CENTRA SOFTWARE INC, S-1/A, 2000-01-28

CENTRA SOFTWARE INC
S-1/A, 2000-01-28
BUSINESS SERVICES, NEC

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 28, 2000

REGISTRATION NO. 333-89817
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- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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CENTRA SOFTWARE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<S> <C> <C>
DELAWARE 7379 04-3268918
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

430 BEDFORD STREET
LEXINGTON, MASSACHUSETTS 02420
(781) 861-7000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------------

MR. LEON NAVICKAS
CENTRA SOFTWARE, INC.
430 BEDFORD STREET
LEXINGTON, MASSACHUSETTS 02420
(781) 861-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
--------------------------

COPIES TO:

<TABLE>
<S> <C>
ROBERT L. BIRNBAUM, JR., ESQ. PETER B. TARR, ESQ.
MARK L. JOHNSON, ESQ. HALE AND DORR LLP
FOLEY, HOAG & ELIOT LLP 60 STATE STREET
ONE POST OFFICE SQUARE BOSTON, MASSACHUSETTS 02109
BOSTON, MASSACHUSETTS 02109 TELEPHONE: (617) 526-6000
TELEPHONE: (617) 832-1000 TELECOPY: (617) 526-5000
TELECOPY: (617) 832-7000
</TABLE>

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

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

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ____________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ____________

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ____________

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.

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<PAGE>
EXPLANATORY NOTE

This registration statement contains two forms of prospectus: (a) one
prospectus to be used in connection with an offering in the United States and
Canada and (b) 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 "Underwriting" section. The front cover page and the
"Underwriting" section of the international prospectus are included immediately
before Part II of this registration statement.
<PAGE>
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.
<PAGE>

SUBJECT TO COMPLETION, DATED JANUARY 28, 2000

[LOGO]

5,000,000 SHARES
COMMON STOCK

Centra Software, Inc. is offering 5,000,000 shares of its common stock. This
is our initial public offering and no public market currently exists for our
shares. We have applied to have the shares being offered approved for quotation
on the Nasdaq National Market under the symbol "CTRA." 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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<CAPTION>
PER SHARE TOTAL
--------- ----------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to Centra.......................................... $ $
</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.

We have granted the underwriters a 30-day option to purchase up to an
additional 750,000 shares of common stock to cover over-allotments.

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

ROBERTSON STEPHENS

CHASE H&Q
DAIN RAUSCHER WESSELS

THE DATE OF THIS PROSPECTUS IS , 2000.
<PAGE>
[LOGO]

<PAGE>

[Description of gatefold artwork

The words "Centra Live eBusiness Collaboration" appear at the top of the
gatefold. A "cloud" shape appears in the center of the gatefold, on which the
words "Live eBusiness Interaction" are surrounded by the words "Marketing,"
"Services," "Training" and "Selling." The cloud is positioned in the middle
of a three-dimensionally rendered circle divided into slices labeled
"Partners" (with icon of personal computer user), "CentraNow Users" (with
icons of computer users), "Content" (with document icons), "Network Channels"
(with icons of three monitors labeled "Education." "e-Commerce" and
"Services"), "Remote Teams" (with an icon of a laptop user), "Employees"
(with an icon of a computer user), "Prospects" (with an icon of a computer
user), "Customers" (with an icon of a computer user) and "Distribution
Channels" (with an icon of a computer user). The front edge of the circle
displays the phrases "Shared Workspace," "Voice-over-IP," "Collaboration
Management" and "Enterprise Systems Integration." An arrow pointing from the
upper left corner of the page to the cluster of spheres bears the phrases
"BUSINESS RELATIONSHIPS," "BUSINESS CONTENT" and "BUSINESS KNOWLEDGE." A
dialog box on the upper left edge of the circle states "Centra 99/Centra 99
is an enterprise application that improves business performance and
flexibility by enabling live collaboration to support internal and external
business processes." A dialog box on the lower left edge of the circle states
"CentraNow/CentraNow provides live collaboration to business professionals
and their teams through the centra.com Web site." A dialog box on the right
edge of the circle states "Centra Business Collaboration Network/The Centra
Business Collaboration Network, or Centra BCN, is a service that aggregates
content and users into a marketplace supported by live business-to-business
interaction over the Internet." The Centra logo appears in the bottom
righthand corner of the gatefold.]

<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, "CENTRA,"
"WE," "US" AND "OUR" REFER TO CENTRA SOFTWARE, INC., A DELAWARE CORPORATION, AND
ITS WHOLLY OWNED SUBSIDIARIES, UNLESS THE CONTEXT REQUIRES OTHERWISE.

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TABLE OF CONTENTS

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PAGE
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Summary..................................................... 3
Risk Factors................................................ 6
Use of Proceeds............................................. 15
Dividend Policy............................................. 15
Capitalization.............................................. 16
Dilution.................................................... 17
Selected Consolidated Financial Data........................ 18
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 19
Business.................................................... 30
Management.................................................. 43
Transactions with Related Parties........................... 53
Principal Stockholders...................................... 56
Description of Capital Stock................................ 58
Shares Eligible for Future Sale............................. 60
Underwriting................................................ 62
Legal Matters............................................... 64
Experts..................................................... 64
Where You Can Find More Information......................... 64
Index to Consolidated Financial Statements.................. F-1
</TABLE>

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We own or have rights to trademarks or trade names that we use in
conjunction with the sale of our products and services. Centra is a registered
trademark owned by us. Adaptive Connectivity, CentraNow and Centra Symposium are
trademarks owned by us. This prospectus also contains trademarks and trade names
of other companies.
<PAGE>
SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION IN THIS PROSPECTUS, INCLUDING RISK FACTORS, REGARDING OUR COMPANY
AND THE COMMON STOCK SOLD IN THIS OFFERING.

OUR COMPANY

OUR BUSINESS

We design, develop and support software and services that provide live
business collaboration over the Internet, enabling the development of stronger
customer, partner and employee relationships, collaborative commerce, and
corporate learning and training. Our products provide Internet infrastructure
for comprehensive live collaboration and include functionalities such as voice
over the Internet, software application sharing, real-time data exchange and
shared workspaces. Our products are accessible by users of intranets, business
partners on extranets and remote constituents over the Internet. Our products
provide for the exchange of business-critical information in a variety of
contexts, including one-to-one customer and sales interactions, one-to-many
seminar and presentation events, and many-to-many learning and interactive
teamwork sessions.

OUR MARKET

Companies are increasingly using the Internet as a means for conducting
business online. Forrester Research estimates that business-to-business
e-commerce will increase from $43 billion in 1998 to $1.3 trillion in 2003. To
date, companies have focused their Internet infrastructure spending primarily on
technologies designed to enhance the efficiency of processing commercial
transactions. Companies increasingly seek technologies that complement the
transactional processing of electronic commerce applications with a live,
interactive environment for the exchange of important information with their
constituents, including customers, partners and employees. In order to
collaborate with multiple constituents more effectively and efficiently,
companies need a comprehensive, flexible and broadly accessible Web-based
solution that supports a broad range of live interactions.

OUR PRODUCTS

We have three primary offerings: Centra 99, a software application that
supports live business collaboration online; CentraNow, a Web collaboration
service; and the Centra Business Collaboration Network, or Centra BCN, a network
that enables content and service providers and users to conduct
business-to-business interactions over the Web. These products and services are
designed to enable companies to strengthen their customer, partner and employee
relationships, promote revenue growth through frequent customer interaction, use
their employee knowledge and expertise more effectively, improve the
productivity of their employees and reduce the costs associated with traditional
live collaboration. Our software products and online services take advantage of
the power and accessibility of the Internet to support live business
collaboration with broad audience reach and the ability to handle many
concurrent users and are designed to integrate easily with existing computer
systems and emerging Web technologies. We intend to continue to engage selected
online content and service providers to be members of Centra BCN, which we
believe will increase market awareness of the value of live business
collaboration as well as the benefits of our products and services.

OUR CUSTOMERS

As of December 31, 1999, we had over 170 customers, including the following,
which we believe represent the broad range of industries to which we sell,
Clarke American, Compaq, i2 Technologies, Kraft Foods, MCI WorldCom, Nationwide
Mutual Insurance, Nortel Networks, PricewaterhouseCoopers, Schering Plough,
University of Tennessee and Viacom.

OUR ADDRESS

Our executive offices are located at 430 Bedford Street, Lexington,
Massachusetts 02420, and our telephone number at that location is
(781) 861-7000. Our Web site address is WWW.CENTRA.COM. Information contained on
our Web site is not part of this prospectus.

3
<PAGE>
ADDITIONAL CONSIDERATIONS

We began shipping our first product in July 1997, and to date we have
derived all of our revenues from Centra 99 software products and related
services. Broad and timely acceptance of our CentraNow Web service and
Centra BCN, which were introduced in October 1999, is critical to our future
success. Because our market is rapidly changing and highly competitive, we may
not succeed in generating significant revenues from our CentraNow Web service
and Centra BCN and our revenues from Centra 99 may not meet our expectations.
Since inception, we have incurred substantial net losses in each fiscal period,
resulting in an accumulated deficit of $26.5 million at December 31, 1999. We
expect to continue to incur losses for the foreseeable future. For a discussion
of these and other risks relating to an investment in our common stock, see
"Risk Factors" below.

THE OFFERING

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<S> <C>
Common stock offered by Centra............... 5,000,000 shares

Common stock to be outstanding after the
offering................................... 23,250,052 shares

Use of proceeds.............................. To pay $6.5 million due to holders of our
series A and series B preferred stock upon
completion of the offering and to fund
working capital and other general corporate
purposes. See "Use of Proceeds."

Proposed Nasdaq National Market symbol....... CTRA
</TABLE>

The number of shares of common stock to be outstanding after the offering is
based on shares outstanding as of December 31, 1999. This number includes
13,746,735 shares of common stock to be issued upon conversion of our
outstanding preferred stock upon completion of the offering. It excludes
(a) 1,377,413 shares issuable upon exercise of options outstanding as of
December 31, 1999, which have a weighted average exercise price of $1.48 per
share, and (b) 4,840,347 additional shares reserved as of December 31, 1999 for
future issuance under our stock-based compensation plans.

After this offering, our directors and executive officers and their
affiliates will collectively control over 44% of our common stock, which will
enable them to influence all matters requiring stockholder approval, including
any proposed change in control of our company. See "Risk Factors" below.

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

EXCEPT WHERE WE STATE OTHERWISE, THE INFORMATION WE PRESENT IN THIS
PROSPECTUS REFLECTS:

- THE AUTOMATIC CONVERSION OF OUR OUTSTANDING PREFERRED STOCK INTO COMMON
STOCK UPON COMPLETION OF THIS OFFERING,

- AMENDMENTS TO OUR CERTIFICATE OF INCORPORATION AND BY-LAWS EFFECTIVE UPON
COMPLETION OF THIS OFFERING, AND

- NO EXERCISE OF THE UNDERWRITERS' OPTION TO PURCHASE ADDITIONAL SHARES IN
THE OFFERING.

4
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following tables summarize the financial data of our business. The pro
forma share information included in the consolidated statement of operations
data have been computed as described in note 1(k) of the notes to consolidated
financial statements included elsewhere in this prospectus. The pro forma column
in the consolidated balance sheet data reflects the conversion of our
outstanding preferred stock into common stock upon completion of this offering
and an increase in the book value of the series A and series B preferred stock
to reflect amounts payable to holders upon conversion. The pro forma as adjusted
column in the consolidated balance sheet data also reflects our sale of the
5,000,000 shares of common stock offered by us at an assumed public offering
price of $9.00 per share and after deducting the estimated underwriting
discounts and commissions and the estimated offering expenses that we will pay,
and the application of the estimated net proceeds as described under "Use of
Proceeds," including our payment of $6.5 million to the holders of the series A
and series B preferred stock.

Basic and diluted net loss per share.............. $(0.45) $ (0.75) $ (1.33) $ (1.16) $ (1.39)
Weighted average shares outstanding............... 1,561 3,935 5,156 5,845 6,588

Pro forma basic and diluted net loss per share.... $ (0.64)
Pro forma weighted average shares outstanding..... 15,281
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 7,878 $ 7,878 $30,090
Working capital............................................. 5,828 (652) 28,529
Total assets................................................ 13,296 13,296 36,803
Term loan, net of current maturities........................ 376 376 376
Redeemable convertible preferred stock...................... 32,480 -- --
Total stockholders' equity (deficit)........................ (24,787) 1,213 31,689
</TABLE>

5
<PAGE>
RISK FACTORS

THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CONSIDER CAREFULLY
THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS
PROSPECTUS BEFORE DECIDING WHETHER TO INVEST IN SHARES OF OUR COMMON STOCK. IF
ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS, OPERATING RESULTS OR
FINANCIAL CONDITION COULD BE MATERIALLY ADVERSELY AFFECTED. THIS COULD CAUSE THE
MARKET PRICE OF OUR COMMON STOCK TO DECLINE, AND COULD CAUSE YOU TO LOSE ALL OR
PART OF YOUR INVESTMENT.

RISKS RELATED TO OUR BUSINESS

OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR FUTURE
PROSPECTS.

Our company was founded in April 1995 and has a limited operating history,
which makes it difficult for investors to evaluate our future prospects. We
began shipping our first product in July 1997 and began to operate our CentraNow
Web service and Centra BCN in October 1999.

WE HAVE INCURRED SUBSTANTIAL LOSSES IN THE PAST AND MAY NOT BE PROFITABLE IN THE
FUTURE.

Since we began operations, we have incurred substantial net losses in every
fiscal period. We cannot predict when we will become profitable, if at all, and
if we do, we may not remain profitable for any substantial period of time. If we
fail to achieve profitability within the time frame expected by investors, the
market price of our common stock may fall. We had net losses of $6.4 million in
1997, $6.3 million in 1998 and $8.6 million in 1999. As a result of ongoing
operating losses, we had an accumulated deficit of $26.5 million at
December 31, 1999. We have generated limited amounts of revenues while
increasing operating expenditures in all areas, particularly in product
development and sales and marketing. Although we have experienced revenue growth
in recent periods, the growth has been off of a small base and it is unlikely
that the rate of our recent revenue growth is sustainable.

DISAPPOINTING QUARTERLY RESULTS COULD CAUSE THE MARKET PRICE OF OUR COMMON STOCK
TO FALL.

Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter. If our quarterly revenues
or operating results fall below the expectations of securities analysts or
investors, the price of our common stock could fall substantially.

Our quarterly revenues and operating results may fluctuate for numerous
reasons, including the other risks identified below.

Most of our expenses, such as employee compensation and rent, are relatively
fixed. Moreover, our expense levels are based, in part, on our expectations
regarding future revenue increases. As a result, any shortfall in revenues in
relation to our expectations could cause significant changes in our operating
results from quarter to quarter and could result in increased quarterly losses.

OUR SALES CYCLE MAKES IT DIFFICULT TO PREDICT OUR QUARTERLY OPERATING RESULTS.

We have a long sales cycle because we generally need to educate potential
customers regarding the benefits of our live online business, or eBusiness,
collaboration products and services prior to sale. Our sales cycle varies
depending on the size and type of customer contemplating a purchase and whether
we have conducted business with a potential customer in the past. Potential
customers frequently need to obtain approvals from multiple decision makers
within their organization prior to making purchase decisions. Our long sales
cycle, which can range from several weeks to several months or more, makes it
difficult to predict the quarter in which sales may occur. Delays in sales could
cause significant variability in our revenues and operating results for any
particular period.

6
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THE DEVELOPMENT OF A MARKET FOR OUR LIVE eBUSINESS COLLABORATION PRODUCTS AND
SERVICES IS UNCERTAIN.

The market for live eBusiness collaboration products and services is
immature and rapidly evolving. If the market for eBusiness collaboration
solutions does not grow at the rate we expect, this will have a material adverse
effect on our business, operating results and financial condition. As is typical
for new and rapidly evolving industries, customer demand for recently introduced
eBusiness collaboration products and services is highly uncertain.

WE EXPECT TO DEPEND ON SALES OF OUR CENTRA 99 SOLUTION FOR SUBSTANTIALLY ALL OF
OUR REVENUES FOR THE FORESEEABLE FUTURE.

Our Centra 99 software products and related services accounted for all of
our revenues in 1999. We anticipate that revenues from Centra 99 products and
related services will continue to constitute substantially all of our revenues
for the foreseeable future. Consequently, any decline in the demand for
Centra 99, or its failure to achieve broad market acceptance, would seriously
harm our business.

OUR CENTRANOW WEB SERVICE AND CENTRA BCN ARE AT AN EXTREMELY EARLY STAGE OF
DEVELOPMENT AND MARKET ACCEPTANCE.

We began operating our CentraNow Web service and Centra BCN in
October 1999. To date, the CentraNow Web collaboration service offers only free
services. Broad and timely acceptance of our CentraNow Web service and Centra
BCN is critical to our future success and is subject to a number of significant
risks, many of which are outside our control. These risks include:

- our system's ability to support large numbers of users, content and
service providers and purchasers is unproven;

- the idea of providing a service that supports the buying and selling of
content and services online is new and unproven, and it is not clear
whether we can attract participants and advertisers to the service; and

- we may not be successful in identifying a large number of industry-leading
content and service providers that want to market and sell their offerings
over the network.

WE HAVE NOT INTRODUCED REVENUE-GENERATING SERVICES ON OUR CENTRANOW WEB SERVICE
OR CENTRA BCN.

Although we expect to derive a significant portion of our future revenues
from our CentraNow Web service and Centra BCN, we have not yet introduced priced
offerings for the Web service and we do not have a proven pricing, expense and
revenue model for the services we provide in connection with Centra BCN. If we
are unable to introduce priced offerings on CentraNow successfully or if our
pricing, expense and revenue model for the network is not acceptable to our
customers, either or both of CentraNow and Centra BCN may not be commercially
viable. This would seriously harm our business, particularly if the failure of
CentraNow or Centra BCN to achieve market acceptance negatively affects sales of
our other products and services.

WE FACE SIGNIFICANT COMPETITION FROM OTHER TECHNOLOGY COMPANIES AND WE MAY NOT
BE ABLE TO COMPETE EFFECTIVELY.

The market for live eBusiness collaboration solutions is immature, intensely
competitive, developing rapidly and subject to rapid technological change. We
expect that the intensity of our competition will increase in the future.
Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any one of which could seriously harm our
business. Competitors vary in size and in the scope and breadth of the products
and services offered. We encounter competition with respect to different aspects
of our collaboration solution from a variety of software and services vendors
including Interwise, LearnLinc, the Lotus division of IBM, Placeware and

7
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WebEx. Siebel has announced that it is extending its enterprise software
application with collaboration features, and other enterprise software vendors,
such as Oracle and SAP, may choose to extend their applications with similar
features in the future. These collaborative features could make it more
difficult for us to sell our products to these vendors' customers. In addition,
current and potential competitors have established, and may in the future
establish, cooperative relationships with third parties to increase the
availability of their products to the marketplace. Accordingly, new competitors
or alliances may emerge and rapidly acquire significant market share. Potential
competitors may have significantly greater financial, marketing, technical and
other competitive resources than we have. The entry of new competitors or
alliances into our market could reduce our sales, require us to lower our
prices, or both. Many of these factors are outside our control, and there can be
no assurance that we can maintain or enhance our competitive position against
current and future competitors.

OUR SUCCESS DEPENDS ON OUR ABILITY TO EXPAND OUR SALES FORCE AND DISTRIBUTION
CHANNELS.

To increase our revenues, we must increase the size of our sales force and
the number of our indirect channel partners, including original equipment
manufacturers, value-added resellers and systems integrators. As of
December 31, 1999, our sales organization consisted of 30 professionals. We
intend to increase our sales organization by between 35% and 55% over the next
twelve months. However, there is intense competition for sales personnel in our
business, and we cannot assure you that we will be successful in attracting,
integrating, motivating and retaining new sales personnel. Our existing or
future channel partners may choose to devote greater resources to marketing and
supporting the products of other companies. In addition, we may face conflicts
among our sales force and channel partners. Our inability to increase our direct
sales force and our number of indirect channel partners may limit our future
revenue growth and hurt our future operating results.

OUR PERFORMANCE DEPENDS ON OUR ABILITY TO OBTAIN FOLLOW-ON SALES.

Customers typically place limited initial orders for Centra 99 installations
that allow the customers to evaluate the software's performance. Our strategy is
to pursue more significant follow-on sales after these initial installations.
License revenues generated from follow-on sales accounted for 34% of our license
revenues in 1999. Our future financial performance will depend on successful
initial deployments of our products that, in turn, lead to follow-on sales. We
cannot be sure that initial deployments of our products by our customers will
meet their needs and expectations, or that we will be able to generate follow-on
sales.

WE MUST HIRE AND RETAIN SKILLED PERSONNEL IN A COMPETITIVE LABOR MARKET.

Qualified personnel are in great demand throughout the software and Internet
industries. Our success depends in large part upon our ability to attract,
train, motivate and retain highly skilled employees, particularly sales and
marketing personnel, professional services personnel, software engineers and
other senior personnel. As of December 31, 1999, we had 117 employees. We intend
to increase our employee headcount by between 50% and 75% over the next twelve
months. However, if we fail to attract and retain the highly trained technical
personnel that are integral to our direct sales, professional services and
product development teams, the rate at which we can generate sales and develop
new products or product enhancements may be limited. This could have a material
adverse effect on our business, operating results and financial condition.

IF WE LOSE THE SERVICES OF OUR CHIEF EXECUTIVE OFFICER, CHIEF OPERATING OFFICER
OR ANY OTHER MEMBER OF OUR MANAGEMENT TEAM, OUR BUSINESS COULD SUFFER.

Our future success depends to a significant degree on the skill, experience
and efforts of Leon Navickas, our chief executive officer, Anthony Mark, our
president and chief operating officer, and the other members of our management
team. The loss of any member of our management team could

8
<PAGE>
have a material adverse effect on our business. We do not have employment
agreements with any of our executive officers. We do not maintain "keyman" life
insurance that would result in a payment to us in the event of the death of one
of our officers, except for a $2.0 million policy with respect to Mr. Navickas.

OUR BUSINESS WILL BE ADVERSELY AFFECTED IF THE INTERNET DOES NOT BECOME A VIABLE
AND SUBSTANTIAL COMMERCIAL MEDIUM.

Our future success depends heavily on the acceptance and wide use of the
Internet for e-commerce. If e-commerce does not continue to grow or grows more
slowly than expected, demand for our products and services may fail to develop.
Consumers and businesses may reject the Internet as a viable commercial medium
for a number of reasons, including potentially inadequate network
infrastructure, slow development of enabling technologies, insufficient
commercial support or privacy concerns. In addition, delays in the development
or adoption of new standards and protocols required to handle increased levels
of e-commerce, or increased government regulation or taxation, could cause the
Internet to lose its viability as a commercial medium.

FUTURE REGULATIONS COULD BE ENACTED THAT EITHER DIRECTLY RESTRICT OUR BUSINESS
OR INDIRECTLY IMPACT OUR BUSINESS BY LIMITING THE GROWTH OF ELECTRONIC COMMERCE.

As commercial use of the Internet increases, federal, state and foreign
agencies could adopt regulations covering issues such as user privacy, content
and taxation of products and services. If enacted, government regulations could
limit the market for our products and services. Although many regulations might
not apply to our business directly, we expect that laws regulating personal and
consumer information could indirectly affect our business. The
Telecommunications Act of 1996 prohibits certain types of information and
content from being transmitted over the Internet. The prohibition's scope and
the liability associated with a violation are currently unsettled. In addition,
although substantial portions of the Communications Decency Act were held to be
unconstitutional, we cannot be certain that similar legislation will not be
enacted and upheld in the future. It is possible that legislation could expose
companies involved in e-commerce to liability, which could limit the growth of
e-commerce generally. Legislation like the Telecommunications Act and the
Communications Decency Act could dampen the growth in Web usage and decrease its
acceptance as a medium of communications and commerce.

OUR FAILURE TO MANAGE OUR RAPID GROWTH EFFECTIVELY COULD HURT OUR BUSINESS.

Our failure to manage our rapid growth effectively could have a material
adverse effect on the quality of our products, our ability to retain key
personnel, and our business, operating results and financial condition. We have
been experiencing a period of rapid growth that has been placing a significant
strain on all of our resources. From January 1, 1999 to December 31, 1999, the
number of our employees increased from 72 to 117. To manage our future growth,
if any, effectively, we must enhance our information technology infrastructure,
financial and accounting systems, controls and personnel, integrate a
significant number of new hires, and manage expanded operations in
geographically distributed locations. In addition, we may need to identify and
move to alternative facilities to accommodate our growth, which could disrupt
our business and hurt our operating results.

OUR FUTURE SUCCESS WILL DEPEND ON OUR ABILITY TO ENHANCE OUR EXISTING PRODUCTS
AND SERVICES AND TO DEVELOP AND INTRODUCE NEW PRODUCTS AND SERVICES.

We believe our future success will depend in large part on our ability to
enhance and broaden our live eBusiness collaboration products and services to
meet the evolving needs of the market. Our market is characterized by rapidly
changing technologies, frequent new product and service introductions, and
evolving industry standards. The recent growth of the Internet and intense

9
<PAGE>
competition in our industry exacerbate these market characteristics. To achieve
our goals, we need to respond effectively to technological changes and new
industry standards and developments. In the past, we have experienced delays in
the introduction of new products. In addition, our product enhancements must
meet the requirements of our current and prospective customers and must achieve
significant market acceptance. We could also incur substantial costs if we need
to modify our products, services or information technology infrastructure to
adapt to these changes, standards and developments.

IF OUR PRODUCTS FAIL TO FUNCTION WHEN USED BY MANY USERS IN A COMPANY-WIDE
ENVIRONMENT, WE MAY LOSE SALES AND SUFFER DECREASED REVENUES.

Our strategy requires that our software be highly scalable, or able to
accommodate substantial increases in the number of users concurrently using the
product. We are just beginning to deploy large-scale Web-based software
implementations, and none of our large-scale deployments has been operating at
any customer site for an extended period of time. If our products do not perform
adequately in large-scale implementations, we may lose customer sales, resulting
in decreased revenues.

AS WE EXPAND OUR INTERNATIONAL OPERATIONS, WE WILL FACE NEW BUSINESS RISKS THAT
WE HAVE NOT ENCOUNTERED PREVIOUSLY.

Historically, we have not derived a significant portion of our total
revenues from sales to customers outside the United States. We have established
a sales office in the United Kingdom. In addition, we are seeking to establish
sales or operations offices or staff in Germany, Greece, Japan, Portugal and
Sweden. This expansion will require additional resources and management
attention and will subject us to new regulatory, economic and political risks.
Given our limited experience in international markets, we cannot be sure that
our international expansion will be successful. In addition, we will face new
risks in doing business internationally. These risks could reduce demand for our
products and services, lower the prices at which we can sell our products and
services, or otherwise have an adverse effect on our operating results. Among
the risks we believe are most likely to affect us are:

- longer payment cycles and problems in collecting accounts receivable;

- adverse changes in trade and tax regulations;

- the absence or significant lack of legal protection for intellectual
property rights;

- the adoption of data privacy laws or regulations;

- political and economic instability; and

- currency risks.

OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY RIGHTS.

Our success depends to a significant degree upon the protection of our
software and other proprietary technology. If we fail to protect our proprietary
rights, other companies might copy our technology and introduce products or
services which compete with ours, without paying us for our technology. This
could have a material adverse effect on our business, operating results and
financial condition. Our proprietary technology includes the Centra, CentraNow
and Adaptive Connectivity trademarks and three patent applications, none of
which has been issued. We depend upon a combination of patent and trademark
laws, license agreements, non-disclosure and other contractual provisions to
protect proprietary and distribution rights in our products. In addition, we
attempt to protect our proprietary information and those of our vendors and
partners through confidentiality and license agreements with our employees and
others. Although we have taken steps to protect our proprietary technology, they
may be inadequate. Existing trade secret, copyright and trademark laws

10
<PAGE>
offer only limited protection. Moreover, the laws of other countries in which we
market our products may afford little or no effective protection of our
intellectual property. If we resort to legal proceedings to enforce our
intellectual property rights, the proceedings could be burdensome and expensive,
even if we were to prevail.

CLAIMS BY OTHER COMPANIES THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD
FORCE US TO REDESIGN OUR PRODUCTS OR OTHERWISE HURT OUR FINANCIAL CONDITION.

If we were to discover that any of our products violated third-party
proprietary rights, there can be no assurance that we would be able to
reengineer the product or to obtain a license on commercially reasonable terms,
if at all, to continue offering the product without substantial reengineering.
We do not conduct comprehensive patent searches to determine whether the
technology used in our products infringes patents held by third parties. In
addition, product development is inherently uncertain in a rapidly developing
technology environment in which there may be numerous patent applications
pending, many of which are confidential when filed, with regard to similar
technologies. Any claim of infringement could cause us to incur substantial
costs defending against the claim, even if the claim is invalid, and could
distract our management from our business. Furthermore, a party making such a
claim could secure a judgment that requires us to pay substantial damages. A
judgment could also include an injunction or other court order that could
prevent us from selling our products or cause our customers to stop using our
products.

OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR PRODUCTS CONTAIN ERRORS.

Software products as complex as ours may contain undetected errors or "bugs"
that result in product failures. From time to time we have identified errors in
our products after commercial introduction of the products. While we have not
been materially harmed by errors in the past, the occurrence of errors in the
future could result in loss of or delay in revenues, loss of market share,
diversion of product development resources, injury to our reputation or damage
to our efforts to build brand awareness, any of which could have a material
adverse effect on our business, operating results and financial condition.

WE COULD INCUR SUBSTANTIAL COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS
RELATING TO OUR CUSTOMERS' USE OF OUR PRODUCTS AND SERVICES.

Many of the business interactions supported by our products and services are
critical to our customers' businesses. Any failure in a customer's business
interaction or other collaborative activity caused or allegedly caused by our
products and services could result in a claim for substantial damages against
us, regardless of our responsibility for the failure. Although we maintain
general liability insurance, including coverage for errors and omissions, there
can be no assurance that our existing coverage will continue to be available on
reasonable terms or will be available in amounts sufficient to cover one or more
large claims, or that the insurer will not disclaim coverage as to any future
claim.

WE MAY REQUIRE ADDITIONAL FUNDS.

