MOLDFLOW CORP, S-1/A, 2000-03-24

MOLDFLOW CORP
S-1/A, 2000-03-24
PREPACKAGED SOFTWARE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 2000

REGISTRATION STATEMENT NO. 333-95289
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 4 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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MOLDFLOW CORPORATION
(Exact Name of Registrant as Specified in its Charter)

<TABLE>
<S> <C> <C>
DELAWARE 7372 04-3406763
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification No.)
</TABLE>

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91 HARTWELL AVENUE
LEXINGTON, MA 02421
(781) 674-0085
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive office)
------------------------------

MARC J. L. DULUDE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
MOLDFLOW CORPORATION
91 HARTWELL AVENUE
LEXINGTON, MA 02421
(781) 674-0085
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------

COPIES TO:

<TABLE>
<S> <C>
STUART M. CABLE, P.C. KEITH F. HIGGINS, ESQ.
ANDREW F. VILES, ESQ. JOEL F. FREEDMAN, ESQ.
GOODWIN, PROCTER & HOAR LLP ROPES & GRAY
EXCHANGE PLACE ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02109-2881 BOSTON, MASSACHUSETTS 02110-2624
(617) 570-1000 (617) 951-7000
</TABLE>

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

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

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

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

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

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

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 SEC, ACTING PURSUANT TO SECTION 8(A), MAY
DETERMINE.

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<PAGE>

SUBJECT TO COMPLETION, DATED MARCH 24, 2000

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 THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE IN WHICH THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
3,000,000 SHARES

[LOGO]

COMMON STOCK
------------------

This is an initial public offering of common stock of Moldflow Corporation.
We are offering 3,000,000 shares of common stock in this offering. We expect the
initial public offering price will be between $12.00 and $14.00 per share.

Prior to this offering, there has been no public market for our common
stock. We have applied to list our common stock on the Nasdaq National Market
under the symbol MFLO.

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

INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. PLEASE SEE THE
SECTION ENTITLED "RISK FACTORS" STARTING ON PAGE 7 TO READ ABOUT RISKS YOU
SHOULD CONSIDER CAREFULLY BEFORE BUYING SHARES OF OUR COMMON STOCK.

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

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

<TABLE>
<CAPTION>
PER SHARE TOTAL
----------- -----------
<S> <C> <C>
Public offering price................................... $ $
Underwriting discounts.................................. $ $
Proceeds to Moldflow.................................... $ $
Proceeds to selling stockholders........................ $ $
</TABLE>

The underwriters have an option to purchase 181,656 additional shares of
common stock from Moldflow and 268,344 shares of common stock from several
stockholders identified in the section entitled "Principal and Selling
Stockholders" starting on page 52 at the initial public offering price less the
underwriting discount to cover any over-allotments of shares. We will not
receive any of the proceeds from the sale of shares by the selling stockholders.

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

Adams, Harkness & Hill, Inc. A.G. Edwards & Sons, Inc.

Prospectus dated , 2000
<PAGE>

[EDGAR Graphics Descriptions]

(Inside Front Cover)

Three pages of graphics follow:

- - Page 1: The first page has the words "Process Wide Plastics Solutions" at
the top. The following paragraph is below next to a chart: "Our products work
together to optimize the process of designing and producing injection molded
plastic parts. Moldflow's software technology delivers solutions that
provide valuable information and advice at the product design, mold design
and part production phases of the process -- and this information can be
shared with colleagues down the hall or around the world." The chart has four
columns labeled "Initial Design," "In-Depth Analysis," "Mold Design" and
"Production." Across the rows are arrows labeled "Insight," "Advisers" and
"Xpert." The Insight arrow runs from part design through part production.
The Advisers arrow runs from conceptual design through mold design. The Xpert
arrow crosses part production only.

Lower on the page are the MPA, MPI and MPX logos with the following
respective words beside them: (i) "Moldflow Plastics Advisers helps design
engineers to create their initial product designs knowing that these designs
will be manufacturable and meet the design requirements," (ii) "Moldflow
Plastics Insight allows a specialist to perform comprehensive product reviews
to solve complex part and mold design problems and optimize these designs,"
and (iii) "Moldflow Plastics Xpert removes trial-and-error approaches to
pre-production mold set-up in the injection molding machine and monitors and
controls subsequent production." At the bottom of the page is Moldflow's logo
and Moldflow's website address "www.moldflow.com."

- - Pages 2 and 3: Gatefold has words "Global Concurrent Product Development"
at the top. Picture of planet Earth is in center with arrows pointing in
from and out to four corners of page. Each corner depicts a separate step
in the design and production process for plastic parts. The upper left
corner has the words "Initial Design" and a picture of a man and a woman
viewing a computer monitor depicting a three dimensional image of cell
phone outer casings as well as two computer screens with closer views of
these casings. Above this picture are the words "The Problem" and the
following paragraph: "The creation of injection molded plastic parts is a
complex, fragmented global process. Manufacturers in many industries are
facing increasing pressure to reduce the time required to bring a plastic
part from initial design to production." The upper right corner has the
words "In-Depth Analysis" and a picture of man working at a computer as well
as two computer screens depicting three dimensional images of cell phone
outer casings. The bottom right corner has the words "Mold Design" and a
picture of a metal mold as well as two computer screens depicting cell phone
outer casings within a mold. The bottom left corner has the words
"Production" and picture of a large injection molding machine as well as a
picture of a computer and a computer screen displaying pages of Moldflow's
MPX product. Below this picture are the words "The Moldflow Solution" and
the following paragraph: "Our approach, called Process Wide Plastics
Solutions, provides our customers with a software tool for each step in
the process, from part design through production monitoring. Using our
products can significantly reduce the time it takes to design plastic parts,
improve their quality and decrease the cost of production." The bottom
center has an arrow pointing down to a picture of cell phone.

<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
Prospectus Summary.......................................... 3

Risk Factors................................................ 7

Use of Proceeds............................................. 14

Dividend Policy............................................. 14

Capitalization.............................................. 15

Dilution.................................................... 16

Selected Financial Data..................................... 17

Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 19

Business.................................................... 30

Management.................................................. 44

Certain Relationships and Related Transactions.............. 51

Principal and Selling Stockholders.......................... 52

Description of Capital Stock................................ 54

Shares Eligible for Future Sale............................. 58

Underwriting................................................ 60

Validity of Common Stock.................................... 62

Experts..................................................... 62

Where You Can Find More Information......................... 62

Index to Consolidated Financial Statements.................. F-1
</TABLE>
<PAGE>
PROSPECTUS SUMMARY

YOU SHOULD READ THE FOLLOWING SUMMARY TOGETHER WITH THE MORE DETAILED
INFORMATION AND OUR CONSOLIDATED FINANCIAL STATEMENTS, THE NOTES TO THOSE
STATEMENTS AND THE OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS.

MOLDFLOW CORPORATION

We believe we are the world's leading developer of software solutions that
enhance the design, analysis and manufacture of injection molded plastic parts.
We have developed a suite of software applications that address the difficulties
and variables inherent in the design and production of injection molded plastic
parts. We believe we have the widest and most advanced range of software
solutions and proprietary technology to address the problems that arise in each
phase of the process of designing and manufacturing injection molded plastic
parts. Our products enable our customers to speed their products to market,
decrease manufacturing costs and reduce costly design and manufacturing errors
with an automated and integrated process. Our products are used by more than
2,200 customers at more than 2,500 sites in over 50 countries around the world.
Representative customers include Baxter International, DaimlerChrysler, DuPont,
Fuji Xerox, Hewlett-Packard, Lego, Lucent Technologies, Motorola, Nokia and
Samsung.

The use of plastics as a manufacturing material is widespread because
plastic parts can be formed into an almost limitless number of shapes, are
relatively inexpensive to manufacture in volume and are easy to assemble.
Injection molding, the dominant method by which plastic parts are produced, is
extremely complex due to the inherent difficulties and the many variables
encountered in transforming various molten plastic materials into sophisticated
part shapes. Common consumer products that make extensive use of injection
molded plastic parts include cellular telephones, personal digital assistants,
pagers, automobiles, televisions, cameras, toys and personal computers. As
product life cycles shrink and the importance of time to market increases,
successful manufacturers in these industries must design and build products
quickly. In particular, product delays or high product defect rates for
manufacturers in rapidly changing industries can result in significant economic
and opportunity costs.

We believe a substantial portion of companies producing injection molded
plastic parts continue to employ trial-and-error at most steps of the design and
production process. We believe this condition exists today primarily because of
the limited availability of specific software tools which are capable of
addressing many of the complex and unique issues involved in designing injection
molded plastic parts and their molds. Further, the trend toward outsourcing and
supply chain management across multiple geographic time zones has exacerbated
the inefficiencies and costs occurring in the design and manufacturing of
plastic parts.

Prior to 1997, our products were designed to be used by highly specialized
engineers conducting in-depth plastics simulation. Since then, we have developed
two new product lines that can be used by design engineers and injection molding
machine operators who do not specialize in plastic part design. We believe a
large untapped market exists for these new product lines. In particular, we
believe that up to 750,000 injection molding machines are currently in use and
are being operated without integrated software solutions that can analyze and
improve the efficiency of their production.

We intend to exploit the universal accessibility of the Internet to further
grow our business. For example, we are currently configuring our products for
use in an application service provider or ASP model, which would permit our
customers to use our products on demand over the Internet. We also intend to
create an Internet portal to enable our customers to use our production set-up
and monitoring product to remotely monitor the injection molding manufacturing
process, including machine efficiency and production data, from anywhere in the
world. We believe this global

3
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availability of software solutions addressing each stage of the plastics product
development process will provide an environment for continuous collaboration
across all participants in a supply chain for every plastic part made.

We operate facilities in nine countries. We sell our products worldwide
primarily through our direct sales force in North America, Europe and Asia and,
to a lesser extent, through original equipment manufacturers and distributors.
We have distribution arrangements with Parametric Technology Corporation,
Structural Dynamics Research Corporation or SDRC, Unigraphics Solutions and
CoCreate and resellers of products of SolidWorks, a subsidiary of Dassault
Systemes, and Autodesk. Our research and development efforts involve
approximately 50 research and development personnel located at our United
States, Australia and United Kingdom facilities. As a result, our research and
development continues on an around-the-clock basis.

On February 11, 2000, we entered into a definitive agreement to acquire
C-Mold, a developer of software solutions for the design and analysis of
injection molded plastic parts headquartered in Ithaca, New York. C-Mold has
developed software that is complementary to our current product offerings in the
areas of part design and in-depth plastics simulation. In particular, we believe
the acquisition of C-Mold will enhance our development capabilities and enable
us to broaden our product lines into adjacent markets more quickly. C-Mold had
$7.7 million in revenue for the fiscal year ended September 30, 1999. The
purchase price will be $11.0 million in cash. We anticipate that the acquisition
will close on or prior to May 31, 2000. However, our acquisition of C-Mold may
not be completed.

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

We were reincorporated in Delaware as Moldflow Corporation on January 15,
1997. From 1994 to 1997, we existed as an Australian corporation under the name
Moldflow International Pty. Ltd. From 1980 to 1994, we existed as an Australian
corporation under the name Moldflow Pty. Ltd. Our principal executive offices
are located at 91 Hartwell Avenue, Lexington, MA 02421. Our telephone number at
that location is (781) 674-0085 and our Internet address is www.moldflow.com.
The information contained on our Website is not part of this prospectus.

The name Moldflow and our logo are names and trademarks that belong to us.
We have registrations for other names and marks used in this prospectus. This
prospectus also contains the trademarks and trade names of other entities that
are the property of their respective owners.

4
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THE OFFERING

Shares offered by Moldflow................... 3,000,000 shares

Common stock to be outstanding after this
offering................................... 9,081,496 shares

Use of proceeds.............................. To fund our pending acquisition of C-Mold and
for general corporate purposes, including
working capital, capital expenditures and any
other acquisitions. See "Use of Proceeds."

Proposed Nasdaq National Market symbol....... MFLO

Risk factors................................. See "Risk Factors" for discussion of factors
you should carefully consider before deciding
to invest in shares of our common stock.
</TABLE>

The number of shares of our common stock that will be outstanding after this
offering excludes 599,900 shares of common stock issuable upon exercise of stock
options outstanding at March 1, 2000 at a weighted average exercise price of
$3.91 per share.

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

EXCEPT AS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. IN ADDITION, WE HAVE
ADJUSTED ALL OF THE INFORMATION IN THIS PROSPECTUS, EXCEPT AS OTHERWISE NOTED,
TO REFLECT:

- A 2.4-TO-1 REVERSE STOCK SPLIT OF OUR COMMON STOCK EFFECTED IN CONNECTION
WITH THIS OFFERING,

- THE CONVERSION OF ALL OUTSTANDING SHARES OF OUR CLASS C PREFERRED STOCK
INTO SHARES OF COMMON STOCK UPON THE CLOSING OF THIS OFFERING,

- THE EXERCISE OF THE OUTSTANDING WARRANT TO PURCHASE 20,833 SHARES OF OUR
COMMON STOCK AT AN AGGREGATE EXERCISE PRICE OF $150,000 UPON THE CLOSING
OF THIS OFFERING, AND

- THE AMENDMENT AND RESTATEMENT OF OUR CERTIFICATE OF INCORPORATION IN
CONNECTION WITH THIS OFFERING.

5
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SUMMARY FINANCIAL DATA

The tables below present our summary consolidated financial data which you
should read together with our consolidated financial statements and related
notes and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" presented elsewhere in this prospectus. The pro forma
combined statement of operations data reflects the combined results of Moldflow
and C-Mold as if the acquisition of C-Mold had been completed at the beginning
of the applicable period. Pro forma net income per common share reflects the
assumed conversion of all convertible preferred stock and the exercise of an
outstanding warrant into shares of common stock upon the closing of this
offering as if they had occurred at the beginning of the applicable period. The
as adjusted balance sheet data at January 1, 2000 reflects the automatic
conversion of all outstanding shares of preferred stock into an aggregate of
5,488,450 shares of common stock and the exercise of the outstanding warrant to
purchase 20,833 shares of common stock upon the closing of this offering, as
well as the sale of the 3,000,000 shares of common stock in this offering,
assuming an initial public offering price of $13.00 per share and after
deducting underwriting discounts and commissions and our estimated offering
expenses. The pro forma combined as adjusted balance sheet data further reflects
the acquisition of C-Mold as if it had occurred on January 1, 2000.

<TABLE>
<CAPTION>
FISCAL YEAR SIX MONTHS ENDED SIX MONTHS
FISCAL YEAR ENDED ENDED ----------------------- ENDED
JUNE 30, JUNE 30, 1999 JANUARY 1, 2000
------------------------------ PRO FORMA JANUARY 2, JANUARY 1, PRO FORMA
1997 1998 1999 COMBINED 1999 2000 COMBINED
-------- -------- -------- -------------- ---------- ---------- ----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Software licenses................ $ 6,743 $ 8,514 $12,238 $16,010 $5,275 $ 6,651 $ 8,483
Services......................... 8,080 7,875 7,983 11,879 3,969 4,853 6,957
------- ------- ------- ------- ------ ------- -------
Total revenue.................. 14,823 16,389 20,221 27,889 9,244 11,504 15,440
Operating expenses, excluding
amortization and litigation...... 16,230 15,734 18,675 26,578 8,877 10,610 14,324
Amortization of goodwill and other
intangible assets................ 2,370 84 -- 1,543 -- -- 772
Litigation......................... -- -- 620 1,110 -- 530 991
------- ------- ------- ------- ------ ------- -------
Income (loss) from operations...... (3,777) 571 926 (1,342) 367 364 (647)
Net income (loss).................. (4,270) 189 481 (1,033) 203 433 (335)

Pro forma net income per common
share:
Basic............................ $ 0.08 $ 0.07
Diluted.......................... $ 0.08 $ 0.07

Shares used in computing pro forma
net income per common share:
Basic............................ 5,717 5,855
Diluted.......................... 6,166 6,311
</TABLE>

<TABLE>
<CAPTION>
AS OF JANUARY 1, 2000
--------------------------------------
PRO FORMA
COMBINED
ACTUAL AS ADJUSTED AS ADJUSTED
-------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 1,328 $36,248 $27,188
Total assets................................................ 10,564 45,484 49,513
Stockholders' equity........................................ 1,763 36,683 36,683
</TABLE>

6
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RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISKS AND ALL OTHER INFORMATION
CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING OUR COMMON STOCK.

IF WE EXPERIENCE DELAYS IN INTRODUCING NEW PRODUCTS OR IF OUR EXISTING OR NEW
PRODUCTS DO NOT ACHIEVE MARKET ACCEPTANCE, WE MAY LOSE REVENUE.

Our industry is characterized by:

- rapid technological advances,

- evolving industry standards,

- changes in end-user requirements,

- intense competition,

- technically complex products,

- frequent new product introductions, and

- evolving offerings by product manufacturers.

We believe our future success will depend, in part, on our ability to
anticipate or adapt to these factors and to offer on a timely basis products
that meet customer demands. For example, the introduction of new products and
services embodying new technologies and the emergence of new industry standards
can render our existing products obsolete. The development of new or enhanced
products is a complex and uncertain process requiring the anticipation of
technological and market trends. We may experience design, manufacturing,
marketing and other difficulties that could delay or prevent our development,
introduction or marketing of new products and enhancements and result in
unexpected expenses.

Our growth and profitability also will depend upon our ability to expand the
use and market penetration of our existing product lines as well as new products
we introduce. Market acceptance of our products will depend in part on our
ability to demonstrate the cost-effectiveness, ease of use and technological
advantages of our products over competing products.

BECAUSE WE DO NOT HAVE EXTENSIVE EXPERIENCE DEVELOPING INTERNET-ENABLED
PRODUCTS, WE MAY INCUR SIGNIFICANT COSTS DEVELOPING INTERNET-ENABLED PRODUCTS
AND MAY NOT BE ABLE TO DEVELOP THESE PRODUCTS.

Our business strategy includes providing additional Internet-related
functions to our products to exploit the trend toward worldwide collaborative
product development and manufacturing and to explore new pricing and packaging
strategies made possible by the Internet. We have limited experience in
developing and marketing Internet-enabled products. We may incur significant
costs developing Internet-enabled products and may be unable to capitalize on
the rapid transformation of the Internet as a computing platform, communications
vehicle and distribution channel.

IF INTERNET USAGE DOES NOT CONTINUE TO GROW, WE MAY NOT BE ABLE TO SUCCESSFULLY
IMPLEMENT OUR INTERNET STRATEGY.

Widespread use of the Internet is a relatively recent phenomenon. The future
success of our Internet strategy depends, in part, on the continued development
of the Internet as a viable commercial medium. We cannot be certain that the
Internet will continue to be developed or accessible for free or at nominal cost
to users. In this event, our future growth may be adversely impacted.

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WE MAY EXPERIENCE DIFFICULTY ACHIEVING SALES TARGETS, MAKING TIMELY PRODUCT
RELEASES OR OTHERWISE OPERATING OUR BUSINESS IF WE ARE UNABLE TO ATTRACT OR
RETAIN KEY PERSONNEL.

In order to grow our business, we will have to hire additional employees in
various countries. Our future success, therefore, will depend, in part, on
attracting and retaining additional qualified management, marketing and
technical personnel. We do not know whether we will be successful in hiring or
retaining qualified personnel. Competition for personnel throughout the software
industry is intense.

IF WE BECOME SUBJECT TO INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS, WE COULD
INCUR SIGNIFICANT EXPENSES AND WE COULD BE PREVENTED FROM OFFERING SPECIFIC
PRODUCTS OR SERVICES.

Our products include proprietary intellectual property. We may become
subject to claims that we infringe on the proprietary rights of others. In the
United States, a significant number of software and business method patents have
been issued over the past decade and the holders of these patents have been
actively seeking out potential infringers. If any element of our products or
services violates third-party proprietary rights, we might not be able to obtain
licenses on commercially reasonable terms to continue offering our products or
services without substantial re-engineering and any effort to undertake such
re-engineering might not be successful. In addition, 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. Any
judgment against us could require us to pay substantial damages and could also
include an injunction or other court order that could prevent us from offering
our products and services.

WE MAY LOSE SALES TO COMPETITORS IF WE ARE UNABLE TO PROTECT IMPORTANT
INTELLECTUAL PROPERTY.

Our ability to compete effectively against other companies in our industry
will depend, in part, on our ability to protect our proprietary rights in our
technology. We may be unable to maintain the proprietary nature of our
technology. While we have attempted to safeguard and maintain our proprietary
rights, we do not know whether we have been or will be completely successful in
doing so.

We rely, in part, on contractual provisions to protect our trade secrets and
proprietary knowledge. These agreements may be breached, and we may not have
adequate remedies for any breach. Our trade secrets may also become known
without breach of such agreements or may be independently developed by
competitors. In addition, foreign countries, including some of those in which we
do business, may reduce or limit the protection of our intellectual property
rights.

OUR FINANCIAL CONDITION OR RESULTS OF OPERATIONS MAY BE ADVERSELY AFFECTED BY
INTERNATIONAL BUSINESS RISKS.

The majority of our employees, including sales, support and research and
development personnel, are located outside of the United States. Conducting
business outside of the United States is subject to numerous risks, including:

- decreased liquidity resulting from longer accounts receivable collection
cycles typical of foreign countries,

- decreased revenue on foreign sales resulting from possible foreign
currency exchange and conversion issues,

- lower productivity resulting from difficulties managing our sales, support
and research and development operations across many countries,

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- lost revenue resulting from difficulties associated with enforcing
agreements and collecting receivables through foreign legal systems,

- lost revenue resulting from the imposition by foreign governments of trade
protection measures, and

- higher cost of sales resulting from import or export licensing
requirements.

OUR PENDING ACQUISITION OF C-MOLD AS WELL AS ANY FUTURE ACQUISITIONS AND
STRATEGIC RELATIONSHIPS MAY RESULT IN LOST REVENUE CAUSED BY BUSINESS
DISRUPTIONS AND MISSED OPPORTUNITIES CAUSED BY THE DISTRACTION OF OUR
MANAGEMENT.

On February 11, 2000, we entered into a definitive agreement to acquire
Advanced CAE Technology, Inc., a software company doing business as C-Mold. We
may not complete the acquisition. The value of C-Mold may not be greater than or
equal to the purchase price. If we are unable to effectively integrate C-Mold's
products, personnel and systems, our business and operating results will likely
suffer. We expect this integration to place a significant burden on our
management team. Further, we cannot guarantee that we will realize any of the
benefits or strategic objectives we are seeking to obtain by acquiring C-Mold.
In connection with accounting for the acquisition of C-Mold, we will record a
significant amount of goodwill and other intangible assets, the amortization of
which will adversely affect our results of operations in future periods.

Additionally, we may engage in other acquisitions and strategic
relationships in the future. We may not be able to identify suitable acquisition
candidates, and, if we do identify suitable candidates, we may not be able to
make such acquisitions on commercially acceptable terms or at all. If we acquire
another company, we will only receive the anticipated benefits if we
successfully integrate the acquired business into our existing business in a
timely and non-disruptive manner. We may have to devote a significant amount of
time and management and financial resources to do so. Even with this investment
of management and financial resources, an acquisition may not produce the
revenues, earnings or business synergies that we anticipated. If we fail to
integrate the acquired business effectively or if key employees of that business
leave, the anticipated benefits of the acquisition would be jeopardized. The
time, capital, management and other resources spent on an acquisition that
failed to meet our expectations could cause our business and financial condition
to be materially and adversely affected. In addition, acquisitions can involve
non-recurring charges and amortization of significant amounts of goodwill and
other acquired intangible assets that could adversely affect our results of
operations.

WE COULD SUFFER MONETARY DAMAGES, INCUR SUBSTANTIAL COSTS, LOSE OUR PRODUCT
DEVELOPMENT ADVANTAGE AND FACE ENHANCED COMPETITION AS A RESULT OF PENDING
LITIGATION INVOLVING A FORMER EMPLOYEE AND ONE OF OUR COMPETITORS.

We are pursuing a lawsuit against both a former Moldflow employee and C-Mold
alleging theft and misappropriation of some of our trade secrets. In response to
our lawsuit, C-Mold filed counterclaims against us alleging antitrust
violations, defamation and trade libel and tortious interference. We may suffer
adverse consequences as a result of this lawsuit or the counterclaims which we
cannot now predict. If the lawsuit or the counterclaims are decided against us,
we could suffer monetary damages, lose our product development advantage and
face enhanced competition. Continuation of the lawsuit or the counterclaims will
result in additional litigation expenses. This litigation is currently being
held in abeyance in connection with our pending acquisition of C-Mold. If the
acquisition is completed, this litigation will be dismissed with prejudice by
the agreement of all parties. If for any reason our acquisition of C-Mold is not
completed, we expect that the litigation will resume.

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<PAGE>
WE HAVE MORE LIMITED FINANCIAL AND OTHER RESOURCES THAN MANY OF OUR COMPETITORS
AND POTENTIAL COMPETITORS AND MAY BE UNABLE TO COMPETE SUCCESSFULLY AGAINST
THEM.

We operate in a highly competitive environment and may not be able to
successfully compete. Companies in our industry and entities in similar
industries could decide to focus on the development of software solutions for
the design, analysis and manufacturing of injection molded plastic parts. Many
of these entities have substantially greater financial, research and
development, manufacturing and marketing resources than we do. Increased
competition may result in price reductions, reduced profitability and loss of
market share.

OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO SIGNIFICANT FLUCTUATIONS AND AS A
RESULT PERIOD-TO-PERIOD COMPARISONS OF OUR RESULTS OF OPERATIONS ARE NOT
NECESSARILY MEANINGFUL AND SHOULD NOT BE RELIED UPON AS INDICATORS OF FUTURE
PERFORMANCE.

We have experienced significant fluctuations in our results of operations on
a quarterly basis. In particular, we have historically experienced lower revenue
in our first fiscal quarter as compared with the preceding quarter as a result
of seasonal factors, which decrease demand for our products in this quarter. For
instance, our total revenue in the first quarter of the current fiscal year was
$5.2 million as compared with total revenue of $5.6 million in the immediately
preceding fourth quarter. We expect to continue to experience significant
fluctuations in our future quarterly results of operations due to a variety of
factors, many of which are outside of our control, including:

- seasonal slowdowns, in particular, in our first fiscal quarter, in many of
the markets in which we sell our products,

- developments in the litigation that we are pursuing against our former
employee and our competitor, and in the nature and extent of proceedings
and findings related to the counterclaims pending against us,

- the timing and magnitude of capital expenditures, including costs relating
to the expansion of our operations and infrastructure,

- introductions of new services or enhancements by us and our competitors,

- changes in our and our competitors' pricing policies,

- currency fluctuations, and

- timing and integration of acquisitions, including our pending acquisition
of C-Mold.

WE MAY HAVE DIFFICULTY MANAGING THE EXPANSION OF OUR OPERATIONS, WHICH COULD
RESULT IN DAMAGE TO CUSTOMER RELATIONSHIPS OR DELAYED BILLING OR COLLECTION OF
REVENUE.

The implementation of our business strategy could result in a period of
rapid growth in the number of our employees and the scope of our operations. In
addition, if we complete the acquisition of C-Mold, we will be further expanding
the number of employees and facilities. Rapid expansion could place a
significant strain on our senior management team and our operational, financial
and other resources as we attempt to expand our operations in multiple locations
around the world. We may have difficulty effectively managing the budgeting,
forecasting, global hiring and other business control issues presented by such a
rapid expansion. This could, among other things, adversely affect our
relationships with our customers and result in delays in billing and collections
of revenue from our customers and increased costs.

10
<PAGE>
IF WE ARE UNABLE TO MAINTAIN AND LEVERAGE OUR STRATEGIC ALLIANCES, WE MAY BE
UNABLE TO GROW AS PLANNED.

We are, and will continue to be, dependent to some extent on distribution
arrangements and strategic partnerships with third-parties because we sell a
portion of our products through these third parties. In addition, we may sell
other products through third-party distributors in the future. These third
parties may not fulfill their agreements with us. In particular, third-party
distributors may breach or terminate their distribution agreements with us or
fail to devote sufficient time and resources to successfully commercialize, or
increase sales of, our products. As a result, our revenues from these
arrangements depend, in part, on third parties' sales of our products.

DISRUPTION OF OPERATIONS AT OUR MELBOURNE, AUSTRALIA FACILITY COULD INTERFERE
WITH OUR PRODUCT DEVELOPMENT AND PRODUCTION CYCLES.

A significant portion of our computer equipment, source code and personnel,
including critical resources dedicated to research and development, is presently
located at a single operating facility in a suburb of Melbourne, Australia. The
occurrence of a natural disaster or other unanticipated catastrophe at this
facility could cause interruptions in our operations and services. Extensive or
multiple interruptions in our operations at this facility could severely disrupt
our product development.

OUR MOLDFLOW PLASTICS XPERT (MPX) PRODUCT LINE MAY LEAD TO PRODUCT LIABILITY
CLAIMS AGAINST US.

We have designed our Moldflow Plastics Xpert (MPX) product line to be
installed directly on our customers' injection molding machines and to
automatically adjust the operation of these machines. As a result, it is
possible that our customers may claim that our product interfered with the
proper operation of their machines and may seek reimbursement for consequential
and other damages from us. Although we expressly disclaim any liability for
consequential or other damages in connection with our sale of the MPX product,
this disclaimer may not protect us from claims for damages from our customers
and these claims may adversely affect our relationships with our customers or
our reputation generally. In addition, our insurance coverage limits may not be
adequate to protect us against any product liability claims that arise. This
insurance is expensive and may not be available on acceptable terms, or at all.

OUR EXISTING STOCKHOLDERS WILL HAVE SUBSTANTIAL INFLUENCE OVER MATTERS REQUIRING
A STOCKHOLDER VOTE.

Upon the closing of this offering, funds associated with Ampersand Ventures
will own approximately 44.6% of our outstanding common stock. Ampersand will,
therefore, have the ability to exert significant influence over our board of
directors and the outcome of stockholder votes. Furthermore, officers, directors
and their affiliates, including Ampersand, will own approximately 60.6% of our
outstanding common stock. If all of these stockholders were to vote together as
a group, they would have the ability to elect our board of directors and control
the outcome of stockholder votes.

AN ACTIVE TRADING MARKET FOR OUR COMMON STOCK MAY NOT DEVELOP, WHICH MAY
ADVERSELY AFFECT OUR STOCK PRICE.

Before this offering, there has been no public market for our common stock.
Although we expect our common stock to be quoted on the Nasdaq National Market,
an active trading market for our shares may not develop or be sustained
following this offering. You may not be able to resell your shares at prices
equal to or greater than the initial public offering price. The initial public

11
<PAGE>
offering price will be determined through negotiations between us and the
underwriters and may not be indicative of the market price for these shares
following this offering. You should read "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.

BECAUSE OUR STOCK PRICE IS LIKELY TO BE HIGHLY VOLATILE, OUR STOCK PRICE COULD
EXPERIENCE SUBSTANTIAL DECLINES AND OUR MANAGEMENT'S ATTENTION MAY BE DIVERTED
FROM MORE PRODUCTIVE TASKS.

The stock market has, from time to time, experienced extreme price and
volume fluctuations. Many factors may cause the market price for our common
stock to decline, perhaps substantially, following this offering, including:

- a decrease in the demand for our common stock,

- revenues and operating results failing to meet the expectations of
securities analysts or investors in any quarter,

- downward revisions in securities analysts' estimates or changes in general
market conditions,

- technological innovations by competitors or in competing technologies,

- investor perception of our industry or our prospects, and

- general technology or economic trends.

In the past, companies that have experienced volatility in the market price
of their stock have been the subject of securities class action litigation. We
may be involved in a securities class action litigation in the future. Such
litigation often results in substantial costs and a diversion of management's
attention and resources and could harm our business, financial condition and
results of operations.

SHARES ELIGIBLE FOR PUBLIC SALE AFTER THIS OFFERING COULD ADVERSELY AFFECT OUR
STOCK PRICE.

The market price of our common stock could decline as a result of sales of
shares by our existing stockholders after this offering, or the perception that
such sales will occur. These sales also might make it difficult for us to sell
equity securities in the future at a time and at a price that we deem
appropriate. After this offering, we will have 9,081,496 shares of common stock
outstanding. All of the shares sold in this offering will be freely tradeable.
Of the remaining shares, over 99% are subject to 180-day lock-up agreements. At
least 6,006,048 additional shares will generally be available for sale in the
public market 180 days after the date of this prospectus. In addition,
approximately 180 days after this offering, we intend to register
2,000,000 shares of common stock for issuance under our 2000 Stock Option and
Incentive Plan and promptly following this offering we intend to register
500,000 shares of common stock for issuance under our Employee Stock Purchase
Plan.

WE WILL HAVE BROAD DISCRETION AS TO THE USE OF THE PROCEEDS FROM THIS OFFERING
AND MAY USE THE PROCEEDS IN A MANNER WITH WHICH YOU DISAGREE.

Our board of directors and management will have broad discretion over the
use of the net proceeds of this offering. You may disagree with the judgment of
our board of directors and management regarding the application of the proceeds
of this offering.

12
<PAGE>
PROVISIONS OF DELAWARE LAW AND OF OUR CHARTER AND BY-LAWS MAY MAKE A TAKEOVER
MORE DIFFICULT.

Provisions in our certificate of incorporation and by-laws and in the
Delaware corporate law may make it difficult and expensive for a third party to
pursue a tender offer, change in control or takeover attempt which is opposed by
our management and board of directors. Public stockholders who might desire to
participate in such a transaction may not have an opportunity to do so. We also
have a staggered board of directors which makes it difficult for stockholders to
change the composition of the board of directors in any one year. These
anti-takeover provisions could substantially impede the ability of public
stockholders to change our management and board of directors.

BECAUSE WE DO NOT INTEND TO PAY DIVIDENDS, YOU WILL BENEFIT FROM AN INVESTMENT
IN OUR COMMON STOCK ONLY IF IT APPRECIATES IN VALUE.

We have never declared or paid any cash dividends on our common stock. We
currently intend to retain our future earnings, if any, to finance the expansion
of our business and do not expect to pay any cash dividends in the foreseeable
future. In addition, our existing credit facility does not permit us to pay cash
dividends. As a result, the success of your investment in our common stock will
depend entirely upon its future appreciation. There is no guaranty that our
common stock will appreciate in value after the offering or even maintain the
price at which you purchased your shares.

WE MAY LOSE REVENUE AS A RESULT OF DISRUPTIONS BROUGHT ABOUT BY YEAR 2000
PROBLEMS.

In conducting our business, we rely on computer systems to manage our
business and to serve our customers. Further, all of our products include
computer software or hardware components or both. Year 2000 problems may
adversely affect our operations and increase our costs. Among other things, Year
2000 problems could cause us to:

- fail to fulfill our contractual obligations with our customers,

- face substantial claims by our customers and loss of revenue,

- fail to bill our customers accurately and on a timely basis, and

- be subject to the inability by customers and others to pay, on a timely
basis or at all, obligations owed to us.

Although the effects of any or all of these events are not quantifiable at
this time, any of these events could have a material adverse effect on our
business and operating results.

13
<PAGE>
USE OF PROCEEDS

We estimate that the net proceeds to us from our sale of 3,000,000 shares of
our common stock in this offering will be approximately $34.8 million, assuming
an initial public offering price of $13.00 per share and after deducting the
underwriting discounts and commissions and our estimated offering expenses. If
the underwriters exercise their over-allotment option in full, we estimate that
our net proceeds will be approximately $37.0 million. We intend to use
approximately $11.2 million of our net proceeds to fund our pending acquisition
of C-Mold and related transaction expenses and the remainder for general
corporate purposes, including working capital, capital expenditures and any
other acquisitions. We will not receive any proceeds from the sale of shares by
selling stockholders in this offering in connection with the exercise of the
over-allotment option.

Until used, we intend to invest these proceeds in government securities and
other short-term, investment-grade securities.

DIVIDEND POLICY

14
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of January 1, 2000 on
an actual basis and as adjusted for the following:

- the filing prior to the effective date of this offering of an amended
certificate of incorporation authorizing 60,000,000 shares of common stock
and 5,000,000 shares of undesignated preferred stock,

- the conversion of all outstanding shares of preferred stock into an
aggregate of 5,488,450 shares of common stock upon the closing of this
offering,

- the exercise of the outstanding warrant to acquire 20,833 shares of common
stock at an aggregate exercise price of $150,000 upon the closing of this
offering, and

- the receipt of the estimated net proceeds of $34.8 million from our sale
in this offering of 3,000,000 shares of common stock assuming an initial
public offering price of $13.00 per share.

