
The Company adopted SOP No. 98-1 on January 1, 1999. Internally developed
software costs, which are included in property and equipment, are amortized on
a straight-line basis over a useful life of three years.

Capitalized software costs: Financial accounting standards require the
capitalization of certain software product costs after technological
feasibility of the software is established. Due to the relatively short period
between the technological feasibility of a product and completion of product
development and the insignificance of related costs incurred during this
period, no software development costs were capitalized during each of the three
years in the period ended December 31, 1999, or the six-month periods ended
June 30, 1999 and 2000.

Other assets: Other assets consist of lease security deposits, intangible
assets, and debt issuance costs. Intangible assets, which consist primarily of
acquired contracts and trained work force, are being amortized using the
straight-line method over their estimated useful lives of three years. Debt
issuance costs are being amortized over the terms of the related debt using the
effective-interest rate method. As of December 31, 1998 and 1999, and June 30,
2000, accumulated amortization related to other assets was $45,598, $88,981,
and $117,284, respectively.

Long-lived assets: The Company, using its best estimates based on
reasonable and supportable assumptions and projections, reviews its long-lived
assets for impairment whenever events or changes in circumstances have
indicated that the carrying amount of its assets might not be recoverable.
Impaired assets are reported at fair value. In September 1998, the Company
determined that its technology acquired in connection with the purchase of
Workflow Solutions, Inc. (Note 13) in March 1998, had no future value and,
therefore, recognized an impairment loss of $225,908 related to this asset,
which is included in research and development expense for the year ended
December 31, 1998.

Revenue recognition: Effective January 1, 1998, the Company recognizes
revenue in accordance with the AICPA's SOP No. 97-2, Software Revenue
Recognition, and SOP No. 98-4 and SOP No. 98-9, Software Revenue Recognition,
as modified. These statements provide that arrangements to deliver software or
a software system, either alone or together with other products or services,
which require significant production, modification, or customization of
software, be accounted for in conformity with Accounting Research Bulletin
(ARB) No. 45, Long-Term Construction-Type Contracts, using the relevant
guidance in SOP No. 81-1, Accounting for Performance of Construction-Type and
Certain Production-Type Contracts. Accordingly, the Company recognizes revenue
from its license and implementation contracts using the percentage-of-
completion method due to the significant customization of software. Percentage
of completion is measured based on the ratio of labor hours incurred compared
to total estimated labor hours. Provisions for estimated losses on uncompleted
contracts are recognized in the period in which such losses are determined.
This methodology is consistent with that used in 1997. Revenue from
postcontract customer support contracts is recognized ratably over the period
earned based on vendor-specific objective evidence. Revenue from subscription
and other service arrangements is recognized ratably over the life of the
contracts.

F-9
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Deferred revenue: Deferred revenue consists of prepayments and advance
billings for license and implementation, ongoing postcontract customer support,
and subscription contracts.

Research and development expense: Research and development costs are
expensed as incurred.

Income taxes: The Company records income taxes using the asset and
liability method under which deferred tax assets, including net operating
losses, and liabilities are determined based on temporary differences between
the book and tax bases of assets and liabilities. The Company believes
sufficient uncertainty exists regarding the realizability of the deferred tax
assets such that a full valuation allowance is required.

Noncash stock-based compensation: The Company accounts for stock-based
awards to employees using the intrinsic value method in accordance with
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued
to Employees, and to nonemployees using the fair value based method in
accordance with Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation.

Foreign currency translation: The functional currency of the Company's
foreign subsidiaries is the local currency in the country in which the
subsidiary is located. Assets and liabilities of the subsidiaries have been
translated to U.S. dollars at year-end exchange rates. Revenues and expenses
have been translated at average monthly exchange rates. Any translation
adjustments are included in other comprehensive loss.

Net loss per share: Basic net loss per share is computed by dividing net
loss applicable to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted net loss per share is computed by
dividing net loss by the weighted average number of common shares and dilutive
potential common shares outstanding during the period of other common stock
equivalents, including mandatorily redeemable convertible preferred stock,
stock options, and warrants. A total of 3,600,757, 5,082,866, 11,089,581,
16,529,985 and 14,631,007 shares for each of the three years in the period
ended December 31, 1999, and the six months ended June 30, 1999 and 2000,
respectively, have been excluded from the computation of diluted net loss per
share as their effect would be antidilutive.

Upon the completion of the Company's proposed initial public offering, all
mandatorily redeemable convertible preferred stock will automatically convert
into common stock. Accordingly, pro forma net loss per share is computed using
the net loss applicable to common stockholders assuming no mandatorily
redeemable preferred stock dividends and accretion and the weighted average
number of shares of common stock outstanding and the weighted average
mandatorily redeemable convertible preferred stock outstanding as if such
shares were converted to common stock at the time of issuance.

Comprehensive loss: The Company adopted the provisions of SFAS No. 130,
Reporting Comprehensive Income, effective January 1, 1998. SFAS No. 130
requires the presentation of comprehensive income and its components. Other
comprehensive income refers to revenues, expenses, gains, and losses that are
not included in net income, but rather are recorded directly in stockholders'
equity. Besides foreign currency translation, the Company has no other
components of comprehensive loss.

Recent accounting pronouncements: In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by SFAS No. 137 and SFAS No. 138. Effective for
the Company in the fiscal year beginning January 1, 2001, SFAS No. 133 requires
an entity to recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
The Company has not completed the process of evaluating the impact this
statement will have on the financial position or results of operations of the
Company.

F-10
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In December 1999, Staff Accounting Bulletin (SAB) No. 101, Revenue
Recognition in Financial Statements, was issued. SAB No. 101 summarizes the
Securities and Exchange Commission staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. The
Company will implement SAB No. 101 in the fourth quarter of 2000. The Company
believes that the adoption of SAB No. 101 will not have a material impact on
its revenue recognition.

Reclassifications: Certain reclassifications have been made to prior year
balances to conform with the current year presentation.

