IMANAGE INC, S-1/A, 1999-10-19

IMANAGE INC
S-1/A, 1999-10-19
PREPACKAGED SOFTWARE

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 19, 1999

REGISTRATION NO. 333-86353
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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AMENDMENT NO. 2

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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IMANAGE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 7372 36-4043595
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION NUMBER) IDENTIFICATION NO.)
</TABLE>

2121 SOUTH EL CAMINO REAL, SUITE 400
SAN MATEO, CALIFORNIA 94403
(650) 356-1166
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

MAHMOOD PANJWANI
PRESIDENT AND CHIEF EXECUTIVE OFFICER
IMANAGE, INC.
2121 SOUTH EL CAMINO REAL, SUITE 400
SAN MATEO, CALIFORNIA 94403
(650) 356-1166
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

COPIES TO:

<TABLE>
<S> <C>
GREGORY M. GALLO, ESQ. CURTIS L. MO, ESQ.
DAVID A. HUBB, ESQ. RICHARD C. LESKA, ESQ.
VICTORIA W-Y LEE, ESQ. BROBECK, PHLEGER & HARRISON LLP
GRAY CARY WARE & FREIDENRICH LLP TWO EMBARCADERO PLACE
400 HAMILTON AVENUE 2200 GENG ROAD
PALO ALTO, CALIFORNIA, 94301-1825 PALO ALTO, CALIFORNIA 94303
(650) 833-2000 (650) 424-0160
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration 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 number of the earlier effective registration statement for the same
offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]

CALCULATION OF REGISTRATION FEE

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<S> <C> <C> <C> <C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) PRICE(2) REGISTRATION FEE(3)
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Common Stock $0.001 par value...... 4,140,000 $10.00 $41,400,000 $11,510
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</TABLE>

(1) Includes 540,000 shares which the underwriters have the option to purchase
to cover over-allotments, if any.

(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended.

(3) $11,120 of which was previously paid.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED OCTOBER 19, 1999.

LOGO

3,600,000 SHARES

COMMON STOCK

This is our initial public offering and no public market currently exists
for our shares. We have applied for approval for quotation of our common stock
on the Nasdaq National Market under the symbol IMAN. We anticipate that the
initial public offering price will be between $8.00 and $10.00 per share.

-------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 6.
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<TABLE>
<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds to iManage......................................... $ $
</TABLE>

THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

iManage has granted the underwriters a 30-day option to purchase up to an
additional 540,000 shares of common stock to cover any over-allotments.
BancBoston Robertson Stephens Inc. expects to deliver the shares of common stock
to purchasers on , 1999.

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ROBERTSON STEPHENS
U.S. BANCORP PIPER JAFFRAY
C.E. UNTERBERG, TOWBIN

THE DATE OF THIS PROSPECTUS IS , 1999
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EXPLANATORY NOTE

This Registration Statement contains two forms of prospectus: (1) one
prospectus to be used in connection with an offering in the United States and
Canada and (2) one prospectus to be used in connection with a concurrent
offering outside of the United States and Canada. The U.S. prospectus and the
international prospectus are identical in all respects except for the front
cover page and the first page of the "Underwriting" section. The front cover
page and the first page of the "Underwriting" section of the international
prospectus are included immediately after the back cover of the prospectus.
<PAGE> 4

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, IMANAGE, WE,
US AND OUR REFER TO IMANAGE, INC. AND ALL ENTITIES OWNED OR CONTROLLED BY
IMANAGE, INC. EXCEPT WHERE IT IS CLEAR THAT THE TERM MEANS ONLY THE PARENT
COMPANY.

UNTIL , 1999, 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 IN CONNECTION WITH
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

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

TABLE OF CONTENTS

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PAGE
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Prospectus Summary.......................................... 3
Risk Factors................................................ 6
Special Note Regarding Forward-Looking Statements........... 16
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 36
Management.................................................. 48
Certain Transactions........................................ 57
Principal Stockholders...................................... 61
Description of Capital Stock................................ 63
Shares Eligible for Future Sale............................. 67
Underwriting................................................ 69
Legal Matters............................................... 71
Experts..................................................... 71
Where You Can Find Additional Information................... 71
Index to Financial Statements............................... F-1
</TABLE>

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PROSPECTUS SUMMARY

You should read this summary together with the entire prospectus, including
the more detailed information in our financial statements and accompanying notes
appearing elsewhere in this prospectus.

IMANAGE, INC.

We provide content and collaboration management software for enterprises
engaged in electronic business, or e-business. Our software provides a web-based
unified content platform, that is, it brings together various forms of
information and content, including graphics, video, text, audio and data, and
manages, organizes and delivers this information and content in a centralized
manner throughout the extended enterprise. Our software has been designed to
address the needs of a broad range of markets, such as financial services,
retail, manufacturing and distribution, banking and professional services.
Initially, we targeted substantially all of our sales and marketing efforts on
the legal applications market. We have licensed our software to over 400
customers including Airtouch Communications Inc., America Online, Inc., Cleary,
Gottlieb, Steen & Hamilton, Charles Schwab & Company, Inc., Cravath, Swaine &
Moore, Fried, Frank, Harris, Shriver & Jacobson, Marriott International, Inc.,
Morgan, Lewis & Bockius LLP, Wal-Mart Stores Inc., and Wilson, Sonsini, Goodrich
& Rosati, Professional Corporation.

With the growing pervasiveness of the Internet, organizations are
increasingly engaging in e-business transactions. To enable these transactions,
organizations are developing intranets, which are web-based technologies
designed to disseminate, exchange and manage information internally, and
extranets, which are web-based technologies designed to extend the enterprise
and enable direct collaboration with partners, customers and service providers.
As a result of these developments in electronic business, or e-business, there
has been a dramatic increase in the amount of information available to the
average employee. The average employee receives a broad range of information,
content and documents, in multiple formats, through a variety of sources
including email, voicemail, enterprise and desktop applications, facsimiles and
photocopies, the Internet, and intranet and extranet web sites. The overwhelming
amount and variety of information that may be disseminated through these
disparate media sources in e-business transactions threatens an enterprise's
ability to deliver the right information to the right person at the right time.

Our comprehensive e-business content and collaboration management software
(i) offers a scalable and reliable platform; (ii) ensures timely delivery of
relevant information; and (iii) provides security and accountability. We sell
our software products, including the iManage infoCommerce Server, iManage
infoLink, iManage infoLook, and iManage infoRite, through our direct sales force
and a network of strategic partners and systems integrators.

Our objective is to be the leading provider of e-business content and
collaboration management software. Key elements of our strategy to achieve this
objective include:

- capturing additional market share;

- leveraging our installed customer base;

- expanding key business relationships;

- maintaining our technological leadership; and

- strengthening our international presence.
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We were originally incorporated in Illinois in October 1995 under the name
NetRight Technologies, Inc. and we reincorporated in Delaware in December 1996.
In April 1999, we changed our name from NetRight Technologies, Inc. to iManage,
Inc. Our principal offices are located at 2121 South El Camino Real, Suite 400,
San Mateo, California 94403. Our telephone number is (650) 356-1166. Our website
address is located at www.iManage.com, but the information on our web site does
not constitute a part of this prospectus.

iManage is a registered trademark of iManage, Inc. This prospectus contains
other trade names, trademarks and service marks of iManage, Inc. and of other
companies.

THE OFFERING

Common stock offered by iManage................. 3,600,000 shares

Common stock to be outstanding after the
offering........................................ 20,378,530 shares

Use of proceeds................................. For general corporate
purposes, capital
expenditures and working
capital. See "Use of
Proceeds" on page 18.

Proposed Nasdaq National Market symbol.......... IMAN

The number of shares of our common stock outstanding after the offering is
based on shares outstanding as of June 30, 1999 and does not include 1,894,950
shares of common stock subject to options outstanding under our equity incentive
plans as of June 30, 1999. The number of shares outstanding also assumes the
conversion of all our outstanding shares of preferred stock into 8,033,117
shares of common stock.

RECENT DEVELOPMENTS

We expect that our total revenues for the three months ended September 30,
1999 will be approximately $4.8 million. Of this amount, our license revenues
consisted of approximately $3.6 million and our support and services revenues
consisted of approximately $1.2 million. For the nine month period ended
September 30, 1999, we expect our total revenues will be approximately $12.7
million, of which approximately $9.7 million consisted of license revenues and
approximately $3.0 million consisted of support and services revenues. For the
three months ended September 30, 1999, our net loss is expected to be
approximately $498,000 and for the nine month period ended September 30, 1999,
our net loss is expected to be approximately $2.4 million. At September 30,
1999, we had cash, cash equivalents and short term investments of approximately
$15.1 million, working capital of approximately $7.4 million, total assets of
approximately $21.6 million, long-term debt of approximately $1.8 million and
stockholders' equity of approximately $8.0 million.

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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
JUNE 30, 1999
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PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short term investments.... $12,117 $12,117 $41,249
Working capital...................................... 6,261 6,261 35,393
Total assets......................................... 18,560 18,560 47,692
Long-term debt....................................... 889 889 889
Total stockholders' equity........................... 7,445 7,445 36,577
</TABLE>

The pro forma data give effect to the conversion of all of our outstanding
shares of preferred stock into common stock upon the closing of this offering.
The pro forma as adjusted data give effect to the sale of the 3,600,000 shares
of common stock that we are offering under this prospectus at an assumed initial
public offering price of $9.00 per share and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses. See
"Capitalization" on page 19.

Unless otherwise indicated, all information contained in this prospectus
assumes:

- no exercise of the underwriters' over-allotment option, and

- the conversion of each outstanding share of preferred stock into one
share of common stock immediately before the consummation of this
offering.

This prospectus includes statistical data regarding the Internet industry.
These data are taken or derived from information published by sources, including
the Delphi Group. Although we believe that these data are generally indicative
of the matters reflected in those reports, these data are inherently imprecise,
and we caution you not to place undue reliance on these data.
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RISK FACTORS

You should carefully consider the risks described below, together with all
of the other information included in this prospectus, before you decide to buy
our common stock. If any of the following risks actually occur, our business,
financial condition and operating results could be seriously harmed, the trading
price of our common stock could decline and you may lose all or part of your
investment.

OUR LIMITED OPERATING HISTORY MAY PREVENT US FROM ACHIEVING SUCCESS IN OUR
BUSINESS.

We were founded in October 1995 and began shipping our first product in
October 1996. Because of our limited operating results, we have limited insight
into trends that may emerge and affect our business. As a result, an evaluation
of our prospects is difficult to make. The potential revenues and income of our
business and many of the markets we intend to target are unproven.

We face significant risks because of our limited operating history,
including:

- we have a limited number of product offerings and will need to
successfully introduce new products and enhance our existing offering,
with, for example, an enhanced version of iManage infoLink which we
expect to release in October 1999 and an enhanced version of iManage
infoCommerce Server which we expect to release by the end of the first
quarter of 2000;

- we need to sell additional licenses and software products to our existing
customers and expand our customer base beyond legal and other
professional service firms to achieve profitability;

- we need to expand our sales and marketing and customer support
organization to focus on a broad range of markets, build strategic
relationships with information technology consultants, systems
integrators and unified messaging original equipment manufacturers and
strengthen our international operations in Europe and the Asia/Pacific
region in order to increase sales; and

- we need to effectively manage our anticipated growth, which may distract
management and increase our operating expenses, and attract and retain
key personnel.

If we do not successfully address any of these and other challenges, our
business and operating results will be seriously harmed.

WE HAVE AN ACCUMULATED DEFICIT OF $9.1 MILLION AS OF JUNE 30, 1999 AND MAY NOT
BE ABLE TO ACHIEVE PROFITABILITY.

Our failure to significantly increase our total revenues would seriously
harm our business and operating results. We incurred net losses of $692,000 in
1996, $3.6 million in 1997, $2.8 million in 1998 and $1.9 million for the six
month period ended June 30, 1999. As of June 30, 1999, we had an accumulated
deficit of $9.1 million.

To increase our revenues, we must incur significant expenses to increase
our research and development, sales and marketing and general and administrative
resources. If our revenues do not grow to offset these increased expenses, we
will not be profitable. We may not be able to sustain our recent revenue growth
rates. In fact, we may not have any revenue growth, and our revenues could
decline. For a more detailed description of our operating results, please see
"Selected Financial Data" on page 21 and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" which begins on page 22.

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OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND DIFFICULT TO PREDICT. IF WE
FAIL TO MEET THE EXPECTATIONS OF PUBLIC MARKET ANALYSTS OR INVESTORS, THE MARKET
PRICE OF OUR COMMON STOCK MAY DECREASE SIGNIFICANTLY.

Our quarterly operating results have varied significantly in the past and
will likely vary significantly in the future. As a result, we believe that
period-to-period comparisons of our operating results are not meaningful and
should not be relied upon as indicators of our future performance. In the
future, our operating results may be below the expectations of securities
analysts and investors. Our failure to meet these expectations would likely
cause the price of our common stock to decline. Operating results vary depending
on a number of factors, including:

- the size, timing, terms and fluctuations of customer orders;

- our ability to expand our relationships with information technology
consultants, system integrators and unified messaging original equipment
manufacturers; and

- the timing of the introduction or enhancement of products by us.

In addition, depending on the manner in which we sell existing or future
products, this could have the effect of extending the length of time over which
we recognize revenues. Our quarterly revenues could be significantly affected
based on how applicable accounting standards are amended or interpreted over
time.

Furthermore, our expense levels are relatively fixed and are based, in
part, on expectations as to future revenues. Therefore, if revenue levels fall
below our expectations, our net loss will increase because only a small portion
of our expenses vary with our revenues. For a more detailed description of our
quarterly results and the factors that may affect them, please see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" which
begins on page 22.

OUR REVENUES WILL DECLINE SIGNIFICANTLY IF THE MARKET DOES NOT CONTINUE TO
ACCEPT OUR IMANAGE SUITE OF PRODUCTS.

In 1998 and the six month period ended June 30, 1999, we derived all of our
license revenues from the sale of licenses for our iManage infoCommerce Server,
iManage infoRite and iManage infoLink products. We currently expect to continue
to derive substantially all of our license revenues from these products. If the
market does not continue to accept these products, our revenues will decline
significantly. Factors that may affect the market acceptance of these products
include the performance, price and total cost of ownership of our products and
the availability, functionality and price of competing products and
technologies. Many of these factors are beyond our control.

WE HAVE ALWAYS BEEN HEAVILY DEPENDENT UPON LAW FIRM CUSTOMERS. IF WE DO NOT
EXPAND SALES OF OUR PRODUCTS TO OTHER CUSTOMERS, WE MAY NOT BE ABLE TO GROW OUR
REVENUES CONSISTENT WITH PAST GROWTH RATES AND OUR OPERATING RESULTS WILL
SUFFER.

In 1998 and the six month period ended June 30, 1999, we derived 89.0% and
95.0% of our total revenues, respectively, from the sale of licenses to law
firms and professional service firms. As of June 30, 1999, 83.0% of our
customers were law firms or professional service firms. Since January 1, 1998,
49 of our top 50 customers, in terms of billings, were law firms or professional
service firms. Our future success is substantially dependent on our ability to
sell a significant number of licenses to customers in other businesses,
particularly large multi-national corporations. In order to sell a significant
number of licenses to these businesses, we must devote time and resources to
train our sales employees to work in industries outside law firms and
professional service firms. We may not be successful in our efforts. Unlike law
firms and professional service organizations, customers in other

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industries, including large multi-national corporations, may not require or
perceive the value of our content and collaboration management solution. If we
cannot license our products to customers in other industries, our business could
be significantly adversely affected.

WE MAY BE UNABLE TO PENETRATE ADDITIONAL MARKETS AND GROW OUR REVENUES IF WE DO
NOT SUCCESSFULLY OBTAIN LEADS OR REFERRALS FROM OUR CUSTOMERS.

To increase sales of our e-business content and collaboration management
solution and grow our total revenues, we will try to obtain leads or referrals
from our current customers. For example, we expect to sell licenses to large
multi-national corporations primarily through introductions from our existing
customers. If we are unable to maintain these existing customer relationships,
or fail to establish additional relationships, we will have to devote
substantially more resources, both financial and personnel, to the sales and
marketing of our products. As a result, our success depends in part on the
ultimate success of these current relationships and the willingness of our
customers to provide us with these introductions, referrals and leads. Our
current customer relationships do not, and any future relationships we establish
may not, afford us any exclusive marketing or distribution rights. In addition,
at any time, our customers may terminate their relationships with us, pursue
other relationships with our competitors or develop or acquire products that
compete with our products. Even if our customers provide us with leads and
introductions, we may not penetrate additional markets or grow our revenues.

IF THE EMERGING MARKET FOR E-BUSINESS CONTENT AND COLLABORATION MANAGEMENT
SOFTWARE DOES NOT DEVELOP AS QUICKLY AS WE EXPECT, OUR BUSINESS WILL SUFFER AND
OUR STOCK PRICE MAY DECLINE.

The market for e-business content and collaboration management software has
only recently begun to develop, is rapidly evolving and will likely have an
increasing number of competitors. We cannot be certain that a viable market for
our products will emerge or be sustainable. If the e-business content and
collaboration management market fails to develop, or develops more slowly than
expected, demand for our products will be less than anticipated and our business
and operating results would be seriously harmed.

Furthermore, to be successful in this emerging market, we must be able to
differentiate our business from our competitors through our product and service
offerings and brand name recognition. We may not be successful in
differentiating our business or achieving widespread market acceptance of our
products and services. In addition, enterprises that have already invested
substantial resources in other methods of managing their content and
collaborative process may be reluctant or slow to adopt a new approach that may
replace, limit or compete with their existing systems.

DUE TO OUR LENGTHY AND VARIABLE SALES CYCLE, WE MAY NOT BE ABLE TO PREDICT WHEN
OR IF SALES WILL BE MADE AND WE MAY EXPERIENCE UNPLANNED SHORTFALLS IN REVENUES.

Our products have an unpredictable sales cycle that contributes to the
uncertainty of our future operating results. Customers often view the purchase
of our products as a significant and strategic decision, and this decision
typically involves a considerable commitment of resources and is influenced by
the customers' budget cycles. Selling our products also requires us to educate
potential customers on their use and benefits because our e-business content and
collaboration management software is a new category of product. As a result, our
products have a lengthy sales cycle, which has historically ranged from
approximately two to six months.

As potential customers evaluate our products and before they place an order
with us, we typically expend significant sales and marketing expenses. Larger
customers may purchase our

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products as part of multiple, simultaneous purchasing decisions, which may
result in additional unplanned administrative processing and other delays in our
product sales. If sales forecasted from a specific customer for a particular
quarter are not realized, we may experience unplanned shortfalls in revenues. As
a result, we have only a limited ability to forecast the timing and size of
sales of our products.

COMPETITION FROM PROVIDERS OF SOFTWARE ENABLING CONTENT AND COLLABORATION
MANAGEMENT AMONG BUSINESSES MAY INCREASE, WHICH COULD CAUSE US TO REDUCE OUR
PRICES, AND RESULT IN REDUCED GROSS MARGINS OR LOSS OF MARKET SHARE.

The market for products that enable companies to manage and share content
and collaborate throughout an extended enterprise is new, highly fragmented,
rapidly changing and increasingly competitive. We expect competition to continue
to intensify, which could result in price reductions for our products, reduced
gross margins and loss of market share, any of which would have a material
adverse effect on our business and financial condition. For a further discussion
of the competitive markets in which we operate, please see
"Business -- Competition" on page 45.

IF OUR EFFORTS TO ENHANCE EXISTING PRODUCTS AND INTRODUCE NEW PRODUCTS ARE NOT
SUCCESSFUL, WE MAY NOT BE ABLE TO GENERATE DEMAND FOR OUR PRODUCTS.

Our future success depends on our ability to provide a comprehensive
e-business content and collaboration management solution. To provide this
comprehensive solution, we must continually develop and introduce high quality,
cost-effective products as well as product enhancements on a timely basis. In
August 1999, we shipped iManage infoLook, a product that integrates with
Microsoft Outlook. Our future revenue growth will depend significantly on the
success of this new product. To date, we have only tested this product with a
limited number of customers, and we delayed its release two months to
incorporate customer-specific functionality. Therefore, we cannot guarantee that
this product will gain widespread market acceptance. If the market does not
accept iManage infoLook or other new products, our business will suffer and our
stock price will likely fall.

In addition, while our current product offerings have the ability to manage
many types of content, such as graphics, video, text, audio and data, we are
dependent upon third parties to develop additional interfaces that will enable
the deposit of certain types of structured relational data, particularly data
generated by enterprise resource planning systems, into the iManage e-business
Server. These third parties may not be able to develop these technologies, and
we may therefore not be able to continue to offer a comprehensive e-business
content and collaboration management solution. Our failure to offer a
comprehensive solution would seriously harm our business.

IF OUR PRODUCTS CANNOT SCALE TO MEET THE DEMANDS OF THOUSANDS OF CONCURRENT
USERS, OUR TARGETED CUSTOMERS MAY NOT LICENSE OUR SOLUTIONS, WHICH WILL CAUSE
OUR REVENUE TO DECLINE.

Our strategy is to target large organizations that, because of the
significant amounts of information and content that they generate and use,
require our e-business content and collaboration management solution. For this
strategy to succeed, our software products must be highly scalable; that is,
they must be able to accommodate thousands of concurrent users. If our products
cannot scale to accommodate a large number of concurrent users, our target
markets will not accept our products and our business and operating results will
suffer.

While we and independent test laboratories have tested the scalability of
our products in simulations, we have not had the opportunity to observe the
performance of our products in the context of an actual large-scale, that is,
tens to hundreds of thousands of concurrent users, customer

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implementation. In fact, only a limited number of our customers have more than
one thousand concurrent users who use our software to manage their information
and content needs. As a result, it is possible that if our software solution is
widely deployed, it may not perform adequately or fail entirely. If our
customers cannot successfully implement large-scale deployments, or if they
determine that our products cannot accommodate large-scale deployments, our
customers will not license our solutions and this will materially adversely
affect our financial condition and operating results.

OUR PRODUCTS MIGHT NOT BE COMPATIBLE WITH ALL MAJOR PLATFORMS, WHICH COULD
INHIBIT SALES AND HARM OUR BUSINESS.

We must continually modify and enhance our products to keep pace with
changes in computer hardware and software and database technology, as well as
emerging technical standards in the software industry. For example, we have
designed our products to work with databases and servers such as Informix,
Oracle and SQL Server and software applications including Microsoft Office,
Lotus Notes and Novell GroupWise. Any changes to these platforms could require
us to modify our products and could cause us to delay releasing a product until
the updated version of that platform or application has been released. As a
result, uncertainties related to the timing and nature of new product
announcements, introductions or modifications by vendors of operating systems,
back-end supporting applications and browsers and other Internet-related
applications could hurt our business, as customers delay purchases until they
determine how our products will operate with these updated platforms or
applications.

In addition, our iManage infoCommerce Server runs on the Windows NT
platform. If a customer does not currently use the Windows NT platform and does
not choose to adopt this platform, we will be unable to license our products to
this customer. Furthermore, some of our products do not run on other popular
operating systems, such as the UNIX operating system. If another platform
becomes more widely used, we could be required to convert our product to that
platform. We may not succeed in these efforts, and even if we do, potential
customers may not choose to license our product.

DEFECTS IN OUR SOFTWARE PRODUCTS COULD DIMINISH DEMAND FOR OUR PRODUCTS.

Our software products are complex and may contain errors, including year
2000-related errors, that may be detected at any point in the life of the
product. To date, we have not identified any material defects in our products
that have affected their performance. However, we may discover material defects
in the future. Additionally, we cannot assure you that, despite testing by us,
our implementation partners and our current and potential customers, errors will
not be found in new products or releases after shipment, resulting in loss of
revenues, delay in market acceptance and sales, diversion of development
resources, injury to our reputation or increased service and warranty costs. If
any of these were to occur, our business would be adversely affected and our
stock price could fall.

Because our products are generally used in systems with other vendors'
products, they must integrate successfully with these existing systems. System
errors, whether caused by our products or those of another vendor, could
adversely affect the market acceptance of our products, and any necessary
revisions could cause us to incur significant expenses. In addition, since many
of our customers use our products for critical applications, errors, defects or
other performance problems with our products could result in financial or other
damage to our customers and could significantly impair their operations.

10
<PAGE> 13

IF WE ARE UNABLE TO RESPOND TO RAPID MARKET CHANGES DUE TO CHANGING TECHNOLOGY
AND EVOLVING INDUSTRY STANDARDS, OUR FUTURE SUCCESS WILL BE ADVERSELY AFFECTED.

The market for our products is characterized by rapidly changing
technology, evolving industry standards, frequent new service and product
introductions and changes in customer demands. Our future success will depend to
a substantial degree on our ability to offer products and services that
incorporate leading technology, and respond to technological advances and
emerging industry standards and practices on a timely and cost-effective basis.
You should be aware that:

- our technology or systems may become obsolete upon the introduction of
alternative technologies, such as products that better manage various
types of content;

- we may not have sufficient resources to develop or acquire new
technologies or to introduce new products or services capable of
competing with future technologies or service offerings;

- the price of the products provided by us is expected to decline as
rapidly as the cost of any competitive alternatives; and

- the development, acquisition and implementation of new technologies and
equipment are likely to continue to require significant capital
investment by us, but capital may not be available for this purpose in
the future.

OUR PRODUCTS MAY LACK ESSENTIAL FUNCTIONALITY IF WE ARE UNABLE TO OBTAIN AND
MAINTAIN LICENSES TO THIRD-PARTY SOFTWARE AND APPLICATIONS.

We rely on software that we license from third parties, including software
that is integrated with internally developed software and used in our products
to perform key functions. For example, we license Search '97 from Verity, Inc.
and we license Outside In Viewer Technology and Outside In HTML Export from INSO
Corporation. The functionality of our products therefore depends on our ability
to integrate these third-party technologies into our products. Furthermore, we
may license additional software from third parties in the future to add
functionality to our products. If our efforts to integrate this third-party
software into our products are not successful, our customers may not license our
products and our business will suffer.

In addition, we would be seriously harmed if the providers from whom we
license software ceased to deliver and support reliable products, enhance their
current products or respond to emerging industry standards. Moreover, the
third-party software may not continue to be available to us on commercially
reasonable terms or at all. Our license agreement with Verity terminates in
February 2002, but may be extended to January 2003 at our option, and our
agreement with INSO terminates in December 2001 and each may be renewed only
with the other party's written consent. The loss of, or inability to maintain or
obtain licensed software, could result in shipment delays or reductions.
Furthermore, we might be forced to limit the features available in our current
or future product offerings. Either alternative could seriously harm our
business and operating results.

IF WE ARE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY, OUR BUSINESS MAY SUFFER
AS WE COULD LOSE MARKET SHARE, INCUR COSTLY LITIGATION EXPENSES OR LOSE VALUABLE
ASSETS.

We believe that our continued success depends on protecting our proprietary
technology. We rely on a combination of patent, trademark, service mark, trade
secret and copyright law and contractual restrictions to protect the proprietary
aspects of our technology. In addition, we also enter into confidentiality or
license agreements with our employees and consultants, and control access to and
distribution of our software, documentation and other proprietary information.
These legal and practical protections afford only limited protection. Despite
our efforts to protect our proprietary

11
<PAGE> 14

rights, unauthorized parties may attempt to copy aspects of our products or to
obtain and use our proprietary information. These attempts, if successful, could
cause us to lose market share and thus harm our business and operating results.
Litigation may be necessary to enforce our intellectual property rights, to
protect our trade secrets and to determine the validity and scope of the
proprietary rights of others. Any litigation could result in substantial costs
and diversion of resources and could seriously harm our business and operating
results. In addition, as we expand our international sales, we may find that the
laws of many countries, particularly those in the Asia/Pacific region, do not
protect our proprietary rights to as great an extent as the laws of the United
States.

OTHERS MAY BRING INFRINGEMENT CLAIMS AGAINST US WHICH COULD BE TIME CONSUMING
AND EXPENSIVE FOR US TO DEFEND.

Other companies, including our competitors, may obtain patents or other
proprietary rights that would prevent, limit or interfere with our ability to
make, use or sell our products. For example, we may discover that third parties
have developed similar or competing technologies to manage, organize and deliver
information and content. As a result, we may be found to infringe on the
proprietary rights of others. Furthermore, companies in the software market are
increasingly bringing suits that allege infringement of their proprietary
rights, particularly patent rights. We could incur substantial costs to defend
any litigation, and intellectual property litigation could force us to do one or
more of the following:

- cease using key aspects of our e-business content and collaboration
management solution that incorporate the challenged intellectual
property;

- obtain a license from the holder of the infringed intellectual property
right; and

- redesign some or all of our suite of e-business content and collaboration
management products to avoid infringing.

In the event of a successful claim of infringement against us and our
failure or inability to license the infringed technology, our business and
operating results would be significantly harmed.

WE COULD BE SUBJECT TO PRODUCT LIABILITY CLAIMS IF OUR CUSTOMERS' INFORMATION OR
CONTENT IS DAMAGED THROUGH THE USE OF OUR PRODUCTS.

If software errors or design defects in our products cause damage to
customers' data and our agreements do not protect us from related product
liability claims, our business, financial condition and operating results may be
materially adversely affected. Our software products are complex and
sophisticated and may contain design defects or software errors that are
difficult to detect and correct. Errors, bugs or viruses may result in the loss
of market acceptance or the loss of customer data. Our agreements with customers
that attempt to limit our exposure to product liability claims may not be
enforceable in jurisdictions where we operate.

WE MAY BE UNABLE TO RETAIN OUR CURRENT KEY PERSONNEL AND ATTRACT ADDITIONAL
QUALIFIED PERSONNEL TO OPERATE AND EXPAND OUR BUSINESS.

Our success depends largely on the skills, experience and performance of
the members of our senior management and other key personnel, such as Mahmood
Panjwani, our president and chief executive officer, and Rafiq Mohammadi, our
chief technology officer. We may not be successful in attracting, assimilating
or retaining qualified personnel in the future. None of our senior management or
other key personnel is bound by an employment agreement. If we lose one or more
of these key employees, our business and operating results could be seriously
harmed. In addition, our future

12
<PAGE> 15

success will depend largely on our ability to continue attracting and retaining
highly skilled personnel. Like other high-technology companies, we face intense
competition for qualified personnel.