We may need to raise additional capital in order to fund the development and
marketing of our products and services. Although we expect that this offering
will provide us with sufficient working capital for at least the next
12 months, our current plans and projections may prove to be inaccurate or our
expected cash flow may prove to be insufficient to fund our operations because
of product delays, unanticipated expenses or other unforeseen difficulties.

Our ability to obtain additional financing will depend on a number of
factors, including market conditions, our operating performance and investor
interest, particularly in business collaboration software companies. These
factors may make the timing, amount, terms and conditions of any financing

11
<PAGE>
unattractive. They may also result in our incurring additional indebtedness or
accepting stockholder dilution. If adequate funds are not available or are not
available on acceptable terms, we may have to forego strategic acquisitions or
investments, defer our product development activities, or delay our continued
roll out of new products and product versions. Any of these actions may
seriously harm our business and operating results.

WE MAY BE ADVERSELY AFFECTED BY UNEXPECTED YEAR 2000 ISSUES.

The Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. This could
result in a system failure or miscalculations if a computer program recognizes a
date of "00" as the year 1900 instead of 2000. If not corrected, many computer
systems could fail or create erroneous results in 2000. Although we believe the
current versions of our products and services are Year 2000 compliant, we may
face claims based on Year 2000 issues arising from the integration of multiple
products within an overall system. In addition, although we have received
compliance reports from a number of our vendors, there can be no assurance that
Year 2000 errors or defects will not be discovered in our internal software
systems and, if such errors or defects are discovered, there can be no assurance
that the costs of making these systems Year 2000 compliant will not be material.

THE FORWARD-LOOKING STATEMENTS WE MAKE IN THIS PROSPECTUS MIGHT PROVE
INACCURATE. AS A RESULT, OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR
ACHIEVEMENTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED IN THE FORWARD-LOOKING
STATEMENTS.

Some of the statements under "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
terminology such as "may," "will," "should," "could," "expects," "plans,"
"intends," "anticipates," "believes," "estimates," "predicts," "potential" or
"continue" or other comparable terminology. These statements involve known and
unknown risks and uncertainties that may cause our actual results, levels of
activity, performance or achievements to differ materially from any future
results, levels of activity, performance or achievements expressed or implied by
such forward-looking statements. These factors include, among other things,
those listed under "Risk Factors" and elsewhere in this prospectus. We cannot
guarantee any future results, levels of activity, performance or achievements.

This prospectus contains market data related to the Internet and to us.
These data have been included in studies published by the Internet market
research firms of Forrester Research and International Data Corporation.
International Data Corporation's estimate that the number of Web users in
commercial businesses will increase from 59 million in 1998 to 250 million by
2003 is based on several assumptions, including that:

- all devices using the Internet for email will also be using the Web;

- by 2003, one-third of commercial business Web users will be purchasing via
the Web; and

- e-commerce will rapidly increase as the Web becomes an accepted vehicle
for volume business-to-business purchases.

Forrester Research's estimate that business-to-business e-commerce will
increase from $43 billion in 1998 to $1.3 trillion in 2003, is based on several
assumptions, including that:

- the business trade in hard goods conducted over the Internet will rise
dramatically;

- technology vendors and service providers will continue to shift priorities
to support Internet commerce;

12
<PAGE>
- buyers will continue to press their suppliers to offer frequently
purchased goods over the Internet;

- suppliers will continue to incentivize buyers not to use high-cost
channels like phone and fax; and

- three industries--aerospace, utilities and motor vehicles--will increase
Internet sales.

International Data Corporation's estimate that corporate spending on
Internet software will increase from $1.7 billion in 1998 to $13.6 billion in
2002, is based on several assumptions, including that:

- the reengineering of business processes that span departmental functions
will continue through the millennium; and

- organizations will use Web-enabled analytical applications to control
expenses and find new business opportunities.

If any of these assumptions is incorrect, actual results may differ from the
projections based on those assumptions. The applications and Internet related
markets may not grow at rates projected by Forrester Research or International
Data Corporation. The failure of these markets to grow at projected rates may
seriously harm our business and may cause the price of our common stock to
decline.

RISKS RELATED TO THIS OFFERING AND OWNERSHIP OF OUR COMMON STOCK

THE MARKET PRICE OF OUR COMMON STOCK MAY BE VOLATILE, WHICH COULD RESULT IN
SUBSTANTIAL LOSSES FOR INVESTORS PURCHASING SHARES IN THIS OFFERING.

Prior to this offering, you could not buy or sell our common stock publicly.
An active public market for our common stock may not develop or be sustained
after this offering. We will negotiate and determine the initial public offering
price with the representatives of the underwriters based on several factors.
This price may vary from the market price of our common stock after this
offering. You may be unable to sell your shares of common stock at or above the
initial offering price. The market price of our common stock may fluctuate
significantly in response to the following factors, some of which are beyond our
control:

- general fluctuations in stock market prices and volume, which are
particularly common among highly volatile securities of software and
Internet-based companies like ours;

- variations in our quarterly operating results;

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

- changes in market valuations of similar companies;

- announcements by us or our competitors of significant products, contracts,
acquisitions or strategic partnerships; and

- additions or departures of key personnel.

FUTURE SALES OF COMMON STOCK BY OUR EXISTING SHAREHOLDERS COULD CAUSE OUR STOCK
PRICE TO FALL.

The market price of our common stock could decline as a result of market
sales of the 18,250,052 shares of common stock that will be held by our existing
stockholders after this offering, or the perception that these sales could
occur. These sales might also make it more difficult for us to sell equity
securities at a time and price that we deem appropriate.

13
<PAGE>
OUR DIRECTORS AND MANAGEMENT WILL COLLECTIVELY CONTROL OVER 44% OF OUR
OUTSTANDING COMMON STOCK.

After this offering, our directors and executive officers and their
affiliates will collectively control approximately 44.4% of our outstanding
common stock. As a result, these stockholders, if they act together, will be
able to influence our management and affairs and all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may have the
effect of delaying or preventing a change in control of our company and might
affect the market price of our common stock.

OUR CORPORATE DOCUMENTS AND DELAWARE LAW MAKE A TAKEOVER OF OUR COMPANY MORE
DIFFICULT, WHICH MAY LIMIT THE MARKET PRICE OF OUR COMMON STOCK.

Our charter and by-laws and Section 203 of the Delaware General Corporation
Laws contain provisions that might enable our management to resist a takeover of
our company. These provisions might discourage, delay or prevent a change in the
control of Centra or a change in our management. These provisions could also
discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. The existence
of these provisions could limit the price that investors might be willing to pay
in the future for shares of our common stock.

WE MAY USE APPROXIMATELY $22 MILLION OF OUR PROCEEDS FROM THIS OFFERING IN WAYS
WITH WHICH YOU MAY NOT AGREE.

We have not identified specific uses for approximately $22 million of our
estimated proceeds from this offering, and our specific intentions regarding the
allocated proceeds are uncertain and subject to change. Therefore, we will have
broad discretion in how we use the proceeds of this offering. You will not have
the opportunity to evaluate the economic, financial or other information on
which we base our decisions on how to use our proceeds.

OUR HOLDERS OF SERIES A AND SERIES B PREFERRED STOCK WILL RECEIVE A SUBSTANTIAL
BENEFIT FROM THIS OFFERING.

Pursuant to the terms of our charter, the holders of our series A and
series B preferred stock will receive an aggregate payment of $6.5 million from
us upon the closing of this offering. In addition, all of the series A and
series B preferred stock will convert into 3,824,235 shares of common stock.

INVESTORS IN THIS OFFERING WILL PAY A MUCH HIGHER PRICE THAN THE BOOK VALUE OF
OUR COMMON STOCK.

The initial public offering price of our common stock is $7.21 higher than
the book value per share of our common stock, based on an assumed public
offering price of $9.00. As a result, investors purchasing common stock in this
offering will incur immediate and substantial dilution. In the past, we issued
options to acquire common stock at prices significantly below the initial public
offering price. To the extent these outstanding options are ultimately
exercised, there will be further dilution to investors.

14
<PAGE>
USE OF PROCEEDS

We estimate that the net proceeds from our sale of the 5,000,000 shares of
common stock offered by us will be $40.5 million, based on an assumed public
offering price of $9.00 per share and after deducting estimated underwriting
discounts and commissions and estimated offering expenses that we will pay.

We intend to pay $6.5 million of our net proceeds to entities and persons
who hold series A and series B preferred stock immediately before the completion
of this offering. Under the provisions of our certificate of incorporation, this
amount, which equals 150% of the original purchase price paid for the series A
and series B preferred stock, will be payable as a result of the completion of
this offering. The series A and series B preferred stock, along with our other
outstanding series of preferred stock, will convert into common stock
automatically upon the completion of this offering.

We will use our remaining net proceeds for working capital and other general
corporate purposes, including sales and marketing expenses and capital
expenditures. We have not yet determined with any certainty the manner in which
we will allocate the net proceeds, but we currently intend to use approximately
$10 million of the net proceeds to expand our sales and marketing capabilities
and approximately $2 million for capital expenditures. The amounts and timing of
these expenditures will vary depending on a number of factors, including the
amount of cash generated by our operations, competitive and technological
developments, and the rate of growth, if any, of our business. We have no
current plans for the remaining proceeds.

We may use a portion of the net proceeds for acquisitions of businesses,
products and technologies complementary to our business. Although we have
evaluated possible acquisitions, from time to time, we currently have no
commitments or agreements to make any acquisitions and we cannot assure you that
we will make any acquisitions in the future. Pending the foregoing uses, we
intend to invest the net proceeds in U.S. government securities and other
short-term, investment-grade, interest-bearing instruments, repurchase
agreements or high-grade corporate notes.

DIVIDEND POLICY

We have never declared or paid any cash dividends on shares of our capital
stock. We currently intend to retain earnings, if any, to fund the development
and growth of our business and do not anticipate paying cash dividends in the
foreseeable future. Our payment of any future dividends will be at the
discretion of our board of directors after taking into account various factors,
including our financial condition, operating results, cash needs and growth
plans. Our credit facility contains restrictive covenants that prohibit us from
paying cash dividends or making stock repurchases or redemptions without the
prior written consent of the lender bank.

15
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1999:

- on an actual basis;

- on a pro forma basis to reflect (a) the conversion of all of our
outstanding preferred stock into common stock upon completion of this
offering, (b) an increase in the book value of the series A and series B
preferred stock to reflect amounts payable to holders upon conversion,
(c) the accrual of amounts payable to the holders of series A and
series B preferred stock, and (d) amendments to our certificate of
incorporation effective upon completion of this offering; and

- on a pro forma as adjusted basis to reflect (a) our sale of 5,000,000
shares of common stock at an assumed public offering price of $9.00 per
share and after deducting estimated underwriting discounts and commissions
and estimated offering expenses that we will pay and (b) the payment of
$6.5 million of our net proceeds to the holders of the series A and series
B preferred stock as described in "Use of Proceeds."

This table should be read together with the consolidated financial
statements and related notes appearing elsewhere in this prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Amounts payable to series A and series B preferred $ -- $ 6,480 $ --
stockholders..............................................
======== ======== ========
Term loan, net of current maturities........................ 376 376 376
-------- -------- --------
Redeemable convertible preferred stock, $0.001 par value;
9,164,490 shares authorized and issued, actual; no shares
authorized and issued, pro forma and pro forma as
adjusted.................................................. 32,480 -- --
-------- -------- --------
Stockholders' equity (deficit):
Preferred stock, $0.001 par value; no shares authorized,
actual; 10,000,000 shares authorized, pro forma and pro
forma as adjusted; no shares issued..................... -- -- --
Common stock, $0.001 par value; 25,000,000 shares
authorized, actual; 100,000,000 shares authorized, pro
forma and pro forma as adjusted; 5,164,923 shares
issued, actual; 18,911,658 shares issued, pro forma;
23,911,658 shares issued, pro forma as adjusted......... 5 19 24
Additional paid-in capital................................ 3,770 30,406 70,877
Accumulated deficit....................................... (26,536) (27,186) (27,186)
Deferred compensation..................................... (1,986) (1,986) (1,986)
Less--treasury stock, at cost; 661,606 shares actual, pro
forma and pro forma as adjusted......................... (40) (40) (40)
-------- -------- --------
Total stockholders' equity (deficit).................... (24,787) 1,213 41,689
-------- -------- --------
Total capitalization.................................. $ 8,069 $ 1,589 $ 42,065
======== ======== ========
</TABLE>

16
<PAGE>
DILUTION

Our pro forma net tangible book value as of December 31, 1999 was
approximately $1.0 million, or $0.05 per share of common stock. Pro forma net
tangible book value per share is determined by dividing (a) the amount of our
total tangible assets less our total liabilities, including $6.5 million payable
to the holders of series A and series B preferred stock, by (b) the pro forma
number of shares of common stock outstanding after giving effect to the
conversion of our preferred stock into common stock. After giving effect to our
sale of 5,000,000 shares of common stock at an assumed public offering price of
$9.00 per share and after deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us, our adjusted pro
forma net tangible book value as of December 31, 1999 would have been
$41.7 million, or $1.79 per share. This amount represents an immediate increase
in pro forma net tangible book value to our existing stockholders of $1.74 per
share and an immediate dilution to new investors of $7.21 per share. The
following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $9.00
Pro forma net tangible book value per share as of December
31, 1999................................................ $0.05
Increase per share attributable to new investors.......... 1.74
-----
Adjusted pro forma net tangible book value per share after
this offering............................................. 1.79
-----
Dilution per share to new investors......................... $7.21
=====
</TABLE>

If the underwriters exercise their option to purchase additional shares in
this offering, our adjusted pro forma net tangible book value at December 31,
1999 would have been $48.0 million, or $1.99 per share, representing an
immediate increase in pro forma net tangible book value to our existing
stockholders of $1.94 per share and an immediate dilution to new investors of
$7.01 per share.

The following table summarizes as of December 31, 1999, on a pro forma basis
after giving effect to the conversion of our preferred stock, the number of
shares of common stock purchased from us, the total consideration paid to us and
the average price per share paid by our existing stockholders and by new
investors, based upon an assumed public offering price of $9.00 per share and
before deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us.

<TABLE>
<CAPTION>
SHARES TOTAL
PURCHASED CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ----------- -------- -----------------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.................... 18,250,052 78.5% $31,511,000 41.2% $ 1.73
New investors............................ 5,000,000 21.5 45,000,000 58.8 9.00
---------- ----- ----------- -----
Total.................................. 23,250,052 100.0% $76,511,000 100.0%
========== ===== =========== =====
</TABLE>

The preceding discussion and tables assume no exercise of any stock options
outstanding as of December 31, 1999. As of December 31, 1999, there were options
outstanding to purchase a total of 1,377,413 shares of common stock. Those
options had a weighted average exercise price of $1.48 per share. To the extent
any of these options are exercised, there will be further dilution to new
investors.

17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data set forth below should be read in
conjunction with our consolidated financial statements and related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this prospectus. The consolidated statement
of operations data for the years ended December 31, 1997, 1998 and 1999 and the
consolidated balance sheet data as of December 31, 1998 and 1999 are derived
from financial statements audited by Arthur Andersen LLP and included elsewhere
in this prospectus. The consolidated statement of operations data for the period
from our inception, April 4, 1995, to December 31, 1995 and for the year ended
December 31, 1996 and the consolidated balance sheet data as of December 31,
1995, 1996 and 1997 are derived from audited financial statements not included
in this prospectus. Historical results are not necessarily indicative of
operating results to be expected in the future.

<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(APRIL 4, 1995) YEAR ENDED DECEMBER 31,
TO DECEMBER 31, -----------------------------------------
1995 1996 1997 1998 1999
--------------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License................................................... -- -- $ 234 $ 3,356 $ 7,017
Service................................................... -- -- 55 870 1,578
------ ------- ------- ------- -------
Total revenues.......................................... -- -- 289 4,226 8,595
------ ------- ------- ------- -------
Cost of revenues:
License................................................... -- -- 75 185 173
Service................................................... -- -- 130 919 1,543
------ ------- ------- ------- -------
Total cost of revenues.................................. -- -- 205 1,104 1,716
------ ------- ------- ------- -------
Gross profit................................................ -- -- 84 3,122 6,879
------ ------- ------- ------- -------
Operating expenses:
Sales and marketing....................................... $ 94 $ 607 2,465 5,066 8,040
Product development....................................... 411 1,564 3,042 3,078 4,594
General and administrative................................ 141 463 983 1,442 2,440
Compensation charge for issuance of stock options......... -- -- -- -- 736
------ ------- ------- ------- -------
Total operating expenses................................ 646 2,634 6,490 9,586 15,810
------ ------- ------- ------- -------
Operating loss.............................................. (646) (2,634) (6,406) (6,464) (8,931)
Interest income, net........................................ 32 65 35 211 308
------ ------- ------- ------- -------
Net loss.................................................... (614) (2,569) (6,371) (6,253) (8,623)
Accretion of discount on preferred stock.................... 85 373 506 506 507
------ ------- ------- ------- -------
Net loss attributable to common stockholders................ $ (699) $(2,942) $(6,877) $(6,759) $(9,130)
====== ======= ======= ======= =======
Basic and diluted net loss per share........................ $(0.45) $ (0.75) $ (1.33) $ (1.16) $ (1.39)
====== ======= ======= ======= =======
Weighted average shares outstanding......................... 1,561 3,935 5,156 5,845 6,588
====== ======= ======= ======= =======
Pro forma basic and diluted net loss per share.............. $ (0.64)
=======
Pro forma weighted average shares outstanding............... 15,281
=======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 514 $ 964 $ 8,079 $ 1,979 $ 7,878
Working capital............................................. 396 681 7,241 1,541 5,828
Total assets................................................ 676 1,503 9,238 4,753 13,296
Term loan, net of current maturities........................ 48 55 158 530 376
Redeemable convertible preferred stock...................... 1,105 4,240 17,992 18,498 32,480
Total stockholders' deficit................................. (596) (3,105) (9,977) (16,672) (24,787)
</TABLE>

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS
OF OPERATIONS SHOULD BE READ TOGETHER WITH "SELECTED CONSOLIDATED FINANCIAL
DATA" AND OUR CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES APPEARING
ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION AND ANALYSIS CONTAINS
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS, UNCERTAINTIES AND ASSUMPTIONS.
THE ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS AS A RESULT OF MANY FACTORS, INCLUDING THOSE SET
FORTH UNDER "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

We design, develop and support software and services for live eBusiness
collaboration. From our incorporation in April 1995 through June 1997, we were
in the development stage. In July 1997, we began commercial shipment of the
initial version of our software product. In April 1999, we significantly
expanded the functionality of this product and introduced the enhanced version
under the name Centra 99. In October 1999, we announced the introduction of our
Web collaboration service, CentraNow, and the Centra Business Collaboration
Network.

Through December 31, 1999, our revenues were derived from licenses of our
software products, from related maintenance, and from the delivery of
implementation consulting, training and hosting services. We price licenses of
Centra 99 on a rental or purchase basis under a variety of licensing models,
including named-user licenses, concurrent-user licenses, time-limited licenses
and revenue-sharing. Customers who license Centra 99 typically purchase
renewable maintenance contracts that provide software upgrades and technical
support over a stated term, usually a twelve-month period. Maintenance is priced
as a percentage of our license fees. We also offer implementation consulting,
training and education services to our customers on a time-and-materials basis.
In August 1999, we began providing hosting services for customers on a temporary
basis under hosting agreements, with terms ranging from six to twelve months, to
outsource the administration and infrastructure necessary to operate Centra 99.
The hosting fees include a set-up fee and monthly service fees, in addition to
license fees for the software. While CentraNow currently is a free service, we
intend to offer priced services with expanded functionality on CentraNow in the
future.

We recognize our software license revenues in accordance with AICPA
Statement of Position 97-2, "Software Revenue Recognition," and related
amendments and interpretations contained in the AICPA's Statement of Position
98-4. We generally recognize revenues allocated to software licenses upon
delivery of the software products, when all of the following conditions have
been met:

- we have signed a non-cancelable license agreement with the customer;

- the license fee is fixed or determinable; and

- the license fee is collectible.

Because substantially all of our software license agreements include related
services, these agreements are multiple-element arrangements. We allocate the
fees in multiple-element arrangements based on vendor-specific objective
evidence of value for each element. Delivery of the software generally is deemed
to occur upon shipment of the software. In situations where we provide
application hosting services, delivery of the software occurs upon initiation of
the hosting service. Revenues from maintenance and hosting services are
recognized ratably over the related contractual period. Revenues allocable to
implementation, consulting and training services are recognized as services are
performed.

We record as deferred revenues any billed amounts due from customers in
excess of revenues recognized.

We sell our products and services primarily through a direct sales force and
through relationships with distributors and other strategic partners. We have
established European sales operations based in the United Kingdom and have a
master distributor in Japan. Revenues from international sales were

19
<PAGE>
$503,000 for 1999, or 6% of total revenues. We intend to continue to build our
international presence and anticipate that the percentage of revenues derived
from outside the United States will increase.

Our cost of license revenues includes royalties due to third parties for
technology included in our products, as well as costs of product documentation,
media used to deliver our products and fulfillment. Our cost of service revenues
includes (a) salaries and related expenses for our consulting, education and
technical support services organizations, (b) an overhead allocation consisting
primarily of our facilities, communications and depreciation expenses, and
(c) direct costs related to our hosting services.

Our operating expenses are classified into four general categories: sales
and marketing, product development, general and administrative, and compensation
charge for issuance of stock options.

- Sales and marketing expenses consist primarily of (a) salaries and other
related costs for sales and marketing personnel and (b) costs associated
with marketing programs, including trade shows and seminars, public
relations activities and new product launches.

- Product development expenses consist primarily of employee salaries and
benefits, fees for outside consultants and related costs associated with
the development of new products, the enhancement of existing products,
quality assurance, testing and documentation.

- General and administrative expenses consist primarily of salaries and
other related costs for executive, financial, administrative and
information technology personnel, as well as accounting and legal costs.

- Compensation charge for issuance of stock options represents the
amortization, over the vesting period of the option, of the difference
between the exercise price of options granted to employees and the deemed
fair market value of the options for financial reporting purposes.

In the development of new products and enhancements of existing products,
the technological feasibility of the software is not established until
substantially all product development is complete. Historically, our software
development costs eligible for capitalization have been insignificant and all
costs related to internal product development have been expensed as incurred.

Our series A and series B preferred stock have participation rights that
allow holders to receive a liquidation premium equal to 150% of their original
investment upon the redemption, liquidation and automatic conversion of the
preferred stock into common stock. For financial reporting purposes, we
discounted the value of series A and series B preferred stock by the value of
these participating rights. We have been increasing the carrying value of the
series A and series B preferred stock for the liquidation premium and
participation discount through charges to stockholders' deficit over the
redemption period. This increase is also reflected in the accretion of discount
on preferred stock in our statement of operations. Upon the automatic conversion
of the series A and series B preferred stock into common stock at the completion
of this offering, any unamortized liquidation premium and participation discount
on the series A and series B preferred stock will be accreted. The unamortized
liquidation premium and participation discount on the series A and series B
preferred stock as of December 31, 1999 totalled $650,000. This accretion will
have a significant adverse impact on net income (loss) attributable to common
stockholders and basic and diluted net income (loss) per share in the period in
which the conversion occurs.

We have experienced substantial losses in each fiscal period since our
inception. As of December 31, 1999, we had an accumulated deficit of
$26.5 million. These losses and our accumulated deficit have resulted from our
lack of substantial revenues, as well as the significant costs incurred in the
development of our products and services and in the preliminary establishment of
our infrastructure. We expect to increase our expenditures in all areas in order
to execute our business plan, particularly in sales and marketing. The planned
increase in sales and marketing expense will result principally from the hiring
of additional sales force personnel to focus on major account sales

20
<PAGE>
and from marketing programs to increase brand awareness. Accordingly, we expect
to experience additional losses for the foreseeable future.

Although we have experienced revenue growth in recent periods, our recent
rate of revenue growth may not be sustainable. We may not be able to continue to
increase our revenues or to attain profitability and, if we do achieve
profitability, we may not be able to sustain profitability for any period. We
believe that period-to-period comparisons of our historical operating results
may not be meaningful, and you should not rely upon them as an indication of our
future financial performance.

RESULTS OF OPERATIONS

The following table sets forth operating data expressed as percentages of
total revenues for each period indicated.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues:
License................................................... 81% 79% 82%
Service................................................... 19 21 18
------ ---- ----
Total revenues.......................................... 100 100 100
------ ---- ----
Cost of revenues:
License................................................... 26 4 2
Service................................................... 45 22 18
------ ---- ----
Total cost of revenues.................................. 71 26 20
------ ---- ----
Gross margin................................................ 29 74 80
------ ---- ----
Operating expenses:
Sales and marketing....................................... 853 120 94
Product development....................................... 1,053 73 53
General and administrative................................ 340 34 28
Compensation charge for issuance of stock options......... -- -- 9
------ ---- ----
Total operating expenses................................ 2,246 227 184
------ ---- ----
Operating loss.............................................. (2,217) (153) (104)
Interest income, net........................................ 12 5 3
------ ---- ----
Net loss.................................................... (2,205)% (148)% (101)%
====== ==== ====
</TABLE>

COMPARISON OF 1999 AND 1998

REVENUES. Total revenues increased by $4.4 million, or 103%, to
$8.6 million for 1999, from $4.2 million for 1998. The increase was attributable
to an increase in our customer base resulting in substantial growth in license
and service revenues.

- License revenues increased by $3.7 million, or 109%, to $7.0 million for
1999, from $3.4 million for 1998. The increase was attributable to the
expansion of our sales force, increased sales productivity due to the
addition of new sales management personnel, expanded sales to our existing
customer base, and an increase in the average selling prices of software
licenses resulting from the introduction and release of Centra 99 in
April 1999.

- Service revenues increased by $708,000, or 81%, to $1.6 million for 1999,
from $870,000 for 1998. The increase related primarily to an increase in
maintenance support contracts and

21
<PAGE>
consulting services sold to new customers. Service revenues represented
18% of total revenues for 1999 and 21% of total revenues for 1998.

COST OF LICENSE REVENUES. Cost of license revenues decreased by $12,000, or
6%, to $173,000 for 1999, from $185,000 for 1998. Cost of license revenues was
2% of license revenues for 1999 and 6% of license revenues for 1998. The
decrease was attributable to a decrease in royalty obligations to third parties
resulting from our purchase in 1999 of technology that we previously licensed.
We anticipate that cost of license revenues will increase in the future in
absolute dollars due to additional customers licensing our products and the
licensing of additional technologies from third parties.

COST OF SERVICE REVENUES. Cost of service revenues increased by $624,000,
or 68%, to $1.5 million for 1999, from $919,000 for 1998. The increase was due
primarily to an increase in the number of technical support, consulting and
education personnel providing services to our customers. Cost of service
revenues was 98% of service revenues for 1999 and 106% of service revenues for
1998. The decrease as a percentage of service revenues was due primarily to the
growth in service revenues resulting from a larger installed customer base. We
anticipate that the cost of service revenues will continue to increase in
absolute dollars to the extent that we continue to generate new customers and
associated license and service revenues. Cost of service revenues as a
percentage of service revenues can be expected to vary significantly from period
to period depending on the mix of services that we provide and overall
utilization rates of our service personnel.

SALES AND MARKETING EXPENSES. Sales and marketing expenses increased by
$3.0 million, or 59%, to $8.0 million for 1999, from $5.1 million for 1998. The
increase was primarily attributable to an increase in the number of direct
sales, telemarketing and sales management employees. To a lesser extent, the
increase was related to an increase in marketing programs, including trade
shows, and advertising and public relations related to product launch
activities. Sales and marketing expenses were 94% of total revenues for 1999 and
120% of total revenues for 1998. The decrease as a percentage of total revenues
was due primarily to the increase in total revenues. We expect that sales and
marketing expenses will continue to increase in absolute dollars to support
marketing programs for new product launches, international expansion and
increased sales efforts.

PRODUCT DEVELOPMENT EXPENSES. Product development expenses increased by
$1.5 million, or 49%, to $4.6 million for 1999, from $3.1 million for 1998. The
increase primarily resulted from salaries associated with newly hired product
development personnel, increased fees for outside consultants and, to a lesser
extent, the purchase of certain source code. Product development expenses were
53% of total revenues for 1999 and 73% of total revenues for 1998. The decrease
as a percentage of total revenues was due primarily to the increase in total
revenues. We believe that continued investment in product development is
critical to attaining our strategic objectives, and, as a result, we expect
product development expenses will continue to increase in absolute dollars as
additional product development personnel are added.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by $1.0 million, or 69%, to $2.4 million for 1999, from $1.4 million
for 1998. The increase primarily resulted from salaries associated with newly
hired personnel and related operational costs required to manage our growth.
General and administrative expenses were 28% of total revenues for 1999 and 34%
of total revenues for 1998. The decrease as a percentage of total revenues was
due primarily to the increase in total revenues. We expect that general and
administrative expenses will continue to increase in absolute dollars, as we
continue to add personnel to support our expanding operations, incur additional
costs related to the growth of our business, and assume the responsibilities and
the costs associated with becoming a public company.

COMPENSATION CHARGE FOR ISSUANCE OF STOCK OPTIONS. We incurred a charge of
$736,000 for 1999 related to the issuance of stock options to employees and
non-employees during 1999. These options vest over periods up to five years,
which will result in additional compensation expense of

22
<PAGE>
approximately $2.0 million for periods ending subsequent to December 31, 1999.
If all options vest in accordance with the original terms, we expect to incur
charges of $444,000 in 2000, $444,000 in 2001, $444,000 in 2002, $444,000 in
2003 and $209,000 in 2004.

INTEREST INCOME, NET. Interest income, net increased by $97,000, or 46%, to
$308,000 for 1999, from $211,000 for 1998. The increase resulted from a higher
average cash balance for 1999 compared to 1998 due to the receipt of proceeds
from our sale of equity securities in April 1999.

NET LOSS. Net loss increased by $2.3 million, or 38%, to $8.6 million for
1999, from $6.3 million for 1998. The increase was due to increased operating
expenses, partially offset by increased revenues.

COMPARISON OF 1998 AND 1997

REVENUES. Total revenues increased by $3.9 million to $4.2 million for
1998, from $289,000 for 1997, due to the release of our initial product in
July 1997 and increased acceptance of our products. Bay Networks, which was
subsequently acquired by Nortel Networks, accounted for 11% of total revenues
for 1998.