NOTE 2: PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
December 31, June 30,
------------------------ -----------
1998 1999 2000
----------- ----------- -----------
(unaudited)
<S> <C> <C> <C>
Computer equipment.................... $ 1,413,226 $ 2,386,189 $ 2,953,637
Machinery and equipment............... 158,732 359,855 471,066
Furniture and fixtures................ 329,002 332,605 350,062
Leasehold improvements................ 181,433 186,468 319,589
----------- ----------- -----------
2,082,393 3,265,117 4,094,354
Accumulated depreciation.............. (613,747) (1,304,688) (1,809,054)
----------- ----------- -----------
$ 1,468,646 $ 1,960,429 $ 2,285,300
=========== =========== ===========
</TABLE>

Total equipment under capital leases at December 31, 1998 and 1999, and
June 30, 2000, was $1,418,088, $2,259,942, and $2,635,392, net of accumulated
depreciation of $288,594, $764,274, and $1,118,459, respectively.

NOTE 3: LINE OF CREDIT

During 1998, the Company obtained a line of credit of $1,500,000. The line
of credit was increased to $3,000,000 during 1999 and is limited by an
available borrowing base consisting of 75% of eligible accounts receivable and
expires March 31, 2000 (Note 17). Interest at the prime rate plus 1% (9.5% at
December 31, 1999) is due monthly with principal due upon maturity. Borrowings
under the line of credit at December 31, 1998 and 1999, and June 30, 2000, were
$334,073, $308,696, and $308,696, respectively, and the amount available under
the line of credit on that date was $415,927, $-0-, and $441,304, respectively.

The line of credit is secured by substantially all the assets of the
Company, including intellectual property, includes financial covenants related
to minimum net worth, profitability, and compliance with quick ratios, among
others, and does not permit payment of dividends.

NOTE 4: SHORT-TERM OBLIGATIONS

At December 31, 1998, short-term obligations consisted of a loan payable to
a financial institution with interest due monthly at an interest rate of prime
plus 2% (9.75% at December 31, 1998). This obligation was paid in full in 1999
with proceeds from the issuance of Series D preferred stock (Note 8).

F-11
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 5: NOTES PAYABLE TO STOCKHOLDERS

At December 31, 1998, notes payable to stockholders consisted of
convertible subordinated promissory notes of $1,838,238 with interest at 8%.
Accrued interest related to the stockholder notes at December 31, 1998, was
$15,292. These notes payable including accrued interest of $76,552 were
converted in their entirety into 333,007 shares of Series D preferred stock in
1999 (Note 8).

Interest expense related to the stockholder notes for the years ended
December 31, 1997, 1998, and 1999, was $34,905, $15,292, and $61,260,
respectively.

NOTE 6: CAPITAL LEASE OBLIGATIONS

The Company leases certain of its equipment under capital lease agreements.
The Company paid interest on the capital lease obligations at variable rates of
8.5% to 23% during the three years ended December 31, 1999.

In 1998, the Company entered into a master lease agreement under which the
Company received lease financing up to an aggregate purchase price of
$1,000,000. Leases executed pursuant to this loan agreement aggregated
approximately $944,000, $53,000, and $-0- during the years ended December 31,
1998 and 1999, and the six months ended June 30, 2000, respectively, and
provide for equal monthly payments over a three-year term with an implicit
interest rate of 9.25%.

In 1999, the Company entered into a second master lease agreement under
which the Company received lease financing up to an aggregate purchase price of
$1,750,000. Leases executed pursuant to this loan agreement aggregated
approximately $864,000 and $375,000 during the year ended December 31, 1999,
and the six months ended June 30, 2000, and provide for equal monthly payments
over a three-year term with an implicit interest rate of 8.5%. The Company
accounts for its obligations under these master lease line agreements as
capital leases.

Aggregate future minimum payments on capital lease arrangements as of
December 31, 1999, are as follows:

<TABLE>
<S> <C>
2000............................................................. $ 889,706
2001............................................................. 758,174
2002............................................................. 346,617
----------
Total minimum lease payments..................................... 1,994,497
Less amount representing interest................................ (351,878)
----------
Present value of net minimum lease payments...................... 1,642,619
Less current portion............................................. (667,120)
----------
Long-term portion................................................ $ 975,499
==========
</TABLE>

During each of the three years in the period ended December 31, 1999, and
the six months ended June 30, 1999 and 2000, the Company entered into capital
lease obligations and recorded equipment under capital leases totalling
$424,691, $944,282, $914,286, $355,699, and $375,453, respectively.

F-12
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 7: LONG-TERM DEBT

At December 31, 1998 and 1999, and June 30, 2000, long-term debt consisted
of a note in the amount of $56,784, $30,485, and $16,753, respectively, with
monthly payments of principal and interest at prime plus 1% (9.5% at December
31, 1999) until maturity on January 15, 2001. Total future maturities of long-
term debt as of December 31, 1999, are $25,730 in 2000 and $4,755 in 2001.

NOTE 8: MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND WARRANTS

Mandatorily redeemable convertible preferred stock: The Company has issued
four series of mandatorily redeemable convertible preferred stock (Series A,
Series B, Series C, and Series D, collectively referred to as "preferred
stock") through four private offerings. Information related to these issuances
is as follows:

<TABLE>
<CAPTION>
Shares Shares Issue
Series Date authorized issued Proceeds costs
------ ---- ---------- ------ -------- -----
<S> <C> <C> <C> <C> <C>
A July 1997 1,140,080 1,000,000 $ 2,500,000 $ 257,326
B October 1997 1,912,162 1,891,892 7,000,000 49,900
C August 1998 785,652* 695,652 4,000,000 29,522
D February 1999 4,902,203 3,881,767 22,320,160 1,296,438
</TABLE>
--------
* In February 1999, the Company increased the number of authorized shares of
Series C preferred stock from 720,652 to 785,652.