OUR TOTAL REVENUES WILL NOT INCREASE IF WE FAIL TO SUCCESSFULLY MANAGE OUR
GROWTH AND EXPANSION.

Our historical growth has placed, and any further growth is likely to
continue to place, a significant strain on our limited resources. Any failure to
manage growth effectively could seriously harm our business and operating
results.

We have grown from 29 employees at January 1, 1998 to 87 employees at June
30, 1999. To be successful, we will need to implement additional management
information systems, improve our operating, administrative, financial and
accounting systems and controls, train new employees and maintain close
coordination among our executive, research and development, accounting, finance,
marketing, sales and operations organizations. Our failure to do any of these
measures will hurt our business and reduce our total revenues.

AS WE EXPAND OUR OPERATIONS INTERNATIONALLY, WE WILL FACE SIGNIFICANT RISKS IN
DOING BUSINESS IN FOREIGN COUNTRIES.

A key component to our business strategy is to expand our existing sales
and marketing activities internationally, particularly in Asia, Australia, New
Zealand and the United Kingdom. If our efforts are successful, we will be
subject to a number of risks associated with international business activities,
including:

- costs of customizing our products for foreign countries, including
localization, translation and conversion to international and other
foreign technology standards;

- compliance with multiple, conflicting and changing governmental laws and
regulations, including changes in regulatory requirements that may limit
our ability to sell our software in particular countries;

- import and export restrictions, tariffs and greater difficulty in
collecting accounts receivable; and

- foreign currency-related risks if a significant portion of our revenues
become denominated in foreign currencies, like the euro, the largely
untested currency of the European Union.

Our failure to successfully address any of these risks will hurt our operations
and may prevent our total revenues from growing.

Our international activities also face foreign currency-related risks. To
date, all of our revenues have been denominated in U.S. dollars, but we believe
that an increasing portion of our revenues may be denominated in foreign
currencies. We currently do not engage in foreign exchange hedging activities.
For additional information on our foreign currency risks, please see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" which begins on page 22.

YEAR 2000 COMPLIANCE COSTS AND RISKS ARE DIFFICULT TO ASSESS AND COULD RESULT IN
DELAY OR LOSS OF REVENUES, DIVERSION OF DEVELOPMENT RESOURCES, DAMAGE TO OUR
REPUTATION OR INCREASED SERVICE, WARRANTY OR LITIGATION COSTS.

Although we believe that our internally-developed proprietary systems are
year 2000 compliant, that is, that they will recognize date information
correctly when the year changes to 2000, these systems could be substantially
impaired or cease to operate due to year 2000 problems. In addition,

13
<PAGE> 16

we rely on information technology supplied by third parties. Year 2000 problems
experienced by us or any of these third parties could materially adversely
affect our business. Furthermore, the Internet could face serious disruptions
arising from the year 2000 problem.

We believe that many of our customers and potential customers have
implemented policies that prohibit or strongly discourage making changes or
additions to their internal computer systems until after January 1, 2000. We
will experience fewer sales if potential customers who might otherwise purchase
our products delay the purchase and implementation of our product until after
January 1, 2000 in an effort to stabilize their internal computer systems to
cope with the year 2000 problem or because their information technology budgets
have been diverted to address year 2000 issues. If our potential customers delay
purchasing or implementing our products as a result of the year 2000 problem,
our business will be seriously harmed. In addition, because the revenues from
some of our customers are recognized on a ratable basis, any implementation
delays by these customers caused by their needs to address year 2000 issues will
affect our ability to recognize these revenues.

Given the pervasive nature of the year 2000 problem, we cannot guarantee
that disruptions in other industries and market segments will not adversely
affect our business. We have not completed our year 2000 investigation and
overall compliance initiative. The costs related to year 2000 compliance, which
thus far have not been material, could ultimately be significant and may harm
our business.

PROVISIONS IN OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT OR DELAY A
CHANGE IN CONTROL OF IMANAGE AND MAY REDUCE THE MARKET PRICE OF OUR COMMON
STOCK.

Provisions of our certificate of incorporation and bylaws may discourage,
delay or prevent a merger or acquisition that a stockholder may consider
favorable. These provisions include those that:

- authorize the issuance of preferred stock without stockholder approval;

- prohibit cumulative voting in the election of directors;

- require super-majority voting to effect amendments to our certificate of
incorporation and bylaws;

- limit the persons who may call special meetings of stockholders; and

- prohibit stockholder actions by written consent.

Provisions of Delaware law also may discourage, delay or prevent someone
from acquiring or merging with us.

FUTURE ACQUISITIONS MAY BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS, DILUTE
STOCKHOLDER VALUE OR DIVERT MANAGEMENT ATTENTION.

As part of our business strategy, we may find it necessary to acquire
additional businesses, products or technologies that we feel could complement or
expand our business, increase our market coverage, enhance our technical
capabilities or offer other types of growth opportunities. If we identify an
appropriate acquisition candidate, we may not be able to successfully negotiate
the terms of the acquisition, finance the acquisition, or integrate the acquired
business, products or technologies into our existing business and operations.
Furthermore, completing a potential acquisition and integrating an acquired
business will cause significant diversions of management time and other
resources. Since we have never acquired another business, we may experience
unexpected difficulties and obstacles in acquiring and integrating new
operations.

If we consummate a significant acquisition in which the consideration
consists of stock or other securities, your equity could be significantly
diluted. If we were to proceed with a significant

14
<PAGE> 17

acquisition in which the consideration included cash, we could be required to
use a substantial portion of our available cash, including proceeds of this
offering, to consummate that acquisition. Acquisition financing may not be
available on favorable terms, if at all. In addition, we may be required to
amortize significant amounts of goodwill and other intangible assets in
connection with future acquisitions, which would seriously harm our operating
results.

OUR EXECUTIVE OFFICERS, DIRECTORS AND MAJOR STOCKHOLDERS WILL RETAIN SIGNIFICANT
CONTROL OVER IMANAGE AFTER THIS OFFERING, WHICH MAY LEAD TO CONFLICTS WITH OTHER
STOCKHOLDERS OVER CORPORATE GOVERNANCE MATTERS.

Upon completion of this offering, our executive officers, directors and
principal stockholders will beneficially own approximately 64.7% of our
outstanding common stock. As a result, these stockholders will be able to
exercise control over all matters requiring stockholder approval, including the
election of directors and approval of significant corporate transactions, which
could have the effect of delaying or preventing a third party from acquiring
control over or merging with us. We also plan to reserve up to 5% of the shares
offered in this offering under a directed share program which our executive
officers, directors, principal stockholders, employees, business associates and
related persons may be able to purchase shares in this offering at the initial
public offering price. This program may further increase the amount of stock
held by persons whose interests are closely aligned with management's interests.

OUR STOCK PRICE MAY BE VOLATILE AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT
OR ABOVE THE INITIAL PUBLIC OFFERING PRICE.

The initial public offering price for our common stock will be determined
through negotiations between the underwriters and us. If you purchase shares of
common stock, an active trading market may not develop and you may not be able
to resell those shares at or above the initial public offering price. The market
price of our common stock may fluctuate significantly in response to a number of
factors, some of which are beyond our control, including:

- quarterly fluctuations in operating results as we expand into other
markets or adopt other pricing structures such as subscription or
services-based licensing;

- changes in financial estimates or recommendations by securities analysts;

- announcements by us or our competitors of financial results, new
products, significant technological innovations, contracts, acquisitions,
strategic partnerships, joint ventures, capital commitments or other
events;

- additions or departures of key personnel, including Mahmood Panjwani, our
president and chief executive officer, and Rafiq Mohammadi, our chief
technology officer;

- any future sales of our common stock or other securities; and

- stock market price and volume fluctuations, which are particularly common
among securities of Internet-related companies.

In addition, the stock market has experienced extreme volatility that often
has been unrelated to the performance of particular companies. These market
fluctuations may cause our stock price to fall regardless of our performance.

OUR STOCK PRICE COULD FALL WHEN SHARES OF OUR COMMON STOCK BECOME AVAILABLE FOR
SALE IN THE FUTURE.

If our stockholders sell substantial amounts of our common stock in the
public market following this offering, the market price of our common stock
could fall. In addition, the sale of these shares could impair our ability to
raise capital through the sale of additional stock. Based on shares

15
<PAGE> 18

outstanding as of June 30, 1999, upon completion of this offering, we will have
20,378,530 shares of common stock outstanding, or 20,918,530 shares if the
underwriters' overallotment is exercised in full. Other than the shares sold in
this offering, no shares will be immediately eligible for sale in the public
market. Our directors, executive officers and current stockholders will be
subject to agreements with the underwriters or us that restrict their ability to
transfer their stock for 180 days from the date of this prospectus. After these
agreements expire, an additional 14,324,197 shares will be eligible for sale in
the public market, in some cases subject only to the volume, manner of sale and
notice requirements of Rule 144 of the Securities Act. The increase in the
shares eligible for sale upon expiration of these agreements may cause the price
of our stock to decline.

YOU WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION AS A RESULT OF THIS OFFERING.

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

MANAGEMENT CAN SPEND THE PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH THE
STOCKHOLDERS MAY NOT AGREE.

We plan to use the net proceeds from this offering for general corporate
purposes. Therefore, we will have broad discretion as to how we will spend these
proceeds, and stockholders may not agree with the ways in which we use the
proceeds. We may not be successful in investing the net proceeds from this
offering, in our operations or external investments, to yield a favorable return
or result.

WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS WHICH WOULD LIMIT OUR
ABILITY TO GROW.

We may need to seek additional funding in the future. We do not know if we
will be able to obtain additional financing on favorable terms, if at all. In
addition, if we issue equity securities, stockholders may experience additional
dilution or the new equity securities may have rights, preferences or privileges
senior to those of existing holders of common stock. If we cannot raise funds on
acceptable terms, if and when needed, we may not be able to develop or enhance
our products, take advantage of future opportunities or respond to competitive
pressures or unanticipated requirements, which could seriously harm our
business.

IF OUR STOCK PRICE FALLS SIGNIFICANTLY, WE MAY BECOME THE SUBJECT OF A
SECURITIES CLASS-ACTION LAWSUIT THAT COULD RESULT IN SUBSTANTIAL COSTS AND
DISTRACTION TO MANAGEMENT.

In the past, securities class-action litigation has often been brought
against a company following periods of volatility in the market price of its
securities. We may in the future be the target of similar litigation. Securities
litigation could result in substantial costs and divert management's attention
and resources.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements under Prospectus Summary, Risk Factors, Management's
Discussion and Analysis of Financial Condition and Results of Operations,
Business and elsewhere in this prospectus constitute forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as may,
will, should, expect, plan, intend, forecast, anticipate, believe, estimate,
predict, potential, continue or the negative of these terms or other comparable
terminology. The forward-looking statements contained in this prospectus involve
known and unknown risks, uncertainties and

16
<PAGE> 19

other factors that may cause our or our industry's actual results, level of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these statements. These factors include, among others, those listed under "Risk
Factors" and elsewhere in this prospectus.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. You should not place undue reliance on
these forward-looking statements.

17
<PAGE> 20

USE OF PROCEEDS

We estimate that our net proceeds from the sale of the 3,600,000 shares of
common stock we are offering will be approximately $29,132,000, at an assumed
initial public offering price of $9.00 per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses. If the
underwriters' over-allotment option is exercised in full, we estimate that our
net proceeds will be approximately $33,652,000.

The principal purposes of this offering are to obtain additional capital,
to create a public market for our common stock, to enhance our ability to
acquire other businesses, products or technologies, and to facilitate future
access to public equity markets. We intend to use the proceeds for working
capital, capital expenditures and other general corporate purposes. We may also
use a portion of the net proceeds from this offering to acquire or invest in
businesses, technologies or products that are complementary to our business. We
currently have no commitments or agreements with respect to any acquisitions.
Pending our use 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 our common stock and
do not currently anticipate paying these cash dividends. We currently anticipate
that we will retain all of our future earnings for use in the development and
expansion of our business and for general corporate purposes. Any determination
to pay dividends in the future will be at the discretion of our board of
directors and will depend upon our financial condition, operating results and
other relevant factors as determined by the board of directors, in its
discretion. Additionally, we have entered into loan agreements with creditors
that restrict our ability to pay dividends.

18
<PAGE> 21

CAPITALIZATION

The following table presents the capitalization of iManage as of June 30,
1999:

- on an actual basis;

- on a pro forma basis to reflect the conversion of each outstanding share
of preferred stock into one share of common stock upon the closing of
this offering; and

- on a pro forma as adjusted basis to reflect the sale of 3,600,000 shares
of common stock that we are offering at an assumed initial public
offering price of $9.00 per share after deducting estimated underwriting
discounts and commissions and our estimated offering expenses and the
application of the net proceeds we receive from this offering. The pro
forma as adjusted information reflects none of the 1,894,950 shares of
common stock issuable upon exercise of outstanding options at June 30,
1999 at a weighted average exercise price of $0.58.

This table should be read in conjunction with our financial statements and
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this prospectus. For more
information regarding our capitalization, please see "Use of Proceeds" on page
18 and "Certain Transactions" on page 57.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE
AND PER SHARE DATA)
<S> <C> <C> <C>
Long-term debt............................................ $ 889 $ 889 $ 889
------- ------- -------
Stockholders' equity:
Preferred stock; 8,153,708 shares authorized, actual;
2,000,000 shares authorized, pro forma and pro forma
as adjusted; 8,033,117 shares issued and outstanding,
actual; none issued or outstanding, pro forma and pro
forma as adjusted.................................... 8 -- --
Common stock; 20,000,000 shares authorized, actual;
100,000,000 shares authorized, pro forma and pro
forma as adjusted; 8,745,413 shares issued and
outstanding, actual; 16,778,530 issued and
outstanding, pro forma; 20,378,530 shares issued and
outstanding, pro forma as adjusted................... 8 16 20
Additional paid-in capital................................ 20,100 20,100 49,228
Deferred stock-based compensation......................... (3,047) (3,047) (3,047)
Notes receivable for common stock......................... (498) (498) (498)
Accumulated deficit....................................... (9,126) (9,126) (9,126)
------- ------- -------
Total stockholders' equity...................... 7,445 7,445 36,577
------- ------- -------
Total capitalization............................ $ 8,334 $ 8,334 $37,466
======= ======= =======
</TABLE>

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<PAGE> 22

DILUTION

If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma net tangible book value per share of our common
stock after this offering. In the table below, we have calculated pro forma net
tangible book value per share by dividing the net tangible book value, tangible
assets less total liabilities, by the number of outstanding shares of common
stock as adjusted for the conversion of 8,033,117 shares of preferred stock into
common stock upon consummation of this offering. If you participate in this
offering, you could pay as much as $9.00 per share, which substantially exceeds
$0.41 per share, which is the pro forma per share value of our tangible assets
after deducting our liabilities. Additionally, as detailed below, new investors
purchasing shares in this offering at the initial public offering price will
contribute 73.2% of the total consideration paid to us but will own only 17.7%
of our shares.

Our pro forma net tangible book value as of June 30, 1999 was approximately
$6,919,000, or $0.41 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 pro forma number of shares of common stock
outstanding. After giving effect to the receipt of the estimated net proceeds
from this offering, based upon an assumed initial public offering price of $9.00
per share and after deducting the estimated underwriting discounts and
commissions and estimated offering expenses, our pro forma as adjusted net
tangible book value as of June 30, 1999 would have been approximately
$36,051,000, or $1.77 per share. This represents an immediate increase in pro
forma as adjusted net tangible book value of $1.36 per share to existing
stockholders and an immediate dilution of $7.23 per share to investors
purchasing common stock in this offering. The following table illustrates the
per share dilution:

<TABLE>
<CAPTION>
ASSUMING NO
EXERCISE OF
OVER-ALLOTMENT
OPTION
--------------
<S> <C> <C>
Assumed initial public offering price per share............. $9.00
Pro forma net tangible book value per share as of June 30,
1999................................................... $ 0.41
Increase per share attributable to new investors.......... 1.36
-------
Pro forma as adjusted net tangible book value per share
after the offering........................................ 1.77
-----
Dilution per share to new investors......................... $7.23
=====
</TABLE>

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

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PAID PER SHARE
---------- ------- ----------- ------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 16,778,530 82.3% $11,880,000 26.8% $0.71
New investors....................... 3,600,000 17.7% $32,400,000 73.2% 9.00
---------- ----- ----------- -----
Total..................... 20,378,530 100.0% $44,280,000 100.0%
========== ===== =========== =====
</TABLE>

20
<PAGE> 23

SELECTED FINANCIAL DATA

The following data have been derived from financial statements audited
by
PricewaterhouseCoopers LLP, independent accountants, except for the data for the
six month period ended June 30, 1998. Balance sheets at December 31, 1997 and
1998 and at June 30, 1999, the related statements of operations and of cash
flows for the three years ended December 31, 1998 and the six month period ended
June 30, 1999 and related notes appear elsewhere in this prospectus. The
statement of operations data for the period from October 10, 1995, our
inception, through December 31, 1995 and the balance sheet data as of December
31, 1995 and 1996 are derived from audited financial statements not included in
this prospectus.

The selected financial data presented below contains only a portion of
iManage's financial statements and should be read in conjunction with the
financial statements and related notes and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
prospectus.

<TABLE>
<CAPTION>
PERIOD FROM SIX MONTH PERIOD
OCTOBER 10, 1995 YEAR ENDED DECEMBER 31, ENDED JUNE 30,
(INCEPTION) TO -------------------------- ---------------------
DECEMBER 31, 1995 1996 1997 1998 1998 1999
----------------- ------ ------- ------- ----------- -------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
License................................ $ -- $ 70 $ 1,172 $ 6,509 $ 1,849 $ 6,159
Support and services................... -- 4 358 1,232 384 1,715
------ ------ ------- ------- ------- -------
Total revenues.................. -- 74 1,530 7,741 2,233 7,874
------ ------ ------- ------- ------- -------
Cost of revenues:
License................................ -- 4 136 414 150 327
Support and services................... -- 38 163 1,213 499 1,173
------ ------ ------- ------- ------- -------
Total cost of revenues.......... -- 42 299 1,627 649 1,500
------ ------ ------- ------- ------- -------
Gross profit............................. -- 32 1,231 6,114 1,584 6,374
Operating expenses:
Sales and marketing.................... 19 335 1,120 4,393 1,798 3,677
Research and development............... 24 113 935 2,351 1,058 1,884
General and administrative............. 21 272 706 1,295 577 938
Stock-based compensation............... -- -- 2,079 1,054 422 1,991
------ ------ ------- ------- ------- -------
Total operating expenses........ 64 720 4,840 9,093 3,855 8,490
------ ------ ------- ------- ------- -------
Loss from operations..................... (64) (688) (3,609) (2,979) (2,271) (2,116)
Interest income (expense), net........... -- (4) 13 139 34 186
------ ------ ------- ------- ------- -------
Loss before provision for income taxes... (64) (692) (3,596) (2,840) (2,237) (1,930)
------ ------ ------- ------- ------- -------
Provision for income taxes............... -- -- -- -- -- 4
------ ------ ------- ------- ------- -------
Net loss................................. $ (64) $ (692) $(3,596) $(2,840) $(2,237) $(1,934)
====== ====== ======= ======= ======= =======
Net loss per share -- basic and
diluted................................ $(0.01) $(0.12) $ (0.57) $ (0.38) $ (0.31) $ (0.24)
Shares used in net loss per
share -- basic and diluted............. 6,000 6,004 6,292 7,455 7,227 8,102
Pro forma net loss per share -- basic and
diluted................................ $ (0.21) $ (0.12)
Shares used in pro forma net loss per
share -- basic and diluted............. 13,489 16,135
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------ JUNE 30,
1995 1996 1997 1998 1999
---- ---- ------ ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEETS DATA:
Cash, cash equivalents and short term investments........... $ 10 $359 $1,789 $ 7,617 $12,117
Working capital (deficit)................................... (18) 17 1,740 6,119 6,261
Total assets................................................ 44 511 3,260 13,495 18,560
Long-term debt.............................................. -- -- -- -- 889
Total stockholders' equity.................................. 17 90 1,986 7,360 7,445
</TABLE>

21
<PAGE> 24

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

The following discussion should be read in conjunction with the financial
statements and related notes included elsewhere in this prospectus.

OVERVIEW

We supply e-business content and collaboration management software that
provides organizations with a web-based unified content platform that manages,
organizes and delivers relevant information from a variety of sources in a
centralized manner throughout the extended enterprise. We believe we are a
leading provider of e-business content and collaboration management software,
based on the number of customers we serve and the features our software
provides. Since 1996, we have licensed our products to over 400 customers for
use by over 100,000 end users.

We were incorporated in October 1995 and commenced operations shortly after
that time. During the period October 1995 through September 1996 we were a
development stage company and had no revenues. Our operating activities during
this period related primarily to developing our product, building our corporate
infrastructure and raising capital. In October 1996, we released the first
version of our iManage infoCommerce Server and iManage infoRite,and sold them
through a small sales force and support staff. In June 1997, we enhanced our
iManage suite of products and shipped iManage infoLink. In March 1998, we
released an enhanced version of iManage infoCommerce Server. We began shipping
our iManage infoLook in August 1999.

Our total revenues, which consist of software license revenues and support
and services revenues, totaled $74,000 in 1996, $1.5 million in 1997, $7.7
million in 1998 and $7.9 million in the six month period ended June 30, 1999.
Through June 30, 1999, substantially all of our total revenues were derived from
licenses of the iManage infoCommerce Server, iManage infoRite and iManage
infoLink and related services. We currently expect that substantially all of our
total revenues will be derived from our iManage infoCommerce Server, iManage
infoRite and iManage infoLink product lines and related services. Our license
revenues are based on the number of users and servers. Support and services
revenues consist of customer support, training and consulting. Customers who
license our products generally purchase support contracts, which are billed on a
subscription basis typically covering a 12-month period. Training services are
billed on a per student or per class session basis and consulting is customarily
billed at a fixed daily rate plus our out-of-pocket expenses.

We market our software and services primarily through our direct sales
organization, resellers and system integrators in the United States and Canada,
and through distributors in the United Kingdom and Australia. Revenues from
iManage infoCommerce Server, iManage infoRite and iManage infoLink licenses and
services to customers outside the United States and Canada have been
insignificant to date.

Through 1997, we recognized revenues based on the American Institute of
Certified Public Accountants Statement of Position 91-1. Commencing in 1998, we
began recognizing revenues based on the American Institute of Certified Public
Accountants Statement of Position 97-2, Software Revenue Recognition, or SOP
97-2, as amended by Statement of Position 98-4. Further implementation
guidelines relating to these standards may result in unanticipated changes in
our revenue recognition practices, and these changes could affect our future
revenues and earnings.

We recognize license revenues upon shipment if a signed contract exists,
the fee is fixed and determinable, collection of resulting receivables is
probable and product returns are reasonably estimable and if applicable,
acceptance criteria have been met. Provisions for estimated warranty costs and
sale returns are recorded at the time of shipment.

22
<PAGE> 25

For contracts with multiple obligations, for example, deliverable and
undeliverable products, support and other service, we allocate revenues to the
undelivered element of the contract based on objective evidence of its fair
value, which is specific to us. We generally do not allow the right of return
but have accepted returns in isolated instances when resellers, system
integrators and distributors have incorrectly ordered product. We recognize
revenues allocated to undelivered products when the criteria for license
revenues described above are met. We recognize support and services revenues,
including amounts allocated from contracts with multiple obligations and for
ongoing customer support, ratably over the period of the support contract. Our
support and service arrangements entitle customers to telephone support and
unspecified upgrades and enhancements. Payments for support and services are
generally made in advance and are non-refundable. For revenues allocated to
training and consulting services or derived from the separate sales of these
services, we recognize revenues as the related services are performed.

Our cost of license revenues includes royalties due to third parties for
integrated technology, the cost of manuals and product documentation, production
media used to deliver our products and packaging costs. Our cost of support and
services revenues includes salaries and related expenses for the customer
support and training organization and an allocation of overhead expenses.

Our operating expenses are classified as sales and marketing, research and
development, general and administrative and stock-based compensation. We
classify all charges to these operating expense categories based on the nature
of the expenditures. Although each category includes expenses that are unique to
the category type, there are common recurring expenditures that are typically
included in all operating expense categories, including salaries, employee
benefits, incentive compensation, bonuses, travel costs, professional fees,
telephone, communication and rent and allocated facilities costs. The sales and
marketing category of operating expenses includes additional expenditures
specific to the sales group, such as commissions, and expenditures specific to
the marketing group, including public relations and advertising, trade shows and
marketing collateral materials. In the development of our new products and
enhancements of existing products, the technological feasibility of the software
is not established until substantially all product development is complete.
Historically, software development costs eligible for capitalization have been
insignificant, and we have expensed all costs related to internal research and
development as we have incurred them.

In connection with the granting of stock options to our employees and
consultants, we have recorded deferred stock-based compensation totaling
approximately $8.2 million through June 30, 1999, of which approximately $3.0
million remains to be amortized. This amount represents the difference between
the exercise price and the current estimated fair value of our common stock on
the date these stock options were granted. This amount is included as part of
stockholders' equity and is being amortized by charges to operations over the
vesting period of the options, consistent with the method described in Financial
Accounting Standards Board, or FASB, Interpretation No. 28. We recognized
stock-based compensation expense of approximately $2.1 million and $1.1 million
in 1997 and 1998, respectively, and approximately $2.0 million for the six month
period ended June 30, 1999, which includes stock-based compensation amounts for
services not initially deferred. We expect to record additional deferred
stock-based compensation for stock option grants made subsequent to June 30,
1999 of at least $1.3 million. The amortization of the remaining deferred
stock-based compensation at June 30, 1999 will result in additional charges to
operations through 2002. The stock-based compensation expense is included in our
operating expenses.

We anticipate that our operating expenses will increase substantially as we
intend to continue to incur significant research and development costs and
invest heavily in the expansion of our sales, marketing and support
organizations to build an infrastructure to support our long-term growth
strategy. The number of our full-time employees increased from 59 as of December
31, 1998, to 87 as of June 30, 1999. We will seek to hire additional employees
in the future. As a result of

23
<PAGE> 26

investments relating to the expansion of our business, we have incurred net
losses in each quarter since inception and, as of June 30, 1999, had an
accumulated deficit of $9.1 million. To achieve profitability, we will have to
increase our total revenues significantly. We cannot assure you that we will
ever attain or maintain profitability.

In view of the rapidly changing nature of our market and our limited
operating history, we believe that period-to-period comparisons of our revenues
and operating results are not necessarily meaningful and should not be relied
upon as indicative of future performance. Our historic revenue growth rates are
not necessarily sustainable or indicative of our future growth. Our prospects
must be considered in light of the risks, expenses and difficulties frequently
encountered by companies in early stages of development, particularly companies
in new and rapidly evolving markets. We cannot assure you we will be successful
in addressing these risks and difficulties.

RESULTS OF OPERATIONS

The following table presents our statement of operations data as a
percentage of total revenues for the periods indicated.

<TABLE>
<CAPTION>
SIX MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------- -----------------------
1996 1997 1998 1998 1999
------- ------- ------ ----------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
License............................ 94.6% 76.6% 84.1% 82.8% 78.2%
Support and services............... 5.4 23.4 15.9 17.2 21.8
------- ------- ------ ------- ------
Total revenues............. 100.0 100.0 100.0 100.0 100.0
------- ------- ------ ------- ------
Cost of revenues:
License............................ 5.4 8.9 5.3 6.7 4.2
Support and services............... 51.4 10.7 15.7 22.3 14.9
------- ------- ------ ------- ------
Total cost of revenues..... 56.8 19.5 21.0 29.1 19.1
------- ------- ------ ------- ------
Gross profit......................... 43.2 80.5 79.0 70.9 80.9
Operating expenses:
Sales and marketing................ 452.7 73.2 56.7 80.5 46.7
Research and development........... 152.7 61.1 30.4 47.4 23.9
General and administrative......... 367.6 46.1 16.7 25.8 11.9
Stock-based compensation........... 0.0 135.9 13.6 18.9 25.3
------- ------- ------ ------- ------
Total operating expenses... 973.0 316.3 117.5 172.6 107.8
------- ------- ------ ------- ------
Loss from operations................. (929.7) (235.9) (38.5) (101.7) (26.9)
------- ------- ------ ------- ------
Interest income (expense), net....... (5.4) 0.8 1.8 1.5 2.4
------- ------- ------ ------- ------
Loss before provision for income
taxes.............................. (935.1) (235.0) (36.7) (100.2) (24.5)
------- ------- ------ ------- ------
Provision for income taxes........... 0.0 0.0 0.0% 0.0 0.1
------- ------- ------ ------- ------
Net loss............................. (935.1)% (235.0)% (36.7)% (100.2)% (24.6)%
======= ======= ====== ======= ======
</TABLE>

24
<PAGE> 27

SIX MONTH PERIOD ENDED JUNE 30, 1998 AND 1999

REVENUES

Our total revenues are derived from software licenses and related support
and services. Our revenues were $2.2 million and $7.9 million for the six month
period ended June 30, 1998 and 1999, respectively, representing an increase of
$5.7 million, or 259.1%. International revenues were not significant for the six
month period ended June 30, 1998 and 1999.

License Revenues. Our license revenues were $1.8 million and $6.2 million
for the six month period ended June 30, 1998 and 1999, respectively,
representing an increase of $4.4 million, or 244.4%. License revenues
represented 82.8% and 78.2% of total revenues for the six month period ended
June 30, 1998 and 1999, respectively. This increase was primarily a result of
increased sales of iManage infoCommerce Server, iManage infoRite and iManage
infoLink, reflecting the increased market acceptance of these products, as well
as increases in the size and productivity of the sales force and our resellers.