<TABLE>
<CAPTION>
AS OF JANUARY 1, 2000
-----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Convertible preferred stock, $0.01 par value per share:
Series C-1; 4,918,616 shares authorized, issued and
outstanding, actual; no shares authorized, issued and
outstanding, as adjusted................................ $ 1,151 $ --
Series C-2; 1,855,688 shares authorized, issued and
outstanding, actual; no shares authorized, issued and
outstanding, as adjusted................................ 8,382 --
Series C-3; 1,480,082 shares authorized, 1,365,275 issued
and outstanding, actual; no shares authorized, issued
and outstanding, as adjusted............................ 2,833 --
------- --------
Total convertible preferred stock....................... 12,366 --
Undesignated preferred stock, $0.01 par value per share; no
shares authorized, issued and outstanding, actual;
5,000,000 shares authorized, no shares issued and
outstanding, as adjusted.................................. -- --
Common stock, $0.01 par value per share; 20,000,000 shares
authorized, 560,327 shares issued and outstanding, actual;
60,000,000 shares authorized, 9,069,610 shares issued and
outstanding, as adjusted.................................. 6 91
Additional paid-in capital.................................. 285 47,486
Deferred compensation....................................... (57) (57)
Notes receivable from stockholders.......................... (198) (198)
Accumulated deficit......................................... (11,280) (11,280)
Accumulated other comprehensive income...................... 641 641
------- --------
Total stockholders' equity................................ 1,763 36,683
------- --------
Total capitalization.................................... $ 1,763 $ 36,683
======= ========
</TABLE>

The above table excludes 574,234 shares of common stock issuable upon
exercise of stock options outstanding as of January 1, 2000 at a weighted
average exercise price of $3.35 per share. The above table also assumes no
exercise of the underwriters' over-allotment option.

15
<PAGE>
DILUTION

As of January 1, 2000, we had a pro forma net tangible book value of $1.9
million, or $0.32 per share of common stock. Pro forma net tangible book value
per share is equal to our total tangible assets less total liabilities, divided
by the number of shares of our outstanding common stock assuming the conversion
of all outstanding preferred stock into common stock and the exercise of the
outstanding warrant to purchase common stock.

After giving effect to the sale of the 3,000,000 shares of common stock
offered by us at an assumed initial public offering price of $13.00 per share,
and after deducting our underwriting discounts and commissions and our estimated
offering expenses, our pro forma net tangible book value as of January 1, 2000
would have been $36.7 million, or $4.04 per share of common stock. This
represents an immediate increase in pro forma net tangible book value of $3.72
per share to our existing stockholders and an immediate dilution of $8.96 per
share to new investors in this offering. If the initial public offering price is
higher or lower than $13.00 per share, the dilution to new stockholders will be
higher or lower. The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $13.00
Pro forma net tangible book value per share before this $0.32
offering................................................
Increase per share attributable to new investors.......... 3.72
-----
Pro forma net tangible book value per share after this
offering.................................................. 4.04
------
Dilution per share to new investors......................... $ 8.96
======
</TABLE>

In addition, after giving effect to the acquisition of C-Mold, our pro forma
net tangible book value after this offering as of January 1, 2000 would have
been $28.9 million, or $3.19 per share of common stock.

The following table summarizes, on a pro forma basis as of January 1, 2000,
the number of shares of common stock purchased, the total consideration paid and
the average price per share paid by existing stockholders and new investors in
this offering assuming the conversion of all outstanding preferred stock into
common stock and the exercise of the outstanding warrant to purchase common
stock. The table assumes that the initial public offering price will be $13.00.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- -------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. 6,069,610 66.9% $12,807,000 24.7% $ 2.11
New investors...................... 3,000,000 33.1 39,000,000 75.3 13.00
--------- ----- ----------- -----
Total.......................... 9,069,610 100.0% $51,807,000 100.0%
========= ===== =========== =====
</TABLE>

The tables above exclude:

- 181,656 shares which may be issued by us pursuant to the underwriters'
over-allotment option,

- 574,234 shares of common stock issuable upon exercise of outstanding
options at January 1, 2000 at a weighted average exercise price of $3.35
per share, and

- an aggregate of 2,500,000 shares available for future grant under our 2000
Stock Option and Incentive Plan and our Employee Stock Purchase Plan.

To the extent our outstanding options are exercised, new investors may
experience further dilution.

16
<PAGE>
SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and related
notes included elsewhere in this prospectus. The statement of operations data
for the years ended June 30, 1997, 1998 and 1999 and the balance sheet data at
June 30, 1998 and 1999 are derived from our audited consolidated financial
statements appearing elsewhere in this prospectus. The balance sheet data at
June 30, 1997 are derived from our audited consolidated financial statements not
included in this prospectus. The statement of operations data for the years
ended June 30, 1995 and 1996 and the balance sheet data at June 30, 1995 and
1996 are derived from our unaudited consolidated financial statements not
included in this prospectus. The unaudited consolidated financial statements, in
the opinion of management, have been prepared on the same basis as the audited
consolidated financial statements and reflect all adjustments necessary for a
fair presentation of that data. The interim statement of operations data for the
six-month periods ended January 2, 1999 and January 1, 2000 and the interim
balance sheet data at January 1, 2000 are derived from our unaudited
consolidated interim financial statements appearing elsewhere in this prospectus
which, in the opinion of management, have been prepared on the same basis as the
audited consolidated financial statements and reflect all adjustments necessary
for a fair presentation of that data. The data for the six-month period ended
January 1, 2000 are not necessarily indicative of results for the year ending
June 30, 2000 or any future period. Pro forma net income per common share
reflects the assumed conversion of all outstanding convertible preferred stock
and the exercise of the outstanding warrant into shares of common stock upon
completion of this offering as if such conversion had occurred at the beginning
of the applicable period.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED JUNE 30, -----------------------
---------------------------------------------------- JANUARY 2, JANUARY 1,
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Software licenses.................... $ 5,374 $ 6,531 $ 6,743 $ 8,514 $12,238 $5,275 $ 6,651
Services............................. 6,162 7,472 8,080 7,875 7,983 3,969 4,853
------- ------- ------- ------- ------- ------ -------
Total revenue...................... 11,536 14,003 14,823 16,389 20,221 9,244 11,504
------- ------- ------- ------- ------- ------ -------
Costs and expenses:
Cost of software licenses revenue.... 215 261 377 397 378 168 322
Cost of services revenue............. 1,676 2,615 1,904 1,685 1,319 605 491
Research and development............. 2,234 3,535 3,527 3,062 3,466 1,754 1,709
Selling and marketing................ 4,541 6,094 6,703 7,287 9,673 4,615 5,811
General and administrative........... 2,486 2,550 3,719 3,303 3,839 1,735 2,277
Litigation........................... -- -- -- -- 620 -- 530
Amortization of intangible assets.... 2,440 2,904 2,370 84 -- -- --
------- ------- ------- ------- ------- ------ -------
Total operating expenses........... 13,592 17,959 18,600 15,818 19,295 8,877 11,140
------- ------- ------- ------- ------- ------ -------

Income (loss) from operations........ (2,056) (3,956) (3,777) 571 926 367 364
Interest income (expense), net......... 156 135 (139) (238) (177) (85) (39)
Other income (loss), net............... 766 (24) 17 19 (92) (22) (64)
------- ------- ------- ------- ------- ------ -------
Income (loss) before income taxes.... (1,134) (3,845) (3,899) 352 657 260 261
Provision for income taxes............. 466 414 371 163 176 57 (172)
------- ------- ------- ------- ------- ------ -------
Net income (loss).................... (1,600) (4,259) (4,270) 189 481 203 433
Accretion on convertible preferred
stock................................ 146 482 741 80 -- -- --
------- ------- ------- ------- ------- ------ -------
Net income (loss) available to common
stockholders....................... $(1,746) $(4,741) $(5,011) $ 109 $ 481 $ 203 $ 433
======= ======= ======= ======= ======= ====== =======
</TABLE>

17
<PAGE>

<TABLE>
<CAPTION>
AS OF JUNE 30,
---------------------------------------------------- AS OF JANUARY 1,
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- ----------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................... $ 564 $ 1,638 $ 1,009 $ 1,700 $ 1,240 $ 1,328
Total assets................................. 16,184 16,432 13,940 14,336 10,247 10,564
Long-term debt, net of current portion....... -- -- 524 890 -- --
Redeemable convertible preferred stock....... 1,608 9,582 10,322 -- -- --
Stockholders' equity (deficit)............... 3,461 (5,340) (10,584) 34 1,270 1,763
</TABLE>

The computation of basic and diluted net income (loss) per common share has
been adjusted retroactively for all periods presented to reflect the
redesignation of our common and preferred stock in March 1998. As a result of
the treatment of this redesignation, we had no common stock outstanding prior to
June 30, 1998 for purposes of computing net income (loss) per common share.
Accordingly, basic net income (loss) per common share was zero for the years
ended June 30, 1995, 1996, 1997 and 1998.

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

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS.

OVERVIEW

Our primary business is the development, sale and support of software
applications for the design and manufacture of plastic injection molded parts.
Our products allow a product designer or engineer to simulate the manufacture of
a plastic part to determine and maintain the optimal part design and
manufacturing conditions throughout the manufacturing process.

We develop software products internally and through cooperative research
relationships with a number of public and private educational and research
organizations around the world. Prior to June 1997, our products consisted
solely of our Moldflow Plastics Insight (MPI) series for in-depth mold design.
Since then, we have introduced two new product lines. Our Moldflow Plastics
Advisers (MPA) series for part design and high level mold design was introduced
in fiscal 1997 and our Moldflow Plastics Xpert (MPX) series for production
set-up and production monitoring was introduced in fiscal 1999. We have also
introduced additional modules of our MPI product series since June 1997.

We sell our products and services internationally through our direct sales
operations in nine countries. In addition, we sell through a network of
distributors and value-added resellers and through distribution arrangements
with developers of other design software products.

We generate revenue from two principal sources:

- license fees for our packaged software products, and

- services revenue derived from maintenance and support services related to
our software products, consulting, training and material testing.

SOFTWARE LICENSES REVENUE. Typically, our customers pay an up-front,
one-time fee for a perpetual license of our software products. The amount of the
fee depends upon the number and type of software modules purchased and the
number of the customers' employees or other users who can access the software
product simultaneously. Sales of our MPA product are subject to the terms of a
"shrink-wrapped" or "click-wrapped" software license agreement which is
pre-packaged with the software and is also included as part of customers'
installation process. For sales of our MPI and MPX products, we generally
require a signed license agreement. In addition, we receive royalty payments
from original equipment manufacturers related to the bundling of our software
with their design software programs.

We recognize software licenses revenue when evidence of a purchase
commitment exists, delivery has occurred upon shipment of the product to the
customer, no significant installation obligations remain, the license fee is
fixed and determinable, and collectibility is probable. Installation of the
software by Moldflow is not essential to its functionality, and typically is
completed by our customers.

SERVICES REVENUE. Most of our customers enter into maintenance and support
contracts, which require us to provide customer technical support services and
unspecified product upgrades and enhancements on a when-and-if-available basis.
Services revenue is primarily comprised of revenue derived from these
maintenance and support contracts. At January 1, 2000, 1,105 customers had
maintenance and support contracts with us. During the six months ended
January 1, 2000, our customers renewed maintenance and support contracts with us
on approximately 71% of the product licenses that were under maintenance and
support contracts up for renewal during the six

19
<PAGE>
months ended January 1, 2000. We caution you, however, that the maintenance and
support contract renewal rate for product licenses under these contracts may not
be indicative of trends in our services revenue because, among other things,
this rate does not reflect maintenance and support contracts with new customers
or existing customers who purchase new product licenses and enter into new
maintenance and support contracts rather than renew existing contracts.
Maintenance and support contract revenue is invoiced in advance and is
recognized ratably over the term of the corresponding maintenance agreement,
which typically is twelve months.

Maintenance and support contracts are often entered into at the same time as
the sale of our software licenses, and we consider these multiple elements of a
single arrangement. Payment for this arrangement is typically received up-front,
and the total fee is then allocated ratably to these elements based upon vendor
specific objective evidence of fair value for each, which is determined based on
prices charged to our customers when these elements are sold separately. The
revenue allocated to each of these elements is then recognized as described
above.

We also provide consulting services, training of customers' employees, and
material testing services. Other services revenue is recognized as the services
are performed.

COST OF SOFTWARE LICENSES REVENUE. Cost of software licenses revenue
consists primarily of the costs associated with compact discs and related
packaging material, duplication and shipping costs and the salaries of our
distribution personnel. In some cases, we pay royalties to third parties for
usage-based licenses of their products that are embedded in our software
programs. Product royalties are expensed when the related obligation arises,
which is generally upon the sale of our products, and are included in cost of
software licenses revenue.

COST OF SERVICES REVENUE. Cost of services revenue consists primarily of
salary, fringe benefit and facility related costs of our maintenance and
support, consulting and training activities and of our material testing
laboratory in Australia, and is expensed when incurred. Additionally, from time
to time, we engage outside consultants to meet peaks in customer demand for our
consulting services.

RESEARCH AND DEVELOPMENT. We maintain an in-house development staff to
enhance our existing products and to develop new ones. Product development
expenditures are generally charged to operations as incurred. Statement of
Financial Accounting Standards No. 86 requires the capitalization of certain
software development costs subsequent to the establishment of technological
feasibility. We typically establish technological feasibility upon the
completion of a working model. Accordingly, due to the minimal level of software
development costs incurred subsequent to the establishment of technological
feasibility, costs eligible for capitalization have not been significant to
date.

SELLING AND MARKETING. We sell our products primarily through our direct
sales force and indirect distribution channels. Selling and marketing expenses
consist primarily of personnel costs, commissions to employees, sales office
facilities, travel and promotional events such as trade shows, advertising,
print and Web-based collateral materials, and public relations programs.

GENERAL AND ADMINISTRATIVE. General and administrative expenses include our
personnel, routine legal, audit and other costs of our executive management,
finance and administrative support activities.

LITIGATION. In February 1999, we filed suit in U.S. District Court against
a former employee and C-Mold in which we allege theft and misappropriation of
our trade secrets related to the development of a three-dimensional plastic
simulation and modeling product. The U.S. District Court has issued a
preliminary injunction precluding the defendants from using or disclosing our
trade secrets and prohibiting our former employee from working for our
competitor in this area. In

20
<PAGE>
January 2000, the court denied C-Mold's motion to have this injunction lifted.
In April 1999, C-Mold filed counterclaims against us in which they allege that
we engaged in anti-competitive practices including, among other things,
restraint of trade, attempt to monopolize, price discrimination, libel and
defamation. Certain of the counterclaims have been dismissed. This litigation is
currently being held in abeyance pending the completion of our acquisition of
C-Mold, at which time it will be dismissed. In the event that the litigation
resumes, we intend to vigorously pursue our claims and defend the counterclaims
asserted against us. We are unable to determine the ultimate outcome of these
matters. Litigation expenses reflect our costs for pursuing our claims and for
defending against the counterclaims.

INTEREST INCOME (EXPENSE), NET. Interest income (expense), net includes our
cost of borrowings, including interest cost incurred on our working capital
lines of credit and stockholder loans, offset in part by interest income earned
on invested cash balances.

OTHER INCOME (LOSS), NET. Other income (loss), net includes realized and
unrealized gains and losses arising from translation of foreign currency
denominated asset and liability balances and other non-operating income and
expense items.

PROVISION FOR INCOME TAXES. Our provision for income taxes includes
federal, state and foreign taxes on our income in the countries in which we do
business. Because we have incurred significant operating losses in prior years,
we have significant net operating loss carryforwards available to offset our
future tax obligations in the U.S. and Australia, and to a lesser extent,
certain other countries. At June 30, 1999, we had available federal, state and
foreign net operating loss carryforwards of approximately $4.4 million,
$3.0 million and $7.8 million. Use of net operating losses to reduce future
taxable income is subject to a number of limitations. We expect that our income
taxes will increase in the future once our net operating loss carryforwards and
other deferred tax assets are fully utilized.

Our fiscal year end is June 30. References to 1997, 1998 or 1999 mean the
fiscal year ended June 30, unless otherwise indicated. During the fiscal year,
we follow a schedule in which each interim quarterly period ends on the Saturday
of the thirteenth full week of the reporting period.

21
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth statement of operations data for the periods
indicated as a percentage of total revenue:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED JUNE 30, --------------------
-------------------------------- JAN. 2, JAN. 1,
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenue:
Software licenses.............................. 45.5% 51.9% 60.5% 57.1% 57.8%
Services....................................... 54.5 48.1 39.5 42.9 42.2
----- ----- ----- ----- -----
Total revenue................................ 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- -----
Costs and expenses:
Cost of software licenses revenue.............. 2.6 2.4 1.9 1.8 2.8
Cost of services revenue....................... 12.8 10.3 6.5 6.5 4.3
Research and development....................... 23.8 18.7 17.1 19.0 14.9
Selling and marketing.......................... 45.2 44.4 47.8 49.9 50.5
General and administrative..................... 25.1 20.2 19.0 18.8 19.8
Litigation..................................... -- -- 3.1 -- 4.6
Amortization of intangible assets.............. 16.0 0.5 -- -- --
----- ----- ----- ----- -----
Total operating expenses..................... 125.5 96.5 95.4 96.0 96.9
----- ----- ----- ----- -----
Income (loss) from operations.................. (25.5) 3.5 4.6 4.0 3.1

Interest income (expense), net................... (0.9) (1.5) (0.9) (0.9) (0.4)
Other income (loss), net......................... 0.1 0.1 (0.5) (0.2) (0.6)
----- ----- ----- ----- -----
Income (loss) before income taxes.............. (26.3) 2.1 3.2 2.9 2.1
Provision for income taxes....................... 2.5 1.0 0.9 0.6 (1.5)
----- ----- ----- ----- -----
Net income (loss).............................. (28.8)% 1.1% 2.3% 2.3% 3.6%
===== ===== ===== ===== =====
</TABLE>

SIX MONTHS ENDED JANUARY 1, 2000 COMPARED TO SIX MONTHS ENDED JANUARY 2, 1999

REVENUE. Total revenue increased by 24.4%, or $2.3 million, to
$11.5 million for the six months ended January 1, 2000 from $9.2 million for the
six months ended January 2, 1999. In the same period, software licenses revenue
increased by 26.1%, or $1.4 million, to $6.7 million. The increase in software
licenses revenue was primarily attributable to an increase of $1.0 million in
license revenue in our Asia region due in part to an improvement in the region's
economic conditions. To a lesser extent, license revenue was higher due to an
increase in the number of our direct sales representatives and new MPA and MPX
product releases in March 1999 and September 1999. Software licenses revenue
accounted for 57.8% of total revenue for the six months ended January 1, 2000
compared to 57.1% for the six months ended January 2, 1999. Services revenue
increased by 22.3%, or $884,000, to $4.9 million for the six months ended
January 1, 2000 from $4.0 million for the six months ended January 2, 1999. This
increase was due primarily to an increase in the amount of revenue derived from
maintenance and support contracts resulting from the growth in our software
licenses revenue and installed user base in fiscal 1999. No customer accounted
for more than 10% of total revenue for the six months ended January 1, 2000 and
January 2, 1999.

COST OF REVENUE. Cost of software licenses revenue increased 91.7%, or
$154,000, to $322,000 for the six months ended January 1, 2000 from $168,000 for
the six months ended January 2, 1999. This increase was primarily attributable
to hardware costs related to MPX product sales and, to a lesser extent, costs
associated with increased personnel. Cost of services revenue decreased 18.8%,
or $114,000, from $605,000 for the six months ended January 2, 1999 to $491,000
for the six

22
<PAGE>
months ended January 1, 2000. This decrease resulted from the continued
redirection of field technical personnel from largely passive roles of customer
hotline and maintenance services to active field roles in pre-sales and customer
retention programs, which costs are included in selling and marketing.

RESEARCH AND DEVELOPMENT. Research and development expenses decreased 2.6%,
or $45,000, to $1.7 million for the six months ended January 1, 2000 from
$1.8 million for the six months ended January 2, 1999. This decrease was the
result of lower research sponsorship costs in the six months ended January 1,
2000.

SELLING AND MARKETING. Selling and marketing expenses increased 25.9%, or
$1.2 million, to $5.8 million for the six months ended January 1, 2000 from
$4.6 million for the six months ended January 2, 1999. This growth was due
principally to an increase in the number of direct sales representatives and
pre-sales application support engineers. To a lesser extent, this growth was due
to the establishment of a direct sales subsidiary in Sweden in July 1999 and an
increase in spending for promotional activities.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
31.2%, or $542,000, to $2.3 million for the six months ended January 1, 2000
from $1.7 million for the six months ended January 2, 1999. This resulted from
the cost of additional finance and administrative personnel hired in the second
half of fiscal 1999, an increase in costs of pursuing business development
opportunities, and an increase in general corporate insurance and facility
costs.

LITIGATION. Litigation expenses were $530,000 for the six months ended
January 1, 2000. There were no litigation expenses for the six months ended
January 2, 1999. These litigation expenses consist of the legal costs incurred
to pursue our claims regarding theft of our trade secrets and to defend against
the counterclaims.

INTEREST INCOME (EXPENSE), NET. Interest income (expense), net decreased
54.1%, or $46,000, to a net expense of $39,000 in the six months ended
January 1, 2000 from a net expense of $85,000 for the six months ended
January 2, 1999. This was due primarily to a decrease in interest expense
resulting from the reduction in the amount of outstanding borrowings under our
domestic and foreign revolving credit facilities.

OTHER INCOME (LOSS), NET. Other income (loss), net increased $42,000 to a
loss of $64,000 in the six months ended January 1, 2000 from a loss of $22,000
for the six months ended January 2, 1999. This change was primarily due to
unrealized foreign exchange losses incurred on the translation of intercompany
foreign currency denominated obligations.

PROVISION FOR INCOME TAXES. The provision for income taxes was a benefit of
$172,000 in the six months ended January 1, 2000 compared to a provision of
$57,000 for the six months ended January 2, 1999. This change reflects the
impact of a refund received in September 1999 of foreign taxes that we paid in
prior years.

COMPARISON OF FISCAL YEARS 1999 AND 1998

REVENUE. Total revenue increased 23.4%, or $3.8 million, to $20.2 million
for 1999 from $16.4 million for 1998. The increase was attributable principally
to growth in software licenses revenue, resulting primarily from the impact of
the release of three new products, MPI/Fusion, MPI/ FLOW 3D and MPA/Mold Adviser
in August 1998, September 1998 and March 1999. A portion of the increase
resulted from the continued implementation of our direct selling model,
including the addition of sales representatives and the improvement of sales
productivity. Software licenses revenue increased 43.7%, or $3.7 million, to
$12.2 million for 1999 from $8.5 million for 1998. Software licenses revenue
accounted for 60.5% of total revenue in 1999, compared to 51.9% during

23
<PAGE>
1998. Services revenue increased slightly by $108,000, or 1.4%, as the increase
in maintenance and support contract revenue was offset, in part, by a reduction
in consulting revenue resulting from our decision to de-emphasize our simulation
consulting and analysis business. No customer accounted for more than 10% of our
total revenue during 1999 and a distributor in Japan, ISI-Dentsu, Ltd.,
accounted for 12.7% of our total revenue in 1998.

COST OF REVENUE. Cost of software licenses revenue decreased by 4.8%, or
$19,000, to $378,000 for 1999 from $397,000 for 1998. This decrease was due
primarily to lower packaging and freight costs in 1999. Cost of services revenue
decreased by 21.7%, or $366,000, to $1.3 million for 1999 from $1.7 million for
1998. This was due primarily to lower personnel costs resulting from the
continued redirection of technical and consulting employees into pre-sales
support activities, which costs are included in selling and marketing. To a
lesser extent, this reduction was due to the implementation of a worldwide
customer support management system and the centralization of U.S.-based customer
support activities.

RESEARCH AND DEVELOPMENT. Research and development expenses increased by
13.2%, or $404,000, to $3.5 million for 1999 from $3.1 million for 1998. This
increase was attributable to the addition of software development engineers in
Australia and the United Kingdom, and increased costs of travel and outside
consultants primarily engaged in MPX product development activities.

SELLING AND MARKETING. Selling and marketing expenses increased by 32.7%,
or $2.4 million, to $9.7 million for 1999 from $7.3 million for 1998. These
expenses increased as a percentage of total revenue from 44.4% to 47.8% due
principally to the hiring of additional direct sales representatives, pre-sales
support and product marketing employees, and also to a lesser extent the
establishment of a marketing communications function. Further, we increased our
spending for promotional activities including collateral materials, direct
mailings and public relations in connection with the rollout of new products
introduced during 1999.

GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
by 16.2%, or $536,000, to $3.8 million for 1999 from $3.3 million for 1998.
These expenses increased in 1999 due primarily to the addition of financial and
administrative management personnel. In addition, we increased our spending for
improvements in information systems and routine legal and audit fees.

LITIGATION. Litigation expenses were $620,000 in 1999. This was
attributable to the legal costs incurred in 1999 to pursue our claims regarding
theft of our trade secrets and to defend against the other parties'
counterclaims. There were no such expenses in 1998.

INTEREST INCOME (EXPENSE), NET. Interest income (expense), net decreased by
25.6%, or $61,000, to a net expense of $177,000 in 1999 from a net expense of
$238,000 in 1998 due primarily to a reduction in the amount of interest expense
incurred as a result of a reduction in the level of bank and stockholder debt
outstanding in 1999. Outstanding debt was reduced through repayment with funds
generated from operations in 1999 and through the conversion of $890,000 of
stockholder debt into preferred stock.

OTHER INCOME (LOSS), NET. Other income (loss), net decreased by $111,000,
to a loss of $92,000 in 1999 from income of $19,000 in 1998 due primarily to
unrealized foreign exchange losses incurred on the translation of intercompany
foreign currency denominated obligations.

PROVISION FOR INCOME TAXES. The provision for income taxes increased
slightly to $176,000 in 1999 from $163,000 in 1998 due primarily to changes in
the amount of taxes paid on income in state and foreign jurisdictions.

24
<PAGE>
COMPARISON OF FISCAL YEARS 1998 AND 1997

REVENUE. Our total revenue increased 10.6%, or $1.6 million, to
$16.4 million for 1998 from $14.8 million for 1997. The increase was principally
attributable to the introduction in June 1997 of the MPA/Part Adviser product.
To a lesser extent our revenues increased as a result of the establishment of
our direct sales subsidiary in Italy in January 1998. This increase was offset
in part by lower sales in Asia resulting from declining economic conditions in
the region and the impact of currency fluctuations. Software licenses revenue
accounted for 51.9% of total revenue in 1998, compared to 45.5% during 1997.
Services revenue declined by 2.5% in 1998, or $205,000, to $7.9 million,
compared to $8.1 million in 1997. This was due to our decision to de-emphasize
our simulation and analysis consulting business while redirecting our
consultants into pre-sales support in order to increase software product sales
at a more rapid pace. In 1998 and 1997, a distributor in Japan, ISI-Dentsu,
Ltd., accounted for 12.7% and 14.9% of our total revenue for those periods.

COST OF REVENUE. Cost of software licenses revenue increased by 5.3%, or
$20,000, to $397,000 for 1998 from $377,000 for 1997 due primarily to the
increased volume of product sales. Cost of services revenue decreased by 11.5%,
or $219,000, to $1.7 million in 1998 from $1.9 million in 1997. The decrease was
attributable principally to a redirection of some of our technical and
consulting employees into pre-sales support activities, which costs are included
in selling and marketing.

RESEARCH AND DEVELOPMENT. Research and development expenses decreased by
13.2%, or $465,000, to $3.1 million for 1998 from $3.5 million for 1997. This
decrease was attributable primarily to the reduction in costs of our development
activities in Australia due to the weakening in the rate of exchange of the
Australian dollar to the U.S. dollar during 1998.

SELLING AND MARKETING. Selling and marketing expenses increased by 8.7%, or
$584,000, to $7.3 million for 1998 from $6.7 million for 1997. These expenses
increased due to compensation and other costs related to the addition of sales
associates and sales management in existing operations, including our Japanese
operation established in August 1997, and the establishment of direct sales and
support operations in Italy in January 1998.

GENERAL AND ADMINISTRATIVE. General and administrative expenses decreased
by 11.2%, or $416,000, to $3.3 million for 1998 from $3.7 million for 1997. The
decrease was due primarily to a reduction in the cost of our Asian regional
finance and administrative activities located in Australia resulting from
changes in the rate of exchange versus the U.S. dollar and a reduction in the
level of professional fees incurred after our reorganization into a U.S.
corporation in August 1997.

AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets
decreased $2.3 million, or 96.5%, to $84,000 in 1998 from $2.4 million in 1997
as our intangible assets, including developed software and goodwill acquired in
1994, became fully amortized in 1997.

INTEREST INCOME (EXPENSE), NET. Interest income (expense), net increased by
71.2%, or $99,000, to a net expense of $238,000 in 1998 from a net expense of
$139,000 in 1997 due to the increased level of bank and stockholder debt
outstanding in 1998.

OTHER INCOME (LOSS), NET. Other income (loss), net increased by $2,000, to
income of $19,000 in 1998 from income of $17,000 in 1997 due primarily to
unrealized foreign exchange gains resulting from the translation of intercompany
foreign currency denominated obligations.

PROVISION FOR INCOME TAXES. The provision for income taxes decreased by
56.1%, or $208,000, from $371,000 in 1997 to $163,000 in 1998 primarily as the
result of a reduction in the amount of foreign withholding taxes paid after the
establishment of our direct sales subsidiary in Japan.

25
<PAGE>
SELECTED QUARTERLY RESULTS OF OPERATIONS

The following table sets forth the unaudited quarterly consolidated
statement of operations data for each of the ten quarters in the period ended
January 1, 2000. In the opinion of management, the unaudited financial results
include all adjustments, consisting only of normal recurring adjustments,
necessary for the fair presentation of our results of operations for those
periods and have been prepared on the same basis as the audited consolidated
financial statements. The quarterly data should be read in conjunction with our
audited consolidated financial statements and the accompanying notes appearing
elsewhere in this prospectus. The results of operations for any quarter are not
necessarily indicative of the results of operations for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------------------
OCT 4, JAN. 3, APR. 4, JUN. 30, OCT. 3, JAN. 2, APR. 3, JUN. 30,
1997 1998 1998 1998 1998 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Software licenses................... $1,568 $2,410 $2,313 $2,223 $2,350 $2,925 $3,555 $3,408
Services............................ 1,956 2,050 1,851 2,018 1,838 2,131 1,845 2,169
------ ------ ------ ------ ------ ------ ------ ------
Total revenue..................... 3,524 4,460 4,164 4,241 4,188 5,056 5,400 5,577
------ ------ ------ ------ ------ ------ ------ ------
Costs and expenses:
Cost of software licenses revenue... 165 125 79 28 77 91 116 94
Cost of services revenue............ 429 398 417 441 290 315 363 351
Research and development............ 809 748 785 720 895 859 1,031 681
Selling and marketing............... 1,569 1,920 1,900 1,898 2,086 2,529 2,526 2,532
General and administrative.......... 776 840 742 945 794 941 1,065 1,039
Litigation.......................... -- -- -- -- -- -- 150 470
Amortization of intangible assets... 84 -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total operating expenses.......... 3,832 4,031 3,923 4,032 4,142 4,735 5,251 5,167
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from operations....... (308) 429 241 209 46 321 149 410
Interest income (expense), net........ (39) (42) (44) (113) (41) (44) 8 (100)
Other income (loss), net.............. 1 (60) 16 62 50 (72) (19) (51)
------ ------ ------ ------ ------ ------ ------ ------
Income (loss) before income taxes... (346) 327 213 158 55 205 138 259
Provision for income taxes............ -- 57 75 31 (3) 60 62 57
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss)................... $ (346) $ 270 $ 138 $ 127 $ 58 $ 145 $ 76 $ 202
====== ====== ====== ====== ====== ====== ====== ======

<CAPTION>
QUARTER ENDED
-------------------
OCT. 2, JAN. 1,
1999 2000
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Revenue:
Software licenses................... $2,823 $3,828
Services............................ 2,358 2,495
------ ------
Total revenue..................... 5,181 6,323
------ ------
Costs and expenses:
Cost of software licenses revenue... 169 153
Cost of services revenue............ 236 255
Research and development............ 835 874
Selling and marketing............... 2,698 3,113
General and administrative.......... 1,076 1,201
Litigation.......................... 280 250
Amortization of intangible assets... -- --
------ ------
Total operating expenses.......... 5,294 5,846
------ ------
Income (loss) from operations....... (113) 477
Interest income (expense), net........ (1) (38)
Other income (loss), net.............. (34) (30)
------ ------
Income (loss) before income taxes... (148) 409
Provision for income taxes............ (217) 45
------ ------
Net income (loss)................... $ 69 $ 364
====== ======
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------------------
OCT. 4, JAN. 3, APR. 4, JUN. 30, OCT. 3, JAN. 2,
1997 1998 1998 1998 1998 1999
-------- -------- -------- -------- -------- --------
(AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Software licenses................... 44.5% 54.0% 55.5% 52.4% 56.1% 57.9%
Services............................ 55.5 46.0 44.5 47.6 43.9 42.1
----- ----- ----- ----- ----- -----
Total revenue..................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== =====
Costs and expenses:
Cost of software licenses revenue... 4.7% 2.8% 1.9% 0.7% 1.8% 1.8%
Cost of services revenue............ 12.2 8.9 10.0 10.4 6.9 6.2
Research and development............ 23.0 16.8 18.9 17.0 21.4 17.0
Selling and marketing............... 44.5 43.0 45.6 44.8 49.8 50.0
General and administrative.......... 22.0 18.8 17.8 22.3 19.0 18.6
Litigation.......................... -- -- -- -- -- --
Amortization of intangible assets... 2.4 -- -- -- -- --
----- ----- ----- ----- ----- -----
Total operating expenses.......... 108.8 90.3 94.2 95.2 98.9 93.6
----- ----- ----- ----- ----- -----
Income (loss) from operations....... (8.8) 9.7 5.8 4.8 1.1 6.4
Interest income (expense), net........ (1.1) (0.9) (1.1) (2.7) (1.0) (0.9)
Other income (loss), net.............. 0.0 (1.3) 0.4 1.5 1.2 (1.4)
----- ----- ----- ----- ----- -----
Income (loss) before income taxes... (9.9) 7.5 5.1 3.6 1.3 4.1
Provision for income taxes............ -- 1.3 1.8 0.7 (0.1) 1.2
----- ----- ----- ----- ----- -----
Net income (loss)................... (9.9)% 6.2% 3.3% 2.9% 1.4% 2.9%
===== ===== ===== ===== ===== =====

<CAPTION>
QUARTER ENDED
-----------------------------------------
APR. 3, JUN. 30, OCT. 2, JAN. 1,
1999 1999 1999 2000
-------- -------- -------- --------
(AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C> <C>
Revenue:
Software licenses................... 65.8% 61.1% 54.5% 60.5%
Services............................ 34.2 38.9 45.5 39.5
----- ----- ----- -----
Total revenue..................... 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Costs and expenses:
Cost of software licenses revenue... 2.1% 1.7% 3.3% 2.4%
Cost of services revenue............ 6.7 6.3 4.6 4.0
Research and development............ 19.1 12.2 16.1 13.8
Selling and marketing............... 46.8 45.4 52.1 49.2
General and administrative.......... 19.7 18.6 20.8 19.0
Litigation.......................... 2.8 8.4 5.4 4.0
Amortization of intangible assets... -- -- -- --
----- ----- ----- -----
Total operating expenses.......... 97.2 92.6 102.3 92.4
----- ----- ----- -----
Income (loss) from operations....... 2.8 7.4 (2.3) 7.6
Interest income (expense), net........ 0.1 (1.8) -- (0.6)
Other income (loss), net.............. (0.4) (1.0) (0.7) (0.5)
----- ----- ----- -----
Income (loss) before income taxes... 2.5 4.6 (3.0) 6.5
Provision for income taxes............ 1.1 1.0 (4.2) 0.7
----- ----- ----- -----
Net income (loss)................... 1.4% 3.6% 1.2% 5.8%
===== ===== ===== =====
</TABLE>

26
<PAGE>
Our quarterly results have varied in the past and may vary significantly in
the future depending on many factors, many of which are outside of our control.
The primary factors that may affect us include the following:

- seasonal slowdowns, in particular, in our first fiscal quarter, in many of
the markets in which we sell our products,

- start-up expenses for new facilities and new personnel,

- our success in expanding our sales and marketing programs, including the
rollout of our Internet-enabled products currently under development,

- currency fluctuations,

- developments in the litigation that we are pursuing against our former
employee and our competitor, and in the nature and extent of proceedings
and findings related to their counterclaims pending against us, and

- the timing and integration of acquisitions.