Following is a summary of terms and conditions for each series of
mandatorily redeemable convertible preferred stock as of December 31:

<TABLE>
<CAPTION>
Cumulative and
Aggregate liquidation unpaid Cumulative and
Annual value dividends unpaid dividends
Stated dividend ----------------------- -------------- ----------------
value rate 1998 1999 1999 1999
----------- ----------- ----------- ----------- -------------- ----------------
(per share) (per share) (per share)
<S> <C> <C> <C> <C> <C> <C>
Series A................ $2.50 $0.150 $ 2,718,750 $ 2,868,750 $ 368,750 $0.369
Series B................ 3.70 0.222 7,507,500 7,927,500 927,500 0.490
Series C................ 5.75 0.345 4,089,999 4,329,999 330,000 0.474
Series D................ 5.75 0.345 -- 23,518,009 1,197,847 0.309
----------- ----------- ----------
$14,316,249 $38,644,258 $2,824,097
=========== =========== ==========
</TABLE>

Conversion: Each share of preferred stock is convertible at the option of
the holder into common stock. The conversion of preferred stock is determined
by dividing its stated value by its conversion price. The original conversion
prices, which were equal to the stated values for the preferred stock, will be
adjusted for any subsequent issuances of common stock at consideration per
share less than the preferred stock conversion prices. Under the terms of the
Fourth Amended and Restated Certificate of Incorporation, the preferred stock
shall be automatically converted into shares of common stock upon the closing
of a public offering at a price per share of not less than $12.00 and a net
offering price to the Company of not less than $20,000,000 (Note 17).

Dividends: The holders of preferred stock are entitled to receive, out of
any funds legally available therefor, dividends at the annual dividend rate
payable when, as and if, declared by the board of directors. No preferred stock
dividends have been paid to date.

F-13
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Starting in July 1997 with the First Amended and Restated Certificate of
Incorporation, dividends on the preferred stock were cumulative to the holders
of preferred stock. However, on August 12, 1998, the board of directors
approved the Company's Third Amended and Restated Certificate of Incorporation
which provided that the dividends on the preferred stock were not cumulative
and no rights accrued to the holders of preferred stock if dividends on such
shares were not declared or paid in any year. Although, in the event of a
voluntary or involuntary liquidation, dissolution, or winding up of the
Company, the dividends were cumulative and accrued from the original date of
issue. Accordingly, the dividends which had previously been accrued were
reversed in their entirety upon approval. Subsequently, on February 8, 1999,
the board of directors filed the Company's Fourth Amended and Restated
Certificate of Incorporation which provides that, in the event of a redemption
of the preferred stock, the dividends shall again be cumulative and accrue from
the original date of issue. Accordingly, cumulative dividends were recorded
from the date of issuance of the preferred stock for the year ended December
31, 1999.

Liquidation: In the event of a voluntary or involuntary liquidation,
dissolution, or winding up of the Company, the holders of preferred stock will
be entitled to receive, prior and in preference to any distribution of any of
the assets or surplus funds of the Company to the holders of the common stock,
the stated value per share, plus an amount equal to all accrued but unpaid
cumulative dividends on the preferred stock.

Redemption: At any time after December 31, 2003, within 30 days after
receipt by the Company of the written request of the holders of not less than
the majority of the then outstanding shares of preferred stock, the Company
will redeem the percentage of the preferred stock specified in the request by
paying in cash its stated value per share together with all accrued but unpaid
dividends. The total aggregate redemption value of the preferred stock as of
December 31, 1998 and 1999, was $13,500,000 and $38,644,258, respectively.

The redemption value is not equal to the amount recorded at issuance due to
the allocation of proceeds to preferred stock warrants and issue costs. This
discount of $3,955,483 is being accreted to the preferred stock over the period
from issuance until redemption using the effective-interest rate method.

Voting: Each share of preferred stock has voting rights and powers
equivalent to each full share of common stock into which shares of preferred
stock would be convertible on the record date for the vote.

Mandatorily redeemable convertible preferred stock warrants: The Company
has issued warrants to purchase additional preferred stock as part of certain
preferred stock issuances as follows:

<TABLE>
<CAPTION>
Number
of Price Estimated
Series Date shares per share fair value Expiration
------ ---- ------ --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
A July 1997 111,280 $2.50 $ 144,504 2002
D February 1999 970,436 5.75 2,177,793 2004
</TABLE>

Proceeds from the respective preferred stock issuances with warrants were
allocated between the mandatorily redeemable convertible preferred stock and
the preferred stock warrants based on their relative fair values. The estimated
fair values were determined using the Black-Scholes option pricing model with
the following underlying assumptions: risk-free interest rates of 4.8% to 6.1%;
expected lives ranging from two to four years; and stock price volatility of
66%.

F-14
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company has also issued warrants to purchase preferred stock in
conjunction with certain financing arrangements or in exchange for services to
nonemployees as follows:

<TABLE>
<CAPTION>
Estimated
Number of Price per fair In conjunction
Series Date shares share value Expiration with
------ ---- --------- --------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
A July 1997 16,000 $2.50 $10,409 2002 Services rendered
A July 1997 13,592 2.50 8,327 2004 Services rendered
B October 1997 5,405 3.70 5,067 2002 Services rendered
B March 1998 14,865 3.70 15,000 2008 Master lease
C October 1998 6,957 5.75 8,000 2003 Line of credit
C November 1998 65,595 5.75 74,500 2003 Convertible
subordinated
promissory notes
D March 1999 10,000 5.75 15,821 2004 Master lease
</TABLE>

The estimated fair values of the 1997 transactions have been recognized as
compensation expense during the year ended December 31, 1997. The estimated
fair values for the remaining transactions, except for the November 1998
issuance, have been recorded as debt issuance costs. The Company recorded a
discount on the convertible subordinated promissory notes equal to the fair
value of the November 1998 warrants which was amortized to interest expense
over the life of the notes. The estimated fair values were determined using the
Black-Scholes option pricing model with the following underlying assumptions:
risk-free interest rates of 4.8% to 6.1%; expected lives ranging from two to
four years; and stock price volatility of 66%.