Support and Services Revenues. Support and services revenues consist
primarily of support and, to a lesser extent, training and consulting services
associated with the increase in licenses of iManage infoCommerce Server, iManage
infoRite and iManage infoLink during these periods. Our support and services
revenues were $384,000 and $1.7 million for the six month period ended June 30,
1998 and 1999, respectively, representing an increase of $1.3 million, or
342.7%. Support and services revenues represented 17.2% and 21.8% of total
revenues for the six month period ended June 30, 1998 and 1999, respectively.
The increase in support and services revenues for the six month period ended
June 30, 1999 compared to the six month period ended June 30, 1998 was primarily
a result of increased licenses of iManage infoCommerce Server, iManage infoRite
and iManage infoLink in 1999. We expect that the proportion of our support and
services revenues to total revenues will fluctuate in the future, depending in
part on the level and nature of license revenues as well as the number of
support contracts sold and the level of training and consulting revenues.

COST OF REVENUES

Cost of License Revenues. Cost of license revenues was $150,000 and
$327,000 for the six month period ended June 30, 1998 and 1999, respectively,
representing an increase of $177,000, or 118.0%. This increase was principally a
result of increased royalties owed to third parties for integrated technologies
as a result of additional third-party technology arrangements entered into
during 1999. Cost of license revenues represented 8.1% and 5.3% of license
revenues for the six month period ended June 30, 1998 and 1999, respectively. We
expect that the cost of license revenues will fluctuate as a percentage of
license revenues in the future depending in part on the demand for our current
products.

Cost of Support and Services Revenues. Cost of support and services
revenues was $499,000 and $1.2 million for the six month period ended June 30,
1998 and 1999, respectively, representing an increase of $701,000, or 140.5%.
This increase was primarily a result of an increase of $308,000 in technical
support and training personnel costs and headcount, an increase of $240,000 in
facility-related overhead costs and an increase of $74,000 in travel-related
costs, all of which were necessary to manage and support our growing customer
base. Cost of support and services revenues was 129.9% and 68.4% of support and
services revenues for the six month period ended June 30, 1998 and 1999,
respectively. Cost of support and services revenues as a percentage of support
and services revenues may vary between periods due to the customer support
services versus the mix of training and consulting services we provide.

25
<PAGE> 28

OPERATING EXPENSES

Sales and Marketing. Sales and marketing expenses were $1.8 million and
$3.7 million for the six month period ended June 30, 1998 and 1999,
respectively, representing an increase of $1.9 million, or 105.6%. This increase
was primarily a result of investments in sales and marketing, which included an
increase of $1.2 million in personnel-related costs to recruit and hire sales
and marketing personnel an increase of $249,000 in facility-related overhead
expenses and an increase of $229,000 in professional service expenses primarily
related to third-party consultants. Sales and marketing employees increased from
17 as of June 30, 1998 to 35 as of June 30, 1999, an increase of 18, or 105.9%.
Sales and marketing expenses represented 80.5% and 46.7% of total revenues for
the six month period ended June 30, 1998 and 1999, respectively. We believe that
a significant increase in our sales and marketing efforts is essential for us to
maintain our market position and further increase acceptance of our products.
Accordingly, we anticipate that sales and marketing expenses will increase in
absolute dollars but may fluctuate as a percentage of total revenues in future
periods.

Research and Development. Research and development expenses were $1.1
million and $1.9 million for the six month period ended June 30, 1998 and 1999,
respectively, representing an increase of $800,000, or 72.7%. This increase was
primarily a result of an increase in the number of software developers, program
management, documentation personnel and outside contractors we use to support
development of our products. Our research and development employees increased
from 16 as of June 30, 1998 to 23 as of June 30, 1999, an increase of seven, or
43.8%. Research and development costs represented 47.4% and 23.9% of total
revenues for the six month period ended June 30, 1998 and 1999, respectively. We
believe that significant increases in our research and development investment
are essential for us to maintain our market position, to continue to expand our
product line and to enhance the unified content technology platform for our
suite of products. Accordingly, we anticipate that we will continue to invest
significantly in product research and development for the foreseeable future,
and as a result, our research and development expenses are likely to increase in
absolute dollars in future periods.

General and Administrative. General and administrative expenses were
$577,000 and $938,000 for the six month period ended June 30, 1998 and 1999,
respectively, representing an increase of $361,000, or 62.6%. This increase was
primarily a result of an increase of $182,000 related to additional finance,
executive, information services and human resources personnel needed to support
the growth of our business, an increase of $143,000 in facility-related overhead
costs and an increase of $67,000 in outside contractors expense associated with
expanded human resources programs. General and administrative costs represented
25.8% and 11.9% of our total revenues for the six month period ended June 30,
1998 and 1999, respectively. We believe that our general and administrative
expenses will continue to increase in absolute dollars as a result of the
continued expansion of our administrative staff and expenses associated with
being a public company.

Interest Income (Expense), Net. Interest income was $39,000 and $204,000
for the six month period ended June 30, 1998 and 1999, respectively,
representing an increase of $165,000, or 423.1%. This increase reflects the
higher cash and short-term investment base as a result of proceeds we received
in September 1998 from issuance of our series C preferred stock and borrowings
under our equipment line of credit in March 1999, in addition to the generation
of cash from operations during 1999. Interest expense was $5,000 and $18,000 for
the six month period ended June 30, 1998 and 1999, respectively, with the
increase primarily the result of borrowings under our equipment line of credit
in March 1999.

Provision for Income Taxes. As of June 30, 1999, we had estimated net
operating loss carryforwards for federal and state income tax reporting purposes
of approximately $3.2 million and federal and state tax credit carryforwards of
$350,000, which expire through 2018. The U.S. tax laws

26
<PAGE> 29

contain provisions that limit the use in any future period of net operating loss
and credit carryforwards upon the occurrence of events, such as a significant
change in ownership interests. We had deferred tax assets, including our net
operating loss carryforwards and tax credits, totaling approximately $1.9
million as of June 30, 1999. A valuation allowance has been recorded for the
entire deferred tax asset as a result of uncertainties regarding the realization
of the asset balance. See note 7 to financial statements on page F-21.

YEAR ENDED DECEMBER 31, 1996, 1997 AND 1998

REVENUES

Our revenues were $74,000 in 1996, $1.5 million in 1997 and $7.7 million in
1998, representing increases of $1.4 million, or 1,927.0%, from 1996 to 1997,
and $6.2 million, or 413.3%, from 1997 to 1998.

License Revenues. Our license revenues were $70,000 in 1996, $1.2 million
in 1997 and $6.5 million in 1998, representing increases of $1.1 million, or
1,614.3%, from 1996 to 1997 and $5.3 million, or 441.7%, from 1997 to 1998.
License revenues represented 94.6%, 76.6% and 84.1% of our total revenues in
1996, 1997 and 1998, respectively. The increase in our license revenues from
1996 to 1997 was primarily the result of the initial shipment in October 1996 of
iManage infoCommerce Server, iManage infoRite and iManage infoLink. The increase
in our license revenues from 1997 to 1998 was primarily due to increased market
acceptance of these products and increased prices for these products.

Support and Services Revenues. Our support and services revenues were
$4,000 in 1996, $358,000 in 1997 and $1.2 million in 1998, representing
increases of $354,000 from 1996 to 1997 and $842,000, or 235.2%, from 1997 to
1998. In 1997 and 1998, support and services revenues consisted primarily of
customer support and, to a lesser extent, training services, associated with the
increasing license revenues during these periods. Support and services revenues
represented 5.4%, 23.4% and 15.9% of our total revenues in 1996, 1997 and 1998,
respectively. The increase in absolute dollars in support and services revenues
from 1997 to 1998 reflects increasing licenses of our iManage infoCommerce
Server, iManage infoRite and iManage infoLink.

COST OF REVENUES

Cost of License Revenues. Cost of license revenues was $4,000 in 1996,
$136,000 in 1997 and $414,000 in 1998, representing increases of $132,000, or
3,300.0%, from 1996 to 1997 and $278,000, or 204.4%, from 1997 to 1998. The
increase from 1996 to 1997 was a result of increased costs of production of
manuals and other media associated with the increasing license revenues during
this period. The increase in 1997 to 1998 was a result of increased royalties to
third parties for technology integrated into our iManage infoCommerce Server in
the fourth quarter of 1997 and the first quarter of 1998. Cost of license
revenues as a percentage of license revenues was 5.7% for 1996, 11.6% for 1997
and 6.4% for 1998.

Cost of Support and Services Revenues. Cost of support and services
revenues was $38,000 in 1996, $163,000 in 1997 and $1.2 million in 1998,
representing increases of $125,000, or 328.9%, from 1996 to 1997 and $1.0
million, or 636.2%, from 1997 to 1998. The increases from 1996 to 1998 resulted
primarily from an increase of $94,000 in 1997 and an increase of $689,000 in
1998 related to personnel-related expenses from increases in technical support
and training personnel and an increase of $213,000 in 1998 related to increases
in travel-related costs to manage and support our growing customer base. Cost of
support and services revenues as a percentage of support and services revenues
was 950.0% for 1996, 45.5% for 1997 and 98.5% for 1998.

27
<PAGE> 30

OPERATING EXPENSES

Sales and Marketing. Sales and marketing expenses were $335,000 in 1996,
$1.1 million in 1997 and $4.4 million in 1998, representing increases of
$765,000, or 228.4%, from 1996 to 1997 and $3.3 million, or 300.0%, from 1997 to
1998. The increases from 1996 through 1998 primarily reflected investments in
our sales and marketing infrastructure, which included an increase of $406,000
in 1997 and an increase of $2.3 million in 1998 related to significant
personnel-related expenses including salaries, benefits and commissions,
recruiting fees, and related costs of hiring sales management, sales
representatives, sales engineers and marketing personnel. Sales and marketing
employees totaled three, nine and 23 as of December 31, 1996, 1997 and 1998,
respectively, representing increases of 200.0% from 1996 to 1997 and 155.6% from
1997 to 1998. The increase in sales and marketing expenses from 1997 to 1998
also reflected an increase of $399,000 in travel and entertainment expenses, an
increase of $340,000 in public relations and trade show expenses, and an
increase of $201,000 in facility-related overhead costs. Sales and marketing
expenses as a percentage of total revenues were 452.7% for 1996, 73.2% for 1997
and 56.7% for 1998. The decreases in sales and marketing expenses as a
percentage of total revenues from 1996 through 1998 reflected the more rapid
growth of our total revenues compared to the growth of sales and marketing
expenses in these periods.

Research and Development. Research and development expenses were $113,000
in 1996, $935,000 in 1997 and $2.4 million in 1998, representing increases of
$822,000, or 727.4%, from 1996 to 1997 and $1.5 million, or 156.7% from 1997 to
1998. The increases from 1996 through 1998 were primarily related to increased
personnel costs resulting from the increase in the wage rates, benefits and the
number of software developers and quality assurance personnel and third-party
consultants to support our product development and testing activities related to
the development of iManage infoRite, iManage infoLink and iManage infoLook as
well as enhancements to iManage infoCommerce Server. Our research and
development employees totaled three, 12 and 16 as of December 31, 1996, 1997 and
1998, respectively, representing increases of 300.0% from 1996 to 1997 and 33.3%
from 1997 to 1998. Research and development costs as a percentage of total
revenues were 152.7.% in 1996, 61.1% in 1997 and 30.4% in 1998. The decreases in
research and development expenses as a percentage of total revenues from 1996
through 1998 reflected increases in our total revenues.

General and Administrative. General and administrative expenses were
$272,000 in 1996, $706,000 in 1997 and $1.3 million in 1998, representing
increases of $434,000, or 159.6%, from 1996 to 1997 and $594,000, or 84.1%, from
1997 to 1998. The increases from 1996 through 1998 were primarily the result of
increased personnel costs of $177,000 in 1997 and $339,000 in 1998 resulting
from additional finance, executive and administrative personnel and increases of
$69,000 in 1997 and $245,000 in 1998 in professional service costs, primarily
accounting and legal, to support the growth of our business during these
periods. General and administrative costs, as a percentage of total revenues
were 367.6% in 1996, 46.1% in 1997 and 16.7% in 1998.

Interest Income (Expense), Net. Interest income (expense), net was $(4,000)
in 1996, $13,000 in 1997 and $139,000 in 1998, representing increases of
$17,000, or 425.0%, from 1996 to 1997, and $126,000, or 969.2%, from 1997 to
1998. The increases from 1996 through 1998 were primarily the result of the
higher invested cash base as a result of proceeds received from the issuance of
our series A, B and C preferred stock.

Provision for Income Taxes. We have not recorded a provision for federal
and state income taxes because we have experienced net losses since inception
which has resulted in deferred tax assets. We have recorded a valuation
allowance for the entire deferred tax asset as a result of uncertainties
regarding the realization of the asset balance.

28
<PAGE> 31

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth unaudited statement of operations data for
the six quarters ended June 30, 1999, as well as such data expressed as a
percentage of our total revenues for the periods indicated. You should read this
information in conjunction with our financial statements and related notes
appearing elsewhere in this prospectus. We have derived this unaudited
information on a basis consistent with our audited Financial Statements and, in
the opinion of our management, it reflects all normal recurring adjustments
considered necessary for a fair presentation of our financial position and
operating results for the quarters presented. Our quarterly results have in the
past been, and may in the future be, subject to significant fluctuations. As a
result, we believe that results of operations for interim periods should not be
relied upon as any indication of the results to be expected in any future
period.

<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED
-----------------------------------------------------------------
MAR 31, JUNE 30, SEPT 30, DEC 31, MAR 31, JUNE 30,
1998 1998 1998 1998 1999 1999
------- -------- -------- ------- ------- --------
(UNAUDITED AND IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues:
License................................. $ 564 $1,285 $2,195 $2,465 $2,805 $ 3,354
Support and services.................... 206 178 382 466 774 941
------- ------ ------ ------ ------ -------
Total revenues................... 770 1,463 2,577 2,931 3,579 4,295
------- ------ ------ ------ ------ -------
Cost of revenues:
License................................. 53 97 112 152 149 178
Support and services.................... 233 266 289 425 526 647
------- ------ ------ ------ ------ -------
Total cost of revenues........... 286 363 401 577 675 825
------- ------ ------ ------ ------ -------
Gross profit.............................. 484 1,100 2,176 2,354 2,904 3,470
------- ------ ------ ------ ------ -------
Operating expenses:
Sales and marketing..................... 810 988 1,212 1,383 1,707 1,970
Research and development................ 487 571 595 698 900 984
General and administrative.............. 280 297 331 387 440 498
Stock-based compensation................ 249 173 390 242 527 1,464
------- ------ ------ ------ ------ -------
Total operating expenses......... 1,826 2,029 2,528 2,710 3,574 4,916
------- ------ ------ ------ ------ -------
Loss from operations...................... (1,342) (929) (352) (356) (670) (1,446)
Interest income (expense), net............ 2 32 27 78 77 109
------- ------ ------ ------ ------ -------
Loss before provision for income taxes.... (1,340) (897) (325) (278) (593) (1,337)
------- ------ ------ ------ ------ -------
Provision for income taxes................ -- -- -- -- 1 3
------- ------ ------ ------ ------ -------
Net loss.................................. $(1,340) $ (897) $ (325) $ (278) $ (594) $(1,340)
======= ====== ====== ====== ====== =======
</TABLE>

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<PAGE> 32

<TABLE>
<CAPTION>
THREE MONTH PERIOD ENDED
-----------------------------------------------------------------
MAR 31, JUNE 30, SEPT 30, DEC 31, MAR 31, JUNE 30,
1998 1998 1998 1998 1999 1999
------- -------- -------- ------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
As a percentage of total revenues:
Revenues:
License................................. 73.2% 87.8% 85.2% 84.1% 78.4% 78.1%
Support and services.................... 26.8 12.2 14.8 15.9 21.6 21.9
------- ------ ------ ------ ------ -------
Total revenues................... 100.0 100.0 100.0 100.0 100.0 100.0
------- ------ ------ ------ ------ -------
Cost of revenues:
License................................. 6.9 6.6 4.3 5.2 4.2 4.1
Support and services.................... 30.3 18.2 11.2 14.5 14.7 15.1
------- ------ ------ ------ ------ -------
Total cost of revenues........... 37.1 24.8 15.6 19.7 18.9 19.2
------- ------ ------ ------ ------ -------
Gross profit.............................. 62.9 75.2 84.4 80.3 81.1 80.8
------- ------ ------ ------ ------ -------
Operating expenses:
Sales and marketing..................... 105.2 67.5 47.0 47.2 47.7 45.9
Research and development................ 63.2 39.0 23.1 23.8 25.1 22.9
General and administrative.............. 36.4 20.3 12.8 13.2 12.3 11.6
Stock-based compensation................ 32.3 11.8 15.1 8.3 14.7 34.1
------- ------ ------ ------ ------ -------
Total operating expenses......... 237.1 138.7 98.1 92.5 99.9 114.5
------- ------ ------ ------ ------ -------
Loss from operations...................... (174.3) (63.5) (13.7) (12.2) (18.7) (33.7)
Interest income (expense), net............ 0.3 2.2 1.0 2.7 2.2 2.5
------- ------ ------ ------ ------ -------
Loss before provision for income taxes.... (174.0) (61.3) (12.6) (9.5) (16.6) (31.1)
------- ------ ------ ------ ------ -------
Provision for income taxes................ 0.0 0.0 0.0 0.0 0.0 0.1
------- ------ ------ ------ ------ -------
Net loss.................................. (174.0)% (61.3)% (12.6)% (9.5)% (16.6)% (31.2)%
======= ====== ====== ====== ====== =======
</TABLE>

Revenues. Our total revenues increased in each of the six quarterly periods
presented above. The increase in total revenues in these periods reflects the
increase in the number of customers and increased sales following our release of
enhancements to our iManage infoCommerce Server in March 1998. Since June 30,
1998, our license revenues have decreased as a percentage of our total revenues
as our support and services revenues have increased with the increase in our
customer base.

Cost of Revenues. Cost of revenues increased in each of the six quarterly
periods ended June 30, 1999 as a result of the growth of revenues.

Operating Expenses. Operating expenses increased significantly in each of
the six quarterly periods presented above as a result of increased sales and
marketing expenses associated with higher numbers of personnel, use of
independent contractors and other third parties for development of our products,
recruiting and related hiring expenses for additional senior management in our
sales and marketing, general and administrative, and research and development
organizations and stock-based compensation expense.

Our quarterly operating results have varied widely in the past, and we
expect that they will continue to fluctuate in the future. We believe that our
period-to-period operating results are not meaningful, and you should not rely
on them as indicative of our future performance. Although we have experienced
significant revenue growth recently, our revenues might not continue to grow and

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<PAGE> 33

we might not become or remain profitable in the future. Our future operating
results will depend on many factors, including:

- the size, timing, terms and fluctuations of customer orders, particularly
large orders from a limited number of customers, especially in markets
outside the legal applications market where we have traditionally focused
our sales and marketing efforts;

- our ability to expand our relationships with information technology
consultants, system integrators and unified messaging original equipment
manufacturers;

- the timing of the introduction or enhancement of products by us, such as
the release of enhanced versions of our iManage infoLink planned for
October 1999 and our iManage infoCommerce Server planned for the end of
the first quarter of 2000, and the release of new or enhanced products by
our competitors; and

- changes in technology, industry standards or customer preferences, such
as customers placing a lower priority on content and collaboration
management.

We have in the past experienced delays in the planned release dates of our
new software products or upgrades and have discovered software defects in our
new products after their introduction. Our new products or upgrades may not be
released according to schedule, or when released may contain defects. Either of
these situations could result in adverse publicity, loss of revenues, delay in
market acceptance or claims by customers brought against us, any of which could
harm our business. In addition, the timing of individual sales has been
difficult for us to predict, and large individual sales have, in some cases,
occurred in quarters subsequent to those anticipated by us. The loss or deferral
of one or more significant sales may harm our quarterly operating results.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have funded our operations primarily through sales of
convertible preferred stock, resulting in net proceeds of $10.9 million through
June 30, 1999. To a lesser extent, we have financed our operations through
lending arrangements. As of June 30, 1999, we had cash, cash equivalents and
short-term investments of $12.1 million, and approximately $3.5 million of
available borrowings under a line of credit.

Net cash used in operating activities was $412,000, $1.8 million and
$622,000 in 1996, 1997 and 1998, respectively. For the six month period ended
June 30, 1999, net cash provided by operations was $4.7 million. For the 1996,
1997 and 1998 periods, net cash used by operating activities was primarily a
result of funding ongoing operations. Net cash provided by operations in the six
month period ended June 30, 1999 was primarily the result of increasing sales of
our iManage suite of products, receipt of cash associated with license and
support and service revenues in advance of revenue recognition and non-cash
charges associated with stock-based compensation expense.

Since inception, our investing activities have consisted of purchases of
property and equipment and, in 1999, the purchase of short-term investments. Net
cash used in investing activities totaled $59,000, $192,000 and $431,000 in
1996, 1997 and 1998, respectively, and $4.7 million in the six month period
ended June 30, 1999. We finance the acquisition of property and equipment, which
largely consists of computer hardware and software and furniture and fixtures
for our increasing employee base as well as for our management information
systems, primarily through a line of credit. We anticipate that we will
experience an increase in our capital expenditures consistent with our
anticipated growth in operations, infrastructure and personnel. We do not expect
to incur significant costs to make our products or internal information systems
year 2000 compliant because we believe our products and information systems are
designed to function properly through and beyond the year 2000.

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<PAGE> 34

Our financing activities provided $820,000, $3.4 million and $6.9 million
in 1996, 1997 and 1998, respectively, and $1.0 million in the six month period
ended June 30, 1999. In 1996, cash provided by financing activities consisted
primarily of $625,000 received in connection with the sale of series A preferred
stock. In 1997, cash provided by financing activities consisted primarily of
$3.4 million received in connection with the sale of series A and series B
preferred stock. In 1998, cash provided by financing activities consisted
primarily of $7.0 million received in connection with the sale of series B and
series C preferred stock. In the six month period ended June 30, 1999, cash
provided by financing activities consisted primarily of $1.0 million in
borrowings under our equipment line of credit.

As of June 30, 1999, we had a revolving line of credit with a bank for $5.0
million, which bears interest at the lending bank's prime rate plus 0.25%.
Borrowings were limited to the lesser of 80% of eligible accounts receivable or
$5.0 million and were secured by substantially all of our assets. As of June 30,
1999, we had not borrowed under the revolving line of credit. We could borrow
approximately $2.5 million under this line as of June 30, 1999. In addition, as
of June 30, 1999, we had an equipment line of credit with a bank for $2.0
million, which bears interest at the lending bank's prime rate plus 0.5%. As of
June 30, 1999, we had borrowed $1.0 million under the equipment line of credit.
This line of credit includes covenant restrictions requiring us to maintain
certain minimum financial ratios, including a liquidity ratio test and liquidity
coverage, and profitability levels and limits our ability to declare and pay
dividends. We were in violation of the profitability covenant at June 30, 1999
and received a waiver from the bank.

We currently anticipate that the net proceeds of this offering, together
with our existing lines of credit and available funds, will be sufficient to
meet our anticipated needs for working capital and capital expenditures at least
through the next 12 to 24 months. However, we may be required, or could elect,
to seek additional funding prior to that time. Our future capital requirements
will depend on many factors, including our future revenue, the timing and extent
of spending to support product development efforts and expansion of sales,
general and administrative activities, the timing of introductions of new
products and market acceptance of our products. We cannot assure you that
additional equity or debt financing, if required, will be available on
acceptable terms or at all.

YEAR 2000 COMPLIANCE

Background of Year 2000 Issues. Many currently installed computer systems
and software products are unable to distinguish between twentieth century dates
and twenty-first century dates because such systems were developed using two
digits rather than four to determine the applicable year. For example, computer
programs that have date-sensitive software may recognize a date using 00 as the
year 1900 rather than the year 2000. This error could result in system failures
or miscalculations causing disruptions of operations, including a temporary
inability to process transactions, send invoices or engage in similar normal
business activities. As a result, many companies' software and computer systems
may need to be upgraded or replaced to comply with such year 2000 requirements.

State of Readiness. We have completed our assessment of the potential
overall impact of the impending century change on our business. Based on this
assessment, we believe the current versions of our software products are year
2000 compliant. By year 2000 compliant, we mean that our software products, when
used with accurate date data and in accordance with their associated
documentation, are capable of properly processing date data from, into and
between the 20th and 21st centuries, including the years 1999, 2000 and leap
years, provided that all other products, such as hardware, software and
firmware, used with our products properly exchange date data with them. However,
our products are generally integrated into enterprise systems involving
sophisticated hardware and complex software products that we cannot adequately
evaluate for year 2000 compliance. We may

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<PAGE> 35

face claims based on year 2000 problems in other companies' products, or issues
arising from the integration of multiple products within an overall system even
if our products are otherwise year 2000 compliant. Although we have not been a
party to any litigation or arbitration proceeding involving our products or
services related to year 2000 compliance issues, we may in the future be
required to defend our products or services in these proceedings, or to
negotiate resolutions of claims based on year 2000 issues. The costs of
defending and resolving year 2000-related disputes, regardless of the merits of
these disputes, and any liability we may have for year 2000-related damages,
including consequential damages, could substantially harm our business.

We have completed our review of internal management information and other
computer systems to identify any year 2000 problems. To date, we have not
encountered any material year 2000 problems with our internal management
information or computer systems or any other equipment that might be subject to
such problems. We believe that the Verity and INSO software that we incorporate
into our iManage infoCommerce Server are year 2000 compliant based on
information that each of them has provided to us. We are beginning to
communicate with our other external vendors that supply us with other software
and information systems and with our significant suppliers to determine their
year 2000 readiness. We have completed our year 2000 investigation of our major
vendors and suppliers and overall compliance initiative.

Costs. To date, we have not incurred any material costs directly associated
with our year 2000 compliance efforts, except for compensation expenses
associated with our salaried employees who have devoted some of their time to
our year 2000 assessment and remediation efforts. We do not expect the total
cost of year 2000 problems to be material to our business. However, we will
continue to evaluate new versions of our software products, new software and
information systems provided to us by third parties and any new infrastructure
systems that we acquire to determine whether they are year 2000 compliant.
Despite our current assessment, we may not identify and correct all significant
year 2000 problems on a timely basis. Year 2000 compliance efforts may involve
significant time and expense and unremediated problems could substantially harm
our business.

Risks. We are not currently aware of any year 2000 readiness problems
relating to our internally developed proprietary systems that would
substantially harm our business. We may discover year 2000 readiness problems in
these systems that will require substantial revision. In addition, third-party
software, hardware or services incorporated into our material systems may need
to be revised or replaced, all of which could be time-consuming and expensive.
Our failure to fix or replace our internally developed proprietary software or
third-party software, hardware or services on a timely basis could result in
lost revenues, increased operating costs, the loss of customers and other
business interruptions, any of which could substantially harm our business.
Moreover, our failure to adequately address year 2000 readiness issues in our
internally developed proprietary software could result in claims of
mismanagement, misrepresentation or breach of contract and related litigation,
which could be costly and time-consuming to defend.

In addition, we believe that year 2000 issues may affect the purchasing
patterns of customers and potential customers, as companies expend significant
resources to correct or upgrade their current software systems for year 2000
compliance or defer additional software purchases until after 2000. As a result,
some customers and potential customers may have more limited budgets available
to purchase software products such as those offered by us, and others may choose
to refrain from changes in their information technology environment until after
January 1, 2000. To the extent year 2000 issues cause significant delay in, or
cancellation of, purchases of our products or services, our business would be
materially adversely affected.

Finally, governmental agencies, telephone and utility companies, Internet
access companies, third-party service providers and others outside of our
control may not be year 2000 ready. The

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<PAGE> 36

failure by these entities to be year 2000 ready could result in a systemic
failure beyond our control, such as a prolonged Internet, telecommunications or
electrical failure, which could also prevent us from delivering our services to
our customers, decrease the use of the Internet or prevent users from accessing
web sites.

Contingency Plan. We have not yet completed development of our contingency
plans. The results of our year 2000 simulation testing and the responses
received from third-party vendors and service providers will be taken into
account in determining the nature and extent of any contingency plans we adopt.
We currently anticipate that we will complete development of our contingency
plans within the next few months.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 1998, AcSEC released Statement of Position 98-9 or SOP 98-9,
Modification of SOP 97-2, Software Revenue Recognition. SOP 98-9 amends SOP 97-2
to require that an entity recognize revenue for multiple element arrangements by
means of the residual method when (1) there is no vendor-specific objective
evidence, or VSOE, of the fair values of all the undelivered elements that are
not accounted for by means of long-term contract accounting, (2) VSOE of fair
value does not exist for one or more of the delivered elements and (3) all
revenue recognition criteria of SOP 97-2, other than the requirement for VSOE of
the fair value of each delivered element, are satisfied. The provisions of SOP
No. 98-9 that extend the deferral of certain paragraphs of SOP 97-2 became
effective December 15, 1998. These paragraphs of SOP 97-2 and SOP 98-9 will be
effective for transactions that are entered into in fiscal years beginning after
March 15, 1999. Retroactive application is prohibited. We are currently
evaluating the impact of the requirements of SOP 98-9 and the effects, if any,
on our current revenue recognition policies.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, or SFAS 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS 133 establishes new standards of
accounting and reporting for derivative instruments and hedging activities. SFAS
133 requires that all derivatives be recognized at fair value in the statement
of financial position, and that the corresponding gains or losses be reported
either in the statement of operations or as a component of comprehensive income,
depending on the type of hedging relationship that exists. In July 1999, the
Financial Accounting Standard Boards issued SFAS No. 137, or SFAS 137,
Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of SFAS No. 133. SFAS 137 deferred the effective date of SFAS 133
until the first fiscal quarter beginning after June 15, 2000. We do not
currently hold derivative instruments or engage in hedging activities. We are
continuing to evaluate the impact of the requirements of SFAS No. 133 and SFAS
No. 137 will have on our financial statements and related disclosures.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

We develop products in the United States and market our products in North
America, and to a lesser extent in Europe and Asia/Pacific regions. As a result,
our financial results could be affected by changes in foreign currency exchange
rates or weak economic conditions in foreign markets. Because all of our
revenues are currently denominated in U.S. dollars, a strengthening of the
dollar could make our products less competitive in foreign markets. Our interest
income is sensitive to changes in the general level of U.S. interest rates,
particularly since the majority of our investments are in short-term
instruments. Our interest expense is also sensitive to changes in the general
level of U.S. interest rates. Due to the short-term nature of our investments,
we believe that there is not a material risk exposure.

