ONESOFT CORP, S-1, 2000-01-07

ONESOFT CORP
S-1, 2000-01-07

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<PAGE>

As filed with the Securities and Exchange Commission on January 7, 2000

Registration No. 333-

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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ONESOFT CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 2389 54-1771616
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code Number)
organization)

1505 Farm Credit Drive, Suite 100
McLean, Virginia 22102
(703) 821-9190
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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James W. MacIntyre, IV
Chief Executive Officer
OneSoft Corporation
1505 Farm Credit Drive, Suite 100
McLean, Virginia 22102
(703) 821-9190
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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With copies to:

Jonathan L. Kravetz, Esq. Stephen A. Riddick, Esq.
Mintz, Levin, Cohn, Ferris, Brobeck, Phleger & Harrison LLP
Glovsky and Popeo, P.C. 701 Pennsylvania Ave., N.W.
One Financial Center Suite 220
Boston, MA 02111 Washington, D.C.
(617) 542-6000 (202) 220-5214

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Approximate date of commencement of proposed sale to public: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are being offered or
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
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 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 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>
<CAPTION>
Proposed Maximum Amount of
Title of Shares to Be Registered Aggregate Offering Price (1) Registration Fee
- -----------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.001 par value
per share.................... $70,000,000 $18,480
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act.

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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 Section 8(a), may determine.

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

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Information contained herein is subject to completion or amendment. A +
+registration statement relating to these securities has been filed with the +
+Securities and Exchange Commission. These securities may not be sold nor may +
+offers to buy be accepted prior to the time the registration statement +
+becomes effective. This prospectus shall not constitute an offer to sell or +
+the solicitation of an offer to buy nor shall there be any sale of these +
+securities in any State in which such offer, solicitation or sale would be +
+unlawful prior to registration or qualification under the securities laws of +
+any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated January , 2000

[LOGO OF ONESOFT]

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Shares
Common Stock

- --------------------------------------------------------------------------------
This is the initial public offering of OneSoft Corporation and we are offering
shares of our common stock. We anticipate that the initial public offering
price will be between $ and $ per share.

We have applied to have the shares we are offering approved for quotation on
the Nasdaq National Market under the symbol "ONSF."

Investing in our common stock involves risks. See "Risk Factors" beginning on
page 3.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.

<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public Offering Price $ $
Underwriting Discounts and Commissions (1) $ $
Proceeds to OneSoft $ $
</TABLE>
-----
(1) Our "Underwriting" section contains more information about the
compensation of the underwriters.

We and certain selling stockholders have granted the underwriters a 30-day
option to purchase up to additional shares of common stock to cover any
over-allotments. We will not receive any proceeds from the sale of shares of
common stock by selling stockholders.

Deutsche Banc Alex. Brown

Friedman Billings Ramsey

SoundView Technology Group

The date of this Prospectus is , 2000.
<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 this
prospectus or of any sale of our common stock. In this prospectus, "OneSoft,"
"we," "us" and "our" refer to OneSoft Corporation (unless the context otherwise
requires).

Until , 2000, all dealers that buy, sell or trade our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This requirement is in addition to the dealers' obligation to
deliver a prospectus when acting as underwriters and with respect to their
unsold allotments or subscriptions.

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TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 3
Special Note Regarding Forward-Looking Statements and Industry Data...... 15
Use of Proceeds.......................................................... 15
Dividend Policy.......................................................... 15
Capitalization........................................................... 16
Dilution................................................................. 17
Selected Consolidated Financial Data..................................... 18
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 28
Management............................................................... 47
Certain Relationships and Related Transactions........................... 57
Principal and Selling Stockholders....................................... 60
Description of Capital Stock............................................. 63
Shares Eligible for Future Sale.......................................... 66
Underwriting............................................................. 69
Legal Matters............................................................ 72
Experts.................................................................. 72
Where You Can Find Additional Information................................ 73
Index to Consolidated Financial Statements............................... F-1
</TABLE>

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

"OneSoft," "OneCommerce," "PrimeCommerce," "Internet Commerce Opportunity
Assessment" and "iCOA," and "Rapid Solution Deployment" and "RSD" are
trademarks and service marks of OneSoft Corporation. All other trademarks or
tradenames referred to in this prospectus are the property of their respective
owners.
<PAGE>

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information regarding OneSoft and the common stock being sold in this offering
and our financial statements and notes thereto appearing elsewhere in this
prospectus.

Our Business

We develop and provide Internet commerce application software and services
that enable our clients to rapidly build, grow, and extend their online
businesses. The core of our solution is OneCommerce, our application software
built on the eXtensible Markup Language standard, or XML. We designed
OneCommerce for scalable operation on the Microsoft operating platform.
OneCommerce enables enterprises to intelligently and dynamically interact with
their customers and trading partners over the Internet to exchange information,
provide services, and complete business-to-business and business-to-consumer
transactions. We primarily deliver OneCommerce as an outsourced application
service, which shortens our clients' time-to-market and minimizes their need to
make substantial investments to develop and maintain their own Internet
commerce, or e-commerce, Web sites.

In order to succeed in the Internet commerce marketplace, both traditional
companies and Internet-only businesses are investing heavily in Internet
infrastructure software solutions. We believe that our market opportunity
derives from the need for a solution that:

. provides comprehensive functionality across key business processes;
. supports XML, an emerging standard for Internet commerce;
. rapidly adapts to changing business and technology requirements; and
. is designed for delivery on an outsourced basis.

We believe that our solution, comprised of OneCommerce and a broad array of
enabling services, responds to these needs. OneCommerce manages Web site
content, provides personalized visitor experiences, processes orders, delivers
customer support, and integrates with internal and external business
applications. We believe we have developed the only XML-based Internet commerce
application software. We have designed our solution to be offered by us and our
partners on an outsourced basis. Widely-respected companies involved with
Internet commerce such as Microsoft and USWeb/CKS have endorsed OneCommerce as
one of the industry's top few solutions for large-scale Internet commerce. Our
clients include Alloy Online, ePhones, Espanol.com, Maytag, Phillips
Publishing, SmartCruiser.com, The Mark Group, and WeightWatchers.com.

Our objective is to provide the software infrastructure that supports a
leading share of commerce conducted over the Internet. We intend to do this by
expanding our range of application services to include additional software
functionality and value-added services. We also intend to contribute to and
leverage the emerging technology standards upon which we have built
OneCommerce. Further, we plan to expand our distribution channels to include a
broad range of application service providers, systems integrators, and other
professional services companies.

Our executive offices are located at 1505 Farm Credit Drive, McLean,
Virginia 22102. Our telephone number is (703) 821-9190. Our Web site is located
at http://www.onesoft.com. Information contained on our Web site is not a part
of this prospectus.

1
<PAGE>

The Offering

<TABLE>
<CAPTION>
Common stock offered by OneSoft...................... shares
<C> <S>
Common stock to be outstanding after this offering.. shares
Use of proceeds..................................... General corporate
purposes, including
working capital. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol.............. ONSF
</TABLE>

The number of shares of our common stock that will be outstanding after this
offering is based on the number of shares outstanding on December 31, 1999, and
assumes no exercise of the underwriters' over-allotment option, and the
conversion into common stock of all of our preferred stock outstanding on that
date. It also assumes the filing of our amended and restated certificate of
incorporation immediately following the closing of this offering. It excludes
shares issuable upon exercise of subject options at a weighted-average
exercise price of $ per share and warrants at a weighted-average
exercise price of $ per share and additional shares available for issuance
under our stock plans as of December 31, 1999.

Summary Consolidated Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended Nine Months
December 31, Ended September 30,
------------------------------- --------------------
1995 1996 1997 1998 1998 1999
------ ------ ------ -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................ $ -- $2,074 $2,005 $ 1,556 $ 1,290 $ 4,647
Gross profit............ -- 616 606 495 664 1,533
(Loss) income from
operations............. (8) 48 (614) (3,764) (1,808) (16,121)
Net (loss) income....... (8) 49 (601) (3,590) (1,695) (15,827)
Net (loss) income
available to
shareholders........... (8) 49 (601) (3,608) (1,707) (16,845)
Basic and diluted net
loss per share......... $(0.00) $ 0.02 $(0.10) $ (0.60) $ (0.29) $ (2.79)
Weighted average common
shares-basic and
diluted................ 3,000 3,000 5,832 5,969 5,966 6,028
Pro forma basic and
diluted net loss per
share.................. $ (0.44) $ (1.46)
Pro forma weighted
average common shares-
basic and diluted...... 8,182 10,851
<CAPTION>
September 30, 1999
------------------------------
Pro Pro Forma
Actual Forma As Adjusted
-------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents.................... $ 22,998 $22,998
Working capital.............................. 22,244 22,244
Total assets................................. 30,608 30,608
Long term debt and capital lease
obligations................................. 85 85
Redeemable preferred stock................... 44,098 --
Stockholders' (deficit) equity .............. (18,617) 25,481
</TABLE>

The unaudited pro forma balance sheet data above reflects the conversion of
all classes of preferred stock into common stock as of September 30, 1999. See
Note 11 of Notes to Consolidated Financial Statements. The unaudited pro forma
as adjusted balance sheet data above reflects the receipt of the net proceeds
from the sale of the shares of common stock in this offering at an
assumed initial public offering price of $ per share, after deducting
estimated underwriting discounts and commissions and estimated offering
expenses.

2
<PAGE>

RISK FACTORS

This section highlights specific risks with respect to an investment in our
business. Investing in our common stock involves a high degree of risk. We also
caution you that this prospectus includes forward-looking statements that are
based on management's beliefs and assumptions and on information currently
available to management. You should carefully consider the risks described
below and the other information in this prospectus before purchasing the common
stock.

Risks Related to Our Business

We have had recent losses and will incur substantial future losses that may
depress our stock price

We have incurred significant losses since 1997, including losses of
approximately $600,000 and $3.6 million for the years ended December 31, 1997
and 1998, respectively, and $15.8 million for the nine months ended September
30, 1999. Our losses have resulted in an accumulated deficit of approximately
$21.2 million as of September 30, 1999. We expect to substantially increase our
sales and marketing, research and development, and general and administrative
expenses. We anticipate incurring substantial losses for the next several
years. As a result, we will need to generate significant additional revenues to
achieve and maintain profitability in the future. Any significant shortfall of
revenues in relation to our expectations or any material delay in client
licenses would have an immediate adverse effect on our business. We are not
certain when we will become profitable. Even if we do achieve profitability, we
may not sustain or increase profitability on a quarterly or annual basis.
Failure to achieve or maintain profitability will materially and adversely
affect the market price of our common stock.

We expect our quarterly revenues and operating results to fluctuate

Our revenues and operating results are likely to vary significantly from
quarter to quarter. The factors that will affect our quarterly operating
results include:

. fluctuations in demand for our products and services;

. the timing of our application software and services sales;

. the timing of our application software implementations;

. increased expenditures for sales and marketing, research and development
and administration;

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

. the mix of services provided, and whether we or our channel partners
provide these services.

If revenue falls below our expectations in a quarter and we are not able to
quickly reduce our spending in response, our operating results for that quarter
could be harmed. It is likely that in some future quarter our operating results
may be below the expectations of public market analysts and investors and, as a
result, the price of our common stock may fall.

3
<PAGE>

Only a small number of clients have licensed our application software, and our
Internet commerce solution may never achieve broad market acceptance

We first introduced the XML-based version of OneCommerce in April 1999 and
delivered a second major release in November 1999. To date, only a limited
number of clients have licensed OneCommerce and an even smaller number are
operational on the most recent version. Therefore, we have not demonstrated
broad market acceptance of OneCommerce. If OneCommerce does not gain broad
market acceptance, or if OneCommerce fails to meet customer expectations, our
business would be harmed.

A large portion of our revenues are currently derived from a limited number of
clients

Five of our clients accounted for 71% of our revenues for the year ended
December 31, 1998. Five of our clients accounted for an aggregate of 57% of our
revenues for the nine months ended September 30, 1999. Although we believe that
our client concentration will decrease as we continue to build our client base,
we expect that a small number of clients will continue to account for a
substantial portion of revenues in the near term. As a result, our inability to
secure additional significant clients during a given period or the loss of any
one major client could adversely affect our business.

All of our revenues are directly related to a single family of relatively new
applications with few clients to date, and our business will suffer if these
offerings are not commercially successful

Our OneCommerce family of application services and related professional
services account for substantially all of our revenues to date, and we expect
these application services and professional services to continue to account for
most of our revenues for the foreseeable future. If our current limited
offerings are not commercially successful, our business will suffer. We may not
successfully develop or market any enhanced or new application services in the
future, which would limit our ability to increase revenues.

In the emerging marketplace of Internet commerce, our application services
and professional services involve a new approach to the conduct of online
business. As a result, intensive marketing and sales efforts may be necessary
to educate prospective clients regarding the uses and benefits of our
application services and our professional services, thereby generating demand.
Companies that have already invested substantial resources in other methods of
conducting business may be reluctant to adopt a new approach that may replace,
limit or compete with their existing systems. Accordingly, a viable market for
our application services and professional services may not emerge or be
sustainable.

We anticipate the need to raise additional capital in the future, and if we
cannot meet future capital requirements, our business will be harmed

We currently anticipate that the net proceeds from this offering, together
with our existing working capital will be sufficient to meet our anticipated
working capital and capital expenditure requirements through at least the next
12 months. The time period for which we believe our capital is sufficient is an
estimate; the actual time period may differ materially as a result of a number
of factors, risks and uncertainties which are described herein. We may need to
raise additional funds in the future through public or private debt or equity
financings in order to:

. continue rapid expansion of our business;

. acquire complementary businesses or technologies;

4
<PAGE>

. develop new products or services; or

. respond to competitive pressures.

Additional financing may not be available on terms favorable to us, if at
all. If adequate funds are not available or are not available on acceptable
terms, we will not be able to take advantage of opportunities, develop new
products or services, or otherwise respond to unanticipated competitive
pressures. In such case, our business could be harmed.

We are growing rapidly and effectively managing our growth may be difficult

From January 1, 1999 to December 31, 1999, we grew from 72 to 264 employees,
our revenues increased dramatically, and we intend to continue to grow. If we
are successful, this growth will place a significant strain on the ability of
our management team to execute our business plan. In addition, significant
investments in personnel, management systems, and resources will be required.
There will also be significant additional administrative burdens placed on our
management team as a result of our status as a public company. We are upgrading
our financial accounting and planning systems, our project management systems,
our sales force automation systems, and installing a new customer relationship
management system. The installation and incorporation of these systems into our
management processes will place a significant burden on our management team and
our information technology staff, and these systems may not be effective once
implemented. If we do not manage this growth effectively, our business will
suffer.

We depend on our key personnel and we may not be able to fill other key
management positions

Our performance is substantially dependent on the continued services and on
the performance of our executive officers and other key employees, particularly
James W. MacIntyre, IV, our chief executive officer, Frederick C. Hawkins, III,
our chief financial officer, and Thomas E. Young, our senior vice president of
marketing and sales. The loss of the services of any of our key employees, or
an inability to hire other key members of management could materially and
adversely affect our business.

Our long sales cycle makes our quarterly results difficult to forecast
accurately

Our application services and professional services are complex and often
involve significant investment decisions by prospective clients. As a result,
our sales process is often lengthy for reasons which include the following:

. prospective clients often evaluate several possible alternative
solutions from other software vendors, systems integrators, and internal
development efforts;

. we typically must extensively educate the potential client about our
Internet commerce solution; and

. our clients frequently must seek multiple internal approvals to reach a
purchase decision due to the key role Internet commerce solutions may
play in their business.

Our sales cycle may be subject to a number of significant delays over which
we have little or no control. Our long sales cycle makes it difficult for us to
predict the quarter in which we will complete a particular sale. Because of
sales delays, our revenues and operating results may vary from period to
period. As a result, period-to-period comparisons of our results of operations
may not be meaningful, and you should not rely on them as an indication of
future performance.

5
<PAGE>

The market for our solutions is new and rapidly developing and may fail to
mature into a sustainable market

The Internet commerce market is new and rapidly evolving. It is not clear
whether the developing infrastructure will be adequate to support increased
Internet commerce, or whether our customers will be successful in using our
application software and services to conduct their commercial operations
online. Consequently, the demand for our application services and professional
services in the Internet commerce market is uncertain. Our business will suffer
if our application services and professional services are not widely accepted
in the Internet commerce software market.

If broad market acceptance of XML does not develop, our business could be
harmed

OneCommerce is currently based in large part on XML, an emerging technology
standard for sharing data. It is possible that a competing standard perceived
to be superior could replace XML. If that happens, the market may not accept an
XML-based application and our future results would suffer. If a new standard
were perceived to be superior, our application software might not be compatible
with the new standard or we might not be able to develop a product using a new
standard in a timely manner. Consequently, a failure of XML to achieve broad
market acceptance or the introduction of a competing standard perceived to be
superior in the market could harm our business.

We are dependent on the acceptance and use of Microsoft operating systems and
Internet technologies

We designed OneCommerce to run only on Microsoft operating systems and
Internet technologies. However, to date a majority of large-scale Internet
commerce sites have used other operating systems such as UNIX or Linux. We
cannot be certain that the Microsoft operating systems and Internet
technologies will achieve wide market acceptance as an easily scalable
operating platform for large-scale Internet commerce solutions. If a
significant number of potential clients do not want to use the Microsoft
operating systems and Internet technologies, we will be forced to develop
products that run on other operating systems or Internet servers. Moreover, any
change to the Microsoft operating systems or Internet technologies could
require us to modify our application services and could cause us to delay
upgrades and releases. Any decline in the market acceptance of the Microsoft
operating systems and Internet technologies for any reason, including as a
result of errors or delayed introduction of enhancement or upgrades, could harm
our business.

If we are forced to develop new application services in response to these
risks, we will be required to commit a substantial investment of resources, and
we may not be able to successfully develop or introduce new applications on a
timely or cost-effective basis, or at all, which could lead potential customers
to choose alternatives to our solution.

We are dependent on marketing, technology, and distribution relationships, and
if these relationships are not successful, our growth may be limited

We rely on marketing, technology, and distribution relationships with a
variety of companies, which, in part, generate leads for the sale of our
Internet commerce application services. These relationships include:

. vendors of key technology platforms;

. systems integrators and consulting firms;

. vendors of complementary Internet commerce software; and

. application service providers, or ASPs.

6
<PAGE>

Not all of our channel partner and alliance partner relationships are
documented in writing, and some are governed by agreements that can be
terminated by either party with little or no prior notice. We may not be able
to maintain these relationships and enter into additional relationships that
will provide timely and cost-effective distribution of OneCommerce.

Moreover, these relationships are not exclusive. If the partners with whom
we have relationships are not successful in selling and implementing systems
that include our application services, or if they more vigorously promote
competing solutions or technologies, our growth could be adversely affected.

We may fail to establish and maintain beneficial strategic relationships

We intend to establish additional strategic relationships with key
participants in the Internet commerce industry to increase our application
software and services sales. There is intense competition for these
relationships, and we may not be able to enter into these relationships on
commercially reasonable terms or at all. In the event of a dispute among
potential partners, it is possible that we could be drawn into litigation aimed
at preventing us from continuing our relationship with either party. Even if we
enter into relationships with other Internet commerce vendors, they themselves
may not attract significant numbers of customers. Accordingly, we may not
realize additional sales from these relationships. Moreover, we may have to
expend significant resources to establish these relationships. Our inability to
enter into new strategic relationships and expand our existing ones could harm
our business.

We face intense competition, which could adversely affect our sales and
profitability

The Internet commerce application software and professional services market
is intensely competitive, highly fragmented, characterized by rapid
technological change and significantly affected by new product and service
introductions. Recent acquisitions of several of our competitors by large
software companies and other market activities of industry participants have
increased the competition in our market. We compete with other Internet
commerce software vendors including Art Technology Group, BroadVision,
OpenMarket, Vignette, InterWorld, and others. We also compete with application
server products and their vendors including IBM and its Websphere products, the
Sun-Netscape Alliance and its products, Allaire Corporation and its products,
among others. A number of these competitors have significantly greater
financial, technical, marketing and other resources than we have and have been
in business longer than we have. Many competitors also have greater brand
recognition and more customers than we do. Competitors may therefore have the
capability to support marketing endeavors that are more extensive than ours or
to adopt pricing and terms that are more aggressive than ours.

Many of our key personnel are new to our company and may not work together
successfully

A number of people on our management team and sales force have joined
OneSoft in the last 12 months. Our management team has limited experience
working together. Our future performance will depend, in part, on our ability
to integrate successfully our newly hired executive officers into our
management team, and our ability to develop an effective working relationship
among management. Our executive officers, who have worked together for only a
short time, may not be successful in working together or managing our company.
Any disaffection or disaccord among executive officers, or between our officers
and our board of directors, could affect our ability to make strategic
decisions. In addition, we are rapidly hiring sales personnel with limited
experience marketing our services and working with our sales force. If our key
personnel are unable to market our services and work together successfully, our
business could be harmed.

7
<PAGE>

Competition for employees in our industry, and in our geographic region, is
intense, and we may not be able to hire or retain employees

We believe we will need to attract, retain and motivate talented management
and other highly skilled employees to be successful. Competition for skilled
personnel in our industry and in our geographic region is intense. If we are
unable to retain our key employees or attract, assimilate or retain other
highly qualified employees in the future, the growth of our business will not
meet future expectations.

If we fail to develop new products and services in the face of our industry's
rapidly evolving technology, our future results may be adversely affected

The market for Internet commerce application software and related services
is subject to rapid technological change, changing customer needs, frequent new
product introductions and evolving industry standards that may render existing
applications and services obsolete. Our growth and future operating results
will depend in part upon our ability to enhance existing applications and
develop and introduce new application software or components that:

. exploit technological advances in the marketplace;

. meet changing customer requirements;

. achieve market acceptance;

. integrate successfully with third party software; and

. respond to competitive products.

Our research and development efforts have required, and are expected to
continue to require, substantial investment. We may not possess sufficient
resources to continue to make the necessary investments in technology. In
addition, we may not successfully identify new software opportunities and
develop and bring new software to market in a timely and efficient manner. If
we are unable, for technological or other reasons, to develop and introduce new
and enhanced software in a timely manner, we may lose existing customers and
fail to attract new customers, which could result in a decline in revenues.

Our application software may contain defects, which can result in reduced
sales, increased service and warranty costs, and liability to our clients

Our application software may contain errors that become apparent when they
are introduced or when the volume of usage increases. Errors in our software,
implementation errors, including those caused by third parties, or other
performance difficulties could result in decreased sales of our software,
increased service and warranty costs, and liability to our clients, which could
have an adverse effect on our business. Although we carry errors and omissions
insurance, such insurance may not cover all liability claims made against us.
Our risk of liability to clients is particularly pronounced because of our
belief that our application software will be critical to their operations.

Intellectual property claims against us can be costly and result in the loss of
significant rights

Other parties may assert infringement or unfair competition claims against
us. Any claim, with or without merit, could result in significant litigation
costs and distraction of management. Some of our competitors have been issued
U.S. patents on certain aspects of their electronic commerce software products.
Although we do not believe that we are infringing on any such patent rights,
those companies may claim that we are doing so. If any such claim was made
against us, our business could be harmed, particularly if we are unsuccessful
in defending such claim. If we are forced to defend any such claim, whether it
is

8
<PAGE>

with or without merit or is determined in our favor, then we may face costly
litigation, diversion of technical and management personnel, or delays in
future application software releases. We may also be required to enter into
costly and burdensome royalty and licensing agreements. Such royalty or
licensing agreements, if required, may not be available on terms acceptable to
us, or at all.

We rely on our intellectual property rights and if we are unable to protect
these rights, we may face increased competition

We rely on a combination of patent, copyright, trademark, and trade secret
laws and restrictions on disclosure to protect our intellectual property
rights. We have applied to register 95 trademarks in the United States,
including "OneSoft", "OneCommerce", "PrimeCommerce", and "Internet Commerce
Opportunity Assessment", among others. We also have filed a patent application
claiming proprietary inventions used in our software architecture. We cannot be
certain that trademark registrations or patents will issue from these
applications. Moreover, even if they do, unauthorized persons may attempt to
copy or otherwise obtain and use our intellectual property. Monitoring
unauthorized use of our intellectual property is difficult, and we cannot be
certain that the steps we have taken will be effective to prevent unauthorized
use. In addition, our business activities may infringe on the proprietary
rights of others, and, from time to time, we have received and may continue to
receive, claims of infringement against us.

Litigation may be necessary to enforce our intellectual property rights, to
protect our trade secrets, or to determine the validity and scope of the
proprietary rights of others. Litigation could subject us to significant
liability for damages and invalidation of our proprietary rights. These
lawsuits, regardless of their success, would likely be time consuming and
expensive to resolve, and would divert management's time and attention away
from our business.

Our application to register the trademark "OneSoft" has been opposed by
1Soft Corporation, the alleged owner of the trademark "1Soft". We believe that
we have rights to use "OneSoft" in association with the goods and services
identified in our application and that there is no likelihood of confusion
between our use of the trademark "OneSoft" and the opposition's use of the
trademark "1Soft". We have filed a civil action in the U.S. District Court for
the Eastern District of Virginia, requesting that the court issue a declaration
of judgment that our use of the trademark "OneSoft" does not create unfair
competition or dilution of the mark "1Soft", and that no infringement or
likelihood of confusion exists. However, we cannot be certain that the court
will rule in our favor. If our use of the "OneSoft" trademark was restricted,
it could have an adverse effect on our business.

9
<PAGE>

We generally enter into confidentiality or license agreements with our
employees and consultants, and control access to and distribution of our
intellectual property, documentation, and other proprietary information.
Despite our efforts to protect our proprietary rights from unauthorized use or
disclosure, unauthorized parties may attempt to disclose, obtain, or use our
solutions or intellectual property. We cannot assure you that the steps we have
taken will prevent misappropriation of our solutions or intellectual property,
particularly in foreign countries where laws or law enforcement practices may
not protect our proprietary rights as fully as in the United States.

Acquisitions may disrupt or otherwise have a negative impact on our business

We may acquire or make investments in complementary businesses, products,
services or technologies on an opportunistic basis when they will assist us in
carrying out our business strategy. Growth through acquisitions has been a
successful strategy used by other technology companies. We do not have any
present understanding, nor are we conducting any negotiations, relating to any
such acquisition or investment. If we acquire a company, then we could have
difficulty in assimilating that company's personnel and operations. In
addition, the key personnel of the acquired company may decide not to work for
us. If we acquire products, services or technologies, we could have difficulty
in assimilating them into our operations. These difficulties could disrupt our
ongoing business, distract our management and employees and increase our
expenses. Furthermore, we may have to incur debt or issue equity securities to
pay for any future acquisitions, the issuance of which could be dilutive to our
existing stockholders. In addition, these securities may have rights,
preferences or privileges senior to those of our existing stockholders.

We intend to expand our international sales efforts but do not have substantial
experience in international markets

We intend to expand our international sales efforts in the future. We have
very limited experience in marketing, selling, and supporting our application
software and services abroad. Expansion of our international operations will
require a significant amount of attention from our management and substantial
financial resources. If we are unable to grow our international operations
successfully and in a timely manner, our business could suffer. Doing business
internationally involves additional risks, particularly:

. unexpected changes in regulatory requirements, taxes, trade laws, and
tariffs;

. restrictions on repatriation of earnings;

. differing intellectual property rights and protections;

. differing labor regulations;

. political and economic uncertainty or instability in some regions;

. greater difficulty in staffing and managing foreign operations; and

. fluctuating currency exchange rates.

Risks Related to Our Industry

We depend on the growth in the use of the Internet for business

Our future success depends heavily on the increased use of the Internet for
business. Although the Internet is experiencing rapid growth in the number of
users and traffic, this growth is a recent phenomenon and may not continue. The
failure of the Internet to continue to grow and develop as a commercial or
business medium could harm our business. The

10
<PAGE>

acceptance and use of the Internet for commerce could be limited by a number of
factors such as the growth and use of the Internet in general, the relative
ease of conducting transactions on the Internet, concerns about transaction
security, and taxation of transactions on the Internet.