All warrants to purchase preferred stock may be exercised in whole or in
part through their expiration dates. The July 1997 warrants may be exercised up
to three years from the effective date of an initial public offering of the
Company, if longer. The March 1998 warrants may be exercised up to five years
from the effective date of an initial public offering of the Company, if
longer. Additionally, the November 1998 warrants expire upon the effective date
of an initial public offering.

NOTE 9: STOCKHOLDERS' EQUITY

Common stock shares reserved: The Company has reserved shares of common
stock for future issuances as follows:

<TABLE>
<CAPTION>
December 31, June 30,
-------------------- -----------
1998 1999 2000
--------- ---------- -----------
(unaudited)
<S> <C> <C> <C>
Outstanding stock options.................. 1,250,420 2,394,932 3,058,724
Stock options available for grant.......... 159,756 497,133 523,854
Warrants to purchase common stock.......... 12,000 12,000 12,000
Conversion of mandatorily redeemable
convertible preferred stock, including
warrants to purchase preferred stock:
Series A................................. 1,140,080 1,140,872 1,140,872
Series B................................. 1,912,162 1,912,162 1,912,162
Series C................................. 720,652 785,652 785,652
Series D................................. -- 4,902,203 4,902,203
Series E................................. -- -- 3,162,990
--------- ---------- ----------
Total...................................... 5,195,070 11,644,954 15,498,457
========= ========== ==========
</TABLE>

F-15
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Dividend policy: The Company has never declared or paid dividends on its
capital stock.

Common stock warrants: In 1996, the Company issued fully vested warrants to
nonemployees to purchase 12,000 shares of common stock at a price of $2.50 per
share. The warrants may be exercised in whole or in part through 2001.

NOTE 10: STOCK OPTION PLAN

On February 1, 1997, the Company adopted a combined stock option plan (the
Plan) which provides for the issuance of incentive and nonqualified common
stock options to employees, directors, and officers of the Company. The board
of directors has reserved 3,050,000 shares of common stock to be issued in
conjunction with the Plan (Note 17). The term of each option is 10 years. Most
options granted to employees vest ratably over a four-year period. Stock
options granted to nonemployees vest immediately upon issuance.

The following table summarizes information about stock options outstanding
at December 31, 1999:

<TABLE>
<CAPTION>
Options
Options outstanding exercisable
--------------------------------------- -------------------
Weighted
average Weighted Weighted
Range of remaining average average
exercise contractual exercise exercise
prices Shares life (in years) price Shares price
------------ --------- -------------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
$0.25--$0.37 637,240 7.76 $0.30 460,361 $0.29
0.62-- 1.00 380,032 8.76 0.89 156,086 0.88
1.92 569,500 9.08 1.92 252,938 1.92
3.75 19,500 9.21 3.75 1,969 3.75
4.25-- 4.75 67,000 9.52 4.61 1,958 4.56
5.00-- 5.80 721,660 9.84 5.72 -- --
--------- -------
2,394,932 8.92 2.56 873,312 0.89
========= =======
</TABLE>

F-16
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

A summary of the status of the Company's stock option plan as of December
31, 1997, 1998, and 1999, is presented below:

<TABLE>
<CAPTION>
Weighted
average
exercise
Shares price
--------- --------
<S> <C> <C>
Outstanding, January 1, 1997............................ -- $ --
Granted............................................... 551,380 .25
---------
Outstanding, December 31, 1997.......................... 551,380 .25
Granted............................................... 911,500 .67
Exercised............................................. (67,324) .27
Forfeited............................................. (145,136) .42
---------
Outstanding, December 31, 1998.......................... 1,250,420 .53
Granted............................................... 1,468,710 4.02
Exercised............................................. (90,611) .79
Forfeited............................................. (233,587) 1.35
---------
Outstanding, December 31, 1999.......................... 2,394,932 2.56
Granted............................................... 1,729,470 7.74
Exercised............................................. (809,487) 1.47
Forfeited............................................. (256,191) 5.38
---------
Outstanding, June 30, 2000 (unaudited).................. 3,058,724 5.54
=========
</TABLE>

At December 31, 1997, 1998, and 1999, and June 30, 2000, 193,787, 385,027,
873,312, and 630,008 options were exercisable at a weighted average exercise
price of $.25, $.34, $.89, and $1.62, respectively.

Information regarding stock option grants is summarized as follows:

<TABLE>
<CAPTION>
December 31,
-------------------------------------------------------
1998 1999 June 30, 2000
--------------------------- --------------------------- -----------------------------
Weighted Weighted Weighted
average Weighted average Weighted average Weighted
exercise average exercise average exercise average
Shares price fair value Shares price fair value Shares price fair value
------- -------- ---------- ------- -------- ---------- --------- -------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Exercise price equals
market price.......... 496,900 $0.90 $0.15 720,500 $2.37 $0.37 -- -- --
Exercise price is less
than market price..... 414,600 0.38 0.32 748,210 5.61 3.62 1,729,470 $7.74 $2.37
</TABLE>

F-17
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Noncash stock-based compensation relates to income statement categories as
follows:

<TABLE>
<CAPTION>
December 31, June 30,
------------------------- ------------------
1997 1998 1999 1999 2000
-------- ------- -------- ------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cost of revenues............... $ 2,682 $ 5,486 $ 18,403 $ 3,389 $ 38,046
Sales and marketing............ 81,183 17,096 32,445 6,607 1,144,164
Research and development....... 4,918 15,294 85,881 9,826 103,045
General and administrative..... 1,723 8,167 480,470 3,219 34,877
-------- ------- -------- ------- ----------
$ 90,506 $46,043 $617,199 $23,041 $1,320,132
======== ======= ======== ======= ==========
</TABLE>