LIQUIDITY AND CAPITAL RESOURCES

Historically, we have financed our operations and met our capital
expenditure requirements primarily through private sales of our capital stock,
stockholder loans, funds generated from operations and borrowings from lending
institutions. As of January 1, 2000, our primary sources of liquidity consisted
of $1.3 million in total cash and cash equivalents and $1.4 million of available
borrowings under our $3,250,000 domestic and foreign revolving lines of credit,
which are secured by substantially all of our assets. As of January 1, 2000, the
balance outstanding on our lines of credit was $998,000. Borrowings under our
lines of credit are subject to a borrowing base of 80% of eligible domestic
accounts receivable, 30% of eligible foreign accounts receivable, and 90% of a
standby letter of credit issued by an Australian bank. The assets of our
Australian subsidiary secure the standby letter of credit. Interest on these
lines of credit is payable monthly at rates of prime plus 1.25% for the domestic
line and prime plus 1.5% for the foreign line. The standby letter of credit is
subject to a fee of 0.5% per year.

Net cash used in operating activities was $608,000 in 1997, and net cash
provided by operations was $771,000 in 1998, $1.2 million in 1999 and $210,000
in the six months ended January 1, 2000. The cash used in operating activities
in 1997 primarily reflects the net loss of $4.3 million offset, in part, by
non-cash charges of $3.1 million for depreciation of fixed assets and
amortization of intangible assets included in the net loss. The cash provided by
operations in 1998, 1999 and the six months ended January 1, 2000 reflects the
impact of increases in net income, deferred maintenance and support contract
revenue and accounts payable, offset by the impact of the increase in 1998 of
accounts receivable, and by non-cash depreciation and amortization charges
included in net income.

Net cash used in investing activities was $1.2 million, $729,000 and
$854,000 in 1997, 1998 and 1999, and $387,000 in the six months ended
January 1, 2000. Net cash used in investing activities reflects amounts used for
purchases of property and equipment, primarily for computers, networking and
materials laboratory test equipment to support our global product development
activities, and to enable data communications among our worldwide development,
sales, customer support and administrative organizations. In addition, in 1997,
net cash used in investing activities reflects $431,000 used to acquire the
shares of our third party distributor in France.

Net cash provided by financing activities was $1.4 million and $716,000 in
1997 and 1998. Net cash used in financing activities was $907,000 in 1999 and
net cash provided by financing activities was $134,000 in the six months ended
January 1, 2000. Net cash provided by financing activities in 1997 and 1998
reflects primarily borrowings from stockholders and lending institutions, net of
the repayment of debt obligations. In July 1998, we converted indebtedness of
$890,000 incurred in

27
<PAGE>
1997 and 1998 under stockholder loans into shares of preferred stock. For more
information on the loan conversion, see "Certain Relationships and Related
Transactions--Loans from Stockholders." Net cash used in financing activities in
1999 reflects principally the repayments of amounts outstanding on our working
capital lines of credit and capital lease obligations. Net cash provided by
financing activities in the six months ended January 1, 2000 reflects
principally borrowings on our working capital lines of credit.

We believe that the net proceeds of this offering, together with our current
cash, cash equivalents, and available lines of credit will be sufficient to
complete the planned acquisition of C-Mold and to meet our anticipated cash
needs for working capital and capital expenditures for at least the next
12 months following the date of this prospectus. On a long-term basis or to
complete other acquisitions, we may require additional external financing
through credit facilities, sales of additional equity or other financing
vehicles.

YEAR 2000 ISSUES

We are unaware of any problems that have arisen with respect to year 2000
issues in our current software products, our internal computer systems or in the
computer systems of our vendors. Prior to January 1, 2000, we conducted a
comprehensive review of the potential impact that the change in the date to the
year 2000 would have on our current products and computer systems. Based on this
review, we determined that all of our current products and major computer
systems are able to recognize and appropriately process dates commencing in the
year 2000. Our historical costs to assess our year 2000 readiness have not been
significant. The majority of the costs required to complete our year 2000
compliance process were incurred as part of our normal capital asset acquisition
program, and would have been incurred without consideration of year 2000 issues.
We are not currently able to estimate the final aggregate cost of addressing the
year 2000 issue, because funds may be required as a result of future findings.
However, given the lack of any problems related to the year 2000 since the year
change, we do not anticipate that we will experience any material problems
related to the year 2000 in the future. As a result, we do not expect costs
associated with these problems to have an adverse effect on our business and
financial results.

RECENT ACCOUNTING PRONOUNCEMENTS

In December 1998, the American Institute of Certified Public Accountants
issued Statement of Position No. 98-9, "Modification of SOP No. 97-2, Software
Revenue Recognition, with Respect to Certain Transactions." SOP 98-9 amends SOP
97-2 to require recognition of revenue using the "residual method" in
circumstances outlined in SOP 98-9. Under the residual method, revenue is
recognized as follows: (1) the total fair value of undelivered elements, as
indicated by vendor specific objective evidence, is deferred and subsequently
recognized in accordance with the relevant sections of SOP 97-2 and (2) the
difference between the total arrangement fee and the amount deferred for the
undelivered elements is recognized as revenue related to the delivered elements.
SOP 98-9 is effective for transactions entered into in fiscal years beginning
after March 15, 1999. Also, the provision of SOP 97-2 that were deferred by SOP
98-4 will continue to be deferred until the date SOP 98-9 becomes effective. We
do not expect that the adoption of SOP 98-9 will have a significant impact on
our results of operations or financial position.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS 133 establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. SFAS 133, as amended by SFAS 137, is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000, with earlier
application encouraged. We do not currently use derivative instruments or engage
in hedging activities.

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QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We develop our products in research centers in Australia, the United Kingdom
and the United States. We sell our products globally through our direct sales
force and indirect distributor channels. As a result, our financial results are
affected by factors such as changes in foreign currency exchange rates and weak
economic conditions in foreign markets. In the future, we expect to increase our
international operations in our existing markets and in geographic locations
where we do not have any operations now.

We collect a substantial portion of our revenue and pay a substantial
portion of our operating expenses in foreign currencies. As a result, changes in
currency exchange rates from time to time may affect our operating results.
Currently, we do not engage in hedging transactions to reduce our exposure to
changes in currency exchange rates, although we may do so in the future. We
cannot assure you, however, that any efforts we may make in the future to hedge
our exposure to currency exchange rate changes will be successful.

EUROPEAN UNION CURRENCY CONVERSION

On January 1, 1999, eleven member nations of the European Economic and
Monetary Union began using a common currency, the Euro. For a three-year
transition period ending June 30, 2002, both the Euro and each of the currencies
for such member countries will remain in circulation. After June 30, 2002, the
Euro will be the sole legal tender for those countries. The adoption of the Euro
will affect many financial systems and business applications as the commerce of
those countries may be transacted both in the Euro and the existing national
currency during the transition period. Significant portions of our revenue have
been historically generated in Europe. Of the eleven countries currently using
the Euro, we have subsidiary operations in France, Germany and Italy. We have
assessed the potential impact of the Euro conversion in a number of areas,
particularly on our pricing and other marketing strategies. Although we do not
currently expect that the conversion, either during or after the transition
period, will have an adverse effect on our operations or financial condition,
the conversion has only recently been implemented and there can be no assurance
that it will not have some unexpected adverse impact.

IMPACT OF INFLATION

We believe that our revenue and results of operations have not been
significantly impacted by inflation during the past three fiscal years.

FORWARD LOOKING STATEMENTS

This prospectus contains forward-looking statements. You can identify these
statements by forward-looking words such as "may," "will," "expect,"
"anticipate," "believe," "estimate," and "continue" or similar words. You should
read statements that contain these words carefully because they discuss our
future expectations, contain projections of our future results of operations or
of our financial condition, or state other "forward-looking" information. We
believe that it is important to communicate our future expectations to our
investors. However, there may be events in the future that we are not able to
accurately predict or control and that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Investors are cautioned that all forward-looking statements involve risks and
uncertainties, and actual results may differ materially from those discussed as
a result of various factors, including those factors described in the "Risk
Factors" section of this prospectus. Readers should not place undue reliance on
our forward-looking statements. Before you invest in our common stock, you
should be aware that the occurrence of the events described in the "Risk
Factors" section and elsewhere in this prospectus could harm our business,
prospects, operating results and financial condition.

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BUSINESS

OVERVIEW

We believe we are the world's leading developer of software solutions that
enhance the design, analysis, and manufacture of injection molded plastic parts.
Our products are used by participants in all aspects of the injection molded
plastic parts manufacturing process, including part designers, mold designers,
manufacturing engineers and machine operators. Our products enable our customers
to speed their products to market, decrease manufacturing costs and reduce
costly design and manufacturing errors by:

- assisting part designers in the selection of a plastic material,

- determining the strength, rigidity and ease of manufacturing of a given
part design,

- predicting the amount a plastic part will shrink or warp during
production,

- optimizing production conditions such as machine temperatures, injection
speeds, cooling, times and the locations in a mold to inject the plastic,

- identifying and providing optimized solutions for adverse variations
during production, and

- providing features which facilitate collaboration over shared media, such
as the Internet.

Prior to 1997, we offered a single product line, Moldflow Plastics Insight
(MPI), which was designed to be used by highly specialized engineers conducting
in-depth plastics simulation. Our two new product lines, Moldflow Plastics
Advisers (MPA) and Moldflow Plastics Xpert (MPX), can be used by participants in
all phases of the design and production process for injection molded plastic
parts, many of whom do not specialize in plastic part design. We believe a
large, untapped market for our new product lines exists.

We focus on developing software tools that improve the entire span of
product development for injection molded plastic parts to enable our customers
to enhance their competitiveness and reduce their costs. We believe we have the
widest and most advanced range of software solutions and proprietary technology
to address the problems that arise in each phase of the process of designing and
manufacturing injection molded plastic parts.

Our products are used by more than 2,200 customers at more than 2,500 sites
in over 50 countries around the world. We sell our products primarily through
our direct sales force in North America, Europe and Asia and, to a lesser
extent, through original equipment manufacturers and through distributors in
defined geographic regions. Representative customers include Baxter
International, DaimlerChrysler, DuPont, Fuji Xerox, Hewlett-Packard, Lego,
Lucent Technologies, Motorola, Nokia and Samsung. We have distribution
arrangements with Parametric Technology Corporation, Structural Dynamics
Research Corporation or SDRC, Unigraphics Solutions and CoCreate and resellers
of products of SolidWorks, a subsidiary of Dassault Systemes, and Autodesk.

INDUSTRY BACKGROUND

INJECTION MOLDED PLASTICS INDUSTRY

From high technology to traditional manufacturing, companies in many
industries today make extensive use of plastic materials to produce component
parts for their products. The widespread use of plastics as a manufacturing
material has occurred because plastic parts can be formed into an almost
limitless number of shapes, are relatively inexpensive to manufacture in volume
and are easy to assemble. Common consumer products that make extensive use of
plastic parts include cellular telephones, personal digital assistants, pagers,
automobiles, televisions, cameras, toys and personal computers. The commercial
success of each of these products often relies heavily upon reducing the time to
bring new products to market, reducing engineering and manufacturing costs, and
improving product quality and design.

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In high technology industries, the use of plastics has become increasingly
important as weight, cost and quality are standard points of competitive
differentiation. Most importantly, because plastics can be molded into extremely
complex shapes, they are uniquely suited for use in high technology products.
Products such as cell phones, personal digital assistants or PDAs, and notebook
computers have all employed increasingly complex designs characterized by
smaller parts, reduced weight, more sophisticated shapes and lower tolerances.
These complexities often lengthen the time to market for new products. As
product life cycles shrink and time to market becomes increasingly important,
successful manufacturers in these industries must design and build products
quickly and correctly the first time. In particular, production delays or high
product defect rates for manufacturers in rapidly changing industries can
represent significant economic and opportunity costs. For example, according to
Dataquest analog cellular handset and digital cellular/PCS handset production is
forecast to grow from 175 million units in 1998 to 551 million units in 2003.

The use of plastics also continues to increase in traditional industries
such as the automotive industry in large part due to improvements in the
injection molding process. Automobile manufacturers frequently find that plastic
parts provide the same or superior functionality at a lower cost than other
alternatives and permit a single part to replace multiple parts. Reducing the
number of parts decreases assembly costs and simplifies the overall product
development process. For instance, industry trade journals have reported that
DaimlerChrysler predicts that the 75-100 metal parts currently used on a typical
car's body structure could be replaced by 6-12 plastic parts on future cars. In
addition to cost savings and enhanced part performance, the use of plastics in
the automobile industry can yield improvements in other important design
criteria such as fuel economy due to the weight savings achieved by using
plastics instead of other heavier structural materials. For example, industry
trade journals have reported that DaimlerChrysler has recently produced a new
hardtop for its Jeep Wrangler model which uses plastics on external components
and weighs 23 pounds less than its current production hardtop.

INJECTION MOLDING PROCESS

The dominant method for producing plastic parts with complex shapes is
injection molding. We believe that in 1999 up to 750,000 injection molding
machines were in operation on a worldwide basis. Injection molding involves the
injection of molten plastic into a cavity called the mold, usually made of
metal, where it is packed under pressure, subsequently cooled, and then ejected,
yielding a final part.

The injection molding process is extremely complex. It requires the matching
of part geometry to mold geometry, as well as accommodating varying material,
machine, and environmental operating conditions. Not only must the mold cavity
be machined precisely to produce the desired shape of the final part, it also
must account for shrinkage and warpage of the plastic material as it cools and
is ejected. Problems can arise in this process if the molten plastic enters the
mold at the wrong temperature, if the locations of the points of entry of the
plastic into the mold are mismatched to the design of the part, or if the
properties of the chosen plastic are poorly matched to the product's function.
Each of these potential problems can cause an excessive number of defective or
substandard parts to be produced or require several attempts to remachine the
mold.

The process of designing and producing injection molded plastic parts
consists of four distinct steps, the design portion of which can take from
several weeks to several months depending on the complexity and other attributes
of the part being designed:

- PART DESIGN--A design engineer, who typically does not specialize in the
design of plastic parts, lays out the initial design of the end product,
including the plastic components. These

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design engineers face difficult plastic-related decisions which often fall
outside of their area of specialization, including:

- selecting a plastic material out of which the plastic portion of the
product will be made from among the thousands of plastic materials
currently available,

- estimating the strength and rigidity of the part,

- designing the part with shapes and thicknesses that can be readily
produced using injection molding, and

- completing each of the steps in a cost efficient manner.

- MOLD DESIGN--After the part has been designed, typically a second engineer
designs the mold into which injection molding machines can pack the
selected plastic material to create the part. Designing a mold requires
the engineer to estimate many important variables, including the amount
the plastic part will warp or shrink and the optimal locations for
injecting plastic into the mold. The cost of a mold can vary from as
little as a few thousand dollars to more than one million dollars.

- PRODUCTION SET-UP--After the mold has been designed and built, the mold is
fastened into an injection molding machine. A machine operator then
adjusts several machine settings, such as machine temperature, injection
speed and cooling time until the machine produces a single acceptable
part. In many instances, once acceptable parts are made with some
frequency, the operator makes little or no effort to improve the machine's
set-up to optimize speed or minimize failure rates.

- PRODUCTION MONITORING--Once commercial production begins, machine
operators monitor the injection molding machine's performance, which will
vary over time. This variation can be caused by operating conditions which
shift as a result of factors such as temperature fluctuations and
lot-to-lot variations in the plastic raw material.

Traditionally, these steps have been carried out through a trial-and-error
process which requires a significant amount of guesswork throughout. As a
result, the design and development process has been inherently inefficient. An
incorrect guess at any step of this process may produce suboptimal parts or
require that portions or all of the process be repeated, delaying production and
increasing costs.

The inefficiencies and resulting cost increases occurring in this process
are further exacerbated when companies outsource one or more of these steps.
Many companies have set up supply chains to match expertise and cost structures
to each step of this process and take advantage of available networks to
establish "design anywhere, build anywhere" collaborations with suppliers and
between divisions across their company. The part design, mold design and
production steps often occur in geographically separated facilities. As a
result, the iterative process of designing a plastic part is frequently hindered
by having to coordinate this process across multiple locations and time zones.

ABSENCE OF SOFTWARE SOLUTIONS FOR THE INJECTION MOLDED PLASTICS INDUSTRY

Although many industries have embraced software tools to improve their
product design and production processes, we believe that a substantial portion
of companies in the injection molded plastics industry continue to employ a
trial-and-error process at most steps of the design and development process. We
believe this condition exists today primarily because of the limited
availability of specific software tools capable of addressing many of the
complex and unique issues involved in designing injection molded plastic parts
and their molds. In addition, we believe that up to 750,000 injection molding
machines are currently in use worldwide and are being operated without
integrated software tools which can analyze and improve the efficiency of their
production.

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THE MOLDFLOW SOLUTION

Using our extensive knowledge of designing and manufacturing with plastics,
we have developed a suite of software applications which enhance our customers'
ability to optimize the design and production process for injection molded
plastic parts. Our approach, which we call Process Wide Plastics Solutions,
provides our customers with a software tool for each step in this process, from
part design through production monitoring, in an integrated environment.
Together, our suite of products permit plastics manufacturers for the first time
to significantly decrease the guesswork involved in each step of the injection
molding process by replacing the traditional trial-and-error process with an
automated and integrated process.

Our products can significantly reduce the time it takes to design plastic
parts for injection molding, improve the quality of the plastic part produced
and decrease the cost of the production process by:

- assisting part designers in the selection of a plastic material based on
their design criteria,

- determining the strength and rigidity of a given part design,

- evaluating the ease of manufacturing a given part design,

- predicting the amount a part will shrink or warp during production,

- determining the optimal locations in a mold to inject the plastic
material,

- selecting optimal machine temperatures, injection speeds and cooling times
for part production,

- identifying and providing solutions for adverse variations during
production, and

- providing features which facilitate collaboration over shared media, such
as the Internet.

With direct sales offices and distribution partners worldwide, we believe
that we are uniquely positioned to deliver our evolving suite of software tools
to customers in any part of the world.

OUR STRATEGY

We plan to extend our position as the leading provider of software solutions
that enhance the design, analysis and manufacture of injection molded plastic
parts. Key elements of our strategy are to:

CAPITALIZE ON MARKET OPPORTUNITY FOR EXPANDED PRODUCT OFFERINGS

We focus our research and development efforts on developing new products to
address unmet market needs. We developed Moldflow Plastics Advisers (MPA),
initially released in June 1997 and expanded in 1999, to provide plastic part
and mold design solutions to design engineers who are not highly specialized in
plastics simulation. Prior to the introduction of MPA, no software solution
existed specifically for use by these design engineers for the design of
injection molded plastic parts. Our MPA product has contributed significantly to
our revenue since its introduction. We developed Moldflow Plastics Xpert (MPX),
our newest product line initially introduced in September 1998, to optimize the
production set-up and monitoring of injection molding machines. No software
solution currently exists with functionality comparable to our MPX product to
address this market. We believe MPX represents a significant opportunity for
growth and we intend to vigorously pursue this largely untapped market. In
addition, we will continue to develop new product lines and expand our existing
product lines as opportunities arise.

EXPLOIT THE INTERNET TO PROVIDE SOLUTIONS TO OUR CUSTOMERS

We intend to use the Internet to allow users of our products, including part
and mold designers, machine operators, suppliers, business customers and
outsourcing plants, to share product data and coordinate product design and
development on a worldwide basis. Currently, our

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products permit users to produce and access product reports via the Internet
which can be viewed with any standard web browser. For example, we intend to use
the Internet to:

- release our MPA product using an application server provider or ASP
model, which would permit customers to use our products on demand over
the Internet, and

- create an Internet portal to enable customers to use our MPX product to
monitor the injection molding process, including machine efficiency and
production data, from anywhere in the world.

FOCUS ON DIRECT SELLING MODEL

We believe that a key element of our success over the last two years has
been our focus on creating a highly effective direct sales organization. Most of
our products are sold through this organization, which encompassed 28 sales
associates employed at sales offices located in nine countries as of March 1,
2000. Over the last two years, we have implemented a new sales model which
involves teaming each sales associate with an engineer. Each team works together
to conduct a thorough evaluation of potential customers' design and
manufacturing processes and provide them with a detailed analysis of the cost
savings our products could produce.

EXPAND OUR GLOBAL PRESENCE

We will continue to build on our existing global presence in sales, support
and research and development, which we believe provides us with a competitive
advantage. We maintain direct sales and support offices in the United States,
Australia, United Kingdom, France, Germany, Italy, Sweden, Korea and Japan. In
addition, we extend our geographic coverage by selling our products through over
100 distributors worldwide. Our research and development process involves
approximately 50 research and development personnel located at our United
States, Australia and United Kingdom facilities. Our personnel share software
code among these facilities, and are able to electronically update colleagues in
most cases every two hours and, at a minimum, at the end of each team's working
day. As a result, our research and development continues on an around-the-clock
basis. We believe that this geographically dispersed, team-oriented approach to
product development and delivery helps us to bring new products to market
faster.

SELECTIVELY ENGAGE IN ACQUISITIONS AND STRATEGIC RELATIONSHIPS

We intend to selectively engage in acquisitions and enter into strategic
relationships to accelerate the implementation of elements of our strategy. We
may pursue acquisitions, partnerships or licensing arrangements to obtain
technology to improve or broaden our product offerings if we determine that to
do so would be more cost effective or timely than developing our own.

OUR PRODUCTS

We offer software solutions for all phases of designing and manufacturing
injection molded plastic parts. We have categorized our product offerings into
three distinct families, the Moldflow Plastics Advisers (MPA) series for part
design and high-level mold design, the Moldflow Plastics Insight (MPI) series
for more in-depth mold design and the Moldflow Plastics Xpert (MPX) series for
production set-up and production monitoring. Our products employ complex and
proprietary mathematical concepts. For example, our MPA and MPI products employ
our patent-pending Dual Domain technology, which permits users to conduct
complex plastic flow simulations using the solid models created by their design
modeling software. As a result, users can eliminate the otherwise necessary,
time consuming and error prone step of creating a different type of model based
upon the part geometry contained in the solid model's database. Our products run
on the most widely used computing platforms and operating systems, including
various versions of Windows and UNIX.

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MOLDFLOW PLASTICS ADVISERS

Our MPA series provides part and mold designers with applications that
permit them to quickly check the ultimate manufacturability of their designs at
an early stage in the design process. We have designed MPA to input its results
directly into MPX to enhance the efficiency of machine set-up. The MPA series
consists of two products:

PART ADVISER is a user-friendly application which enables product
designers without expertise in designing plastic parts to address key
manufacturing concerns in the preliminary design stage. Part Adviser offers
practical advice for the broad range of problems it identifies without the
need to consult with engineers who specialize in plastic part design. For
the first time, part designers are able to receive rapid feedback on the
extent to which a number of factors, including modifications such as part
geometry, material selection or plastic fill locations affect the
manufacturability of a plastic part. In addition, Part Adviser permits the
designer to instantly share information with fellow team members across the
Internet.

MOLD ADVISER extends the capabilities of Part Adviser to permit the mold
designer to layout and analyze an optimal mold. This product eliminates the
need to design and build molds through trial-and-error, enabling a mold
designer to create molds quickly and efficiently.

The following is an example of how one of our customers has used MPA:

POLAROID CORPORATION, a producer of instant and digital imaging products,
recently used our MPA product in the design of its new digital microscope camera
product. Among the many challenges faced by Polaroid in designing their product
was the modification of an existing mold used to produce the camera's shutter.

- Polaroid estimated that the use of our MPA product reduced their overall
product development time by 50% and enabled them to take the digital
microscope camera product from concept to market in only nine months.

- Polaroid design engineers were able to verify that the existing mold could
be modified to reflect the design of the new shutter and produce parts of
acceptable quality.

MOLDFLOW PLASTICS INSIGHT

The MPI series contains our broadest set of predictive capabilities for
injection molding for use by highly specialized design engineers. The MPI series
assists design engineers in determining the optimal combination of part
geometry, material choice, mold design and processing parameters to produce
quality finished products. MPI allows the optimization of the variables which
remain in the mold designer's control to adjust. For instance, a mold designer
often receives a part design and is not permitted to make changes to the design,
but rather must create a mold design and a set of operating conditions best
suited for the part as designed. MPI may also be used in connection with a
completed mold which was poorly designed and is producing defective parts at an
unacceptable rate. In these cases, MPI can be used to find the best possible
operating conditions for the mold-part combination to minimize the defects. The
results generated by our MPI products can be input directly into our MPX product
to reduce machine set-up time.

All applications in the MPI series use an integrated environment which
permits users to easily import all of the most commonly used types of
computer-generated models, select and compare material grades, prepare models
for analysis, sequence a series of analysis jobs, undertake advanced analysis
post-processing and use Internet-based capabilities to enhance collaboration
with team members. In these applications, we believe that we offer the broadest
integration with existing computer-aided design products in the plastics
software industry.

MPI/FLOW predicts the flow and subsequent packing of plastics at the
start of the injection molding cycle to enable users to optimize locations
for plastic filling and processing conditions,

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assess possible part defects and automatically determine the dimensions for
a balanced feed system for the plastic material.

MPI/COOL is used to design cooling circuits and a mold block around a
part to optimize mold design by adjusting the size and locations of the
cooling circuits. Because many warpage problems result from improper cooling
design, using MPI/COOL for mold designs enhances ultimate product quality.
MPI/COOL also enables all the benefits of mold cooling analysis to be
applied to gas injection molded parts.

MPI/WARP AND MPI/SHRINK predict and identify the cause and amount of
warpage and shrinkage in plastic parts. The mathematical tools incorporated
in these products permit the user to analyze warpage for the more than 4,500
plastics materials in our database.

MPI/FUSION allows users to work directly from three-dimensional solid
models to perform detailed calculations. Based upon the same patent pending
technology at the core of the MPA series of products, MPI/FUSION permits
more rapid investigation into the characteristics of the plastic parts and
molds being analyzed.

MPI/FLOW3D uses a fully three-dimensional meshing and solving technology
to analyze thick plastic parts. The majority of the MPI modules are focused
on the broadest class of plastic parts, those that are termed thin wall.
There are plastic parts, however, that are very thick or have widely varying
thicknesses throughout. Until the development of MPI/FLOW3D, creators of
these types of products had no commercially viable product alternative to
investigate the filling process to produce better parts and molds.

MPI/STRESS predicts the structural integrity of plastic components under
stress to quickly predict whether initial concept designs meet desired
structural requirements and whether the part will permanently deform if put
under load. The stress analysis calculates the amount of force which will
cause buckling and predicts the final buckled shape.

MPI/FIBER utilizes sophisticated visualization tools to provide insight
into the part's properties by allowing the user to see how fiber alignment
varies throughout the part's layers. The fiber analysis also predicts the
effects of fiber orientation. The effects of plastic flow on fiber
orientation have a significant impact on the mechanical and structural
properties of fiber filled plastic injection molded parts. Plastics are
often filled with various forms and quantities of fibers to tailor the
material's operating characteristics, such as strength or resistance to
bending.

MPI/OPTIM automatically determines the optimum processing conditions to
be set for a specific part on an injection molding machine to produce a part
of acceptable quality. These results may be used as input for MPX to ensure
molding machine setup is as quick and efficient as possible. The results may
also be used in isolation, as an input to assist the operator in finding the
best settings for a specific machine to produce the desired parts.

MPI/GAS provides predictive capabilities for the gas injection molding
process. The gas injection molding process is very similar to the injection
molding process described earlier but the machine produces an injection of
air, timed within the filling phase to follow the injection of plastic, to
produce wider, but hollow, channels within the part. These channels add
structural rigidity to the end product that is often desirable for large
parts such as television casings and lawn furniture.

MPI/TSETS provides tools to simulate the major thermoset molding
processes. Thermoset materials are a type of plastic which are used for
products which must withstand higher temperatures without alteration in
their material properties. Because other plastics may deform when exposed to
high temperatures, thermoset materials are used for a variety of plastic
parts such as chip holders in integrated circuits, distributor caps and
other automotive engine components and electrical outlets.

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The following is an example of how one of our customers has used MPI:

HEWLETT-PACKARD COMPANY used our MPI product in the design of a model in its
HP Deskjet line of inkjet computer printers. Approximately 60% to 80% of the
mechanical parts used in these printers are injection molded plastic parts.
After using our MPI product, Hewlett-Packard determined that the cavity through
which plastic was fed into the mold for one of its parts was wider than
necessary and resulted in the mold taking longer to fill with plastic.

- Hewlett-Packard was able to modify the mold by narrowing the cavity,
resulting in a reduction in the amount of time required to produce each
part by approximately 15 seconds, or 30%.

- Hewlett-Packard estimated that this time savings would reduce their annual
production costs by $1.1 million.

MOLDFLOW PLASTICS XPERT

Our MPX product attaches to injection molding machines to monitor and
control the manufacturing process. MPX addresses common shop floor issues such
as machine set-up, process optimization and production part quality monitoring.
MPX interacts directly with the molding machine's built-in controller to provide
optimized process correction. With MPX, engineers and die-setters can
consistently and systematically set up molds, identify a robust molding window
and monitor production. MPX can be used with substantially all injection molding
machines and provides operators with a single, intuitive user interface,
minimizing the need for machine-specific operator training. In addition, MPX
gives real-time feedback, providing a mechanism for rapid manual or automatic
process adjustments. We designed MPX to reduce mold set-up times and to optimize
the efficiency of the part production cycle. Our MPX product consists of three
integrated modules:

SETUP XPERT enables systematic mold set-up from starting points
generated by MPA, MPI or operator inputs, independent of operator and
location. Setup Xpert optimizes the molding cycle and maximizes the usage of
machine capabilities without requiring the operator to have in-depth
knowledge of the individual machine or process. Setup Xpert quickly sets up
and optimizes each machine, while ensuring that each operator uses the same
set-up procedures.

MOLDSPACE XPERT establishes a defined range of operating conditions
within which acceptable quality parts will be produced. Moldspace Xpert can
reduce to a few minutes an optimization task that previously took several
hours or was not performed. The identification of a defined range of
operating conditions is one of the key steps in being able to determine what
operating conditions can be used by the machine to prevent scrap and machine
downtime.

PRODUCTION XPERT graphically monitors variables specific to the
injection molding process and automatically evaluates the quality of the
production process. In addition, Production Xpert spots problems and either
provides suggestions on how to correct the process or makes the necessary
changes.

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The following is an example of how one of our customers has used MPX:

MONTBLANC-SIMPLO GMBH designs and sells the Montblanc brand of premium pens.
Montblanc-Simplo employs injection molding to manufacture the outer casings of
many styles of pens. Their machine operators were experiencing difficulty
identifying the precise machine operating conditions.

- Montblanc has been able to reduce the scrap rate of pen casings by 50%
without significantly altering the time required to manufacture each
casing.

- Montblanc estimated that it has been able to reduce its production set-up
times and reset-up times by approximately 60% with an equivalent reduction
in wasted material.

OUR CUSTOMERS

Our products are used at more than 2,500 user sites in more than 2,200
companies, which are located in over 50 countries spanning the globe.
Representative customers in various industries include:

<TABLE>
<S> <C>
AUTOMOTIVE MATERIAL SUPPLIERS
- ---------- -----------------
DaimlerChrysler AG Bayer AG
DENSO Corporation The Dow Chemical Company
Ford Motor Company Eastman Chemical Company
Hyundai Business Group E. I. duPont de Nemours and Company
Solvay SA M. A. Hanna Company
Valeo SA MEDICAL
Volkswagen AG -------
TOYS Abbott Laboratories
- ---- Baxter International, Inc.
Hasbro, Inc. Becton Dickinson and Company
The Lego Group OTHER/MULTIPLE INDUSTRIES
Mattel, Inc. ------------------------
ELECTRONICS Fisher & Paykel Industries Limited
- ---------- Honeywell International, Inc.
The Framatome Group LG Group
Fuji Xerox Co., Ltd. Minnesota Mining and Manufacturing (3M)
Hewlett-Packard Company Montblanc-Simplo GmbH
Lucent Technologies, Inc. Polaroid Corporation
Motorola, Inc. Samsung Group
Nokia Corporation
Siemens AG
Tyco International Inc.
</TABLE>

SALES AND MARKETING

We distribute our products and services primarily through a direct sales
organization. As of March 1, 2000, our direct sales organization consisted of 28
sales associates, who operated out of offices located in Australia, France,
Germany, Italy, Japan, Korea, Sweden, the United Kingdom and the United States.
Our direct sales model involves pairing a sales associate and an engineer to
form a single sales team. These teams work together to conduct a thorough
evaluation of potential customers' design and manufacturing processes and
provide the potential customers with a detailed analysis of the cost savings our
products could produce in a selected aspect of their business. Based upon the
success of this sales model to date in increasing sales as well as the awareness
among our potential customers of our products, we intend to continue building
our direct sales organization worldwide.

38
<PAGE>
To supplement the efforts of our direct sales organization, we also sell our
products through marketing and distribution arrangements with several design
software vendors as an integrated application on their solid modeling design
systems. For example, Parametric Technology Corporation incorporates our MPA
product in a module of its Pro/ENGINEER product, which they call Pro/PLASTIC
ADVISOR, Structural Dynamics Research Corporation or SDRC sells our MPA product
as well as many modules contained within our MPI family of products, and
Unigraphics Solutions, Inc. sells our MPA product. Several distributors of
SolidWorks Corporation, a subsidiary of Dassault Systemes S.A., distribute our
MPA product and Autodesk, Inc. has designated us an MAI partner, which gives us
access to Autodesk's distribution channel to sell our MPA product. We have
retained over 100 distributors to provide worldwide sales coverage to complement
our direct sales organization.

CUSTOMER SUPPORT AND OTHER SERVICES

CUSTOMER SUPPORT AND TRAINING

We provide customer training on our products and 24-hour customer support.
Our customers may access customer support either through our telephone hotline
or our website. In addition, our product development staff is available to solve
more complex problems.

CONSULTING SERVICES

In addition to traditional customer support services, we also provide
consulting services to customers who lack employees with the expertise necessary
to take advantage of the full capability of our products. We employ design
engineers who use our products on behalf of our customers to optimize their part
design and production processes. We view providing consulting services as
complementary to our core business of selling sophisticated software solutions.
Accordingly, we provide consulting services typically in cases where we believe
that providing these services will help build relationships with future
customers for our software products.

MATERIAL TESTING SERVICES

Our material testing group provides testing services to our customers who
are seeking accurate, reliable material data on new or existing grades of
polymers, measured under a wide range of practical molding conditions. We have
established a database containing information on more than 4,500 plastics
materials. We conduct this testing at our facility located near Melbourne,
Australia, which we have equipped with state-of-the-art equipment and a number
of injection molding machines. The research and testing conducted at this
facility provides essential data for our full line of software applications.

PRODUCT DEVELOPMENT

Our product development strategy focuses on ongoing development and
innovation of new technologies to increase our customers' productivity and
provide solutions that our customers can integrate into their existing computing
platforms. We plan to extend our leadership position in plastics simulation
technology by continuing to make significant investments in research and
development and to maintain our market share by rapidly creating and delivering
new product releases to our customers. We intend to take advantage of current
and future technology trends, such as the Internet, to ensure our customers are
always able to gain incremental competitive advantage in their respective
industries.

Our product development activities take place in facilities located in the
United States, Australia and the United Kingdom. We linked the information
systems of each of these facilities to provide a continuous development
environment, enabling software development to be undertaken 24 hours per day.

39
<PAGE>
We also fund or participate in a wide assortment of external research and
development projects, often being conducted by the world's leading experts in
their fields. For instance, we currently have ongoing projects with CEMEF in
France and the University of Illinois, two highly regarded centers for plastic
material research. In many cases, under these projects we gain access to
fundamental research with comprehensive experimentation results. Often the
centers agree to restricted publishing rights in order to pursue topics of
mutual interest. A partial list of our collaborative partners includes ENSAM
(France) for shrinkage, Cranfield University (United Kingdom) for analysis of
fiber filled parts, Universities of Leeds, Bradford and Durham (United Kingdom)
for fiber orientation measurement, Technical University of Eindhoven
(Netherlands) for numerical methods, McGill University (Canada) for material
crystallization, University of Sydney (Australia) for fluid mechanics and
Nanyang Technological University of Singapore for optimization. We believe that
these relationships provide a significant benefit to our product development
efforts.

As of March 1, 2000, our product development staff had 50 employees, most of
whom hold advanced degrees and have industry experience in engineering,
mathematics, computer science or related disciplines. We seek to recruit highly
skilled employees, and our ability to attract and retain such employees will be
a principal factor in our success in maintaining our leading technological
position. We believe that such investments in research and development are
required in order for us to remain competitive and we believe our cadre of
software developers and our worldwide development capabilities represent a
significant competitive advantage.