We depend on the speed and reliability of the Internet to enable the growth of
Internet commerce

The recent growth in Internet traffic has caused frequent periods of
decreased performance. If Internet usage continues to grow rapidly, its
infrastructure may not be able to support these demands and its performance and
reliability may decline. If outages or delays on the Internet occur frequently
or increase in frequency, Internet commerce could grow more slowly or decline,
which may reduce the demand for our Internet software application services. The
ability of OneCommerce and our professional services to satisfy our clients'
needs is ultimately limited by and depends upon the speed and reliability of
the Internet. Consequently, the emergence and growth of the market for our
application services and our professional services depends upon improvements
being made to the entire Internet infrastructure to alleviate overloading and
congestion. If these improvements are not made, the ability of our clients to
utilize our solutions will be hindered, and our business may suffer.

Breaches of security on the Internet may slow the growth of Internet commerce
and limit our growth

A significant barrier to market acceptance of Internet commerce and
communication is the concern regarding the secure exchange of valuable and
confidential information over public networks. Anyone who is able to circumvent
security measures could misappropriate proprietary, confidential customer
information or cause interruptions in our clients' operations. Our clients may
be required to incur significant costs to protect against security breaches or
to alleviate problems caused by breaches, reducing their demand for our
application services. A well-publicized breach of security could deter
consumers and businesses from using the Internet to conduct transactions that
involve transmitting confidential information. The failure of the security
features of our application software to prevent security breaches, or well-
publicized security breaches affecting the Web in general, could significantly
harm our business.

Unplanned system interruptions and capacity constraints could reduce our
ability to provide hosting services and could harm our business and our
reputation

Our clients have in the past experienced some interruptions with our hosted
network. We believe that these interruptions will continue to occur from time
to time. These interruptions could be due to hardware and operating system
failures. We expect a substantial portion of our revenues to be derived from
customers who use our hosted network. As a result, our business will suffer if
we experience frequent or long system interruptions that result in the
unavailability or reduced performance of our hosted network or reduce our
ability to provide remote management services. We expect to experience
occasional temporary capacity constraints due to sharply increased traffic,
which may cause unanticipated system disruptions, slower response times,
impaired quality and degradation in levels of customer service. If this were to
continue to happen, our business and reputation could be seriously harmed.

Our success largely depends on the efficient and uninterrupted operation of
our computer and communications hardware and network systems. Substantially all
of our computer

11
<PAGE>

communications systems are located in Northern Virginia. Our systems and
operations are vulnerable to damage or interruption from fire, earthquake,
power loss, telecommunications failure and similar events.

We have entered into service agreements with some of our clients that
require minimum performance standards, including standards regarding the
availability and response time of our remote management services. If we fail to
meet these standards, our clients could terminate their relationships with us
and we could be subject to contractual monetary penalties. Any unplanned
interruption of services may harm our ability to attract and retain clients.

We rely on relationships with, and the system integrity of, our hosting
partners

Some of our hosted network consists of data centers hosted by our partners.
Accordingly, we rely on the speed and reliability of the systems and networks
of these hosting partners. If our hosting partners experience system
interruptions or delays or other problems, or if we do not maintain or develop
relationships with hosting partners, our business could suffer.

Increasing governmental regulation of the Internet and Internet commerce could
limit the market for our products

A number of legislative and regulatory proposals under consideration by
federal, state, local, and foreign governmental organizations may lead to laws
or regulations concerning various aspects of the Internet such as taxation of
goods and services provided over the Internet, pricing, content and quality of
goods and services. Legislation and anticipated legislation could dampen the
growth in Internet usage and decrease or limit its acceptance as a
communications and commercial medium. If enacted, these laws and regulations
could limit the market for our products and services. In addition, existing
laws could be applied to the Internet. Legislation or application of existing
laws could expose companies involved in Internet commerce to increased
liability, which could limit the growth of Internet commerce generally, and
limit demand for our application software and services, in particular.

Government regulation of the collection and use of personal data could reduce
demand for our products and services

Our Internet application software connects to and analyzes data from various
applications, including Internet applications, which enable businesses to
capture and use information about their customers. Government regulation that
limits our clients' use of this information could reduce the demand for our
products. A number of jurisdictions have adopted, or are considering adopting,
laws that restrict the use of customer information from Internet applications.
The European Union has required that its member states adopt legislation that
imposes restrictions on the collection and use of personal data on the
Internet. They also must adopt legislation limiting the transfer of personally-
identifiable data to countries that do not impose equivalent restrictions. The
United States Department of Commerce and the European Union are negotiating
safe-harbor regulations for U.S.-based Internet commerce companies, but have
not yet reached agreement. In the United States, the Children's Online Privacy
Protection Act was enacted in October 1998. The Federal Trade Commission has
enacted rules implementing this legislation imposing disclosure obligations on
Internet sites collecting personally-identifiable data from children under 13.
These rules become effective in April. In addition, the Federal Trade
Commission is investigating privacy practices of businesses that collect
information on the Internet. These and other privacy-related initiatives

12
<PAGE>

could reduce demand for some of the Internet applications with which
OneCommerce operates, and could restrict the use of some of the features of
OneCommerce in some Internet commerce applications. Either scenario could
potentially result in reduced demand for our application software and services.

Our business could be harmed by Year 2000 compliance issues

Many currently installed computer systems, software products, and other
control devices are not capable of distinguishing 21st century dates from 20th
century dates. As a result, some computer systems, software products, and
control devices used by companies may fail to perform properly because of this
Year 2000 processing error. This type of Year 2000 error could directly or
indirectly cause system failures or miscalculations that could disrupt
operations, including among other things a temporary inability to process
transactions, issue invoices, or engage in similar normal business activities.

Significant uncertainty exists in the Internet software applications
industry concerning the potential effects associated with compliance. Although
we believe that each of our material systems is Year 2000 compliant, we have
not yet determined whether all of the systems of our suppliers, business
partners or clients are Year 2000 compliant. Accordingly, we cannot predict the
extent to which our clients' and their business partners' systems and
applications are Year 2000 compliant. If these systems are not Year 2000
compliant, our business could be harmed.

In addition, we believe that the purchasing patterns of clients and
potential clients may be affected by Year 2000 issues in a variety of ways.
Many companies have been expending significant resources to correct or patch
their current software systems for Year 2000 compliance. Those expenditures may
continue or increase, resulting in reduced funds available to purchase Internet
application software such as that offered by OneSoft.

Risks Related to This Offering

Internet-related stock prices are especially volatile and this volatility may
depress our stock price

The stock market, and specifically the stock prices of Internet-related
companies, has been very volatile. This volatility is often not related to the
operating performance of the companies. This broad market volatility and
industry volatility may reduce the price of our common stock, without regard to
our operating performance. Investors may not be able to resell their shares of
our common stock following periods of volatility because of the market's
adverse reaction to such volatility.

Securities class action litigation has often been brought against companies
experiencing volatility in the market price of their securities. Litigation
brought against us could result in substantial costs to us in defending against
a lawsuit and management's attention could be diverted from our business.

Because certain existing stockholders own a large percentage of our voting
stock, other stockholders' voting power may be limited

Following consummation of this offering, it is anticipated that our
officers, directors, and their affiliates will beneficially own or control
approximately % of our common stock. In combination with entities owning 5% or
more of our outstanding shares of common stock, this group will control
shares of common stock, or % of the outstanding shares of our

13
<PAGE>

stock. As a result, if such persons act together, they will have the ability to
control all matters submitted to our stockholders for approval, including
election and removal of directors and the approval of any merger,
consolidation, or sale of all or substantially all of our assets. These
stockholders may make decisions that are adverse to your interests. See our
discussion under the heading "Principal Stockholders" for more information
about ownership of our outstanding shares.

Management may apply the proceeds of this offering to uses that do not increase
our profits or market value

Our management has broad discretion as to how to spend the proceeds from
this offering and may spend these proceeds in ways with which our stockholders
may not agree. Our management has not determined how a substantial portion of
the offering proceeds will be allocated among the various uses. Accordingly,
the net proceeds may be used for corporate purposes that do not increase our
profitability or our market value. Until the proceeds are needed, we plan to
invest them in investment-grade, interest-bearing securities. The failure of
management to apply these proceeds effectively could harm our business. See
"Use of Proceeds."

Future sales of shares of our common stock could cause the price of our shares
to decline

If our shareholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options and warrants, in the
public market following the offering, then the market price of our common stock
could fall. Restrictions under the securities laws and certain lock-up
agreements limit the number of shares of common stock available for sale in the
public market. The holders of shares of common stock and warrants and
options for an aggregate of shares of common stock have agreed not to sell
any such securities for 180 days after the offering without the prior written
consent of Deutsche Bank Securities Inc. However, Deutsche Bank Securities Inc.
may, in its sole discretion, release all or any portion of the securities
subject to such lock-up agreements.

We may file a registration statement to register all shares of common stock
under our stock option plans shortly after completion of this offering. After
such registration statement is effective, shares issued upon exercise of stock
options will be eligible for resale in the public market without restriction.

Anti-takeover provisions and our right to issue preferred stock could make a
third-party acquisition of us difficult

We are a Delaware corporation. Anti-takeover provisions of Delaware law
could make it more difficult for a third party to acquire control of us, even
if such change in control would be beneficial to shareholders. Our restated
certificate of incorporation provides that our board of directors may issue
preferred stock without shareholder approval. In addition, our restated bylaws
provide for a classified board, with each board member serving a staggered
three-year term. The issuance of preferred stock, the existence of a classified
board, and other provisions in the charter and under Delaware law could make it
more difficult for a third party to acquire us.

You will incur immediate and substantial dilution in the book value of your
investment

The initial public offering price is substantially higher than the pro forma
net book value per share of our outstanding common stock. If you purchase
shares of our common stock, you will incur immediate and substantial dilution
in the amount of $ per share. If the holders of outstanding options or
warrants exercise those options or warrants, you will experience further
dilution.

14
<PAGE>

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
AND INDUSTRY DATA

We make many statements in this prospectus under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business," and elsewhere that are
forward-looking and are not based on historical facts. These statements relate
to our future plans, objectives, expectations, and intentions. We may identify
these statements by the use of words such as "believe," "expect," "anticipate,"
"intend," and "plan," and similar expressions. These forward-looking statements
involve a number of risks and uncertainties. Our actual results could differ
materially from those anticipated in these forward-looking statements as a
result of various factors, including those we discuss in "Risk Factors" and
elsewhere in this prospectus. These forward-looking statements speak only as of
the date of this prospectus, and we caution you not to rely on these statements
without also considering the risks and uncertainties associated with these
statements and our business that are addressed in this prospectus.

This prospectus contains estimates of market growth related to the Internet.
These estimates have been included in studies published by nationally-known
market research firms. These estimates assume that certain events, trends and
activities will occur. If any of these market studies are wrong about any of
their assumptions, then their market estimates may also be wrong.

USE OF PROCEEDS

Our net proceeds from the sale of the shares of common stock we are
offering, at an assumed initial offering price of $ per share, are estimated
to be approximately $ million after deducting underwriting discounts and
commissions and estimated offering expenses payable by us. We expect to use the
net proceeds for sales and marketing expansion, research and development
activities, and other general corporate purposes, including capital
expenditures.

The amounts and timing of our actual expenditures will depend on numerous
factors, including market acceptance of our application services and
professional services, the amount of proceeds actually raised in this offering,
the amount of cash generated by our operations, and competition. We may also
use a portion of the net proceeds from this offering for the acquisition of, or
investment in, companies, technologies or assets that complement our business.
However, we have no present understandings, commitments, or agreements to enter
any potential acquisitions or investments. Further, we have not determined the
amounts we plan to spend on any of the areas listed above or the timing of
these expenditures. As a result, our management will have broad discretion to
allocate the net proceeds from this offering. Pending application of the net
proceeds, we intend to invest them in short-term, interest-bearing, investment-
grade securities.

DIVIDEND POLICY

We have never declared or paid any cash dividends on shares of our capital
stock. We intend to retain any future earnings to finance future growth and do
not anticipate paying any cash dividends in the future. Payment of future
dividends, if any, will be at the discretion of our board of directors after
taking into account various factors, including our financial condition,
operating results, current and anticipated cash needs, and plans for expansion.

15
<PAGE>

CAPITALIZATION

The following table shows:

. our actual capitalization as of September 30, 1999;

. our capitalization as of that date on a pro forma basis to give effect
to the conversion of all preferred stock outstanding as of September 30,
1999 into common stock upon the closing of this offering; and

. our pro forma capitalization as adjusted to reflect our receipt of the
net proceeds from the sale of shares of common stock offered by us
at the assumed initial public offering price of $ per share and after
deducting underwriting discounts and commissions and estimated offering
expenses.

<TABLE>
<CAPTION>
September 30, 1999
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Lease obligations, long-term portion......... $ 85 $ 85
Redeemable convertible preferred stock (non-
cumulative), par value $0.01 per share;
9,757,031 shares authorized; 9,681,158
shares issued and outstanding, actual; no
shares issued and outstanding, pro forma and
pro forma as adjusted....................... 44,098 -- --
Stockholders' equity:
Common stock, par value $0.001 per share;
20,242,969 shares authorized; 6,081,070
shares issued and outstanding, actual;
15,762,228 shares issued and outstanding
pro forma and shares issued and
outstanding pro forma as adjusted.......... 6 16
Additional paid-in capital.................. 4,529 48,617
Deferred stock compensation................. (1,978) (1,978)
Accumulated deficit......................... (21,174) (21,174)
-------- --------
Total stockholders' (deficit) equity....... (18,617) 25,481
-------- --------
Total capitalization....................... $ 25,566 $ 25,566 $
======== ======== ====
</TABLE>

The outstanding share information shown in the table excludes the following
shares:

. 3,356,480 shares of common stock issuable upon the exercise of
outstanding stock options granted as of September 30, 1999 under our
Amended and Restated 1997 Employee, Director and Consultant Stock Option
Plan, at a weighted average exercise price of $1.50 per share;

. 643,520 additional shares of common stock available for future grant
under our Amended and Restated 1997 Employee, Director and Consultant
Stock Option Plan, as of September 30, 1999; and

16
<PAGE>

DILUTION

Our pro forma net tangible book value as of September 30, 1999, was $25.5
million, or $1.62 per share of common stock. Pro forma net tangible book value
per share represents the amount of our total tangible assets, less total
liabilities, divided by the number of shares of common stock outstanding as of
September 30, 1999, after giving effect to the conversion of all outstanding
shares of preferred stock and warrants into shares of common stock upon
completion of this offering. After giving effect to the receipt of the net
proceeds from the sale of shares of our common stock offered in this offering
at an assumed initial public offering price of $ per share, and after
deducting underwriting discounts and commissions, and the estimated offering
expenses, our pro forma net tangible book value as of September 30, 1999 would
have been $ million, or $ per share of common stock. This represents an
immediate increase in pro forma net tangible book value of $ per share to our
existing stockholders and an immediate dilution of $ per share to new
investors at the assumed initial public offering price. The following table
illustrates the per share dilution:

<TABLE>
<S> <C>
Assumed initial public offering price per share............................ $
Pro forma net tangible book value per share as of September 30, 1999..... 1.62
Increase per share attributable to new investors.........................
Pro forma net tangible book value per share after the offering
----
Dilution per share to new investors........................................ $
====
</TABLE>

The following table summarizes, as of September 30, 1999, on the pro forma
basis described above, the number of shares of common stock purchased from us,
the total consideration paid to us, and the average price per share paid by
existing stockholders and by new investors purchasing shares of common stock in
this offering, before deducting underwriting discounts and commissions and the
estimated offering expenses:

<TABLE>
<CAPTION>
Shares
Purchased Total Consideration Average
-------------- ---------------------- Price
Number Percent Amount Percent Per Share
------ ------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... % $ % $
New investors..................
--- --- --------- --------- ---
Total........................ 100% 100%
=== === ========= ========= ===
</TABLE>

The foregoing discussion and tables assumes no exercise of any outstanding
stock options or warrants as of September 30, 1999. As of September 30, 1999,
there were options and warrants outstanding to purchase a total of 3,417,131
shares of our common stock with a weighted-average exercise price of $1.53 per
share. If any of these options and warrants are exercised, there will be
further dilution to new public investors. Please see Note 6 to the financial
statements for more information about these options and warrants.

If the underwriters exercise their over-allotment in full, the following
will occur:

. the number of shares of common stock held by existing stockholders will
be reduced to approximately % of the total number of shares of common
stock to be outstanding after this offering; and

. the number of shares of common stock held by the new investors will
increase to shares, or % of the total number of shares of common
stock to be outstanding immediately after this offering. See "Principal
Stockholders."

17
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and related notes and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included elsewhere in this prospectus. The consolidated
statement of operations data for each of the three years in the period ended
December 31, 1998 and our consolidated balance sheet data as of December 31,
1997 and 1998 are derived from our consolidated financial statements that have
been audited by Ernst & Young LLP, independent auditors, and are included
elsewhere in this prospectus. The consolidated balance sheet data as of
December 31, 1995 and 1996 and the consolidated statement of operations data
for the year ended December 31, 1995 are derived from the unaudited
consolidated financial statements not included in this prospectus and include,
in the opinion of management, all adjustments, consisting only of normal
recurring adjustments, that are necessary. The consolidated balance sheet data
as of September 30, 1999 and the consolidated statement of operations data for
the nine months ended September 30, 1998 and 1999 are derived from unaudited
consolidated financial statements included elsewhere in this prospectus and
include, in the opinion of management, all adjustments, consisting only of
normal recurring adjustments, that are necessary for the fair presentation of
our financial position and results of operations for those periods. Historical
results are not necessarily indicative of future results. The pro forma
consolidated balance sheet data as of September 30, 1999 is unaudited and
reflects the assumed conversion of all outstanding shares of preferred stock
into common stock upon the completion of this offering. The unaudited pro forma
as adjusted balance sheet data above reflects the receipt of the net proceeds
from the sale of the shares of common stock offered by OneSoft at an assumed
initial public offering price of $ per share after deducting the estimated
underwriting discounts and commissions and offering expenses.
<TABLE>
<CAPTION>
Years Ended Nine Months Ended
December 31, September 30,
----------------------------------------- ---------------------
1995 1996 1997 1998 1998 1999
--------- --------- --------- --------- --------- ----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenue:
Application services... $ -- $ 240 $ 171 $ 561 $ 462 $ 1,071
Professional services.. -- 1,834 1,835 995 828 3,576
--------- --------- --------- --------- --------- ----------
Total revenues......... -- 2,074 2,006 1,556 1,290 4,647
Cost of revenues........ -- 1,458 1,400 1,061 626 3,115
--------- --------- --------- --------- --------- ----------
Gross profit............ -- 616 606 495 664 1,532
Operating expenses:
Research and
development costs..... -- -- 255 1,044 664 2,814
Sales and marketing
expenses.............. -- -- -- 1,190 434 7,549
General and
administrative
expenses.............. 8 568 955 2,012 1,365 4,744
Stock and stock option
compensation expense.. -- -- 10 12 9 2,546
--------- --------- --------- --------- --------- ----------
Total operating
expenses.............. 8 568 1,220 4,258 2,472 17,653
--------- --------- --------- --------- --------- ----------
Income (loss) from
operations............. (8) 48 (614) (3,763) (1,808) (16,121)
Interest income........ -- -- 17 169 113 291
Interest expense....... -- -- (18) (14) (9) --
Minority interest...... -- 1 14 18 9 3
--------- --------- --------- --------- --------- ----------
Net income (loss)....... (8) 49 (601) (3,590) (1,695) (15,827)
========= ========= ========= ========= ========= ==========
Accretion of preferred
stock.................. -- -- -- 18 12 1,017
--------- --------- --------- --------- --------- ----------
Net income (loss)
available to
shareholders........... $ (8) $ 49 $ (601) $ (3,608) $ (1,707) $ (16,844)
========= ========= ========= ========= ========= ==========
Basic and diluted net
income (loss) per
share.................. $ (0.00) $ 0.02 $ (0.10) $ (0.60) $ (0.29) $ (2.79)
========= ========= ========= ========= ========= ==========
Weighted average shares
used in computing basic
and diluted net income
(loss) per share....... 3,000,000 3,000,000 5,832,278 5,968,736 5,965,692 6,027,792
========= ========= ========= ========= ========= ==========
Pro forma basic and
diluted net loss per
share.................. $ (0.44) $ (1.46)
========= ==========
Weighted average shares
used in computing pro
forma basic and diluted
net loss per share..... 8,182,430 10,850,675
========= ==========
</TABLE>

<TABLE>
<CAPTION>
December 31, September 30, 1999
------------------------- -------------------------------
Pro Forma
1995 1996 1997 1998 Actual Pro Forma As Adjusted
---- ---- ----- ------- -------- --------- -----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash
equivalents............ $13 $ 9 $ 733 $ 2,556 $ 22,998 $22,998 $
Working capital......... (7) 1 494 2,506 22,244 22,244
Total assets............ 13 358 1,391 4,094 30,608 30,608
Long-term debt and
capital lease
obligations............ -- -- 31 33 85 85
Redeemable convertible
preferred stock........ -- -- 1,750 7,604 44,098 --
Stockholders' (deficit)
equity................. $(7) $44 $(766) $(4,360) $(18,617) $25,481
</TABLE>

18
<PAGE>

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

The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with "Selected Consolidated
Financial Data" and our consolidated financial statements and related notes
appearing elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions.
The actual results may differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including but not
limited to those set forth under "Risk Factors" and elsewhere in this
prospectus.

Overview

We were founded in Northern Virginia in 1995, and were reincorporated in the
state of Delaware in June 1997. Initial revenues were primarily generated from
professional services and software customization provided to governmental and
non-profit organizations. Beginning in 1997, we devoted our efforts primarily
to the research, development and distribution of OneCommerce, our application
software, and related enabling services, and shifted the focus of our business
to serving commercial clients. We released version 1.0 of OneCommerce in the
third quarter of 1998. We introduced OneCommerce version 2.0, the first XML-
based implementation of our application software, in April 1999. OneCommerce
version 3.0 was released in November 1999. Throughout these periods, we
expanded our organization in key areas, particularly research and development,
marketing and sales, and deployment services. We grew from 18 employees on
December 31, 1997, to 264 full-time employees on December 31, 1999, and expect
that our growth in personnel will continue throughout 2000.

We derive revenues from two primary sources: (1) application services and
(2) professional services. Application services revenues consist principally of
license fees for our OneCommerce application software and revenues from the
following services, packaged with the licensed application software: software
maintenance, managed services including application outsourcing, technical
support and transaction services. Our professional services, delivered by our
Internet Solution Center, include strategy, deployment and solutions management
services that enable clients to plan, design, implement and monitor their
Internet commerce businesses based on OneCommerce. Professional services also
include educational services to train our distribution partners to effectively
sell, install and support our OneCommerce solution, and train our clients to
use the administrative features of our software.

Application services are priced based primarily on the expected number of
server processors, or central processing units, required to support the
anticipated level of activity on our client's Internet commerce site. These
application services are typically rendered pursuant to a software license and
associated service agreement, generally with 24 to 36 month terms. The service
agreement is priced primarily on the selection and level of services provided.
A typical new Internet commerce Web site requires a license for OneCommerce
software for a minimum level of four processor license units, and managed
services for which the client will pay a flat monthly fee and initial service-
term commitment and configuration fee. We charge additional application service
fees as our clients add processor capacity.

While the majority of our software licenses are perpetual, we currently
license and plan to continue licensing our OneCommerce software on a term
basis. We sell most software licenses packaged with managed services and
recognize license revenues ratably over the term of the managed services
agreement. We recognize software maintenance revenues and managed services
revenues on a monthly basis consistent with those agreements.

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<PAGE>

We generally bill our professional services on a time and materials basis.
Revenues from professional services agreements that are billed on a time and
materials basis are recognized as services are provided. Revenues generated
pursuant to fixed-fee professional services contracts are recognized as
services are rendered using the percentage-of-completion method of accounting,
and cash received from customers in excess of revenues is recognized as
deferred revenues. Although currently the majority of our professional services
revenues are derived from time and materials contracts, we plan to increasingly
offer service on a fixed-fee basis.

Cost of revenues include the direct costs of application services and
professional services, which consist primarily of the salaries and benefits of
our services personnel, costs of education and training of service partners and
clients, and costs related to hosting, network and systems infrastructure, and
facilities. We anticipate a transitory decline in our gross margins from the
provision of professional services, as we incur increasing costs related to the
development of packaged service offerings, and to the training of our indirect
channel partners to use these packaged service offerings to deploy and support
our OneCommerce solution.

Sales and marketing expenses consist primarily of salaries and commissions
for our direct and indirect sales force, promotional expenses including
expenses for advertising and trade shows, and the facilities costs for our
various sales offices. We market and sell our application and professional
services through our sales force, and application services through indirect
sales and distribution channels. Sales through indirect distribution channels
began in August 1999, accounting for an immaterial amount of revenues for the
nine months ended September 30, 1999. We intend to increase our use of indirect
channel partners as a means to broaden the distribution of our Internet
commerce solution and related services. Our sales and marketing team of 56
persons focuses on the North American market, and we intend to establish an
international sales presence in 2000. All sales to date have been domestic.

Research and development expenses consist primarily of salaries for
development personnel, and the related costs associated with the research,
development and enhancement of our software and service offerings, as well as
quality assurance and testing. Our current policy is to recognize these
expenses in the period incurred. We expect the absolute dollar amount of these
expenses to grow substantially as we continue to invest a significant
percentage of our revenues in these activities.

General and administrative expenses consist principally of salaries and
benefits for executive and managerial personnel, as well as expenses for
facilities, recruiting, legal services, financial services, and other
professional services. We expect these expenses to continue to increase as we
expand our operations. In addition, we anticipate that we will incur greater
general and administrative costs associated with our reporting obligations as a
public company.

Stock and stock option compensation expenses consist of the non-cash
compensation recorded in connection with the granting of options to employees
and non-employees. We recorded expenses of $9,622, $12,047 and $305,000 during
the years ended December 31, 1997 and 1998 and the nine months ended September
30, 1999 as a result of the issuance of stock options to employees with
exercise prices less than the fair market value of our common stock at the date
of issuance.

For the nine months ended September 30, 1999, we recorded $2.2 million of
expense related to the fair value of the options issued to non-employees. Four
hundred thousand dollars of this amount related to services performed during
1999 by non-employees. The remaining $1.9 million resulted from the issuance of
an option to a consultant for the purchase of 250,000 shares of common stock
with an exercise price of $0.552 per share. These 250,000

20
<PAGE>

options vest upon this individual meeting certain sales goals prior to December
2000 as discussed in the option agreement. We have accounted for these 250,000
options under SOP 96-18 and accordingly recorded an expense using variable
accounting for the options through September 30, 1999.

We have experienced substantial net losses since our inception due to the
significant costs incurred to develop our software and related intellectual
property, to recruit and train personnel for our growing operations, as well as
other expenses related to the development of our business and brand. As of
September 30, 1999, we had an accumulated deficit of approximately $21.2
million. We anticipate that our operating expenses will increase substantially
in future quarters as we increase sales and marketing operations, develop new
distribution channels, fund greater levels of research and development, and
support and improve operational and financial systems. Accordingly, we expect
to continue to incur additional losses for the foreseeable future.

Results of Operations

The following table sets forth the percentage of total revenues represented
by various items of revenues and expenses during the periods indicated:

<TABLE>
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
-------------- ---------------
1997 1998 1998 1999
----- ------ ------ ------
<S> <C> <C> <C> <C>
Percentage of Total Revenues:
Revenues:
Application services....................... 8.5 % 36.1 % 35.8 % 23.0 %
Professional services...................... 91.5 63.9 64.2 77.0
----- ------ ------ ------
Total revenue.......................... 100.0 100.0 100.0 100.0
Cost of revenues........................... 69.8 68.2 48.5 67.0
----- ------ ------ ------
Gross profit............................... 30.2 31.8 51.5 33.0
Operating expenses:
Research and development.................. 12.7 67.1 51.5 60.6
Sales and marketing....................... 0.0 76.5 33.7 162.5
General and administrative................ 47.6 129.3 105.8 102.1
Stock and stock option compensation....... 0.5 0.8 0.7 54.8
(Loss) from operations..................... (30.6) (242.0) (140.2) (346.9)
Interest income (expense), net............. 0.0 10.0 8.1 6.2
Net loss................................... (29.9)% (230.8)% (131.4)% (340.6)%
===== ====== ====== ======
</TABLE>

Nine Months Ended September 30, 1998 Compared to September 30, 1999

Application services revenues. Application services revenues increased
138.1% from $462,000 in the nine months ended September 30, 1998 to $1.1
million in the nine months ended September 30, 1999. The increase reflects the
continued development of our direct and indirect distribution channels, as well
as our ongoing investment in research and development to enhance our
application services offerings. For the nine months ended September 30, 1998,
application service revenues comprised 36% of our total revenues, while
application service revenues comprised 23% of total revenues for the comparable
period in 1999.