- License revenues increased by $3.1 million to $3.4 million for 1998, from
$234,000 for 1997. The increase in license revenues reflected a full year
of sales in 1998, the release of a new product version in October 1997 and
the expansion of the direct sales force in 1998. License revenues
represented 79% of total revenues for 1998 and 81% of total revenues for
1997.

- Service revenues increased by $815,000 to $870,000 for 1998, from $55,000
for 1997. The increase related primarily to an increase in maintenance
support contracts and consulting services sold to new customers. Service
revenues represented 21% of total revenues for 1998 and 19% of total
revenues for 1997.

COST OF LICENSE REVENUES. Cost of license revenues increased by $110,000,
or 147%, to $185,000 for 1998, from $75,000 for 1997. The increase was
attributable to increases in license revenues and third-party royalties. Cost of
license revenues was 6% of license revenues for 1998 and 32% of license revenues
for 1997. The improvement in margins for license revenues was related primarily
to the increase in license revenues.

COST OF SERVICE REVENUES. Cost of service revenues increased by $789,000 to
$919,000 for 1998, from $130,000 for 1997. The increase was principally a result
of an increase in the number of service personnel, as well as a full year of
service costs in 1998. Cost of service revenues was 106% of service revenues for
1998 and 236% of service revenues for 1997. During 1997 and 1998, we realized
negative margins on service revenues as we increased the number of our service
employees in anticipation of a larger customer base.

SALES AND MARKETING EXPENSES. Sales and marketing expenses increased by
$2.6 million, or 106%, to $5.1 million for 1998, from $2.5 million for 1997. The
increase was due to increases in sales and marketing personnel and marketing
program expenditures.

PRODUCT DEVELOPMENT EXPENSES. Product development expenses increased by
$36,000, or 1%, to $3.1 million for 1998, from $3.0 million for 1997.

GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by $459,000, or 47%, to $1.4 million for 1998, from $983,000 for 1997.
The increase was primarily due to salaries associated with an increase in the
number of general and administrative employees.

INTEREST INCOME, NET. Interest income, net increased by $176,000 to
$211,000 for 1998, from $35,000 for 1997. The increase resulted from an increase
in average cash balances in 1998 compared to 1997 due to the receipt of proceeds
from our sale of equity securities in December 1997.

23
<PAGE>
NET LOSS. Net loss decreased by $118,000, or 2%, to $6.3 million for 1998,
from $6.4 million for 1997. The decrease in 1998 was due to a full year of
revenues in 1998, partially offset by increased operating expenses.

QUARTERLY RESULTS OF OPERATIONS

The following table presents our unaudited quarterly results of operations
for 1998 and 1999 both in absolute dollars and as a percentage of our total
revenues for each quarter. You should read the following table in conjunction
with our consolidated financial statements and related notes appearing elsewhere
in this prospectus. We have prepared this unaudited information on a basis
consistent with the audited consolidated financial statements contained in this
prospectus and includes all adjustments, consisting only of normal recurring
adjustments, that we consider necessary for a fair presentation of our financial
position and operating results for the quarters presented. You should not draw
any conclusions about our future results from the results of operations for any
quarter.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- --------- ---------- --------- --------- --------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
License....................... $ 645 $ 674 $ 798 $ 1,239 $ 686 $ 1,503 $ 2,345 $ 2,483
Service....................... 169 228 202 271 340 337 371 530
------- ------- ------- ------- ------- ------- ------- -------
Total revenues.............. 814 902 1,000 1,510 1,026 1,840 2,716 3,013
------- ------- ------- ------- ------- ------- ------- -------
Cost of revenues:
License....................... 35 43 42 65 36 55 47 35
Service....................... 178 265 241 235 327 320 411 485
------- ------- ------- ------- ------- ------- ------- -------
Total cost of revenues...... 213 308 283 300 363 375 458 520
------- ------- ------- ------- ------- ------- ------- -------
Gross profit.................... 601 594 717 1,210 663 1,465 2,258 2,493
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing........... 1,270 1,123 1,141 1,532 1,356 1,861 2,001 2,822
Product development........... 629 715 691 1,043 1,122 1,041 975 1,456
General and administrative.... 343 389 332 378 417 492 635 896
Compensation charge for
issuance of stock options... -- -- -- -- 21 103 112 500
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses.... 2,242 2,227 2,164 2,953 2,916 3,497 3,723 5,674
------- ------- ------- ------- ------- ------- ------- -------
Operating loss.................. (1,641) (1,633) (1,447) (1,743) (2,253) (2,032) (1,465) (3,181)
Interest income, net............ 93 57 43 18 5 80 126 97
------- ------- ------- ------- ------- ------- ------- -------
Net loss........................ (1,548) (1,576) (1,404) (1,725) (2,248) (1,952) (1,339) (3,084)
Accretion of discount on
preferred stock............... 127 127 126 126 127 127 126 127
------- ------- ------- ------- ------- ------- ------- -------
Net loss attributable to common
stockholders.................. $(1,675) $(1,703) $(1,530) $(1,851) $(2,375) $(2,079) $(1,465) $(3,211)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>

24
<PAGE>

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
--------- --------- ---------- --------- --------- --------- ---------- ---------
(AS PERCENTAGES OF TOTAL REVENUES)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues:
License....................... 79% 75% 80% 82% 67% 82% 86% 82%
Service....................... 21 25 20 18 33 18 14 18
---- ---- ---- ---- ---- ---- --- ----
Total revenues.............. 100 100 100 100 100 100 100 100
---- ---- ---- ---- ---- ---- --- ----
Cost of revenues:
License....................... 4 5 4 4 3 3 2 1
Service....................... 22 29 24 16 32 17 15 16
---- ---- ---- ---- ---- ---- --- ----
Total cost of revenues...... 26 34 28 20 35 20 17 17
---- ---- ---- ---- ---- ---- --- ----
Gross margin.................... 74 66 72 80 65 80 83 83
---- ---- ---- ---- ---- ---- --- ----
Operating expenses:
Sales and marketing........... 156 125 114 101 132 101 74 94
Product development........... 77 79 69 69 109 57 36 48
General and administrative.... 42 43 33 25 41 27 23 30
Compensation charge for
issuance of stock options... -- -- -- -- 2 5 4 16
---- ---- ---- ---- ---- ---- --- ----
Total operating expenses.... 275 247 216 195 284 190 137 188
---- ---- ---- ---- ---- ---- --- ----
Operating loss.................. (201) (181) (144) (115) (219) (110) (54) (105)
Interest income, net............ 11 6 4 1 -- 4 5 3
---- ---- ---- ---- ---- ---- --- ----
Net loss........................ (190) (175) (140) (114) (219) (106) (49) (102)
Accretion of discount on
preferred stock............... 16 14 13 8 12 7 5 4
---- ---- ---- ---- ---- ---- --- ----
Net loss attributable to common
stockholders.................. (206)% (189)% (153)% (122)% (231)% (113)% (54)% (106)%
==== ==== ==== ==== ==== ==== === ====
</TABLE>

Our total revenues have increased each period except for a decrease for the
three months ended March 31, 1999, which resulted from decreased sales
productivity related to our replacement of a senior sales executive. These
increases have primarily been due to increased acceptance of our products, the
expansion of our sales force and increased service revenues as our installed
customer base has grown. Total cost of revenues also have generally increased in
absolute dollars over the periods presented due to increased royalty costs and
an increase in the number of customer support personnel. A significant portion
of our revenues has been generated from a limited number of customers, and it is
difficult to predict the timing of future orders and shipment to these and other
customers. We anticipate that our operating results in any given period will
continue to depend to a significant extent upon sales to a small number of
customers.

Operating expenses have experienced significant variations from quarter to
quarter primarily as the result of the timing and number of additions of
personnel and related compensation costs for sales and marketing, product
development and general and administrative expenses. In addition, variations in
sales and marketing are also related to the timing, number and significance of
specific marketing activities, such as trade shows, product launches and other
promotional activities. Operating expenses will continue to increase as we grow
our infrastructure to support our expanding operations.

A variety of factors, many of which are outside of our control, may affect
our quarterly operating results. These factors include:

- the evolution of the market for live eBusiness collaboration solutions;

- market acceptance of our products and services;

- our success and timing in developing and introducing new products and
enhancements to existing products;

- the introduction of products and services by our competitors;

- changes in pricing policies by us or our competitors;

25
<PAGE>
- the length of our sales cycle;

- changes in customer buying patterns; and

- market entry by new competitors.

Our quarterly operating results have varied widely in the past, and we
expect that they will continue to fluctuate in the future as a result of a
number of factors, many of which are outside our control. Our limited operating
history and the undeveloped nature of the market for live eBusiness
collaboration solutions make predicting future revenues difficult. Our expense
levels are based, in part, on expectations regarding future revenue increases,
and to a large extent, such expenses are fixed, particularly in the short term.
There can be no assurance that our expectations regarding future revenues are
accurate. Moreover, we may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall. Accordingly, any significant
shortfall in revenues in relation to our expectations would likely cause
significant increases in our net losses for that period.

Due to the foregoing factors, our operating results are difficult to
forecast. We believe that period-to-period comparisons of our operating results
are not meaningful, and you should not rely on them as indicative of our future
performance. You should also evaluate our prospects in light of the risks,
expenses and difficulties commonly encountered by comparable early-stage
companies in new and rapidly emerging markets. We cannot assure you that we will
successfully address the risks and challenges that face us. In addition,
although we have experienced significant revenue growth recently, we cannot
assure you that our revenues will continue to grow or that we will become or
remain profitable in the future.

LIQUIDITY AND CAPITAL RESOURCES

Since our inception, we have financed our operations primarily through
private sales of equity securities, resulting in net proceeds of $31.5 million
through December 31, 1999. To a lesser extent, we have financed our operations
with equipment financing through a line of credit and term loan arrangements
with Silicon Valley Bank.

As of December 31, 1999, we had cash and cash equivalents totaling
$7.9 million, an increase from $2.0 million of cash and cash equivalents held as
of December 31, 1998. This increase primarily resulted from our sale of equity
securities in April 1999, which provided net proceeds of $13.4 million, reduced
by cash used to fund operations and investing activities for 1999.

Our operating activities resulted in a net cash outflow of $6.4 million for
1999, primarily due to operating losses, as well as increases in account
receivables, prepaid expenses and other assets partially offset by increases in
depreciation and amortization and deferred revenue. Our operating activities
resulted in net cash outflows of $5.5 million for 1997 and $6.5 million for
1998. The operating cash outflows primarily resulted from operating losses and
increases in accounts receivable, partially offset by increases in accounts
payable, accrued expenses and deferred revenues.

Our investing activities resulted in a net cash outflow of $1.3 million for
1999, due to purchases of property and equipment. Our investing activities
resulted in net cash outflows of $774,000 for 1997 and $191,000 for 1998. Our
investing activities principally consist of purchases of property and equipment.

Our financing activities resulted in a net cash inflow of $13.6 million for
1999, primarily due to our sale of equity securities in April 1999. Our
financing activities resulted in net cash inflows of $13.3 million for 1997 and
$632,000 for 1998. Our financing activities principally consist of sales of
equity securities and the issuance and repayment of bank loans.

As of December 31, 1999, under an equipment term loan line of credit, we had
outstanding loans of $663,000, which bear interest at the rate of 9.5% per year.
Principal payments are due in 36 equal monthly installments through
September 30, 2002, and all borrowings are secured by substantially all of our
assets. We had a $750,000 bank revolving line of credit that expired on
December 30, 1999.

26
<PAGE>
We have received a commitment letter from the bank for a $2.0 million
revolving line of credit. The revolving line of credit will bear interest at the
prime rate plus 0.50% with availability based on eligible accounts receivable,
as defined. We also received a commitment letter from the bank for a
$2.0 million equipment line of credit, of which $1.0 million is available
through June 30, 2000 and the remaining $1.0 million will be available
thereafter. The equipment line of credit will bear interest at the prime rate
plus 1.0%. All borrowings will be converted into 36 month term loans.

Capital expenditures totalled $543,000 for 1997, $472,000 for 1998 and
$1.3 million for 1999. Our capital expenditures consisted of purchases of
operating resources to manage our operations, including computer hardware and
software, office furniture and equipment and leasehold improvements. Purchases
of computer equipment represent the largest component of our capital
expenditures. We expect capital expenditures to increase for the foreseeable
future as we increase our number of employees, increase the size of our
operating facilities, and improve and expand our information systems. Since
inception, we have generally funded capital expenditures either through the use
of working capital or with equipment bank loans.

As of December 31, 1999, we had net operating loss carryforwards of
$22.8 million and research and development credit carryforwards of $394,000. The
net operating loss and credit carryforwards will expire at various dates,
beginning in 2000, if not used. Under the provisions of the Internal Revenue
Code, substantial changes in our ownership may limit the amount of net operating
loss carryforwards that could be utilized annually in the future to offset
taxable income. A full valuation allowance has been established in our financial
statements to reflect the uncertainty of our ability to use available tax loss
carryforwards and other deferred tax assets.

We expect to experience significant growth in our operating expenses,
particularly product development and sales and marketing expenses, for the
foreseeable future in order to execute our business plan. As a result, we
anticipate that such operating expenses, as well as planned capital
expenditures, international sales expansion and the launch of our Web-based
service will constitute a material use of our cash resources. A portion of our
net proceeds from this offering may be used to fund the expansion of our sales
and marketing capabilities and capital expenditures, as described in "Use of
Proceeds." We also may utilize cash resources to fund acquisitions of, or
investments in, complementary businesses, technologies or product lines. We
believe that the net proceeds from the sale of common stock in this offering,
together with our existing cash and cash equivalents, will be sufficient to
finance our operations through at least the next 12 months. If we do not
complete this offering, we believe that our existing cash and cash equivalents
will be sufficient to allow us to operate under a different operating plan, with
reduced sales and marketing expenditures, through at least the next 12 months.
Thereafter, we may find it necessary to obtain additional equity or debt
financing. If additional financing is needed, there can be no assurance that
such financing will be available to us on commercially reasonable terms, if at
all.

IMPACT OF THE YEAR 2000 ISSUE

Many currently installed computer systems and software products are unable
to distinguish between twentieth and twenty-first century dates because those
systems and products were developed using two digits rather than four to
determine the applicable year. This error could result in system failures or
miscalculations causing disruptions of operations, including, among other
things, 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 OF OUR OPERATIONS. Our business is dependent on the
operation of numerous systems that could potentially be affected by Year
2000-related problems. Those systems include, among others:

- the software products we sell to customers;

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- hardware and software systems used by us in our operations;

- communication networks such as our client/server network, the Internet and
our corporate intranet;

- the hardware and software systems of our customers and suppliers; and

- non-information technology systems and services, such as utilities,
telephone systems and building systems.

We have conducted an assessment of the potential overall impact of the Year
2000 on our operations. To date, we have identified and tested the material
systems used in our business that may be affected by the Year 2000 and we have
not identified any non-compliant systems used in our operations.

READINESS OF OUR PRODUCTS. Based on a third-party review of the use of
dates within our products, each of the current versions of our products was
found to be Year 2000 compliant when used in accordance with the related
documentation, subject to the Year 2000 compliance of the underlying host
machine and any other software used in connection with our products.

RISKS. Although we have not been party to any litigation or arbitration
proceedings to date 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 such 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 such disputes, and any liability for Year
2000 related damages, including consequential damages, could have a material
adverse effect on our business, operating results and financial condition.

CONTINGENCY PLAN. To date, we have not encountered any material Year 2000
problems with the hardware and software systems we use in our operations.
However, we could experience material adverse effects on our business if we fail
to identify all Year 2000 dependencies in our systems and in the systems of our
suppliers, customers and financial institutions. We have completed a contingency
plan for handling Year 2000 problems that are not detected and corrected prior
to their occurrence. Despite our efforts, we may not identify and remediate all
significant Year 2000 problems on a timely basis, remediation efforts may
involve significant time and expense, and unremediated problems may have a
material adverse effect on our business. We do not plan to assess the specific
Year 2000 compliance of external forces such as utility and transportation
systems or Year 2000 compliance failures that might generally affect industry
and commerce. Any Year 2000 failure of this type, or any other significant
unforeseen Year 2000 failure may force us to halt or significantly curtail our
operations for an indeterminate period.

COSTS. To date, we have not incurred any material costs directly associated
with our Year 2000 compliance efforts, except for compensation expense
associated with our salaried employees who have devoted some of their time to
our Year 2000 assessment and remediation efforts and the costs of a third party
hired by us to test our products and internal systems for Year 2000 problems. We
do not expect the total cost of Year 2000 problems to be material to our
business, operating results and financial condition. Costs associated with Year
2000 issues totalled less than $50,000 through December 31, 1999. We anticipate
that we will spend less than $50,000 in future costs associated with our Year
2000 readiness.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1999, Financial Accounting Standards Board ("FASB") issued SFAS
No. 137, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES-DEFERRAL
OF THE EFFECTIVE DATE OF FASB STATEMENT NO. 133, which defers the effective date
of SFAS No. 133 to all fiscal quarters of all fiscal years beginning after
June 15, 2000. SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES, issued in June 1998, establishes accounting and reporting standards
for derivative instruments,

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including certain derivative instruments embedded in other contracts, and
hedging activities. It requires an entity to recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. We do not expect adoption of this statement to have a
significant impact on our consolidated financial position or operating results.

In December 1998, the AICPA issued Statement of Position 98-9, "Modification
of SOP 97-2, Software Revenue Recognition, With Respect to Certain
Transactions." SOP 98-9 requires use of the residual method of recognition of
revenues when vendor-specific objective evidence exists for undelivered elements
but does not exist for delivered elements of a software arrangement. We will be
required to comply with the provisions of SOP 98-9 for transactions entered into
beginning January 1, 2000. We do not expect the adoption of SOP 98-9 will have a
material effect on our financial position or operating results.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We develop products in the United States and sell them worldwide. As a
result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
Since our sales are currently priced in U.S. dollars and translated to local
currency amounts, a strengthening of the dollar could make our products less
competitive in foreign markets. Interest income and expense are sensitive to
changes in the general level of U.S. interest rates, particularly since our
investments are in short-term instruments and our long-term debt and available
line of credit require interest payments calculated at variable rates. Based on
the nature and current levels of our investments and debt, however, we have
concluded that there is no material market risk exposure.

Our general investing policy is to limit the risk of principal loss and
ensure the safety of invested funds by limiting market and credit risk. We
currently use a registered investment manager to place our investments in highly
liquid money market accounts and short-term investments. All highly liquid
investments with original maturities of three months or less are considered to
be cash equivalents.

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BUSINESS

OVERVIEW

We design, develop and support software and services that provide live
eBusiness collaboration, enabling the development of stronger customer, partner
and employee relationships, collaborative commerce, and corporate learning and
training. Our products provide Internet infrastructure for comprehensive live
collaboration and include functionalities such as voice over the Internet,
software application sharing, real-time data exchange and shared workspaces.
Companies can use our products for selling, marketing, services and learning.
Our products are reliable and easy to use, and are able to handle many
concurrent users. They are designed to integrate with our customers' existing
computer systems and emerging Internet technologies. As of December 31, 1999, we
had over 170 customers, including Clarke American, Compaq, i2 Technologies,
Kraft Foods, MCI WorldCom, Nationwide Mutual Insurance, Nortel Networks,
PricewaterhouseCoopers, Schering Plough, University of Tennessee and Viacom. In
October 1999, we introduced CentraNow, a Web service for live online business
collaboration, as well as the Centra Business Collaboration Network or Centra
BCN, a global online business network that enables content and service providers
and users to conduct business-to-business interactions over the Web.

INDUSTRY BACKGROUND

The Internet is experiencing dramatic growth, both in the number of users
and as a means of conducting business. International Data Corporation estimates
that the number of Web users in commercial businesses will increase from
59 million in 1998 to 250 million by 2003. According to Forrester Research,
business-to-business e-commerce will increase from $43 billion in 1998 to
$1.3 trillion in 2003. As e-commerce and the number of online constituents
grows, companies are making substantial investments in the development of the
software infrastructure necessary to take advantage of the power and
accessibility of the Internet. International Data Corporation also estimates
that corporate spending on Internet software will increase from $1.7 billion in
1998 to $13.6 billion in 2002.

To date, companies have focused their Internet infrastructure spending
primarily on technologies designed to enhance the efficiency of processing
commercial transactions. Companies increasingly seek solutions that complement
the transactional processing of e-commerce applications with a live, interactive
environment for the exchange of important information with their constituents,
including customers, partners and employees. These companies seek to utilize the
capabilities of the Internet for business interactions in order to enhance
relationships, create revenue-generating opportunities through customer
collaboration, use their employee knowledge and expertise more effectively,
improve employee productivity and lower operating costs. In order to achieve
these goals, companies need collaborative technologies that enable the sharing
of business-critical information across geographically distributed enterprises.
These technologies must support the numerous ways in which people collaborate,
including one-to-one customer and sales interactions, one-to-many seminar and
presentation events and many-to-many learning and interactive teamwork sessions.

In order to develop and maintain strong business relationships, companies
historically have relied on in-person meetings and traditional business
collaboration technologies, such as the telephone and videoconferencing. To
support in-person meetings, companies incur significant costs resulting from
lost productivity and from employee travel. More importantly, the time and
expense required for in-person collaboration limit a company's ability to
deliver the frequent and spontaneous real-time interactions that are necessary
to strengthen customer and partner relationships and to improve employee
productivity. While the telephone offers broad accessibility and live
interaction, it supports only voice communication and lacks support for other
critical elements of effective business collaboration, such as shared workspaces
and the ability to share control of, and access to, software applications.

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Videoconferencing provides real-time video and voice communication, but it is
expensive and generally limited to specifically configured corporate sites.

The Internet provides a new medium for live collaboration between a company
and its constituents. However, most existing Internet-based solutions, including
text chat, instant messaging and screen sharing, address only discrete live
collaboration needs and are not integrated with each other around a common user
interface or back-end management system. As a result, these products do not
support the broad range of live interaction required by business professionals
for effective live collaboration, and they are not suitable for organizations
seeking to simplify their information technology systems around corporate
standards.

To maximize the return on their investments in Internet infrastructure and
harness the power and accessibility of the Internet for conducting business
interactions, companies require a solution that can integrate voice
communication, conferencing, content sharing and group interaction, which
collectively enable live online business, or eBusiness, collaboration. A live
eBusiness collaboration solution must support a broad range of group
interactions in a variety of business contexts through one consistent and
easy-to-use interface. The solution must allow customers, partners and employees
to interact from any location, regardless of whether they are on a corporate
network or dialing-in from home or on the road. Finally, an effective live
eBusiness collaboration solution must have a reliable and scalable management
environment that can grow to support and integrate with e-commerce Web sites,
enterprise computer systems and emerging Web technologies.

OUR SOLUTION

We design, develop and support solutions for live eBusiness collaboration
that enable the development of stronger business relationships, collaborative
commerce, and corporate learning and training. Our solution consists of three
elements: Centra 99, a Web-based enterprise-class software application;
CentraNow, a Web collaboration service; and Centra BCN, our online network of
members and users. Centra 99 is an enterprise software application that improves
business performance and flexibility by enabling live collaboration to support
internal and external business processes. CentraNow provides a live
collaboration service for business professionals and their teams through our Web
site. Centra BCN is a global eBusiness network that enables content and service
providers and users to conduct business-to-business interactions over the Web.

We believe our live eBusiness collaboration solution provides the following
benefits:

COMPREHENSIVE AND ACCESSIBLE. We offer a comprehensive live collaboration
solution, including voice communication over the Internet, or voice-over-IP,
software application sharing, real-time data exchange and shared workspaces. Our
graphical user interface is easy to use. Our solution is scalable and
facilitates a broad range of business interactions, including one-to-one,
one-to-many, and many-to-many collaborations. With the capabilities to perform
well under low-bandwidth constraints and to reach participants through corporate
firewalls, our solution enables access by remote users with 28.8 Kbps modem
connections and by external customers and partners.

STRENGTHENED CUSTOMER AND PARTNER RELATIONSHIPS. As a result of our
solution's highly interactive capabilities and the ease with which people can
convene online using our products, companies can develop stronger business
relationships and loyalty through frequent personal interaction and information
sharing. These capabilities also provide companies with the ability to
strengthen existing and develop new customer relationships in order to increase
revenues and customer loyalty.

IMPROVED UTILIZATION OF INTELLECTUAL CAPITAL. Within most companies, a
limited number of people possess a disproportionate amount of the organization's
collective "knowledge" or intellectual capital. Our solution enables these
companies to utilize these important individuals more efficiently and
effectively. With our solution, experts are no longer limited to interacting in
a particular geographic

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area or constrained by the need to travel. Companies gain opportunities for
wider, more frequent and more cost-effective delivery of knowledge in support of
business processes such as sales, services, marketing, product development and
training.

ENHANCED DISTRIBUTION AND MARKETABILITY OF CONTENT AND SERVICES. Our
solution offers content and service providers a versatile distribution system
for the interactive marketing and delivery of revenue-generating content and
services. For example, content providers and companies offering knowledge-based
services can use our solution to efficiently access potential customers
worldwide. Centra BCN members can leverage the live eBusiness collaboration
capabilities of our solution for the marketing and support of their content and
service offerings.

ENHANCED PRODUCTIVITY AND SIGNIFICANT COST REDUCTIONS. Our solution enables
companies to increase the productivity of their employees while dramatically
reducing travel, facilities and telecommunications costs. By providing a
comprehensive collaboration solution, we enable companies to communicate with
their constituents without the financial and personnel costs associated with
business travel or video or audio conferencing.

OUR STRATEGY

Our goal is to be the leading provider of products and services for live
eBusiness collaboration. Key elements of our strategy to achieve this goal
include:

INCREASE BASE OF WEB-BASED COLLABORATION USERS. We believe that the
dynamics of live eBusiness collaboration will fuel user adoption of our
solution. As our solution is deployed by more organizations, online
collaboration users will invite increasing numbers of customers, partners and
other external users to participate through our CentraNow Web service, which
will, over time, increase awareness of the value of Centra 99's live
collaboration capabilities. We intend to capitalize on this network effect of
Web-based collaboration to expand our base of users and increase the value of
our products and services.

INCREASE ADOPTION OF OUR SOLUTION BY OUR CUSTOMER BASE. We believe that our
existing customers will be a significant source of revenues as they implement
our products across their organizations. We have licensed our products to over
170 customers, many of whom initially implemented our products within specific
departments or for identified business processes, such as sales, services,
marketing and training. As customers continue to use our live eBusiness
collaboration products, we believe they will seek to implement our products and
use our services across additional departments and business processes throughout
the extended enterprise. In addition, as live eBusiness collaboration becomes
increasingly critical to our customers' business processes, we expect that they
will seek to extend the reach of our solution to their customers and partners
using CentraNow and Centra BCN.

CONTINUE TO EXPAND THE COMMUNITY OF CENTRA BCN MEMBERS. We intend to
facilitate the adoption of Centra BCN by strengthening our relationships with
Web destinations, as well as providers of eBusiness applications and
professional consulting and training services. Our network members Ariba and
Rosenbluth International enhance their service offerings with the collaborative
capabilities of CentraNow. We are working with our members to increase the
content and services available to network users and to expand our customer base.
As we add new members to Centra BCN, we believe the value of the network will
increase for all users.

ENHANCE OUR COLLABORATION TECHNOLOGY. We believe, based on our awareness of
competitive products, that our technology enables us to offer the most complete
solution for live eBusiness collaboration. Our voice-over-IP conferencing
technology and open and scalable systems architecture were developed to meet
companies' demands for a live collaboration solution with broad reach that can
be easily integrated with their existing computer systems. We have invested over
four years in the

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development of the collaborative technologies that provide the foundation for
Centra 99 and CentraNow. We intend to continue to devote significant resources
to the development of new and innovative products and services for live
eBusiness collaboration based on our proven systems architecture.

DEVELOP MARKETING RELATIONSHIPS. We are seeking to develop marketing
relationships with other companies to take advantage of the market opportunity
for live eBusiness collaboration. For example, we have entered into a
relationship with PricewaterhouseCoopers that enables them to incorporate Centra
99 into their application deployment methodology, which we believe will increase
our ability to market Centra 99 to PricewaterhouseCoopers' consulting clients.
These relationships increase market awareness of our products and services and
create alternative distribution channels. We intend to enter into marketing
relationships with additional companies in the Web application and professional
services markets.

EXPAND INTERNATIONAL OPERATIONS. We believe that international customers
represent a significant opportunity for our products and services. We have
established European sales operations based in the United Kingdom and have
engaged Macnica to serve as our master distributor in Japan. We intend to
continue to increase our global presence by expanding our worldwide field sales
and services organization and by entering into relationships with distributors.

PRODUCTS AND SERVICES

Our live eBusiness collaboration products and services enable Web-based
interaction with customers, partners and employees in a variety of business
contexts. Unlike other ways people may collaborate, our solution enables groups
of people to assemble, communicate, interact, share content and work together in
real-time over intranets, extranets and the Internet. Our solution integrates
voice conferencing, real-time data exchange and an easy-to-use user interface
delivered through a Web browser. We incorporate a broad range of content by
providing interfaces to enterprise application systems, information repositories
and common file formats like Microsoft PowerPoint. In addition, we operate a
network that supports online business-to-business collaboration.

Our solution consists of three elements: Centra 99, a Web-based
enterprise-class software application; CentraNow, a Web collaboration service;
and Centra BCN, our online network of content and service providers and users.
Centra 99 and related services accounted for all of our revenues in 1999. Our
products and services create a mutually reinforcing dynamic, designed to
accelerate usage of our products and services by individual users and content
and service providers seeking to collaborate. This dynamic actively enables and
encourages our users to expose other potential users to the value of our
products and services.

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As illustrated below, our three user interfaces--CentraNow, Centra Symposium
and Centra Conference--are accessible over the Internet. For Centra 99, the
management server contains rules to manage an interaction, and the collaboration
servers support collaboration functionalities such as voice-over-IP, real-time
data exchange and shared workspaces. The CentraNow Web service is managed by a
dedicated server, and additional servers may be added to deliver content and
services for Centra BCN members. For Centra 99, toolkits and open application
programming interfaces, or APIs, enable easy integration with e-commerce,
knowledge management and enterprise software applications. Our products and
services are based upon a technological foundation employing Internet standards
and Microsoft platform technologies.