COMPETITION

The markets into which our products are sold are highly competitive. We
compete with many companies engaged in selling software solutions to companies
engaged in product development and manufacturing. We also face competition from
materials vendors, injection molding machine manufacturers and small vendors,
such as independent engineering consultants. In addition, new competitors may
arise as we introduce new products into the marketplace. We believe that we have
the widest and most advanced range of software solutions and proprietary
technology to address the problems that arise in each phase of the process of
designing and manufacturing injection molded plastic parts. Although we have a
large number of current and potential competitors, we do not believe that any
competitor other than C-Mold currently constitutes a major competitor with
respect to any of our current product offerings.

The entrance of new competitors would be likely to intensify competition in
all or a portion of the markets in which we compete. Some of our current and
possible future competitors have greater financial, technical, marketing and
other resources than we do, and some have well established relationships with
our current and potential customers. Alliances among competitors may emerge and
rapidly acquire significant market share. Moreover, competition may increase as
a result of software industry consolidation.

We believe that the principal competitive factors affecting our market
include:

- speed of innovation,

- ease of use,

- flexibility,

- quality,

- ease of integration into or communication with computer-aided design
systems,

- compatibility across computer platforms,

- range of supported computer platforms,

- performance,

- price and cost of ownership,

- customer service and support,

40
<PAGE>
- company reputation and financial viability, and

- effectiveness of sales and marketing efforts.

We believe that we compete effectively on these factors.

TECHNOLOGY AND PROPRIETARY RIGHTS

Our proprietary technology applies general mathematical models describing
the behavior of plastics as fluids under conditions of heat and pressure to the
real world environment of plastic polymers and injection molding machines. We
believe that our broad range of proven numerical methods represents considerable
intellectual property and that these trade secrets are difficult to reproduce.
We own all of the core technology used in our products and license only assorted
peripheral software that facilitates the operation of our products' core
functions. We do not believe that the loss of any of these licenses would harm
our business operations or result in the loss of a significant amount of
revenue.

We engage in a regular review of our proprietary technology to determine the
optimal method of protecting such technology. We have been granted a patent on
portions of our technology and have filed both U.S. and international
applications with respect to other technologies. We view these patents as one
important way of protecting our key intellectual property that may not be
protected by the use of other methods. However, we do not view any patent or
patent application to be material to our business. We may not obtain any of the
patents for which we have applied and may not be able to enforce any patents we
currently hold or obtain in the future.

We rely on a combination of trade secret, copyright and trademark laws,
license agreements, nondisclosure and other contractual provisions and technical
measures to protect the unpatented proprietary technology contained in our
products. We distribute our software under software license agreements that
typically grant customers nonexclusive, nontransferable licenses to use our
products. These agreements usually restrict use of the licensed software to our
customer's internal operations on designated computers at specified sites unless
the customer obtains a site license for the customer's use of the software, and
are subject to terms and conditions prohibiting unauthorized reproduction or
transfer of the software.

For certain software such as the MPA series, we rely primarily on
"shrink-wrapped" or "click-wrapped" licenses that are not signed by licensees
and therefore may be unenforceable under the laws of certain jurisdictions.

We also seek to protect the source code of our software through trade secret
and copyright law. We have obtained or applied for United States federal
trademark mark protection for Moldflow, MPI, MPA, MPX and a number of other
trademarks and logos. We have also applied for or obtained trademark
registrations of these key marks in a number of foreign jurisdictions and are in
the process of seeking trademark registrations in other foreign countries.

We require our employees and consultants to sign a confidentiality and
non-competition agreement. Under these agreements, our employees agree not to
disclose trade secrets or confidential information and agree not to engage in or
be connected with any business that is competitive with our business while
employed by us, and in some cases for specified periods thereafter. Within these
agreements, employees also agree that any products or technology they create
during the term of their employment are our property.

Despite these precautions, misappropriation of our technology may occur.
Further, patent, trademark, copyright and trade secret protection may not be
available for our products in every country.

41
<PAGE>
The software development industry is characterized by rapid technological
change. Therefore, we believe that factors such as the technological and
creative skills of our personnel, new product developments, frequent product
enhancements, name recognition and reliable product maintenance are more
important to establishing and maintaining a technology leadership position than
the various legal protections of our technology which may be available.

We seek to monitor the public records in order to become aware of any
potentially conflicting proprietary rights. To date, we have not received any
notification that any of our products infringe on the proprietary rights of
third parties. We can not assure you, however, that third parties will not claim
such infringement by us or our licensors with respect to current or future
products. We expect that software product developers will increasingly be
subject to such claims as the number of products and competitors in our market
segment grows and the product functionality in different market segments
overlaps. In addition, patents on software and business methods are becoming
more common and we expect that more patents will issue in our technical field.
Any such claims, with or without merit, could be time-consuming, result in
costly litigation, cause product shipment delays or require us to enter into
royalty or licensing agreements. Moreover, such royalty or licensing agreements,
if required, may not be on terms acceptable to us.

We integrate third-party software into our products. This software may not
continue to be available on commercially reasonable terms. If we cannot maintain
licenses to this third-party software, distribution of our products could be
delayed until equivalent software could be developed or licensed and integrated
into our products. This could cause delays in our product sales and development
efforts.

EMPLOYEES

As of March 1, 2000, we had 163 employees, 55 of whom resided in Australia,
42 of whom resided in the United States, 15 of whom resided in the United
Kingdom and 51 of whom resided in other countries. None of our employees is
subject to any collective bargaining agreement. We believe that our relationship
with our employees is good.

FACILITIES

We operate out of two primary facilities. We lease a 7,900 square foot
office in Lexington, Massachusetts pursuant to a 5-year lease that expires in
November 2001. The Lexington facility is our corporate headquarters. Personnel
located at the Lexington facility include most of our senior management team,
some of our North American sales force, some product marketing and development
personnel and some finance and administration personnel. We also own an 18,100
square foot office building set on approximately 15 acres in the Kilsyth suburb
of Melbourne, Australia. Personnel located at our Melbourne facility include
members of our software development and research team, our materials testing
personnel and a portion of our Asia Pacific sales force. We also maintain an
office containing a smaller group of our sales, administrative and software
development personnel in the United Kingdom as well as direct sales offices in
Korea, Japan, Sweden, Germany, Italy and France. We had aggregate lease payments
of $664,000 in our 1999 fiscal year.

LEGAL PROCEEDINGS

In February 1999, we filed suit in the United States District Court for the
Northern District of New York against a former employee, Leonid K. Antanovskii,
and his current employer, C-Mold. We are seeking immediate and permanent
injunctive relief and monetary damages arising from the alleged theft and
misappropriation of some of our trade secrets. Specifically, we allege
misappropriation of trade secrets, proprietary information and confidential
information, breach of

42
<PAGE>
contract, breach of implied covenant of good faith, breach of fiduciary duty,
aiding and abetting a breach of fiduciary duty, unfair competition, interference
with contractual relations, fraud, civil conspiracy and unjust enrichment. On
February 28, 1999, the court issued a preliminary injunction prohibiting
Mr. Antanovskii and C-Mold from using or disclosing our confidential and trade
secret information. On January 11, 2000, the court denied C-Mold's motion to
vacate the preliminary injunction and ordered that it remain in place. On the
same date the court also held Mr. Antanovskii and C-Mold in contempt of court
and ordered sanctions, including the award of attorneys' fees in connection with
the motion, against Mr. Antanovskii and C-Mold.

In March 1999, C-Mold filed counterclaims against us alleging that we had
violated federal antitrust laws, committed defamation and trade libel and
tortiously interfered with C-Mold's prospective business advantage.
Specifically, C-Mold alleges that we have engaged in predatory and
anticompetitive conduct in an attempt to monopolize the market for computer
software for use in simulating, modeling and analyzing the design and
manufacture of plastic injection molded articles or products and their
corresponding molds, particularly in full three-dimensional geometry. C-Mold
alleges antitrust violations based on bad faith assertion of a trade secret
claim and predatory pricing. In addition, C-Mold claims that we made certain
disparaging comments regarding C-Mold's products and its business. C-Mold has
requested that the court awards costs, attorneys' fees, injunctive relief and
monetary damages. We filed a motion to dismiss the amended counterclaims in
July 1999 and all discovery with respect to the counterclaims was stayed. On
January 26, 2000, the court granted our motion to dismiss these counterclaims in
part and denied it in part. All aspects of the litigation are currently being
held in abeyance upon agreement of the parties, in connection with our pending
acquisition of C-Mold. If the acquisition is completed, this litigation will be
dismissed with prejudice by the agreement of all parties. If for any reason our
acquisition of C-Mold is not completed, we expect that the litigation will
resume.

In the event that the litigation resumes, we intend to vigorously defend
against the remaining counterclaims. We believe that the counterclaims are
without merit.

We have incurred and may continue to incur significant expenses in the
course of pursuing our claims in this case and defending the counterclaims made
against us. For the year ended June 30, 1999 and the six months ended
January 1, 2000, our litigation expenses were $620,000 and $530,000.

From time to time we may be involved in other disputes and litigation
matters that arise in the ordinary course of business.

PENDING ACQUISITION

On February 11, 2000, we entered into a definitive agreement to acquire
C-Mold. C-Mold has developed software that is complementary to our current
product offerings in the areas of part design and in-depth plastics simulation.
In particular, we believe the acquisition of C-Mold will enhance our development
capabilities and enable us to broaden our product lines into adjacent markets
more quickly. C-Mold had $7.7 million in revenue for the fiscal year ended
September 30, 1999. The purchase price will be $11.0 million in cash. The
acquisition is subject to a number of closing conditions, including completion
of our business and financial review of C-Mold, delivery by C-Mold of disclosure
schedules in a form satisfactory to us, settlement of our outstanding litigation
with C-Mold, approval by C-Mold's stockholders and our obtaining financing for
the acquisition. We anticipate that the acquisition will close on or prior to
May 31, 2000. However, our acquisition of C-Mold may not be completed.

43
<PAGE>
MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

Our executive officers and directors and their positions and ages as of
March 1, 2000 are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- -------- --------
<S> <C> <C>
Marc J. L. Dulude...................... 39 President, Chief Executive Officer and Director
Suzanne E. Rogers...................... 42 Vice President of Finance and Administration, Chief
Financial Officer and Treasurer
A. Roland Thomas....................... 41 Vice President of Research and Development and
Director
Richard M. Underwood................... 45 Vice President of Sales
Kenneth R. Welch....................... 42 Vice President of Marketing
Charles D. Yie(1)...................... 41 Chairman of the Board of Directors
Julian H. Beale(1)(2).................. 65 Director
Roger Brooks(2)........................ 55 Director
Richard A. Charpie, Ph.D............... 47 Director
Robert P. Schechter(2)................. 51 Director
</TABLE>

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

(1) Member of the compensation committee

(2) Member of the audit committee

MARC J. L. DULUDE has served as our President and Chief Executive Officer
and as a director of Moldflow since May 1996. Prior to joining Moldflow,
Mr. Dulude served in various positions with and most recently as the Senior Vice
President of Marketing of Parametric Technology Corporation, a computer-aided
design software company, from 1991 to May 1996, and in various positions with
the Bell-Northern Research division of Northern Telecom, a telecommunications
company, from 1987 to 1991. Mr. Dulude holds Bachelor and Master of Mechanical
Engineering degrees from Carleton University in Canada.

SUZANNE E. ROGERS has served as our Vice President of Finance and
Administration, Chief Financial Officer and Treasurer since September 1996.
Before joining Moldflow, Ms. Rogers served as the Vice President of Finance and
Chief Financial Officer from November 1994 to September 1996 and as the
Controller from May 1993 to November 1994 of Scitex America Corp., a subsidiary
of Scitex Corporation Ltd., a graphic arts systems manufacturer, in various
positions with Autographix, a graphic workstation manufacturer, from 1991 to
1993 and as the Director of Finance of MRS Technology, a micro-lithography
equipment manufacturer, from 1987 to 1991. Ms. Rogers is a certified public
accountant.

A. ROLAND THOMAS has served as a director of Moldflow since November 1989,
our Vice President of Research and Development since January 1997 and has served
in various other positions with Moldflow since 1982. Mr. Thomas holds a Bachelor
of Mechanical Engineering degree from the Royal Melbourne Institute of
Technology.

RICHARD M. UNDERWOOD has served as our Vice President of Sales since
October 1997. Prior to joining Moldflow, Mr. Underwood served in various
positions with and most recently as the Vice President of Sales Operations of
Parametric Technology Corporation from 1990 to October 1997.

KENNETH R. WELCH has served as our Vice President of Marketing since
November 1996. Prior to joining Moldflow, Mr. Welch served as the Director of
AutoCAD Product Marketing for Autodesk, Inc., a computer-aided design software
company, from September 1995 to November 1996, Vice President of Sales and
Marketing of Visual Kinematics, an original equipment manufacturer of software
tools, from June 1994 to September 1995, and the Director of Product Marketing
of Rasna Corporation, a computer-aided engineering software company, from 1989
to June 1994. Mr. Welch holds Bachelor and Master of Science degrees in Civil
Engineering from the University of California at Davis.

44
<PAGE>
CHARLES D. YIE has served as the Chairman of our board of directors since
August 1996 and as a director since December 1995. He joined Ampersand's
predecessor in 1985 and serves as a General Partner of all Ampersand's active
partnerships. Mr. Yie has served as a director of more than twelve public and
private companies and currently serves as a director of Intelligent
Controls, Inc., an electronic measurement systems manufacturer serving the
petroleum industry, and various privately-held companies. Mr. Yie holds a B.S.
in Electrical Engineering and an M.S. in Management from the Massachusetts
Institute of Technology.

JULIAN H. BEALE has served as a director of Moldflow since September 1996.
Mr. Beale is a private investor and a principal of JTC Investment Management
Pty. Ltd. Mr. Beale served as a member of Australia's federal Parliament from
1984 to 1996.

ROGER BROOKS has served as a director of Moldflow since October 1998.
Mr. Brooks has served as the President and Chief Executive Officer and a
director of Intelligent Controls, Inc. since May 1998. Previously, Mr. Brooks
served as President and Chief Executive Officer and a director of Dynisco Inc.,
an instrumentation and equipment company, from 1984 through 1996.

RICHARD A. CHARPIE, PH.D. has served as a director of Moldflow since
December 1995. Dr. Charpie joined Ampersand Ventures' predecessor in 1980 and
led its activities beginning in 1983. The Managing General Partner of all of
Ampersand's active partnerships, he founded the firm in 1988 and structured its
spinoff from PaineWebber. Dr. Charpie has served as a director of more than
thirty-five public and private companies and currently serves as a director of
TriPath Imaging, Inc., a medical products company, V. I. Technologies, Inc., a
developer of blood products and systems, and various privately-held companies.
Dr. Charpie holds an M.S. degree in Physics and a Ph.D. in Applied Economics and
Finance from the Massachusetts Institute of Technology.

ROBERT P. SCHECHTER has served as a director of Moldflow since
January 2000. Mr. Schechter has served as President and Chief Executive Officer
of Natural MicroSystems, a telecommunications enabling technology company, since
April 1995 and its chairman since March 1996. Prior to joining Natural
MicroSystems, Mr. Schechter served in various positions with and most recently
as the Senior Vice President of the International Business Group of Lotus
Development Corporation, a software company, from 1987 to March 1994.
Mr. Schechter also serves as a director of Infinium Software, Inc., an
application software company.

BOARD COMPOSITION

Following the closing of this offering, our board of directors will be
divided into three classes, each of whose members will serve for a staggered
three-year term. Our board of directors will consist of Messrs. Schechter,
Thomas and Yie as Class I directors, whose term of office will continue until
the 2000 annual meeting of stockholders, Messrs. Beale and Dulude as Class II
directors, whose term of office will continue until the 2001 annual meeting of
stockholders, and Messrs. Brooks and Charpie as Class III directors, whose term
of office will continue until the 2002 annual meeting of stockholders. At each
annual meeting of stockholders, a class of directors will be elected for a
three-year term.

BOARD COMMITTEES

Effective upon the closing of this offering, our board of directors will
reconstitute the audit committee and compensation committee.

AUDIT COMMITTEE. The members of the audit committee will be responsible for
recommending to the board of directors the engagement of our outside auditors
and reviewing our accounting controls and the results and scope of audits and
other services provided by our auditors. All of the members of the audit
committee will be independent directors.

COMPENSATION COMMITTEE. The members of the compensation committee, a
majority of whom will be independent directors, will be responsible for
reviewing and recommending to the board of

45
<PAGE>
directors the amount and type of consideration to be paid to senior management,
administering our stock option plans and establishing and reviewing general
policies relating to compensation and benefits of employees.

DIRECTOR COMPENSATION

Directors who are employees receive no additional compensation for their
services as directors. Non-employee directors receive a $2,000 quarterly fee for
their service as directors and $250 for each meeting of a committee of the board
of directors they attend. Non-employee directors are also eligible to
participate in the 2000 Stock Option and Incentive Plan. The 2000 Stock Option
and Incentive Plan contains a formula under which each non-employee director
will receive an option to acquire 10,000 shares of common stock upon initial
election to the board. Non-employee directors will also receive an option to
acquire an additional 10,000 shares of common stock following the 2002 annual
meeting of stockholders and at every second annual meeting of stockholders
thereafter. Mr. Schechter received an option to acquire 10,000 shares upon his
election on January 20, 2000 and Messrs. Beale, Brooks, Charpie and Yie will
each receive options to acquire 10,000 shares of common stock concurrently with
the effectiveness of this offering.

EXECUTIVE COMPENSATION

The following table sets forth the total compensation paid or accrued in the
fiscal year ended June 30, 1999 to our Chief Executive Officer and the four
other most highly compensated executive officers, each of whose aggregate
compensation exceeded $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------- --------------
NUMBER
OF SECURITIES
OTHER UNDERLYING ALL
ANNUAL OPTIONS OTHER
NAME SALARY BONUS COMPENSATION GRANTED COMPENSATION
- ---- --------- --------- ----------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Marc J. L. Dulude............. $215,000 $35,000 -- 131,250 $26,563(1)
President and Chief
Executive Officer
Suzanne E. Rogers............. 133,000 20,000 -- 35,417 10,400(2)
Vice President of Finance
and Administration, Chief
Financial Officer and
Treasurer
Richard M. Underwood.......... 120,000 -- $97,000(3) 22,917 17,321(2)
Vice President of Sales
A. Roland Thomas.............. 96,880 19,407 -- 25,000 22,150(4)
Vice President of Research
and Development
Kenneth R. Welch.............. 133,000 17,500 -- 33,333 10,400(2)
Vice President of Marketing
</TABLE>

- ------------------------------
(1) Includes $12,000 as a car allowance, $10,500 in contributions by Moldflow to
Mr. Dulude's 401(k) account, and $4,063 representing life insurance and
disability insurance purchased for Mr. Dulude's benefit.

(2) Constitute contributions by Moldflow to the executive officers' 401(k)
accounts.

(3) Constitutes sales commissions.

(4) Includes $9,057 in contributions to Mr. Thomas' retirement plan account and
$13,093 as a car allowance.

46
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information regarding stock options granted
during fiscal 1999 to the executive officers listed in the Summary Compensation
Table. The exercise price per share of each option was equal to the fair market
value of the common stock as of the grant date as determined by the board of
directors.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------ POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF PERCENT OF TOTAL EXERCISE STOCK PRICE
SECURITIES OPTIONS OR BASE APPRECIATION
UNDERLYING GRANTED TO PRICE FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN ($/ EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR(2) SHARE) DATE 5% 10%
- ---- ----------- ---------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Marc J. L. Dulude............. 16,667 4.52% $0.72 8/14/2006 $ 5,729 $ 13,723
114,583 31.07 6.00 6/15/2007 328,251 786,217
Suzanne E. Rogers............. 10,417 2.82 0.72 8/14/2006 3,581 8,577
25,000 6.78 6.00 6/15/2007 71,618 171,538
Richard M. Underwood.......... 2,083 0.57 0.72 8/14/2006 716 1,715
2,083 0.57 1.20 1/21/2007 1,194 2,859
2,083 0.57 4.80 4/22/2007 4,774 11,434
16,668 4.52 6.00 6/15/2007 47,749 114,368
A. Roland Thomas.............. 25,000 6.78 6.00 6/15/2007 71,618 171,538
Kenneth R. Welch.............. 8,333 2.26 0.72 8/14/2006 2,865 6,862
25,000 6.78 6.00 6/15/2007 71,618 171,538
</TABLE>

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

(1) Subject to each executive officer's continued employment with Moldflow, 25%
of the options in each option grant vest on the first anniversary of the
date of the grant and the remaining options vest in equal quarterly
installments through the fourth anniversary of the date of the grant. In
addition, these options also vest in full upon any change of control of
Moldflow as defined in the options.

(2) Based on an aggregate of 368,480 options granted to employees in fiscal
1999.

(3) The amounts shown as potential realizable value illustrate what might be
realized upon exercise immediately prior to expiration of the option term
using the 5% and 10% appreciation rates compounded annually as established
in regulations of the Securities and Exchange Commission.

The following table sets forth the potential realizable value of the options
granted to the listed executive officers using our assumed initial public
offering price of $13.00 per share:

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF
NUMBER OF STOCK PRICE APPRECIATION FOR
SECURITIES OPTION TERM
UNDERLYING -----------------------------
OPTIONS GRANTED 5% 10%
---------------- ------------- -------------
<S> <C> <C> <C>
Marc J. L. Dulude...... 16,667 $ 308,122 $ 452,453
114,583 1,513,289 2,505,547
Suzanne E. Rogers...... 10,417 192,578 282,787
25,000 330,173 546,666
Richard M. Underwood... 2,083 38,508 56,547
2,083 37,508 55,547
2,083 30,010 48,048
16,668 220,133 364,473
A. Roland Thomas....... 25,000 330,173 546,666
Kenneth R. Welch....... 8,333 154,052 226,213
25,000 330,173 546,666
</TABLE>

The potential realizable value is not intended to predict future
appreciation of the price of our common stock. The values shown do not
consider non-transferability, vesting or termination of the options upon
termination of the employee's employment relationship with us.

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<PAGE>
FISCAL YEAR-END OPTION VALUES

The following table sets forth information concerning the number and value
of unexercised options to purchase common stock held as of June 30, 1999 by the
executive officers listed in the Summary Compensation Table. There was no public
trading market for our common stock as of June 30, 1999. Accordingly, the values
of the unexercised in-the-money options have been calculated on the basis of the
estimated fair value of our common stock at June 30, 1999 of $6.00 per share,
less the applicable exercise price multiplied by the number of shares which may
be acquired on exercise. None of the executive officers listed in the Summary
Compensation Table exercised any stock options in fiscal 1999.

AGGREGATE OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
------------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Marc J. L. Dulude....................... -- 131,250 $ -- $ 88,002
Suzanne E. Rogers....................... -- 35,417 -- 55,002
Richard M. Underwood.................... -- 22,917 -- 23,496
A. Roland Thomas........................ 17,392 69,494 98,091 152,855
Kenneth R. Welch........................ -- 33,333 -- 43,998
</TABLE>

2000 STOCK OPTION AND INCENTIVE PLAN

Our board of directors has adopted and our stockholders have approved the
2000 Stock Option and Incentive Plan. The 2000 Stock Option and Incentive Plan
allows for the issuance of up to 2,000,000 shares of common stock plus an
additional amount equal to 20% of any net increase in the total number of shares
of common stock outstanding after this offering. Our compensation committee will
administer the 2000 Stock Option and Incentive Plan.

Under the 2000 Stock Option and Incentive Plan, our compensation committee
may:

- grant incentive stock options,

- grant non-qualified stock options,

- grant stock appreciation rights,

- issue or sell common stock with vesting or other restrictions, or without
restrictions,

- grant rights to receive common stock in the future with or without
vesting,

- grant common stock upon the attainment of specified performance goals, and

- grant dividend rights in respect of common stock.

These grants and issuances may be made to officers, employees, directors,
consultants, advisors and other key persons of Moldflow.

Our compensation committee has the right, in its discretion, to select the
individuals eligible to receive awards, determine the terms and conditions of
the awards granted, accelerate the vesting schedule of any award and generally
administer and interpret the plan.

The exercise price of options granted under the 2000 Stock Option and
Incentive Plan is determined by our compensation committee. Under present law,
incentive stock options and options intended to qualify as performance-based
compensation under Section 162(m) of the Internal Revenue Code of 1986 may not
be granted at an exercise price less than the fair market value of the common
stock on the date of grant, or less than 110% of the fair market value in the
case of incentive stock options granted to optionees holding more than 10% of
the voting power.

Non-qualified stock options may be granted at prices which are less than the
fair market value of the underlying shares on the date granted. Options are
typically subject to vesting schedules, terminate eight years from the date of
grant and may be exercised for specified periods after the

48
<PAGE>
termination of the optionee's employment or other service relationship with us.
Upon the exercise of options, the option exercise price must be paid in full
either in cash or by certified or bank check or other instrument acceptable to
the committee or by delivery of shares of common stock that have been owned by
the optionee free of restrictions for at least six months.

The 2000 Stock Option and Incentive Plan and all awards issued under the
plan will terminate upon a merger, reorganization or consolidation, the sale of
all or substantially all of our assets or all of our outstanding capital stock
or a liquidation or other similar transaction, unless Moldflow and the other
parties to such transactions have agreed otherwise.

EMPLOYEE STOCK PURCHASE PLAN

The Employee Stock Purchase Plan was adopted by our board of directors in
January 2000 and was approved by our stockholders in February 2000. Up to
500,000 shares of our common stock may be issued under the Employee Stock
Purchase Plan. The Employee Stock Purchase Plan is administered by our
compensation committee.

The first offering under the Employee Stock Purchase Plan will commence on
July 1, 2000 and end on December 31, 2000. Subsequent offerings will commence on
each January 1 and July 1 thereafter and will have a duration of six months.
Generally, all employees who are customarily employed for more than 20 hours per
week as of the first day of the applicable offering period are eligible to
participate in the Employee Stock Purchase Plan. Any employee who owns or is
deemed to own shares of stock representing in excess of 5% of the combined
voting power of all classes of our stock may not participate in the Employee
Stock Purchase Plan.

During each offering, an employee may purchase shares under the Employee
Stock Purchase Plan by authorizing payroll deductions of up to 10% of his cash
compensation during the offering period. Unless the employee has previously
withdrawn from the offering, his accumulated payroll deductions will be used to
purchase shares of our common stock on the last business day of the period at a
price equal to 85% of the fair market value of our common stock on the first or
last day of the offering period, whichever is lower. Under applicable tax rules,
an employee may purchase no more than $25,000 worth of our common stock in any
calendar year under the Employee Stock Purchase Plan. We have not issued any
shares to date under the Employee Stock Purchase Plan.

1997 EQUITY INCENTIVE PLAN

The 1997 Equity Incentive Plan was initially approved by our board of
directors in August 1997 and was approved by our stockholders in October 1997.
The 1997 Equity Incentive Plan provides for the issuance of 1,537,158 shares of
our common stock. As of March 1, 2000, options to purchase 599,900 shares of our
common stock were outstanding under the 1997 Equity Incentive Plan. Options
granted under the 1997 Equity Incentive Plan generally vest over four years and
terminate on the eighth anniversary of the date of grant. We will not make any
additional grants under the 1997 Equity Incentive Plan after the completion of
this offering.

EMPLOYMENT AGREEMENTS

We have entered into employment agreements with each of Messrs. Dulude,
Thomas, Underwood and Welch and Ms. Rogers. Each agreement is for a period of
one year, and will be automatically extended for one additional year on the
anniversary date unless either party has given notice that it does not wish to
extend the agreement. Each agreement provides for the payment of base salary and
incentive compensation and for the provision of certain fringe benefits to the
executive. The agreements require our executive officers to refrain from
competing with Moldflow and from soliciting our employees for a period of twelve
months following termination for any reason. Each agreement also provides for
certain payments and benefits for an executive officer should his or her
employment with us be terminated because of death or disability, by the
executive for good reason or by us without cause, as further defined in the
agreements. In general, in the case of a termination by the executive officer
for good reason, or by us without cause, the executive

49
<PAGE>
officer will receive up to one year of salary, an extension of benefits for one
year and an acceleration of vesting for stock options and restricted stock which
otherwise would vest during the next twelve months. Upon a change of control, as
defined in the agreements, the executive officer is eligible for payment of a
minimum of six months and up to one year of salary, an extension of benefits for
one year and an acceleration of vesting for all outstanding stock options and
restricted stock. Mr. Dulude's agreement also includes certain provisions
requiring Moldflow to increase the payments to him following a change in control
in the event that amounts paid to him would subject him to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986.

RESTRICTED STOCK AGREEMENTS

In July 1998, Messrs. Dulude, Underwood and Welch and Ms. Rogers purchased
from Moldflow a total of 551,287 shares of common stock at a price of $0.36 per
share. Each of these executive officers paid for the shares by delivering to
Moldflow a promissory note, which bears interest at a rate of 5.77% per year.
Principal and interest on the notes become payable in full on June 30, 2003, but
may be prepaid at any time. Each of these executive officers also entered into a
stock restriction agreement with Moldflow. Pursuant to these agreements,
Moldflow has the right, but not the obligation, to repurchase a portion of these
shares at the initial purchase price per share upon the termination for any
reason of the employment of the respective executive officer. The repurchase
rights with respect to these shares lapse on varying schedules through
October 2002 so long as the executive officer who purchased the shares remains
an employee of Moldflow. The repurchase right with respect to a portion of these
shares will also lapse if Moldflow terminates the employment of the executive
officer without cause as defined in his or her employment agreement or if
employment terminates due to his or her death or disability. The repurchase
right will lapse in its entirety in the event Moldflow experiences a change in
control as defined in the executive officers' employment agreements.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Messrs. Beale and Yie are the members of our compensation committee. Neither
Mr. Beale nor Mr. Yie is an executive officer of Moldflow or has received any
compensation from Moldflow within the last three years other than in his
capacity as a director.

In January 1997, we entered into loan agreements with a group of our
stockholders consisting of JTC Investment Management Pty. Ltd., funds associated
with Ampersand Ventures, Thomas Investments Australia Pty. Ltd, Floatflow
Pty. Ltd. and Helmet Investments Australia Pty. Ltd. pursuant to which these
stockholders provided us with a credit line of approximately $1.1 million. In
July 1998, we converted the outstanding principal balance of $890,000 under this
credit line into 698,609 shares of our series C-3 convertible preferred stock
and paid these stockholders $107,000 of accrued interest. Mr. Yie is affiliated
with the funds associated with Ampersand Ventures, and Mr. Beale is affiliated
with JTC Investment Management Pty. Ltd.

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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

1997 REORGANIZATION

In June 1997, our predecessor, Moldflow International Pty. Ltd., an
Australian corporation, entered into a reorganization agreement with Moldflow
and its stockholders. In the reorganization, the stockholders of Moldflow
International became stockholders of Moldflow, and Moldflow International became
a wholly-owned subsidiary of Moldflow. Stockholders of Moldflow International
were issued shares of either Moldflow's common stock, series A convertible
preferred stock or series B convertible preferred stock. In March 1998, these
shares of common stock, series A convertible preferred and series B convertible
preferred were redesignated as series C-1, C-2 and C-3 convertible preferred
stock. Upon completion of this offering, all shares of our outstanding preferred
stock will be converted into shares of common stock.

LOANS FROM STOCKHOLDERS

In January 1997, we entered into loan agreements with a group of our
stockholders consisting of JTC Investment Management Pty. Ltd., funds associated
with Ampersand Ventures, Thomas Investments Australia Pty. Ltd, Floatflow
Pty. Ltd. and Helmet Investments Australia Pty. Ltd. pursuant to which these
stockholders provided us with a credit line of approximately $1.1 million. In
July 1998, we converted the outstanding principal balance of $890,000 under this
credit line into 698,609 shares of our series C-3 convertible preferred stock
and paid these stockholders $107,000 of accrued interest. Dr. Charpie and
Mr. Yie, directors of Moldflow, are affiliated with the funds associated with
Ampersand Ventures, Mr. Beale, also a director of Moldflow, is affiliated with
JTC Investment Management Pty. Ltd., and Mr. Thomas, our Vice President of
Research and Development and a director of Moldflow, is the beneficial owner of
Thomas Investments Australia Pty. Ltd.

LOAN TO EXECUTIVE OFFICER AND DIRECTOR

In July 1999, Mr. Thomas borrowed approximately $129,000 from our
subsidiary, Moldflow International, pursuant to a promissory note. This
promissory note is not interest bearing and is due on July 1, 2000. The amounts
due under this promissory note will be completely offset by amounts due to
Mr. Thomas on July 1, 2000 pursuant to the terms of a deferred compensation
arrangement between Moldflow and Mr. Thomas.

In connection with the expatriate assignment of Mr. Thomas from Australia to
the United States, Moldflow loaned him $87,000 in September 1996. The loan was
repaid in January 1999.

OTHER ARRANGEMENTS WITH EXECUTIVE OFFICERS

In addition, other agreements with our executive officers are described
under "Management--Employment Agreements" and "Management--Restricted Stock
Agreements."

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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information regarding the beneficial
ownership of Moldflow common stock as of March 1, 2000 and on an as adjusted
basis to reflect the sale of the common stock offered hereby by:

- all persons known by us to own beneficially 5% or more of the common
stock,

- each of our directors,

- the executive officers listed in the summary compensation table,

- each stockholder selling shares in this offering, and

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

Unless otherwise indicated, each of the stockholders has sole voting and
investment power with respect to the shares of common stock beneficially owned
by the stockholder. The address of Ampersand Ventures is 55 William Street,
Suite 240, Wellesley, MA 02481, the address of JTC Investment Management
Pty. Ltd. is 333 Collins Street, Melbourne VIC 3000, Australia, the address of
Lombard Capital Fund LLC, is c/o Asiaciti Corp. Services Pte. Ltd., 3 Raffles
Place, #09-01 Bharat Building, Singapore 048617 and the address of Paul
Bordonaro is c/o Floatflow Pty. Ltd., 13 Townsend Street, Ivanhoe, VIC 3079,
Australia. The address of all other listed stockholders is c/o Moldflow
Corporation, 91 Hartwell Avenue, Lexington, MA 02421.

The number of shares beneficially owned by each stockholder is determined
under rules issued by the Securities and Exchange Commission and includes voting
or investment power with respect to securities. Under these rules, beneficial
ownership includes any shares as to which the individual or entity has sole or
shared voting power or investment power and includes any shares as to which the
individual or entity has the right to acquire beneficial ownership within
60 days after March 1, 2000 through the exercise of any warrant, stock option or
other right. The inclusion in this prospectus of such shares, however, does not
constitute an admission that the named stockholder is a direct or indirect
beneficial owner of such shares.

<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES
BENEFICIALLY
OWNED(1)
NUMBER OF SHARES ------------------- SHARES TO BE SOLD
BENEFICIALLY BEFORE AFTER UPON EXERCISE OF
NAME OF BENEFICIAL OWNER OWNED OFFERING OFFERING OVER-ALLOTMENT OPTION
- ------------------------ ---------------- -------- -------- ---------------------
<S> <C> <C> <C> <C>
Ampersand Ventures(2).............. 4,039,060 66.6% 44.6% --
Richard A. Charpie(3).............. 4,039,060 66.6 44.6 --
Charles D. Yie(4).................. 4,039,060 66.6 44.6 --
JTC Investment Management Pty.
Ltd.(5).......................... 752,627 12.4 8.3 204,177
Julian H. Beale(6)................. 752,627 12.4 8.3 --
Marc J. L. Dulude(7)............... 403,151 6.6 4.4 --
Lombard Capital Fund LLC(8)........ 218,054 3.6 2.4 35,000
A. Roland Thomas(9)................ 183,493 3.0 2.0 --
Paul Bordonaro(10)................. 158,457 2.6 1.7 29,167
Richard M. Underwood(11)........... 57,755 * * --
Suzanne E. Rogers(12).............. 54,127 * * --
Kenneth R. Welch(13)............... 51,486 * * --
Roger Brooks....................... 1,562 * * --
Robert P. Schechter................ -- * * --
All executive officers and
directors, as a group
(10 persons)(14)................. 5,543,261 90.9 60.9 --
</TABLE>

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

* Represents less than 1% of the outstanding shares of common stock.

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<PAGE>
(1) All percentages assume the underwriters do not elect to exercise the
over-allotment option to purchase an additional 450,000 shares of common
stock. The number of shares of common stock includes shares to be issued
upon completion of this offering pursuant to the conversion of all of the
shares of our class C preferred stock into shares of common stock and the
exercise of the outstanding warrant into shares of common stock.