Professional services revenues. Professional services revenues increased
335.3% from $828,000 in the nine months ended September 30, 1998 to $3.6
million in the comparable period of 1999. This expansion reflects the increased
number of deployments of our OneCommerce software and application services.

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<PAGE>

Cost of revenues. Cost of revenues increased 395.2% from $626,000 during the
nine months ended September 30, 1998 to $3.1 million in the nine months ended
September 30, 1999. This increase reflects the increase in salary and benefits
associated with the addition of new employees to staff our Internet Solution
Center and network operations center, as well as increased investments in
infrastructure to support the greater demand for our applications services and
professional services. The increase in costs during the nine months ended
September 30, 1999 also reflects the education and training of our distribution
partners with the intention of preparing them to deploy our application
services. We plan to continue expanding our services capacity through both
hiring and infrastructure investments and, accordingly, expect the cost of
revenue to increase in absolute dollars.

Research and development expenses. Research and development expenses
increased 321.7% from $664,000 during the nine months ended September 30, 1998
to $2.8 million during the nine months ended September 30, 1999. The increase
in research and development expenses was due to the hiring of additional
personnel and to other expenses associated with the development of new products
and services, specifically for the development and release of version 3.0 of
our OneCommerce software application. Full-time research and development
personnel grew from 10 employees as of September 30, 1998 to 39 employees as of
September 30, 1999. We plan to continue expanding our research and development
organization and expect to increase the dollar amount of expenses in this area.

Sales and marketing expenses. Sales and marketing expenses increased
1,628.1% from $434,000 during the nine months ended September 30, 1998 to $7.5
million during the nine months ended September 30, 1999. The increase in sales
and marketing expenses resulted primarily from higher labor, recruiting,
benefits, travel and, promotional costs associated with the hiring of
additional sales and marketing personnel and the expansion of our sales
organization. Full time sales and marketing personnel grew from 9 employees as
of September 30, 1998, to 27 employees as of September 30, 1999. We plan to
continue expanding our sales and marketing organization, and therefore expect
our sales and marketing expenses to increase during the next fiscal year.

General and administrative expenses. General and administrative expenses
increased 235.7% from $1.4 million in the nine months ended September 30, 1998
to $4.7 million in the nine months ended September 30, 1999. The increases in
general and administrative expenses were primarily due to infrastructure
investments in systems and personnel required to support our expanded
operations and larger number of customer related transactions. Our full-time
general and administrative personnel grew from 8 employees as of September 30,
1998 to 37 employees as of September 30, 1999. We expect general and
administrative expenses to increase in absolute dollar amounts in 2000 as we
continue to add personnel to support expanding operations related to the growth
of our business and assume the reporting requirements of a public company.

Stock and stock option compensation expenses. We recorded stock option
related compensation expenses of $9,034 and $2.5 million in the nine months
ended September 30, 1998 and 1999, respectively. These amounts result from (1)
the exercise prices of options granted to employees being less than the fair
value of our common stock underlying those options on the respective grant
dates, and (2) the fair value of stock options granted to non-employees. The
increase was primarily the result of our issuance of options to non-employees
resulting in $1.9 million of expense during the nine months ended September 30,
1999 whereas there were no significant issuance of options to non-employees
during the nine months ended September 30, 1998.

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<PAGE>

Net interest income. Net interest income increased 176.2% from $105,000 in
the nine months ended September 30, 1998 to $290,000 in the comparable period
in 1999. This change reflects increased interest income due to the greater cash
balances held by us during 1999.

Year Ended December 31, 1997 Compared to 1998

Application services revenues. Application services revenues increased
228.1% from $171,000 in 1997 to $561,000 in 1998. The increase reflects the
results of increased sales and marketing activities, as well as continued
development of our application service offerings. For the 1997 fiscal year,
application service revenues comprised 9% of our total revenues, while
application service revenues comprised 36% of total revenues during 1998.

Professional services revenues. Professional services revenues decreased
44.7% from $1.8 million in 1997 to $995,000 in 1998. This decrease reflected
the ongoing shift in business focus from being a provider of services primarily
to government sector clients in our first year of operation to focusing on
providing Internet commerce solutions to clients in the commercial sector.
Professional services revenues decreased during this period of transition
because revenues from new Internet commerce clients had not yet offset the
decrease in revenues from government-related clients as we shifted our sales
and marketing efforts away from the non-profit sector.

Cost of revenues. Cost of revenues decreased 21.4% from $1.4 million during
1997 to $1.1 million in 1998. As we continued to shift our focus from serving
clients in the non-profit sector towards clients in the commercial-sector, we
shifted service-related personnel to the research and development group in
order to develop our version 1.0 of our OneCommerce product.

Research and development expenses. Research and development expenses
increased 293.7% from $254,000 in 1997 to $1.0 million in 1998. The increase in
research and development expenses was due to the hiring of additional personnel
and to other expenses associated with the development of new products and
services, particularly our development efforts associated with version 2.0 of
our OneCommerce software application which began during the second half of
1998.

Sales and marketing expenses. We had no sales and marketing expenses in 1997
and $1.2 million of sales and marketing expenses in 1998. The increase in sales
and marketing expenses resulted from our initial efforts to develop a sales and
marketing organization, as we began the transition from a consulting oriented
professional services business to a company focused on developing, marketing
and selling Internet commerce infrastructure solutions.

General and administrative expenses. General and administrative expenses
increased 109.4% from $955,000 in 1997 to $2.0 million in 1998. The increase in
general and administrative expenses was primarily due to increased staffing
required to support our expanded operations and customer related transactions
and increased professional services costs.

Stock and stock option compensation expenses. We recorded stock option
related compensation of $9,622 in 1997 and $12,047 in 1998. These amounts
resulted from the exercise price of options granted to employees being less
than the fair value of the common stock underlying those options.

Interest income. Interest income increased from a net expense of $1,000 in
1997 to net other income of $156,000 in 1998 due to greater cash balances held
by us during 1998.

23
<PAGE>

Year Ended December 31, 1996 Compared to 1997

Application services revenues. Application services revenues decreased 28.8%
from $240,000 in 1996 to $171,000 in 1997. This decrease primarily reflects
fewer sales of our software applications to government and non-profit related
entities. For the 1996 fiscal year, application service revenues comprised 12%
of our total revenues, while application services revenues comprised 9% of
total revenues during 1997.

Professional services revenues. Professional services revenues were
virtually unchanged between 1996 and 1997, totaling approximately $1.8 million
in each year. This is reflective of the company's early focus on developing its
distribution capabilities into the commercial sector while reducing new sales
to government related customers.

Cost of revenues. Cost of revenues decreased 6.7% from $1.5 million in 1996
to $1.4 million in 1997. This decrease in cost of revenues reflects a
corresponding decrease in revenues for the respective periods.

Research and development expenses. We had no research and development
expenses during 1996 and $254,000 of research and development expenses in 1997.
The increase in research and development expenses was due to the hiring of
personnel and to other expenses associated with the development of new products
and services, particularly our development efforts associated with version 1.0
of our OneCommerce software application.

Sales and marketing expenses. We incurred no sales and marketing expenses in
either 1996 or 1997. During 1996, our first year of operations, we were focused
entirely on rendering application services and professional services to a
limited number of clients. In 1997, we focused on development of our
OneCommerce software application, which led to the commencement of sales and
marketing activities the following year.

General and administrative expenses. General and administrative expenses
increased 67.8% from $569,000 in 1996 to $955,000 in 1997. The increase in
general and administrative expenses was primarily due to increased staffing
required to support our expanded operations and increased professional services
costs.

Stock and stock option compensation expenses. We recorded no stock option
compensation in 1996 and approximately $10,000 of stock option compensation in
1997 due to the issuance of options to employees with exercise prices less than
the fair value of the common stock underlying the options.

Quarterly Results of Operations

The following table sets forth consolidated statement of operations data for
each of the seven quarters beginning with the quarter ended March 31, 1998
through the quarter ended September 30, 1999. This quarterly information is
unaudited but has been prepared on the same basis as the annual consolidated
financial statements. In the opinion of our management, it reflects all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair representation of the information for the periods presented. This
statement of operations data should be read in conjunction with our
consolidated financial statements and related notes included elsewhere in this
prospectus. Operating results for any quarter are not necessarily indicative of
results for any future period.

24
<PAGE>

<TABLE>
<CAPTION>
Three Months Ended
-------------------------------------------------------------------------------
March 31, June 30, September 30, December 31, March 31, June 30, September 30,
1998 1998 1998 1998 1999 1999 1999
--------- -------- ------------- ------------ --------- -------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Application services... $ 158 $ 222 $ 82 $ 99 $ 116 $ 353 $ 602
Professional services.. 220 172 436 167 917 1,025 1,634
----- ----- ------ ------- ------- ------- -------
Total revenues......... 378 394 518 266 1,033 1,378 2,236
Cost of revenues........ 124 178 324 435 512 819 1,783
----- ----- ------ ------- ------- ------- -------
Gross profit............ 254 216 194 (169) 521 559 453
Operating expenses:
Research and
development........... 163 191 310 380 412 898 1,504
Sales and marketing.... 76 69 289 756 1,256 1,937 4,356
General and
administrative........ 291 567 507 647 1,000 1,316 2,428
Stock and stock option
compensation.......... 3 3 3 3 1,195 460 891
----- ----- ------ ------- ------- ------- -------
Total operating
expenses.............. 533 830 1,109 1,786 3,863 4,611 9,179
Loss from operations... (279) (614) (915) (1,955) (3,342) (4,052) (8,726)
Interest income........ 25 19 69 56 50 57 183
Interest expense....... -- (7) (2) (5) -- -- --
Minority interest...... -- 8 1 9 1 1 1
----- ----- ------ ------- ------- ------- -------
Net loss................ $(254) $(594) $ (847) $(1,895) $(3,291) $(3,994) $(8,542)
===== ===== ====== ======= ======= ======= =======
</TABLE>

The increase in application services revenues from the three months ended
September 30, 1998 through the three months ended September 30, 1999 was
primarily due to the growing market acceptance of our OneCommerce application
software. The declining gross margin during the period from the three months
ended March 31, 1999 through the three months ended September 30, 1999 was
primarily due to the expansion of our services organization and the support and
training provided to channel partners that deploy our software. The increase in
sales and marketing expenses from the three months ended June 30, 1998 through
the three months ended September 30, 1999 was primarily due to increases in the
hiring of sales personnel and increasing sales resulting in increased
commissions and promotional activities. Specifically, during the period ended
September 30, 1999, sales and marketing expenses also increased over the June
30, 1999 quarter primarily due to the launch of a significant marketing
campaign.

Liquidity and Capital Resources

Historically, we have funded our operations primarily through the private
sale of equity securities. From inception through December 1, 1999, we raised
$43.3 million from the private sale of common and preferred stock.

We used $12.4 million of cash in operating activities during the nine months
ended September 30, 1999. This represents a cash operating loss and changes in
working capital items consisting primarily of cash provided by accounts
payable, accrued expenses, and other current liabilities offset by increases in
accounts receivable, and other current assets.

25
<PAGE>

Our investing activities used cash of $2.6 million in the first three
quarters of 1999. Net cash used in investing activities in this period was
primarily the result of capital expenditures for computer and communications
equipment, purchased software, office equipment, furniture, fixtures and
leasehold improvements.

Our cash and cash equivalents totaled $23.0 million at September 30, 1999.
In October 1999, we conducted a final closing of our private placement of
Series C convertible preferred stock, raising an additional $2.8 million. Based
on our current business plan, we believe that existing cash and cash
equivalents, the proceeds from the October private placement and the proceeds
from this initial public offering will be sufficient to meet our working
capital and capital expenditure requirements at least through the 12 months
following the completion of this offering. However, we may need to raise
additional funds during this period, and we cannot be certain that we will be
able to obtain additional financing on acceptable terms, if at all. If we
cannot raise required funds on acceptable terms, we may not be able to develop
or enhance our products, take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements.

Quantitative and Qualitative Disclosure about Market Risk

We do not have operations subject to risks of foreign currency fluctuations
or changes in interest rates, nor do we use derivative financial instruments in
our operations or investment portfolio. Our long-term debt consists primarily
of capital leases which have fixed interest rates ranging from 6.4% to 25.0%.
We invest our cash and cash equivalents in investment grade, highly liquid
investments, consisting of money market instruments and bank certificates of
deposit. We anticipate investing our net proceeds from this offering in similar
investment grade and highly liquid investments pending their use as described
in this prospectus.

Impact of Year 2000

Many currently installed computer and communications systems and software
products are unable to distinguish between 20th century dates and 21st century
dates. This situation could result in system failures or miscalculations
causing disruptions in the operations of any business. As a result, many
companies' software and computer and communications systems may need to be
upgraded or replaced to comply with such year 2000 requirements.

Our Year 2000 Testing and Licensing. We have tested all of our products for
Year 2000 compliance. The testing method employed was derived from our review
and analysis of the Year 2000 testing practices of other software vendors,
relevant industry Year 2000 compliance standards and the specific functionality
and operating environment of our Internet software solution. The tests were run
on all supported platforms as each version was released, and include testing
for date calculation and internal storage of date information with test numbers
starting in 1999 and going over into the Year 2000. Based on these tests, we
believe our Internet commerce software application to be Year 2000 compliant
with respect to date calculations and internal storage of date information.

In certain cases, we have warranted that the use or occurrence of dates on
or after January 1, 2000 will not adversely affect the performance of our
products with respect to four digit date-dependent data or the ability to
create, store, process and output information related to such data. If any of
our licensees experience Year 2000 problems as a result of their use of our
OneCommerce products, those licensees could assert claims for damages. Our
standard licensing agreement provides that if our products do not perform to
their specifications, we

26
<PAGE>

will correct such problems or issue replacement software. If these corrective
measures fail, we must refund the license fee associated with the non-
performing products. Our standard software license agreement limits our
liability to the amount of the license fee paid. To date, we have not received
any Year 2000 related claims on our products.

Our Internal Systems. Although we do not have a formal contingency plan to
address year 2000 issues, we worked internally and with third party vendors to
assure that we are prepared for the year 2000. We inventoried our internal
software and hardware systems, as well as products and services provided by
vendors. These systems include those related to product delivery, customer
service, internal and external communications, accounting and payroll.
Nevertheless, we cannot adequately test the Year 2000 readiness of such third
parties. The failure of any of these third parties to be Year 2000 ready could
result in a deterioration in the performance of our network or other systems,
or a complete system failure, which would have a material adverse effect on our
business, financial condition, results of operations and the price of our
common stock. Additionally, data service providers who rely on the Internet
could face serious disruptions arising from the Year 2000 issue. We are also
subject to external forces that might generally affect industry and commerce,
such as utility Year 2000 compliance failures and related service
interruptions. All of these factors could have a material adverse effect on our
business, financial condition, results of operations and the price of our
common stock.

Clients. The ability of our clients to receive our services depends on the
readiness of their computer equipment and the equipment and services of
communications and other third party vendors. We do not currently have any
information concerning the Year 2000 readiness status of our clients. Any Year
2000 compliance problem experienced by our clients could decrease demand for
our products that could seriously harm our business and operating results. If
our current or future clients fail to achieve Year 2000 readiness, it could
have a material adverse effect on our business, financial condition, results of
operations and the price of our common stock.

Costs/Contingency Plans. We do not anticipate our expenses for our Year 2000
compliance to be material. However, the cost of developing and implementing a
comprehensive contingency plan, if necessary, could be material. We have not
developed a contingency plan to address situations that may result if either we
or third parties upon whom we rely, are unable to achieve Year 2000 readiness.

Recent Accounting Pronouncements

In March 1998, the Accounting Standards Executive Committee issued Statement
of Position, or SOP, 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use". SOP 98-1 requires companies to
capitalize certain qualifying computer software costs which are incurred during
the application development stage and amortize them over the software's
estimated useful life. We were required to adopt SOP 98-1 effective January 1,
1999. Management believes that the adoption of SOP 98-1 will not have a
material impact on our consolidated financial position or results of
operations.

27
<PAGE>

BUSINESS

Our Company

We develop and provide Internet commerce application software and services
that enable our clients to rapidly build, grow, and extend their online
businesses. The core of our solution is OneCommerce, our application software
built on the XML standard, a technology unavailable when early e-commerce
software products were developed. We designed OneCommerce for scalable
operation on the Microsoft operating platform. OneCommerce enables enterprises
to intelligently and dynamically interact with their customers and trading
partners over the Internet to exchange information, provide services, and
complete business-to-business and business-to-consumer transactions.
OneCommerce supports the core business processes required to conduct Internet
commerce, including Internet marketing and sales, order processing, and
customer relationship and content management. Our innovative use of XML also
allows OneCommerce sites to be easily integrated to a wide variety of Internet-
connected business applications, online services, and content sources.

We primarily deliver OneCommerce as an outsourced application service, which
shortens our clients' time-to-market and minimizes their need to make
substantial investments in the hardware, software, and technical personnel
required to support their own Internet commerce Web sites. Clients purchase
additional application software licenses and services from us as their site
traffic and transaction volumes grow. This business model allows us to benefit
from our clients' success. Our clients include mid-sized and large traditional
businesses that are deploying e-commerce Web sites to augment their existing
sales channels as well as new enterprises that are building Internet-only sales
channels. We currently serve over 40 clients from the retail and distribution,
media and entertainment, manufacturing, and business services industries.

Industry Overview

The Internet is dramatically changing the way that business is conducted.
Companies, their customers, suppliers, partners, and distributors now have the
means to more fully automate and extend the reach of their businesses. As a
result, Internet commerce is growing exponentially. Forrester Research
estimates that revenue from Internet commerce will increase from $43 billion in
1998 to $1.3 trillion in 2003. This anticipated growth will have a profound
effect on virtually every industry throughout the industrialized world. Not
only have industry giants embraced Internet commerce by allocating large
budgets to developing Internet commerce sales channels, but also thousands of
pure Internet-based businesses have emerged in just a few years. Internet
commerce is progressively eliminating traditional barriers to entry, eroding
geographic boundaries and increasing customer choice and power. Entirely new
business models now pose competitive threats to traditional market leaders.
These competitive pressures force businesses to continuously advance their
Internet commerce capabilities. As a result, businesses require infrastructure
solutions to grow and develop their Internet commerce businesses.

Challenges in Implementing Internet Commerce

Companies seeking to build or enhance their Internet commerce capabilities
face numerous challenges. These include:

. Need for speed and agility. In the crowded and rapidly changing
environment of Internet commerce, companies that can quickly deploy
their Internet commerce sites and adapt those sites to changes in
business and technology have a distinct competitive advantage.

28
<PAGE>

. Integrating multiple sales and supply channels. To be effective,
traditional businesses migrating to Internet commerce must plan,
implement and adapt their Internet sites while maintaining their
traditional business base. For example, manufacturers may decide to sell
directly to consumers via the Internet. At the same time, they must
retain their relationships with and provide incentives to their
traditional retailers, who may also develop their own competing Internet
commerce strategies. These business-to-consumer and business-to-business
interaction models must often be implemented within the same Internet
commerce site. In addition, the site must be integrated with multiple
systems, suppliers, and partners.

. Lack of expertise and facilities. Most companies lack the necessary
skilled technical personnel to effectively develop and operate their
Internet commerce businesses. Additionally, most companies entering the
Internet commerce arena do not have the facilities to operate their
Internet commerce site at their own locations.

. Selecting and integrating multiple technologies. Companies must select
from a wide variety of software applications to build and maintain a
competitive Internet commerce site. These applications are often stand-
alone programs produced by different vendors. As a result, they do not
integrate and communicate easily with each other, lack a common method
for integrating with existing information systems, and are costly to
maintain.

. Risk of obsolescence. Companies need a scalable Internet commerce
infrastructure to accommodate greater traffic and adapt to evolving
market and technology requirements. Without these capabilities, often
referred to as scalability and extensibility, companies face costly and
time-consuming rebuilding of their Internet commerce sites, which can
result in a loss of market opportunities. According to a Boston
Consulting Group study, the average retail Internet commerce site
undergoes a major reconstruction approximately every 20 weeks, and
annual site development and maintenance costs average 15% of annual
revenue.

. Justifying Internet commerce investment based on financial
return. Deploying and maintaining an Internet commerce site is
expensive. GartnerGroup reports that the average cost to develop and
launch an Internet commerce site was $1.0 million in 1999. Businesses
often incur higher costs of ownership over time due to application
upgrades and new technology developments. In order to quantify the
investment in Internet commerce and maximize the return on that
investment, companies need tools to model and measure the financial
performance of their Web site and to assess the likely outcomes of
contemplated new sites, changes, and upgrades.

The Industry's Response

We believe that two key industry trends are acting to alleviate some of the
challenges faced by companies implementing Internet commerce strategies:

Broad acceptance of standards-based technologies

A relatively recent standard for Internet commerce has emerged in eXtensible
Markup Language, or XML, that defines a universal method for structuring and
communicating data via the Internet and between software applications. We
believe that XML will be a key enabler for conducting Internet commerce and
will ease the burden of systems integration between companies. XML was formally
recommended by the World Wide Web Consortium as a standard in February 1998.
Since then, a number of industry leaders, including IBM, Microsoft, Oracle, and
Sun Microsystems have announced support for XML.

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<PAGE>

Unlike HyperText Markup Language, which is the standard currently used in
most Internet applications, XML permits data to be coded for content rather
than solely for presentation. Descriptive tags are attached to each piece of
data so applications can understand the meaning of the data and process it
accordingly. This coding difference allows applications to examine and
manipulate data contained in a document. This feature eliminates the need for
re-keying data and the need for customized programs that translate and format
information sent and received across the Internet.

At the same time, data from independent sources indicates an increasing
number of businesses run their business applications on the Microsoft operating
platform.

Outsourcing the operation of Internet commerce sites

As enterprises conduct more of their business over the Internet, the
investment in systems and technical support necessary to provide the
functionality and reliability required in today's market environment increases.
More businesses are turning toward a new breed of service provider for Internet
application outsourcing services. For a monthly fee, these providers, commonly
referred to as application service providers, or ASPs, provide clients the
functionality they require, together with agreed-upon levels of reliability and
scalability through an established, sophisticated technical infrastructure and
staff. ASPs run software applications for their clients on closely monitored,
centralized facilities equipped with software to manage site capacity and
backup communications lines and power. By using an outsourced service such as
an ASP, a company can improve its time-to-market without making the substantial
initial and ongoing investment in technology and support staff necessary to
support a technology-enabled business process. International Data Corporation
estimates that the worldwide market for application outsourcing will grow from
$23 million in 1998 to over $2 billion in 2003, a 144% compound annual growth
rate.

The market opportunity for managed Internet commerce application software

In recent years, software vendors have introduced a range of applications
for Internet commerce sites for one or more functions. These functions include
tasks such as personalizing the content of a site to the profile of the
visitor, processing orders, providing online customer service, monitoring the
traffic through a site and providing reports about the performance of the site.
These applications have met some of the challenges of Internet commerce
businesses because they offer functionality that is specifically relevant to
Internet commerce. International Data Corporation projects that the Internet
commerce application market will grow from $444 million in 1998 to $13 billion
in 2003, a 96% compound annual growth rate.

Despite the growth of the Internet commerce applications market, we believe
the majority of applications do not address all the critical needs of Internet
commerce businesses. Few of these applications are designed to take full
advantage of the emerging XML standard or the efficiencies of Microsoft
Internet technologies. In addition, most existing applications were not
designed to be offered to customers on an outsourced basis by ASPs. We believe
that businesses requiring Internet commerce solutions have recognized these
trends in the market. We expect that they will seek to purchase applications
that offer an integrated solution for their Internet commerce software
requirements, both now and as their Internet commerce businesses evolve.
Further, we believe that many Internet commerce businesses will choose to
purchase their Internet commerce solution on an outsourced basis to reduce the
initial expenditure and to take advantage of the expertise and facilities of an
ASP. Lastly, we believe that many purchasers of the early generation products
on the market today will seek to replace these products to improve the
financial performance of their Internet commerce sites.

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<PAGE>

Our Solution

OneSoft provides Internet commerce application software and managed
services, collectively called application services, to businesses seeking to
conduct business-to-business and business-to-consumer transactions via the
Internet. Our solution provides businesses the infrastructure to rapidly build,
grow, and extend their Internet commerce businesses, which assists them to
generate revenue, reduce costs, and optimize the value of their Internet
commerce sites. We believe that our solution provides the following advantages
to our clients:

. Comprehensive integrated Internet commerce application suite. The core
of our solution is our software application, OneCommerce. It provides
integrated functionality in the critical business processes of Internet
commerce: personalized marketing and selling, order processing, customer
care, decision support, and integration with partners and suppliers.
This comprehensive solution eliminates the time and expense of
integrating and maintaining multiple technologies from different
vendors. The integration of these functions within one software solution
also facilitates the capture of extremely detailed information about Web
site visitor behavior. With that knowledge, businesses can improve
customer acquisition and retention rates, resulting in increased sales.
Businesses can also use this information to model and assess likely
outcomes and financial results of potential site changes and upgrades.

. Internet application architecture designed for delivery on an outsourced
basis. We designed our software architecture to support outsourced
delivery by our channel partners, such as ASPs and other Internet
hosting companies, and by our Internet Solution Center. Our architecture
enables our channel partners to implement a scalable and extensible
managed service offering for their clients. This outsourcing model
reduces the expense and risk for clients to launch and manage a fully
operative Internet commerce site. This approach also allows clients to
leverage the expertise and facilities of our channel partners and
OneSoft rather than investing in additional personnel and technical
resources.

. XML-based architecture. OneCommerce is the first Internet commerce
software application based entirely on XML for both internal sharing of
data between system components, and external system-to-system
communications. This use of XML provides the capability to easily
integrate new functions and technologies, as well as to extend existing
ones, without expensive site reconstruction or system modifications. We
achieve this extensibility as a result of our component-based
application software design and use of XML. Each of the components can
be independently modified while still properly interacting with all
other components in the system.

. Software optimized to leverage widely-used Microsoft Internet
technologies. OneCommerce is specifically designed to work with
Microsoft operating systems and related Microsoft Internet software.
This aspect of our design allows our clients to build on their existing
technology investments. Our clients also benefit from Microsoft's multi-
billion dollar investments in software research and development, while
capturing the price-to-performance advantage of Microsoft's Internet
software platform.

. Managed services for Internet commerce. As additional support for
Internet commerce businesses, we provide a broad array of services
necessary to manage a Web site, through our channel partners and through
our Internet Solution Center. We offer software applications management
and provide technical support. In addition, we can provide hosting
services and Internet connectivity. We also enable Internet commerce
transaction services such as payment processing and order fulfillment.

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<PAGE>

Our Strategy

We are a pioneer in bringing new Internet commerce solutions to market and
in developing new services to deliver those solutions. Our objective is to
provide the software infrastructure that supports a leading share of commerce
conducted over the Internet. We believe we can become a leading provider of
Internet commerce software and services through the following strategies:

Leverage new modes of application delivery via the Internet. We have
designed OneCommerce to be delivered either as a licensed software application
to clients for on-site use or as an application service offered by us or a wide
range of our partners. We believe that an application service will address the
key challenges faced by Internet commerce businesses: time-to-market and
startup costs. Accordingly, we believe that most Internet commerce software
applications will be offered as a service in the future. On December 9, 1999,
we announced a major strategic alliance with the world's leading Internet
professional services company, USWeb/CKS, to provide our Internet commerce
applications as an outsourced service. We believe we can leverage the
outsourcing capabilities of our software architecture, and alliances such as
our relationship with USWeb/CKS, to generate additional sales of our
application services.