[Description of diagram

Three screens, labeled "CentraNow," "Centra Symposium" and "Centra
Conference," appear across top of diagram. Each of the three screens is
connected to a "cloud" shape, labeled "The Internet," appearing below the
screens. The cloud is connected to eight icons: (1) three icons, all labeled
"Centra BCN Member Channels," and an additional icon labeled "CentraNow
Management Server" rest on a circle labeled "Centra Business Collaboration
Network" and (2) three icons, all labeled "Centra Collaboration Servers," and an
additional icon labeled "Centra Management Server" rest on a circle labeled
"Centra 99." The two circles rest on a square labeled "Toolkits & Open API's,"
which has the subheadings "e-Commerce," "Knowledge Management" and "Enterprise
Applications." The square rests on two rectangles. One rectangle is labeled
"Microsoft Platform," which has the subheadings "Windows OS," "SQL Server" and
"Microsoft Exchange." The other rectangle is labeled "Internet Standards," which
has the subheadings "JAVA," "XML," "HTTP/HTML" and "LDAP Directory Services."]

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CENTRA 99

Centra 99 is a Web-based enterprise software application designed to enable
live eBusiness collaboration over intranets, extranets or the Internet. Centra
99 can support and manage the business interactions of large numbers of users.
Centra 99 provides collaboration capabilities that support a broad range of
business functions, such as sales, customer support, marketing and services. For
a description of several customer applications of Centra 99, see "--Customer
Case Studies."

Key capabilities of Centra 99 include:

USER INTERFACE. Centra 99 supports three application-specific user
interfaces that are intuitive and consistent. These include Centra Conference,
which is designed for one-to-one selling and large-scale Web presentations;
Centra Symposium, which is appropriate for highly interactive events such as
hands-on classes, workshops, coaching and teamwork; and CentraNow, which is
designed for spontaneous meetings and can be easily accessed through Centra 99.

STRUCTURE. Centra 99 uses our proprietary software, Choreography, to apply
structure and control to live eBusiness collaboration and group interaction.
This capability provides a more effective means of orchestrating interaction
between people and content than is typically possible in traditional live
business collaboration.

UNIFIED MANAGEMENT SYSTEM. Centra 99 provides a unified management system
that enables companies to centrally manage multiple collaboration servers, large
numbers of users, system content, and multiple live and recorded business
collaborations.

MAXIMUM REACH. Centra 99 has been designed to enable users to participate
in live events without requiring any change to their computer hardware or
network. Centra 99 enables access by users ranging from mobile professionals
using laptop PCs connected via low-speed 28.8 Kbps modems to corporate users
behind secure network firewalls.

VOICE-OVER-IP. Centra 99 supports voice communication over the Internet as
an integral part of the collaborative experience. The synchronization of voice
and content into one unified communication protocol enhances the quality of the
user experience and enables users to participate in Centra-supported events over
a single network connection. Finally, because voice-over-IP uses the Internet,
users avoid supplemental telephone and conference call charges.

EVENT RECORDING AND PLAYBACK. Centra Symposium events can be recorded in
full fidelity, including audio, software application sharing and user
interactions, for later playback. This feature enables customers to capture
knowledge and publish recorded events for future playback and reuse.

MICROSOFT PLATFORM INTEGRATION. We offer a version of Centra 99 that
integrates with Microsoft Backoffice. This solution enables organizations to
leverage their investments in Microsoft Office, Microsoft SQL Server database
technology and the Microsoft Exchange messaging platform. This integration
offers users enhanced functionality for live eBusiness collaboration and has
increased the attractiveness of Centra 99 to organizations that have
standardized on Microsoft technology.

FLEXIBLE, SCALABLE, EXTENSIBLE AND OPEN SYSTEMS ARCHITECTURE. Centra 99 is
designed to permit the addition of distributed collaboration servers for
increased capacity. This architecture provides customers with a high degree of
flexibility to increase system capacity and optimize network traffic across
distributed organizations. Centra 99 also supports open, published APIs and
Internet standards for integration with other existing computer systems and
eBusiness systems.

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CENTRANOW WEB SERVICE

Based upon Centra 99 technology, CentraNow extends the benefits of live
eBusiness collaboration to individual business professionals. In order to
promote user traffic and familiarity with the benefits of live eBusiness
collaboration, CentraNow offers registered users a free collaboration service
for up to five participants. We intend to extend CentraNow with priced services
offerings and expanded functionality in 2000.

Key capabilities of CentraNow include:

SELF-SERVICE MODEL. CentraNow is an easy-to-use Web service that enables
individuals to schedule a meeting, invite participants by e-mail, and lead a
collaborative session without technical assistance or pre-installed software.
Live technical support is available, if needed, to aid new users.

CONTENT-RICH COLLABORATIVE EXPERIENCE. Participants in CentraNow sessions
can share Microsoft PowerPoint presentations and live software applications with
other participants. Participants can collaboratively mark-up and discuss
content, as well as respond electronically to questions and surveys.

VOICE-OVER-IP. Voice communication among all participants over the Internet
is a standard feature of CentraNow and enhances the live collaboration
experience.

CENTRA BUSINESS COLLABORATION NETWORK

The Centra Business Collaboration Network, or Centra BCN, is a Web-based
service for content and service providers, including Centra 99 users. The online
network enables content aggregation and distribution and live event hosting.
Centra BCN enables content and service providers to add live collaboration and
business interaction to their offerings, while increasing the value of our
service for other businesses and business professionals by providing compelling
collaborative content and events.

Network users will be able to collaborate with other people regarding
content provided by our network members. Each network member will have a channel
on the network dedicated to their collaborative content and events. As more
content is aggregated on Centra BCN, we expect to attract more users. A larger
user base will create a global pool of qualified customers for both members and
network users. Finally, by exposing large business communities to the value of
live eBusiness collaboration through the network, we will increase awareness and
promote the attractiveness of Centra 99 and CentraNow.

PROFESSIONAL SERVICES

We offer comprehensive customer assistance programs, including support
services, education and consulting. Our services organization consisted of 17
employees as of December 31, 1999.

CONSULTING. We offer a wide range of professional consulting services to
customers to facilitate the efficient and cost-effective use of our products and
services. Our consulting group is responsible for the deployment and
implementation of our products. Services include installation, deployment and
implementation, development support and education.

EDUCATION. We provide education programs to assist presenters, content
developers, event managers, systems administrators, help-desk support
professionals, implementation specialists and other professionals in the use of
our products and services. We offer a comprehensive series of online classes
using Centra 99 to provide knowledge and skills to successfully deploy, use and
maintain our products and services. These courses focus on the technical aspects
of our products, as well as business issues and processes related to live
eBusiness collaboration.

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SUPPORT. Our standard maintenance agreement gives customers access to new
software releases and related technical support. Our support team helps resolve
technical inquiries and is available over the Web and by telephone, e-mail and
fax. This group is also responsible for maintaining technical information on our
products.

PRICING

Centra 99 is sold as a Web-based enterprise software product on a rental or
purchase basis. Revenues are derived from server software licenses, user
licenses and software maintenance. A variety of licensing models are used to
support the business needs of different types of customers. These licensing
models include named-user licenses, concurrent-user licenses, time-limited
licenses and revenue-sharing. In addition, we offer our customers hosting
services to outsource the administration of their live eBusiness collaboration
operations. Hosting customers pay a set-up fee and monthly services fees in
addition to license fees for the purchased software. The CentraNow Web service
is currently a free service for registered users. In 2000, we intend to
introduce priced services. We typically provide our professional services on a
time-and-materials basis. Prices for Centra 99 start at $25,000 and increase
based upon both the number of system users and the level of use.

TECHNOLOGY

Our live collaboration technology supports a wide range of business
collaboration events and is designed to deliver high performance and
scalability. The Centra 99 collaboration server software can be deployed on a
single Microsoft Windows NT server and is designed to operate without any
special hardware or network technologies. The system was designed to scale, as
customer usage requires, by adding additional collaboration servers.

We use a broad range of technologies to meet end-user requirements, such as
supporting business contexts ranging from one-on-one meetings to large seminars
and presentations, end-user reach across the enterprise and the Internet, and
easy client deployability. These technologies include Java, C++, JavaScript,
Visual Basic, HTML and XML languages, widely utilized network protocols, leading
directory services such as Lightweight Directory Access Protocol or LDAP, and
Microsoft Internet Explorer and Netscape Navigator Web browsers. The use of Java
as the primary development language has enabled our development of browser-based
user interfaces that reduce the memory space required on a user's hard drive and
are available on demand without prior download or installation.

Our collaboration technology supports network connections as low as 28.8
Kbps and supports user access through corporate network firewalls and Web proxy
servers. The technology was designed to provide high reliability and performance
over low-bandwidth private and public networks. Because all data streams are
combined into a single network connection, our sophisticated connection manager,
known as Adaptive Connectivity, can choose the most reliable method of
connecting a user to a live collaborative event.

A core feature of our technology is voice-over-IP, which provides reliable
and high-quality delivery of audio among all participants. Our voice-over-IP
technology has a unique set of features, including compression, visual feedback
to both speakers and listeners, silence elimination, and timely synchronization
with multimedia content and shared software applications.

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CUSTOMERS

We have targeted and will continue to target Global 2000 companies and other
large organizations in a broad range of industries. The following is a partial
list of our customers:

ENTERPRISE SOFTWARE
Ariba
The Baan Company
i2 Technologies
Manugistics
Open Text
Oracle
The Vantive Corporation
Wall Data

COMPUTERS
Compaq
Data General
Exabyte
Hitachi Data Systems
Sequent

NETWORKING/COMMUNICATIONS
Ascend Communications
Juniper Networks
NEC America
Nortel Networks
Novell

TELECOMMUNICATIONS
Allegiance Telecom
Ameritech Mobile
Communications
AT&T
Bell Canada
MCI WorldCom
Mitel
PSInet
USInternetworking

ENTERTAINMENT AND INFORMATION
Viacom

BROKERAGE AND BANKING
Advanta Mortgage
Advest
American Fidelity Group

INSURANCE
Applied Systems
CCC Information Services
Consumer Insurance Services of
America
Independent Insurance
Agents of America
Nationwide Mutual Insurance
The Standard Insurance

CONSUMER GOODS
Federated Department Stores
Kraft Foods
Sony

PHARMACEUTICAL AND HEALTHCARE
DuPont Pharma Medical
Imaging
Merck
Schering Plough
Shared Medical Systems

INTERNET LEARNING
Health Learning Systems
Kaplan Educational Centers
Ziff-Davis Education

CONSULTING AND SERVICES
Automatic Data Processing
(ADP)
Advanced Manufacturing
Research
DA Consulting Group
First Consulting Group
Mastech
PricewaterhouseCoopers
Science Applications
International Corporation
(SAIC)

MANUFACTURING
Armstrong World Industries
Clarke American
Marshall Industries
O.C. Tanner
Office Furniture USA

GOVERNMENT
Canadian Department of
Agriculture
United States Army

HIGHER EDUCATION
James Madison University
North Carolina A&T
University of Tennessee

Bay Networks, which was subsequently acquired by Nortel Networks, accounted
for 11% of our total revenues in 1998.

CUSTOMER CASE STUDIES

The case studies detailed below are included to illustrate typical customer
uses of Centra 99. We have not derived significant revenues from any of these
customers.

i2 TECHNOLOGIES

i2 Technologies is a leading provider of software solutions for intelligent
eBusiness and supply chain management.

In 1998, i2 undertook an initiative to increase the frequency and
effectiveness of communication between 40 of its satellite offices and its
project teams, as well as to provide a vehicle for improved

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<PAGE>
communication with customers. i2 required a technology solution that would keep
field personnel up to speed on new projects and marketing initiatives, allow i2
to demonstrate products away from its headquarters, and give i2 the ability to
provide customer training in an effective, timely and cost-effective way using
the Internet. This solution needed to be able to reach both internal and
external audiences.

In 1999, i2 deployed Centra 99. Centra 99's application-sharing capabilities
enabled i2 to host product roll-outs at headquarters and simultaneously
demonstrate the new features of a product. Centra 99 allowed i2 employees,
customers and partners to participate in a wide range of events, including
one-to-one and team sales coaching, product introductions, virtual sales calls
and online sales meetings. Centra 99 also allowed i2 to leverage industry
experts for virtual events and cost-efficient lead generation activities. In
2000, i2 plans to use Centra 99 to augment its traditional classroom training
for customers and channel partners with enterprise application support and
certification, customer and partner education, and update training.

CLARKE AMERICAN

Clarke American is a large specialty printer of financial institution checks
in the United States. In 1997, Clarke American began to deploy SAP enterprise
resource planning software, a widely deployed business software application.
While it initially provided two weeks of product training at its corporate
headquarters for existing employees, Clarke American needed a solution for
training subsequently hired employees. With more than 20 remote manufacturing
facilities, Clarke American could not cost-effectively send an SAP expert
on-site each time a new employee was hired or new software was deployed.

With Centra 99, Clarke American's SAP experts are able to remain at
corporate headquarters and to use the corporate intranet and the Internet to
deliver live, hands-on SAP training to employees across the country. Centra 99
allowed Clarke American to increase the productivity of its SAP experts,
eliminate the costs of on-site training sessions, reduce the time spent by
employees in training sessions, and shorten the implementation process.

During its roll-out of SAP, Clarke American discovered that it could also
use Centra 99 to meet the ongoing support requirements of its employees.
Consequently, Clarke American uses Centra 99 to support a series of weekly
online sessions aimed at developing employee skills.

UNIVERSITY OF TENNESSEE

The University of Tennessee offers a program that allows physicians from
across the United States to earn executive MBA degrees over the Internet. While
business expertise is increasingly important in healthcare, many physicians are
unable to interrupt their clinical practices to undertake a business education
program. The University's College of Business Administration has developed a
12-month Physician Executive MBA program that combines innovative delivery tools
with a flexible schedule.

In 1997, the University selected Centra 99 as the collaborative solution to
provide the virtual classroom that supports the entire Physician Executive MBA
program. The University chose Centra 99 because it provided an opportunity to
leverage the Internet for new sources of revenue by extending curriculum to new
audiences, regardless of location.

By leveraging the capabilities of Centra 99, the University has been able to
make the Physician Executive MBA program accessible to a broader group of
physicians. Physicians need to be physically present on campus only for four
one-week sessions during the year. The remainder of the classroom training is
provided in forty three-hour online sessions, which physicians can access from
personal computers at home, at the office or on the road. The University
graduated its first class of 20 students from the program in December 1998 and
expects to graduate an additional 26 students in December 1999.

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<PAGE>
SALES AND MARKETING

We sell Centra 99 through a direct sales force and through other marketing
relationships. As of December 31, 1999, our sales organization consisted of 30
sales and pre-sales consulting professionals located in nine domestic locations
and an office in the United Kingdom. Our direct sales force focuses on selling
Centra 99 to Global 2000 companies and other large organizations. We utilize
sales teams consisting of both sales and technical professionals who work
directly with potential customers to provide proposals, demonstrations and
presentations designed to meet the specific needs of each customer.

We also sell Centra 99 indirectly through a relationship with a distributor.
We have contracted with Macnica to serve as our master distributor in Japan. We
intend to increase our direct sales force, both domestically and abroad, and to
authorize additional distributors and resellers in selected international
markets.

We expect to market our CentraNow Web service and the Centra Business
Collaboration Network primarily by engaging established Web destinations and
content and service providers to be network members. After we introduce priced
CentraNow services in 2000, a sales team will market and sell these services to
registered CentraNow users through Web-based marketing and telesales. We expect
that our telesales team also will work with our direct sales force to convert
subscribers into Centra 99 customers.

We focus our marketing efforts on creating awareness of our solution among
business executives considering enterprise-level live eBusiness collaboration
solutions as well as individual users suitable for the CentraNow Web service. We
conduct a variety of marketing programs worldwide to educate our target market.
We have engaged in marketing activities such as online seminars, direct
marketing, Web marketing, trade shows, press and industry analyst relations, and
users conferences. The marketing organization works closely with our customers
and direct sales organization to capture, organize and prioritize customer
feedback to help guide our product development organization.

We have entered into agreements with eight systems integrators and two
training companies to integrate our products and services into their offerings.
These relationships increase market awareness of our live eBusiness
collaboration solution and assist us with sales lead generation. For example, we
have entered into a relationship with PricewaterhouseCoopers that enables them
to incorporate Centra 99 into their application deployment methodology. In
concert with us, PricewaterhouseCoopers will use Centra 99 to deliver live
interactive training, support, implementation and consulting services to their
customers that are deploying enterprise applications such as Oracle, Peoplesoft,
SAP and Siebel. We have similar relationships with DA Consulting Group, Deloitte
Consulting and Global Knowledge Network that provide additional marketing
resources, awareness and account access to increase our reach into the
marketplace.

PRODUCT DEVELOPMENT

In July 1997, we began commercial shipment of the initial version of our
software product. We have subsequently enhanced the product through several
releases. The CentraNow Web service and Centra BCN began operation in
October 1999, and we will continue to enhance these services.

We continue to devote a substantial portion of our resources to developing
new products and services, and enhancing our existing products and services. Our
product development expenses were $3.0 million in 1997, $3.1 million in 1998 and
$4.6 million in 1999. As of December 31, 1999, our product development
organization consisted of 38 employees. We believe a technically skilled
development organization is critical to our success. We must attract and retain
highly qualified employees to further our product development efforts.

40
<PAGE>
COMPETITION

The market for live eBusiness collaboration solutions is immature, intensely
competitive, rapidly evolving and subject to rapid technological change. We
expect that the intensity of our competition will increase in the future.
Increased competition is likely to result in price reductions, reduced gross
margins and loss of market share, any one of which could seriously harm our
business. Competitors vary in size and in the scope and breadth of the products
and services offered. We encounter competition with respect to different aspects
of our collaboration solution from a variety of software and services vendors
including Interwise, LearnLinc, the Lotus division of IBM, Placeware and WebEx.
Siebel has announced that it is extending its enterprise software application
with collaboration features, and other enterprise software vendors, such as
Oracle and SAP, may choose to extend their applications with similar features in
the future. These collaboration features might make it more difficult for us to
sell our products to these vendors' customers. In addition, bigger companies
with more resources than we have could enter our market and either reduce our
sales or require us to lower our prices, or both.

Some of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources than we do. They
have significantly greater name recognition and a larger installed base of
customers. In addition, many of our competitors have well-established
relationships with our current and potential customers. In the past, we have
lost potential customers to competitors for various reasons, including lower
prices and other incentives not matched by us. In addition, current and
potential competitors have established or may establish cooperative
relationships among themselves or with third parties to increase the ability of
their products to address customer needs. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share.

We believe that the principal competitive factors affecting our market
include a significant base of reference customers, the breadth and depth of the
offered solution, distribution breadth, product quality and reliability,
customer and professional services quality, core technology, product features
and price. Although we believe that our solution competes favorably with respect
to these factors, our market is relatively new and is developing rapidly. We may
not be able to maintain our competitive position against current and potential
competitors, especially those with significantly greater financial, marketing,
service, technical and other resources.

INTELLECTUAL PROPERTY RIGHTS

We depend on our ability to develop and maintain the proprietary aspects of
our technology. To protect our proprietary technology, we rely primarily on a
combination of contractual provisions, confidentiality procedures, trade
secrets, and patent, copyright and trademark laws.

We license rather than sell Centra 99 and require our customers to enter
into license agreements, which impose restrictions on their ability to utilize
the software. In addition, we seek to avoid disclosure of our trade secrets
through a number of means, including but not limited to requiring those persons
with access to our proprietary information to execute confidentiality agreements
with us and restricting access to our source code. We seek to protect our
software, documentation and other written materials under trade secret and
copyright laws, which afford only limited protection. We cannot be sure that any
of our proprietary rights with respect to CentraNow or Centra BCN will be viable
or of value in the future since the validity, enforceability and type of
protection of proprietary rights in Internet-related industries are uncertain
and still evolving.

We presently have three U.S. patent applications pending. It is possible
that no patent will be issued from our patent applications or that the patents
that we have applied for, if issued, or any other patents we might obtain in the
future, may be successfully challenged. It is also possible that we may not
develop proprietary products or technologies that are patentable, that any
patent issued to us may not provide us with any competitive advantages, or that
the patents of others will materially adversely affect our business, operating
results and financial condition.

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We rely on technology that we license from third parties, including software
that is integrated with our proprietary software and used in Centra 99 to
perform key functions. If we are unable to continue to license any of this
software on commercially reasonable terms, we could face delays in releases of
our software until equivalent technology can be identified, licensed or
developed, and integrated into our current product. These delays could have a
material adverse effect on our business, operating results and financial
condition.

Centra is a registered trademark in the United States. We also have filed
applications to register the Centra trademark in the European Union and Japan.
In addition, we have filed applications to register CentraNow and Adaptive
Connectivity as trademarks in the United States.

Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy aspects of our products or to obtain or use information that
we regard as proprietary. Policing unauthorized use of our products is
difficult, and while we are unable to determine the extent to which piracy of
our software products exists, software piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect our
proprietary rights to as great an extent as do the laws of the United States.
Our means of protecting our proprietary rights may not be adequate and our
competitors may independently develop similar technology, duplicate our products
or design around patents issued to us.

There has been a substantial amount of litigation in the software and
Internet industries regarding intellectual property rights. It is possible that
in the future third parties may claim that we or our current or potential future
products infringe their intellectual property. We expect that software product
developers and providers of Internet-related solutions will increasingly be
subject to infringement claims as the number of products and competitors in our
industry grows and the functionality of products in different industries
increasingly overlaps. Furthermore, former employers of our current and future
employees may assert that our employees have improperly disclosed confidential
or proprietary information to us. Any such claims, with or without merit, could
be time-consuming to defend, divert management's attention and resources, result
in costly litigation, cause product shipment delays or require us to enter into
royalty or licensing agreements which may not be available on terms acceptable
to us or at all. In addition, parties making these claims may be able to obtain
an injunction, which could prevent us from selling our products in the United
States or abroad. A successful infringement claim against us and our failure or
inability to license the infringed rights or develop or license technology with
comparable functionality could have a material adverse effect on our business,
operating results and financial condition.

EMPLOYEES

As of December 31, 1999, we had a total of 117 employees, including 38 in
product development, 38 in sales and marketing, 17 in customer support,
professional services and training and 24 in administration and finance. Of
these employees, 111 were located in the United States and 6 were located
outside the United States. None of our employees is represented by a collective
bargaining agreement, nor have we experienced any work stoppage. We consider our
relations with our employees to be good.

FACILITIES

Our headquarters occupy approximately 23,000 square feet in Lexington,
Massachusetts, under a lease that expires on August 31, 2001. We have a right to
extend the lease until August 31, 2003. These current facilities are expected to
meet our needs through March 31, 2000, at which time we intend to expand our
facilities by entering into one or more additional leases at our current
location or lease space at another location. In addition, we lease sales and
service offices in the metropolitan areas of Atlanta, Chicago, London,
Philadelphia, San Mateo and Washington, D.C. Each of these offices generally is
leased under an agreement with a remaining term of 12 months or less.

LEGAL PROCEEDINGS

We are not currently subject to any material legal proceedings.

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MANAGEMENT

EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES

The following table sets forth information with respect to our executive
officers, directors and key employees as of December 31, 1999:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- ---------------------------------------------------
<S> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS
Leon Navickas........................... 43 Chief Executive Officer and Chairman
Anthony J. Mark......................... 52 President and Chief Operating Officer
Stephen A. Johnson...................... 44 Chief Financial Officer, Treasurer and Secretary
Joseph M. Gruttadauria.................. 40 Vice President, Professional Services
Steven N. Lesser........................ 43 Vice President, Worldwide Sales
David Barrett(1)........................ 43 Director
Richard D'Amore(1)...................... 46 Director
Jonathan Flint(1)....................... 48 Director

KEY EMPLOYEES
Michael Hackney......................... 41 Chief Technology Officer
Lisa LeBlanc............................ 34 Vice President, Corporate Marketing
Michael Tupanjanin...................... 39 Vice President, Business Development
Christopher Reed........................ 45 Vice President, Product Marketing
Lawrence Whittle........................ 34 Vice President, European Sales
</TABLE>

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

(1) Member of the audit and compensation committees.

LEON NAVICKAS founded Centra and has served as our Chief Executive Officer
and Chairman of the Board since our incorporation in April 1995. He also served
as our President from our incorporation until January 1999. From May 1983 until
April 1995, Mr. Navickas served as General Manager of Research and Development,
Notes Division for Lotus Development Corp.

ANTHONY J. MARK has served as our President and Chief Operating Officer
since January 1999 and as our Chief Operating Officer since October 1997. From
March 1997 until October 1997, Mr. Mark served as our Vice President, Product
Development. From May 1995 until March 1997, he performed consulting services
for a number of private companies. From May 1993 until May 1995, Mr. Mark served
as Vice President and General Manager, Broadcast Products Division for Avid
Technology, Inc., a software development company.

STEPHEN A. JOHNSON has served as our Chief Financial Officer since
November 1998. Since June 1999, Mr. Johnson has served as our Chief Financial
Officer, as well as Treasurer and Secretary. From May 1997 until November 1998,
Mr. Johnson served as our Director of Finance and Administration. From
March 1997 until May 1997, he served as a consultant to Centra. From
October 1991 until March 1997, Mr. Johnson served in a number of positions at
Avid Technology, Inc., including Controller from October 1991 until
August 1995; Finance Manager, Desktop Products Division from August 1995 until
February 1996; and Director of Finance, Worldwide Field Operations from
February 1996 until March 1997.

JOSEPH M. GRUTTADAURIA has served as our Vice President, Professional
Services since March 1997. From March 1996 until March 1997, Mr. Gruttadauria
served as the Vice President of Sales and Services and Chief Information Officer
for OneWave, Inc., a consulting company. From December 1994 until March 1996, he
served as Director, Customer Service for SAP Americas, a software company. From
June 1994 until December 1994 Mr. Gruttadauria served as Vice President,
Services and Manufacturing for the Softswitch Business Unit of Lotus Development
Corp. From December 1989

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<PAGE>
until June 1994 Mr. Gruttadauria served as Vice President, Service and
Manufacturing for Softswitch, Inc. a software development company.

STEVEN N. LESSER has served as our Vice President, Worldwide Sales since
January 1999. From July 1997 to August 1998, Mr. Lesser served as Vice
President, North American Sales for Marcam Corporation, a software development
company. From March 1993 until July 1997, he served as Vice President, North
America Sales for MAPICS Business Group of Marcam Corporation.

DAVID BARRETT has served as one of our directors since December 1999.
Mr. Barrett has served as a member of our Advisory Group since March 1998. Since
February 1998, Mr. Barrett has served in a number of roles at Calico
Commerce, Inc., a provider of software and services that enable customers to
sell complex products and services over the Internet, including Executive Vice
President, Business Operation from February 1998 to May 1999 and Executive Vice
President and Chief Operating Officer from May 1999 to date. From December 1996
until February 1998, Mr. Barrett served as Senior Vice President, Worldwide
Sales and Customer Services at Pure Atria/Rational Software Corporation, an
enterprise software development automation company. From March 1996 to
December 1996, Mr. Barrett served as Vice President, Sales, Marketing and
Services at Nets, Inc., an e-commerce company. From July 1994 until March 1996,
Mr. Barrett served as Vice President, Field Sales and Services for Lotus
Development Corporation.

RICHARD D'AMORE has served as one of our directors since April 1995. Since
March 1994, Mr. D'Amore has been a General Partner of North Bridge Venture
Partners, L.P., a venture capital investing firm. Mr. D'Amore also serves as a
director of Veeco Instruments, Inc., Silverstream Software, Inc., and Solectron
Corporation.

JONATHAN FLINT has served as one of our directors since April 1995.
Mr. Flint has been a member of Polaris Venture Management Co., LLC, the general
partner of Polaris Venture Partners and Polaris Venture Founders' Fund, entities
since June 1996. Mr. Flint is also a General Partner of Alta V Management
Partners, L.P., the General Partner of Alta V Limited Partnership. Mr. Flint
also serves as a director of Allaire Corporation.

MICHAEL HACKNEY has served as our Chief Technology Officer since
February 1998. From September 1996 until February 1998, he served as our
Director of Development. From February 1996 until September 1996, he served as
our Senior Architect. From February 1994 until February 1996, Mr. Hackney was a
member of Ascom Nexion's technology group. From April 1992 until February 1994,
he was also a member of the technology staff at GTE Laboratories.

LISA LEBLANC has served as our Vice President, Corporate Marketing since
October 1999. From August 1996 until October 1999, she served as our Director,
Corporate Marketing. From June 1996 until August 1996, Ms. LeBlanc served as
Director, Marketing North America and Asia Pacific for Avid Technology, Inc., a
software development company. From January 1994 until June 1996, Ms. LeBlanc
served as the North American Field Marketing Manager at Avid Technology, Inc.

MICHAEL TUPANJANIN has served as our Vice President, Business Development
since June 1999. From May 1998 until June 1999, Mr. Tupanjanin served as
Publishing Director, New Ventures for CMP Media, Inc. From January 1996 until
April 1998, he served as Publisher of CMP Media's ChannelWeb.com business unit.
From November 1994 until January 1996, Mr. Tupanjanin served as Director of
National Accounts for CMP Media, Inc.

CHRISTOPHER REED has served as our Vice President, Product Marketing since
March 1998. From April 1997 until March 1998, he served as Principal of
ParaTechnology, Inc., a consulting firm. From August 1996 until April 1997,
Mr. Reed served as an independent marketing consultant. From March 1995 until
August 1996, he served as Vice President, Marketing for NetSuite
Development, Inc., a software company. From March 1993 until March 1995,
Mr. Reed served as Director, Solutions Marketing for Lotus Development
Corporation.

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<PAGE>
LAWRENCE WHITTLE has served as our Vice President, European Sales since
March 1999. From May 1997 until February 1999, Mr. Whittle served as Vice
President, European and Middle East Sales for Marcam Corporation, a software
development company. From May 1996 to May 1997 he served as Central European
Regional Sales Manager for Marcam Corporation. From October 1994 until May 1996
he served as European Major Accounts Manager for Marcam Corporation.