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ISSUES RELATED TO THE EUROPEAN MONETARY CONVERSION

On January 1, 1999, member states of the European Economic Community, or
the EEC, fixed their respective currencies to a new currency, the euro. On that
day, the euro became a functional legal currency within these countries. During
the three years beginning on January 1, 1999, business in these EEC member
states will be conducted in both the existing national currency, such as the
Netherlands guilder, French franc or Deutsche mark, and the euro. Companies
operating in or conducting business in EEC member states will need to ensure
that their financial and other software systems are capable of processing
transactions and properly handling the existing currencies, as well as the euro.
We are still assessing the impact that the euro will have on our internal
systems and products. While we believe our enterprise-wide information systems
will be euro-compliant, we have not tested these systems. We have not determined
the costs related to any euro-related problems that may arise in the future.
These problems may materially adversely affect our business, operating results
and financial condition.

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<PAGE> 38

BUSINESS

COMPANY OVERVIEW

We provide e-business content and collaboration management software. Our
software provides a web-based unified content platform that manages, organizes
and delivers relevant information from a variety of sources in a centralized
manner throughout the extended enterprise. We believe that our solution features
a highly scalable, reliable and robust platform designed to provide security,
accountability and the timely delivery of relevant information, content and
documents. Our core technology architecture has been developed over the last
four years and has been deployed in over 400 customers, including: Airtouch
Communications, Inc., America Online, Inc., Charles Schwab & Company, Inc.,
Cleary, Gottlieb, Steen & Hamilton, Cravath, Swaine & Moore, Fried, Frank,
Harris, Shriver & Jacobson, Marriott International, Inc., Morgan, Lewis &
Bockius LLP, Wal-Mart Stores Inc., and Wilson, Sonsini, Goodrich & Rosati, Inc.,
Professional Corporation.

INDUSTRY BACKGROUND

The Internet is having a dramatic and pervasive impact on the way that many
organizations conduct business. Organizations worldwide are looking for new and
innovative ways to use the Internet to gain competitive advantages. For example,
organizations are employing web-based technologies to disseminate, exchange and
manage information internally through corporate intranets to enable
collaboration among employees. Organizations are also using web-based
technologies to develop corporate extranets that extend the enterprise and
enable it to collaborate directly with its partners, customers and service
providers. According to a recent survey from the Delphi Group, collaborative
information management, that is, the dissemination, exchange and management of
information across an extended enterprise, is the number one priority of
corporate information technology departments. The use of web-based technologies
has led to the development of an electronic business environment, or e-business,
where the dynamic exchange, timely dissemination and use of information is
essential to conducting business.

The development of e-business has led to a dramatic increase in the amount
of information available to the average employee. This increase in information
has not only transformed the business world but has also introduced new
complexities and challenges as employees struggle to cope with the volume and
diversity of information that they are required to process on a daily basis. The
average employee receives a broad range of information, content and documents
through a variety of sources including email, voicemail, enterprise and desktop
applications, facsimiles and photocopies, the Internet, and intranet and
extranet web sites. In addition, the growth of e-business has resulted in a
proliferation of the various forms in which employees receive and exchange
information. These new forms include media such as graphics, video, text, audio
and data. The e-business requirement that the right information be delivered to
the right person at the right time is threatened by the overwhelming amount and
variety of information that is now disseminated through these disparate media
sources.

Most companies have ineffective approaches for addressing the challenge of
ensuring that the right information gets to the right person at the right time.
In the absence of a comprehensive e-business solution, organizations have
generally adopted one of two approaches. Organizations have either developed a
custom approach through a combination of email and intranet and extranet web
sites or used packaged applications that are not specifically designed to meet
the requirements of e-business. Organizations that have implemented a custom
approach often fail to achieve the integrated delivery and management of
critical information and content for several reasons. Email, while easy-to-use
and convenient, lacks effective collaboration and project management, control,
accountability

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<PAGE> 39

and security, and is not integrated with intranet information and content.
Intranets and extranets, while more effective mechanisms for disseminating
information, typically lack the scalable content management infrastructure to
ensure that posted information is accurate, up-to-date, organized and actually
viewed by the intended audience.

Alternatively, other organizations have attempted to address the
information challenges of e-business by deploying a variety of packaged
applications, including enterprise information portals, web-based information
delivery systems, and knowledge and document management solutions. Enterprise
information portals and web-based information delivery systems are effective
means of accessing and distributing information. However, they lack the
comprehensive infrastructure to manage and organize all forms of information,
content and documents and to enable collaboration and project management across
the extended enterprise. Client-server based knowledge and document management
systems are capable of organizing and storing documents but are expensive to
maintain and are not designed to deliver and exchange information over the web
to thousands of concurrent users. As the custom approach and use of packaged
applications demonstrate, there is no comprehensive solution that addresses the
key aspects of content and collaboration management to enable more effective
information management, organization and delivery across the extended
enterprise.

SOLUTION

We provide e-business content and collaboration management software. Our
solution provides a web-based unified content platform that manages, organizes
and delivers relevant information from a variety of sources in a centralized
manner throughout the extended enterprise.

Our solution provides the following key benefits:

Comprehensive E-Business Content and Collaboration Management. Our iManage
infoCommerce Server provides a comprehensive e-business content and
collaboration management solution that addresses key aspects of managing,
organizing and delivering information and content to the right person at the
right time throughout the extended enterprise. Our server provides users with a
centralized online location to access content, such as graphics, video, text,
audio and data. In addition to offering a robust underlying content management
infrastructure, our solution is designed to ensure effective content access,
delivery and notification based on relevance to particular projects, processes
and individuals. We believe our comprehensive solution enables our customers to
more effectively collaborate and exchange information over the web.

Highly Scalable, Reliable and Robust Platform. We believe our solution
features a highly scalable, reliable and robust platform. We have developed our
underlying architecture over the last four years and have deployed our solution
in over 400 customers. Our software has been designed to accommodate the demands
of e-business and to scale to tens of thousands of concurrent users and millions
of information objects. For example, in a single customer deployment, our
solution scaled to accommodate over 3.8 million information objects and 2,400
concurrent users in over 14 geographic locations across the world.

Timely Delivery of Relevant Information. Our solution ensures the timely
delivery of relevant information by notifying the appropriate users of the
information and providing them with access to the information through the web
and email. For example, with the release of iManage infoLook in August 1999, a
user can specify business rules or profiles so that new information is delivered
only to those individuals who meet the criteria that the user specifies. Through
the use of rules and profiles, a user can limit the information he receives to
meet his specified criteria. The delivery of and access to relevant information
is immediate through our automatic publication and notification features. This

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<PAGE> 40

functionality is designed to ensure that the right information is delivered to
the right person at the right time.

Security and Accountability. Our solution offers the ability to centrally
enforce security privileges based on individual or group access level
permissions within an organization or across the extended enterprise. For
example, rather than attaching documents to email, which is a highly insecure
method of distributing information, our solution only sends a link to the
content which resides on a secure content server. This approach enhances
security in contrast to other forms of information distribution. The use of
links also ensures accountability by preserving control of the content in a
single location. As a result, organizations using our solution can now track
when documents were sent, when they were received and reviewed, when project
folders were accessed and who accessed them.

Our solution has been designed to address the needs of a broad range of
markets, such as financial services, retail, manufacturing and distribution,
banking and professional services. Initially, we targeted substantially all of
our sales and marketing efforts on the legal applications market. The customers
in this market require management and organization of a large volume of critical
information in a scalable and secure environment. We now intend to leverage on
our success and experience in the legal applications market to market our
solution to other markets.

STRATEGY

Our objective is to become the leading provider of e-business content and
collaboration management software. Key elements of our strategy to achieve this
objective include:

Capture Market Share. Our strategy is to become the market leader in
providing software to enable unified e-business content and collaboration
management over the Internet. As our customers deploy our solution, their
customers, partners and service providers will be exposed to the benefits and
functionality of our products. We believe that the introduction of our products
to these non-customers will accelerate industry recognition and adoption of our
products. As more and more organizations deploy our e-business solution, we
believe that the management, organization and delivery of relevant information
will improve, which will drive greater usage.

Leverage Installed Customer Base. We believe there are significant
opportunities to leverage the use of our products throughout our current
customer base. Our corporate customers generally deploy our products initially
on a departmental basis and we believe that initial customer satisfaction with
these deployments will lead to significant opportunities for enterprise-wide
adoption. In addition, most companies and professional service firms, including
our customers, are just beginning to exploit the business opportunities that the
web has created. As they increasingly migrate their business processes to the
web, we believe they will need additional licenses of our software to support
and enable e-business content and collaboration applications.

Expand and Leverage Key Business Relationships. To accelerate the
acceptance of our solution and to promote the adoption of e-business content and
collaboration management over the web, we intend to develop over the next 12
months additional cooperative alliances and relationships with leading
information technology consultants, system integrators and unified messaging
original equipment manufacturers. We believe that these alliances and
relationships will provide additional marketing and sales channels for our
products, enable us to more rapidly incorporate additional functions and
platforms into our e-business suite of products, and facilitate the successful
deployment of customer applications.

Maintain Technological Leadership. We believe that we offer the most
complete e-business content and collaboration management solution available
today. We have devoted significant resources

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<PAGE> 41

to developing our solution over the last four years. We intend to extend our
leadership position by continuing to enhance our technology through significant
investment in research and development activities. We also plan over the next 12
months to expand our unified content platform by integrating content from new
media sources including facsimile machines, photocopiers, voicemail systems and
scanners.

Strengthen International Presence. We believe that there will be
significant international opportunities for our products and services and intend
to strengthen our global sales, marketing and distribution efforts to address
the range of markets and applications for our e-business content and
collaboration management solution. We currently have a direct sales presence in
the U.S. and Canada. In Europe and the Asia/Pacific region, we sell our products
through third-party distributors. During the next 12 months, we intend to
aggressively strengthen our international presence by adding direct sales
personnel and increasing our indirect sales channels to fully capitalize on
international market opportunities.

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IMANAGE PRODUCTS

Our iManage suite of e-business content and collaboration management
products, which we have developed over the last four years, provides a
comprehensive set of application modules that work in concert with each other
and the same underlying server. Our current product line consists of the iManage
infoCommerce Server and iManage infoLink, iManage infoLook and iManage infoRite
application modules.

The following table describes the major features and benefits of our
iManage suite of products.

<TABLE>
<S> <C> <C>
- -------------------------------------------------------------------------------------------------
PRODUCT FEATURES BENEFITS
- -------------------------------------------------------------------------------------------------
iManage infoCommerce Application server Ensures server uptime by splitting server
Server failover processes across multiple servers so that if
Content and collaboration any one server fails, users are automatically
server routed to the next available server.
Transaction Ensures all server transactions are completed
processing in full or the information is restored to the
previous state before the transaction
commenced.
Content indexing Allows users to use search criteria to find
specific information.
Roles-based security Protects content from unauthorized access and
allows users to be assigned security privileges
based on their role in an organization.
- -------------------------------------------------------------------------------------------------
iManage infoLook Auto-notification Automatically alerts subscribers when new
Microsoft Outlook content has been contributed to a project
folder.
integration module Auto-publishing Automates the process of publishing content to
an intranet, extranet or Internet web site.
Link/URL routing Allows users to email links and uniform
resource locators, or URLs, to specific server
content instead of physically transferring
content via email, ensuring system security,
accountability and network efficiency.
Rules-based Provides the ability to route to specific
processing project folders incoming email, content and
facsimiles based on specific user defined
rules.
- -------------------------------------------------------------------------------------------------
iManage infoLink Security-based Enables navigation through project folders and
Web-portal module navigation review of content based on security privileges.
User-definable Allows content from multiple projects to be
search folders dynamically grouped together using search
criteria.
Secured content Allows secure content contribution into iManage
contribution repositories securely over the Internet.
- -------------------------------------------------------------------------------------------------
iManage infoRite Content profiling Adds context to content and enables users to
Content-authoring module and history track usage of content and access history.
Integrated online Allows users to search the content of iManage
research repositories and online information services.
Microsoft Office Provides access to iManage repositories and the
integration ability to submit content directly from within
Microsoft Word, Excel and PowerPoint products.
Content relationship Enables information to be grouped so that users
grouping can track information that is relevant to a
project, process or individual.
- -------------------------------------------------------------------------------------------------
</TABLE>

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<PAGE> 43

Our iManage infoCommerce Server provides the core functionality of our
content and collaboration management solution. Each of our application modules,
iManage infoLook, iManage infoLink and iManage infoRite, work in conjunction
with the iManage infoCommerce Server and with one another. Each of these modules
delivers additional functionality for different client configurations and
applications. An organization can elect to use any combination of iManage
infoLink, iManage infoLook and iManage infoRite with the iManage infoCommerce
Server as its needs dictate. Additionally, multiple organizations using iManage
infoLink with iManage infoCommerce Server enjoy the benefits of using an iManage
virtual private network upon which they can collaborate and share information.

iManage infoLook, our newest module, integrates with Microsoft Outlook and
enables users to manage, organize and deliver e-business information, content
and documents through the familiar, easy-to-use Outlook environment. iManage
infoLink is a web-based user interface that provides full access to all iManage
infoCommerce Server content through a web browser. iManage infoRite is a
dedicated content-authoring interface that integrates with Microsoft Office
publishing tools, such as Excel, Word and PowerPoint and is designed for heavy
publishing uses. These application modules allow different users with different
interfaces to share and exchange information and content. The overall objective
in the design of each element of the iManage suite of products is to provide a
simplified mechanism to enable intra-business and business-to-business content
and collaboration management capabilities for organizations over their existing
email, intranet and Internet networks.

We also provide the following products:

iManage Notes Module. The iManage Notes Module enables users of the Lotus
Notes application environment to integrate their Notes content and email
correspondence directly into an iManage e-business Server repository.

iManage GroupWise Module. The iManage GroupWise Module enables users of the
Novell GroupWise application environment to integrate their GroupWise content
and email correspondence directly into an iManage e-business Server repository.

iManage Software Development Kit, or SDK. iManage SDK is a software
development kit developed primarily for third-party developers who wish to
integrate their applications with iManage infoCommerce Server repositories.
Software integrators also use the iManage SDK to develop their own applications
based on the iManage suite of e-business content and collaboration management
products.

Our products are licensed to customers on a per server and a per user
basis. We do not license our products on a concurrent user basis, nor are they
available on a rental or service basis. However, we are reviewing both
subscription and services-based licensing models for possible adoption in future
product offerings.

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<PAGE> 44

Technology Platform.

iManage Components Architecture

The iManage suite of products incorporates a number of open industry
standards as well as proprietary technologies that ensure our broad industry
suitability to e-business collaboration and content applications. The following
is a list of technologies that are employed within our products to meet the
requirements of the market and provide competitive advantages to our products:

MAPI Store Provider interface, or MSP. The MSP interface integrates
Microsoft Outlook to our repositories and functionality to enable Outlook to
work with the iManage infoCommerce Server as if it were a Microsoft Exchange
server. This integration allows us to seamlessly route and forward email,
voicemail and other content into the iManage infoCommerce Server directly from
Outlook.

NT and NDS directory service support. Our products incorporate a highly
sophisticated security management system. This system integrates with the
existing directories of Microsoft Windows NT and Novell NDS so that users of NT
and Novell networks can automatically be listed as users of the iManage system.

JAVA, HTML and Active Server Page support. We developed web interfaces to
support the most widely used web application and content technologies, namely
JAVA, HTML and Active Server Pages, or ASP. Using these technologies, we have
designed interfaces so that users of Microsoft

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<PAGE> 45

Internet Explorer and Netscape Navigator web browsers, as well as other
browsers, can access information contained within iManage infoCommerce Server
repositories.

Microsoft Office 2000 integration. We designed interfaces to our server
that enable users of Microsoft Office 2000 and previous Microsoft Office
versions the ability to contribute content directly to the iManage repositories.
This integration enables authors of information, which is to be published on an
intranet, extranet or Internet site, to remain within the authoring tool of
choice, such as Excel, Word or PowerPoint, and save their content directly to
the iManage repository.

Component Object Model, or COM, support. We employed COM as our standard
means of integrating each component of our solution into other components and
the operating environment itself. COM has become a development standard for all
Microsoft Windows applications and an efficient means to develop new modular
functionality for our products.

International support. To date, our software has been translated and
localized into German for distribution in Germany. We expect to provide
additional language conversions to ensure our products can be distributed in
additional non-English speaking international markets.

SALES AND MARKETING

We sell our software products through our direct sales force and a network
of strategic partners and systems integrators. As of June 30, 1999, we employed
34 people in our sales, marketing and business development organization. Our
distribution network of over 150 reseller partners and systems integrators
complements our direct sales force and represents us in Australia, Canada, New
Zealand, the United Kingdom and the United States. Our application specialists
provide pre-sales support and post-sales implementation for our customers.

Our marketing programs focus on creating overall awareness of e-business
content and collaboration management. To generate market awareness, we
participate in market research, industry analyst product and strategy updates,
trade shows and seminars and engage in web site marketing to generate qualified
sales leads. We utilize market research in a formal feedback process to
determine specific industry segment needs, which we use to define and direct our
product development efforts.

Our sales process consists of engaging senior management, primarily chief
information and chief technology officers, at our potential customers to explain
the benefits of our solution. With our technical professionals and systems
integration partners, we assess the specific needs of the enterprise and create
demonstrations and proposals to satisfy customer requirements. We have certified
and trained approximately 500 third-party consultants to assist our customers in
the technical implementation of our solution.

We believe that strategic alliances will be increasingly important in
marketing and selling our solution and developing customer applications. Over
the next 12 months, we intend to broaden the number of alliances we have with
key systems integrators. Furthermore, we intend during the next 12 months to
aggressively expand our sales and marketing staff and devote substantial
resources to our sales and marketing activities.

CUSTOMERS

We have licensed our products to over 400 customers. To date, we have
focused our sales and marketing resources primarily on law firms. In 1998 and
the six month period ended June 30, 1999, we derived 89.0% and 95.0% of our
total revenues, respectively, from the sale of licenses to law firms and
professional service firms. The following table lists our top twenty law firm
customers, in terms of

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<PAGE> 46

billings, since January 1, 1998 and our non-law firm customers that have
purchased licenses in excess of $50,000 since January 1, 1998.

<TABLE>
<S> <C>
Airtouch Communications Inc. McCutchen, Doyle, Brown & Enersen, LLP
America Online, Inc. McDermott, Will & Emery
Barnes & Thornburg Minter Ellison
Charles Schwab & Company, Inc. Morgan, Lewis & Bockius LLP
City of Phoenix Paul, Weiss, Rifkind, Wharton & Garrison
Cleary, Gottlieb, Steen & Hamilton Pillsbury Madison & Sutro LLP
Commodities Corporation LLC Ropes & Gray
Cravath, Swaine & Moore State of California
Federal Home Loan Bank Chicago State of Indiana
Fraser Milner Stoel Rives LLP
Fried, Frank, Harris, Shriver & Jacobson TIAA-CREF
Gibson, Dunn & Crutcher LLP Vinson & Elkins L.L.P.
Jenkens & Gilchrist, A Professional Wal-Mart Stores Inc.
Corporation Wilmer, Cutler & Pickering
Lane Powell Spears Lubersky LLP Wilson, Sonsini, Goodrich & Rosati,
Marriott International, Inc. Professional Corporation
Mayer, Brown & Platt
</TABLE>

In 1996, Hahn Loeser & Parks accounted for 31% of our total revenues, MBL
Life Assurance Corporation accounted for 15% of our total revenues, McFall
Sherwood & Sheehy accounted for 10% of our total revenues and Norfolk Southern
accounted for 11% of our total revenues. There were no customers that accounted
for more than 10% of our total revenues for 1997, 1998 and the six month period
ended June 30, 1999.

CUSTOMER SERVICE, TRAINING AND SUPPORT

We believe that customer satisfaction is essential for our long-term
success. Our technical support group provides dependable and timely resolution
of customer technical inquiries and is available to customers by telephone,
email and over the web. We use a customer service automation system to track
each customer's inquiry until it is resolved. Our training services group
delivers education and training to our customers and partners. We offer a
comprehensive series of classes to our customers to provide them with the
knowledge and skills to successfully deploy, use and maintain our products.
These courses focus on the technical aspects of our products as well as related
business issues and processes. We regularly hold our classes in various
locations throughout the United States and in our training facilities at our
research and development headquarters in Chicago, Illinois. Our customer support
and training organization consisted of 18 employees at June 30, 1999.

RESEARCH AND DEVELOPMENT

We believe that our future success will depend in large part on our ability
to enhance our product family, develop new products, maintain technological
leadership, and satisfy an evolving range of customer requirements for
large-scale interactive online content and collaboration management
applications. Our product development organization is responsible for product
architecture, core technology, product testing, quality assurance, documentation
and expanding the ability of our products to operate with leading hardware
platforms, operating systems, database management systems, and key electronic
commerce transaction processing standards. As of June 30, 1999, our product
development organization consisted of 22 employees.

We believe that our product development team and core technologies
represent a significant competitive advantage. Our product development team
includes key members of other past research and development organizations that
have developed scalable, reliable, critical online applications. We

44
<PAGE> 47

believe our technically skilled, quality-oriented and highly productive
development organization is a key component of the success of our new product
offerings. We must attract and retain highly qualified employees to further our
product development efforts. Our business and operating results could be
seriously harmed if we are not able to hire and retain a sufficient number of
these individuals.

Our research and development expenditures were approximately $113,000 for
1996, $935,000 for 1997, $2.4 million for 1998 and $1.9 million for the six
month period ended June 30, 1999. All research and development expenditures have
been expensed as incurred. We expect to continue to devote substantial resources
to our research and development activities.

COMPETITION

We have experienced and expect to continue to experience increased
competition from current and potential competitors. Many of these companies have
greater name recognition, longer operating histories, larger customer bases and
significantly greater financial, technical, marketing, public relations, sales,
distribution and other resources than we have. We expect to face competition
from these and other competitors, including:

- companies addressing certain segments of our market including Agile
Software Corporation, BackWeb Technologies Ltd., Documentum, Inc.,
Hummingbird Communications Ltd., Marimba, Inc., Open Text Corporation,
TIBCO Software Inc. and Verity, Inc.;

- intranet and groupware companies including IBM and its subsidiary, Lotus
Development Corporation, Microsoft and Novell; and

- in-house development efforts by our customers and potential customers or
partners.

We believe that we may face additional competition from operating system
vendors, online service providers, client/server applications and tools vendors
and enterprise information portal companies. If any of our competitors were to
become the industry standard or were to enter into or expand relationships with
significantly larger companies through mergers, acquisitions or otherwise, our
business could be seriously harmed. In addition, potential competitors may
bundle their products or incorporate functionality into existing products in a
manner that discourages users from purchasing our products.

We believe that the principal competitive factors in the e-business content
and collaboration management market are:

- product performance, features, functionality and reliability;

- price/performance characteristics;

- timeliness of new product introductions;

- adoption of emerging industry standards;

- brand name; and

- access to customers.

We believe we compete favorably with our competitors with respect to each
of the foregoing factors. However, because many of our existing and potential
competitors have greater name recognition, longer operating histories, larger
customer bases and significantly greater financial, technical, marketing, public
relations, sales, distribution and other resources, they may have stronger

45
<PAGE> 48

brand names and access to more customers than we do. These competitors may be
able to undertake more extensive marketing campaigns, adopt more aggressive
pricing policies and make more attractive offers to distribution partners than
we can. To remain competitive, we believe we must invest significant resources
in enhancing our current products and developing new ones, and maintain customer
satisfaction. If we fail to do so, our products will not compete favorably with
those of our competitors and our business will be significantly harmed.

We expect that competition will continue to increase and that our primary
competitors may not have entered the market yet. Increased competition could
result in price reductions, fewer customer orders, reduced gross margin and loss
of market share, any of which could cause our operating results to suffer.

INTELLECTUAL PROPERTY

We believe that our success and ability to compete is dependent on our
ability to develop and protect our technology. To protect our proprietary
technology, we rely primarily on patent, trademark, service mark, trade secret
and copyright laws and contractual restrictions.

Most of our customers' use of our software is governed by shrink-wrap or
signed written license agreements. We also enter into written agreements with
each of our channel partners with respect to the distribution of our products.
In addition, we seek to avoid disclosure of our trade secrets by requiring each
of our employees and others with access to our proprietary information to
execute confidentiality agreements with us. We protect our software,
documentation and other written materials under trade secret and copyright laws,
which afford only limited protection.

We currently have no issued U.S. patents, we have applied for one U.S.
patent and we have two pending foreign patent applications. It is possible that
no patents will be issued from our currently pending patent applications and
that our potential future patents may be found invalid or unenforceable, or
otherwise be successfully challenged. It is also possible that any patent issued
to us may not provide us with any competitive advantages, that we may not
develop future proprietary products or technologies that are patentable, and
that the patents of others may seriously limit our ability to do business. In
this regard, we have not performed any comprehensive analysis of patents of
others that may limit or ability to do business.

Despite our efforts to protect our proprietary rights, we may be unable to
prevent others from infringing upon or misappropriating our intellectual
property. Any steps we take to protect our intellectual property may be
inadequate, time consuming and expensive. In addition, the laws of some foreign
countries do not protect our proprietary rights to as great an extent as the
laws of the United States. A discussion of risks associated with the protection
of our intellectual property rights and the intellectual property right of
others is presented in "Risk Factors" included elsewhere in this prospectus.

Substantial litigation regarding intellectual property rights exists in the
software industry. To date, we have not been notified that our technologies
infringe the proprietary rights of anyone. We cannot assure you that others will
not claim that we have infringed proprietary rights with respect to past,
current or future technologies. We expect that we could become subject to
intellectual property infringement claims as the number of our competitors grows
and our services overlap with competitive offerings. These claims, even if
without merit, could be expensive, time-consuming to defend, divert management's
attention from the operation of iManage and cause product shipment delays. If we
become liable for infringing intellectual property rights, we would be required
to pay a substantial damage award and to develop non-infringing technology,
obtain a license or cease selling

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<PAGE> 49

the products that contain the infringing intellectual property. We may be unable
to develop non-infringing technology or obtain a license on commercially
reasonable terms, if at all.

We license indexing and searching technologies from third parties. We
cannot assure you that these technology licenses will not infringe the
proprietary rights of others or will continue to be available to us on
commercially reasonable terms, if at all. We license Search '97 from Verity,
Inc. for search functionality in the iManage infoCommerce Server. This agreement
expires in February 2002 and is renewable with the written agreement of the
parties. Either party may terminate the agreement for cause prior to the
expiration date with 90 days written notice. We are currently negotiating an
addendum to the Verity license that would give us the option to extend the term
of the agreement through January 31, 2003. In addition, we license Outside In
Viewer Technology and Outside In HTML Export from INSO Corporation for
file-viewing functionality in our solution. This agreement expires in December
2001 and is renewable with the written consent of the parties. Either party may
terminate the agreement for cause prior to the expiration date. If we cannot
renew these licenses, shipments of our products could be delayed until
equivalent software could be developed or licensed and integrated into our
products. These types of delays could seriously harm our business. For a
discussion of the risks associated with our intellectual property, please see
"Risk Factors -- Our products may lack essential functionality if we are unable
to obtain and maintain licenses to third-party software and applications" on
page 11.

EMPLOYEES

As of June 30, 1999, we had 87 full-time employees. Of these employees, 22
were in product development, 34 in sales, marketing and business development, 18
in customer support and training and 13 in finance and administration. None of
our employees is subject to a collective bargaining agreement. We believe our
relations with our employees are good. Our future success depends on our ability
to attract, motivate and retain highly qualified technical and management
personnel. From time to time we also employ independent contractors to support
our product development, sales, marketing and business development
organizations.

FACILITIES

Our principal offices are located in a leased facility in San Mateo,
California and consists of approximately 12,000 square feet under a three-year
lease that expires in 2001. We are in the process of securing an additional
12,000 square feet in this facility, which we expect to finalize in the fourth
quarter of 1999. Our engineering and customer support personnel and our training
facility are located in a leased facility in Chicago, Illinois. This facility
consists of approximately 14,000 square feet and our lease is non-cancelable
through 2004 and expires in 2009. We are in the process of exercising an option
to lease approximately 7,000 additional square feet in this facility. We believe
that our existing facilities are adequate for our current needs and that
suitable additional or alternative space will be available in the future on
commercially reasonable terms.

LEGAL PROCEEDINGS

We are not presently involved in any legal proceedings.

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<PAGE> 50

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table provides information concerning directors and executive
officers of iManage as of June 30, 1999:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mahmood Panjwani........................ 40 President, Chief Executive Officer and
Chairman of the Board of Directors
Owen Carton............................. 34 Vice President, Marketing and Strategic
Planning
Mark Culhane............................ 39 Chief Financial Officer and Secretary
Rafiq Mohammadi......................... 39 Chief Technology Officer, Vice
President, Engineering and Director
Shamshad Rashid......................... 39 Vice President, Business Development
Philip Uchno............................ 44 Vice President, Worldwide Sales
Mark Perry.............................. 56 Director(1)(2)
Moez Virani............................. 44 Director(1)(2)
DuWayne Peterson........................ 67 Director(1)(2)
</TABLE>

- -------------------------
(1) Member of audit committee
(2) Member of compensation committee

Mahmood Panjwani is a co-founder of iManage and has served as our
president, chief executive officer and chairman of our board of directors since
October 1995. In August 1988, Mr. Panjwani founded Q-Image Corporation, a
consulting services company, and served as its president and chairman of the
board of directors until December 1997.

Owen Carton has served as our vice president, marketing and strategic
planning since July 1998. Before joining iManage, from November 1996 to May
1998, Mr. Carton was vice president, marketing at FrontOffice Technologies,
Inc., a messaging and knowledge management software company. From 1993 to 1996,
Mr. Carton was vice president, marketing for Timeline Inc., a financial
analysis, budgeting and reporting systems company. From 1985 to 1993, Mr. Carton
held various senior level product marketing positions for Microsoft Corporation.