Expand sales presence and market coverage through direct sales and strategic
alliances. We intend to expand our direct sales presence and support services
across the United States and in major international markets. In addition, we
plan to strengthen our distribution efforts by forming additional alliances
with leading providers of complementary software and services. These include
ASPs, systems integrators, Web design firms, and Internet strategy consulting
firms. We expect to cultivate these relationships and others like them to:

. leverage our sales and marketing efforts for increased lead generation
and revenues from a larger base of clients;

. increase the number of trained professionals who can perform
implementation and application management services for clients, thereby
increasing the potential distribution volume of our software;

. gain business expertise in targeted industries to assist clients with
site implementations and to provide input for solutions development; and

. obtain technical expertise for developing new software functionality and
capabilities.

Broaden our range of application functionality and services. We currently
offer functionality for the critical processes of Internet commerce. We intend
to add new functionality such as support for Web sites that act as marketplaces
for interest-specific products and content, and offer additional value-added
services such as automated outbound targeted marketing campaigns. We expect to
implement our expansion through internal development, partnerships and
strategic acquisitions.

Focus on delivering economic success to our clients. We believe that we have
identified several key indicators, or metrics, of financial performance for
Internet commerce sites. We incorporate in our Internet application software
the ability to track, analyze, and customize these performance metrics. We plan
to continue to focus on performance metrics as Internet commerce evolves. Based
on these metrics, we will continue to develop tools and techniques to evaluate
Internet commerce business opportunities and performance. We plan to extend our
existing analytical software capabilities to provide interactive decision-
making models that forecast potential return based on different Web site
configurations and features. In addition,

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<PAGE>

we expect to continue to prioritize our software development efforts based on
areas we identify as providing the most significant contributions to the
financial success of Internet commerce businesses in order to promote our
clients' and our own competitive advantage.

Products and Services

We offer our clients a broad array of application software and services that
enable them to rapidly build, grow and extend their Internet commerce
businesses. We provide these application services directly through our Internet
Solution Center, as well as through a growing number of partners supported by
our Internet Solution Center. We also focus on combining application software
and services into packaged solutions for delivery by our distribution partners.
We typically charge for application services based on the amount of computing
capacity, that is, number of processors, required to support a specific volume
of concurrent site visitors and transactions.

Our application software and services are described below.

OneCommerce

OneCommerce is our application software that gives companies the power to
deploy, manage and grow all aspects of their Internet commerce business. In
December 1999, the world's leading Internet professional services company,
USWeb/CKS, selected OneCommerce to provide an end-to-end hosted Internet
commerce service to its customers. Microsoft Corporation, one of the foremost
innovators in the development of Internet technologies, recommends OneCommerce
as an outstanding choice for companies deploying large-scale Internet commerce
businesses. In addition, service firms that implement Internet commerce
solutions voted OneCommerce "Best New Product" at the 1999 Breakaway Xchange
Conference, sponsored by CMP Media, Inc., a leading high technology publishing
firm.

We have designed OneCommerce to provide our clients the advantages of
flexibility, extensibility and scalability as their Internet commerce
businesses grow and evolve. OneCommerce achieves these attributes by separating
critical application functions into independent components that can be easily
arranged and modified, while remaining fully integrated, through our innovative
use of XML. This enables OneCommerce to be quickly adapted to many business-to-
business, as well as business-to-consumer, models. The OneCommerce software
framework and product features are described below:

[GRAPHIC #1]

The graphic below illustrates the OneCommerce software framework. The graphic
diagrams how the four major areas of OneCommerce interact with each other. The
four major areas- Intelligent Customer Interactions, Internet Business
Optimization and Control, Business Systems Integration, and OS.XML-are depicted
as layered bars demonstrated the interaction between the areas. Detailed
functional capabilities are displayed for the Intelligent Customer Interaction
and the Business Optimization and Control areas. These elements are shown as a
series of rectangular boxes stacked in two parallel columns around a tall
rectangle called e-business Intelligence. On either side of the large box are
icons that represent online customers and partners, and business management.

The core technology of OneCommerce is comprised of four major areas: (1)
Intelligent Customer Interactions; (2) Internet Business Optimization and
Control; (3) Business Systems Integration; and (4) OneSoft Internet commerce
vocabulary called OS.XML. These areas are described in detail in the following
sections.

Intelligent Customer Interactions. OneCommerce intelligently manages
interactive sessions conducted with Web site visitors and with information
systems on the Internet. Our application software tailors the navigational
choices available to site visitors based on their preferences and recent site
activity, as well as the financial objectives of the Internet commerce site.
The ability to conduct personalized interactions with site visitors, which we

33
<PAGE>

refer to as an interaction model, creates a customized site experience for the
site visitor. Using a variety of techniques, these models dynamically route
visitors towards revenue-generating activities on the site. Each interaction
model can dynamically combine any of the functionality provided by the
OneCommerce application. OneCommerce-powered sites can simultaneously support
multiple types of site visitors from the same Web site. For example, a single
Web site using OneCommerce can simultaneously support large numbers of unique
interactions with different types of retail consumers, wholesalers, and other
business partners. Current functional capabilities include:

<TABLE>
<CAPTION>
OneCommerce Functionality Summary of Business Capabilities
<S> <C>
. Present any type of customer with any type of
merchandising content. This includes product descriptions,
articles, banner advertisements, links to related sites
and community features such as chat rooms.
Content Management . Organize, store, and manage any type of Web content that
can be defined using XML and stored in a database.
. Structure and arrange the Web site with unlimited
variations based on affinity profiles.
. Develop and test content changes prior to moving those
changes to the active Web site.

- --------------------------------------------------------------------------------
. Gather and store customer information provided by the
customer.
. Create and continually update profiles based on site
activity using proprietary algorithms, called affinity
profiles.
Targeted Marketing . Present up-sell and cross-sell promotions to customers
and Site Personalization once they have selected products to review.
. Target and personalize the presentation of products and
content to site visitors based on their individual
affinity profiles.

- --------------------------------------------------------------------------------
. Allow site visitor to exchange information and communicate
directly by participating in online bulletin boards, chat
sessions and group discussions, conferences, and events.
Community . Collaborate with site users in the creation and
publication
of site content.

- --------------------------------------------------------------------------------
. Create an order of multiple products and services from the
same Web site for visitors.
. Determine availability of products for sale by accessing
inventory records in real time.
Sales and Order Processing . Input and process customer payment information in real-
time to complete a sales order.
. Create, save, process, and track multiple orders for each
customer.
. Simultaneously support business-to-business and business-
to-consumer sales interactions within the same Web site.

- --------------------------------------------------------------------------------
. Enables client personnel to engage in online interactions
with site visitors.
. Manage personal account profiles, submit online inquiries,
and register comments and complaints at any point during
the buying process.
Customer Account and . Deliver self-service order tracking and customer account
Relationship and profile maintenance.
Management
. Maintain detailed records of a customer's interactions
over
multiple visits to the site.

- --------------------------------------------------------------------------------
. Define and create custom application functionality for an
Internet commerce site.
Application Customizations . Carry forward modifications when clients upgrade to new
releases.
</TABLE>

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<PAGE>

Internet Business Optimization and Control. OneCommerce provides the ability
to monitor and report business performance metrics such as total number of
visitors and visitor-to-order conversion rates. This capability enables non-
technical business managers to make frequent and rapid site adjustments to
improve business performance. These changes are made through easy-to-use, Web-
based workstations, called Role-Centric Workstations. Most application software
alternatives limit business managers to making minor modifications such as
creating a new sales promotion. OneCommerce allows managers to make substantive
changes in their Internet business model without redesigning or reprogramming
the Web site application code, thereby saving significant time and cost.
Descriptions of the standard Role-Centric Workstations provided with
OneCommerce are listed below:

<TABLE>
<CAPTION>
Role-Centric Workstation Summary of Site Management Capabilities
<C> <S>
. Provide a personalized location where sit managers tailor
their use of Role-Centric Workstations.
. Maintain the account structure and profile of management
users.
OneWorkstation . Modify capabilities from one or more of the Workstations
to suit a particular business role.
. Tailor Workstations to support customized application
functionality.

- --------------------------------------------------------------------------------------
. Define, create, edit, and delete site content.
. Provide "drag and drop" capability to create bundles of
products or content, and define product features.
ContentStation . Manage product inventory, administer shipping and handling
charges, and implement taxation rules on products and
services.

- --------------------------------------------------------------------------------------
. Provide real-time access to site performance and financial
metrics.
CommandStation . Present site performance and financial information to
business managers through comprehensive and flexible
reports.

- --------------------------------------------------------------------------------------
. View customer and market segment profiles.
MarketStation . Create up-sell, cross-sell, and targeted merchandising
programs.
. Create and target promotions and discounts based on both
product categories and customer profiles.

- --------------------------------------------------------------------------------------
. Process customer inquiries and quickly resolve order
issues.
SalesStation . Provide real-time searching and updating of specific
customer orders, including payment authorization, shipping
information, order and item level details, and returns
processing.
. Tracking, updating, and processing of customer online
inquiries.

- --------------------------------------------------------------------------------------
. Create and maintain structure for customer account
profiles and access privileges.
AccountStation . Provide real-time updating and modification of accounts in
response to customer inquiries.

- --------------------------------------------------------------------------------------
. Create and maintain Workstation user profiles.
AdminStation . Control permissions and authority to make changes to
various parts of the site.
. Tailor Workstations to support combinations of roles and
responsibilities in individual Internet commerce
businesses.
</TABLE>

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<PAGE>

Business Systems Integration. OneCommerce incorporates a flexible framework
of XML-based application programming interfaces, or APIs. This framework
represents an XML vocabulary for Internet commerce, which we call OS.XML. Our
framework supports the integration of software applications, content and data
sources, and value-added services. Benefits include ease of information
formatting, presentation, and communication between systems. OneCommerce
provides prepackaged APIs to leading business application systems and services.
These can include:

. business applications like enterprise resource planning, or ERP;

. content sources, such as corporate databases, streaming audio and video,
or streaming news feeds;

. Internet-based services such as the OrderTrust network for order and
payment processing, and SkyAlland Marketing for outsourced customer
service; and

. other Internet commerce sites including retail sites, online malls,
corporate purchasing sites, and business-to-business trading exchanges.

OS.XML: The Vocabulary of Internet Commerce. OS.XML is a flexible data
representation of content types, rules, and transactions required for Internet
commerce. OneCommerce was designed to easily support integration to external
systems, services, and data sources through its unique use of XML. OneCommerce
software components, called Connector Components, are used to translate
formatted data into OS.XML files when received from or sent to sources outside
OneCommerce. OneCommerce can combine site graphics, navigation, and
functionality with any form of data using OS.XML. OS.XML information can be
manipulated by any of the components within OneCommerce without additional
formatting. As a result, OneCommerce can support and interact with any number
of XML vocabularies developed for specific business processes or industries.
Examples of these are Ariba's cXML, CommerceOne's Commerce Business Library,
known as CBL, Microsoft's BizTalk, the Universal Commerce Language and
Protocol, known as UCLP, as well as OneSoft's own OS.XML.

Our Internet Solution Center

Our Internet Solution Center, or ISC, supports distribution, deployment, and
operation of our software. The ISC combines managed application and transaction
services, "best practices," and software applications into packaged service
offerings that lower a business' cost of entry into Internet commerce and
accelerates their time-to-market. The ISC plays a critical role in the
expansion of our distribution programs by delivering deployment, sales
training, and technical support to partners, allowing them to quickly and
effectively market and implement our solutions. By supporting a completely
outsourced solution, the ISC offers our clients, both directly and through our
partners, a cost-effective approach to building and operating their Internet
commerce business. The services provided by the ISC are broken into three
categories: application software outsourcing services, transaction services,
and professional services.

Application Software Outsourcing Services. For monthly fees and service-term
commitments, mid-to-large sized businesses and our distribution partners can
obtain comprehensive outsourced Internet commerce services and infrastructure
through our 24 x 7 x 365 network operations center, as well as application
management services. Our application software outsourcing services include the
following:

. Network Operations Services provide partners and clients with outsourced
system services, including secure facilities, hardware, configuration
and maintenance, high speed Internet connectivity, and network
infrastructure.

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<PAGE>

. Application Management Services provide partners and clients with the
installation, ongoing monitoring, and proactive maintenance of the
OneCommerce software application, Microsoft Internet technologies, and
complementary software applications. We provide these application
management services to partners and clients from our network operations
center or through our ASP partners.

. Support Services provide partners and clients with technical support,
and routine software maintenance services. Our staff manages issue
resolution through a carefully prescribed support process that serves
both clients and partners. We also distribute electronic software
updates that keep partners and clients current with the latest version
of OneCommerce.

Transaction Services. Our transaction processing capabilities provide
reliable, secure, and efficient options for processing a variety of Internet
commerce transactions. Through our partners, we currently offer two categories
of transaction services:

. Payment Processing Services support our Internet commerce partners and
clients with the ability to accept and process most major payment card
transactions, electronic fund transfers, or other types of financial
transactions.

. Order Processing and Other Transaction Services enable our partners and
clients to accept and process order transactions, including monitoring
and reporting status, supplier relationships and fulfillment and
distribution.

Professional Services. The ISC provides Internet commerce strategy and
deployment services to our partners and clients. Partners and clients benefit
from professional services expertise at every stage of the systems lifecycle
and training in each discipline as well.

. Strategy Services provides partners and clients with the tools and
knowledge, called an Internet Commerce Opportunity Assessment, or iCOA,
to assess and plan their Internet commerce initiatives from a financial,
competitive market analysis, and business process perspective.

. Deployment Services provides partners and clients with experienced
solution development, creative design, and application integration to
deploy OneCommerce software using our Rapid Solutions Deployment
methodology, or RSD, that facilitates the successful and consistent
deployment of our comprehensive Internet commerce solutions.

. Solutions Management provides partners and clients with project
management, quality assessment, and best practices to ensure initial and
ongoing success of a business' Internet commerce initiative. Partners
and clients benefit from the best practices of this group and the
service it provides to augment their post-deployment, in-house
capability as an outsourced full-service technology partner.

. Educational Services provides training to our partners to effectively
sell, deploy and support our OneCommerce solution. We also educate our
Internet commerce clients to implement their own OneCommerce solutions.
Each of our training courses offers evaluation and certification
testing. We incorporate best practices into our curriculum from product
development, professional services, sales and marketing and managed
services groups to provide a quality experience that provides
concentrated product learning and actual sales and deployment scenarios.
As of December 31, 1999, 73 partner associates have completed initial
training.

37
<PAGE>

Sales and Marketing

Sales Strategy

We market and sell our application services through both direct and indirect
sales channels. As of December 31, 1999, our sales organization was comprised
of 32 individuals all of whom were based in North America, including 13
business development directors and six inside sales personnel, all of whom
carry quotas. Our main sales office is located at our headquarters in McLean,
Virginia. We also recently opened sales offices in Los Angeles and New York
City. Our sales cycle typically takes 90 days to complete. Our sales team
collaborates with prospective clients to determine their requirements for a
proposed Internet commerce solution, which can then be incorporated into one or
more detailed technical product reviews.

A key element of our strategy is to leverage our channel and alliance
partners for the distribution of our application services. We target mid-to-
large sized companies and new businesses planning to use the Internet as a
significant business channel. We primarily target companies in the retail and
distribution, media and entertainment, manufacturing, and business services
industries.

An additional element of our strategy is expansion of our international
activities. We currently market and sell our products primarily in North
America. We intend to broaden our presence in international markets by
developing an international sales force, leveraging current strategic partners
with global presence, and by entering into additional distribution agreements.
We expect to open sales offices in London and Miami within the next 12 months.

Marketing Strategy

As of December 31, 1999, we had 13 employees engaged in a variety of
marketing activities, including strategy development, corporate and product
marketing, market research, and market launch. We use a broad mix of programs
and target our efforts in areas including:

. brand-building and marketplace awareness;

. generating and developing client leads;

. educating the market on the advantages of OneSoft's application
services;

. utilizing our strategic partnerships and major clients to endorse our
solution for target markets; and

. building and enhancing relationships with press, media, and industry
analysts.

We produce a variety of materials, including brochures, white papers,
presentations, and demonstrations, as well as managing several corporate Web
sites. We leverage our strategic partners in our efforts through joint
marketing activities.

Channel and Alliance Partners

A key element of our strategy is to establish strategic alliances to assist
us in marketing, selling, and developing client Internet commerce systems.
These relationships help to increase market penetration of our application
service offerings. We develop and maintain significant working relationships
with vendors that we believe will contribute to our ongoing success. These
relationships fall into four categories: strategic alliances, ASPs, systems
integrators, and complementary solution vendors.

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<PAGE>

We work closely with these partners and intend to continue to develop
relationships of this nature. Our strategic alliances are managed by a team of
partner managers. As of December 31, 1999 there were individuals recruiting,
qualifying, and supporting the OneSoft alliance partners.

Strategic Alliances

In April 1999, we formed a partnership with Microsoft Corporation creating
the OneSoft Commerce Partner, or OCP, program for Microsoft Certified Solution
Providers, called MCSPs. We created this program to enable a limited number of
the over 15,000 MCSPs worldwide to distribute our application services. As part
of this partnership, we co-market with Microsoft the combined solution of
OneSoft and Microsoft products. We are currently training and certifying OCPs
on the sale and deployment of our OneCommerce Internet commerce software
application and enabling services.

In December 1999, we announced the formation of an alliance with USWeb/CKS,
the world's largest Internet professional services firm. Our alliance enables
USWeb/CKS to deliver a packaged Internet commerce infrastructure solution in a
hosted environment that will also include enterprise resource planning services
for Internet commerce businesses, customer relationship management and
knowledge management. This strategic alliance enables us to reach a wider group
of customer opportunities based on USWeb/CKS brand recognition and market share
in the industry.

We belong to the Compaq NonStop e-Business Alliance, and Compaq is a charter
member of our OCP program. Through these programs, our development team
continually works jointly with Compaq to increase the performance and
scalability of our Internet commerce architecture. These programs provide
access to partners and distribution channels to some of the largest companies
in the world that are using Compaq as their preferred hardware vendor.

Application Service Providers

We partner with ASPs and Internet hosting providers such as USWeb/CKS and
Exodus Communications to support the industry trend toward delivering software
as a service. Our Internet Solution Center provides our ASP partners with
training, deployment tools and support. These ASPs also provide businesses with
direct client support, end-user support, and maintenance services from a
central point of contact. This eliminates the need for businesses to develop or
acquire software and hardware or employ technical personnel to support this
system.

Systems Integrators

We partner with a broad range of systems integrators to deliver services to
our clients. They are required to maintain a level of proficiency in our
products. Through our OCP program, systems integrators receive deployment
training, sales and deployment tools, packaged solution templates, and other
support necessary to become proficient implementers of our application
software.

Set forth below is a list of systems integrators with which we have
relationships:

AppNet, Inc.
Compaq Computer Corporation
Compass Technology Management
Digital Boardwalk
International Software Solutions, Inc.

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<PAGE>

M1 Software
Sierra Systems
SoftNet Systems Corporation
Surebridge

Complementary Solution Vendors

We partner with vendors that have complementary Internet commerce product
and service offerings in order to support the delivery of comprehensive
solutions to our clients. We support these partnerships through a combination
of joint marketing, training, and development. These vendors have developed
software or services that address elements of Internet commerce infrastructure
needed by a particular industry or for a particular business process.

Set forth below is a partial list of organizations with which we have
relationships:

<TABLE>
<C> <S>
AB&C Group Direct response, physical fulfillment, and warehousing
service provider
eShare Customer interaction and management software application
provider
OrderTrust Network-based order and payment processing provider
Smith-Gardner Direct marketing and catalog marketing enterprise resource
planning customer management software application provider
SkyAlland Marketing Customer loyalty management outsourced service provider
</TABLE>

Clients

We have provided our application services to over 40 clients. These clients
include both traditional "bricks-and-mortar" companies and Internet-only
companies in the retail and distribution, media and entertainment,
manufacturing, and business services industries. The following table represents
all clients as of December 31, 1999 who have licensed OneCommerce or its
predecessor products, and who have contracted for services in an amount
totaling at least $50,000.

<TABLE>
<CAPTION>
Retail &
Distribution Media & Entertainment Manufacturing Business Services
- ------------------ --------------------- ------------- -----------------
<S> <C> <C> <C>
Alloy Online Eruptor Entertainment Maytag Ehomes
Allpets.com FilmLocker ETRAV
Ephones.com Phillips Publishing SmartCruiser
Espanol.com
Mark Group
SpaConcepts
Weightwatchers.com
</TABLE>

Case Studies

The following case studies illustrate the challenges faced by representative
clients in deploying their Internet commerce applications, and the benefits
derived from using OneCommerce. In each case, the client licensed our
application software, contracted for outsourced application services, and used
the services of our Internet Solution Center to launch their Web site and
integrate their site with their internal business systems.

Alloy Online, Inc. Alloy Online, www.alloy.com, provides online communities,
content and commerce to Generation Y, the 56 million Americans between the ages
of 10 and 24 who account for more than $250 billion of annual disposable
income. Alloy markets its products to this influential generation through the
Internet and mail-order catalogues.

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As Alloy's business became more complex, Alloy was forced to look for a
replacement for its original Internet commerce solution. Its legacy Internet
infrastructure software had neither the scalablility nor flexibility to meet
its changing business needs. Alloy also wanted to reduce the time its
executives spent addressing technical issues, allowing the company to execute
on its business model.

OneSoft replaced Alloy's system with a comprehensive software solution
provided on an outsourced basis. OneCommerce's extensible architecture provided
the direct marketing, customer support and business content management
capabilities required to support Alloy's growing community and commerce
demands. This comprehensive solution provided the Internet commerce
infrastructure that Alloy used as it became a leader in its industry by
creating a Generation Y portal with 1.6 million registered users.

ePhones. ePhones, www.ePhones.com, is an online provider of wireless
products and services. ePhones, formerly known as Totally Wireless, a "bricks-
and-mortar" seller of wireless phones and products that wanted to move its
business online.

ePhones sought an Internet commerce solution that would allow it to provide
customers with products from over 43 carriers and rate plans with over 100,000
different phone/rate combinations. The solution it desired needed to support
dynamic pricing, an enhanced, geographically calibrated search feature, a help
feature that would allow customers to search for the best prices available, a
personalization feature that would support up-sell and cross-sell
opportunities, and multiple customer interaction capabilities.

OneSoft provided comprehensive software supporting direct marketing, selling
and customer support. ePhones, then branded as Totally Wireless, went online
using our OneCommerce solution in May 1999. OneSoft's solution provided the
flexibility to manage content and the complexity of the product offerings. The
cross-selling ability of OneCommerce was particularly important because of the
multitude of features that accompany each product. In the first three months
online, sales increased by 36% and site traffic jumped 82%.

In addition, the extensibility inherent in OneCommerce enabled ePhones to
completely re-brand its business without tearing down and rebuilding the
existing Totally Wireless site.

SmartCruiser. SmartCruiser.com, www.smartcruiser.com, is the first online
cruise site with a booking engine that offers consumers the lowest price on a
wide variety of cruise vacations from fourteen leading cruise lines. Founded in
1999, SmartCruiser.com is located in Boynton Beach, FL.

SmartCruiser.com required a solution that provided its customers the
convenience and efficiency of researching a wide variety of cruise vacations by
date, destination, and cruise line, as well as the ease of purchasing their
cruise vacation online.

SmartCruiser.com contracted with us for our OneCommerce application software
and managed services. Our Internet Solution Center delivered the site in less
than 90 days, and manages site operations on an outsourced basis. Using
OneCommerce, SmartCruiser.com created a catalog of cruise offerings,
established an Internet-based target marketing and sales program, and
streamlined the reservations process. The site also integrates to multiple
systems from various airline, hotel and cruise companies and enables
SmartCruiser.com to use Role-Centric Workstations to update site content.

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SmartCruiser.com has quickly grown its online business by using OneCommerce.
The number of site hits increased 295% and the number of unique users increased
127% in the first five weeks. In addition, the number of return users increased
100% in the first six weeks.

Competition

Our competitors vary in size, in the scope and breadth of their products and
services and in their technical, financial and human resources. We have three
primary sources of competition:

. in-house development efforts by potential clients and systems
integration firms that build very customized solutions using development
platform application server products;

. Internet application software vendors such as Art Technology Group,
BroadVision, InterWorld, OpenMarket and Vignette; and

. vendors of platform application server products, such as IBM and the
Sun-Netscape Alliance.

In addition, we face potential competition from vendors of other Internet
commerce software applications as they expand the functionality of their
product offerings. These vendors may include Allaire Corporation and other
vendors of software designed to enable Internet commerce or management of
customer relationships.

Principal competitive factors include:

. quality, breadth and depth of application offerings;

. product robustness and extensibility;

. openness of technology architecture, including adherence to industry
standards;

. ease of deployment and maintenance;

. time-to-market;

. quality of services and customer support; and

. ability to effectively provide applications as a service.

Although we believe that our solutions compete favorably with respect to
these factors, our market is new and rapidly evolving. Many of our competitors
have substantially greater capital resources, research and development
programs, sales and marketing forces and customer bases to whom they can sell
their products and services. We may not be able to maintain our competitive
position against current and potential competitors.

Technology

We designed OneCommerce specifically for Internet commerce using a
component-based architecture that operates on Microsoft Internet technologies
and Compaq's Distributed Internet Server Array hardware configuration, known as
DISA.

OneCommerce components communicate using our XML vocabulary for Internet
commerce, which we call OS.XML. This unique application of XML simplifies
integration to external systems, preserves information during transaction
processing, and protects technological investment by allowing the system to be
cost effectively modified over time.

The OneCommerce architecture enables sites to cost-effectively scale to meet
increasing site user traffic and transaction activity. It also provides a
reliable foundation for delivering outsourced Internet commerce application
software.

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The Fundamental Elements of Internet Commerce -- a Component Based Architecture

The OneCommerce architecture has been designed to support any Internet
commerce interaction between an online customer or partner and an Internet
commerce business. This architecture is based on five essential elements:

The OneCommerce Component-Based Architecture

[GRAPHIC #2]

The graphic below illustrates the OneCommerce Component-Based Architecture.
The components called Presentation, Interaction, Transaction, Integration and
Information are displayed in a column of separate boxes. Arrows between the
boxes illustrate how they interact with each other and external systems and
databases. The external systems are displayed on the right side of the
graphic. The Integration Component is displayed as the Connector Component
boxes in the graphic.
In order to effectively conduct Internet commerce, an Internet commerce
solution must address all five of the above elements. In typical Internet
commerce solutions, however, these elements are not separated as discrete
components that can be individually modified or combined. This limits the
ability to support the varying and emerging business process requirements of
Internet commerce.

We believe we have overcome this problem by designing a software
architecture that both separates these five essential elements and provides
Internet commerce businesses with a framework within which the elements and
components can be modified and combined in any way. We describe below the five
elements, how they work, and their benefits.

1. Presentation. Presentation Models control how information and interactive
site options are displayed to Web site visitors. Presentation Models capture
the information to be processed and return results to the visitor based on his
or her affinity profile. Presentation Models are written in the eXtensible
Stylesheet Language, or XSL, and can reference existing HTML, and MIME files.
XSL translates OS.XML data for presentation and interprets site input data into
OS.XML for processing. Unlike most alternative Internet commerce solutions,
OneCommerce can format and deliver the same information for separate and proper
display on PC screens, wireless devices, cellular phones or printers.

2. Interaction. Interaction Models allow Internet commerce businesses to
define and control interactions with online users and remote systems based on a
combination of the visitor or system's affinity profile and the business
objectives of the client. Most existing Internet commerce solutions are limited
by preprogrammed online customer interactions, but OneCommerce allows
businesses to differentiate and evolve their sites based on online customer
experiences. Interaction Models are written in industry-standard scripting
languages, including Java Script or VisualBasic Script.

3. Transaction. Transaction Components provide application functionality in
our transactional format. The functionality supported includes searching,
controlling access, processing payments, profiling, and targeting product and
content offers. These components process data stored in either OneCommerce or
external data sources to complete actions requested by online visitors or
remote systems. Transaction Components do not perform data access themselves,
but rather process OS.XML data provided by Information or Connection
Components. This means that new functionality can be easily added as new
Transaction Components without requiring modifications to the data sources or
any of the other OneCommerce components as long as the new component can
receive and send formatted OS.XML. In contrast, most existing solutions make it
difficult to expand the site's functionality without costly modifications to
the site or its underlying databases.