BOARD COMPOSITION

Following this offering, the board of directors will be divided into three
staggered classes and each of the directors, other than the initial Class I and
II directors, will serve a three-year term. Immediately after the completion of
this offering:

- Richard D'Amore will be the sole Class I director and will serve until our
annual stockholders' meeting in 2000;

- David Barrett and Jonathan Flint will be the Class II directors and will
serve until our annual stockholders' meeting in 2001; and

- Leon Navickas will be the sole Class III director and will serve until our
annual stockholders' meeting in 2002.

At each annual meeting of stockholders a class of directors will be elected for
a three-year term to succeed the directors of the same class whose terms are
then expiring.

Two of our current directors, Richard D'Amore and Jonathan Flint, originally
were elected as directors pursuant to provisions of an investors' rights
agreement that will terminate upon the completion of this offering.

Each executive officer serves at the discretion of the board of directors
and holds office until his successor is elected and qualified or until his
earlier resignation or removal. There are no family relationships among any of
our directors and executive officers.

BOARD COMMITTEES

The board of directors established an audit committee in October 1999. The
audit committee consists of David Barrett, Richard D'Amore and Jonathan Flint.
The audit committee reviews our internal accounting procedures, evaluates our
audit and control functions, and reviews the results and scope of the audit and
other services provided by our independent public accountants.

The board of directors elected a new compensation committee in
October 1999. The compensation committee consists of David Barrett, Richard
D'Amore and Jonathan Flint. The compensation committee reviews and recommends to
the board of directors the compensation and benefits of our officers and
directors, including administering and granting options under our stock option
plans. The compensation committee also establishes and reviews general policies
relating to the compensation and benefits of our employees.

The board has not established a standing nominating committee.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the board of directors or the compensation committee serves as
a member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of our board of directors
or compensation committee. Prior to October 1999, Leon Navickas participated in
discussions of the board of directors regarding executive officer compensation,
except with respect to his own compensation.

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<PAGE>
DIRECTOR COMPENSATION

We do not currently compensate directors for their services as members of
the board of directors or any committee of the board. We reimburse directors for
out-of-pocket expenses incurred in attending board and committee meetings.

In December 1999 the board of directors granted to David Barrett options to
purchase 22,500 shares of common stock at a price of $5.00 per share. They will
vest over a 4-year period with 25% vesting at the first anniversary of the grant
date and 6.25% each quarter thereafter.

LIABILITY LIMITATIONS AND INDEMNIFICATION

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

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

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

- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or

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

The limitations do not apply to liabilities arising under the federal securities
laws and do not affect the availability of equitable remedies, including
injunctive relief or rescission.

Our certificate of incorporation and by-laws provide that we will indemnify
our directors and officers, and may indemnify other employees and agents, to the
maximum extent permitted by law. We believe that indemnification under our
by-laws covers at least negligence and gross negligence on the part of
indemnified parties. Our by-laws also permit us to secure insurance on behalf of
any officer, director, employee or agent for any liability arising out of his or
her actions in their capacity as an officer, director, employee or agent,
regardless of whether the by-laws would permit indemnification. We intend to
obtain an insurance policy that insures our directors and officers against
losses, above a deductible amount, from specified types of claims.

We have entered into agreements to indemnify our directors and executive
officers, in addition to the indemnification rights provided in our by-laws.
Under these agreements we will indemnify our directors and executive officers
for judgments, fines, settlement amounts and expenses, including attorneys'
fees, incurred by a director or executive officer in an action or proceeding,
including an action by or in the right of Centra, arising out of the person's
services as a director or executive officer of Centra or any subsidiary of
Centra or any other company or enterprise to which the person provides services
at our request. We believe that these provisions and agreements are desirable to
help us attract and retain qualified persons as directors and executive
officers.

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

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

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<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons under our
certificate of incorporation or by-laws or the agreements described above, we
have been advised that in the opinion of the SEC this indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.

EXECUTIVE COMPENSATION

COMPENSATION EARNED

The following table sets forth the compensation earned during 1999 by our
named executive officers, who consist of our chief executive officer and our
four other executive officers who earned more than $100,000 in salary and bonus.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING
SALARY BONUS OPTIONS
-------- -------- ------------
<S> <C> <C> <C>
Leon Navickas .............................................. $150,000 (1) --
Chief Executive Officer

Anthony J. Mark ............................................ 175,000 (1) 300,000
President and Chief Operating Officer

Stephen A. Johnson ......................................... 140,000 (1) 45,000
Chief Financial Officer, Treasurer and Secretary

Joseph M. Gruttadauria ..................................... 150,000 $ 50,000 37,500
Vice President, Professional Services

Steven N. Lesser ........................................... 99,680 100,000(2) 364,500
Vice President, Worldwide Sales
</TABLE>

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

(1) Bonus amounts for 1999 for these executive officers have not yet been
determined.

(2) Represents commissions.

OPTION GRANTS

The following table sets forth information regarding stock options granted
to the named executive officers during 1999.

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<PAGE>
OPTION GRANTS IN FISCAL 1999

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENT OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO PRICE OPTION TERM
OPTIONS EMPLOYEES IN PER EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
- ---- ---------- ------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Leon Navickas.......................... -- -- -- -- -- --
Anthony J. Mark........................ 300,000 16.5% $0.27 1/12/09 $131,900 $210,100
Stephen A. Johnson..................... 37,500 2.1 0.27 1/12/09 16,500 26,300
7,500 0.4 0.27 2/9/09 3,300 19,500
Joseph M. Gruttadauria................. 37,500 2.1 0.27 1/12/09 16,500 26,300
Steven N. Lesser....................... 364,500 20.1 0.27 1/12/09 160,300 255,000
</TABLE>

The potential realizable values are based on the assumption that our common
stock appreciates at the annual rate shown, compounded annually, from the date
of grant until the expiration of the ten-year term. These numbers are calculated
based on SEC requirements and do not reflect projections or estimates of future
stock price growth. Actual gains, if any, on stock option exercises will depend
on the future performance of the common stock.

The percentage of total options is based on an aggregate of 1,816,675
options granted by us during 1999 to our employees, including the named
executive officers. Options were granted with an exercise price equal to the
fair market value of our common stock, as determined in good faith by our board
of directors. All of the options were granted for a term of 10 years, subject to
earlier termination in the event of a termination of employment. The exercise
price for all options may be paid in cash, shares of common stock, or a
combination of cash and shares. Under the terms of our 1995 stock option plan,
the board of directors retains discretion, subject to limitations set forth in
the plan, to modify the terms of outstanding options.

OPTION EXERCISES; OPTION AND RESTRICTED STOCK HOLDINGS

The following table sets forth information regarding exercises of stock
options during 1999 and exercisable and unexercisable options held as of
December 31, 1999 by each of the named executive officers.

AGGREGATED OPTION EXERCISES IN FISCAL 1999
AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED AT FISCAL YEAR-END AT FISCAL YEAR-END
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leon Navickas........................ -- -- -- -- -- --
Anthony J. Mark...................... 300,000 $0 -- -- -- --
Stephen A. Johnson................... 45,000 0 37,500 22,500 $331,238 $198,743
Joseph M. Gruttadauria............... 37,500 0 -- -- -- --
Steven N. Lesser..................... 364,500 0 -- -- -- --
</TABLE>

All of these options were granted under our 1995 stock option plan. They
vested over a 4-year period with 25% vesting at the first anniversary of the
grant date and 6.25% each quarter thereafter.

48
<PAGE>
The value of unexercised in-the-money options is based on a price of $9.00,
our assumed initial public offering price, minus the per share exercise price,
multiplied by the number of shares underlying the option.

We agreed that each of the named executive officers granted options in 1999
could exercise those options immediately. We entered into similar agreements in
prior years. The shares received upon exercise are subject to repurchase by us
at the original option exercise price, subject to vesting at the same rates as
provided in the original options. The following table sets forth information
regarding this vested and unvested "restricted" common stock held as of
December 31, 1999 by each of the named executive officers. The value of the
restricted stock is based on a price of $9.00, our assumed initial public
offering price, minus the aggregate exercise price paid to acquire the
restricted stock.

<TABLE>
<CAPTION>
SHARES OF VALUE OF IN-THE-MONEY
RESTRICTED STOCK RESTRICTED STOCK
AT FISCAL YEAR-END AT FISCAL YEAR-END
---------------------- ------------------------
NAME VESTED UNVESTED VESTED UNVESTED
- ---- --------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Leon Navickas..................................... 1,800,000 -- $16,198,800 --
Anthony J. Mark................................... 286,875 313,125 2,522,391 $2,742,359
Stephen A. Johnson................................ 13,125 61,875 114,625 540,375
Joseph M. Gruttadauria............................ 177,656 137,344 1,566,998 1,206,502
Steven N. Lesser.................................. -- 364,500 -- 3,183,300
</TABLE>

INCENTIVE STOCK PLANS

1995 STOCK OPTION PLAN

In 1995, the board of directors adopted and our stockholders approved the
1995 stock option plan. As of December 31, 1999, options to purchase a total of
1,354,913 shares of common stock were outstanding under the 1995 plan. These
options had a weighted average exercise price of $1.42 per share. Effective
December 1999, the board terminated further issuances of options under the 1995
plan.

The 1995 plan authorizes the grant of options to purchase common stock
intended to qualify as incentive stock options, as defined in Section 422 of the
Internal Revenue Code, and the grant of options that do not so qualify. The
exercise price of incentive options granted under the 1995 plan must be at least
equal to the fair market value of the common stock on the date of grant. The
exercise price of incentive options granted to an optionee who owns stock
possessing more than 10% of the voting power of our outstanding capital stock
must be at least equal to 110% of the fair market value of the common stock on
the date of grant, and the optionee must exercise his or her option within five
years from the date of the grant of such option.

The 1995 plan provides that, upon a merger or consolidation, our board may
provide that:

- some or all outstanding options must be assumed or substituted for with
similar options of the corporation surviving any such merger or
consolidation;

- any unexercised options shall terminate immediately prior to the
consummation of the transaction unless exercised by the optionee within a
specified period of time;

- holders of options receive a cash payment in the event of a merger under
terms where holders of our common stock receive a cash payment for each
share surrendered in the merger; or

- provide that all or any outstanding options shall become immediately
exercisable in full.

The 1995 plan is administered by the compensation committee of the board of
directors.

49
<PAGE>
1999 STOCK INCENTIVE PLAN

The 1999 stock incentive plan was adopted by the board of directors in
October 1999 and approved by our stockholders in November 1999. We have reserved
a total of 3,500,000 shares of common stock for issuance under the 1999 plan. As
of December 31, 1999, options to purchase a total of 22,500 shares of common
stock were outstanding under the 1999 Plan. These options have a weighted
average exercise price of $5.00.

The 1999 plan authorizes the grant of incentive options and nonqualified
options. The 1999 plan also provides for awards of stock appreciation rights,
performance shares, restricted stock and other stock-based awards.

Incentive options may be granted under the 1999 plan to our key employees
and our affiliates within the meaning of the Internal Revenue Code, including
our officers and directors as well as officers and directors of our affiliates
who are also employees. The exercise price of incentive options granted under
the 1999 plan must be at least equal to the fair market value of our common
stock on the date of grant. The exercise price of incentive options granted to
an optionee who owns stock possessing more than 10% of the voting power of our
outstanding capital stock must be at least equal to 110% of the fair market
value of the common stock on the date of grant, and such optionee must exercise
his or her option within five years from the date of the grant of such option.

Under the terms of the 1999 plan, we may grant nonqualified options to our
officers and other employees, our directors, and other individuals providing
services to us. There are no limits on the exercise price of nonqualified
options granted under the 1999 plan.

The 1999 plan provides that, upon a change of control, all outstanding plan
options and other awards may be:

- exchanged for similar options or awards of the corporation surviving the
change of control;

- made immediately exercisable in full; or

- terminated as of the effective date of such change of control, provided
that the holders have the right to exercise the options or awards to the
extent then vested.

For these purposes, a "change of control" means the occurrence of any of the
following:

- any person becomes a beneficial owner, directly or indirectly of 50% or
more of the combined voting power of our outstanding shares;

- any merger or consolidation of Centra with another company, other than a
merger or consolidation which results in our voting shares outstanding
immediately prior to the merger or consolidation, representing more than
65% of the combined voting power of the voting shares of the surviving
entity; or

- the liquidation, sale or disposition of all or substantially all of our
assets.

The 1999 plan is administered by the compensation committee of the board of
directors. The compensation committee selects the individuals to whom options
will be granted and determines the option exercise price and other terms of each
award, subject to the provisions of the 1999 plan.

1999 DIRECTOR OPTION PLAN

The 1999 director option plan was adopted by the board of directors in
October 1999 and approved by our stockholders in November 1999. The director
plan provides for the grant of stock options to those of our directors who are
not full-time employees of Centra or a subsidiary of Centra. Only non-statutory
options may be granted under the director plan. The maximum number of shares of

50
<PAGE>
Common Stock as to which options may be granted under the Plan is 200,000. As of
December 31, 1999, no options had been granted under the director plan.

The director plan is administered by a committee of the board of directors.
The option exercise price for each option granted under the director plan is the
fair market value of the common stock as of the date of grant. Payment of the
option exercise price is to be made in cash for the full exercise price of the
options. Options are not assignable or transferrable except by will or the laws
of descent and distribution. They terminate on the earlier of ten years after
the date of grant or sixty days after the optionee ceases to serve as a
director, except in the event of death or disability.

1999 EMPLOYEE STOCK PURCHASE PLAN

The 1999 employee stock purchase plan was adopted by the board of directors
in October 1999 and approved by our stockholders in November 1999. We have
reserved 1,500,000 shares of common stock for issuance under the stock purchase
plan. As of December 31 each year, we will increase the number of shares we
reserve for issuance under the stock purchase plan automatically by 2% of the
total number of shares of our common stock then outstanding or, if less, 300,000
shares.

Under the terms of the stock purchase plan, all of our employees who have
completed three months of employment and whose customary employment is more than
20 hours per week and more than five months in the calendar year, are eligible
to participate in the stock purchase plan. Employees who own stock and hold
outstanding options to purchase stock representing five percent or more of the
total combined voting power or value of all classes of our stock are not
eligible to participate in the stock purchase plan.

The right to purchase common stock under the stock purchase plan is made
available through a series of offerings. On the first day of an offering period,
we will grant to each eligible employee who has elected in writing to
participate in the stock purchase plan an option to purchase shares of common
stock. The employee is required to authorize an amount, between 1% and 10% of
the employee's compensation, to be deducted from the employee's pay during the
offering period. On the last day of the offering period, the employee will be
deemed to have exercised the option, at the option exercise price, to the extent
of accumulated payroll deductions. Under the terms of the stock purchase plan,
the option exercise price is an amount equal to 85% of the closing market price
of our common stock on either the first or last day of the offering period,
whichever is lower. In the event of a change in control of Centra, the stock
purchase plan will terminate and shares will be purchased with the payroll
deductions accumulated to date by participating employees.

No employee may be granted an option that would permit the employee's rights
to purchase common stock to accrue at a rate in excess of $25,000 of the fair
market value of the common stock, determined as of the date the option is
granted, in any calendar year.

The stock purchase plan is administered by the compensation committee of the
board of directors.

401(k) PLAN

Effective August 1996, we established a 401(k) defined contribution
retirement plan covering all employees who are at least 21 years of age. The
retirement plan provides for voluntary employee contributions in amounts
determined by the employees, subject to a maximum limit allowed by Internal
Revenue Service guidelines. For 2000, this limit is $10,500. We may contribute
these amounts to the accounts of participants in the retirement plan as
determined by the board of directors, subject to any applicable legal
requirements. To date, we have not made any contribution to the retirement plan,
and we do not anticipate making any contribution to the retirement plan in the
foreseeable future.

51
<PAGE>
SEVERANCE AGREEMENTS

We have entered into severance agreements with Leon Navickas, our Chief
Executive Officer; Anthony J. Mark, our President and Chief Operating Officer;
Stephen A. Johnson, our Chief Financial Officer, Treasurer and Secretary; Steven
N. Lesser, our Vice President, Worldwide Sales; and Joseph M. Gruttadauria, our
Vice President, Professional Services. Under these agreements, if the executive
officer is terminated without cause, he will be entitled to continue to receive
base salary and benefits for a period ending on the earliest of (a) 181 days
from the date of termination, (b) the date on which he begins new employment and
(c) the date on which he materially breaches any written agreement with us. For
these purposes, "cause" means:

- an act of personal dishonesty committed in connection with
responsibilities as an employee and intended to result in substantial
personal enrichment;

- a felony conviction;

- a willful act that constitutes gross misconduct and that is injurious to
Centra; or

- continued, intentional violations of employment obligations after written
notice from Centra.

None of our executive officers has an employment agreement with us. Our
executive officers may resign and we may terminate their employment at any time,
subject to the provisions of their severance agreements.

CHANGE OF CONTROL ARRANGEMENTS

We have entered into change of control agreements with each of Leon
Navickas, our Chief Executive Officer; Anthony J. Mark, our President and Chief
Operating Officer; Stephen A. Johnson, our Chief Financial Officer, Treasurer
and Secretary; Steven N. Lesser, our Vice President, Worldwide Sales; and Joseph
M. Gruttadauria, our Vice President, Professional Services. Each agreement
provides that upon a change of control, 50% of the executive's unvested options
will vest and become immediately exercisable and 50% of our right to repurchase
the executive's unvested options will terminate. A "change of control" means:

- any merger or consolidation which results in the voting shares outstanding
immediately prior to the merger or consolidation, representing immediately
after the merger or consolidation, less than 50% of the voting power of
the surviving entity;

- a sale of all or substantially all of our assets; or

- the sale of our shares in a single transaction or a series of related
transactions, representing at least 80% of the voting power of our voting
shares.

These change of control provisions apply to previous grants of restricted stock
and options and to any future grants of restricted stock and options. The change
of control provisions shall not apply to a proposed merger or consolidation if
(1) our independent accountants determine that enforcement of the change of
control provision would preclude the proposed merger or consolidation as a
pooling of interests and (2) we intended to enter into the proposed merger or
consolidation but for the preclusion of polling of interest accounting
treatment.

The compensation committee of the board of directors, as administrator of
the 1995 stock option plan and the 1999 stock incentive plan, can provide for
accelerated vesting of the shares of common stock subject to outstanding options
held by any of our executive officers or directors in connection with specified
changes of control of Centra. The accelerated vesting may be conditioned on the
termination of the individual's employment following the change of control.

52
<PAGE>
TRANSACTIONS WITH RELATED PARTIES

SALES OF PREFERRED STOCK

In May and June 1996, we sold 1,416,490 shares of series B convertible
preferred stock at a price of $2.25 per share, for gross proceeds of $3,187,000.

- We sold 549,777 of the shares to Alta V Limited Partnership for a total
price of $1,237,000. Jonathan Flint, one of our directors, is affiliated
with Alta V Limited Partnership.

- We sold 333,334 of the shares to North Bridge Venture Partners, L.P. for a
total price of $750,000. Richard D'Amore, one of our directors, is
affiliated with North Bridge Venture Partners, L.P.

In March 1997, we sold 1,670,000 shares of series C convertible preferred
stock at a price of $2.50 per share, for gross proceeds of $4,175,000.

- We sold 316,672 of the shares to Alta V Limited Partnership for a total
price of $792,000. Jonathan Flint, one of our directors, is affiliated
with Alta V Limited Partnership.

- We sold 200,000 of the shares to Commonwealth Capital Ventures, L.P. for a
total purchase price of $500,000. Commonwealth Capital Ventures, L.P. is a
5% stockholder of Centra.

- We sold 280,000 of the shares to North Bridge Venture Partners, L.P. for a
total price of $700,000. Richard D'Amore, one of our directors, is
affiliated with North Bridge Venture Partners, L.P.

- We sold 40,000 shares to Leon Navickas, our Chief Executive Officer and
Chairman, for a total price of $100,000.

- We sold 20,000 of the shares to TM Partners for a total of $50,000.
Anthony J. Mark, our President and Chief Operating Officer, is affiliated
with TM Partners.

In December 1997, we sold 2,250,000 shares of series D convertible preferred
stock at a price of $4.00 per share, for gross proceeds of $9,000,000.

- We sold 503,459 of the shares to Alta V Limited Partnership for a total
price of $2,014,000. Jonathan Flint, one of our directors, is affiliated
with Alta V Limited Partnership.

- We sold 250,000 of the shares to Commonwealth Capital Ventures, L.P. for a
total purchase price of $1,000,000. Commonwealth Capital Ventures, L.P. is
a 5% stockholder of Centra.

- We sold 707,662 of the shares to Polaris Venture Partners, L.P. for a
total price of $2,831,000, and 42,338 of the shares to Polaris Venture
Partners Founders' Fund, L.P. for a total price of $169,000. Jonathan
Flint, one of our directors, is affiliated with Polaris Venture Partners,
L.P. and Polaris Venture Partners Founders' Fund, L.P.

- We sold 400,000 of the shares to North Bridge Venture Partners, L.P. for a
total price of $1,600,000. Richard D'Amore, one of our directors, is
affiliated with North Bridge Venture Partners, L.P.

- We sold 325,000 shares to Scripps Ventures, LLC for a total purchase price
of $1,300,000. Scripps Ventures, LLC is a 5% stockholder of Centra.

- We sold 12,500 shares to TM Partners for a total purchase price of
$50,000. Anthony J. Mark, our President and Chief Operating Officer, is
affiliated with TM Partners.

In April 1999, we sold 2,695,000 shares of series E convertible preferred
stock at a price of $5.00 per share, for gross proceeds of $13,475,000.

53
<PAGE>
- We sold 158,336 of the shares to Alta V Limited Partnership for a total
price of $792,000. Jonathan Flint, one of our directors, is affiliated
with Alta V Limited Partnership.

- We sold 100,000 shares to Commonwealth Capital Ventures, LLC for a total
purchase price of $500,000. Commonwealth Capital Ventures, L.P. is a 5%
stockholder of Centra.

- We sold 84,920 of the shares to Polaris Venture Partners, L.P. for a total
price of $425,000, and 5,080 of the shares to Polaris Venture Partners
Founders' Fund, L.P. for a total price of $25,000. Jonathan Flint, one of
our directors, is affiliated with Polaris Venture Partners, L.P. and
Polaris Venture Partners Founders' Fund, L.P.

- We sold 200,000 of the shares North Bridge Venture Partners, L.P. for a
total price of $1,000,000. Richard D'Amore, one of our directors, is
affiliated with North Bridge Venture Partners, L.P.

- We sold 70,000 shares to Scripps Ventures, LLC for a total purchase price
of $350,000. Scripps Ventures, LLC is a 5% stockholder of Centra.

- We sold 65,000 shares to SL Partners for a total purchase price of
$325,000. Steven N. Lesser, our Vice President, Sales, is affiliated with
SL Partners.

- We sold 10,000 shares to TM Partners for a total purchase price of
$50,000. Anthony J. Mark, our President and Chief Operating Officer, is
affiliated with TM Partners.

REGISTRATION RIGHTS

The holders of 13,746,735 shares of common stock are entitled to rights to
register their shares under the Securities Act. These rights are provided under
the terms of an agreement between us and the holders of registrable securities,
who are former holders of our preferred stock. These holders include:

- Leon Navickas, our Chief Executive Officer and Chairman, who has
registration rights covering 210,000 shares of common stock;

- venture capital firms affiliated with Richard D'Amore, one of our
directors, which have registration rights covering 2,570,001 shares of
common stock; and

- venture capital firms affiliated with Jonathan Flint, one of our
directors, which have registration rights covering 4,294,566 shares of
common stock.

The registration rights:

- are held by all persons and entities that participated in our preferred
stock financings;

- allow holders to require us to register their shares under the Securities
Act; and

- allow holders to include their shares in registration statements filed by
us.

For a more detailed description of the registration rights, see "Description
of Capital Stock--Registration Rights."

INDEMNIFICATION AGREEMENTS

We have entered into indemnification agreements with our executive officers
and directors. Under these agreements, we have agreed:

- to indemnify, to the fullest extent allowed by Delaware law, the executive
officers and directors against certain liabilities related to their
service or status as officers or directors; and

- in any proceeding in which they could be indemnified, to advance to the
executive officers and directors the expenses they incur in those
proceedings.

54
<PAGE>
We intend to execute similar indemnification agreements with our future
directors and executive officers. For a more detailed description of the
indemnification agreements, see "Management--Liability Limitations and
Indemnification."

PAYMENT TO PREFERRED STOCKHOLDERS UPON COMPLETION OF THIS OFFERING

Upon the closing of this offering, we will pay $6,480,000 to holders of
series A and series B convertible preferred stock according to the terms of our
certificate of incorporation.

- We will pay $2,598,000 to Alta V Limited Partnership. Jonathan Flint, one
of our directors, is affiliated with Alta V Limited Partnership.

- We will pay $1,875,000 to North Bridge Venture Partners, L.P. Richard
D'Amore, one of our directors, is affiliated with North Bridge Venture
Partners, L.P.

- We will pay $150,000 to Leon Navickas, our Chief Executive Officer and
Chairman.

Please see "Use of Proceeds" for further information.

TERMS OF TRANSACTIONS

We believe that all of the transactions described above were made on terms
no less favorable to us than would have been obtained from unaffiliated third
parties. We have adopted a policy under which all future transactions between us
and any of our directors or executive officers must be on terms no less
favorable to us than would have been obtained from unaffiliated third parties
and must be approved by a majority of the disinterested members of the board of
directors.

55
<PAGE>
PRINCIPAL STOCKHOLDERS

The following table sets forth information about the beneficial ownership of
our outstanding common stock on December 31, 1999, by:

- each person or entity who is known by us to own beneficially more than
five percent of our common stock;

- each of the named executive officers;

- each of our directors; and

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

In accordance with SEC rules, beneficial ownership includes any shares as to
which a person or entity has sole or shared voting power or investment power and
any shares as to which the person or entity has the right to acquire beneficial
ownership within 60 days after December 31, 1999 through the exercise of any
stock option. Except as noted below, we believe that the persons named in the
table have sole voting and investment power with respect to the shares of common
stock set forth opposite their names. Percentage of beneficial ownership is
based on 18,250,052 shares of common stock outstanding as of December 31, 1999,
including shares into which our outstanding preferred stock will convert upon
completion of this offering, and 23,250,052 shares of common stock that will be
outstanding after completion of this offering. All shares included below under
"Right to Acquire" represent shares subject to outstanding stock options. The
address of our executive officers and directors is in care of Centra
Software, Inc., 430 Bedford Street, Lexington, Massachusetts 02420.

<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF SHARES SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
----------------------------------- -------------------
OUTSTANDING RIGHT TO TOTAL BEFORE AFTER
SHARES ACQUIRE NUMBER OFFERING OFFERING
----------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Jonathan Flint(1).................................. 4,326,457 -- 4,326,457 23.7% 18.6%
Entities affiliated with Burr, Egan, Deleage & 3,066,457 -- 3,066,457 16.8 13.2
Co.(2)...........................................
One Post Office Square
Suite 3800
Boston, MA 02109
North Bridge Venture Partners, L.P. ............... 2,570,001 -- 2,570,001 14.1 11.1
950 Winter Street
Suite 4600
Waltham, MA 02451
Richard D'Amore(3)................................. 2,570,001 -- 2,570,001 14.1 11.1
Leon Navickas(4)................................... 2,010,000 -- 2,010,000 11.0 8.6
Scripps Ventures, LLC.............................. 1,792,500 -- 1,792,500 9.8 7.7
200 Madison Avenue
New York, NY 10016
Entities affiliated with The Goldman Sachs Group, 1,500,000 -- 1,500,000 8.2 6.5
Inc.(5)..........................................
85 Broad Street, Tenth Floor
New York, New York 10004
HarbourVest Partners V--Direct Fund L.P. .......... 1,500,000 -- 1,500,000 8.2 6.5
1 Financial Center
Boston, MA 02111
Commonwealth Capital Ventures, L.P. ............... 1,491,667 -- 1,491,667 8.2 6.4
20 William Street
Wellesley, MA 02481
</TABLE>

56
<PAGE>

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

* Less than one percent.

(1) Represents 3,034,566 shares held of record by Alta V Limited Partnership;
31,891 shares held of record by Customs House Partners; 71,127 shares held
of record by Polaris Venture Partners Founders' Fund, L.P.; and 1,188,873
shares held of record by Polaris Venture Partners, L.P. Mr. Flint is a
General Partner of Polaris Venture Management, Co., LLC. Mr. Flint is a
General Partner of the entity that manages Alta V Limited Partnership and
Customs House Partners. Mr. Flint disclaims beneficial ownership of all of
these shares, except to the extent of his pecuniary interest, if any.

(2) Represents 3,034,566 shares held of record by Alta V Limited Partnership and
31,891 shares held of record by Customs House Partners.

(3) Represents 2,570,001 shares held of record by North Bridge Venture Partners,
L.P. Mr. D'Amore is a General Partner of North Bridge Venture Partners, L.P.
Mr. D'Amore disclaims beneficial ownership of all of these shares, except to
the extent of his pecuniary interest, if any.

(4) Includes 45,000 shares held of record by Trustees of the Navickas Education
Trust 1997.

(5) Represents 1,350,000 shares held of record by The Goldman Sachs Group, Inc.
and 150,000 shares held of record by Stone Street Fund, 1999, L.P.

(6) Represents 71,127 shares held of record by Polaris Venture Founders' Fund,
L.P. and 1,188,873 shares held of record by Polaris Venture Partners, L.P.

57
<PAGE>
DESCRIPTION OF CAPITAL STOCK

GENERAL

Upon completion of this offering, we will be authorized to issue 100,000,000
shares of common stock, $0.001 par value, and 10,000,000 shares of undesignated
preferred stock, $0.001 par value. The following contains a summary of all of
the material terms of our capital stock.

COMMON STOCK

As of December 31, 1999, there were 18,250,052 shares of common stock
outstanding, as adjusted to reflect the conversion of all outstanding preferred
stock upon completion of this offering. The shares were held of record by 107
stockholders.

Holders of common stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Holders of common stock are entitled to
receive their proportionate share of dividends, if any, declared from time to
time by the board of directors out of funds legally available for that purpose.
See "Dividend Policy." In the event of our liquidation, dissolution or winding
up, holders of common stock are entitled to their proportionate share of all
assets remaining after payment of liabilities, after taking into consideration
the prior distribution rights of any preferred stock then outstanding. Common
stock has no preemptive or conversion rights or other subscription rights. No
redemption or sinking fund provisions apply to the common stock. All outstanding
shares of common stock are fully paid and nonassessable, and the shares of
common stock being offered by us will be fully paid and nonassessable as of the
completion of this offering.