Mark Culhane has served as our chief financial officer and secretary since
September 1998. From June 1992 to December 1997, Mr. Culhane held various
positions at SciClone Pharmaceuticals, a publicly-held life science company, his
last position being that of SciClone's chief financial officer, vice president,
finance and administration and secretary from May 1994 through December 1997.
From 1982 to the time that Mr. Culhane joined SciClone, he held various
positions at Price Waterhouse LLP, now known as PricewaterhouseCoopers LLP, most
recently as senior manager. Mr. Culhane is a certified public accountant.

Rafiq Mohammadi is a co-founder of iManage and has served as our chief
technology officer and director since October 1995. Between 1985 and 1995, Mr.
Mohammadi co-founded and served as president of M/H Manage, a company that
developed and distributed software that converted documents between different
platforms and formats.

Shamshad Rashid is a co-founder of iManage and has served as our vice
president, business development since October 1995. Ms. Rashid served as vice
president, operations at Q-Image, and has served as its president since December
1997.

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<PAGE> 51

Philip Uchno has served as our vice president, worldwide sales since May
1999. From 1989 to the time he joined iManage, Mr. Uchno was employed by Silicon
Graphics, Inc. where he began as a regional sales manager and then director,
telecommunications marketing. In July 1997, Mr. Uchno became Silicon Graphics'
Vice-President, Asia-Pacific field operations and held that position until July
1998 when he was appointed vice president, manufacturing industry marketing.

Mark Perry has been one of our directors since September 1998. From October
1995 to May 1996, Mr. Perry was a consultant to New Enterprise Associates, a
venture capital firm and one of our major stockholders. Mr. Perry is currently
serving as a general partner at New Enterprise Associates, a position he has
held since June 1996. From May 1994 to December 1995, Mr. Perry was president
and chief executive officer of ViewStar Corporation, a client/server software
company. From 1985 to April 1994, Mr. Perry worked at Silicon Graphics where he
last held the position of vice-chairman. Mr. Perry serves on the boards of
directors of Exabyte Corporation, a network storage and backup company, and
Hyperion Solutions Corporation, an analytic application software company, as
well as on the boards of directors of several private companies.

Moez Virani has been one of our directors since December 1996. Mr. Virani
has been a partner at Mohr Davidow Ventures, a venture capital firm, since July
1999. From January 1998 to June 1999, Mr. Virani served as the chief financial
officer of Ziff-Davis Events, Inc., a media company. From February 1995 to
December 1998, Mr. Virani was the chief financial officer and chief operating
officer of SOFTBANK Forums, Inc., a wholly-owned subsidiary of SOFTBANK, Inc.
From 1984 to 1995, Mr. Virani worked for Sun Microsystems in a variety of
domestic and international finance positions.

DuWayne Peterson has been one of our directors since September 1999. Mr.
Peterson is currently serving as president of DuWayne Peterson Associates, a
consulting and advisory firm specializing in information technology. From June
1986 to June 1991, Mr. Peterson served as executive vice president and chief
information officer for Merrill Lynch. From March 1977 to June 1986 he served as
executive vice president of Security Pacific Corporation and chairman and chief
executive officer of Security Pacific Automation Company. He has also held
senior information technology management positions at Citibank and RCA. Mr.
Peterson serves on the board of directors of IFS International, an electronic
banking software company, as well as on the boards of directors of several
private companies.

BOARD COMPOSITION

Effective upon the closing of this offering, our certificate of
incorporation and bylaws will provide for a board of directors consisting of
four members, divided into three classes, each serving staggered three-year
terms: Class I, whose term will expire at the annual meeting of stockholders
expected to be held in April 2000; Class II, whose term will expire at the
annual meeting of stockholders expected to be held in April 2001; and Class III,
whose term will expire at the annual meeting of stockholders expected to be held
in April 2002. As a result, only one class of directors will be elected at each
annual meeting of stockholders, with the other classes continuing for the
remainder of their respective terms. Effective upon the closing of this
offering, Rafiq Mohammadi will serve as a Class I director, Mahmood Panjwani and
Moez Virani will serve as Class II directors and Mark Perry and DuWayne Peterson
will serve as Class III directors.

BOARD COMPENSATION

Our directors do not receive cash compensation for their services as
directors and do not currently receive any reimbursement for expenses incurred
in attending board and board committee meetings.

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<PAGE> 52

Our amended 1997 option plan will provide that each nonemployee director
will automatically be granted a nonstatutory stock option to purchase 30,000
shares of common stock upon his initial election or appointment to the board.
Subject to the director's continuous service, one-third of the shares subject to
this initial option will vest after one year and the remaining two-thirds will
vest in equal monthly increments over the following two years. In addition,
beginning with our annual stockholders meeting in 2001, when a nonemployee
director is reelected to the board, the director will automatically be granted a
nonstatutory stock option for a number of shares of common stock equal to (a)
10,000 shares multiplied by (b) the number of years of the director's elected
term. For example, if a director is reelected to a three year term, the size of
the option grant would be 30,000 shares. Similarly, if a director is reelected
to a two year or one year term, the size of the option grant would be 20,000 or
10,000 shares, respectively. Each of these additional options will vest in equal
monthly increments over the director's elected term, although vesting will
accelerate in full if a change in control occurs before the optionee's
termination of service. A director will not receive an additional option if at
the time of the director's reelection to the board, the director has served on
the board for less than one year. Each option granted to a nonemployee director
will have a per share exercise price equal to the fair market value of a share
of common stock on the grant date. Each option granted to a nonemployee director
will have a term of 10 years.

BOARD COMMITTEES

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

AUDIT COMMITTEE. The audit committee reviews the results and scope of the
annual audit and meets with our independent auditors to review our internal
accounting policies and procedures.

COMPENSATION COMMITTEE. The compensation committee reviews and makes
recommendations to our board of directors with respect to our general and
specific compensation policies and practices and administers our amended 1997
stock option plan and 1999 employee stock purchase plan.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the compensation committee has at any time since our
formation been one of our officers or employees. None of our executive officers
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 on our board of directors or compensation committee. Before the
creation of our compensation committee, all compensation decisions were made by
our full board of directors. Neither Mr. Panjwani nor Mr. Mohammadi participated
in discussions by our board of directors with respect to his own compensation.

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<PAGE> 53

EXECUTIVE COMPENSATION

The following table presents the compensation paid to or earned by our
chief executive officer and our other four most highly compensated executive
officers whose salary and bonus for the fiscal year ended December 31, 1998
exceeded $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ---------------------
------------------ SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#)
--------------------------- ---- -------- ------- ---------------------
<S> <C> <C> <C> <C>
Mahmood Panjwani.............................. 1998 $120,000 $84,066 --
President and Chief Executive Officer
Owen Carton(1)................................ 1998 67,708 15,000 305,000
Vice President, Marketing and
Strategic Planning
Mark Culhane(2)............................... 1998 35,000 10,000 180,000
Chief Financial Officer and Secretary
Rafiq Mohammadi............................... 1998 120,000 -- --
Vice President, Engineering and Chief
Technology Officer
Shamshad Rashid............................... 1998 100,000 -- --
Vice President, Business Development
</TABLE>

- -------------------------
(1) Mr. Carton joined us in July 1998. His annual salary is $150,000.
(2) Mr. Culhane joined us in September 1998. His annual salary is $140,000.

OPTIONS GRANTS IN LAST FISCAL YEAR

The following table presents the grants of stock options under and outside
of our amended 1997 stock option plan during 1998 to our chief executive officer
and our other four most highly compensated executive officers. The options
granted to the individuals listed below are immediately exercisable and are
either incentive stock options or nonqualified stock options. We have a right to
repurchase these shares upon termination of the optionee's employment with us.
Our repurchase right generally lapses as to 25% of the shares subject to the
option one year from the date of grant and as to 2.083% of the shares each
succeeding month. In November 1998, our board of directors approved acceleration
of vesting for options granted to Mark Culhane, our chief financial officer,
upon a change of control of iManage. Options expire ten years from the date of
grant. Options were granted at an exercise price equal to the fair market value
of our common stock, as determined by our board of directors, on the date of
grant. The following table is based on the grant of options to purchase a total
of 1,147,325 shares of our common stock during 1998.

The 5% and 10% assumed annual rates of stock price appreciation are
required by the rules of the Securities and Exchange Commission and do not
represent our estimate or projection of future common stock prices. Unless the
market price of the common stock appreciates over the option term, no value will
be realized from the option grants made to the executive officers. Actual gains,
if any, on stock option exercises will be dependent on the future performance of
our common stock. The

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<PAGE> 54

assumed 5% and 10% rates of stock appreciation are based on the assumed offering
price of $9.00 per share.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF % OF POTENTIAL REALIZABLE VALUE
SECURITIES TOTAL AT ASSUMED ANNUAL RATES
UNDERLYING OPTIONS OF STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE FOR OPTION TERM
GRANTED EMPLOYEES IN OR BASE EXPIRATION ---------------------------
NAME (#) FISCAL YEAR PRICE ($/SH) DATE 5% ($) 10% ($)
---- ---------- ------------ ------------ ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mahmood Panjwani..... -- -- -- --
Owen Carton.......... 305,000 26.6% $0.30 07/27/08 $4,379,815 $7,028,323
Mark Culhane......... 180,000 15.7 0.40 10/13/08 2,566,809 4,129,862
Rafiq Mohammadi...... -- -- -- --
Shamshad Rashid...... -- -- -- --
</TABLE>

OPTION EXERCISES AND HOLDINGS

The following table presents the number of shares acquired and the value
realized upon exercise of stock options during 1998 and the number of shares of
common stock subject to vested and unvested stock options held as of December
31, 1998 by our chief executive officer and our other four most highly
compensated executive officers. Also presented are values of in-the-money
options, which represent the positive difference between the exercise price of
each outstanding stock option and a fair market value on December 31, 1998 of
$0.40 per share.

FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED IN-
OPTIONS AT THE-MONEY OPTIONS AT
SHARES FY-END (#) FY-END ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mahmood Panjwani..... -- -- -- -- -- --
Owen Carton.......... -- $ -- 305,000 -- $ 91,500 --
Mark Culhane......... 180,000 0 -- -- -- --
Rafiq Mohammadi...... -- -- -- -- -- --
Shamshad Rashid...... -- -- -- -- -- --
</TABLE>

CHANGE OF CONTROL AND SEVERANCE ARRANGEMENTS

In July 1998, we entered into a letter agreement with Owen Carton that
provides that if he is terminated by us without cause, Mr. Carton will be
entitled to receive six months of his base salary to be paid in accordance with
our normal payroll practices.

In September 1998, we entered into a letter agreement with Mark Culhane
that provides that if, within 12 months following a transfer of control of
iManage, he is constructively terminated, Mr. Culhane will be entitled to
receive six months of his base salary to be paid in accordance with our normal
payroll practices. In addition, Mr. Culhane's options will immediately
accelerate in an amount equal to the lesser of (A) 60% of the total number of
his shares subject to options as of the date of the constructive termination or
(B) the number of his remaining unvested shares subject to options as of the
date of the constructive termination.

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<PAGE> 55

In May 1999, we entered into a letter agreement with Philip Uchno that
provides that if, within 12 months following a transfer of control of iManage,
he is constructively terminated, Mr. Uchno's options will immediately accelerate
in an amount equal to 50% of his remaining unvested options as of the date of
the constructive termination. If at any time on or before May 5, 2000 we
terminate Mr. Uchno without cause, his options will vest based on the number of
full months of service he has provided to iManage as of the date of his
termination. If at any time on or before May 5, 2000 Mr. Uchno terminates his
employment with us for any reason, or if we terminate his employment for cause,
we will have the right to repurchase his vested options at the original option
price.

STOCK OPTION PLANS

AMENDED 1997 STOCK OPTION PLAN

Our amended 1997 stock option plan was adopted by our board of directors in
June 1997 and approved by our stockholders in June 1997 and has been amended
from time to time. A total of 6,000,000 shares of common stock have been
reserved for issuance under the amended 1997 stock option plan. The share
reserve will automatically be increased on the first day of each fiscal year
beginning on and after December 31, 2000 by the lesser of:

- 1,200,000 shares;

- 5% of the number of shares of our common stock that was issued and
outstanding on the last day of the immediately preceding fiscal year; or

- a lesser number of shares as determined by our board of directors or a
committee of our board of directors.

Under the amended 1997 stock option plan, all of our employees or employees
of a subsidiary, all directors who are not our employees or employees of a
subsidiary and any independent contractor or advisor who performs services for
us or a subsidiary are eligible to receive nonstatutory stock options. Employees
are also eligible to receive incentive stock options intended to qualify under
Section 422 of the Internal Revenue Code of 1986. The amended 1997 stock option
plan is administered by our board of directors, which selects the persons who
will receive options, determines the number of shares in each option and
prescribes other terms and conditions, including the type of consideration to be
paid to us upon exercise and vesting schedules, in connection with each option.
However, this responsibility may be delegated to a committee at the option of
our board of directors.

With respect to nonstatutory stock options granted under the amended 1997
stock option plan, the exercise price must be at least 85% of the fair market
value of our common stock on the date of grant. The exercise price under
incentive stock options cannot be lower than 100% of the fair market value of
our common stock on the date of grant and, in the case of incentive stock
options granted to 10% stockholders, not less than 110% of such fair market
value. The term of an option cannot exceed ten years, and the term of an
incentive stock option granted to a 10% stockholder cannot exceed five years.
Options generally expire not later than 30 days following a termination of
employment or six months following the optionee's termination date if the
termination was due to the optionee's death or disability.

Options granted under the amendment 1997 stock option plan generally vest
over four years, although the board or committee may specify a different vesting
schedule for a particular grant. Options granted under the amended 1997 stock
option plan are generally nontransferable other than by will or the laws of
descent and distribution, although the board or committee may grant nonstatutory
stock options which allow for limited transferability.

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<PAGE> 56

In the event of a change in control of iManage, the acquiring or successor
corporation may assume or substitute for the outstanding options granted under
the amended 1997 stock option plan. The outstanding options will terminate if
these options are not exercised or assumed or substituted for by the acquiring
or successor corporation.

Under our amended 1997 stock option plan, as of June 30, 1999, there were
outstanding options to purchase 1,894,950 shares of common stock at exercise
prices ranging from $0.20 to $1.65 per share, or a weighted average exercise
price per share of $0.58. Options to acquire 2,274,333 shares have been
exercised. As of June 30, 1999, a total of 830,717 shares of common stock were
available for future option grants. If any option granted under the amended 1997
stock option plan expires, terminates or is canceled for any reason, or if we
repurchase shares of stock issued subject to a right of repurchase, the shares
allocable to the unexercised option or the repurchased shares will become
available for further issuance for grants under the amended 1997 stock option
plan.

1999 EMPLOYEE STOCK PURCHASE PLAN

Our 1999 employee stock purchase plan was adopted by our board of directors
in August 1999 and approved by our stockholders in October 1999. This plan will
be effective upon the completion of this offering. Initially, a total of 500,000
shares of common stock will be reserved for issuance under the purchase plan,
none of which will be issued as of the effective date of this offering. The
share reserve will automatically increase on January 1, 2001, and on each
January 1 thereafter until and including January 1, 2009, by an amount equal to
the lesser of:

- 500,000 shares;

- 2% of the number of shares of our common stock that was issued and
outstanding on the last day of the immediately preceding fiscal year; or

- a lesser number of shares as determined by our board of directors or a
committee of our board of directors.

The purchase plan, which is intended to qualify under Section 423 of the
Internal Revenue Code of 1986, will be administered by our board of directors or
by a committee of our board of directors. Employees, including our officers and
directors who are also employees, of iManage or any subsidiary designated by our
board of directors for participation in the purchase plan, will be eligible to
participate in the purchase plan if they are customarily employed for more than
20 hours per week and more than five months per year. Eligible employees will be
able to participate at the start of any offering period.

Each offering of common stock under the purchase plan is for a period of
six months. An offering period will generally commence on the first days of
August and February of each year and end on the last days of the following July
and January, respectively. However, the first offering period will commence on
the date of this prospectus and will end on the last day of January 2002. This
initial offering period will be comprised of six-month purchase periods,
although the first purchase period of the initial offering period will commence
on the date of this prospectus and end on July 31, 2000. Shares are purchased on
the last day of each purchase period of the initial offering period and on the
last day of each subsequent six-month offering period. The board may establish a
different term for one or more offerings or purchase periods or different
commencement or ending dates for an offering or a purchase period.

The purchase plan will permit eligible employees to purchase shares of
common stock through payroll deductions at a price equal to 85% of the lower of
the fair market value of our common stock on (a) the first day of the offering
period or (b) the purchase date. Participants generally may not

54
<PAGE> 57

purchase more than 2,500 shares on any purchase date or purchase stock having a
value, measured at the beginning of the offering period, greater than $25,000 in
any calendar year. In the event of a change in control of iManage, our board of
directors may adjust the last day of the then current offering period to a date
on or before the change in control, or the acquiring corporation may assume or
replace the outstanding purchase rights under the purchase plan.

401(k) Plan

We sponsor a tax-qualified employee savings and retirement plan intended to
qualify under Section 401 of the Internal Revenue Code, or a 401(k) plan.
Employees who are at least 21 years old and who performed at least one hour of
service for us are generally eligible to participate and may enter the plan as
of the first day of any calendar quarter. Participants may make pre-tax
contributions to the plan of up to 20% of their eligible compensation, subject
to a statutorily prescribed annual limit, which was $10,000 in calendar year
1998. Each participant is fully vested in his or her contributions and the
investment earnings on these contributions at all times. The 401(k) plan does
not currently permit us to make matching contributions on behalf of
participants. Contributions by the participants or us to the plan, and the
income earned on these contributions, are generally not taxable to the
participants until withdrawn. Contributions are generally deductible by us when
made. The 401(k) plan assets are held in trust. The trustee of the 401(k) plan
invests the assets of the plan in various investment options as directed by the
participants.

LIMITATIONS OF LIABILITY AND INDEMNIFICATION MATTERS

We have adopted provisions in our certificate of incorporation, which the
Delaware General Corporation Law permits, which provide that our directors shall
not be personally liable to us or our stockholders for monetary damages
resulting from a violation of the directors' duty to act with care and in the
best interests of the stockholders, except for liability:

- for acts or omissions that are not in good faith, are deliberately
improper or are known to be illegal;

- under Section 174 of the Delaware General Corporation Law relating to
improper dividends or distributions; or

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

This limitation of liability does not affect the availability of equitable
remedies, including injunctive relief or rescission.

Our bylaws authorize us to indemnify our officers, directors, employees and
agents to the extent permitted by the Delaware General Corporation Law. Section
145 of the Delaware General Corporation Law empowers us to enter into
indemnification agreements with our officers, directors, employees and agents.

Prior to the completion of this offering, we intend to enter into separate
indemnification agreements with each of our current directors and executive
officers which may, in some cases, be broader than the specific indemnification
provisions allowed by the Delaware General Corporation Law. The indemnification
agreements may require us, among other things, to indemnify such executive
officers and directors against liabilities that may arise by reason of status or
service as directors or executive officers and to advance expenses they spend as
a result of any proceeding against them as to which they could be indemnified.

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<PAGE> 58

We intend to obtain liability insurance for our directors and officers and
intend to obtain a rider to extend that coverage for public securities matters.

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

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, executive officers or persons controlling
iManage, we have been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.

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<PAGE> 59

CERTAIN TRANSACTIONS

Since our inception in October 1995, there has not been, nor is there
currently planned, any transaction or series of similar transactions to which
iManage was or is a party in which the amount involved exceeds $60,000 and in
which any director, executive officer or holder of more than 5% of iManage's
capital stock or any member of their immediate family had or will have a direct
or indirect material interest other than agreements which are described under
the caption "Management" and the transactions described below.

SALE OF STOCK TO INSIDERS

The following directors, executive officers, holders of more than 5% of a
class of voting securities and members of these persons' immediate families
purchased shares of our series A preferred stock, series B preferred stock,
series C preferred stock or common stock:

<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
STOCKHOLDER PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK
----------- --------------- --------------- --------------- ------------
<S> <C> <C> <C> <C>
Anthelion Capital LLC............ 352,113 -- -- 75,000
Neil Araujo...................... -- -- -- 750,000
Zia Bhatti....................... -- -- -- 750,000
Owen Carton...................... -- -- -- 305,000
Mark Culhane and related
entities(1).................... -- -- -- 180,000
Entities and individuals
affiliated with Louis Leitz
Digital Systems
GmbH & Co...................... -- 1,273,885 -- 20,000
Rafiq Mohammadi.................. -- -- -- 3,000,000
Entities associated with New
Enterprise Associates.......... -- 1,034,401 1,705,599 --
Entities and individuals
affiliated with
Mahmood Panjwani and Shamshad
Rashid(2)...................... 64,506 -- -- 3,354,875
Raj-Dak Investments LLC and
related entities............... 281,690 -- -- 50,000
Iqbal Sadruddin.................. 257,434 -- -- 70,567
Philip Uchno..................... -- -- -- 230,000
Entities and individuals
affiliated with C.E. Unterberg,
Towbin, L.P., formerly know as
Unterberg Harris, L.P.......... 1,267,605 764,326 -- --
Entities and individuals
affiliated with Moez Virani.... 206,417 -- -- 123,513
</TABLE>

- -------------------------
(1) Includes 5,000 shares held by Mark and Michele Culhane as trustees of the
Michael D. Culhane 1999 Irrevocable Trust; 5,000 shares held by Mark and
Michele Culhane as trustees of the Maxwell A. Culhane 1999 Irrevocable
Trust; and 5,000 shares held by Mark and Michele Culhane as trustees of the
Monica G. Culhane 1999 Irrevocable Trust.

(2) Includes 29,295 shares of series A preferred stock held jointly by Akber
Panjwani and Karim Panjwani, both brothers of Mr. Panjwani; 6,000 shares of
common stock held by Akber Panjwani and his spouse as custodians for their
children; 21,000 shares of common stock held jointly by Akber Panjwani and
his spouse; 9,000 shares of common stock held by Karim Panjwani and his
spouse as custodians for their children; 6,000 shares of common stock held
jointly by Karim

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<PAGE> 60

Panjwani and his spouse; 53,000 shares of common stock held by Sherbanu
Panjwani, Mr. Panjwani's mother; 174,875 shares of common stock held by
Samia Rashid, the sister of Ms. Shamshad Rashid; 3,000 shares of common
stock held by Samia Rashid's husband; 9,000 shares of common stock held by
Aftab Rashid, the brother of Ms. Shamshad Rashid, and his spouse as
custodians for their children; 6,000 shares of common stock held jointly by
Aftab Rashid and his spouse; 9,000 shares of common stock held by Altaf
Rashid, the brother of Ms. Shamshad Rashid, and his spouse as custodians for
their children; 6,000 shares of common stock held jointly by Altaf Rashid
and his spouse; 6,000 shares of common stock held by Naushad Rashid, the
brother of Ms. Shamshad Rashid, and his spouse as custodians for their
children; 6,000 shares of common stock held jointly by Naushad Rashid and
his spouse; 35,211 shares of series A preferred stock held by Naushad
Rashid; 6,000 shares of common stock held by Yasmeen Rashid, the sister of
Ms. Shamshad Rashid; and 56,000 shares of common stock held by Zohra and
Noor Ali Rashid, the mother and father of Ms. Shamshad Rashid.

The following is a summary of sales of our preferred and common stock that
are presented in the table above:

Series A financing. Between December 27, 1996 and August 28, 1997, we sold
a total of 2,853,708 shares of series A preferred stock at a price of $0.71 per
share.

Series B financing. Between December 15, 1997 and July 31, 1998, we sold a
total of 3,200,000 shares of series B preferred stock at a price of $1.57 per
share.

Series C financing. Between September 28, 1998 and November 30, 1998, we
sold a total of 1,979,409 shares of our series C preferred stock at a price of
$2.10 per share. 100,000 of these shares were issued for $210,000 in pre-paid
rent for our San Mateo facility. Immediately before the closing of this
offering, all outstanding shares of series A preferred stock, series B preferred
stock and series C preferred stock will automatically convert into shares of
common stock on a one-for-one basis.

Sales of Common Stock.

- On October 10, 1995, we sold to each of Mahmood Panjwani and Rafiq
Mohammadi 3,000,000 shares of common stock at a price of $0.000165 per
share.

- On December 27, 1996, we sold a total of 291,080 shares of common stock
at a price of $0.071 per share.

- In February 1998, Mr. Araujo and Mr. Bhatti each exercised an option to
acquire 750,000 shares of common stock at a price of $0.20 per share.

- Of the 75,000 shares of common stock shown as held by Anthelion Capital
LLC, 50,000 shares are owned by Amit Shah and 25,000 shares are owned by
Amit Parikh, both principals of Anthelion Capital LLC.

- Messrs. Shah and Parikh each acquired their shares upon exercise of
options granted at a price of $0.20 per share.

- The 20,000 shares of common stock shown as held by Louis Leitz Digital
Systems GmbH & Co. are owned by Harold Ractzsch, acquired upon exercise
of an option granted at $0.30 per share. All other holders of common
stock set forth in the table above acquired their shares upon exercise of
stock options as described below.

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<PAGE> 61

OPTION GRANTS TO DIRECTORS AND EXECUTIVE OFFICERS

In November 1997, we granted to Moez Virani, one of our directors, an
option to purchase a total of 50,000 shares of common stock at an exercise price
of $0.20 per share. In March 1999, we granted Mr. Virani an additional option to
purchase 25,000 shares of common stock at an exercise of $0.60 per share. Mr.
Virani has exercised both options.

In July 1998, we granted to Owen Carton, our vice president, marketing and
strategic planning, an option to purchase 305,000 shares of common stock at an
exercise price of $0.30 per share. Mr. Carton exercised options to purchase
177,917 shares in April 1999 and 127,083 shares in May 1999 with funds we loaned
him under two full recourse promissory notes approved by our board of directors.
The April 1999 and May 1999 promissory notes accrue interest at rates of 4.71%
and 4.83% per year, respectively, and are due on March 31, 2003 and May 30,
2003, respectively.

In September 1998, we granted to Mark Perry, one of our directors, an
option to purchase 100,000 shares of common stock at an exercise price of $0.40
per share. Mr. Perry has not exercised the option.

In October 1998, we granted to Mark Culhane, our chief financial officer
and secretary, options to purchase 180,000 shares of common stock at an exercise
price of $0.40 per share. In November 1998, Mr. Culhane exercised the option in
full with funds we loaned him under a full recourse promissory note approved by
our board of directors. The promissory note accrues interest at the rate of
4.51% per year and is due on November 12, 2002.

In May 1999, we granted to Philip Uchno, our vice president, worldwide
sales, an option to purchase 230,000 shares of common stock at an exercise price
of $0.90 per share. In July 1999, Mr. Uchno exercised the option in full with
funds we loaned him under a full recourse promissory note approved by our board
of directors. The promissory note accrues interest at the rate of 5.22% per year
and is due on July 31, 2003.

In June 1999, we granted to Shamshad Rashid, our vice president, business
development, an option to purchase 180,000 shares of common at an exercise price
of $1.65 per share. In July 1999, Ms. Rashid exercised the option in full with
funds we loaned her under a full recourse promissory note approved by our board
of directors. The promissory note accrues interest at the rate of 4.9% per year
and is due on July 26, 2001.

OTHER INSIDER ARRANGEMENTS

Before founding iManage, Mahmood Panjwani, our president and chief
executive officer, and Shamshad Rashid, our vice president, business development
and Mr. Panjwani's spouse, operated Q-Image Corporation, a consulting services
company founded by Mr. Panjwani. Mr. Panjwani served as president of Q-Image
from August 1988 to December 1997. Ms. Rashid has continued her involvement with
Q-Image where she has served as president since December 1997. Ms. Rashid
estimates that she dedicates approximately 95% of her time to iManage.
Currently, Mr. Panjwani and Ms. Rashid jointly hold a 90% ownership in Q-Image.

From 1995 until late 1998, we subleased office space in Sunnyvale,
California from Q-Image. During 1998, we paid a total of $54,000 in rent to
Q-Image. In November 1998, we moved to our current location in San Mateo,
California and we terminated our sublease arrangement with Q-Image for the
Sunnyvale facility. Q-Image now subleases office space from us in our San Mateo
facility for $84,600 per year for 1999 and $91,650 per year for 2000 under a
written sublease agreement.

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<PAGE> 62

Since 1997, we have engaged Q-Image for personnel recruiting services under
an arrangement where we pay Q-Image a placement fee amounting to 25% of the base
salary of the candidates we hire. During 1998, we paid a total of $101,575 in
placement fees to Q-Image under the terms of a written agreement. Although this
written agreement expired in August 1999, we are currently negotiating with
Q-Image to renew the agreement. During the six month period ended June 30, 1999,
we paid a total of $141,250 in placement fees to Q-Image.

We are presently utilizing the services of several full-time consultants
who were referred to us by Q-Image. Under our current arrangement with Q-Image,
we pay fees to Q-Image equivalent to the salaries and incentive pay of these
consultants. We also pay additional fees to Q-Image to cover the cost of
employee benefits provided by Q-Image to these individuals. We have in the past,
and may in the future, hire consultants from Q-Image as full-time iManage
employees. During 1998 and the six month period ended June 30, 1999, we paid
Q-Image $365,826 and $279,148, respectively, for the services of these
consultants.

On November 14, 1996, December 12, 1996 and December 19, 1996, Mahmood
Panjwani loaned us $25,000, $10,000 and $15,000, respectively. Each loan accrued
interest at the rate of 10% per year. Both loans were repaid in full on
September 14, 1998.

On October 10, 1995 and June 25, 1996, Rafiq Mohammadi loaned us $24,010
and $5,000, respectively. Each loan accrued interest at the rate of 10% per
year. Mr. Mohammadi was repaid $10,000 of this loan in two installments of
$7,000 in May 1997 and $3,000 in August 1997, and the balance was repaid in full
on September 14, 1998.

All of the transactions described above were approved by disinterested
directors of the board of directors. As a result, we believe those transactions
were made on terms no less favorable to us than could have been obtained from
unaffiliated third parties. We intend that all future transactions, including
the agreements with Q-Image and loans between us and our officers, directors and
principal stockholders and their affiliates, will be approved by a majority of
the board of directors. In addition, we intend that all of these future
transactions will take place on terms no less favorable to us than could be
obtained from unaffiliated third parties.