SFAS No. 123, Accounting for Stock-Based Compensation, requires the
disclosure of the pro forma net loss had the company adopted the fair value
method as of the beginning of 1997. The Company has calculated the pro forma
loss net loss under SFAS No. 123 using the Black-Scholes option pricing model
with the following weighted average assumptions for options granted during the
years ended December 31, 1997, 1998, and 1999 and the six months ended June 30,
2000: risk-free interest rates of 4.5% to 6.7%; an expected life of one to four
years; no stock price volatility; and no dividends over the expected life. The
difference between pro forma and recorded net loss is as follows:

<TABLE>
<CAPTION>
Six months ended June
Year ended December 31, 30,
---------------------------------- ----------------------
1997 1998 1999 1999 2000
---------- ----------- ----------- ---------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net loss applicable to
common stockholders,
as reported......... $3,948,702 $12,261,295 $18,800,604 $9,094,943 $12,927,352
Pro forma net loss
applicable to common
stockholders........ 3,948,702 12,269,691 18,935,363 9,140,713 13,773,050
Pro forma net loss per
share, basic and
diluted............. 2.51 7.00 10.52 5.13 5.41
</TABLE>

F-18
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 11: INCOME TAXES

No provision for federal income tax has been recorded as the Company has
incurred net operating losses through December 31, 1999. The tax effects of
temporary differences and net operating loss carryforwards that give rise to
the Company's deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>
December 31, June 30,
------------------------- ------------
1998 1999 2000
----------- ------------ ------------
(unaudited)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss
carryforwards................. $ 6,297,396 $ 11,298,334 $ 14,612,801
Research and development
carryforwards................. 278,042 803,828 732,639
Intangible amortization......... 102,945 112,179 109,465
Accrued vacation................ 97,834 118,278 158,842
Stock-based compensation and
warrants...................... 28,446 26,430 352,158
Depreciation.................... -- -- 32,232
Other, net...................... 4,241 2,428 14,766
----------- ------------ ------------
Gross deferred tax assets.... 6,808,904 12,361,477 16,012,903
Deferred tax liabilities:
Depreciation.................... (29,084) (8,490) --
----------- ------------ ------------
Net deferred tax assets...... 6,779,820 12,352,987 16,012,903
Valuation allowance............... (6,779,820) (12,352,987) (16,012,903)
----------- ------------ ------------
Deferred tax balance.............. $ -- $ -- $ --
=========== ============ ============
</TABLE>

The Company has not recorded any benefit from temporary differences and net
operating loss or tax credit carryforwards as of December 31, 1998 and 1999,
and June 30, 2000, respectively, as realization of such benefits is not
reasonably assured. The Company's net operating loss carryforwards of
$33,230,394 and $42,978,178 and tax credit carryforwards of $803,828 and
$732,639 as of December 31, 1999, and June 30, 2000, respectively, expire in
varying amounts during the years 2009 through 2018.

A reconciliation of net loss at the federal statutory rate to actual tax
expense is as follows:

<TABLE>
<CAPTION>
December 31, June 30,
------------------------ ---------------
1997 1998 1999 1999 2000
------ ------ ------ ------ ------
(unaudited)
<S> <C> <C> <C> <C> <C>
Tax at statutory rate......... 34.00 % 34.00 % 34.00 % 34.00 % 34.00 %
Tax credits................... 3.12 1.63 3.47 2.62 1.88
Change in valuation
allowance................... (36.89) (35.37) (37.33) (36.51) (35.72)
Stock-based compensation...... -- (0.13) -- -- --
Other......................... (0.23) (0.13) (0.14) (0.11) (0.16)
------ ------ ------ ------ ------
-- % -- % -- % -- % -- %
====== ====== ====== ====== ======
</TABLE>

F-19
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

NOTE 12: COMMITMENTS

The Company has operating leases for corporate facilities. Rent expense is
amortized on a straight-line basis over the terms of the related leases. Rent
expense under operating leases was $213,405, $459,686, $513,059, $254,596, and
$420,310 for the years ended December 31, 1997, 1998, and 1999, and the six-
month periods ended June 30, 1999 and 2000, respectively.

Future minimum rental payments required under noncancellable operating
leases are as follows for the years ending December 31:

NOTE 13: ACQUISITION

On March 2, 1998, the Company acquired certain assets and liabilities of
Workflow Solutions, Inc. (WSI) in exchange for $336,500 in cash and the
assumption of $126,603 in liabilities. Results of operations include operating
results of the acquisition subsequent to the purchase date. In connection with
the acquisition, the Company also entered into noncompete agreements in
exchange for options to purchase 40,000 shares of the Company's common stock at
an exercise price of $0.37 per share for a total value of $10,000. The
acquisition was accounted for as a purchase with the purchase price allocated,
based on the fair value at date of purchase, as follows:

<TABLE>
<S> <C>
Accounts receivable............................................. $ 26,111
Equipment....................................................... 18,403
Intangible assets:
Technology.................................................... 290,439
Acquired contracts............................................ 68,150
Trained workforce............................................. 60,000
Long-term debt.................................................. (72,178)
Other liabilities............................................... (54,425)
--------
Total cash paid................................................. $336,500
========
</TABLE>

NOTE 14: EMPLOYEE BENEFIT PLAN

In 1997, the Company established an employee savings 401(k) plan. All
employees meeting certain age and service requirements are eligible to
participate in the savings plan. The plan is funded by voluntary employee
salary deferrals, employer matching contributions as specified in the plan
document, and discretionary employer contributions. There were no Company
contributions to the plan during each of the three years in the period ended
December 31, 1999 or the six-month periods ended June 30, 1999 and 2000.

NOTE 15: RELATED PARTY TRANSACTIONS

Revenue for the years ended December 31, 1997, 1998, and 1999, and the six-
month periods ended June 30, 1999 and 2000, included $700,773, $1,013,783,
$507,657, $406,407, and $243,664, respectively, in revenue from an affiliate of
a stockholder. In addition, at December 31, 1998, the Company recorded $250,000

F-20
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

in accrued expenses for an amount owed to a member of the board of directors
for consulting services performed for the Company. This amount was paid in
1999. Other current assets included a note receivable of $50,000 as of December
31, 1998, from an officer of the Company that was settled in 1999. During the
year ended December 31, 1999 and the six months ended June 30, 2000, $1,153,245
and $1,264,909, respectively, of issue costs was paid to a preferred
stockholder in connection with the Series D and Series E preferred stock
financing.