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4. Integration. Connector Components make the data and functionality of
external systems available to OneCommerce and vice versa. These components
interact with all external services, systems, and data repositories through the
communication of data and instructions in OS.XML format. By receiving and
transforming data from external business systems to OS.XML, the Connector
Components make the data immediately accessible to all components within the
OneCommerce application, eliminating the time and cost of complex application
integration.

5. Information. Information Components store and manage all data and data
definitions utilized within the OneCommerce system. These components support a
standard set of functionality accessed via the Transaction Components and are
responsible for data and data definition management and storage. Information
Components essentially transform into OS.XML data extracted from and inserted
into standard Open DataBase Connectivity, or ODBC, compliant databases and data
sources. By using Information Components to perform this transformation,
storage, searching and retrieval of information can be optimized for
performance on individual databases while still leveraging OS.XML within
OneCommerce. Information Components are optimized for Microsoft's SQL Server
7.0, however they can operate on any ODBC compliant database, again simplifying
the process if integration with alternative external databases is required.

Technology Foundation for Outsourced Applications

Transactional Internet Application Architecture

OneCommerce is a transactional system. This means that rather than locking
an online customer to the same server for the duration of his or her session,
OneCommerce can treat every request or "click' as a distinct transaction.
OneCommerce can process these transactions across multiple servers while
recognizing that they collectively comprise a single site visitor session. The
transaction record is stored safely in a secure database, and if the customer
interacts with a different server for the next 'click', the customer's session
information is immediately accessible on the new server. This has a number of
advantages for operating an Internet commerce site in an outsourced
environment.

. Any customer interaction can occur on any server and customers can be
directed to the server with the least load for every individual
transaction or "click';

. User requests are evenly distributed across all available servers
utilizing hardware more efficiently;

. Customer session data is stored in a secure database and is
instantaneously restored in the event of transaction or hardware
failure; and

. Detailed activity logs are created which improve the accuracy and value
of financial reporting and analysis.

Industry Standard Platforms

OneCommerce is designed and optimized for Microsoft Internet technologies
and the Compaq DISA hardware configuration. Microsoft Internet technologies
provide an integrated platform consisting of operating system, Internet
connectivity, secure transaction monitoring, and database software that would
typically require several products from different vendors to duplicate.
OneCommerce operates on top of these capabilities, eliminating the need to
integrate or manage upgrades for multiple products.

The DISA architecture is a method for arranging multiple Internet
application servers in such a way that they support high volume transaction
processing. This method of setting up

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servers allows adding new servers for additional capacity without stopping site
operations. DISA also limits the risk of losing data or service if any one
server has technical problems. DISA enables Internet commerce businesses to
quickly and easily scale for increasing customer demand by adding servers. For
example, a small DISA system may start with two application servers, then scale
up to 20, 30, or more servers, as site traffic and transaction volumes
increase, without interrupting site operations.

Research and Development

We have invested substantial resources in research and development
activities. The majority of our activity consists of adding new competitive
product features, integrating complementary solutions, and delivering new
product releases as we expand into supporting new vertical markets and business
models.

We license and integrate certain third-party technologies and products into
OneCommerce through licensing agreements. We continually evaluate additional
third-party technologies for integration into our product line. We believe that
our future success depends in large part on our ability to enhance existing
products, develop new products, and maintain technological leadership. We
expect to continue to devote substantial resources to our research and
development activities.

As of December 31, 1999, there were 39 employees and 19 contractors in our
product development organization. Our development team is located at our
headquarters in McLean, Virginia.

We had no research and development expenses in the year ended December 31,
1996, $0.3 million in the year ended December 31, 1997, $1.0 million in the
year ended December 31, 1998, and $2.8 million in the nine months ended
September 30, 1999. Our policy is to expense research and development expenses
as incurred.

Intellectual Property and Proprietary Rights

Our success and ability to compete depend upon on our ability to develop and
protect the proprietary aspects of our technology and to operate without
infringing on the proprietary rights of others. We rely on a combination of
patent, trademark, trade secret, and copyright law and contractual restrictions
to protect our proprietary technology. These legal protections afford only
limited protection for our technology. We seek to protect our source code for
our software, documentation, and other written materials under trade secret and
copyright laws. We license our software pursuant to signed license agreements
and "clickthrough" or "shrink wrap" agreements, which impose restrictions on
the licensee's ability to use the software such as prohibiting reverse
engineering and limiting the use of copies. We also seek to avoid disclosure of
our intellectual property by requiring employees and consultants with access to
our proprietary information to execute confidentiality agreements.

We have filed a provisional patent application with the United States Patent
and Trademark Office covering inventions within OneCommerce. We have applied
for trademark and service mark registration for over 95 marks, including
"OneSoft" and "OneCommerce". We also have rights to 362 domain names.

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

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the extent to which piracy of our software exists, software piracy can be
expected to be a persistent problem. Litigation may be necessary in the future
to enforce our intellectual property rights, to protect our trade secrets, to
determine the validity and scope of our patents or the proprietary rights of
others, or to defend against claims of infringement or invalidity. Any such
resulting litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on our business. Our means
of protecting our proprietary rights may not be adequate or our competitors may
independently develop similar technology. See "Risk Factors--We rely on our
intellectual property rights and if we are unable to protect those rights, we
may face increased competition."

We have received correspondence from attorneys representing our former chief
technology officer, asserting that he invented certain technology incorporated
in our pending patent application and that our use of any of this technology
infringes on his ownership rights. We believe this assertion lacks merit, and
we intend to vigorously defend against any legal action that might be brought
with respect to this matter. We further believe that if the former employee is
found to be an inventor of some of the technology claimed in our pending patent
application, he will also be found to have invented that technology while
employed by us. As such, we do not believe that we would be excluded from using
this technology. Nevertheless, should litigation arise from this matter, the
results are unpredictable, and we cannot guarantee that we will preserve the
right to use the proprietary technology asserted to be owned by the former
employee. See "Risk Factors--Intellectual property claims against us could be
costly and result in the loss of significant rights."

We are currently engaged in litigation over the use of our trademark
"OneSoft". See "Legal Proceedings" below.

Employees

As of December 31, 1999, we had a total of 264 employees. Of our employees,
39 were in research and development, 56 in sales and marketing, 113 in
services, and 56 in finance and administration. Our future success will depend
in part on our ability to attract, retain and motivate highly qualified
technical and management personnel, for whom competition is intense. From time
to time, we also employ independent contractors to support our research and
development efforts. Our employees are not represented by any collective
bargaining unit, and we have never experienced a work stoppage. We believe our
relations with our employees are good.

Properties

Our headquarters are located in a leased facility in McLean, Virginia,
consisting of approximately 90,000 square feet. The McLean facility is expected
to meet our needs through March 2000, at which time we intend to expand our
facilities by entering into one or more additional leases. We have also leased
space for our network operation center in Annandale, Virginia and space for
sales and support personnel in New York, New York and Santa Monica, California.

Legal Proceedings

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MANAGEMENT

Directors, Executive Officers and Key Employees

The following table shows the name, age and position of each of our
executive officers and directors as of the date of this prospectus.

<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
James W. MacIntyre, IV 32 Chairman of the Board, President and Chief
....................... Executive Officer
Frederick C. Hawkins, 35 Chief Financial Officer and Senior Vice President
III.................... of Finance
Thomas E. Young......... 34 Senior Vice President of Marketing and Sales
Peter M. Jones.......... 42 Executive Vice President of Corporate Development
Jeffrey M. MacIntyre.... 30 Senior Vice President of Services and Director
Eric D. Waller.......... 34 Vice President of Product Development
Randall V. Pevin........ 35 Vice President of Operations
Henry D. Barratt, Jr. 47
(1) (2)................ Director
A. Douglas Peabody (1) 47
....................... Director
Justin Hall-Tipping (1) 43
(2).................... Director
Stephen P. Rader........ 44 Director
Thomas R. Hitchner (2).. 48 Director
Carlos E. Cisneros...... 34 Director
</TABLE>
- --------
(1)Member of the Audit Committee.
(2)Member of the Compensation Committee.

James W. MacIntyre, IV is the founder of OneSoft and has served as our
president and chief executive officer since our inception in 1995. Mr.
MacIntyre has served as our chairman of the board since January 1996. From
October 1994 to January 1995, Mr. MacIntyre served as president of Convergence,
Inc., a developer of Internet application systems. Mr. MacIntyre has over 12
years of management experience in product design, development, marketing and
sales of software and networking products. He also established the organization
and operations of TGF Technologies, Inc., which is now one of the largest
Internet service providers in northern New England, and which recently was
acquired by OneMain.com, Inc. Mr. MacIntyre holds a B.A. in philosophy and
economics from the University of Vermont. Jeffrey M. MacIntyre is the brother
of James W. MacIntyre, IV.

Frederick C. Hawkins, III has served as our chief financial officer and
senior vice president of finance since November 1997. From December 1996 to
November 1997, Mr. Hawkins worked as an independent business consultant,
providing strategic planning and financing advice to Silicon Valley companies.
From 1990 to December 1996, Mr. Hawkins served as President of Advanced Health
Products, Inc., a medical products company. Mr. Hawkins holds a B.S. from The
Wharton School at the University of Pennsylvania and an M.B.A. from the
Stanford Graduate School of Business.

Thomas E. Young has served as our senior vice president of marketing and
sales since October 1999. From May 1999 to October 1999, Mr. Young was our
senior vice president of marketing. From June 1998 to May 1999, Mr. Young was
the vice president of e-Chain Technologies, a business unit of Manugistics
Group, Inc., an enterprise application vendor. While at e-Chain Technologies,
Mr. Young created and ran the e-commerce division. From 1995 to 1998, Mr. Young
managed Manugistics' global product marketing, product management and North
American business development. From 1993 to 1995, Mr. Young was the manager of

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<PAGE>

business development at Manugistics. Prior to this, Mr. Young worked at
Andersen Consulting for over four years. Mr. Young holds a B.S. in Mechanical
Engineering from the University of Maryland and completed graduate work in high
tech marketing at Stanford University.

Peter M. Jones joined OneSoft in May 1999 and has served as our executive
vice president of corporate development since December 1999. From December 1994
to May 1999, Mr. Jones was an independent strategy consultant for several
companies in the United States and Europe. Mr. Jones holds a B.A. in
mathematics from Oxford University and an M.B.A. from Harvard Business School.

Jeffrey M. MacIntyre has served as our senior vice president of services and
a member of the board of directors of OneSoft since November 1997. Mr.
MacIntyre joined OneSoft in connection with the merger of InterFlowww
Enterprises Inc., a software development company he co-founded. From April 1996
to March 1997, Mr. MacIntyre was a project management consultant for
Convergence, Inc., a developer of Internet applications. From June 1996 to
March 1997, Mr. MacIntyre was the president of InterFlowww, where he was
responsible for business formation and management. From August 1994 to March
1996, Mr. MacIntyre was a business process design consultant for Andersen
Consulting. Mr. MacIntyre holds a B.A. in English, with a concentration in
management information systems, from the University of Vermont. James W.
MacIntyre, IV is the brother of Jeffrey M. MacIntyre.

Eric D. Waller has served as our vice president of product development since
June 1999. From March 1999 to June 1999, Mr. Waller served as our senior
manager of product engineering. From August 1997 to March 1999, Mr. Waller was
the director of commercial products of Reliable Software Technologies, a
software products and consulting company, where he was responsible for sales,
marketing, engineering and customer service. From August 1995 to August 1997,
Mr. Waller served as a product architect for Platinum Technology, Inc. an
enterprise application company, later acquired by Computer Associates
International, Inc. From April 1994 to August 1995, Mr. Waller was a senior
software engineer at Chalke, Inc., a financial software products company.

Randall V. Pevin has served as our vice president of operations since
November 1997. From October 1996 to November 1997, Mr. Pevin was a project
manager at OneSoft. From June 1994 to June 1996, Mr. Pevin served as a lead
consultant at Logical Network Services Technical Consulting, where he managed
software projects. Mr. Pevin holds a B.A. in business administration from
Central Connecticut University.

Henry D. Barratt, Jr. has served as a member of OneSoft's board of directors
since November 1997. Mr. Barratt is a managing director of Blue Water Capital,
L.L.C., a venture capital firm which he co-founded in 1996. From October 1994
to December 1995, Mr. Barratt was the president of The Drayton Company, an
investment banking firm.

A. Douglas Peabody has served as a member of OneSoft's board of directors
since August 1998. Since January 1993, Mr. Peabody has served as president of
Meigher, Peabody & Company, Inc., a general partner of Meigher Communications,
L.P., a publishing company he co-founded. From 1982 to January 1995, Mr.
Peabody worked at Inco Venture Capital Management, where he served in various
executive capacities before he was appointed president and managing principal
in April 1992. Mr. Peabody served as a director of America Online, Inc. from
1985 to 1993 and as its vice chairman from 1989 to 1993. Mr. Peabody holds an
A.B. from Dartmouth College, an M.B.A. from The Wharton School of the
University of Pennsylvania, and a J.D. from the University of Virginia School
of Law.

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<PAGE>

Justin Hall-Tipping has served as a member of OneSoft's board of directors
since July 1998. Mr. Hall-Tipping has served as managing director of SG
Capital Partners, the U.S. merchant banking affiliate of Societe Generale
Capital Corporation, since June 1997. From May 1995 to June 1997, Mr. Hall-
Tipping was director of the Data Intelligence Group of Reuters PLC. From 1991
to May 1995, Mr. Hall-Tipping was chief executive officer of HeartBeat Corp.,
a partner of NEPA Venture Fund. Mr. Hall-Tipping holds a B.S. in international
finance and banking from City University in London and an M.B.A from Harvard
Business School.

Stephen P. Rader has served as a member of OneSoft's board of directors
since April 1999. Mr. Rader has served as a managing member of Rader,
Reinfrank & Co., LLC, a private investment firm he co-founded, since January
1997. From October 1989 to December 1996, Mr. Rader served as managing
director of Chartwell Partners, a private investment firm. Mr. Rader holds a
B.S. and a J.D. from the University of Southern California.

Thomas R. Hitchner has served as a member of OneSoft's board of directors
since August 1999. Mr. Hitchner has been a general partner of QuestMark
Partners, L.P., since November 1998. From February 1984 to November 1998, Mr.
Hitchner was an employee of Alex. Brown & Sons, Incorporated, most recently as
a managing director and a member of its private equity group. Mr. Hitchner is
also a director of Zapme! Corporation. Mr. Hitchner holds a B.A. from Harvard
University.

Carlos E. Cisneros has served as a member of OneSoft's board of directors
since July 1999. Since 1996, Mr. Cisneros has been the chief executive officer
and the chairman of the board of the Cisneros Television Group. Since 1998,
Mr. Cisneros has been the vice chairman of Ibero American Media Partners.
Since 1991, Mr. Cisneros has been the executive vice president of Venevision
International, Inc. Mr. Cisneros is also a director of El Sitio Inc. Mr.
Cisneros holds a B.A. in political science from American University.

Board Composition

We currently have eight directors. Prior to the closing of this offering,
holders of our Series A preferred stock were entitled to nominate and elect
two directors while holders of our Series B preferred stock and our Series C
preferred stock were each entitled to nominate and elect one director. Messrs.
Barratt, Jr. and Hall-Tipping were nominated by the Series A preferred
stockholders, Mr. Rader was nominated by the Series B preferred stockholders,
and Mr. Hitchner was nominated by the Series C preferred stockholders. Each of
these persons serves on our board of directors pursuant to these preferred
stock nominating and election rights. The holders of our common stock, voting
as a separate class, were entitled to elect four members of our board of
directors, to be nominated by Mr. MacIntyre, IV. Messrs. MacIntyre, IV,
MacIntyre, and Cisneros serve on our board of directors pursuant to these
rights, with one vacancy. In addition, Mr. Peabody serves as a non-affiliated
director, nominated by the board of directors and elected by the stockholders.
Upon the closing of this offering, these board representation rights will
terminate and no stockholders will have any special rights with respect to
board representation.

Prior to the closing of this offering, directors are elected by the
stockholders at each annual meeting of stockholders and serve for one year or
until their successors are duly elected and qualified. Our restated
certificate of incorporation and restated bylaws, to be effective upon the
closing of this offering, provide that our board of directors will be divided
into three classes, as nearly equal in size as possible with staggered three-
year terms. The division of the three classes, the initial directors and their
respective expiration dates are as follows:

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<PAGE>

. the class I directors will be Messrs. Barratt, Jr., Hall-Tipping, and
MacIntyre, and their term will expire at the annual meeting of
stockholders to be held in 2001;

. the class II directors will be Messrs. Hitchner, Peabody, and Rader, and
their term will expire at the annual meeting of stockholders to be held
in 2002; and

. the class III directors will be Messrs. Cisneros and MacIntyre, IV, and
their term will expire at the annual meeting of stockholders to be held
in 2003.

At each annual meeting of stockholders beginning with the annual meeting to
be held in 2001, the successors to directors whose terms expire will be elected
to serve from the time of election and qualification until the third annual
meeting following election, or until their successors have been duly elected
and qualified, or until their earlier resignation or removal. In addition, the
authorized number of directors may be changed only by resolution of the board
of directors. Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as
nearly as possible, each class will consist of one-third of the directors. The
classification of our board of directors may have the effect of discouraging or
making it more difficult for a third party to acquire control of OneSoft.

Board Committees

Our board of directors has an audit committee and a compensation committee.

Audit Committee. The current members of our audit committee are Messrs.
Barratt, Jr., Hall-Tipping and Peabody. Our audit committee reviews, acts on,
and reports to the board of directors with respect to various auditing and
accounting matters, including the selection of our independent auditors, the
scope of the annual audits, fees to be paid to the auditors, the performance of
our independent auditors and our accounting practices.

Compensation Committee. The current members of our compensation committee
are Messrs. Barratt, Jr., Hall-Tipping and Hitchner. Our compensation committee
determines the salaries and incentive compensation of our officers and provides
recommendations for the salaries and incentive compensation of our other
employees. The compensation committee also administers our Amended and Restated
1997 Employee, Director and Consultant Stock Option Plan.

Compensation Committee Interlocks and Insider Participation

The voting members of our compensation committee of the board of directors
are Messrs. Barratt, Jr., Hall-Tipping and Hitchner, none of whom has, at any
time since our formation, been an officer or employee of OneSoft. No executive
officer of OneSoft currently serves, or in the past has served, 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. Prior to the formation of the compensation committee,
the board of directors as a whole made decisions relating to the compensation
of our executive officers.

Director Compensation

Our directors do not receive cash compensation for their services as
directors but are reimbursed for their reasonable and necessary expenses
incurred in attending board meetings.

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In June 1998, we granted to Mr. Peabody, one of our directors, an option to
purchase 100,000 shares of common stock at an exercise price of $0.552 per
share. Mr. Peabody exercised this option in full in April 1999. These shares
are subject to restrictions that terminate upon completion of this offering.

In October 1998, we granted to Blue Water Strategic Fund I, L.L.C. a non-
qualified stock option to purchase 25,000 shares of common stock at an exercise
price of $0.552 per share. Mr. Henry D. Barratt, Jr., one of our directors, is
a managing director of Blue Water Capital, L.L.C., a venture capital firm which
is the managing member of Blue Water Strategic Fund I, L.L.C. The option to
Blue Water Strategic Fund I L.L.C. was immediately exercisable upon the grant,
and terminates in October 2008.

Key Person Life Insurance

We have purchased and presently maintain a key person life insurance policy
in the amount of $2,000,000 on the life of James W. MacIntyre, IV, in favor of
OneSoft.

Executive Compensation

The following table shows all compensation awarded to, earned by, or paid to
our Chief Executive Officer and our other most highly compensated executive
officers or former executive officers who earned at least $100,000 for services
rendered to OneSoft in all capacities during the year ended December 31, 1999.

Summary Compensation Table

<TABLE>
<CAPTION>
Long Term
Annual Compensation
Compensation (1) Awards
----------------- ------------
Securities
Underlying
Name and Principal Position Salary Bonus Options
- --------------------------- -------- -------- ----------
<S> <C> <C> <C> <C>
James W. MacIntyre, IV..................... $221,539 $ 54,044 --
President and Chief Executive Officer
Richard Borenstein......................... 125,769 118,325 100,000
Former Senior Vice President of World Wide
Sales (2)
Frederick C. Hawkins, III.................. 150,756 87,250 --
Senior Vice President of Finance and Chief
Financial Officer
Jeffrey M. MacIntyre....................... 117,692 48,551 --
Senior Vice President of Services
Randall V. Pevin........................... 93,077 25,833
Vice President of Operations
Thomas E. Young............................ 92,308 90,320 220,000
Senior Vice President of Marketing and
Sales
</TABLE>
- --------
(1) The columns for "Other Annual Compensation" and "All Other Compensation"
have been omitted because there is no such compensation required to be
reported.
(2) Mr. Borenstein ceased to be an executive officer of OneSoft on or about
October 1,1999. His full-time employment with us terminated on December 31,
1999.

51
<PAGE>

Option Grants in 1999

The following table contains information concerning the stock option grants
made to each of the individuals listed in the Summary Compensation Table during
the fiscal year ended December 31, 1999. These options were granted pursuant to
our Amended and Restated 1997 Employee, Director and Consultant Stock Option
Plan and are incentive stock options.

<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates Of
Stock Price
Appreciation
Individual Grants For Option Term (3)
-------------------------------------------------- --------------------
Number Of % Of Total
Shares Options
Underlying Granted To Exercise
Options Employees In Price Expiration
Name Granted 1999(1) Per Share (2) Date 5% 10%
---- ---------- ------------ ------------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
James W. MacIntyre, IV.. -- -- -- -- -- --
Richard Borenstein...... 250,000(4) 8.7% $0.552 3/30/00 -- --
Frederick C. Hawkins,
III.................... -- -- -- -- -- --
Randall V. Pevin........ -- -- -- -- -- --
Jeffrey M. MacIntyre.... -- -- -- -- -- --
Thomas E. Young......... 200,000(5) 6.9% $0.552 9/17/09 -- --
20,000(6) 0.1% $11.00 12/30/09 -- --
</TABLE>
- --------
(1) The percentage shown under this column is based on options to purchase
shares of our common stock granted to employees, consultants and directors
of OneSoft under our Amended and Restated 1997 Employee, Director and
Consultant Stock Option Plan during 1999.
(2) The exercise price may be paid in cash or in shares of common stock valued
at fair market value on the exercise date. All stock options were granted
with an exercise price equal to the fair market value of the common stock
on the date of grant, as determined by the board of directors.
(3) Assumes appreciation of the common stock at a rate of 5% and 10% per year
over the 10-year option period as mandated by the rules and regulations of
the Securities and Exchange Commission, and does not represent our estimate
or projection of the future value of the common stock. The actual value
realized may be greater or less than the potential realizable values set
forth in the table.
(4) This option has vested for the exercise of 100,000 shares.
(5) The options vest over a three-year period beginning on the first
anniversary of the date of employment, May 3, 1999, and expire on the tenth
anniversary of the date of grant.
(6) The options vest over a four-year period beginning on the first
anniversary of the date of grant, December 30, 1999.

Option Exercises

None of the individuals listed in the Summary Compensation Table exercised
any options to purchase securities of OneSoft during the year ended December
31, 1999.

52
<PAGE>

Year-end Option Values

The following table sets forth information with respect to the aggregate
value of options held by each executive officer named in the Summary
Compensation Table as of December 31, 1999. The potential value of the
unexercised in-the-money options at fiscal year end is based on the value of $
per share, the anticipated initial public offering price of our shares of
common stock, less the per share exercise price.

We have rights to repurchase the shares issued on exercise of these options
upon termination of the optionee's employment, death or disability. These
rights of repurchase will terminate upon the consummation of this offering. All
options were granted at an exercise price equal to the fair market value of our
common stock on the date of grant, as determined by our board of directors.

<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options at
at December 31, 1999 December 31, 1999
---------------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ---------------- ----------- -------------
<S> <C> <C> <C> <C>
James W. MacIntyre, IV.. 38,670 19,330 $ --
Richard Borenstein...... 100,000 --
Frederick C. Hawkins,
III.................... 200,000 100,000
Randall V. Pevin........ 98,750 66,250
Jeffrey M. MacIntyre.... 34,670 17,330
Thomas E. Young......... -- 220,000
</TABLE>

The columns for number of shares acquired on exercise and value received
have been omitted because there were no option exercises by the individuals
listed in the Summary Compensation Table for the year ended December 31, 1999.

Employee Benefit Plans

Amended and Restated 1997 Employee, Director and Consultant Stock Option
Plan. The following description of OneSoft's Amended and Restated 1997
Employee, Director and Consultant Stock Option Plan is a summary of the
material terms of the plan.

The purpose of the plan is to enhance the profitability and value of OneSoft
for the benefit of its stockholders by enabling OneSoft to offer to employees,
directors and consultants stock based incentives. This is a means to both
increase the ownership of OneSoft held by those individuals in order to
attract, retain and reward them and strengthen the mutual interests between
those individuals and the stockholders of OneSoft. The plan authorizes the
grant of options to purchase shares of common stock to employees, directors and
consultants of OneSoft and its affiliates. Under the plan, OneSoft may grant
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986 and non-qualified stock options. Incentive stock options
may only be granted to employees of OneSoft.

The plan was approved by OneSoft's board of directors and its stockholders
in March 1997 and subsequently amended by the board of directors and
stockholders in August 1999, and January 2000. A total of 5,000,000 shares are
reserved for issuance under the plan. As of December 31, 1999, 231,750 shares
had been issued as the result of the exercise of options, 3,682,483 shares were
subject to outstanding options, and 1,085,767 shares were available for future
grants. The plan is administered by the compensation committee of the board of
directors. Subject to the provisions of the plan, the committee has authority
to determine the employees, directors and consultants of OneSoft who are to be
awarded options and the terms of these awards, including:

53
<PAGE>

. the number of shares subject to an option;

. when the option becomes exercisable;

. the option exercise price per share; and

. the duration of the option.

Incentive stock options must have an exercise price equal to at least 100%,
110% if the grant is to a stockholder holding more than 10% of OneSoft's voting
stock, of the fair market value of a share on the date of the award and
generally have a duration of 10 years, five years if the grant is to a
stockholder holding more than 5% of OneSoft's voting stock. Terms and
conditions of awards are in written agreements between OneSoft and the holders
of the options. Awards under the plan may not be made after the tenth
anniversary of the date of its adoption but awards granted before that date may
extend beyond that date.

If the employment with OneSoft of the holder of an incentive stock option is
terminated for any reason other than as a result of the holder's death or
disability or for "cause" as defined in the plan, the holder may exercise the
option, to the extent exercisable on the date of termination of employment,
until the earlier of the option's specified expiration date and 90 days after
the date of termination. If an option holder dies or becomes disabled, both
incentive and non-qualified stock options may generally be exercised, to the
extent exercisable on the date of death or disability, by the option holder or
the option holder's survivors until the earlier of the option's specified
termination date and one year after the date of death or disability. If an
option holder's employment with OneSoft is terminated for cause, all
outstanding and unexercised options are immediately forfeited.

Employment Agreements

We have entered into employment agreements with James W. MacIntyre, IV,
Frederick C. Hawkins, III and Jeffrey M. MacIntyre which contain non-
disclosure, assignment of inventions, non-competition and non-solicitation
restrictions and covenants. These agreements provide for annual base salaries,
subject to increase by the board of directors, and allow for additional annual
bonus compensation upon the meeting of certain mutually agreed upon business
objectives. Current salaries are $240,000 for James W. MacIntyre, IV, $175,000
for Frederick C. Hawkins, III and $150,000 for Jeffrey M. MacIntyre. These
agreements automatically renew annually unless either we, or they, provide
written notice of intention not to renew an agreement. Pursuant to his
agreement, we granted Mr. Hawkins incentive stock options to purchase 300,000
shares of our common stock under our Amended and Restated 1997 Employee,
Director and Consultant Stock Option Plan at an exercise price of $0.552 per
share. These options vest quarterly over a period of three years.

Additionally, we have entered into employment-at-will letter agreements with
Randall V. Pevin and Thomas E. Young, which also contain non-disclosure,
assignment of inventions, non-competition and non-solicitation restrictions and
covenants. These letter agreements provide for annual base salaries, subject to
increase by the board of directors. The agreement with Mr. Young allows for
annual bonus compensation upon the meeting of certain mutually agreed upon
business objectives. Pursuant to our agreement with Mr. Young, we granted him
incentive stock options to purchase 220,000 shares of our common stock at an
exercise price of $0.552 per share under our Amended and Restated 1997
Employee, Director and Consultant Stock Option Plan. These options vest
annually over a period of three years.