PREFERRED STOCK

Immediately prior to this offering, our certificate of incorporation
provided for five series of preferred stock:

- Series A redeemable convertible participating preferred stock, of which
1,133,000 shares were issued and outstanding;

- Series B redeemable convertible participating preferred stock, of which
1,416,490 shares were issued and outstanding;

- Series C redeemable convertible preferred stock, of which 1,670,000 shares
were issued and outstanding;

- Series D redeemable convertible preferred stock, of which 2,250,000 shares
were issued and outstanding; and

- Series E redeemable convertible preferred stock, of which 2,695,000 shares
were issued and outstanding.

Upon the completion of this offering, each outstanding share of preferred stock
will convert automatically into 1.5 shares of common stock.

Upon the completion of this offering, the board of directors will be
authorized, without stockholder approval, from time to time to issue up to an
aggregate of 10,000,000 shares of preferred stock, $0.001 par value per share,
in one or more series, each of the series to have such rights and preferences,
including voting rights, dividend rights, conversion rights, redemption
privileges and liquidation preferences, as shall be determined by the board of
directors. The rights of the holders of common stock will be affected by, and
may be adversely affected by, the rights of holders of any preferred stock that
may be issued in the future. Issuance of preferred stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for others
to acquire, or of discouraging others from attempting to acquire,

58
<PAGE>
a majority of our outstanding voting stock. We have no current plans to issue
any shares of preferred stock.

REGISTRATION RIGHTS

The holders of 13,746,735 shares of common stock are entitled to rights to
register their shares under the Securities Act at any time after the completion
of this offering. These rights are provided under the terms of an agreement
between us and the holders of registrable securities, who are former holders of
our preferred stock. If we register any of our securities either for our own
account or for the account of other security holders, the holders of registrable
securities will be entitled to include their shares of common stock in the
registration, subject to the ability of the underwriters to limit the number of
shares included in the offering. The holders of registrable securities may also
require us to use our best efforts to register all or a portion of their
registrable securities on Form S-3 when use of the form becomes available to us,
provided that the proposed aggregate offering price, based on the then-current
public market price, is at least $500,000. All registration expenses must be
borne by us and all selling expenses relating to registrable securities must be
borne by the holders of the securities being registered.

ANTI-TAKEOVER EFFECTS OF DELAWARE LAW AND OUR CHARTER AND BY-LAWS

Delaware law and our certificate of incorporation and by-laws could make it
more difficult to acquire us by means of a tender offer, a proxy contest, open
market purchases, removal of incumbent directors and otherwise. These
provisions, summarized below, are expected to discourage types of coercive
takeover practices and inadequate takeover bids and to encourage persons seeking
to acquire control of us to first negotiate with us. We believe that the
benefits of increased protection of our potential ability to negotiate with the
proponent of an unfriendly or unsolicited proposal to acquire or restructure us
outweigh the disadvantages of discouraging takeover or acquisition proposals
because negotiation of these proposals could result in an improvement of their
terms.

We must comply with Section 203 of the Delaware General Corporation Law, an
anti-takeover law. In general, Section 203 prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became an
interested stockholder, unless the business combination or the transaction in
which the person became an interested stockholder is approved in a prescribed
manner. Generally, a "business combination" includes a merger, asset or stock
sale, or other transaction resulting in a financial benefit to an interested
stockholder. An "interested stockholder" includes a person who, together with
affiliates and associates, owns, or did own within three years prior to the
determination of interested stockholder status, 15% or more of the corporation's
voting stock. The existence of this provision generally will have an
anti-takeover effect for transactions not approved in advance by the board of
directors, including discouraging attempts that might result in a premium over
the market price for the shares of common stock held by stockholders.

Upon the closing of this offering, our certificate of incorporation and
by-laws will require that any action required or permitted to be taken by our
stockholders must be effected at a duly called annual or special meeting of the
stockholders and may not be effected by a consent in writing. In addition, upon
the completion of this offering, special meetings of our stockholders may be
called only by the board of directors or some of our officers. Our certificate
of incorporation and by-laws also provide that, effective upon the completion of
this offering, our board of directors will be divided into three classes, with
each class serving staggered three-year terms. These provisions may have the
effect of deterring hostile takeovers or delaying changes in our control or
management.

59
<PAGE>
TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the common stock is ChaseMellon
Shareholder Services.

SHARES ELIGIBLE FOR FUTURE SALE

Before this offering, there has been no market for our common stock. We
cannot predict the effect, if any, that sales of shares of common stock to the
public or the availability of shares for sale to the public will have on the
market price of the common stock prevailing from time to time. Nevertheless, if
a significant number of shares of common stock are sold in the public market, or
if people believe that such sales may occur, the prevailing market price of our
common stock could decline and could impair our future ability to raise capital
through the sale of our equity securities.

Upon completion of this offering we will have outstanding 23,250,052 shares
of common stock, assuming no exercise of outstanding options after December 31,
1999. Of these shares, the 5,000,000 shares sold in this offering will be freely
tradable without restriction under the Securities Act except for any shares
purchased by "affiliates" of Centra as that term is defined in Rule 144 under
the Securities Act.

The remaining 18,250,052 shares of common stock were issued and sold by us
in reliance on exemptions from the registration requirements of the Securities
Act, all of which are subject to lock-up agreements with the underwriters that
provide that we and those holders of stock and options may not dispose of or
hedge any common stock or securities convertible into or exchangeable for shares
of common stock. These restrictions will be in effect for a period of 180 days
after the date of this prospectus. At any time and without notice, FleetBoston
Robertson Stephens Inc. may, in its sole discretion, release all or some of the
securities from these lock-up agreements. In addition, holders of stock options
could exercise these options and sell some of the shares issued upon exercise as
described below.

<TABLE>
<CAPTION>
NUMBER OF SHARES
RELEVANT DATES ELIGIBLE FOR FUTURE SALE COMMENT
- ----------------------------------- ------------------------ -----------------------------------
<S> <C> <C>
180 days after effective date...... 13,442,521 All shares subject to lock-up
released; shares eligible for sale
under Rules 144 and 701

More than 181 days after Additional shares becoming eligible
effective date................... 4,807,531 for sale under Rule 144 more than
180 days after the effective date
</TABLE>

In addition, as of December 31, 1999, there were outstanding options to
purchase 1,377,413 shares of common stock. All of these options are subject to
lock-up agreements.

RULE 144

In general, under Rule 144, an affiliate of Centra, or person (or persons
whose shares are aggregated) who has beneficially owned restricted shares for at
least one year, will be entitled to sell in any three-month period a number of
shares that does not exceed the greater of:

- one percent of the then-outstanding shares of common stock (approximately
232,501 shares immediately after this offering), or

- the average weekly trading volume during the four calendar weeks preceding
the date on which notice of the sale is filed with the SEC.

60
<PAGE>
Sales under Rule 144 must also comply with manner of sale provisions and
notice requirements and are subject to the availability of public information
about us. We are unable to estimate the number of shares that will be sold under
Rule 144, as this will depend on the market price for the common stock, the
personal circumstances of the sellers and other factors.

RULE 144(k)

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

RULE 701

Any of our employees, officers, directors or consultants who purchased
shares pursuant to a written compensatory plan or contract may be entitled to
rely on the resale provision of 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 subject to lock-up agreements and their
Rule 701 shares will only become eligible for sale at the earlier of (a) the
expiration of the 180-day lock-up agreements and (b) no sooner than 90 days
after the offering upon obtaining the prior written consent of FleetBoston
Robertson Stephens Inc.

Upon the completion of this offering, we intend to file a registration
statement on Form S-8 under the Securities Act covering, among other things,
shares of common stock covered by outstanding options under the 1995 stock plan,
the 1999 stock incentive plan, the 1999 director option plan and the 1999
employee stock purchase plan. Based on the number of shares covered by
outstanding options as of December 31, 1999 and currently reserved for issuance
under the incentive plans, the registration statement would cover a total of
approximately 6,200,000 shares. The registration statement will become effective
upon filing. Accordingly, shares registered under the registration statement
will be available for sale in the open market immediately, after complying with
Rule 144 volume limitations applicable to affiliates, and with applicable
180-day lock-up agreements.

REGISTRATION RIGHTS

After the completion of this offering, holders of 13,746,735 shares of
common stock will be entitled to specific rights to register those shares for
sale in the public market. See "Description of Capital Stock--Registration
Rights." Registration of these shares under the Securities Act would result in
the shares becoming freely tradable without restriction under the Securities
Act, except for shares purchased by affiliates, immediately upon the
effectiveness of the registration.

61
<PAGE>
UNDERWRITING

The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Hambrecht & Quist LLC and Dain Rauscher
Wessels, a division of Dain Rauscher Incorporated, have severally agreed with
us, subject to the terms and conditions of the underwriting agreement, to
purchase from us the numbers of shares of common stock set forth opposite their
names below. The underwriters are committed to purchase and pay for all of the
shares if any are purchased.

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc..........................
Hambrecht & Quist LLC.......................................
Dain Rauscher Wessels.......................................
---------
Total................................................... 5,000,000
=========
</TABLE>

We have been advised that the underwriters propose to offer the shares of
common stock to the public at the public offering price located on the cover
page of this prospectus and to dealers at that price less a concession of not in
excess of $ per share, of which $ may be reallowed to other dealers. After
the initial public offering, the public offering price, concession and
reallowance to dealers may be reduced by the representatives. No reduction in
this price will change the amount of proceeds to be received by us as indicated
on the cover page of this prospectus.

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 750,000 additional shares of common stock at the same price per
share as we will receive for the 5,000,000 shares that the underwriters have
agreed to purchase. To the extent that the underwriters exercise this option,
each of the underwriters will have a firm commitment to purchase approximately
the same percentage of 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 5,000,000 shares offered by this prospectus. If purchased, the additional
shares will be sold by the underwriters on the same terms as those on which the
5,000,000 shares are being sold. We will be obligated, under this option, to
sell shares to the extent the option is exercised. The underwriters may exercise
the option only to cover over-allotments made in connection with the sale of the
5,000,000 shares of common stock offered by this prospectus.

UNDERWRITING DISCOUNTS AND COMMISSIONS. The underwriting discounts and
commissions will be an amount equal to the public offering price per share, less
the amount paid per share by the underwriters to us. We currently expect that
the underwriting discounts and commissions will equal 7% of the public offering
price. The following table shows the estimated per share and total underwriting
discounts and commissions to be paid by us to the underwriters. This information
is presented assuming either no exercise or full exercise by the underwriters of
their over-allotment option.

<TABLE>
<CAPTION>
WITHOUT WITH
PER OVER-ALLOTMENT OVER-ALLOTMENT
SHARE OPTION OPTION
-------- -------------- --------------
<S> <C> <C> <C>
Assumed public offering price.............. $9.00 $45,000,000 $51,750,000
Estimated underwriting discounts and
commissions.............................. 0.63 3,150,000 3,622,500
Estimated proceeds, before expenses, to
us....................................... 8.37 41,850,000 48,127,500
</TABLE>

62
<PAGE>

The expenses of the offering payable by us are estimated at $1,375,000, of
which $217,000 had been paid as of December 31, 1999. FleetBoston Robertson
Stephens Inc. expects to deliver the shares of common stock to purchasers on
, 2000.

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

FUTURE SALES. Each of our executive officers, directors and other
significant stockholders of record has agreed with the representatives, for a
period of 180 days after the date of this prospectus, not to offer to sell,
contract to sell or otherwise sell, dispose of, loan, pledge or grant any rights
with respect to any shares of common stock, any options or warrants to purchase
any shares of common stock, or any securities convertible into or exchangeable
for shares of common stock owned as of the date of this prospectus or acquired
directly from us by these holders or with respect to which they have or may
acquire the power of disposition, without the prior written consent of
FleetBoston Robertson Stephens Inc. However, FleetBoston Robertson
Stephens Inc. may, in its sole discretion and at any time without notice,
release all or any portion of the securities subject to lock-up agreements. In
addition, we have agreed that during the 180 days after the date of this
prospectus we will not, without the prior written consent of FleetBoston
Robertson Stephens Inc., (1) consent to the disposition of any shares held by
stockholders subject to lock-up agreements prior to the expiration of the
lock-up period or (2) issue, sell, contract to sell, or otherwise dispose of,
any shares of common stock, any options to purchase any shares of common stock
or any securities convertible into, exercisable for or exchangeable for shares
of common stock other than (a) our sale of shares in this offering, (b) the
issuance of common stock upon the exercise of outstanding options and the
issuance of options under existing stock option and incentive plans, provided
such common stock and the common stock issuable upon the exercise of such
options cannot be transferred prior to the expiration of the lock-up period and
(c) the issuance of shares in connection with certain acquisitions that cannot
be sold on the public market during the lock-up period. Please see "Shares
Eligible for Future Sale."

DIRECTED SHARES. At our request, the underwriters have reserved up to 5% of
the shares of the common stock offered by this prospectus for sale to our
officers, directors, employees and their family members and to our business
associates at the public offering price set forth on the cover page of this
prospectus. These business associates are current and former clients, vendors,
suppliers and other individuals who, in the judgment of our management, have
contributed to our success. These persons must commit to purchase no later than
the close of business on the day following the date of this prospectus. The
number of shares available for sale to the general public will be reduced to the
extent these persons purchase the reserved shares. Sales of these reserved
shares will be effected through E*OFFERING Corp. and E*TRADE Securities, Inc. A
copy of the prospectus in electronic format will be made available on the Web
site hosted by E*OFFERING Corp. and E*TRADE Securities, Inc.

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

NO PRIOR PUBLIC MARKET. Prior to this offering, there has been no public
market for the common stock. Consequently, the initial public offering price for
the common stock offered by this prospectus will be determined through
negotiations between us and the representatives. The material factors to be
considered in these negotiations are prevailing market conditions, our financial
information, market valuations of other companies that we and the
representatives believe to be comparable to us, estimates of our business
potential and the present state of our development.

63
<PAGE>
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 or 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 the underwriter or syndicate member is purchased by the
representatives in a syndicate covering transaction and has therefore not been
effectively placed by the underwriter or syndicate member. The representatives
have advised us that these transactions may be effected on the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time.

LEGAL MATTERS

The validity of the shares offered by this prospectus will be passed upon
for us by Foley, Hoag & Eliot LLP, Boston, Massachusetts. Legal matters will be
passed upon for the underwriters by Hale and Dorr LLP, Boston, Massachusetts.

EXPERTS

The financial statements as of December 31, 1998 and 1999 and for each of
the three years in the period ended December 31, 1999 included in this
prospectus and the registration statement relating to this prospectus have been
audited by Arthur Andersen LLP, as independent public accountants, as indicated
in their report with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in giving said reports.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1 with the SEC for our
common stock offered hereby. This prospectus does not contain all of the
information set forth in the registration statement. You should refer to the
registration statement and its exhibits for additional information. Whenever we
make reference in this prospectus to any of our contracts, agreements or other
documents, the references are not necessarily complete and you should refer to
the exhibits attached to the registration statement for the copies of the actual
contract, agreement or other document. When we complete this offering, we will
also be required to file annual, quarterly and special reports, proxy statements
and other information with the SEC.

You can read our SEC filings, including the registration statement, over the
Internet at the SEC's Web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549; Suite
1400, 500 West Madison Street, Chicago, Illinois 60661 and 7 World Trade Center,
Thirteenth Floor, New York, New York 10048. You may also obtain copies of the
documents at prescribed rates by writing to the Public Reference Section of the
SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference facilities.

We intend to send our stockholders annual reports containing audited
consolidated financial statements and quarterly reports containing unaudited
consolidated financial statements for the first three quarters of each fiscal
year.

64
<PAGE>
CENTRA SOFTWARE, INC.
CONSOLIDATED FINANCIAL STATEMENTS
INDEX

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2

Consolidated Balance Sheets as of December 31, 1998 and 1999
and Pro Forma December 31, 1999 (unaudited)............... F-3

Consolidated Statements of Operations for the Years Ended
December 31, 1997,
1998 and 1999............................................. F-4

Consolidated Statements of Redeemable Convertible Preferred
Stock and Stockholders' Equity (Deficit) for the Years
Ended December 31, 1997, 1998 and 1999, and Pro Forma
December 31, 1999 (unaudited)............................. F-5

Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1998 and 1999.......................... F-6

Notes to Consolidated Financial Statements.................. F-7
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Centra Software, Inc.:

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

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Centra Software, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted accounting principles.

/s/ Arthur Andersen LLP

Boston, Massachusetts
January 5, 2000

F-2
<PAGE>
CENTRA SOFTWARE, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------------- DECEMBER 31,
1998 1999 1999
----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 1,979,000 $ 7,878,000 $ 7,878,000
Accounts receivable, net of reserves of approximately
$100,000 and $194,000 at December 31, 1998 and 1999,
respectively............................................ 1,769,000 2,667,000 2,667,000
Prepaid expenses and other current assets................. 190,000 510,000 510,000
----------- ------------ ------------
Total current assets.................................. 3,938,000 11,055,000 11,055,000
----------- ------------ ------------
Property and Equipment, at cost:
Computers and equipment................................... 1,187,000 2,343,000 2,343,000
Furniture and fixtures.................................... 204,000 312,000 312,000
Leasehold improvements.................................... 66,000 93,000 93,000
----------- ------------ ------------
1,457,000 2,748,000 2,748,000
Less--Accumulated depreciation and amortization........... 660,000 1,271,000 1,271,000
----------- ------------ ------------
797,000 1,477,000 1,477,000
----------- ------------ ------------
Other Assets.............................................. 18,000 764,000 764,000
----------- ------------ ------------
$ 4,753,000 $ 13,296,000 $ 13,296,000
=========== ============ ============

LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current maturities of term loan........................... $ 325,000 $ 339,000 $ 339,000
Accounts payable.......................................... 416,000 562,000 562,000
Accrued expenses.......................................... 931,000 2,780,000 2,780,000
Accrued dividends payable................................. -- -- 6,480,000
Deferred revenue.......................................... 725,000 1,546,000 1,546,000
----------- ------------ ------------
Total current liabilities............................. 2,397,000 5,227,000 11,707,000
----------- ------------ ------------
Term loan, net of current maturities........................ 530,000 376,000 376,000
----------- ------------ ------------
Commitments (Note 5)
Redeemable convertible preferred stock, $0.001 par value--
Authorized--9,164,490 shares; no shares pro forma
Issued and outstanding--6,469,490 shares, 9,164,490
shares, and no shares as of December 31, 1998 and 1999
and pro forma December 31, 1999, respectively, at
carrying value.......................................... 18,498,000 32,480,000 --
----------- ------------ ------------
Stockholders' equity (deficit):
Preferred stock, $0.001 par value--
Authorized--no shares actual; 10,000,000 shares pro forma
Issued and outstanding--none actual; and pro forma -- -- --
Common stock, $0.001 par value--
Authorized--25,000,000 shares; actual; 100,000,000 shares
pro forma
Issued--3,742,689 shares, 5,164,923 shares and 18,911,658
shares at December 31, 1998 and 1999 and pro forma
December 31, 1999, respectively......................... 3,000 5,000 19,000
Additional paid-in capital.................................. 693,000 3,770,000 30,406,000
Accumulated deficit......................................... (17,354,000) (26,536,000) (27,186,000)
Deferred compensation....................................... -- (1,986,000) (1,986,000)
Treasury stock (455,339 shares, 661,606 shares and 661,606
shares of common stock at December 31, 1998 and 1999 and
pro forma December 31, 1999, respectively, at cost)....... (14,000) (40,000) (40,000)
----------- ------------ ------------
Total stockholders' equity (deficit).................. (16,672,000) (24,787,000) 1,213,000
----------- ------------ ------------
$ 4,753,000 $ 13,296,000 $ 13,296,000
=========== ============ ============
</TABLE>

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

F-3
<PAGE>
CENTRA SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
License.............................................. $ 234,000 $ 3,356,000 $ 7,017,000
Service.............................................. 55,000 870,000 1,578,000
----------- ----------- -----------
Total revenues................................... 289,000 4,226,000 8,595,000
----------- ----------- -----------
Cost of Revenues:
License.............................................. 75,000 185,000 173,000
Service.............................................. 130,000 919,000 1,543,000
----------- ----------- -----------
Total cost of revenues........................... 205,000 1,104,000 1,716,000
----------- ----------- -----------
Gross profit..................................... 84,000 3,122,000 6,879,000
----------- ----------- -----------
Operating Expenses:
Sales and marketing(1)............................... 2,465,000 5,066,000 8,040,000
Product development(1)............................... 3,042,000 3,078,000 4,594,000
General and administrative(1)........................ 983,000 1,442,000 2,440,000
Compensation charge for issuance of stock options
(Note 7e).......................................... -- -- 736,000
----------- ----------- -----------
Total operating expenses......................... 6,490,000 9,586,000 15,810,000
----------- ----------- -----------
Operating loss....................................... (6,406,000) (6,464,000) (8,931,000)
Interest Income........................................ 69,000 244,000 375,000
Interest Expense....................................... (34,000) (33,000) (67,000)
----------- ----------- -----------
Net loss............................................. (6,371,000) (6,253,000) (8,623,000)
Accretion of discount on preferred stock............... 506,000 506,000 507,000
----------- ----------- -----------
Net loss attributable to common stockholders........... $(6,877,000) $(6,759,000) $(9,130,000)
=========== =========== ===========
Basic and diluted net loss per share................... $ (1.33) $ (1.16) $ (1.39)
=========== =========== ===========
Pro forma basic and diluted net loss per share......... $ (0.64)
===========
Weighted average shares outstanding:
Basic and diluted.................................... 5,156,000 5,845,000 6,588,000
=========== =========== ===========
Pro forma basic and diluted.......................... 15,281,000
===========
</TABLE>

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

(1) Excludes compensation charge for issuance of stock options.

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

F-4
<PAGE>
CENTRA SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' EQUITY (DEFICIT)
FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
REDEEMABLE CONVERTIBLE STOCKHOLDERS' EQUITY (DEFICIT)
PREFERRED STOCK -----------------------------------------------
-------------------------- COMMON STOCK
CARRYING ----------------------------- ADDITIONAL
SHARES VALUE SHARES $0.001 PAR VALUE PAID-IN CAPITAL
---------- ------------- ---------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996........................ 2,549,490 $ 4,311,000 2,730,000 $ 2,000 $ 503,000
Sale of series C redeemable convertible
preferred stock, net of issuance costs of
$27,000....................................... 1,670,000 4,175,000 -- -- --
Sale of series D redeemable convertible
preferred stock, net of issuance costs of
$20,000....................................... 2,250,000 9,000,000 -- -- --
Accretion of series A and B redeemable
convertible preferred stock discount.......... -- 506,000 -- -- --
Sale of common stock............................ -- -- 804,375 1,000 133,000
Repurchase of common stock...................... -- -- -- -- --
Net loss........................................ -- -- -- -- --
---------- ----------- ---------- ------- -----------
BALANCE, DECEMBER 31, 1997........................ 6,469,490 17,992,000 3,534,375 3,000 636,000
Accretion of series A and B redeemable
convertible preferred stock discount.......... -- 506,000 -- -- --
Sale of common stock............................ -- -- 208,314 -- 57,000
Repurchase of common stock...................... -- -- -- -- --
Net loss........................................ -- -- -- -- --
---------- ----------- ---------- ------- -----------
BALANCE, DECEMBER 31, 1998........................ 6,469,490 18,498,000 3,742,689 3,000 693,000
Sales of series E redeemable convertible
preferred stock, net of issuance costs of
$52,000....................................... 2,695,000 13,475,000 -- -- --
Deferred compensation related to grants of
common stock options.......................... -- -- -- -- 2,722,000
Amortization of deferred compensation........... -- -- -- -- --
Accretion of series A and B redeemable
convertible preferred stock discount.......... -- 507,000 -- -- --
Sale of common stock............................ -- -- 1,422,234 2,000 355,000
Repurchase of common stock...................... -- -- -- -- --
Net loss........................................ -- -- -- -- --
---------- ----------- ---------- ------- -----------
BALANCE, DECEMBER 31, 1999........................ 9,164,490 32,480,000 5,164,923 5,000 3,770,000
Accretion of series A and B redeemable
convertible preferred stock discount
(unaudited)................................... -- 650,000 -- -- --
Conversion of redeemable convertible preferred
stock into common stock (unaudited)........... (9,164,490) (26,650,000) 13,746,735 14,000 26,636,000
Accrual of dividends payable on series A and B
redeemable convertible preferred stock
(unaudited)................................... -- (6,480,000) -- -- --
---------- ----------- ---------- ------- -----------
PRO FORMA BALANCE, DECEMBER 31, 1999
(UNAUDITED)....................................... -- $ -- 18,911,658 $19,000 $30,406,000
========== =========== ========== ======= ===========

<CAPTION>
STOCKHOLDERS' EQUITY (DEFICIT)
--------------------------------------------------------------------
STOCK TREASURY STOCK
ACCUMULATED DEFERRED SUBSCRIPTION -------------------
DEFICIT COMPENSATION RECEIVABLE SHARES COST
------------ ------------ ---------------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996........................ $ (3,671,000) $ -- $ -- 395,433 $(10,000)
Sale of series C redeemable convertible
preferred stock, net of issuance costs of
$27,000....................................... (27,000) -- -- -- --
Sale of series D redeemable convertible
preferred stock, net of issuance costs of
$20,000....................................... (20,000) -- -- -- --
Accretion of series A and B redeemable
convertible preferred stock discount.......... (506,000) -- -- -- --
Sale of common stock............................ -- -- (8,000) -- --
Repurchase of common stock...................... -- -- -- 51,656 (3,000)
Net loss........................................ (6,371,000) -- -- -- --
------------ ----------- -------- ------- --------
BALANCE, DECEMBER 31, 1997........................ (10,595,000) -- (8,000) 447,089 (13,000)
Accretion of series A and B redeemable
convertible preferred stock discount.......... (506,000) -- -- -- --
Sale of common stock............................ -- -- 8,000 -- --
Repurchase of common stock...................... -- -- -- 8,250 (1,000)
Net loss........................................ (6,253,000) -- -- -- --
------------ ----------- -------- ------- --------
BALANCE, DECEMBER 31, 1998........................ (17,354,000) -- -- 455,339 (14,000)
Sales of series E redeemable convertible
preferred stock, net of issuance costs of
$52,000....................................... (52,000) -- -- -- --
Deferred compensation related to grants of
common stock options.......................... -- (2,722,000) -- -- --
Amortization of deferred compensation........... -- 736,000 -- -- --
Accretion of series A and B redeemable
convertible preferred stock discount.......... (507,000) -- -- -- --
Sale of common stock............................ -- -- -- -- --
Repurchase of common stock...................... -- -- -- 206,267 (26,000)
Net loss........................................ (8,623,000) -- -- -- --
------------ ----------- -------- ------- --------
BALANCE, DECEMBER 31, 1999........................ (26,536,000) (1,986,000) -- 661,606 (40,000)
Accretion of series A and B redeemable
convertible preferred stock discount
(unaudited)................................... (650,000) -- -- -- --
Conversion of redeemable convertible preferred
stock into common stock (unaudited)........... -- -- -- -- --
Accrual of dividends payable on series A and B
redeemable convertible preferred stock
(unaudited)................................... -- -- -- -- --
------------ ----------- -------- ------- --------
PRO FORMA BALANCE, DECEMBER 31, 1999
(UNAUDITED)....................................... $(27,186,000) $(1,986,000) $ -- 661,606 $(40,000)
============ =========== ======== ======= ========

TOTAL
STOCKHOLDERS'
EQUITY (DEFICIT)
----------------
<S> <C>
BALANCE, DECEMBER 31, 1996........................ $ (3,176,000)
Sale of series C redeemable convertible
preferred stock, net of issuance costs of
$27,000....................................... (27,000)
Sale of series D redeemable convertible
preferred stock, net of issuance costs of
$20,000....................................... (20,000)
Accretion of series A and B redeemable
convertible preferred stock discount.......... (506,000)
Sale of common stock............................ 126,000
Repurchase of common stock...................... (3,000)
Net loss........................................ (6,371,000)
------------
BALANCE, DECEMBER 31, 1997........................ (9,977,000)
Accretion of series A and B redeemable
convertible preferred stock discount.......... (506,000)
Sale of common stock............................ 65,000
Repurchase of common stock...................... (1,000)
Net loss........................................ (6,253,000)
------------
BALANCE, DECEMBER 31, 1998........................ (16,672,000)
Sales of series E redeemable convertible
preferred stock, net of issuance costs of
$52,000....................................... (52,000)
Deferred compensation related to grants of
common stock options.......................... --
Amortization of deferred compensation........... 736,000
Accretion of series A and B redeemable
convertible preferred stock discount.......... (507,000)
Sale of common stock............................ 357,000
Repurchase of common stock...................... (26,000)
Net loss........................................ (8,623,000)
------------
BALANCE, DECEMBER 31, 1999........................ (24,787,000)
Accretion of series A and B redeemable
convertible preferred stock discount
(unaudited)................................... (650,000)
Conversion of redeemable convertible preferred
stock into common stock (unaudited)........... 26,650,000
Accrual of dividends payable on series A and B
redeemable convertible preferred stock
(unaudited)................................... --
------------
PRO FORMA BALANCE, DECEMBER 31, 1999
(UNAUDITED)....................................... $ 1,213,000
============
</TABLE>

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

F-5
<PAGE>
CENTRA SOFTWARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net loss.................................................. $(6,371,000) $(6,253,000) $(8,623,000)
Adjustments to reconcile net loss to net cash used in
operating activities--
Depreciation and amortization........................... 227,000 369,000 613,000
Compensation charge for issuance of stock options....... -- -- 736,000
Loss on disposal of fixed assets........................ 51,000 -- --
Changes in assets and liabilities--
Accounts receivable................................... (149,000) (1,619,000) (899,000)
Prepaid expenses and other current assets............. (46,000) (113,000) (321,000)
Other assets.......................................... 113,000 10,000 (746,000)
Accounts payable...................................... 445,000 (110,000) 145,000
Accrued expenses...................................... 165,000 585,000 1,850,000
Deferred revenue...................................... 64,000 660,000 821,000
----------- ----------- -----------
Net cash used in operating activities............... (5,501,000) (6,471,000) (6,424,000)
----------- ----------- -----------

Cash Flows from Investing Activities:
Purchase of property and equipment, net................... (543,000) (472,000) (1,291,000)
Purchases of short-term investments....................... (70,000) -- --
Sale of short-term investments............................ -- 70,000 --
(Increase) decrease in restricted cash.................... (161,000) 211,000 --
----------- ----------- -----------
Net cash used in investing activities............... (774,000) (191,000) (1,291,000)
----------- ----------- -----------

Cash Flows from Financing Activities:
Proceeds from sale of preferred stock, net................ 13,128,000 -- 13,423,000
Proceeds from sale of common stock........................ 126,000 65,000 357,000
Purchase of treasury stock................................ (3,000) (1,000) (26,000)
Proceeds from term loan................................... 159,000 713,000 209,000
Payments on term loan..................................... (88,000) (120,000) (323,000)
Payments on capital lease obligations..................... (2,000) (25,000) (26,000)
----------- ----------- -----------
Net cash provided by financing activities........... 13,320,000 632,000 13,614,000
----------- ----------- -----------

Net Increase (Decrease) in Cash and Cash Equivalents........ 7,045,000 (6,030,000) 5,899,000
Cash and Cash Equivalents, beginning of year................ 964,000 8,009,000 1,979,000
----------- ----------- -----------
Cash and Cash Equivalents, end of year...................... $ 8,009,000 $ 1,979,000 $ 7,878,000
=========== =========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest.................. $ 34,000 $ 37,000 $ 74,000
=========== =========== ===========

Supplemental Disclosure of Noncash Financing Activities:
Accretion of discount on series A and series B redeemable
convertible preferred stock............................. $ 506,000 $ 506,000 $ 507,000
=========== =========== ===========
Property and equipment acquired under capital lease....... $ 111,000 $ -- $ --
=========== =========== ===========
Issuance of common stock and stock subscription
receivable.............................................. $ 8,000 $ -- $ --
=========== =========== ===========
</TABLE>

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

F-6
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES

Centra Software, Inc. (Centra) was incorporated as a Delaware corporation on
April 4, 1995. From incorporation in April 1995 through June 1997, Centra was in
the development stage, engaged primarily in development of its initial products.
In July 1997, Centra began commercial shipment of its initial product. Centra is
a provider of software and services that support live eBusiness collaboration,
collaborative commerce, and corporate learning and training.