NOTE 16: GEOGRAPHIC INFORMATION

SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, establishes reporting and disclosure standards for an enterprise's
operating segments. The Company licenses and markets its products primarily in
the United States, operating in a single industry segment. As Captura UK and
Captura France currently operate as sales offices, management reviews their
operating results and assesses their performance on an enterprise-wide basis.
Information regarding revenues and long-lived assets by geographic regions is
as follows:

<TABLE>
<CAPTION>
Six months ended June
Year ended December 31, 30,
-------------------------------- ---------------------
1997 1998 1999 1999 2000
---------- ---------- ---------- ---------- ----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
United States......... $1,407,690 $2,051,218 $3,515,494 $1,629,766 $1,941,412
Europe................ -- 41,505 714,149 237,593 264,163
---------- ---------- ---------- ---------- ----------
Total................. $1,407,690 $2,092,723 $4,229,643 $1,867,359 $2,205,575
========== ========== ========== ========== ==========
Long-lived assets, net:
United States......... $1,632,815 $2,244,853 $3,181,518
Europe................ 38,378 88,630 148,182
---------- ---------- ----------
Total................. $1,671,193 $2,333,483 $3,329,700
========== ========== ==========
</TABLE>

NOTE 17: SUBSEQUENT EVENTS

On January 4, 2000, the Company gave $1,000,000 to an officer of the
Company in exchange for an unsecured, full-recourse promissory note. This note,
together with interest at a rate of 6.12%, is due in 2004. On January 11, 2000,
three stock option agreements with this officer were amended. Under these
amended stock option agreements, the option holder may exercise his options to
purchase common stock that have not yet vested. The options to purchase 475,000
shares of common stock were exercised by the officer and converted to common
stock. The Company has the right to repurchase any remaining unvested shares of
common stock, in case of termination of the officer's employment, at a purchase
price equal to the original exercise price of the underlying options. The
officer paid $970,500 in cash to exercise the options. No compensation expense
was recognized in conjunction with the amendment.

On February 16, 2000, the Company closed an equity financing of $21,135,735
in exchange for 2,275,106 shares of Series E mandatorily redeemable convertible
preferred stock at $9.29 per share. For each share of Series E preferred stock
purchased, stockholders also received warrants to purchase one fourth of a
share of the Series E preferred stock at a price of $9.29 per share. The
Company's Certificate of Incorporation was amended to facilitate this
transaction by authorizing 3,162,990 shares of Series E preferred stock.
Additionally, the number of authorized shares of common stock was increased
from 20,000,000 shares to

F-21
<PAGE>

CAPTURA SOFTWARE, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

40,000,000 shares, and the number of authorized shares of Series A preferred
stock was increased from 1,140,080 shares to 1,140,872 shares. The Series E
preferred stock has substantially the same terms and conditions as the other
preferred stock except the minimum price per share for an initial public
offering of $12 is no longer a requirement for automatic conversion of the
preferred stock. In addition, the Company issued warrants to two Series E
preferred stockholders to purchase 269,107 shares of Series E preferred stock
at $9.29 per share based on meeting certain performance criteria. The warrants
expire in 2002. The Company recognized expense of $908,648 for the six months
ended June 30, 2000.

In March 2000, the Company established a new subsidiary, Captura Asia
Pacific PTY Limited in Australia. The consolidated financial statements as of
and for the six months ended June 30, 2000 include the accounts of this
subsidiary.

On March 31, 2000, the Company entered into a new operating lease for
corporate facilities. The lease term is seven years commencing on June 1, 2000.
Future minimum rental payments under this lease are $598,378 in 2000,
$1,045,736 in 2001, $1,079,929 in 2002, $1,114,122 in 2003, $1,148,315 in 2004,
and $2,912,104 thereafter.

The Company has amended certain terms of its line-of-credit agreement (Note
3), including an extension of maturity to August 15, 2001. Interest at prime
plus 1% (10.5% at June 30, 2000) is due monthly with principal at maturity.

On September 13, 2000, the Company closed another round of equity financing
of $20,610,487 in exchange for 2,218,567 shares of Series E mandatorily
redeemable convertible preferred stock at $9.29 per share. For each share of
Series E preferred stock purchased, stockholders also received warrants to
purchase one fourth of a share of the Series E preferred stock at a price of
$9.29 per share. The Company's Certificate of Incorporation was amended to
facilitate this transaction by authorizing an additional 4,574,820 shares of
Series E preferred stock. Revenue earned from one of these Series E preferred
stockholders during the years ended December 31, 1998, 1999 and the six months
ended June 30, 1999 and 2000 was $35,100, $646,206, $248,659 and $417,636,
respectively. In addition, the Company issued warrants to a Series E preferred
stockholder to purchase 1,210,980 shares of Series E preferred stock at $9.29
per share. The warrants are exercisable five years from the date of grant,
however, exercisability is accelerated if and when certain performance criteria
are met.

On October 9, 2000, the board of directors authorized the following:

. The filing of a Registration Statement with the Securities and
Exchange Commission permitting the Company to sell shares of common
stock in an initial public offering.

. The increase in the number of shares of common stock reserved for
issuance under the stock option plan to 5,550,000 shares.

. The adoption of the 2000 Employee Stock Purchase Plan. The board of
directors has reserved 500,000 shares of common stock for issuance
under this plan.

. The adoption of the 2000 Director Option Plan. This plan provides for
the grant of nonqualified stock options to members of the board of
directors who are not also employees. The board of directors has
reserved 200,000 shares of common stock for issuance under this plan.

F-22
<PAGE>

Inside Back
-----------

At the top of the page on the right-hand side is the company logo which reads
"Captura."