54
<PAGE>

Our employment agreement with James W. MacIntyre, IV provides that if we
terminate his employment without "cause," as defined in the agreement, he
terminates his employment with "good reason," as defined in the agreement, or
we fail to renew his agreement, such that he is employed with us less than
three years, he will be entitled to severance pay equal to 100% of his annual
base salary, plus 100% of his annual bonus, paid in twelve monthly installments
from the date of termination, plus fringe benefits for twelve months from the
date of termination. If Mr. MacIntyre's employment is terminated after three
years or more of employment, by reason of any of the above conditions, we will
pay him one-half of his annual salary plus one-half of his bonus, paid in six
monthly installments from the date of termination, plus fringe benefits for six
months from the date of termination. Our employment agreements with Frederick
C. Hawkins, III and Jeffrey M. MacIntyre provide that if we terminate their
employment without "cause," as defined in the agreements, they terminate their
employment with "good reason," as defined in the agreements, or we fail to
renew their agreements, such that they are employed with us less than three
years, they will be entitled to severance pay equal to one-half of their annual
base salaries, plus one-half of his annual bonus in the case of Mr. Hawkins],
paid in six monthly installments from the date of termination, plus fringe
benefits for six months from the date of termination. If the terminations of
Messrs. MacIntyre, IV, Hawkins or MacIntyre are voluntary, other than for "good
reason," by OneSoft for cause or as a result of death or disability, we have no
obligation to pay severance beyond the individual's accrued and unpaid base
salary and bonus up to the date of termination. Our letter agreements with Mr.
Pevin and Mr. Young have no severance provisions.

Severance Agreement

We have entered into a severance agreement with Richard Borenstein pursuant
to which we agreed to pay Mr. Borenstein a lump sum of $42,000 upon termination
of his full-time employment with us on December 31, 1999. Additionally, we will
pay his fringe benefits until March 31, 2000. As Mr. Borenstein has a H-1B visa
to work for OneSoft, our severance agreement with him contains provisions
outlining assistance that OneSoft may provide to him in modifying his H-1B
visa. At the time of our termination of his full-time employment Mr. Borenstein
held a fully vested option to purchase 100,000 shares of our common stock at an
exercise price of $0.552 per share. This option expires on March 30, 2000.

Indemnification of Directors and Executive Officers and Limitation of Liability

Our restated certificate of incorporation limits the liability of our
directors to the maximum extent permitted by Delaware law. Delaware law
provides that a director of a corporation will not be personally liable for
monetary damages for breach of fiduciary duty as a director, except for
liability:

. for any breach of the director's duty of loyalty to OneSoft or our
stockholders;

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

. under Section 174 of the Delaware General Corporation Law regarding
unlawful dividends and stock purchases; or

55
<PAGE>

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

As permitted by Delaware law, our restated bylaws provide that we must
indemnify our directors and executive officers to the fullest extent permitted
by Delaware law and advance expenses, as incurred, to our directors and
executive officers to defend any action for which rights of indemnification are
provided. In addition, our restated certificate of incorporation and restated
bylaws also permit us to grant such rights to indemnification to our employees
and agents. Our restated bylaws also provide that we may enter into
indemnification agreements with our directors and officers and purchase
insurance on behalf of any person whom we are required or permitted to
indemnify. We have obtained liability insurance for our officers and directors.

The limitation of liability and indemnification provisions in our restated
certificate of incorporation and restated bylaws may discourage stockholders
from bringing a lawsuit against directors for breach of their fiduciary duty.
They may also reduce the likelihood of derivative litigation against directors
and officers, even though an action, if successful, might benefit us and other
stockholders. Furthermore, a stockholder's investment may be adversely affected
to the extent we pay the costs of settlement and damage awards against
directors and officers as required by these indemnification provisions.

Presently, there is no pending litigation or proceeding involving any of our
directors, officers or employees for which indemnification is sought, nor are
we aware of any threatened litigation that may result in claims for
indemnification.

56
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Management and Others

On November 1, 1995, in connection with the formation and initial financing
of Global Exchange Inc., a Virginia corporation, our predecessor in interest,
James W. MacIntyre, IV, our chairman, president and chief executive officer,
purchased 250 shares of the common stock of Global Exchange Inc. for an
aggregate purchase price of $250. On March 18, 1997, InterFlowww Enterprises,
Inc., a Vermont corporation, merged with and into Global Exchange Inc. pursuant
to a plan of merger approved by Global Exchange Inc.'s and InterFlowww's
stockholders and boards of directors as of March 17, 1997. Pursuant to the plan
of merger, each share of InterFlowww common stock was converted into 11.2
shares of Global Exchange Inc.'s common stock. On March 31, 1997, upon our
reincorporation in Delaware, each share of common stock of Global Exchange Inc.
was converted into 300 shares of our common stock. James W. MacIntyre, IV, a
principal stockholder of InterFlowww, and Jeffrey M. MacIntyre, our senior vice
president of services and the president and a principal stockholder of
InterFlowww, received 2,250,000 shares and 420,000 shares, respectively, of our
common stock (on a post-reincorporation basis) upon consummation of the
InterFlowww merger. Jeffrey M. MacIntyre joined OneSoft and became a director
and our senior vice president of services following the merger.

In April 1996, Global Exchange Inc. employed William Langdon as chief
financial officer. In June 1997, we terminated Mr. Langdon's employment with
us, and we executed a settlement agreement with him. Under the settlement
agreement, we paid Mr. Langdon $80,000 and agreed to pay him an additional
$30,000 within 60 days of an initial public offering of our capital stock.

In August 1996, we formed Sports Warehouse, Inc., a Delaware corporation. On
August 9, 1996, Sports Warehouse, Inc. granted Bakersville Holdings Limited 48
shares of its common stock. Carlos E. Cisneros, a member of our board of
directors, is a beneficial owner of Bakersville Holdings. On April 17, 1997, we
entered into a shareholders agreement with Bakersville Holdings with regard to
Sports Warehouse, Inc. Pursuant to this agreement, Bakersville Holdings
invested an additional $50,000 in Sports Warehouse in exchange for, among other
things, the right to convert its $150,000 aggregate investment in Sports
Warehouse into shares of our common stock at the time of our initial public
offering at a conversion factor which would assume a compounded annual return
on the $150,000 investment calculated at 20% per year from the date of the
agreement. Following receipt of notice from us regarding our proposed initial
public offering, Bakersville Holdings converted its shares in Sports Warehouse
valued at $244,800 into 24,480 shares of our common stock on November 23, 1999.
We plan to dissolve Sports Warehouse in January 2000.

Indebtedness of Management

In December 1997, we lent $412,333 to Frederick C. Hawkins, III, our chief
financial officer and senior vice president of finance, in connection with his
purchase of 750,000 shares of our common stock, at a price of $0.552 per share,
from William Robertson, a former majority stockholder. The loan, secured by a
pledge of the 750,000 shares of Mr. Hawkins' OneSoft common stock and other
assets, accrues interest at the rate of 6.02% per annum, and is payable on or
after the first to occur of December 1, 2002, the sale of substantially all of
our assets, or a sale of the collateral pledged as security for the loan.

In August 1999, we lent $500,000 to James W. MacIntyre, IV, our president
and chief executive officer, secured by a pledge of 100,000 shares of Mr.
MacIntyre's OneSoft common stock. The loan accrues interest at the rate of
5.43% per annum and is payable on or before August 13, 2002.

57
<PAGE>

Directors and Executive Officers

On April 12, 1998, our Board of Directors voted to appoint A. Douglas
Peabody as a Director of OneSoft. In June 1998, we granted Mr. Peabody an
immediately exercisable non-qualified stock option to purchase 100,000 shares
of our common stock at the price of $0.552 per share. On April 12, 1999, Mr.
Peabody exercised his option in full.

On November 7, 1997, we granted Frederick C. Hawkins, III, an incentive
stock option to purchase 300,000 shares of our common stock under our Amended
and Restated 1997 Employee, Director and Consultant Stock Option Plan at a
price of $0.552 per share. These options vest quarterly over a period of three
years.

On October 6, 1997, we granted James W. MacIntyre, IV, a non-qualified stock
option to purchase 58,000 shares of our common stock under our Amended and
Restated 1997 Employee, Director and Consultant Stock Option Plan at a price of
$0.552 per share. These options vest quarterly over a period of three years.

On October 6, 1997, we granted Jeffrey M. MacIntyre, a non-qualified stock
option to purchase 52,000 shares of our common stock under our Amended and
Restated 1997 Employee, Director and Consultant Stock Option Plan at a price of
$0.552 per share. These options vest quarterly over a period of three years.

On May 5, 1997, October 6, 1997 and October 16, 1998 we granted Randall V.
Pevin incentive stock options to purchase 35,000, 30,000, and 100,000 shares,
respectively. Each of these options had exercise prices of $0.062 per share,
$0.552 per share, $0.552 per share, respectively. The first two above-listed
options vest quarterly over a period of three years, and the third option vests
bi-annually over a period of two years.

On May 3, 1999 and December 30, 1999 we granted Thomas E. Young, incentive
stock options to purchase 200,000 and 20,000 shares, respectively. These
options have exercise prices of $0.552 per share and $11.00 per share,
respectively. The first option vests over a three year period. The second
option vests over a four year period.

On March 8, 1999 and September 17, 1999, we granted incentive stock options
to purchase 5,000 and 25,000 shares, respectively. These options have exercise
prices of $0.552 per share and $4.00 per share, respectively. Both of the
options vest over a four year period.

Series A Convertible Preferred Stock Offerings

In November 1997, March 1998 and June 1998, we raised gross proceeds of
approximately $7.6 million from the issue and sale of a total of 3,192,530
shares of Series A preferred stock in a private placement to two investors.
Blue Water Strategic Fund I, L.L.C. and SGC Partners II LLC, each a five
percent beneficial holder of our common stock, purchased all of the shares of
Series A preferred stock. Blue Water Strategic Fund I purchased shares of
Series A preferred stock at the prices of $2.28 and $2.41 per share. SGC
Partners II purchased shares of Series A preferred stock at a price of $2.41
per share. Henry D. Barratt, Jr., one of our directors, is a managing director
of Blue Water Capital, L.L.C., the managing member of Blue Water Strategic Fund
I, and was elected to our board of directors pursuant to an investor rights
agreement, the provisions of which that relate to the election of directors
will terminate upon the closing of this offering. Justin Hall-Tipping, one of
our directors, is a managing director of SG Capital Partners, the managing
member of SGC Partners II LLC and was elected to our board of directors
pursuant to an investor rights agreement, the provisions of which that relate
to the election of directors will terminate upon the closing of this offering.

58
<PAGE>

Series B Convertible Preferred Stock Offering

In February 1999, we raised gross proceeds of approximately $7.5 million
from the issue and sale of a total of 2,023,857 shares of Series B convertible
preferred stock in a private placement to two investors at a price of $3.706
per share. Rader Reinfrank Holdings No. 2 and SGC Partners II LLC, each a five
percent beneficial holder of our common stock, purchased all of the shares of
Series B convertible preferred stock. Stephen P. Rader, one of our directors,
is a managing member of Rader Reinfrank & Co., LLC, the general partner of
Rader Reinfrank Investors, L.P., general partner of Rader Reinfrank Holdings
No. 2. Justin Hall-Tipping, a member of our board of directors, is the managing
director of SG Capital Partners, the managing member of SGC Partners II LLC.
Messrs. Rader and Hall-Tipping were elected to our board of directors pursuant
to an investor rights agreement, the provisions of which that relate to the
election of directors will terminate upon the closing of this offering.

Series C Convertible Preferred Stock Offering

In August 1999 and October 1999, we raised gross proceeds of approximately
$32.2 million from the issue and sale of a total of 4,891,253 shares of Series
C convertible preferred stock in a private placement to 20 investors at a price
of $6.59 per share. QuestMark Partners, L.P., a five percent beneficial
stockholder of OneSoft, purchased a total of 1,517,451 shares of Series C
convertible preferred stock. Thomas R. Hitchner, one of our directors, is a
general partner of QuestMark Partners, L.P., and was elected to our board of
directors pursuant to an investor rights agreement, the provisions of which
that relate to the election of directors will terminate upon the closing of
this offering.

59
<PAGE>

PRINCIPAL AND SELLING STOCKHOLDERS

The following table presents information regarding the beneficial ownership
of OneSoft's common stock as of December 31, 1999, and as adjusted to reflect
the sale of the common stock in this offering, by:

. each person, or group of affiliated persons, known to us to be the
beneficial owner of more than 5% of our common stock;

. each of our directors;

. each executive officer listed in the Summary Compensation Table above;
and

. all current directors and executive officers of OneSoft as a group.

Beneficial ownership for purposes of the following table is determined in
accordance with the rules of the Securities and Exchange Commission and is not
necessarily indicative of beneficial ownership for any other purpose. In
computing the number of shares beneficially owned by a person and the
percentage ownership of that person, shares of common stock issuable upon the
exercise of options that are currently exercisable or exercisable within 60
days of December 31, 1999 are deemed to be outstanding. These shares, however,
are not considered outstanding for purposes of computing the percentage
ownership of any other person.

Except as indicated in the footnotes below, we believe that the persons and
entities named in the table have sole voting and sole investment power with
respect to all shares beneficially owned by them, subject to community property
laws where applicable. Percentage of ownership is based on 16,314,490 shares of
common stock outstanding as of December 31, 1999, assuming conversion of all
outstanding preferred stock into common stock, and shares of common stock
outstanding after completion of the offering. This table assumes no exercise of
the underwriters' over-allotment option. Unless otherwise indicated in the
footnotes, the address for each of the individuals listed in the table is c/o
OneSoft Corporation, 1505 Farm Credit Drive, Suite 100, McLean, VA 22102.

<TABLE>
<CAPTION>
Percentage of
Outstanding
Shares
Beneficially
Number Owned
of Shares -----------------
Beneficially Before After
Name of Beneficial Owner Owned Offering Offering
- ------------------------ ------------ -------- --------
<S> <C> <C> <C>
Executive Officers and Directors:
James W. MacIntyre, IV (1)..................... 3,304,406 20.2%
Richard Borenstein (2)......................... 100,000 * *
Frederick C. Hawkins, III (3).................. 962,700 5.8
Thomas E. Young................................ -- * *
Randall V. Pevin(4)............................ 98,750 * *
Jeffrey M. MacIntyre (5)....................... 459,000 2.8
Henry D. Barratt, Jr. (6)...................... 1,896,130 11.6
A. Douglas Peabody............................. 100,000 * *
Justin Hall-Tipping (7)........................ 3,125,382 19.2
Stephen P. Rader (8)........................... 1,815,096 11.1
Thomas R. Hitchner (9)......................... 1,517,451 9.3
Carlos E. Cisneros (10)........................ 365,100 2.2
All directors and executive officers as a group
(12 persons) (11)............................. 13,744,015 81.7
Other 5% Stockholders:
Blue Water Strategic Fund I, L.L.C. (6)........ 1,896,130 11.6
SGC Partners II LLC (7)........................ 3,125,382 19.2
Rader Reinfrank Holdings No. 2 (8)............. 1,815,096 11.2
QuestMark Partners, L.P. (9)................... 1,517,451 9.3
</TABLE>

60
<PAGE>

- --------
* Represents beneficial ownership of less than 1%.
(1) Consists of shares held of record by Mr. MacIntyre. Includes 43,500 shares
subject to currently exercisable options. Does not include shares of common
stock over which Mr. MacIntyre has voting control pursuant to an
irrevocable proxy that terminates upon the completion of this offering.

(2) Consists of 100,000 shares subject to currently exercisable options. Mr.
Borenstein ceased being an executive officer of the Company on or about
October 1,1999. Mr. Borenstein's full time-employment with us terminated on
December 31, 1999.

(3) Consists of 200,000 shares subject to currently exercisable options, and
25,000 shares that will be exercisable within 60 days of this offering.

(4) Includes 98,750 shares subject to currently exercisable options.

(5) Includes 39,000 shares subject to currently exercisable options.

(6) Consists of 1,871,130 shares owned by Blue Water Strategic Fund I, L.L.C.
Mr. Barratt, a director of OneSoft, is a Managing Director of Blue Water
Capital, L.L.C., the managing member of Blue Water Strategic Fund I. This
number also includes 25,000 shares subject to currently exercisable
options. Blue Water Capital has sole voting and investment power with
respect to these shares. Mr. Barratt expressly disclaims beneficial
ownership of these shares, except to the extent of his pecuniary interest
therein. The address for Blue Water Capital, L.L.C. and Blue Water
Strategic Fund I, L.L.C. is 8300 Greensboro Drive, Suite 1210, McLean,
Virginia 22102.

(7) Consists of 3,125,382 shares owned by SGC Partners II LLC. Mr. Hall-
Tipping, a director of OneSoft, is a managing director of SG Capital
Partners, the managing member of SGC Partners II LLC. SG Capital Partners
has sole voting and investment power with respect to these shares. Mr.
Hall-Tipping expressly disclaims beneficial ownership of these shares,
except to the extent of his pecuniary interest therein. The address for SGC
Partners II LLC and SG Capital Partners is 1221 Avenue of the Americas, New
York, New York 10020.

(8) Consists of 1,815,096 shares owned by Rader Reinfrank Holdings No. 2. Mr.
Rader, a director of OneSoft, is a managing member of Rader Reinfrank &
Co., LLC, the General Partner of Rader Reinfrank Investors, L.P., General
Partner of Rader Reinfrank Holdings No. 2, a California general
partnership. Rader Reinfrank & Co., has sole voting and investment power
with respect to these shares. Mr. Rader expressly disclaims beneficial
ownership of these shares, except to the extent of his pecuniary interest
therein. The address for Rader Reinfrank Holdings No. 2 and Rader Reinfrank
& Co., LLC is 9465 Wilshire Boulevard, Suite 950, Beverly Hills, California
90212.

(9) Consists of 1,517,451 shares owned by QuestMark Partners, L.P. Mr.
Hitchner, a director of OneSoft, is a general partner of QuestMark
Partners. QuestMark Partners has sole voting and investment power with
respect to these shares. Mr. Hitchner expressly disclaims beneficial
ownership of these shares, except to the extent of his pecuniary interest
therein. The address for QuestMark Partners, L.P. is One South Street,
Suite 800, Baltimore, Maryland 21202.

(10) Consists of 365,100 shares owned by Bakersville Holdings Limited. Mr.
Cisneros, a director of OneSoft, is a beneficial owner of Bakersville
Holdings. Bakersville Holdings has sole voting and investment power with
respect to these shares. The address for Bakersville Holdings Limited is
1900 Avenue of the Stars, Suite 2100, Los Angeles, CA 90067.

(11) Includes 531,250 shares subject to currently exercisable options. See
footnotes (1) through (9) above.

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<PAGE>

In the event that the underwriters' over-allotment option is exercised in
full, the beneficial ownership of certain stockholders will change as follows:

<TABLE>
<CAPTION>
Shares
Beneficially
Number of Owned After
Shares Offered the Offering
in the Over- --------------
allotment Number Percent
-------------- ------ -------
<S> <C> <C> <C>
James W. MacIntyre, IV (1)........................
Bakersville Holdings Limited (2)..................
Eugene Choi (3)...................................
Frederick C. Hawkins, III (4).....................
Jeffrey M. MacIntyre (5)..........................
South Street LLC (6)..............................
Andrew Wright (7).................................
</TABLE>
- --------
* Less than 1%
(1) See footnote (1) above.
(2) See footnote (10) above.
(3) Prior to this offering, Eugene Choi, an employee of ours, owned shares of
our common stock.
(4) See footnote (3) above.
(5) See footnote (4) above.
(6) Prior to this offering, South Street LLC, a holder of Series C preferred
stock, owned 37,936 shares of our common stock.
(7) Prior to this offering, Andrew Wright, a holder of Series C preferred
stock, owned 75,873 shares of our common stock.

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<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon completion of this offering, we will be authorized to issue 50,000,000
shares of common stock, par value $.001 per share, and 5,000,000 shares of
preferred stock, par value $.001 per share, of which there will be shares
of common stock and no shares of preferred stock outstanding. As of December
31, 1999, and assuming the conversion of all outstanding shares of convertible
preferred stock into shares of common stock upon the closing of this offering,
there were outstanding 16,314,490 shares of common stock held of record by 57
stockholders. In addition, as of December 31, 1999 there were outstanding
options to purchase 3,682,483 shares of common stock, and outstanding warrants
to purchase 60,651 shares of common stock.

Common Stock

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 and do not have
cumulative voting rights. Subject to preferences that may be applicable to any
outstanding shares of preferred stock, holders of common stock are entitled to
receive ratably such dividends, if any, as may be declared by our board of
directors out of funds legally available. All outstanding shares of common
stock are fully paid and nonassessable, and the holders of common stock have no
preferences or rights of conversion, exchange, preemption or redemption. In the
event of any liquidation, dissolution or winding-up of our affairs, holders of
common stock will be entitled to share ratably in our assets that are remaining
after payment or provision for payment of all of our debts and obligations, and
after liquidation payments to holders of outstanding shares of preferred stock,
if any.

Preferred Stock

Upon the closing of this offering, all of our outstanding shares of
preferred stock will convert into 10,107,640 shares of common stock. These
shares of preferred stock will no longer be authorized, issued or outstanding
after completion of this offering.

The board of directors has the authority to issue 5,000,000 shares of
preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions granted to or imposed upon the preferred stock,
including dividend rights, conversion rights, terms of redemption, liquidation
preference, sinking fund terms and the number of shares constituting any series
or the designation of a series, without any further vote or action by the
stockholders. The board of directors, without stockholder approval, can issue
preferred stock with voting and conversion rights which could adversely affect
the voting power of the holders of common stock. The issuance of preferred
stock could have the effect of delaying, deferring or preventing a change in
control of OneSoft. We have no present plan to issue any shares of preferred
stock. See "Anti Takeover Effects of Various Provisions of Delaware Law and
OneSoft's Restated Certificate of Incorporation and Restated Bylaws."

Warrants

As of the date of this prospectus, a warrant to purchase a total of 60,651
shares of our common stock is held by Deutsche Bank Securities Inc. The warrant
was issued to Deutsche Bank Securities Inc. as partial consideration for their
services as placement agent for the private placement of our Series C
convertible preferred stock in August and October 1999. This warrant is
currently exercisable at an exercise price of $6.59 per share and may be
exercised on a cashless basis. It expires on October 5, 2004. The number of
shares for which the warrant described above is exercisable is subject to
adjustment upon changes in our

63
<PAGE>

capital structure, including stock splits, combinations or dividends and
reclassifications, exchanges or substitutions. The warrant carries certain
registration rights. See "Registration Rights--Warrant Holder."

Registration Rights

Common Stockholders. On the date 180 days after the completion of this
offering, the holders of 13,426,546 shares of common stock or their transferees
will have certain rights to cause us to register these shares under the
Securities Act of 1933. We may be required to effect up to two such demand
registrations, at our expense. We will not be required to effect such a
registration if the anticipated gross proceeds of the shares to be registered
are expected to be less than $25 million. In addition, the holders of these
shares will have the right to cause us to register these shares, at our
expense, on a Form S-3, provided that we are eligible to use this form. We may
be required to effect up to four such registrations, except that, if we have
effected all four registrations and the holders of registration rights have not
yet requested a demand registration, we may be required to effect five such
registrations. We will not be required to effect such a registration if the
anticipated gross proceeds of the shares to be registered are expected to be
less than $5.0 million. If we propose to register any of our securities under
the Securities Act, either for our own account or for the account of other
security holders, other than in connection with an employee stock benefit plan
or certain business combinations involving us, the holders of 16,372,490 shares
of common stock, including 58,000 shares of common stock to be issued upon the
exercise of options and, in the case of an underwritten offering, 60,651 shares
of common stock to be issued upon the exercise of a warrant, will be entitled
to notice of the registration and will be entitled to include, at our expense,
their shares of common stock. All of these registration rights, except for
those in favor of the warrant holder, will terminate on the earlier of August
13, 2006 or when a holder is able to sell all of its shares pursuant to Rule
144 under the Securities Act in any 90-day period. These registration rights
are subject to certain conditions and limitations, including the right of the
underwriters of an offering to limit the number of shares included in any such
registration under certain circumstances.

Warrant Holder. Pursuant to the terms of the warrant, the holder of the
warrant to purchase a total of 60,651 shares of common stock is entitled to
specified rights with respect to the registration of its shares of common stock
under the Securities Act. Subject to various and customary exceptions, if we
propose to register shares of the common stock under the Securities Act in an
underwritten public offering, the holder is entitled to notice of the
registration and is entitled to include its shares of common stock issuable
upon the exercise of the warrant in the registration at our expense. The
underwriters have the right to limit the number of warrant shares included in
any such registration.

Anti-Takeover Effects of Various Provisions of Delaware Law and OneSoft's
Restated Certificate of Incorporation and Restated Bylaws

After the closing of this offering, we will be subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law. In general,
Section 203 prohibits a publicly-held Delaware corporation from engaging in a
"business combination" 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 the interested stockholder attained that status
with the approval of the board of directors or unless the business combination
is approved in a prescribed manner. "Business combinations" include mergers,
asset sales and other transactions resulting in a financial benefit to the
interested stockholder. Generally, an "interested stockholder" is a person who,
together with his affiliates and associates, owns, or

64
<PAGE>

within the prior three years did own, 15% or more of the corporation's voting
stock. This statute could prohibit or delay the accomplishment of mergers or
other takeover or change of control attempts with respect to OneSoft and,
accordingly, may discourage attempts to acquire us.

In addition, our restated certificate of incorporation and restated bylaws
that will be in effect upon the closing of this offering, the relevant
provisions of which are summarized below, may delay, defer or prevent a tender
offer or takeover attempt that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares held by stockholders.

Classified Board of Directors. Following the completion of this offering,
our board of directors will be divided into three classes serving staggered
three-year terms. Consequently, approximately one-third of the board of
directors will be elected each year. These provisions are likely to increase
the time required for stockholders to change the composition of our board of
directors. For example, in general, at least two annual meetings will be
necessary for stockholders to effect a change in the majority of our board of
directors.

Advance Notice Requirements for Stockholder Proposals and Director
Nominees. Our restated bylaws provide that, for nominations to the board of
directors or for other business to be properly brought by a stockholder before
a meeting of stockholders, the stockholder must first have given timely notice
of the proposal in writing to our Secretary. For an annual meeting, a
stockholder's notice generally must be delivered not less than 45 days nor more
than 75 days prior to the anniversary of the preceding year's mailing date. For
a special meeting, the notice must generally be delivered not later than the
later of 90 days prior to the special meeting or 10 days following the day on
which public announcement of the meeting is first made. Detailed requirements
as to the form of the notice and information required in the notice are
specified in our restated bylaws. If it is determined that business was not
properly brought before a meeting in accordance with our bylaw provisions, such
business will not be conducted at the meeting.

Stockholder Action, Special Meeting of Stockholders. Our restated
certificate of incorporation does not permit our stockholders to act by written
consent. As a result, any action to be effected by our stockholders must be
effected at a duly called annual or special meeting of the stockholders.
Special meetings of the stockholders may be called only by our board of
directors.

Transfer Agent and Registrar

The transfer agent and registrar for the common stock is .

65
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there was no public market for our common stock. An
active public market for our common stock may not develop or be sustained after
this offering. Future sales of substantial amounts of common stock, including
shares issued upon exercise of outstanding options or warrants, in the public
market after this offering could adversely affect the prevailing market price
of our common stock and could impair our ability to raise equity capital in the
future. In addition, since a limited number of shares will be available for
sale immediately after this offering due to the contractual and legal
restrictions on resale described below, sales of substantial amounts of our
common stock in the public market after the restrictions lapse could adversely
affect the prevailing market price and our ability to raise equity capital in
the future.