(2) Consists of 1,482,131 shares held by Ampersand Specialty Materials and
Chemicals II Limited Partnership, 2,516,019 shares held by Ampersand
Specialty Materials and Chemicals III Limited Partnership and 40,910 shares
held by Ampersand Specialty Materials and Chemicals III Companion Fund
Limited Partnership. Ampersand Specialty Materials and Chemicals II Limited
Partnership, Ampersand Specialty Materials and Chemicals III Limited
Partnership and Ampersand Specialty Materials and Chemicals III Companion
Fund Limited Partnership are referred to collectively herein as Ampersand
Ventures. ASMC-II MCLP LLP is the general partner of ASMC-II Management
Company Limited Partnership, which is the general partner of Ampersand
Specialty Materials and Chemicals II Limited Partnership, which exercises
sole voting and investment power with respect to all of the shares held of
record by Ampersand Specialty Materials and Chemicals II Limited
Partnership. ASMC-III MCLP LLP is the general partner of ASMC-III Management
Company Limited Partnership, which is the general partner of Ampersand
Specialty Materials and Chemicals III Limited Partnership and Ampersand
Specialty Materials and Chemicals III Companion Fund Limited Partnership,
which exercises sole voting and investment power with respect to all of the
shares held of record by Ampersand Specialty Materials and Chemicals III
Limited Partnership and Ampersand Specialty Materials and Chemicals III
Companion Fund Limited Partnership. Dr. Charpie, a director of Moldflow, is
the Managing General Partner of both ASMC-II MCLP LLP and ASMC-III MCLP LLP
and Mr. Yie, a director of Moldflow, is a General Partner of both ASMC-II
MCLP LLP and ASMC-III MCLP LLP. Dr. Charpie and Mr. Yie disclaim any
beneficial ownership of the shares held by Ampersand Ventures, except to the
extent of their respective pecuniary interests therein.

(3) Consists solely of the shares described in note (2) above, of which
Dr. Charpie may be considered the beneficial owner. Dr. Charpie disclaims
beneficial ownership of such shares, except to the extent of his pecuniary
interest therein.

(4) Consists solely of the shares described in note (2) above, of which Mr. Yie
may be considered the beneficial owner. Mr. Yie disclaims beneficial
ownership of such shares, except to the extent of his pecuniary interest
therein.

(5) Mr. Beale, a director of Moldflow, may be considered the beneficial owner of
these shares based on his voting and investment power with respect to the
parent company of JTC Investment Management Pty. Ltd.

(6) Consists solely of the shares described in note (5) above, of which
Mr. Beale may be considered the beneficial owner. Mr. Beale disclaims
beneficial ownership of 323,706 of such shares.

(7) Includes 6,250 shares that may be acquired within 60 days of March 1, 2000.

(8) The sole beneficial owner of these shares is Asiaciti Trust Samoa Limited,
which is controlled by Graeme W. Briggs.

(9) Includes 158,457 shares held by Thomas Investments Australia Pty. Ltd., of
which Mr. Thomas is the beneficial owner. Also includes 25,036 shares that
may be acquired within 60 days of March 1, 2000.

(10) Consists solely of shares held by Floatflow Pty. Ltd., of which
Mr. Bordonaro is the beneficial owner.

(11) Includes 1,953 shares that may be acquired within 60 days of March 1, 2000.

(12) Includes 3,906 shares that may be acquired within 60 days of March 1, 2000.

(13) Includes 3,125 shares that may be acquired within 60 days of March 1, 2000.

(14) Includes 40,270 shares that may be acquired within 60 days of March 1,
2000.

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<PAGE>
DESCRIPTION OF CAPITAL STOCK

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

Following the offering, our authorized capital stock will consist of
60,000,000 shares of common stock, of which 9,081,496 will be issued and
outstanding, and 5,000,000 shares of undesignated preferred stock issuable in
one or more series designated by our board of directors, of which no shares will
be issued and outstanding. In addition, 599,900 shares of our common stock will
be issuable upon exercise of stock options outstanding and 2,500,000 shares of
our common stock will be available for future grant under our stock option plan
and our employee stock purchase plan.

COMMON STOCK

VOTING RIGHTS. The holders of our common stock have one vote per share.
Holders of our common stock are not entitled to vote cumulatively for the
election of directors. Generally, all matters to be voted on by stockholders
must be approved by a majority, or, in the case of the election of directors, by
a plurality, of the votes cast at a meeting at which a quorum is present, voting
together as a single class, subject to any voting rights granted to holders of
any then outstanding preferred stock.

DIVIDENDS. Holders of common stock will share ratably in any dividends
declared by our board of directors, subject to the preferential rights of any
preferred stock then outstanding. Dividends consisting of shares of common stock
may be paid to holders of shares of common stock.

OTHER RIGHTS. Upon liquidation, dissolution or winding up of Moldflow, all
holders of common stock are entitled to share ratably in any assets available
for distribution to holders of shares of common stock. No shares of common stock
are subject to redemption or have preemptive rights to purchase additional
shares of common stock.

PREFERRED STOCK

Our certificate of incorporation provides that shares of preferred stock may
be issued from time to time in one or more series. Our board of directors is
authorized to fix the voting rights, if any, designations, powers, preferences,
qualifications, limitations and restrictions thereof, applicable to the shares
of each series. Our board of directors may, without stockholder approval, issue
preferred stock with voting and other rights that could adversely affect the
voting power and other rights of the holders of the common stock and could have
anti-takeover effects, including preferred stock or rights to acquire preferred
stock in connection with implementing a shareholder rights plan. We have no
present plans to issue any shares of preferred stock. The ability of our board
of directors to issue preferred stock without stockholder approval could have
the effect of delaying, deferring or preventing a change of control of Moldflow
or the removal of existing management.

INDEMNIFICATION MATTERS

Prior to the offering, we will have entered into indemnification agreements
with each of our directors. The form of indemnification agreement provides that
we will indemnify our directors for expenses incurred because of their status as
a director to the fullest extent permitted by Delaware law, our certificate of
incorporation and our by-laws.

Our certificate of incorporation contains a provision permitted by Delaware
law that generally eliminates the personal liability of directors for monetary
damages for breaches of their fiduciary duty, including breaches involving
negligence or gross negligence in business combinations, unless the director has
breached his or her duty of loyalty, failed to act in good faith, engaged in
intentional misconduct or a knowing violation of law, paid a dividend or
approved a stock

54
<PAGE>
repurchase in violation of the Delaware General Corporation Law or obtained an
improper personal benefit. This provision does not alter a director's liability
under the federal securities laws and does not affect the availability of
equitable remedies, such as an injunction or rescission, for breach of fiduciary
duty. Our by-laws provide that directors and officers shall be, and in the
discretion of our board of directors, non-officer employees may be, indemnified
by Moldflow to the fullest extent authorized by Delaware law, as it now exists
or may in the future be amended, against all expenses and liabilities reasonably
incurred in connection with service for or on behalf of Moldflow. Our by-laws
also provide for the advancement of expenses to directors and, in the discretion
of our board of directors, to officers and non-officer employees. In addition,
our by-laws provide that the right of directors and officers to indemnification
shall be a contract right and shall not be exclusive of any other right now
possessed or hereafter acquired under any by-law, agreement, vote of
stockholders or otherwise. We also have directors' and officers' insurance
against certain liabilities. We believe that the indemnification agreements,
together with the limitation of liability and indemnification provisions of our
certificate of incorporation and by-laws and directors' and officers' insurance
will assist us in attracting and retaining qualified individuals to serve as
directors and officers of Moldflow.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be provided to directors, officers or persons controlling Moldflow
as described above, we have been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable. At present,
there is no pending material litigation or proceeding involving any director,
officer, employee or agent of Moldflow in which indemnification will be required
or permitted.

PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BY-LAWS THAT MAY HAVE
ANTI-TAKEOVER EFFECTS

Certain provisions of our certificate of incorporation and by-laws described
below, as well as the ability of our board of directors to issue shares of
preferred stock and to set the voting rights, preferences and other terms
thereof, may be deemed to have an anti-takeover effect and may discourage
takeover attempts not first approved by our board of directors, including
takeovers which particular stockholders may deem to be in their best interests.
These provisions also could have the effect of discouraging open market
purchases of our common stock because they may be considered disadvantageous by
a stockholder who desires subsequent to such purchases to participate in a
business combination transaction with us or to elect a new director to our
board.

CLASSIFIED BOARD OF DIRECTORS

Our board of directors is divided into three classes serving staggered
three-year terms, with approximately one-third of the board being elected each
year. Our classified board, together with certain other provisions of our
certificate of incorporation authorizing the board of directors to fill vacant
directorships or increase the size of the board, may prevent a stockholder from
removing, or delay the removal of, incumbent directors and simultaneously
gaining control of the board of directors by filling vacancies created by such
removal with its own nominees.

DIRECTOR VACANCIES AND REMOVAL

Our certificate of incorporation and by-laws provide that vacancies in our
board of directors may be filled only by the affirmative vote of a majority of
the remaining directors. Our certificate of incorporation provides that
directors may be removed from office only with cause and only by the affirmative
vote of holders of at least 75% of the shares then entitled to vote at an
election of directors.

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<PAGE>
NO STOCKHOLDER ACTION BY WRITTEN CONSENT

Our certificate of incorporation provides that any action required or
permitted to be taken by our stockholders at an annual or special meeting of
stockholders must be effected at a duly called meeting and may not be taken or
effected by a written consent of stockholders.

SPECIAL MEETINGS OF STOCKHOLDERS

Our certificate of incorporation and by-laws provide that a special meeting
of stockholders may be called only by our board of directors. Our by-laws
provide that only those matters included in the notice of the special meeting
may be considered or acted upon at that special meeting unless otherwise
provided by law.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND STOCKHOLDER PROPOSALS

Our by-laws include advance notice and informational requirements and time
limitations on any director nomination or any new proposal which a stockholder
wishes to make at an annual meeting of stockholders. For the first annual
meeting following the completion of this offering, a stockholder's notice of a
director nomination or proposal will be timely if delivered to the Secretary of
Moldflow at our principal executive offices not later than the close of business
on the later of the 75th day prior to the scheduled date of such annual meeting
or the 10th day following the day on which public announcement of the date of
such annual meeting is made by Moldflow.

AMENDMENT OF THE CERTIFICATE OF INCORPORATION

As required by Delaware law, any amendment to our certificate of
incorporation must first be approved by a majority of our board of directors
and, if required by law, thereafter approved by a majority of the outstanding
shares entitled to vote with respect to such amendment, except that any
amendment to the provisions relating to stockholder action by written consent,
directors, limitation of liability and the amendment of our certificate of
incorporation must be approved by not less than 75% of the outstanding shares
entitled to vote with respect to such amendment.

AMENDMENT OF BY-LAWS

Our certificate of incorporation and by-laws provide that our by-laws may be
amended or repealed by our board of directors or by the stockholders. Such
action by the board of directors requires the affirmative vote of a majority of
the directors then in office. Such action by the stockholders requires the
affirmative vote of at least 75% of the shares present in person or represented
by proxy at an annual meeting of stockholders or a special meeting called for
such purpose unless our board of directors recommends that the stockholders
approve such amendment or repeal at such meeting, in which case such amendment
or repeal only requires the affirmative vote of a majority of the shares present
in person or represented by proxy at the meeting.

STATUTORY BUSINESS COMBINATION PROVISION

Following the offering, we will be subject to Section 203 of the Delaware
General Corporation Law, which prohibits a publicly-held Delaware corporation
from consummating a "business combination," except under certain circumstances,
with an "interested stockholder" for a period of three years after the date such
person became an "interested stockholder" unless:

- before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the
business combination;

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<PAGE>
- upon the closing of the transaction that resulted in the interested
stockholder becoming such, the interested stockholder owned at least 85%
of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding shares held by directors who are also
officers of the corporation and shares held by employee stock plans; or

- following the transaction in which such person became an interested
stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders
by the affirmative vote of the holders of at least two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder.

The term "interested stockholder" generally is defined as a person who,
together with affiliates and associates, owns, or, within the prior three years,
owned, 15% or more of a corporation's outstanding voting stock. The term
"business combination" includes mergers, consolidations, asset sales involving
10% or more of a corporation's assets and other similar transactions resulting
in a financial benefit to an interested stockholder. Section 203 makes it more
difficult for an "interested stockholder" to effect various business
combinations with a corporation for a three-year period. A Delaware corporation
may "opt out"of Section 203 with an express provision in its original
certificate of incorporation or an express provision in its certificate of
incorporation or by-laws resulting from an amendment approved by holders of at
least a majority of the outstanding voting stock. Neither our certificate of
incorporation nor our by-laws contain any such exclusion.

TRADING ON THE NASDAQ NATIONAL MARKET SYSTEM

We have applied to have our common stock approved for quotation on the
Nasdaq National Market under the symbol MFLO.

NO PREEMPTIVE RIGHTS

No holder of any class of our stock has any preemptive right to purchase any
of our securities.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock will be EquiServe
Trust Company, N.A.

57
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there was no public market for our common stock, and
we cannot predict the effect, if any, that sales of common stock or the
availability of common stock for sale will have on the market price of our
common stock prevailing from time to time. Nonetheless, substantial sales of
common stock in the public market following this offering, or the perception
that such sales could occur, could lower the market price of our common stock or
make it difficult for us to raise additional equity capital in the future.

Following this offering, there will be 9,081,496 shares of our common stock
outstanding, assuming no exercise of the underwriters' over-allotment option and
no exercise of outstanding options. All of the shares which are being sold in
this offering will be freely transferable without restriction or further
registration under the Securities Act unless the shares are purchased by
"affiliates" as that term is defined in Rule 144 under the Securities Act.

The remaining 6,081,496 shares of common stock held by existing stockholders
that will be outstanding after the offering will be "restricted securities" as
defined in Rule 144, and may be sold in the future without registration under
the Securities Act subject to compliance with the provisions of Rule 144,
Rule 701 or any other applicable exemption under the Securities Act.

In connection with this offering, our existing officers, directors and
stockholders, who hold substantially all of our currently outstanding shares of
common stock and will own an aggregate of 6,080,024 shares of common stock after
this offering and 527,572 shares of common stock issuable upon exercise of stock
options outstanding, have agreed with the underwriters that, subject to
exceptions, they will not sell or dispose of any of their shares for 180 days
after the date of this prospectus. Adams, Harkness & Hill, Inc. may, in its sole
discretion and at any time without notice, release all or any portion of the
shares subject to such restrictions. Subject to these lock-up agreements, the
shares of common stock outstanding upon the closing of the offering will be
available for sale in the public market as follows:

<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF
SHARES DESCRIPTION
- --------------------- -----------
<C> <S>
3,000,000 After the date of this prospectus, freely tradeable shares
sold in the offering.

6,006,048 After 180 days from the date of this prospectus, the lock-up
period will expire and these shares will be saleable under
Rule 144.

75,448 On various dates following the 180th day from the date of
this prospectus, these shares will vest and be saleable
under Rule 144.
</TABLE>

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

- one percent of the then outstanding shares of common stock, which is
expected to be approximately 90,815 shares upon the completion of this
offering, or

- the average weekly trading volume of the common stock during the four
calendar weeks preceding the date on which notice of such sale is filed,
subject to manner of sale provisions and notice requirements and to the
availability of current public information about us.

Affiliates may sell shares not constituting restricted securities in accordance
with the foregoing volume limitations and other restrictions, but without regard
to the one-year holding period.

58
<PAGE>
In addition, a person who was not an affiliate of ours, as defined in
Rule 144, 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 would
be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from an
affiliate of ours, such person's holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from the affiliate.

In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchased shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell those shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with some of the restrictions,
including the holding period, contained in Rule 144.

We cannot predict the effect, if any, that market sales of shares or the
availability of shares for sale will have on the market price of our common
stock prevailing from time to time. We are unable to estimate the number of our
shares that may be sold in the public market pursuant to Rule 144 or Rule 701
because this will depend on the market price of our common stock, the personal
circumstances of the sellers and other factors. Nevertheless, sales of
significant amounts of our common stock in the public market could adversely
affect the market price of our common stock.

We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of this prospectus, except we
may issue, and grant options to purchase, shares of common stock under the 2000
Stock Option and Incentive Plan and our Employee Stock Purchase Plan.

We intend to file registration statements on Form S-8 with respect to the
aggregate of shares of common stock issuable under our 2000 Stock Option
and Incentive Plan approximately 180 days following this offering. We intend to
file a registration statement with respect to our Employee Stock Purchase Plan
promptly following the consummation of this offering. Shares issued upon the
exercise of stock options after the effective date of the Form S-8 registration
statement will be eligible for resale in the public market without restriction,
except that affiliates must comply with Rule 144.

59
<PAGE>
UNDERWRITING

Under the underwriting agreement, which is filed as an exhibit to the
registration statement relating to this prospectus, each underwriter named
below, for whom Adams, Harkness & Hill, Inc. and A.G. Edwards & Sons, Inc. are
acting as representatives, has agreed to purchase from us the respective number
of shares of common stock shown opposite its name below:

<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON
UNDERWRITERS STOCK
- ------------ ----------------
<S> <C>
Adams, Harkness & Hill, Inc................................
A.G. Edwards & Sons, Inc...................................

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

The underwriting agreement provides that the underwriters' obligation to
purchase shares of common stock depends on the satisfaction of the conditions
contained in the underwriting agreement and that, if any of the shares of common
stock are purchased by the underwriters under the underwriting agreement, all of
the shares of common stock that the underwriters have agreed to purchase under
the underwriting agreement must be purchased. The conditions contained in the
underwriting agreement include the requirement that the representations and
warranties made by us and the selling stockholders to the underwriters are true,
that there is no material change in the financial markets and that we deliver to
the underwriters customary closing documents.

The representatives of the underwriters have advised us that the
underwriters propose to offer the shares of common stock directly to the public
at the public offering price set forth on the cover page of this prospectus, and
to dealers, who may include the underwriters, at the public offering price less
a selling concession not in excess of $ per share. The underwriters may
also allow, and dealers may reallow, a concession not in excess of $ per
share to brokers and dealers. After the offering, the underwriters may change
the offering price and other selling terms.

Adams, Harkness & Hill, Inc. and A.G. Edwards & Sons, Inc. have informed us
that the underwriters do not intend to confirm sales of shares of common stock
offered by this prospectus to any accounts over which they exercise
discretionary authority.

The following table shows the per share and total public offering price,
underwriting discount to be paid by us to the underwriters and the proceeds
before expenses to us and the selling stockholders. This information is
presented assuming both no exercise and full exercise by the underwriters of
their over-allotment option.

<TABLE>
<CAPTION>
TOTAL
-------------------------
WITHOUT WITH
PER SHARE OPTION OPTION
--------- ----------- -----------
<S> <C> <C> <C>
Public offering price.................................. $13.00 $39,000,000 $41,361,528
Underwriting discount.................................. 0.91 2,730,000 2,895,307
Proceeds before expenses to Moldflow................... 12.09 36,270,000 38,466,221
Proceeds before expenses to the selling stockholders... 12.09 -- 3,244,279
</TABLE>

60
<PAGE>
The total proceeds before expenses to be received by us from this offering
will be approximately $36.3 million, assuming no exercise of the over-allotment
option.

The expenses of this offering, exclusive of the underwriting discount, are
estimated at $1.5 million and are payable by us.

We have granted to the underwriters an option to purchase from us and the
selling stockholders up to 450,000 additional shares of common stock,
exercisable solely to cover over-allotments, if any, at the public offering
price less the underwriting discount shown on the cover page of this prospectus.
The underwriters may exercise this option at any time until 30 days after the
date of the underwriting agreement. If this option is exercised, each
underwriter will be committed, so long as the conditions of the underwriting
agreement are satisfied, to purchase a number of additional shares of common
stock proportionate to the underwriters' initial commitment as indicated in the
preceding table and we and the selling stockholders will be obligated, under the
over-allotment option, to sell the shares of common stock to the underwriters.

We have agreed that, without the prior consent of Adams, Harkness &
Hill, Inc., we will not, directly or indirectly, offer, sell or otherwise
dispose of any shares of common stock or any securities which may be converted
into or exchanged for any such shares of common stock for a period of 180 days
from the date of this prospectus. Our executive officers and directors, the
selling stockholders and other stockholders who currently hold in the aggregate
more than 99% of our outstanding common stock have agreed under lock-up
agreements that, without the prior written consent of Adams, Harkness &
Hill, Inc., they will not, directly or indirectly, offer, sell or otherwise
dispose of any shares of common stock or any securities that may be converted
into or exchanged for any such shares other than 268,344 shares that may be sold
by selling stockholders in connection with the underwriters' exercise of the
over-allotment option for the period ending 180 days after the date of this
prospectus.

Prior to the offering, there has been no public market for the shares of
common stock. The initial public offering price and the underwriters'
compensation will be negotiated between the representatives and us. In
determining the initial public offering price of the common stock, we and the
representatives will consider, in addition to prevailing market conditions, our
historical performance and capital structure, estimates of our business
potential and earning prospects, an overall assessment of our management and the
consideration of the above factors in relation to the market valuation of
companies in related businesses.

We and the selling stockholders will indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act and
liabilities arising from breaches of representations and warranties contained in
the underwriting agreement, and contribute to payments that the underwriters may
be required to make for certain liabilities.

Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
selling group members to bid for and purchase shares of common stock. As an
exception to these rules, the representatives are permitted to engage in
transactions that stabilize the price of the common stock. These transactions
may consist of bids or purchases for the purposes of pegging, fixing or
maintaining the price of the common stock.

The underwriters may create a short position in the common stock in
connection with the offering, which means that they may sell more shares than
are set forth on the cover page of this prospectus. If the underwriters create a
short position, then the representatives may reduce that short position by
purchasing common stock in the open market. The representatives also may elect
to reduce any short position by exercising all or part of the over-allotment
option.

The representatives also may impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares of
common stock in the open market to reduce the underwriters' short position or to
stabilize the price of the common stock, the

61
<PAGE>
representatives may reclaim the amount of the selling concession from the
underwriters and selling group members who sold those shares as part of the
offering. In addition, the representatives reserve the right to reclaim selling
concessions from underwriters and selling group members if the representatives
receive a report that clients of the underwriters and selling group members have
sold the stock they purchased in this offering, generally within 30 days
following this offering. The representatives reserve this right even if the
representatives do not purchase shares in the open market.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it might discourage resales of the security by purchasers in an
offering.

The underwriters have reserved for sale at the initial public offering price
up to 225,000 shares of our common stock for persons designated by Moldflow. The
number of shares available for sale to the general public will be reduced to the
extent such persons purchase such reserved shares. Any reserved shares not so
purchased will be offered by the underwriters to the general public on the same
basis as other shares offered hereby. Moldflow intends, through Adams,
Harkness & Hill, Inc. and A.G. Edwards & Sons, Inc., to seek indications of
interest from designated persons, including employees, customers and others with
whom Moldflow has or may seek to develop business relationships. No offers or
other solicitations were made prior to the filing of the registration statement
of which this prospectus is a part. Moldflow has not sent communications to
anyone regarding the purchase of reserved shares and has not determined how many
persons it will contact.

VALIDITY OF COMMON STOCK

The validity of the shares of common stock offered hereby will be passed
upon for Moldflow by Goodwin, Procter & Hoar LLP, Boston, Massachusetts. Various
legal matters related to the sale of the common stock offered hereby will be
passed upon for the underwriters by Ropes & Gray, Boston, Massachusetts.

EXPERTS

The audited consolidated financial statements of Moldflow as of June 30,
1998 and 1999, and for each of the years ended June 30, 1997, 1998 and 1999, and
the audited consolidated financial statements of C-Mold as of September 30, 1998
and 1999, and for each of the years ended September 30, 1998 and 1999, included
in this prospectus have been so included in reliance on the reports of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission, or SEC, a
registration statement on Form S-1 (including the exhibits and schedules
thereto) under the Securities Act and the rules and regulations thereunder, for
the registration of the common stock offered hereby. This prospectus is part of
the registration statement. This prospectus does not contain all the information
included in the registration statement because we have omitted certain parts of
the registration statement as permitted by the SEC rules and regulations. For
further information about us and our common stock, you should refer to the
registration statement. Statements contained in this prospectus as to any
contract, agreement or other document referred to are not necessarily complete.
Where the contract or other document is an exhibit to the registration
statement, each statement is qualified by the provisions of that exhibit.

You can inspect and copy at the public reference facility maintained by the
SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC's regional offices at Seven World

62
<PAGE>
Trade Center, 13th Floor, New York, New York 10048 and 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. You may call the SEC at 1-800-732-0330 for
further information about the operation of the public reference rooms. Copies of
all or any portion of the registration statement can be obtained from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. In addition, the registration statement is publicly available
through the SEC's site on the Internet's World Wide Web, located at
http://www.sec.gov.

We will also file annual, quarterly and current reports, proxy statements
and other information with the SEC. You can also request copies of these
documents, for a copying fee, by writing to the SEC. We intend to furnish to our
stockholders annual reports containing audited financial statements for each
fiscal year.

63
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S> <C>
MOLDFLOW CORPORATION

Report of Independent Accountants........................... F-2
Consolidated Balance Sheet at June 30, 1998 and 1999 and
January 1, 2000 (unaudited)............................... F-3
Consolidated Statement of Operations for the years ended
June 30, 1997, 1998 and 1999 and the six months ended
January 2, 1999 (unaudited) and January 1, 2000
(unaudited)............................................... F-4
Consolidated Statement of Stockholders' Equity for the years
ended June 30, 1997, 1998 and 1999 and the six months
ended January 1, 2000 (unaudited)......................... F-5
Consolidated Statement of Cash Flows for the years ended
June 30, 1997, 1998 and 1999 and the six months ended
January 2, 1999 (unaudited) and January 1, 2000
(unaudited)............................................... F-6
Notes to Consolidated Financial Statements.................. F-7

ADVANCED CAE TECHNOLOGY, INC.

Report of Independent Accountants........................... F-24
Consolidated Balance Sheet at September 30, 1998 and 1999
and December 31, 1999 (unaudited)......................... F-25
Consolidated Statement of Operations for the years ended
September 30, 1998 and 1999 and the three months ended
December 31, 1998 and 1999 (unaudited).................... F-26
Consolidated Statement of Stockholders' Equity for the years
ended September 30, 1998 and 1999 and the three months
ended December 31, 1999 (unaudited)....................... F-27
Consolidated Statement of Cash Flows for the years ended
September 30, 1998 and 1999 and the three months ended
December 31, 1998 and 1999 (unaudited).................... F-28
Notes to Consolidated Financial Statements.................. F-29

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION FOR
MOLDFLOW CORPORATION

Basis of Presentation....................................... F-41
Unaudited Pro Forma Combined Balance Sheet at January 1,
2000...................................................... F-42
Unaudited Pro Forma Combined Statement of Operations for the
year ended June 30, 1999 and for the six months ended
January 1, 2000........................................... F-43
Notes to Unaudited Pro Forma Combined Financial
Information............................................... F-44
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of Moldflow Corporation

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

PricewaterhouseCoopers LLP

Boston, Massachusetts
August 20, 1999, except as to Note 16 for
which the date is January 20, 2000

F-2
<PAGE>
MOLDFLOW CORPORATION

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA
JANUARY 1,
JUNE 30, JANUARY 1, 2000
------------------- 2000 (UNAUDITED)
1998 1999 (UNAUDITED) (NOTE 2)
-------- -------- ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,700 $ 1,240 $ 1,328 $ 1,478
Accounts receivable, net of allowance for doubtful
accounts of $539, $232 and $237 at June 30, 1998 and
1999 and January 1, 2000 (unaudited), respectively...... 4,277 4,444 4,534 4,534
Inventories............................................... -- 84 99 99
Prepaid expenses.......................................... 400 283 340 340
Other current assets...................................... 814 539 851 851
-------- -------- -------- --------
Total current assets.................................... 7,191 6,590 7,152 7,302
Fixed assets, net........................................... 2,978 3,110 3,026 3,026
Restricted cash............................................. 3,982 -- 22 22
Other assets................................................ 185 547 364 364
-------- -------- -------- --------
Total assets............................................ $ 14,336 $ 10,247 $ 10,564 $ 10,714
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank notes payable........................................ $ 1,525 $ 832 $ 1,029 $ 1,029
Current portion of capital lease obligations.............. 158 191 120 120
Accounts payable.......................................... 985 1,422 1,202 1,202
Accrued expenses.......................................... 3,539 2,835 3,102 3,102
Deferred revenue.......................................... 2,983 3,418 3,310 3,310
-------- -------- -------- --------
Total current liabilities............................... 9,190 8,698 8,763 8,763
Notes payable to stockholders............................... 890 -- -- --
Capital lease obligations, net of current portion........... 227 11 -- --
Unearned revenue from research and development contract..... 3,982 -- -- --
Other long-term liabilities................................. 13 268 38 38
-------- -------- -------- --------
Total liabilities....................................... 14,302 8,977 8,801 8,801
-------- -------- -------- --------
Commitments and contingencies (Note 13)
Stockholders' equity:
Convertible preferred stock, $0.01 par value; 8,254,386
shares authorized; 7,440,970, 8,139,579, 8,139,579 and 0
shares issued and outstanding at June 30, 1998 and 1999,
January 1, 2000 (unaudited) and pro forma January 1,
2000 (unaudited), respectively.......................... 11,476 12,366 12,366 --
Common stock, $0.01 par value; 8,333,333 shares
authorized; 0, 553,177, 560,327 and 6,069,610 shares
issued and outstanding at June 30, 1998 and 1999,
January 1, 2000 (unaudited) and pro forma January 1,
2000 (unaudited), respectively.......................... -- 6 6 61
Additional paid-in capital................................ -- 270 285 12,746
Deferred compensation..................................... -- (67) (57) (57)
Notes receivable from stockholders........................ -- (198) (198) (198)
Accumulated deficit....................................... (12,194) (11,713) (11,280) (11,280)
Accumulated other comprehensive income.................... 752 606 641 641
-------- -------- -------- --------
Total stockholders' equity.............................. 34 1,270 1,763 1,913
-------- -------- -------- --------
Total liabilities and stockholders' equity.............. $ 14,336 $ 10,247 $ 10,564 $ 10,714
======== ======== ======== ========
</TABLE>

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

F-3
<PAGE>
MOLDFLOW CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
YEAR ENDED JUNE 30, JANUARY 2, JANUARY 1,
------------------------------ 1999 2000
1997 1998 1999 (UNAUDITED) (UNAUDITED)
-------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue:
Software licenses...................................... $ 6,743 $8,514 $12,238 $5,275 $6,651
Services............................................... 8,080 7,875 7,983 3,969 4,853
------- ------ ------- ------ ------
Total revenue........................................ 14,823 16,389 20,221 9,244 11,504
------- ------ ------- ------ ------
Costs and expenses:
Cost of software licenses revenue...................... 377 397 378 168 322
Cost of services revenue............................... 1,904 1,685 1,319 605 491
Research and development............................... 3,527 3,062 3,466 1,754 1,709
Selling and marketing.................................. 6,703 7,287 9,673 4,615 5,811
General and administrative............................. 3,719 3,303 3,839 1,735 2,277
Litigation............................................. -- -- 620 -- 530
Amortization of intangible assets...................... 2,370 84 -- -- --
------- ------ ------- ------ ------
Total operating expenses............................. 18,600 15,818 19,295 8,877 11,140
------- ------ ------- ------ ------
Income (loss) from operations.......................... (3,777) 571 926 367 364
Interest income.......................................... 14 -- 21 1 26
Interest expense......................................... (153) (238) (198) (86) (65)
Other income (loss), net................................. 17 19 (92) (22) (64)
------- ------ ------- ------ ------
Income (loss) before income taxes...................... (3,899) 352 657 260 261
Provision (benefit) for income taxes..................... 371 163 176 57 (172)
------- ------ ------- ------ ------
Net income (loss)...................................... (4,270) 189 481 203 433
Accretion on convertible preferred stock................. 741 80 -- -- --
------- ------ ------- ------ ------
Net income (loss) available to common stockholders... $(5,011) $ 109 $ 481 $ 203 $ 433
======= ====== ======= ====== ======
Net income (loss) per common share:
Basic................................................ $ -- $ -- $ 1.82 $ 0.94 $ 1.18
Diluted.............................................. $ -- $ 0.04 $ 0.08 $ 0.03 $ 0.07
Pro forma unaudited net income per common share:
Basic................................................ $ 0.08 $ 0.07
Diluted.............................................. $ 0.08 $ 0.07
Shares used in computing net income (loss) per common
share:
Basic................................................ -- -- 265 215 367
Diluted.............................................. -- 5,228 6,166 6,042 6,311
Pro forma unaudited basic............................ 5,717 5,855
Pro forma unaudited diluted.......................... 6,166 6,311
</TABLE>

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

F-4
<PAGE>
MOLDFLOW CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL
-------------------- ---------------------- PAID-IN DEFERRED
SHARES AMOUNT SHARES PAR VALUE CAPITAL COMPENSATION
--------- -------- ---------- --------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1996.................. -- $ -- 2,016,923 $297 $740 $ --
Issuance of common stock.................. 3,333 1 36
Accretion of redeemable preferred stock to
redemption value........................
Comprehensive income (loss):
Net loss................................
Foreign currency translation
adjustment............................
Comprehensive loss......................
--------- ------- ---------- ---- ---- -----
Balance at June 30, 1997.................. -- -- 2,020,256 298 776 --
Accretion of redeemable preferred stock to
redemption value........................
Issuance of common stock in exchange for
redemption rights of outstanding
preferred stock......................... 29,167 4 73
Exchange of class A convertible preferred
stock for series A convertible preferred
stock, which was redesignated as series
C-2 convertible preferred stock......... 1,855,688 8,382
Exchange of convertible preferred stock
for series B convertible preferred
stock, which was redesignated as series
C-3 convertible preferred stock......... 666,666 1,943
Redesignation of common stock as series
C-1 convertible preferred stock......... 4,918,616 1,151 (2,049,423) (302) (849)
Comprehensive income:
Net income..............................
Foreign currency translation
adjustment............................
Comprehensive income....................
--------- ------- ---------- ---- ---- -----
Balance at June 30, 1998.................. 7,440,970 11,476 -- -- -- --
Conversion of promissory notes to series
C-3 convertible preferred stock......... 698,609 890
Issuance of common stock.................. 551,287 6 192
Exercise of stock options................. 1,890 -- 1
Deferred compensation associated with
stock options........................... 77 (77)
Amortization of deferred compensation..... 10
Comprehensive income:
Net income..............................
Foreign currency translation
adjustment............................
Comprehensive income....................
--------- ------- ---------- ---- ---- -----
Balance at June 30, 1999.................. 8,139,579 12,366 553,177 6 270 (67)
Exercise of stock options (unaudited)..... 7,150 -- 15
Amortization of deferred compensation
(unaudited)............................. 10
Comprehensive income (unaudited):
Net income..............................
Foreign currency translation
adjustment............................
Comprehensive income....................
--------- ------- ---------- ---- ---- -----
Balance at January 1, 2000 (unaudited).... 8,139,579 $12,366 560,327 $ 6 $285 $ (57)
========= ======= ========== ==== ==== =====

<CAPTION>
NOTES ACCUMULATED TOTAL
RECEIVABLE COMPREHENSIVE OTHER STOCKHOLDERS'
FROM INCOME ACCUMULATED COMPREHENSIVE EQUITY
STOCKHOLDERS (LOSS) DEFICIT INCOME (DEFICIT)
------------- --------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1996.................. $ -- $ (7,292) $914 $(5,341)
Issuance of common stock.................. 37
Accretion of redeemable preferred stock to
redemption value........................ (741) (741)
Comprehensive income (loss):
Net loss................................ $(4,270) (4,270) (4,270)
Foreign currency translation
adjustment............................ (269) (269) (269)
-------
Comprehensive loss...................... (4,539)
----- ======= -------- ---- -------
Balance at June 30, 1997.................. -- (12,303) 645 (10,584)
Accretion of redeemable preferred stock to
redemption value........................ (80) (80)
Issuance of common stock in exchange for
redemption rights of outstanding
preferred stock......................... 77
Exchange of class A convertible preferred
stock for series A convertible preferred
stock, which was redesignated as series
C-2 convertible preferred stock......... 8,382
Exchange of convertible preferred stock
for series B convertible preferred
stock, which was redesignated as series
C-3 convertible preferred stock......... 1,943
Redesignation of common stock as series
C-1 convertible preferred stock......... --
Comprehensive income:
Net income.............................. 189 189 189
Foreign currency translation
adjustment............................ 107 107 107
-------
Comprehensive income.................... 296
----- ======= -------- ---- -------
Balance at June 30, 1998.................. -- (12,194) 752 34
Conversion of promissory notes to series
C-3 convertible preferred stock......... 890
Issuance of common stock.................. (198) --
Exercise of stock options................. 1
Deferred compensation associated with
stock options........................... --
Amortization of deferred compensation..... 10
Comprehensive income:
Net income.............................. 481 481 481
Foreign currency translation
adjustment............................ (146) (146) (146)
-------
Comprehensive income.................... 335
----- ======= -------- ---- -------
Balance at June 30, 1999.................. (198) (11,713) 606 1,270
Exercise of stock options (unaudited)..... 15
Amortization of deferred compensation
(unaudited)............................. 10
Comprehensive income (unaudited):
Net income.............................. 433 433 433
Foreign currency translation
adjustment............................ 35 35 35
-------
Comprehensive income.................... $ 468
----- ======= -------- ---- -------
Balance at January 1, 2000 (unaudited).... $(198) $(11,280) $641 $ 1,763
===== ======== ==== =======
</TABLE>

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

F-5
<PAGE>
MOLDFLOW CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
---------------------------
YEAR ENDED JUNE 30, JANUARY 2, JANUARY 1,
------------------------------ 1999 2000
1997 1998 1999 (UNAUDITED) (UNAUDITED)
-------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $(4,270) $ 189 $ 481 $ 203 $ 433
Adjustments to reconcile to net cash provided by (used in)
operating activities:
Loss on disposal of fixed assets........................ -- -- 18 7 8
Depreciation and amortization........................... 3,138 810 881 426 417
Provision for doubtful accounts......................... (95) 256 29 9 7
Foreign exchange losses................................. 122 51 97 134 56
Common stock issued for services........................ 37 -- -- -- --
Changes in assets and liabilities:
Accounts receivable................................... (4) (1,901) (7) (88) (23)
Prepaid expenses, other current assets and
inventories......................................... 361 (47) 209 383 (382)
Accounts payable...................................... (463) 122 437 134 (208)
Accrued expenses...................................... (82) 889 (1,104) (1,048) 24
Deferred revenue...................................... 643 442 374 (284) (189)
Other assets.......................................... 5 (40) (209) (205) 67
------- ------- ------- ------- ------
Net cash provided by (used in) operating
activities........................................ (608) 771 1,206 (329) 210
------- ------- ------- ------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets................................. (723) (729) (863) (683) (391)
Proceeds from fixed asset disposals....................... -- -- 9 -- 4
Acquisition of business, net of cash acquired............. (431) -- -- -- --
------- ------- ------- ------- ------
Net cash used in investing activities............... (1,154) (729) (854) (683) (387)
------- ------- ------- ------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable to stockholder.... 542 460 -- -- --
Borrowings on bank notes payable.......................... 1,060 1,495 1,412 349 1,000
Payments on bank notes payable............................ (78) (1,124) (2,120) (56) (803)
Payments on capital lease obligations..................... (86) (115) (200) (99) (78)
Proceeds from issuance of common stock.................... -- -- 1 1 15
------- ------- ------- ------- ------
Net cash provided by (used in) financing
activities........................................ 1,438 716 (907) 195 134
------- ------- ------- ------- ------
Effect of exchange rate changes on cash and cash
equivalents............................................... (305) (67) 95 41 131
------- ------- ------- ------- ------
NET INCREASE (DECREASE) IN CASH............................. (629) 691 (460) (776) 88
Cash and cash equivalents, beginning of period.............. 1,638 1,009 1,700 1,700 1,240
------- ------- ------- ------- ------
Cash and cash equivalents, end of period.................... $ 1,009 $ 1,700 $ 1,240 $ 924 $1,328
======= ======= ======= ======= ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 145 $ 183 $ 225 $ 80 $ 69
Cash paid for income taxes................................ 416 112 157 52 109
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING
ACTIVITIES:
Acquisition of fixed assets under capital leases.......... $ 88 $ 18 $ -- $ -- $ 4
Conversion of notes payable to stockholder into series C-3
convertible preferred stock............................. -- -- 890 890 --
Issuance of common stock in exchange for notes
receivable.............................................. -- -- 198 198 --
</TABLE>

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

F-6
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND NATURE OF BUSINESS

Moldflow Corporation (the "Company") was incorporated in Delaware, USA in
January 1997. The Company was formed as the successor corporation to Moldflow
International Pty. Ltd. ("MIPL"), an Australian corporation that had been
incorporated in March 1994. On August 5, 1997, the stockholders of MIPL effected
a reorganization of that company's shares, resulting in MIPL becoming a wholly
owned subsidiary of the Company, and the stockholders of MIPL becoming
stockholders of the Company (Note 7). Given the carryover of the stockholders'
interests in MIPL to the Company, these consolidated financial statements
present together the financial position and results of operations of MIPL and
the Company before and after the reorganization.