To the left of the company logo is a picture of a computer screen with an opened
Captura Expense Quick Report screen containing data entry boxes. To the right of
the picture is text that reads: "Captura Expense utilizes the power of our
Automated Payment Processing Engine to deliver a web-based solution that handles
corporate card and cash transactions for purchasing and traveling
professionals."

In the bottom, left-hand corner of the page is a photo of a hand-held device
sitting in the palm of a hand. To the right of the photo is an enlargement of
the screen on the hand-held inside a circular border, indicating that the
operator of the hand-held is using Captura Expense.

In the bottom, right-hand corner of the page is a photo of a cellular phone. To
the left of the cell phone is an enlargement of the cellular phone display,
indicating that the operator of the cell phone is using Captura Expense.

In between the two graphics at the bottom of the page is text that reads:
We are working to extend the power of our Automated Payment Processing Engine to
mobile wireless and hand-held devices."
<PAGE>

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

[LOGO OF CAPTURA]

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

Prospectus

, 2000

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

Banc of America Securities LLC

U.S. Bancorp Piper Jaffray

Wit SoundView

Pacific Crest Securities

Until , 2000, all dealers that buy, sell or trade the common stock
may be required to deliver a prospectus, regardless of whether they are
participating in the offering. 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.

-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the registrant in connection with the sale of
the Common Stock being registered hereby. All amounts shown are estimates,
except the Securities and Exchange Commission registration fee, the NASD filing
fee and the Nasdaq National Market listing fee.

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee.............. $ 18,480
NASD Filing fee.................................................. 7,500
Nasdaq National Market listing fee............................... 95,000
Printing and engraving expenses.................................. 300,000
Legal fees and expenses.......................................... 650,000
Accounting fees and expenses..................................... 550,000
Transfer Agent and Registrar fees................................ 10,000
Miscellaneous expenses........................................... 19,020
----------
Total.......................................................... $1,650,000
==========
</TABLE>

Item 14. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.

Article XI of our amended and restated certificate of incorporation
provides for the indemnification of directors to the fullest extent permissible
under Delaware law.

Article VI of our bylaws provides for the indemnification of officers and
directors acting on behalf of us if such person acted in good faith and in a
manner reasonably believed to be in and not opposed to our best interest, and,
with respect to any criminal action or proceeding, the indemnified party had no
reason to believe his or her conduct was unlawful. Our bylaws also allow us to
indemnify employees and agents.

We have entered into indemnification agreements with our directors and
executive officers, in addition to indemnification provided for in our bylaws,
and intend to enter into indemnification agreements with any new directors and
executive officers in the future.

Item 15. Recent Sales of Unregistered Securities

During the last three years, we have issued unregistered securities to a
limited number of persons as described below. We believe that each transaction
was exempt from the registration requirements under the Securities Act of 1933
by virtue of Section 4(2) thereof, Regulation D promulgated thereunder, or Rule
701 pursuant to compensatory benefit plans and contracts. The recipients of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof, and appropriate legends were affixed to the
share certificates and instruments issued in such transactions. All recipients
had adequate access, through their relationships with Captura, to information
about Captura.

1. On October 17, 1997 and December 15, 1997, we issued 1,891,892 shares
of Series B preferred stock to eight accredited investors. The
aggregate consideration was $7,000,000 or $3.70 per share.

II-1
<PAGE>

These transactions were exempt from the registration requirements of
the Securities Act by virtue of Section 4(2) and Regulation D based on
the status of each of the investors as accredited under Rule 501.

2. On March 31, 1998, and June 1, 1998, we issued warrants to purchase
24,765 shares of Series B preferred stock in connection with lease
agreements. These transactions were exempt from the registration
requirements of the Securities Act by virtue of Section 4(2)
thereunder.

3. On June 1, 1998, we issued a warrant to purchase 6,957 shares of
Series C preferred stock in connection with a loan agreement. This
transaction was exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) thereunder.

4. On August 12, 1998, we issued 695,651 shares of Series C preferred
stock to eight accredited investors. The aggregate consideration was
$4,000,000 or $5.75 per share. These transactions were exempt from the
registration requirements of the Securities Act by virtue of Section
4(2) and Regulation D based on the status of each of the investors as
accredited under Rule 501.

5. On November 16, 1998, and December 30, 1998, we issued Subordinated
Convertible Promissory Notes in aggregate amount of $1,885,881 to
seven accredited investors. The Notes were converted into shares of
Series D preferred stock in connection with our sale and issuance of
Series D preferred stock in February 1999. In connection with the
issuance of the Notes, we issued warrants to purchase 66,674 shares of
Series C preferred stock at an exercise price of $5.75 share. These
transactions were exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) and Regulation D based on the
status of each of the investors as accredited under Rule 501.

6. On February 8, 1999 and February 26, 1999, we issued 3,881,767 shares
of Series D preferred stock to 17 accredited investors. The aggregate
consideration was $22,320,160 or $5.75 per share. In connection with
these transactions, we issued warrants to purchase 970,436 shares of
Series D preferred stock at an exercise price of $5.75 per share.
These transactions were exempt from the registration requirements of
the Securities Act by virtue of Section 4(2) and Regulation D based on
the status of each of the investors as accredited under Rule 501.

7. On March 4, 1999, we issued warrants to purchase 17,826 shares of
Series D preferred stock in connection with loan agreements. These
transactions was exempt from the registration requirements of the
Securities Act by virtue of Section 4(2) thereunder.

8. On February 16, 2000, and September 13, 2000, we issued 4,493,673
shares of Series E preferred stock to 27 accredited investors. The
aggregate consideration was $41,746,222 or $9.29 per share. In
connection with these transactions, we issued warrants to purchase
1,123,413 shares of Series E preferred stock at an exercise price of
$9.29 per share. These transactions were exempt from the registration
requirements of the Securities Act by virtue of Section 4(2) and
Regulation D based on the status of each of the investors as
accredited under Rule 501.