Upon completion of this offering, we will have outstanding shares of
common stock, based on shares outstanding at December 31, 1999, assuming no
exercise of the underwriters' over-allotment option and no exercise of
outstanding options or warrants. Of this number, all of the shares sold in this
offering will be freely tradable in the public market without restriction or
further registration under the Securities Act, unless those shares are
purchased by any of our affiliates. An affiliate of OneSoft is a person that
directly or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, OneSoft. Our current affiliates
include the individuals and entities that hold more than 10% of our stock
listed under "Principal Stockholders" as well as our other executive officers
and directors.

The remaining shares of common stock held by existing stockholders are
deemed "restricted securities" as defined under Rule 144 promulgated under the
Securities Act. Restricted securities may not be sold publicly unless they are
registered under the Securities Act or are sold pursuant to Rule 144 or another
exemption from registration. Of these shares, shares are subject to lock-up
agreements with the underwriters or directly with us, under which all of our
directors and officers and stockholders holding more than 1% of our common
stock have agreed not to transfer or dispose of, directly or indirectly, any
shares of common stock or any securities convertible into or exercisable or
exchangeable for shares of common stock, for a period of 180 days after the
date of this prospectus. Deutsche Bank Securities Inc., in some instances
together with us, may release the shares subject to the lock-up agreements in
whole or in part at any time with or without notice. Subject to these lock-up
agreements, the shares of common stock outstanding upon completion of this
offering will be available for sale in the public market as follows:

<TABLE>
<CAPTION>
Days After the Effective Shares Eligible
Date for Sale Comment
- ------------------------ --------------- ------------------------------------------------
<S> <C> <C>
On Effectiveness........ Freely tradable shares sold in this offering and
shares saleable under Rule 144(k) that are not
subject to the 180 day lock-up

90 days................. Additional shares saleable under Rules 144 and
701 that are not subject to the 180 day lock-up

180 days................ The 180 day lock-up is released and these
additional shares are saleable under Rule 144
(subject, in some cases, to volume limitations),
or Rule 144(k)

More than 180 days...... Restricted shares that are held for less than
one year and are not yet saleable under Rule 144
</TABLE>

66
<PAGE>

Rule 144

In general, under Rule 144, beginning 90 days after the date of this
prospectus, stockholders of OneSoft that have beneficially owned their shares
for at least one year, but less than two years, and affiliates of OneSoft that
have beneficially owned their shares for any period of more than one year or
who have purchased OneSoft shares in the open market, would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of:

. 1% of the number of shares of common stock then outstanding, equal to
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 of sale with the SEC.

Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us.

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 except one of our affiliates,
is entitled to sell those shares without complying with the volume limitation
or the manner of sale, public information or notice provisions of Rule 144.

Rule 701

In general, under Rule 701 of the Securities Act, any of our employees,
officers, directors, consultants or advisors who purchased shares from us in
connection with a compensatory stock or option plan or other written agreement
is eligible to resell those shares 90 days after the effective date of this
offering in reliance on Rule 144, but without compliance with certain
restrictions, including the holding period contained in Rule 144. However,
shares issued pursuant to Rule 701 are subject to lock-up agreements and will
only become eligible for sale at the earlier of the expiration of the 180-day
lock-up agreements or the obtaining of the prior written consent of Deutsche
Bank Securities Inc.

Registration Rights

At any time more than six months after the closing of this offering, the
holders of shares of our common stock and shares of our common stock
issuable upon the exercise of outstanding options and warrants, or their
transferees, will be entitled to rights to register their shares under the
Securities Act. See "Description of Capital Stock--Registration Rights."
Registration of these shares under the Securities Act would result in these
shares becoming freely tradable without restriction under the Securities Act
immediately upon the effectiveness of the registration, except for shares
purchased by affiliates.

Stock Options

Promptly following this offering, we will file a registration statement
under the Securities Act covering all shares of common stock subject to
outstanding options or options reserved for issuance under our Amended and
Restated 1997 Employee, Director and Consultant Stock Option Plan. Based on the
number of shares subject to options outstanding or reserved for issuance under
this plan at December 31, 1999, this registration statement would cover

67
<PAGE>

approximately shares. The registration statement will automatically become
effective upon filing. Accordingly, subject to Rule 144 volume limitations
applicable to our affiliates, shares registered under the registration
statement will be available for sale in the open market immediately and
shares registered under the registration statement will be available for sale
in the open market immediately after the 180-day lock-up agreements expire.

Warrants

As of December 31, 1999, we had outstanding a warrant to purchase 60,651
shares of common stock. When this warrant is exercised and the exercise price
is paid in cash, the shares must be held for one year before they can be sold
under Rule 144. This warrant also contains "net exercise provisions." These
provisions allow the holder to exercise the warrant for a lesser number of
shares of common stock in lieu of paying cash. The shares of common stock
issued in a "net exercise" could be publicly sold under Rule 144 immediately
after exercise, subject to the 180-day lock-up period.

68
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the underwriting agreement, the
underwriters, named below through their representatives Deutsche Bank
Securities Inc., Friedman, Billings, Ramsey & Co., Inc. and SoundView
Technology Group, Inc. have severally agreed to purchase from OneSoft the
following respective number of shares of common stock at the initial public
offering price less the underwriting discounts and commissions set forth on the
cover page of this prospectus.

<TABLE>
<CAPTION>
Number of
Underwriter Shares
- ----------- ---------
<S> <C>
Deutsche Bank Securities Inc. .......................................
Friedman, Billings, Ramsey & Co., Inc................................
SoundView Technology Group, Inc. ....................................
---
Total..............................................................
===
</TABLE>

The underwriting agreement provides that the obligations of the underwriters
are subject to certain conditions precedent and that the underwriters will
purchase all shares of the common stock offered hereby, other than those
covered by the over-allotment option described below, if any of such shares are
purchased.

The underwriters propose to offer the shares of common stock to the public
at public offering price set forth on the cover page of this prospectus and to
dealers at a price that represents a concession not in excess of $ per share,
under the public offering price. The underwriters may allow, and these dealers
may re-allow, a concession of not more than $ per share to other dealers.
After the initial public offering, representatives of the underwriters may
change the offering price and other selling items.

We, and the selling stockholders, have granted the underwriters an option,
to purchase up to and additional shares of common stock, respectively at the
public offering price less the underwriting discounts and commissions set forth
on the cover page of this prospectus. This option is exercisable not later than
30 days after the date of this prospectus. The underwriters may exercise this
option only to cover over-allotments made in connection with the sale of the
common stock offered hereby. To the extent the underwriters exercise this
option, each of the underwriters will become obligated, subject to conditions,
to purchase approximately the same percentage of additional shares of common
stock as the number of shares of common stock offered hereby. We and the
selling stockholders will be obligated, pursuant to the option, to sell these
additional shares of common stock to the underwriters to the extent the option
is exercised. If any additional shares of common stock are purchased, the
underwriters will offer the additional shares on the same terms as those on
which the shares are being offered.

We have requested that, of the shares of common stock to be sold in this
offering, up to shares be offered at the price to the public set forth on
the cover page of this prospectus to our directors, officers, employees and
business associates. As a result, the number of shares of common stock
available for sale to the general public will be reduced to the extent these
persons purchase the reserved shares. The underwriters will offer to the
general public, on the same basis as the other shares to be sold in this
offering, any reserved shares that were not purchased.

The underwriting fee is equal to the public offering price per share of
common stock less the amount paid by the underwriters to us per share of common
stock. The underwriting fee is % of the initial public offering price. We
have agreed to pay the underwriters the following

69
<PAGE>

fees, assuming either no exercise or full exercise by the underwriters of the
underwriters' over-allotment option:

<TABLE>
<CAPTION>
Total Fees
-----------------------------------------
Without Exercise of With Full Exercise of
Fee Per Over-Allotment Over-Allotment
Share Option Option
------- ------------------- ---------------------
<S> <C> <C> <C>
Fees paid by OneSoft..........
</TABLE>

In addition, we estimate that our share of the total expenses of this
offering, excluding underwriting discounts and commissions, will be
approximately $ .

We and the selling stockholders have agreed to indemnify the underwriters
against some specified types of liabilities, including liabilities under the
Securities Act and to contribute to payments the underwriters may be required
to make in respect of any of these liabilities.

Each of our officers and directors and certain of our stockholders and
holders of options and warrants to purchase our stock, have agreed not to
offer, sell, contract to sell or otherwise dispose of, or enter into any
transaction that is designed to, or could be expected to, result in the
disposition of any portion of our common stock held by these persons for a
period of 180 days after the effective date of the registration statement, of
which this prospectus is a part, without the prior written consent of Deutsche
Bank Securities Inc. This consent may be given at any time without public
notice. We have entered into a similar agreement with the representatives of
the underwriters.

Transfers or dispositions can be made during the lock-up periods in the case
of gifts for estate planning purposes where the donee signs a lock-up
agreement.

The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

To facilitate the offering of our common stock, the underwriters may engage
in transactions that stabilize, maintain or otherwise affect the market price
of our common stock. Specifically, the underwriters may over-allot shares of
our common stock in connection with this offering, thus creating a short
position in our common stock for their own account. A short position results
when an underwriter sells more shares of common stock than that underwriter is
committed to purchase. Additionally, to cover the over-allotments or to
stabilize the market price of our common stock, the underwriters may bid for,
and purchase, shares of our common stock in the open market. Finally, the
representatives, on behalf of the underwriters, may also reclaim selling
concessions allowed to an underwriter or dealer if the underwriting syndicate
repurchases shares distributed by that underwriter or dealer. Any of these
activities may maintain the market price of our common stock at a level above
that which might otherwise prevail in the open market. These transactions may
be effected on the Nasdaq National Market or otherwise. The underwriters are
not required to engage in these activities and, if commenced, may end any of
these activities at any time.

At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares for friends and family members of our
executive officers and other persons that are affiliated with companies with
whom we have a business relationship, such as executives of companies that
market, sell or otherwise promote our products. None of these shares will be
subject to lock-up agreements.

The number of shares of our common stock available for sale to the general
public will be reduced to the extent these reserved shares are purchased. Any
reserved shares that are not purchased by these persons will be offered by the
underwriters to the general public on the same basis as the other shares in
this offering.

70
<PAGE>

The representatives of the underwriters have advised us that the
underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.

Deutsche Bank Securities Inc. served as placement agent in connection with
our Series C preferred stock financing and was paid a cash placement agent fee.
Deutsche Bank Securities Inc. received a warrant for the purchase of 60,651
shares of our common stock.

Pricing of this Offering

Prior to this offering, there has been no public market for our common
stock. Consequently, the initial public offering price for our common stock has
been determined by negotiation among us and the representatives of the
underwriters. Among the primary factors considered in determining the public
offering price were:

. prevailing market conditions;

. our results of operations in recent periods;

. the present stage of our development;

. the market capitalizations and stages of development of other companies
that we and the representatives of the underwriters believe to be
comparable to our business; and

. estimates of our business potential.

71
<PAGE>

LEGAL MATTERS

The validity of the common stock offered by this prospectus will be passed
upon for us by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Boston,
Massachusetts. Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. and certain
of its members have options to purchase a total of 156,000 shares of our common
stock. Certain issues will be passed upon for the underwriters by Brobeck,
Phleger & Harrison LLP, Washington, D.C.

EXPERTS

Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1997 and 1998, and for each of the three years in
the period ended December 31, 1998, as set forth in their report. We have
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.

72
<PAGE>

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-l under the Securities Act of 1933 regarding the common
stock offered by us. This prospectus does not contain all of the information
included in the registration statement and the exhibits filed as part of the
registration statement. Particular items are omitted in accordance with the
rules and regulations of the Securities and Exchange Commission. For further
information with respect to OneSoft and the common stock offered by this
prospectus, reference is made to the registration statement and its exhibits
and schedules. You may review a copy of the registration statement, including
exhibits, at the Securities and Exchange Commission located at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, Seven World Trade Center, 13th
Floor, New York, New York 10048 or Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of all or any part of the
registration statement may be obtained from that office after payment of fees
prescribed by the Securities and Exchange Commission. The Securities and
Exchange Commission maintains a Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Securities and Exchange Commission at
http://www.sec.gov. Please call the Securities and Exchange Commission at 1-
800-SEC-0330 for further information on the operation of the public reference
rooms.

Upon receipt of a request by an investor or his or her representative prior
to , 2000 (25 days after the date of this prospectus), we shall transmit
or cause to be transmitted promptly, without charge, a paper copy of the
prospectus.

We intend to provide our stockholders with annual reports containing
financial statements audited by an independent public accounting firm and to
make available to our stockholders quarterly reports containing unaudited
financial data for the first three quarters of each year.

73
<PAGE>

ONESOFT CORPORATION

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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

F-1
<PAGE>

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

Board of Directors
OneSoft Corporation

We have audited the accompanying consolidated balance sheets of OneSoft
Corporation as of December 31, 1998 and 1997, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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, the financial statements referred to above present fairly,
in all material respects, the financial position of OneSoft Corporation at
December 31, 1998 and 1997 and the results of its operations and its cash flows
for each of the three years ended December 31, 1998, in conformity with
generally accepted accounting principles.

/s/ Ernst & Young LLP

May, 26 1999
McLean, VA

F-2
<PAGE>

ONESOFT CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31, September 30, 1999
---------------------- ------------------------
1997 1998 Actual Pro Forma
---------- ---------- ----------- -----------
(Unaudited)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents... $ 733,366 $2,555,843 $22,998,177 $22,998,177
Accounts receivable, net of
allowance.................. 82,489 392,193 2,878,278 2,878,278
Other receivables........... -- 193,257 -- --
Other current assets........ 11,890 161,317 1,392,138 1,392,138
---------- ---------- ----------- -----------
Total current assets........ 827,745 3,302,610 27,268,593 27,268,593
Notes receivable--related
party...................... 412,750 441,036 964,518 964,518
Other non-current assets.... -- -- 646,825 646,825
Property and equipment,
net........................ 150,334 350,826 1,728,295 1,728,295
---------- ---------- ----------- -----------
Total assets................ $1,390,829 $4,094,472 $30,608,231 $30,608,231
========== ========== =========== ===========
Liabilities and stockholders'
equity
Current liabilities:
Accounts payable............ $ 160,419 $ 306,515 $ 2,279,720 $ 2,279,720
Accrued payroll............. 83,426 415,527 1,783,667 1,783,667
Other current liabilities... 39,293 34,033 41,780 41,780
Deferred revenue............ -- -- 762,758 762,758
Capital lease obligations--
current.................... 26,991 40,231 157,057 157,057
Notes payable--related
party...................... 24,000 -- -- --
---------- ---------- ----------- -----------
Total current liabilities... 334,129 796,306 5,024,982 5,024,982
Capital lease obligations--
noncurrent.................. 31,099 33,489 84,912 84,912
Minority interest............ 41,351 20,911 17,692 17,692
Redeemable convertible
preferred stock; $0.01 par
value, 9,757,031 shares
authorized, 766,770,
3,192,530, 9,681,158 and 0
issued and outstanding...... 1,750,000 7,604,034 44,097,760 --
Stockholders' (deficit)
equity:
Common stock; $0.001 par
value, 20,242,969 shares
authorized, 5,950,620,
5,977,570, 6,081,070 and
15,762,228 shares issued
and outstanding............ 5,951 5,978 6,081 15,760
Additional capital.......... -- 1,644 4,528,710 48,616,791
Unearned stock option
compensation............... (50,614) (38,567) (1,978,076) (1,978,076)
Accumulated deficit......... (721,087) (4,329,323) (21,173,830) (21,173,830)
---------- ---------- ----------- -----------
Total stockholders'
(deficit) equity........... (765,750) (4,360,268) (18,617,115) 25,480,645
---------- ---------- ----------- -----------
Total liabilities and
stockholders' (deficit)
equity..................... $1,390,829 $4,094,472 $30,608,231 $30,608,231
========== ========== =========== ===========
</TABLE>

F-3
<PAGE>

ONESOFT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
----------------------------------- -------------------------
1996 1997 1998 1998 1999
---------- ---------- ----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Application services...... $ 240,100 $ 170,891 $ 560,890 $ 462,227 $ 1,071,005
Professional services..... 1,834,165 1,834,509 994,668 827,677 3,575,566
---------- ---------- ----------- ----------- ------------
Total revenues.......... 2,074,265 2,005,400 1,555,558 1,289,904 4,646,571
Cost of revenues............ 1,457,841 1,399,554 1,061,011 626,102 3,114,557
---------- ---------- ----------- ----------- ------------
Gross profit................ 616,424 605,846 494,547 663,802 1,532,014
Operating expenses:
Research and development
costs.................... -- 254,456 1,044,358 663,819 2,813,519
Sales and marketing
expenses................. -- -- 1,190,009 434,320 7,549,367
General and administrative
expenses................. 568,517 955,454 2,011,916 1,364,808 4,744,263
Stock and stock option
compensation expense..... -- 9,622 12,047 9,034 2,545,529
---------- ---------- ----------- ----------- ------------
Income (loss) from
operations................. 47,907 (613,686) (3,763,783) (1,808,179) (16,120,664)
Other income (expenses):
Interest income........... -- 16,902 169,128 113,711 290,284
Interest expense.......... (133) (17,615) (13,514) (9,067) --
---------- ---------- ----------- ----------- ------------
(133) (713) 155,614 104,644 290,284
---------- ---------- ----------- ----------- ------------
Net income (loss) before
taxes and minority
interest................... 47,774 (614,399) (3,608,169) (1,703,535) (15,830,380)
Provision for income taxes.. -- -- -- -- --
Minority interest in
consolidated subsidiaries.. 736 13,893 17,967 9,018 3,219
---------- ---------- ----------- ----------- ------------
Net income (loss)........... $ 48,510 $ (600,506) $(3,590,202) $(1,694,517) $(15,827,161)
Accretion of preferred
stock...................... -- -- 18,034 12,139 1,017,346
---------- ---------- ----------- ----------- ------------
Net income (loss) available
to shareholders............ 48,510 (600,506) (3,608,236) (1,706,656) (16,844,507)
========== ========== =========== =========== ============
Income (loss) per share
basic and diluted.......... $0.02 $(0.10) $(0.60) $(0.29) $(2.79)
========== ========== =========== =========== ============
Pro forma loss per share
basic and diluted.......... $(0.44) $(1.46)
=========== ============
Weighted average shares used
in calculation of basic and
diluted income (loss) per
share...................... 3,000,000 5,832,278 5,968,736 5,965,692 6,027,792
========== ========== =========== =========== ============
Weighted average shares used
in calculation of Pro forma
loss per share............. 8,182,430 10,850,675
========== ========== =========== =========== ============
</TABLE>

F-4
<PAGE>

ONESOFT CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
Common Stock Unearned Total
----------------- Stock Additional Accumulated Stockholders'
Shares Amount Compensation Capital Deficit Equity (Deficit)
--------- ------ ------------ ---------- ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1995................... 3,000,000 $3,000 $ -- $ -- $ (12,376) $ (9,376)
Net income............. -- -- -- -- 48,510 48,510
--------- ------ ----------- ---------- ------------ ------------
Balance, December 31,
1996................... 3,000,000 3,000 -- -- 36,134 39,134
Recapitalization....... 3,360,000 3,360 -- (3,360) -- --
Sale of common stock... 340,620 341 -- 199,659 -- 200,000
Issuance of stock
options............... -- -- (60,236) 60,236 -- --
Amortization of
unearned stock option
compensation.......... -- -- 9,622 -- -- 9,622
Repurchase of common
stock................. (750,000) (750) -- (256,535) (156,715) (414,000)
Net loss............... -- -- -- -- (600,506) (600,506)
--------- ------ ----------- ---------- ------------ ------------
Balance, December 31,
1997................... 5,950,620 5,951 (50,614) -- (721,087) (765,750)
Exercise of stock
options............... 26,950 27 -- 1,644 -- 1,671
Amortization of
unearned stock option
compensation.......... -- -- 12,047 -- -- 12,047
Accretion of preferred
stock................. -- -- -- -- (18,034) (18,034)
Net loss............... -- -- -- -- (3,590,202) (3,590,202)
--------- ------ ----------- ---------- ------------ ------------
Balance, December 31,
1998................... 5,977,570 5,978 (38,567) 1,644 (4,329,323) (4,360,268)
Exercise of stock
options............... 103,500 103 -- 57,028 -- 57,131
Issuance of stock
options............... -- -- (2,244,868) 4,470,038 -- 2,225,170
Amortization of
unearned stock
compensation.......... -- -- 305,359 -- -- 305,359
Accretion of preferred
stock................. -- -- -- -- (1,017,346) (1,017,346)
Net loss............... -- -- -- -- (15,827,161) (15,827,161)
--------- ------ ----------- ---------- ------------ ------------
Balance at September 30,
1999................... 6,081,070 $6,081 $(1,978,076) $4,528,710 $(21,173,830) $(18,617,115)
========= ====== =========== ========== ============ ============
</TABLE>

F-5
<PAGE>

ONESOFT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
---------------------------------- -------------------------
1996 1997 1998 1998 1999
--------- ---------- ----------- ----------- ------------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss)...... $ 48,510 $ (600,506) $(3,590,202) $(1,694,517) $(15,827,161)
Adjustments to
reconcile net income
(loss) to net cash
Provided by (used in)
operating activities:
Depreciation........... 10,690 27,395 118,543 49,901 833,325
Amortization of
unearned stock
compensation.......... -- 9,622 12,047 9,035 2,545,529
Minority interest...... (736) (13,893) (17,967) (6,700) (3,219)
Changes in operating
assets and
liabilities:
Accounts receivable... (305,718) 223,233 (309,704) (358,016) (2,486,085)
Other receivables..... -- -- (193,257) (77,400) 193,257
Other current assets.. -- (11,463) (149,427) 5,461 (1,877,648)
Accounts payable...... 195,935 (28,438) 146,096 (111,249) 1,973,205
Accrued payroll....... 56,732 26,696 332,101 213,329 1,368,140
Other current
liabilities.......... 34,220 7,293 (4,796) 36,954 924,579
--------- ---------- ----------- ----------- ------------
Net cash provided by
(used in) operating
activities............ 39,633 (360,061) (3,656,566) (1,933,202) (12,356,078)
--------- ---------- ----------- ----------- ------------
Investing activities
Acquisition of property
and equipment......... (53,777) (48,474) (260,887) (125,932) (2,042,545)
Minority interest
contribution to Sports
Warehouse, Inc........ -- 50,000 -- -- --
Notes receivable--
related party......... -- (412,750) (46,286) -- (523,482)
--------- ---------- ----------- ----------- ------------
Net cash used in
investing activities.. (53,777) (411,224) (307,173) (125,932) (2,566,027)
--------- ---------- ----------- ----------- ------------
Financing activities
Repurchase of common
stock................. -- (414,000) -- -- --
Exercise of stock
options............... -- -- 1,671 1,671 57,131
Sale of common stock... -- 200,000 -- -- --
Sale of redeemable
preferred stock, net
of offering costs..... -- 1,750,000 5,836,000 5,836,000 35,476,380
Payments of capital
lease obligations..... -- (34,230) (27,455) (56,345) (169,072)
Repayment of notes
payable--related
party................. -- (30,000) (24,000) -- --
Borrowings under notes
payable--related
party................. 10,000 24,000 -- -- --
--------- ---------- ----------- ----------- ------------
Net cash provided by
financing activities.. 10,000 1,495,770 5,786,216 5,781,326 35,364,439
--------- ---------- ----------- ----------- ------------
Net (decrease) increase
in cash............... (4,144) 724,485 1,822,477 3,722,192 20,442,334
Cash at beginning of
year.................. 13,025 8,881 733,366 733,366 2,555,843
--------- ---------- ----------- ----------- ------------
Cash at end of year.... $ 8,881 $ 733,366 $ 2,555,843 $ 4,455,558 $ 22,998,177
========= ========== =========== =========== ============
</TABLE>

F-6
<PAGE>

ONESOFT CORPORATION

NOTES TO FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies

Organization

OneSoft, Inc. ("The Company") is a leading provider of Internet commerce
software and services that enable businesses to use the Internet as a commerce
channel with their customers, partners and suppliers. The Company was
incorporated in Virginia in November 1995 and in June 1997 the Company merged
with a shell company resulting in the surviving company being incorporated in
Delaware. The shareholder ownership percentages of the Company were the same
both prior and subsequent to this transaction. From inception, the Company has
conducted development efforts resulting in the creation of "OneCommerce", our
Internet commerce software, and the services used to deploy the application for
our business customers. In 1997 the Company began licensing its software, which
has evolved into offering companies a comprehensive solution to efficiently
build, grow and extend their Internet commerce businesses rapidly and cost-
effectively, thus maximizing their revenue opportunities. The Company holds a
70% equity interest in Sports Warehouse, Inc. which it has consolidated for
financial statement purposes.

Recapitalization

During the first quarter of 1997, the Company acquired all of the
outstanding common stock of Interflowww, Inc. for 3,360,000 shares of the
Company's founders share. Interflowww, Inc. was majority owned by a shareholder
of the Company, and its limited operations since inception had been funded
entirely by OneSoft.

Interim Financial Information (Unaudited)

The historical financial information and pro forma information as of
September 30, 1999 and for the nine months ended September 30, 1998 and 1999 is
unaudited but includes all adjustments, consisting of only normal recurring
adjustments, that in the opinion of management is necessary for a fair
presentation of the Company's financial position, operating results, and cash
flows for such periods. Operating results for the nine month period ended
September 30, 1999 are not indicative of results to be expected for fiscal year
of 1999 or any future period.

Principles of Consolidation

All significant intercompany accounts and transactions have been eliminated
in consolidation.

Revenue Recognition

The Company recognizes revenue in accordance with the American Institute of
Certified Public Accountants' Statement of Position 97-2, "Software Revenue
Recognition" ("SOP 97-2"), as amended by Statement of Position 98-4, "Deferral
of the Effective Date of a Provision of SOP 97-2" ("SOP 98-4"). The Company
derives revenue from application and professional services. Applications
services revenues consist primarily of license fees, software maintenance fees
and fees for managed services that include application outsourcing, technical
support and transaction services. The Company derives revenue from the
provision of professional services that assist clients in the planning, design
and implementation of their Internet commerce business.

F-7
<PAGE>

ONESOFT CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

1. Organization and Significant Accounting Policies (continued)

Revenues from license fees is recognized when persuasive evidence of an
agreement exists, delivery of the product has occurred, no significant company
obligations with regard to installation or implementation of the software
remain, the fee is fixed or determinable and collection is probable. Revenues
on arrangements with customers that are not the ultimate end user (primarily
resellers) is recognized upon receipt of a reseller report of the sale and the
Company's shipment of the licensed software. Advanced payments are recorded as
deferred revenue until the product is shipped, services are delivered or
obligations are met. The Company's products do not require significant
customization.

Revenue related to maintenance is recognized on a straight line basis over
the period maintenance is provided. Professional services revenue, which is
substantially time and materials related, is recognized as the services are
provided.

In December 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-9, "Modification of SOP 97-2, Software Revenue
Recognition, With Respect to Certain Transactions" ("SOP 98-9"). SOP 98-9
requires use of the "residual method" for recognition of revenues when vendor-
specific objective evidence exists for undelivered elements but does not exist
for delivered elements of a software arrangement. The Company will be required
to comply with the provisions of SOP 98-9 for transactions entered into
beginning January 1, 2000. The Company does not believe that the adoption of
SOP 98-9 will have a material effect on its financial position or results of
operations.

Stock Split

In 1998, the Company declared a 10 to 1 stock split of its common stock. On
March 1, 1999, the Company declared an additional 10 to 1 stock split of its
Series A preferred stock. Accordingly all prior period stock balances have been
restated to reflect the stock splits as if both splits had occurred at the
beginning of the earliest period presented.

Fair Value of Financial Instruments

The Company considers the recorded value of its financial assets and
liabilities, consisting primarily of cash, accounts receivable, notes
receivable, current liabilities and capital lease obligations to approximate
the fair value of the respective assets and liabilities at December 31, 1997
and 1998.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ materially from those estimates.

Concentration of Credit Risk

Financial instruments which subject the Company to concentrations of credit
risk primarily consist of cash, cash equivalents and accounts receivable. The
Company maintains its cash and cash equivalents principally in domestic
financial institutions of high credit standing.

F-8
<PAGE>

ONESOFT CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

1. Organization and Significant Accounting Policies (continued)

The Company's accounts receivable are derived primarily from the sale of
software products and related services. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral.

At December 31, 1997 and 1998 and September 30, 1999, five customers
accounted for approximately 86%, 88%, and 76% respectively of the total
accounts receivable balance.