The Company was formed to design, develop, manufacture and market computer
software applications for the design, engineering and manufacture of injection
molded plastic parts and, as such, revenues are derived from the plastic design
and manufacturing industry. The Company sells its products primarily to
customers in the United States, Europe, Asia and Australia.

The Company's fiscal year end is June 30. References to 1997, 1998 or 1999
mean the fiscal year ended June 30, unless otherwise indicated. During the
fiscal year, the Company follows a schedule in which each interim quarterly
period ends on the Saturday of the thirteenth full week of the reporting period.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and all of its wholly owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in the consolidated financial statements.

FOREIGN CURRENCY TRANSLATION

Assets and liabilities of international subsidiaries, whose functional
currency is the local currency, are translated at the rates in effect at the
balance sheet date and translation adjustments are recorded in stockholders'
equity. Statement of operations amounts are translated at the average rate for
the year. Foreign currency transaction gains and losses are included in other
income and expense.

CASH AND CASH EQUIVALENTS

All highly liquid investments purchased with a maturity of three months or
less are considered to be cash equivalents. The Company invests excess cash
primarily in over-night investments held at major financial institutions.
Accordingly, these investments are subject to minimal credit and market risk and
are reported at cost, which approximates fair value.

ACCOUNTS RECEIVABLE, CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

Financial instruments which potentially expose the Company to concentrations
of credit risk include only accounts receivable. The Company's customer base
consists of a large number of geographically dispersed customers. The Company
maintains reserves for potential credit losses on accounts receivable and such
losses, in the aggregate, have not exceeded management expectations.

Revenue of $2,206,000 (15% of total revenue), $2,074,000 (13% of total
revenue) and $1,888,000 (9% of total revenue) was attributable to one customer
in fiscal 1997, 1998 and 1999, respectively. At June 30, 1998 and 1999, accounts
receivable from that customer accounted for

F-7
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
$462,000 (10% of total accounts receivable) and $153,000 (3% of total accounts
receivable), respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash and cash equivalents,
short-term investments, accounts receivable, accounts payable, accrued expenses,
deferred revenue, and long-term debt. The carrying amounts of these instruments
at June 30, 1999 approximate their fair values.

INVENTORIES

Inventories are predominantly finished goods and are stated at the lower of
cost, using the first-in, first-out method, or market.

FIXED ASSETS

Fixed assets are recorded at cost and are depreciated using the
straight-line method over their estimated useful lives. Fixed assets held under
capital leases are stated at the lower of the fair market value of the related
asset or the present value of the minimum lease payments at the inception of the
lease and are amortized using the straight-line method over the shorter of the
life of the related asset or the term of the lease.

IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of," the Company records impairment losses on long-lived
assets used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. Through June 30, 1999, the Company had not
recognized an impairment loss on its long-lived assets.

REVENUE RECOGNITION

Revenue is derived from the licensing of computer software products and from
services consisting of maintenance and support, consulting, material testing and
training. Effective July 1, 1998, the Company adopted the guidelines of
Statement of Position (SoP) 97-2, "Software Revenue Recognition" ("SoP 97-2"),
which provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions.

The Company recognizes revenue from sales of software licenses upon product
shipment and upon receipt of a signed purchase order or contract, provided that
the license fee is fixed and determinable, collection is probable and all other
revenue recognition criteria of SoP 97-2 are met. The Company's software
products do not require significant modification or customization. Installation
of the products is generally routine, requires insignificant effort and is not
essential to the functionality of the product. The Company recognizes revenue
from maintenance and support ratably over the contract period and from training
and other related services as the services are performed. Maintenance and
support contracts are often entered into at the same time as the sale of our
software licenses. In accordance with SOP 97-2, the Company considers these
multiple elements of a single arrangement. Payment for this arrangement is
typically received up-front, and the total fee is then allocated ratably to
these elements based upon vendor specific objective evidence of fair

F-8
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

value for each, which is determined based upon the prices charged to customers
when these elements are sold separately; the revenue allocated to each is then
recognized as described above for these elements.

SOFTWARE DEVELOPMENT COSTS

Costs associated with the research and development of the Company's products
are expensed as incurred. Costs associated with the development of computer
software are expensed prior to establishing technological feasibility, as
defined by SFAS No. 86, "Accounting for the Costs of Computer Software to be
Sold, Leased, or Otherwise Marketed," and capitalized thereafter until
commercial release of the software products. Software development costs eligible
for capitalization have not been significant to date.

ADVERTISING COSTS

The Company expenses the cost of advertising as incurred, or as appropriate,
the first time advertising takes place. Advertising expense for the years ended
June 30, 1997, 1998 and 1999 was $252,000, $207,000 and $741,000, respectively.

ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation to employees in accordance
with Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock
Issued to Employees," and related interpretation. Accordingly, compensation
expense is recorded for options issued to employees in fixed amounts to the
extent that the fixed exercise prices are less than the fair market value of the
Company's common stock at the date of grant. The Company follows the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation"
(Note 9). All stock-based awards to non-employees are accounted for at their
fair value in accordance with SFAS No. 123.

NET INCOME (LOSS) PER COMMON SHARE--HISTORICAL

The Company computes net income (loss) per common share in accordance with
SFAS No. 128, "Earnings Per Share," ("SFAS 128") and SEC Staff Accounting
Bulletin No. 98 ("SAB 98"). Under the provisions of SFAS 128 and SAB 98, basic
earnings per common share is computed by dividing net income (loss) available to
common stockholders by the weighted-average number of common shares outstanding.
Diluted earnings per common share is computed by dividing net income (loss) by
the weighted-average number of common shares outstanding and, when dilutive, all
potential common equivalent shares outstanding including restricted stock,
options and warrants. The dilutive effect of options and warrants to purchase
common stock is determined under the treasury stock method using the average
fair value of common stock for the period (Note 10).

NET INCOME PER COMMON SHARE--PRO FORMA (UNAUDITED)

Pro forma net income per common share for the year ended June 30, 1999 and
the six months ended January 1, 2000 is calculated assuming that the automatic
conversion of all convertible preferred stock outstanding had occurred at
July 1, 1998 and July 1, 1999, respectively (Note 7). The calculation of pro
forma net income per common share for the year ended June 30, 1999 does not
include 411,000 potential shares of common stock equivalents, as their inclusion
would be antidilutive. The calculation of pro forma net income per common share
for the six months ended

F-9
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
January 1, 2000 does not include 289,000 potential shares of common stock
equivalents, as their inclusion would be antidilutive.

SEGMENT AND GEOGRAPHIC INFORMATION

As required, the Company adopted SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information," on July 1, 1998 (Note 15). SFAS No. 131
establishes standards for reporting information on operating segments in interim
and annual financial statements. SFAS No. 131 relates to disclosure only and had
no impact on the Company's consolidated financial position or results of
operations.

COMPREHENSIVE INCOME

As required, the Company adopted SFAS No. 130, "Reporting Comprehensive
Income" on July 1, 1998. Under SFAS No. 130, the Company is required to display
comprehensive income and its components as part of the Company's full set of
financial statements. The measurement and presentation of net income did not
change. Comprehensive income is comprised of net income and other comprehensive
income. Other comprehensive income includes certain changes in equity that are
excluded from net income. At June 30, 1999, accumulated other comprehensive
income was comprised solely of cumulative foreign currency translation
adjustments. The individual components of comprehensive income are reflected in
the consolidated statement of stockholders' equity for the years ended June 30,
1997, 1998 and 1999.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The interim consolidated financial statements and related notes as of
January 1, 2000 and for the six month periods ended January 2, 1999 and
January 1, 2000 are unaudited. In the opinion of the Company's management, the
unaudited interim consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for these
interim periods. The results of operations for the six months ended January 1,
2000 are not necessarily indicative of the results of operations for the year
ended June 30, 2000 or any other future period.

UNAUDITED PRO FORMA BALANCE SHEET

Under the terms of the Company's convertible preferred stock (Note 7), all
such preferred stock will be converted automatically into 5,488,450 shares of
common stock in connection with an initial public offering of common stock.
Also, the holder of an outstanding warrant to purchase common stock (Note 6) has
committed to exercise the warrant in connection with the initial public offering
of common stock; the warrant is exercisable for 20,833 shares of common stock at
$7.20 per share. The unaudited pro forma balance sheet reflects the conversion
of the preferred stock and the exercise of the warrant as if the conversion and
exercise had occurred on January 1, 2000.

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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

F-10
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS

In December 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
No. 98-9, "Modification of SOP No. 97-2, Software Revenue Recognition, with
Respect to Certain Transactions" ("SOP 98-9"). SOP 98-9 amends SOP 97-2 to
require recognition of revenue using the "residual method" in circumstances
outlined in SOP 98-9. Under the residual method, revenue is recognized as
follows: (1) the total fair value of undelivered elements, as indicated by
vendor specific objective evidence, is deferred and subsequently recognized in
accordance with the relevant sections of SOP 97-2 and (2) the difference between
the total arrangement fee and the amount deferred for the undelivered elements
is recognized as revenue related to the delivered elements. SOP 98-9 is
effective for transactions entered in fiscal years beginning after March 15,
1999 (fiscal 2000 for the Company). Also, the provisions of SOP 97-2 that were
deferred by SOP 98-4 will continue to be deferred until the date SOP 98-9
becomes effective. The Company does not expect that the adoption of SOP 98-9
will have a significant impact on the Company's results of operations or
financial position.

In June 1998, the Financial Accounting Standard Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133").
SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as "derivatives"), and for hedging
activities. SFAS 133, as amended by SFAS 137, is effective for all fiscal
quarters of all years beginning after June 15, 2000, with earlier application
encouraged. The Company does not currently use derivative instruments or engage
in hedging activities.

3. FIXED ASSETS

Fixed assets consist of the following (dollars in thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL JUNE 30,
LIFE -------------------
(YEARS) 1998 1999
--------- -------- --------
<S> <C> <C> <C>
Land........................................... -- $ 522 $ 562
Buildings...................................... 30 1,275 1,392
Equipment...................................... 5-7 1,724 2,149
Computer equipment............................. 3-5 1,276 1,491
Furniture and fixtures......................... 7-10 240 493
Vehicles....................................... 3-7 20 --
Computers and equipment under capital leases... 3-7 657 708
Leasehold improvements......................... -- 20
------- -------
5,714 6,815
Less--accumulated depreciation and
amortization................................. (2,736) (3,705)
------- -------
$ 2,978 $ 3,110
======= =======
</TABLE>

Depreciation expense, including amortization of assets under capital leases,
was $768,000, $726,000 and $881,000 for the years ended June 30, 1997, 1998 and
1999, respectively. Accumulated amortization for assets held under capital
leases was $342,000, $425,000 and $596,000 at June 30, 1997, 1998 and 1999,
respectively.

F-11
<PAGE>
MOLDFLOW CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4. ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
JUNE 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Employee wages and commissions............................. $ 411 $ 565
Employee leave costs....................................... 685 604
Employee retirement costs.................................. 389 344
Professional fees.......................................... 189 591
Other...................................................... 1,865 731
------ ------
$3,539 $2,835
====== ======
</TABLE>

5. NOTES PAYABLE TO STOCKHOLDERS

In January 1997, certain subsidiaries of the Company entered into loan
agreements with stockholders of the Company which provided the Company with a
maximum borrowing amount of $1,073,000. At June 30, 1998, amounts outstanding
under the notes were $890,000 with accrued interest of $107,000. Interest
expense incurred by the Company under these agreements in the year ended
June 30, 1998 was $85,000.

On July 6, 1998, the Company converted the outstanding principal balance of
the notes of $890,000 into 698,609 shares of the Company's series C-3
convertible preferred stock. Accrued interest of $107,000 was paid in cash upon
conversion.

6. BANK NOTES PAYABLE

LINES OF CREDIT

In April 1998, the Company entered into an agreement with a bank for a
revolving credit facility totaling $3,750,000. In November 1998, the overall
facility was reduced to $3,250,000. Borrowings under the facility are secured by
certain assets of the Company and its Australian subsidiaries, and by a standby
letter of credit issued by an Australian bank. Available borrowings under the
line are computed based upon a percentage of domestic and foreign accounts
receivable and the value of the standby letter of credit in the amount of
$754,000. The line bears interest at the rate of prime plus 1.25% (9.0% at
June 30, 1999) and prime plus 1.50% (9.25% at June 30, 1999) on the domestic and
foreign lines, respectively, and was subject to a commitment fee of one half of
one percent. All outstanding principal plus accrued interest was due in
October 1999.

At June 30, 1998 and 1999, borrowings under the facility were $1,475,000 and
$767,000, respectively. The agreement contains covenants which, among other
matters, restrict or limit the ability of the Company to pay dividends, incur
indebtedness, merge, acquire or sell assets. The Company must also maintain
certain financial ratios regarding liquidity, profitability and net worth, among
other restrictions. At June 30, 1999, the Company was in compliance with these
covenants.

F-12
<PAGE>
MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. BANK NOTES PAYABLE (CONTINUED)

In connection with the facility, the Company issued warrants to purchase up
to 20,833 shares of the Company's common stock. These warrants are immediately
exercisable at $7.20 per share and have an expiration date of April 2005. The
value ascribed to these warrants was determined by management using the
Black-Scholes pricing model with the following assumptions: risk-free interest
rate of 5.8%; expected life of 7 years; expected volatility of 100%; and no
dividend yield. The resulting value of the warrants was not significant.

UNAUDITED--On October 22, 1999, the term of the facility was extended to
December 31, 2000. All other significant provisions of the facility remained
unchanged. In addition, the holder of the warrant has committed to exercise the
warrant in connection with the initial public offering of common stock.

EQUIPMENT LOANS

At June 30, 1998 and 1999, the Company had $62,000 and $65,000,
respectively, outstanding under various equipment term loans. The loans bear
interest at variable rates and require monthly payments of principal and
interest through 2000. At June 30, 1998 and 1999, the long-term portion of the
loans amounted to $12,000 and $0, respectively, and are included in other
long-term liabilities.

SECURED LOAN

At June 30, 1997, the Company had $1,217,000 outstanding under a secured
line of credit which was collateralized by real estate and substantially all
other assets of the Company. In April 1998, in connection with the revolving
credit facility described above, the note was repaid in full.

7. CONVERTIBLE PREFERRED STOCK

On June 30, 1997, the Board of Directors of MIPL voted to enter into an
agreement with its stockholders and with the Company, whereby MIPL would
reacquire all of its outstanding and issued shares and issue an equal number of
common and convertible preferred shares to the Company. Simultaneously under the
arrangement, the former stockholders of MIPL would become stockholders of the
Company. Upon execution of the share exchange on August 5, 1997, the Company
effectively reorganized and MIPL became a wholly owned subsidiary of the
Company. The exchange resulted in the issuance by the Company of common stock,
series A convertible preferred stock, and series B convertible preferred stock.

Prior to the exchange, the MIPL preferred stockholders' redemption rights
were removed. As consideration for the removal of these redemption rights, these
stockholders received 29,167 common shares of MIPL which were valued at $77,000.

On March 9, 1998, the Company redesignated the previously issued common,
series A convertible preferred and series B convertible preferred into shares of
series C-1, C-2 and C-3 convertible preferred stock, respectively. In addition,
on that date, the Company increased the number of authorized common shares from
4,166,667 to 8,333,333 and increased the number of all classes of authorized
convertible preferred shares from 5,732,032 to 8,254,386.

F-13
<PAGE>
MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. CONVERTIBLE PREFERRED STOCK (CONTINUED)
On July 6, 1998, the Company converted the outstanding principal balance of
$890,000 in notes payable to stockholders of the Company into 698,609 shares of
newly designated series C-3 convertible preferred stock.

Convertible preferred stock consists of the following (amounts in thousands,
except share data):

<TABLE>
<CAPTION>
JUNE 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Series C-1 convertible preferred stock, $0.01 par value;
4,918,616 shares authorized, issued and outstanding at
June 30, 1998 and 1999 (liquidation preference of
$7,181 at June 30, 1999)............................... $ 1,151 $ 1,151

Series C-2 convertible preferred stock, $0.01 par value;
1,855,688 shares authorized, issued and outstanding at
June 30, 1998 and 1999 (liquidation preference of
$10,058 at June 30, 1999).............................. 8,382 8,382

Series C-3 convertible preferred stock, $0.01 par value;
1,480,082 shares authorized; 666,666 and 1,365,275
shares issued and outstanding at June 30, 1998 and
1999, respectively (liquidation preference of $1,993 at
June 30, 1999)......................................... 1,943 2,833
------- -------
$11,476 $12,366
======= =======
</TABLE>

The series C-1, C-2 and C-3 convertible preferred stock have the following
characteristics:

VOTING

Each holder of the series C-1, C-2 and C-3 convertible preferred stock is
entitled to the number of votes equal to the number of whole shares of common
stock into which such holders' shares are convertible. The holders of the
series C-1, C-2 and C-3 convertible preferred stock shall vote together with the
holders of common stock as a single class.

DIVIDENDS

The holders of the series C-1, C-2 and C-3 convertible preferred stock are
entitled to dividends when and if declared by the Board of Directors subject to
any preferential dividend rights of any other then outstanding series of
preferred stock. In addition, the holders of series C-1, C-2 and C-3 convertible
preferred stock are entitled to receive a payment equal to any dividend declared
or paid by the Company in respect to common stock for each share of common stock
into which the convertible preferred stock is then convertible.

LIQUIDATION PREFERENCE

In the event of any liquidation, dissolution, or winding up of the affairs
of the Company, the holders of the series C-1, C-2 and C-3 convertible preferred
stock shall rank equally among themselves and be entitled to be paid out of the
assets of the Company available for distribution prior and in preference to the
holders of common stock.

F-14
<PAGE>
MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. CONVERTIBLE PREFERRED STOCK (CONTINUED)
The holders of the series C-1, C-2 and C-3 convertible preferred stock are
entitled to receive upon liquidation an amount equal to $1.46 per share, $5.42
per share and $1.46 per share, respectively, plus all accrued and unpaid
dividends. After the payment of all preferential amounts, the series C-1, C-2
and C-3 preferred stockholders and any other class ranking equal shall be
entitled to receive, on a pro-rata basis with the holders of the common stock,
the remaining funds and assets of the Company available for distribution to its
stockholders.

CONVERSION

Each share of the series C-1, C-2 and C-3 preferred stock is convertible, at
the option of the holder, into common stock of the Company based on a formula
which currently would result in a 1-for-0.41667 exchange for the series C-1 and
C-3 holders and a 1-for-1.54668 exchange for the series C-2 holders. All shares
of series C-1, C-2 and C-3 preferred stock will automatically convert into
common stock in connection with an initial public offering of common stock.

8. COMMON STOCK

Each share of common stock entitles the holder to one vote on all matters
submitted to a vote of the Company's stockholders. Common stockholders are
entitled to dividends when and if declared by the Board of Directors, subject to
the preferential rights of the series C-1, C-2 and C-3 preferred stockholders.

At June 30, 1999, the Company had 6,202,178 shares of its common stock
reserved for issuance upon the conversion of the series C-1, C-2 and C-3
preferred stock, warrants and instruments issued under the Company's Equity
Incentive Plan.

On July 1, 1998, the Company issued 551,287 shares of its common stock to
certain officers and senior managers of the Company for a cash purchase price of
$198,000. In connection with this issuance, the employees entered into Stock
Restriction Agreements that contain restrictions on the sale of the shares by
the employees and loan agreements evidenced by promissory notes bearing interest
at 5.77% and maturing on June 30, 2003. The shares purchased by the employees
under the Stock Restriction Agreements vest on varying schedules through fiscal
year 2003.

9. STOCK OPTION PLAN

In August 1997, the Company adopted the 1997 Equity Incentive Plan (the
"Plan") which provides for the grant of incentive stock options, non-qualified
stock options, stock awards and stock purchase rights for the purchase of up to
931,303 shares of the Company's common stock by officers, employees, consultants
and directors of the Company. In April 1999, the number of shares available
under the Plan was increased to 1,537,158 shares. The Board of Directors is
responsible for administration of the Plan. The Board determines the term of
each option, the option exercise price, the number of shares for which each
option is granted and the rate at which each option is exercisable. Incentive
stock options may be granted to any officer or employee at an exercise price per
share of not less than the fair value per common share on the date of the grant
(not less than 110% of fair value in the case of holders of more than 10% of the
Company's voting stock) and with a term not to exceed ten years from the date of
the grant (five years for incentive stock options granted to holders of more
than 10% of the Company's voting stock). Non-qualified stock options may be
granted to any officer, employee, consultant or director at an exercise price
per share of not less than the book value per share.

F-15
<PAGE>
MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. STOCK OPTION PLAN (CONTINUED)
In January 1999 an amendment was made to certain employee stock options
which resulted in a determinable measurement date. Deferred compensation of
$77,000 was recorded, in accordance with APB No. 25, and will be amortized over
the related vesting period. Related compensation expense of $10,000 was recorded
during the year ended June 30, 1999.

Except for the options noted above, no compensation cost has been recognized
for employee stock-based compensation for the years ended June 30, 1997, 1998
and 1999. Had compensation cost been determined based on the fair value at the
grant dates for awards in 1997, 1998 and 1999 consistent with the provisions of
SFAS No. 123, the Company's net income (loss) available to common stockholders
would have been the pro forma amounts indicated below. Because options vest over
several years and additional option grants are expected to be made in future
years, the pro forma results are not representative of the pro forma results for
future years.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Net income (loss) available to common stockholders:
As reported....................................... $(5,011) $ 109 $ 481
Pro forma......................................... (5,011) (58) 462
Net income (loss) per common share:
Basic--as reported................................ $ -- $ -- $1.82
Pro forma basic................................... -- -- 1.74
Diluted--as reported.............................. -- 0.04 0.08
Pro forma diluted................................. -- -- 0.07
</TABLE>

The fair value of each option grant was estimated on the date of grant under
the minimum value method using the Black-Scholes option-pricing model with the
following assumptions for grants: no dividend yield; volatility of 0.001%;
risk-free interest rates of 5.8%, 5.8% and 4.6% for 1997, 1998 and 1999,
respectively; and expected option life of 8 years.

A summary of the status of the Company's stock options as of June 30, 1998
and 1999 and MIPL's stock options as of June 30, 1997, and changes during the
years then ended, is presented below:

<TABLE>
<CAPTION>
1997 1998 1999
------------------- --------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year..... 62,500 $7.80 -- $ -- 795,624 $2.45
Granted.............................. -- -- 1,267,277 1.15 375,938 4.44
Exercised............................ -- -- -- -- (553,177) 0.36
Canceled............................. (62,500) 7.80 (471,653) 2.45 (52,280) 0.36
-------- ---------- ---------
Outstanding at end of year........... -- -- 795,624 2.45 566,105 3.07
======== ========== =========
Options exercisable at end of year... -- 254,392 68,382
Weighted average fair value of
options granted during the year.... $ -- $ 0.41 $ 1.37
Options available for future grant... -- 135,679 417,877
</TABLE>

F-16
<PAGE>
MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. STOCK OPTION PLAN (CONTINUED)
In conjunction with the redesignation of the Company's common and preferred
stock in March 1998 (Note 7), 390,842 options with an exercise price of $2.64
were exchanged for 697,910 options with an exercise price of $0.36. The exercise
price at the time of the exchange was considered the fair market value of the
common stock of the Company subsequent to the redesignation. All other terms of
the new options remained consistent with the terms of the exchanged options.

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

<TABLE>
<CAPTION>
WEIGHTED AVERAGE
REMAINING
CONTRACTUAL LIFE SHARES
EXERCISE PRICE SHARES (YEARS) EXERCISABLE
- -------------- -------- ---------------- -----------
<S> <C> <C> <C>
$0.36...................................... 196,751 6.2 68,382
$0.72-1.20................................. 101,958 7.1 --
$4.80-6.00................................. 267,396 7.8 --
------- ------
$0.36-6.00................................. 566,105 7.1 68,382
======= ======
</TABLE>

10. NET INCOME (LOSS) PER COMMON SHARE

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
----------------------------------
1997 1998 1999
-------- ---------- ----------
(IN THOUSANDS EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C>
Net income (loss)......................... $(4,270) $ 189 $ 481
Accretion on preferred stock.............. 741 80 --
------- ---------- ----------
Net income (loss) available to common
stockholders............................ $(5,011) $ 109 $ 481
======= ========== ==========
Weighted average shares used in computing
net income (loss) per common share--
basic................................... -- -- 264,731
------- ---------- ----------
Effect of dilutive securities:
Restricted stock...................... -- -- 286,741
Employee stock options................ -- 34,207 162,264
Convertible preferred stock........... -- 5,193,717 5,452,064
------- ---------- ----------
Dilutive potential common shares........ -- 5,227,924 5,901,069
------- ---------- ----------
Weighted average shares used in computing
net income (loss) per common share--
diluted................................. -- 5,227,924 6,165,800
======= ========== ==========
Net income (loss) per common
share--basic............................ $ -- $ -- $ 1.82
Net income (loss) per common share--
diluted................................. $ -- $ 0.04 $ 0.08
</TABLE>

Under the provisions of SFAS 128, the computation of basic and diluted net
income (loss) per common share has been adjusted retroactively for all periods
presented to reflect the redesignation of the Company's common and preferred
stock in March 1998 (Note 7). As a result of this treatment

F-17
<PAGE>
MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. NET INCOME (LOSS) PER COMMON SHARE (CONTINUED)
of the redesignation, the Company had no common stock outstanding prior to
June 30, 1998 for purposes of computing net income (loss) per common share.
Accordingly, basic net income (loss) per common share was zero for the years
ended June 30, 1997 and 1998.

Options and warrants to purchase 680,000 and 432,000 shares of common stock
were outstanding for the years ended June 30, 1998 and 1999, respectively, but
were not included in the calculation of diluted net income per common share, as
their inclusion would be antidilutive.

11. INCOME TAXES

The income (loss) before income taxes consists of the following (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Domestic income (loss)............................. $ 1,030 $(57) $(3,335)
Foreign income (loss).............................. (4,929) 409 3,992
------- ---- -------
Income (loss) before taxes....................... $(3,899) $352 $ 657
======= ==== =======
</TABLE>

The provision for income taxes consists of the following (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal................................................... $ 14 $ 10 $ 5
State..................................................... 41 47 18
Foreign................................................... 316 184 153
------- ---- -------
Total current........................................... 371 241 176
------- ---- -------
Deferred:
Federal................................................... -- (78) --
State..................................................... -- -- --
Foreign................................................... -- -- --
------- ---- -------
Total deferred.......................................... -- (78) --
------- ---- -------
$ 371 $163 $ 176
======= ==== =======
</TABLE>

The reconciliation of the provision for income taxes computed at the U.S.
federal statutory tax rate to the actual provision is as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Statutory federal rate of 34%............................... $(1,326) $120 $223
Foreign withholding taxes................................... 323 36 79
State income taxes, net of federal benefit.................. 29 (51) 12
Permanent differences....................................... 516 11 (94)
Change in valuation allowance............................... 881 27 (54)
Foreign tax rate differential............................... 5 35 20
Other....................................................... (57) (15) (10)
------- ---- ----
$ 371 $163 $176
======= ==== ====
</TABLE>

F-18
<PAGE>
MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. INCOME TAXES (CONTINUED)

The deferred tax assets and liabilities consist of the following (in
thousands):

<TABLE>
<CAPTION>
JUNE 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards....................... $ 4,071 $ 4,472
Foreign tax credits.................................... 311 326
Accrued expenses not deductible for tax purposes....... 239 133
Revenue deferred for financial purposes................ 1,628 1,614
Other.................................................. 327 274
------- -------
Gross deferred tax assets............................ 6,576 6,819
Deferred tax asset valuation allowance................. (6,293) (6,536)
------- -------
Total deferred tax assets............................ 283 283
Deferred tax liabilities................................. (205) (205)
------- -------
Net deferred tax assets.............................. $ 78 $ 78
======= =======
</TABLE>

At June 30, 1999, the Company had available federal, state and foreign net
operating loss carryforwards of approximately $4,375,000, $3,037,000 and
$7,844,000, respectively. These carryforwards expire at various times through
2014 if not utilized. Under the provisions of the U.S. Internal Revenue Code,
certain substantial changes in the Company's ownership may limit the amount of
federal net operating loss carryforwards and tax credit carryforwards which
could be utilized annually to offset federal future taxable income and taxes
payable.

Under generally accepted accounting principles, the benefit associated with
future deductible differences is recognized if it is more likely than not that
the benefit will be realized. Management believes that, based on the Company's
historical results of operations, it is more likely than not that a substantial
amount of the Company's deferred tax assets will not be realized. Accordingly,
the Company has recorded a valuation allowance of $6,293,000 and $6,536,000 at
June 30, 1998 and 1999, respectively. Management believes that the net deferred
tax asset represents management's best estimate, based upon the weight of
available evidence, of the deferred tax asset that will be realized. If such
evidence were to change, based upon near-term operating results and longer-term
projections, the amount of the valuation allowance recorded against the gross
deferred tax asset may be decreased or increased.

12. BENEFIT PLANS

401(K) SAVINGS PLAN

The Company has established a retirement savings plan under Section 401(k)
of the U.S. Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan covers
substantially all U.S. based employees of the Company who meet minimum age and
service requirements, and allows Participants to defer a portion of their annual
compensation on a pre-tax basis. Matching contributions to the 401(k) Plan may
be made at the discretion of the Company. The Company contributed $87,000,
$132,000 and $175,000 to the 401(k) Plan in the years ended June 30, 1997, 1998
and 1999, respectively.

F-19
<PAGE>
MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. BENEFIT PLANS (CONTINUED)
SUPERANNUATION PLAN

Employees of the Company's Australian subsidiary are covered by a defined
contribution Super-annuation Plan. The Superannuation Plan covers substantially
all Australian employees and, under Australian law, the Company is required to
contribute 7% of taxable compensation to this plan. The Company contributed
$226,000, $157,000 and $201,000 to the Superannuation Plan in the years ended
June 30, 1997, 1998 and 1999, respectively.

13. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company leases certain of its office space and certain office equipment
under noncancelable operating leases which expire at various dates through 2009.
The Company also leases computers and other equipment under capital leases that
expire through 2001. Future minimum lease commitments at June 30, 1999 are as
follows (in thousands):

<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING JUNE 30, LEASES LEASES
- -------------------- --------- --------
<S> <C> <C>
2000...................................................... $ 958 $206
2001...................................................... 817 11
2002...................................................... 443 --
2003...................................................... 190 --
2004...................................................... 177 --
Thereafter................................................ 729 --
------ ----
$3,314 217
======
Less: portion representing interest 15
----
$202
====
</TABLE>

Total rent expense under these operating leases was $297,000, $515,000 and
$664,000 for the years ended June 30, 1997, 1998 and 1999, respectively.

LITIGATION

On February 17, 1999, the Company filed suit against a former employee and
the individual's current employer, a competitor of the Company, seeking
immediate and permanent injunctive relief in connection with the theft and
misappropriation of the Company's proprietary trade secrets. Specifically, the
suit alleges, among other things, (i) misappropriation of trade secrets,
proprietary information, unfair competition and civil conspiracy, (ii) breach of
contract, implied covenant of good faith and fiduciary duty, and (iii) fraud
against the individual in his actions to breach his fiduciary duties. The
complaint seeks permanent injunction against the defendants, actual
consequential and punitive damages, and recovery of all legal costs.

Counterclaims, and amendments thereto, have been filed against the Company,
alleging that the Company (i) breached certain federal antitrust laws and
(ii) committed defamation and trade libel. The Company has moved to dismiss
these amended counterclaims. While the outcome of these

F-20
<PAGE>
MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

13. COMMITMENTS AND CONTINGENCIES (CONTINUED)
matters cannot be predicted with certainty, the Company believes that these
counterclaims are without merit.