INDEMNIFICATION AGREEMENTS

We intend to enter into indemnification agreements with each of our
directors and officers. These agreements will require us to indemnify these
individuals to the fullest extent permitted by the Delaware General Corporation
Law.

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<PAGE> 63

PRINCIPAL STOCKHOLDERS

The following table presents information concerning the beneficial
ownership of the shares of our common stock as of June 30, 1999, and as adjusted
to reflect the sale of shares of common stock in this offering assuming (a)
16,778,530 shares of common stock outstanding as of June 30, 1999 and 20,378,530
shares outstanding immediately following the completion of this offering, (b)
conversion of all of iManage's outstanding shares of convertible preferred stock
into common stock and (c) no exercise of the underwriters' over-allotment
option, by:

- each person we know to be the beneficial owner of 5% or more of the
outstanding shares of common stock;

- each executive officer listed in the summary compensation table above;

- each of our directors; and

- all executive officers and directors of iManage as a group.

Beneficial ownership is determined under the rules of the Securities and
Exchange Commission and generally includes voting or investment power over
securities. Except in cases where community property laws apply or as indicated
in the footnotes to this table, we believe that each stockholder identified in
the table possesses sole voting and investment power over all shares of common
stock shown as beneficially owned by the stockholder. Shares of common stock
subject to options that are currently exercisable or exercisable within 60 days
of June 30, 1999 are considered outstanding and beneficially owned by the person
holding the options for the purpose of computing the percentage ownership of
that person but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person. Unless indicated below, the address of
each individual listed below is 2121 South El Camino Real, Suite 400, San Mateo,
California 94403.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
-------------------------
NUMBER OF SHARES PRIOR TO AFTER THE
NAME AND ADDRESS BENEFICIALLY OWNED THE OFFERING OFFERING
---------------- ------------------ ------------ ---------
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Rafiq Mohammadi.................................... 3,000,000 17.9% 14.7%
Mahmood Panjwani(1)................................ 2,978,000 17.6 14.5
Shamshad Rashid(2)................................. 2,978,000 17.6 14.5
Mark Perry(3)...................................... 2,840,000 16.8 13.9
c/o New Enterprise Associates
2490 Sand Hill Road
Menlo Park, CA 94025
Moez Virani(4)..................................... 329,930 2.0 1.6
c/o Mohr Davidow Ventures
2775 Sand Hill Road, Suite 240
Menlo Park, CA 94025
Owen Carton(5)..................................... 305,000 1.8 1.5
Mark Culhane(6).................................... 180,000 1.1 *
OTHER 5% STOCKHOLDERS
New Enterprise Associates(7)....................... 2,740,000 16.3 13.4
Attn: Mark Perry
2490 Sand Hill Road
Menlo Park, CA 94025
Entities and individuals associated with C.E.
Unterberg, Towbin, L.P.(8)....................... 2,031,931 12.1 10.0
Swiss Bank Tower
10 East 50th Street
New York, NY 10022
Entities and individuals associated with Louis
Leitz Digital Systems GmbH & Co.(9).............. 1,283,885 7.7 6.3
Seimenstrasse 64,
70469 Stuttgart Germany
All executive officers and directors as a group (8
persons)(10)..................................... 9,862,930 57.0 47.2
</TABLE>

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

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<PAGE> 64

* Less than 1%

(1) Includes 2,648,000 shares held in joint tenancy with Ms. Rashid, Mr.
Panjwani's wife, 50,000 shares registered in the name of Mr. Panjwani and
Ms. Rashid as the trustees of the Danyal M. Panjwani Trust and 100,000
shares registered in the name of Mr. Panjwani and Ms. Rashid as the
trustees of the Panjwani Irrevocable Trust dated December 31, 1998. Also
includes 180,000 shares subject to options held by Ms. Rashid, exercisable
within 60 days of June 30, 1999, of which 86,250 are subject to a right of
repurchase in favor of iManage which lapses over time.

(2) Includes 2,648,000 shares held in joint tenancy with Mr. Panjwani, Ms.
Rashid's husband, 50,000 shares registered in the name of Mr. Panjwani and
Ms. Rashid as the trustees of the Danyal M. Panjwani Trust and 100,000
shares registered in the name of Mr. Panjwani and Ms. Rashid as the
trustees of the Panjwani Irrevocable Trust dated December 31, 1998. Also
includes 180,000 shares subject to options held by Ms. Rashid, exercisable
within 60 days of June 30, 1999, of which 86,250 are subject to a right of
repurchase in favor of iManage which lapses over time.

(3) Mr. Perry is a general partner of New Enterprise Associates and a director
of iManage. Includes 100,000 shares subject to options exercisable within
60 days of June 30, 1999, all of which are subject to a right of repurchase
in favor of iManage which lapses over time. Also includes 2,783 shares held
by NEA Ventures 1998, Limited Partnership, 27,828 shares held by NEA
Presidents Fund, L.P. and 2,709,389 shares held by New Enterprise
Associates VIII, Limited Partnership. Mr. Perry disclaims beneficial
ownership of shares held by these entities, except for his proportional
interest arising from his partnership interest in New Enterprise
Associates.

(4) Includes 254,930 shares registered in the name of the Moez R. Virani and
Vivienne Virani, TTEES of the Virani Fam 93 Rev Tr Dtd 11/24/93.

(5) Includes 111,198 shares subject to a right of repurchase in favor of
iManage which lapses over time.

(6) Represents 180,000 shares subject to a right of repurchase in favor of
iManage which lapses over time. Includes 5,000 shares registered in the
name of Mark and Michele Culhane as trustees of the Michael D. Culhane 1999
Irrevocable Trust, 5,000 shares registered in the name of Mark and Michele
Culhane as trustees of the Maxwell A. Culhane 1999 Irrevocable Trust and
5,000 shares registered in the name of Mark and Michele Culhane as trustees
of the Monica G. Culhane 1999 Irrevocable Trust.

(7) Represents 2,783 shares held by NEA Ventures 1998, Limited Partnership,
27,828 shares held by NEA Presidents Fund, L.P. and 2,709,389 shares held
by New Enterprise Associates VIII, Limited Partnership. Mr. Perry is a
general partner of New Enterprise Associates and has dispositive and voting
power for these shares.

(8) Includes 127,388 shares held by C.E. Unterberg, Towbin LLC, 1,016,786
shares held by Unterberg Harris Private Equity Partners, L.P., 323,940
shares held by C.E. Unterberg, Towbin, L.P., 217,177 shares held by
Unterberg Harris Private Equity Partners, C.V., 63,694 shares held by A.
Robert Towbin, a managing director of C.E. Unterberg, Towbin L.P., and an
aggregate of 282,946 shares held by seven trusts and two 401(k) profit
sharing accounts, all of which have beneficiaries or trustees who are
affiliated with C.E. Unterberg, Towbin L.P. or the principals of C.E.
Unterberg, Towbin L.P.

(9) Includes 10,000 shares held by Harold Raetzsch, a former executive officer
of Louis Leitz Digital Systems GmbH & Co.'s U.S. subsidiary. These 10,000
shares are subject to a repurchase option in favor of iManage in the event
Mr. Raetzsch ceases to serve as a consultant or advisor to us.

(10) Includes 707,448 shares subject to a right of repurchase in favor of
iManage which lapses over time. Also includes 510,000 shares subject to
options exercisable within 60 days of June 30, 1999.

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<PAGE> 65

DESCRIPTION OF CAPITAL STOCK

Immediately following the closing of this offering, our authorized capital
stock will consist of 100,000,000 shares of common stock and 2,000,000 shares of
preferred stock. As of June 30, 1999, and assuming the conversion of all
outstanding preferred stock into common stock upon the closing of this offering,
there were outstanding 16,778,530 shares of common stock held of record by
approximately 93 stockholders and options to purchase 1,894,950 shares of common
stock.

Immediately before the closing of this offering, we intend to amend and
restate our certificate of incorporation and our bylaws. Our certificate of
incorporation, bylaws and rights agreement, including all of its amendments,
described below, are included as exhibits to the registration statement of which
this prospectus forms a part.

COMMON STOCK

Dividend Rights. Subject to preferences that may apply to shares of
preferred stock outstanding at the time, the holders of outstanding shares of
common stock are entitled to receive dividends out of assets legally available
at the times and in the amounts as our board of directors may from time to time
determine.

Voting Rights. Each common stockholder is entitled to one vote for each
share of common stock held on all matters submitted to a vote of stockholders.
Cumulative voting for the election of directors is not provided for in our
certificate of incorporation, which means that the holders of a majority of the
shares voted can elect all of the directors then standing for election.

No Preemptive or Similar Rights. Our common stock is not entitled to
preemptive rights and is not subject to conversion or redemption.

Right to Receive Liquidation Distributions. Upon our liquidation,
dissolution or winding-up, the assets legally available for distribution to our
stockholders are distributable ratably among the holders of our common stock and
any participating preferred stock outstanding at that time after payment of
liquidation preferences, if any, on any outstanding preferred stock and payment
of other claims of creditors. Each outstanding share of common stock is, and all
shares of common stock to be outstanding upon completion of this offering will
be, fully paid and nonassessable.

PREFERRED STOCK

Upon the closing of this offering, each outstanding share of series A
preferred stock, series B preferred stock and series C preferred stock will be
converted into one share of common stock. See Note 6 to our financial statements
for a description of the preferred stock.

Following the offering, we will be authorized, subject to the limits
imposed by the Delaware General Corporation Law, to issue preferred stock in one
or more series, to establish from time to time the number of shares to be
included in each series, to fix the rights, preferences and privileges of the
shares of each wholly unissued series and any of its qualifications, limitations
or restrictions. Our board of directors can also increase or decrease the number
of shares of any series, but not below the number of shares of that series then
outstanding, without any further vote or action by the stockholders.

Our board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of our common stock. The issuance of preferred
stock, while providing flexibility in connection with possible acquisitions and
other corporate purposes, could, among other things, have the effect of
delaying, deferring or preventing a change in control of iManage and may cause
the market price of our common stock to decline or impair the voting and other
rights of the holders of our common stock. We have no current plans to issue any
shares of preferred stock.

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<PAGE> 66

REGISTRATION RIGHTS

The holders of approximately 8,033,117 shares of preferred stock have the
right to require us to register their shares with the Securities and Exchange
Commission so that those shares may be publicly resold or to include their
shares in any registration statement we file.

Demand registration rights

- At any time after December 31, 2001, stockholders with registration
rights can request that we file a registration statement so that they can
publicly sell their shares. The underwriters of any underwritten offering
will have the right to limit the number of shares to be included in the
filed registration statement.

- At any time six months after the closing of this offering, the holders of
at least 30% of the shares having registration rights have the right to
demand that we file a registration statement on a form other than Form
S-3, as long as the aggregate amount of securities to be sold under the
registration statement exceeds $7.5 million.

- If we are eligible to file a registration statement on Form S-3, the
holders of at least 10% of the shares having registration rights have the
right to demand that we file a registration statement on Form S-3, as
long as the amount of securities to be sold under the registration
statement exceeds $500,000.

We will be required to file two registration statements on a form other
than Form S-3 for the holders of at least 30% of shares having registration
rights. If we are eligible to file a registration statement on Form S-3, we are
not required to file more than one registration statement during any 12-month
period. We may postpone the filing of a registration statement for up to 60 days
once in a 12-month period if we determine that the filing would be seriously
detrimental to us or our stockholders.

Piggyback registration rights

If we register any securities for public sale, stockholders with
registration rights will have the right to include their shares in the
registration statement. The underwriters of any underwritten offering will have
the right to limit the number of shares to be included in the registration
statement.

Expenses of registration

We will pay all expenses relating to any demand or piggyback registration.
However, we will not pay for the expenses of any demand registration if the
request is subsequently withdrawn by the holders of a majority of the shares
having registration rights, subject to very limited exceptions.

Expiration of registration rights

The registration rights described above will expire six years after this
offering is completed. The registration rights will terminate earlier with
respect to a particular stockholder if that holder can resell all of its
securities in a three-month period under Rule 144 of the Securities Act and we
are subject to the reporting requirements of the Securities Exchange Act of
1934.

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER PROVISIONS

The provisions of the Delaware General Corporation Law, our certificate of
incorporation and our bylaws described below may have the effect of delaying,
deferring or discouraging another person from acquiring control of us.

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<PAGE> 67

We will be subject to the provisions of Section 203 of the Delaware General
Corporation Law regulating corporate takeovers. This section prevents Delaware
corporations from engaging, under limited circumstances, in a business
combination, which includes a merger or sale of more than 10% of the
corporation's assets, with any interested stockholder, which is a stockholder
who owns 15% or more of the corporation's outstanding voting stock, as well as
affiliates and associates of stockholders, for three years following the date
that the stockholder became an interested stockholder unless:

- the transaction is approved by the board prior to the date the interested
stockholder attained that status;

- upon the closing of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced; or

- on or after the date the business combination is approved by the board
and authorized at an annual or special meeting of stockholders by at
least two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.

A Delaware corporation may opt out of this provision with an express
provision in its original certificate of incorporation or an express provision
in its certificate of incorporation or bylaws resulting from a stockholders'
amendment approved by at least a majority of the outstanding voting shares.
However, we have not opted out of this provision. This provision of the Delaware
General Corporation Law could prohibit or delay mergers or other takeover or
change-in-control attempts and, accordingly, may discourage attempts to acquire
us.

CHARTER AND BYLAWS

Charter

Upon the closing of this offering, our certificate of incorporation will
provide that all stockholder actions must be effected at a duly-called annual or
special meeting and not by a consent in writing. Our certificate of
incorporation will also require the approval of our board of directors in order
to adopt, amend or repeal our bylaws. In addition, our certificate of
incorporation will permit the stockholders to adopt, amend or repeal our bylaws
only upon the affirmative vote of the holders of at least two-thirds of the
voting power of all then outstanding shares of stock entitled to vote.

Directors will be removable for cause only by stockholders holding a
majority of the then outstanding shares of stock entitled to vote. Vacancies on
the board of directors resulting from death, resignation, removal or other
reason may be filled by a majority of the directors then in office, even if less
than a quorum. Vacancies from newly created directorships must be filled by a
majority of the directors then in office. Lastly, the provisions in the
certificate of incorporation described above and other provisions pertaining to
the limitation of liability and indemnification of directors will be able to be
amended or repealed only with the affirmative vote of the holders of at least
two-thirds of the voting power of all then outstanding shares of stock entitled
to vote.

These provisions may have the effect of deterring hostile takeovers or
delaying changes in the control or management of iManage, which could have an
adverse effect on the market price of our common stock.

Bylaws

Upon the closing of this offering, our bylaws will also contain many of the
provisions in our certificate of incorporation described above. Our bylaws will
not permit stockholders to call a special meeting. In addition, our bylaws will
establish an advance notice procedure for matters to be brought before an annual
or special meeting of our stockholders, including the election of directors.
Business

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<PAGE> 68

permitted to be conducted at any annual meeting or special meeting of
stockholders will be limited to business properly brought before the meeting.

Our bylaws will also provide that we will indemnify officers and directors
against losses that they may incur in investigations and legal proceedings
resulting from their services to us, which may include services in connection
with takeover defense measures. These provisions may have the effect of
preventing changes in our management.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

Our certificate of incorporation limits the liability of directors to the
fullest extent permitted by the Delaware General Corporation Law. In addition,
our certificate of incorporation and bylaws provide that we will indemnify our
directors and officers to the fullest extent permitted by the Delaware General
Corporation Law. We intend to enter into separate indemnification agreements
with our directors and executive officers that provide them indemnification
protection in the event our certificate of incorporation is subsequently
amended.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is BankBoston, N.A.
The address of our transfer agent and registrar is 150 Royall Street, Canton, MA
02021, and its telephone number at this location is (781) 575-2469.

LISTING

We have applied for our common stock to be quoted on the Nasdaq National
Market under the trading name IMAN.

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<PAGE> 69

SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there has been no public market for our common stock.
Future sales of substantial amounts of our common stock, including shares issued
upon exercise of outstanding options, in the public market after this offering
could adversely affect market prices prevailing from time to time. Furthermore,
as described below, no shares currently outstanding will be available for sale
immediately after this offering due to contractual and legal restrictions on
resale. Nevertheless, sales of substantial amounts of our common stock in the
public market after the restrictions lapse could adversely affect the prevailing
market price at such time and our ability to raise equity capital in the future.

- Upon the closing of this offering, we will have outstanding an aggregate
of approximately shares of common stock, assuming conversion of all
outstanding preferred stock and based on common stock outstanding as of
June 30, 1999, and assuming no exercise of the underwriters'
over-allotment option or exercise of outstanding options.

- Of these shares, the shares of common stock to be sold in this offering
will be freely tradable without restriction or further registration under
the Securities Act, unless such shares are held by affiliates of iManage,
defined as persons who directly or indirectly control or are controlled
by or are under common control with iManage.

All remaining shares held by our existing stockholders were issued and sold
by iManage in private transactions and are eligible for public sale as follows:

<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF SHARES
DATE THAT MAY BE SOLD COMMENT
---- ---------------- -------
<S> <C> <C>
Date of this prospectus..................... 0 Freely tradable shares
181 days after the date of this 14,324,197 Restricted securities held for
prospectus................................ at least one year may be sold
under Rule 144
</TABLE>

LOCK-UP AGREEMENTS

All of our officers and directors and substantially all of our security
holders have signed lock-up agreements under which they agreed not to sell,
dispose of, loan, pledge or grant any rights with respect to any shares of
common stock or any securities convertible into or exercisable or exchangeable
for shares of common stock without the prior written consent of BancBoston
Robertson Stephens for a period of 180 days after the date of this prospectus.

BancBoston Robertson Stephens may choose to release some of these shares
from these restrictions prior to the expiration of this 180-day period, although
it has no current intention to do so.

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:

- 1% of the number of shares of common stock then outstanding, which will
equal approximately 203,786 shares immediately after this offering; or

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<PAGE> 70

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

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 has not 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, is entitled to sell those
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144. Therefore, unless otherwise
restricted, shares that have been held by a non-affiliate for at least two years
may be sold in the open market immediately after the lock-up agreements expire.

RULE 701

Any employee, officer or director of, or consultant to, us who purchased
his shares under a written compensatory plan or contract may be entitled to sell
his shares in reliance on Rule 701. Rule 701 permits affiliates to sell their
Rule 701 shares under Rule 144 without complying with the holding period
requirements of Rule 144. Rule 701 further provides that non-affiliates may sell
these shares in reliance on Rule 144 without having to comply with the holding
period, public information, volume limitation or notice provisions of Rule 144.
All holders of Rule 701 shares are required to wait until 90 days after the date
of this prospectus before selling those shares. However, all shares issued under
Rule 701 are subject to lock-up agreements and will only become eligible for
sale when the 180-day lock-up agreements expire.

REGISTRATION RIGHTS

Upon completion of this offering, the holders of 8,033,117 shares of common
stock, or their transferees, will have certain rights to register those shares
under the Securities Act. If these shares are registered, they will be freely
tradable without restriction under the Securities Act.

STOCK OPTIONS

We intend to file one or more registration statements on Form S-8 under the
Securities Act to register approximately 1,672,031 shares of common stock issued
under our stock option and employee stock purchase plans. These registration
statements are expected to be filed soon after the date of this prospectus and
will automatically become effective upon filing. Shares registered under these
registration statements will be available for sale in the open market, unless
the shares are subject to vesting restrictions with iManage or the lock-up
restrictions described above.

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<PAGE> 71

UNDERWRITING

The underwriters named below have entered into an underwriting agreement
with us to purchase the number of shares of common stock set forth opposite
their names below. The underwriters are obligated to purchase and pay for all
the shares listed below if any are purchased.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
BancBoston Robertson Stephens Inc. .........................
U.S. Bancorp Piper Jaffray Inc..............................
C.E. Unterberg, Towbin......................................
E*TRADE Securities, Inc. ...................................
--------
Total............................................. 3,600,000
========
</TABLE>

The underwriters initially propose to offer the shares of common stock
directly to the public at the initial public offering price presented on the
cover page of this prospectus. Any shares sold by the underwriters to securities
dealers may be sold at a discount of up to per share from the initial
public offering price. The underwriters may allow, and such dealers may
re-allow, to other dealers a discount of up to $ per share from the initial
public offering price. After the initial offering of the common stock, the
public offering price and other selling terms may be changed by the
representatives of the underwriters at any time without notice. The underwriters
do not intend to confirm sales to any accounts over which they exercise
discretionary authority.

Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to 540,000 additional shares of common stock at the same price per
share as we will receive for the 3,600,000 shares that the underwriters have
agreed to purchase. To the extent this option is exercised, each of the
underwriters will become obligated, subject to various conditions, to purchase
approximately the same percentage of these additional shares that the number of
shares of common stock to be purchased by it shown in the above table represents
as a percentage of the 3,600,000 shares in this offering. If purchased, these
additional shares will be sold by the underwriters on the same terms as those on
which the shares are being sold.

Qualified Independent Underwriter. The offering is being conducted in
accordance with Rule 2720 of the National Association of Securities Dealers,
Inc. which provides that, among other things, when an NASD member firm
participates in the offering of equity securities of a company with whom such
member has a conflict of interest, the initial public offering price can be no
higher than that recommended by a qualified independent underwriter. C.E.
Unterberg, Towbin is deemed to have a conflict of interest because some entities
affiliated with C.E. Unterberg, Towbin own more than 10% of our capital stock.
BancBoston Robertson Stephens is serving as the qualified independent
underwriter in the offering and will recommend a price in compliance with the
requirements of Rule 2720. BancBoston Robertson Stephens has performed due
diligence investigations and reviewed and participated in the preparation of the
prospectus and the registration statement of which this prospectus forms a part.
BancBoston Robertson Stephens will receive no additional compensation in its
capacity as the qualified independent underwriter.

Indemnification. The underwriting agreement contains covenants of indemnity
among the underwriters and us against specified civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.

discretion and at any time without notice, release all or any portion of the
securities subject to lock-up agreements. All of the shares of common stock
subject to the lock-up agreements will be eligible for sale in the public market
upon the expiration of the lock-up agreements, subject to holding period, volume
limitations and other conditions of Rule 144.

Future Sales. In addition, we have agreed that during the period of 180
days following the effective date of this prospectus, we will not, without the
prior written consent of BancBoston Robertson Stephens, subject to limited
exceptions, including in connection with acquisitions, dispose of or hedge any
shares of common stock, or any securities convertible into, exercisable for or
exchangeable for shares of common stock, other than our sales of shares in this
offering, the issuance of common stock upon the exercise of outstanding options
or our issuance of options or shares under existing stock option or stock
purchase plans.

The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.

No Prior Public Market. Before this offering, there has been no public
market for our common stock. Consequently, the initial public offering price for
the common stock in this offering will be determined through negotiations among
us and the representatives of the underwriters. The factors to be considered in
these negotiations include prevailing market conditions, our financial
information, the market valuation of other companies that we and the
representatives believe to be comparable to us, estimates of our business
potential and the business potential of the industry in which we compete, an
assessment of our management, our past and present operation and the prospects
for our future revenues.

Stabilization. The representatives have advised us that, based on
Regulation M under the Exchange Act, some persons participating in the offering
may engage in transactions including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids that may have the effect of
stabilizing or maintaining the market price of the common stock at a level above
that which might otherwise prevail in the open market. A stabilizing bid is a
bid for or the purchase of the common stock on behalf of the underwriters for
the purpose of fixing or maintaining the price of the common stock. A syndicate
covering transaction is the bid for the purchase of the common stock on behalf
of the underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A penalty bid is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by this underwriter or syndicate member is purchased by
the representatives in a syndicate covering transaction and has therefore not
been effectively placed by this underwriter or syndicate member. These
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.

Internet Distribution. A copy of the prospectus in electronic format will
be made available on the internet web site hosted by E*TRADE Securities, Inc.
E*TRADE will accept conditional offers to purchase shares from all of its
customers that pass and complete an online eligibility profile. In the event
that the demand for shares from the customers of E*TRADE exceeds the amount of
shares allocated to it, E*TRADE will use a random allocation methodology to
distribute shares in even lots of 100 shares/customer.

Directed Shares. The underwriters have reserved for sale at the initial
public offering price up to 5% of the common stock in this offering for
individuals designated by us who have expressed an interest in purchasing shares
of common stock in this offering. The number of shares available for sale to the
general public will be reduced to the extent these persons purchase the reserved
shares. The underwriters will offer any reserved shares not so purchased to the
general public on the same basis as other shares in this offering described
above.

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<PAGE> 73

LEGAL MATTERS

The validity of the common stock offered by this prospectus will be passed
upon for us by Gray Cary Ware & Freidenrich LLP, Palo Alto, California. Various
legal matters in connection with this offering will be passed upon for the
underwriters by Brobeck, Phleger & Harrison LLP, Palo Alto, California. As of
June 30, 1999, an investment partnership and an associate attorney at Gray Cary
Ware & Freidenrich LLP beneficially owned an aggregate of 61,402 shares of our
common stock. Gary Cary is one of our customers.

EXPERTS

The financial statements as of December 31, 1997 and 1998 and June 30, 1999
and for each of the three years in the period ended December 31, 1998 and the
six month period ended June 30, 1999 included in this prospectus have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the
Securities Act that registers the shares of our common stock to be sold in this
offering. The registration statement, including the attached exhibits and
schedules, contain additional relevant information about us and our capital
stock. The rules and regulations of the SEC allow us to omit certain information
included in the registration statement from this document.

In addition, upon completion of this offering, we will become subject to
the reporting and information requirements of the Exchange Act and, as a result,
will file periodic reports, proxy statements and other information with the SEC.
You may read and copy this information at the following public reference rooms
of the SEC:

<TABLE>
<S> <C> <C>
Washington, D.C. New York, New York Chicago, Illinois
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, NY 10048 Chicago, IL 60661-2511
</TABLE>

You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth St., N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. You may obtain information on the operation of the
public reference rooms by calling the SEC at 1-800-SEC-0330.

The SEC also maintains an internet website that contains reports, proxy
statements and other information about issuers, like iManage, who file
electronically with the SEC. The address of that website is http://www.sec.gov.

We intend to furnish our stockholders with annual reports containing
audited financial statements, and make available to our stockholders quarterly
reports for the first three quarters of each fiscal year containing unaudited
interim financial information.

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<PAGE> 74

IMANAGE, INC.

INDEX TO FINANCIAL STATEMENTS

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

F-1
<PAGE> 75

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of iManage, Inc. (formerly NetRight Technologies, Inc.)