Income Taxes

The Company accounts for taxes under Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS 109). Under SFAS 109,
deferred tax liabilities and assets are determined based on the differences
between the financial statement and tax basis of assets and liabilities using
enacted rates expected to be in effect during the year in which the
differences reverse.

Property and Equipment

Property and equipment are stated at cost and depreciated using the
straight-line method over the estimated useful life of the asset, ranging from
three to five years. Leasehold improvements are depreciated over the lesser of
the useful life of the addition or the lease term.

Product Development

The Company expenses research and development costs as they are incurred.
Product development costs for the years ended December 31, 1996, 1997 and 1998
and nine months ended September 30, 1998 and 1999 were $0, $254,456,
$1,044,358, $663,819 and $2,813,519, respectively.

Reclassification

Certain prior year balances have been reclassified to conform with the 1998
presentation.

2. Accounts Receivable & Other Receivables

Accounts receivable consist of the following:

<TABLE>
<CAPTION>
December 31,
------------------ September 30,
1997 1998 1999
-------- -------- -------------
<S> <C> <C> <C>
Billed receivables......................... $100,511 $369,447 $3,075,361
Unbilled receivables....................... 15,959 103,280 --
Allowance for possible losses.............. (33,981) (80,534) (197,083)
-------- -------- ----------
Total...................................... $ 82,489 $392,193 $2,878,278
======== ======== ==========
</TABLE>

Other receivables consist of amounts reimbursable to the Company primarily
as the result of equipment leases.

F-9
<PAGE>

ONESOFT CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

3. Notes Receivable--Related Party

On December 1, 1997, the Company loaned an officer of the Company $412,333
to purchase 750,000 shares of the Company's common stock from a third party.
The note is due on December 1, 2002, accrues interest at 6.02% per annum, and
is secured by the 750,000 shares of OneSoft common stock and other assets. At
December 31, 1998, the outstanding loan is $441,036 consisting of principal of
$412,333 and accrued interest of $28,286. At September 30, 1999, the
outstanding loan is $460,948 consisting of principal of $412,333 and accrued
interest of $48,615.

On August 13, 1999 the Company loaned an officer of the Company $500,000.
The loan is due on August 13, 2002, accrues interest at 5.43% per annum, and
is secured by shares of the Company's common stock. At September 30, 1999 the
outstanding loan is $503,570 consisting of principal of $500,000 and accrued
interest of $3,570.

4. Property and Equipment

Property and equipment consist of the following:

<TABLE>
<CAPTION>
December 31,
------------------ September 30,
1997 1998 1999
-------- -------- -------------
<S> <C> <C> <C>
Equipment................................ $152,885 $216,075 $ 502,438
Furniture................................ 10,943 101,304 251,293
Leasehold improvements................... 24,591 36,502 937,738
Software................................. -- 153,573 507,785
-------- -------- ----------
188,419 507,454 2,199,254
Less accumulated depreciation and
amortization............................ (38,085) (156,628) (470,959)
-------- -------- ----------
Total.................................... $150,334 $350,826 $1,728,295
======== ======== ==========
</TABLE>

5. Notes Payable

At December 31, 1997, the Company had unsecured notes payable of $24,000 to
a company controlled by a stockholder of the Company. This note was due on
demand and accrued interest at a rate of 9.5 % per annum. This note was paid
in full during 1998.

The Company paid interest of approximately $0, $7,615, $13,500, $9,066 and
$26,648 related to all of its notes payable and capital leases for the years
ended December 31, 1996, 1997 and 1998 and the nine months ended September 30,
1998 and 1999, respectively.

6. Stockholders' Equity and Redeemable Convertible Preferred Stock

Common Stock

On April 13, 1997, the Company sold 340,620 shares of common stock for
$.587 per share.

On December 1, 1997, the Company purchased 750,000 shares of common stock
from a former officer of the Company for $414,000.

F-10
<PAGE>

ONESOFT CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

6. Stockholders Equity and Redeemable Convertible Preferred Stock (continued)

Redeemable Convertible Preferred Stock

On November 14, 1997, the Company sold 766,770 shares of Series A Mandatory
Redeemable Convertible Preferred Stock for proceeds of $1,750,000.

On March 13, 1998, the Company sold 147,220 shares of Series A Mandatory
Redeemable Convertible Preferred Stock for proceeds of $336,000.

In June 1998, the Company sold 2,278,540 shares of Series A Mandatory
Redeemable Convertible Preferred Stock for proceeds of $5,500,000.

On March 1, 1999 the Company sold 2,023,857 shares of Series B Mandatory
Redeemable Convertible Preferred Stock for proceeds of $7.5 million. In
conjunction with this sale, the Company declared a 10 to 1 stock split for
series A preferred stock. All prior period stock balances have been restated to
reflect the stock split as if it had occurred at the beginning of the earliest
period.

On August 13, 1999 the Company sold 4,464,771 shares of Series C Mandatory
Redeemable Convertible Preferred Stock for net proceeds of approximately $29.4
million.

All classes of the Company's Mandatory Redeemable Convertible Preferred
Stock (collectively referred to as the "Preferred Stock") convert into an
equivalent number of common shares at the holders discretion at any time after
issuance. The Preferred Stock is entitled to dividends, payable if and when
declared by the board of directors. The Preferred Stock has voting rights on an
as if converted basis. The Preferred Stock will convert into common stock if
the Company is sold or holds a public offering of equity securities, as defined
in the agreement. The Preferred Stock has certain anti-dilutive and future
registration provisions as defined in the agreement. The Preferred Shares have
liquidation preferences over common shares. Accretion of the preferred shares
for the year ended December 31, 1998 and the nine months ended September 30,
1999, respectively. 1999 was $18,034 and $1,017,346, respectively.

Stock Options

Statement of Financial Accounting Standard (SFAS) No. 123, "Accounting for
Stock-Based Compensation," requires a fair value based methodology of
accounting for all stock option plans. The Company has elected to follow APB 25
and related interpretations in accounting for its employee stock options and
has provided pro forma fair value disclosure under SFAS No. 123. Under APB 25,
because the exercise price of the Company's stock options equal or exceed the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.

During 1997, the Company adopted the 1997 Stock Option Plan (the "Plan").
Under the Plan, 3,000,000 shares of common stock are reserved for issuance.
During 1999, the Company's Board of Directors increased the number of shares of
common stock that can be issued under the Plan to 4,000,000. Options under the
Plan may be of two types: non qualified stock options and incentive stock
options. All employee options expire after 3 months from the employee
termination date. Options vest over periods not to exceed 5 years and the
contractual term of the options is 10 years from the date of grant. At December
31, 1997 and 1998 and September 30, 1999 the Company had 1,908,960, 1,351,510
and 643,520 options available for grant under the plan.

F-11
<PAGE>

ONESOFT CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

6. Stockholders Equity and Redeemable Convertible Preferred Stock (continued)

The Company recorded expense of $9,622, $12,047 and $320,359 during the
years ended December 31, 1997 and 1998 and the nine months ended September 30,
1999 as a result of the issuance of stock options to employees with exercise
prices less than the fair market value of the Company's common stock at the
date of issuance.

The Company recorded an additional $2,225,170 of expense related to the fair
value of the options issued to non-employees. Of this amount $363,170 related
to services performed during 1999 by non-employees and $1,862,000 of the
balance resulted from the issuance to a consultant of an option for 250,000
shares of common stock with and exercise price of $0.552 per share. These
options vest upon this individual meeting certain sales goals, prior to
December of 2000, pursuant to the option agreement. The Company has accounted
for these options under SOP 96-18 and accordingly recorded the variable
accounting for the options through September 30, 1999.

Pro forma information regarding net income is required by SFAS No. 123, and
has been determined as if the Company had accounted for its stock options under
the fair value method of that statement. The fair value for these options was
estimated at the date of grant using the minimum valuation method and the
following assumptions: risk free interest rate 6%; a dividend yield of 0%; and
weighed average expected life of 4 years. For purposes of pro forma disclosure,
the estimated fair value of the options is amortized to expense over the
options' vesting period.

The weighted average fair values of the options granted in 1997 with a stock
price equal to the exercise price and with a stock option price greater than
the exercise price is $0.14 and $0.44 per share, respectively. The weighted
average fair values of the options granted in 1998 with a stock price equal to
the exercise price is $0.14 per share. The weighted average fair values of the
options granted in 1999 with a stock price equal to the exercise price and with
a stock price greater than the exercise price are $1.53 and $3.39 per share,
respectively.

<TABLE>
<CAPTION>
Nine Months
Year Ended December Ended
31, September
---------------------- 30,
1997 1998 1999
--------- ----------- ------------
<S> <C> <C> <C>
Pro forma net loss................... $(609,822) $(3,653,083) $(17,060,591)
Pro forma basic and diluted net loss
per share(1)........................ $(0.10) $(0.61) $(2.83)
</TABLE>
- --------
(1) The pro forma net loss reflects the pro forma weighted outstanding shares
for the years ended December 31, 1997 and 1998 and the nine months ended
September 30, 1999. See note 11.

F-12
<PAGE>

ONESOFT CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

6. Stockholders Equity and Redeemable Covertible Preferred Stock (continued)

The Company's stock option activity and related information is as follows:

<TABLE>
<CAPTION>
Weighted-
Average
Number of Exercise
Options Price
--------- ---------
<S> <C> <C>
Outstanding at January 1, 1997......................... -- $ --
Granted............................................... 1,091,040 0.53
Exercised............................................. -- --
Forfeited............................................. -- --
--------- -----
Outstanding at December 31, 1997....................... 1,091,040 0.53
Granted............................................... 853,150 0.53
Exercised............................................. (26,950) 0.06
Canceled/Forfeited.................................... (268,750) 0.49
--------- -----
Outstanding at December 31, 1998....................... 1,648,490 0.55
Granted............................................... 2,156,490 2.10
Exercised............................................. (103,500) 0.55
Canceled/Forfeited.................................... (345,000) 1.04
--------- -----
Outstanding at September 30, 1999...................... 3,356,480 $1.50
========= =====
Exercisable at December 31, 1998...................... 615,416 $0.55
========= =====
Exercisable at September 30, 1999..................... 1,131,049 $0.55
========= =====
</TABLE>

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

<TABLE>
<CAPTION>
September 30, 1999 September 30, 1999
Options Outstanding Options Exercisable
--------------------- ---------------------
Weighted- Weighted-
Average Average
Range of Number Exercise Number Exercise
Exercise Price Outstanding Price Exercisable Price
- -------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Less than $1.00..................... 2,576,950 $0.47 1,116,299 $0.45
$1.00 to $4.00...................... 377,000 3.97 -- --
$4.01 to $8.00...................... 402,530 5.45 14,750 5.90
--------- ---------
3,356,480 1,131,049
========= =========
</TABLE>

The average remaining contractual lives for options outstanding at December
31, 1998 and September 31, 1999 was 9 years and 8 years respectively.

7. Income Taxes

At December 31, 1998, the Company had a net operating loss carryforwards for
tax purposes of approximately $3.9 million, which principally expires in 2018.
The timing and manner in which the operating loss carryforward may be utilized
in any year by the Company will be limited by the Company's ability to generate
future earnings and certain other provisions of the US tax code.

F-13
<PAGE>

ONESOFT CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

7. Income Taxes (continued)

Net deferred tax assets at December 31, consist of:

<TABLE>
<CAPTION>
1997 1998
--------- -----------
<S> <C> <C>
Net operating loss carryforward...................... $ 211,284 $ 1,507,510
Allowance for bad debts.............................. 13,592 32,214
Other................................................ 2,057 25,558
Valuation allowance.................................. (226,933) (1,565,282)
--------- -----------
Net deferred tax asset............................... $ -- $ --
========= ===========
</TABLE>

As the Company does not have a history of consistent earnings and no
assurance can be made of future earnings, a valuation allowance in the amount
of the deferred tax asset has been recorded.

A summary of items which cause the recorded income taxes to differ from the
statutory Federal income tax rate is as follows:

<TABLE>
<CAPTION>
Year ended December 31,
------------------------
1997 1998
----------- ------------
<S> <C> <C>
Tax expense (benefit) at statutory Federal
rate........................................... $ (208,896) $ (1,226,777)
Effect of:
State income tax, net......................... (36,864) (216,490)
Stock issuance costs.......................... -- 55,164
Other......................................... 18,827 49,755
Increase in valuation allowance............... 226,933 1,338,348
---------- ------------
Income tax expense (benefit).................... $ -- $ --
========== ============
</TABLE>

The Company paid no income taxes during the years ended December 31, 1998
and 1997 and the nine months ended September 30, 1999.

8. Leases

The Company currently leases office space and equipment under non-cancelable
operating leases. The future minimum lease payments under non-cancelable
operating leases at December 31, 1998 are as follow:

<TABLE>
<CAPTION>
Fiscal Year
-----------
<S> <C>
1999................................................................ $243,300
2000................................................................ 210,694
2001................................................................ 86,171
--------
Total............................................................... $540,165
========
</TABLE>

F-14
<PAGE>

ONESOFT CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

8. Leases (continued)

The Company currently leases equipment and furniture under non-cancelable
capital leases. The future minimum lease payments under non-cancelable capital
leases at December 31, 1998 are as follow:

<TABLE>
<CAPTION>
Fiscal Year
- -----------
<S> <C>
1999................................................................... $48,749
2000................................................................... 24,626
2001................................................................... 10,085
Thereafter............................................................. --
-------
Total minimum lease payments........................................... 83,460
Less amount representing interest...................................... 9,740
-------
Present value of minimum lease payments................................ 73,720
Less current portion of capital lease obligation....................... 40,231
-------
Non-current portion of capital lease obligation........................ $33,489
=======
</TABLE>

Rent expense for the years ended December 31, 1996, 1997, 1998 and the nine
months ended September 30, 1998 and 1999 was approximately $64,000, $67,000,
$122,000, $68,500 and $496,081, respectively.

9. 401(k) Plan

The Company has a 401(k) Plan for the benefit of all employees who meet
certain eligibility requirements. The plan documents provide for the Company to
make defined contributions as well as matching and other discretionary
contributions, as determined by the Board of Managers. The Company contributed
$0, $4,777, $0 and $0 to the plan for the years ended December 31, 1996, 1997,
1998 and the nine months ended September 30, 1999, respectively.

F-15
<PAGE>

ONESOFT CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

10. Earnings Per Share

The following table sets forth the computation of historical basic and
diluted earnings per share:

<TABLE>
<CAPTION>
Nine months Ended
Year Ended December 31, September 30,
---------------------------------- -------------------------
1996 1997 1998 1998 1999
---------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Numerator:
Net income (loss)..... $ 48,510 $ (600,506) $(3,590,202) $(1,694,517) $(15,827,161)
Accretion on preferred
shares............... -- -- (18,034) (12,139) (1,017,346)
---------- ---------- ----------- ----------- ------------
Net income available
to shareholders...... $ 48,510 $ (600,506) $(3,608,236) $(1,706,656) $(16,844,507)
========== ========== =========== =========== ============
Denominator:
Weighted average
common shares........ 3,000,000 5,832,278 5,968,736 5,965,692 6,027,792
Effect of dilutive
securities:
Stock option........ -- -- -- --
Preferred stock..... -- -- -- --
---------- ---------- ----------- ----------- ------------
Weighted average
common shares basic
and diluted.......... 3,000,000 5,832,278 5,968,736 5,965,692 6,027,792
========== ========== =========== =========== ============
</TABLE>

The effect of the exercise of options or preferred stock would be dilutive
for years ended December 31, 1997 and 1998 and the nine months ended September
30, 1998 and 1999. There were no dilutive securities outstanding during 1996.

11. Pro Forma Balance Sheet and Earnings Per Share (unaudited)

The pro forma balance sheet reflects the conversion of all classes of
preferred stock as of September 30, 1999.

The pro forma earning per share reflects the conversion of the all classes
of preferred stock as of the beginning of the respective periods presented.

The following table sets forth the components of pro forma basic and diluted
earnings per share:

<TABLE>
<CAPTION>
Year Ended December Nine Months Ended
31, 1998 September 30, 1999
------------------- ------------------
<S> <C> <C>
Numerator:
Net income (loss)................. $(3,590,202) $(15,827,161)
Denominator:
Weighted average common shares.... 5,968,736 6,027,792
Conversion of preferred shares.... 2,213,694 4,822,883
----------- ------------
Pro forma weighted average common
shares basic and diluted......... 8,182,430 10,850,675
=========== ============
</TABLE>

F-16
<PAGE>

ONESOFT CORPORATION

NOTES TO FINANCIAL STATEMENTS--(Continued)

12. Commitments & Contingencies

The Company has entered into employment agreements with its Chief Executive
Officer ("CEO"), Chief Financial Officer ("CFO") and the Senior Vice President
of Services ("VP of Services") which contain non-disclosure, assignment of
inventions, non-competition and non-solicitation restrictions and covenants.
These agreements provide for current annual base salaries of $240,000, $175,000
and $150,000 for the CEO, CFO and VP of Services respectively, subject to
increase by the board of directors, and allow for additional annual bonus
compensation based on the meeting of certain mutually agreed upon business
objectives and as defined in the agreements. The agreements automatically renew
annually unless either the Company or these executives, provide written notice
of intention not to renew an agreement. In addition these agreements provide
for certain severance benefits to these executives as defined in the
agreements.

The Company also is involved in other legal proceedings in the ordinary
course of its business. In the opinion of management, these proceedings involve
amounts that would not have a material effect on the financial position or
results of operations of the Company if such proceedings were disposed of
unfavorably.

13. Events Subsequent to auditors opinion (unaudited)

On October 5,1999, the Company sold 426,482 shares of Series C Redeemable
Convertible Preferred Stock for net proceeds of approximately $2.8 million. In
conjunction with this transaction the Company issued an investor a warrant to
purchase 60,651 shares of common stock with an exercise price of $6.59 for
assistance in selling the preferred stock.

F-17
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution.

The following table sets forth an itemization of all estimated expenses, all
of which we will pay, in connection with the issuance and distribution of the
securities being registered:

<TABLE>
<CAPTION>
Underwriter Amount
----------- ------
<S> <C>
SEC Registration Fee.................................................. $
Nasdaq National Market Listing Fee....................................
NASD Fee..............................................................
Printing and engraving expenses.......................................
Legal fees and expenses...............................................
Accounting fees and expenses..........................................
Blue Sky qualification fee and expenses...............................
Transfer agent and registrar fees.....................................
Miscellaneous.........................................................
</TABLE>

Item 14. Indemnification of Directors and Officers.

Our restated certificate of incorporation (the "Charter") provides that we
shall indemnify and advance expenses to the fullest extent permitted by Section
145 of the Delaware General Corporation Law, as amended from time to time, to
each person who is or was one of our directors or officers and the heirs,
executors and administrators of such a person. Any expenses, including
attorneys' fees, incurred by a person who is or was one of our directors or
officers, and the heirs, executors and administrators of such a person in
connection with defending any such proceeding in advance of its final
disposition shall be paid by us; provided, however, that if the Delaware law
requires an advancement of expenses incurred by an indemnitee in his capacity
as a director or officer, and not in any other capacity in which service was or
is rendered by such indemnitee, including, without limitation, service to an
employee benefit plan, shall be made only upon delivery to us of an undertaking
by or on behalf of such indemnitee, to repay all amounts so advanced, if it
shall ultimately be determined that such indemnitee is not entitled to be
indemnified for such expenses. Notwithstanding the aforementioned
indemnification provisions, we may, at the discretion of our chief executive
officer, enter into indemnification agreements with directors or officers.

Section 145 of the Delaware law provides that a corporation has the power to
indemnify any director or officer, or former director or officer, who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, other than an action by or in the right of the corporation,
by reason of the fact that such director or officer or former director or
officer is or was a director, officer, employee or agent of the corporation,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by them in connection with such
action, suit or proceeding, if such person shall have acted in good faith and
in a manner reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
provided that such person had no reasonable cause to believe his or her conduct
was unlawful, except that, if such action shall be in the right of the
corporation, no such indemnification shall be provided as to any claim, issue
or matter as to which such person shall have been judged to have been liable to
the corporation unless and to the extent that the Court of Chancery of the
State of Delaware, or any court in which such suit or action was brought, shall
determine

II-1
<PAGE>

upon application that, in view of all of the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as such
court shall deem proper.

The restated certificate of incorporation contains a provision to limit the
personal liability of our directors to the fullest extent permitted by Section
102(b)(7) of the Delaware law, as amended. In addition, the restated bylaws
provide that we shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
other than an action by us or in our right, by reason of the fact that he is or
was one of our directors, officers, employees or agents, or is or was serving
at our request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to our best interests, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.

As permitted by the Delaware law, the restated certificate of incorporation,
which will be filed prior to the completion of the offering, provides that,
subject to certain limited exceptions, none of our directors shall be liable to
us or our stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (1) for any breach of the director's duty of
loyalty to us or our stockholders, (2) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law, (3) for
the unlawful payment of dividends on or redemption or repurchase of our capital
stock or (4) for any transaction from which the director derived an improper
personal benefit. The effect of this provision is to limit our ability and our
stockholders' ability through stockholder derivative suits on our behalf to
recover monetary damages against a director for the breach of certain fiduciary
duties as a director, including breaches resulting from grossly negligent
conduct. In addition, the restated certificate of incorporation and Restated
bylaws provide that we shall, to the fullest extent permitted by the Delaware
law, indemnify all of our directors and officers and that we may, to the extent
permitted by the Delaware law, indemnify our employees and agents.

We have agreed to indemnify the underwriters against certain liabilities,
including civil liabilities under the Securities Act.

Item 15. Recent Sales of Unregistered Securities.

Set forth in chronological order is information regarding shares of common
stock issued, and options and warrants granted, by the registrant within the
past three years. Also included is the consideration, if any, received by the
registrant for such shares and options and information relating to the section
of the Securities Act or rule of the Securities and Exchange Commission under
which exemption from registration was claimed.

Certain Grants and Exercises of Stock Options

The issuance of the securities described below were exempt from registration
under the Securities Act in reliance on Rule 701 promulgated under Section 3(b)
of the Securities Act, as transactions not involving a public offering or
transactions pursuant to compensatory benefit plans and contracts relating to
compensation as provided under Rule 701.

In March 1997, the registrant's Amended and Restated 1997 Employee, Director
and Consultant Stock Option Plan was approved and adopted by the board of
directors and stockholders of the registrant. In August 1999 and January 2000,
the board of directors and

II-2
<PAGE>

stockholders of the registrant approved and adopted amendments to the plan that
increased the total number of shares of common stock for which options may be
granted under the plan. Since March 1997, options to purchase a total of
4,820,150 shares of common stock have been granted, 905,917 shares of which
have been cancelled. As of December 31, 1999, 231,750 of these options had been
exercised.

In March 1997, we issued an incentive stock option to purchase 81,000 shares
of our common stock at an exercise price of $0.062 per share to one consultant
in exchange for services rendered to OneSoft.

In February 1999, we issued a non-qualified stock option to purchase 75,000
shares of our common stock at an exercise price of $0.552 per share to three
consultants in exchange for services rendered to OneSoft.

In April 1999, we issued 100,000 shares of our common stock to one board
member at $0.552 per share.

Issuances of Capital Stock

The sale and issuance of the securities described below were deemed to be
exempt from registration under the Securities Act pursuant to Section 4(2)
and/or Regulation D promulgated thereunder.

(1) In March 1997, we issued 840,000 shares of our common stock to three of
our employees, including one of our Senior vice presidents, in connection with
the merger of InterFlowww Enterprises, Inc. into Global Exchange, Inc., our
predecessor in interest.

(2) In April 1997, we issued and sold 340,620 shares of our common stock in
a private placement to one investor for $200,000

(3) In November 1997, March 1998, and June 1998 the registrant issued and
sold a total of 3,192,530 shares of Series A convertible preferred stock in a
private placement to two investors at a price per share of $2.283 and
$2.4138264 for gross consideration of approximately $7.6 million.

(4) In February 1999, the registrant issued and sold a total of 2,023,857
shares of Series B convertible preferred stock in a private placement to two
investors at a price per share of $3.705793 for gross consideration of
approximately $7.5 million.

(5) In August 1999 and October 1999 the registrant issued and sold a total
of 4,891,253 shares of Series C convertible preferred stock in a private
placement to twenty investors at a price per share of $6.59 for gross
consideration of approximately $32.2 million. We granted the exclusive agent
for this private placement Deutsche Bank Securities Inc. a five-year, non-
cancelable and non-transferable warrant to purchase 60,651 shares of our common
stock at the equivalent of the offering price.

(6) In November 1999, we issued 24,480 shares of our common stock to one of
our investors upon conversion of its 30% interest in Sports Warehouse, Inc.

II-3
<PAGE>

Item 16. Exhibits and Financial Statement Schedules.

(a) Exhibits

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

*3.1 Restated Certificate of Incorporation of OneSoft Corporation

*3.2 Restated Bylaws of OneSoft Corporation

*4.1 Form of Common Stock Certificate

*4.2 See Exhibits 3.1 and 3.2 for provisions of the Restated Certificate of
Incorporation and Restated Bylaws of the Registrant defining the
rights of holders of common stock of the Registrant

*5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. with
respect to the legality of securities being registered

*10.1 Amended and Restated 1997 Employee, Director and Consultant Stock
Option Plan

*10.2 Employment Agreements

*10.3 Third Amended and Restated Investor Rights Agreement dated as of
August 13, 1999 by and among the Registrant, the holders of Series A
Preferred Stock, the holders of Series B Preferred Stock, the holders
of Series C Preferred Stock and the holders of Common Stock.

*10.4 Form of Incentive Stock Option Agreement

*10.5 Form of Non-Qualified Stock Option Agreement

*10.6 OneSoft Corporation Weighted Average 401(k) and Profit Sharing Plan

23.1 Consent of Ernst & Young LLP

*23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (see
Exhibit 5.1)

*24.1 Powers of Attorney (See Signature Page)

27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.

(b) Financial Statement Schedules

Financial Statements Schedules are omitted because the information is
included in the Financial Statements or notes thereto.

II-4
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of McLean, Commonwealth of
Virginia, on the day of January, 2000.

OneSoft Corporation

/s/ James W. MacIntyre, IV
By: _________________________________
James W. MacIntyre, IV
Chairman of the Board of
Directors,
President and Chief Executive
Officer

POWER OF ATTORNEY

We the undersigned officers and directors of OneSoft Corporation hereby
severally constitute and appoint James W. MacIntyre, IV and Frederick C.
Hawkins, III, and each of them singly (with full power to each of them to act
alone), our true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution in each of them for him and in his name, place
and stead, and in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement (or any
other Registration Statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file
the same, with all exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as full to 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 their or his substitute or substitutes may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by below by the following persons in the
capacities and on the dates indicated.

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

<S> <C> <C>
/s/ James W. MacIntyre, IV Chairman, Chief Executive January 7, 2000
______________________________________ Officer, President and
James W. MacIntyre, IV Treasurer (principal
executive officer)

/s/ Frederick C. Hawkins, III Chief Financial Officer January 7, 2000
______________________________________ (principal financial and
Frederick C. Hawkins, III accounting officer)

/s/ Jeffrey M. Macintyre Director January 7, 2000
______________________________________
Jeffrey M. MacIntyre
</TABLE>

II-5
<PAGE>

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

<S> <C> <C>
/s/ Henry D. Barratt, Jr. Director January 7, 2000
______________________________________
Henry D. Barratt, Jr.

/s/ Justin Hall-Tipping Director January 7, 2000
______________________________________
Justin Hall-Tipping

/s/ A. Douglas Peabody Director January 7, 2000
______________________________________
A. Douglas Peabody

/s/ Stephen P. Rader Director January 7, 2000
______________________________________
Stephen P. Rader

/s/ Thomas R. Hitchner Director January 7, 2000
______________________________________
Thomas R. Hitchner

/s/ Carlos E. Cisneros Director January 7, 2000
______________________________________
Carlos E. Cisneros
</TABLE>

II-6

<PAGE>

Exhibit 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
May 26, 1999, to the Registration Statement (Form S-1 No. 333-______) and
related Prospectus of OneSoft Corporation for the registration of ______ shares
of its common stock.

/s/ Ernst & Young LLP

McLean, Virginia
January 7, 2000