Centra is subject to certain business risks that could affect future
operations and financial performance. These risks include, but are not limited
to, rapid technological changes, significant competition, dependence on key
individuals, quarterly performance fluctuations, ability to enhance existing
products and services and the need to obtain adequate financing to fund these
enhancements and for the development of new products.

The accompanying consolidated financial statements reflect the application
of certain accounting polices, as described in this note and elsewhere in the
notes to consolidated financial statements.

(A) BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Centra and its
wholly-owned subsidiaries, Centra Software Europe Limited, which was
incorporated in the United Kingdom on June 25, 1999 and Centra Software
Securities Corporation, a Massachusetts securities corporation. All significant
intercompany transactions and balances have been eliminated in consolidation.

(B) USE OF ESTIMATES

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

Centra recognizes revenues in accordance with the American Institute of
Certified Public Accountants' (AICPA) Statement of Position 97-2, SOFTWARE
REVENUE RECOGNITION (SOP 97-2), as amended by Statement of Position 98-4,
DEFERRAL OF THE EFFECTIVE DATE OF A PROVISION of SOP 97-2 (SOP 98-4). Centra
derives substantially all of its revenues from the sale of software licenses,
post-contract support (maintenance), and other services. Maintenance includes
telephone technical support, bug fixes and rights to upgrades and enhancements
on a when-and-if available basis. Professional services include training and
basic implementation consulting to meet specific customer needs.

Revenues from license fees are recognized when persuasive evidence of an
agreement exists, delivery of the product has occurred, the fee is fixed or
determinable and collectability is probable. Advance payments are recorded as
deferred revenue until the products are shipped, services are delivered or
obligations are met. Centra's products do not require significant customization.

Revenues related to maintenance and hosting services are recognized on a
straight-line basis over the period that the maintenance and hosting services
are provided and revenues allocable to implementation, consulting and training
services are recognized as the services are performed.

F-7
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In December 1998, the AICPA issued Statement of Position 98-9, MODIFICATION
OF SOP 97-2, SOFTWARE REVENUE RECOGNITION, WITH RESPECT TO CERTAIN TRANSACTIONS
(SOP 98-9). SOP 98-9 requires use of the residual method for recognition of
revenues when vendor-specific objective evidence exists for undelivered elements
but does not exist for delivered elements of a software arrangement. Centra will
be required to comply with the provisions of SOP 98-9 for transactions entered
into beginning January 1, 2000. Centra does not expect that the adoption of SOP
98-9 will have a material effect on the financial position or results of
operations.

(D) CASH EQUIVALENTS

Centra considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.

Centra accounts for cash equivalents in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, ACCOUNTING FOR CERTAIN
INVESTMENTS IN DEBT AND EQUITY SECURITIES. At December 31, 1998, Centra's cash
equivalents consisted of money market accounts and highly rated commercial
paper. At December 31, 1999, Centra's cash equivalents consisted of money market
accounts and highly rated corporate bonds.

(E) DEPRECIATION AND AMORTIZATION

Centra provides for depreciation and amortization of property and equipment
using the straight-line method by charges to operations in amounts to allocate
the cost of assets over their estimated useful lives as follows:

<TABLE>
<CAPTION>
ESTIMATED
ASSET CLASSIFICATION USEFUL LIFE
- -------------------- -------------
<S> <C>
Computers and equipment..................................... 3 years
Furniture and fixtures...................................... 3 years
Leasehold improvements...................................... Life of lease
</TABLE>

In accordance with SFAS No. 121, ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, Centra reviews its
long-lived assets (which consists of property and equipment) for impairment as
events and circumstances indicate the carrying amount of an asset may not be
recoverable. Centra evaluates the realizability of its long-lived assets based
on profitability and cash flow expectations for the related asset. Management
believes that, as of each of the balance sheet dates presented, none of Centra's
long-lived assets were impaired.

(F) PRODUCT DEVELOPMENT COSTS

SFAS No. 86, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE TO BE SOLD,
LEASED OR OTHERWISE MARKETED, requires capitalization of certain software
development costs subsequent to the establishment of technological feasibility.
Based upon Centra's product development process, technological feasibility is
established upon completion of a working model. Costs incurred by Centra between
the establishment of technological feasibility and the point at which the
product is ready for general release has not been significant. Accordingly,
Centra has charged all such costs to product development expenses in the
accompanying consolidated statements of operations.

F-8
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(G) DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS AND CONCENTRATION OF
CREDIT RISK

Financial instruments that potentially expose Centra to concentrations of
credit risk consist mainly of cash and cash equivalents and accounts receivable.
Centra maintains its cash and cash equivalents principally in domestic financial
institutions and investments of high credit rating. Centra's accounts receivable
are derived primarily from sales of software products and services. Centra
performs credit evaluations of its customers and generally does not require
collateral. Centra does not believe that significant credit risk exists at
December 31, 1998 and 1999. The carrying amounts of Centra's financial
instruments approximate fair market value.

During the year ended December 31, 1998, Centra had one customer who
accounted for 11% of revenues. No customer accounted for greater than 10% of
revenues for the years ended December 31, 1997 or 1999. As of December 31, 1998,
Centra had one customer who accounted for 17% of accounts receivable. As of
December 31, 1999, Centra had three customers who accounted for 16%, 12% and 10%
of accounts receivable, respectively.

(H) FOREIGN CURRENCY TRANSLATION

The financial statements of Centra's non-US subsidiary are translated in
accordance with SFAS No. 52 FOREIGN CURRENCY TRANSLATION. The functional
currency of Centra's foreign subsidiary is the US dollar, accordingly, all
assets and liabilities of the foreign subsidiary are translated using the
exchange rate at the balance sheet date except for property and equipment and
stockholders' deficit, which are translated at historical rates. Revenues and
expenses are translated at average rates during the period, except for
depreciation and amortization, which are translated at historical rates.
Transaction and translation gains and losses are included in the accompanying
consolidated statement of operations for the year ended December 31, 1999 and
were not material to the financial statements taken as a whole.

(I) COMPREHENSIVE INCOME (LOSS)

As of January 1, 1998, Centra adopted SFAS No. 130, REPORTING COMPREHENSIVE
INCOME. SFAS No. 130 requires disclosure of all components of comprehensive
income (loss) on an annual and interim basis. Comprehensive income (loss) is
defined as the change in equity of a business enterprise during a period from
transactions and other events and circumstances from nonowner sources. Centra's
comprehensive loss is equal to net loss for all periods presented.

(J) NET LOSS PER SHARE

Basic and diluted net loss per share are presented in conformity with SFAS
No. 128, EARNING PER SHARE (SFAS No. 128) for all periods presented. Pursuant to
Securities and Exchange Commission Staff Accounting Bulletin No. 98, common
stock and redeemable convertible preferred stock issued or granted for nominal
consideration prior to the anticipated effective date of Centra's initial public
offering must be included in the calculation of basic and diluted net loss per
share as if they had been outstanding for all periods presented. The common
shares to be issued for the series A and series B preferred stock upon
conversion, redemption or liquidation will be for nominal consideration due to
the liquidation premium payable to the holders of series A and series B.
Accordingly, the shares to be issued at the time the series A and series B
preferred stock converts to common stock have been included in the calculation
of basic and diluted net loss per share from date of issuance. In accordance

F-9
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

with SFAS No. 128, basic and diluted net loss per share has been computed by
dividing the weighted-average number of shares of common stock outstanding
during the period, less shares subject to repurchase into the net loss
attributable to common stockholders which includes both the accretion of the
discount and the liquidation premium on the series A and series B preferred
stock.

(K) PRO FORMA NET LOSS PER SHARE

Pro forma net loss per share has been computed as described above and also
gives effect to the conversion of redeemable convertible preferred stock not
included in the computation of basic and diluted net loss per share that will
automatically convert upon the completion of Centra's proposed initial public
offering (using the if-converted method) from the original date of issuance.
Upon consummation of the proposed initial public offering, all of the redeemable
convertible preferred stock outstanding as of December 31, 1999 will be
converted into an aggregate of 13,746,735 shares of common stock.

Historical and pro forma basic and diluted net loss per share are as
follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
HISTORICAL:
Net loss attributable to common stockholders........... $(6,877,000) $(6,759,000) $(9,130,000)
=========== =========== ===========
Basic and diluted shares:
Weighted-average shares of common and series A and B
preferred stock outstanding.......................... 6,684,000 7,028,000 7,857,000
Less: weighted-average shares subject to repurchase.... (1,528,000) (1,183,000) (1,269,000)
----------- ----------- -----------
Weighted-average shares of common and series A and B
preferred stock outstanding used in computing basic
and diluted net loss per share....................... 5,156,000 5,845,000 6,588,000
----------- ----------- -----------
Basic and diluted net loss per share................... $ (1.33) $ (1.16) $ (1.39)
=========== =========== ===========

PRO FORMA:
Net loss attributable to common stockholders........... $(9,130,000)
Less: Accretion of unamortized discount on series A and
B preferred stock.................................... 650,000
-----------
Net loss $(9,780,000)
===========
Weighted-average shares of common and series A and B
preferred stock outstanding used in computing basic
and diluted net loss per share....................... 6,588,000
Adjusted to reflect the assumed conversion of series C,
D and E preferred stock from the date of issuance.... 8,693,000
-----------
Weighted-average shares used in computing pro forma
basic and diluted net loss per share 15,281,000
===========
Pro forma basic and diluted net loss per share......... $ (0.64)
===========
</TABLE>

F-10
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Options to purchase a total of 641,513, 1,092,920 and 1,377,413 common shares
have not been included in the computation of dilutive EPS above for the years
ended December 31, 1997, 1998 and 1999, respectively. These shares are
considered antidilutive as Centra has recorded a loss for all periods presented.

(L) SEGMENT INFORMATION

In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS
No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
(SFAS No. 131). As of December 31, 1999, Centra operates solely in one segment,
the development and marketing of software products and related services, and
therefore there is no impact to Centra's financial statements of adopting SFAS
No. 131. Centra's revenues from customers outside of the United States were
approximately $13,000, $585,000 and $503,000 in the years ended December 31,
1997, 1998 and 1999, respectively.

(M) RECENT ACCOUNTING PRONOUNCEMENTS

In March 1998, the Accounting Standards Executive Committee issued Statement
of Position 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE DEVELOPED OR
OBTAINED FOR INTERNAL USE (SOP 98-1). SOP 98-1 requires companies to capitalize
certain qualifying computer software costs that are incurred during the
application development stage and amortize them over the software's estimated
useful life. Costs of enhancements to internal-use computer software are
capitalized and amortized over the software's estimated useful life if they
result in additional functionality and are qualified expenditures. Centra
adopted SOP 98-1 effective January 1, 1999. The adoption of SOP 98-1 did not
have a material effect on Centra's consolidated financial position, results of
operations or cash flows.

In April 1998, the AICPA issued SOP 98-5, REPORTING THE COSTS OF START-UP
ACTIVITIES (SOP 98-5). SOP 98-5 is effective beginning on January 1, 1999, and
requires that start-up costs, capitalized prior to January 1, 1999, be written
off and any future start-up costs be expensed as incurred. The adoption of SOP
98-5 did not have a material impact on Centra's financial position, results of
operations or cash flows.

In June 1999, the FASB issued SFAS No. 137, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES-DEFERRAL OF THE EFFECTIVE DATE OF FASB
STATEMENT NO. 133, which defers the effective date of SFAS No. 133 to all fiscal
quarters of all fiscal years beginning after June 15, 2000. SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, issued in June
1998, establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts, and
hedging activities. It requires an entity to recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value. Centra does not expect adoption of this statement
will be material to its financial position, results of operations or cash flows.

F-11
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(N) ACCRUED EXPENSES

Accrued expenses at December 31, 1998 and 1999 consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1998 1999
-------- ----------
<S> <C> <C>
Payroll and payroll-related costs..................... $472,000 $1,200,000
Accrued initial public offering costs................. -- 489,000
Other accrued expenses................................ 459,000 1,091,000
-------- ----------
$931,000 $2,780,000
======== ==========
</TABLE>

(2) INCOME TAXES

Centra provides for federal and state income taxes in accordance with SFAS
No. 109, ACCOUNTING FOR INCOME TAXES. Under the liability method specified by
SFAS No. 109, a deferred tax asset or liability is determined based on the
difference between the financial statement and tax bases of assets and
liabilities, as measured by the enacted tax rates. The components of Centra's
net deferred tax assets are approximately as follows at December 31, 1998 and
1999:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
----------- ----------
<S> <C> <C>
Net operating loss carryforwards.................... $ 5,821,000 $9,130,000
Tax credit carryforwards............................ 406,000 394,000
Other temporary differences......................... 465,000 459,000
----------- ----------
6,692,000 9,983,000
Valuation allowance................................. (6,692,000) (9,983,000)
----------- ----------
Net deferred tax asset........................ $ -- $ --
=========== ==========
</TABLE>

A valuation allowance has been recorded in the accompanying financial
statements to offset this benefit, because of the uncertainty of realization.

As of December 31, 1999, Centra had federal tax net operating loss
carryforwards available to offset future taxable income, if any, of
approximately $22,825,000. These carryforwards expire through 2019 and are
subject to review and possible adjustment by the Internal Revenue Service.

The U.S. Internal Revenue Code of 1986, as amended (the Code), contains
provisions that may limit the net operating loss and tax credit carryforwards
available to be used in any given year upon the occurrence of certain events,
including changes in the ownership interests of significant stockholders. In the
event of a cumulative change in ownership in excess of 50% over a three-year
period, the amount of the net operating loss carryforwards and tax credit
carryforwards that Centra can utilize in any one year may be limited. In the
event of a change in ownership, as defined, the annual limitation on the use of
the existing net operating loss carryforwards is equal to an amount determined
by multiplying the value of Centra at the time of the ownership change by the
U.S. federal applicable rate of interest, as determined by the U.S. Internal
Revenue Service. Centra has completed several financings since its

F-12
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2) INCOME TAXES (CONTINUED)

inception and has not determined if its net operating losses and tax credit
carryforwards have been limited by these financings.

A reconciliation of the federal statutory rate to Centra's effective tax
rate is as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Income tax provision at federal statutory rate.............. (34.0)% (34.0)% (34.0)%
Increase in tax resulting from--
State tax provision, net of federal benefit................. (6.0) (6.0) (6.0)
Increase in valuation allowance............................. 40.0 40.0 40.0
----- ----- -----
Effective tax rate.......................................... --% --% --%
===== ===== =====
</TABLE>

(3) REVOLVING LINE OF CREDIT

Centra had a $750,000 revolving line of credit with a bank, which expired on
December 30, 1999. On December 30, 1999, Centra received a commitment letter
from the bank for a $2.0 million revolving line of credit. Borrowings under the
proposed revolving line of credit will bear interest at prime rate plus .50%,
with availability based on eligible accounts receivable, as defined. As of
December 31, 1998 and 1999, no amounts were outstanding under the revolving line
of credit.

(4) TERM LOAN FACILITY AND CAPITAL LEASES

Centra had a fixed asset line of credit/term loan facility, with a bank. On
December 31, 1999, all advances under the original fixed asset line of credit
had converted to a $480,000 term loan. Drawings under the original fixed asset
line of credit were permitted through June 30, 1998, at which time each drawing
under the line was converted to a term loan. In December 1998, Centra amended
the fixed asset line of credit to allow for an additional $600,000 fixed asset
line of credit. Advances under the amended line were permitted through
September 30, 1999. Principal repayments are due monthly for each advance in 36
equal installments upon the conversion. Total borrowings outstanding under the
term loans as of December 31, 1998 and 1999 amounted to $771,000 and $663,000,
respectively, and are secured by substantially all assets of Centra. Outstanding
amounts under the term loans at December 31, 1999 bears interest at 9.5% per
annum.

On December 30, 1999, Centra received a commitment letter from the bank for
a $2.0 million equipment line of credit, of which $1.0 million is available
through June 30, 2000 and the remaining $1.0 million will be available
thereafter. The equipment line of credit will bear interest at prime rate plus
1.0%. All borrowings will be converted into 36 month term loans.

In addition to the above fixed asset line of credit/term loan facility,
Centra also has two capital leases. These leases bear interest at rate of 10.5%
per annum and are payable through June 2002. As of December 31, 1998 and 1999,
obligations under these capital leases amounted to $84,000 and $52,000,
respectively.

F-13
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(4) TERM LOAN FACILITY AND CAPITAL LEASES (CONTINUED)

Future principal maturities of Centra's long-term obligations as of
December 31, 1999 are as follows:

(5) COMMITMENTS

Centra conducts its operations in leased facilities and is obligated to pay
monthly rent through August 2001. As of December 31, 1999, the minimum future
rental payments under the operating lease agreements are approximately as
follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------
<S> <C>
2000........................................................ $ 736,000
2001........................................................ 402,000
----------
$1,138,000
==========
</TABLE>

Rent expense charged to operations was approximately $257,000, $362,000 and
$570,000 for the years ended December 31, 1997, 1998 and 1999, respectively.

(6) REDEEMABLE CONVERTIBLE PREFERRED STOCK

Centra has 9,164,490 authorized shares of preferred stock, of which
1,133,000, 1,416,490, 1,670,000, 2,250,000 and 2,695,000 have been designated as
series A redeemable convertible participating preferred stock (series A
preferred stock), series B redeemable convertible participating preferred stock
(series B preferred stock), series C redeemable convertible preferred stock
(series C preferred stock) and series D redeemable convertible preferred stock
(series D preferred stock) and series E redeemable convertible preferred stock
(series E preferred stock), respectively. During 1995, Centra sold 1,133,000
shares of series A preferred stock for $1.00 per share. During 1996, Centra sold
1,416,490 shares of series B preferred stock at $2.25 per share for gross
proceeds of $3,187,000. During 1997, Centra sold 1,670,000 shares of series C
preferred stock for $2.50 per share for gross proceeds of $4,175,000 and
2,250,000 shares of series D preferred stock for $4.00 per share for gross
proceeds of $9,000,000. During 1999, Centra sold 2,695,000 shares of series E
preferred stock for $5.00 per share for gross proceeds of $13,475,000.

Series A and series B preferred stockholders have participation rights that
allow them to receive a cash payment equal to 150% of their original investment
upon redemption, liquidation, and automatic conversion plus the common shares
into which the series A and the series B preferred stock converts. Centra has
attributed $113,000 and $354,000 of value to these participating rights of the
series A and series B preferred stock, respectively, by decreasing the carrying
value of preferred stock and increasing additional paid-in capital in equal
amounts at the date of issuance. Centra is increasing ratably over the
redemption period the carrying value of series A and series B preferred stock by
accreting the discount

F-14
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)

and the liquidation premium. For the years ended December 31, 1997, 1998, and
1999 Centra recorded $506,000, $506,000 and $507,000, respectively of accretion.

The rights, preferences and privileges of the series A, series B, series C,
series D and series E preferred stock are listed as follows:

CONVERSION

The series A, series B, series C, series D and series E preferred stock are
convertible into common stock at the rate of 1 1/2 shares of common stock for
each share of preferred stock, adjusted for certain dilutive events. Conversion
is automatic immediately prior to the closing of an initial public offering of
common stock at a per share price of at least $5.00 for the series A, series B,
series C and series D preferred stock and $6.67 for the series E preferred
stock, and resulting in aggregate proceeds to Centra of at least $10,000,000.
Upon conversion, series A and series B preferred stockholders are also entitled
to receive a liquidation premium as a cash payment equal to 150% of their
original investment ($1,699,500 and $4,780,500, respectively, at December 31,
1999). As of December 31, 1999, all series of redeemable convertible preferred
stock would convert to 13,746,735 shares of common stock. Pro forma
stockholders' equity at December 31, 1999, as adjusted for the conversion of the
redeemable convertible preferred stock is disclosed in the accompanying pro
forma consolidated balance sheet.

DIVIDENDS

The holders of the series A, series B, series C, series D and series E
preferred stock are entitled to receive dividends, if and when declared, at the
same rate as dividends to the common stockholders, based on the number of common
shares into which the series A, series B, series C, series D and series E
preferred stock are convertible.

REDEMPTION

The series A, series B, series C, series D and series E preferred
stockholders have a redemption right that requires Centra to repurchase
outstanding shares of the series A, series B, series C, series D and series E
preferred stock. Upon a majority vote, the series A, series B, series C,
series D and series E preferred stockholders may require Centra to repurchase
shares of the series A, series B, series C, series D and series E preferred
stock, with cash consideration of $1,699,500, $4,780,500, $4,175,000, $9,000,000
and $13,475,000, respectively. These amounts are equal to the respective
liquidation preferences as of December 31, 1999. For series A and series B
preferred stock, Centra must issue, as additional consideration, the number of
shares of common stock into which the series A and series B preferred stock
would convert. The series A, series B, series C, series D and series E preferred
stock are redeemable, beginning on December 31, 2002, at a rate of 33 1/3% of
the shares then outstanding. On December 31, 2003 and 2004, 50% and 100%,
respectively, of the series A, series B, series C, series D and series E
preferred stock then outstanding are redeemable.

VOTING

The series A, series B, series C, series D and series E preferred
stockholders are entitled to vote on all matters with the common stockholders as
if they were one class of stock. The series A, series B, series C, series D and
series E preferred stockholders are entitled to the number of votes equal to the

F-15
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(6) REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)

number of shares of common stock into which each share of the series A,
series B, series C, series D and series E preferred stock is then convertible.

MERGERS AND OTHER REORGANIZATIONS

Upon a merger or capital reorganization, as defined, the holders of the
series A, series B, series C, series D and series E preferred stock shall be
entitled to receive upon conversion of the preferred stock the number of shares
of stock to which a holder of common stock would have been entitled in such a
merger or capital reorganization. In addition, the series A and series B
preferred stockholders will receive a liquidation premium as a cash payment
equal to 150% of their original investment amount plus the same consideration
available to the common stockholders.

(7) STOCKHOLDERS' EQUITY (DEFICIT)

(A) AUTHORIZED SHARES

On October 14, 1999, Centra amended its certificate of incorporation to,
among other things, increase its authorized capital stock to 34,164,490 shares
of which 25,000,000 are $0.001 par value common stock and 9,164,490 shares of
$0.001 par value redeemable convertible preferred stock.

(B) RECAPITALIZATION

On October 14, 1999, Centra's board of directors approved a 3-for-2 stock
split of its common stock. The stock split was effective on October 27, 1999.
All shares and per share amounts of common stock for all periods have been
retroactively adjusted to reflect the stock split. Upon the closing of Centra's
proposed initial public offering, its certificate of incorporation will be
amended and restated to change its authorized capital stock to 100,000,000
shares of $0.001 par value common stock and 10,000,000 shares of $0.001 par
value preferred stock.

Centra has reserved the following number of shares of common stock for the
conversion of preferred stock and issuance of stock option and restricted stock:

<TABLE>
<S> <C>
Series A preferred stock.................................... 1,699,500
Series B preferred stock.................................... 2,124,735
Series C preferred stock.................................... 2,505,000
Series D preferred stock.................................... 3,375,000
Series E preferred stock.................................... 4,042,500
Stock options and restricted stock.......................... 4,840,347
----------
23,184,235
==========
</TABLE>

(D) RESTRICTED STOCK AGREEMENTS

Centra has entered into stock repurchase agreements with the stockholders of
all outstanding shares of restricted common stock. The agreements provide that
in the event that the stockholders are no longer employed by Centra, Centra has
the right to repurchase any unvested shares from the

F-16
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

stockholders at the original issuance prices of $0.001 to $0.33 per share. The
repurchase option on the 2,188,301 shares of restricted common stock outstanding
at December 31, 1999 lapse as follows: 25% on the one-year anniversary date from
issuance and then 6.25% on each subsequent quarter over the next three years. As
of December 31, 1999, 968,161 shares of common stock were vested and 1,220,140
shares of common stock are subject to repurchase rights. During the years ended
December 31, 1997, 1998 and 1999, Centra exercised its rights under the stock
repurchase agreements and repurchased 51,656, 8,250 and 206,249 shares,
respectively. These shares were repurchased at original issuance price.

(E) STOCK OPTION AND STOCK PURCHASE PLANS

1995 STOCK PLAN

In 1995, Centra adopted the 1995 Stock Plan (the 1995 Plan), which provides
for the granting of incentive stock options to employees of Centra and
nonqualified stock options to any directors, officers, employees or consultants
of Centra. Options to purchase 3,852,000 shares of common stock may be issued
pursuant to the 1995 Plan, plus an additional 385,500 shares, as defined under
the 1995 Plan. Option and stock pricing is determined by Centra's Board of
Directors and all options to date have been granted at the fair market value
determined by the Board of Directors. Options and stock granted under the 1995
Plan vest as follows: 25% on the one-year anniversary date and then 6.25% on
each subsequent quarter over the next three years, and expire no later than
10 years from the date of grant.

Centra allowed for the immediate exercise of certain stock options granted
under the 1995 Plan. The shares received upon exercise are subject to repurchase
by Centra at the original option exercise price, subject to vesting at the same
rates as provided in the original option agreements. A total of 2,464,907 shares
have been issued upon the immediate exercise of certain stock options granted
under the 1995 Plan, of which 1,220,140 shares are subject to repurchase rights.

1999 STOCK INCENTIVE PLAN

In November 1999, Centra adopted the 1999 Stock Incentive Plan (the 1999
Plan). A total of 3,500,000 shares of common stock have been reserved for
issuance under the 1999 Plan. As of December 31, 1999, options to purchase
22,500 shares of common stock had been granted under the 1999 Plan.

The 1999 Plan authorizes the grant of incentive options and nonqualified
options. The 1999 Plan also provides for awards of stock appreciation rights,
performance shares, restricted stock and other stock-based awards.

Incentive options may be granted under the 1999 Plan to key employees and
affiliates within the meaning of the Internal Revenue Code, including officers
and directors as well as officers and directors of affiliates who are also
employees. The exercise price of incentive options granted under the 1999 Plan
must be at least equal to the fair market value of our common stock on the date
of grant. The exercise price of incentive options granted to an optionee who
owns stock possessing more than 10% of the voting power of the outstanding
capital stock must be at least equal to 110% of the fair market value of the
common stock on the date of grant, and such optionee must exercise his or her
option within five years from the date of the grant of such option.

F-17
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

Under the terms of the 1999 Plan, Centra may grant nonqualified options to
officers and other employees, directors, and other individuals providing
services. There are no limits on the exercise price of nonqualified options
granted under the 1999 Plan.

The 1999 Plan is administered by the compensation committee of the board of
directors. The compensation committee selects the individuals to whom options
will be granted and determines the option exercise price and other terms of each
award, subject to the provisions of the 1999 Plan.

1999 DIRECTOR OPTION PLAN

In November 1999, Centra adopted the 1999 Director Option Plan (Director
Plan). The Director Plan provides for the grant of stock options to those
directors who are not full-time employees of Centra or one of its subsidiaries.
Only non-statutory options may be granted under the Director Plan. The maximum
number of shares of common stock as to which options may be granted under the
Plan is 200,000. As of December 31, 1999, no options had been granted under the
Director Plan.

The Director Plan is administered by the board of directors. The option
exercise price for each option granted under the Director Plan is the fair
market value of the common stock as of the date of grant. Payment of the option
exercise price is to be made in cash for the full exercise price of the options.
Options are not assignable or transferrable except by will or the laws of
descent and distribution. They terminate on the earlier of ten years after the
date of grant or sixty days after the optionee ceases to serve as a director,
except in the event of death or disability.

Options to purchase 4,840,347 shares of common stock were available for
grant at December 31, 1999.