9. On June 30, 2000, and September 30, 2000, we issued warrants to
purchase 1,480,087 shares of Series E preferred stock in connection
with commercial agreements. These transactions were exempt from the
registration requirements of the Securities Act by virtue of Section
4(2) thereunder.

10. Since our incorporation, we have issued an aggregate 4,911,270 options
to purchase our common stock to employees, directors, and consultants
with exercise prices ranging from $0.25 to $8.00 per share. These
transactions were exempt from the registration requirements of the
Securities Act by virtue of Rule 701.

II-2
<PAGE>

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits

<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1+ Form of Underwriting Agreement

3.1 Seventh Amended and Restated Certificate of Incorporation of the
registrant

3.2 Third Amended and Restated Bylaws of the registrant to be effective
upon the closing of this offering

4.1+ Form of registrant's Common Stock Certificate

4.2 Fifth Amended and Restated Investor Rights Agreement, dated as of
September 13, 2000

5.1+ Opinion of Wilson Sonsini Goodrich & Rosati, P.C. regarding legality of
the securities being issued

10.1 Form of Indemnification Agreement entered into by and between the
registrant and each of its directors and executive officers

10.2 Form of Management Continuity Agreement entered into by and between the
registrant and certain of its executive officers

10.3 Form of Amendment to Management Continuity Agreement entered into by
and between the registrant and certain of its executive officers

10.4 Management Continuity Agreement entered into by and between the
registrant and Gary Tidd

10.5 Offer Letter dated February 8, 2000 by and between the registrant and
Gary Tidd

10.6 Form of Option Acceleration Agreement entered into by and between the
registrant and certain executive officers

10.7 Agreement and Release dated February 4, 2000 by and between the
registrant and Katarina Bonde

10.8 Amended and Restated 1997 Stock Option Plan, as amended and restated
October 9, 2000

10.9 Form of Stock Option Agreement

10.10 2000 Employee Stock Purchase Plan and related agreements

10.11 2000 Director Option Plan

10.12 Form of Director Option Agreement

10.13+ Alliance Partner Agreement by and between the registrant and Exodus
Communications, Inc.

10.14+ Global E-Finance Marketing Agreement by and between the registrant and
MasterCard International Incorporated

10.15+ Business Alliance Agreement by and between the registrant and Qwest
Cyber.Solutions, LLC

10.16+ Captura E-Speak Pilot Project Agreement by and between the registrant
and Hewlett-Packard Company

10.17+ Strategic Alliance Agreement by and between the registrant and Hewlett-
Packard Company

10.18+ Intel Online Services Master Customer Agreement by and between the
registrant and Intel Online Service, Inc.

10.19+ Amended and Restated Loan and Security Agreement dated September 11,
2000 by and between the registrant and Silicon Valley Bank

10.20+ Master Lease Agreement dated April 19, 1999 by and between the
registrant and Third Coast Capital, a Division of DVI Financial
Services, Inc., and amendment

10.21+ Master Lease Agreement dated March 31, 1998 by and between the
registrant and Third Coast Capital, a Division of DVI Financial
Services, Inc.

10.22+ Master Lease Agreement dated April 24, 1998 by and between the
registrant and First Portland Corporation d/b/a Firstcorp
</TABLE>

II-3
<PAGE>

<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.23+ Lease dated August 8, 2000 by and between the registrant and The Plaza
at Yarrow Bay, LLC

10.24+ Commercial Lease dated March 31, 2000 by and between the registrant and
Michael R. Mastro

10.25+ Lease dated February 3, 1997 by and between the registrant and WRC
Properties, Inc., and amendment

10.26+ Sublease dated June 21, 2000 by and between the registrant and Advanced
Technology Laboratories, Inc.

21.1 Subsidiaries of the registrant

23.1 Consent of Deloitte & Touche LLP, Independent Accountants

23.2+ Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included in Exhibit
5.1)

24.1 Power of Attorney (contained on signature page)

27.1 Financial Data Schedule
</TABLE>
--------
+ to be filed by amendment

(b) Financial Statement Schedules

All schedules are omitted because they are inapplicable or the requested
information is shown in the consolidated financial statements of the registrant
or related notes thereto.

Item 17. Undertakings

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, 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 of
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 to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
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.

(2) For the purpose of determining any liability under the Securities
Act, 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.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Kirkland,
State of Washington, on the 12th day of October, 2000.

CAPTURA SOFTWARE, INC.

/s/ D. Robert Colliton
By __________________________________
D. Robert Colliton
Chief Financial Officer

SIGNATURES AND POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Dan Vetras and D. Robert Colliton, and
each of them acting individually, his true and lawful attorneys-in-fact and
agents, each with full power of substitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to sign any
registration statement for the same offering covered by this Registration
Statement that is to be effective upon filing pursuant to Rule 462(b)
promulgated under the Securities Act of 1933, as amended, and all post-
effective amendments thereto, and to file the same, with all exhibits thereto
and all documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, with full power of
each to act alone, full power and authority to do and perform each and every
act and thing requisite and necessary to be done in connection therewith, as
fully for all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or his or their substitute or substitutes, may lawfully do or cause to be
done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated below on the 12th day of October, 2000.

<TABLE>
<CAPTION>
Signature Title
--------- -----

<C> <S>
/s/ Dan Vetras President, Chief Executive Officer and
______________________________________ Director (Principal Executive Officer)
Dan Vetras

/s/ D. Robert Colliton Chief Financial Officer (Principal
______________________________________ Financial and Accounting Officer)
D.Robert Colliton

/s/ Fred Harman Director
______________________________________
Fred Harman

/s/ Tony Audino Director
______________________________________
Tony Audino

/s/ Norman H. Nie Director
______________________________________
Norman H. Nie
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
Signature Title
--------- -----

<C> <S>
/s/ Tim McMullen Director
______________________________________
Tim McMullen

/s/ Bob Finzi Director
______________________________________
Bob Finzi

/s/ Mike Brochu Director
______________________________________
Mike Brochu
</TABLE>

II-6
<PAGE>

EXHIBIT INDEX