During fiscal 1999, the Company incurred legal expenses of $620,000 during
the prosecution of the above referenced trade secret litigation. These expenses
have been included in litigation expenses in the consolidated statement of
operations. Management anticipates that further material expenditures will be
incurred at least through fiscal 2000 in pursuit of the Company's claims and in
defending against the counterclaims.

UNAUDITED--In connection with the trade secret litigation described above,
during the six months ended January 1, 2000, the Company incurred legal expenses
of $530,000 reflecting current period legal costs incurred to pursue its claims
regarding theft of trade secrets and to defend against the other parties'
counterclaims. All aspects of the litigation are currently being held in
abeyance upon agreement of the parties, in connection with the Company's pending
acquisition of the other party (Note 16). If the acquisition is completed, this
litigation will be dismissed with prejudice by the agreement of all parties. If
for any reason the acquisition of the other party is not completed, the Company
expects that the litigation will resume. In the event that the litigation
resumes, the Company intends to vigorously pursue its claims and defend against
the remaining counterclaims. In such event, the Company anticipates that it will
continue to incur legal costs to pursue its claims and to defend against the
counterclaims. The Company estimates that its possible costs to defend against
the counterclaims could range from $0 to $1,600,000.

14. RESEARCH AND DEVELOPMENT ARRANGEMENT

During 1994, the Company entered into a research and development arrangement
(the "Arrangement") with an unrelated third party. Under the terms of the
Arrangement, the Company received payments for (i) a license for certain of the
Company's technology and (ii) future research activities relating to the
licensed technology as agreed to by the parties. The Company accounted for the
Arrangement under SFAS No. 68, "Research and Development Arrangements," and,
accordingly, the amount of the Company's potential future obligation to provide
security and to subscribe for shares in the third party was recorded as unearned
revenue on the consolidated balance sheet. The part of the funds originally paid
to the Company that might have been required to satisfy the Company's potential
security and subscription obligation was held in a restricted cash account and
was classified as a long-term asset on the consolidated balance sheet. The
Company's potential security and subscription obligation was limited to the
amount of restricted cash on deposit. At June 30, 1998, the restricted cash and
potential security and subscription obligation amounted to $3,982,000. The
restricted cash was held in an interest bearing account in an Australian bank.
The interest earned on this account was used to satisfy the Company's
requirement to make minimum royalty payments to the third party, who had a right
of set-off against the accumulated interest. Interest income and license fees of
$270,000, $235,000 and $155,000 for the years ended June 30, 1997, 1998 and
1999, respectively, and have been offset against each other in the consolidated
statement of operations.

In April 1999, the Company and the third party concluded that the project
was technically infeasible. Subsequently, under the terms of the Arrangement,
the Company subscribed the funds held as restricted cash for shares in the third
party, which used those funds to repay its borrowing. Involvement of the third
party's original shareholders in the Arrangement was then terminated.

F-21
<PAGE>
MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. SEGMENT AND GEOGRAPHIC INFORMATION

The Company is engaged in one industry segment: the development, marketing
and support of software products for the plastic design and manufacturing
industry.

The Company licenses its products to customers throughout the world. Sales
and marketing operations outside the United States are conducted principally
through the Company's foreign sales subsidiaries in Europe and Asia.

The Company's principal software development facility is located in
Australia and additional development facilities are located in the United States
and the United Kingdom.

Geographic information regarding the Company's operations was as follows (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1997
---------------------------------------------------
ASIA/AUSTRALIA USA EUROPE CONSOLIDATED
-------------- -------- -------- ------------
<S> <C> <C> <C> <C>
Revenue from unaffiliated
customers:
Software licenses............... $2,767 $1,810 $2,166 $ 6,743
Services........................ 2,954 2,392 2,734 8,080
------ ------ ------ -------
Total......................... $5,721 $4,202 $4,900 $14,823
====== ====== ====== =======
Fixed assets, net................. $3,119 $ 234 $ 206 $ 3,559
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1998
---------------------------------------------------
ASIA/AUSTRALIA USA EUROPE CONSOLIDATED
-------------- -------- -------- ------------
<S> <C> <C> <C> <C>
Revenue from unaffiliated
customers:
Software licenses............... $2,945 $2,443 $3,126 $ 8,514
Services........................ 2,067 3,078 2,730 7,875
------ ------ ------ -------
Total......................... $5,012 $5,521 $5,856 $16,389
====== ====== ====== =======
Fixed assets, net................. $2,325 $ 396 $ 257 $ 2,978
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1999
---------------------------------------------------
ASIA/AUSTRALIA USA EUROPE CONSOLIDATED
-------------- -------- -------- ------------
<S> <C> <C> <C> <C>
Revenue from unaffiliated
customers:
Software licenses............... $3,156 $3,904 $5,178 $12,238
Services........................ 1,856 3,070 3,057 7,983
------ ------ ------ -------
Total......................... $5,012 $6,974 $8,235 $20,221
====== ====== ====== =======
Fixed assets, net................. $2,363 $ 408 $ 339 $ 3,110
</TABLE>

16. SUBSEQUENT EVENTS

On January 20, 2000, the Board of Directors approved a 2.4-to-1 reverse
stock split of the Company's common stock to be effective prior to the effective
date of the registration statement related to the Company's planned initial
public offering of common stock. All share and per share

F-22
<PAGE>
MOLDFLOW CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. SUBSEQUENT EVENTS (CONTINUED)
information in the accompanying consolidated financial statements and notes has
been retroactively restated to reflect the effect of this reverse stock split.

In addition, the Board of Directors approved an amendment to the Company's
certificate of incorporation to take effect prior to the effective date of the
registration statement, increasing the authorized capital stock to 60,000,000
shares of common stock and 5,000,000 shares of preferred stock, each with a par
value of $0.01 per share.

Also on January 20, 2000, the Board of Directors approved the Moldflow
Corporation 2000 Stock Option and Incentive Plan with an authorization of up to
2,000,000 shares of common stock and the Moldflow Corporation Employee Stock
Purchase Plan with an authorization of up to 500,000 shares of common stock.

UNAUDITED--On February 11, 2000, the Company entered into a definitive
agreement to acquire Advanced CAE Technology, Inc., which does business as
"C-Mold." The purchase price will be $11.0 million in cash and the Company
estimates that it will incur $200,000 in related acquisition expenses.
Completion of the acquisition is subject to satisfaction of a number of
conditions, including the Company's ability to obtain satisfactory financing for
the transaction.

F-23
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Stockholders of Advanced CAE Technology, Inc.

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

PricewaterhouseCoopers LLP

Boston, Massachusetts
February 11, 2000

F-24
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
SEPTEMBER 30,
------------------- DECEMBER 31,
1998 1999 1999
-------- -------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $2,600 $2,648 $2,003
Marketable securities..................................... 393 521 686
Accounts receivable, net of allowance for doubtful
accounts of $189, $185 and $173 at September 30, 1998
and 1999 and December 31, 1999 (unaudited).............. 1,360 1,056 1,329
Refundable income taxes................................... 126 61 61
Prepaids and other current assets......................... 255 285 271
Deferred taxes............................................ 71 187 187
------ ------ ------

Total current assets.................................... 4,805 4,758 4,537

Fixed assets, net........................................... 2,469 2,394 2,373
Other assets................................................ 80 384 393
------ ------ ------

Total assets............................................ $7,354 $7,536 $7,303
====== ====== ======

LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long term debt......................... $ 46 $ 48 $ 48
Accounts payable.......................................... 72 177 141
Accrued expenses.......................................... 705 773 682
Deferred revenue.......................................... 1,255 1,660 1,548
------ ------ ------

Total current liabilities............................... 2,078 2,658 2,419

Long term debt, net of current portion...................... 1,112 1,097 1,092
Other liabilities........................................... 11 11 1
------ ------ ------

Total liabilities....................................... 3,201 3,766 3,512
------ ------ ------

Minority interest........................................... 296 337 344
------ ------ ------

Commitments and contingencies (Note 11)

Stockholders' equity:
Common stock, $0.001 par value; 10,000,000 shares
authorized; 4,111,326, 4,113,476 and 4,113,476 shares
issued and 3,979,374, 3,946,303 and 3,941,373 shares
outstanding, at September 30, 1998 and 1999 and December
31, 1999 (unaudited), respectively...................... 4 4 4
Additional paid-in capital................................ 628 706 706
Retained earnings......................................... 3,411 2,747 2,583
Accumulated other comprehensive income.................... 11 230 416
Treasury stock............................................ (197) (254) (262)
------ ------ ------

Total stockholders' equity.............................. 3,857 3,433 3,447
------ ------ ------

Total liabilities, minority interest and stockholders'
equity................................................ $7,354 $7,536 $7,303
====== ====== ======
</TABLE>

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

F-25
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Software licenses....................................... $3,919 $3,772 $ 619 $ 774
Services................................................ 3,417 3,896 995 1,027
------ ------ ------ ------

Total revenue......................................... 7,336 7,668 1,614 1,801
------ ------ ------ ------

Costs and expenses:
Cost of software licenses revenue....................... 122 149 26 60
Cost of services revenue................................ 1,437 1,635 402 395
Research and development................................ 1,155 1,314 293 354
Selling and marketing................................... 2,924 3,389 781 862
General and administrative.............................. 1,127 1,416 453 234
Litigation.............................................. -- 490 -- 196
------ ------ ------ ------

Total operating expenses.............................. 6,765 8,393 1,955 2,101
------ ------ ------ ------

Income (loss) from operations............................. 571 (725) (341) (300)

Interest income........................................... 99 100 22 25
Interest expense.......................................... (164) (157) (13) (13)
Other income (loss), net.................................. (7) (18) (9) (10)
------ ------ ------ ------

Income (loss) before income taxes and minority
interest............................................ 499 (800) (341) (298)

Provision (benefit) for income taxes...................... 138 (209) (150) (146)
------ ------ ------ ------

Income (loss) before minority interest.................. 361 (591) (191) (152)

Minority interest in income of consolidated
subsidiaries............................................ 54 73 12 12
------ ------ ------ ------

Net income (loss)......................................... $ 307 $ (664) $ (203) $ (164)
====== ====== ====== ======
</TABLE>

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

F-26
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER COMPREHENSIVE
--------------------- PAID-IN RETAINED COMPREHENSIVE INCOME
SHARES PAR VALUE CAPITAL EARNINGS INCOME (LOSS)
--------- --------- ---------- --------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1997............... 3,960,524 $4 $458 $3,156 $ 176

Purchase of treasury stock.................. (63,028)
Stock donation.............................. 72
Issuance of common stock under employee
stock purchase plan....................... 81,878 -- 98
Cash distribution........................... (52)
Comprehensive income (loss):
Net income................................ 307 $ 307
Unrealized loss on marketable
securities.............................. (5) (5)
Foreign currency translation adjustment... (160) (160)
-----
Total comprehensive income................ 142
--------- -- ---- ------ ----- =====
Balance at September 30, 1998............... 3,979,374 4 628 3,411 11

Purchase of treasury stock.................. (35,221)
Stock donation.............................. 75
Issuance of common stock under employee
stock purchase plan....................... 2,150 -- 3
Comprehensive income (loss):
Net loss.................................. (664) (664)
Unrealized gain on marketable
securities.............................. 129 129
Foreign currency translation adjustment... 90 90
-----
Total comprehensive loss.................. (445)
--------- -- ---- ------ ----- =====
Balance at September 30, 1999............... 3,946,303 4 706 2,747 230

Purchase of treasury stock (unaudited)...... (4,930)
Comprehensive income (loss):
Net loss (unaudited)...................... (164) (164)
Unrealized gain on marketable securities
(unaudited)............................. 165 165
Foreign currency translation adjustment
(unaudited)............................. 21 21
-----
Total comprehensive income (unaudited).... $ 22
--------- -- ---- ------ ----- =====
Balance at December 31, 1999 (unaudited).... 3,941,373 $4 $706 $2,583 $ 416
========= == ==== ====== =====

TOTAL
TREASURY STOCKHOLDERS'
STOCK EQUITY
--------- -------------
<S> <C> <C>
Balance at September 30, 1997............... $(100) $3,694
Purchase of treasury stock.................. (97) (97)
Stock donation.............................. 72
Issuance of common stock under employee
stock purchase plan....................... 98
Cash distribution........................... (52)
Comprehensive income (loss):
Net income................................ 307
Unrealized loss on marketable
securities.............................. (5)
Foreign currency translation adjustment... (160)

Total comprehensive income................
----- ------
Balance at September 30, 1998............... (197) 3,857
Purchase of treasury stock.................. (57) (57)
Stock donation.............................. 75
Issuance of common stock under employee
stock purchase plan....................... 3
Comprehensive income (loss):
Net loss.................................. (664)
Unrealized gain on marketable
securities.............................. 129
Foreign currency translation adjustment... 90

Total comprehensive loss..................
----- ------
Balance at September 30, 1999............... (254) 3,433
Purchase of treasury stock (unaudited)...... (8) (8)
Comprehensive income (loss):
Net loss (unaudited)...................... (164)
Unrealized gain on marketable securities
(unaudited)............................. 165
Foreign currency translation adjustment
(unaudited)............................. 21

Total comprehensive income (unaudited)....
----- ------
Balance at December 31, 1999 (unaudited).... $(262) $3,447
===== ======
</TABLE>

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

F-27
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- -------------------
1998 1999 1998 1999
-------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 307 $ (664) $ (203) $ (164)
Adjustments to reconcile to net cash used:
Stock donation expense.................................. 72 75 -- --
Depreciation and amortization........................... 292 307 61 52
Deferred taxes.......................................... 57 (247) -- --
Minority interest income................................ 54 72 12 12
Provision for doubtful accounts......................... (10) (6) (3) (3)
Unrealized gain (loss) on marketable securities......... (5) 128 81 165
Changes in assets and liabilities:
Accounts receivable................................... (31) 306 44 (90)
Prepaid expenses and other current assets............. (33) 35 11 (145)
Accounts payable...................................... (113) 107 12 (53)
Accrued expenses...................................... 80 183 (391) (321)
Deferred revenue...................................... 87 295 96 (125)
Other assets.......................................... 22 (306) 16 28
------ ------ ------ ------
Net cash provided by (used in) operating
activities.......................................... 779 285 (264) (644)
------ ------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets................................. (214) (198) (4) (20)
Sale of marketable securities............................. 307 -- -- --
------ ------ ------ ------
Net cash provided by (used in) investing
activities.......................................... 93 (198) (4) (20)
------ ------ ------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt................................ (121) (13) (17) (9)
Partnership distributions................................. (23) (23) -- --
Repurchase of common stock................................ (97) (56) -- (8)
Proceeds from issuance of common stock.................... 98 3 -- --
------ ------ ------ ------
Net cash used in financing activities............... (143) (89) (17) (17)
------ ------ ------ ------
Effect of exchange rate changes on cash and cash
equivalents............................................... 8 50 29 36
------ ------ ------ ------
NET INCREASE (DECREASE) IN CASH............................. 737 48 (256) (645)

Cash and cash equivalents, beginning of period.............. 1,863 2,600 2,600 2,648
------ ------ ------ ------
Cash and cash equivalents, end of period.................... $2,600 $2,648 $2,344 $2,003
====== ====== ====== ======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest.................................... $ 157 $ 164 $ 25 $ 23
Cash paid for income taxes................................ 106 10 9 9
</TABLE>

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

F-28
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND NATURE OF BUSINESS

Advanced CAE Technology, Inc., doing business as C-Mold (the "Company"), was
incorporated in New York, USA, in February 1986. The Company is engaged in the
development and sale of software for plastic injection molding simulation in the
polymer processing industry. The Company sells its products primarily to
customers in the United States, Europe and Asia.

The Company's fiscal year end is September 30. References to 1997, 1998 or
1999 mean the fiscal year ended September 30, unless otherwise indicated.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries: AC Technology Europe B.V., Plastic Moulding
Consultants, Ltd., C-MOLD Singapore Pte. Ltd. and C-MOLD Scandinavia A.B.; its
99 percent-owned subsidiary, Advanced CAE Technology Pacific; its
84 percent-owned subsidiary, AC Technology Enterprise, Ltd.; and its
28 percent-owned subsidiary, ACT Partnership, which is consolidated because it
is controlled by the Company. All significant intercompany balances and
transactions have been eliminated in the consolidated financial statements.

FOREIGN CURRENCY TRANSLATION

CASH AND CASH EQUIVALENTS

All highly liquid investments purchased with a maturity of three months or
less are considered to be cash equivalents. Accordingly, these items are subject
to minimal credit and market risk and are reported at cost, which approximates
fair value.

MARKETABLE SECURITIES

All of the Company's marketable securities are classified as
available-for-sale securities and are valued at market value at September 30,
1998 and 1999. Unrealized gains and losses on these securities are included as
components of comprehensive income and are reflected in the consolidated
statement of stockholders' equity.

ACCOUNTS RECEIVABLE, CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

Financial instruments that potentially expose the Company to concentrations
of credit risk include accounts receivable. The Company's customer base consists
of a large number of geographically dispersed customers. The Company maintains
reserves for potential credit losses on accounts receivable and such losses, in
the aggregate, have not exceeded management expectations.

F-29
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue of $1,286,000 (18% of total revenue) and $773,000 (10% of total
revenue) was attributable to one customer in fiscal 1998 and 1999, respectively.
At September 30, 1998 and 1999, accounts receivable from that customer accounted
for $353,000 (23% of total accounts receivable) and $81,000 (7% of total
accounts receivable), respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist of cash and cash equivalents,
marketable securities, accounts receivable, accounts payable, accrued expenses,
deferred revenue and debt. The carrying amounts of these instruments at
September 30, 1998 and 1999 approximate their fair values.

FIXED ASSETS

Fixed assets are recorded at cost and are depreciated using an accelerated
method over their estimated useful lives.

IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of," the Company records impairment losses on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amount. Through September 30, 1999, the Company had not
recognized an impairment loss on its long-lived assets.

REVENUE RECOGNITION

Revenue is derived from the licensing of computer software products and from
services consisting of maintenance and support, consulting, material testing and
training. The Company has adopted the guidelines of Statement of Position 97-2,
"Software Revenue Recognition" ("SoP 97-2"), which provides guidance on applying
generally accepted accounting principles in recognizing revenue on software
transactions.

SOFTWARE DEVELOPMENT COSTS

F-30
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Computer Software to be Sold, Leased, or Otherwise Marketed," and capitalized
thereafter until commercial release of the software products. Software
development costs eligible for capitalization have not been significant to date.

ADVERTISING COSTS

The Company expenses as incurred costs of producing advertising and
sales-related collateral materials. Other production costs associated with
direct mail programs, placement costs associated with magazine or other printed
media and all direct costs associated with trade shows and other sales related
events are expensed when the related direct mail is sent, advertising space is
used or the event is held. Advertising expense for the years ended
September 30, 1998 and 1999 was $60,000 and $67,000, respectively.

ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation to employees in accordance
with Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock
Issued to Employees," and related interpretation. Accordingly, compensation
expense is recorded for options issued to employees in fixed amounts to the
extent that the fixed exercise prices are less than the fair market value of the
Company's common stock at the date of grant. The Company follows the disclosure
requirements of SFAS No. 123, "Accounting for Stock-Based Compensation"
(Note 8). All stock-based awards to non-employees are accounted for at their
fair value in accordance with SFAS No. 123.

SEGMENT AND GEOGRAPHIC INFORMATION

The Company has adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information" (Note 15). SFAS No. 131 establishes
standards for reporting information on operating segments in interim and annual
financial statements. SFAS No. 131 relates to disclosure only and had no impact
on the Company's consolidated financial position or results of operations.

COMPREHENSIVE INCOME

The Company has adopted SFAS No. 130, "Reporting Comprehensive Income."
Under SFAS No. 130, the Company is required to display comprehensive income and
its components as part of the Company's full set of financial statements. The
measurement and presentation of net income did not change. Comprehensive income
is comprised of net income and other comprehensive income. Other comprehensive
income includes certain changes in equity that are excluded from net income. At
September 30, 1999, accumulated other comprehensive income was comprised of
cumulative foreign currency translation adjustments and unrealized gains and
losses on marketable securities. The individual components of comprehensive
income are reflected in the consolidated statement of stockholders' equity for
the years ended September 30, 1997, 1998 and 1999.

UNAUDITED INTERIM FINANCIAL STATEMENTS

The interim consolidated financial statements as of December 31, 1999 and
for the three month periods ended December 31, 1998 and 1999 are unaudited. In
the opinion of the Company's management, the unaudited interim consolidated
financial statements include all adjustments,

F-31
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position and results of operations for these
interim periods. The results of operations for the three months ended
December 31, 1999 are not necessarily indicative of the results of operations
for the year ended September 30, 2000 or any other future period.

USE OF ESTIMATES

RECENT ACCOUNTING PRONOUNCEMENTS

F-32
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. MARKETABLE SECURITIES

The amortized cost and estimated market value of marketable securities were
as follows (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Amortized cost.............................................. $200 $200
Gross unrealized gains...................................... 193 321
---- ----
Market value................................................ $393 $521
==== ====
</TABLE>

4. FIXED ASSETS

Fixed assets consist of the following (dollars in thousands):

<TABLE>
<CAPTION>
ESTIMATED
USEFUL SEPTEMBER 30,
LIFE -------------------
(YEARS) 1998 1999
--------- -------- --------
<S> <C> <C> <C>
Land............................................ -- $ 531 $ 555
Buildings and improvements...................... 7 - 39 1,694 1,709
Laboratory equipment............................ 5 308 310
Computer equipment.............................. 5 1,269 1,252
Furniture and fixtures.......................... 7 562 574
Software........................................ 3 130 201
------ -------
4,494 4,601
Less--accumulated depreciation and
amortization.................................. (2,025) (2,207)
------ -------
$2,469 $ 2,394
====== =======
</TABLE>

Total depreciation and amortization expense was $292,000 and $307,000 for
the years ended September 30, 1998 and 1999, respectively.

5. ACCRUED EXPENSES

Accrued expenses consist of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Accrued commissions......................................... $ 33 $ 60
Accrued payroll and vacation................................ 180 212
Accrued income tax payable.................................. 118 50
Other accrued expenses...................................... 374 451
---- ----
$705 $773
==== ====
</TABLE>

F-33
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6. LONG TERM DEBT

Long term debt consists of a mortgage loan on the Ithaca, New York facility,
a term loan on the Louisville, Kentucky facility and a mortgage loan on the
Taipei, Taiwan facility.

The mortgage loan for the Ithaca facility is a 30-year mortgage for $328,000
due in 2019. The unpaid balance on the mortgage loan was $233,000 at
September 30, 1999. The interest rate on the mortgage loan is adjustable
annually and is set 300 basis points over the one-year Treasury bill rate (8.0%
at September 30, 1999). Monthly interest and principal payments are $2,000. The
mortgage loan is guaranteed up to approximately $100,000 by certain officers of
the Company. The mortgage is secured by all real property in Ithaca. The
mortgage also contains certain subjective covenants including a material adverse
change clause. The Company was in compliance with these covenants at
September 30, 1999.

During 1994, the Company entered into a Revised and Replacement Letter loan
agreement (the Agreement) with a bank. The Agreement made available to the
Company a 10-year term loan due in 2005 for an amount not to exceed $650,000.
The unpaid balance was $621,000 at September 30, 1999. The purpose of the
Agreement was to finance the construction of the Company's facility in
Louisville. The Agreement has an adjustable interest rate defined at the prime
rate (8.25% at September 30, 1999). The Agreement is to be repaid in equal
monthly payments of $6,000. Each payment will be applied first to interest with
the remainder applied to principal. Based on the current monthly payments of
$6,000 and an interest rate of 8.25%, the Company will be required to make a
final payment of approximately $490,000 in the year 2005. The Agreement is
secured by the real property located in Louisville. The Company was in
compliance with the related debt covenants at September 30, 1999.

The mortgage loan for the Taiwan facility was refinanced during fiscal 1997
and is due in 2012. At September 30, 1999, the unpaid balance on the mortgage
was $291,000. The interest rate on the mortgage loan is adjusted annually (8.4%
at September 30, 1999). Monthly interest and principal payments are $4,000. The
mortgage loan is secured with the property of a subsidiary of the Company.

Future principal payments for long-term debt as of September 30, 1999 are as
follows (in thousands):

<TABLE>
<CAPTION>
FISCAL YEAR
- -----------
<S> <C>
2000........................................................ $ 48
2001........................................................ 52
2002........................................................ 57
2003........................................................ 62
2004........................................................ 67
Thereafter.................................................. 858
------
1,145
Less: current portion....................................... 48
------
$1,097
======
</TABLE>

F-34
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. COMMON STOCK

Each share of the Company's $0.001 par value common stock entitles the
holder to one vote on all matters submitted to a vote of the Company's
stockholders. Common stockholders are entitled to dividends when and if declared
by the board of directors.

In October 1995, a founding stockholder of the Company donated
238,000 shares of common stock back to the Company for distribution to its
employees. The shares are to be equally divided over five consecutive years and
distributed equally to eligible employees. These distributions were effected on
January 1, 1996, 1997, 1998 and 1999 and the final distribution will be made on
January 1, 2000. If an employee decides not to accept the donated shares, those
shares will carryover and be evenly distributed over the remaining years. Any
unclaimed shares in the year 2000 will be returned to the donor. As of
September 30 1999, 46,654 shares remain undistributed.

During 1998 and 1999, the Company repurchased 63,028 and 35,221 shares,
respectively, of common stock from existing stockholders for $97,000 and
$57,000, respectively. As of September 30, 1999, the Company had repurchased an
aggregate of 167,173 shares for treasury.

8. STOCK OPTION PLAN

In fiscal 1992, the Company adopted the Advanced CAE Technology, Inc. Stock
Option Plan (the "Plan") which provides for the grant of incentive stock
options, non-qualified stock options, stock awards and stock purchase rights for
the purchase of up to 2,000,000 shares of the Company's common stock by
officers, employees, consultants and directors of the Company. The Board of
Directors is responsible for administration of the Plan. The term of each option
shall be determined by a committee selected by the Board of Directors, but in no
event shall an option be exercisable after the expiration of 5 years from the
date on which it is granted. Each option may include, at the discretion of the
committee, a vesting period following the grant of any option during which all
or any part of such option remains forfeitable and cannot be exercised. All
options shall provide for full and immediate vesting in the event that the
Company disposes of all or substantially all of its assets as an entity and
dissolves, consolidates or merges into another corporation and not be the
resulting or surviving corporation. The Board of Directors of the Company may at
any time suspend or terminate the Plan or may amend it from time to time.

Under APB 25, no compensation cost has been recognized for employee
stock-based compensation for the years ended September 30, 1998 and 1999. Had
compensation cost been determined based on the fair value at the grant dates for
awards in 1998 and 1999 consistent with the provisions of SFAS No. 123, the
Company's net income (loss) would have been the pro forma amounts indicated
below. Because options vest over several years and additional option grants are
expected to be made in future years, the pro forma results are not
representative of the pro forma results for future years.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------
1998 1999
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Net income (loss):
As reported...................................... $307 $(664)
Pro forma........................................ 264 (690)
</TABLE>

F-35
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. STOCK OPTION PLAN (CONTINUED)
The fair value of each option grant was estimated on the date of grant under
the minimum value method using the Black-Scholes option-pricing model with the
following assumptions for grants: no dividend yield; volatility of 0.001%;
risk-free interest rates of 5.1% and 5.1% for 1998 and 1999, respectively; and
expected option life of 5 years.

A summary of the status of the Company's stock options as of September 30,
1998 and 1999 and changes during the years then ended is presented below:

<TABLE>
<CAPTION>
1998 1999
--------------------- ---------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year................ 526,769 $1.35 350,719 $1.46
Granted......................................... 35,800 1.58 21,200 1.60
Exercised....................................... (173,800) 1.17 (3,913) 1.48
Canceled........................................ (38,050) 1.49 (9,788) 1.56
---------- ----------

Outstanding at end of year...................... 350,719 1.46 358,218 1.46
========== ==========

Options exercisable at end of year.............. 146,427 233,343
Weighted average fair value of options granted
during the year............................... $ 1.22 $ 1.23
Options available for future grant.............. 1,649,283 1,641,784
</TABLE>

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

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL
LIFE SHARES
SHARES (YEARS) EXERCISABLE
EXERCISE PRICE -------- ----------- -----------
<S> <C> <C> <C>
$1.20 - 1.32................................................ 96,418 1.03 96,418
$1.50 - 1.53................................................ 219,400 2.38 129,025
$1.60....................................................... 42,400 4.13 7,900
------- -------
$1.20 - $1.60............................................... 358,218 2.22 233,343
======= =======
</TABLE>

F-36
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES

Income (loss) before income taxes and minority interest consists of the
following (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Domestic.................................................... $241 $(1,029)
Foreign..................................................... 258 229
---- -------
$499 $ (800)
</TABLE>

The income tax provision (benefit) consists of the following (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Current:
Federal................................................... $ 21 $ (70)
State..................................................... 23 49
Foreign................................................... 56 59
---- -----
Total current............................................. 100 38
---- -----
Deferred:
Federal................................................... 48 (210)
State..................................................... (10) (37)
---- -----
Total deferred taxes (benefit)............................ 38 (247)
---- -----
Total taxes (benefit)..................................... $138 $(209)
==== =====
</TABLE>

The reconciliation of the provision for income taxes computed at the U.S.
federal statutory tax rate to the actual provision is as follows (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Statutory federal rate of 34%............................... $170 $(272)
State income taxes, net of federal effect................... 9 8
Foreign tax rate differential............................... (32) (19)
Permanent differences....................................... 1 12
Change in valuation allowance............................... 30 81
Other....................................................... (40) (19)
---- -----
$138 $(209)
==== =====
</TABLE>

F-37
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES (CONTINUED)
Net deferred tax assets consist of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ -- $ 194
Tax credits............................................... 234 349
Accrued expenses not deductible for tax purposes.......... 79 109
Other..................................................... 5 8
-------- --------
Gross deferred tax assets............................... 318 660

Deferred tax asset valuation allowance...................... (230) (311)
-------- --------
Total deferred tax assets................................. 88 349
Deferred tax liabilities.................................... (4) (18)
-------- --------
Net deferred tax assets................................... 84 331
======== ========
</TABLE>

Under generally accepted accounting principles, the benefit associated with
future deductible differences is recognized if it is more likely than not that
the benefit will be realized. Management believes that, based on the Company's
historical results of operations, it is more likely than not that a portion of
the Company's deferred tax assets will not be realized. Accordingly, the Company
has recorded a valuation allowance of $230,000 and $311,000 at September 30,
1998 and 1999, respectively. Management believes that the net deferred tax asset
represents management's best estimate, based upon the weight of available
evidence, of the deferred tax asset that will be realized. If such evidence were
to change, based upon near-term operating results and longer-term projections,
the amount of the valuation allowance recorded against the gross deferred tax
asset may be decreased or increased.

As of September 30, 1999, the Company has approximately $293,000 in foreign
tax credits available to offset future income tax and $500,000 in federal net
operating loss carryforwards to offset future taxable income, which begin to
expire in 2019. Under the provisions of the U.S. Internal Revenue Code, certain
substantial changes in the Company's ownership may limit the amount of federal
net operating loss carryforwards and tax credit carryforwards which could be
utilized annually to offset future federal taxable income and taxes payable.

No provision was made in fiscal 1999 for U.S. income taxes on the
undistributed earnings of the foreign subsidiaries, as it is the Company's
intention to utilize those earnings in the foreign operations.

10. BENEFIT PLANS

401(K) SAVINGS PLAN

The Company has established a retirement savings plan under Section 401(k)
of the U.S. Internal Revenue Code (the "401(k) Plan"). The 401(k) Plan covers
substantially all U.S. based employees of the Company who meet minimum age and
service requirements and allows participants to defer a portion of their annual
compensation on a pre-tax basis. Company contributions to the 401(k) Plan may be
made at the discretion of the Board of Directors. Employer contributions were
$23,000 and $20,000 for the years ending September 30, 1998 and 1999,
respectively. Company contributions to the plan are vested according to the
following schedule: 20 percent after two years of service and an additional
20 percent in each successive year. After six years of service, employees are
100 percent vested.

F-38
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. BENEFIT PLANS (CONTINUED)
PROFIT SHARING PLAN

The Company sponsors a profit sharing plan for all eligible employees. The
amount and distribution of profit sharing is at the sole discretion of the Board
of Directors. Profit sharing expense was $80,000 and $0 for the years ending
September 30, 1998 and 1999, respectively.

BONUS PLAN

The Company also sponsors a bonus plan for employees who, during the
preceding 12 months, have performed substantially above and beyond their
expected level of performance. The amount and distribution of these bonuses is
at the sole discretion of the Board of Directors. The Company paid $3,000 and $0
for the years ending September 30, 1998 and 1999, respectively.

11. COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company leases certain equipment under non-cancelable operating leases
that expire at various dates through 2001. Lease expense for the years ended
September 30, 1998 and 1999 under these leases was $110,000 and $59,000,
respectively.

Future minimum annual lease payments as of September 30, 1999 are as follows
(in thousands):

<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
- -------------------------
<S> <C>
2000.................................................. $34
2001.................................................. 1
---
$35
===
</TABLE>

LITIGATION

On February 17, 1999, suit was filed against the Company and one of its
employees by a competitor. The plaintiff is seeking immediate and permanent
injunctive relief in connection with the alleged theft and misappropriation of
the competitor's proprietary trade secrets. Specifically, the suit alleges,
among other things, (i) misappropriation of trade secrets, proprietary
information, unfair competition and civil conspiracy, (ii) breach of contract,
implied covenant of good faith and fiduciary duty, and (iii) fraud against the
individual in his actions to breach his fiduciary duties. The complaint seeks a
permanent injunction against the Company, actual, consequential and punitive
damages, and recovery of all legal costs.

Counterclaims, and amendments thereto, have been filed by the Company,
alleging that the competitor (i) breached certain federal antitrust laws and
(ii) committed defamation and trade libel. The competitor has moved to dismiss
these amended counterclaims.

Through February 11, 2000, based on the stage of developments with the
claims asserted against the Company and the Company's counterclaims, the Company
has not been able to reasonably estimate the amount of possible losses, if any,
related to this litigation. On February 11, 2000, the Company entered a
definitive agreement to be acquired by the counterparty in this litigation
(Note 13). Accordingly, this litigation is being held in abeyance in connection
with the pending acquisition. If the acquisition is completed, this litigation
will be dismissed with prejudice by the agreement of all parties. If for any
reason the acquisition is not completed, management expects that the litigation
will resume.

F-39
<PAGE>
ADVANCED CAE TECHNOLOGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. SEGMENT AND GEOGRAPHIC INFORMATION

The Company conducts and manages its business in one industry segment: the
development, marketing and support of software products for plastic injection
molding simulation in the polymer processing industry.

Geographic information regarding the Company's operations was as follows (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1998
---------------------------------------------
USA EUROPE ASIA CONSOLIDATED
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Revenue from unaffiliated customers:
Software licenses......................................... $2,150 $1,181 $588 $3,919
Services.................................................. 2,712 520 185 3,417
------ ------ ---- ------
Total................................................... $4,862 $1,701 $773 $7,336
====== ====== ==== ======
Fixed assets, net........................................... $1,899 $ 67 $503 $2,469
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999
---------------------------------------------
USA EUROPE ASIA CONSOLIDATED
-------- -------- -------- ------------
<S> <C> <C> <C> <C>
Revenue from unaffiliated customers:
Software licenses......................................... $1,802 $1,343 $627 $3,772
Services.................................................. 2,890 797 209 3,896
------ ------ ---- ------
Total................................................... $4,692 $2,140 $836 $7,668
====== ====== ==== ======
Fixed assets, net........................................... $1,788 $ 80 $526 $2,394
</TABLE>

Revenues above for the USA include $1,344,000 and $806,000 of export sales
in the years ended September 30, 1998 and 1999, respectively.

13. SUBSEQUENT EVENT--PENDING ACQUISITION

On February 11, 2000, the Company entered into a definitive agreement to be
acquired by Moldflow Corporation ("Moldflow.") The purchase price will be
$11.0 million in cash. Completion of the acquisition is subject to satisfaction
of a number of conditions, including Moldflow's ability to obtain satisfactory
financing for the transaction.

F-40
<PAGE>
MOLDFLOW CORPORATION

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

BASIS OF PRESENTATION

The following unaudited pro forma combined balance sheet gives effect to the
pending acquisition by Moldflow Corporation (the "Company") of all of the stock
of Advanced CAE Technology, Inc., doing business as "C-Mold," as if it had
occurred on January 1, 2000. The unaudited pro forma combined statement of
operations gives effect to the pending acquisition as if it had occurred on
July 1, 1998. These statements are based on the actual historical financial
statements of the Company and C-Mold, and the estimates and assumptions set
forth below and in the notes to the unaudited pro forma combined financial
information.