F-18
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

The following is a summary of common stock option and restricted stock
activity under the 1995 and 1999 Plans:

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF SHARES EXERCISE PRICE EXERCISE PRICE
---------------- ------------------- ----------------
<S> <C> <C> <C>
Outstanding, December 31, 1996.................... 319,406 $ 0.07--0.17 $ 0.15
Granted......................................... 1,305,825 0.17 0.17
Exercised....................................... (804,375) 0.07--0.17 0.17
Canceled........................................ (179,343) 0.07--0.17 0.16
---------- ------------------- ------
Outstanding, December 31, 1997.................... 641,513 0.07--0.17 0.16
Granted......................................... 840,450 0.27 0.27
Exercised....................................... (208,314) 0.17--0.27 0.26
Canceled........................................ (180,729) 0.17--0.27 0.17
---------- ------------------- ------
Outstanding, December 31, 1998.................... 1,092,920 0.07--0.27 0.21
Granted......................................... 1,816,675 0.27--8.00 1.22
Exercised....................................... (1,422,234) 0.17--0.33 0.25
Canceled........................................ (109,948) 0.17--5.00 0.38
---------- ------------------- ------
Outstanding, December 31, 1999.................... 1,377,413 $ 0.07--8.00 $ 1.48
========== =================== ======
Exercisable common stock options, December 31,
1999............................................ 67,687 $ 0.07--5.00 $ 0.46
========== =================== ======
Exercisable common stock options, December 31,
1998............................................ 291,246 $ 0.07--0.27 $ 0.17
========== =================== ======
Exercisable common stock options, December 31,
1997............................................ 84,092 $ 0.07--0.17 $ 0.16
========== =================== ======
</TABLE>

The range of exercise prices for common stock options outstanding and
options exercisable at December 31, 1999 is as follows:

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- -------------------------------------------------- ----------------------------
RANGE OF REMAINING WEIGHTED WEIGHTED
EXERCISE OPTIONS CONTRACTUAL AVERAGE OPTIONS AVERAGE
PRICES OUTSTANDING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
------------------ ----------- ----------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 0.07--0.17 217,643 7.2 years $0.17 10,907 $0.17
0.27--0.33 817,670 8.8 years 0.28 19,280 0.27
0.67 38,325 9.5 years 0.67 -- 0.67
5.00 224,775 9.4 years 5.00 37,500 5.00
8.00 79,000 9.9 years 8.00 -- 8.00
------------------ --------- --------- ----- ------- -----
$ 0.07--8.00 1,377,413 8.7 years $1.48 67,687 $0.46
================== ========= ========= ===== ======= =====
</TABLE>

In connection with stock options grants to employees and non-employees
during the year ended December 31, 1999, Centra recorded deferred compensation
of $2,722,000, which represents the aggregate difference between the option
exercise price and the deemed fair market value of the common stock determined
for financial reporting purposes for grants to employees and the fair market
value of the options for the non-employees. The deferred compensation will be
recognized as an expense over the vesting period of the underlying stock
options. Centra recorded compensation expense of $736,000 during the year ended
December 31, 1999, related to these options as a compensation charge for
issuances of stock options. If Centra allocated this expense to each operating
expense

F-19
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

category, sales and marketing, product development and general and
administrative expenses would have increased by $176,000, $75,000 and $485,000,
respectively.

In October 1995, the FASB issued SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, which requires the measurement of the fair value of stock options
to be included in the statements of operations or disclosed in the notes to the
financial statements. Centra has determined that it will continue to account for
stock-based compensation for employees and directors under Accounting Principles
Board Opinion No. 25 and elect the disclosure-only alternative under SFAS
No. 123. Centra records the fair market value of stock options granted to
nonemployees in the consolidated statement of operations. The Company has
computed the pro forma disclosures required under SFAS No. 123 for stock options
granted to employees and directors using the Black-Scholes option pricing model.
The assumptions used are as follows:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
Risk-free interest rate............................ 5.7%-6.9% 4.5%-6.7% 4.8%-6.1%
Expected dividend yield............................ -- -- --
Expected lives..................................... 7.5 years 7.5 years 7.5 years
Expected volatility................................ 60% 100% 85%
</TABLE>

The expected volatility factor was based on actual volatility factors for
comparable public software companies. The weighted average fair value of grants
at fair market value during the years ended December 31, 1997, 1998 and 1999 was
$0.14, $0.27 and $6.48 per share, respectively. The weighted average exercise
price of grants at fair market value during the years ended December 31, 1997,
1998 and 1999 was $0.17, $0.27, and $8.00, respectively. During 1999, Centra
granted certain options with an exercise price below the deemed fair market
value of the common stock. The weighted average exercise price and weighted
average fair value of these options was $1.56 and $3.17, respectively.

The pro forma effects of applying SFAS No. 123 are as follows for the years
ended December 31, 1997, 1998 and 1999:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Net loss attributable to common stockholders--
As reported.......................................... $(6,877,000) $(6,759,000) $(9,130,000)
Pro forma............................................ $(6,894,000) $(6,823,000) $(9,815,000)
EPS
As reported.......................................... $ (1.33) $ (1.16) $ (1.39)
Pro forma............................................ $ (1.34) $ (1.17) $ (1.49)
</TABLE>

The Black-Scholes option pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option pricing models require the input of highly
subjective assumptions, including expected stock price volatility. Because
Centra's employee stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

F-20
<PAGE>
CENTRA SOFTWARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(7) STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

1999 EMPLOYEE STOCK PURCHASE PLAN

In November 1999, Centra adopted the 1999 Employee Stock Purchase Plan (the
Stock Purchase Plan). The Stock Purchase Plan authorizes the issuance of up to a
total of 1,500,000 shares of Centra's common stock to participating employees.
As of December 31 of each year, Centra will increase the number of shares
reserved for issuance under the Stock Purchase Plan automatically by 2% of the
total number of shares of our common stock then outstanding or, if less, 300,000
shares.

Under the terms of the Stock Purchase Plan, all employees who have completed
three months of employment and whose customary employment is more than 20 hours
per week and more than five months in the calendar year, are eligible to
participate in the Stock Purchase Plan. Employees who own stock and hold
outstanding options to purchase stock representing five percent or more of the
total combined voting power or value of all classes of stock are not eligible to
participate in the Stock Purchase Plan.

The right to purchase common stock under the Stock Purchase Plan is made
available through a series of offerings. On the first day of an offering period,
Centra will grant to each eligible employee who has elected in writing to
participate in the Stock Purchase Plan an option to purchase shares of common
stock. The employee is required to authorize an amount, between 1% and 10% of
the employee's compensation, to be deducted from the employee's pay during the
offering period. On the last day of the offering period, the employee will be
deemed to have exercised the option, at the option exercise price, to the extent
of accumulated payroll deductions. Under the terms of the Stock Purchase Plan,
the option exercise price is an amount equal to 85% of the fair market value of
one share of common stock on either the first or last day of the offering
period, whichever is lower. In the event of a change in control of Centra, the
Stock Purchase Plan will terminate and shares will be purchased with the payroll
deductions accumulated to date by participating employees.

The stock purchase plan is administered by the compensation committee of the
board of directors.

(8) EMPLOYEE BENEFIT PLAN

Centra has adopted an employee benefit plan (the 401(k) Plan) under
Section 401(k) of the Internal Revenue Code. The 401(k) Plan allows employees to
make pretax contributions up to the maximum allowable amount set by the Internal
Revenue Service. Under the 401(k) Plan, Centra may match a portion of the
employee contribution up to a defined maximum and provide profit sharing to
employees at its discretion. Centra made no contributions to the 401(k) Plan for
the years ended December 31, 1997, 1998 and 1999.

F-21
<PAGE>
[Description of inside back cover artwork

The heading "Consistent, Easy to Use Collaboration Interfaces" appears at the
top of the page, above the following sentence: "Centra 99 is an
enterprise-class live eBusiness collaboration system that supports three
application-specific user interfaces." The following product descriptions
appear on the left side of the page:

"SYMPOSIUM
Centra Symposium is utilized for highly interactive events such as
hands-on classes, workshops, coaching and teamwork."

"CONFERENCE
Centra Conference is designed for one-to-one selling and large-scale
Web presentations."

"CentraNow
CentraNow is a self-service Web destination that can be accessed through
Centra 99 and is designed for spontaneous meetings."

A separate illustrative screen shot appears to the right of each of the
product descriptions described above.]
<PAGE>
[LOGO]

UNTIL , 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE>
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.
<PAGE>
SUBJECT TO COMPLETION, DATED JANUARY 28, 2000

[LOGO]

5,000,000 SHARES

COMMON STOCK

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

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

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

<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----
<S> <C> <C>
Public Offering Price..................................... $ $
Underwriting Discounts and Commissions.................... $ $
Proceeds to Centra........................................ $ $
</TABLE>

We have granted the underwriters a 30-day option to purchase up to an
additional 750,000 shares of common stock to cover over-allotments.

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

ROBERTSON STEPHENS INTERNATIONAL

CHASE H&Q

DAIN RAUSCHER WESSELS

THE DATE OF THIS PROSPECTUS IS , 2000.
<PAGE>
UNDERWRITING

<TABLE>
<CAPTION>
NUMBER
U.S. UNDERWRITERS OF SHARES
- ----------------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc..........................
Hambrecht & Quist LLC.......................................
Dain Rauscher Wessels.......................................
<CAPTION>
INTERNATIONAL UNDERWRITERS
- --------------------------
FleetBoston Robertson Stephens International Limited.
<S> <C>
Hambrecht & Quist LLC.......................................
Dain Rauscher Wessels.......................................

---------
Total................................................... 5,000,000
=========
</TABLE>

62
<PAGE>
commissions to be paid by us to the underwriters. This information is presented
assuming either no exercise or full exercise by the underwriters of their
over-allotment option.

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

63
<PAGE>
considered in these negotiations are prevailing market conditions, our financial
information, market valuations of other companies that we and the
representatives believe to be comparable to us, estimates of our business
potential and the present state of our development.

STABILIZATION. The representatives have advised us that, under
Regulation M under the Securities Exchange Act, some participants 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 or 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 the underwriter or syndicate
member is purchased by the representatives in a syndicate covering transaction
and has therefore not been effectively placed by the underwriter or syndicate
member. The representatives have advised us that these transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.

64
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses payable by us in connection with
the sale of the common stock being registered, other than the underwriting
discounts and commissions. All amounts are estimates except the SEC registration
fee and the Nasdaq National Market listing fee.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 15,985
NASD filing fee............................................. 6,250
Nasdaq National Market listing fee.......................... 95,000
Accounting fees and expenses................................ 300,000
Legal fees and expenses..................................... 425,000
Blue Sky fees and expenses.................................. 10,000
Transfer agent fees......................................... 15,000
Printing and engraving expenses............................. 175,000
Miscellaneous............................................... 332,765
----------
Total................................................... $1,375,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law empowers a Delaware
corporation to indemnify its present and former directors and officers under
certain conditions. Article Sixth of our certificate of incorporation provides
that we shall indemnify each person who at any time is, or shall have been, one
of our directors or officers and was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was one of our directors or officers, or is or was serving
at our request as a director, officer, trustee of, or in similar capacity with,
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement incurred in connection with any such action, suit or proceeding,
to the maximum extent permitted by the Delaware General Corporation Law, as
currently in effect or amended in the future. No amendment to or repeal of the
provisions of Article Sixth of our certificate of incorporation shall deprive a
director or officer of the benefit of those Articles with respect to any act or
failure occurring prior to such amendment or repeal.

Section 102(b)(7) of the Delaware General Corporation Law empowers a
Delaware corporation to adopt a charter provision eliminating or limiting the
personal liability of directors to the corporation or its stockholders for
breach of fiduciary duty as directors, provided that the provision may not
eliminate or limit the liability of directors for:

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

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

- any payment of a dividend or approval of a stock purchase that is illegal
under Section 174 of the Delaware General Corporation Law; or

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

Article Seventh of our certificate of incorporation provides that, to the
maximum extent permitted by the Delaware General Corporation Law, none of our
directors shall be personally liable to us or to any of our stockholders for
monetary damages arising out of that director's breach of fiduciary duty as one
of our directors. No amendment to or repeal of the provisions of Article Seventh
shall apply to or

II-1
<PAGE>
have any effect on the liability or the alleged liability of any of our
directors with respect to any act or failure to act of that director occurring
before the amendment or repeal. A principal effect of Article Seventh is to
limit or eliminate the potential liability of our directors for monetary damages
arising from breaches of their duty of care, unless the breach involves one of
the four exceptions described above.

Section 145 of the Delaware General Corporation Law also empowers a Delaware
corporation to obtain insurance on behalf of its directors and officers against
liabilities incurred by them in those capacities. We intend to procure a
directors' and officers' liability and company reimbursement liability insurance
policy that insures (a) our directors and officers against losses, above a
deductible amount, arising from specified types of claims made against them by
reason of enumerated acts done or attempted by our directors or officers and
(b) us against losses, above a deductible amount, arising from any of the
specified types of claims, but only if we are required or permitted to indemnify
our directors or officers for those losses under statutory or common law or
under provisions of our certificate of incorporation or by-laws.

The preceding discussion gives effect to amendments of our certificate of
incorporation and by-laws that will become effective upon completion of the
offering contemplated by this Registration Statement.

Please also see section 7 of the underwriting agreement relating to the
offering, filed as Exhibit 1.1 to this Registration Statement, for
indemnification arrangements between the underwriters and us.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since October 27, 1996, we have issued and sold unregistered securities as
described below.

COMMON STOCK

We have issued and sold shares of common stock to our employees, directors
and advisers as set forth in the following table. Except as noted, all issuances
were made to employees. The notes to the table provide additional information
regarding sales made to executive officers, directors and advisors. The
issuances described below were made in reliance upon the exemption from
registration set forth in Rule 701 under the Securities Act. None of the
transactions described below involved a distribution or public offering. No
underwriters were engaged in connection with the issuances described below, and
no underwriting commissions or discounts were paid.

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF AGGREGATE PURCHASE PRICE
DATE OF SALE SHARES SOLD PURCHASERS PURCHASE PRICE PER SHARE
- ------------ ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C>
April 24, 1997(1)............................ 667,500 3 $111,250 $0.17
May 7, 1997.................................. 24,000 1 4,000 0.17
May 8, 1997(2)............................... 52,500 1 8,750 0.17
September 16, 1997(3)........................ 45,000 2 7,500 0.17
April 15, 1998(4)............................ 105,000 3 28,000 0.27
July 10, 1998(5)............................. 22,500 1 6,000 0.27
July 24, 1998(6)............................. 52,500 1 14,000 0.27
April 12, 1999(7)............................ 417,000 3 111,200 0.27
April 26, 1999(8)............................ 345,000 2 92,000 0.27
April 30, 1999............................... 30,000 1 8,000 0.27
June 11, 1999................................ 7,500 1 2,500 0.33
August 2, 1999............................... 150,000 1 50,000 0.33
</TABLE>

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

(1) 225,000 shares were sold to Joseph M. Gruttadauria, our Vice President,
Professional Services, and 247,500 shares were sold to Anthony J. Mark, our
President and Chief Operating Officer.

(2) All 52.500 shares were sold to Charles Digate, one of our directors at the
time of sale.

II-2
<PAGE>

(3) 22,500 shares were sold to each of Chuck Moran and Tom Samph, each of whom
serve as Advisers.

(4) 52,500 shares were sold to Mr. Mark, 30,000 shares were sold to Stephen A.
Johnson, our Chief Financial Officer, Treasurer and Secretary, and 22,500
shares were sold to David Barrett, one of our directors.

(5) All 22,500 shares were sold to James Dickie, one of our Advisers.

(6) All 52,500 shares were sold to Mr. Gruttadauria.

(7) 364,500 shares were sold to Steven N. Lesser, our Vice President, Worldwide
Sales, and 37,500 shares were sold to Mr. Gruttadauria.

(8) 45,000 shares were sold to Mr. Johnson, and 300,000 shares were sold to
Mr. Mark.

CONVERTIBLE PREFERRED STOCK

SERIES B. In May and June 1996, we sold 1,416,490 shares of series B
convertible preferred stock for $3,187,102, or $2.25 per share, as follows:

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES SOLD AGGREGATE PURCHASE PRICE
- ---- --------------------- ------------------------
<S> <C> <C>
Alta V Limited Partnership(1)....................... 549,777 $1,236,998
Customs House Partners.............................. 5,778 13,001
North Bridge Venture Partners, L.P.(2).............. 333,334 750,001
Commonwealth Capital Ventures L.P................... 444,445 1,000,001
Edward Tackas....................................... 15,600 35,100
The Career Group, Ltd............................... 7,111 16,000
Bill Gross's idealab!............................... 44,445 100,001
Rubin Gruber........................................ 16,000 36,000
</TABLE>

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

(1) Affiliate of Jonathan Flint, one of our directors.

(2) Affiliate of Richard D'Amore, one of our directors.

The issuance of series B convertible preferred stock was made in reliance
upon the exemption from registration set forth in Section 4(2) of the Securities
Act relating to sales by an issuer not involving a public offering. The
transaction did not involve a distribution or public offering. No underwriters
were engaged in connection with the issuance, and no underwriting commissions or
discounts were paid.

SERIES C. In March 1997, we sold 1,670,000 shares of series C convertible
preferred stock for $4,175,000, or $2.50 per share, as follows:

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

(1) Affiliate of Jonathan Flint, one of our directors.

(2) Affiliate of Richard D'Amore, one of our directors.

(3) Our Chief Executive Officer and Chairman.

(4) Affiliate of Anthony J. Mark, our President and Chief Operating Officer.

The issuance of series C convertible preferred stock was made in reliance
upon the exemption from registration set forth in Section 4(2) of the Securities
Act relating to sales by an issuer not involving a public offering. The
transaction did not involve a distribution or public offering. No underwriters
were engaged in connection with the issuance, and no underwriting commissions or
discounts were paid.

II-3
<PAGE>
SERIES D. In December 1997, we sold 2,250,000 shares of series D
convertible preferred stock for proceeds of $9,000,000, or $4.00 per share, as
follows:

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES SOLD AGGREGATE PURCHASE PRICE
- ---- --------------------- ------------------------
<S> <C> <C>
Alta V Limited Partnership(1)....................... 503,459 $2,013,836
Customs House Partners.............................. 5,291 21,164
North Bridge Venture Partners, L.P.(2).............. 400,000 1,600,000
Commonwealth Capital Ventures L.P................... 250,000 1,000,000
Scripps Ventures, LLC............................... 325,000 1,300,000
Polaris Venture Partners, L.P.(1)................... 707,662 2,830,648
Polaris Venture Partners Founders' Fund, L.P.(1).... 42,338 169,352
TM Partners(3)...................................... 12,500 50,000
Rubin Gruber........................................ 3,750 15,000
</TABLE>

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

(1) Affiliate of Jonathan Flint, one of our directors.

(2) Affiliate of Richard D'Amore, one of our directors.

(3) Affiliate of Anthony J. Mark, our President and Chief Operating Officer.

The issuance of series D convertible preferred stock was made in reliance
upon the exemption from registration set forth in Section 4(2) of the Securities
Act relating to sales by an issuer not involving a public offering. The
transaction did not involve a distribution or public offering. No underwriters
were engaged in connection with the issuance, and no underwriting commissions or
discounts were paid.

SERIES E. In April 1999, we sold 2,695,000 shares of series E convertible
preferred stock for proceeds of $13,475,000, or $5.00 per share, as follows:

<TABLE>
<CAPTION>
NAME NUMBER OF SHARES SOLD AGGREGATE PURCHASE PRICE
- ---- --------------------- ------------------------
<S> <C> <C>
Alta V Limited Partnership(1)....................... 158,336 $ 791,680
Bridge Street Fund 1999, L.P........................ 24,240 121,200
Customs House Partners.............................. 1,664 8,320
North Bridge Venture Partners, L.P.(2).............. 200,000 1,000,000
Commonwealth Capital Ventures L.P................... 100,000 500,000
Scripps Ventures, LLC............................... 70,000 350,000
Polaris Venture Partners, L.P.(1)................... 84,920 424,600
Polaris Venture Partners Founders' Fund, L.P.(1).... 5,080 25,400
The Goldman Sachs Group, L.P........................ 900,000 4,500,000
HarbourVest Partners V-Direct Fund L.P.............. 1,000,000 5,000,000
TM Partners(3)...................................... 10,000 50,000
SL Partners(4)...................................... 65,000 325,000
Stone Street Fund 1999, L.P......................... 75,760 378,800
</TABLE>

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

(1) Affiliate of Jonathan Flint, one of our directors.

(2) Affiliate of Richard D'Amore, one of our directors.

(3) Affiliate of Anthony J. Mark, our President and Chief Operating Officer.

(4) Affiliate of Steven N. Lesser, our Vice President, Worldwide Sales.

The issuance of series E convertible preferred stock was made in reliance
upon the exemption from registration set forth in Section 4(2) of the Securities
Act relating to sales by an issuer not involving a public offering. The
transaction did not involve a distribution or public offering. No underwriters
were engaged in connection with the issuance, and no underwriting commissions or
discounts were paid.

II-4
<PAGE>
STOCK OPTIONS

The options described below were granted to employees, except as noted, in
reliance upon the exemptions from registration set forth in Rule 701 under the
Securities Act.

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF EXERCISE PRICE
DATE OF GRANT OPTION SHARES OPTIONEES PER SHARE
- ------------- ------------- --------- --------------
<S> <C> <C> <C>
December 5, 1996......................................... 57,375 7 $0.17
January 28, 1997......................................... 215,100 15 0.17
July 23, 1997............................................ 238,725 17 0.17
September 30, 1997....................................... 63,000 10 0.17
January 1, 1998.......................................... 206,250 16 0.27
March 31, 1998........................................... 309,000 22 0.27
July 9, 1998............................................. 82,950 20 0.27
October 7, 1998.......................................... 62,250 20 0.27
January 12, 1999......................................... 90,375 13 0.27
April 9, 1999............................................ 314,250 42 0.27
June 11, 1999 (1)........................................ 117,000 21 0.33
August 5, 1999........................................... 39,075 15 0.67
October 14, 1999......................................... 210,975 67 5.00
December 10, 1999........................................ 79,000 11 8.00
</TABLE>

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

(1) Options to purchase 7,500 shares of common stock were granted to Elizabeth
Kosheff, a consultant.

II-5
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES.

(A) EXHIBITS

<TABLE>
<C> <S>
+1.1 Underwriting Agreement
+3.1 Certificate of Incorporation of Centra Software, Inc., as
amended
+3.2 Proposed form of Amended and Restated Certificate of
Incorporation of Centra Software, Inc. (to become effective
as of the closing of the offering)
+3.3 By-Laws of Centra Software, Inc.
+3.4 Proposed form of Amended and Restated By-Laws of Centra
Software, Inc. (to become effective as of the closing of the
Offering)
+4.1 Specimen certificate for common stock of Centra Software,
Inc.
5.1 Opinion of Foley, Hoag & Eliot LLP
+10.1 Centra Software, Inc. 1995 Stock Plan, as amended
+10.2 Centra Software, Inc. 1999 Stock Incentive Plan
+10.3 Centra Software, Inc. 1999 Employee Stock Purchase Plan
+10.4 Centra Software, Inc. 1999 Director Stock Option Plan
+10.5 Amendments of Incentive Stock Option and/or Stock
Restriction Agreements ("Change of Control Agreement")
between Centra Software, Inc. and the following:
(a) Joseph Gruttadauria, dated April 25, 1997
(b) Joseph Gruttadauria, dated May 8, 1997
(c) Stephen A. Johnson, dated May 27, 1999
(d) Steven Lesser, dated May 27, 1999
(e) Anthony Mark, dated April 25, 1997
(f) Leon Navickas, dated March 10, 1997
(g) Leon Navickas, dated May 8, 1997
+10.6 Severance Agreements between Centra Software, Inc. and the
following:
(a) Joseph Gruttadauria, dated March 24, 1997
(b) Stephen A. Johnson, dated May 27, 1999
(c) Steven Lesser, dated May 27, 1999
(d) Anthony Mark, dated March 10, 1997
(e) Leon Navickas, dated May 8, 1997
+10.7 Form of Indemnity Agreement entered into by Centra Software,
Inc. and each of Joseph Gruttadauria, Stephen A. Johnson,
Steven Lesser, Anthony J. Mark and Leon Navickas.
+10.8 Lease dated July 21, 1999 between Centra Software, Inc. and
Trustees of Elandzee Trust, as amended
+10.9 Sublease dated May 13, 1997 between Centra Software, Inc.
and Robert Half International, Inc.
+10.10 Sublease dated December 31, 1996 between Centra Software,
Inc. and C.P. Clare
+10.11 Loan and Security Agreement, dated November 5, 1997 between
Centra Software, Inc. and Silicon Valley Bank, as amended
+10.12 Fourth Amended and Restated Investors' Rights Agreement,
dated April 21, 1999, by and among Centra Software, Inc.,
Leon Navickas and the persons and entities listed therein,
as amended
+10.13 Form of Indemnity Agreement entered into by Centra Software,
Inc. and each of David Barrett, Richard D'Amore and Jonathan
Flint.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Foley, Hoag & Eliot LLP (included in Exhibit 5.1)
</TABLE>

II-6
<PAGE>

<TABLE>
<C> <S>
+24.1 Power of Attorney
+27.1 Financial Data Schedule
</TABLE>

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

+ Previously filed.

(B) FINANCIAL STATEMENT SCHEDULES

Report of Independent Public Accountants on Financial Statement Schedule
Schedule II--Valuation and Qualifying Accounts for the Years Ended
December 31, 1997, 1998 and 1999

All other schedules are omitted because they are not applicable or the
required information is shown in our consolidated financial statements and
related notes.

ITEM 17. UNDERTAKINGS.

We undertake to provide to the underwriters at the closing specified in the
underwriting agreement, certificates in denominations and registered in names as
required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, we have been advised that in the opinion
of the SEC that indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against those liabilities (other than our payment of expenses
incurred or paid by one of our directors, officers or controlling persons of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by our directors, officers or controlling persons in connection with
the securities being registered, we will, unless in the opinion of our counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether that indemnification by us is
against public policy as expressed in the Securities Act and we will be governed
by the final adjudication of such issue.

We undertake 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 we filed pursuant to Rule 424(b)(1) or (4) or 497(h) under the
Securities Act shall be deemed to be part of this registration statement as
of the time it was declared effective.

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

II-7
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, Centra
Software, Inc. has duly caused this Amendent No. 3 to Registration Statement to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
Town of Lexington, Massachusetts, as of January 27, 2000.

<TABLE>
<S> <C> <C>
CENTRA SOFTWARE, INC.

By: /s/ LEON NAVICKAS
-----------------------------------------
Chief Executive Officer
</TABLE>

In accordance with the requirements of the Securities Act of 1933, this
Amendment No. 3 to Registration Statement has been signed by the following
persons in the indicated capacities as of January 27, 2000.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ LEON NAVICKAS
------------------------------------------- Chief Executive Officer and Chairman
Leon Navickas (PRINCIPAL EXECUTIVE OFFICER)

/s/ STEPHEN A. JOHNSON Chief Financial Officer, Treasurer and
------------------------------------------- Secretary
Stephen A. Johnson (PRINCIPAL ACCOUNTING AND FINANCIAL OFFICER)

*
------------------------------------------- Director
Richard D'Amore

*
------------------------------------------- Director
Jonathan Flint
</TABLE>

<TABLE>
<S> <C> <C> <C>
*By: /s/ STEPHEN A. JOHNSON
--------------------------------------
Stephen A. Johnson
ATTORNEY-IN-FACT
</TABLE>

II-8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Stockholders of Centra Software, Inc.:

We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Centra Software, Inc. included in this
registration statement, and have issued our report thereon dated January 5,
2000. Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the index of this
registration statement is the responsibility of the Company's management and is
presented for purposes of complying with the Securities and Exchange
Commission's rules and regulations and is not part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states, in all material respects, the financial data required to be set forth
herein in relation to the basic financial statements taken as a whole.

/s/ Arthur Andersen LLP

Boston, Massachusetts

January 5, 2000
<PAGE>
SCHEDULE II

CENTRA SOFTWARE, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999

<TABLE>
<CAPTION>
BALANCE
BEGINNING OF CHARGED TO BALANCE
ALLOWANCE FOR DOUBTFUL ACCOUNTS: YEAR EXPENSE WRITE-OFFS END OF YEAR
- -------------------------------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
December 31, 1997................................. $ -- $50,000 $ -- $ 50,000
December 31, 1998................................. 50,000 99,000 49,000 100,000
December 31, 1999................................. 100,000 190,000 96,000 194,000
</TABLE>
<PAGE>
EXHIBIT INDEX

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

+ Previously filed.

<PAGE>

Exhibit 5.1

[Foley, Hoag & Eliot LLP letterhead]

January 28, 2000

Centra Software, Inc.
430 Bedford Street
Lexington, Massachusetts 02420

Ladies and Gentlemen:

We are familiar with the Registration Statement on Form S-1
(Registration No. 333-89817), as amended by Amendment No. 1, Amendment No. 2 and
Amendment No. 3 thereto (as amended, the "Registration Statement"), filed by
Centra Software, Inc., a Delaware corporation (the "Company"), with the
Securities and Exchange Commission under the Securities Act of 1933, as amended.
The Registration Statement relates to the proposed public offering by the
Company of up to 5,750,000 shares (the "Shares") of its Common Stock, $.001 par
value per share (the "Common Stock") to be issued by the Company. The foregoing
number of Shares assumes the exercise in full of the over-allotment option
described in the Registration Statement.

We are familiar with the Company's Certificate of Incorporation, its
By-Laws, the records of meetings and consents of its Board of Directors and of
its stockholders provided to us by the Company, and its stock records. In
addition, we have examined and relied on the originals or copies certified or
otherwise identified to our satisfaction of all such corporate records of the
Company and such other instruments and other certificates of public officials,
officers and representatives of the Company and such other persons, and we have
made such investigations of law, as we have deemed appropriate as a basis for
the opinions expressed below.

Based on the foregoing, it is our opinion that:

1. The Company has corporate power adequate for the issuance of the
Shares in accordance with the Registration Statement. The Company has taken all
necessary corporate action required to authorize the issuance and sale of the
Shares. When certificates for the Shares have been duly executed and
countersigned, and delivered against due receipt of consideration therefor as
described in the Registration Statement, the Shares will be legally issued,
fully paid and non-assessable.
<PAGE>

Centra Software, Inc.
January 28, 2000
Page 2

We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us under the heading "Legal
Matters" in the prospectus forming part of the Registration Statement.

Very truly yours,

Foley, Hoag & Eliot LLP

By: /s/ Mark L. Johnson
----------------------------
A Partner

<PAGE>

Exhibit 23.1

CONSENT OF INDEPENDENT AUDITORS

As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of
this registration statement.

Arthur Andersen LLP
Boston, Massachusetts
January 25, 2000