In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' equity and of cash flows present fairly, in all
material respects, the financial position of iManage, Inc. (formerly NetRight
Technologies, Inc.) at December 31, 1997 and 1998 and June 30, 1999, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998 and the six month period ended June 30, 1999, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICEWATERHOUSECOOPERS LLP

San Jose, California
August 20, 1999, except as to
Note 10, which is as of August 30, 1999

F-2
<PAGE> 76

IMANAGE, INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, PRO-FORMA
------------------ JUNE 30, JUNE 30,
1997 1998 1999 1999
------- ------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 1,789 $ 7,617 $ 8,622
Short-term investments............................... -- -- 3,495
Trade accounts receivable, net of allowance for
doubtful accounts of $75 in 1997, $175 in 1998 and
$115 in 1999...................................... 1,124 4,194 4,120
Other current assets................................. 101 443 250
------- ------- -------
Total current assets......................... 3,014 12,254 16,487
Property and equipment, net............................ 237 483 1,478
Other assets........................................... 9 758 595
------- ------- -------
Total assets................................. $ 3,260 $13,495 $18,560
======= ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................................... $ 188 $ 595 $ 763
Accrued liabilities.................................. 347 2,190 1,343
Advances from stockholders........................... 69 -- --
Equipment line of credit, current portion............ -- -- 111
Deferred revenue..................................... 670 3,350 8,009
------- ------- -------
Total current liabilities.................... 1,274 6,135 10,226
Equipment line of credit, less current portion......... -- -- 889
------- ------- -------
Total liabilities............................ 1,274 6,135 11,115
------- ------- -------
Commitments (Note 4)
Stockholders' Equity:
Preferred stock; $0.001 par value; authorized: 8,154
shares; issued and outstanding: 4,128 shares in
1997, 8,033 shares in 1998, 8,033 shares in 1999
and zero shares pro forma (Liquidation value:
$11,207).......................................... 4 8 8 $ --
Common stock, $0.001 par value; authorized:
20,000,000 shares; issued and outstanding: 6,516
shares in 1997, 8,198 shares in 1998, 8,745 shares
in 1999 and 16,778 shares pro forma............... 6 7 8 16
Additional paid-in capital........................... 6,810 15,679 20,100 20,100
Deferred stock-based compensation.................... (482) (770) (3,047) (3,047)
Notes receivable for common stock.................... -- (372) (498) (498)
Accumulated deficit.................................. (4,352) (7,192) (9,126) (9,126)
------- ------- ------- -------
Total stockholders' equity................... 1,986 7,360 7,445 $ 7,445
------- ------- ------- -------
Total liabilities and stockholders' equity... $ 3,260 $13,495 $18,560
======= ======= =======
</TABLE>

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

F-3
<PAGE> 77

IMANAGE, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTH PERIOD
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------- ----------------------
1996 1997 1998 1998 1999
------ ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses............................ $ 70 $ 1,172 $ 6,509 $ 1,849 $ 6,159
Support and services................ 4 358 1,232 384 1,715
------ ------- ------- ------- -------
Total revenues................... 74 1,530 7,741 2,233 7,874
------ ------- ------- ------- -------
Cost of revenues:
Licenses............................ 4 136 414 150 327
Support and services................ 38 163 1,213 499 1,173
------ ------- ------- ------- -------
Total cost of revenues........... 42 299 1,627 649 1,500
------ ------- ------- ------- -------
Gross profit.......................... 32 1,231 6,114 1,584 6,374
Operating expenses:
Sales and marketing................. 335 1,120 4,393 1,798 3,677
Research and development............ 113 935 2,351 1,058 1,884
General and administrative.......... 272 706 1,295 577 938
Stock-based compensation............ -- 2,079 1,054 422 1,991
------ ------- ------- ------- -------
Total operating expenses......... 720 4,840 9,093 3,855 8,490
------ ------- ------- ------- -------
Loss from operations.................. (688) (3,609) (2,979) (2,271) (2,116)
Interest income....................... -- 22 153 39 204
Interest expense...................... (4) (9) (14) (5) (18)
------ ------- ------- ------- -------
Loss before provision for income
taxes............................... (692) (3,596) (2,840) (2,237) (1,930)
------ ------- ------- ------- -------
Provision for income taxes............ -- -- -- -- 4
------ ------- ------- ------- -------
Net loss.............................. $ (692) $(3,596) $(2,840) $(2,237) $(1,934)
====== ======= ======= ======= =======
Net loss per share -- basic and
diluted............................. $(0.12) $ (0.57) $ (0.38) $ (0.31) $ (0.24)
====== ======= ======= ======= =======
Shares used in net loss per
share -- basic and diluted.......... 6,004 6,292 7,455 7,227 8,102
====== ======= ======= ======= =======
Pro forma net loss per share -- basic
and diluted (unaudited)............. $ (0.21) $ (0.12)
======= =======
Shares used in pro forma net loss per
share -- basic and diluted
(unaudited)......................... 13,489 16,135
======= =======
</TABLE>

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

F-4
<PAGE> 78

iMANAGE, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
NOTES
RECEIVABLE
PREFERRED STOCK COMMON STOCK ADDITIONAL DEFERRED FOR
--------------- --------------- PAID-IN STOCK-BASED COMMON ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION STOCK DEFICIT TOTAL
------ ------ ------ ------ ---------- ------------ ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, January 1, 1996.... -- $ -- 6,000 $ 6 $ 75 $ -- $ -- $ (64) $ 17
Issuance of Series A
preferred stock, net of
issuance costs of $5....... 886 1 -- -- 624 -- -- -- 625
Issuance of common stock..... -- -- 291 -- 20 -- -- -- 20
Capital contributed from
stockholders............... -- -- -- -- 120 -- -- -- 120
Net loss..................... -- -- -- -- -- -- -- (692) (692)
----- ---- ----- --- ------- ------- ----- ------- -------
Balances, December 31,
1996....................... 886 1 6,291 6 839 -- -- (756) 90
Issuance of Series A
preferred stock, net of
issuance costs of $17...... 1,968 2 -- -- 1,377 -- -- -- 1,379
Issuance of Series B
preferred stock, net of
issuance costs of $11...... 1,274 1 -- -- 1,988 -- -- -- 1,989
Exercise of common stock
options.................... -- -- 225 -- 45 -- -- -- 45
Options issued in exchange
for services............... -- -- -- -- 47 -- -- -- 47
Deferred stock-based
compensation............... -- -- -- -- 2,514 (2,514) -- -- --
Amortization of deferred
stock-based compensation... -- -- -- -- -- 1,951 -- -- 1,951
Amortization of non-employee
stock-based compensation... -- -- -- -- -- 81 -- -- 81
Net loss..................... -- -- -- -- -- -- -- (3,596) (3,596)
----- ---- ----- --- ------- ------- ----- ------- -------
Balances, December 31,
1997....................... 4,128 4 6,516 6 6,810 (482) -- (4,352) 1,986
Issuance of Series B
Preferred Stock, net of
issuance costs of $17...... 1,926 2 -- -- 3,005 -- -- -- 3,007
Issuance of Series C
preferred stock, net of
issuance costs of $4....... 1,879 2 -- -- 3,941 -- -- -- 3,943
Issuance of Series C
preferred stock to prepay
rent....................... 100 -- -- -- 210 -- -- -- 210
Exercise of common stock
options.................... -- -- 1,682 1 371 -- (372) -- --
Options issued in exchange
for services............... -- -- -- -- 89 -- -- -- 89
Deferred stock-based
compensation............... -- -- -- -- 1,253 (1,253) -- -- --
Amortization of deferred
stock-based compensation... -- -- -- -- -- 866 -- -- 866
Amortization of non-employee
stock-based compensation... -- -- -- -- -- 99 -- -- 99
Net loss..................... -- -- -- -- -- -- -- (2,840) (2,840)
----- ---- ----- --- ------- ------- ----- ------- -------
Balances, December 31,
1998....................... 8,033 8 8,198 7 15,679 (770) (372) (7,192) 7,360
Exercise of common stock
options.................... -- -- 547 1 153 -- (126) -- 28
Options issued in exchange
for services............... -- -- -- -- 208 -- -- -- 208
Deferred stock-based
compensation............... -- -- -- -- 4,060 (4,060) -- -- --
Amortization of deferred
stock-based compensation... -- -- -- -- -- 1,760 -- -- 1,760
Amortization of non-employee
stock-based compensation... -- -- -- -- -- 23 -- -- 23
Net loss..................... -- -- -- -- -- -- -- (1,934) (1,934)
----- ---- ----- --- ------- ------- ----- ------- -------
Balances, June 30, 1999...... 8,033 $ 8 8,745 $ 8 $20,100 $(3,047) $(498) $(9,126) $ 7,445
===== ==== ===== === ======= ======= ===== ======= =======
</TABLE>

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

F-5
<PAGE> 79

IMANAGE, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ---------------------
1996 1997 1998 1998 1999
----- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................. $(692) $(3,596) $(2,840) $(2,237) $(1,934)
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Depreciation and amortization.......... 19 61 313 71 300
Amortization of prepaid rent........... -- -- 12 -- 180
Amortization of deferred stock-based
compensation......................... -- 2,032 965 422 1,783
Stock issued for services.............. -- 47 89 -- 208
Provision for doubtful accounts........ 10 65 100 50 --
Changes in operating assets and
liabilities:
Trade accounts receivable............ (79) (1,170) (3,195) (2,113) 74
Accounts payable..................... 178 6 407 229 168
Accrued liabilities.................. 80 284 1,868 647 (847)
Deferred revenue..................... 81 589 2,680 1,787 4,659
Other assets......................... (9) (99) (1,021) (12) 105
----- ------- ------- ------- -------
Net cash (used in) provided by
operating activities............ (412) (1,781) (622) (1,156) 4,696
----- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITY:
Purchase of property and equipment........ (59) (192) (431) (248) (1,224)
Purchase of short-term investments........ -- -- -- -- (3,495)
----- ------- ------- ------- -------
Net cash used in investing
activity........................ (59) (192) (431) (248) (4,719)
----- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) advances and
loans from stockholders................ 55 (10) (69) -- --
Proceeds from equipment line of credit.... -- -- -- -- 1,000
Contributed capital....................... 120 -- -- -- --
Issuance of common stock, net............. 20 45 -- -- 28
Issuance of preferred stock, net.......... 625 3,368 6,950 1,399 --
----- ------- ------- ------- -------
Net cash provided by financing
activities...................... 820 3,403 6,881 1,399 1,028
----- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents............................... 349 1,430 5,828 (5) 1,005
Cash and cash equivalents at beginning of
period.................................... 10 359 1,789 1,789 7,617
----- ------- ------- ------- -------
Cash and cash equivalents at end of
period.................................... $ 359 $ 1,789 $ 7,617 $ 1,784 $ 8,622
===== ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest.................... $ -- $ 2 $ 17 $ 4 $ 17
===== ======= ======= ======= =======
Cash paid for income taxes................ $ $ 3 $ 2 $ 1 $ 42
===== ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURES OF NONCASH
FINANCING ACTIVITIES:
Issuance of common stock in exchange for
notes receivable....................... $ -- $ -- $ 372 $ 300 $ 126
===== ======= ======= ======= =======
Issuance of Series C preferred stock to
prepay rent............................ $ -- $ -- $ 210 $ -- $ --
===== ======= ======= ======= =======
Deferred stock based compensation......... $ -- $ 2,514 $ 1,253 $ 394 $ 4,060
===== ======= ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 80

IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION AND NATURE OF OPERATIONS:

NATURE OF OPERATIONS

iManage, Inc. (formerly NetRight Technologies, Inc.) (the "Company")
supplies e-business content and collaboration management software that provides
organizations with an web-based unified content platform that enables them to
manage, organize and deliver information in a centralized manner throughout the
extended enterprise. The Company markets and sells its software and services
primarily through its direct sales organization, resellers and system
integrators in the United States and Canada and through distributors in the
United Kingdom and Australia. In 1996, 1997, 1998 and the six month period ended
June 30, 1999, 87%, 58%, 55% and 81% of revenues, respectively, were through
resellers. The Company's license and support and services revenues to date have
substantially been derived from the sale of iManage's suite of products,
including iManage e-business Server, iManage iForm and iManage iSync, to
customers primarily located in the United States.

NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

UNAUDITED INTERIM RESULTS

The accompanying interim financial statements for the six month period
ended June 30, 1998, together with the related notes, are unaudited. The
unaudited interim financial statements have been prepared on the same basis as
the financial statements for 1996, 1997 and 1998 and the six month period ended
June 30, 1999 and, in the opinion of management, reflect all adjustments, which
include only normal recurring adjustments, necessary to present fairly the
Company's results of operations and its cash flows for the six month period
ended June 30, 1998.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FINANCIAL INSTRUMENTS

Cash equivalents represent commercial paper, money market funds, cash and
time deposits with original or remaining maturities at the date of purchase of
three months or less. The carrying amounts reported for cash and cash
equivalents are considered to approximate fair values based upon the short
maturities of those financial instruments.

Short-term investments are classified as available for sale and have
maturities of one year or less as of the date of the balance sheet. The carrying
amount of the Company's short term investments, which comprise commercial paper
and corporate debt obligations, approximates fair value. Realized gains and
losses on short-term investments are calculated using the specific
identification method. Realized gains and losses in the six month period ended
June 30, 1999 and unrealized holding gains and losses at June 30, 1999 were not
significant.

F-7
<PAGE> 81
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The carrying amounts of certain of the Company's other financial
instruments including accounts receivable, accounts payable and accrued expenses
approximate fair value due to their short maturities. The carrying amounts of
notes payable under the equipment line of credit approximates fair value based
on the terms of similar borrowing arrangements available to the Company.

CERTAIN RISKS AND CONCENTRATIONS

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents,
short-term investments and accounts receivable. The Company maintains
substantially all of its cash and cash equivalent balances and short-term
investments with two major financial institutions domiciled in the United
States. The Company performs ongoing credit evaluations of its customers,
generally does not require collateral of its customers and maintains allowances
for potential credit losses.

Three customers accounted for 40% of trade accounts receivable at December
31, 1997. Two different customers accounted for 33% of trade accounts receivable
at December 31, 1998. A sixth customer accounted for 12% of trade accounts
receivable at June 30, 1999. Four customers accounted for 67% of the Company's
total revenues for 1996. There were no customers that accounted for more than
10% of revenues for 1997 and 1998 or for the six month period ended June 30,
1999, respectively. Additionally, 58%, 84%, 89% and 95% of the Company's
revenues for the years ended December 31, 1996, 1997 and 1998 and the six month
period ended June 30, 1999 were derived from law firms.

The Company relies on software licensed from third parties, including
software that is integrated with internally developed software and used in the
Company's products to perform key functions. The functionality of the Company's
products, therefore, depends on its ability to integrate these third party
technologies into its products.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and depreciated using the
straight-line method over estimated useful lives of three years. Depreciation
for leasehold improvements is recorded using the straight-line method over the
lesser of the estimated useful lives of the assets or the lease term, generally
three years. Upon sale or retirement of assets, cost and related accumulated
depreciation are removed from the balance sheet and the resulting gain or loss
is reflected in operations.

LONG-LIVED ASSETS

The Company reviews property and equipment for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability is measured by comparison of its carrying
amount to future net cash flows the assets are expected to generate. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
projected discounted future cash flows arising from the asset.

F-8
<PAGE> 82
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

SOFTWARE DEVELOPMENT COSTS

Costs related to research and development of new software products are
charged to research and development expenses as incurred. Software development
costs are capitalized beginning when a product's technological feasibility has
been established, which to date has been when the Company has a working model of
the software, and ending, when a product is available for general release to
customers. Substantially all development costs are incurred prior to
establishing a working model. As a result, the Company has not capitalized any
software development costs since such costs have not been significant.

REVENUE RECOGNITION

The Company's revenues are derived from two sources as follows: (i)
software license revenue, derived primarily from product sales on a per server
and per user basis, including software modules, to end users, resellers, systems
integrators and distributors and (ii) support and services revenue, derived
primarily from providing customer support and software updates and training and
consulting services to end users. The Company adopted the provisions of
Statement of Position 97-2, or SOP 97-2, "Software Revenue Recognition," as
amended by Statement of Position 98-4, "Deferral of the Effective Date of
Certain Provisions of SOP 97-2," effective January 1, 1998. SOP 97-2 supersedes
Statement of Position 91-1, "Software Revenue Recognition," and delineates the
accounting for software license and support and services revenues. Under SOP
97-2, the Company recognizes license revenues upon shipment of a product master,
which allows the customer to make the number of copies specified in the contract
if a signed contract exists, the fee is fixed and determinable, collection of
resulting receivables is probable and product returns are reasonably estimable
and, if applicable, acceptance criteria have been met. Provisions for estimated
warranty costs and sales returns are recorded at the time of shipment.

For contracts with multiple obligations (e.g. deliverable and undeliverable
products, support and other services), the Company allocates revenues to the
undelivered element of the contract based on objective evidence of its fair
value, which is specific to the Company. The Company generally does not allow
the right of return but has accepted returns in isolated instances when
resellers, system integrators and distributors have incorrectly ordered product.
The Company recognizes revenues allocated to undelivered products when the
criteria for license revenues set forth above are met. The Company recognizes
support and services revenues, including amounts allocated from contracts with
multiple obligations and for ongoing customer support, ratably over the period
of the support contract. The Company's support and service arrangements entitle
customers to telephone support and unspecified upgrades and enhancements.
Payments for support and services are generally made in advance and are
non-refundable. For revenues allocated to training and consulting services or
derived from the separate sales of these services, the Company recognizes
revenues as the related services are performed.

Through 1997, the Company recognized license revenues upon shipment if
remaining obligations were insignificant, collection of the resulting receivable
was probable and if applicable, acceptance criteria were met. Provisions for
estimated warranty costs, estimated sales returns and insignificant vendor
obligations were recorded at the time products were shipped. Service and support
revenues, including revenues allocated from contracts including software
licenses, were recognized ratably over the period of the service and support
agreements. Training and consulting revenues were recognized as the related
services were performed.

F-9
<PAGE> 83
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

As of June 30, 1999, deferred revenue included advance payments received
for support and services and license revenues received or due under the terms of
the contracts for which customer acceptance had not been received or vendor
specific objective evidence was not available for elements of the contracts.

INCOME TAXES

Income taxes are accounted for using the liability method under which
deferred tax assets and liabilities are determined based on differences between
the financial statement and tax bases of assets and liabilities using enacted
tax rates in effect for the period in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.

From October 10, 1995 to December 26, 1996, the Company was organized as a
S corporation, which is a conduit entity for income tax purposes. Subsequent to
December 26, 1996, the Company was organized as a C corporation and was
therefore liable for income taxes.

STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation using the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25 or APB 25,
"Accounting for Stock Issued to Employees" and has elected to adopt the
disclosure-only provisions of Statement of Financial Accounting Standards No.
123, or SFAS 123, "Accounting for Stock-Based Compensation."

ADVERTISING

The Company expenses advertising costs as incurred. During 1996, 1997 and
1998 and the six month period ended June 30, 1999, the Company incurred $83,000,
$88,000, $286,000 and $301,000 of advertising cost.

SEGMENTS

Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, or SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company operates in one disclosable
segment, using one measurement of profitability for its business. Although the
Company has sales outside the United States, such sales are not significant. All
long-lived assets are maintained in the United States.

COMPREHENSIVE INCOME

Comprehensive income is defined as the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. There were no differences between net loss for 1996,
1997 and 1998 and the six month period ended June 30, 1998 and 1999 and
comprehensive loss for each of these periods.

F-10
<PAGE> 84
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

INTERNAL USE SOFTWARE COSTS

Effective January 1, 1999, the Company adopted Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." Through June 30, 1999, the Company has not incurred any costs
which would be required to be capitalized under the provisions of this standard.

START-UP COSTS

Effective January 1, 1999, the Company adopted the provisions of Statement
of Position 98-5, or SOP 98-5, "Reporting on the Costs of Start-Up Activities."
The adoption of SOP 98-5 had no impact on the Company's financial statements as
the Company has expensed all costs of start-up activities and organizational
costs as incurred.

NET LOSS PER SHARE

Basic net loss per share is computed based on the weighted average number
of shares outstanding during the period. Diluted net loss per share is also
computed based on the weighted average number of shares outstanding during the
period. Diluted net loss per share does not include the weighted average effect
of dilutive potential common shares including convertible preferred stock,
options to purchase common stock and common stock subject to repurchase in any
period presented because the effect is antidilutive.

The following table presents information necessary to reconcile basic and
diluted net loss per common and common equivalent share (in thousands):

<TABLE>
<CAPTION>
SIX MONTH PERIOD
ENDED JUNE 30,
---------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss............................... $ (692) $(3,596) $(2,840) $(2,237) $(1,934)
Shares used in net loss per
share -- basic and diluted........... 6,004 6,292 7,455 7,227 8,102
------- ------- ------- ------- -------
Net loss per share -- basic and
diluted.............................. $ (0.12) $ (0.57) $ (0.38) $ (0.31) $ (0.24)
======= ======= ======= ======= =======
Anti-Dilutive Securities:
Convertible preferred stock.......... 12 2,074 6,034 5,009 8,033
Options to purchase common stock..... -- 261 1,154 1,036 1,720
Common stock subject to repurchase... -- 2 458 532 360
------- ------- ------- ------- -------
12 2,337 7,646 6,577 10,113
======= ======= ======= ======= =======
</TABLE>

PRO FORMA NET LOSS PER SHARE AND PRO FORMA STOCKHOLDERS' EQUITY (UNAUDITED)

Pro forma basic and diluted net loss per common share has been computed as
described above and also gives effect to weighted average common equivalent
shares from preferred stock that will automatically convert upon the closing of
the Company's initial public offering using the as-if-converted method for 1998
and the six month period ended June 30, 1999.

F-11
<PAGE> 85
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

A reconciliation of the numerator and denominator used in the calculation
of pro forma basic and diluted net loss per common share follows (in thousands
except per share data):

<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED
JUNE 30,
1998 1999
------- ------------
<S> <C> <C>
Net loss.................................................... $(2,840) $(1,934)
------- -------
Shares used in net loss per common share, basic and
diluted................................................... 7,455 8,102
Adjustments to reflect the effect of the assumed conversion
of the preferred stock.................................... 6,034 8,033
------- -------
Shares used in pro forma net loss per common share, basic
and diluted............................................... 13,489 16,135
------- -------
Pro forma net loss per common share, basic and diluted...... $ (0.21) $ (0.12)
======= =======
</TABLE>

If the offering contemplated by this prospectus is consummated, all of the
convertible preferred stock outstanding as of the closing date will
automatically be converted into an aggregate of approximately 8,033,000 shares
of common stock, based on the shares of convertible preferred stock outstanding
at June 30, 1999. Unaudited pro forma stockholders' equity at June 30, 1999, as
adjusted for the conversion of convertible preferred stock, is disclosed on the
balance sheet.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 1998, AcSEC released Statement of Position 98-9 or SOP 98-9,
Modification of SOP 97-2, "Software Revenue Recognition." SOP 98-9 amends SOP
97-2 to require that an entity recognize revenue for multiple element
arrangements by means of the "residual method" when (1) there is no
vendor-specific objective evidence ("VSOE") of the fair values of all the
undelivered elements that are not accounted for by means of long-term contract
accounting, (2) VSOE of fair value does not exist for one or more of the
delivered elements, and (3) all revenue recognition criteria of SOP 97-2 (other
than the requirement for VSOE of the fair value of each delivered element) are
satisfied. The provisions of SOP No. 98-9 that extend the deferral of certain
paragraphs of SOP 97-2 became effective December 15, 1998. These paragraphs of
SOP 97-2 and SOP 98-9 will be effective for transactions that are entered into
in fiscal years beginning after March 15, 1999. Retroactive application is
prohibited. The Company is currently evaluating the impact of the requirements
of SOP 98-9 and the effects, if any, on its current revenue recognition
policies.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, or SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes new standards of
accounting and reporting for derivative instruments and hedging activities. SFAS
133 requires that all derivatives be recognized at fair value in the statement
of financial position, and that the corresponding gains or losses be reported
either in the statement of operations or as a component of comprehensive income,
depending on the type of hedging relationship that exists. In July, 1999, the
Financial Accounting Standard Boards issued SFAS No. 137, or "SFAS 137,"
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of the
Effective Date of SFAS No. 133." SFAS 137 deferred the effective date of SFAS
133 until the first fiscal quarter beginning after June 15, 2000. The Company
does not currently hold derivative instruments or engage in hedging activities.
The Company is continuing to

F-12
<PAGE> 86
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

evaluate the impact of the requirements of SFAS No. 133 and SFAS No. 137 will
have on its financial statements and related disclosures.

NOTE 3 -- BALANCE SHEET ACCOUNTS:

FINANCIAL INSTRUMENTS:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------- JUNE 30,
1997 1998 1999
-------------------- -------------------- --------------------
COST FAIR VALUE COST FAIR VALUE COST FAIR VALUE
------ ----------- ------ ----------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
CASH AND CASH EQUIVALENTS
Cash.............................. $ -- $ -- $ 57 $ 57 $ 352 $ 352
Time deposits..................... 1,789 1,789 4,842 4,842 450 450
Money market...................... -- -- 2,718 2,718 332 332
Commercial paper.................. -- -- -- -- 7,488 7,488
------ ------ ------ ------ ------ ------
$1,789 $1,789 $7,617 $7,617 $8,622 $8,622
====== ====== ====== ====== ====== ======
SHORT-TERM INVESTMENTS
Federal government obligations.... $ -- $ -- $ -- $ -- $ 984 $ 984
Commercial paper.................. -- -- -- -- 2,511 2,511
------ ------ ------ ------ ------ ------
$ -- $ -- $ -- $ -- $3,495 $3,495
====== ====== ====== ====== ====== ======
</TABLE>

PROPERTY AND EQUIPMENT, NET:

<TABLE>
<CAPTION>
DECEMBER 31,
------------ JUNE 30,
1997 1998 1999
---- ---- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Furniture and fixtures...................................... $ 64 $198 $ 544
Computer software and equipment............................. 253 550 825
Leasehold improvements...................................... -- -- 603
---- ---- ------
317 748 1,972
Less accumulated depreciation............................... 80 265 494
---- ---- ------
$237 $483 $1,478
==== ==== ======
</TABLE>

Depreciation expense was $19,000, $60,000, $185,000 and $229,000 for 1996,
1997, 1998 and the six month period ended June 30, 1999, respectively.

F-13
<PAGE> 87
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

OTHER ASSETS:

<TABLE>
<CAPTION>
DECEMBER 31,
------------ JUNE 30,
1997 1998 1999
---- ---- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Technology licenses......................................... $-- $725 $725
Less accumulated amortization............................... -- (128) (199)
-- ---- ----
-- 597 526
-- ---- ----
Other assets................................................ 9 161 69
-- ---- ----
$9 $758 $595
== ==== ====
</TABLE>

In 1998, the Company entered into technology license agreements including
non-cancelable minimum payments. The present value of payments under these
agreements is recorded as an asset and amortized over the terms of the
agreements (generally three years) as the technological feasibility had been
established for the product, which included the technology.

ACCRUED LIABILITIES:

<TABLE>
<CAPTION>
DECEMBER 31,
-------------- JUNE 30,
1997 1998 1999
---- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C>
Technology licenses......................................... $ 50 $ 425 $ --
Payroll and related......................................... 198 1,276 1,102
Other....................................................... 99 489 241
---- ------ ------
$347 $2,190 $1,343
==== ====== ======
</TABLE>

NOTE 4 -- COMMITMENTS:

The Company leases its office facilities in San Mateo, California and
Chicago, Illinois under non-cancelable operating leases which expire on December
31, 2001 and April 30, 2004, respectively.

Under the terms of the San Mateo lease, the Company issued 100,000 shares
of series C preferred stock in lieu of future rental payments (see Note 6). In
addition, the lease has two one year options to extend upon six months written
notice to the landlord.

Under the terms of the Chicago lease, there is an option to extend the term
of the lease for 5 years.

F-14
<PAGE> 88
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Future minimum payments under the non-cancelable operating leases as of
June 30, 1999 are as follows (in thousands):

<TABLE>
<CAPTION>
OPERATING
---------
<S> <C>
Six Month Period Ending December 31, 1999................... $ 278
YEAR
2000...................................................... 546
2001...................................................... 567
2002...................................................... 145
2003...................................................... 153
and thereafter............................................ 425
------
$2,114
======
</TABLE>

Rent expense was $30,000, $111,000, $216,000 and $326,000 for 1996, 1997
and 1998 and the six month period ended June 30, 1999, respectively. See Note 8
for sublease income received.

NOTE 5 -- LINE OF CREDIT AGREEMENT:

In March 1999, the Company entered into a line of credit agreement with a
bank, comprised of a revolving line of credit and an equipment line of credit.
The line of credit agreement, which is collateralized by substantially all of
the Company's assets, intangible assets and intellectual property, includes
covenant restrictions requiring the Company to maintain certain minimum
financial ratios and profitability levels and limits the Company's ability to
declare and pay dividends. The Company was in violation of the profitability
covenant at June 30, 1999 and received a waiver from its bank.

The revolving line of credit provides for borrowings of up to $5,000,000,
which can be used at the discretion of the Company through March 31, 2000.
Borrowings are limited to the lesser of 80% of eligible accounts receivable or
$5,000,000 ($2,500,000 at June 30, 1999), bear interest at prime plus 0.25%
(8.00% at June 30, 1999) and are due at March 31, 2000. At June 30, 1999, no
amounts have been drawn against this facility.

The equipment line of credit, which bears interest at prime plus 0.50%
(8.25% at June 30, 1999), provides for borrowings of up to $2,000,000 to finance
the Company's purchases of property and equipment. At June 30, 1999, $1,000,000
has been drawn against this facility, of which $111,000 is currently payable.
Principal repayment begins in February 2000 and continues through February 2002
in equal monthly installments of principal and interest. In July 1999, the
Company borrowed an additional $396,000 for equipment purchases.

Principal payments due under the facility as of June 30, 1999 are as
follows (in thousands):

<TABLE>
<S> <C>
SIX MONTH PERIOD ENDING DECEMBER 31, 1999................... $ --
YEAR ENDING DECEMBER 31,
2000...................................................... 306
2001...................................................... 333
2002...................................................... 333
2003...................................................... 28
------
$1,000
======
</TABLE>

F-15
<PAGE> 89
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 6 -- STOCKHOLDERS' EQUITY:

CONVERTIBLE PREFERRED STOCK

At June 30, 1999, the amounts, terms and value of series A convertible
("series A"), series B convertible ("series B") and series C convertible
("series C") preferred stock are as follows (in thousands):

<TABLE>
<CAPTION>
COMMON
STOCK
ISSUED AND NET RESERVED FOR
SERIES AUTHORIZED OUTSTANDING PROCEEDS CONVERSION
------ ---------- ----------- -------- ------------
<S> <C> <C> <C> <C>
A....................... 2,853 2,854 $ 2,004 2,854
B....................... 3,200 3,200 4,996 3,200
C....................... 2,100 1,979 4,153 1,979
----- ----- ------- -----
8,154 8,033 $11,153 8,033
===== ===== ======= =====
</TABLE>

Other rights, privileges and preferences of series A, series B and series C
preferred stock are as follows:

VOTING RIGHTS

Holders of series A, series B and series C preferred stock are entitled to
one vote for each share of common stock into which each share of preferred stock
could be converted. The holders of the outstanding shares of series A, series B
and series C preferred stock shall vote with the holders of the common stock
upon the election of directors. The consent of the holders of a majority of the
preferred stock, voting together as a single class, shall be required for any
action that (i) amends or repeals any provision of the Company's Certificate of
Incorporation if such action would materially and adversely change the rights,
preferences or privileges of a class of preferred stock; (ii) authorizes or
issues shares of any class of stock having any preference or priority as to
dividends or assets superior to or on a parity with a class of the preferred
stock; (iii) pays or declares any dividends on any junior securities; (iv)
authorizes a merger, sale of substantially all the assets of the Company,
recapitalization or reorganization of the Company.

DIVIDENDS

The holders of series A, series B and series C preferred stock are entitled
to receive noncumulative dividends as and when declared by the Board of
Directors, prior and in preference to any declaration or payment of any dividend
on the common stock of the Company. The dividends shall be at the rate of 10% of
the series A, series B and series C preferred stock per share liquidation
preference per annum. No dividends have been declared as of June 30, 1999.

CONVERSION RIGHTS

Shares of series A, series B and series C preferred stock are convertible
into common stock at the option of the holder, or automatically upon a public
offering with proceeds of at least $12,000,000 and at an offering price of at
least $5.00 per share, or upon the election of the holders of a majority of the
then outstanding shares of series A, series B and series C preferred stock
voting together or

F-16
<PAGE> 90
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

separately as a class. Each share of preferred stock shall be convertible into
the number of fully paid and non-assessable shares of common stock, which
results from dividing the purchase price per share for each series of preferred
stock into the per share conversion price applicable to each series at the time
of conversion. The conversion price per share is subject to adjustments for the
issuance of additional shares to other than employees, contractors or members of
the Board of Directors at a price less than the conversion price. The purchase
price and initial conversion price per share of series A, series B and series C
preferred stock is $0.71, $1.57 and $2.10, respectively. As of June 30, 1999,
each outstanding share of preferred stock is convertible into one share of
common stock.

LIQUIDATION

In the event of liquidation or sale of the Company, holders of shares of
series A, series B and series C preferred stock are entitled to receive in
preference over common stockholders, an amount of $0.71, $1.57 and $2.10, per
share, respectively, including any declared but unpaid dividends. After the
payment of the applicable liquidation preference to the holders of the series A,
series B and series C preferred stock, the remaining assets are to be
distributed to the holders of series A and series C preferred and common stock,
until the series A preferred stockholders have received an additional amount
equal to $1.42 per share and the series C preferred stockholders have received
an additional amount equal to $1.05 per share. Thereafter, any remaining assets
shall be distributed ratably to the holders of common stock.