The Company's fiscal year ends on June 30 while C-Mold's fiscal year ends on
September 30. The unaudited pro forma combined statement of operations for the
year ended June 30, 1999 combines the Company's actual results for its year
ended June 30, 1999 with C-Mold's actual results for its year ended
September 30, 1999. The unaudited pro forma combined statement of operations for
the six months ended January 1, 2000 combines the Company's and C-Mold's actual
results for the six months ended January 1, 2000.

The acquisition is subject to the terms of a definitive agreement between
the parties dated February 11, 2000. Completion of the transaction is subject to
the satisfaction of a number of conditions, including the Company's ability to
obtain satisfactory financing for the transaction. Under the definitive
agreement, the Company will pay $11.0 million in cash for all of the outstanding
common stock and options to acquire common stock of C-Mold. Also pursuant to the
definitive agreement, upon completion of the acquisition, the litigation between
the Company and C-Mold will be dismissed with prejudice by the agreement of all
parties; accordingly, the combined Company will no longer incur related
litigation expenses.

The acquisition will be accounted for using the purchase method of
accounting and accordingly, the purchase price was allocated to the assets and
liabilities assumed based upon management's estimates of fair value, with any
excess purchase price being allocated to goodwill and other intangible assets.
The pro forma adjustments related to the purchase price allocation represent
management's best estimate of the effects of the pending acquisition and are
subject to adjustment upon completion of independent valuation analyses to be
obtained in connection with the closing of the transaction.

The pro forma adjustments are based upon estimates, currently available
information and certain assumptions that management deems appropriate. The
unaudited pro forma combined financial information presented herein is not
necessarily indicative of the results the Company would have obtained had such
events occurred on July 1, 1998, as assumed for purposes of the combined
statement of operations, or on January 1, 2000, as assumed for purposes of the
combined balance sheet, or of the future results of the Company. The unaudited
pro forma combined financial information should be read in conjunction with the
audited financial statements and notes thereto of each of the Company and C-Mold
included elsewhere in this prospectus.

F-41
<PAGE>
MOLDFLOW CORPORATION

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

(IN THOUSANDS)

<TABLE>
<CAPTION>
JANUARY 1, 2000
---------------------------------------------------
MOLDFLOW PRO FORMA
CORPORATION C-MOLD ADJUSTMENTS COMBINED
----------- -------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 1,328 $ 2,003 $ 206 (a) $ 3,468
(69)(a)
Marketable securities.............................. -- 686 -- 686
Accounts receivable, net........................... 4,534 1,329 -- 5,863
Prepaid expenses and other current assets.......... 1,290 519 -- 1,809
-------- ------- ------- --------

Total current assets............................. 7,152 4,537 137 11,826

3,026 2,373 5,474
Fixed assets, net.................................... (595)(a)
670 (b)

Goodwill and other intangible assets................. -- -- 7,714 (d) 7,714
Other assets......................................... 386 393 -- 779
-------- ------- ------- --------

Total assets..................................... $ 10,564 $ 7,303 $ 7,926 $ 25,793
======== ======= ======= ========

LIABILITIES, MINORITY INTEREST AND STOCKHOLDERS'
EQUITY
Current liabilities:
Current debt obligations........................... $ 1,149 $ 48 $ -- $ 1,197
Accounts payable................................... 1,202 141 -- 1,343
Accrued expenses................................... 3,102 682 750 (c) 4,534
Deferred revenue................................... 3,310 1,548 -- 4,858
-------- ------- ------- --------

Total current liabilities........................ 8,763 2,419 750 11,932

Long term debt, net of current portion............... -- 1,092 (233)(a) 859
Other long term liabilities.......................... 38 1 -- 39
-------- ------- ------- --------

Total liabilities................................ 8,801 3,512 517 12,830
-------- ------- ------- --------

Minority interest.................................... -- 344 (344)(a) --
-------- ------- ------- --------

Stockholders' equity:

12,657 710 23,857
Common stock and additional paid-in capital........ (710)(e)
11,200 (f)
(11,280) 2,583 (11,280)
Retained earnings (accumulated deficit)............ 119 (a)
(2,702)(e)

Other stockholders' equity......................... 386 154 (154)(e) 386
-------- ------- ------- --------

Total stockholders' equity....................... 1,763 3,447 7,753 12,963
-------- ------- ------- --------

Total liabilities, minority interest and
stockholders' equity............................... $ 10,564 $ 7,303 $ 7,926 $ 25,793
======== ======= ======= ========
</TABLE>

The accompanying notes are an integral part of this unaudited pro forma
combined financial information.

F-42
<PAGE>
MOLDFLOW CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1999
----------------------------------------------------
MOLDFLOW PRO FORMA
CORPORATION C-MOLD ADJUSTMENTS COMBINED
------------ -------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue:
Software licenses................................. $12,238 $3,772 $ -- $16,010
Services.......................................... 7,983 3,896 -- 11,879
------- ------ ------- -------
Total revenue................................... 20,221 7,668 -- 27,889
------- ------ ------- -------
Costs and expenses:
Cost of software licenses revenue................. 378 149 -- 527
Cost of services revenue.......................... 1,319 1,635 -- 2,954
Research and development.......................... 3,466 1,314 -- 4,780
Selling and marketing............................. 9,673 3,389 -- 13,062
General and administrative........................ 3,839 1,416 -- 5,255
Litigation........................................ 620 490 -- 1,110
Amortization of goodwill and other intangible
assets.......................................... -- -- 1,543 (a) 1,543
------- ------ ------- -------
Total operating expenses........................ 19,295 8,393 1,543 29,231
------- ------ ------- -------
Income (loss) from operations....................... 926 (725) (1,543) (1,342)
Interest and other income (expense), net............ (269) (75) -- (344)
------- ------ ------- -------
Income (loss) before income taxes and minority
interest...................................... 657 (800) (1,543) (1,686)
Minority interest in income of consolidated
subsidiaries...................................... -- 73 (73)(b) --
Provision (benefit) for income taxes................ 176 (209) (620) (653)
------- ------ ------- -------
Net income (loss)................................... $ 481 $ (664) $ (850) $(1,033)
======= ====== ======= =======
Net income (loss) per common share (c):
Basic............................................. $ 1.82 $ (0.92)
Diluted........................................... $ 0.08 $ (0.92)
Shares used in computing net income (loss)
per common share (c):
Basic............................................. 265 1,127
Diluted........................................... 6,166 1,127

<CAPTION>
SIX MONTHS ENDED JANUARY 1, 2000
----------------------------------------------------
MOLDFLOW PRO FORMA
CORPORATION C-MOLD ADJUSTMENTS COMBINED
------------ -------- ------------ -----------
<S> <C> <C> <C> <C>
Revenue:
Software licenses................................. $ 6,651 $1,832 $ -- $ 8,483
Services.......................................... 4,853 2,104 -- 6,957
------- ------ ----- -------
Total revenue................................... 11,504 3,936 -- 15,440
------- ------ ----- -------
Costs and expenses:
Cost of software licenses revenue................. 322 132 -- 454
Cost of services revenue.......................... 491 658 -- 1,149
Research and development.......................... 1,709 701 -- 2,410
Selling and marketing............................. 5,811 1,698 -- 7,509
General and administrative........................ 2,277 525 -- 2,802
Litigation........................................ 530 461 991
Amortization of goodwill and other intangible
assets.......................................... -- -- 772 (a) 772
------- ------ ----- -------
Total operating expenses........................ 11,140 4,175 772 16,087
------- ------ ----- -------
Income (loss) from operations....................... 364 (239) (772) (647)
Interest and other income (expense), net............ (103) (103) -- (206)
------- ------ ----- -------
Income (loss) before income taxes and minority
interest...................................... 261 (342) (772) (853)
Minority interest in income of consolidated
subsidiaries...................................... -- 24 (24)(b) --
Provision (benefit) for income taxes................ (172) (36) (310) (518)
------- ------ ----- -------
Net income (loss)................................... $ 433 $ (330) $(438) $ (335)
======= ====== ===== =======
Net income (loss) per common share (c):
Basic............................................. $ 1.18 $ (0.27)
Diluted........................................... $ 0.07 $ (0.27)
Shares used in computing net income (loss)
per common share (c):
Basic............................................. 367 1,229
Diluted........................................... 6,311 1,229
</TABLE>

The accompanying notes are an integral part of this unaudited pro forma combined
financial information.

F-43
<PAGE>
MOLDFLOW CORPORATION

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

1. UNAUDITED PRO FORMA COMBINED BALANCE SHEET

The accompanying unaudited pro forma combined balance sheet has been
prepared as if the acquisition had occurred on January 1, 2000 and reflects the
following determination and allocation of the purchase price (in thousands):

<TABLE>
<S> <C>
Purchase price:
Purchase consideration--cash.............................. $11,000
Direct acquisition expenses............................... 200
-------
Total purchase price.................................... $11,200
=======
Tangible assets and liabilities:
Cash and cash equivalents................................. $ 2,140
Marketable securities..................................... 686
Accounts receivable, net.................................. 1,329
Prepaid expenses and other current assets................. 519
Fixed assets.............................................. 2,448
Other assets.............................................. 393
Current portion of long term debt......................... (48)
Accounts payable.......................................... (141)
Accrued expenses.......................................... (1,432)
Deferred revenue.......................................... (1,548)
Other long-term liabilities............................... (1)
Long-term debt, net of current portion.................... (859)
-------
Net tangible assets..................................... 3,486

Goodwill and other intangible assets...................... 7,714
-------
Total purchase price.................................... $11,200
=======
</TABLE>

The purchase accounting allocation summarized above is reflected in the
following pro forma adjustments to the unaudited pro forma combined balance
sheet:

(a) Immediately prior to the acquisition, C-Mold will sell its 28% interest in
the ACT Partnership for cash proceeds of approximately $206,000. Because
C-Mold controlled the ACT Partnership, it historically has been treated as a
consolidated subsidiary. These adjustments are to record the sale, including
receipt of the sale proceeds, removal of the assets and liabilities of the
ACT Partnership previously consolidated with C-Mold and elimination of the
related minority interest.

(b) To increase the fixed assets to their estimated fair value, preliminarily
based on a real estate tax appraisal for the land and building located in
Kentucky. Upon completion of the acquisition, the Company will obtain an
independent professional appraisal of the fixed assets acquired.

(c) To record a liability for severance costs related to C-Mold employees
following the acquisition and C-Mold's legal costs in connection with the
transaction, equal to the cap on such costs agreed to in the definitive
agreement.

(d) Upon completion of the acquisition, the Company will obtain an independent
professional valuation of identifiable intangible assets acquired.
Preliminarily, the Company expects such identifiable intangible assets to
include primarily five-year non-compete covenants with all members of senior
management, the founders and board members of C-Mold, all of whom will

F-44
<PAGE>
MOLDFLOW CORPORATION

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

1. UNAUDITED PRO FORMA COMBINED BALANCE SHEET (CONTINUED)
not be employed by the Company and C-Mold's workforce in-place which will be
retained by the Company. To a lesser extent, the Company also expects the
identifiable intangible assets to include existing software technology and
products, customer base, and in-process research and development. After
allocation to the identifiable intangible assets, any remaining intangible
value will be attributed to goodwill. For preliminary pro forma purchase
price allocation purposes, pending the independent professional valuation,
the Company has grouped all of the value attributable to intangible assets
together with goodwill, as reflected in this pro forma adjustment.

(e) To eliminate the historical stockholders' equity accounts of C-Mold.

(f) To record the common stock assumed to be issued to fund the total purchase
price of $11.2 million. The Company expects to use the proceeds from its
planned initial public offering of common stock, at an assumed offering
price of $13.00 per share, to fund the acquisition.

2. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS

The accompanying unaudited pro forma combined statement of operations has
been prepared as if the acquisition had occurred on July 1, 1998 and reflects
the following pro forma adjustments and the related tax effects:

(a) Reflects amortization of the acquired goodwill and other intangible
assets, assuming an average useful life of five years. Upon completion
of the independent professional valuation and final allocation of the
purchase price, specific identifiable intangible assets and any residual
goodwill will be amortized over useful lives directly attributable to
the assets. Preliminarily, the Company expects the intangible assets to
have the following useful lives: non-compete covenants--5 years;
workforce in-place--4 years; existing software technology and
products--3 to 5 years; customer base--3 years; and goodwill--7 years.

(b) To eliminate the minority interest in C-Mold which will no longer exist
following the acquisition.

(c) The pro forma combined net income (loss) per common share reflects the
issuance of 861,538 shares of common stock, at an assumed initial public
offering price of $13.00 per share, to fund the acquisition as if such
shares were issued on July 1, 1998.

F-45
<PAGE>

[Inside Back Cover]

The inside back cover page is blank.
<PAGE>
3,000,000 Shares

[LOGO]

Common Stock

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

PROSPECTUS

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

Adams, Harkness & Hill, Inc.
A.G. Edwards & Sons, Inc.

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

You should rely only on 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 any sale of our common stock.

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

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

, 2000
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the estimated expenses payable by us in
connection with the offering (excluding underwriting discounts and commissions):

<TABLE>
<CAPTION>
NATURE OF EXPENSE AMOUNT
- ----------------- ----------
<S> <C>
SEC Registration Fee........................................ $ 12,752
NASD Filing Fee............................................. 5,330
Nasdaq National Market Listing Fee.......................... 75,625
Accounting Fees and Expenses................................ 600,000
Legal Fees and Expenses..................................... 500,000
Printing Expenses........................................... 200,000
Blue Sky Qualification Fees and Expenses.................... 15,000
Transfer Agent's Fee........................................ 5,500
Miscellaneous............................................... 85,793
----------
TOTAL..................................................... $1,500,000
==========
</TABLE>

The amounts set forth above, except for the Securities and Exchange
Commission, National Association of Securities Dealers, Inc. and Nasdaq National
Market fees, are in each case estimated.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

In accordance with Section 145 of the Delaware General Corporation Law,
Article VII of our certificate of incorporation provides that no director of
Moldflow shall be personally liable to Moldflow or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability
(1) for any breach of the director's duty of loyalty to Moldflow or its
stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) in respect of unlawful
dividend payments or stock redemptions or repurchases, or (4) for any
transaction from which the director derived an improper personal benefit. In
addition, our first amended and restated certificate of incorporation provides
that if the Delaware General Corporation Law is amended to authorize the further
elimination or limitation of the liability of directors, then the liability of a
director of the corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.

Article V of our by-laws provides for indemnification by Moldflow of its
officers and certain non-officer employees under certain circumstances against
expenses, including attorneys' fees, judgments, fines and amounts paid in
settlement, reasonably incurred in connection with the defense or settlement of
any threatened, pending or completed legal proceeding in which any such person
is involved by reason of the fact that such person is or was an officer or
employee of the registrant if such person acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the best interests of
Moldflow, and, with respect to criminal actions or proceedings, if such person
had no reasonable cause to believe his or her conduct was unlawful.

II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

Set forth in chronological order below is information regarding the number
of shares of capital stock issued by Moldflow since our formation. Also included
is the consideration, if any, received by Moldflow for such shares. There was no
public offering in any such transaction and we believe that each transaction was
exempt from the registration requirements of the Securities Act of 1933, as
amended, by reason of Section 4(2) thereof, based on the private nature of the
transactions and the financial sophistication of the purchasers, all of whom had
access to complete information concerning Moldflow and acquired the securities
for investment and not with a view to the distribution thereof. In addition, we
believe that the transactions described below with respect to issuances and
option grants to our employees and consultants were exempt from the registration
requirements of said Act by reason of Section 4(2) of said Act or Rule 701
promulgated thereunder.

(a) Issuance of Capital Stock

(i) In August 1997, in connection with its reorganization Moldflow
issued 4,918,616 shares of its common stock, 1,855,688 shares of
its series A convertible preferred stock and 666,666 shares of its
series B convertible preferred stock to the shareholders of
Moldflow International Pty. Ltd., an Australian corporation, in
exchange for all of the outstanding capital stock of Moldflow
International.

(ii) In March 1998, Moldflow's shares of common stock, series A
convertible preferred stock and series B convertible preferred
stock were redesignated as series C-1 convertible preferred stock,
series C-2 convertible preferred stock and series C-3 convertible
preferred stock.

(iii) In April 1998, Moldflow granted warrants to purchase 20,833 shares
of its common stock to Silicon Valley Bank at an exercise price of
$7.20 per share.

(iv) In July 1998, Moldflow sold 551,285 shares of its common stock for
an aggregate purchase price of $198,463.35 which was paid by
promissory notes. These shares are subject to stock restriction
agreements.

(v) In July 1998, Moldflow issued 698,609 shares of its series C-3
convertible preferred stock in connection with the conversion into
equity of the outstanding principal balance of approximately
$890,000 under stockholder loan agreements.

(vi) In April 1999, Moldflow issued 327 shares of its common stock upon
the exercise of previously granted stock options at an aggregate
exercise price of $117.75.

(vii) In June 1999, Moldflow issued 1,562 shares of its common stock
upon the exercise of previously granted stock options at an
aggregate exercise price of $562.50.

(viii) In July 1999, Moldflow issued 74 shares of its common stock upon
the exercise of previously granted stock options at an aggregate
exercise price of $26.85.

(ix) In August 1999, Moldflow issued 2,715 shares of its common stock
upon the exercise of previously granted stock options at an
aggregate exercise price of $1,240.65.

(x) In September 1999, Moldflow issued 327 shares of its common stock
upon the exercise of previously granted stock options at an
aggregate exercise price of $136.50.

(xi) In October 1999, Moldflow issued 2,900 shares of its common stock
upon the exercise of previously granted stock options at an
aggregate exercise price of $1,607.10.

(xii) In November 1999, Moldflow issued 52 shares of its common stock
upon the exercise of previously granted stock options at an
aggregate exercise price of $37.50.

(xiii) In December 1999, Moldflow issued 2,117 shares of its common stock
upon the exercise of previously granted stock options at an
aggregate exercise price of $1,006.80.

II-2
<PAGE>
(xiv) In January 2000, Moldflow issued 4,080 shares of its common stock
upon the exercise of previously granted stock options at an
aggregate exercise price of $1,798.20.

(xv) In February 2000, Moldflow issued 6,778 shares of its common stock
upon the exercise of previously granted stock options at an
aggregate exercise price of $3,217.30.

(xvi) In March 2000, Moldflow issued 1,078 shares of its common stock
upon the exercise of previously granted stock options at an
aggregate exercise price of $429.75.

(b) Grants of Stock Options

(i) As of March 1, 2000, options to purchase 599,900 shares of common
stock were outstanding under Moldflow's 1997 Equity Incentive Plan
of which options to purchase 116,086 shares are exercisable within
60 days of such date. All such options were granted between August
1997 and March 1, 2000 to officers, directors, employees and
consultants of Moldflow.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) EXHIBITS. The following is a complete list of exhibits filed or
incorporated by reference as part of this Registration Statement.

+1.1 Form of Underwriting Agreement

+2.1 Agreement and Plan of Merger, dated February 11, 2000, by
and among the Registrant, Moldflow Merger Corp. (a
subsidiary of the Registrant), Advanced CAE Technology, Inc.
d/b/a C-Mold ("C-Mold") and certain stockholders of C-Mold.
(Excluding schedules and exhibits which the Registrant
agrees to furnish supplementally to the Commission upon
request.)

+3.1 Form of Second Amended and Restated Certificate of
Incorporation of the Registrant.

+3.2 Form of Third Amended and Restated Certificate of
Incorporation of the Registrant.

+3.3 Form of Amended and Restated By-laws of the Registrant.

+4.1 Specimen certificate for shares of Common Stock, $.01 par
value, of the Registrant.

+5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of
the securities offered.

+10.1 Indenture of Lease, dated October 15, 1996, between Moldflow
Pty. Ltd and Mortimer B. Zuckerman and Edward H. Linde,
Trustees of 91 Hartwell Avenue Trust, which relates to space
in a certain building known as, and with an address at, 91
Hartwell Avenue, Lexington, Massachusetts.

+10.2 Acknowledgment of Assumption of Lease, dated June 28, 1999,
by and among Boston Properties Limited Partnership (as
successor-in-interest to the Trustees of 91 Hartwell Avenue
Trust), Moldflow Pty. Ltd and the Registrant.

+10.3 Stock Purchase Agreement, dated August 25, 1998, among
Ampersand Specialty Materials and Chemicals III Limited
Partnership ("Ampersand III"), Ampersand Specialty Materials
and Chemicals Companion Fund III Limited Partnership
("Ampersand III CF"), JTC Investment Management Pty. Ltd.
("JTC") and Westpac Custodian Nominees Limited (as nominee
for NJI No. 1(A) Investment Fund and NJI No. 1(B) Investment
Fund) ("Westpac").

+10.4 Shareholders Agreement, dated July 18, 1997 ("Shareholders
Agreement"), by and among the Registrant, Thomas Investments
Australia Pty. Ltd. ("Thomas"), Helmet Investments Australia
Pty. Ltd. ("Helmet"), Floatflow Pty. Ltd. ("Floatflow"),
JTC, Westpac, Ampersand
</TABLE>

II-3
<PAGE>
<TABLE>
<C> <S>
Specialty Materials and Chemicals II Limited Partnership
("Ampersand II"), Ampersand III, Ampersand III CF and Mazza
& Riley, Inc.

+10.5 First Amendment to Shareholders Agreement, dated October 24,
1997.

+10.6 Amended and Restated Credit Agreement, dated January 28,
1998 ("Amended and Restated Credit Agreement"), by and among
the Registrant, Thomas, Helmet, Floatflow, JTC, Westpac,
Ampersand II, Ampersand III and Ampersand III CF.

+10.7 First Amendment to Amended and Restated Credit Agreement,
dated August 25, 1998.

+10.8 Termination of Amended and Restated Credit Agreement.

+10.9 Loan Agreement, dated April 23, 1998, by and among Silicon
Valley Bank, the Registrant, Moldflow International Pty.
Ltd. and Moldflow Pty. Ltd.

+10.10 Loan Document Modification Agreement No. 2, dated
November 30, 1998, by and between Silicon Valley Bank and
the Registrant.

+10.11 Amendment to Loan Modification Agreement No. 2, dated
January 19, 1999, by and between Silicon Valley Bank and the
Registrant.

+10.12 Loan Document Modification Agreement No. 3, dated as of
June 1, 1999, by and between Silicon Valley Bank and the
Registrant.

+10.13 Loan Document Modification Agreement No. 4, dated as of
October 22, 1999, by and between Silicon Valley Bank and the
Registrant.

+10.14 Warrant to Purchase Common Stock, dated April 23, 1998,
issued by the Registrant to Silicon Valley Bank.

+10.15 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Marc J. L. Dulude.

+10.16 Amended and Restated Promissory Note, dated September 9,
1999, issued by Marc J. L. Dulude in favor of the
Registrant.

+10.17 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Suzanne E. Rogers.

+10.18 Amended and Restated Promissory Note, dated September 9,
1999, issued by Suzanne E. Rogers in favor of the
Registrant.

+10.19 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Kenneth R. Welch.

+10.20 Amended and Restated Promissory Note, dated September 9,
1999, issued by Kenneth R. Welch in favor of the Registrant.

+10.21 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Richard M. Underwood.

+10.22 Amended and Restated Promissory Note, dated September 9,
1999, issued by Richard M. Underwood in favor of the
Registrant.

+10.23 Service Agreement, dated July 1, 1994, between Moldflow Pty.
Ltd. and A. Roland Thomas.

+10.24 Letter Amendment, dated June 30, 1997, to Service Agreement
between Moldflow Pty. Ltd. and A. Roland Thomas.

+10.25 Letter Amendment, dated July 1, 1999, to Service Agreement
between Moldflow Pty. Ltd. and A. Roland Thomas.

+10.26 Loan Agreement, dated July 1, 1999 between Moldflow Pty.
Ltd, and A. Roland Thomas.

+10.27 Moldflow Corporation 2000 Stock Option and Incentive Plan.
</TABLE>

II-4
<PAGE>

<TABLE>
<C> <S>
+10.28 Form of Incentive Stock Option Agreement under the Moldflow
Corporation 2000 Stock Option and Incentive Plan.

+10.29 Form of Non-Qualified Stock Option Agreement for Company
Employees under the Moldflow Corporation 2000 Stock Option
and Incentive Plan.

+10.30 Moldflow Corporation Employee Stock Purchase Plan.

+10.31 Moldflow Corporation 1997 Equity Incentive Plan.

+10.32 Form of Incentive Stock Option Agreement under the Moldflow
Corporation 1997 Equity Incentive Plan.

+10.33 Form of Non-Qualified Stock Option Agreement under the
Moldflow Corporation 1997 Equity Incentive Plan.

+10.34 Form of Non-Qualified Stock Option Agreement for Australian
employees under the Moldflow Corporation 1997 Equity
Incentive Plan.

+10.35 Employment Agreement, dated February 1, 2000, between the
Registrant and Marc J. L. Dulude.

+10.36 Employment Agreement, dated February 1, 2000, between the
Registrant and Suzanne E. Rogers.

+10.37 Employment Agreement, dated February 1, 2000, between the
Registrant and Kenneth R. Welch.

+10.38 Employment Agreement, dated February 1, 2000, between the
Registrant and Richard M. Underwood.

+10.39 Employment Agreement, dated March 20, 2000, between the
Registrant and A. Roland Thomas.

+10.40 Form of Director Indemnification Agreement to be entered
into between the Registrant and each non-employee director.

+10.41 Form of Non-Qualified Stock Option Agreement for
Non-Employee Directors under the Moldflow Corporation 2000
Stock Option and Incentive Plan.

+21.1 Subsidiaries of the Registrant.

+23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
5.1 hereto).

23.2 Consent of PricewaterhouseCoopers LLP.

+24.1 Powers of Attorney.

+27.1 Financial Data Schedule.
</TABLE>

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

+ Previously filed.

II-5
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES

II. Valuation and Qualifying Accounts

All other schedules have been omitted because they are not required or
because the required information is given in the consolidated financial
statements or notes to those statements.

ITEM 17. UNDERTAKINGS

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

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

The undersigned registrant hereby undertakes that:

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

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

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston, on March 24,
2000.

<TABLE>
<S> <C> <C>
MOLDFLOW CORPORATION

BY: /S/ SUZANNE E. ROGERS
-----------------------------------------
Suzanne E. Rogers
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
</TABLE>

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

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
President, Chief Executive
*** Officer and Director
------------------------------------------- (Principal Executive March 24, 2000
Marc J. L. Dulude Officer)

Vice President and Chief
/s/ SUZANNE E. ROGERS Financial Officer
------------------------------------------- (Principal Financial March 24, 2000
Suzanne E. Rogers Officer and Principal
Accounting Officer)

*** Director
------------------------------------------- March 24, 2000
A. Roland Thomas

*** Director
------------------------------------------- March 24, 2000
Charles D. Yie

*** Director
------------------------------------------- March 24, 2000
Julian H. Beale

*** Director
------------------------------------------- March 24, 2000
Richard A. Charpie
</TABLE>

II-7
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
*** Director
------------------------------------------- March 24, 2000
Roger Brooks

*** Director
------------------------------------------- March 24, 2000
Robert P. Schechter
</TABLE>

<TABLE>
<S> <C> <C> <C>
*** /s/ SUZANNE E. ROGERS
--------------------------------------
Suzanne E. Rogers
ATTORNEY-IN-FACT
</TABLE>

II-8
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- -----------
<C> <S>
+1.1 Form of Underwriting Agreement
+2.1 Agreement and Plan of Merger, dated February 11, 2000, by
and among the Registrant, Moldflow Merger Corp. (a
subsidiary of the Registrant), Advanced CAE Technology, Inc.
d/b/a C-Mold ("C-Mold") and certain stockholders of C-Mold.
(Excluding schedules and exhibits which the Registrant
agrees to furnish supplementally to the Commission upon
request.)
+3.1 Form of Second Amended and Restated Certificate of
Incorporation of the Registrant.
+3.2 Form of Third Amended and Restated Certificate of
Incorporation of the Registrant.
+3.3 Form of Amended and Restated By-laws of the Registrant.
+4.1 Specimen certificate for shares of Common Stock, $.01 par
value, of the Registrant.
+5.1 Opinion of Goodwin, Procter & Hoar LLP as to the legality of
the securities offered.
+10.1 Indenture of Lease, dated October 15, 1996, between Moldflow
Pty. Ltd and Mortimer B. Zuckerman and Edward H. Linde,
Trustees of 91 Hartwell Avenue Trust, which relates to space
in a certain building known as, and with an address at, 91
Hartwell Avenue, Lexington, Massachusetts.
+10.2 Acknowledgment of Assumption of Lease, dated June 28, 1999,
by and among Boston Properties Limited Partnership (as
successor-in-interest to the Trustees of 91 Hartwell Avenue
Trust), Moldflow Pty. Ltd and the Registrant.
+10.3 Stock Purchase Agreement, dated August 25, 1998, among
Ampersand Specialty Materials and Chemicals III Limited
Partnership ("Ampersand III"), Ampersand Specialty Materials
and Chemicals Companion Fund III Limited Partnership
("Ampersand III CF"), JTC Investment Management Pty. Ltd.
("JTC") and Westpac Custodian Nominees Limited (as nominee
for NJI No. 1(A) Investment Fund and NJI No. 1(B) Investment
Fund) ("Westpac").
+10.4 Shareholders Agreement, dated July 18, 1997 ("Shareholders
Agreement"), by and among the Registrant, Thomas Investments
Australia Pty. Ltd. ("Thomas"), Helmet Investments Australia
Pty. Ltd. ("Helmet"), Floatflow Pty. Ltd. ("Floatflow"),
JTC, Westpac, Ampersand Specialty Materials and Chemicals II
Limited Partnership ("Ampersand II"), Ampersand III,
Ampersand III CF and Mazza & Riley, Inc.
+10.5 First Amendment to Shareholders Agreement, dated October 24,
1997.
+10.6 Amended and Restated Credit Agreement, dated January 28,
1998 ("Amended and Restated Credit Agreement"), by and among
the Registrant, Thomas, Helmet, Floatflow, JTC, Westpac,
Ampersand II, Ampersand III and Ampersand III CF.
+10.7 First Amendment to Amended and Restated Credit Agreement,
dated August 25, 1998.
+10.8 Termination of Amended and Restated Credit Agreement.
+10.9 Loan Agreement, dated April 23, 1998, by and among Silicon
Valley Bank, the Registrant, Moldflow International Pty.
Ltd. and Moldflow Pty. Ltd.
+10.10 Loan Document Modification Agreement No. 2, dated
November 30, 1998, by and between Silicon Valley Bank and
the Registrant.
+10.11 Amendment to Loan Modification Agreement No. 2, dated
January 19, 1999, by and between Silicon Valley Bank and the
Registrant.
+10.12 Loan Document Modification Agreement No. 3, dated as of
June 1, 1999, by and between Silicon Valley Bank and the
Registrant.
+10.13 Loan Document Modification Agreement No. 4, dated as of
October 22, 1999, by and between Silicon Valley Bank and the
Registrant.
+10.14 Warrant to Purchase Common Stock, dated April 23, 1998,
issued by the Registrant to Silicon Valley Bank.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- -----------
<C> <S>
+10.15 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Marc J. L. Dulude.
+10.16 Amended and Restated Promissory Note, dated September 9,
1999, issued by Marc J. L. Dulude in favor of the
Registrant.
+10.17 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Suzanne E. Rogers.
+10.18 Amended and Restated Promissory Note, dated September 9,
1999, issued by Suzanne E. Rogers in favor of the
Registrant.
+10.19 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Kenneth R. Welch.
+10.20 Amended and Restated Promissory Note, dated September 9,
1999, issued by Kenneth R. Welch in favor of the Registrant.
+10.21 Stock Restriction Agreement, dated July 1, 1998, between the
Registrant and Richard M. Underwood.
+10.22 Amended and Restated Promissory Note, dated September 9,
1999, issued by Richard M. Underwood in favor of the
Registrant.
+10.23 Service Agreement, dated July 1, 1994, between Moldflow Pty.
Ltd. and A. Roland Thomas.
+10.24 Letter Amendment, dated June 30, 1997, to Service Agreement
between Moldflow Pty. Ltd. and A. Roland Thomas.
+10.25 Letter Amendment, dated July 1, 1999, to Service Agreement
between Moldflow Pty. Ltd. and A. Roland Thomas.
+10.26 Loan Agreement, dated July 1, 1999 between Moldflow Pty.
Ltd, and A. Roland Thomas.
+10.27 Moldflow Corporation 2000 Stock Option and Incentive Plan.
+10.28 Form of Incentive Stock Option Agreement under the Moldflow
Corporation 2000 Stock Option and Incentive Plan.
+10.29 Form of Non-Qualified Stock Option Agreement for Company
Employees under the Moldflow Corporation 2000 Stock Option
and Incentive Plan.
+10.30 Moldflow Corporation Employee Stock Purchase Plan.
+10.31 Moldflow Corporation 1997 Equity Incentive Plan.
+10.32 Form of Incentive Stock Option Agreement under the Moldflow
Corporation 1997 Equity Incentive Plan.
+10.33 Form of Non-Qualified Stock Option Agreement under the
Moldflow Corporation 1997 Equity Incentive Plan.
+10.34 Form of Non-Qualified Stock Option Agreement for Australian
employees under the Moldflow Corporation 1997 Equity
Incentive Plan.
+10.35 Employment Agreement, dated February 1, 2000, between the
Registrant and Marc J. L. Dulude.
+10.36 Employment Agreement, dated February 1, 2000, between the
Registrant and Suzanne E. Rogers.
+10.37 Employment Agreement, dated February 1, 2000, between the
Registrant and Kenneth R. Welch.
+10.38 Employment Agreement, dated February 1, 2000, between the
Registrant and Richard M. Underwood.
+10.39 Employment Agreement, dated March 20, 2000, between the
Registrant and A. Roland Thomas.
+10.40 Form of Director Indemnification Agreement to be entered
into between the Registrant and each non-employee director.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------------------- -----------
<C> <S>
+10.41 Form of Non-Qualified Stock Option Agreement for
Non-Employee Directors under the Moldflow Corporation 2000
Stock Option and Incentive Plan.
+21.1 Subsidiaries of the Registrant.
+23.1 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit
5.1 hereto).
23.2 Consent of PricewaterhouseCoopers LLP.
+24.1 Powers of Attorney.
+27.1 Financial Data Schedule.
</TABLE>

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

+ Previously filed.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE

To the Board of Directors
and Stockholders of Moldflow Corporation

Our audits of the consolidated financial statements referred to in our report
dated August 20, 1999, except as to Note 16 for which the date is January 20,
2000, appearing in the Prospectus constituting part of this Registration
Statement on Form S-1 of Moldflow Corporation also included an audit of the
financial statement schedule listed in Item 16(b) of this Form S-1. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.

PricewaterhouseCoopers LLP

Boston, Massachusetts
August 20, 1999

S-1
<PAGE>
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS OF MOLDFLOW CORPORATION

<TABLE>
<CAPTION>
BEGINNING ENDING
ITEM BALANCE ADDITIONS DEDUCTIONS BALANCE
---- --------- --------- ---------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
For the year ended June 30, 1997:
Allowance for doubtful accounts............ $1,274 22(a) (949)(b) $ 347
Deferred tax asset valuation allowance..... 6,394 1,334(a) (350)(c) 7,378

For the year ended June 30, 1998:
Allowance for doubtful accounts............ 347 275(a) (83)(b) 539
Deferred tax asset valuation allowance..... 7,378 5(a) (1,090)(c) 6,293

For the year ended June 30, 1999:
Allowance for doubtful accounts............ 539 33(a) (340)(b) 232
Deferred tax asset valuation allowance..... 6,293 416(a) (173)(c) 6,536
</TABLE>

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

(a) Additional provisions and foreign currency translation effects.

(b) Specific write-offs and foreign currency translation effects.

(c) Utilization of net operating losses, reductions in other deferred tax assets
and foreign currency translation effects.

S-2

<PAGE>
Exhibit 23.2

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use in this Registration Statement on Form S-1 of our
reports dated August 20, 1999, except as to Note 16 for which the date is
January 20, 2000, relating to the consolidated financial statements and
financial statement schedule of Moldflow Corporation, which appear in such
Registration Statement. We also consent to the use in this Registration
Statement on Form S-1 of our report dated February 11, 2000, relating to the
consolidated financial statements of Advanced CAE Technology, Inc., which
appears in such Registration Statement. We also consent to the reference to us
under the heading "Experts" in such Registration Statement.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Boston, Massachusetts
March 24, 2000