OTHER RIGHTS

The holders of series A, series B and series C preferred stock have certain
piggy-back and demand registration rights which terminate six years after an
initial public offering by the Company. The holders of preferred stock have the
right in the event the Company proposes to offer equity securities to any person
to purchase a portion of the shares so as to maintain their percentage ownership
of preferred stock. The holders of preferred stock also have the right of first
refusal on a pro rata basis with respect to sales by the founders of shares of
the Company's common stock. These rights terminate upon an initial public
offering by the Company.

ISSUANCE OF PREFERRED STOCK IN EXCHANGE FOR RENT

In November 1998, the Company issued 100,000 shares of series C preferred
stock in conjunction with an office lease agreement. The Company determined the
fair value of the stock was $210,000, which was the price paid per share by the
third party investors for the series C preferred stock in November 1998
multiplied by the number of shares issued. This amount has been recorded as
prepaid rent and is being amortized on a straight-line basis over the term of
the lease. As of June 30, 1999, approximately $32,000 representing the
unamortized portion of prepaid rent, is included in other current assets.

COMMON STOCK

Each share of common stock has the right to one vote. The holders of common
stock are also entitled to receive dividends whenever funds are legally
available and when declared by the Board of Directors, subject to prior rights
of holders of all classes of stock outstanding having priority rights as

F-17
<PAGE> 91
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

to dividends. No dividends have been declared or paid on the Company's common
stock as of June 30, 1999.

At December 31, 1997 and 1998 and June 30, 1999, 150,000, 428,000 and
368,000 outstanding shares of common stock were subject to the Company's right
of repurchase at the shares original issuance price, respectively. Weighted
average original issuance price of these shares was $0.20 per share and the
Company's right to repurchase these shares lapses ratably over periods through
September 2003.

STOCK OPTION PLAN

The Company has reserved 5,000,000 shares of common stock for issuance
under the 1997 Stock Incentive Plan (the "Plan"). Under the Plan, the Board of
Directors may issue incentive stock options to employees and nonqualified stock
options to consultants or nonemployee directors of the Company, and stock
purchase rights to employees or nonemployee directors of, or consultants to, the
Company. The Board of Directors has the authority to determine to whom options
will be granted, the number of shares, the term and exercise price, which cannot
be less than fair market value at date of grant for incentive stock options or
85% of fair market value for nonqualified stock options. If an employee owns
stock representing more than 10% of the outstanding shares, the price of each
share shall be at least 110% of fair market value, as determined by the Board of
Directors. The options vest and are exercisable at times and increments as
specified by the Board of Directors, and expire ten years from date of grant.
Options granted under the Plan generally vest and become exercisable 25% one
year after the date of the optionholders' date of employment and thereafter
ratably over three years.

Activity under the Plan does not include options to purchase 180,000 shares
of common stock granted outside the plan in 1998 and is as follows (in
thousands, except per share data):

<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
------------------------------------
WEIGHTED
SHARES AVERAGE
AVAILABLE NUMBER OF EXERCISE EXERCISE
FOR GRANT SHARES PRICE PRICE
--------- --------- ------------- --------
<S> <C> <C> <C> <C>
Shares reserved at plan inception.............. 3,600
Options granted................................ (2,401) 2,401 $ 0.20 $0.20
Options exercised.............................. (225) 0.20 0.20
Options canceled............................... 2 (2) 0.20 0.20
------ ------
Balances, December 31, 1997.................... 1,201 2,174 0.20 $0.20
Additional shares reserved..................... 400 -- -- --
Options granted................................ (967) 967 0.30 - 0.40 0.32
Options exercised.............................. -- (1,502) 0.20 0.20
Options canceled............................... 19 (19) 0.20 - 0.30 0.28
------ ------
Balances, December 31, 1998.................... 653 1,620 0.20 - 0.40 $0.27
Additional shares reserved..................... 1,000 -- -- --
Options granted................................ (828) 828 0.60 - 1.65 0.99
Options exercised.............................. -- (547) 0.20 - 0.60 0.28
Options canceled............................... 6 (6) 0.40 - 0.60 0.47
------ ------
Balances, June 30, 1999........................ 831 1,895 $0.20 - $1.65 $0.58
------ ------
</TABLE>

F-18
<PAGE> 92
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The options outstanding and currently exercisable by exercise price at June
30, 1999 are as follows:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS CURRENTLY
- ----------------------------------------------------- EXERCISABLE
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
NUMBER OF REMAINING AVERAGE AVERAGE
EXERCISE SHARES CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE IN YEARS PRICE EXERCISABLE PRICE
- ------------- ----------- ------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.20 - $0.30 938,000 8.5 $0.25 525,000 $0.24
$0.40 155,000 9.3 $0.40 20,000 $0.40
$0.60 274,000 9.6 $0.60 37,000 $0.60
$0.90 302,000 9.8 $0.90 -- $0.90
$1.50 - $1.65 226,000 9.9 $1.62 96,000 $1.63
--------- -------
1,895,000 9.1 $0.58 678,000 $0.46
========= =======
</TABLE>

At December 31, 1997 and 1998, options to purchase 1,152,000 and 775,000
shares of the Company's common stock, respectively, were exercisable at weighted
average exercise prices of $0.20 and $0.24 per share, respectively.

During 1998, the Company granted options to purchase 180,000 shares of the
Company's common stock at an exercise price of $0.40 per share to an officer of
the Company, which were issued outside the terms of the Plan and were
immediately exercisable. The weighted average fair value of these options was
$1.80 per common stock option. Shares issued upon exercise of these options,
however, are subject to the Company's right of repurchase, which lapse as to 25%
of the shares one and two years from the date of grant for 150,000 and 30,000
shares, respectively and thereafter, ratably over three years. The options
expire ten years from the date of grant. During 1998 and as permitted by the
option agreement, these options were exercised in exchange for a full recourse
note receivable from the officer totaling $72,000 due November 12, 2002. In
addition, two other employees exercised options issued under the Plan to
purchase 1,500,000 shares of the Company's common stock at $0.20 per share in
exchange for full recourse notes receivable totaling $300,000 in equal
installments through September 1, 2001. These notes receivable bear interest at
4.5% to 4.83% per annum.

STOCK-BASED COMPENSATION

The Company has adopted the disclosure only provision of SFAS 123. Had
compensation cost been determined for options issued under the Plan and outside
the Plan based on the fair value of the options at the grant date for awards in
1997 and 1998 and the six month period ended June 30, 1999

F-19
<PAGE> 93
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

consistent with the provisions of SFAS 123, the Company's net loss would have
been increased to the pro forma amounts indicated below (in thousands, except
per share amounts):

<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED
JUNE 30,
1997 1998 1999
------- ------- ------------
<S> <C> <C> <C>
Net loss:
As reported......................................... $(3,596) $(2,840) $(1,934)
======= ======= =======
Pro forma........................................... $(3,686) $(2,882) $(2,037)
======= ======= =======
Net loss per share -- basic and diluted as reported... $ (0.57) $ (0.38) $ (0.24)
======= ======= =======
Net loss per share -- basic and diluted pro-forma..... $ (0.59) $ (0.39) $ (0.25)
======= ======= =======
</TABLE>

As the provisions of SFAS 123 have only been applied to stock options
granted since the Plan's inception in 1997, the impact of the pro forma stock
compensation cost will likely continue to increase as the vesting period for the
Company's options and the period over which the stock compensation is charged to
expense is generally four to five years.

The estimated weighted average minimum value of options granted during
1997, 1998 and the six month period ended June 30, 1999 was $0.05, $0.06 and
$0.25 per share. The minimum value of each option grant is estimated on the date
of grant using the minimum value method with the following weighted-average
assumptions:

<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED
JUNE 30,
1997 1998 1999
-------- ---------- ------------
<S> <C> <C> <C>
Expected life of option............................. 5 years 5 years 5 years
Risk-free interest rate............................. 5.66% 4.96% 5.65%
Dividend yield...................................... 0% 0% 0%
</TABLE>

DEFERRED STOCK COMPENSATION

During 1997 and 1998 and the six month period ended June 30, 1999, the
Company issued options to purchase its common stock to certain employees
totaling 2,401,000, 967,000 and 828,000 , respectively under the Plan and
outside the Plan with weighted average exercise prices of $0.20, $0.32 and $0.99
per share, respectively, below the deemed fair value of the Company's common
stock at the date of grant. The weighted average fair value of the underlying
common stock was $1.26, $1.47 and $6.09 in 1997 and 1998, and the six month
period ended June 30, 1999, respectively. In accordance with the requirements of
APB 25, the Company has recorded deferred stock based compensation for the
difference between the exercise price of the stock options and the deemed fair
value of the Company's stock at the date of grant. This deferred compensation is
amortized to expense over the period during which the Company's right to
repurchase the stock lapses or options become exercisable, generally four or
five years consistent with the method described in FASB Interpretation No. 28.
At June 30, 1999, the Company had recorded deferred compensation related to
these options in an amount of $7,619,000, of which $1,951,000, $866,000 and
$1,760,000 had been amortized to expense during 1997 and 1998 and the six month
period ended June 30, 1999, respectively.

F-20
<PAGE> 94
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

Future compensation expense from options granted through June 30, 1999 is
estimated to be $1,121,000, $1,242,000, $505,000 and $167,000 for the remainder
of 1999, 2000, 2001 and 2002, respectively.

NOTE 7 -- INCOME TAXES:

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets are as followed (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
---------------- JUNE 30,
1997 1998 1999
----- ------- --------
<S> <C> <C> <C>
Net operating loss carryforwards........................... $ 521 $ 991 $ 670
Deferred compensation...................................... 53 140 259
Depreciation............................................... 5 64 68
Allowance for doubtful accounts............................ 47 87 97
Accrued liabilities........................................ 23 265 535
Research and development credit............................ 62 195 307
----- ------- -------
Total deferred tax assets.................................. 711 1,742 1,936
Less valuation allowance................................... (711) (1,742) (1,936)
----- ------- -------
Net deferred tax asset................................... $ -- $ -- $ --
===== ======= =======
</TABLE>

The valuation allowance increased by $683,000, $1,031,000 and $194,000 for
1997 and 1998 and the six month period ended June 30, 1999.

Due to uncertainty surrounding the realization of the favorable tax
attributes in future tax returns, the Company has placed a valuation allowance
against its deferred tax assets. At such time as it is determined that it is
more likely than not that the deferred tax assets are realizable, the valuation
allowance will be reduced.

The principal items accounting for the difference between income tax
benefit at the U.S. statutory rate and the provision for income taxes reflected
in the statement of operations are as follows:

<TABLE>
<CAPTION>
SIX MONTH
PERIOD
ENDED
JUNE 30,
1996 1997 1998 1999
---- ---- ---- ---------
<S> <C> <C> <C> <C>
Federal statutory rate................................. 34% 34% 34% 34%
State taxes............................................ 6 6 5 5
Tax credits............................................ -- 2 5 6
Other.................................................. -- -- 4 --
Deferred compensation.................................. -- (22) (12) (35)
Net operating losses and tax credits, not benefited.... (40) (20) (36) (10)
--- --- --- ---
--% --% --% --%
=== === === ===
</TABLE>

F-21
<PAGE> 95
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

The Company's provision for income taxes for the six month period ended
June 30, 1999 consists of $4,000 of currently payable state income taxes. The
tax provision is net of the benefit for the utilization of state and federal net
operating loss carryforwards of $344,000.

At June 30 1999, the Company has federal and state net operating loss
carryforwards of approximately $1,755,000 and $1,448,000 available to reduce
future taxable income, which expire through 2002 and 2018, respectively. In
addition, the Company has research and development tax credit carryforwards of
approximately $220,000 for federal income tax purposes and $130,000 for Illinois
purposes at June 30, 1999, which expire in 2012 to 2018.

Pursuant to the provisions of Section 382 of the Internal Revenue Code,
utilization of the NOLs are subject to annual limitations due to a greater than
50% change in the ownership of the Company which occurred during 1997 and 1998.

NOTE 8 -- RELATED PARTY TRANSACTIONS:

In 1995 and 1996, the Company borrowed a total of $29,000 from one of its
stockholders for working capital purposes at a 10% interest rate and received
advances from another stockholder totaling $50,000. Such notes and advances and
the related accrued interest were repaid $10,000 in 1997 and $69,000 in 1998.

One of the founders and shareholders of the Company is the owner of a
consulting company which subleased space to the Company and provided other
services including accounting and payroll assistance and employee recruitment in
1997 and 1998. In addition, Company reimbursed the consulting company for
certain travel expenses and janitorial services incurred on its behalf and for
the use of certain assets in 1997 and 1998.

In 1999, the Company subleased office space to this consulting company.
Additionally, the Company hired certain of the consulting company's consultants
to provide software development services in 1999.

Amounts included in net loss which were paid, received or due to or from
this related party are as follows (in thousands):

<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED
JUNE 30,
1996 1997 1998 1999
---- ---- ---- ------------
<S> <C> <C> <C> <C>
Sublease rent expense............................... $18 $ 45 $ 54 $ --
Sublease rent income................................ -- -- -- 42
Consulting and other service expense................ 70 284 467 420
</TABLE>

The total amounts of related party receivable and payables in other assets
and accounts payable at period end are as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------ JUNE 30,
1997 1998 1999
---- ---- --------
<S> <C> <C> <C>
Receivables................................................. $-- $-- $ 46
Payables.................................................... 27 -- 159
</TABLE>

F-22
<PAGE> 96
IMANAGE, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

NOTE 9 -- 401(k) PLAN

The Company sponsors an employee savings and retirement plan intended to
qualify under section 401(k) of the Internal Revenue Code. Eligible employees,
at least 21 years old and having completed 1 hour of service, may contribute up
to 20% of eligible compensation, subject to annual limitations, and are fully
vested in their own contributions. The Company is not permitted to make matching
contributions, but can make discretionary contributions. To date, no such
discretionary contributions have been made by the Company.

NOTE 10 -- SUBSEQUENT EVENTS

On August 30, 1999 the Board of Directors approved the initial public
offering of the Company's Common Stock resulting in gross proceeds of up to
$40,000,000. Additionally, the Board approved a change in the authorized shares
of common stock and preferred stock to 100,000,000 and 2,000,000, respectively.
This change is to be effective immediately prior to the effective date of the
contemplated public offering and after the anticipated conversion to common
stock of the outstanding preferred shares.

The Board also approved, subject to stockholder approval, an increase in
the number of authorized shares under the 1997 Stock Option Plan to 6,000,000,
with automatic annual increases beginning in 2001 of the lesser of (i) 1,200,000
shares, (ii) 5% of the outstanding common stock of the Company at the last day
of the preceding year, or (iii) a lesser amount as determined by the Board.
Additionally, automatic grants for non-employee directors were approved as
follows: (i) initial grants of options to purchase common shares to vest over
three years for any newly elected directors following the initial public
offering, and (ii) annual grants of options to purchase common stock to be
granted at the Company's annual meeting which will vest over one year.

Finally, the Board approved, subject to stockholder approval, the 1999
Employee Stock Purchase Plan ("Purchase Plan"). A total of 500,000 shares of
common stock has been reserved for issuance under the Purchase Plan, which is
subject to annual increases. The Purchase Plan allows for eligible employees to
purchase a limited number of shares of the Company's common stock at 85% of the
fair market value during certain plan-defined periods.

UNAUDITED SUBSEQUENT EVENT

In September 1999, the Company borrowed an additional $604,000 for
equipment purchases under the equipment line of credit.

F-23
<PAGE> 97
Description of Graphics

INSIDE FRONT COVER:

There is a large letter "i" centered in the middle of the page. To the right of
the letter "i" are the words "business," "information" and "commerce." The
word "iManage" appears on the bottom right corner of the page.

GATEFOLD:

On the left side of the page are the words "unified content." Below these words
is a circle which contains within it pictures of a telephone, a group of
people, a stack of documents and an envelope with the letter "e" coming out of
it. Around the circle are the words "voicemail," "new media," "collaboration,"
"documents," "faxes" and "e-mail." To the right of the circle are the words "on
demand," "scalable" and "e-business." To the right of these words are pictures
of multiple buildings. On top of each building is a circle which contains
within it pictures of a telephone, a group of people, a stack of documents and
an envelope with the letter "e" coming out of it. Each building is linked to
the other buildings next to it with a line.

INSIDE BACK COVER:

Centered on the top of the page are the words "E-Business Information
Commerce." Below these words are pictures of three different iManage screens.
The words "Web access to the e-business server via our user customizable portal
interface" are next to the first picture of an iManage screen. The words "Email
integration allows users to send URL 'links' and use rules to auto notify
subscribers about folder content changes" are next to the second picture of an
iManage screen. The words "Dedicated content authoring interface provides
online research integration and other tools to accelerate the production and
organization of new server content" are next to the third picture of an iManage
screen.
<PAGE> 98

SUBJECT TO COMPLETION, DATED OCTOBER 19, 1999.

LOGO

3,600,000 SHARES

COMMON STOCK

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

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING
ON PAGE 6.
-------------------------

-------------------------
ROBERTSON STEPHENS INTERNATIONAL
U.S. BANCORP PIPER JAFFRAY
C.E. UNTERBERG, TOWBIN

THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE> 99

UNDERWRITING

<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
----------------- ---------
<S> <C>
BancBoston Robertson Stephens Inc. .........................
U.S. Bancorp Piper Jaffray Inc..............................
C.E. Unterberg, Towbin......................................
E*TRADE Securities, Inc. ...................................
</TABLE>

<TABLE>
<CAPTION>
INTERNATIONAL UNDERWRITERS
--------------------------
<S> <C>
BancBoston Robertson Stephens International Ltd. ...........
U.S. Bancorp Piper Jaffray Inc. ............................
C.E. Unterberg, Towbin......................................
E*TRADE Securities, Inc. ...................................

Total....................................................... 3,600,000
=========
</TABLE>

Indemnification. The underwriting agreement contains covenants of indemnity
among the underwriters and us against specified civil liabilities, including
liabilities under the Securities Act and

69
<PAGE> 100

liabilities arising from breaches of representations and warranties contained in
the underwriting agreement.

Lock-Up Agreement. Each of our officers, directors and substantially all
security holders have agreed with the representatives and us, for a period of
180 days after the effective date of this prospectus, not to dispose of or hedge
any shares of common stock, or securities convertible into or exchangeable for
shares of common stock, now owned or later acquired by them without the prior
written consent of BancBoston Robertson Stephens. BancBoston Robertson Stephens
may, in its sole discretion and at any time without notice, release all or any
portion of the securities subject to lock-up agreements. All of the shares of
common stock subject to the lock-up agreements will be eligible for sale in the
public market upon the expiration of the lock-up agreements, subject to holding
period, volume limitations and other conditions of Rule 144.

The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.

No Prior Public Market. Before this offering, there has been no public
market for our common stock. Consequently, the initial public offering price for
the common stock in this offering has been determined through negotiations among
us and the representatives of the underwriters. The factors considered in these
negotiations included prevailing market conditions, our financial information,
the market valuation of other companies that we and the representatives believe
to be comparable to us, estimates of our business potential and the business
potential of the industry in which we compete, an assessment of our management,
our past and present operation and the prospects for our future revenues.

Stabilization. The representatives have advised us that, pursuant to
Regulation M under the Exchange Act, some persons participating in the offering
may engage in transactions including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids that may have the effect of
stabilizing or maintaining the market price of the common stock at a level above
that which might otherwise prevail in the open market. A stabilizing bid is a
bid for or the purchase of the common stock on behalf of the underwriters for
the purpose of fixing or maintaining the price of the common stock. A syndicate
covering transaction is the bid for the purchase of the common stock on behalf
of the underwriters to reduce a short position incurred by the underwriters in
connection with the offering. A penalty bid is an arrangement permitting the
representatives to reclaim the selling concession otherwise accruing to an
underwriter or syndicate member in connection with the offering if the common
stock originally sold by this underwriter or syndicate member is purchased by
the representatives in a syndicate covering transaction and has therefore not
been effectively placed by this underwriter or syndicate member. These
transactions may be effected on the Nasdaq National Market or otherwise and, if
commenced, may be discontinued at any time.

70
<PAGE> 101

LOGO
<PAGE> 102

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth all expenses, other than the underwriting
discounts and commissions, to be paid by the Registrant in connection with the
sale of the Common Stock being registered. All amounts shown are estimates
except for the registration fee, the NASD filing fee and the Nasdaq National
Market fee.

<TABLE>
<S> <C>
Registration fee............................................ $ 11,510
NASD filing fee............................................. 4,500
Nasdaq National Market fee.................................. 1,000
Blue sky qualification fees and expenses.................... 5,000
Printing and engraving expenses............................. 250,000
Legal fees and expenses..................................... 350,000
Accounting fees and expenses................................ 350,000
Transfer agent and registrar fees........................... 10,000
Miscellaneous............................................... 17,990
--------
Total............................................. 1,000,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Section 145 of the Delaware General Corporation Law permits indemnification
of officers, directors and other corporate agents under certain circumstances
and subject to certain limitations. The Registrant's certificate of
incorporation and bylaws provide that the Registrant shall indemnify its
directors, officers, employees and agents to the full extent permitted by the
Delaware General Corporation Law, including circumstances in which
indemnification is otherwise discretionary under the Delaware General
Corporation Law. In addition, the Registrant has entered into separate
indemnification agreements with its directors and executive officers which
require the Registrant, among other things, to indemnify them against certain
liabilities which may arise by reason of their status or service, other than
liabilities arising from acts or omissions not in good faith or willful
misconduct.

These indemnification provisions and the indemnification agreements entered
into between the Registrant and its executive officers and directors may be
sufficiently broad to permit indemnification of the Registrant's executive
officers and directors for liabilities, including reimbursement of expenses
incurred, arising under the Securities Act.

The Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Registrant and
its officers and directors for certain liabilities arising under the Securities
Act, or otherwise.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since inception, we have issued and sold the following unregistered
securities:

(a) Through June 30, 1999, we granted stock options to purchase
4,501,325 shares of our common stock at exercise prices ranging from $0.20
to $1.65 per share to our employees, consultants and directors under our
amended 1997 stock option plan.

II-1
<PAGE> 103

(b) On October 13, 1998, we granted Mark Culhane options to purchase
180,000 shares of our common stock outside of our amended 1997 stock option
plan at an exercise price of $0.40 per share.

(c) Through June 30, 1999, we issued and sold an aggregate of
2,274,333 shares of our common stock to employees, consultants and
directors at prices ranging from $0.20 to $1.50 per share under exercises
of options granted under our amended 1997 stock option plan.

(d) On November 12, 1998, we issued and sold 180,000 shares of our
common stock to Mark Culhane at a price of $0.40 per share under an
exercise of options granted outside of our amended 1997 stock option plan.

(e) On October 10, 1995, we issued and sold an aggregate of 6,000,000
shares of our common stock to Mahmood Panjwani and Rafiq Mohammadi at a
price of $0.000165 per share.

(f) Between December 27, 1996 and August 28, 1997, we issued and sold
an aggregate of 2,853,708 shares of series A preferred stock at a price of
$0.71 per share.

(g) On December 27, 1996, we issued and sold 291,080 shares of common
stock at a price of $0.071 per share.

(h) Between December 15, 1997 and July 31, 1998, we issued and sold an
aggregate of 3,200,000 shares of series B preferred stock at a price of
$1.57 per share.

(i) On September 28, 1998, we issued and sold 1,879,409 shares of
series C preferred stock at a price of $2.10 per share.

(j) On November 30, 1998, we issued 100,000 shares of series C
preferred stock at a price of $2.10 per share to Cornerstone Properties I,
LLC in lieu of rent on office space in San Mateo, California.

There were no underwriters employed in connection with any of the
transactions set forth in Item 15.

All sales of common stock made pursuant to the exercise of stock options
were made in reliance on Rule 701 under the Securities Act or on Section 4(2) of
the Securities Act.

All other sales were made in reliance on Section 4(2) of the Securities Act
promulgated under the Securities Act. These sales were made without general
solicitation or advertising. Each purchaser was a sophisticated investor with
access to all relevant information necessary to evaluate the investment and
represented to Registrant that the shares were being acquired for investment.

II-2
<PAGE> 104

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1+ Restated Certificate of Incorporation of the Company.
3.2+ Amended and Restated Bylaws of the Company.
4.1+ Rights Agreement dated December 27, 1996, as amended to
date.
4.2+ Right of First Refusal and Co-Sale Agreement dated December
27, 1996, as amended to date.
4.3** Specimen Common Stock Certificate.
5.1** Opinion of Gray Cary Ware & Freidenrich LLP.
10.1* Form of Indemnification Agreement for directors and
executive officers.
10.2+ 1997 Stock Option Plan and forms of Incentive Stock Option
Agreement and Nonstatutory Stock Option Agreement
thereunder.
10.3+ 1999 Employee Stock Purchase Plan and form of subscription
agreement thereunder.
10.4+ Loan and Security Agreement dated March 31, 1999 between
Silicon Valley Bank and the Company, as amended to date.
10.5+ Office Lease for 2121 S. El Camino Real, San Mateo,
California between Cornerstone Properties I, LLC and the
Company dated November 30, 1998.
10.6+ Office Building Lease for 55 East Monroe Street between TST
55 East Monroe, LLC and the Company dated January 1999, as
amended to date.
10.7+ Sublease between the Company and Q-Image Corporation dated
December 5, 1998.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2** Consent of Gray Cary Ware & Freidenrich LLP (included in
Exhibit 5.1).
24.1* Power of Attorney (see page II-4).
27.1* Financial Data Schedule.
</TABLE>

- ---------------
* Previously filed with the Registrant's Registration Statement on Form S-1
(File No. 333-86353) on September 1, 1999.

+ Previously filed with Amendment No. 1 to the Registrant's Registration
Statement on Form S-1 (File No. 333-86353) on October 8, 1999.

** To be filed by amendment.

(b) Financial Statement Schedules.

REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES

To the Board of Directors and Stockholders
of iManage, Inc. (formerly NetRight Technologies, Inc.)

Our audits of the financial statements referred to in our report dated August
20, 1999, except as to Note 10, which is as of August 30, 1999 appearing in this
prospectus of iManage, Inc. also included an audit of the financial statement
schedule listed in Item 16(b) of this Form S-1. In our opinion,

II-3
<PAGE> 105

this financial statement schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements.

PricewaterhouseCoopers LLP

San Jose, California
August 20, 1999

RULE 12-09 VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
DEFERRED
SALES ALLOWANCE TAX ASSET
RETURNS FOR DOUBTFUL VALUATION
RESERVE ACCOUNTS ACCOUNT
--------- ------------ ----------
<S> <C> <C> <C>
Balance, December 31, 1995................. $ -- $ -- $ --
Increase to allowance.................... -- 10,000 28,000
Decrease to allowance.................... -- -- --
--------- --------- ----------
Balance, December 31, 1996................. -- 10,000 28,000
Increase to allowance.................... 40,000 65,000 683,000
Decrease to allowance.................... -- -- --
--------- --------- ----------
Balance, December 31, 1997................. 40,000 75,000 711,000
Increase to allowance.................... 122,000 100,000 1,031,000
Decrease to allowance.................... (87,000) -- --
--------- --------- ----------
Balance, December 31, 1998................. 75,000 175,000 1,742,000
Increase to allowance.................... 15,000 -- 194,000
Decrease to allowance.................... (5,000) (60,000) --
--------- --------- ----------
Balance, June 30, 1999..................... $ 85,000 $ 115,000 $1,936,000
========= ========= ==========
</TABLE>

Schedules not listed above have been omitted because the information
required to be set forth in those schedules are not applicable or are not shown
in the financial statements or notes related to the statements.

ITEM 17. UNDERTAKINGS

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

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

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to

II-4
<PAGE> 106

Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to
be part of this Registration Statement as of the time it was declared
effective; and

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

II-5
<PAGE> 107

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 the Registrant
has duly caused this Amendment No. 2 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of Palo
Alto, County of Santa Clara, State of California, on the 19th day of October,
1999.

iMANAGE, INC.

By: /s/ MAHMOOD PANJWANI
------------------------------------
Mahmood Panjwani
President, Chief Executive Officer
and Chairman of the Board

Pursuant to the requirements of the Securities Act, this Amendment No. 2 to
the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ MAHMOOD PANJWANI President, Chief Executive Officer October 19, 1999
- ------------------------------------------ and Chairman of the Board
Mahmood Panjwani (Principal Executive Officer)

/s/ MARK CULHANE Chief Financial Officer and October 19, 1999
- ------------------------------------------ Secretary (Principal Financial and
Mark Culhane Accounting Officer)

/s/ RAFIQ MOHAMMADI* Chief Technology Officer, Vice October 19, 1999
- ------------------------------------------ President, Engineering and Director
Rafiq Mohammadi

/s/ MARK PERRY* Director October 19, 1999
- ------------------------------------------
Mark Perry

/s/ MOEZ VIRANI* Director October 19, 1999
- ------------------------------------------
Moez Virani

/s/ DUWAYNE PETERSON Director October 19, 1999
- ------------------------------------------
DuWayne Peterson

*By /s/ MARK CULHANE
-------------------------------------
Mark Culhane
Attorney-in-Fact
</TABLE>

II-6
<PAGE> 108

INDEX TO EXHIBITS

- ---------------
* Previously filed with the Registrant's Registration Statement on Form S-1
(File No. 333-86353) on September 1, 1999.

+ Previously filed with Amendment No. 1 to the Registrant's Registration
Statement on Form S-1 (File No. 333-86353) on October 8, 1999.

** To be filed by amendment.

<PAGE> 1
Exhibit 23.1

Consent of Independent Accountants

We hereby consent to the use in this Registration Statement on Form S-1 of our
reports dated August 20, 1999, except as to Note 10, which is as of August 30,
1999, relating to the financial statements and financial statement schedules of
iManage, Inc., which appear in such Registration Statement. We also consent to
the references to us under the headings "Experts" and "Selected Financial Data"
in such Registration Statement.

PricewaterhouseCoopers LLP

San Jose, California
October 18, 1999